AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH __, 2000.
Registration No. 333-______
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------
VEECO INSTRUMENTS INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<CAPTION>
Delaware 35633821 11-2989601
<S> <C> <C>
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
Terminal Drive Gregory A. Robbins, Esq.
Plainview, New York 11803 Vice President and General Counsel
(516) 349-8300 Terminal Drive
(Address, Including Zip Code, and Plainview, New York 11803
Telephone Number, Including Area Code, Telephone: (516) 349-8300
of Registrant's Principal Executive Facsimile: (516) 349-9079
Offices) (Name, Address, Including Zip Code,
and Telephone Number, Including Area
Code, of Agent for Service)
Copies to:
Rory A. Greiss, Esq.
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022-3598
Telephone: (212) 836-8261
Facsimile: (212) 836-8689
Richard D. Pritz, Esq.
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
Telephone: (212) 259-8000
Approximate date of commencement of proposed sale to the public. At the
effective time of the merger of Veeco Acquisition Corp., a wholly-owned
subsidiary of the Registrant, with and into CVC, Inc., which shall occur as soon
as practicable after the effective date of this Registration Statement and the
satisfaction or waiver of all conditions to the closing of such merger.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. |_|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_| ___________.
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_| __________.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===============================================================================================================================
Title of Each Class Of Securities Amount To Be Proposed Maximum Proposed Maximum Amount of
To Be Registered Registered Offering Price Per Unit Aggregate Offering Price Registration Fee
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $0.01 per share 6,000,000 $ 92.50 (1) $ 555,000,000 (1) $ 146,520
===============================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee in
accordance with Rule 457(f) under the Securities Act of 1933, based on the
average of the high and low prices for the shares of the Registrant as
reported on The NASDAQ National Market on March 14, 2000.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
VEECO INSTRUMENTS INC.
Terminal Drive
Plainview, New York 11803
_____ __, 2000
Dear Veeco Instruments Inc. Stockholder:
I am writing to you today about our proposed merger with CVC, Inc. This
merger will create a combined company that is a leader in the design,
manufacture, marketing and servicing of a broad line of process equipment and
metrology equipment used to manufacture and test microelectronic products for
the data storage, optical telecommunications and semiconductor industries.
In the merger, each share of CVC common stock outstanding will be
exchanged for 0.43 shares of common stock of Veeco. We expect to issue
approximately 5,000,000 shares of Veeco common stock in connection with the
merger. Upon completion of the merger, former CVC stockholders will own
approximately 21.6% of Veeco's outstanding common stock (not including shares
underlying options, warrants and similar convertible securities).
You will be asked to vote upon the issuance of shares of Veeco common
stock in connection with the merger at Veeco's upcoming special meeting. At the
special meeting, you will also be asked to vote upon an amendment to our Amended
and Restated Certificate of Incorporation to increase the number of shares of
authorized Veeco common stock from 25,000,000 shares to 40,000,000 shares in
order to provide for additional shares of Veeco common stock to be used in
connection with the merger, for future acquisitions, stock splits, stock
dividends and the raising of additional capital.
We are very excited about the opportunities we envision for the combined
company. Your Board of Directors has determined that the terms and conditions of
the merger are advisable and fair to, and in the best interests of, Veeco and
you, and unanimously recommends that you approve the issuance of the shares of
Veeco common stock in connection with the merger and the increase in Veeco's
authorized capital stock. Your Board of Directors has obtained an opinion from
its independent financial advisor, Banc of America Securities LLC, to the effect
that, subject to the assumptions and qualifications set forth in the opinion,
the exchange ratio in the merger was fair to Veeco from a financial point of
view as of the date of the opinion.
Attached is a notice of special meeting of stockholders of Veeco and a
joint proxy statement/prospectus relating to the merger. The accompanying joint
proxy statement/prospectus is the proxy statement for Veeco's special meeting
and for CVC's special meeting to vote on the merger. It is also the prospectus
of Veeco relating to the shares of Veeco common stock to be issued in the
merger. The joint proxy statement/prospectus provides detailed information about
the two companies and the merger. Please give all of this information your
careful attention. The merger involves risks. YOU SHOULD CAREFULLY CONSIDER THE
DISCUSSION IN THE SECTION ENTITLED "RISK FACTORS" BEGINNING ON PAGE 12 OF THE
JOINT PROXY STATEMENT/PROSPECTUS.
Your vote is very important regardless of the number of shares you own. To
vote your shares, you may use the enclosed proxy card or attend the Veeco
special meeting. To approve the issuance of shares of Veeco common stock in the
merger or the amendment to Veeco's Amended and Restated Certificate of
Incorporation, you MUST vote "FOR" the relevant proposal by following the
instructions stated on the enclosed proxy card. If you do not vote at all, it
will, in effect, count as a vote against the amendment to Veeco's Amended and
Restated Certificate of Incorporation. We urge you to vote FOR these proposals,
necessary steps in the merger of Veeco and CVC.
Veeco's 2000 annual meeting of stockholders will be held on May 12, 2000.
Veeco stockholders will receive a separate proxy statement relating to that
annual meeting.
Sincerely,
Edward H. Braun
Chairman, Chief Executive Officer
and President
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THIS TRANSACTION OR THE SECURITIES OF
VEECO TO BE ISSUED IN THE MERGER, OR DETERMINED IF THIS JOINT PROXY
STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
This joint proxy statement/prospectus is dated ________ __, 2000, and was
first mailed to Veeco stockholders on or about ________ __, 2000.
<PAGE>
VEECO INSTRUMENTS INC.
Terminal Drive
Plainview, New York 11803
(516) 349-8300
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL __, 2000
We will hold a special meeting of stockholders of Veeco Instruments Inc.
at 9:30 a.m. (New York City time), on _______ April __, 2000, at the Corporate
Center, 395 North Service Road, Lower Auditorium, Melville, New York, to
consider the following proposals:
1. To approve the issuance of shares of common stock, $0.01 par value
per share, of Veeco under an Agreement and Plan of Merger among
Veeco, CVC, Inc. and Veeco Acquisition Corp., a wholly-owned
subsidiary of Veeco, under which CVC will become a wholly-owned
subsidiary of Veeco. The shares of Veeco common stock will be issued
to current stockholders of CVC in connection with the merger of
Veeco and CVC;
2. To consider and vote upon a proposed amendment to Veeco's Amended
and Restated Certificate of Incorporation, as amended to date, to
increase the authorized shares of Veeco's common stock, $0.01 par
value per share, from 25,000,000 shares to 40,000,000 shares; and
3. To transact any other business which may properly come before the
special meeting or any adjournment or postponement of the special
meeting.
YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE ISSUANCE OF SHARES OF
VEECO COMMON STOCK TO CVC STOCKHOLDERS IN THE VEECO/CVC MERGER IS ADVISABLE AND
FAIR TO, AND IN THE BEST INTERESTS OF, VEECO AND YOU, AND UNANIMOUSLY RECOMMENDS
THAT YOU VOTE TO APPROVE THIS ISSUANCE OF VEECO COMMON STOCK TO CVC STOCKHOLDERS
IN THE MERGER. YOUR BOARD OF DIRECTORS ALSO UNANIMOUSLY RECOMMENDS THAT YOU VOTE
TO APPROVE THE AMENDMENT TO VEECO'S AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION.
We describe the merger between Veeco and CVC more fully in the
accompanying joint proxy statement/prospectus, which we urge you to read
carefully.
Only Veeco stockholders of record at the close of business on March 20,
2000 are entitled to notice of, and to vote at, the Veeco special meeting or any
adjournment or postponement of the Veeco special meeting.
YOUR VOTE IS IMPORTANT. TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE
VEECO SPECIAL MEETING, YOU ARE URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED
PROXY AND MAIL IT PROMPTLY IN THE POSTAGE-PAID ENVELOPE PROVIDED, WHETHER OR NOT
YOU PLAN TO ATTEND THE VEECO SPECIAL MEETING IN PERSON.
YOU MAY REVOKE YOUR PROXY IN THE MANNER DESCRIBED IN THE ACCOMPANYING
JOINT PROXY STATEMENT/PROSPECTUS AT ANY TIME BEFORE IT HAS BEEN VOTED AT THE
VEECO SPECIAL MEETING. YOU MAY VOTE IN PERSON AT THE VEECO SPECIAL MEETING EVEN
IF YOU HAVE RETURNED A PROXY.
By order of the Board of Directors,
John F. Rein, Jr.
Secretary
<PAGE>
CVC, INC.
525 Lee Road
Rochester, New York 14606
(716) 458-2550
_________ __, 2000
Dear CVC, Inc. Stockholders:
I am writing to you today about our proposed merger with Veeco Instruments
Inc. This merger will create a combined company that is a leader in the design,
manufacture, marketing and servicing of a broad line of process equipment and
metrology equipment used to manufacture and test microelectronic products for
the data storage, optical telecommunications and semiconductor industries.
In the merger, each share of CVC common stock will be exchanged for 0.43
shares of Veeco common stock. Veeco expects to issue approximately 5,000,000
shares of its common stock in the merger. Upon completion of the merger, former
CVC stockholders will own approximately 21.6% of Veeco's outstanding common
stock (not including shares of underlying options and warrants). Veeco common
stock is traded on The Nasdaq National Market under the trading symbol "VECO,"
and closed at $____ per share on _____ __, 2000. You will be asked to vote on
the merger at CVC's upcoming special meeting.
Also, in connection with this merger, outstanding options to purchase CVC
common stock will be assumed by Veeco and become rights to purchase Veeco common
stock pursuant to their existing terms. The number of shares of CVC common stock
currently subject to these options will be multiplied by 0.43, and the exercise
price of these options will be divided by 0.43.
We are very excited about the opportunities we envision for the combined
company. Your Board of Directors has determined that the terms and conditions of
the merger are advisable and fair to, and in the best interests of, CVC and you,
and unanimously recommends that you approve the merger agreement and the merger.
Your Board of Directors has obtained an opinion from its independent financial
advisor, Lehman Brothers Inc., to the effect that the consideration to be
received by you in the merger is fair to you from a financial point of view.
Attached is a notice of special meeting of stockholders of CVC and a joint
proxy statement/prospectus relating to the merger. The accompanying joint proxy
statement/prospectus is the proxy statement for the CVC special meeting and for
Veeco's special meeting to vote on the issuance of shares of Veeco common stock
in the merger. It is also the prospectus of Veeco relating to the shares of
Veeco common stock to be issued to CVC stockholders in the merger. It provides
detailed information about the two companies and the merger. Please give all of
this information your careful attention. THE MERGER AND AN INVESTMENT IN VEECO
COMMON STOCK INVOLVE RISKS. YOU SHOULD CAREFULLY CONSIDER THE DISCUSSION IN THE
SECTION ENTITLED "RISK FACTORS" BEGINNING ON PAGE 12 OF THE JOINT PROXY
STATEMENT/PROSPECTUS.
Under a voting agreement that is described in the joint proxy
statement/prospectus, the owners of a majority of the outstanding CVC common
stock have agreed to vote their shares to approve the merger agreement and the
merger. These CVC stockholders have also granted to Veeco irrevocable proxies to
vote their shares of CVC common stock in this manner. This effectively insures
that the CVC stockholder vote required to approve and adopt the merger agreement
and approve the merger will be obtained regardless of whether or how other CVC
stockholders vote their shares.
PLEASE DO NOT SEND YOUR STOCK CERTIFICATES WITH YOUR PROXY CARD.
To vote your shares, you may use the enclosed proxy card or attend the CVC
special meeting. To approve the merger agreement and the merger, you MUST vote
"FOR" the proposal by following the instructions stated on the enclosed proxy
card. If you do not vote at all, it will, in effect, count as a vote against the
merger. We urge you to vote FOR this proposal, a necessary step in the merger of
CVC and Veeco.
Sincerely,
Christine B. Whitman
Chairman, President and Chief
Executive Officer
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THIS TRANSACTION OR THE SECURITIES OF
VEECO TO BE ISSUED IN THE MERGER, OR DETERMINED IF THIS JOINT PROXY
STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
This joint proxy statement/prospectus is dated ________ __, 2000, and was
first mailed to CVC stockholders on or about ________ __, 2000.
<PAGE>
CVC, INC.
525 Lee Road
Rochester, New York 14606
(716) 458-2550
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL __, 2000
We will hold a special meeting of stockholders of CVC, Inc. at 9:30 a.m.
(New York City time), on April __, 2000, at the Corporate Center, 395 North
Service Road, Lower Auditorium, Melville, New York, to consider the following
proposals:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger among CVC, Veeco Instruments Inc. and
Veeco Acquisition Corp., a wholly-owned subsidiary of Veeco,
relating to a merger in which CVC will become a wholly-owned
subsidiary of Veeco and each outstanding share of CVC common stock
will be converted into the right to receive 0.43 shares of Veeco
common stock; and
2. To transact any other business which may properly come before the
special meeting or any adjournment or postponement of the special
meeting.
YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER IS ADVISABLE AND
FAIR TO, AND IN THE BEST INTERESTS OF, CVC AND YOU, AND UNANIMOUSLY RECOMMENDS
THAT YOU VOTE TO APPROVE THE MERGER AGREEMENT AND THE MERGER.
We describe the merger more fully in the accompanying joint proxy
statement/prospectus, which we urge you to read.
Only CVC stockholders of record at the close of business on March 20, 2000
are entitled to notice of, and to vote at, the CVC special meeting or any
adjournment or postponement of the special meeting.
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE CVC SPECIAL MEETING, YOU
ARE URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN
THE POSTAGE-PAID ENVELOPE PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND THE CVC
SPECIAL MEETING IN PERSON. YOU MAY REVOKE YOUR PROXY IN THE MANNER DESCRIBED IN
THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS AT ANY TIME BEFORE IT HAS BEEN
VOTED AT THE CVC SPECIAL MEETING. YOU MAY VOTE IN PERSON AT THE CVC SPECIAL
MEETING EVEN IF YOU HAVE RETURNED A PROXY.
By order of the Board of Directors,
Emilio O. DiCataldo
Secretary
<PAGE>
TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT
THE MERGER ............................................................. iv
SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS ............................................. vii
JOINT PROXY STATEMENT/
PROSPECTUS SUMMARY ..................................................... 1
The Companies ............................................................. 1
Terms of the Merger ....................................................... 1
The CVC Special Meeting ................................................... 1
The Veeco Special Meeting ................................................. 2
Reasons for the Merger .................................................... 2
Share Ownership of Management
and Certain Beneficial Holders ......................................... 3
Recommendation of CVC's
Board of Directors ..................................................... 3
Recommendation of Veeco's
Board of Directors ..................................................... 3
Voting and Solicitation ................................................... 3
Stockholder Voting Arrangements ........................................... 4
Opinion of Lehman Brothers Inc.
Independent Financial Advisor
to CVC ................................................................. 5
Opinion of Banc of America Securities,
LLC Independent Financial Advisor
to Veeco ............................................................... 5
Interests of Certain Persons in
the Merger ............................................................. 5
No Solicitation ........................................................... 6
When the Merger Will Occur ................................................ 6
What CVC Stockholders Will Receive
In the Merger .......................................................... 6
Material U.S. Federal Income Tax
Consequences of the Merger ............................................... 7
No Appraisal Rights ....................................................... 7
Conditions to the Merger .................................................. 7
Accounting Treatment of the Merger ........................................ 8
Affiliate Agreements ...................................................... 8
Regulatory Approvals ...................................................... 8
Termination of the Merger Agreement ....................................... 9
Expenses and Termination Fees ............................................. 9
Restrictions on Selling Veeco Common
Stock Received in the Merger ........................................... 10
Certain CVC Persons to Become Veeco
Directors and Executive Officers ....................................... 10
Ownership of Veeco Following the Merger ................................... 10
Markets and Market Prices ................................................. 11
RISK FACTORS .............................................................. 12
Risks Related to the Merger and Receipt of Veeco Stock
There Are Technical, Operational and
Strategic Challenges That May Prevent Veeco
From Successfully Integrating CVC With Veeco. .......................... 12
The Value CVC Stockholders Will Receive
In the Merger is Uncertain Due to the
Risks Associated With a Fixed Exchange
Ratio and Fluctuations in Veeco's Stock
Price .................................................................. 12
Certain Executive Officers and Directors
of CVC Have Different Interests From,
and in Addition To, Those of CVC
Stockholders. These Interests May Influence
Their Recommendation of or Vote For the Merger. ........................ 13
Loss of "Pooling of Interests" Accounting
Treatment for the Merger Would Harm
the Financial Results of the Combined
Company ................................................................ 13
Failure to Complete the Merger Could
Harm Veeco's and CVC's Future
Businesses and Operations and CVC's
and Veeco's Stock Prices ............................................... 14
Certain Customers May Curtail Their Purchases
From the Combined Company .............................................. 14
Veeco's Stock Price is Volatile ........................................... 14
Veeco's Organizational Documents
Have Anti-Takeover Provisions That
Might, Among Other Things, Discourage,
Prevent or Delay a Change of Control of
Veeco That a Holder of Veeco Stock
Might Consider in Its Best Interests ................................... 15
Veeco's Shares Eligible for Future Sale
May, If Issued, Adversely Affect
Veeco's Stock Price .................................................... 16
Risks Related to the Failure of Veeco's
Stockholders to Approve the Amendment to
Veeco's Amended and Restated Certificate of
Incorporation
Veeco May Be Deemed to Be In Violation of
Contractual Arrangements Including the Merger
Agreement .............................................................. 16
Risks Related to Veeco
Veeco Is Dependent on the Microelectronics
Industry, Which Includes the Highly Cyclical
Data Storage, Optical Telecommunications
and Semiconductor Industries ........................................... 16
Veeco's Quarterly Results Tend to
Fluctuate Significantly ................................................ 17
Veeco Operates in an Industry That
Is Subject to Rapid Technological Change ............................... 17
Veeco's Limited Sales Backlog Leads to
Uncertainty As to Whether Veeco Will
Meet Its Objective for a Particular Quarter.
Operating Results May Be Adversely
Affected by Issues Relating to Timing
of Revenue Recognition ................................................. 18
<PAGE>
Veeco Cannot Ensure That It Will Continue
to Compete Effectively in a Highly
Competitive Industry ................................................... 18
Veeco Depends on Its Principal Customers
For a High Percentage of Its Sales. The
Loss of All or a Significant Portion
of Sales to a Principal Customer Could
Adversely Affect Veeco ................................................. 19
Sales to International Markets Make
Up a Significant Portion of Veeco's
Total Revenues. Veeco's Operating
Results Could Be Adversely Affected
by Economic Downturns in Foreign
Markets ................................................................ 19
Patents and Other Intellectual Property ................................... 20
Veeco Relies Heavily On its Key Personnel
The Loss of Key Personnel and, In Particular,
the Loss of Edward H. Braun, Veeco's
Chairman, President and CEO, Could
Harm Veeco's Operating Results ......................................... 20
Veeco Intends to Continue to Grow
Through Mergers and Acquisitions. If
Veeco Cannot Identify Suitable Acquisition
Candidates and Integrate Acquisitions
Successfully, Its Operations Could
Be Harmed .............................................................. 20
Risks Related to CVC
A Significant Amount of CVC's
Revenues Is Recorded Late In Each Quarter.
CVC May Be Unable to Adjust Spending
Quickly Enough to Compensate for Shortfalls in
Quarterly Revenues, and as a Result,
CVC's Operating Results Could
Be Adversely Affected .................................................. 21
The Success of CVC's Business Depends
on the Demand for Products From
Data Storage and Semiconductor
Manufacturers, Whose Industries Are
Highly Cyclical ........................................................ 21
CVC's Efforts to Expand its Sales to the Optical
Telecommunications Industry May Not Succeed ............................ 22
CVC's Revenues and Profits May Decrease If
It Loses Any of Its Major Customers ................................... 22
If CVC Does Not Respond Effectively
and on a Timely Basis to Rapid
Technological Change, CVC's Ability
to Attract and Maintain Customers
Could be Diminished .................................................... 22
CVC Operates in an Extremely Competitive
Market, and, If CVC Fails to Compete
Effectively, Its Business May Be Harmed ................................ 23
The Success of CVC's Business Depends
on Continued Market Acceptance of
CVC's Connexion Cluster Tool System .................................... 23
CVC Has Invested Significant Resources in the
Development of Advanced Copper Deposition
Technology. If CVC Fails to Successfully
Develop Advanced Copper Deposition
Processes That Are Accepted by the
Marketplace, CVC's Profitability
Could Be Diminished .................................................... 24
Sales to International Markets Constitute a
Significant and Growing Portion of
CVC's Total Revenues. CVC's Operating
Results Could Be Harmed By Economic
Downturns in Foreign Markets and CVC's
Dependence on International Sales
Representatives ........................................................ 24
The Loss of Any Key Personnel Could
Adversely Impact CVC's Ability to Meet
Customer and Technological Demands ..................................... 25
CVC May Have Difficulty Attracting
and Retaining Qualified Personnel, Which
Could Adversely Impact CVC's Ability to
Execute Its Business Strategy .......................................... 25
CVC Has a Lengthy Sales Cycle Which
May Increase Its Exposure to Customer
Cancellations or Delays in Orders ...................................... 25
Protection of CVC's Intellectual Property
Rights May Result in Costly Litigation ................................. 26
CVC's Success Depends, in Part, on
Intellectual Property Which May Be
Difficult to Protect, and the Loss of
Which Could Affect CVC's Ability
to Compete Effectively ................................................. 26
CVC Depends on a Limited Number of
Suppliers and, in Some Cases Sole
Suppliers. Any Disruption or Termination
of These Supply Channels May Harm
CVC's Business ......................................................... 27
SELECTED HISTORICAL AND
PRO FORMA CONSOLIDATED AND
COMBINED FINANCIAL DATA ................................................ 28
COMPARATIVE PER SHARE DATA ................................................ 32
THE CVC SPECIAL MEETING ................................................... 34
Date, Time and Place of CVC Special
Meeting ................................................................ 34
Purpose ................................................................... 34
Record Date and Outstanding Shares ........................................ 34
Voting and Solicitation ................................................... 34
Recommendation of CVC's Board of
Directors .............................................................. 35
THE VEECO SPECIAL MEETING ................................................. 35
Date, Time and Place of Veeco Special
Meeting ................................................................ 35
Purpose ................................................................... 35
Voting and Solicitation ................................................... 35
Recommendation of Veeco's Board
of Directors ........................................................... 36
THE MERGER ................................................................ 37
Background of the Merger .................................................. 37
CVC's Reasons for the Merger .............................................. 38
Veeco's Reasons for the Merger ............................................ 39
Recommendation of CVC's Board
of Directors ........................................................... 41
Recommendation of Veeco's Board
of Directors ........................................................... 42
ii
<PAGE>
Opinion of Lehman Brothers Inc.
Independent Financial Advisor
to CVC ................................................................. 42
Opinion of Banc of America Securities
LLC Independent Financial Advisor
to Veeco ............................................................... 46
Structure of the Merger ................................................... 60
Interests of Executive Officers and
Directors of CVC in the Merger ......................................... 60
Resale of Veeco Common Stock
Issued in the Merger ................................................... 61
Listing of Veeco Common Stock
Issued in the Merger ................................................... 62
Delisting and Deregistration of CVC
Common Stock; Cessation of Periodic
Reporting .............................................................. 62
Material U.S. Federal Income Tax
Consequences of the Merger ............................................. 62
Accounting Treatment of the Merger ........................................ 64
Regulatory Filings and Approvals
Required to Complete the Merger ........................................ 64
Closing and Effectiveness of the Merger ................................... 64
THE MERGER AGREEMENT ...................................................... 64
General ................................................................... 64
Effective Time of the Merger .............................................. 65
Merger Consideration ...................................................... 65
Representations and Warranties ............................................ 66
Certain Covenants ......................................................... 68
No Solicitation ........................................................... 70
Board Recommendations ..................................................... 73
Conditions to Merger ...................................................... 74
Termination of the Merger Agreement ....................................... 76
Fees and Expenses ......................................................... 78
Amendment; Waiver ......................................................... 79
OTHER AGREEMENTS .......................................................... 80
Voting Arrangements with CVC
Stockholders ........................................................... 80
Voting Arrangements with Veeco
Stockholders ........................................................... 81
AMENDMENT TO VEECO'S AMENDED
AND RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES
OF VEECO COMMON STOCK .................................................. 81
UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS ................................................... 83
INFORMATION REGARDING CVC ................................................. 89
CVC's Business ............................................................ 89
CVC's Properties .......................................................... 102
CVC's Legal Proceedings ................................................... 103
CVC's Market Price and Dividends
on Common Equity and Related Stockholder
Matters ................................................................ 103
CVC's Management's Discussion and
Analysis of Financial Condition and
Results of Operations .................................................. 103
CVC's Quantitative and Qualitative
Disclosures About Market Risk .......................................... 109
CVC's Financial Statements and
Supplementary Data ..................................................... 109
Directors and Executive Officers of CVC ................................... 113
Security Ownership of Certain Beneficial
Owners and Management of CVC ........................................... 117
CVC Certain Relationships and
Related Transactions ................................................... 118
CVC Executive Compensation ................................................ 119
COMPARISON OF RIGHTS OF
STOCKHOLDERS OF VEECO AND
RIGHTS OF STOCKHOLDERS OF CVC .......................................... 124
EXPERTS ................................................................... 130
LEGAL MATTERS ............................................................. 131
DOCUMENTS INCORPORATED BY
REFERENCE IN THIS JOINT
PROXY STATEMENT/PROSPECTUS ............................................. 131
WHERE YOU CAN FIND MORE
INFORMATION ............................................................ 131
OTHER MATTERS ............................................................. 132
Deadline for Veeco Annual Meeting Proxy
Proposals .............................................................. 132
Deadline for CVC Annual Meeting Proxy
Proposals .............................................................. 132
FINANCIAL STATEMENTS OF
CVC, INC. .............................................................. F-1
APPENDICES
Appendix A Merger Agreement
Appendix B CVC Stockholders Voting
Agreement and Form of Related CVC
Stockholders Power of Attorney and
Irrevocable Proxy
Appendix C Veeco Stockholders Voting
Agreement and Form of Related Veeco
Stockholders Power of Attorney and
Irrevocable Proxy
Appendix D Opinion of Lehman Brothers Inc.
Appendix E Opinion of Banc of America Securities
LLC
Appendix F Resolution Approving Amendment to Veeco's Amended
and Restated Certificate of Incorporation
iii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT TRANSACTIONS ARE PROPOSED?
A: Veeco will be acquiring CVC.
For a more complete description of the merger, see "The Merger" on page
37.
Q: WHAT WILL CVC STOCKHOLDERS RECEIVE IN THE MERGER?
A: As a result of the merger, CVC stockholders will receive 0.43 shares of
Veeco common stock in exchange for each share of their CVC common stock.
Instead of any fractional share of Veeco common stock, stockholders of CVC
will receive cash based on the closing market price of Veeco common stock
on the day before the merger. For example, if the merger is completed, a
holder of 101 shares of CVC common stock would receive 43 shares of Veeco
common stock and a check representing the value of the remaining 0.43
shares of Veeco common stock.
As a result of the merger, the former stockholders of CVC will be entitled
to receive a total of approximately 5,000,000 shares of Veeco common
stock. The number of shares of Veeco common stock issued to the former
stockholders of CVC will represent approximately 21.6% of Veeco common
stock outstanding after the merger (not including shares underlying
options and warrants).
Also, in connection with the merger, Veeco will assume CVC's outstanding
options. Accordingly, after completion of the merger, holders of options
to purchase CVC common stock will hold options to purchase shares of Veeco
common stock. Both the number of shares for which those options are
exercisable, and the exercise price payable under the option, will be
adjusted in a manner consistent with the 0.43 exchange ratio inherent in
the merger.
Veeco's and CVC's stock prices are volatile. We encourage you to obtain
current market quotations of Veeco common stock and CVC common stock.
For a more complete description of what CVC stockholders will receive in
the merger, see "The Merger Agreement - Merger Consideration" on page 65.
Q: DOES THE BOARD OF DIRECTORS OF CVC RECOMMEND THAT CVC STOCKHOLDERS VOTE IN
FAVOR OF THE TRANSACTION?
A: Yes. After careful consideration, CVC's Board of Directors unanimously
recommends that CVC's stockholders vote in favor of the merger agreement
and the merger.
For a more complete description of the recommendation of CVC's Board of
Directors, see "The Merger - CVC's Reasons For the Merger" on page 38,
and "The Merger - Recommendation of CVC's Board of Directors" on page 41.
Q: DOES THE BOARD OF DIRECTORS OF VEECO RECOMMEND THAT VEECO STOCKHOLDERS
VOTE IN FAVOR OF THE TRANSACTION?
A: Yes. After careful consideration, Veeco's Board of Directors unanimously
recommends that Veeco's stockholders vote in favor of the issuance of
shares of Veeco common stock in the merger and also unanimously recommends
that Veeco stockholders vote in favor of the proposed amendment to Veeco's
Amended and Restated Certificate of Incorporation.
iv
<PAGE>
For a complete description of the recommendation of Veeco's Board of
Directors, see "The Merger - Veeco's Reasons For the Merger" on page 39,
and "The Merger - Recommendation of Veeco's Board of Directors" on page
42.
Q: WHAT DO CVC STOCKHOLDERS AND VEECO STOCKHOLDERS NEED TO DO NOW?
A: Both Veeco stockholders and CVC stockholders should read this joint proxy
statement/prospectus carefully, including all of the Appendices that are
referred to herein and attached hereto. They should consider how the
transaction will affect them as a Veeco or CVC stockholder, as applicable.
They may also want to review the documents referenced in this joint proxy
statement/prospectus under "Where You Can Find More Information" on page
131.
Q: WHAT DO I DO IF I WANT TO CHANGE MY VOTE?
A: If you want to change your vote, deliver to the Secretary of CVC (if you
are a CVC stockholder) or to the Secretary of Veeco (if you are a Veeco
stockholder) a written notice of revocation of your proxy or a
later-dated, signed proxy card before the CVC special meeting or the Veeco
special meeting, as applicable.
For a more complete description of how to change your vote, see "The CVC
Special Meeting" on page 34 (if you are a CVC stockholder) and "The Veeco
Special Meeting" on page 35 (if you are a Veeco stockholder).
Q: WHAT IS THE TOTAL VALUE OF THE TRANSACTION AND WILL IT CHANGE BETWEEN NOW
AND THE TIME THE MERGER IS COMPLETED?
A: Based on the closing price of Veeco common stock on The Nasdaq National
Market on ______ __, 2000 and the number of shares of CVC common stock
outstanding on __________ __, 2000 (not including shares underlying
options and warrants), the total value of the Veeco common stock that
Veeco will issue in the merger will be about $___ million. The 0.43
exchange ratio is fixed, which means that it will not change, even if the
trading price of the Veeco common stock or of the CVC common stock
changes. Therefore, the market value of the Veeco common stock you will
receive in the merger will increase or decrease as the price of the Veeco
common stock increases or decreases.
Q: WHERE WILL THE NEW VEECO COMMON STOCK ISSUED TO CVC STOCKHOLDERS TRADE
AFTER THE MERGER?
A: The Veeco common stock CVC stockholders will receive in the merger will be
listed on The Nasdaq National Market.
Q: WHAT HAVE BEEN THE DIVIDEND POLICIES OF CVC AND VEECO?
A: Veeco and CVC do not pay cash dividends, and they do not expect to do so
in the foreseeable future.
Q: WHAT VOTE IS NEEDED FOR THE MERGER?
A: A majority of all of the CVC common stock outstanding must vote "FOR" the
merger at the CVC special meeting in order for the merger to be approved
by CVC's stockholders.
CVC stockholders who own about 52% of the outstanding CVC common stock
have agreed with Veeco that they will vote "FOR" the merger. These CVC
stockholders have granted irrevocable proxies to Veeco to vote their
shares in this manner. This effectively ensures that the CVC stockholder
vote required to approve and adopt the merger agreement and approve the
merger will be obtained, regardless of whether or how other CVC
stockholders vote their shares.
v
<PAGE>
A majority of the votes cast at Veeco's special meeting (including proxy
votes) must vote "FOR" the issuance of Veeco common stock in the merger in
order for the issuance of Veeco common stock in the merger to be approved
by Veeco's stockholders.
Q: WHAT VOTE IS NEEDED FOR THE PROPOSED AMENDMENT TO VEECO'S AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION?
A: The holders of a majority of the outstanding shares of Veeco common stock
must vote "FOR" the proposed amendment to Veeco's Amended and Restated
Certificate of Incorporation in order for that proposal to be approved by
Veeco's stockholders.
Q: WHAT HAPPENS IF A CVC STOCKHOLDER VOTES "AGAINST" BUT A MAJORITY OF THE
HOLDERS OF CVC COMMON STOCK VOTE "FOR" THE MERGER?
A: The merger will be approved, and that CVC stockholder will receive 0.43
shares of Veeco common stock for each share of CVC common stock such
stockholder holds when the merger is completed.
CVC stockholders holding approximately 52% of the outstanding shares of
CVC common stock have entered into a voting agreement with Veeco. Under
this voting agreement, they have agreed to vote their CVC shares in favor
of the merger and delivered irrevocable proxies empowering Veeco to vote
their CVC shares in this manner. These voting arrangements effectively
ensure that the merger will be approved by CVC's stockholders, whether or
not any other CVC stockholders vote to approve the merger.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE
MY SHARES FOR ME?
A: No. Your broker will vote your shares only if you provide instructions on
how to vote by following the information provided to you by your broker.
Q: SHOULD CVC STOCKHOLDERS SEND IN THEIR STOCK CERTIFICATES NOW?
A: No. After the merger is completed, CVC stockholders will receive a letter
of transmittal and other documentation from the exchange agent in the
merger, together with written instructions for exchanging their CVC stock
certificates for Veeco stock certificates.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working toward completing the merger as quickly as possible and
hope to complete the merger shortly after the CVC special meeting and
Veeco special meeting.
Q: WHOM SHOULD I CALL WITH QUESTIONS?
A: CVC stockholders should call CVC Investor Relations at (716) 458-2550
(x3217) with any questions about the merger.
Veeco stockholders should call Veeco Investor Relations at (516) 349-8300
(x1472) with any questions about the merger.
You may also obtain additional information about CVC and Veeco from
documents filed with the Securities and Exchange Commission by following
the instructions in the section entitled "Where You Can Find More
Information" on page 131.
vi
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This joint proxy statement/prospectus and the documents incorporated by
reference contain certain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements involve risks and uncertainties. Forward-looking statements include
statements including, without limitation, expectations about market conditions
or about market acceptance, expectations of future sales or gross profits,
possible or assumed future results of operations of Veeco and CVC and the
consolidation and integration of the merged companies. Forward-looking
statements relate to expectations concerning matters that are not historical
facts. Words or phrases such as "will likely result", "expect", "will continue",
"anticipate", "believes", "estimate", "intend", "plan", "project" or similar
expressions are intended to identify forward-looking statements. Actual results
may vary materially from those expressed in such forward-looking statements as a
result of various factors, including:
o The fact that these forward-looking statements are based on
information of a preliminary nature which may be subject to further
and continuing review and adjustment,
o The risk of a significant delay in the expected completion of, and
unexpected consequences resulting from, the merger,
o The risk that government authorities may impose unfavorable terms as
a condition of merger,
o The risk of favorable customer contracts expiring or being renewed
on less attractive terms,
o The cyclical nature of the data storage, optical telecommunications
and semiconductor industries,
o Risks associated with the acceptance of new products by individual
customers and by the marketplace,
o The financial condition of CVC's and Veeco's customers,
o Changes in foreign currency exchange rates,
o The inability of the parties to recognize the anticipated benefits
of the merger, and
o Matters set forth in this joint proxy statement/prospectus
generally.
Although each of Veeco and CVC believes that these forward-looking
statements are reasonable, neither can assure you that these expectations will
prove to be correct. Factors which could cause actual results to differ from
expectations also include those set forth under "Risk Factors" on page 12 of
this joint proxy statement/prospectus and elsewhere throughout this document and
the documents incorporated by reference.
Each of Veeco and CVC cautions you not to put undue reliance on any
forward-looking statement contained in this joint proxy statement/prospectus and
the documents incorporated by reference. Neither of Veeco or CVC has any
intention or obligation to update forward-looking statements after this document
is distributed, even if new information, future events or other circumstances
have made them incorrect or misleading.
vii
<PAGE>
- --------------------------------------------------------------------------------
JOINT PROXY STATEMENT/PROSPECTUS SUMMARY
This summary highlights selected information found in greater detail
elsewhere in this joint proxy statement/prospectus. This summary does not
contain all of the information that is important to you. To understand the
proposed merger fully and for a more complete description of the legal terms of
the proposed merger, we urge you to carefully read the entire document
(including the attached Appendices) and the documents to which we have referred
you before you decide how to vote. See "Where You Can Find More Information" on
page 131.
THE COMPANIES
CVC, INC.
525 Lee Road
Rochester, New York 14606
(716) 458-2550
CVC is a worldwide supplier of process equipment used in the manufacture
of magnetic recording heads for disk drives and advanced semiconductor devices
for computers and communications equipment. CVC's equipment either deposits or
removes thin film layers as steps in the process of manufacturing magnetic
recording heads and semiconductor devices. Since 1993, CVC has shipped more than
100 CONNEXION Cluster Tool systems, including more than 400 process modules.
CVC's customers include many of the leading manufacturers of magnetic recording
heads for the data storage industry such as Alps, Fujitsu, IBM, Read-Rite,
Seagate Technology and TDK, as well as manufacturers of semiconductor devices
such as Anadigics, Analog Devices, Honeywell and M/A-COM.
CVC was incorporated in Delaware in 1990 in connection with its
acquisition of CVC Products, Inc. CVC Products, Inc. was founded in 1934 as the
experimental vacuum processing group of Eastman Kodak.
VEECO INSTRUMENTS INC.
Terminal Drive
Plainview, New York 11803
(516) 349-8300
Veeco designs, manufactures, markets and services a broad line of
equipment primarily used by manufacturers in the data storage, optical
telecommunications and semiconductor industries. Veeco's metrology, or
measurement, equipment is primarily used to provide critical measurements such
as thickness, width, height, angle and roughness of certain features on thin
film magnetic heads used in hard disk drives, as well as on semiconductor
devices. This metrology equipment allows customers to monitor their products
throughout the manufacturing process in order to improve yields, reduce costs
and improve product quality. The process equipment products manufactured by
Veeco either deposit or remove various materials as an integral part of the
production of current and next generation thin film magnetic heads and
components for the optical telecommunications industry. Veeco sells its products
throughout the world to data storage, optical telecommunications and
semiconductor industry customers, including leading companies such as IBM,
Seagate and Read-Rite.
TERMS OF THE MERGER
For information on the terms of the merger in addition to the information
contained in this summary, see "The Merger" beginning on page 37 and "The
Merger Agreement" beginning on page 64.
The Agreement and Plan of Merger, dated February 29, 2000, among Veeco,
CVC and Acquisition (the "merger agreement") is attached as Appendix A to this
joint proxy statement/prospectus and is incorporated by reference. Veeco and CVC
encourage you to read the merger agreement carefully. It is the legal document
governing the merger.
THE CVC SPECIAL MEETING
DATE, TIME AND PLACE OF CVC SPECIAL MEETING
The CVC special meeting will be held at 9:30 a.m. (New York City time), on
April __, 2000, at the Corporate Center, 395 North Service Road, Lower
Auditorium, Melville, New York.
Purpose
The purpose of the CVC special meeting is to approve and adopt the merger
agreement and to approve the merger. CVC stockholders may also consider and vote
upon such other matters as may be properly brought
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
before the CVC special meeting or any adjournments or postponements of the CVC
special meeting.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of CVC common stock as of the close of business on
March 20, 2000 (the "CVC Record Date") are entitled to notice of, and to vote
at, the CVC special meeting. As of the CVC Record Date, there were approximately
___ CVC stockholders of record holding a total of approximately ______ shares of
CVC common stock.
On or about _______ __, 2000, this joint proxy statement/prospectus, which
includes a notice satisfying the requirements of Delaware law, is being mailed
to all CVC stockholders of record as of the CVC Record Date.
VOTE REQUIRED
In order for CVC to complete the merger, the holders of a majority of the
outstanding shares of CVC common stock must vote "FOR" approval and adoption of
the merger agreement and the approval of the merger.
THE VEECO SPECIAL MEETING
DATE, TIME AND PLACE OF VEECO SPECIAL MEETING
The Veeco special meeting will be held at 9:30 a.m. (New York City time),
on April ___, 2000, at the Corporate Center, 395 North Service Road, Lower
Auditorium, Melville, New York.
PURPOSE
The purpose of the Veeco special meeting is to approve the issuance of
shares of Veeco common stock in the merger. Veeco stockholders will also be
asked to vote upon a proposal to increase the number of shares of authorized
Veeco common stock from 25,000,000 to 40,000,000 shares. This increase will
provide additional shares of Veeco common stock to be used by Veeco in
connection with the merger, for future acquisitions, stock splits, stock
dividends and the raising of additional capital. Veeco stockholders may also be
asked to consider and vote upon such other matters as may properly be brought
before the Veeco special meeting and any adjournments or postponements of the
Veeco special meeting.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of Veeco common stock as of the close of business
on Monday, March 20, 2000 (the "Veeco Record Date") are entitled to notice of,
and to vote at, the Veeco special meeting. As of the Veeco Record Date, there
were approximately ___ Veeco stockholders of record holding a total of
approximately ______ shares of Veeco common stock.
On or about _______ __, 2000, this joint proxy statement/prospectus, which
includes a notice satisfying the requirements of Delaware law, is being mailed
to all Veeco stockholders of record as of the Veeco Record Date.
VOTE REQUIRED
In order for Veeco to complete the merger and issue shares of Veeco common
stock to CVC stockholders in the merger, the holders of a majority of the shares
of Veeco common stock present (by proxy or in person) and voting at the Veeco
special meeting must vote "FOR" approval of the issuance of shares of Veeco
common stock to CVC stockholders in the merger.
In order to approve the increase in the number of shares of authorized
Veeco common stock from 25,000,000 to 40,000,000 shares, the holders of a
majority of the outstanding shares of Veeco common stock entitled to vote at the
special meeting must vote "FOR" approval of the amendment to Veeco's Amended and
Restated Certificate of Incorporation providing for the increase.
REASONS FOR THE MERGER
VEECO'S REASONS FOR THE MERGER
You should review carefully the section entitled "The Merger - Veeco's
Reasons for the Merger", beginning on page 39, to understand Veeco's reasons for
entering into the merger agreement.
CVC'S REASONS FOR THE MERGER
You should review carefully the section entitled "The Merger - CVC's
Reasons for the Merger," beginning on page 38, to understand CVC's reasons for
entering into the merger agreement.
2
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
SHARE OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL HOLDERS
CVC
As of the CVC Record Date, the directors and executive officers of CVC, as
a group, held (together with their affiliates) approximately __% of the
outstanding shares of CVC common stock.
VEECO
As of the Veeco Record Date, the directors and executive officers of
Veeco, as a group, held (together with their affiliates) approximately __% of
the outstanding shares of Veeco common stock.
RECOMMENDATION OF CVC'S
BOARD OF DIRECTORS
CVC'S BOARD OF DIRECTORS HAS APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY AND HAS DETERMINED THAT THE MERGER IS
ADVISABLE AND FAIR TO, AND IN THE BEST INTERESTS OF, CVC AND ITS STOCKHOLDERS.
AFTER CAREFUL CONSIDERATION, CVC'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT CVC STOCKHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT
AND APPROVAL OF THE MERGER.
RECOMMENDATION OF VEECO'S
BOARD OF DIRECTORS
VEECO'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED THEREBY AND HAS DETERMINED THAT THE MERGER IS
ADVISABLE AND FAIR TO, AND IN THE BEST INTERESTS OF, VEECO AND ITS STOCKHOLDERS.
AFTER CAREFUL CONSIDERATION, VEECO'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT VEECO'S STOCKHOLDERS VOTE "FOR" APPROVAL OF THE ISSUANCE OF SHARES OF VEECO
COMMON STOCK IN THE MERGER. VEECO'S BOARD OF DIRECTORS ALSO UNANIMOUSLY
RECOMMENDS THAT VEECO'S STOCKHOLDERS VOTE "FOR" APPROVAL OF THE AMENDMENT TO
VEECO'S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER
OF AUTHORIZED SHARES OF VEECO COMMON STOCK FROM 25,000,000 TO 40,000,000 SHARES.
VOTING AND SOLICITATION
CVC
At the CVC special meeting, each CVC stockholder is entitled to one vote
for each share of CVC common stock such CVC stockholder holds. CVC's Restated
Bylaws provide that the holders of a majority of all of the CVC common stock
entitled to vote, whether present in person or represented by proxy, shall
constitute a quorum for the transaction of business at the CVC special meeting.
Shares that are voted "FOR," "AGAINST" or "ABSTAIN" with respect to a
matter are treated as being present at the CVC special meeting for the purposes
of establishing a quorum. For purposes of obtaining the required vote of a
majority of the outstanding shares of CVC common stock to approve and adopt the
merger agreement and to approve the merger, the effect of an abstention or a
broker non-vote is the same as a vote against the proposal.
All valid proxies received before the CVC special meeting will be voted.
All shares represented by a proxy will be voted, and where a stockholder
specifies by means of the proxy a choice ("FOR," "AGAINST" or "ABSTAIN") with
respect to any matter to be acted upon, the shares will be voted in accordance
with that specification. IF NO CHOICE IS INDICATED ON THE PROXY, THE SHARES WILL
BE VOTED IN FAVOR OF THE APPROVAL AND THE ADOPTION OF THE MERGER AGREEMENT AND
APPROVAL OF THE MERGER (OTHER THAN INSTANCES OF BROKER NON-VOTES, WHICH WILL NOT
BE VOTED).
The cost of solicitation to CVC stockholders will be borne by CVC. In
addition, CVC may reimburse brokerage firms, banks and other fiduciaries
representing beneficial owners of CVC common stock for expenses incurred in
forwarding solicitation materials to the beneficial owners. Proxies also may be
solicited by certain of CVC's directors, officers and regular employees,
personally or by telephone or telecopier. These persons will not receive
additional compensation, but may be reimbursed for reasonable out-of-pocket
expenses.
Veeco
At the Veeco special meeting, each Veeco stockholder is entitled to one
vote for each share of
3
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Veeco common stock such Veeco stockholder holds. Veeco's bylaws provide that the
holders of 50% of all of the Veeco common stock entitled to vote, whether
present in person or represented by proxy, shall constitute a quorum for the
transaction of business at the Veeco special meeting. Under applicable rules of
The Nasdaq National Market, if a quorum is present, the affirmative vote of a
majority of the votes cast, whether in person or by proxy, at Veeco's special
meeting is required to approve the issuance of shares of Veeco common stock
therein. Under Veeco's Amended and Restated Certificate of Incorporation, if a
quorum is present, the affirmative vote of the holders of a majority of the
outstanding Veeco common stock, whether in person or by proxy, at Veeco's
special meeting is required to approve the amendment to Veeco's Amended and
Restated Certificate of Incorporation to increase the number of authorized
shares of Veeco common stock from 25,000,000 to 40,000,000 shares.
Shares that are voted "FOR," "AGAINST" or "ABSTAIN" with respect to a
matter are treated as being present at the Veeco special meeting for the
purposes of establishing a quorum. The effect of an abstention or a broker
non-vote is the same as a vote against the proposal to approve the amendment to
Veeco's Amended and Restated Certificate of Incorporation.
All valid proxies received before the Veeco special meeting will be voted.
All shares represented by a proxy will be voted, and where a stockholder
specifies by means of the proxy a choice ("FOR," "AGAINST" or "ABSTAIN") with
respect to any matter to be acted upon, the shares will be voted on that matter
in accordance with that specification. IF NO CHOICE IS INDICATED ON THE PROXY,
THE SHARES WILL BE VOTED IN FAVOR OF THE ISSUANCE OF SHARES OF VEECO COMMON
STOCK IN THE MERGER AND IN FAVOR OF THE AMENDMENT TO VEECO'S AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF
SHARES OF VEECO COMMON STOCK FROM 25,000,000 TO 40,000,000.
The cost of solicitation to Veeco stockholders will be borne by Veeco.
Veeco has retained Georgeson Shareholder Communications Inc., or GSC, to solicit
proxies. GSC may contact Veeco stockholders by mail, telephone, telex, telegraph
and personal interviews. GSC will receive from Veeco a fee of $7,500 for its
services, plus reimbursement of out-of-pocket expenses. Veeco has agreed to
indemnify GSC against certain liabilities and expenses in connection with such
solicitation, including liabilities under the federal securities laws. In
addition, Veeco may reimburse brokerage firms, banks and other fiduciaries
representing beneficial owners of Veeco common stock for expenses incurred in
forwarding solicitation materials to the beneficial owners. Proxies also may be
solicited by certain of Veeco's directors, officers and regular employees,
personally or by telephone or telecopier. These persons will not receive
additional compensation, but may be reimbursed for reasonable out-of-pocket
expenses.
STOCKHOLDER VOTING ARRANGEMENTS
VOTING ARRANGEMENTS WITH CVC STOCKHOLDERS
Certain stockholders of CVC own approximately 52% of the outstanding
shares of CVC common stock. These CVC stockholders include certain CVC directors
and executive officers and Seagate Technology, Inc., CVC's biggest customer and
largest stockholder. These CVC stockholders have entered into a voting agreement
with Veeco under which they have agreed to vote their shares of CVC common
stock, together with any shares of CVC common stock that they may subsequently
acquire, in favor of the approval of the merger agreement and the merger. In
addition, these stockholders have agreed to vote against proposals or
transactions that would in any manner impede, frustrate, prevent or nullify the
merger or the merger agreement or any related transactions. However, such CVC
stockholders are not required to vote their shares against a CVC Acquisition
Proposal, as such term is defined on page 71, or in favor of the election of any
CVC director. These CVC stockholders have also granted proxies to Veeco to vote
all of their shares of CVC common stock in this manner. These proxies cannot be
revoked. Both the voting agreement and proxies of these CVC stockholders
terminate at the time of completion of the merger or upon the earlier
termination of the merger agreement in accordance with its terms.
These voting arrangements effectively ensure that the merger and the
merger agreement will be approved at the CVC special meeting whether or not
other CVC stockholders vote in favor of the merger.
4
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
The voting agreement between Veeco and these CVC stockholders, and the
form of the related irrevocable proxy granted to Veeco by each such CVC
stockholder are included as Appendix B to this joint proxy statement/prospectus.
For more information on these voting arrangements, see "Other Agreements -
Voting Arrangements with CVC Stockholders" on page 80.
VOTING ARRANGEMENTS WITH VEECO STOCKHOLDERS
Certain officers and directors of Veeco, including Edward H. Braun,
Veeco's President, Chairman and Chief Executive Officer, have entered into a
voting agreement with CVC under which they have agreed to vote their shares of
Veeco common stock, together with any shares of Veeco common stock that they may
subsequently acquire, in favor of the approval of the merger agreement, the
merger and the issuance of shares of Veeco common stock to CVC stockholders in
the merger. In addition, these stockholders have agreed to vote against
proposals or transactions that would in any manner impede, frustrate, prevent or
nullify the merger or the merger agreement or any related transactions. However,
such Veeco stockholders are not required to vote their shares against a Veeco
Acquisition Proposal, as such term is defined on page 72, or in favor of the
election of any Veeco director. These Veeco stockholders have also granted
proxies to CVC to vote all of their shares of Veeco common stock in this manner.
These proxies cannot be revoked. Both the voting agreement and proxies of these
Veeco stockholders terminate at the Effective Time or upon the earlier
termination of the merger agreement in accordance with its terms. These Veeco
stockholders include certain Veeco directors and executive officers.
The voting agreement between CVC and these Veeco stockholders, and the
form of the related irrevocable proxy granted to CVC by each such Veeco
stockholder are included as Appendix C to this joint proxy statement/prospectus.
For more information on these voting arrangements, see "Other Agreements -
Voting Arrangements with Veeco Stockholders" on page 81.
OPINION OF LEHMAN BROTHERS INC.
INDEPENDENT FINANCIAL ADVISOR TO CVC
In deciding to approve the merger, CVC's Board of Directors considered,
among other things, the opinion of Lehman Brothers Inc., its independent
financial advisor, that, as of the date of the merger agreement, the exchange
ratio offered to CVC stockholders in the merger was fair from a financial point
of view to CVC stockholders. The full text of the written opinion of Lehman
Brothers Inc., which sets forth assumptions made, matters considered and
limitations on the review undertaken in connection with the opinion, is attached
as Appendix D. You are urged to read this opinion in its entirety. LEHMAN
BROTHERS INC.'S OPINION IS DIRECTED TO THE CVC BOARD OF DIRECTORS, ADDRESSES
ONLY THE FAIRNESS OF THE EXCHANGE RATIO OFFERED TO CVC STOCKHOLDERS IN THE
MERGER FROM A FINANCIAL POINT OF VIEW, AND DOES NOT CONSTITUTE A RECOMMENDATION
TO ANY CVC STOCKHOLDER AS TO HOW SUCH CVC STOCKHOLDER SHOULD VOTE ON THE MERGER.
For more information, see "The Merger - Opinion of Lehman Brothers Inc.
Independent Financial Advisor to CVC" on page 42.
OPINION OF BANC OF AMERICA SECURITIES LLC
INDEPENDENT FINANCIAL ADVISOR TO VEECO
In deciding to approve the merger, Veeco's Board of Directors considered,
among other things, the opinion of Banc of America Securities LLC, its
independent financial advisor, that, as of the date Veeco's Board of Directors
approved the merger agreement, the exchange ratio in the merger was fair from a
financial point of view to Veeco. The full text of the written opinion of Banc
of America Securities LLC, which sets forth assumptions made, matters considered
and limitations on the review undertaken in connection with the opinion, is
attached as Appendix E. You are urged to read this opinion in its entirety. BANC
OF AMERICA SECURITIES LLC'S OPINION IS DIRECTED TO THE VEECO BOARD OF DIRECTORS,
ADDRESSES ONLY THE FAIRNESS OF THE EXCHANGE RATIO TO VEECO FROM A FINANCIAL
POINT OF VIEW, AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY VEECO STOCKHOLDER
AS TO HOW SUCH VEECO STOCKHOLDER SHOULD VOTE ON THE ISSUANCE OF SHARES OF VEECO
COMMON STOCK IN THE MERGER. For more information, see "The Merger - Opinion of
Banc of America Securities LLC Independent Financial Advisor to Veeco" beginning
on page 46.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering CVC's Board of Directors' recommendation that CVC
stockholders vote to approve the merger and the merger agreement, CVC
stockholders should note that certain officers and directors of CVC have
interests in the merger that are different from, or in
5
- --------------------------------------------------------------------------------
<PAGE>
addition to, their interests as CVC stockholders. These interests relate to
accelerated vesting of stock options, potential severance payments and
indemnification rights. Furthermore, options to purchase shares of CVC common
stock held by some directors of CVC will become immediately vested and
exercisable as a result of the merger. Also, Veeco has entered into an
employment agreement with Christine Whitman, who is currently the Chief
Executive Officer, President and Chairman of CVC and a CVC director. If the
merger is completed, Ms. Whitman will become Veeco's President and Chief
Operating Officer following the merger.
NO SOLICITATION
CVC
CVC has agreed not to directly or indirectly solicit, induce, encourage,
initiate or facilitate a CVC Acquisition Proposal. With respect to CVC
Acquisition Proposals, CVC has also agreed not to engage in negotiations or
discussions with respect to them, provide nonpublic information in connection
with them, enter into a contract or letter of intent with respect to them or
recommend or endorse them. However, if CVC receives an unsolicited written CVC
Acquisition Proposal that its Board of Directors reasonably determines in good
faith would be reasonably likely to result in a Superior CVC Proposal, as that
term is defined on page 71, then CVC can have discussions and take other actions
to become informed about that CVC Acquisition Proposal in certain circumstances.
These circumstances include that the CVC Board of Directors believes those
discussions and actions to be necessary to fulfill its fiduciary duties to CVC's
stockholders and has received written advice from its legal counsel, as well as
that CVC enters into specified confidentiality and "standstill" arrangements
with the person or entity making the CVC Acquisition Proposal. For more
information regarding CVC's agreements with Veeco relating to CVC Acquisition
Proposals, see "The Merger Agreement - No Solicitation - No Solicitation - CVC."
VEECO
Veeco has agreed not to directly or indirectly solicit, induce, encourage,
initiate or facilitate a Veeco Acquisition Proposal. With respect to Veeco
Acquisition Proposals, Veeco has also agreed not to engage in negotiations or
discussions with respect to them, provide nonpublic information in connection
with them, enter into a contract or letter of intent with respect to them or
recommend or endorse them. However, if Veeco receives an unsolicited written
Veeco Acquisition Proposal that its Board of Directors reasonably determines in
good faith would be reasonably likely to result in a Superior Veeco Proposal, as
that term is defined on page 73, then Veeco can have discussions and take other
actions to become informed about that Veeco Acquisition Proposal in certain
circumstances. These circumstances include that Veeco enters into specified
confidentiality and "standstill" arrangements with the person or entity making
the Veeco Acquisition Proposal. For more information regarding Veeco's
agreements with CVC relating to Veeco Acquisition Proposals, see "The Merger
Agreement - No Solicitation - No Solicitation - Veeco."
WHEN THE MERGER WILL OCCUR
Unless Veeco and CVC otherwise agree, the merger will take place no later
than the second business day after all of the conditions to closing of the
merger contained in the merger agreement have been satisfied or waived. Assuming
that both CVC and Veeco satisfy or waive all of the conditions in the merger
agreement, we anticipate that the merger will occur shortly after the CVC
special meeting and the Veeco special meeting. For more information on
regulatory matters and other conditions to the closing of the merger, see "The
Merger Agreement - Conditions to the Merger" on page 74. The time when the
merger is completed is referred to as the "Effective Time."
WHAT CVC STOCKHOLDERS WILL
RECEIVE IN THE MERGER
HOLDERS OF SHARES OF CVC COMMON STOCK
If the merger occurs, each CVC stockholder will receive 0.43 shares of
Veeco common stock for each share of CVC common stock they own at the Effective
Time of the merger. Veeco will not issue fractional shares of Veeco common stock
in exchange for shares of CVC common stock in the merger. Instead, Veeco will
issue an appropriate amount of cash in lieu of any fractional shares. This cash
amount will be based on the closing trading price of Veeco common stock on the
day before the merger.
6
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
CVC OPTIONS
Each option to purchase a share of CVC common stock will be assumed by
Veeco upon completion of the merger and will convert into an option to purchase
0.43 shares of Veeco common stock at an exercise price equal to the current
exercise price divided by 0.43. Generally, Veeco will assume each option to
purchase shares of CVC common stock in accordance with the terms of the stock
option plan or other arrangement under which the option was issued, but
converted as described above into an option to purchase shares of Veeco common
stock.
STOCK CERTIFICATES
CVC stockholders should NOT surrender their CVC stock certificates until
after the merger and until they receive a letter of transmittal and other
information and instructions on how to exchange shares. For information on
exchanging shares of CVC common stock for shares of Veeco common stock after the
merger, see "The Merger Agreement - Merger Consideration - Exchange of
Certificates" on page 65.
MATERIAL U.S. FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER
The receipt of shares of Veeco common stock in the merger generally will
be tax-free to CVC stockholders for U.S. federal income tax purposes, except for
tax on gain resulting from the receipt of cash instead of fractional shares. For
more information, see "The Merger - Material U.S. Federal Income Tax
Consequences of the Merger" on page 62.
TAX MATTERS ARE VERY COMPLICATED, AND THE TAX CONSEQUENCES OF THE MERGER
TO CVC STOCKHOLDERS WILL DEPEND ON THE FACTS OF THEIR OWN SITUATION. CVC AND
VEECO URGE CVC STOCKHOLDERS TO CONSULT THEIR OWN TAX ADVISOR AS TO THE SPECIFIC
TAX CONSEQUENCES OF THE MERGER TO THEM, INCLUDING THE APPLICABLE FEDERAL, STATE,
LOCAL AND FOREIGN TAX CONSEQUENCES.
NO APPRAISAL RIGHTS
In connection with the merger, stockholders of CVC are not entitled to
appraisal rights under Delaware law. See "The Merger Agreement - Merger
Consideration - No Appraisal Rights" on page 65.
CONDITIONS TO THE MERGER
VEECO AND ACQUISITION
Veeco and Acquisition will complete the merger only if a number of
conditions are either satisfied or waived by Veeco and Acquisition. These
include:
o CVC's representations and warranties set forth in the merger agreement are
true and correct as of the closing date of the merger, such that any
inaccuracies do not amount to a Material Adverse Effect, as that term is
defined on page 76, with respect to CVC.
o CVC performs certain covenants and obligations contained in the merger
agreement in all material respects.
o CVC's stockholders approve and adopt the merger agreement and approve the
merger.
o Veeco's stockholders approve the issuance of shares of Veeco common stock
in the merger.
o There has been no Material Adverse Effect with respect to CVC and there
exists no condition which could reasonably be expected to result in such a
Material Adverse Effect.
o PricewaterhouseCoopers LLP, independent public accountants to CVC,
delivers a letter to the effect that it is not aware of any fact
concerning CVC or its stockholders or affiliates that would preclude Veeco
from accounting for the merger as a "pooling of interests."
o Ernst & Young LLP, independent public accountants for Veeco, issues an
opinion that the merger can be accounted for as a "pooling of interests."
o No suit, action or other legal proceeding by any domestic governmental
authority or injunction or final judgment is pending before any court or
governmental authority seeking to restrain or prohibit or to obtain
damages or other relief in connection with the merger agreement or the
merger.
For more detailed information concerning the conditions to Veeco's and
Acquisition's obligations to complete the merger, see "The Merger Agreement -
Conditions to the Merger" on page 74.
CVC
CVC will complete the merger only if a number of conditions are either
satisfied or waived by CVC. These
7
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
include:
o Veeco's and Acquisition's representations and warranties set forth in the
merger agreement are true and correct as of the closing date of the
merger, such that any inaccuracies do not amount to a Material Adverse
Effect with respect to Veeco.
o Veeco and Acquisition perform certain covenants and obligations contained
in the merger agreement in all material respects.
o CVC's stockholders approve and adopt the merger agreement and approve the
merger.
o Veeco's stockholders approve the issuance of shares of Veeco common stock
in the merger.
o There has been no Material Adverse Effect with respect to Veeco and there
exists no condition which could reasonably be expected to result in such a
Material Adverse Effect.
o PricewaterhouseCoopers LLP, independent public accountants to CVC,
delivers a letter to the effect that it is not aware of any fact
concerning CVC or its stockholders or affiliates that would preclude Veeco
from accounting for the merger as a "pooling of interests."
o Ernst & Young, LLP, independent public accountants for Veeco issue an
opinion that the merger can be accounted for as a "pooling of interests."
o No suit, action or other legal proceeding by any domestic governmental
authority or injunction or final judgment is pending before any court or
governmental authority seeking to restrain or prohibit or to obtain
damages or other relief in connection with the merger agreement or the
merger.
For more detailed information concerning the conditions to CVC's
obligation to complete the merger, see "The Merger Agreement - Conditions to the
Merger" on page 74.
ACCOUNTING TREATMENT OF THE MERGER
The merger will be accounted for as a "pooling of interests" for financial
reporting and accounting purposes under generally accepted accounting
principles. After the merger, the results of operations of CVC will be included
in the consolidated financial statements of Veeco. For more information, see
"The Merger - Accounting Treatment of the Merger" on page 64.
AFFILIATE AGREEMENTS
CVC and Veeco have agreed to use all reasonable efforts to cause their
affiliates (which includes certain of their executive officers, directors and
principal stockholders) to enter into agreements before the date of the mailing
of this joint proxy statement/prospectus to CVC stockholders and Veeco
stockholders. These agreements would restrict the transfer of shares of CVC
common stock and Veeco common stock held by these affiliates in a manner that is
intended to preserve the availability of "pooling of interests" accounting for
the merger. Generally, among other things, a CVC or Veeco affiliate who executes
such an agreement will agree not to transfer any shares of Veeco common stock or
CVC common stock held by such affiliate for a 30-day period prior to the
Effective Time and until, after the Effective Time, Veeco has publicly announced
financial results covering at least 30 days of combined operations of CVC and
Veeco after the merger. Transfers of Veeco common stock or CVC common stock by
affiliates during this time period could cause "pooling of interests" accounting
for the merger to be unavailable. See "Risk Factors - Risks Related to the
Merger and Receipt of Veeco Stock - Loss of "Pooling of Interests" Accounting
Treatment Would Harm the Financial Results of the Combined Company" on page 13.
REGULATORY APPROVALS
The merger must comply with the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"). Veeco, CVC and certain other persons
have made the notifications required under the HSR Act and have furnished
certain information to the Federal Trade Commission and the Antitrust Division
of the Department of Justice. The waiting period under the HSR Act has expired
or been terminated. The merger must also comply with federal and state
securities laws. For more information concerning the HSR Act and antitrust
regulation of the merger, see "The Merger - Regulatory Filings and Approvals
Required to Complete the Merger" on page 64.
8
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
TERMINATION OF THE MERGER AGREEMENT
MUTUAL TERMINATION
Either Veeco or CVC may terminate the merger agreement at any time prior
to the Effective Time if:
o Veeco and CVC mutually consent.
o The merger is not completed by August 31, 2000.
o A court or other governmental authority issues a final and nonappealable
order, decree or ruling or takes other action, having the effect of
permanently restraining, enjoining or otherwise prohibiting the merger.
o A suit or action by a domestic governmental authority is pending that
seeks to restrain or prohibit or to obtain damages in connection with the
merger agreement or the merger.
o Veeco's stockholders do not approve the issuance of shares of Veeco common
stock in the merger.
o CVC's stockholders do not approve and adopt the merger agreement and
approve the merger.
TERMINATION BY CVC
CVC may terminate the merger agreement at any time prior to the Effective
Time, if:
o Veeco materially breaches its representations, warranties or covenants
under the merger agreement.
o A Material Adverse Effect occurs with respect to Veeco that is not
reasonably capable of being cured before August 31, 2000.
o A Veeco Triggering Event, as that term is defined on page 78, occurs.
TERMINATION BY VEECO
Veeco and Acquisition may terminate the merger agreement at any time prior
to the Effective Time if:
o CVC materially breaches its representations, warranties or covenants under
the merger agreement.
o A Material Adverse Effect occurs with respect to CVC that is not
reasonably capable of being cured before August 31, 2000.
o A CVC Triggering Event, as that term is defined on page 77, occurs.
o In the event of a Superior Veeco Proposal, as that term is defined on page
73.
For a more detailed discussion of the circumstances in which the merger
agreement can be terminated, see "The Merger Agreement - Termination of the
Merger Agreement" on page 76.
EXPENSES AND TERMINATION FEES
PAYMENT OF EXPENSES
CVC and Veeco will each pay their own fees and expenses in connection with
the merger, whether or not the merger is completed, except that CVC and Veeco
will share equally filing fees and printing expenses in connection with this
joint proxy statement/prospectus and the fees and expenses involved in
connection with the HSR Act filings and any other required foreign antitrust
filings.
If either Veeco or CVC terminates the merger agreement because the other
materially breaches its representations, warranties or covenants under the
merger agreement in a manner that permits termination of the merger agreement,
then the breaching party must pay the terminating party's fees and expenses
relating to the merger and the merger agreement.
Termination Fees
Veeco has agreed to pay CVC a $4.0 million termination fee if Veeco or CVC
terminates the merger agreement because Veeco's stockholders do not approve the
issuance of shares of Veeco common stock to CVC stockholders in the merger.
CVC has agreed to pay Veeco a termination fee of $14.6 million in the
following circumstances:
o Veeco or CVC terminates the merger agreement because CVC's stockholders do
not approve the merger agreement and the merger.
9
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
o Veeco terminates the merger agreement because a CVC Triggering Event has
occurred.
o CVC materially breaches its representations, warranties or covenants under
the merger agreement in a manner that permits termination of the merger
agreement at a time when a CVC Acquisition Proposal has been announced,
commenced, submitted or made.
Veeco has agreed to pay CVC a termination fee of $14.6 million in the
following circumstances:
o Veeco or CVC terminates the merger agreement because Veeco's stockholders
do not approve the issuance of Veeco common stock in the merger at a time
when a Veeco Acquisition Proposal has been announced, commenced, submitted
or made. In this case, the $14.6 million termination fee would be payable
by Veeco instead of the $4.0 million termination fee referred to above.
o Veeco terminates the merger agreement in the event of a Superior Veeco
Proposal.
o CVC terminates the merger agreement because a Veeco Triggering Event has
occurred.
For more information about the payment of expenses and termination fees,
see "The Merger Agreement - Fees and Expenses" on page 78.
RESTRICTIONS ON SELLING VEECO
COMMON STOCK RECEIVED IN THE MERGER
All shares of Veeco common stock received by CVC stockholders in
connection with the merger will be freely transferable, unless the holder is an
affiliate of CVC or Veeco under the Securities Act of 1933. For a more complete
description of transfer restrictions that apply to these affiliates, see "The
Merger - Resale of Veeco Common Stock Issued in the Merger" on page 61.
In addition, under applicable rules governing the availability of "pooling
of interests" accounting treatment for the merger, affiliates of Veeco and CVC
may not sell any shares of CVC common stock or Veeco common stock during the
period that starts 30 days before completion of the merger and ends when Veeco
publicly announces financial results covering at least 30 days of combined
operations of Veeco and CVC after the merger. Veeco and CVC have agreed to try
to cause their affiliates to enter into agreements restricting transfer of Veeco
common stock and CVC common stock during such periods. See "The Merger Agreement
- - Certain Covenants - Affiliate Agreements" on page 70 and "Risk Factors -
Risks Related to the Merger and Receipt of Veeco Stock - Loss of "Pooling of
Interests" Accounting Treatment for the Merger Would Harm the Financial Results
of the Combined Company" on page 13.
CERTAIN CVC PERSONS TO BECOME
VEECO DIRECTORS AND EXECUTIVE OFFICERS
Under the merger agreement, Veeco has agreed that Christine Whitman and
Douglas Kingsley will be appointed as directors of Veeco upon the completion of
the merger. Ms. Whitman is currently the Chairman, President and Chief Executive
Officer of CVC and a CVC director. Mr. Kingsley is currently a CVC director.
Also, upon the completion of the merger, Ms. Whitman will become the President
and Chief Operating Officer of Veeco under the terms of the employment agreement
that she entered into with Veeco at the time of the signing of the merger
agreement.
OWNERSHIP OF VEECO
FOLLOWING THE MERGER
Based upon the number of shares of CVC common stock outstanding on the CVC
Record Date, Veeco expects to issue a total of approximately 5,000,000 shares of
Veeco common stock to CVC stockholders in connection with the merger. That
number does not include shares of Veeco common stock that may be issued in the
future under CVC stock options assumed by Veeco in the merger. Based upon the
number of shares of Veeco common stock outstanding on the Veeco Record Date (not
including outstanding options or warrants), the former holders of CVC common
stock will hold approximately 21.6% of the total number of issued and
outstanding shares of Veeco common stock after completion of the merger.
Based upon the number of outstanding options to purchase shares of CVC
common stock as of the CVC Record Date, those CVC options will become options to
purchase an aggregate of approximately 950,000 shares of Veeco common stock in
connection with the merger. In addition, based upon the number of shares of CVC
common stock issuable upon the exercise of a warrant to purchase CVC common
stock held by Seagate Technology Inc., upon completion of the merger, that
warrant will become a warrant to purchase approximately 340,000 shares of the
Veeco common stock.
10
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Markets and Market Prices
Veeco common stock is listed on The Nasdaq National Market under the
symbol "VECO." CVC common stock is listed on The Nasdaq National Market under
the symbol "CVCI." After the completion of the merger, CVC common stock will
cease to be quoted on The Nasdaq National Market.
The following table sets forth (a) the closing sale price per share of
Veeco common stock as reported on The Nasdaq National Market, (b) the closing
sale price per share of CVC common stock as reported on The Nasdaq National
Market and (c) the equivalent per share price (as explained below) of CVC common
stock in each case, on February 28, 2000, the last trading day before Veeco and
CVC announced that they had signed the merger agreement, and on _____ __, 2000,
the most recent practicable date before the date of this joint proxy
statement/prospectus.
Equivalent
Veeco Share CVC Share CVC Per
Price Price Share Price(1)
------------------------------------------------
February 28, 2000....... $74.3125 $29.0 $31.9544
_____ __, 2000..........
- ----------
(1) The equivalent CVC per share price represents 0.43 of the price of one
share of Veeco common stock.
CVC and Veeco cannot guarantee or predict the actual trading prices of
shares of CVC common stock and shares of Veeco common stock before or at the
time the merger is completed. The trading prices for CVC common stock and Veeco
common stock have historically been volatile. For more information on this risk,
see "Risk Factors - Risks Related to the Merger and Receipt of Veeco Stock - The
Value CVC Stockholders Will Receive In the Merger is Uncertain Due to the Risks
Associated With a Fixed Exchange Ratio and Fluctuations in Veeco's Stock Price"
on page 12.
11
- --------------------------------------------------------------------------------
<PAGE>
RISK FACTORS
The merger will result in the stockholders of CVC becoming stockholders of
Veeco. You should carefully consider the following risk factors as well as the
other information contained and incorporated by reference in this joint proxy
statement/prospectus before deciding whether to vote to approve the merger or
the Veeco common stock issuance. This joint proxy statement/prospectus contains
forward-looking statements that involve known and unknown risks and
uncertainties. See the discussions of these forward-looking statements under
"Special Note Regarding Forward-Looking Statements" on page vii. The following
risk factors are cautionary statements that identify important factors that are
relevant to such forward-looking statements. These factors include risks and
uncertainties that could cause actual results to differ materially and adversely
from the results contained in such forward-looking statements.
RISKS RELATED TO THE MERGER AND RECEIPT OF VEECO STOCK
THERE ARE TECHNICAL, OPERATIONAL AND STRATEGIC CHALLENGES THAT MAY PREVENT
VEECO FROM SUCCESSFULLY INTEGRATING CVC WITH VEECO.
In order to realize the benefits of the merger, Veeco and CVC will have to
effectively integrate their operations and their management, technical research
and development, sales and marketing, business development efforts and personnel
and also retain key personnel in this process. If they are not successful in
accomplishing this integration, then the objectives of the merger, including
improved operating results of the combined entity, will not be realized. If the
integration is not successful or is unexpectedly delayed or more expensive than
contemplated by the parties, the combined company will not realize anticipated
benefits to the fullest extent possible. In addition, if the merger is not
consummated, then the attention and effort devoted to the integration of the two
companies will have significantly diverted the attention of both companies'
management from other important issues, and could have an adverse impact on
Veeco and CVC in the future.
If the merger is approved, the combined company will use common
information and communication systems, operating procedures, financial controls
and human resources practices. Veeco may encounter, among others, the following
difficulties, costs and delays in integrating these operations:
o Integrating the information and communications systems of Veeco and
CVC will be challenging, expensive and time consuming.
o Combining other operational systems such as customer service, will
be difficult.
o Veeco or CVC may lose key employees in the merger and the attention
of the management teams of each company may be diverted by the
merger from other ongoing business concerns.
o The business cultures of CVC and Veeco may be more difficult to
integrate than anticipated.
THE VALUE CVC STOCKHOLDERS WILL RECEIVE IN THE MERGER IS UNCERTAIN DUE TO
THE RISKS ASSOCIATED WITH A FIXED EXCHANGE RATIO AND FLUCTUATIONS IN VEECO'S
STOCK PRICE.
As of the time of the Merger, each outstanding share of CVC common stock
will be converted into the right to receive 0.43 shares of Veeco common stock.
Because this exchange ratio is fixed, it will not increase or decrease due to
fluctuations in the market price of the common stock of either Veeco or CVC. The
specific value of the shares of Veeco common stock to be received by CVC
stockholders in the merger will depend on the market price of the shares of
Veeco common stock at the time of the merger. We advise both Veeco stockholders
and CVC stockholders to obtain recent market quotations for Veeco common stock
and CVC common stock as the date of the CVC special meeting and the Veeco
special meeting approach for purposes of considering whether to vote in favor
12
<PAGE>
of or against the merger and the Veeco common stock issuance. The Veeco common
stock and the CVC common stock have historically been subject to substantial
price volatility. Veeco and CVC expect that the market prices of the Veeco
common stock and the CVC common stock will continue to fluctuate before the time
of the merger. For more information, see "Comparative Per Share Data" on page
32.
CERTAIN EXECUTIVE OFFICERS AND DIRECTORS OF CVC HAVE DIFFERENT INTERESTS
FROM, AND IN ADDITION TO, THOSE OF CVC STOCKHOLDERS. THESE INTERESTS MAY
INFLUENCE THEIR RECOMMENDATION OF OR VOTE FOR THE MERGER.
Certain directors and executive officers of CVC have interests in the
merger that are different from, or in addition to, those of CVC stockholders
generally. Because of these interests, these persons may be influenced to vote
in favor of or to recommend the merger. These interests include:
o Potential severance payments payable to executive officers of CVC
under certain circumstances following the merger.
o Options to purchase CVC common stock held by certain directors of
CVC will accelerate and become fully vested and exercisable upon the
completion of the merger.
o Directors and executive officers of CVC have customary rights to
indemnification against specified liabilities and, after the merger.
Veeco is required to keep these indemnification rights in place and
to maintain directors' and officers' liability insurance for these
persons for a period of six years.
o At the Effective Time, outstanding options to purchase shares of CVC
common stock, including those held by executive officers and
directors of CVC will be assumed by Veeco and converted into options
to purchase shares of Veeco common stock.
o Christine Whitman, the Chairman, President and Chief Executive
Officer of CVC has entered into an employment agreement with Veeco
and, at the Effective Time, will become Veeco's President and Chief
Operating Officer.
LOSS OF "POOLING OF INTERESTS" ACCOUNTING TREATMENT FOR THE MERGER WOULD
HARM THE FINANCIAL RESULTS OF THE COMBINED COMPANY.
If the merger does not qualify for "pooling of interests" accounting
treatment for financial reporting purposes, the future reported earnings of
Veeco would be harmed because Veeco will be required to record and amortize
goodwill and other intangible assets of CVC resulting from the merger. Such
accounting treatment will have the effect of reducing operating income, which
may harm the trading price of Veeco common stock. The availability of "pooling
of interests" accounting treatment for the merger depends in part upon
circumstances and events occurring after the completion of the merger. For
example, there must not be any significant changes in the business of Veeco,
including certain significant dispositions of assets, for a period of two years
following completion of the merger. Also, affiliates of CVC and Veeco must not
sell any shares of CVC's or Veeco common stock, except in specified limited
amounts, during the period that starts 30 days before completion of the merger
and ends when Veeco publicly announces financial results covering at least 30
days of combined operations of CVC and Veeco after the merger. If the Effective
Time of the merger occurs before May 31, 2000, Veeco expects that these combined
financial results would be published in July 2000, although Veeco cannot be
certain that this will be the case. If affiliates of Veeco or CVC sell shares of
Veeco's or CVC common stock in excess of a specified limited amount before that
time, the merger may not qualify for "pooling of interests" accounting. It is a
condition to Veeco's and CVC's obligation to close the merger that Ernst & Young
LLP, independent public accountants for Veeco, delivers its opinion that the
merger can be accounted for by Veeco as a "pooling of interests."
13
<PAGE>
FAILURE TO COMPLETE THE MERGER COULD HARM VEECO'S AND CVC'S FUTURE
BUSINESSES AND OPERATIONS AND CVC'S AND VEECO'S STOCK PRICES.
Veeco and CVC face a number of special risks if the merger is not
completed, including the following risks:
o If the merger agreement is terminated for some reasons, Veeco may be
required to pay CVC: (a) its fees and expenses in connection with
the merger, (b) a termination fee of $4.0 million or (c) a
termination fee of $14.6 million. The amount payable by Veeco
depends upon the circumstances under which the merger agreement is
terminated. See "The Merger Agreement - Fees and Expenses."
o If the merger agreement is terminated for some reasons, CVC may be
required to pay Veeco its fees and expenses in connection with the
merger or a termination fee of $14.6 million. Whether CVC must pay
Veeco's fees and expenses in connection with the merger or the
termination fee depends upon the circumstances under which the
merger agreement is terminated. See "The Merger Agreement - Fees and
Expenses."
o The price of Veeco or CVC stock may decline in the event that the
current market price reflects a market assumption that the merger
will be completed.
o Costs related to the merger, such as legal and accounting fees, SEC
filing fees and some financial advisor fees must be paid even if the
merger is not completed.
In addition, current and prospective employees of Veeco and CVC may
experience uncertainty about their future roles with the combined company, which
may hurt Veeco's and CVC's ability to attract and retain key management,
marketing, technical and administrative personnel. This may impede subsequent
integration of the companies.
CERTAIN CUSTOMERS MAY CURTAIL THEIR PURCHASES FROM THE COMBINED COMPANY.
As noted elsewhere in this "Risk Factors" section, the majority of both
Veeco's and CVC's revenues are derived from a relatively small number of large
customers. Some of these customers are common to both Veeco and CVC. Veeco and
CVC cannot assure you that one or more of these customers will not reduce their
total purchases from the combined company after the merger so that such
customer(s) will not be so dependent on a single supplier.
VEECO'S STOCK PRICE IS VOLATILE.
The stock market in general and the market for shares of technology
companies in particular have experienced extreme price fluctuations. These
fluctuations have often been unrelated to the operating performance of the
affected companies. Many companies in the data storage, semiconductor and
related equipment industries, including Veeco, have experienced dramatic
volatility in the market prices of their common stock. Veeco believes that a
number of factors, both within and outside Veeco's control, could cause the
price of Veeco common stock to fluctuate, perhaps substantially. These factors
include:
o Announcements of developments related to Veeco's business or Veeco's
competitors' or customers' businesses.
o Fluctuations in Veeco's financial results.
o General conditions or developments in the personal computer, data
storage, optical telecommunications or semiconductor industry.
14
<PAGE>
o Potential sales of Veeco common stock into the marketplace by Veeco
or its stockholders.
o Announcements of technological innovations or new or enhanced
products by Veeco or its competitors or customers.
o A shortfall in revenue, gross margin, earnings or other financial
results or changes in research analysts' expectations.
o The limited number of shares of Veeco common stock traded on a daily
basis.
Veeco cannot be certain that the market price of Veeco common stock will
not experience significant fluctuations in the future, including fluctuations
that are material, adverse and unrelated to Veeco's performance.
VEECO'S ORGANIZATIONAL DOCUMENTS HAVE ANTI-TAKEOVER PROVISIONS THAT MIGHT,
AMONG OTHER THINGS, DISCOURAGE, PREVENT OR DELAY A CHANGE OF CONTROL OF VEECO
THAT A HOLDER OF VEECO STOCK MIGHT CONSIDER IN ITS BEST INTEREST.
Veeco's Board of Directors has the authority to issue up to 500,000 shares
of "blank check" preferred stock and to fix the rights, preferences, privileges
and restrictions, including voting rights, of these shares without any further
vote or action by Veeco's stockholders. The rights of the holders of any
preferred stock that may be issued in the future may adversely affect the rights
of the holders of Veeco common stock. The issuance of the preferred stock, while
providing Veeco with desirable flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire a majority of Veeco's outstanding
voting stock. This could delay, defer or prevent a change of control of Veeco
that a holder of Veeco common stock might consider in its best interests.
Furthermore, such preferred stock may have other rights including economic
rights senior to Veeco common stock, and as a result, the issuance of the
preferred stock could have a material adverse effect on the market value of
Veeco common stock. Veeco has no present plan to issue shares of preferred
stock.
Veeco's Board of Directors is divided into three classes of directors with
staggered terms. Directors are elected to three-year terms and the term of one
class of directors expires each year. The existence of a classified Board of
Directors is designed to provide continuity and stability to Veeco's management,
which results from directors serving for three-year, rather than one-year terms.
The existence of a classified Board of Directors is also designed to render
certain hostile takeovers more difficult. The existence of a classified Board of
Directors may therefore have the effect of making it more difficult for a third
party to acquire control of Veeco in certain instances. This could delay, defer
or prevent a change of control that a holder of Veeco common stock might
consider in its best interest. Further, if Veeco stockholders are dissatisfied
with the policies and/or decisions of Veeco's Board of Directors, the existence
of a classified Board of Directors will make it more difficult for the
stockholders to change the composition (and therefore the policies) of Veeco's
Board of Directors in a relatively short period of time.
Furthermore, Veeco may in the future adopt other measures that may have
the effect of delaying, deferring or preventing a change in control of Veeco.
Certain of such measures may be adopted without any further vote or action by
the holders of Veeco common stock. In addition, certain other provisions of
Veeco's certificate of incorporation and by-laws relating to (a) actions
required to be taken at a meeting of stockholders and (b) the percentage of
stockholders required to call a special meeting of stockholders, may have
anti-takeover effects, which may delay, defer or prevent a takeover attempt that
a holder of Veeco common stock might consider in its best interest.
15
<PAGE>
VEECO'S SHARES ELIGIBLE FOR FUTURE SALE MAY, IF ISSUED, ADVERSELY AFFECT
VEECO'S STOCK PRICE.
Future sales of Veeco common stock in the public market, or the issuance
of shares of Veeco common stock upon the exercise of stock options, or
otherwise, could adversely affect the market price of Veeco common stock. The
shares of Veeco common stock issued in the merger will be freely transferable
without restrictions or registration under the Securities Act other than by
affiliates of Veeco or CVC who receive shares of Veeco common stock in the
merger. In addition, as of _______ __, 2000, there were _____ shares of Veeco
common stock reserved for issuance upon exercise of stock options. As of ______
__, 2000, options to purchase _____ of such shares were outstanding and options
to purchase _____ of such shares were fully vested and exercisable. In addition,
Veeco's employees are entitled to purchase shares under the Veeco Instruments
Inc. Employee Stock Purchase Plan. Veeco is authorized to issue up to an
additional 176,898 shares under that Employee Stock Purchase Plan. Any shares
purchased thereunder will be eligible for sale following the expiration of
applicable holding periods. Notwithstanding the foregoing, Veeco has a
securities trading policy which restricts Veeco's officers, directors and
employees from engaging in transactions involving Veeco's securities, including
the Veeco common stock, during certain specified periods.
In addition, certain Veeco stockholders, who hold in the aggregate
5,954,099 shares of Veeco common stock (not including shares of Veeco common
stock subject to stock options), are currently entitled to certain "piggy-back"
registration rights with respect to such shares. In addition, certain of such
holders are entitled to certain demand registration rights with respect to such
shares. If such holders, by exercising their registration rights, cause a large
number of shares to be registered and sold in the public market, such sales may
have an adverse effect on the market price for Veeco common stock.
RISK RELATED TO THE FAILURE OF VEECO'S STOCKHOLDERS TO APPROVE THE AMENDMENT TO
VEECO'S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION.
VEECO MAY BE DEEMED TO BE IN VIOLATION OF CONTRACTUAL ARRANGEMENTS
INCLUDING THE MERGER AGREEMENT.
If Veeco's stockholders do not approve the proposed amendment to Veeco's
Amended and Restated Certificate of Incorporation that provides for an increase
in the number of authorized shares of Veeco's common stock from 25,000,000 to
40,000,000 shares, Veeco would not have enough authorized shares to cover the
shares to be issued to CVC stockholders in the merger and to be reserved for
issuance upon the exercise of CVC stock options and CVC warrants to be assumed
by Veeco in the merger. In that case, Veeco could be deemed to be in violation
of contractual provisions in the merger agreement which, if deemed material,
could give rise to CVC's right to terminate the merger agreement. In the case of
such a termination by CVC, Veeco could be required to pay CVC's fees and
expenses incurred in connection with the merger agreement and the merger. In
addition, Veeco would not have shares of Veeco common stock available for use in
connection with the future acquisitions, for stock splits and stock dividends,
and for other corporate purposes, including the raising of additional capital.
RISKS RELATED TO VEECO
VEECO IS DEPENDANT ON THE MICROELECTRONICS INDUSTRY, WHICH INCLUDES THE
HIGHLY CYCLICAL DATA STORAGE, OPTICAL TELECOMMUNICATIONS AND SEMICONDUCTOR
INDUSTRIES.
Veeco's business depends in large part upon the capital expenditures of
data storage, semiconductor and optical telecommunications manufacturers which
accounted for the following percentages of Veeco's net sales for the periods
indicated:
Year Ended December 31,
-----------------------
1997 1998 1999
---- ---- ----
Data Storage .......................... 51.6% 52.8% 54.8%
16
<PAGE>
Semiconductor ......................... 19.3% 18.6% 12.1%
Optical Telecommunications ............ 3.0% 3.8% 8.3%
The data storage and semiconductor industries have been characterized by
cyclicality. These industries have experienced significant economic downturns at
various times in the last decade, characterized by diminished product demand,
accelerated erosion of average selling prices and production overcapacity. The
optical telecommunications industry is still in its early developmental stage,
but is expected to eventually experience cyclicality and periods of economic
downturn similar to those experienced by the data storage and semiconductor
industries.
VEECO'S QUARTERLY OPERATING RESULTS TEND TO FLUCTUATE SIGNIFICANTLY.
Veeco's quarterly results have fluctuated significantly in the past. Veeco
expects this trend to continue. Factors which affect Veeco's quarterly results
include:
o Specific economic conditions in the data storage and semiconductor
industries.
o The timing of significant orders.
o Shipment delays.
o Specific feature requests by customers.
o The introduction of new products by Veeco and its competitors.
o Production and quality problems.
o Changes in the cost of materials.
o Disruption in sources of supply.
o Seasonal patterns of capital spending by customers.
o A downturn in the market for personal computers or other products
incorporating data storage and semiconductor technology.
o Market acceptance of Veeco's systems and its customers' products.
Many of these factors are beyond Veeco's control. If Veeco's net sales
levels in a particular quarter do not meet expectations, its operating results
will be adversely affected, which may have an adverse impact on Veeco's stock
price.
VEECO OPERATES IN AN INDUSTRY THAT IS SUBJECT TO RAPID TECHNOLOGICAL
CHANGE.
The data storage, optical telecommunications and semiconductor
manufacturing industries are subject to rapid technological change and new
product introductions and enhancements. Veeco's ability to remain competitive
will depend in part upon its ability to develop in a timely and cost effective
manner new and enhanced systems at competitive prices and to accurately predict
technology transitions. In addition, new product introductions or enhancements
by Veeco's competitors could cause a decline in sales or loss of market
acceptance of our existing products. Increased competitive pressure could also
lead to intensified price competition resulting in lower margins. This could
materially and adversely affect Veeco's business, financial condition and
results of operations. Veeco's
17
<PAGE>
success in developing, introducing and selling new and enhanced systems depends
upon a variety of factors, including:
o Veeco's product offerings.
o Timely and efficient completion of product design and development.
o Timely and efficient implementation of manufacturing processes.
o Effective sales, service and marketing.
o Product performance in the field.
Because new product development commitments must be made well in advance
of sales, new product decisions must anticipate both the future demand for the
products under development and the equipment required to produce such products.
Veeco cannot be certain that it will be successful in selecting, developing,
manufacturing and marketing new products or in enhancing existing products.
VEECO'S LIMITED SALES BACKLOG LEADS TO UNCERTAINTY AS TO WHETHER VEECO
WILL MEET ITS SALES OBJECTIVE FOR A PARTICULAR QUARTER. OPERATING RESULTS MAY BE
ADVERSELY AFFECTED BY ISSUES RELATING TO TIMING OF REVENUE RECOGNITION.
Veeco's backlog at the beginning of a quarter typically does not include
all sales required to achieve Veeco's sales objective for that quarter.
Moreover, all customer purchase orders are subject to cancellation or
rescheduling by the customer, generally with limited or no penalties. Therefore,
backlog at any particular date is not necessarily representative of actual sales
for any following period. Veeco's net sales and operating results for a quarter
may depend upon orders it obtains for systems to be shipped in the same quarter
that the order is received. In addition, Veeco derives a substantial portion of
its net sales in any fiscal period from the sale of a relatively small number of
high-priced systems. As a result, the timing of recognition of revenue for a
single transaction could have a material adverse effect on Veeco's sales and
operating results. Veeco's business and financial results for a particular
period could be materially and adversely affected if an anticipated order for
even one system is not received in time to permit shipping during the period.
VEECO CANNOT ENSURE THAT IT WILL CONTINUE TO COMPETE EFFECTIVELY IN A
HIGHLY COMPETITIVE INDUSTRY.
Veeco's served industries are intensely competitive. Established
companies, both domestic and foreign, compete with each of Veeco's product
lines. Many of Veeco's competitors have greater financial, engineering,
manufacturing and marketing resources than Veeco does. A substantial investment
is required by customers to install and integrate capital equipment into a
production line. As a result, once a manufacturer has selected a particular
vendor's capital equipment, Veeco believes that the manufacturer generally
relies upon that equipment for the specific production line application and
frequently will attempt to consolidate its other capital equipment requirements
with the same vendor. Accordingly, if a particular customer selects a
competitor's capital equipment, Veeco expects to experience difficulty in
selling to that customer for a significant period of time. Veeco believes that
its ability to compete successfully depends on a number of factors both within
and outside of Veeco's control, including:
o Price.
o Product quality.
o Breadth of product line.
18
<PAGE>
o System performance.
o Cost of ownership.
o Global technical service and support.
o Success in developing or otherwise introducing new products.
Veeco cannot be certain that it will be able to compete successfully in
the future.
VEECO DEPENDS ON ITS PRINCIPAL CUSTOMERS FOR A HIGH PERCENTAGE OF ITS
SALES. THE LOSS OF ALL OR A SIGNIFICANT PORTION OF SALES TO A PRINCIPAL CUSTOMER
COULD ADVERSELY AFFECT VEECO.
Veeco relies on its principal customers for a significant portion of its
sales. Veeco's principal customers include International Business Machines
Corporation, or IBM, Seagate Technology, Inc. and Read-Rite Corp. The following
table sets forth the approximate percentage of Veeco's net sales to these
principal customers for the periods indicated:
Year Ended December 31,
----------------------------------
1997 1998 1999
---- ---- ----
Seagate ........................... 14% 10% 14%
IBM ............................... 6% 17% 10%
Read-Rite ......................... 11% 7% 7%
Next five top
customers ......................... 12% 11% 14%
If Veeco lost a major customer, or a significant portion of its sales to any
major customer, it could adversely affect Veeco's results of operations. Veeco's
ability to increase sales in the future will depend in part upon its ability to
obtain orders from new customers. Veeco cannot be certain that it will be able
to do so. In addition, a relatively small number of large manufacturers, many of
whom are Veeco's customers, dominate the data storage industry and, to a lesser
extent, the semiconductor industry. If any of these large manufacturers
discontinues its relationship with Veeco or suffers economic setbacks, Veeco's
results of operations could be materially and adversely affected.
SALES TO INTERNATIONAL MARKETS MAKE UP A SIGNIFICANT PORTION OF VEECO'S
TOTAL REVENUES. VEECO'S OPERATING RESULTS COULD BE ADVERSELY AFFECTED BY
ECONOMIC DOWNTURNS IN FOREIGN MARKETS.
Veeco's net sales to foreign customers represented approximately 43% of
Veeco's total net sales in 1997, 51% in 1998 and 54% in 1999. Veeco expects net
sales to foreign customers will continue to represent a large percentage of its
total net sales. International sales are subject to various risks, including:
o Changes in foreign currency exchange rates.
o Political and economic instability.
o The greater difficulty of administering business abroad.
o The need to comply with a wide variety of foreign and U.S. export
laws and regulatory requirements.
19
<PAGE>
Veeco's net sales denominated in foreign currencies represented
approximately 6% of Veeco's total net sales in 1997, 12% in 1998 and 12% in
1999. Veeco generally has not engaged in foreign currency hedging transactions.
PATENTS AND OTHER INTELLECTUAL PROPERTY.
Veeco's success depends in part on its proprietary technology. Although
Veeco attempts to protect its intellectual property rights through patents,
copyrights, trade secrets and other measures, it cannot be certain that it will
be able to protect its technology adequately or that Veeco's competitors will
not be able to develop similar technology independently. Veeco cannot be certain
that others will not independently develop similar products, duplicate Veeco's
products or, if patents have been issued to Veeco, design around Veeco's
patents, nor can Veeco be certain that it can meaningfully protect its trade
secrets. In addition, Veeco cannot be certain that it will not be sued by third
parties alleging that Veeco has infringed their patents or other intellectual
property rights. If any third party sues Veeco, Veeco's business, results of
operations or financial condition could be materially and adversely affected.
Veeco has been notified by some of its customers that they have either
received notices of infringement from, or been named as defendants in lawsuits
filed by, the Lemelson Medical, Education & Research Foundation, Limited
Partnership. According to these customers, Lemelson has alleged that the
manufacture of certain products by these customers and/or the equipment used to
manufacture those products infringes certain patents held by Lemelson. These
customers have requested that Veeco indemnify and defend them for any
infringement by Veeco of the patents owned by Lemelson. Based on Veeco's review
of the products it sold to these customers, Veeco does not believe it will have
significant liability for any such infringement; however, Veeco cannot be
certain that it will not be determined to have significant liability, and if so,
Veeco's business, results of operations or financial condition could be
materially and adversely affected.
VEECO RELIES HEAVILY ON ITS KEY PERSONNEL. THE LOSS OF KEY PERSONNEL AND,
IN PARTICULAR, THE LOSS OF EDWARD H. BRAUN, VEECO'S CHAIRMAN, PRESIDENT AND CEO,
COULD HARM VEECO'S OPERATING RESULTS.
Veeco's future success depends in part on its ability to attract and
retain qualified management, technical, sales and support personnel for its
operations. Competition for such personnel is intense. Specifically, the success
of Veeco's business will be dependent upon the continued services of Edward H.
Braun, its Chairman, Chief Executive Officer and President. If Mr. Braun's
services were no longer available to Veeco, its future operations could be
materially and adversely affected. In connection with the merger, Christine
Whitman, the current Chairman, Chief Executive Officer and President of CVC,
will replace Mr. Braun as Veeco's President. Mr. Braun will, however, continue
to be the Chairman and Chief Executive Officer of Veeco. Currently, none of
Veeco's key personnel is subject to a long-term employment agreement or an
agreement not to compete with Veeco. Accordingly, Veeco cannot be certain that
it will be able to retain key personnel in the future. Failure to retain key
personnel could have an adverse effect on Veeco's operations. Ms. Whitman has
entered into a three year employment contract with Veeco which includes
noncompetition provisions. This employment contract is described in greater
detail under "The Merger - Interests of Directors and Executive Officers of CVC
in the Merger - Whitman Employment Agreement" on page 61.
VEECO INTENDS TO CONTINUE TO GROW THROUGH MERGERS AND ACQUISITIONS. IF
VEECO CANNOT IDENTIFY SUITABLE ACQUISITION CANDIDATES AND INTEGRATE ACQUISITIONS
SUCCESSFULLY, ITS OPERATIONS COULD BE HARMED.
An important element of Veeco's growth strategy has been and continues to
be the merger with and acquisition of businesses that complement, enhance or
geographically expand Veeco's existing business segments or product lines. Veeco
can give you no assurance, however, that it will be able to (a) maintain its
recent growth rate through mergers and acquisitions, (b) identify suitable
acquisition candidates and acquire such companies on favorable terms, (c)
successfully integrate acquired businesses into Veeco's existing operations or
realize the
20
<PAGE>
intended benefits of such acquisitions, or (d) retain sales representatives and
key employees previously associated with acquired businesses. To complete future
mergers or acquisitions, Veeco may issue a significant number of shares of Veeco
common stock and/or incur significant additional indebtedness, which could have
a dilutive effect on Veeco's earnings or the book value per share of Veeco
common stock.
RISKS RELATED TO CVC
A SIGNIFICANT AMOUNT OF CVC'S REVENUES IS RECORDED LATE IN EACH QUARTER.
CVC MAY BE UNABLE TO ADJUST SPENDING QUICKLY ENOUGH TO COMPENSATE FOR SHORTFALLS
IN QUARTERLY REVENUES, AND AS A RESULT CVC'S OPERATING RESULTS COULD BE
ADVERSELY AFFECTED.
CVC has historically recorded a significant amount of its revenues for
each quarter late in the quarter, while its expenses have been incurred more
evenly throughout the period. The concentration of product shipments late in the
quarter is primarily due to customer order patterns and the length of CVC's
production cycle. This concentration increases the risk of shipment delays and,
consequently, the risk that quarterly revenue expectations will not be met.
CVC's revenues for a particular period could be materially reduced if an
anticipated order for even one system is not received in time to permit shipment
during that period. In addition, a significant portion of CVC's expenses is
relatively fixed.
CVC also has limited visibility on revenues for future quarterly periods
and faces risks of revenue shortfalls due to its limited sales backlog in
current periods. If the number of systems CVC actually ships, and thus the
amount of revenues CVC is able to record, late in any particular quarter is
below expectations for any reason, the adverse effect may be magnified by CVC's
inability to adjust spending quickly enough to compensate for the revenue
shortfall.
THE SUCCESS OF CVC'S BUSINESS DEPENDS ON THE DEMAND FOR PRODUCTS FROM DATA
STORAGE AND SEMICONDUCTOR MANUFACTURERS, WHOSE INDUSTRIES ARE HIGHLY CYCLICAL.
CVC's business depends in large part upon the demand for products from
data storage and semiconductor manufacturers. The data storage and semiconductor
industries accounted for the following percentages of our net sales for the
periods indicated:
Year Ended
September 30,
----------------------
1997 1998 1999
---- ---- ----
Data Storage ...................... 88% 77% 85%
Semiconductor ..................... 9% 21% 9%
The data storage and semiconductor industries have been characterized by
cyclicality. These industries have experienced significant economic downturns at
various times in the last decade, characterized by slowing product demand,
inventory surpluses, accelerated erosion of average selling prices and
production overcapacity. In the recent past, these downturns have materially
reduced demand for the type of capital equipment and process technology that CVC
offers. In addition, because of (1) CVC's continuing need to invest in research
and development, (2) CVC's substantial capital equipment requirements and (3)
CVC's extensive ongoing customer service and support requirements worldwide,
CVC's ability to reduce expenses in response to any downturn or slowdown in the
rate of capital investment by manufacturers in these industries may be limited.
In the recent past, the data storage and semiconductor industries have
experienced inventory oversupply and poor operating results. CVC's business
could be harmed if slowdowns in the rate of capital investment or inventory
surpluses in the data storage and semiconductor industries occur in the future.
21
<PAGE>
CVC'S EFFORTS TO EXPAND ITS SALES TO THE OPTICAL TELECOMMUNICATIONS
INDUSTRY MAY NOT SUCCEED.
CVC views its efforts to expand its sales to the optical
telecommunications industry as an important part of its growth strategy. Such
efforts may not succeed. To the extent that future growth in this area is not as
rapid as hoped, CVC's results of operations or financial condition could be
adversely affected.
CVC'S REVENUES AND PROFITS MAY DECREASE IF IT LOSES ANY OF ITS MAJOR
CUSTOMERS.
CVC's customer base is highly concentrated among a limited number of large
customers, primarily because the data storage industry is dominated by a small
number of large companies. In particular, purchases by Seagate Technology, have
historically accounted for a significant portion of CVC's revenues. The loss of
any of these customers, and the loss of Seagate in particular, could result in a
material decrease in CVC's revenues.
The following table sets forth the percentage of CVC's total revenues
derived from sales to its five largest customers, as well as Seagate on a
stand-alone basis, for the periods indicated:
Year Ended
September 30,
----------------------
1997 1998 1999
---- ---- ----
Five Largest Customers ................... 79% 71% 79%
Seagate Technology ....................... 47% 31% 34%
CVC anticipates that its revenue will continue to depend on a limited
number of major customers, although the companies considered to be major
customers and the percentage of CVC's revenue represented by each major customer
may vary from quarter to quarter.
CVC generally does not have long-term purchase agreements with its
customers and does not have any written agreements that require customers to
purchase fixed minimum quantities of its products. CVC's sales to specific
customers tends to vary significantly from year to year depending upon
customers' budgets for capital expenditures and new product introductions. The
loss of, or reduced demand for products or related services from, any of CVC's
major customers could harm its business. If any of these large manufacturers
discontinues its relationship with CVC or suffers economic downturns, CVC's
operating results could suffer.
IF CVC DOES NOT RESPOND EFFECTIVELY AND ON A TIMELY BASIS TO RAPID
TECHNOLOGICAL CHANGE, CVC'S ABILITY TO ATTRACT AND MAINTAIN CUSTOMERS COULD BE
DIMINISHED.
The data storage and semiconductor manufacturing industries are subject to
rapid technological change and new product introductions and enhancements, as
well as evolving industry standards. CVC's ability to remain competitive will
depend in part upon its ability to develop new and enhanced systems at
competitive prices in a timely and cost-effective manner and to accurately
predict technology transitions. In addition, new product introductions or
enhancements by CVC's competitors could cause a decline in sales or loss of
market acceptance of its existing products. Increased competitive pressure could
also lead to intensified price competition, resulting in lower margins, which
could adversely impact CVC's business.
Because new product development commitments must be made well in advance
of sales, new product decisions must anticipate both the future demand for the
products under development and the equipment required to produce new products.
New product development, as well as the introduction of new products, may also
require us to increase CVC's research and development and marketing
expenditures. CVC cannot be certain that it will be successful in developing,
manufacturing and marketing new products or in enhancing existing products.
22
<PAGE>
CVC OPERATES IN AN EXTREMELY COMPETITIVE MARKET, AND, IF CVC FAILS TO
COMPETE EFFECTIVELY, ITS BUSINESS MAY BE HARMED.
The data storage and semiconductor capital equipment industries are
intensely competitive. Established companies, both domestic and foreign, compete
with each of CVC's product lines. Many of CVC's competitors have greater
financial, engineering, manufacturing and marketing resources than CVC does. A
substantial investment is required by customers to evaluate, test, select and
integrate capital equipment into a production line. As a result, once a
manufacturer has selected a particular vendor's capital equipment, CVC believes
that the manufacturer generally relies upon that equipment for the specific
production line application and frequently will attempt to consolidate its other
capital equipment requirements with the same vendor. Accordingly, if a
particular customer selects a competitor's capital equipment, CVC expects to
experience difficulty in selling to that customer for a significant period of
time. CVC believes that its ability to compete successfully depends on a number
of factors both within and outside of CVC's control, including:
o Price.
o Product quality.
o Breadth of product line.
o System performance.
o Cost of ownership.
o Global technical service and support.
o Success in developing or otherwise introducing new products.
CVC cannot be certain that it will be able to compete successfully in the
future.
THE SUCCESS OF CVC'S BUSINESS DEPENDS ON CONTINUED MARKET ACCEPTANCE OF
CVC'S CONNEXION CLUSTER TOOL SYSTEM.
CVC's principal product is a line of capital equipment known as the
CONNEXION Cluster Tool system which, together with its associated process
modules, is used to manufacture magnetic recording heads and semiconductor
devices. CVC believes that continued future growth depends in large part upon
its ability to gain increased customer acceptance for its CONNEXION Cluster Tool
system and related technology.
The following table sets forth the percentage of CVC's net sales derived
from sales of the CONNEXION Cluster Tool systems for the periods indicated:
Year Ended
September 30,
----------------------
1997 1998 1999
---- ---- ----
CONNEXION Cluster Tool system ............ 85% 83% 71%
Continued acceptance of CVC's CONNEXION Cluster Tool system will depend on
factors, including:
o Cost of ownership.
23
<PAGE>
o Performance and reliability.
o Ability to manufacture on a successful and timely basis.
o Availability of customer support.
If CVC fails to continually enhance the CONNEXION Cluster Tool system, the
future marketplace acceptance of that product could be diminished. CVC cannot
assure you that it will be successful in obtaining increased market acceptance
of the CONNEXION Cluster Tool system or any future enhanced version of the
system. If CVC fails to gain sufficient customer acceptance for this system,
CVC's business could be harmed.
CVC HAS INVESTED SIGNIFICANT RESOURCES IN THE DEVELOPMENT OF ADVANCED
COPPER DEPOSITION TECHNOLOGY. IF CVC FAILS TO SUCCESSFULLY DEVELOP ADVANCED
COPPER DEPOSITION PROCESSES THAT ARE ACCEPTED BY THE MARKETPLACE, CVC'S
PROFITABILITY COULD BE DIMINISHED.
To date, CVC has invested significantly, and expects to continue investing
significantly, in the development of advanced copper deposition technology for
high performance integrated circuit fabrication for the semiconductor market.
Currently, CVC expects that in fiscal 2000, approximately 20% of its research
and development budget will be dedicated to the development of its copper
deposition technology. The development of this technology is emerging and highly
complex and the market for equipment incorporating this technology is not
expected to reach commercial viability until after 2000. Recently, several
semiconductor device manufacturers have announced that they have made
advancements in copper-based technology. These and other competitors with
substantially greater resources than those of CVC are investing in research and
development of similar technologies and may achieve market acceptance of their
products before CVC. CVC cannot assure you that its efforts in this area will be
technologically successful or, even if technologically successful, will be
commercially accepted by the marketplace. If CVC fails to achieve commercial
success in its pursuit of copper-based technology for the semiconductor
industry, its profitability could be diminished.
SALES TO INTERNATIONAL MARKETS CONSTITUTE A SIGNIFICANT AND GROWING
PORTION OF CVC'S TOTAL REVENUES. CVC'S OPERATING RESULTS COULD BE HARMED BY
ECONOMIC DOWNTURNS IN FOREIGN MARKETS AND CVC'S DEPENDENCE ON INTERNATIONAL
SALES REPRESENTATIVES.
An increasing portion of CVC's revenues in recent years has been derived
from sales in international markets. International sales are subject to various
risks.
The following table sets forth for the periods indicated the percentage of
CVC's total revenues derived from sales to customers located outside of the
United States:
Year Ended
September 30,
----------------------
1997 1998 1999
---- ---- ----
Non-U.S. Customers ..................... 31% 38% 53%
CVC intends to continue to expand its operations outside the United States
and enter additional international markets, which will require significant
management attention and financial resources. International business presents
additional risks, including:
o Periodic recessions in foreign economies as they impact CVC's
particular sector.
o The risk of government-financed competition.
24
<PAGE>
o Changes in trade policies and tariff regulations.
o Worldwide political and economic instability.
o Difficulties in obtaining U.S. export licenses and managing
businesses abroad.
CVC's international sales are denominated in U.S. dollars. As a result,
changes in the value of foreign currencies relative to the value of the U.S.
dollar can render CVC's products comparatively more expensive. Although CVC has
not been significantly negatively impacted in the past by foreign currency
changes in Japan, Korea, Taiwan and Europe, these conditions could negatively
impact CVC's international sales in future periods. Further, CVC's international
sales are made primarily through several independent sales representatives and a
third-party distributor. CVC cannot be certain that they will continue to market
and distribute CVC's products successfully, if at all. CVC's implementation of
new distribution and sales arrangements could result in delays and disruptions
in its international sales and customer support efforts, which could reduce
CVC's sales, damage its reputation and adversely impact its business.
THE LOSS OF ANY KEY PERSONNEL COULD ADVERSELY IMPACT CVC'S ABILITY TO MEET
CUSTOMER AND TECHNOLOGICAL DEMANDS.
Because of CVC's need for employees with both executive and advanced
technical skills, CVC depends in significant part upon the continued
contributions of its officers and key personnel. CVC's key personnel are
critical to its success, and many of them would be difficult to replace. Many of
CVC's employees are not bound by long-term employment or noncompetition
agreements, and competitors in the high technology industry in which CVC
competes may attempt to recruit them. The loss of CVC's officers or other key
personnel could cause its business to suffer.
CVC MAY HAVE DIFFICULTY ATTRACTING AND RETAINING QUALIFIED PERSONNEL,
WHICH COULD ADVERSELY IMPACT CVC'S ABILITY TO EXECUTE ITS BUSINESS STRATEGY.
The competition for personnel throughout CVC's industry can be
significant. Because of this competition for qualified labor, CVC has
occasionally experienced delays in meeting its staffing requirements. CVC's
future success will depend on its ability to attract and retain qualified
technical, marketing and management personnel, particularly highly skilled
design, process and test engineers. The market for personnel with these skills
has become intensely competitive, particularly in California where there has
been a significant increase in the business activities of other companies in the
data storage and semiconductor manufacturing sectors.
Any protracted inability on CVC's part to recruit, train and retain
adequate numbers of qualified personnel could adversely affect its ability to
manufacture, sell and support its products, which could harm CVC's business.
CVC HAS A LENGTHY SALES CYCLE WHICH MAY INCREASE ITS EXPOSURE TO CUSTOMER
CANCELLATIONS OR DELAYS IN ORDERS.
Sales of CVC's systems depend, in significant part, upon the decision of
an existing or prospective customer to add new manufacturing capacity or to
expand existing manufacturing capacity, both of which involve a significant
capital commitment. CVC may experience delays in finalizing system sales
following initial system qualification while the customer evaluates and receives
approvals for the initial purchase of our systems. In general, for new customers
or applications CVC's sales cycle could take 12 to 18 months to complete. During
this time, CVC may expend substantial funds and management effort. Lengthy sales
cycles subject CVC to a number of significant risks, including inventory
obsolescence and fluctuations in operating results over which CVC has little or
no control.
25
<PAGE>
PROTECTION OF CVC'S INTELLECTUAL PROPERTY RIGHTS MAY RESULT IN COSTLY
LITIGATION.
There has been substantial litigation regarding patent and other
intellectual property rights in the data storage, semiconductor and related
industries. CVC has been, and may in the future be, notified of allegations that
it may be infringing intellectual property rights possessed by others. In the
future, protracted litigation and expense may be incurred if necessary to defend
CVC against alleged infringement of third party rights. Any litigation of this
type, even if CVC is ultimately successful in its defense, could result in
substantial cost and diversion of time and effort by CVC's management, which by
itself could have a negative impact on CVC's business. Adverse determinations in
that litigation could:
o Result in CVC's loss of proprietary rights.
o Subject CVC to significant liabilities, including treble damages in
some instances.
o Require CVC to seek licenses from third parties, which licenses may
not be available on reasonable terms or at all.
o Prevent CVC from manufacturing or selling its products.
Any of these outcomes could harm CVC's business.
CVC'S SUCCESS DEPENDS, IN PART, ON INTELLECTUAL PROPERTY WHICH MAY BE
DIFFICULT TO PROTECT, AND THE LOSS OF WHICH COULD AFFECT CVC'S ABILITY TO
COMPETE EFFECTIVELY.
CVC believes that its success depends, in part, on its ability to obtain
and protect patents protecting its proprietary technology. As of December 31,
1999, CVC had obtained 16 U.S. patents and had 29 U.S. patent applications
pending. In addition, CVC had obtained two foreign patents from the United
Kingdom and had 13 foreign patent applications pending on its behalf as of that
date.
CVC cannot assure you that:
o Pending patent applications or any future applications will be
approved.
o Any patents will provide CVC with competitive advantages or will not
be challenged by third parties.
o The patents of others will not have an adverse effect on CVC's
ability to do business.
CVC cannot assure you that others will not independently develop similar
products, duplicate CVC's products or, if patents are issued to CVC, design
around these patents. In addition, CVC may be forced to expend time and
resources on protracted litigation to defend its intellectual property rights
against third parties. Further, because patents may afford less protection under
foreign law than is available under U.S. law, CVC cannot assure you that any
foreign patents issued to it will adequately protect CVC's proprietary rights.
In addition to patent protection, CVC also relies upon trade secret
protection, employee and third-party nondisclosure agreements and other
intellectual property protection methods to protect its confidential and
proprietary information. Despite these efforts, CVC cannot be certain that:
o Others will not independently develop substantially equivalent
proprietary information and techniques.
26
<PAGE>
o Others will not otherwise gain access to CVC's trade secrets.
o Others will not disclose CVC's technology.
o CVC can meaningfully protect its trade secrets.
CVC DEPENDS ON A LIMITED NUMBER OF SUPPLIERS, AND IN SOME CASES SOLE
SUPPLIERS. ANY DISRUPTION OR TERMINATION OF THESE SUPPLY CHANNELS MAY HARM CVC'S
BUSINESS.
CVC purchases components, subassemblies and services from a limited number
of suppliers and occasionally from a single source. Disruption or termination of
these sources could occur, and these disruptions could have at least a temporary
adverse effect on CVC's operations. A prolonged inability on CVC's part to
obtain components included in our systems could adversely impact CVC's sales or
its ability to attract and maintain customers.
27
<PAGE>
SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED AND COMBINED FINANCIAL DATA
The selected historical consolidated financial data of Veeco as of and for
the years ended December 31, 1995 through 1999 have been derived from its
audited historical consolidated financial statements and notes thereto, which as
of December 31, 1999 and 1998 and for the years ended December 31, 1997 through
1999 are incorporated by reference herein, and should be read in conjunction
with such financial statements and notes thereto. The selected historical
consolidated financial data of CVC as of and for the years ended September 30,
1995 through 1999 have been derived from its audited historical consolidated
financial statements and notes thereto, which as of September 30, 1999 and 1998
and for the years ended September 30, 1997 through 1999 are included elsewhere
herein, and should be read in conjunction with such financial statements and
notes thereto. The selected historical consolidated financial data of CVC as of
December 31, 1999 and for the three months ended December 31, 1999 and 1998 have
been derived from its unaudited historical consolidated financial statements
which are included elsewhere herein and should be read in conjunction with such
financial statements and notes.
The selected unaudited pro forma combined financial data give effect to
the merger under the "pooling of interests" method of accounting. The unaudited
pro forma combined financial data are based on the historical consolidated
financial statements and notes thereto (as applicable) of Veeco and CVC which
are included or incorporated by reference herein. The unaudited combined balance
sheet assumes the merger took place on December 31, 1999 and combines Veeco's
December 31, 1999 consolidated balance sheet with CVC's December 31, 1999
unaudited consolidated balance sheet. The unaudited pro forma combined
statements of income assumes that the merger took place on January 1, 1997, and
combine Veeco's consolidated statements of income for the years ended December
31, 1999, 1998 and 1997 with CVC's consolidated statements of operations for the
years ended September 30, 1999, 1998 and 1997, respectively.
The unaudited pro forma combined financial data is derived from the
unaudited pro forma combined financial statements included elsewhere herein and
should be read in conjunction with those statements and notes thereto. See
"Unaudited Pro Forma Combined Financial Statements." The unaudited pro forma
combined financial data is presented for illustrative purposes only and is not
necessarily indicative of the combined financial position or results of
operations of future periods or the results that actually would have been
realized had CVC and Veeco been a single entity during these periods.
28
<PAGE>
VEECO INSTRUMENTS INC. AND SUBSIDIARIES
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------------------------------------------
1999 1998 1997 1996 1995
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statement of income data (1):
Net sales ..................... $ 246,606 $ 214,985 $ 223,410 $ 170,829 $ 128,796
Cost of sales ................. 125,650 115,441 113,487 86,324 63,914
--------------------------------------------------------------------
Gross profit .................. 120,956 99,544 109,923 84,505 64,882
Costs and expenses ............ 83,944 71,928 68,955 50,400 40,793
Merger and reorganization
expenses ...................... 2,600(2) 7,500(3) 2,250(4) -- --
Loss on sale of leak detection
business ...................... 2,500 -- -- -- --
Write-off of purchased
in-process technology ......... 1,300 -- 4,200 -- --
--------------------------------------------------------------------
Operating income .............. 30,612 20,116 34,518 34,105 24,089
Interest (income) expense, net (1,784) 1,007 122 (236) 249
--------------------------------------------------------------------
Income before income taxes .... 32,396 19,109 34,396 34,341 23,840
Income tax provision .......... 11,986 5,736 7,780 7,067 2,590
--------------------------------------------------------------------
Net income .................... $ 20,410 $ 13,373 $ 26,616 $ 27,274 $ 21,250
====================================================================
Earnings per share:
Net income per common share ... $ 1.17 $ .83 $ 1.67 $ 1.73 $ 1.39
Diluted net income per common
share ......................... $ 1.15 $ .82 $ 1.62 $ 1.70 $ 1.36
Pro Forma Income Tax
Presentation (5):
Income before income taxes .... N/A $ 19,109 $ 34,396 $ 34,341 $ 23,840
Pro forma income tax provision N/A 7,190 12,987 13,089 7,147
--------------------------------------------------------------------
Pro forma net income .......... N/A $ 11,919 $ 21,409 $ 21,252 $ 16,693
====================================================================
Pro forma net income per common
share ......................... N/A $ 0.74 $ 1.35 $ 1.35 $ 1.09
Pro forma diluted net income
per common share .............. N/A $ 0.73 $ 1.30 $ 1.33 $ 1.07
Weighted average shares
outstanding ................... 17,381 16,136 15,901 15,760 15,259
Diluted weighted average shares
outstanding ................... 17,768 16,396 16,417 15,999 15,577
<CAPTION>
As of December 31,
--------------------------------------------------------------------
1999 1998 1997 1996 1995
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data (1):
Cash, cash equivalents and
short-term
Investments ............... $ 80,306 $ 23,493 $ 20,825 $ 26,640 $ 20,913
Working capital ............... 149,873 87,073 70,483 63,030 50,361
Excess of cost over net assets
acquired, net ................. 5,509 4,187 4,318 4,448 4,579
Total assets .................. 265,279 179,231 165,951 117,997 97,284
Long-term debt (including
current installments) ......... 16,994 18,797 19,367 12,007 11,944
Shareholders' equity .......... 192,351 115,739 96,147 73,525 60,127
</TABLE>
- ----------
(1) In November 1999, Veeco merged with Ion Tech, Inc., in a transaction
accounted for as a "pooling of interests." Prior to its merger with Veeco,
Ion Tech's fiscal year end was June 30. In connection with the merger, the
financial results of Ion Tech were recast for 1998 to conform to Veeco's
December 31 year end. For the years ended 1997, 1996 and 1995, Veeco's
historical results include Ion Tech's fiscal year ended June 30, 1998,
1997 and 1996 results, respectively. As a result, six months of 1998 Ion
Tech activity are included in Veeco's 1997 results of operations as well
as Veeco's 1998 results of operations.
(2) During 1999, Veeco recorded a $2.6 million charge for merger related
expenses consisting of legal and other transaction costs in connection
with the merger with Ion Tech.
(3) In May 1998, Veeco merged with Digital Instruments, Inc., in a transaction
accounted for as a "pooling of interests." Merger expenses related to the
Digital merger were comprised of transaction fees and expenses of $3.3
million and a $1.6 million non-cash compensation charge related to stock
issued in accordance with a pre-existing agreement with a key Digital
employee. Reorganization expenses consisted of $0.5 million for
termination benefit costs, $0.7 million for an estimated loss on a future
sublease of an abandoned office and manufacturing facility, $0.9 million
for write-downs of long-lived assets held for sale or disposal, and $0.5
million for other costs. See Note 2 to the consolidated financial
statements of Veeco for the year ended December 31, 1999 incorporated by
reference herein.
(4) In June 1997, Veeco merged with Wyko Corporation, in a transaction
accounted for as a "pooling of interests." During 1997, Veeco recorded a
$2.3 million charge for merger-related expenses consisting of investment
banking, legal and other transaction costs in connection with the merger
with Wyko.
(5) Before Veeco's May 1998 merger with Digital, Digital had elected "S"
corporation status for income tax purposes and, therefore, was not subject
to federal income taxes. As a result of the merger, Digital's "S"
corporation election was terminated. Pro forma net income and pro forma
earnings per share present income taxes as if Digital had been a "C"
corporation for all periods presented and therefore, subject to federal
income taxes at the corporate level.
29
<PAGE>
CVC, INC. SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
December 31, Years ended September 30,
-------------------- ---------------------------------------------------------
1999 1998 1999 1998 1997 1996 1995
-------------------- ---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Income Data:
Net sales .......................... $ 25,216 $ 14,655 $ 82,915 $ 68,173 $ 62,588 $ 48,378 $ 21,358
Cost of sales ...................... 15,505 8,249 50,502 42,019 41,286 33,755 15,630
-------- -------- -------- -------- -------- -------- --------
Gross profit ....................... 9,711 6,406 32,413 26,154 21,302 14,623 5,728
Costs and expenses ................. 8,494 5,181 27,533 23,787 17,207 11,247 5,585
In-process R&D write-off ........... -- -- 1,174 -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Operating income ................... 1,217 1,225 3,706 2,367 4,095 3,376 143
Interest and other income (expense),
net ................................ (277) (326) (198) (1,154) (593) (197) (559)
Write-off of deferred charges ...... -- -- -- (675) -- -- --
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes .. 940 899 3,508 538 3,502 3,179 (416)
Income tax provision (benefit) ..... 395 419 1,937 274 1,457 -- (546)
-------- -------- -------- -------- -------- -------- --------
Net income ......................... $ 545 $ 480 $ 1,571 $ 264 $ 2,045 $ 3,179 $ 130
======== ======== ======== ======== ======== ======== ========
Earnings per Share:
Net income per common share ........ $ 0.07 $ 0.45 $ 1.01 $ 0.26 $ 2.67 $ 4.32 $ 0.18
Diluted net income per common share 0.05 0.07 0.18 0.04 0.29 0.46 0.02
Weighted average shares outstanding 7,346 1,058 1,561 1,021 765 735 735
Diluted weighted average shares
outstanding ........................ 11,903 7,318 8,589 7,070 6,992 6,914 5,302
<CAPTION>
As of
December 31, As of September 30,
---------- -----------------------------------------------------
1999 1999 1998 1997 1996 1995
---------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents ....... $ 4,171 $ 434 $ 106 $ 2,161 $ 730 $ 3,157
Working capital ................. 38,889 22,104 10,904 9,259 8,816 5,429
Total assets .................... 77,278 75,917 42,764 43,833 31,837 23,554
Short term borrowings and current
portion of long-term debt ..... 1,040 13,217 5,689 2,295 894 188
Long-term debt, less current
portion ....................... 7,346 8,493 11,379 5,309 5,635 3,528
Preferred stock ................. -- 19,895 10,040 10,040 10,040 10,040
Common stockholders' equity
(deficit) ..................... 49,114 11,698 1,940 1,388 (721) (3,857)
Total stockholders' equity ...... 49,114 31,593 11,980 11,428 9,319 6,183
</TABLE>
30
<PAGE>
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
(Dollars in thousands, except per share data)
Year ended December 31,
----------------------------------
1999 1998 1997
----------------------------------
Statement of income data: (unaudited)
Net sales ................................. $ 329,521 $ 283,158 $ 285,998
Cost of sales ............................. 176,152 157,460 154,773
----------------------------------
Gross profit .............................. 153,369 125,698 131,225
Costs and expenses ........................ 111,477 95,715 86,162
Merger and reorganization expenses ........ 2,600 7,500 2,250
Loss on sale of leak detection business ... 2,500 -- --
Write-off of purchased in-process
technology ................................ 2,474 -- 4,200
----------------------------------
Operating income .......................... 34,318 22,483 38,613
Interest and other (income) expense, net .. (1,586) 2,836 715
----------------------------------
Income before income taxes ................ 35,904 19,647 37,898
Income tax provision ...................... 13,923 6,010 9,237
----------------------------------
Net income ................................ $ 21,981 $ 13,637 $ 28,661
==================================
Earnings per share:
Net income per common share ............... $ 1.22 $ .82 $ 1.77
Diluted net income per common share ....... $ 1.02 $ .70 $ 1.48
Pro forma income tax presentation:
Income before income taxes ................ N/A $ 19,647 $ 37,898
Pro forma income tax provision ............ N/A 7,464 14,444
----------------------------------
Pro forma net income ...................... N/A $ 12,183 $ 23,454
==================================
Pro forma net income per common share ..... N/A $ 0.74 $ 1.45
Pro forma diluted net income per common
share ..................................... N/A $ 0.63 $ 1.21
Weighted average shares outstanding ....... 18,052 16,575 16,230
Diluted weighted average shares
outstanding ............................... 21,461 19,436 19,424
As of
December 31, 1999
-----------------
(unaudited)
Balance Sheet Data:
Cash, cash equivalents and short-term investments .......... $ 84,477
Working capital ............................................ 175,762
Excess of cost over net assets acquired, net ............... 5,559
Total assets ............................................... 342,557
Long-term debt (including current installments) ............ 25,380
Shareholders' equity ....................................... 228,465
31
<PAGE>
COMPARATIVE PER SHARE DATA
(Unaudited)
The following table sets forth (i) certain historical per share data of
Veeco and CVC; (ii) unaudited pro forma combined per share data of Veeco and
CVC, and (iii) unaudited equivalent pro forma per share data of CVC, in the case
of the presentations referred to in clauses (ii) and (iii), after giving effect
to the merger on a "pooling of interests" basis at a conversion ratio in the
merger of 0.43 shares of Veeco common stock for each share of CVC common stock.
This data should be read in conjunction with the selected historical
consolidated financial data, the historical consolidated financial statements of
Veeco and CVC and the notes thereto which are included or incorporated by
reference in this joint proxy statement/prospectus. The pro forma combined and
equivalent pro forma financial data are not necessarily indicative of the
operating results or financial position that would have been achieved had the
merger been consummated at the beginning of the periods presented, and should
not be construed as indicative of future operations. Neither Veeco nor CVC has
ever declared or paid cash dividends on its shares of capital stock.
Fiscal Years
------------
1999 1998 1997
---- ---- ----
Historical Veeco:
Net income per share (1) ..................... $ 1.17 $.83 $1.67
Diluted net income per share (2) ............. $ 1.15 $.82 $1.62
Book value per share (3) ..................... $10.91 -- --
Historical Veeco Pro Forma Income Tax
Presentation:
Net income per share (4) ..................... N/A $.74 $1.35
Diluted net income per share (5) ............. N/A $.73 $1.30
Historical CVC:
Net income per share (6) ..................... $ 1.01 $.26 $2.67
Diluted net income per share (7) ............. $ .18 $.04 $ .29
Book value per share (8) ..................... $ 4.23 -- --
Pro Forma Combined:
Net income per share (9) ..................... $ 1.22 $.82 $1.77
Diluted net income per share (10) ............ $ 1.02 $.70 $1.48
Book value per share (11) .................... $10.10 -- --
Pro Forma Combined Income Tax Presentation:
Net income per share (12) .................... N/A $.74 $1.45
Diluted net income per share (13) ............ N/A $.63 $1.21
Equivalent Pro Forma CVC:
Net income per share (14) .................... $ .52 $.35 $ .76
Diluted net income per share (15) ............ $ .44 $.30 $ .63
Book value per share (16) .................... $ 4.34 -- --
- ----------
(1) The historical net income per share of Veeco is based upon the weighted
average number of shares of Veeco common stock outstanding for each
period.
(2) The historical diluted net income per share of Veeco is based upon the
weighted average number of shares of Veeco common stock and equivalent
shares outstanding for each period.
(3) The historical book value per share of Veeco is computed by dividing
stockholders' equity by the number of shares of Veeco common stock
outstanding at the end of the period.
32
<PAGE>
(4) The historical Veeco pro forma income tax presentation net income per
share is based upon the weighted average number of shares of Veeco common
stock outstanding for each period and includes provisions for income
taxes, based upon the statutory rates in effect during the periods
presented, as if Digital was a "C" corporation for periods prior to its
acquisition by Veeco in 1998.
(5) The historical Veeco pro forma income tax presentation diluted net income
per share is based upon the weighted average number of shares of Veeco
common stock and equivalent shares outstanding for each period and
includes provisions for income taxes, based upon the statutory rates in
effect during the periods presented, as if Digital was a "C" corporation
for the periods prior to its acquisition by Veeco in 1998.
(6) The historical net income per share of CVC is based upon the weighted
average number of shares of CVC common stock outstanding for its fiscal
years ended September 30, 1999, 1998 and 1997.
(7) The historical diluted net income per share of CVC is based upon the
weighted average number of shares of CVC common stock and equivalent
shares outstanding for its fiscal years ended September 30, 1999, 1998 and
1997.
(8) The historical book value per share of CVC is computed by dividing
stockholders' equity (unaudited) at December 31, 1999 by the number of
shares of CVC common stock outstanding.
(9) The pro forma combined net income per share is based upon the pro forma
weighted average number of shares of (i) Veeco common stock outstanding
for each period and (ii) CVC common stock outstanding for each period
multiplied by the conversion ratio of 0.43.
(10) Pro forma combined diluted net income per share is based upon the pro
forma weighted average number of shares and equivalent shares of (i) Veeco
common stock outstanding for each period and (ii) CVC common stock
outstanding for each period multiplied by the conversion ratio of 0.43.
(11) The pro forma combined book value per share is computed by dividing pro
forma stockholders' equity by the sum of the number of shares of (i) Veeco
common stock outstanding at the end of the period and (ii) CVC common
stock outstanding at the end of the period multiplied by the conversion
ratio of 0.43.
(12) The pro forma combined income tax presentation net income per share is
based upon the pro forma weighted average number of shares of (i) Veeco
common stock outstanding for each period and (ii) CVC common stock
outstanding for each period multiplied by the conversion ratio of 0.43,
and includes provisions for income taxes, based upon the statutory rates
in effect during the periods presented, as if Digital was a "C"
corporation for the periods prior to its acquisition by Veeco in 1998.
(13) The pro forma combined income tax presentation diluted net income per
share is based upon the pro forma weighted average number of shares and
equivalent shares of (i) Veeco common stock outstanding for each period
and (ii) CVC common stock outstanding for each period multiplied by the
conversion ratio of 0.43, and includes provisions for income taxes, based
upon the statutory rates in effect during the periods presented, as if
Digital was a "C" corporation for the periods prior to its acquisition by
Veeco in 1998.
(14) The equivalent pro forma net income per share of CVC is computed by
multiplying pro forma combined net income per share by the conversion
ratio of 0.43.
(15) Equivalent pro forma diluted net income per share of CVC is computed by
multiplying pro forma combined diluted net income per share by the
conversion ratio of 0.43.
(16) The equivalent pro forma book value per share of CVC is computed by
multiplying the pro forma combined book value per share by the conversion
ratio of 0.43.
33
<PAGE>
THE CVC SPECIAL MEETING
DATE, TIME AND PLACE OF CVC SPECIAL MEETING
The CVC special meeting will be held at 9:30 a.m. (New York City time), on
____________ April___, 2000, at the Corporate Center, 395 North Service Road,
Lower Auditorium, Melville, New York.
PURPOSE
The purpose of the CVC special meeting is to approve and adopt the merger
agreement and to approve the merger. CVC stockholders may also be asked to
consider and vote upon such other matters as may be properly brought before the
CVC special meeting or any adjournments or postponements of the CVC special
meeting.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of CVC common stock as of the CVC Record Date are
entitled to notice of, and to vote at, the CVC special meeting. As of the CVC
Record Date, there were approximately ___ CVC stockholders of record holding an
aggregate of approximately __ shares of CVC common stock.
On or about __________ __, 2000, this joint proxy statement/prospectus,
which includes a notice satisfying the requirements of Delaware law, is being
mailed to all CVC stockholders of record as of the CVC Record Date.
VOTING AND SOLICITATION
At the CVC special meeting, each stockholder is entitled to one vote for
each share of CVC common stock held. Under the Delaware General Corporation Law
(the "DGCL"), the holders of a majority of the outstanding shares of CVC common
stock must vote "FOR" approval and adoption of the merger agreement and approval
of the merger in order for the merger agreement and the merger to be approved by
CVC's stockholders. In addition, CVC's Restated Bylaws provide that the presence
of the holders of a majority of all of the CVC common stock entitled to vote,
whether present in person or represented by proxy, shall constitute a quorum for
the transaction of business at the CVC special meeting.
Shares of CVC common stock that are voted "FOR," "AGAINST" or "ABSTAIN"
with respect to a matter are treated as being present at the CVC special meeting
for purposes of establishing a quorum. For purposes of obtaining the required
vote of a majority of the outstanding shares of CVC common stock to approve and
adopt the merger agreement and to approve the merger, the effect of an
abstention or a broker non-vote is the same as a vote against the proposal.
The holders of approximately 52% of CVC's outstanding common stock have
entered into a voting agreement with Veeco, under which they have agreed to vote
their shares of CVC common stock in favor of approval of the merger agreement
and the merger. However, such CVC stockholders are not required to vote their
shares against a CVC Acquisition Proposal or in favor of the election of any CVC
director. Such CVC stockholders include certain directors and executive officers
of CVC and Seagate Technology, Inc., CVC's biggest customer and largest
stockholder. These CVC stockholders have also granted Veeco irrevocable proxies
to vote their CVC stock in this manner. These voting arrangements effectively
ensure that the merger agreement and the merger will be approved at the CVC
special meeting whether or not any other CVC stockholders vote for such
approval. See "Other Agreements - Voting Arrangements with CVC Stockholders" on
page 80.
All valid proxies received prior to the CVC special meeting will be voted.
All shares represented by a proxy will be voted, and where a stockholder
specifies by means of the proxy a choice ("FOR," "AGAINST" or "ABSTAIN") with
respect to any matter to be acted upon, the shares of CVC common stock will be
voted in
34
<PAGE>
accordance with the specification so made. If no choice is indicated on the
proxy, the shares of CVC common stock will be voted in favor of the approval and
adoption of the merger agreement and approval of the merger (other than
instances of broker non-votes, which shares will not be voted).
In connection with the merger, the CVC stockholders are not entitled to
appraisal rights under the DGCL.
The cost of this solicitation to CVC stockholders will be borne by CVC. In
addition, CVC may reimburse brokerage firms, banks and other fiduciaries
representing beneficial owners of CVC common stock for expenses incurred in
forwarding solicitation material to such beneficial owners. Proxies also may be
solicited by certain of CVC's directors, officers and regular employees,
personally or by telephone or telecopier. Such persons will not receive
additional compensation, but may be reimbursed for reasonable out-of-pocket
expenses incurred in connection with such solicitation.
Any CVC stockholder giving a proxy has the power to revoke it at any time
prior to the voting by filing with the Secretary of CVC written notice of
revocation or a duly executed proxy bearing a later date or by voting in person
at the CVC special meeting.
RECOMMENDATION OF CVC'S BOARD OF DIRECTORS
CVC's Board of Directors has approved the merger agreement and the
transactions contemplated thereby and has determined that the merger is
advisable and fair to, and in the best interests of, CVC and its stockholders.
After careful consideration, CVC's Board of Directors unanimously recommends
that CVC's stockholders vote in favor of approval and adoption of the merger
agreement and approval of the merger.
THE VEECO SPECIAL MEETING
DATE, TIME AND PLACE OF VEECO SPECIAL MEETING
The Veeco special meeting will be held at 9:30 a.m., (New York City time),
on ______April ___, 2000, at the Corporate Center, 395 North Service Road, Lower
Auditorium, Melville, New York.
PURPOSE
The purpose of the Veeco special meeting is to approve the issuance of
shares of Veeco common stock in the merger. As a result of the merger, Christine
Whitman and Douglas Kingsley will become directors of Veeco at the Effective
Time. Ms. Whitman is currently the Chairman, Chief Executive Officer and
President of CVC, and both Ms. Whitman and Mr. Kingsley are currently CVC
directors. Under the merger agreement, Veeco has agreed to appoint Ms. Whitman
and Mr. Kingsley as Veeco directors at the Effective Time.
At the Veeco special meeting, Veeco stockholders will also be asked to
consider and vote upon the proposal to amend Veeco's Amended and Restated
Certificate of Incorporation to increase the number of Veeco's authorized shares
of common stock from 25,000,000 to 40,000,000.
VOTING AND SOLICITATION
At the Veeco special meeting, each stockholder of Veeco is entitled to one
vote for each share of Veeco common stock held. Under Veeco's bylaws, the
presence of the holders of 50% of all of the Veeco common stock entitled to
vote, whether present in person or by proxy, at Veeco's special meeting, shall
constitute a quorum for the transaction of business at Veeco's special meeting.
Under applicable rules of The Nasdaq National Market, if a quorum is
present, the affirmative vote of a majority of the votes cast, whether in person
or by proxy, at Veeco's special meeting is required to approve and adopt the
merger agreement and to approve the merger and the issuance of shares of Veeco
common stock therein.
35
<PAGE>
The affirmative vote of the holders of a majority of the outstanding shares of
Veeco common stock is required to approve the amendment to Veeco's Amended and
Restated Certificate of Incorporation to increase the number of authorized
shares of Veeco common stock from 25,000,000 to 40,000,000.
Shares of Veeco common stock that are voted "FOR," "AGAINST" or "ABSTAIN"
with respect to a matter are treated as being present at the Veeco special
meeting for purposes of establishing a quorum. Accordingly, for purposes of
voting upon the approval of amendment to Veeco's Amended and Restated
Certificate of Incorporation, the effect of an abstention or a broker non-vote
is the same as a vote against the proposal.
The holders of approximately 0.7% of Veeco's outstanding common stock have
entered into a voting agreement with CVC, under which they have agreed to vote
their shares of Veeco common stock in favor of approval of the issuance of Veeco
common stock to CVC stockholders in the merger. However, such Veeco stockholders
are not required to vote their Veeco shares against any Veeco Acquisition
Proposal or in favor of the election of any Veeco director. Such Veeco
stockholders include certain executive officers and directors of Veeco. These
Veeco stockholders have also granted CVC irrevocable proxies to vote their Veeco
stock in this manner. See "Other Agreements - Voting Arrangements with Veeco
Stockholders" on page 81.
All valid proxies received prior to the Veeco special meeting will be
voted. All shares represented by a proxy will be voted, and where a stockholder
specifies by means of the proxy a choice ("FOR," "AGAINST" or "ABSTAIN") with
respect to any matter to be acted upon, the shares will be voted in accordance
with the specification so made. If no choice is made on the proxy, the shares
will be voted in favor of the issuance of shares of Veeco common stock in the
merger and the approval of the proposed amendment to Veeco's Amended and
Restated Certificate of Incorporation (other than broker non-votes, which shares
will not be voted).
The cost of this solicitation to Veeco stockholders will be borne by
Veeco. Veeco has retained Georgeson Shareholder Communications Inc., or GSC, to
solicit proxies. GSC may contact Veeco stockholders by mail, telephone, telex,
telegraph and personal interviews. GSC will receive from Veeco a fee of $7,500
for its services, plus reimbursement of out-of-pocket expenses. Veeco has agreed
to indemnify GSC against certain liabilities and expenses in connection with
such solicitation, including liabilities under the federal securities laws. In
addition, Veeco may reimburse brokerage firms, banks and other fiduciaries
representing beneficial owners of Veeco common stock for expenses incurred in
forwarding solicitation material to such beneficial owners. Proxies may also be
solicited by certain of Veeco's directors, officers and regular employees,
personally or by telephone or by telecopier. Such persons will not receive
additional compensation, but may be reimbursed for reasonable out-of-pocket
expenses incurred in connection with such solicitations.
Any Veeco stockholder giving a proxy has the power to revoke it at any
time prior to the voting by filing with the Secretary of Veeco written notice of
revocation or a duly executed proxy bearing a later date or by voting in person
at the Veeco special meeting.
Veeco's Amended and Restated Certificate of Incorporation provides for a
Board of Directors elected by Veeco stockholders which is divided into three
classes of directors serving staggered terms. If the merger is completed,
Veeco's Board of Directors will increase the number of directors that
constitutes Veeco's Board of Directors from nine to ten, and appoint Ms. Whitman
and Mr. Kingsley to fill the vacancies created by such expansion. Ms. Whitman
will be appointed as a Class III director of Veeco and will serve for a
three-year term ending at Veeco's 2003 annual meeting of stockholders. Mr.
Kingsley will be appointed as a Class I director of Veeco and will serve for a
one-year term ending at Veeco's 2001 annual meeting of stockholders.
RECOMMENDATION OF VEECO'S BOARD OF DIRECTORS
Veeco's Board of Directors has unanimously approved the merger agreement
and the transactions contemplated thereby and has determined that the merger is
advisable and fair to, and in the best interests of, Veeco
36
<PAGE>
and its stockholders. After careful consideration, Veeco's Board of Directors
unanimously recommends that Veeco stockholders vote in favor of the issuance of
shares of Veeco common stock in the merger. Veeco's Board of Directors also
unanimously recommends that Veeco stockholders vote in favor of the amendment to
Veeco's Amended and Restated Certificate of Incorporation to increase the number
of authorized shares of Veeco common stock from 25,000,000 to 40,000,000.
THE MERGER
This section of the joint proxy statement/prospectus describes the
proposed merger. While CVC and Veeco believe that the description covers the
material terms of the merger and the related transactions, this summary may not
contain all of the information that is important to you. You should read this
entire joint proxy statement/prospectus, including its Appendices and the other
documents referred to herein, carefully for a more complete understanding of the
merger. Also, important business and financial information about CVC and Veeco
is included or incorporated by reference into this joint proxy
statement/prospectus. See the section entitled "Documents Incorporated by
Reference in this joint proxy statement/prospectus" on page 131. You may obtain
the information incorporated by reference into this document without charge by
following the instructions in the section entitled "Where You Can Find More
Information" on page 131.
BACKGROUND OF THE MERGER
From time to time, Veeco has conducted preliminary discussions with
numerous merger and acquisition candidates who primarily manufacture high
precision process test and measurement equipment for the microelectronics
industry. Before January 2000, Edward H. Braun, Chairman, Chief Executive
Officer and President of Veeco, and Christine B. Whitman, Chairman, Chief
Executive Officer and President of CVC, were familiar with one another and had
come into contact with one another at industry trade shows, various conventions
and in various other circumstances.
From time to time on several occasions over the past several years, Mr.
Braun and Ms. Whitman had discussed the possibility of a business combination or
strategic relationship involving Veeco and CVC, however, on each occasion, these
discussions were terminated and did not result in any further actions relating
to any such business combination or strategic relationship. Also, from time to
time over the past several years, industry analysts and other persons familiar
with the industry in which Veeco and CVC operate have independently suggested to
Veeco and CVC that a business combination or other strategic relationship
between Veeco and CVC would be viewed favorably by customers and the investment
community.
On January 21, 2000, Mr. Braun called Ms. Whitman to congratulate her on
CVC's public offering and the completion of CVC's first quarter as a public
company. On January 24, 2000, Mr. Braun and Ms. Whitman spoke by telephone and
exchanged general information about Veeco's and CVC's businesses. Mr. Braun
suggested the possibility of a business combination involving Veeco and CVC. Ms.
Whitman invited Mr. Braun to come to Rochester (the home of CVC's headquarters)
to discuss in greater detail the possibility of a merger or other business
combination transaction involving Veeco and CVC.
On January 28, 2000, Mr. Braun met in Rochester with Ms. Whitman and
Emilio DiCataldo, CVC's Senior Vice President and Chief Financial Officer, to
discuss CVC's and Veeco's businesses, the markets served by each company and how
CVC and Veeco might complement each other as part of a combined entity.
On February 10, 2000, Veeco and CVC entered into a Mutual Confidentiality
and Nondisclosure Agreement in connection with their ongoing due diligence
activities and negotiations.
Over the course of the ensuing weeks, discussions took place between
certain of Veeco's and CVC's respective senior management personnel during which
they principally discussed technological developments being worked on in the
process equipment areas by each of the companies and potential synergies that
could result from a
37
<PAGE>
merger or other business combination, as well as the financial results and
condition of each business. Also during this time, representatives of CVC's and
Veeco's respective senior management, including Mr. Braun and Ms. Whitman,
engaged in discussions relating to the terms and conditions of a possible merger
of CVC into Veeco.
Next, CVC and Veeco began to conduct business and legal due diligence
reviews and to negotiate the principal terms and conditions of the merger,
including the exchange ratio, issues relating to the payment of termination
fees, certain closing conditions, shareholder voting arrangements and similar
matters. On February 22, 2000, the parties entered into an exclusivity agreement
under which CVC generally agreed not to solicit, negotiate, or accept proposals
relating to business combinations involving CVC other than the proposed merger
with Veeco until March 5, 2000, and the parties prepared a term sheet setting
forth the principal terms of the proposed merger.
Between February 22, 2000 and February 29, 2000, CVC and Veeco and their
respective counsel and financial advisors continued to negotiate the terms and
conditions set forth in the merger agreement and completed business and legal
due diligence.
On February 28, 2000, Veeco's Board of Directors approved the proposed
merger transaction and authorized Veeco's management to execute the merger
agreement. On February 28, 2000, CVC's Board of Directors approved the proposed
merger transaction and authorized CVC's management to execute the merger
agreement. The merger agreement was executed by the parties on February 29, 2000
and CVC and Veeco publicly announced the transaction before the opening of the
market on that date.
CVC'S REASONS FOR THE MERGER
In reaching its conclusion to approve the merger agreement and recommend
that stockholders vote to adopt the merger agreement and approve the merger,
CVC's Board of Directors considered a number of factors, including the following
material factors:
o Information regarding the financial condition, results of
operations, business and prospects of CVC and Veeco, both on a
stand-alone and combined basis.
o The complementary nature of the businesses of CVC and Veeco and the
business fit between them.
o That CVC's stockholders would receive an ownership interest in the
combined company, allowing them to share in the growth and prospects
of the combined company.
o The judgment and advice of CVC's senior management, including its
favorable recommendation of the merger.
o The opinion of Lehman Brothers Inc. dated February 29, 2000, to the
effect that based upon and subject to the factors set forth in the
opinion letter, as of the date of the opinion, from a financial
point of view the exchange ratio to be offered to the stockholders
of CVC in the merger is fair to such stockholders. See Appendix D to
the joint proxy statement/prospectus for the text of the opinion and
a description of the matters considered and limitations on the
review undertaken.
o The terms of the merger agreement and related agreements, including:
o provisions relating to certainty of closing.
38
<PAGE>
o that Veeco had insisted that holders of a majority of CVC's
outstanding common stock sign voting agreements under which
they agreed to vote for the merger and deliver irrevocable
proxies giving Veeco the right to vote their shares in that
manner, which would effectively preclude consideration of
alternative transactions.
o that Veeco would be obligated to pay CVC $14.6 million if the
merger agreement were terminated under specified circumstances
following a third party proposal to acquire Veeco. See "The
Merger Agreement -- Fees and Expenses" on page 78.
o That the merger is expected to be tax-free to CVC stockholders
(except for tax on gain resulting from the receipt of cash paid by
Veeco instead of fractional shares) for federal income tax purposes.
See "The Merger -- Material U.S. Federal Income Tax Consequences of
the Merger" on page 62.
o Current industry, economic and market conditions.
o The risk that the expected benefits of the merger may not be
realized. See "Risk Factors" beginning on page 12.
o Interests of CVC's management in the merger. See "The Merger --
Interests of Executive Officers and Directors of CVC in the Merger"
on page 60.
In view of the variety of factors considered in connection with the
evaluation of the proposed merger and the terms of the merger agreement, the CVC
Board of Directors did not deem it practicable to and did not quantify or
otherwise assign relative weights to the specific factors considered in reaching
its conclusion. Individual directors may have given different weights to
different factors.
VEECO'S REASONS FOR THE MERGER
Veeco's Board of Directors believes that the merger is in the best
interests of Veeco's stockholders and that the terms of the merger are fair from
a financial point of view to Veeco and Veeco's stockholders. Veeco's Board of
Directors came to its conclusion based upon a number of factors including the
opinion of Banc of America Securities LLC, Veeco's financial advisor. The full
text of Banc of America Securities LLC's opinion is attached as Appendix E and
is discussed below under "The Merger - Opinion of Banc of America Securities LLC
Independent Financial Advisor to Veeco."
Veeco's Board of Directors believes that the merger is consistent with
Veeco's objectives and strategies to gain access to new markets, technologies
and products in order to maintain its competitive position and that the merger
will create a stronger company, both from a financial and an operational
viewpoint. Veeco's Board of Directors considered a number of factors in reaching
its determination that the merger is in the best interests of Veeco's
stockholders. Veeco's Board of Directors believes that the addition of CVC's
complementary product lines, process technology skills, manufacturing
capabilities, engineering, research and development programs, marketing and
management personnel will allow the combined company to expand its product
offerings and strengthen its position in the industry served.
Veeco's Board of Directors noted that the merger will extend Veeco's
process equipment product line by adding CVC's CONNEXION Cluster Tool system,
which includes various physical vapor deposition process modules, and thus offer
Veeco's data storage and optical telecommunications customers a complete range
of deposition technologies.
The Board of Directors determined that additional advantages would flow
from the merger with CVC, including:
39
<PAGE>
o Improving Veeco's ability to provide more comprehensive product
solutions for the data storage, optical telecommunications and
semiconductor industries.
o Enhancement of Veeco's research and development efforts.
o Lessening the present and future dependency on major customers
because of an increased customer base.
o Strengthening and expanding worldwide customer service and support.
o Enhancement of Veeco's purchasing power with its supplier base
because of its increased size and buying power.
o CVC's human resources, with numerous years of technical experience
and strong academic training, would be made available to Veeco and
its customers
Veeco's Board of Directors also considered that the merger was expected to
have a neutral effect on the earnings per share of the combined companies for
the year ending December 31, 2000, and, based upon the prospects of the
companies, that the merger would be accretive to earnings per share of the
combined companies for the year ending December 31, 2001. See "Selected
Unaudited Pro Forma Combined Financial Data" on page 31.
In making its ultimate determination to enter into the merger agreement
with CVC, Veeco's Board of Directors also took into account the terms and
conditions of the merger which had been negotiated with CVC and certain of its
stockholders, including that CVC stockholders holding over a majority of the
outstanding shares of CVC common stock agreed to enter into a voting agreement,
effectively ensuring that their shares of CVC common stock would be voted in
favor of the merger. Having determined that CVC was an appropriate acquisition
candidate for Veeco, certainty of closing once the merger agreement was signed
was an important term of the merger for Veeco.
Veeco's Board of Directors also considered the potential risks and
disadvantages of the merger, including the following:
o A significant portion of CVC's sales are attributable to the data
storage industry, as is the case with Veeco. Accordingly, following
the merger, Veeco would continue to be heavily dependent on the data
storage industry. The data storage industry has been characterized
by cyclicality. The industry has experienced significant economic
downturns at various times in the last decade, characterized by
diminished product demand, accelerated erosion of average selling
prices and production over-capacity. As a result, Veeco may
experience greater period-to-period fluctuations in future operating
results due to general industry conditions or events occurring in
the general economy than it would otherwise experience.
o The substantial dilution in the percentage of the ownership of
Veeco's common stock of existing Veeco stockholders that will result
from the issuance of Veeco common stock in the merger. However,
Veeco's Board of Directors approved the merger despite such dilution
for the reasons stated above.
In view of the wide variety of factors considered in connection with its
evaluation of the merger, Veeco's Board of Directors did not find it practicable
to, and did not, quantify or otherwise attempt to assign relative weights to
different factors considered in reaching its determination. In addition,
individual members of Veeco's Board of Directors may have given different
weights to different factors. All of the factors described above were carefully
considered by Veeco's management and Board of Directors. Veeco entered into the
merger agreement because its Board of Directors concluded that there are
significant opportunities for growth in sales and earnings upon
40
<PAGE>
integrating both companies' operations and that the terms of the merger are fair
from a financial point of view to, and in the best interests of Veeco and
Veeco's stockholders.
RECOMMENDATION OF CVC'S BOARD OF DIRECTORS
CVC's Board of Directors has approved the merger agreement and the
transactions contemplated thereby and has determined that the merger is
advisable and fair to, and in the best interests of, CVC and its stockholders.
After careful consideration, CVC's Board of Directors recommends that CVC
stockholders vote "FOR" approval and adoption of the merger agreement and
approval of the merger. As of the CVC Record Date, members of CVC's Board of
Directors and management of CVC held (together with entities with which they are
affiliated) in the aggregate, approximately ___% of the outstanding CVC common
stock.
RECOMMENDATION OF VEECO'S BOARD OF DIRECTORS
Veeco's Board of Directors has unanimously approved the merger agreement
and the transactions contemplated thereby and has determined that the merger is
advisable and fair to, and in the best interests of, Veeco and its stockholders.
After careful consideration, the Veeco Board of Directors unanimously recommends
that Veeco stockholders vote "FOR" approval of the issuance of shares of Veeco
common stock to CVC stockholders in the merger. Veeco's Board of Directors has
also unanimously approved the proposed Amended and Restated Certificate of
Incorporation providing for an increase in the authorized shares of Veeco common
stock from 25,000,000 to 40,000,000 shares and unanimously recommends that Veeco
stockholders vote "FOR" approval of the merger. As of the Veeco Record Date,
members of Veeco's Board of Directors and management of Veeco held (together
with entities with which they are affiliated), in the aggregate, approximately
0.7% of the outstanding Veeco common stock.
OPINION OF LEHMAN BROTHERS INC. INDEPENDENT FINANCIAL ADVISOR TO CVC
Lehman Brothers has acted as financial advisor to CVC in connection with
the merger. As part of its role as financial advisor to CVC, Lehman Brothers
rendered an opinion to the CVC Board of Directors as to the fairness, from a
financial point of view, of the exchange ratio to be received by the CVC
stockholders in the merger.
The full text of the Lehman Brothers opinion, dated as of February 29,
2000, is attached as Appendix D and is incorporated herein by reference. CVC
stockholders are urged to read the opinion for a discussion of assumptions made,
factors considered and limitations on the review undertaken by Lehman Brothers
in rendering its opinion. This summary of the Lehman Brothers opinion is
qualified by reference to the full text of the opinion.
Except as described below, no limitations were imposed by CVC on the scope
of Lehman Brothers' investigation or the procedures to be followed by Lehman
Brothers in rendering its opinion. In arriving at its opinion, Lehman Brothers
did not ascribe a specific range of value to CVC, but made its determination as
to the fairness, from a financial point of view, to the CVC stockholders of the
exchange ratio to be received by such stockholders, on the basis of financial
and comparable analyses described below. The Lehman Brothers opinion was for the
use and benefit of the CVC Board of Directors and was rendered in connection
with the CVC Board of Directors' consideration of the merger. The Lehman
Brothers opinion is not intended to be, and does not constitute, a
recommendation to any CVC stockholder as to how such stockholder should vote
with respect to the merger. Lehman Brothers was not requested to opine as to,
and its opinion does not in any manner address, CVC's underlying business
decision to proceed with or effect the merger.
In arriving at its opinion, Lehman Brothers reviewed and analyzed:
o The merger agreement and the specific terms of the merger;
o Publicly available information concerning CVC and Veeco that it
believed to be relevant to its analysis, including CVC's Prospectus
dated November 12, 1999 and Quarterly Report on Form 10-Q for the
quarter ended December 31, 1999 and Veeco's Annual Report on Form
10-K for the year ended December 31, 1998 and Quarterly Report on
Form 10-Q for the quarter ended September 30, 1999;
41
<PAGE>
o Financial and operating information with respect to the business,
operations and prospects of CVC furnished to it by CVC;
o Financial and operating information with respect to the business,
operations and prospects of Veeco furnished to it by Veeco;
o A trading history of CVC common stock from November 12, 1999 to
February 28, 2000 and a comparison of that trading history with
those of other companies that Lehman Brothers deemed relevant;
o A trading history of Veeco common stock from February 26, 1999 to
February 28, 2000 and a comparison of that trading history with
companies that Lehman Brothers deemed relevant;
o A comparison of the historical financial results and present
financial condition of CVC with those of other companies that Lehman
Brothers deemed relevant;
o A comparison of the historical financial results and present
financial condition of Veeco with those of other companies that
Lehman Brothers deemed relevant;
o A comparison of the financial terms of the merger with the financial
terms of certain other transactions that Lehman Brothers deemed
relevant;
o Reports prepared by third party research analysts with respect to
the future financial performance of CVC and Veeco; and
o The relative contributions of CVC and Veeco to the financial results
of the combined company upon consummation of the merger.
In addition, Lehman Brothers had discussions with the management of CVC
and Veeco concerning their respective businesses, operations, assets, financial
conditions and prospects (including the cost savings, operating synergies and
strategic benefits expected by the managements of CVC and Veeco to result from a
combination of the businesses of CVC and Veeco) and undertook such other
studies, analyses and investigations as it deemed appropriate.
In arriving at its opinion, Lehman Brothers assumed and relied upon the
accuracy and completeness of the financial and other information used by it
without assuming any responsibility for independent verification of such
information and further relied upon the assurances of management of CVC that
they are not aware of any facts or circumstances that would make such
information inaccurate or misleading. With respect to the financial projections
of CVC, upon advice of CVC, Lehman Brothers has assumed that such projections
have been reasonably prepared on a basis reflecting the best currently available
estimates and judgments of the management of CVC as to the future financial
performance of CVC, and that CVC will perform substantially in accordance with
such projections. With respect to the projected financial performance of Veeco,
upon advice of Veeco, Lehman Brothers has assumed that such projections have
been reasonably prepared on a basis reflecting the best currently available
estimates and judgments of the management of Veeco as to the future financial
performance of Veeco, and that Veeco will perform substantially in accordance
with such projections. In arriving at its opinion, Lehman Brothers did not
conduct a physical inspection of the properties and facilities of CVC or Veeco
and did not make or obtain any evaluations or appraisals of the assets or
liabilities of CVC or Veeco. In addition, the Board of Directors of CVC has not
authorized Lehman Brothers to solicit, and Lehman Brothers did not solicit, any
indications of interest from any third party with respect to the purchase of all
or a part of CVC's business.
Lehman Brothers assumed with CVC's consent, that the merger will qualify
(i) for "pooling-of-interests" accounting treatment and (ii) as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended, and therefore as a tax-free transaction to the U.S. stockholders of
CVC. The Lehman Brothers
42
<PAGE>
opinion necessarily is based upon market, economic and other conditions as they
exist on, and can be evaluated as of, the date of its opinion.
In connection with its written opinion dated February 29, 2000, Lehman
Brothers performed a variety of financial and comparative analyses as summarized
below. The preparation of a fairness opinion involves various determinations as
to the most appropriate and relevant method of financial and comparative
analysis and the application of those methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to summary
description. Furthermore, in arriving at its opinion, Lehman Brothers did not
attribute any particular weight to any analysis or factor considered by it, but
rather made qualitative judgments as to the significance and relevance of each
analysis and factor. Accordingly, Lehman Brothers believes that its analyses
must be considered as a whole and that considering any portions of such analyses
and factors without considering all analyses and factors could create a
misleading or incomplete view of the process underlying its opinion. In its
analysis, Lehman Brothers made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond the control of CVC and Veeco. Any estimates contained in these
analyses are not necessarily indicative of actual values or predictive of future
results or values, which may be more or less favorable than as set forth
therein. In addition, analyses relating to the value of businesses do not
purport to be appraisals or to reflect the prices at which businesses actually
may be sold. Certain of the analyses include information presented in tabular
format. In order to fully understand the financial analyses used by Lehman
Brothers, the tables must be read together with the text of each summary. The
tables alone do not constitute a complete description of the financial analyses.
Transaction Terms. In the merger, CVC stockholders are to receive 0.43
newly issued shares of Veeco common stock for each share of CVC common stock.
Relative Contribution Analysis. Lehman Brothers performed a relative
contribution analysis using projections from management of both CVC and Veeco
for the calendar years 2000 and 2001. The following table presents the
contribution of CVC to the combined company based on those financial
projections:
Pro Forma Combined
Contribution
------------
CVC Veeco
--- -----
Revenues
2000 Estimated ....................................... 30.0% 70.0%
2001 Estimated ....................................... 29.8% 70.2%
Net Income
2000 Estimated ....................................... 21.4% 78.6%
2001 Estimated ....................................... 24.6% 75.4%
Fully-Diluted Ownership of Combined Company ............ 24.6% 75.4%
Comparable Company Analysis. Using publicly available information, Lehman
Brothers compared selected financial data of CVC and Veeco with similar data of
selected companies engaged in businesses considered by Lehman Brothers to be
comparable to that of CVC and Veeco. Lehman Brothers included in its selected
comparable companies for both CVC and Veeco, Advanced Energy Industries, Applied
Science and Technology, Asyst Technologies, Inc., ATMI, Inc., Brooks Automation,
Inc., Dupont Photomask, Inc., Electro Scientific Industries, Inc., Electroglas,
Inc., FSI International, Inc., GaSonics International Corp., Helix Technology
Corp., Kulicke & Soffa Industries, LTX Corp., Mattson Technology, Inc., MKS
Instruments, Inc., Photronics, Inc., PRI Automation, Inc., Robotics Vision
Systems, Inc., Semitool, Inc., Silicon Valley Group, Inc. and Ultratech Stepper,
Inc. (the "Comparable Companies"). For the Comparable Companies, Lehman Brothers
calculated the Firm Value, defined as the market value of the respective
company's common equity plus total debt less cash and cash equivalents, as a
multiple of the estimated calendar year 2000 revenues (the "2000 Revenue
Multiple") based on
43
<PAGE>
estimates of third party research analysts and as a multiple of calendar year
2000 EBIT (the "2000 EBIT Multiple") based on estimates of third party research
analysts. Furthermore, for the Comparable Companies, Lehman Brothers calculated
the Equity Value, defined as the market value of the respective company's common
equity, as a multiple of the calendar year 2000 and 2001 net income (the "2000
Net Income Multiple" and the "2001 Net Income Multiple") based on the respective
estimates provided by First Call. Estimates of 2000 revenues and 2000 EBIT for
CVC and Veeco, and estimates of 2000 and 2001 net income for CVC and Veeco are
based upon management projections.
Lehman Brothers noted that, as of February 28, 2000
o The 2000 Revenue Multiple for CVC based upon the merger was 3.68x as
compared to 3.45x for the median of the Comparable Companies and
4.55x for Veeco;
o The 2000 EBIT Multiple for CVC based upon the merger was 28.0x as
compared to 25.7x for the median of the Comparable Companies and
26.2x for Veeco;
o The 2000 Net Income Multiple for CVC based upon the merger was 47.6x
as compared to 33.3x for the median of the Comparable Companies and
41.4x for Veeco; and
o The 2001 Net Income Multiple for CVC based upon the merger was 30.5x
as compared to 24.1x for the median of the Comparable Companies and
31.6x for Veeco.
Comparable
CVC (Merger) Veeco Companies
------------ ----- ---------
2000 Revenue Multiple ............. 3.68x 4.55x 3.45x
2000 EBIT Multiple ................ 28.0x 26.2x 25.7x
2000 Net Income Multiple .......... 47.6x 41.4x 33.3x
2001 Net Income Multiple .......... 30.5x 31.6x 24.1x
Because of the inherent differences between the businesses, operations and
prospects of CVC and Veeco and the business, operations and prospects of the
companies included in the Comparable Companies, as the case may be, Lehman
Brothers believed that it was inappropriate to, and therefore did not, rely
solely on the quantitative results of the comparable company analysis, and
accordingly also made qualitative judgments concerning differences between the
financial and operating characteristics and prospects of CVC and Veeco and the
companies included in the Comparable Companies, as the case may be, that would
affect the public market valuations of such companies.
Comparable Transaction Analysis. Using publicly available information,
Lehman Brothers compared selected financial data for CVC to similar data for
selected transactions in the semiconductor industry . These comparable
transactions included: Applied Materials, Inc.'s proposed acquisition of ETEC,
Inc., Photronics, Inc.'s acquisition of Align-Rite International, Veeco's
acquisition of Ion Tech Inc., SpeedFam International, Inc.'s acquisition of
Integrated Process Equipment Corp., Veeco's acquisition of Digital Instruments,
Inc., PRI Automation, Inc.'s acquisition of Equipe Technologies, Inc., Eaton
Corporation's acquisition of Fusion Systems, Novellus Systems, Inc.'s
acquisition of Varian Thin Film Systems, Lam Research Corporation's acquisition
of On-Trak Systems, Veeco's acquisition of Wyco Corporation, KLA Instruments
Corporation's acquisition of Tencor Instruments, Applied Materials, Inc.'s
acquisition of Orbot Instruments, Ltd., Plasma and Materials Technologies,
Inc.'s acquisition of Electrotech Limited and Teradyne, Inc.'s acquisition of
Megatest Corporation. Lehman Brothers reviewed the prices paid in the comparable
transactions in terms of the multiple of the Transaction Enterprise Value,
defined as the total consideration paid including total debt assumed less cash
and cash equivalents transferred to the acquiror, to the last twelve months
revenue (the "LTM Revenue Multiple") and EBIT (the "LTM EBIT Multiple").
Furthermore, Lehman Brothers reviewed the prices paid in the comparable
transactions in terms of the multiple of the Transaction Equity Value, defined
as the total consideration paid to the acquiror, to the last twelve months net
income (the "LTM Net Income Multiple"). Lehman Brothers compared these multiples
to the
44
<PAGE>
multiples associated with the merger between CVC and Veeco. In computing CVC's
last twelve months' revenues, EBIT and net income, Lehman Brothers made certain
pro forma adjustments to reflect CVC's acquisition of Commonwealth Scientific
Corporation on May 10, 1999. Lehman Brothers noted that:
o The LTM Revenue Multiple for CVC based upon the merger was 4.57x as
compared to 2.83x for the median of the comparable transactions;
o The LTM EBIT Multiple for CVC based upon the merger was 34.9x as
compared to 16.7x for the median of the comparable transactions;
o The LTM Net Income Multiple for CVC based upon the merger was 60.4x
as compared to 22.4x for the median of the comparable transactions.
CVC (Merger) Comparable Transactions
------------ -----------------------
LTM Revenue Multiple ....... 4.57x 2.83x
LTM EBIT Multiple .......... 34.9x 16.7x
LTM Net Income Multiple .... 60.4x 22.4x
Because the reasons for and the circumstances surrounding each of the
comparable transactions were specific to such transactions, and because of the
inherent differences among the businesses, operations and prospects of CVC and
the selected acquired companies analyzed, Lehman Brothers believed that it was
inappropriate to, and therefore did not, rely solely on the quantitative results
of the comparable transactions analysis and, accordingly, also made qualitative
judgments concerning differences between the terms and characteristics of the
merger and the comparable transactions that would affect the transaction values
of CVC and such acquired companies.
Transaction Premium Analysis. Lehman Brothers reviewed the premium paid in
the merger based on several different share prices for CVC at various points in
time. Lehman Brothers calculated the premium per share offered by Veeco in the
merger compared to CVC's (i) price four weeks prior to February 28, 2000 (the
"Four Week Premium"); (ii) price one week prior to February 28, 2000 (the "One
Week Premium"); and (iii) share price on February 28, 2000 (the "One Day
Premium"). Lehman Brothers noted that:
o The Four Week Premium associated with the merger was 104.5%;
o The One Week Premium associated with the merger was 18.3%; and
o The One Day Premium associated with the merger was 10.2%.
Lehman Brothers also computed premiums paid in selected stock-for-stock
transactions in the technology sector valued between $300 million and $2 billion
("Comparable Transaction Premiums") and noted that the median of the Comparable
Transaction Premiums four weeks prior to the announcement was 51.8%, the median
of the Comparable Transaction Premiums one week prior to announcement was 36.4%
and the median of the Comparable Transactions Premiums one day prior to
announcement was 30.4%.
Comparable Transaction
Merger Premiums
------ --------
Four Week Premium .............. 105% 52%
One Week Premium ............... 18% 36%
One Day Premium ................ 10% 30%
45
<PAGE>
Because the reasons for and the circumstances surrounding each of the
comparable transactions were specific to such transactions, and because of the
inherent differences among the businesses, operations and prospects of CVC and
the selected acquired companies analyzed, Lehman Brothers believed that it was
inappropriate to, and therefore did not, rely solely on the quantitative results
of the transaction premium analysis and, accordingly, also made qualitative
judgments concerning differences between the terms and characteristics of the
merger and the comparable transactions that would affect the transaction
premiums for CVC and such acquired companies.
Discounted Cash Flow Analysis. Lehman Brothers performed a discounted cash
flow ("DCF") analysis for CVC using projections provided by the management of
CVC. The DCF was calculated assuming discount rates ranging from 14% to 16% for
CVC, and was comprised of the sum of the net present value of the free cash flow
for the period January 1, 2000 to December 31, 2004 and a terminal value for
2004 based on a range of multiples of 9.0x to 11.0x 2004 projected EBITDA for
CVC. Using this method, Lehman Brothers calculated estimated per share
valuations for CVC common stock ranging from $21.71 to $27.93.
Exchange Ratio Analysis. Lehman Brothers compared the average ratio of the
closing price of CVC common stock to the closing price of Veeco common stock for
the 4 weeks prior to February 28, 2000 (the "Four Week Average Exchange Ratio")
and the 73 trading days (the period since the CVC initial public offering) prior
to February 28, 2000 (the "73 Day Average Exchange Ratio"). Lehman Brothers
noted that the Four Week Average Exchange Ratio was 0.347 and the 73 Day Average
Exchange Ratio was 0.285.
Merger Four Week Average 73 Day Average
------ ----------------- --------------
Exchange Ratio ....... 0.430 0.347 0.285
Engagement of Lehman Brothers. Lehman Brothers is an internationally
recognized investment banking firm and, as part of its investment banking
activities, is regularly engaged in the evaluation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive bids, secondary distributions of listed and unlisted
securities, private placements and valuations for corporate and other purposes.
The engagement of Lehman Brothers in connection with the merger was formalized
by an engagement letter dated February 7, 2000 between CVC and Lehman Brothers
pursuant to which CVC has agreed to pay Lehman Brothers a customary fee which is
contingent upon consummation of the merger. In addition, CVC has agreed to
reimburse Lehman Brothers for reasonable expenses incurred by Lehman Brothers
and to indemnify Lehman Brothers and certain related persons for certain
liabilities that may arise out of its engagement and the rendering of this
opinion.
Lehman Brothers has performed various investment banking services for CVC
in the past including acting as underwriter for CVC's initial public offering in
1999 and has received customary fees for such services. In the ordinary course
of Lehman Brothers' business, Lehman Brothers actively trades in the equity
securities of CVC (and Veeco) for its own account and for the accounts of its
customers and, accordingly, may at any time hold a long or short position in
such securities.
OPINION OF BANC OF AMERICA SECURITIES LLC INDEPENDENT FINANCIAL ADVISOR TO VEECO
In February 2000, Veeco's Board of Directors retained Banc of America
Securities to act as its financial advisor in connection with the possible
acquisition of, or a possible business combination involving, CVC. Banc of
America Securities is a nationally recognized investment banking firm. Banc of
America Securities is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes. Veeco
selected Banc of America Securities to act as its financial advisor on the basis
of Banc of America Securities' experience in transactions similar to the merger.
Banc of America Securities delivered its opinion to Veeco's Board of
Directors on February 28, 2000, stating that the exchange ratio under the terms
of the February 28, 2000 draft merger agreement was fair to Veeco
46
<PAGE>
from a financial point of view as of that date. Veeco's Board of Directors did
not limit the investigations made or procedures followed by Banc of America
Securities in rendering its opinion.
WE HAVE ATTACHED THE FULL TEXT OF BANC OF AMERICA SECURITIES' WRITTEN
OPINION TO THE VEECO BOARD OF DIRECTORS AS APPENDIX E WHICH IS HEREBY
INCORPORATED BY REFERENCE IN ITS ENTIRETY. YOU SHOULD READ THIS OPINION
CAREFULLY AND IN ITS ENTIRETY IN CONNECTION WITH THIS JOINT PROXY
STATEMENT/PROSPECTUS. HOWEVER, WE HAVE ALSO INCLUDED THE FOLLOWING SUMMARY OF
BANC OF AMERICA SECURITIES' OPINION, WHICH IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF THE OPINION.
BANC OF AMERICA SECURITIES' OPINION IS DIRECTED TO VEECO'S BOARD OF
DIRECTORS. IT DOES NOT CONSTITUTE A RECOMMENDATION TO VEECO STOCKHOLDERS ON HOW
TO VOTE WITH RESPECT TO THE MERGER. THE OPINION ADDRESSES ONLY THE FINANCIAL
FAIRNESS OF THE EXCHANGE RATIO IN THE MERGER TO VEECO. THE OPINION DOES NOT
ADDRESS THE RELATIVE MERITS OF THE MERGER OR ANY ALTERNATIVES TO THE MERGER, THE
UNDERLYING DECISION OF VEECO'S BOARD OF DIRECTORS TO PROCEED WITH OR EFFECT THE
MERGER OR ANY OTHER ASPECT OF THE MERGER. IN FURNISHING ITS OPINION, BANC OF
AMERICA SECURITIES DID NOT ADMIT THAT IT IS AN EXPERT WITHIN THE MEANING OF THE
TERM "EXPERT" AS USED IN THE SECURITIES ACT, NOR DID IT ADMIT THAT ITS OPINION
CONSTITUTES A REPORT OR VALUATION WITHIN THE MEANING OF THE SECURITIES ACT.
STATEMENTS TO SUCH EFFECT ARE INCLUDED IN BANC OF AMERICA SECURITIES' OPINION.
Banc of America Securities:
o Reviewed publicly available financial statements and other business
and financial information of CVC and Veeco, respectively;
o Reviewed internal financial statements and other financial and
operating data concerning CVC and Veeco, respectively;
o Analyzed financial forecasts prepared by the managements of CVC and
Veeco, respectively;
o Reviewed and discussed with senior executives of each of CVC and
Veeco information relating to potential strategic, financial and
operational benefits anticipated from the merger, prepared by the
managements of CVC and Veeco, respectively;
o Discussed the past and current operations, financial condition and
prospects of CVC with senior executives of CVC and discussed the
past and current operations, financial condition and prospects of
Veeco with senior executives of Veeco;
o Reviewed the pro forma impact of the merger on Veeco's earnings per
share, cash flow, consolidated capitalization and financial ratios;
o Reviewed and considered in its analysis, information prepared by
members of senior management of CVC and Veeco relating to the
relative contributions of CVC and Veeco to the combined company;
o Reviewed the reported prices and trading activity for CVC common
stock and Veeco common stock;
o Compared the financial performance of CVC and Veeco and the prices
and trading activity of CVC common stock and Veeco common stock with
that of other publicly traded companies which Banc of America
Securities deemed relevant;
o Compared financial terms of the proposed merger to financial terms,
to the extent publicly available, of other business combination
transactions which Banc of America Securities deemed relevant;
47
<PAGE>
o Participated in discussions and negotiations among representatives
of CVC and Veeco and their financial and legal advisors;
o Reviewed the draft merger agreement and related documents; and
o Performedother analyses and considered other factors which Banc of
America Securities deemed appropriate.
Banc of America Securities reviewed the February 28, 2000 draft of the
merger agreement in its preparation of its opinion. While Veeco and CVC had the
opportunity to agree to materially add, delete or alter material terms of the
merger agreement prior to its execution, the final merger agreement was
substantially similar to the February 28, 2000 draft of the merger agreement.
Banc of America Securities did not assume any responsibility to
independently verify the information listed above. Instead, with the consent of
Veeco's Board of Directors, Banc of America Securities relied on the information
as being accurate and complete in all material respects. Banc of America
Securities also made the following assumptions with the consent of Veeco's Board
of Directors:
o With respect to the financial forecasts for CVC and Veeco provided
to Banc of America Securities by the management of each company,
including information relating to strategic, financial and
operational benefits anticipated from the merger, that (a) the
forecasts were reasonably prepared on bases reflecting the best
available estimates and judgments of the managements of Veeco and
CVC at the time of preparation as to the future financial
performance of both companies and (b) the forecasts provided a
reasonable basis upon which Banc of America Securities could form
its opinion;
o That there were no material changes in the assets, financial
condition, results of operations, business or prospects of either of
Veeco or CVC since the respective dates of their last financial
statements made available to Banc of America Securities;
o That the acquisition would be consummated in a manner that complies
in all respects with the applicable provisions of the Securities
Act, the Securities Exchange Act, and all other applicable federal
and state statutes, rules and regulations;
o That in connection with the receipt of all the necessary regulatory
approvals for the merger, no restrictions would be imposed that
would have a material adverse effect on the contemplated benefits
expected to be derived in the proposed merger;
o That the merger would be recorded as a "pooling of interests"
transaction under U.S. generally accepted accounting principles and
would be treated as a tax-free reorganization or exchange or both,
pursuant to the Internal Revenue Code of 1986, as amended; and
o That the merger would be consummated in accordance with the terms
described in the February 28, 2000 draft merger agreement, without
any further amendments to the agreement, and without waiver by Veeco
of any of the conditions to its obligations that are contained in
the merger agreement.
In addition, for purposes of its opinion, Banc of America Securities:
o Relied on advice of counsel and independent accountants to Veeco as
to all legal and financial reporting matters with respect to Veeco,
the merger and the February 28, 2000 draft merger agreement; and
48
<PAGE>
o Did not assume any responsibility for making an independent
evaluation, appraisal or physical inspection of any of the assets or
liabilities, contingent or otherwise, of CVC or Veeco nor did Banc
of America Securities receive any appraisals.
Banc of America Securities' opinion was based on economic, monetary,
market and other conditions in effect on, and the information made available to
it as of, the date of the opinion.
The following represents a brief summary of the material financial
analyses performed by Banc of America Securities in connection with providing
its opinion to Veeco's Board of Directors. Some of the summaries of financial
analyses performed by Banc of America Securities include information presented
in tabular format. In order to fully understand the financial analyses performed
by Banc of America Securities, you should read the tables together with the text
of each summary. The tables alone do not constitute a complete description of
the financial analyses. Considering the data set forth in the tables without
considering the full narrative description of the financial analyses, including
the methodologies and assumptions underlying the analyses, could create a
misleading or incomplete view of the financial analyses performed by Banc of
America Securities.
VALUATION ANALYSES REGARDING VEECO
Comparable Company Analysis. Based on public and other available
information, Banc of America Securities calculated for companies that Banc of
America Securities deemed to be comparable to Veeco:
(a) the multiples of aggregate value to each of:
(1) revenues for (A) the last twelve months, based on the most
recent financial reporting period for the relevant companies
and (B) estimated calendar year 2000;
(2) earnings before interest and taxes ("EBIT") for (1) the last
twelve months, based on the most recent financial reporting
period for the relevant companies and (2) estimated calendar
year 2000;
and
(b) the multiples of equity value to net income for estimated calendar
years 2000 and 2001.
Banc of America Securities defined aggregate value to mean:
o equity value, defined as the product of the number of shares of
common stock outstanding for a company multiplied by its stock
price; plus
o outstanding debt; less
o cash and cash equivalents.
Banc of America Securities calculated multiples for the following seven
suppliers of capital equipment to the semiconductor and data storage industries:
o CVC, Inc.;
o Lam Research, Inc.;
o Novellus Systems, Inc.;
49
<PAGE>
o Advanced Energy Industries, Inc.;
o ATMI, Inc.;
o Electro Scientific Industries, Inc.; and
o GaSonics International Corporation.
Each company was selected because (a) it had an active public trading
market for its equity securities, (b) was a supplier of capital equipment to the
semiconductor and data storage industries, and (c) Banc of America Securities
believed the company had operating characteristics similar to those of Veeco.
The following table sets forth the multiples indicated by this analysis
for these seven companies:
Aggregate Value to: Range of Multiples Median Mean
-----------------------------------------------------------------------
Last twelve months revenues 2.9x to 10.0x 5.5x 6.1x
Estimated calendar year 2000
revenues 1.9x to 5.9x 3.8x 3.8x
Last twelve months EBIT 26.0x to 80.7x 63.2x 57.1x
Estimated calendar year 2000
EBIT 9.5x to 27.7x 20.7x 21.1x
Equity Value to: Range of Multiples Median Mean
-----------------------------------------------------------------------
Estimated calendar year 2000
net income 15.5x to 43.7x 32.6x 33.7x
Estimated calendar year 2001
net income 14.1x to 30.8x 25.9x 24.6x
The comparable company analysis compared Veeco to the seven comparable
companies on the basis that the companies selected were the most relevant given
the factors considered above. Consequently, Banc of America Securities did not
include every company that could be deemed to be a participant in the same
industry.
Using the financial forecasts provided to Banc of America Securities by
the management of Veeco:
(a) the aggregate value of Veeco on February 25, 2000 implied multiples
of:
o 5.1x last twelve months revenues;
o 4.3x estimated calendar year 2000 revenues;
o 33.8x last twelve months EBIT; and
o 24.8x estimated calendar year 2000 EBIT;
and
(b) the equity value of Veeco on February 25, 2000 implied multiples of:
o 40.6x estimated calendar year 2000 net income; and
o 31.1x estimated calendar year 2001 net income.
50
<PAGE>
Banc of America Securities also noted that these multiples were within the
range of multiples indicated in the analysis of the seven comparable companies,
except with respect to Veeco's multiple for estimated calendar year 2001 net
income, which exceeded the range.
Precedent Transactions Analysis. Based on public and other available
information, Banc of America Securities calculated the multiples of aggregate
value to each of the last twelve months revenues and EBIT based on the most
recent financial reporting period for the target company implied in 42 precedent
transactions of suppliers of capital equipment to the semiconductor and data
storage industries announced between January 1995 and January 2000. Aggregate
value for purposes of the precedent transactions analysis excludes the value of
options. Aggregate value for a target company was taken to equal equity value if
information on the target company's net debt was not publicly available.
Banc of America Securities calculated multiples for the comparable company
acquisitions:
<TABLE>
<CAPTION>
Acquiror Target Announcement Date
- -------- ------ -----------------
<S> <C> <C>
Applied Materials, Inc. Etec Systems, Inc January 12, 2000
Taiwan Semiconductor Worldwide Semiconductor Corp. January 7, 2000
Manufacturing Co. Ltd.
Advantest Corporation Test Equipment Division of December 27, 1999
Asia Electronics Holding
Co. Inc.
Oerlikon-Buhrle Holding AG Plasma-Therm, Inc. December 20, 1999
Cerprobe Corporation OZ Technologies Ltd. December 3, 1999
ATMI, Inc. MST Analytics, Inc. November 30, 1999
Veeco Instruments, Inc. ION Tech, Inc. October 15, 1999
Photronics, Inc. Align-Rite International, Inc. September 15, 1999
The BOC Group, Inc. Chemical Management Division June 9, 1999
of FSI International, Inc.
ATMI, Inc. Delatech, Inc. June 1, 1999
Applied Materials, Inc. Obsidian, Inc. May 28, 1999
ATMI, Inc. Advanced Chemical Systems May 17, 1999
International, Inc.
Electro Scientific Industries, Inc. MicroVision Corporation February 1, 1999
STEAG Electronic Systems GmbH AG Associates Inc. January 19, 1999
and MIG Acquisition Corporation
(a subsidiary of STEAG)
FEI Company Micrion Corporation December 3, 1998
SpeedFam IPEC, Inc. Integrated Process Equipment November 23, 1998
Corporation
Advanced Energy Industries, Inc. RF Power Products, Inc. June 2, 1998
Helix Technology Corporation Granville-Phillips Company April 17, 1998
ADE Corporation Phase Shift Technology, Inc. March 17, 1998
ATMI, Inc. NOW Technologies, Inc. February 20, 1998
Veeco Instruments Inc. Digital Instruments, Inc. February 9, 1998
Danaher Corporation Pacific Scientific Company February 2, 1998
Robotic Vision Systems, Inc. Vanguard Automation, Inc. October 31, 1997
PRI Automation, Inc. Equipe Technologies, Inc. October 27, 1997
Electro Scientific Industries, Inc. Applied Intelligent Systems, Inc. September 29, 1997
Silicon Valley Group, Inc. Tinsley Laboratories, Inc. September 9, 1997
Eaton Corporation Fusion Systems Corporation June 30, 1997
Electro Scientific Industries, Inc. Chip Star, Inc. June 26, 1997
ATMI, Inc. Lawrence Semiconductor May 19, 1997
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
Acquiror Target Announcement Date
- -------- ------ -----------------
<S> <C> <C>
Laboratories
Novellus Systems, Inc. Thin Film Systems (Varian May 7, 1997
Associates, Inc.)
ATMI, Inc. Advanced Delivery & Chemical April 7, 1997
Systems
Lam Research, Inc. OnTrak Systems, Inc. March 24, 1997
Veeco Instruments Inc. Wyko Corporation March 10, 1997
KLA Instruments Tencor Instruments January 14, 1997
Millipore Corporation Tylan General, Inc. December 16, 1996
Applied Materials, Inc. Opal, Inc. November 25, 1996
Applied Materials, Inc. Orbot Instruments Ltd. November 25, 1996
Plasma & Materials Electrotech Group July 18, 1996
Technologies, Inc.
FSI International, Inc. Semiconductor Systems, Inc. February 5, 1996
Kulicke & Soffa Industries, Inc. American Fine Wire October 1, 1995
Teradyne, Inc. Megatest Corporation September 6, 1995
Credence Systems Corporation EPRO Corporation February 6, 1995
</TABLE>
Each transaction was selected because:
o Banc of America Securities believed the target company had similar
operating characteristics to those of Veeco;
o The transaction involved a change of control in ownership of the
target company; and
o The transaction was relatively recent and of a size comparable to
the contemplated merger.
Transactions where the target company had an aggregate value less than $23
million or where an aggregate value for the target company was not publicly
available were excluded.
The following table sets forth the multiples indicated by this analysis
for these 42 precedent transactions:
Aggregate Value to: Range of Multiples Median Mean
------------------- ------------------ ------ ----
Last twelve months revenues 1.1x to 4.6x 2.4x 2.5x
Last twelve months EBIT 7.6x to 41.9x 15.9x 16.9x
The comparable transactions analysis compared the merger to all 42
precedent transactions on the basis that the transactions selected were the most
relevant given the factors considered above. Consequently, Banc of America
Securities did not include every transaction that could be deemed to have
occurred in the industry. The revenue multiples indicated for (a) the
acquisition of AG Associates, Inc. by STEAG Electronic Systems GmbH announced on
January 19, 1999 and (b) the acquisition of Etec Systems, Inc. by Applied
Materials, Inc. announced on January 12, 2000 were excluded because they were
deemed significant statistical outliers.
Banc of America Securities noted that the aggregate value of Veeco on
February 25, 2000 implied multiples of (a) 5.1x last twelve months revenues and
(b) 33.8x last twelve months EBIT. Banc of America Securities also noted that
these multiples exceeded the respective mean and median multiples for last
twelve months revenues and last twelve months EBIT indicated in the analysis of
the 42 precedent transactions.
No company or transaction used in the comparable company and precedent
transactions analyses is identical to Veeco or the merger. Accordingly, an
analysis of the foregoing results is not mathematical. Rather, it
52
<PAGE>
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the companies and other factors that
could affect the public trading value or purchase price of the companies to
which Veeco and the merger are being compared.
Discounted Cash Flow Analysis. Banc of America Securities used (a) free
cash flow forecasts for Veeco for estimated calendar years 2000 and 2001, as
estimated by the management of Veeco and (b) free cash flow forecasts for Veeco
for estimated calendar years 2002 through 2005 derived by applying a growth rate
of 20% to the forecasts for estimated calendar years 2000 and 2001 prepared by
the management of Veeco to perform a discounted cash flow analysis. In
conducting this analysis, Banc of America Securities first estimated the
terminal value of Veeco at the end of 2005 by applying multiples to Veeco's
projected 2005 EBIT, which multiples ranged from 18.0x to 22.0x. Banc of America
Securities then discounted the cash flows and terminal value to present values
using rates ranging from 14.5% to 19.5%. Banc of America Securities selected the
range of terminal multiples based on the multiples of comparable public
companies and precedent transactions, Veeco's current and historical multiples,
and by applying judgment based upon its prior experience. Banc of America
Securities selected the range of discount rates by estimating the weighted
average cost of capital for Veeco.
Using free cash flow forecasts for Veeco for calendar years 2000 and 2001
as estimated by the management of Veeco and for calendar years 2002 through 2005
using the 20% growth rate, this analysis indicated a range of aggregate value
for Veeco as follows:
<TABLE>
<CAPTION>
Implied Aggregate Value
(dollar amounts in thousands)
--------------------------------------------------------------------------------------------------
Terminal Value of 18.0x Terminal Value of 20.0x Terminal Value of 22.0x
Projected Calendar Year Projected Calendar Year Projected Calendar Year
Discount Rate 2005 EBIT 2005 EBIT 2005 EBIT
------------- ----------------------- ----------------------- -----------------------
<S> <C> <C> <C>
14.5% $1,490,837 $1,645,064 $1,799,290
17.0% 1,351,305 1,490,730 1,630,155
19.5% 1,227,561 1,353,874 1,480,188
</TABLE>
Using financial cash flow forecasts for Veeco for calendar years 2000 and
2001 as estimated by the management of Veeco and calendar years 2002 through
2005 using the 20% growth rate, this analysis indicated a range of aggregate
value on a price per share basis for Veeco as follows:
<TABLE>
<CAPTION>
Implied Price Per Share
--------------------------------------------------------------------------------------------------
Terminal Value of 18.0x Terminal Value of 20.0x Terminal Value of 22.0x
Projected Calendar Year Projected Calendar Year Projected Calendar Year
Discount Rate 2005 EBIT 2005 EBIT 2005 EBIT
------------- ----------------------- ----------------------- -----------------------
<S> <C> <C> <C>
14.5% $81.34 $89.41 $97.48
17.0% 74.04 81.33 88.63
19.5% 67.56 74.17 80.78
</TABLE>
Banc of America Securities noted that the aggregate value of Veeco on
February 25, 2000 was $1.25 billion and the price per share of Veeco on February
25, 2000 was $73.00. The aggregate value of Veeco and the price per share of
Veeco on February 25, 2000 were within the ranges of aggregate value and price
per share indicated by the analyses.
Historical Stock Price Analysis. Banc of America Securities reviewed the
performance of the per-share market price and trading volume of Veeco common
stock for the period from February 25, 1999 through February 25, 2000. The
analysis indicated that for the last year, the price per share of Veeco common
stock ranged from
53
<PAGE>
$24.44 to $78.88. Banc of America Securities noted that the closing market price
per share of Veeco common stock on February 25, 2000 was $73.00, near the upper
portion of the range of prices per share for the last year.
VALUATION ANALYSIS OF CVC
Comparable Company Analysis. Based on public and other available
information, Banc of America Securities calculated for companies that Banc of
America Securities deemed to be comparable to CVC:
(a) the multiples of aggregate value to each of:
(1) revenues for (A) the last twelve months, based on the most
recent financial reporting period for the relevant companies
and (B) estimated calendar year 2000;
(2) EBIT for (1) the last twelve months, based on the most recent
financial reporting period for the relevant companies and (2)
estimated calendar year 2000;
and
(b) the multiples of equity value to net income for estimated calendar
years 2000 and 2001.
Banc of America Securities calculated multiples for the following seven
suppliers of capital equipment to the semiconductor and data storage industries:
o Veeco Instruments, Inc.;
o Lam Research, Inc.;
o Novellus Systems, Inc.;
o Advanced Energy Industries, Inc.;
o ATMI, Inc.;
o Electro Scientific Industries, Inc.; and
o GaSonics International Corporation.
Each company was selected because (a) it had an active public trading
market for its equity securities, (b) was a supplier of capital equipment to the
semiconductor and data storage industries, and (c) Banc of America Securities
believed the company had operating characteristics similar to those of CVC.
The following table sets forth the multiples indicated by this analysis
for these seven companies:
Aggregate Value to: Range of Multiples Median Mean
-----------------------------------------------------------------------
Last twelve months revenues 2.9x to 10.0x 5.5x 6.4x
Estimated calendar year 2000
revenues 1.9x to 5.9x 4.1x 4.0x
Last twelve months EBIT 26.0x to 80.7x 49.6x 51.5x
Estimated calendar year 2000
EBIT 9.5x to 25.1x 20.7x 20.6x
54
<PAGE>
Equity Value to: Range of Multiples Median Mean
-----------------------------------------------------------------------
Estimated calendar year 2000
net income 15.5x to 43.7x 32.6x 33.2x
Estimated calendar year 2001
net income 14.1x to 30.8x 25.6x 24.5x
The comparable company analysis compared CVC to the seven comparable
companies on the basis that the companies selected were the most relevant given
the factors considered above. Consequently, Banc of America Securities did not
include every company that could be deemed to be a participant in the same
industry.
Using the financial forecasts provided to Banc of America Securities by
the management of CVC:
(a) the aggregate value of CVC on February 25, 2000 implied multiples
of:
o 3.5x last twelve months revenues;
o 2.7x estimated calendar year 2000 revenues;
o 67.6x last twelve months EBIT; and
o 20.3x estimated calendar year 2000 EBIT; and
(b) the equity value of CVC on February 25, 2000 implied multiples of:
o 41.8x estimated calendar year 2000 net income; and
o 26.7x estimated calendar year 2001 net income.
Banc of America Securities also noted that these multiples were within the
range of multiples indicated in the analysis of the seven comparable companies.
Precedent Transactions Analysis. Based on public and other available
information, Banc of America Securities calculated the multiples of aggregate
value to the last twelve months revenues based on the most recent financial
reporting period for the target company implied in 42 precedent transactions of
suppliers of capital equipment to the semiconductor and data storage industries
announced between January 1995 and January 2000. Aggregate value for purposes of
the precedent transactions analysis excludes the value of options. Aggregate
value for a target company was taken to equal equity value if information on the
target company's net debt was not publicly available.
Banc of America Securities calculated multiples for the precedent
transactions:
<TABLE>
<CAPTION>
Acquiror Target Announcement Date
- -------- ------ -----------------
<S> <C> <C>
Applied Materials, Inc. Etec Systems, Inc January 12, 2000
Taiwan Semiconductor Worldwide Semiconductor Corp. January 7, 2000
Manufacturing Co. Ltd.
Advantest Corporation Test Equipment Division of December 27, 1999
Asia Electronics Holding
Co. Inc.
Oerlikon-Buhrle Holding AG Plasma-Therm, Inc. December 20, 1999
Cerprobe Corporation OZ Technologies Ltd. December 3, 1999
ATMI, Inc. MST Analytics, Inc. November 30, 1999
Veeco Instruments, Inc. ION Tech, Inc. October 15, 1999
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
Acquiror Target Announcement Date
- -------- ------ -----------------
<S> <C> <C>
Photronics, Inc. Align-Rite International, Inc. September 15, 1999
The BOC Group, Inc. Chemical Management Division June 9, 1999
of FSI International, Inc.
ATMI, Inc. Delatech, Inc. June 1, 1999
Applied Materials, Inc. Obsidian, Inc. May 28, 1999
ATMI, Inc. Advanced Chemical Systems May 17, 1999
International, Inc.
Electro Scientific Industries, Inc. MicroVision Corporation February 1, 1999
STEAG Electronic Systems GmbH AG Associates Inc. January 19, 1999
and MIG Acquisition Corporation
(a subsidiary of STEAG)
FEI Company Micrion Corporation December 3, 1998
SpeedFam IPEC, Inc. Integrated Process Equipment November 23, 1998
Corporation
Advanced Energy Industries, Inc. RF Power Products, Inc. June 2, 1998
Helix Technology Corporation Granville-Phillips Company April 17, 1998
ADE Corporation Phase Shift Technology, Inc. March 17, 1998
ATMI, Inc. NOW Technologies, Inc. February 20, 1998
Veeco Instruments Inc. Digital Instruments, Inc. February 9, 1998
Danaher Corporation Pacific Scientific Company February 2, 1998
Robotic Vision Systems, Inc. Vanguard Automation, Inc. October 31, 1997
PRI Automation, Inc. Equipe Technologies, Inc. October 27, 1997
Electro Scientific Industries, Inc. Applied Intelligent Systems, Inc. September 29, 1997
Silicon Valley Group, Inc. Tinsley Laboratories, Inc. September 9, 1997
Eaton Corporation Fusion Systems Corporation June 30, 1997
Electro Scientific Industries, Inc. Chip Star, Inc. June 26, 1997
ATMI, Inc. Lawrence Semiconductor May 19, 1997
Laboratories
Novellus Systems, Inc. Thin Film Systems (Varian May 7, 1997
Associates, Inc.)
ATMI, Inc. Advanced Delivery & Chemical April 7, 1997
Systems
Lam Research, Inc. OnTrak Systems, Inc. March 24, 1997
Veeco Instruments Inc. Wyko Corporation March 10, 1997
KLA Instruments Tencor Instruments January 14, 1997
Millipore Corporation Tylan General, Inc. December 16, 1996
Applied Materials, Inc. Opal, Inc. November 25, 1996
Applied Materials, Inc. Orbot Instruments Ltd. November 25, 1996
Plasma & Materials Electrotech Group July 18, 1996
Technologies, Inc.
FSI International, Inc. Semiconductor Systems, Inc. February 5, 1996
Kulicke & Soffa Industries, Inc. American Fine Wire October 1, 1995
Teradyne, Inc. Megatest Corporation September 6, 1995
Credence Systems Corporation EPRO Corporation February 6, 1995
</TABLE>
Each transaction was selected because:
o Banc of America Securities believed the target company had similar
operating characteristics to those of CVC;
o The transaction involved a change of control in ownership of the
target company; and
56
<PAGE>
o The transaction was relatively recent and of a size comparable to
the contemplated merger.
Transactions where the target company had an aggregate value less than $23
million or where an aggregate value for the target company was not publicly
available were excluded.
The multiples indicated by this analysis for these 42 precedent
transactions with respect to last twelve months revenues ranged from 1.1x to
4.6x, with a median of 2.4x and a mean of 2.5x.
The precedent transactions analysis compared the merger to all 42
precedent transactions on the basis that the transactions selected were the most
relevant given the factors considered above. Consequently, Banc of America
Securities did not include every transaction that could be deemed to have
occurred in the industry. The revenue multiples indicated for (a) the
acquisition of AG Associates, Inc. by STEAG Electronic Systems GmbH announced on
January 19, 1999 and (b) the acquisition of Etec Systems, Inc. by Applied
Materials, Inc. announced on January 12, 2000 were excluded because they were
deemed significant statistical outliers.
Banc of America Securities noted that the aggregate value of CVC on
February 25, 2000 implied a multiple of 3.5x last twelve months revenue. Banc of
America Securities also noted that the multiple exceeded the respective mean and
median multiples for last twelve months revenues indicated in the analysis of
the 42 precedent transactions.
Premiums Paid Analysis. Banc of America Securities reviewed the
consideration paid in the 42 precedent transactions previously listed. Banc of
America Securities calculated the premiums paid relative to the prices of the
acquired companies for one day and one month prior to the announcement of the
acquisition offer. Such analysis indicated median premiums of 36.6% and 56.3%.
The premiums implied by the merger were 6.4% and 100.0% for the periods one day
and one month prior to February 25, 2000.
No company or transaction used in the comparable company, precedent
transactions or premiums paid analyses is identical to CVC or the merger.
Accordingly, an analysis of the foregoing results is not mathematical. Rather,
it involves complex considerations and judgments concerning differences in
financial and operating characteristics of the companies and other factors that
could affect the public trading value or purchase price of the companies to
which CVC and the merger are being compared.
Discounted Cash Flow Analysis. Banc of America Securities used (a) free
cash flow forecasts for CVC for estimated calendar years 2000 and 2001, as
estimated by the management of CVC and (b) free cash flow forecasts for CVC for
estimated calendar years 2002 through 2005 derived by applying a growth rate of
20% to the forecasts for estimated calendar years 2000 and 2001 prepared by the
management of CVC to perform a discounted cash flow analysis. In conducting this
analysis, Banc of America Securities first estimated the terminal value of CVC
at the end of 2005 by applying multiples to CVC's projected 2005 EBIT, which
multiples ranged from 18.0x to 22.0x. Banc of America Securities then discounted
the cash flows and terminal value to present values using rates ranging from
14.5% to 19.5%. Banc of America Securities selected the range of terminal
multiples based on the multiples of comparable public companies and precedent
transactions, CVC's current and historical multiples, and by applying judgment
based upon its prior experience. Banc of America Securities selected the range
of discount rates by estimating the weighted average cost of capital for CVC.
Using free cash flow forecasts for CVC for calendar years 2000 and 2001 as
estimated by the management of CVC and for calendar years 2002 through 2005
using the 20% growth rate, this analysis indicated a range of aggregate value
for CVC as follows:
57
<PAGE>
<TABLE>
<CAPTION>
Implied Aggregate Value
(dollar amounts in thousands)
--------------------------------------------------------------------------------------------------
Terminal Value of 18.0x Terminal Value of 20.0x Terminal Value of 22.0x
Projected Calendar Year Projected Calendar Year Projected Calendar Year
Discount Rate 2005 EBIT 2005 EBIT 2005 EBIT
------------- ----------------------- ----------------------- -----------------------
<S> <C> <C> <C>
14.5% $ 524,391 $ 580,012 $ 635,632
17.0% 474,792 525,075 575,357
19.5% 430,822 476,376 521,930
</TABLE>
Using financial cash flow forecasts for CVC for calendar years 2000 and
2001 as estimated by the management of CVC and calendar years 2002 through 2005
using the 20% growth rate, this analysis indicated a range of aggregate value on
a price per share basis for CVC as follows:
<TABLE>
<CAPTION>
Implied Price Per Share
--------------------------------------------------------------------------------------------------
Terminal Value of 18.0x Terminal Value of 20.0x Terminal Value of 22.0x
Projected Calendar Year Projected Calendar Year Projected Calendar Year
Discount Rate 2005 EBIT 2005 EBIT 2005 EBIT
------------- ----------------------- ----------------------- -----------------------
<S> <C> <C> <C>
14.5% $38.76 $42.90 $47.04
17.0% 35.06 38.81 42.55
19.5% 31.79 35.18 38.57
</TABLE>
Banc of America Securities noted that the aggregate value of CVC on
February 25, 2000 was $329.1 million and the price per share of CVC on February
25, 2000 was $28.00. The aggregate value of CVC and the price per share of CVC
on February 25, 2000 were within the ranges of aggregate value and price per
share indicated by the analyses.
Historical Stock Price Analysis. Banc of America Securities reviewed the
performance of the per-share market price and trading volume of CVC common stock
for the period from November 12, 1999 (the date of CVC's initial public
offering) through February 25, 2000. The analysis indicated that for the last
three and a half months, the price per share of CVC common stock ranged from
$8.38 to $30.50. Banc of America Securities noted that the closing market price
per share of Veeco common stock on February 25, 2000 was $73.00.
Contribution Analysis. Banc of America Securities used financial forecasts
for CVC provided by the management of CVC and financial forecasts for Veeco
provided by the management of Veeco to review the estimated contribution of each
company to the (a) revenues, (b) operating income and (c) net income, for each
of (1) calendar year 1999, (2) estimated calendar year 2000 and (3) estimated
calendar year 2001 for the combined company. This analysis indicated that CVC
would contribute:
<TABLE>
<CAPTION>
On a Estimated On an Estimated
On a Calendar Calendar Year Calendar Year
Contribution to: Year 1999 Basis 2000 Basis 2001 Basis
-----------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues .............. 27% 30% 30%
Operating ............. 12% 24% 27%
Net income ............ 11% 21% 25%
</TABLE>
Banc of America Securities then compared the contributions to the pro
forma share ownership of the combined company to be owned by each company's
stockholders, assuming the merger was consummated pursuant to the February 28,
1999 draft merger agreement. On a pro forma basis, CVC stockholders would own
24.2% of the combined company on a diluted basis.
58
<PAGE>
Accretion/Dilution Analysis. Using financial forecasts of CVC and Veeco
provided by their respective managements, Banc of America Securities reviewed
the pro forma effects of the merger, including a comparison of estimated
earnings per share on a stand-alone basis for Veeco to the estimated earnings
per share of the combined company for estimated calendar years 2000 and 2001.
Banc of America Securities observed that, based on the forecasts, without
realization of the estimated strategic, financial and operational benefits
anticipated from the merger, and assuming consummation of the merger on the
terms set forth in the February 28, 2000 draft merger agreement, the merger
would be:
Accretion/(Dilution) to Veeco
Calendar Year Earnings Per Share
------------- -----------------------------
Estimated calendar year 2000 (4.1%)
Estimated calendar year 2001 1.0%
Exchange Ratio Analysis. Banc of America Securities reviewed the
historical ratio of the closing prices per share of Veeco common stock to CVC
common stock for several different time periods. Banc of America Securities
noted that during the trading period commencing on November 12, 1999 and ending
on February 25, 2000 the historical exchange ratio exceeded 0.43 once for a one
day period during January 2000. During the selected period, the historical
exchange ratio calculated on a daily basis has ranged from a low of 0.18 to a
high of 0.43. Banc of America Securities reviewed the volume weighted average
historical ratios during the last 60 days and 90 days prior to February 25,
2000. The volume weighted average exchange ratios over these periods were 0.30
and 0.29, respectively. Banc of America Securities noted that the volume
weighted average exchange ratios for each period were less than the exchange
ratio of 0.43 set forth in the February 28, 2000 draft merger agreement.
As noted above, the foregoing is merely a summary of the analyses and
examinations that Banc of America Securities considered to be material to its
opinion. It is not a comprehensive description of all analyses and examinations
actually conducted by Banc of America Securities. The preparation of a fairness
opinion is not susceptible to partial analysis or summary description. Banc of
America Securities believes that its analyses and the summary above must be
considered as a whole. Banc of America Securities further believes that
selecting portions of its analyses and of the factors considered, without
considering all analyses and factors, would create an incomplete view of the
process underlying the analyses set forth in its presentation to Veeco's Board
of Directors. Banc of America Securities did not assign any specific weight to
any of the analyses described above. The fact that any specific analysis has
been referred to in the summary above is not meant to indicate that such
analysis was given greater weight than any other analysis. Accordingly, the
ranges of valuations resulting from any particular analysis described above
should not be taken to be Banc of America Securities' view of the actual value
of either Veeco or CVC.
In performing its analyses, Banc of America Securities made numerous
assumptions with respect to industry performance, general business and economic
conditions and other matters, many of which are beyond the control of Veeco and
CVC. The analyses performed by Banc of America Securities are not necessarily
indicative of actual values or actual future results, which may be significantly
more or less favorable than those suggested by these analyses. These analyses
were prepared solely as part of Banc of America Securities' analysis of the
financial fairness of the consideration to be paid by Veeco in the merger and
were provided to Veeco's Board of Directors in connection with the delivery of
Banc of America Securities' opinion. The analyses do not purport to be
appraisals or to reflect the prices at which a company might actually be sold or
the prices at which any securities may trade at any time in the future.
As described above, Banc of America Securities' opinion and presentation
to Veeco's Board of Directors were among the many factors taken into
consideration by Veeco's Board of Directors in making its determination to
approve, and to recommend that Veeco stockholders approve, the merger and the
merger agreement.
Veeco agreed to pay Banc of America Securities a sale transaction fee,
with a portion of the fee contingent upon the execution of the merger agreement
and a portion of the fee contingent upon the consummation of the
59
<PAGE>
merger. Veeco's Board of Directors was aware of this fee structure and took it
into account in considering Banc of America Securities' fairness opinion and in
approving the merger. The engagement letter also calls for Veeco to reimburse
Banc of America Securities for its reasonable out-of-pocket expenses. Veeco has
agreed to indemnify Banc of America Securities, its affiliates, and their
respective partners, directors, officers, agents, consultants, employees and
controlling persons against certain liabilities, including liabilities under the
federal securities laws.
STRUCTURE OF THE MERGER
Acquisition, a newly formed and wholly-owned subsidiary of Veeco, will be
merged with and into CVC. As a result of the merger, the separate corporate
existence of Acquisition will cease and CVC will survive the merger as a
wholly-owned subsidiary of Veeco. Following the completion of the merger the
surviving corporation in the merger will be named "CVC, Inc." and is referred to
in this joint proxy statement/prospectus as the "Surviving Corporation."
INTERESTS OF EXECUTIVE OFFICERS AND DIRECTORS OF CVC IN THE MERGER
General. Certain officers of CVC and the members of the CVC Board of
Directors may have interests in the merger that are different from, or in
addition to, the interests of stockholders generally. Several CVC officers,
including some who are also directors, have employment agreements with CVC.
These officers, as well as CVC's nonemployee directors, are, or may become
entitled to specific benefits under CVC's benefits plans as a result of the
merger. All such additional interests are described below, to the extent
material, and, except as described below these persons have, to the knowledge of
Veeco and CVC, no material interest in the merger apart from stockholders
generally.
CVC Employment Agreements; Severance Payments. CVC has entered into
employment agreements with each of the following CVC officers:
<TABLE>
<CAPTION>
Officers Position
-------- --------
<S> <C>
Christine B. Whitman President, Chairman and Chief Executive Officer
Giovanni Nocerino, Ph.D Executive Vice President, Sales
Emilio O. DiCataldo Senior Vice President and Chief Financial Officer
Mehrdad M. Moslehi, Ph.D Senior Vice President and Chief Technology Officer
Christopher J. Mann Senior Vice President, Marketing
Richard J. Chicotka, Ph.D Vice President, Engineering
Richard A. Kellogg Vice President, Manufacturing
Judd C. Prozeller Vice President, Quality & Human Resources
</TABLE>
Each of the CVC employment agreements provides that if the officer's
employment is terminated either (i) by CVC for any reason other than the
officer's death, disability or "for cause" (as defined in the agreements to
cover specified serious misconduct) following a change in control of CVC (as
defined in the agreements, which definition includes the merger), or (ii) if the
officer resigns for "good reason" (as defined in the agreements to cover a
downgrading of the officer by CVC or non-fulfillment by CVC of certain
contractual commitments to the officer), then, within six months following a
change in control of CVC, the officer will be entitled to a lump-sum severance
payment equal to 12 months of the officer's base salary (18 months for Mr.
DiCataldo), discounted to present value. Each officer will also have the vesting
of any options to purchase stock of CVC held by the officer at the time of such
termination accelerated (unless the termination is more than one year following
the change in control) and will have one year (or to the end of the original
term of the options, if earlier) to exercise all such options.
If the employment of any of CVC's officers is terminated following the
merger, under circumstances entitling them to benefits under their CVC
employment agreements, the approximate total amount of lump-sum severance
payments that would be owed to each such terminated executive officer would be
as follows: Ms.
60
<PAGE>
Whitman, $600,000 (under her employment agreement with Veeco described below),
Dr. Nocerino, $219,092, Mr. DiCataldo, $227,632, Dr. Moslehi, $173,894, Mr.
Mann, $160,535, Dr. Chicotka, $141,891, Mr. Kellogg, $142,787, and Mr.
Prozeller, $114,864.
Whitman Employment Agreement. Ms. Whitman has entered into an employment
agreement with Veeco. This employment agreement becomes effective upon the
completion of the merger, and this Veeco employment agreement will supersede her
employment agreement with CVC at that time. The employment agreement provides
that Ms. Whitman will be the President and Chief Operating Officer of Veeco,
with a minimum base salary of $300,000 per year. It also provides that Veeco
will make best efforts to make Ms. Whitman a member of the Board of Directors of
Veeco. Ms. Whitman will also be eligible to receive an annual cash performance
based bonus of up to $150,000, certain benefits and perquisites available to
Veeco executives generally, and stock options under Veeco stock option plans.
The employment agreement also provides that if Ms. Whitman's employment with
Veeco is terminated either (i) by Veeco for any reason other than death,
disability or "for cause" (as defined in the agreement to cover specified
serious misconduct), or (ii) if Ms. Whitman resigns for "good reason" (as
defined in the agreement to cover a downgrading of Ms. Whitman by Veeco, the
failure to elect Ms. Whitman as a member of Veeco's Board of Directors, any
person other than Ms. Whitman succeeds Edward H. Braun as Veeco's Chief
Executive Officer or non-fulfillment by Veeco of certain contractual commitments
to Ms. Whitman), Ms. Whitman will be entitled to a lump-sum severance payment
equal to 24 months of base salary. Upon any such termination, Ms. Whitman will
also have the vesting of any options to purchase stock of Veeco held by her at
the time of such termination accelerated and will have one year (or to the end
of the original term of the options, if earlier) to exercise all such options.
In the event that Ms. Whitman's employment with Veeco is terminated on account
of death or disability, Ms. Whitman will be entitled to a lump-sum severance
payment equal to 12 months of base salary.
CVC Option Plans. Under the merger agreement, all awards of stock options
on the date of the merger under any option plans maintained by CVC will be
converted into similar options with respect to Veeco common stock. In addition,
in accordance with the terms of the CVC 1999 Nonemployee Directors' Stock Option
Plan, all outstanding options under that plan will become fully vested and
exercisable upon the merger. The number of CVC shares underlying unvested
options that will become exercisable by nonemployee directors of CVC upon
completion of the merger is 15,000.
Indemnification; Directors and Officers Insurance. Veeco has agreed that
all rights to indemnification for acts or omissions occurring prior to the
completion of the merger in favor of CVC's current directors or officers (as
provided in CVC's Restated Bylaws) shall continue for a period of six years
after the completion of the merger. Also, for six years after the completion of
the merger, Veeco will maintain CVC's directors' and officers' liability
insurance policy in respect of acts or omissions occurring prior to the
completion of the merger, covering each person covered by CVC's officers' and
directors' liability insurance policy in effect on February 29, 2000. Veeco may
substitute its own directors' and officers' policy of comparable coverage, but
will not be obligated to pay annual premiums in excess of 150% of the premium
payable by CVC therefor (or for CVC's existing policy) as of February 29, 2000.
If Veeco cannot obtain such comparable coverage for such 150% amount, Veeco
shall be entitled to reduce the amount of coverage to an amount that can be
obtained for a premium equal to such 150% amount.
RESALE OF VEECO COMMON STOCK ISSUED IN THE MERGER
The shares of Veeco common stock to be issued in connection with the
merger will be registered under the Securities Act of 1933, as amended (the
"Securities Act"), and will be freely transferable, except for shares of Veeco
common stock issued to any person deemed to be an "affiliate" of CVC (an
"Affiliate") for purposes of Rule 145 under the Securities Act at the Effective
Time. Persons who may be deemed to be Affiliates include individuals or entities
that control, are controlled by, or are under common control with either Veeco
or CVC, and may include some officers, directors and principal stockholders of
CVC and Veeco. Affiliates may not sell shares of CVC common stock acquired in
connection with the merger except pursuant to an effective registration
statement under the Securities Act covering such shares, or in compliance with
Rule 145 under the Securities Act or another applicable exemption from the
registration requirements of the Securities Act.
61
<PAGE>
Also, under applicable rules relating to the applicability of "pooling of
interests" treatment for the merger, Affiliates of CVC and Veeco may not sell
any shares of CVC common stock or Veeco common stock during the period that
starts 30 days before completion of the merger and ends when Veeco publicly
announces financial results covering at least 30 days of combined operations
after the merger. If Affiliates of Veeco or CVC were to sell shares of CVC
common stock or Veeco common stock during such period, it might have the effect
of rendering "pooling of interests" accounting treatment for the merger
unavailable. Veeco and CVC are required under the merger agreement to use their
reasonable efforts to cause their respective Affiliates to enter into Affiliate
Agreements (as defined). See "The Merger Agreement - Certain Covenants -
Affiliate Agreements" on page 70 and "Risk Factors - Risks Related to the Merger
and Receipt of Veeco Stock - Loss of "Pooling of Interests" Accounting Treatment
for the Merger Would Harm the Combined Company" on page 13.
LISTING OF VEECO COMMON STOCK ISSUED IN THE MERGER
It is a condition to the closing of the merger that the shares of Veeco
common stock to be issued in the merger be approved for quotation on The Nasdaq
National Market, subject to official notice of issuance.
DELISTING AND DEREGISTRATION OF CVC COMMON STOCK; CESSATION OF PERIODIC
REPORTING
If the merger is consummated, the CVC common stock will cease to be listed
on The Nasdaq National Market. In such event, CVC intends to apply to the SEC
for the deregistration of such securities. Upon such deregistration, CVC will no
longer be required to make separate periodic filings with the SEC under the
Securities Exchange Act of 1934, as amended ("Exchange Act").
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Dewey Ballantine LLP and Kaye, Scholer, Fierman, Hays & Handler, LLP, will
have provided opinions to CVC and Veeco, respectively, as of the date the
registration statement of which this joint proxy statement/prospectus forms a
part is declared effective by the SEC, to the effect that the merger will
qualify as a reorganization as described in section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"). These opinions have been filed
with the SEC as exhibits to the registration statement of which this joint proxy
statement/prospectus forms a part. The opinions rely on assumptions, including
assumptions regarding the absence of changes in existing facts and the
completion of the merger in accordance with this joint proxy
statement/prospectus and the merger agreement. The opinions also rely on
representations and covenants, including those contained in officer's
certificates of Veeco and CVC. If any of the assumptions, representations or
covenants are inaccurate, the conclusions contained in the opinions could be
affected.
The tax discussion set forth below assumes that CVC stockholders hold
their shares of CVC common stock as a capital asset. Further, the tax discussion
does not address all of the U.S. federal income tax consequences that may be
relevant to CVC stockholders in light of their particular circumstances; nor
does the discussion address the U.S. federal income tax consequences that may be
applicable to taxpayers subject to special treatment under the Code, such as:
o Insurance companies;
o Financial institutions;
o Dealers in securities;
o Traders that mark to market;
o Tax-exempt organizations;
o Stockholders who hold their shares as part of a hedge, appreciated
financial position, straddle or conversion transaction;
o Stockholders who acquired their CVC common stock through the
exercise of options or otherwise as compensation or through a
tax-qualified retirement plan;
o Stockholders whose functional currency is not the U.S. dollar; and
o Foreign individuals (i.e., individuals who are not citizens or
residents of the United States), foreign corporations, foreign
partnerships or other foreign entities.
62
<PAGE>
No information is provided in this document with respect to the tax
consequences, if any, of the merger under applicable foreign, state, local and
other tax laws. The tax opinions described above and this tax discussion are
based upon the provisions of the Code, applicable Treasury regulations, and
Internal Revenue Service rulings and judicial decisions, as in effect as of the
date of this document. There can be no assurance that future legislative,
administrative or judicial changes or interpretations, which changes or
interpretations could apply retroactively, will not affect the accuracy of the
statements or conclusions set forth in the tax opinions summarized above or in
this tax discussion. No rulings have been or will be sought from the Internal
Revenue Service concerning the tax consequences of the merger and the opinions
of counsel described above and this tax discussion as to the material U.S.
federal income tax consequences of the merger will not be binding on the
Internal Revenue Service or any court.
The tax opinions described above and this tax discussion do not purport to
contain a complete analysis or discussion of all potential tax effects relevant
to the merger. Thus, CVC stockholders are urged to consult their own tax
advisors as to the specific tax consequences to them of the merger, including
tax return reporting requirements, the applicability and effect of federal,
state, local, foreign and other applicable tax laws and the effect of any
proposed changes in the tax laws. Foreign stockholders, if any, who hold or have
held, actually or constructively, five percent of the outstanding capital stock
of CVC, should consult their tax advisor regarding, among other things, the
consequences of the merger under the Foreign Investment In Real Property Tax
Act, including any reporting requirements that may apply.
The material U.S. federal income tax consequences of the merger, assuming
the accuracy of the tax opinions described above, are as follows:
o The merger will constitute a "reorganization" as described in
section 368(a) of the Code.
o CVC stockholders will not recognize any gain or loss upon the
exchange of their CVC common stock solely for shares of Veeco common
stock pursuant to the merger, except for gain resulting from the
receipt of cash they receive instead of a fractional share of Veeco
common stock.
o The aggregate tax basis of the shares of Veeco common stock received
solely in exchange for shares of CVC common stock pursuant to the
merger, including a fractional share of Veeco common stock for which
cash is received, will be the same as the aggregate tax basis of the
shares of CVC common stock exchanged for them.
o The holding period for shares of Veeco common stock received in
exchange for shares of CVC common stock pursuant to the merger will
include the holding period of the shares of CVC common stock
exchanged for them.
o CVC stockholders who receive cash instead of a fractional share of
Veeco common stock will be treated as having received the fractional
share in the merger and then as having the fractional share redeemed
by Veeco in a distribution under section 302 of the Code.
Accordingly, these stockholders should generally recognize gain or
loss equal to the difference, if any, between the tax basis of the
fractional share and the amount of cash received. The gain or loss
generally will be capital gain or loss and, in the case of
individuals, long-term capital gain or loss eligible for reduced
rates of taxation if the CVC stock exchanged has been held for more
than one year.
Other Tax Matters. It is a condition to the obligations of Veeco and CVC
to consummate the merger that Dewey Ballantine LLP and Kaye, Scholer, Fierman,
Hays & Handler, LLP each render an opinion to its respective clients, dated as
of the date of the merger, confirming its opinion to the effect that the merger
will constitute a "reorganization" as described in section 368(a) of the Code.
63
<PAGE>
ACCOUNTING TREATMENT OF THE MERGER
Veeco intends to account for the merger as a "pooling of interests" for
financial reporting and accounting purposes, under generally accepted accounting
principles. After the merger, the results of operations of CVC will be included
in the consolidated financial statements of Veeco.
REGULATORY FILINGS AND APPROVALS REQUIRED TO COMPLETE THE MERGER
The merger is subject to the requirements of the HSR Act, which prevents
some transactions from being completed until required information and materials
are furnished to the Antitrust Division of the Department of Justice and the
Federal Trade Commission and the appropriate waiting periods are terminated or
expire. Veeco, CVC and certain other persons have filed the required information
and materials with the Antitrust Division of the Department of Justice and the
Federal Trade Commission and the applicable waiting period has expired or been
terminated. The requirements of the HSR Act will be satisfied if the merger is
completed within one year after the termination or expiration of this waiting
period.
At any time before or after the closing of the merger, the Antitrust
Division of the Department of Justice, the Federal Trade Commission, as well as
a foreign regulatory agency or government could challenge the merger and take
action under applicable antitrust laws. Other persons could take action under
applicable antitrust laws, including seeking to enjoin the merger. Additionally,
at any time before or after the completion of the merger, even if the applicable
waiting period under the HSR Act expired or was terminated, any state could take
action under applicable antitrust laws. A challenge could be made to the mergers
and, if such a challenge is made, CVC and Veeco might not prevail.
Neither Veeco nor CVC is aware of any other material governmental or
regulatory approval required for closing the merger, other than the
effectiveness of the registration statement of which this joint proxy
statement/prospectus forms a part and compliance with the DGCL. See "The Merger
Agreement - Certain Covenants - Antitrust Matters."
CLOSING AND EFFECTIVENESS OF THE MERGER
The merger will be completed no later than the second business day
following the date on which all of the conditions to closing of the merger are
satisfied or waived, including the approval and adoption of the merger agreement
and approval of the merger by the CVC stockholders and the approval and adoption
of the merger agreement and approval of the merger by the Veeco stockholders.
The merger will become effective upon the filing of a certificate of merger with
the Secretary of State of Delaware.
THE MERGER AGREEMENT
THE FOLLOWING IS A BRIEF SUMMARY OF CERTAIN MATERIAL PROVISIONS OF THE
MERGER AGREEMENT. THE MERGER AGREEMENT IS ATTACHED AS APPENDIX A TO THIS JOINT
PROXY STATEMENT/PROSPECTUS. THIS SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT. WE URGE YOU TO
CAREFULLY REVIEW THE MERGER AGREEMENT.
GENERAL
The merger agreement provides that, following (i) the approval and
adoption of the merger agreement and approval of the merger by the stockholders
of CVC, (ii) the approval of the issuance by Veeco of shares of its common stock
in the merger by the stockholders of Veeco and (iii) the satisfaction or waiver
of the other conditions to the merger, Acquisition will be merged with and into
CVC, the separate existence of Acquisition will cease and CVC will continue as
the Surviving Corporation. Following completion of the merger, CVC will be a
direct wholly-owned subsidiary of Veeco. As a result of the merger, the
Surviving Corporation will possess all the
64
<PAGE>
property, rights and franchises of CVC and Acquisition, and will be subject to
all the debts, restrictions and duties of CVC and Acquisition.
EFFECTIVE TIME OF THE MERGER
The merger agreement provides that the closing of the merger will take
place no later than the second business day after satisfaction or waiver of the
conditions to the merger (unless another time is agreed to by the parties). At
such time CVC and Veeco will file a certificate of merger with the Secretary of
State of Delaware and make all other filings or recordings required by the DGCL
in connection with the merger. The merger will become effective upon such filing
with the Secretary of State of Delaware or at such later time as is specified in
the certificate of merger. If the stockholders of CVC and Veeco approve the
merger, the Effective Time is expected to occur as soon as practicable following
the CVC special meeting and the Veeco special meeting. We currently anticipate
that the merger will occur shortly after the CVC special meeting and Veeco
special meeting.
MERGER CONSIDERATION
General. At the Effective Time, each share of CVC common stock outstanding
immediately prior to the Effective Time will be converted into the right to
receive 0.43 shares of Veeco common stock. Veeco will not issue fractional
shares of Veeco common stock in exchange for shares of CVC common stock in the
merger, but rather, will pay a holder of shares of CVC common stock an
appropriate amount of cash in lieu of any fractional shares otherwise issuable.
Such cash amount will be based upon the closing price per share of Veeco common
stock on the trading day immediately preceding the Effective Time.
No Appraisal Rights. In connection with the merger, CVC stockholders are
not entitled to appraisal rights under the DGCL.
Exchange of Certificates. On or prior the closing date of the merger,
Veeco will select a reputable bank or trust company or bank to act as exchange
agent in the merger (the "Exchange Agent"). Promptly after the Effective Time,
Veeco will deposit with the Exchange Agent certificates representing the shares
of Veeco common stock issuable in the merger and cash sufficient to make
payments in lieu of fractional shares in the merger (collectively, the "Merger
Consideration").
As soon as is reasonably practicable after the Effective Time, the
Exchange Agent will mail to each holder of an outstanding certificate which,
before the merger, represented CVC common stock: (i) a letter of transmittal and
(ii) instructions for use in effecting the surrender of the certificate(s) for
the Merger Consideration. Upon surrender of such certificate(s) to the Exchange
Agent, together with a properly completed letter of transmittal covering such
shares and other customary documentation, the holder of such certificate(s) will
be entitled to receive the Merger Consideration in respect of such shares. As of
the Effective Time, all shares of CVC common stock will no longer be outstanding
and will automatically be canceled and retired and will cease to exist. Each
holder of a certificate previously representing any such shares of CVC common
stock will cease to have any rights with respect to those shares, other than the
right to receive the Merger Consideration, without interest, upon surrender of
the certificate(s) representing such shares of CVC common stock, as contemplated
by the Merger Agreement. STOCKHOLDERS OF CVC SHOULD NOT FORWARD THEIR CVC STOCK
CERTIFICATES TO THE EXCHANGE AGENT WITHOUT A LETTER OF TRANSMITTAL. STOCKHOLDERS
OF CVC SHOULD NOT RETURN THEIR STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
CVC Options. At the Effective Time, each outstanding option to purchase
shares of CVC common stock will be assumed by Veeco and converted, in accordance
with its terms, into an option to purchase the number of shares of Veeco common
stock equal to 0.43 multiplied by the number of shares of CVC common stock which
could have been obtained immediately prior to the merger upon the exercise of
such option, rounded to the nearest whole share. Following the Effective Time,
the exercise price under any such option will be equal to the exercise price per
share of CVC common stock thereunder immediately prior to the Effective Time,
divided by 0.43, rounded to the nearest whole cent. In general, the other terms
and conditions of each CVC option will continue to apply in accordance with
their terms. On the closing date of the merger, Veeco will file a registration
statement on
65
<PAGE>
Form S-8 with the SEC relating to the shares of Veeco common stock issuable upon
the exercise of CVC options assumed by Veeco in the merger.
REPRESENTATIONS AND WARRANTIES
Representations and Warranties of CVC. The merger agreement contains
various representations and warranties of CVC regarding CVC and its subsidiaries
as to, among other things:
o Due organization, existence and good standing, corporate power and
authority, and qualifications or licensing to do business;
o Capitalization and ownership of CVC's subsidiaries;
o Capitalization of CVC, including the number of shares of CVC's
capital stock outstanding, the number of shares issuable upon the
exercise of options and warrants, and obligations to repurchase or
redeem any equity securities;
o The authorization, execution and delivery of the merger agreement
and the validity and enforceability thereof;
o The absence of violations, breaches or defaults under charter
documents, laws, orders or agreements resulting from the execution
and delivery of the merger agreement and compliance therewith;
o Consents and approvals necessary for consummation of the merger;
o Compliance with the Securities Act and the Exchange Act in
connection with documents filed by CVC with the SEC and the fair
presentation, in conformity with generally accepted accounting
principles, of the consolidated financial position of CVC by the
financial statements included in the documents filed by CVC with the
SEC;
o The absence of undisclosed material liabilities;
o The absence of certain changes or events since September 30, 1999;
o The absence of pending litigation and court orders or judgments;
o Compliance with laws;
o Compliance with respect to certain ERISA matters;
o Certain tax matters;
o Certain labor matters;
o The identification of, and certain matters relating to, material
agreements;
o Certain matters relating to the intellectual property owned or used
by CVC;
o The absence of any actions that would preclude Veeco from accounting
for the merger as a "pooling of interests";
o Certain matters relating to environmental liabilities;
66
<PAGE>
o Arrangements with investment bankers or brokers, including
arrangements with Lehman Brothers Inc.;
o The receipt of an opinion from Lehman Brothers Inc., on the date of
CVC's Board of Director's approval of the merger agreement, as to
the fairness of the exchange ratio in the merger to the holders of
CVC common stock from a financial point of view; and
o The CVC Board of Directors' approval of, and their recommendation
that CVC stockholders approve, the merger agreement and the merger.
The representations and warranties of CVC set forth in the merger
agreement are subject to exceptions set forth in a disclosure schedule delivered
by CVC to Veeco and Acquisition dated the date of the merger agreement, and to
matters otherwise disclosed in the documents filed by CVC with the SEC.
Representations and Warranties of Veeco and Acquisition. The merger
agreement also contains various representations and warranties of Veeco and
Acquisition as to, among other things:
o Due organization, existence and good standing, corporate power and
authority to do business;
o The authorization, execution and delivery of the merger agreement
and the validity and enforceability thereof;
o The absence of violations, breaches or defaults under charter
documents, laws, orders or agreements resulting from the execution
and delivery of the merger agreement and compliance therewith;
o Consents and approvals necessary for consummation of the merger;
o Compliance in all material respects with the Securities Act and the
Exchange Act in connection with the documents filed by Veeco with
the SEC and the fair presentation, in conformity with generally
accepted accounting principles, of the consolidated financial
position of Veeco by financial statements included in the documents
filed by Veeco with the SEC;
o The absence of certain changes or events since September 30, 1999;
o Absence of undisclosed material liabilities.
o The capitalization of Veeco, including the number of shares of
Veeco's capital stock outstanding and the number of shares issuable
upon the exercise of options;
o The absence of pending litigation and court orders or judgments;
o Certain tax matters;
o Certain matters relating to environmental liabilities;
o The absence of any actions that would preclude Veeco from accounting
for the merger as a "pooling of interests";
o The receipt of an opinion from Banc of America Securities LLC, on
the date of Veeco's Board of Director's approval of the merger
agreement, as to the fairness of the exchange ratio in the merger to
Veeco from a financial point of view;
o The Veeco Board of Director's approval of, and their recommendation
that Veeco stockholders approve, the issuance of shares of Veeco
common stock in the merger.
o Certain matters relating to the intellectual property owed or used
by Veeco.
67
<PAGE>
o Compliance with laws; and
o Arrangements with investment bankers or brokers, including
arrangements with Banc of America Securities LLC.
The representations and warranties of Veeco and Acquisition set forth in
the merger agreement are subject to exceptions set forth in a disclosure
schedule delivered by Veeco to CVC dated the date of the merger agreement, and
to matters otherwise disclosed in the documents filed by Veeco with the SEC.
Survival of Representations and Warranties. None of the representations
and warranties of the parties under the merger agreement or in any certificate
delivered pursuant to the merger agreement will survive the completion of the
merger.
CERTAIN COVENANTS
Interim Operations. CVC and Veeco have agreed that, prior to the Effective
Time, they will conduct their businesses only in the usual, regular and ordinary
course in substantially the same manner as conducted before the signing of the
merger agreement. CVC and Veeco have also agreed to attempt to preserve
unimpaired at the Effective Time their goodwill and ongoing businesses by using
their reasonable best efforts to: (i) keep intact their business organizations
as of the date of the merger agreement, (ii) keep available the services of
their officers and key employees, as of the date of the merger agreement, and
(iii) preserve their business relationships and good will with customers,
suppliers, distributors, licensors, licensees, landlords and others with whom
they have business dealings. CVC has agreed, prior to the Effective Time, to
confer with Veeco concerning material operational matters and to report to Veeco
periodically concerning the status of CVC's business, operations and finances.
Further, CVC and Veeco have specifically agreed not to do, cause or permit any
of the following to occur without the prior written consent of the other (which
consent is not to be unreasonably withheld or delayed):
o Cause or permit amendments to their certificates of incorporation or
bylaws;
o Declare or pay dividends or make other distributions on their
capital stock, or split, combine or reclassify any of their capital
stock or issue any securities in exchange or substitution for shares
of their capital stock;
o Repurchase or otherwise acquire any shares of their capital stock,
except from former employees, directors and consultants in
accordance with agreements in effect on the date of the merger
agreement relating to repurchase of shares on termination of
service;
o Issue any shares of capital stock or any securities convertible into
or exchangeable or exercisable for shares of its capital stock,
other than under option plans or options or other convertible
securities outstanding on the date of the merger agreement;
o Take or fail to take any action which would interfere with Veeco's
ability to account for the merger as a "pooling of interests";
o Take or fail to take any action that would reasonably be expected to
cause the merger to fail to qualify as a reorganization as described
in Section 368(a) of the Code; or
o Generally, take any action that would make any of their respective
representations and warranties under the merger agreement materially
untrue or incorrect or prevent them from performing their respective
covenants under the merger agreement in any material respect.
Access. Until the Effective Time, CVC and Veeco have agreed to provide
each other with reasonable access to their respective properties, books,
records, tax returns, contracts, information and personnel upon
68
<PAGE>
reasonable request. However, if either party is prohibited from disclosing
confidential information to another party by law or preexisting confidentiality
obligations, then such party will inform the other party of such prohibition and
the parties will work together to resolve any related due diligence matters
without violating such laws or confidentiality obligations, including to obtain
third party consents to such disclosure, if appropriate.
Pooling. Both Veeco and CVC have agreed not to take and to cause their
respective subsidiaries not to take, any action that would adversely affect the
ability of Veeco to account for the merger as a "pooling of interests", and to
use all reasonable efforts to attempt to ensure that none of their Affiliates
takes any such action. Also, CVC has agreed to provide PricewaterhouseCoopers
LLP, independent public accountants to CVC, and Veeco has agreed to provide to
Ernst & Young LLP, independent public accountants to Veeco, certain information
and letters reasonably requested by these accounting firms to permit them to
deliver certain letters called for by the merger agreement relating to the
availability of "pooling of interests" accounting treatment for the merger.
CVC Board Nominees. Veeco has agreed that, if the merger is completed, as
of the Effective Time, Christine Whitman and Douglas Kingsley will be appointed
directors of Veeco.
Whitman Employment Agreement. Veeco has agreed that, under her employment
agreement with Veeco, as of the Effective Time, Christine Whitman, the current
Chairman, Chief Executive Officer and President of CVC, will become Veeco's
President and Chief Operating Officer.
Employee Benefits. Veeco has agreed that all employees of CVC and its
subsidiaries who continue employment with Veeco, the Surviving Corporation or
another subsidiary of Veeco after the merger (a "Continuing Employee") will be
eligible to continue to participate in the Surviving Corporation's health,
vacation and other non-equity based employee benefit plans, subject to Veeco's
right to amend such plans in accordance with their terms. If Veeco or the
Surviving Corporation terminates any such employee benefit plan, then, subject
to any necessary transition period, any affected Continuing Employee will be
eligible to participate in Veeco's health, vacation and other non-equity based
employee benefit plans to substantially the same extent as employees of Veeco in
similar positions and at similar grade levels.
Disclosure. Veeco and CVC have agreed to consult with each other before
issuing any press release or otherwise making any public statement with respect
to the merger or the other transactions contemplated by the merger agreement.
Neither Veeco nor CVC will make any disclosure regarding the merger or the
transactions contemplated by the merger agreement unless the other party has
approved the disclosure or the party seeking to make the disclosure has been
advised in writing by its outside legal counsel that the disclosure is required
by law.
Antitrust Matters. As contemplated by the merger agreement, CVC and Veeco
have filed the required notifications and materials under HSR Act. Under the
merger agreement, CVC and Veeco agreed to respond as promptly as practicable to
(i) any inquiries or requests received from the federal Trade Commission or the
Department of Justice for additional information or documentation and (ii) any
inquiries or requests received from any state attorney general, foreign
antitrust authority or other governmental authority in connection with antitrust
or related matters. Veeco and CVC also agreed to coordinate and keep one another
informed in connection with proceedings and communications with, and actions by,
the Federal Trade Commission, the Department of Justice or any other
governmental authority regarding the merger.
Except as may be prohibited by any governmental authority or by any law,
CVC and Veeco have agreed (i) to consult and cooperate with one another in
connection with any analysis, appearance, presentation, memorandum, brief,
argument, opinion or proposal made or submitted in connection with any legal
proceeding under or relating to the HSR Act or any other antitrust or fair trade
law and (ii) to permit authorized representatives
69
<PAGE>
of the other party to be present at each meeting or conference relating to any
such legal proceeding and to have access to and be consulted in connection with
any document, opinion or proposal made or submitted to any governmental
authority in connection with any such legal proceeding.
At the request of Veeco, CVC shall agree to divest, sell, dispose of, hold
separate or otherwise take or commit to take any action that limits its freedom
of action with respect to its or its subsidiaries' ability to retain, any of the
businesses, product lines or assets of CVC or any of its subsidiaries, provided
that any such action is conditioned upon the consummation of the merger and such
action, when taken together with any similar action by Veeco, would not have a
Material Adverse Effect on Veeco at and after the Effective Time. If requested
by any governmental authority, Veeco shall agree to divest, sell, dispose of,
hold separate or otherwise take or commit to take any action that limits its
freedom of action with respect to its or its subsidiaries' ability to retain,
any of the businesses, product lines or assets of Veeco or any of its
subsidiaries, provided, that (i) any such action is conditioned upon the
consummation of the merger, (ii) in Veeco's reasonable judgment, absent the
taking of such action a required Consent or approval of such governmental
authority to the consummation of the merger will not be obtained and (iii) in
the reasonable judgment of Veeco, such action will not materially affect the
business or operations of Veeco.
Affiliate Agreements. CVC and Veeco have agreed to use all reasonable
efforts to cause each of their respective Affiliates to enter into agreements
("Affiliate Agreements") prior to the date of the mailing of this joint proxy
statement/prospectus that restrict the transfer of shares of CVC common stock
and shares of Veeco common stock held by these Affiliates in a manner that is
intended to preserve the availability of "pooling of interests" accounting for
the merger. Generally, among other things, an Affiliate who executes an
Affiliate Agreement agrees not to transfer any shares of Veeco common stock or
CVC common stock held by such Affiliate for a 30-day period prior to the
Effective Time and until, after the Effective Time, Veeco has publicly announced
financial results covering at least 30 days of combined operations of CVC and
Veeco after the merger. Transfers by such Affiliates of Veeco common stock or
CVC common stock during such period could have the effect of rendering "pooling
of interests" accounting unavailable for the merger. See "Risk Factors - Risks
Related to the Merger and Receipt of Veeco Stock - Loss of "Pooling of
Interests" Accounting Treatment for the Merger Would Harm the Financial Results
of the Combined Company" on page 13.
Other Covenants. The merger agreement contains additional covenants of
Veeco, Acquisition and CVC customary for transactions of this type, including
covenants relating to (i) the parties' obligation to use their best efforts to
obtain consents to the consummation of the merger, (ii) CVC's obligation to
continue to file its tax returns and pay its taxes and debts as they become due;
(iii) the obligation of the parties to give notice in the event they become
aware of breaches, or circumstances that could lead to breaches, of
representations and warranties or covenants; (iv) repayment before the Effective
Time of indebtedness owed to CVC and its subsidiaries by their Affiliates; (v)
compliance by Veeco with "blue sky" laws in connection with the merger; and (vi)
further assurances.
Further, the merger agreements contains covenants relating to matters
discussed elsewhere in this joint proxy statement/prospectus, including:
o Veeco's obligations with respect to assumption of CVC stock options
in connection with and following the completion of the merger;
o Veeco's obligations with respect to the continuation of existing
indemnification arrangements relating to CVC's officers and
directors as of the date of the merger agreement, and Veeco's
obligations with respect to the continuation of a directors' and
officers' liability insurance policy for such persons.
NO SOLICITATION
No Solicitation - CVC. Until the merger is completed or the merger
agreement is terminated, CVC has agreed not to take any of the following actions
directly or indirectly:
70
<PAGE>
o Solicit, initiate, encourage, induce or facilitate the making,
submission or announcement of a CVC Acquisition Proposal (as defined
below);
o Take any action that could reasonably be expected to lead to a CVC
Acquisition Proposal;
o Furnish information regarding CVC or its subsidiaries to any person
or entity in connection with or in response to a CVC Acquisition
Proposal or an inquiry or indication of interest that could lead to
a CVC Acquisition Proposal;
o Engage in discussions or negotiations with any person or entity with
respect to a CVC Acquisition Proposal;
o Approve, endorse or recommend any CVC Acquisition Proposal; or
o Enter into any letter of intent or similar document or any contract
contemplating or otherwise relating to any CVC Acquisition Proposal.
A "CVC Acquisition Proposal" means an offer, proposal, inquiry or
indication of interest contemplating or otherwise relating to a CVC Acquisition
Transaction, and a "CVC Acquisition Transaction" is any of the following:
o A merger, consolidation, statutory share exchange, business
combination, recapitalization, liquidation, dissolution or similar
transaction involving CVC or a subsidiary of CVC in which CVC's or
such subsidiary's stockholders immediately before the transaction
hold less than 80% of the total equity interests in the surviving
entity of the transaction;
o Any sale or other disposition of any business or assets that
constitute or account for 20% or more of the consolidated net
revenues, net income or assets of CVC or a subsidiary of CVC; or
o Any liquidation or dissolution of CVC or a subsidiary of CVC.
If, however, before the adoption of the merger agreement by CVC's
stockholders, CVC receives a bona fide unsolicited written CVC Acquisition
Proposal and CVC's Board of Directors reasonably determines in good faith after
due consideration that such CVC Acquisition Proposal would reasonably be likely
to result in a Superior CVC Proposal (as defined below), then CVC can engage in
discussions and take any other actions that may be reasonably required for the
purpose of becoming informed regarding such CVC Acquisition Proposal, provided
that:
o Neither CVC nor any representative of CVC has violated their
nonsolicitation and related obligations under the merger agreement;
o CVC's Board of Directors concludes in good faith that such action is
required in order for the CVC Board of Directors to comply with its
fiduciary obligations to CVC's stockholders under applicable law,
after having taken into account, among other relevant
considerations, the written advice of its outside legal counsel; and
o Before any such discussions or other action, CVC receives from the
person or entity making the CVC Acquisition Proposal an executed
confidentiality arrangement containing customary limitations on the
use and disclosure of all nonpublic written and oral information
furnished to such person or entity by or on behalf of CVC and
containing "standstill" provisions no less favorable to CVC than
those contained in the confidentiality agreement entered into
between CVC and Veeco.
A "Superior CVC Proposal" means an unsolicited, bona fide, written offer
made by a third party to purchase all outstanding CVC common stock on terms that
CVC's Board of Directors determines to be more
71
<PAGE>
favorable to CVC's stockholders than the terms of the merger, in its reasonable
judgment, after having taken into account, among other relevant considerations,
a written opinion of an independent financial advisor of nationally recognized
reputation; provided, that, any such offer will not be a Superior CVC Proposal
if any financing required to consummate the transaction contemplated by such
offer is not committed and is not reasonably capable of being obtained by such
third party.
CVC has agreed to inform Veeco promptly of any request for non-public
information or any other inquiry that could lead to a CVC Acquisition Proposal,
or of any CVC Acquisition Proposal, and the identity of the party making the CVC
Acquisition Proposal, request or inquiry, and the material terms of the CVC
Acquisition Proposal, request or inquiry. CVC has also agreed to keep Veeco
informed as to the status and details of the CVC Acquisition Proposal, request
or inquiry.
No Solicitation - Veeco. Until the merger is completed or the merger
agreement is terminated, Veeco has agreed not to take any of the following
actions directly or indirectly:
o Solicit, initiate, encourage, induce or facilitate the making,
submission or announcement of a Veeco Acquisition Proposal (as
defined below);
o Take any action that could reasonably be expected to lead to a Veeco
Acquisition Proposal;
o Furnish information regarding Veeco or its subsidiaries to any
person or entity in connection with or in response to a Veeco
Acquisition Proposal or an inquiry or indication of interest that
could lead to a Veeco Acquisition Proposal;
o Engage in discussions or negotiations with any person or entity with
respect to a Veeco Acquisition Proposal;
o Approve, endorse or recommend any Veeco Acquisition Proposal; or
o Enter into any letter of intent or similar document or any contract
contemplating or otherwise relating to any Veeco Acquisition
Proposal.
A "Veeco Acquisition Proposal" means an offer, proposal, inquiry or
indication of interest contemplating or otherwise relating to a Veeco
Acquisition Transaction, and a "Veeco Acquisition Transaction" is any of the
following:
o A merger, consolidation, statutory share exchange, business
combination, recapitalization, liquidation, dissolution or similar
transaction involving Veeco or a subsidiary of Veeco in which
Veeco's or any such subsidiary's stockholders immediately before the
transaction hold less than 80% of the total equity interests in the
surviving entity of the transaction;
o Any sale or other disposition of any business or assets that
constitute or account for 20% or more lf the consolidated net
revenues, net income or assets of Veeco or a subsidiary of Veeco; or
o Any liquidation or dissolution of Veeco or a subsidiary of Veeco.
However, before the adoption of the merger agreement by Veeco's
stockholders, Veeco can engage in discussions and take any other actions that
may be reasonably required for the purpose of becoming informed with respect to,
a bona fide unsolicited written Veeco Acquisition Proposal that is submitted to
Veeco (and not withdrawn) if Veeco's Board of Directors reasonably determines in
good faith after due consideration that such Veeco Acquisition Proposal would
reasonably be likely to result in a Superior Veeco Proposal (as defined below)
if:
72
<PAGE>
o Neither Veeco nor any representative of Veeco has violated their
nonsolicitation and related obligations under the merger agreement;
and
o Before any such discussions or other action, Veeco receives from the
person or entity making the Veeco Acquisition Proposal an executed
confidentiality arrangement containing customary limitations on the
use and disclosure of all nonpublic written and oral information
furnished to such person or entity by or on behalf of Veeco and
containing "standstill" provisions no less favorable to Veeco than
those contained in the confidentiality agreement entered into
between Veeco and CVC.
A "Superior Veeco Proposal" means an unsolicited, bona fide, written offer
by a third party to purchase all outstanding shares of Veeco common stock on
terms that the Board of Directors of Veeco determines make it more favorable to
the stockholders of Veeco for Veeco to consummate that transaction than for
Veeco to consummate the merger. The Board of Directors must make this
determination in its reasonable judgement after taking into account, among other
relevant considerations, a written opinion of an independent financial advisor
of nationally recognized reputation.
Veeco has agreed to inform CVC promptly of any request for non-public
information or any other inquiry that could lead to a Veeco Acquisition
Proposal, or of any Veeco Acquisition Proposal, and the identity of the party
making the Veeco Acquisition Proposal, request or inquiry, and the material
terms of the Veeco Acquisition Proposal, request or inquiry. Veeco has also
agreed to keep CVC informed as to the status and details of the Veeco
Acquisition Proposal, request or inquiry.
BOARD RECOMMENDATIONS
Calling CVC Special Meeting; Recommendation of CVC Board. Under the merger
agreement, CVC agreed to call the CVC special meeting as soon as is practicable
after the registration statement of which this joint proxy statement/prospectus
forms a part is declared effective under the Securities Act by the SEC.
Under the merger agreement, CVC has agreed that this joint proxy
statement/prospectus will include a statement to the effect that CVC's Board of
Directors unanimously recommends that CVC's stockholders vote to adopt the
merger agreement at the CVC special meeting. Further, CVC has agreed that such
recommendation to CVC's stockholders by CVC's Board of Directors will not be
withdrawn or modified in a manner adverse to Veeco unless, at any time prior to
the adoption of the merger agreement by CVC's stockholders the following occurs:
o A proposal to acquire (by merger or otherwise) all of the
outstanding shares of CVC common stock is made to CVC and is not
withdrawn;
o CVC provides Veeco with at least five business days' notice of any
meeting of CVC's Board of Directors at which CVC's Board of
Directors will consider and determine whether such offer is a
Superior CVC Proposal;
o CVC's Board of Directors determines in good faith that such offer
constitutes a Superior CVC Proposal (after taking into account,
among other relevant considerations, a written opinion of an
independent financial advisor of nationally recognized reputation);
o CVC's Board of Directors determines in good faith, after having
taken into account, among other relevant considerations, the written
advice of CVC's outside legal counsel that, in light of such
Superior CVC Proposal, the withdrawal or modification of the CVC
Board of Directors' recommendation is required in order for CVC's
Board of Directors to comply with its fiduciary obligations to CVC's
stockholders under applicable law; and
73
<PAGE>
o Neither CVC nor any of its representatives has violated its
nonsolicitation and related obligations under the merger agreement.
Under the merger agreement, even if CVC's Board of Directors withdraws or
modifies its recommendation of the merger in the manner discussed above, CVC
will remain obligated to call and hold the CVC special meeting for CVC's
stockholders to consider and vote upon the merger agreement and the merger.
Accordingly, due to the voting arrangements in place between Veeco and certain
CVC stockholders holding more than a majority of the outstanding shares of CVC
common stock, even if CVC's Board of Directors withdraws or modifies its
recommendation of the merger in a manner adverse to Veeco, it is likely that (i)
the CVC special meeting will take place; (ii) the merger will be approved by
CVC's stockholders and (iii) the merger will be completed.
Calling Veeco Special Meeting; Recommendation of Veeco Board. Under the
merger agreement, Veeco agreed to call the Veeco special meeting on the same
date as the CVC special meeting is held or as soon as is practicable thereafter.
Under the merger agreement, Veeco has agreed that this joint proxy
statement/prospectus will include a statement to the effect that Veeco's Board
of Directors unanimously recommends that Veeco's stockholders vote to approve
the issuance of shares of Veeco common stock in connection with the merger at
the Veeco special meeting. Further, Veeco has agreed that such recommendation to
Veeco's stockholders by Veeco's Board of Directors will not be withdrawn or
modified in a manner adverse to CVC unless, at any time prior to the adoption of
the merger agreement by Veeco's stockholders the following occurs:
o A proposal to acquire (by merger or otherwise) all of the
outstanding shares of Veeco common stock is made to Veeco and is not
withdrawn;
o Veeco provides CVC with at least five business days' notice of any
meeting of Veeco's Board of Directors at which Veeco's Board of
Directors will consider and determine whether such offer is a
Superior Veeco Proposal;
o Veeco's Board of Directors determines in good faith that such offer
constitutes a Superior Veeco Proposal (after taking into account,
among other relevant considerations, a written opinion of an
independent financial advisor of nationally recognized reputation);
and
o Neither Veeco nor any of its representatives has violated its
nonsolicitation and related obligations under the merger agreement.
Under the merger agreement, even if Veeco's Board of Directors withdraws
or modifies its recommendation of the merger in the manner discussed above,
Veeco will remain obligated to call and hold the Veeco special meeting for
Veeco's stockholders to consider and vote upon the merger agreement and the
merger.
CONDITIONS TO THE MERGER
Conditions to the Obligations of Each Party. The obligations of CVC, Veeco
and Acquisition to complete the merger are subject to the satisfaction of the
following conditions:
o The registration statement of which this joint proxy
statement/prospectus forms a part shall have been declared effective
under the Securities Act and not be subject to any stop order or any
proceeding seeking a stop order;
o The merger agreement and the merger shall have been approved by the
requisite vote of the outstanding shares of CVC common stock,
74
<PAGE>
o The issuance of shares of Veeco common stock in the merger shall
have been approved by the requisite vote of the outstanding shares
of Veeco common stock;
o No suit, action or other legal proceeding by any domestic
governmental authority, or injunction or final judgment shall be
pending on the date of the closing of the merger before any court or
governmental authority in which it is sought to restrain or prohibit
or to obtain damages or other relief in connection with the merger
or the merger agreement;
o The shares of Veeco common stock to be issued in the merger shall
have been approved for listing (subject to notice of issuance) on
The Nasdaq National Market;
o The applicable waiting period under the HSR Act relating to the
merger shall have expired or been terminated and any similar waiting
period under or consent required by any applicable foreign antitrust
law or regulation shall have been obtained (other than where the
failure for such foreign waiting period to have expired or foreign
consent to have been obtained would not be material to either Veeco
or CVC); and
o PricewaterhouseCoopers LLP, independent accountants for CVC, shall
have delivered to CVC and Ernst & Young LLP, independent public
accountants for Veeco, a letter regarding PricewaterhouseCooper's
lack of awareness of any fact relating to CVC that would preclude
Veeco from accounting for the merger as a "pooling of interests",
and Ernst & Young shall have delivered to Veeco an opinion
(reasonably satisfactory to Veeco and CVC) to the effect that the
merger can be accounted for as a "pooling of interests."
As of the date of this joint proxy statement/prospectus, the waiting
period under the HSR Act has expired or been terminated.
Conditions to the Obligations of Veeco and Acquisition. The obligations of
Veeco and Acquisition to complete the merger are subject to the satisfaction or
waiver of the following further conditions:
o CVC shall have performed and complied in all material respects with
its covenants, agreements and conditions required by the merger
agreement to be performed and complied with it on or prior to the
closing date of the merger;
o The representations and warranties of CVC in the merger agreement
shall be accurate in all respects as of the closing date of the
merger as if made on and as of that date without regard to: (i) any
materiality qualifications in any representation or warranty and
(ii) updates to CVC's disclosure schedules since the date of the
merger agreement, except that any inaccuracies in such
representations and warranties will be disregarded if the
circumstances giving rise to such inaccuracies do not constitute and
would not reasonably be expected to have a Material Adverse Effect
(as defined below) on CVC;
o All consents and approvals required to be obtained in connection
with the merger shall have been obtained and shall be in full force
and effect, other than consents or approvals the failure of which to
be obtained would not result, individually or in the aggregate, in a
Material Adverse Effect on CVC or Veeco;
o Veeco shall have received executed Affiliate Agreements from each
CVC Affiliate;
o Christine Whitman's employment agreement with Veeco shall have been
executed and shall be in full force and effect;
75
<PAGE>
o Veeco shall have received a legal opinion from Kaye, Scholer,
Fierman, Hays & Handler, LLP that the merger will qualify as a
reorganization as described in Section 368(a) of the Code; and
o There shall have been no Material Adverse Effect with respect to CVC
and no condition shall exist that could be reasonably likely to
result in such a Material Adverse Effect.
As used in the merger agreement, a "Material Adverse Effect" means, with
respect to CVC or Veeco (as applicable), a material adverse effect in the
business, financial condition or results of operations of CVC or Veeco (as
applicable) and their respective subsidiaries, taken as a whole; provided, that
a Material Adverse Effect shall not be deemed to have occurred primarily as a
result of fluctuations in (i) Veeco's or CVC's (as applicable) order rate,
revenues or net income for any fiscal period prior to the consummation of the
merger or (ii) the number of full-time employees of Veeco or CVC (as
applicable).
Ms. Whitman's employment agreement with Veeco was executed and delivered
by her and by Veeco at the time of the execution of the merger agreement.
Conditions to the Obligations of CVC. The obligation of CVC to complete
the merger is subject to the satisfaction or waiver of the following further
conditions:
o Veeco and Acquisition shall have performed and complied in all
material respects with their covenants, agreements and conditions
required by the merger agreement to be performed and complied with
them on or prior to the closing date of the merger;
o The representations and warranties of Veeco and Acquisition in the
merger agreement shall be accurate in all respects as of the closing
date of the merger as if made on and as of that date without regard
to (i) any materiality qualifications in any representation or
warranty and (ii) updates to Veeco's disclosure schedules since the
date of the merger agreement, except that any inaccuracies in such
representations and warranties will be disregarded if the
circumstances giving rise to such inaccuracies do not constitute and
would not reasonably be expected to have a Material Adverse Effect
on Veeco;
o All consents and approvals of governmental authorities required to
be obtained in connection with the merger shall have been obtained
and shall be in full force and effect, other that consents or
approvals the failure of which to be obtained would not result,
individually or in the aggregate, in a Material Adverse Effect on
Veeco;
o CVC shall have received executed Affiliate Agreements from each
Veeco Affiliate;
o CVC shall have received a legal opinion from Dewey Ballantine LLP
that the merger will qualify as a reorganization as described in
Section 368(a) of the Code; and
o There shall have been no Material Adverse Effect with respect to
Veeco and no condition shall exist that could be reasonably likely
to result in such a Material Adverse Effect.
TERMINATION OF THE MERGER AGREEMENT
Termination by Veeco or CVC. Either Veeco or CVC may terminate the merger
agreement prior to the Effective Time (whether before or after adoption of the
merger agreement by CVC's stockholders and whether before or after the approval
of the issuance of shares of Veeco common stock in the merger by Veeco's
stockholders) as follows:
o By mutual written consent of CVC and Veeco;
76
<PAGE>
o If the merger has not been completed by August 31, 2000; provided,
that a party cannot terminate the merger agreement for such reason
if the failure for the merger to be completed is attributable to a
failure of the party seeking to terminate the merger agreement to
perform a material obligation required to be performed by that party
at or before the Effective Time;
o If a court or other governmental authority issues a final and
nonappealable order, decree or ruling, or takes other action that
permanently restrains, enjoins or otherwise prohibits the merger;
o If a suit or action by a domestic governmental authority is pending
in which it is sought to restrain or prohibit or to obtain damages
in connection with the merger agreement or the transactions
contemplated thereby;
o If CVC's stockholders do not approve and adopt the merger agreement;
provided, that a party cannot terminate the merger agreement for
such reason if the failure to obtain the approval of CVC's
stockholders is attributable to the failure of that party to perform
any material obligation required to be performed by it at or before
the Effective Time; or
o If Veeco's stockholders do not approve the issuance of shares of
Veeco common stock in the merger; provided, that a party cannot
terminate the merger agreement for such reason if the failure to
obtain the approval of Veeco's stockholders is attributable to the
failure of that party to perform any material obligation required to
be performed by it at or before the Effective Time.
Termination by Veeco. Veeco may terminate the merger agreement prior to
the Effective Time (whether before or after adoption of the merger agreement by
CVC's stockholders and whether before or after the approval of the issuance of
shares of Veeco common stock in the merger by Veeco's stockholders) as follows:
o If a CVC Triggering Event (as defined below) occurs;
o If any of CVC's covenants contained in the merger agreement are
breached (and such breach is not cured within fifteen days after
notice thereof) and the effect of such breach is that CVC shall have
performed and complied in all material respects with its covenants,
agreements and conditions required by the merger agreement to be
performed and complied with it on or prior to the closing date of
the merger;
o If CVC's representations and warranties are inaccurate as of the
date of the merger agreement or become inaccurate as of a later date
(as if made on such later date), with the effect that Veeco's
closing condition described above relating to the accuracy of CVC's
representations and warranties would not be satisfied; provided,
that, if such breach is capable of cure, it has not been cured
within fifteen days after notice thereof; or
o If there is a Material Adverse Effect with respect to CVC from the
date of the merger agreement to the closing date of the merger or
there is exists any condition which could reasonably be expected to
result in such a Material Adverse Effect; provided, that, in each
case, the Material Adverse Effect is not reasonably capable of being
cured before August 31, 2000.
o In the event of a Superior Veeco Proposal.
A "CVC Triggering Event" will be deemed to have occurred if (i) the Board
of Directors of CVC fails to recommend that CVC's stockholders vote to adopt the
merger agreement or withdraws or modifies its recommendation in a manner adverse
to Veeco; (ii) CVC fails to include in this joint proxy statement/prospectus its
recommendation that CVC's stockholders adopt the merger agreement or a statement
to the effect that the Board of Directors of CVC has determined that the merger
is in the best interests of CVC's stockholders; (iii) the Board of Directors of
CVC approves, endorses or recommends any CVC Acquisition Proposal; (iv) CVC
enters into a letter
77
<PAGE>
of intent or similar document or any contract relating to a CVC Acquisition
Proposal; (v) CVC fails to hold the CVC special meeting as promptly as
practicable and in any event within 45 days after the registration statement of
which this joint proxy statement/prospectus forms a part, unless a stop order is
issued with respect to that registration statement or an injunction shall have
been issued by a court or other governmental authority to restrain or prohibit
consummation of the merger; or (vi) CVC or any of its subsidiaries or any
representative of any of them violates in a material manner its nonsolicitation
covenant set forth in the merger agreement.
Termination by CVC. CVC may terminate the merger agreement prior to the
Effective Time (whether before or after adoption of the merger agreement by
CVC's stockholders and whether before or after the approval of the issuance of
shares of Veeco common stock in the merger by Veeco's stockholders) as follows:
o If a Veeco Triggering Event (as defined below) occurs;
o If any of Veeco's covenants contained in the merger agreement are
breached (and such breach is not cured within fifteen days after
notice thereof) and the effect of such breach is that Veeco shall
not have performed and complied in all material respects with its
covenants, agreements and conditions required by the merger
agreement to be performed and complied with it on or prior to the
closing date of the merger;
o If Veeco's representations and warranties are inaccurate as of the
date of the merger agreement or become inaccurate as of a later date
(as if made on such later date), with the effect that CVC's closing
condition described above relating to the accuracy of Veeco's
representations and warranties would not be satisfied; provided,
that, if such breach is capable of cure, it has not been cured
within fifteen days after notice thereof; or
o If there is a Material Adverse Effect with respect to Veeco from the
date of the merger agreement to the closing date of the merger or
there exists any condition which could reasonably be expected to
result in such a Material Adverse Effect; provided, that, in each
case, the Material Adverse Effect is not reasonably capable of being
cured before August 31, 2000.
A "Veeco Triggering Event" will be deemed to have occurred if (i) the
Board of Directors of Veeco fails to recommend that Veeco's stockholders vote to
approve the issuance of shares of Veeco common stock in the merger or withdraws
or modified its recommendation in a manner adverse to CVC; (ii) Veeco fails to
include in this joint proxy statement/prospectus its recommendation that Veeco's
stockholders approve the issuance of shares of Veeco common stock in the merger
or a statement to the effect that the Board of Directors of Veeco has determined
that the merger is in the best interests of Veeco's stockholders; (iii) the
Board of Directors of Veeco approves, endorses or recommends any Veeco
Acquisition Proposal (as defined below); (iv) Veeco enters into a letter of
intent or similar document or any contract relating to a Veeco Acquisition
Proposal; (v)Veeco fails to hold the Veeco special meeting on the same date as
the CVC special meeting or as promptly as practicable thereafter, and in any
event within 5 days thereafter; or (vi) Veeco or any of its subsidiaries or any
representative of any of them violates in a material manner its nonsolicitation
covenant set forth in the merger agreement.
FEES AND EXPENSES
Payment of Fees and Expenses. Generally, all fees and expenses incurred in
connection with the merger agreement, the merger and the other transactions
contemplated by the merger agreement will be paid by the party incurring the
fees or expenses (whether or not the merger is completed), except that Veeco and
CVC will share equally the fees and expenses relating to (i) the filing of this
joint proxy statement/prospectus and the related registration statement and (ii)
the filing of the premerger notification and report forms required by the HSR
Act and any notice or other document required to be filed under any foreign
antitrust law or regulation.
If CVC or Veeco breaches its representations, warranties or covenants in a
manner that gives the non-breaching party the right to terminate the merger
agreement, then, if the non-breaching party terminates the merger
78
<PAGE>
agreement, the breaching party must pay all of the fees (including attorneys'
fees, accountants' fees, financial advisory fees and filing fees) and
reasonable, documented out-of-pocket expenses previously and thereafter incurred
by the terminating party in connection with the preparation and negotiation of
the merger agreement and otherwise in connection with the merger.
Termination Fees Payable by Veeco. Veeco will be required to pay CVC a
termination fee of $4.0 million if Veeco or CVC terminates the merger agreement
because Veeco's stockholders do not approve the merger.
Veeco will be required to pay CVC a termination fee of $14.6 million if
the merger agreement is terminated in the following circumstances:
o By Veeco or CVC because Veeco's stockholders do not approve the
issuance of shares of Veeco common stock in the merger if, at or
prior to the time the merger agreement is so terminated, a Veeco
Acquisition Proposal is disclosed, announced, commenced, submitted
or made (this termination fee would be instead of the $4.0 million
termination fee referred to above);
o By Veeco in the event of a Superior Veeco Proposal; or
o By CVC in the event of a Veeco Triggering Event.
Termination Fees Payable by CVC. CVC will be required to pay Veeco a
termination fee of $14.6 million if the merger agreement is terminated in the
following circumstances:
o By Veeco or CVC because CVC's stockholders do not approve the
merger;
o By Veeco in the event that CVC breaches its representations,
warranties or covenants in a manner that gives Veeco the right to
terminate the merger agreement if, at or prior to the time the
merger agreement is so terminated, a CVC Acquisition Proposal is
disclosed, announced, commenced, submitted or made.
o By Veeco in the event of a CVC Triggering Event.
AMENDMENT; WAIVER
The merger agreement may be amended with the approval of CVC's Board of
Directors and Veeco's Board of Directors at any time prior to the Effective
Time. However, after CVC's stockholders and Veeco's stockholders have approved
the merger agreement and the merger, no amendment may be made that by law or
NASD regulation requires further approval of Veeco's or CVC's stockholders,
without first obtaining such approval. Any amendment to the merger agreement
must be in writing and must be signed by each of the parties thereto. Any waiver
under the merger agreement must be in writing and must be signed by the party to
be charged with that waiver.
79
<PAGE>
OTHER AGREEMENTS
VOTING ARRANGEMENTS WITH CVC STOCKHOLDERS
The following is a summary of material provisions of a voting agreement
entered into by certain CVC stockholders with, and the related irrevocable
proxies delivered by such stockholders to, Veeco. Copies of such voting
agreement and the form of irrevocable proxy granted to Veeco by each CVC
stockholder party thereto are attached as Appendix B to this joint proxy
statement/prospectus. This summary does not purport to be complete, and is
qualified in its entirety by reference to such documents. We urge you to
carefully review such voting agreement and irrevocable proxies.
At the time of the execution of the merger agreement, certain CVC
stockholders holding approximately 52% of the outstanding shares of CVC common
stock at that time entered into a voting agreement with Veeco. These CVC
stockholders include, among others:
o Seagate Technology, Inc., CVC's largest customer and largest
stockholder.
o Nikko Tecno Co., Inc.
o Certain funds managed by Advent International Group.
o Christine B. Whitman, CVC's Chairman, Chief Executive Officer and
President and a CVC Director.
o Emilio O. DiCataldo, CVC's Senior Vice President and Chief Financial
Officer.
o Mehrdad M. Moslehi, CVC's Senior Vice President and Chief Technology
Officer.
o Christopher J. Mann, CVC's Senior Vice President, Marketing.
As of the CVC Record Date, such stockholders held approximately 52% of the
outstanding shares of CVC common stock. Under this voting agreement, such CVC
stockholders agreed to vote the shares of CVC common stock held by them at that
time, as well as any shares of CVC common stock acquired by them in the future
(including upon the exercise of options, warrants or similar convertible or
exchangeable securities and in connection with stock splits, stock dividends,
recapitalizations and similar actions taken by CVC with respect to its common
stock) in favor of the adoption of the merger agreement and the approval of the
merger. These stockholders have also agreed to vote such shares of CVC common
stock against any transaction or proposal that would in any manner impede,
frustrate, prevent or nullify the merger, the merger agreement or any of the
other transactions contemplated by the merger agreement. However, these CVC
stockholders are not required to vote their CVC shares against a CVC Acquisition
Proposal or in favor of the election of any CVC director. In addition, under
this voting agreement such CVC stockholders have delivered to Veeco irrevocable
proxies empowering Veeco to vote the shares of CVC common stock held by these
CVC stockholders in favor of the merger agreement and the merger and against any
such inconsistent proposal.
Both the voting agreement and the irrevocable proxies terminate upon the
earlier to occur of (i) the Effective Time and (ii) the termination of the
merger agreement in accordance with its terms.
None of the CVC stockholders who entered into voting agreements and
granted irrevocable proxies received any additional consideration in exchange
therefor.
As a result of these voting agreements and irrevocably proxies, CVC and
Veeco anticipate that, whether or not any other stockholders of CVC vote to
approve the merger and the merger agreement at CVC's special meeting, the
following will occur:
o The shares of stock subject to the voting agreement and irrevocable
proxies will be voted in favor of approval of the merger agreement
and the merger;
o The merger agreement will be approved by the requisite majority vote
of outstanding shares of CVC common stock; and
o Subject to the other conditions to the merger, the merger will
occur.
80
<PAGE>
VOTING ARRANGEMENTS WITH VEECO STOCKHOLDERS
The following is a summary of a voting agreement entered into by certain
Veeco stockholders with, and related irrevocable proxies delivered by such
stockholders to, CVC. Copies of such voting agreement and the form of
irrevocable proxy granted to CVC by each Veeco stockholder party thereto are
attached as Appendix C to this joint proxy statement/prospectus. This summary
does not purport to be complete and is qualified in its entirety by reference to
such documents. We urge you to carefully review such voting agreement and
irrevocable proxies.
At the time of the execution of the merger agreement, the following Veeco
stockholders holding approximately 0.7% of the outstanding shares of Veeco
common stock at that time entered into a voting agreement with CVC:
o Edward H. Braun, Veeco's Chairman, Chief Executive Officer and
President and a Veeco Director.
o John F. Rein, Jr., Veeco's Vice President-Finance and Chief
Financial Officer.
o Emanuel Lakios, Veeco's President-Process Equipment.
o Joseph Rivlin, Veeco's Executive Vice President, Worldwide Field
Operations.
As of the Veeco Record Date, such Veeco stockholders held approximately
__% of the outstanding shares of Veeco common stock. Under this voting
agreement, such Veeco stockholders agreed to vote the shares of Veeco common
stock held by them at that time, as well as any shares of Veeco common stock
acquired by them in the future (including upon the exercise of options, warrants
or similar convertible or exchangeable securities and in connection with stock
splits, stock dividends, recapitalizations and similar actions taken by Veeco
with respect to its common stock) in favor of the adoption of the merger
agreement and the approval of the merger. These stockholders have also agreed to
vote such shares of Veeco common stock against any transaction or proposal that
would in any manner impede, frustrate, prevent or nullify the merger, the merger
agreement or any of the other transactions contemplated by the merger agreement.
However, these Veeco stockholders are not required to vote their Veeco shares
against a Veeco Acquisition Proposal or in favor of the election of any Veeco
director. In addition, under this voting agreement such Veeco stockholders have
delivered to CVC irrevocable proxies empowering CVC to vote the shares of Veeco
common stock held by these Veeco stockholders in favor of the merger agreement
and the merger and against any such inconsistent proposal.
None of the Veeco stockholders who entered into the voting agreement and
granted irrevocable proxies received any consideration in exchange therefor.
Both the voting agreement and the irrevocable proxies terminate upon the
earlier to occur of (i) the Effective Time and (ii) the termination of the
merger agreement in accordance with its terms.
AMENDMENT TO VEECO'S AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES OF VEECO COMMON STOCK
Veeco's Amended and Restated Certificate of Incorporation authorizes the
issuance of up to 25,000,000 shares of Veeco common stock. As of March 1, 2000,
there were 18,082,518 shares of Veeco common stock issued and outstanding. As of
December 31, 1999, there were 2,124,337 shares of Veeco common stock reserved
for issuance upon exercise of stock options which have been granted pursuant to
Veeco's employee and director stock option plans and under Veeco's employees
stock purchase plan. In addition, as a result of the merger, Veeco will be
obligated to issue approximately 5,000,000 shares of Veeco common stock in
exchange for outstanding shares of CVC common stock and to reserve approximately
1,300,000 shares of Veeco common stock for issuance upon the exercise of CVC
stock options and CVC warrants to be assumed by Veeco in the merger.
At the Veeco special meeting, the Veeco stockholders will be asked to
consider and vote upon a proposal, unanimously recommended by Veeco's Board of
Directors, to amend Article 4 of Veeco's Amended and Restated Certificate of
Incorporation, in order to increase the number of shares of Veeco common stock
that Veeco has
81
<PAGE>
authority to issue from 25,000,000 shares to 40,000,000 shares. The purpose of
the amendment is to provide Veeco with additional shares of Veeco common stock
which may be used in connection with future acquisitions, for stock splits and
stock dividends and for other corporate purposes, including the raising of
additional capital, at times when the Board of Directors of Veeco, in its
discretion, deems it advantageous to do so.
Assuming the approval and effectiveness of the proposed amendment to
Veeco's Amended and Restated Certificate of Incorporation and the completion of
the merger, it is anticipated that Veeco will have approximately 14,000,000
authorized and unissued shares of Veeco common stock after the merger, which
Veeco's Board of Directors would be able to authorize for issuance for the
foregoing purposes, at any time, without obtaining further authorization from
the holders of Veeco common stock, unless such authorization is required by
applicable law, regulation or the rules of any stock exchange on which shares of
Veeco's common stock may then be listed. Except as described above, no specific
use of the additional shares of Veeco common stock is presently contemplated,
although Veeco has considered additional acquisitions from time to time and
reserves the right to use any additional authorized shares in the discretion of
Veeco's Board of Directors. Holders of shares of Veeco common stock have no
preemptive rights in connection with the issuance of additional shares of Veeco
common stock. A VOTE IN FAVOR OF THE PROPOSAL TO AMEND VEECO'S AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION SHOULD NOT BE DEEMED TO BE A VOTE TO
APPROVE THE MERGER.
The issuance of additional shares of Veeco common stock may dilute the
present equity ownership position of Veeco stockholders. The issuance of
additional shares of Veeco common stock may, among other things, have a dilutive
effect on Veeco's earnings per share and on the equity and voting power of
existing Veeco stockholders and may adversely affect the market price of the
Veeco common stock.
The availability for issuance of additional shares of Veeco common stock
could enable the Board of Directors to render more difficult or discourage an
attempt to obtain control of Veeco. The additional shares of Veeco common stock
also could be utilized to render more difficult a merger or similar transaction,
even it if appears to be desirable to a majority of the Veeco stockholders.
Veeco is not aware of any pending or threatened efforts to obtain control of
Veeco.
If Veeco's stockholders do not approve the proposed amendment to Veeco's
Amended and Restated Certificate of Incorporation, Veeco would not have enough
authorized shares to cover the shares to be issued to CVC stockholders in the
merger and to be reserved for issuance upon the exercise of CVC stock options
and CVC warrants to be assumed by Veeco in the merger. In that case, Veeco could
be deemed to be in violation of contractual provisions in the merger agreement
which, if deemed material, could give rise to CVC's right to terminate the
merger agreement. In the case of such a termination by CVC, Veeco could be
required to pay CVC's fees and expenses incurred in connection with the merger
agreement and the merger. In addition, Veeco would not have shares of Veeco
common stock available for use in connection with the future acquisitions, for
stock splits and stock dividends, and for other corporate purposes, including
the raising of additional capital.
THE FULL TEXT OF THE PROPOSED RESOLUTION AMENDING VEECO'S AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION IS SET FORTH IN APPENDIX F HERETO AND THE
DESCRIPTION OF THE PROPOSED AMENDMENT HEREIN IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH APPENDIX F.
The affirmative vote of the holders of a majority of the outstanding
shares of Veeco common stock entitled to vote thereon will be required to amend
Veeco's Amended and Restated Certificate of Incorporation to increase the number
of authorized shares of Veeco common stock.
THE BOARD OF DIRECTORS OF VEECO BELIEVES THAT APPROVAL OF THE AMENDMENT TO
VEECO'S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION IS IN THE BEST
INTERESTS OF VEECO AND VEECO'S STOCKHOLDERS. THE BOARD OF DIRECTORS OF VEECO
RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENT TO INCREASE THE AUTHORIZED
NUMBER OF SHARES OF VEECO COMMON STOCK AS DESCRIBED ABOVE AT VEECO'S SPECIAL
MEETING. IN THE EVENT THAT THE PROPOSED AMENDMENT IS NOT APPROVED BY VEECO'S
STOCKHOLDERS AT THE VEECO SPECIAL MEETING, THE AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION IN EFFECT AS OF THE DATE HEREOF WILL REMAIN IN FULL FORCE AND
EFFECT.
82
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements give
effect to the merger under the "pooling of interests" method of accounting. The
unaudited pro forma combined financial statements are based on the historical
consolidated financial statements and notes thereto (as applicable) of Veeco and
CVC which are included or incorporated by reference herein. The unaudited
combined balance sheet assumes the merger took place on December 31, 1999 and
combines Veeco's December 31, 1999 consolidated balance sheet with CVC's
December 31, 1999 unaudited consolidated balance sheet. The unaudited pro forma
combined statements of income assume the merger took place on January 1, 1997
and combine Veeco's consolidated statements of income for the years ended
December 31, 1999, 1998 and 1997 with CVC's consolidated statements of
operations for the years ended September 30, 1999, 1998 and 1997, respectively.
The unaudited pro forma combined financial statements are based on the
estimates and assumptions set forth in the notes to such financial statements.
The pro forma adjustments made in connection with the development of the pro
forma information are preliminary and have been made solely for purposes of
developing such pro forma information for illustrative purposes necessary to
comply with the disclosure requirements of the SEC. The unaudited pro forma
combined financial statements do not purport to be indicative of the results of
operations for future periods or the combined financial position or results that
actually would have been realized had Veeco and CVC been a single entity during
these periods.
Veeco and CVC estimate that they will incur direct transaction and
integration costs of approximately $15,000,000 which will be charged to
operations in the fiscal quarter in which the merger is consummated. This amount
is a preliminary estimate only and is therefore subject to change.
These unaudited pro forma combined financial statements should be read in
conjunction with the historical consolidated financial statements and the
related notes thereto of Veeco and CVC, which are included or incorporated by
reference herein.
83
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AT DECEMBER 31, 1999 (1)
(Dollars in thousands)
<TABLE>
<CAPTION>
Historical Pro Forma
Veeco CVC Adjustments Combined
----- --- ----------- --------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 29,418 $ 4,171 $ $ 33,589
Short-term investments 50,888 -- 50,888
Accounts receivable, net 58,393 18,870 77,263
Inventories 56,689 30,255 86,944
Prepaid expenses and other current
assets 6,111 2,819 8,930
Deferred income taxes 9,544 1,017 10,561
--------- --------- --------- ---------
Total current assets 211,043 57,132 268,175
Property, plant and equipment at cost, net 41,924 19,089 61,013
Excess of cost over net assets acquired, net 5,509 50 5,559
Other assets, net 6,803 1,007 7,810
--------- --------- --------- ---------
Total assets $ 265,279 $ 77,278 $ $ 342,557
========= ========= ========= =========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 16,444 $ 9,866 $ -- $ 26,310
Accrued expenses 28,911 6,960 15,000 (2) 50,871
Income taxes payable 7,580 377 (2,000)(2) 5,957
Current portion of long-term debt 235 1,040 1,275
Notes payable to former Digital stockholders 8,000 -- 8,000
--------- --------- --------- ---------
Total current liabilities 61,170 18,243 13,000 92,413
Deferred income taxes 2,727 1,554 4,281
Long-term debt 8,759 7,346 16,105
Other liabilities 272 1,021 1,293
Stockholders' equity:
Preferred stock, 500,000 shares authorized; no
shares issued and outstanding -- --
Common stock of Veeco, 25,000,000 shares
authorized; 17,627,701 actual shares
and 22,617,773 pro forma shares issued
and outstanding 176 -- 50(3) 226
Common stock of CVC 50,000,000 shares
authorized, 11,604,819 actual shares
and no pro forma shares issued and
outstanding -- 116 (116)(3) --
Additional paid-in capital 120,245 46,073 66(3) 166,384
Retained earnings 72,492 3,329 (13,000)(2) 62,821
Other comprehensive income (562) -- (562)
Unamortized deferred compensation -- (110) (110)
Minimum pension liability -- (294) (294)
--------- --------- --------- ---------
Total stockholders' equity 192,351 49,114 (13,000) 228,465
--------- --------- --------- ---------
Total liabilities and stockholders' equity $ 265,279 $ 77,278 $ $ 342,557
========= ========= ========= =========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
84
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1999 (1)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Historical Pro Forma
Veeco CVC Adjustments Combined
----- --- ----------- --------
<S> <C> <C> <C> <C>
Net sales $ 246,606 $ 82,915 $ $ 329,521
Cost of sales 125,650 50,502 176,152
--------- --------- --------- ---------
Gross profit 120,956 32,413 153,369
Costs and expenses:
Research and development expense 31,545 12,630 44,175
Selling, general and administrative expense 51,434 14,903 66,337
Other expense (income)--net 965 -- 965
Merger and reorganization expenses 2,600 -- 2,600
Loss on sale of leak detection business 2,500 -- 2,500
Write-off of purchased in-process technology 1,300 1,174 2,474
--------- --------- --------- ---------
90,344 28,707 119,051
--------- --------- --------- ---------
Operating income 30,612 3,706 34,318
Interest expense 1,616 1,235 2,851
Interest income (3,400) (1,037) (4,437)
--------- --------- --------- ---------
Income before income taxes 32,396 3,508 35,904
Income tax provision 11,986 1,937 13,923
--------- --------- --------- ---------
Net income $ 20,410 $ 1,571 $ $ 21,981
========= ========= ========= =========
Earnings per common share:
Net income per common share $ 1.17 $ 1.01 $ 1.22(4)
Diluted net income per common share $ 1.15 $ 0.18 $ 1.02(4)
Weighted average shares outstanding 17,381 1,561 671 18,052(4)
Diluted weighted average shares outstanding 17,768 8,589 3,693 21,461(4)
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
85
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998 (1)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Historical Pro Forma
Veeco CVC Adjustments Combined
----- --- ----------- --------
<S> <C> <C> <C> <C>
Net sales $ 214,985 $ 68,173 $ 283,158
Cost of sales 115,441 42,019 157,460
--------- --------- --------- ---------
Gross profit 99,544 26,154 125,698
Costs and expenses:
Research and development expense 27,976 12,615 40,591
Selling, general and administrative expense 44,756 11,172 55,928
Other expense (income)--net (804) -- (804)
Merger and reorganization expenses 7,500 -- 7,500
--------- --------- --------- ---------
79,428 23,787 103,215
--------- --------- --------- ---------
Operating income 20,116 2,367 22,483
Write-off of deferred charges -- 675 675
Interest expense 1,594 1,325 2,919
Interest (income) (587) (171) (758)
--------- --------- --------- ---------
Income before income taxes 19,109 $ 538 19,647
Income tax provision 5,736 274 6,010
--------- --------- --------- ---------
Net income $ 13,373 $ 264 $ $ 13,637
========= ========= ========= =========
Earnings per common share:
Net income per common share $ .83 $ .26 $ .82(4)
Diluted net income per common share $ .82 $ .04 $ .70(4)
Pro forma income tax presentation(5):
Income before income taxes $ 19,109 $ 538 $ 19,647
Pro forma income tax provision 7,190 274 7,464
--------- --------- --------- ---------
Pro forma net income $ 11,919 $ 264 $ $ 12,183
========= ========= ========= =========
Pro forma earnings per common share:
Pro forma net income per common share $ .74 $ .26 $ .74
Pro forma diluted net income per common share $ .73 $ .04 $ .63
Weighted average shares outstanding 16,136 1,021 439 16,575(4)
Diluted weighted average shares outstanding 16,396 7,070 3,040 19,436(4)
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
86
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997 (1)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Historical Pro Forma
Veeco CVC Adjustments Combined
----- --- ----------- --------
<S> <C> <C> <C> <C>
Net sales $ 223,410 $ 62,588 $ $ 285,998
Cost of sales 113,487 41,286 154,773
--------- --------- --------- ---------
Gross profit 109,923 21,302 131,225
Costs and expenses:
Research and development expense 25,016 9,055 34,071
Selling, general and
administrative expense 44,054 8,152 52,206
Other expense (income)--net (115) -- (115)
Merger and reorganization expenses 2,250 -- 2,250
Write-off of purchased in-process
technology 4,200 -- 4,200
--------- --------- --------- ---------
75,405 17,207 92,612
--------- --------- --------- ---------
Operating income 34,518 4,095 38,613
Interest expense 1,220 604 1,824
Interest income (1,098) (11) (1,109)
--------- --------- --------- ---------
Income before income taxes 34,396 3,502 37,898
Income tax provision 7,780 1,457 9,237
--------- --------- --------- ---------
Net income $ 26,616 $ 2,045 $ $ 28,661
========= ========= ========= =========
Earnings per common share:
Net income per common share $ 1.67 $ 2.67 $ 1.77(4)
Diluted net income per common share $ 1.62 $ 0.29 $ 1.48(4)
Pro forma income tax presentation(5):
Income before income taxes $ 34,396 $ 3,502 $ $ 37,898
Pro forma income tax provision 12,987 1,457 14,444
--------- --------- --------- ---------
Pro forma net income $ 21,409 $ 2,045 $ 23,454
========= ========= ========= =========
Pro forma earnings per common share:
Pro forma net income per common share $ 1.35 $ 2.67 $ 1.45
Pro forma diluted net income per Common share $ 1.30 $ 0.29 $ 1.21
Weighted average shares outstanding 15,901 765 329 16,230(4)
Diluted weighted average shares outstanding 16,417 6,992 3,007 19,424(4)
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
87
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. PERIODS COMBINED
The Veeco consolidated balance sheet as of December 31, 1999 has been
combined with the CVC unaudited consolidated balance sheet at December 31, 1999.
The Veeco consolidated statements of income for the years ended December
31, 1999, 1998 and 1997 have been combined with the CVC consolidated statements
of operations for the years ended September 30, 1999, 1998 and 1997,
respectively.
2. MERGER COSTS
Veeco and CVC estimate that they will incur direct costs of the
transaction and integration of approximately $15,000,000 associated with the
merger. Such estimated costs, which are subject to change, consist of fees for
investment banking, legal, accounting and financial printing, as well as costs
associated with certain redundancies and other related costs. Such costs will be
charged to operations in the first fiscal quarter in which the merger is
consummated. The unaudited pro forma balance sheet at December 31, 1999 includes
the effect of such costs. The estimated tax effect related to such costs is $2.0
million.
3. EXCHANGE OF STOCK
This entry reflects the issuance of Veeco shares to the CVC stockholders
as well as the reclassification of the common stock of CVC to additional paid-in
capital.
4. EARNINGS PER SHARE
The unaudited combined net income per common share and diluted net income
per common share is based upon the weighted average number of outstanding common
shares, and, as applicable, options and warrants of Veeco and CVC for each
period at the exchange ratio of 0.43 shares of Veeco common stock for each share
of CVC common stock, options and warrants.
5. PRO FORMA INCOME TAX PRESENTATION
Before Veeco's May 1998 merger with Digital Instruments, Digital had
elected "S" corporation status for federal income tax purposes and, therefore,
was not subject to federal income taxes. Pro forma income tax presentation and
pro forma earnings per common share presents income taxes as if Digital had been
a "C" corporation for all periods presented and, therefore, subject to federal
income taxes at the corporate level. As a result of the merger, Digital's "S"
corporation election was terminated.
88
<PAGE>
INFORMATION REGARDING CVC
CVC's BUSINESS
INTRODUCTION
CVC is a worldwide supplier of process equipment used in the manufacture
of magnetic recording heads for disk drives, optical components for
telecommunications and advanced semiconductor devices for computers and
communications equipment. CVC's equipment either deposits or removes thin film
layers as steps in the process of manufacturing magnetic recording heads and
semiconductor devices. Since 1993, CVC has shipped more than 100 CONNEXION
Cluster Tool systems, including more than 400 process modules. CVC's customers
include many of the leading manufacturers of magnetic recording heads for the
data storage industry such as Alps, Fujitsu, IBM, Read-Rite, Seagate Technology
and TDK, as well as manufacturers of semiconductor devices such as Anadigics,
Analog Devices, Honeywell and M/A-COM.
RECENT DEVELOPMENTS
Stock Split
On August 30, 1999, CVC declared a two-for-three reverse stock split which
became effective in connection with its initial public offering in November
1999. This reverse stock split decreased the number of common shares outstanding
by 1,172,688. Accordingly, all share and per share amounts for all periods
presented herein have been retroactively adjusted to give effect to this stock
split.
Public Offering
On November 12, 1999, CVC received net proceeds of $27.9 million from a
public equity offering, consisting of 3,000,000 shares of common stock sold by
CVC and 500,000 shares of common stock sold by certain stockholders of CVC at an
initial public offering price of $10.00 per share. Total common shares
outstanding after the offering were 11,492,707. CVC used a portion of the net
proceeds from the offering to repay approximately $15.0 million of debt, $10.0
million for the redemption of its Series D Redeemable Preferred Stock and the
balance for general corporate purposes. CVC did not receive any of the proceeds
from the sale of shares by the selling stockholders.
INDUSTRY BACKGROUND
The Data Storage Industry
In order to satisfy market demand for devices with greater storage
capacity, the disk drive industry has developed new types of recording heads
enabling greater areal density. Areal density is the measure of stored bits per
square inch in the recording surface of a disk. According to data storage
industry sources, areal densities have been increasing approximately 60% per
year since 1990. The growth in areal density, or storage capacity, has been
facilitated by the evolution of recording head manufacturing technology from IR,
or inductive recording heads, to MR, or magnetoresistive heads, to the more
recent introduction of giant magnetoresistive heads, or GMR heads.
According to Trend Focus, giant magnetoresistive head shipments are
expected to increase from 0.4 billion units in 1999 to 1.2 billion units in
2002, while the shipment of magnetoresistive heads are expected to decrease from
0.5 billion units in 1999 to limited shipments by 2002. The disk drive
industry's expected growth and transition to technologically advanced recording
heads reflect a number of factors, including:
o The exchange of increasing volumes of data among users across the
Internet and intranets;
89
<PAGE>
o The rapid accumulation of data resulting from growth of digital
content, including audio, video and data;
o Continued improvements in computing price performance ratios,
including the emergence of the sub-$1,000 personal computer; and
o The introduction of new applications for storage devices such as
digital cameras, auto navigation, video on demand and personal
digital assistants, or PDAs.
Magnetic recording heads are manufactured using various thin film
deposition and etch processes, which provide magnetic, conductive and insulating
properties. More advanced heads typically require the deposition of
approximately 18 to 28 thin film layers of different materials. CVC believes
that the data storage industry's current transition to more advanced
technologies will require the data storage industry to make investments in
advanced processing equipment to support both the technology transition and
anticipated volume growth.
The Optical Telecommunications Industry
Fiber optic cable is used for high-speed data transmission. The rapidly
expanding use of the Internet and the transfer of data intense files, such as
downloadable music and video, are creating a need for greater bandwidth to
achieve higher speed data transmission. A system that can transmit more data per
unit of time is said to have greater bandwidth. In response to this demand, a
technology called Dense Wavelength Division Multiplexing (DWDM) is providing
enhanced capacity to the current optical fiber network infrastructure. The
appeal of the technology is its ability to increase the capacity of the existing
fiber optic telecommunications networks without laying additional cable. With
DWDM technology, the use of more than one wavelength per optical fiber provides
independent transmission per wavelength increasing the total amount of available
bandwidth for different services. DWDM has been described as sending laser
pulses of different colors simultaneously over the same fiber.
The use of DWDM in telecommunications networks is challenging component
manufacturers to design a variety of new devices that can be integrated into
DWDM systems. These include devices that can increase the number of wavelengths
carried, span long distances, and develop an all-optical layer so that
wavelengths do not need to be converted between optical and electrical signals.
Components of DWDM networks include filters used for wavelength selection,
sources, pump lasers, modulators and receivers.
The typical high-speed fiber cable today transmits at 2.5Gbps, or
approximately 32,000 voice or data transmissions, but uses less than 1% of the
inherent bandwidth of the fiber. DWDM multiplies the capacity of existing,
embedded fiber optical lines by 8 to 32 times, or up to 80Gbps. An optical fiber
with DWDM carries a number of wavelengths transmitting them at different
wavelengths through the same fiber, and then separates the wavelengths at the
other end - thereby multiplying the capacity of the fiber.
Thin film interference filters are glass substrates coated with precise
multi-layers of dielectric materials to control transmission and reflection.
Bandwidth and shape of filters are very important for multiplexers and
demultiplexers to minimize the cross talk (noise) and block unwanted light in
optical amplifiers. CVC is a provider of ion beam sources and ion beam
deposition and sputtering systems, which are today being used to help create the
optical filters and other components of these DWDM systems. In addition, CVC's
broad range of ion beam etch and physical vapor deposition tools serve a variety
of related applications in this rapidly growing market. CVC provides the
equipment which enables its customers to manufacture the components which are
used in DWDM systems.
The Semiconductor Industry
The manufacture of semiconductors involves multiple thin film processing
steps. Semiconductor devices that utilize exotic substrates, such as Gallium
Arsenide, or GaAs, are more difficult to produce due to physical characteristics
such as lower maximum tolerable processing temperatures and less mechanical
strength of the
90
<PAGE>
substrates. However, these substrates enable the fabrication of high-speed,
high-performance devices with low power consumption that make them ideally
suited for advanced communications applications, such as portable communication
devices, including digital pagers and cellular phones. Due to the
characteristics of these exotic substrates, the fabrication of devices involving
these substrates requires advanced process equipment that can provide multiple,
highly uniform, precision thin film materials.
In order to increase the performance and reduce the cost of semiconductor
devices, manufacturers have continued to shrink line widths, while at the same
time adding multiple layers of metal interconnect materials. Semiconductor
manufacturers currently use aluminum or aluminum alloys to interconnect the
various layers of a semiconductor device. As semiconductor line widths shrink
below 0.18 microns, or 0.18 millionths of a meter, copper is increasingly being
used as an alternative to aluminum interconnects. Copper provides less
resistance to electron flow at narrow line widths and makes it possible to build
high speed devices using fewer interconnect layers than would be necessary with
aluminum. The deposition of copper interconnect material requires two steps: (1)
the deposition of a barrier layer, to protect the insulating layers from being
contaminated by copper, and (2) the deposition of seed and copper fill layers,
which serve as the interconnect. The deposition of interconnect material
involves very specialized substrate processing equipment, including metal
deposition equipment. According to Dataquest, copper deposition equipment sales
are expected to grow from $200 million in 1999 to $700 million in 2003.
Substrate Processing
The manufacture of magnetic recording heads, optical telecommunication
components and semiconductors requires from tens to hundreds of fabrication
processing steps. Many of these steps involve the controlled application or
removal of layers of materials to or from a base material, or substrate, or on a
previously deposited layer. The application of materials to a wafer, known as
deposition, involves the building up of extremely thin films of electrically
insulating or conducting materials. These layers can range from over
one-thousandth to less than one-millionth of a millimeter in thickness. A wide
range of materials and deposition processes are used to build up thin film
layers on substrates to achieve specific performance characteristics. The
removal of material from substrates, known as etching, involves the precise
removal of residue or excess material using dry plasma or ion beams in order to
build a specific pattern, for example, to form a semiconductor device.
The process of manufacturing magnetic recording heads, optical
telecommunication components and semiconductors is constantly evolving to
address the demand for smaller devices with higher performance. Devices with
smaller features sizes and higher levels of performance require new materials or
more manufacturing steps involving multiple layers of thin film materials. To
successfully develop new manufacturing processes, thin film recording head,
optical telecommunication component and semiconductor manufacturers require
sophisticated processing equipment that:
o Incorporates highly specialized processing and systems knowledge;
o Enables the precise, uniform deposition of a wide range of thin film
materials;
o Supports a variety of deposition and etching processes on an
integrated platform; and
o Provides the ability to transition to new materials and fabrication
processes efficiently.
THE CVC SOLUTION
CVC is a worldwide supplier of process equipment for the data storage and
semiconductor industries. CVC provides thin film deposition and etching
equipment based on a central substrate-handling platform to which a series of
interchangeable process modules can be connected. CVC's process equipment
incorporate its expertise in:
o The deposition and removal of multiple thin film materials in a
vacuum environment;
91
<PAGE>
o Advanced physics and material science;
o Engineering of microelectronic and atomic components; and
o Proprietary software that controls the deposition and etching
processes.
CVC's products are designed for the highly uniform, repetitive steps
required for the manufacturing of devices involving multiple thin film layers
and a wide range of materials.
CVC's CONNEXION Cluster Tool system is a modular system with stations for
connecting up to six modules around a central substrate-handling platform. Each
module performs a different manufacturing process on the substrate. CVC's
CONNEXION Cluster Tool system enables the integration of modules supplied by
either CVC or third-parties. CVC currently offers a wide range of advanced
process modules for deposition and etching of thin film layers. The CONNEXION
Cluster Tool, combined with a wide range of process modules, helps to create
highly uniform devices through the integration of various processes in a vacuum
controlled environment. CVC's integrated, modular-based systems provide
functional flexibility that enables data storage and semiconductor manufacturers
to quickly transition to new process technologies, improve time-to-market of
higher performance products and improve manufacturing yields.
STRATEGY
CVC's objective is to enhance its position as a worldwide developer of
thin film processing technologies for the data storage and semiconductor
industries. Key elements of CVC's strategy include:
Maintain Technological Expertise in the Data Storage Industry. Since 1990,
CVC has focused on the development of integrated thin film process technologies
that are part of the manufacturing process of advanced magnetic heads used in
data storage applications. To date, CVC has shipped more than 100 of its cluster
tool systems, including more than 400 process modules. CVC intends to continue
to combine its expertise in the processing of thin films with the modular design
of its CONNEXION Cluster Tool system to develop increasingly efficient and
cost-effective integrated process solutions for the data storage industry.
Expand Data Storage Expertise into the Optical Telecommunications and
Semiconductor Markets. CVC intends to leverage its accumulated expertise in thin
film head processing by targeting selected optical telecommunications and
semiconductor markets that require advanced thin film processes. CVC believes
that its CONNEXION Cluster Tool systems is well suited for the fabrication of
advanced semiconductors, advanced storage devices and optical components. CVC
plans to continue to identify and develop products that address integrated
process solutions where thin film process technologies play a critical role.
Capitalize on Close Relationships with Industry Leaders. CVC has
established strategic relationships with a number of industry-leading data
storage and semiconductor manufacturers. By working closely with industry
leaders early in their research and development stage, CVC can identify and
develop customized integrated process solutions that better address customers'
existing and future processing requirements. Having met the specific needs of
market leaders with innovative integrated process solutions, CVC is able to
leverage the experience gained to create products that will meet the demands of
an expanded set of customers across a range of applications and process
technologies. CVC's ability to implement new process solutions also helps CVC
meet its customers' time-to-market demands and advances CVC's goal of having
products designed early into its customers' production and planning cycles.
Target Advanced Interconnect Opportunities in the Semiconductor Industry.
Since 1993, CVC has committed significant resources to the development of
advanced interconnect technology for high-performance integrated circuit
fabrication. CVC has developed a module that enables deposition of both barrier
and copper layers in an integrated system. CVC has delivered a developmental
integrated copper and barrier deposition system
92
<PAGE>
to one of its strategic customers and intends to continue to develop solutions
to meet the requirements of emerging advanced interconnect technologies.
Continue to Provide Superior Customer Service on a Worldwide Basis. CVC is
focused on delivering a high level of customer satisfaction by providing
superior customer service through a dedicated customer service group consisting
of approximately 53 full-time employees and a research development group
consisting of approximately 103 full-time employees, as well as through
distributors and sales representatives in the United States, Japan, East Asia
and Europe. CVC believes that its focus on customer service combined with CVC's
process and systems expertise has enhanced its reputation in the data storage
and semiconductor industries. CVC's CONNEXION Cluster Tool system is used by a
majority of the leading magnetic recording head manufacturers in the data
storage industry. CVC believes this broad industry representation is due in part
to its superior worldwide customer service.
Broaden Product Offerings through Internal Development and Acquisitions.
CVC plans to continue to expand its product offerings through both internal
development and acquisitions of complementary businesses, products and
technologies. Since the market introduction of the CONNEXION Cluster Tool system
in 1993, CVC has continuously enhanced and expanded its product offerings in
response to the evolving needs of its customers through internal research and
development. In 1998, CVC developed and introduced capabilities that allow
precise measurement and testing functions to take place in a process module
without disrupting the production process and without disturbing the tightly
controlled vacuum environment. In May 1999, CVC expanded its existing family of
process modules through the acquisition of Commonwealth Scientific Corporation,
a provider of ion beam deposition and etching modules.
PRODUCTS
CONNEXION CLUSTER TOOL SYSTEM
CVC's principal product is its CONNEXION Cluster Tool system. The
CONNEXION Cluster Tool system provides some of the processes required to
manufacture magnetic recording heads and semiconductor devices. The CONNEXION
Cluster Tool system is based on a central substrate-handling platform and a
series of interchangeable thin-film deposition and etching processing modules.
CVC's CONNEXION Cluster Tool system enables the integration of process modules
supplied by either CVC or third parties. Since 1993, CVC has shipped more than
100 of these systems, including more than 400 process modules.
Depending on the configuration, individual systems range from $1.0 million
to more than $4.0 million, and individual process modules range from
approximately $350,000 to $2.0 million.
CVC believes that the advantages provided by its CONNEXION Cluster Tool system
include the following:
Ability to Process a Wide Range of Materials. The modular design of the
CONNEXION Cluster Tool system provides customers the ability to process a wide
range of materials. This ability allows CVC's customers to address their rapidly
evolving manufacturing and material requirements across multiple applications.
The following table provides an overview of the materials and applications
addressed by CVC's CONNEXION Cluster Tool systems for the data storage and
semiconductor industries:
93
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Data Storage
- ------------------------------------------------------------------------------------------------------
Materials Groups Specific Materials Product Applications
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Conductors Aluminum Tantalum
Chromium Titanium
Copper Titanium/Tungste
Gold Tungsten
Molybdenum
Platinum
- ------------------------------------------------------------------------------------------------------
Magnetic Materials Aluminum Silicon Iridium Manganese
Iron Iron Manganese
Cobalt Chromium Iron Tantalum Nitride Inductive, Magnetoresistive and
Platinum Nickel Iron Giant Magnetoresistive Recording
Cobalt Iron Nickel Iron Rhodium Heads for Disk Drives
Cobalt Platinum Nickel Manganese
Cobalt Zirconium Platinum Chromium
Tantalum Manganese
Cobalt Zirconium Platinum Manganese
Niobium
- ------------------------------------------------------------------------------------------------------
Insulating Materials Aluminum Nitride Silicon Nitride
Aluminum Oxide Silicon Oxide
- ------------------------------------------------------------------------------------------------------
Wear-Resistant
Coatings Diamond-like-carbon, or DLC
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Optical Telecommunication Devices
- ------------------------------------------------------------------------------------------------------------
Material Groups & Product
Deposition Method Specific Materials Applications
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Optical Coatings Silicon Dioxide (SiO^2) Titanium Oxide (TiO^2) Dense Wavelength
(Optically transparent & Silicon Nitride (Si^3N^4) Tantalum Pentoxide (Ta^2O^5) Division
semi-transparent thin-film Silicon Oxynitride (SiOxNy) Hafnium Oxide (HfO^2) Multiplexing
stacks) Aluminum Oxide (Al^2O^3) Amorphous Silicon (DWDM)
(is proportional to Si)
Anti-Reflection Coatings Vanadium Oxide (Vo^x) Zirconium Oxide (ZnO^2) Components
Magnesium Fluoride (MgF^2) Niobium Oxide (NbO^x) Attentuators
Ion-Beam Deposition Yttrium Oxide (Y^2O^3) Cadmium telluride (CdTe) Access Couplers
Plasma Sputtering Molybdenum Germanium Fiber Bragg
Atomic-Layer CVD (MoGe) Gratings
IR Laser Mirrors
- ------------------------------------------------------------------------------------------------------------
Conductors Titanium/Tungsten (TiW) Tantalum Nitride (TaN) Pump Lasers
Titanium (Ti) Gold Source Lasers
Plasma Sputtering Titanium Nitride (TiN) Copper Photodiodes
Metal-Organic Chemical- Platinum Alloys (Pt) Optoelectronic
Vapor Deposition Chips
(MOCVD)
- ------------------------------------------------------------------------------------------------------------
</TABLE>
94
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Semiconductor Devices
- ------------------------------------------------------------------------------------------------------
Materials Groups Specific Materials Product Applications
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Conductors Aluminum (alloys) Titanium
Cobalt Titanium Silicide
Copper Titanium Tungsten Gallium Arsenide
Gold Nitride and Silicon Semiconductors
Nickel Tungsten
Platinum
- ------------------------------------------------------------------------------------------------------
Barrier/Liner/ Tantalum Titanium Logic and Memory
Glue/Layers Tantalum Nitride Titanium Nitride Integrated Circuits
- ------------------------------------------------------------------------------------------------------
High-k Dielectrics Barium Strontium Tantalum Pentoxide Analog and Mixed Signal
Titanate Titanium Oxide Integrated Circuits
- ------------------------------------------------------------------------------------------------------
Other Specialty Blue Phosphor Silicon Chromium
Materials Chromium Silicon Carbon
Nitride Tantalum Nitride
Nickel Chromium Zinc Oxide
Silicon Chromium
- ------------------------------------------------------------------------------------------------------
</TABLE>
Flexibility of Modular Design. The modular design of the CONNEXION Cluster
Tool system provides customers the flexibility to cost effectively transition
from the development stage to full production. In the development stage,
customers can use a process module as a fully-functional, stand-alone tool to
develop and test individual fabrication steps. Following the successful
development of individual process steps, a customer can combine multiple process
modules with CVC's CONNEXION Cluster Tool platform to form an integrated
production system. Furthermore, the modular design allows customers to
reconfigure systems that are in production to address the evolving manufacturing
processes required by magnetic recording head and semiconductor manufacturers.
The flexibility to exchange modules enables customers to quickly develop new
fabrication processes, improving time-to-market of higher performance products,
with a lower capital investment.
Benefits of Integrated Platform. The integrated platform of the CONNEXION
Cluster Tool system provides customers with the ability to combine various
deposition and etching modules on a single platform in a vacuum controlled
environment. The benefits of a vacuum controlled environment include high
uniformity and reduced incidences of cross contamination and damage from
external handling. CVC's integrated platform enables customers to achieve
improved manufacturing yields, enhanced tool uptime and device reliability and
performance.
Highly Specialized Process Solutions. CVC provides customers highly
specialized process solutions, including a variety of energy sources and
components. These solutions enable CVC's customers to achieve high uniformity
over a wide range of substrate materials and sizes, as well as control of the
composition materials, atomic microstructures and surface/interface properties.
CVC PROCESS MODULES
CVC offers process modules for different methods of depositing thin films
on a wafer, or substrate, such as physical vapor deposition, mainly a physical
technique, and chemical vapor deposition, mainly a chemical technique. CVC also
offers modules for different methods of removing, or etching, portions of thin
films from a wafer or a substrate. CVC obtained its ion beam deposition, etching
and its diamond like carbon processing modules through its acquisition of
Commonwealth Scientific Corporation in May 1999.
Below is a brief description of CVC's process modules:
Physical Vapor Deposition-Plasma Sputtering Module
Physical vapor deposition, or PVD, by plasma sputtering is used to deposit
a wide range of magnetic, conductive and insulating materials on various
substrates with different topographies. PVD is performed in a high
95
<PAGE>
vacuum chamber by applying a strong direct current or radio frequency electric
field to an inert gas, usually argon, to create a plasma. The electrically
charged ions are accelerated toward a target made of the material which is to be
deposited. When the ions hit the target, atoms are physically knocked off the
target and are scattered on the wafer or substrate, slowly building up a thin
film layer. CVC offers both a single wafer PVD module and a multi-station PVD
module for the sequential deposition of various materials within a single vacuum
chamber.
Physical Vapor Deposition Ion Beam Deposition Module
PVD by ion beam deposition is used to deposit a wide range of very thin
magnetic, conductive and insulating materials on various substrates with
different topographies. Ion beam deposition is performed in a high vacuum
chamber by focusing an ion beam generated by a radio frequency or direct current
ion beam source toward a target made of the desired material to be deposited.
The beam of energetic ions hits the target and ejects atoms of the desired
material toward the wafer or substrate, building up a thin film layer in a
slower, more directional manner than with sputtering. In addition, in some
processes, a second ion beam is directed toward the substrate to control the
microstructure of the thin film while depositing the desired material.
Metal-Organic Chemical Vapor Deposition Module
Metal-organic chemical vapor deposition, or MOCVD, is used to deposit
various materials such as aluminum, copper, tungsten, titanium, titanium
nitride, tantalum and tantalum nitride. The MOCVD process causes precursor
materials that contain atoms of the material to be deposited to react at the
heated wafer or substrate surface resulting in the formation of the thin film
layer of the material. MOCVD uses a metal organic compound distributed through a
liquid delivery system as the source of the material to be deposited.
Ion Beam Etch Module
Etching by ion beam is used to transfer a desired device pattern to the
substrates. An ion beam directed toward the substrate can also be used to remove
contaminants such as oxide layers or for substrate conditioning to improve
adhesion. Ion beam etching is performed in a high vacuum chamber by focusing an
ion beam generated by a radio frequency and direct current ion beam source
toward the wafer or substrate.
Diamond-Like-Carbon Module
Ion beam deposition of thin diamond-like-carbon, or DLC, is used to
deposit hard coating layers as wear and corrosion protection for thin-film heads
and magnetic media. The ion beam diamond-like-carbon module employs a
carbon-containing gas flow through an ion source mounted onto a vacuum process
chamber to deposit thin layers of diamond-like-carbon on wafers or other
substrates. CVC's ion beam diamond-like-carbon deposition system sources are
currently used in production by the thin-film head manufacturers. As hard disk
storage densities increase, the distance between the recording head and magnetic
media are decreasing to below 100 Angstroms. The next-generation advanced giant
magnetoresistive heads will require dense and defect-free diamond-like-carbon
films below 50 Angstroms. To address this requirement, CVC has developed a
filtered cathodic arc diamond-like-carbon deposition cluster module which
enables controlled deposition of high-quality ultra thin diamond-like-carbon
layers. This cluster module will enable CVC to effectively serve the
diamond-like-carbon application for several future generations of thin film
recording heads and magnetic media.
Inductively-Coupled-Plasma Soft Clean Module
CVC offers a multi-zone inductively-coupled-plasma, or ICP, soft clean
module for surface preparation prior to material depositions. CVC's ICP module
technology employs the design features of the ICP system licensed by CVC from
Texas Instruments and enhanced by CVC through internal developments. The license
from Texas Instruments covering the design features of the ICP system expires in
2014. The ICP module design provides the capability for damage-free cleaning of
semiconductor surfaces in order to enable formation of low resistivity
96
<PAGE>
interconnect structures such as with copper metallization and with controlled
device interfaces for enhanced interconnect reliability and performance.
Rapid Thermal Processing/Rapid Thermal Chemical Vapor Deposition Module
CVC's rapid thermal processing, or RTP, module with multi-zone temperature
control optimizes temperature and process uniformity and repeatability control.
CVC's RTP and rapid thermal chemical vapor deposition, or RTCVD, module is
designed for various thermal processing applications including anneal, oxidation
and CVD processes.
600 SERIES PHYSICAL VAPOR DEPOSITION SYSTEMS
Introduced in 1988, the 610 and 611 products are PVD sputtering deposition
systems, handling up to 6-inch diameter substrates. The 611 system is equipped
with a loadlock and eight work stations enabling up to eight materials to be
deposited with sequential or co-sputter deposition processes. The CVC 600 Series
system is the basic design with many 611 features but without the loadlock and
less automated process control. A soft clean ion source can be installed in any
work station for low damage cleaning of semiconductor surfaces.
ION BEAM SOURCES AND POWER SUPPLIES
With its acquisition of Commonwealth, CVC obtained a range of ion sources,
as well as the power supplies used to operate these sources. Ion beam processing
is used in a variety of advanced research and development applications, as well
as the production of thin film etch and deposition applications where precise
control and repeatability of multilayer thin films are critical. CVC provides
these products as components to companies supplying equipment to the precision
optics, opthalmics and optoelectronics industries. In addition, CVC uses its ion
beam sources and power supplies in its IBD, IBE and DLC process modules.
CUSTOMERS
CVC's customers include many of the leading manufacturers of thin film
magnetic recording heads for the data storage industry, optical
telecommunications component and semiconductor device manufacturers. During
fiscal year 1999, approximately 85% of CVC's revenues were derived from sales
made to thin film magnetic recording head manufacturers, approximately 3% of
CVC's revenues were from optical telecommunications component manufacturers and
approximately 9% of CVC's revenues were from sales to semiconductor device
manufacturers. Seagate, IBM and TDK each accounted for 10% or more of CVC's
revenues in fiscal 1999 and Seagate, Headway and Alps each accounted for 10% or
more of CVC's revenues in fiscal 1998.
97
<PAGE>
RELATIONSHIP WITH SEAGATE TECHNOLOGY
Seagate Technology, which provides products for storing, managing and
accessing digital information on computers and data communications systems, is
CVC's largest customer, as well as its largest stockholder. Seagate Technology
accounted for 47% of CVC's total revenue in fiscal 1997, 31% of CVC's total
revenue in fiscal 1998 and 34% of CVC's total revenue in fiscal 1999. The
decline in fiscal 1998 in the percentage of CVC's total revenues attributable to
sales to Seagate Technology is due primarily to a decline in the absolute dollar
amount of CVC's sales to Seagate Technology in fiscal 1998. CVC believes that
decline, in turn, reflects competitive market conditions and weakness in demand
for disk drive products. The increase in fiscal 1998 in the percentage of CVC's
total revenues attributable to sales to Seagate Technology reflects an increase
in the absolute dollar amount of CVC's sales to Seagate Technology, partially
offset by increased sales to CVC's other customers due to expansion of its
customer base.
In 1995, Seagate Technology made an equity investment of approximately
$9.0 million in CVC. In connection with this investment, Seagate Technology
obtained the right to elect two members of CVC's Board of Directors. That right
terminated upon consummation of CVC's initial public offering in November 1999.
As of September 30, 1999, Seagate Technology owned shares representing
approximately 29% of CVC's outstanding common stock. In addition, pursuant to a
warrant acquired by it in 1995, Seagate Technology has the right to acquire an
additional 790,760 shares of common stock at an exercise price of $5.58 per
share. Assuming full exercise of this warrant, Seagate Technology would own an
aggregate of approximately 35% of CVC's outstanding common stock as of September
30, 1999.
BACKLOG
CVC's backlog consists generally of product orders for which a purchase
order has been received and which are scheduled for shipment within 12 months.
Because a large percentage of CVC's orders require products to be shipped in the
same quarter in which the orders are received, and due to possible changes in
delivery schedules, cancellations of orders and delays in shipment, CVC does not
believe that the level of backlog at any point in time is an accurate indicator
of its performance.
MARKETING AND SALES
CVC sells its products in the United States and Europe through its direct
sales force that is supported by its 29-person marketing and sales organization.
In Japan and Europe, CVC uses distributors to sell its products. CVC markets its
products in China, Korea, Taiwan, Malaysia, Singapore and Thailand through
independent sales representatives. International sales accounted for 31% of
CVC's total revenues for fiscal 1997, 38% for fiscal 1998 and 53% for fiscal
1999. CVC's sales and marketing organization uses a consultative sales process,
working closely with customers to understand and define their deposition process
and equipment needs and to determine that those needs are addressed by CVC's
process technologies, as well as complementary technologies offered by other
equipment providers. CVC works closely with the senior management and research
and development personnel of its existing customer base to gain insight into
their industries and to focus on offering new process technologies tailored to
their customers' requirements.
The sales cycles for CVC's systems vary depending upon whether the system
is an initial purchase or a repeat order. New customer sales cycles are
typically 12 to 18 months, whereas repeat order sales cycles are typically four
to six months. The sales cycle for a new customer begins with the generation of
a sales lead, which is followed by qualification of the lead, an analysis of the
customer's particular applications needs and problems, one or more presentations
to the customer, frequently including extensive participation by CVC's senior
management, two to three product sample demonstrations, followed by customer
testing of the results and extensive negotiations
98
<PAGE>
regarding the equipment's process and reliability specifications. New customer
sales cycles are monitored closely by senior management for correct strategy
approach and prioritization.
CUSTOMER SERVICE AND SUPPORT
Prompt and effective field service and support is critical to CVC's sales
efforts, due to the substantial commitments made by customers that purchase
CVC's equipment. As of September 30, 1999, CVC had 53 full-time employees
dedicated to customer service and support. CVC's strategy of supporting its
installed base through both customer support and research and development groups
has served to encourage the use of CVC's equipment and process technologies in
customer production applications. CVC's engineers and field support personnel
work closely with customers to help define their production and process
requirements, and customers often collaborate in trial production runs at CVC's
Fremont, California, Rochester, New York and Alexandria, Virginia research and
demonstration facilities. CVC believes that its marketing efforts are enhanced
by the technical expertise of its engineers who also provide customer process
support and participate in industry forums, conferences and user groups.
CVC generally warrants its new systems for 15 months from the date of
shipment. CVC generally warrants to an original purchaser of its new systems
that the products and parts manufactured or assembled by CVC and the application
software supplied will be free from defects in materials and workmanship under
normal use. Installation is included in the price of the system. CVC's field
service engineers provide customers with call-out repair and maintenance
services for a fee. Customers may also enter into repair and maintenance service
contracts covering CVC's systems. For a fee, CVC trains its customers' service
engineers to perform routine services, and, in addition, CVC provides its
customers with 24-hour a day, seven day a week, telephone consultation services.
CVC also has customer support centers located in New York, California, Texas,
Minnesota, Virginia, Northern Ireland and Japan.
RESEARCH AND DEVELOPMENT
The data storage and semiconductor manufacturing industries are
characterized by rapid technological change and requirements for new product
introductions and enhancements. CVC's ability to remain competitive in this
market will depend in part upon its ability to develop new and enhanced systems
and to introduce these systems at competitive prices and on a timely and
cost-effective basis. Accordingly, CVC devotes a significant portion of its
personnel and financial resources to research and development programs and seeks
to maintain close relationships with its customers to remain responsive to their
equipment needs. CVC continuously conducts research and development efforts in
existing products to extend performance and process capabilities as well as on
next generation products.
In the data storage market, CVC has recently developed and introduced
capabilities that allow precise measurement and testing functions to take place
in a process module without disrupting the production process and without
disturbing the tightly controlled vacuum environment. CVC has also developed a
magnetic orientation device to achieve more accurate and programmable
characteristics of magnetic thin films. In the area of advanced interconnect
technologies, CVC has been developing leading-edge metal-organic chemical vapor
deposition barrier and copper metallization processes for high-performance
semiconductor interconnect applications. CVC operates process development and
applications engineering facilities in New York, California, Virginia and Texas
with process and metrology capabilities for data storage thin film recording
head and semiconductor technologies.
As of September 30, 1999, CVC had 103 full-time employees dedicated to its
research and development programs. In fiscal 1997, 1998 and 1999, CVC expended
$9.1 million, $12.6 million and $12.6 million on these programs, constituting
15%, 19% and 15% of revenues during those periods, respectively. Research and
development expenditures consist primarily of salaries, project materials and
other costs associated with CVC's ongoing research and development efforts. CVC
expects in future years that research and development expenditures will continue
to represent a substantial percentage of revenues. CVC augments its internal
technology development efforts by licensing technology from others and
establishing strategic research and development relationships with universities
and various major customers.
99
<PAGE>
Trade, industry standards and development consortia, such as SEMI,
SEMATECH and SISA, formerly known as SEMI/SEMATECH, help to define the methods,
measurement parameters, manufacturing requirements and specifications
influencing commercial transactions within the data storage and semiconductor
industry. Christine Whitman, the Chief Executive Officer of CVC, serves on the
Board of Directors of SISA. CVC believes that its involvement with these
organizations has helped to ensure that CVC's new products conform to industry
standards and emerging requirements.
MANUFACTURING
CVC's manufacturing activities consist primarily of assembling and testing
components and subassemblies which are acquired from third party suppliers and
then integrated by CVC into finished systems. The manufacturing operations are
conducted in CVC's 90,000 square foot facility in Rochester, New York and its
32,000 square foot facility in Alexandria, Virginia. As of September 30, 1999,
CVC had 168 full-time employees dedicated to its manufacturing efforts. CVC
manufactures its systems in controlled clean environments which are similar to
the clean rooms used by data storage and semiconductor manufacturers. All final
assembly and systems tests are performed within CVC's manufacturing facilities.
Quality control of suppliers is maintained through incoming verification of
components, in-process inspection during equipment assembly and final inspection
and operation of all manufactured equipment prior to shipment. CVC's customers
frequently participate in systems testing during the final assembly and
inspection process.
CVC's Rochester and Fremont facilities are ISO 9001 certified. CVC
believes that ISO 9001 certification, a quality assurance model for companies
that design, produce, install and inspect items as part of their businesses,
offers CVC a competitive advantage over competitors that are not ISO 9001
certified and, in some cases, is a condition of doing business with its
customers.
CVC procures components and subassemblies included in its products from a
limited group of suppliers and occasionally from a single source. CVC does not
maintain long-term supply contracts with its key suppliers but believes that
alternative suppliers could be found if necessary.
COMPETITION
The data storage, optical telecommunications components and semiconductor
manufacturing equipment industries are highly competitive. A substantial
investment is required to install and integrate capital equipment into a data
storage, optical component or semiconductor production line. CVC believes that
once a device manufacturer has selected a particular supplier's capital
equipment, that manufacturer generally relies upon that supplier's equipment for
the specific production line application and, to the extent possible, subsequent
generations of similar systems. Accordingly, it may be extremely difficult to
achieve significant sales to a particular customer once another supplier's
manufacturing equipment has been selected by that customer, unless there are
compelling reasons to do so, such as significant performance or cost advantages.
Increased competitive pressure could lead to lower prices for CVC's products,
thereby adversely affecting CVC's operating results.
CVC's current competitors include Anelva, Applied Materials, Astex,
Balzers Process Systems, Nordiko, TEL, Trikon, Ulvac and Veeco. Some of CVC's
competitors have substantially greater financial resources, more extensive
engineering, manufacturing, marketing and customer service and support
capabilities, larger installed bases of semiconductor capital equipment and
broader semiconductor process equipment offerings as well as greater name
recognition than CVC.
CVC believes that its ability to compete in the data storage, optical
telecommunications component and semiconductor manufacturing equipment markets
depends on a number of factors, including:
o The ability to develop and introduce new products rapidly;
o Product and technology innovation;
100
<PAGE>
o Product quality and reliability;
o Product performance;
o Breadth of its product line;
o Price;
o Technical service and support;
o Adequacy of manufacturing quality and capacity and sources of raw
materials;
o Efficiency of production;
o Delivery capabilities; and
o Protection of CVC's products by intellectual property laws.
CVC believes it competes favorably in the data storage, optical
telecommunications component and semiconductor manufacturing markets based on
its multiple processing capabilities, customer support and the cost of ownership
of its equipment.
CVC expects its competitors in the data storage, optical
telecommunications and semiconductor process equipment industries to continue to
improve the design and performance of their current systems and processes and to
introduce new systems and processes with improved price and performance
characteristics.
PATENTS AND OTHER INTELLECTUAL PROPERTY
CVC relies on a combination of patent, copyright, trademark and trade
secret laws and non-disclosure agreements to protect its proprietary process and
equipment technology. Although CVC believes that its patents and its other
intellectual property rights may have significant value, CVC also believes that
due to the rapid technological changes that characterize the data storage and
semiconductor equipment industries, the innovative skills, technical expertise
and know-how of its personnel may be more important than patent protection or
similar rights.
As of September 30, 1999, CVC had obtained 16 issued U.S. patents and had
29 U.S. patent applications pending. CVC has also obtained two foreign patents
from the United Kingdom and had 13 foreign patent applications pending on its
behalf as of that date. In addition, in connection with the acquisition of
Commonwealth Scientific Corporation, CVC has licensed and been assigned rights
to several jointly-owned patents but there can be no assurance that such
licensed and assigned rights are sufficiently broad for current or contemplated
uses.
CVC holds patents which it believes to be material to its business
covering the components used for physical vapor deposition for the data storage
marketplace and rapid thermal processing. As of September 30, 1999, these
patents have durations of not less than 11 years. Through its acquisition of
Commonwealth, CVC also holds patents covering ion beam processing with durations
of not less than 11 years, as of September 30, 1999. In addition, as of
September 30, 1999, CVC holds exclusive licenses to ion source technology
obtained in the acquisition of Commonwealth, which extend to the term of the
underlying patents, varying in length from five to 11 years. In addition, CVC
has licensed the design features in its inductively-coupled-plasma technology.
This license will expire in 2014.
The data storage and semiconductor industries are characterized by
frequent litigation regarding patent and other intellectual property rights.
Although CVC is not aware of any pending or threatened patent litigation
involving it, there can be no assurance that third parties will not assert
claims against CVC with respect to existing
101
<PAGE>
or future products or technologies. In the event of litigation to determine the
validity of any third-party claims, that litigation, whether or not determined
in favor of CVC, could result in significant expense to CVC and divert the
efforts of CVC's technical and management personnel from productive tasks. In
the event of an adverse ruling in this type of litigation, CVC might be required
to discontinue the use of processes, cease the manufacture, use and sale of
infringing products, expend significant resources to develop non-infringing
technology, or obtain licenses to the infringing technology. In the event of a
successful claim against CVC and CVC's failure to develop or license a
substitute technology at a reasonable cost, CVC's business could be harmed.
CVC cannot give any assurance that its pending patent applications will be
approved, that any patents will provide it with competitive advantages or will
not be challenged by third parties, or that the patents of others will not have
an negative impact on CVC's business. CVC cannot give any assurance that others
will not independently develop similar products, duplicate its products or, if
patents are issued to CVC, design around these patents. CVC also relies upon
trade secret protection and employee and third-party nondisclosure agreements to
protect its confidential and proprietary information. Despite these efforts, CVC
cannot give any assurance that others will not independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to its trade secrets or disclose its technology or that CVC can
meaningfully protect its trade secrets.
EMPLOYEES
As of September 30, 1999, CVC had a total of 394 full-time employees at
all of its locations, consisting of 168 in manufacturing, 103 in research and
development, 29 in marketing and sales, 53 in customer service and support, 35
in administration and 6 in facilities maintenance.
As of September 30, 1999, 47 employees at CVC's site in Rochester, New
York were members of Local 342 of the International Union of Electronic,
Electrical, Salaried, Machine & Furniture Workers union and covered by a
collective bargaining agreement scheduled to expire in October, 2001. CVC
believes that its relations with its employees, and the bargaining unit which
represents the Local 342 members, are good.
CVC'S PROPERTIES
CVC's principal office is located in Rochester, New York, and consists of
90,000 square feet used for manufacturing, research and development and
administration. CVC entered into a financing agreement with the County of Monroe
Industrial Development Agency in 1974 under which this agency's bond proceeds
were used to purchase the land and construct the Rochester facility for lease to
CVC. On September 29, 1997, CVC entered into an amended lease agreement with the
County of Monroe Industrial Development Agency that extended the term of the
original lease from the year 2000 to December 31, 2007. Upon the expiration of
this amended lease, CVC is obligated to purchase the Rochester facility from
this agency for nominal consideration.
As part of its acquisition of Commonwealth Scientific Corporation in May
1999, CVC obtained two operating facilities. These facilities are located in
Alexandria, Virginia. The principal administrative office is in an owned
building which is approximately 22,000 square feet. The manufacturing and
engineering functions are located in a separate leased facility of approximately
32,000 square feet. This facility is leased under two separate leases for
approximately 28,000 square feet and 4,250 square feet of contiguous space. The
leases on this facility are scheduled to expire on January 31, 2000 and
September 14, 2001.
In addition, CVC leases 14,400 square feet in Fremont, California, for
research and process development, product engineering and as a base for regional
sales and field service for the West Coast of the United States and 3,400 square
feet in Dallas, Texas, for engineering, equipment design, process development,
sales and customer support. CVC also leases space in Minneapolis, Minnesota,
Japan, Northern Ireland, Singapore and Taiwan for sales and customer support.
Although CVC believes that its current facilities are adequate to meet its
current requirements for the near term, it may seek to lease or acquire
additional facilities in the future.
102
<PAGE>
CVC'S LEGAL PROCEEDINGS
In the ordinary course of business, CVC may be involved in legal
proceedings from time to time. Currently, there are no material legal
proceedings pending against CVC.
CVC'S MARKET PRICE AND DIVIDENDS ON COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
CVC common stock is traded on The Nasdaq National Market under the symbol
"CVCI." The following table presents the high and low trading prices of the CVC
common stock on The Nasdaq National Market (a) for the quarter ended December
31, 1999 (the first quarter during which CVC common stock was traded thereon),
(b) on February 28, 2000 (the date immediately preceding the date on which Veeco
and CVC announced that they had signed the merger agreement) and (c) ________
__, 2000, the most recent practicable date prior to the date hereof:
High Low
---- ---
Quarter Ending December 31, 1999....... $14.81 $ 8.30
February 28, 2000...................... $29.88 $26.56
_________ __, 2000..................... $ $
On _________ __, 2000, the closing price for the CVC common stock was
$____. As of _______ __, 2000, CVC had approximately ___ stockholders of record.
CVC has never paid or declared cash dividends on its common stock. CVC
currently intends to retain all future earnings for its business and does not
anticipate paying cash dividends in the foreseeable future. CVC is restricted
under the terms of some of its credit agreements from paying any dividends to
stockholders without the prior written consent of the lenders. Future dividends,
if any, will depend on, among other things, (1) CVC's operating results, (2)
capital requirements and (3) restrictions in loan agreements.
CVC'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
CVC is a worldwide supplier of process equipment used in the manufacture
of magnetic recording heads for disk drives, optical telecommunications
components and advanced semiconductor devices for computers and communications
equipment. CVC's principal product is the CONNEXION Cluster Tool system, which
provides integrated deposition and etch equipment based on a central substrate
handling platform and a series of interchangeable thin film deposition and etch
processing modules. CVC also derives revenue from the sale of sources, spare
parts, enhancements, and field service contracts. System revenues represented
71% in fiscal 1999, 83% in fiscal 1998 and 85% in fiscal 1997 of CVC's total
revenue. In order to expand its technology and broaden its offering of process
modules, CVC acquired Commonwealth Scientific Corporation in May 1999.
Commonwealth's primary products are ion beam etch, ion beam deposition and
diamond-like carbon process modules for the data storage industry and ion beam
sources principally used by suppliers of optical equipment.
CVC's growth in the past four years has been primarily due to the
expansion of the disk drive industry and transition of the industry to
magnetoresistive, or MR, heads and giant magnetoresistive, or GMR, heads. During
fiscal 1999, fiscal 1998 and fiscal 1997, 85%, 77% and 88% of CVC's revenue was
derived from sales made to manufacturers of magnetic recording heads and 9%,
21%, and 9% was derived from sales to manufacturers of semiconductor devices,
with the remainder of the revenue derived from ancillary products and services.
CVC's top four customers for fiscal 1999, were Seagate, IBM, TDK and Alps, all
of whom manufacture magnetic recording heads. CVC expects that these customers
will continue to account for a significant portion of CVC's fiscal 2000 revenues
and that significant customer concentration will continue for the foreseeable
future.
103
<PAGE>
CVC recognizes revenue from system sales, enhancements and spare parts at
the time of shipment. Provisions for estimated installation and warranty costs
are recorded at the time revenue is recognized. Revenue on field service
contracts is deferred and recognized on a straight-line basis over the period of
the contract.
Revenue derived from system sales is dependent upon the timing of orders,
customer requirements for additional manufacturing capacity and CVC's ability to
respond on a timely basis to rapid technological developments. CVC's customers
typically place large orders, which could cause revenues to fluctuate
significantly from period to period. Orders for system sales range in price from
approximately $1.0 million to $4.0 million, depending on the configuration of
the system. For example, in the second half of fiscal 1998 and the first quarter
of fiscal 1999, CVC's revenues were adversely affected by reduced orders from
magnetic head manufacturers, who experienced reduced demands, inventory
surpluses and poor operating results and as a result, deferred capital
expenditures of fabrication equipment. In recent quarters, magnetic head
manufacturers have increased capital spending to acquire new process
technologies that enable them to produce GMR heads. Because the data storage and
semiconductor industries are highly cyclical, and orders in CVC's backlog are
subject to cancellation or rescheduling, CVC's visibility on revenues for future
periods is limited, and its operating results could fluctuate significantly from
period to period.
International sales accounted for 53%, 38% and 31% of our total revenues
in fiscal 1999, fiscal 1998 and fiscal 1997. CVC expects that international
sales will continue to account for a significant portion of CVC's revenue in the
foreseeable future. CVC's international sales are denominated in U.S. dollars.
As a result, changes in the value of foreign currencies relative to the value of
the U.S. dollar can render our products comparatively more expensive. Although
CVC has not been significantly negatively impacted in the past by foreign
currency changes in Japan, Korea, Taiwan and Europe, currency changes could
negatively impact its international sales in future periods.
CVC's gross margin is influenced by a number of factors related to the mix
of revenues within a particular period. For example, systems for new process
applications tend to have lower margins initially than those for existing
processes. As a result, sales to semiconductor manufacturers, whose process
requirements tend to be unique, generally have a lower gross margin than sales
to magnetic recording head manufacturers, who typically purchase systems for
which we have significantly more processing experience. Sales to international
customers typically have a lower gross margin than sales to domestic customers.
In addition, revenues from ion beam sources, enhancements, spare parts and field
service contracts typically have a higher gross margin than system margins. As a
result of these factors, CVC expects its gross margin to fluctuate from period
to period.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage of
revenues for the following items in CVC's consolidated statement of operations
data.
Three Months Ended Year Ended
December 31, September 30,
------------ -------------
1999 1998 1999 1998 1997
---- ---- ---- ---- ----
Revenues ....................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold ............. 61.5 56.3 60.9 61.6 66.0
Gross margin ................... 38.5 43.7 39.1 38.4 34.0
Operating expenses
Research and development ..... 15.8 16.6 15.2 18.5 14.5
Sales and marketing .......... 11.8 13.2 12.2 11.3 9.0
General and administrative ... 6.1 5.5 5.8 5.1 4.0
In-process R&D write-off ..... -- -- 1.4 -- --
Total ........................ 33.7 35.3 34.6 34.9 27.5
Income from operations ......... 4.8 8.4 4.5 3.5 6.5
Interest and other, net ........ (1.1) (2.2) (0.3) (1.7) (0.9)
Write-off of deferred charges .. -- -- -- (1.0) --
Income before income taxes ..... 3.7 6.2 4.2 0.8 5.6
Income taxes ................... 1.5 2.9 2.3 0.4 2.3
Net income ..................... 2.2 3.3 1.9 0.4 3.3
104
<PAGE>
Three months ended December 31, 1999 Compared to Three Months Ended December 31,
1998
Revenues. Revenues increased 72.1% to $25.2 million for the quarter ended
December 31, 1999 from $14.7 million for the quarter ended December 31, 1998. Of
the increase in revenue, approximately $5.4 million is attributable to
additional sales from Commonwealth Scientific Corporation which was acquired in
May 1999, as well as increased sales to data storage customers of $3.3 million
and increased sales to semiconductor customers of $2.1 million. These increased
sales were partially offset by decreased revenues due to the disposition of two
non-core product lines during fiscal 1999.
Gross Margin. Gross margin decreased to 38.5% of revenues for the quarter
ended December 31, 1999 from 43.7% for the quarter ended December 31, 1998. The
lower margins are mainly a reflection of product mix. Product lines such as
spares, service and enhancements, which tend to have more favorable margins,
represented an unusually high percentage of overall revenue in the fiscal 1999
first quarter when compared to the same period in fiscal 2000.
Research and Development. Research and development expenses increased by
63.3% to $4.0 million for the first quarter of fiscal 2000 from $2.4 million for
the same period in fiscal 1999. As a percentage of revenues, research and
development expenses were 15.8% and 16.6% for the quarters ended December 31,
1999 and 1998, respectively. The increase in these expenses is mainly
attributable to $1.1 million of research personnel, related expenses associated
with the Commonwealth acquisition, $0.2 million in outside contractors utilized
to assist in the development of internal projects and $0.2 million in higher
depreciation due to additional capitalization of demonstration tools throughout
fiscal 1999.
Sales and Marketing. Sales and marketing expenses increased by 54.0% to
$3.0 million for the quarter ended December 31, 1999 from $1.9 million for the
quarter ended December 31, 1998. As a percentage of revenues, sales and
marketing expenses decreased to 11.8% for the December 1999 quarter from 13.2%
for the December 1998 quarter. Of the $1.1 million increase, $0.9 million is due
to the addition of personnel and their related expenses resulting from the
acquisition of Commonwealth. The remainder of the increase is attributable to
the addition of personnel and related expenses in field service to support CVC's
expanded product offering and customer base.
General and Administrative. General and administrative expenses increased
by 89.5% to $1.5 million for the first quarter of fiscal 2000 from $0.8 million
in the first quarter of fiscal 1999. As a percentage of revenues, general and
administrative expenses were 6.1% and 5.5% for the quarters ended December 31,
1999 and 1998, respectively. The increase in general and administrative expenses
reflects additional costs of $0.4 million due to the Commonwealth acquisition
and additional accruals for doubtful accounts of $0.2 million.
Interest and Other, Net. Interest and other, net decreased by 14.9% to
$277,000 in the quarter ended December 31, 1999 from $326,000 in the quarter
ended December 31, 1998. This decrease reflects lower interest expense due to
the payment of debt with a portion of the proceeds from CVC's initial public
offering during the first quarter of fiscal 2000.
Income Taxes. Income tax expense was relatively consistent on a comparable
basis for the first quarter of fiscal 2000 to the first quarter of fiscal 1999.
The effective rate for the quarter ended December 31, 1999 was 42.0% compared to
the effective rate of 46.6% for the quarter ended December 31, 1998. The
decrease in the effective rate is based on an anticipated decrease in the annual
effective rate for fiscal 2000 due to a less significant impact of
non-deductible items as compared to fiscal 1999.
In-Process Research and Development
During fiscal 1999, as part of the purchase of Commonwealth, the value
assigned to research expenditures on products in the development stage which had
not reached technological feasibility and for which there is no alternative
future use were written off in accordance with applicable accounting rules. This
write-off amounted to approximately $1.2 million, respectively.
The in-process technology aquired from Commonwealth consists of four
technology groupings: ion source products, etch modules, deposition modules, and
dielectric deposition modules, which had assigned values of $0.2 million, $0.5
million, $0.3 million and $0.2 million, respectively. Descriptions of these
groupings are as follows:
o Ion source products, including both ion sources and power supplies, are
being designed for use in applications that include etching, deposition,
surface modification and ion assist.
o The etch modules are being designed to support the market requirements for
ion beam processing applications.
o The deposition modules are being designed to support very thin metallic
film through ion beam sputter deposition of target materials.
o The dielectric deposition modules are being designed to support very thin
dielectric film through ion beam sputter deposition of target materials.
There is a risk associated with the completion of the research and development
("R&D") projects. CVC cannot assure that any of the projects will achieve
technological or commercial success without the successful completion of the
remaining R&D efforts on the acquired in-process technologies. Without the
successful completion of the remaining R&D efforts, CVC would not realize the
future revenues and profits attributed to the acquired R&D. CVC believes,
however, that the failure of any particular in-process R&D project would not
materially impact CVC's financial position of operating results.
105
<PAGE>
At December 31, 1999, the estimated development completion costs of the
in-process R&D projects acquired from Commonwealth approximates $1.2 million,
which will be incurred in the remainder of fiscal 2000. The total estimated
completion costs and dates of completion are relatively consistent with the
estimates made at the acquisition date.
YEAR ENDED SEPTEMBER 30, 1999 COMPARED TO YEAR ENDED SEPTEMBER 30, 1998
Revenues. Revenues increased 21.6% to $82.9 million for the year ended
September 30, 1999 from $68.2 million for the year ended September 30, 1998. The
increase is primarily attributable to additional sales resulting from the
Commonwealth acquisition of $13.3 million and increased sales to data storage
customers of $7.0 million, which offset lower sales of CVC's systems to
semiconductor customers of $7.0 million. CVC believes that the decrease in sales
to semiconductor customers reflected residual effects of the semiconductor
market downturn in 1998.
Gross Margin. Gross margin increased to 39.1% of revenues for the year
ended September 30, 1999 from 38.4% for the year ended September 30, 1998. Gross
margin contribution in fiscal 1999 was affected by the lower margins of 30.9% on
sales of the product lines from the Commonwealth acquisition. Gross margins
excluding the impact of the Commonwealth acquisition product lines would have
been 40.7%. The lower gross margins in fiscal 1998 reflect the higher percentage
of new system sales to semiconductor customers, which usually have lower
margins.
Research and Development. Research and development expenses were unchanged
at $12.6 million for fiscal 1999 compared to fiscal 1998. As a percentage of
revenues, research and development expenses decreased to 15.2% for fiscal 1999
compared to 18.5% for fiscal 1998. The higher relative expenditure level in
fiscal 1998 is primarily attributable to material expenses of $0.9 million
associated with the completion of a government contract. Expenses in fiscal 1999
reflect additional research and development expenses of $1.3 million from the
acquisition of Commonwealth, higher depreciation expense of $1.1 million due to
additional capitalization of demonstration tools, partially offset by lower
personnel costs of $0.9 million and lower material costs of $0.2 million related
to internal development projects. Although fiscal 1999 expenditure levels were
unchanged compared to fiscal 1998, CVC believes that research and development
expenditures are essential to maintaining its competitive position in the data
storage and semiconductor markets and expects these expenditure levels to
increase in absolute dollars for the foreseeable future.
Sales and Marketing. Sales and marketing expenses increased by 31.0% to
$10.1 million for fiscal 1999 from $7.7 million for fiscal 1998. As a percentage
of revenues, sales and marketing expenses increased to 12.2% for fiscal 1999
from 11.3% for fiscal 1998. The increase is attributable to the addition of
personnel and their related expenses of $1.6 million as a result of the
Commonwealth acquisition, additional personnel and related expenses in field
service of $0.6 million to support CVC's expanded product offering and customer
base, and increased expenses of $0.4 million for product demonstrations.
General and Administrative. General and administrative expenses increased
38.7% to $4.8 million for fiscal 1999 from $3.5 million for fiscal 1998. As a
percentage of revenues, administrative expenses were 5.8% for fiscal 1999, and
5.1% for fiscal 1998. The increase in general and administrative expenses
reflects additional administration expenses of $0.5 million due to the
Commonwealth acquisition, as well as additional accruals for doubtful accounts
of $0.3 million, and other accruals for post-employment and pension benefits of
$0.2 million.
In-process R&D Write-off. During fiscal 1999, as part of the purchase of
Commonwealth, the value assigned to research expenditures on products in the
development stage which have not reached technological feasibility and for which
there is no alternative future use were written off in accordance with
applicable accounting rules. This write-off amounted to approximately $1.2
million.
Interest and Other, Net. Interest and other, net decreased to $0.2 million
for fiscal 1999 from the $1.2 million for fiscal 1998. The decrease in interest
and other, net primarily reflects reduced interest expense of $0.1 million due
to the reduction of borrowings with the proceeds from the sale of preferred
stock in December 1998, a
106
<PAGE>
one-time gain of $0.4 million associated with the sale of two non-core product
lines and a one-time lawsuit settlement of $0.5 million for infringement by a
third party of a CVC patent.
Income Taxes. Income tax expense for fiscal 1999 amounted to $1.9 million
compared to $0.3 million for fiscal 1998. The effective tax rate for fiscal 1999
was 55.2% compared to the effective rate of 50.9% for fiscal 1998. The increase
is the result of the non-deductible in-process R&D write-off.
YEAR ENDED SEPTEMBER 30, 1998 COMPARED TO YEAR ENDED SEPTEMBER 30, 1997
Revenues. Revenues increased 8.9% to $68.2 million in fiscal 1998 from
$62.6 million in fiscal 1997. The increase in revenues is primarily attributable
to increased systems sales of $7.4 million and spare sales of $0.9 million to
new semiconductor customers. The majority of this increased volume was to new
customers placing their initial system order. Partially offsetting these
increases was decreased system sales to data storage customers by $5.0 million
as demand decreased due to a general downturn in the industry.
Gross Margin. Gross margin increased to 38.4% of revenues in fiscal 1998
from 34.0% in fiscal 1997. The margin improvement was attributable to lower
systems manufacturing costs as the result of efficiencies derived from repeat
orders and increased sales of higher margin spares at 57% and enhancements at
64%.
Research and Development. Research and development expenses increased
39.3% to $12.6 million in fiscal 1998 from $9.1 million in fiscal 1997. As a
percentage of revenues, research and development expenses increased to 18.5% in
fiscal 1998 from 14.5% in fiscal 1997. The increase is attributable to increased
expenditures for an expanded demonstration program of $0.3 million, increased
personnel costs due to the hiring of engineers in the fourth quarter 1997 to
support the expanded demonstration program and new development projects of $1.5
million, increased depreciation of $0.6 million as well as expenses related to
government contracts of $0.5 million.
Sales and Marketing. Sales and marketing expenses increased 37.1% to $7.7
million in fiscal 1998 from $5.6 million in fiscal 1997. As a percentage of
revenues, sales and marketing expenses increased to 11.3% in fiscal 1998 from
9.0% in fiscal 1997. The increase is attributable to the addition of marketing
personnel to support the semiconductor market of $0.5 million, the addition of
field service personnel of $0.8 million, increased trade show and advertising
expense of $0.3 million, and higher commissions resulting from increased system
sales of $0.1 million.
General and Administrative. General and administrative expenses increased
36.9% to $3.5 million in fiscal 1998 from $2.5 million in fiscal 1997. As a
percentage of revenues, general and administrative expenses increased to 5.1% in
fiscal 1998 compared to 4.0% in fiscal 1997. The increase is attributable to the
full year impact of additional employees hired in fiscal 1997 as well as several
new hires in fiscal 1998 of $0.4 million, an increase of $0.2 million in
consulting services directly related to the implementation of a new computer
system and an increase of $0.1 million in depreciation for computer systems
installed in fiscal 1998 and fiscal 1997.
Interest and Other, Net. Interest and other, net increased to $1.2 million
in fiscal 1998 from $0.6 million in fiscal 1997, reflecting an increase in
borrowings on the credit line and interest expense on a new $8.0 million term
loan.
Write-off of Deferred Charges. In fiscal 1997, costs were incurred
relative to preparing CVC for its initial public offering. During the fourth
quarter of fiscal 1998, CVC determined to suspend efforts to complete the public
offering due to continued weakness in the data storage and semiconductor
industries and the equity market for initial public offerings and, accordingly,
these costs were charged against current period earnings.
Income Taxes. Income tax expense in fiscal 1998 was $0.3 million compared
to $1.5 million in fiscal 1997. The effective tax rate for fiscal 1998 was 50.9%
compared to the effective rate of 41.6% in fiscal 1997. The increase of 9.3% was
due to permanent non-tax deductible expenses and a low level of profitability,
partially offset by the utilization of a valuation allowance related to net
operating loss carry forwards.
107
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
On November 12, 1999, CVC received net proceeds of $27.0 million from a
public equity offering, consisting of 3,000,000 shares of common stock sold by
CVC and 500,000 shares of Common Stock sold by certain stockholders of CVC at an
initial public offering price of $10.00 per share. CVC used a portion of the net
proceeds from the offering to repay approximately $12.0 million of debt, $10.0
million for the redemption of Series D Redeemable Preferred Stock and the
balance for general corporate purposes. CVC did not receive any of the proceeds
from the sale of shares by the selling stockholders.
As of December 31, 1999, CVC had working capital of $38.9 million,
including cash and cash equivalents of $4.2 million, compared to working capital
of $22.1 million as of September 30, 1999.
Operating activities provided cash of $0.6 million for the first quarter
of fiscal 2000 as compared to providing cash of $1.5 million in the first
quarter of fiscal 1999. The decrease in cash provided from operating activities
is primarily attributable to changes in components of working capital.
As of December 31, 1999, CVC had available a $15.0 million bank line of
credit and a $3.0 million equipment line of credit. Maximum borrowings under
these lines are based upon certain financial criteria and these borrowings are
at an interest rate of prime. There were no borrowings outstanding under either
of these lines as of December 31, 1999.
CVC expects to spend approximately $6.0 million on capital expenditures in
the current fiscal year, of which $0.9 million had been incurred as of December
31, 1999, including amounts capitalized from inventory. The capital expenditures
were primarily for demonstration and development system tools. CVC continues to
invest heavily in demonstration and development tools for use at its facilities
in order to demonstrate new product capabilities for its magnetic head, optical
component and semiconductor device customers.
CVC believes that existing cash balances together with cash generated from
operations and amounts available under existing lines of credit will be adequate
to fund operations for at least the next 12 months.
CVC's long-term capital requirements will be affected by many factors,
including the success of CVC's current product offerings, CVC's ability to
enhance its current products and to develop and introduce new products that keep
pace with technological developments and general trends in the data storage and
semiconductor industries. CVC plans to finance its long-term capital needs with
the net proceeds of the initial public offering, together with borrowings and
cash flow from operations. To the extent that these funds are insufficient to
finance CVC's activities, CVC will have to raise additional funds through the
issuance of additional equity or debt securities or through other means. There
can be no assurance that additional financing will be available on acceptable
terms.
YEAR 2000
CVC has not experienced any material disruptions of its computer and
microprocessor-based devices or operating difficulties of its mission critical
applications or critical devices relating to the Year 2000 issue. In addition,
CVC is not aware of any difficulties with its products at customer sites nor has
CVC experienced any material problems related to applications or devices
provided by critical external parties for use by CVC. CVC has no reason to
believe that Year 2000 failures will seriously affect CVC in the future.
However, given the proximity to January 1, 2000 and the possibility of latent
Year 2000 defects, CVC cannot yet be sure that it will not experience Year 2000
failures or be affected by third-party Year 2000 failures, either of which may
adversely impact CVC's business. CVC will continue to monitor the operation of
its computers and microprocessor-based devices for any Year 2000 related
problems.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Effective October 1, 1998, CVC adopted Statement of Financial Accounting
Standards (SFAS) No. 130, "Reporting Comprehensive Income", which establishes
new rules for the reporting and display of comprehensive
108
<PAGE>
income and its components; however, the adoption had no impact on the CVC's net
income or stockholders' equity. SFAS No. 130 requires changes to the minimum
pension liability, to be included in other comprehensive income. Prior year
financial statements have been reclassified to conform to the requirements of
SFAS No. 130.
In April 1998, the Accounting Standards Executive Committee issued
Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-Up
Activities." Start-up activities are defined broadly as those one-time
activities relating to opening a new facility, introducing a new product or
service, conducting business in a new territory, conducting business with a new
class of customer, commencing some new operation or organizing a new entity.
Under SOP 98-5, the cost of start-up activities should be expensed as incurred.
SOP 98-5 is effective for CVC's fiscal year 2000 financial statements and CVC
does not expect its adoption to have a material effect on its financial
condition or results of operations.
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." The new
standard establishes accounting and reporting standards for derivative
instruments, including types of derivative instruments embedded in other
contracts, and for hedging activities. SFAS No. 133 is effective for all
quarters of fiscal years beginning after June 15, 2000. CVC does not expect SFAS
No. 133 to have a material effect on its financial condition or results of
operations.
CVC'S QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At December 31, 1999 CVC did not hold any market risk sensitive
instruments.
CVC FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of CVC are listed in the index to the
consolidated financial statements of CVC, as filed as part of this joint proxy
statement/prospectus.
Quarterly Results of Operations
The following tables set forth CVC's operating results for each of the
eight quarters ended December 31, 1999. The information for each of these
quarters is unaudited but has been prepared on the same basis as the audited
consolidated financial statements included with this joint proxy
statement/prospectus and includes all adjustments, consisting only of normal
recurring adjustments, that CVC considers necessary to present fairly this
information when read in conjunction with CVC's consolidated financial
statements and notes thereto included elsewhere in this joint proxy
statement/prospectus and "CVC's Management's Discussion and Analysis of
Financial Condition and Results of Operations" on page 103. CVC's operating
results for any one quarter are not necessarily indicative of results for any
future period.
109
<PAGE>
<TABLE>
<CAPTION>
Mar. 31, June 30 Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31,
1998 1998 1998 1998 1999 1999 1999 1999
-------- -------- -------- -------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statements of
Operations:
Revenues ............ $ 20,529 $ 14,400 $ 13,898 $ 14,655 $ 17,788 $ 23,352 $ 27,120 $ 25,216
Cost of goods
sold .............. 13,108 8,265 8,339 8,249 10,983 14,934 16,336 15,505
-------- -------- -------- -------- -------- -------- -------- --------
Gross margin ........ 7,421 6,135 5,559 6,406 6,805 8,418 10,784 9,711
Operating expenses
Research and
development ..... 4,009 2,968 2,771 2,439 2,546 3,504 4,141 3,983
Sales and marketing 1,913 1,620 2,278 1,930 1,832 2,633 3,686 2,972
General and
administrative .. 865 1,006 577 812 902 1,238 1,870 1,539
In-process R&D
write-off ....... -- -- -- -- -- 1,174 -- --
-------- -------- -------- -------- -------- -------- -------- --------
Total ............. 6,787 5,594 5,626 5,181 5,280 8,549 9,697 8,494
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) from
operations ........ 634 541 (67) 1,225 1,525 (131) 1,087 1,207
Interest and other,
net ............... (305) (414) (224) (326) 190 (220) 158 (277)
Write-off of
deferred charges .. -- -- (675) -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes ...... 329 127 (966) 899 1,715 (351) 1,245 940
Income taxes
(benefit) ......... 137 53 (352) 419 757 348 413 395
-------- -------- -------- -------- -------- -------- -------- --------
Net income (loss) ... $ 192 $ 74 $ (614) $ 480 $ 958 $ (699) $ 832 $ 545
======== ======== ======== ======== ======== ======== ======== ========
<CAPTION>
Mar. 31, June 30 Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31,
1998 1998 1998 1998 1999 1999 1999 1999
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Percentage of
Revenue:
Revenues ............ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Gross margin ........ 36.1 42.6 40.0 43.7 38.3 36.0 39.8 38.5
Operating expenses
Research and
development ..... 19.5 20.6 19.9 16.6 14.3 15.0 15.3 15.8
Sales and
marketing ....... 9.3 11.2 16.4 13.2 10.3 11.3 13.6 11.8
General and
administrative .. 4.2 7.0 4.2 5.5 5.1 5.3 6.9 6.1
In-process R&D
write-off ....... -- -- -- -- -- 5.0 -- --
-------- -------- -------- -------- -------- -------- -------- --------
Total ............. 33.0 38.8 40.5 35.3 29.7 36.6 35.8 33.7
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss)
from operations ... 3.1 3.8 (0.5) 8.4 8.6 (0.6) 4.0 4.8
Interest and
other, net ........ (1.5) (2.9) (1.6) (2.2) 1.1 (0.9) 0.6 (1.1)
Write-off of
deferred charges .. -- -- (4.9) -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Net income (loss) ... 0.9% 0.5% (4.4%) 3.3% 5.4% (3.0%) 3.1% 2.2%
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
110
<PAGE>
CVC's quarterly and annual operating results are affected by a wide
variety of factors that could materially and adversely affect revenues and
profitability from period to period, including:
o Specific economic conditions in the data storage and semiconductor
industries.
o The timing of significant orders.
o Cyclical patterns of capital spending by customers.
o Modification or cancellation of customer orders.
o Continued market acceptance of systems and customers' products.
o Shipment delays.
o Loss of a significant customer.
o Increased research and development or marketing costs associated
with introduction of new products.
o Introduction of new products by customers.
o Ability to successfully introduce new products on a timely basis.
o Changes in our pricing policies or those of competitors.
o Production and quality problems.
o The publication of opinions by industry analysts about CVC, its
products or competitors.
Due to potential quarterly fluctuations in operating results, CVC believes
that quarter-to-quarter comparisons of its results of operations should not be
relied upon as indicators of future performance. Further, in the event that in
some future quarter CVC's net sales or operating results were below the
expectations of public market securities analysts and investors, the price of
the common stock would likely be materially adversely affected.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
The following unaudited pro forma statements of operations for the year
ended September 30, 1999 give effect to the May 10, 1999 acquisition of
Commonwealth Scientific Corporation. The unaudited pro forma statements of
operations are based on the statements of operations for CVC, appearing
elsewhere in this joint proxy statement/prospectus, and the statements of
operations of Commonwealth as if the acquisition occurred on October 1, 1998.
The Commonwealth statements of operations have been modified to conform to CVC's
fiscal year end by combining the quarterly operating results for the quarters
ended December 31, 1998 and March 31, 1999 with the interim results for the
period April 1 to May 9, 1999. These unaudited pro forma statements of
operations should be read in conjunction with the historical financial
statements and notes thereto of CVC and Commonwealth included elsewhere in this
joint proxy statement/prospectus.
The unaudited pro forma combined statements of operations give effect to
the following pro forma adjustments necessary to reflect the acquisition of
Commonwealth:
o Reduction in operating expenses related to the restructuring
activities undertaken, solely comprised of Commonwealth employees
terminated as of or shortly after the acquisition;
o Elimination of the write-off of the potion of the purchase price
allocated to in-process research and development, due to its
one-time nature;
o Amortization of goodwill and other intangibles over periods ranging
from five to seven years; and
o Decrease in income taxes related to adjustments.
Amounts are in thousands, except for per share data.
111
<PAGE>
<TABLE>
<CAPTION>
Year Ended September 30, 1999
------------------------------------------------
CVC Commonwealth Adjustments Combined
--- ------------ ----------- --------
(in thousands, except for per share data)
<S> <C> <C> <C> <C>
Statements of Operations:
Revenues ........................ $ 82,915 $ 18,926 $ -- $ 101,841
Cost of goods sold .............. 50,502 17,350 -- 67,852
--------- --------- --------- ---------
Gross margin .................... 32,413 1,576 -- 33,989
Operating expenses .............. 27,482 6,538 (840) 33,180
In-process R&D
write-off ..................... 1,174 -- (1,174) --
Goodwill and intangibles
amortization .................. 51 -- 80 131
--------- --------- --------- ---------
Total operating expenses ........ 28,707 6,538 (1,934) 33,311
--------- --------- --------- ---------
Income (loss) from operations ... 3,706 (4,962) 1,934 678
Interest and other, net ......... (198) (305) -- (503)
Income (loss) before income taxes 3,508 (5,267) 1,934 175
Income taxes (benefit) .......... 1,937 (1,488) (336) 113
--------- --------- --------- ---------
Net income (loss) ............... $ 1,571 ($ 3,779) $ 2,270 $ 62
========= ========= ========= =========
Net income per share:
Basic $1.01 $0.03
Diluted 0.18 0.01
Weighted average shares outstanding:
Basic 1,561 772 2,333
Diluted 8,589 772 9,361
</TABLE>
112
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF CVC
DIRECTORS AND OFFICERS
The executive officers and directors of CVC and their ages as of March 15, 2000,
are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Christine B. Whitman 48 President, Chief Executive Officer and
Chairman
Giovanni Nocerino, Ph.D. 47 Executive Vice President, Sales
Emilio O. DiCataldo 49 Senior Vice President and Chief Financial
Officer
Mehrdad M. Moslehi, Ph.D. 40 Senior Vice President and Chief Technology
Officer
Christopher J. Mann 41 Senior Vice President, Marketing
Richard J. Chicotka, Ph.D. 58 Vice President, Engineering
Richard A. Kellogg 57 Vice President, Manufacturing
Judd C. Prozeller 48 Vice President, Quality & Human Resources
Robert C. Fink 65 Director
Maurice F. Holmes 56 Director
Douglas A. Kingsley 37 Director
Thomas C. McDermott 63 Director
Seiya Miyanishi 53 Director
Donald L. Waite 67 Director
</TABLE>
Christine B. Whitman. Ms. Whitman joined CVC Products in 1978 and has
served as President, Chief Executive Officer and Chairman of CVC since its
acquisition of CVC Products in 1990. Ms. Whitman received a BA from Syracuse
University and is a member and Secretary of the Board of Directors of SISA,
formerly known as SEMI/SEMATECH. She also serves as a member of the Board of
Directors of Frontier Telephone of Rochester and The M&T Bank. Ms. Whitman
serves on the Executive Committee of the Board of Directors of the Industrial
Management Council, the Board of Trustees for the Greater Rochester Chamber of
Commerce, the United Way Board of Directors, the Al Sigl Center Partners'
Foundation Board of Governors and is a member of the Board of Trustees of
Rochester Institute of Technology.
Giovanni Nocerino, Ph.D. Dr. Nocerino joined CVC in 1997 as Executive Vice
President, Sales. From 1994 to 1997, Dr. Nocerino worked as Vice President and
General Manager of Sales and Marketing at Varian Associates, a supplier of
semiconductor manufacturing equipment. Prior to his employment at Varian
Associates, Dr. Nocerino was Executive Vice President with Materials Research
Corporation, a subsidiary of Sony and a manufacturer of thin film equipment and
material for the data storage and semiconductor industries. Dr. Nocerino holds a
joint honors B.Sc. in Physics and Electronic Engineering and a Ph.D. from the
University of Manchester, England.
Emilio O. DiCataldo. Mr. DiCataldo joined CVC in 1995 as Senior Vice
President and Chief Financial Officer. From 1991 to 1995, Mr. DiCataldo served
as Senior Vice President, Finance and Administration of MedImmune, Inc., a
therapeutic and vaccine company. Prior to his employment at MedImmune, Mr.
DiCataldo held Vice President-level positions at Bausch & Lomb, Inc. and Praxis
Biologics and worked for the firm of Price Waterhouse LLP. Mr. DiCataldo is a
Certified Public Accountant and holds a BS in Accounting from St. John Fisher
College.
Mehrdad M. Moslehi. Ph.D. Dr. Moslehi joined CVC in 1994 as Senior Vice
President and Chief Technology Officer. From 1988 to 1994, Dr. Moslehi served in
various positions at Texas Instruments, a semiconductor manufacturer, most
recently as Branch Manager in their Semiconductor Process and Design Center
113
<PAGE>
where he developed process and equipment technologies such as RTP, PVD and
photochemical cleaning. Dr. Moslehi is named as an inventor on over 80 U.S.
patents and in 1993 he earned the American Electronics Association's
Technologist/Inventor of the Year. Dr. Moslehi received a BS in Electrical
Engineering at Arya-Mehr University of Technology and a MS and Ph.D. in
Electrical Engineering from Stanford University. Dr. Moslehi also serves on the
consulting faculty of Stanford University.
Christopher J. Mann. Mr. Mann joined CVC Products in 1979 and now serves
as Senior Vice President, Marketing after having served as Senior Vice
President, Data Storage from 1997 to June 1999. Mr. Mann has previously held the
positions of Field Service Manager, Engineering Services Manager and Vice
President, Data Storage at CVC. Prior to joining CVC in 1979, Mr. Mann worked
for Sperry in the United Kingdom.
Richard J. Chicotka, Ph.D. Dr. Chicotka joined CVC in 1995 as Vice
President, Operations, and since 1998 has served as Vice President, Engineering.
From 1994 to 1995, Dr. Chicotka served as Director of Development Engineering of
Conner Peripherals, a manufacturer of disk drives. From 1993 to 1994, Dr.
Chicotka served as Director of Process Engineering of Seagate Magnetics, a
division of Seagate Technology. From 1962 to 1992, Dr. Chicotka served in
various positions at IBM, most recently as Manager of Head Process Manufacturing
and Engineering of Storage Products Development and Manufacturing in San Jose,
California. Dr. Chicotka received a BS and MS in Metallurgical Engineering and a
Ph.D. in Materials Science from Polytechnic Institute of Brooklyn.
Richard A. Kellogg. Mr. Kellogg joined CVC in 1999 and currently serves as
Vice President, Manufacturing. From 1998 to 1999, he consulted with CVC and
other firms in the materials management area. From 1997 to 1998, Mr. Kellogg
held the position of Vice President, Materials for Lam Research Corporation, a
manufacturer of semiconductor processing equipment. From 1994 to 1997, Mr.
Kellogg was Vice President of Operations for Varian Thin Film Systems, a
manufacturer of plasma vapor deposition systems and, after its acquisition, with
Novellus Systems. He spent the period from 1989 to 1994 with Libbey Owens Ford
Glass as General Manager of its Shelbyville operations. Mr. Kellogg holds a BA
from Lake Forest College.
Judd C. Prozeller. Mr. Prozeller joined CVC in 1995 and currently serves
as Vice President, Quality and Human Resources. From 1990 to 1995, Mr. Prozeller
served as the Senior Program Director for the Department of Training and
Professional Development at the Rochester Institute of Technology. From 1990 to
1995, Mr. Prozeller also served as a total quality consultant for a number of
large institutional clients. From 1979 to 1988, Mr. Prozeller served in various
positions at the Xerox Corporation, most recently as a Total Quality Consultant,
providing consulting services to various suppliers. Mr. Prozeller received a BS
from New York State University at Brockport, an MED from Nazareth College of
Rochester and an MBA from Rochester Institute of Technology.
Robert C. Fink. Mr. Fink has been a director of CVC since 1997. In 1993,
Mr. Fink joined Lam Research Corporation, a manufacturer of semiconductor
processing equipment, and formerly served as the Chief Operating Officer,
following Lam's acquisition of Drytek, Inc. Mr. Fink served as the President of
Drytek from 1983 to 1988. Prior to Drytek, Mr. Fink spent four years with ITT
Corporation's Semiconductor Division as Director of VLSI Operations for North
America and 12 years with General Instrument Corporation's Microelectronics
Division as Director of Worldwide Manufacturing Resources. Mr. Fink's career
also includes 13 years with General Electric Corporation. He received a BS in
Metallurgical Engineering from Polytechnical Institute of New York.
Maurice F. Holmes. Mr. Holmes has been a director of CVC since October
1999. Since January 1999, Mr. Holmes has been a Professor of the Practice of
Management and Engineering Systems at the Massachusetts Institute of Technology,
as well as holding a dual professorship with both its Sloan School of Management
and School of Engineering. Prior to this, Mr. Holmes served as Corporate Vice
President and the Chief Engineer for Xerox Corporation beginning in 1994. Mr.
Holmes received a BS degree from the University of Pittsburgh and a MS in
Mechanical and Aerospace Science from the University of Rochester. He currently
is a director of Frontier Telephone Company of Rochester, Optical Dynamics
Corporation and Storage Technology Corporation. In addition, Mr. Holmes serves
on the Board of Trustees of Rochester Institute of Technology and the Ford
Design Institute.
114
<PAGE>
Douglas A. Kingsley. Mr. Kingsley has been a director of CVC since 1998.
Mr. Kingsley is a Senior Vice President of Advent International Corporation, a
venture capital firm, where he has been employed since 1990. From 1985 through
1988 Mr. Kingsley was a sales engineer for Teradyne, Inc., a manufacturer of
automatic test equipment for the electronics industry. Mr. Kingsley is a
graduate of Dartmouth College and Harvard Business School. He is a director of
LeCroy Corporation and a member of the Board of Overseers of the Boston Symphony
Orchestra.
Thomas C. McDermott. Mr. McDermott has been a director of CVC since
October 1999. From 1994 to 1997, Mr. McDermott was Chairman of the Board, Chief
Executive Officer and President of Goulds Pumps, Inc. From 1986 to 1993, Mr.
McDermott was the President and Chief Operating Officer of Bausch & Lomb. Prior
to this, Mr. McDermott served in a variety of management positions at Bausch &
Lomb, and also was a member of its Board of Directors from 1983 until 1993. Mr.
McDermott received a BS degree and an Honorary Doctoral Degree from Providence
College. He currently is a director of Canandaigua Brands, Inc. and Thomas &
Betts Corporation. In addition, Mr. McDermott serves on the Board of Governors
of Strong Memorial Hospital and as a Trustee of Rochester Institute of
Technology.
Seiya Miyanishi. Mr. Miyanishi has been a director of CVC since 1990.
Since 1987, Mr. Miyanishi has served as President and Chief Executive Officer of
Nikko Tecno, a company based in Japan and involved in the import and export of
capital equipment, which was founded in 1946. Mr. Miyanishi has served as owner,
President and Chief Executive Officer of several other companies in Japan. Mr.
Miyanishi received a BS of managerial economics from Keio University.
Donald L. Waite. Mr. Waite has been a director of CVC since 1995. Since
1983, Mr. Waite has served in various positions for Seagate Technology, Inc.,
most recently as Senior Administrative Officer, Senior Financial Officer and
Executive Vice President. Additionally, Mr. Waite was named interim chief
executive officer of Dragon Systems in October, 1999. Dragon Systems is a voice
recognition software company in which Seagate Technology, Inc. holds a minority
ownership position. Mr. Waite received a BS in Accounting from Creighton
University and a JD from Georgetown University Law Center. Mr. Waite is a
Certified Public Accountant.
All directors hold office until the next annual meeting of the
stockholders and until their successors have been elected and qualified.
Executive officers of CVC are elected by CVC's Board of Directors on an annual
basis and serve until their successors are duly elected and qualified. There are
no family relationships among any of the executive officers or directors of CVC.
Mr. Douglas Kingsley, a current director of CVC, and Mr. George R.
Thompson, a former director of CVC, did not file Form 3s with the Securities and
Exchange Commission at the time they became directors of CVC (Mr. Kingsley in
December 1998 and Mr. Thompson in May 1999). Both Mr. Thompson and Mr. Kingsley
filed Form 3s on November 10, 1999 in connection with CVC's initial public
offering. Advent International Group did not file a Form 3 with the Securities
and Exchange Commission at the time it became a 10% stockholder of CVC pursuant
to a private placement of CVC preferred stock December 1998. Upon completion of
CVC's initial public offering in November 1999, Advent International Corporation
was no longer a 10% stockholder of CVC.
DIRECTOR COMMITTEES
CVC Audit Committee. The Audit Committee of CVC's Board of Directors
consists of Messrs. Kingsley, McDermott and Waite (Chairman). The Audit
Committee:
o Reviews with CVC's independent accountants the scope and timing of
their audit services;
o The accountants' report on CVC's consolidated financial statements
following completion of their audit; and
o CVC's policies and procedures with respect to internal accounting
and financial controls.
115
<PAGE>
In addition, the Audit Committee makes annual recommendations to CVC's Board of
Directors for the appointment of independent accountants for the ensuing year.
CVC Compensation Committee. The Compensation Committee of CVC's Board of
Directors consists of Messrs. Fink, Holmes and Kingsley. The Compensation
Committee:
o Reviews and evaluates the compensation and benefits of all officers
of CVC;
o Reviews general policy matters relating to compensation and benefits
of employees of CVC;
o Makes recommendations concerning these matters to CVC's Board of
Directors; and
o Administers CVC's stock option plans.
CVC Executive Committee. The Executive Committee of CVC's Board of
Directors consists of Ms. Whitman (Chairman), Mr. Waite and Mr. McDermott. The
Executive Committee is responsible for all matters which arise between meetings
of CVC's Board of Directors, to the extent permitted by law.
DIRECTOR COMPENSATION
Directors who are employees of CVC will receive no additional compensation
for their services as members of CVC's Board of Directors or as members of
committees. Directors who are not employees of CVC are paid an annual retainer
of $8,000, payable in shares of CVC common stock, as well as additional fees
paid in cash of $1,500 for each meeting of the CVC Board of Directors and $500
for each meeting of a committee attended by a director. In addition, chairmen of
committees are paid an additional amount of $1,000 in cash. CVC's directors are
reimbursed for their out-of-pocket and travel expenses incurred in connection
with their service as directors.
CVC's Nonemployee Directors' 1999 Stock Option Plan contains provisions
pursuant to which options for 7,500 shares of CVC common stock are granted to
each nonemployee director upon commencement of service on the CVC Board of
Directors, and options for 2,000 shares of CVC common stock are granted to each
nonemployee director on March 31 of each year of continued service on the CVC
Board of Directors. CVC has authorized and reserved 200,000 shares of CVC common
stock for issuance under this plan.
116
<PAGE>
SECURITY OWNERSHIP
The following table sets forth information regarding the beneficial
ownership of the CVC common stock as of February 29, 2000, by (i) each person or
entity known to CVC to own beneficially more than 5% of the outstanding shares
of CVC common stock, (ii) each of CVC's directors and the named executive
officers and (iii) all CVC directors and executive officers as a group. Unless
otherwise indicated below, to the knowledge of CVC, all persons listed below
have sole voting and investment power with respect to their shares of CVC common
stock, except to the extent authority is shared by spouses under applicable law.
<TABLE>
<CAPTION>
Shares Beneficially
Owned (1) (2)
---------------------------------
Name of Beneficial Owner Number Percent
------ -------
<S> <C> <C>
Beneficial Owners of More than 5% of CVC Common Stock:
Advent International Group (3) 1,017,590 8.68%
Nikko Tecno 1,412,316 12.04%
Seagate Technology, Inc. (4) 3,219,073 25.71%
Directors (5):
Robert C. Fink 4,889 *
Maurice F. Holmes -- *
Douglas A. Kingsley (6) 1,017,590 8.68%
Thomas C. McDermott 2,000 *
Seiya Miyanishi (7) 1,412,316 12.04%
Donald L. Waite (8) 3,219,073 25.71%
Named Executive Officers (5):
Christine B. Whitman** 726,400 6.01%
Mehrdad M. Moslehi 307,200 2.62%
Christopher J. Mann (9) 283,676 2.38%
Emilio O. DiCataldo 146,000 1.23%
Giovanni Nocerino 106,667 *
All directors and executive officers as a group (14 persons) (10) 7,347,811 54.77%
</TABLE>
- ----------
* Less than one percent.
** Also serves as a CVC director.
(1) The number of shares of CVC common stock shown in the table above as
beneficially owned includes shares issuable pursuant to options and
warrants that may be exercised within 60 days after February 29, 2000.
Shares issuable pursuant to such options and warrants are deemed
outstanding for computing the percentage of beneficial ownership of the
person holding such options and warrants but are not deemed outstanding
for computing the percentage of beneficial ownership of any other person.
(2) Includes shares of CVC common stock issuable upon exercise of options, as
follows: Robert C. Fink - 2,223 shares; Christine B. Whitman - 358,400
shares; Mehrdad M. Moslehi - 3,200 shares; Christopher J. Mann - 207,400
shares; Emilio O. DiCataldo - 96,000 shares; and Giovanni Nocerino -
106,667 shares.
(3) Includes ownership by the following venture capital funds managed by
Advent International Corporation: (1) 853,658 shares of CVC common stock
issued to Global Private Equity III Limited Partnership, (2) 130,792
117
<PAGE>
shares of CVC common stock issued to Advent PGGM Global Limited
Partnership, (3) 12,906 shares of CVC common stock issued to Advent
Partners GPE III Limited Partnership, (4) 3,861 shares of CVC common stock
issued to Advent Partners (NA) GPE III Limited Partnership and (5) 15,040
shares of CVC common stock issued to Advent Partners Limited Partnership.
Advent International Group is the general partner for all of the above
limited partnerships. The address of Advent International Group and the
funds managed by it is c/o Advent International Corporation, 75 State
Street, Boston, MA 02109.
(4) Includes 790,760 additional shares of CVC common stock issuable upon
exercise of a warrant held by Seagate Technology, Inc.
(5) The stockholders' address is: c/o CVC, Inc., 525 Lee Road, Rochester, New
York 14606.
(6) Represents 1,017,590 shares beneficially owned by Advent International
Group. Mr. Kingsley is a Senior Vice President of Advent International
Corporation, the venture capital firm which is the manager of the funds
affiliated with Advent International Group. Mr. Kingsley disclaims
beneficial ownership of the shares of CVC common stock beneficially owned
by Advent International Group except to the extent of his indirect
pecuniary interest therein as a partner in Advent International Group.
(7) Represents 1,412,316 shares of CVC common stock beneficially owned by
Nikko Tecno, of which Mr. Miyanishi is a director, officer and principal
stockholder. Mr. Miyanishi disclaims beneficial ownership of the shares of
CVC common stock owned by Nikko Tecno except to the extent of his indirect
pecuniary interest therein as a stockholder of Nikko Tecno. Mr.
Miyanishi's address is: c/o Nikko Tecno, P.O. Box 139, Central Tokyo,
Japan.
(8) Represents 3,219,073 shares beneficially owned by Seagate Technology, Inc.
Mr. Waite is an executive officer and stockholder of Seagate Technology,
Inc. Mr. Waite disclaims beneficial ownership of the shares of CVC common
stock owned by Seagate Technology, Inc. except to the extent of his
indirect pecuniary interest therein as a stockholder of Seagate
Technology, Inc. The address of Seagate Technology, Inc. is 920 Disc
Drive, Scotts Valley, CA 95066.
(9) Includes 20,316 shares of CVC common stock held in an irrevocable trust
for Mr. Mann's children. Mr. Mann disclaims beneficial ownership of these
shares.
(10) Includes (1) 1,412,316 shares held of record by Nikko Tecno, the ownership
of which is attributed to Mr. Miyanishi, (2) 1,017,590 shares held of
record by Advent International Group, the ownership of which is attributed
to Mr. Kingsley, (3) 3,219,073 shares held of record by Seagate
Technology, Inc., the ownership of which is attributed to Mr. Waite, and
(4) 20,316 shares held in an irrevocable trust for Mr. Mann's children,
the ownership of which is attributed to Mr. Mann.
CVC CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Advent International Group is the general partner of a number of limited
partnerships which are together a principal stockholder of CVC. Mr. Kingsley, a
director of CVC, is a Managing Director of Advent.
Christine Whitman, CVC's Chairman, President and Chief Executive Officer,
currently serves as a director of M&T Bank, with whom CVC has outstanding credit
agreements. Net proceeds borrowed by CVC from M&T Bank were $1.7 million in
fiscal 1997, $9.5 million in fiscal 1998 and $3.9 million in fiscal 1999. Ms.
Whitman has entered into an employment agreement with Veeco, and will become
Veeco's President and Chief Operating Officer upon completion of the merger. For
a more detailed description of this employment agreement, see "Interests of
Executive Officers and Directors of CVC in the Merger-Whitman Employment
Agreement" on page 61.
Both Ms. Whitman and Mr. Kingsley will be appointed as directors of Veeco
upon completion of the merger. They have also both entered into a voting
agreement with Veeco under which they have agreed to vote their shares of CVC
common stock in favor of the merger and against proposals or transactions that
would in any manner impede, frustrate, prevent or nullify the merger, the merger
agreement or any of the transactions contemplated by the merger
118
<PAGE>
agreement, and have delivered to Veeco irrevocable proxies that entitle Veeco to
vote their shares in this manner. See "Other Agreements - Voting Arrangements
With CVC Stockholders" on page 80.
CVC EXECUTIVE COMPENSATION
The following table sets forth the total compensation for fiscal 1997,
1998 and 1999, respectively, of the chief executive officer and each of the
other four most highly compensated executive officers of CVC whose total salary
and bonus for CVC's 1999 fiscal year exceeded $100,000:
Summary Compensation Table
<TABLE>
<CAPTION>
Number of
Securities
Underlying
Annual Compensation Options/SARs
------------------- Long-Term
Name and Principal Other Annual Compensation All Other
Position Year Salary Bonus Compensation(1) Awards Compensation(2)
- --------------------- ---- -------- ------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Christine B. Whitman
President, Chief 1999 $178,652 $28,000 - 33,333 $2,936
Executive Officer 1998 173,040 47,600 - - 2,647
and Chairman 1997 167,250 46,600 - 51,000 2,325
Giovanni Nocerino
Executive Vice 1999 $224,950 - $75,654(3) - $3,085
President, Sales & 1998 183,333 - 16,535 160,000 -
Service 1997(4) - - - - -
Mehrdad M. Moslehi
Senior Vice President 1999 $158,489 $10,000 - 16,667 $2,700
and Chief Technical 1998 147,054 31,100 - - 2,576
Officer 1997 140,078 29,100 - 22,500 1,905
Christopher J. Mann 1999 $158,487 - $41,127(5) 16,667 $3,810
Senior Vice President, 1998 147,290 $27,100 77,731(5) - 4,153
Marketing 1997 122,406 28,500 31,962(5) 22,500 2,506
Emilio O. DiCataldo
Senior Vice President 1999 $152,148 $25,000 $ - 30,000 $2,213
and Chief Financial 1998 146,692 31,800 - - 1,900
Officer 1997 142,551 34,400 46,930(6) 48,000 1,330
</TABLE>
- ----------
(1) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of perquisites and other personal benefits
has been omitted in those instances where such perquisites and other
personal benefits constituted less than the lesser of $50,000 or 10% of
the total annual salary and bonus for the executive officer for each
fiscal year.
(2) Represents matching contributions made by CVC on behalf of the executive
officer to its 401(k) Plan.
(3) Represents automobile allowance of $1,901 and sales commissions of
$73,754.
(4) No information for fiscal 1997 is presented as Mr. Nocerino joined CVC in
fiscal 1998. Mr. Nocerino became one of CVC's executive officers in the
fall of 1997.
(5) Represents automobile allowance of $10,488 and sales commissions of
$30,639 in 1999, automobile allowance of $10,488 and sales commissions of
$67,243 in 1998 and automobile allowance of $10,488 and sales commissions
of $21,474 in 1997.
(6) Represents relocation expense of $17,500, relocation allowance of $26,670
and dues of $2,760.
119
<PAGE>
The following table sets forth information regarding the option grants
made during fiscal 1999 to each of the executive officers. CVC issued no stock
appreciation rights in fiscal 1999.
Option Grants
<TABLE>
<CAPTION>
Individual Grants
Value at Assumed Annual
Percent of Total Rates of Stock Price
Number of Options Appreciation for Option
Securities Granted to Exercise or Term
Underlying Employees in Base Price Expiration ------------------------
Name Options Fiscal 1999 ($/Share) Date 5% 10%
---- ------- ----------- --------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Christine B. Whitman... 33,333 10.70% $6.00 5/14/09 $255,254 $322,099
Giovanni Nocerino...... - - - - - -
Mehrdad M. Moslehi..... 16,667 5.35 6.00 5/14/09 127,631 161,054
Christopher J. Mann.... 16,667 5.35 6.00 5/14/09 127,631 161,054
Emilio O. DiCataldo.... 30,000 9.63 6.00 5/14/09 229,731 289,892
</TABLE>
The following table sets forth information regarding exercise of options
and the number and value of options held at September 30, 1999, by each of the
CVC officers listed below.
Year End Option Values
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised Options In-the-Money Options at
at Fiscal Year End Fiscal Year End(1)
---------------------------- ---------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Christine B. Whitman......... 353,600 53,733 $3,263,456 $293,880
Giovanni Nocerino............ 53,333 106,667 227,732 455,468
Mehrdad M. Moslehi........... 3,200 21,467 13,664 85,868
Christopher J. Mann.......... 206,000 25,667 1,905,332 113,666
Emilio O. DiCataldo.......... 142,800 49,200 1,081,812 241,152
</TABLE>
- ----------
(1) The value of the unexercised, in-the-money options on September 30, 1999
is based on the difference between the initial public offering price of
the common stock and the per share option exercise price, multiplied by
the number of shares of common stock underlying the options.
CVC STOCK OPTION PLANS
CVC Stock Option Program
Until June 1996, CVC had an informal stock option program under which
selected CVC employees were granted non-qualified options to purchase shares of
CVC common stock. The primary purpose of this program had been to provide
long-term incentives to selected CVC employees and to further align their
interests with those of CVC. Under this program, the CVC Compensation Committee
and/or CVC's Board of Directors.
o Selected the participants;
o Determined the number of shares of common stock offered to each
participant;
o Determined the terms of the repurchase rights for each participant;
and
120
<PAGE>
o Determined other terms of sale.
Options granted under this informal plan generally vested over a period of
three-to-five years from the date of grant and were exercisable at the fair
market value of a share of CVC common stock at the date of grant. Under this
program, options to purchase 1,473,840 shares of CVC common stock have been
granted, of which options to purchase 321,333 shares of CVC common stock have
been exercised and options to purchase 120,000 shares of CVC common stock have
been cancelled.
CVC 1996 Stock Option Plan
CVC's 1996 Stock Option Plan was adopted by CVC's Board of Directors
effective June 30, 1996 under which selected CVC employees were granted
nonqualified stock options and incentive stock options to purchase shares of CVC
common stock. The primary purpose of this plan was to provide long-term
incentives to selected CVC employees and to further align their interests with
those of CVC. Under the plan, the CVC Compensation Committee and/or CVC's Board
of Directors:
o Selected the participants;
o Determined the form and number of shares of common stock offered to
each participant;
o Determined the exercise period of each option;
o Determined the terms of the repurchase rights for each participant;
and
o Determined other terms of sale.
Options granted to CVC employees under this plan were generally at fair
market value as of the grant date based upon valuations obtained
contemporaneously from an independent appraiser. Options granted generally
vested over a period of three-to-five years from the date of grant and were
exercisable at the fair market value of a share of CVC common stock at the date
of grant.
As of September 30, 1999, options to purchase 582,134 shares of CVC common
stock had been granted under this plan, of which options to purchase 16,600
shares of CVC common stock have been exercised and options to purchase 184,833
shares have been cancelled. This plan was terminated as of August 30, 1999.
CVC 1997 Stock Option Plan
CVC's 1997 Stock Option Plan was adopted by CVC's Board of Directors
effective October 16, 1997, under which stock options may be granted to
employees of CVC and its subsidiaries. This plan permits the grant of stock
options that qualify as incentive stock options under Section 422 of the
Internal Revenue Code and nonqualified stock options which do not so qualify.
CVC has initially authorized and reserved 1,833,333 shares of CVC common stock
for issuance under this plan, with the number of shares authorized and reserved
being increased annually in an amount equal to 5% of the total number of shares
of CVC common stock issued by CVC in the preceding fiscal year, with a maximum
aggregate of shares issued under this plan not to exceed 3,333,333. As of
September 30, 1999, 736,002 options had been granted. Options to purchase
185,734 shares have been cancelled and 133 shares have been exercised as of
September 30, 1999. The shares may be unissued shares or treasury shares. If an
option expires or terminates for any reason without having been exercised in
full, the unpurchased shares subject to that option will again be available for
grant under the plan.
The CVC Compensation Committee administers the plan. Subject to the
limitations set forth therein, the CVC Compensation Committee has the authority
to:
o Determine the persons to whom options will be granted;
121
<PAGE>
o Determine the time at which options will be granted;
o Determine the number of shares subject to each option;
o Determine the exercise price of each option, which may not be less
than the fair market value of the underlying common stock;
o Determine the time or times at which the options will become
exercisable;
o Determine the duration of the exercise period;
o Provide for the acceleration of the exercise period of an option at
any time prior to its termination or upon shares and having a higher
or lower exercise price; and
o Amend the terms of any outstanding stock option to provide for an
exercise price that is higher or lower than the current exercise
price.
All officers, employees and consultants of CVC and its subsidiaries are
eligible to receive grants of stock options under this plan, as selected by the
CVC Compensation Committee. The maximum term of options granted under this plan
is ten years from the date of grant. The maximum number of shares of CVC common
stock that may be subject to options granted to any participant of the plan
during any one calendar year is 333,333. Options granted under the plan will
generally become vested and exercisable over a five-year period in equal annual
installments, unless the CVC Compensation Committee specifies a different
vesting schedule. However, in the event of a change of control upon a
transaction such as a merger, consolidation, sale of all or substantially all of
the assets of CVC or a change in the composition of a majority of CVC's Board of
Directors, then each option that was not then vested prior to these types of
events will become fully vested and immediately exercisable unless assumed or
substituted by the successor corporation.
All options granted under this plan are nontransferable by the optionee,
except for transfers approved by the CVC compensation Committee to permitted
transferees, such as immediate family members of the optionee and charitable
institutions and transfers upon the optionee's death in accordance with his will
or applicable law. In the event of an optionee's death or permanent and total
disability, outstanding options that have become exercisable will remain
exercisable for a period of one year, and the CVC compensation Committee will
have the discretion to determine the extent to which any unvested options shall
become vested and exercisable. In the case of any other termination of
employment, outstanding options that have previously become vested will remain
exercisable for a period of 90 days. However, all unexercised options will be
immediately forfeited by any employee who is terminated as a result of any of
the following:
o Embezzlement or misappropriation of corporate funds;
o Conviction for a felony;
o Misconduct resulting in material injury to CVC;
o Significant activities harmful to CVC's reputation or the reputation
of any of CVC's subsidiaries;
o A significant violation of CVC's corporate policies;
o Willful refusal to perform, or substantial disregard of, the duties
properly assigned to the option holder; or
o A significant violation of any contractual, statutory or common law
duty of loyalty to CVC or any of CVC's subsidiaries.
122
<PAGE>
The exercise price of an option is payable in cash or, in the discretion
of the CVC Compensation Committee, in common stock or a combination of cash and
CVC common stock. An optionee must satisfy all applicable tax withholding
requirements at the time of exercise. This plan has a term of ten years, subject
to earlier termination or amendment by CVC's Board of Directors, and all options
granted under its plan prior to its termination remain outstanding until they
have been exercised or are terminated in accordance with their terms. CVC's
Board of Directors may amend this plan at any time.
CVC 1999 Nonemployee Director Stock Option Plan
CVC's Board of Directors has adopted and CVC's stockholders have approved
the 1999 Nonemployee Director Stock Option Plan. Under this plan, stock options
are granted to each member of CVC's Board of Directors who is not an employee of
CVC.
CVC Assumption of Commonwealth Stock Options
In connection with the closing of the acquisition of Commonwealth
Scientific Corporation, all outstanding options to purchase shares of
Commonwealth as of the closing were assumed by CVC. These non-qualified options
are governed by stand alone agreements with each respective optionee. As of
September 30, 1999, options to purchase an aggregate of 270,697 shares of CVC
common stock are held by former optionees of Commonwealth.
CVC PENSION PLAN
CVC maintains a defined benefit retirement plan for its employees which
provides retirement benefits based upon a formula that takes into account the
employees' compensation and length of service with CVC, as well as benefits
employees may be entitled to receive under prior retirement plans of CVC. This
plan was frozen effective September 30, 1991 and no further benefits will be
accrued under it. Mr. Christopher Mann will receive $157.68 and Ms. Christine
Whitman will receive $394.28, each on a monthly basis, commencing at retirement
at attainment of age 65.
CVC Compensation Committee Interlocks and Insider Participation
The current members of the CVC Compensation Committee are Messrs. Fink,
Holmes and Kingsley. None of these directors was at any time during the fiscal
year ended September 30, 1999, nor at any other time within the past five years,
an officer or employee of CVC. No executive officer of CVC serves as a member of
the Compensation Committee of CVC's Board of Directors.
123
<PAGE>
COMPARISON OF RIGHTS OF STOCKHOLDERS OF VEECO
AND RIGHTS OF STOCKHOLDERS OF CVC
This section describes some of the differences as well as some of the
similarities between the rights of holders of Veeco common stock and those of
holders of CVC common stock. While we believe that the description covers the
material differences between the two, this summary may not contain all of the
information that is important to you, including information set forth in the
certificates of incorporation and bylaws of each company. You should read this
entire joint proxy statement/prospectus and the other documents we refer to
carefully for a more complete understanding of the differences between the
rights of holders of Veeco common stock and those of holders of CVC common
stock. You may obtain the information incorporated by reference without charge
by following the instructions in the section entitled "Where You Can Find More
Information."
When Veeco and CVC complete the merger, CVC stockholders will become Veeco
stockholders. As CVC stockholders, their rights are currently governed by the
DGCL, the CVC Restated Certificate of Incorporation, as amended and the Restated
By-laws of CVC. After the merger, the rights of CVC stockholders who receive
common stock of Veeco will be governed by the DGCL, Veeco's Amended and Restated
Certificate of Incorporation and the Amended and Restated By-laws of Veeco as in
effect at the close of the merger.
The following paragraphs summarize the material differences as well as
some of the similarities between the rights of Veeco stockholders and CVC
stockholders under the certificates of incorporation and bylaws of each company.
DESCRIPTION OF CAPITAL STOCK
Veeco. Veeco's certificate of incorporation authorizes Veeco to issue up
to 25,500,000 shares of capital stock, consisting of two classes: 25,000,000
shares of common stock, $0.01 par value per share, and 500,000 shares of
preferred stock, $0.01 par value per share. With respect to Veeco's undesignated
preferred stock, Veeco's Board of Directors is authorized, without stockholder
approval, to designate one or more series of preferred stock and to determine
the number of shares included in any series and the designation, preferences,
limitations and relative rights of the shares of any series. On March 1, 2000
there were 18,082,518 shares of Veeco common stock and no shares of Veeco
preferred stock issued and outstanding.
CVC. CVC's certificate of incorporation authorizes CVC to issue up to
55,000,000 shares of capital stock, consisting of two classes: 50,000,000 shares
of common stock, $0.01 par value per share, and 5,000,000 shares of preferred
stock, $0.01 par value per share. With respect to CVC's undesignated preferred
stock, CVC's Board of Directors is authorized, without stockholder approval, to
designate one or more series of preferred stock and to determine the number of
shares included in any series and the designation, preferences, limitations and
relative rights of the shares of any series. The CVC Board of Directors is also
authorized to increase or decrease the number of shares of any series of
preferred stock subsequent to the issuance of shares of that series, subject to
certain limitations. On March 1, 2000 there were 11,728,274 shares of CVC common
stock and no shares of CVC preferred stock issued and outstanding.
VOTING RIGHTS
Veeco. Veeco's bylaws provide that each Veeco stockholder has the right to
one vote for each share of Veeco common stock registered in the stockholder's
name on each matter submitted to a stockholder vote. Generally, other than the
election of directors and except as otherwise provided by the DGCL, all matters
to be voted on by Veeco stockholders must be approved by a majority of the votes
cast. The DGCL provides that a certificate of incorporation may allow cumulative
voting for election of directors of a corporation or elections held under
specified circumstances. Veeco's certificate of incorporation does not provide
for cumulative voting.
CVC. The CVC certificate of incorporation provides that each CVC
stockholder has the right to one vote for each share of CVC common stock
registered in the stockholder's name on each matter submitted to a
124
<PAGE>
stockholder vote. The CVC bylaws specify that, other than the election of
directors and except as otherwise provided by the DGCL or the CVC certificate of
incorporation or CVC bylaws, all matters to be voted on by CVC stockholders must
be approved by a majority of the votes cast. The DGCL provides that a
certificate of incorporation may allow cumulative voting for elections of
directors of a corporation or elections held under specified circumstances.
CVC's certificate of incorporation does not provide for cumulative voting.
STOCKHOLDER ACTIONS GENERALLY
Veeco. Veeco's bylaws provide that, at each meeting of stockholders, the
presence in person or by proxy of the holders of 50% of the shares entitled to
vote shall constitute a quorum for the transaction of any business.
CVC. CVC's bylaws provide that, at each meeting of stockholders, the
presence in person or by proxy of the holders of 50% of the shares entitled to
vote shall constitute a quorum for the transaction of any business.
SPECIAL MEETINGS OF STOCKHOLDERS
Veeco. Veeco's bylaws provide that special meetings of the Veeco
stockholders may be called at any time by Veeco's Board of Directors or by the
President of Veeco and shall be called by the President or Secretary of Veeco
upon the written request of a majority of Veeco's Board of Directors then in
office or of 50% of the outstanding Veeco shares entitled to vote. Only business
related to the purposes set forth in the notice of the meeting may be transacted
at a special meeting.
CVC. CVC's certificate of incorporation provides that special meetings of
CVC stockholders may only be called by CVC's Board of Directors pursuant to a
resolution approved by a majority of the entire Board of Directors, or by the
President of CVC. Special meetings may not be called by written consent of CVC
stockholders.
ACTION BY WRITTEN CONSENT IN LIEU OF A STOCKHOLDER MEETING
Veeco and CVC. Veeco's bylaws and CVC's certificate of incorporation
provide that no action required or permitted to be taken at any meeting of
stockholders may be taken by written consent without a meeting.
RECORD DATE FOR DETERMINING STOCKHOLDERS
Veeco. Veeco's bylaws provide that Veeco's Board of Directors may fix a
record date which is not more than 60 nor less than 10 days before the date of a
Veeco stockholders meeting or more than 60 days before any other action.
CVC. CVC's bylaws provide that CVC's Board of Directors may fix, in
advance, a record date which is not more than 60 nor less than 10 days before
the date of a CVC stockholders meeting, nor more than 60 days prior to any other
action. If no record date is fixed by CVC's Board of Directors, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
CVC's stockholders shall be at the close of business on the day prior to the
date on which notice is given, or if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held. The record date
for determining CVC stockholders entitled to express consent to corporate action
in writing without a meeting, when no prior action by the CVC Board of Directors
is necessary, shall be the day on which the first written consent is expressed;
and the record date for determining CVC stockholders for any other purpose shall
be at the close of business on the day on which the CVC Board of Directors
adopts the resolution relating thereto.
NOTICE OF MEETINGS
Veeco. Veeco's bylaws provide that written notice of each meeting of
Veeco's stockholders shall be given to each Veeco stockholder entitled to vote
at the meeting except that: (a) it shall not be necessary to give notice to any
Veeco stockholder who submits a signed waiver of notice before or after the
meeting; and (b) no notice of an
125
<PAGE>
adjourned meeting need be given if the time and place are announced at the
meeting at which the adjournment is taken except that, if adjournment is for
more that thirty days or if, after the adjournment, a new record date is fixed
for the meeting. Each notice of a meeting shall be given, personally or by mail,
not less than 10 nor more than 60 days before the meeting and shall state the
time and place of the meeting, and unless it is the annual meeting, shall state
at whose direction or request the meeting is called and the purposes for which
it is called.
CVC. CVC's bylaws provide for notice provisions similar to those of
Veeco's bylaws with respect to meetings of CVC stockholders, although its bylaws
specify that the notice shall state the place within the city or other
municipality or community at which the list of CVC stockholders may be examined.
The notice of CVC's annual meeting shall state that the meeting is called for
the election of directors and for the transaction of other business which may
properly come before the meeting, and shall (if any other action which could be
taken at a CVC special meeting is to be taken at a CVC annual meeting) state the
purpose or purposes.
ANNUAL MEETING
Veeco. Veeco's bylaws specify that the annual meeting of Veeco's
stockholders shall be held on the first Monday of June in each year, or as soon
thereafter as practicable, and shall be held at a place and time determined by
Veeco's Board of Directors. At the Veeco annual meeting, Veeco's stockholders
elect directors and transact any other business that is properly brought before
the meeting and described in the notice of meeting.
CVC. CVC's bylaws provide that the annual meeting of CVC's stockholders
shall be held on the date and at the time fixed from time to time by CVC's Board
of Directors; provided that an annual meeting of CVC stockholders shall be held
on a date within thirteen months after the date of the preceding CVC annual
meeting. At the CVC annual meeting, CVC's stockholders elect directors and
transact any other business that is properly brought before the meeting and
described in the notice of meeting.
NUMBER, CLASS AND TERM OF DIRECTORS
Veeco. Veeco's certificate of incorporation provides that Veeco's Board of
Directors be divided into three classes with staggered three-year terms. As a
result, only one of the three classes of Veeco's Board of Directors will be
elected each year. Veeco's bylaws provide that Veeco's Board of Directors shall
consist of 5 directors, with changes in the number of directors permitted
exclusively by a resolution of the Board of Directors or by the Veeco
stockholders. Directors shall be elected at each annual meeting of Veeco's
stockholders and shall hold office until the next annual meeting of Veeco's
stockholders and until the election and qualification of his or her successor or
until his or her earlier resignation or removal by vote of Veeco's stockholders.
As of March 1, 2000, Veeco had 9 members of its Board of Directors.
CVC. CVC's certificate of incorporation provides that CVC's Board of
Directors must consist of not less than 3 directors, with the actual number of
directors to be fixed by resolution of the CVC Board of Directors acting by not
less than a majority of the directors then in office. Each CVC director holds
office until the next annual meeting of CVC's stockholders and until his or her
successor is duly elected and qualified or until his or her earlier resignation
or removal. As of March 1, 2000, CVC had 7 members of its Board of Directors.
ELECTION OF DIRECTORS
Veeco. The holders of Veeco common stock elect all members of Veeco's
Board of Directors. Veeco directors are elected by a plurality of the votes of
the Veeco shares present in person or represented by proxy at the meeting and
entitled to vote on the election of directors.
CVC. CVC's bylaws provide that the holders of CVC common stock elect all
members of CVC's Board of Directors. Directors are elected by a plurality of the
votes of the CVC shares present in person or represented by proxy at the meeting
and entitled to vote on the election of directors.
126
<PAGE>
RESIGNATION AND REMOVAL OF DIRECTORS
Veeco. Veeco's bylaws provide that any Veeco director may resign at any
time upon written notice to the President or Secretary of Veeco and be removed,
with or without cause by vote of Veeco's stockholders.
CVC. CVC's bylaws provide that CVC directors elected by a class of CVC
stockholders may only be removed by the vote of the holders of not less than a
majority of the shares of such class voting thereon; provided, however, that if
CVC has cumulative voting, no CVC director may be removed without cause if the
votes against his removal would be sufficient to elect him if voted cumulatively
at an election of CVC directors at which the same number of votes were cast and
the whole CVC Board of Directors were then being elected. At any meeting held
for the purpose of removing a CVC director or CVC directors, the presence in
person or by proxy of the holders of the majority of CVC shares then outstanding
of the class entitled to vote for the removal of such CVC director or CVC
directors shall constitute a quorum for the purpose of removing a CVC director
or CVC directors by the stockholders of such class.
BOARD OF DIRECTORS VACANCIES
Veeco. Veeco's bylaws state that any vacancy on the Veeco Board of
Directors for any cause, and any newly created Veeco directorship resulting from
any increase in the number of Veeco directors, may be filled only by the vote of
a majority of the remaining Veeco directors, though less than a quorum.
CVC. CVC's bylaws state that any vacancy on the CVC Board of Directors for
any reason, including due to the removal of a CVC director and newly created CVC
directorships, may be filled only by the vote or written consent in lieu of
meeting of the class of CVC stockholders entitled to elect such CVC director.
However, CVC's certificate of incorporation provides that no action may be taken
by written consent of CVC stockholders without a meeting.
ANNUAL MEETING OF THE BOARD OF DIRECTORS
Veeco. Veeco's bylaws provide that annual meetings of the Veeco Board of
Directors, for the election of officers and consideration of other matters,
shall be held either: (a) without notice immediately after the annual meeting of
Veeco stockholders and at the same place; or (b) as soon as practicable after
the Veeco annual meeting with notice of the time and place of each special
meeting of the Veeco Board of Directors being given to each Veeco director by
mailing it to him at his residence or usual place of business at least three
days before the meeting, or by delivering or telephoning or telegraphing it to
him at least two days before the meeting.
CVC. There is no provision with respect to meetings of the CVC Board of
Directors in either of the CVC bylaws or the CVC certificate of incorporation.
NOTICE OF SPECIAL MEETINGS OF THE BOARD OF DIRECTORS
Veeco. Veeco's bylaws state that special meetings of Veeco's Board of
Directors may be called by the President of Veeco or by a majority of the entire
Veeco Board of Directors. Notice of the time and place of each special meeting
of Veeco's Board of Directors shall be given to each Veeco director by mailing
it to him at his residence or usual place of business at least three days before
the meeting, or by delivering or telephoning or telegraphing it to him at least
two days before the meeting. Notice of a special meeting of Veeco's Board of
Directors shall also state the purpose for which the meeting is called.
CVC. CVC's bylaws state that special meetings of the Board of Directors of
CVC may be called at the direction of the President of CVC, or any 2 CVC
directors then in office. Written, oral, or any other mode of notice of the time
and place shall be given for special meetings in sufficient time for the
convenient assembly of the directors thereat. The notice of any special meeting
of CVC's Board of Directors shall specify the business to be
127
<PAGE>
transacted at the meeting and/or the purpose for which such meeting is being
called, and no other business or purpose may be conducted or considered at such
meeting.
BOARD ACTION
Veeco and CVC. Both Veeco's and CVC's bylaws provide that a majority of
the entire Board of Directors shall constitute a quorum for the transaction of
business at any meeting except when a vacancy prevents such majority, whereupon
a majority of the directors in office shall constitute a quorum. Action of the
Board of Directors shall be authorized by the vote of a majority of the
directors present at the time of the vote if there is a quorum, unless otherwise
provided in CVC's and Veeco's respective bylaws or by applicable law. In the
absence of a quorum, a majority of the directors present may adjourn any meeting
from time to time until a quorum is present.
ACTIONS IN WRITING; PARTICIPATION BY CONFERENCE TELEPHONE
Veeco and CVC. Both Veeco's and CVC's bylaws provide that: (a) action by
their Boards of Directors and committees thereof may be taken without a meeting
if all of the members of the Board of Directors or committee consent thereto in
writing, and the writing is filed with the minutes of proceedings of the Board
of Directors or the appropriate committee; and (b) members of the Board of
Directors or a committee thereof may participate in a meeting by means of a
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other.
ACTION BY COMMITTEES
Veeco. Veeco's bylaws create the following committees, with the following
powers and duties:
(a) Compensation Committee - The Veeco compensation committee shall be
comprised of three Veeco directors. The Veeco compensation committee shall fix
the compensation of senior management, administer any stock option, stock
appreciation or other incentive compensation programs of Veeco and review, and
provide to the Veeco Board of Directors at least once annually its
recommendations with respect to, compensation payable to Veeco officers and
employees other than senior management.
(b) Audit Committee - The Veeco audit committee shall be comprised of
three Veeco directors who are not employees of Veeco. The Veeco audit committee
shall have full corporate power and authority to act in respect of any matter
which may develop or arise in connection with any audit or the maintenance of
internal accounting controls or any other matter relating to Veeco's financial
affairs. The Veeco audit committee shall review, at least once each fiscal year,
the services performed and to be performed by Veeco's independent public
accountants and the fees charged therefor, and, in connection therewith,
consider the effect of any nonaudit services on the independence of such
accountants. The Veeco audit committee shall also review with Veeco's
independent public accountants and its internal audit department the general
scope of their respective audit coverages, the procedure and internal accounting
controls adopted by Veeco and any significant matters encountered by any of
them.
Veeco's bylaws also provide that the Veeco Board of Directors may
designate one or more directors as alternate members of any Veeco committee, who
may replace any absent or disqualified member. In the absence or
disqualification of any member of a Veeco committee, the member or members
present at a meeting of the committee and not disqualified, whether or not a
quorum, may unanimously appoint another Veeco director to act at the meeting in
place of the absent or disqualified member. All action of a Veeco committee
shall be reported to the Veeco Board of Directors at its next meeting. Each
Veeco committee shall adopt rules of procedure and shall meet as provided by
those rules or by resolution of the Veeco Board of Directors.
CVC. CVC's bylaws authorize the CVC Board of Directors to establish
committees by resolution passed by a majority of the CVC directors then in
office specifying the power and duties of these committees. Each CVC committee
will consist of one or more CVC directors. Any CVC committee, to the extent
provided in a resolution of the CVC Board of Directors, may exercise all the
powers and authority of the CVC Board of Directors. No CVC
128
<PAGE>
committee will have the power to amend CVC's certificate of incorporation, adopt
an agreement of merger or consolidation, recommend to the CVC stockholders the
sale, lease or exchange of all or substantially all of CVC's property and
assets, recommend to CVC's stockholders a dissolution of CVC or a revocation of
a dissolution, declare a dividend, authorize the issuance of stock, elect or
remove any CVC officer, amend or repeal any resolution adopted by CVC's Board of
Directors or take any action prohibited by DGCL.
AMENDMENT OF CERTIFICATE OF INCORPORATION
Veeco and CVC. Section 242 of the DGCL authorizes a corporation to amend
its certificate of incorporation in any way so long as the certificate of
incorporation, as amended, would only contain provisions lawful and proper for
insertion in an original certificate of incorporation. Section 242 of the DGCL
requires that, to amend a certificate of incorporation, (a) the corporation's
Board of Directors must approve a resolution describing the proposed amendment;
and (b) a majority of the outstanding stock entitled to vote on the proposed
amendment must approve the amendment at a special or annual meeting of the
corporation's stockholders.
AMENDMENT OF BY-LAWS
Veeco and CVC. The bylaws of Veeco and the CVC certificate of
incorporation provide that CVC's and Veeco's respective Boards of Directors have
the power to adopt, amend or repeal their respective bylaws, subject to power of
their respective stockholders to alter or repeal the bylaws made or altered by
the Board of Directors. The stockholders of both CVC and Veeco have the power to
make, alter or repeal their respective bylaws.
LIMITATION OF DIRECTOR LIABILITY
Veeco and CVC. The Veeco certificate of incorporation and the CVC bylaws
eliminate the liability of Veeco's and CVC's respective directors to the fullest
extent permitted by the DGCL.
INDEMNIFICATION
Veeco. Veeco's certificate of incorporation provides that its directors,
officers, employees and agents shall be indemnified to the fullest extent
authorized by the DGCL.
CVC. CVC's bylaws provide that its directors and officers shall be
indemnified to the fullest extent authorized by the DGCL. This indemnification
applies to all expenses, liabilities and losses reasonably incurred by the
person in connection with any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or she
is or was a director or officer of CVC or is or was serving at the request of
CVC as a director, officer, employee or agent of another enterprise. CVC's
bylaws require CVC to pay all expenses incurred by a CVC director or officer in
defending any proceeding described above as these expenses are incurred in
advance of the final disposition of the proceeding. CVC may by action of its
Board of Directors provide indemnification to employees and agents of CVC with
the same scope and effect as the indemnification provided to CVC officers and
directors.
INTERESTED DIRECTOR TRANSACTIONS
Veeco and CVC. The Veeco and CVC certificates of incorporation do not
specifically provide for interested director transactions. Under the DGCL,
certain contracts or transactions in which one or more of the directors of Veeco
or CVC has an interest are void or voidable unless the following conditions are
met: (a) the stockholders of the relevant corporation approve the contract or
transaction after full disclosure of material facts; (b) the Board of Directors
of the relevant corporation approves the transaction after full disclosure of
material facts and the transaction is fair, and approved by a majority of the
disinterested directors of the relevant corporation, even though less than a
quorum; or (c) the contract or transaction must have been fair to Veeco or CVC
(as applicable) at the time it was approved.
129
<PAGE>
INTERESTED STOCKHOLDER TRANSACTIONS
Veeco and CVC. Both Veeco and CVC are subject to the provisions of the
DGCL which prohibit a corporation from engaging in a business combination with
an interested stockholder for three years following the date the stockholder
became an interested stockholder, unless: (a) prior to that date, the Board of
Directors approved either the business combination or the transaction that
resulted in the stockholder becoming an interested stockholder; (b) upon
completion of the transaction that resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction began;
(c) or on or following that date, the business combination is approved by the
Board of Directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
two-thirds of the outstanding voting stock not owned by the interested
stockholder.
A business combination is defined to include:
o any merger or consolidation involving the corporation and the
interested stockholder;
o any sale, transfer, pledge or other disposition of 10% or more of
the assets of the corporation involving the interested stockholder;
o subject to limited exceptions, any transaction that results in the
issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder;
o any transaction involving the corporation that has the effect of
increasing the proportionate share of the stock of any class or
series of the corporation beneficially owned by the interested
stockholder; or
o the receipt by the interested stockholder of the benefit of any
loans, advances, guarantees, pledges or other financial benefits
provided by or through the corporation.
Generally, an interested stockholder is a person who, together with its
affiliates and associates, owns 15% or more of the corporation's voting stock or
owned 15% of such voting stock within three years before the proposed business
combination, or is affiliated with the corporation.
LIQUIDATION
Veeco and CVC. Under the DGCL, in the event of a liquidation, dissolution
or winding up of a corporation, after payment of any amounts owed to creditors,
subject to preferences of any outstanding preferred stock, the remaining assets
of the corporation will be divided equally, on a share for share basis, to the
holders of common stock of the corporation.
EXPERTS
The consolidated financial statements and schedule of Veeco included in
Veeco's Annual Report in From 10-K for the year ended December 31, 1999
incorporated by reference in this joint proxy statement/prospectus have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon appearing elsewhere herein, which is based in part on the report of
other auditors. The financial statements referred to above are included in
reliance upon such report given upon the authority of such firms as experts in
accounting and auditing.
The financial statements of CVC, Inc. as of September 30, 1999 and 1998
and for each of the three years in the period ended September 30, 1999,
included in this joint proxy statement/prospectus have been so included in
reliance in the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
The financial statements of Commonwealth Scientific Corporation as of
March 31, 1999 and 1998, and for the three years in the period ended March 31,
1999, included in this joint proxy statement/prospectus have been audited by
Arthur Anderson LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein upon the authority of said
firm as experts in giving such reports.
130
<PAGE>
LEGAL MATTERS
Kaye, Scholer, Fierman, Hays & Handler, LLP will provide a legal opinion
as to the legality of the shares of Veeco common stock offered under this joint
proxy statement/prospectus.
DOCUMENTS INCORPORATED BY REFERENCE IN THIS
JOINT PROXY STATEMENT/PROSPECTUS
This joint proxy statement/prospectus incorporates documents by reference
which are not presented in or delivered with it. All documents filed by Veeco
under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934,
after the date of this joint proxy statement/prospectus and before the Effective
Date, are incorporated into this joint proxy statement/prospectus by reference
and will constitute a part of this joint proxy statement/prospectus from the
date of filing of those documents. You should read only the information
contained in this joint proxy statement/prospectus or that we have referred to
you. Neither CVC nor Veeco has authorized anyone to provide you with information
that is different.
The following documents, which have been filed by Veeco with the SEC, are
incorporated into this joint proxy statement/prospectus by reference:
o Veeco's Annual Report on Form 10-K, for the fiscal year ended
December 31, 1999;
o The description of Veeco common stock contained in Veeco's
registration statement on Form S-1, filed with the SEC on June 27,
1995 and any amendments or reports filed for the purpose of updating
that description.
TO THE EXTENT THAT ANY STATEMENT IN THIS JOINT PROXY STATEMENT/ PROSPECTUS
IS INCONSISTENT WITH ANY STATEMENT THAT IS INCORPORATED BY REFERENCE, THE
STATEMENT IN THIS JOINT PROXY STATEMENT/PROSPECTUS WILL CONTROL. THE
INCORPORATED STATEMENT WILL NOT BE DEEMED EXCEPT AS MODIFIED OR SUPERSEDED, TO
BE A PART OF THIS JOINT PROXY STATEMENT/PROSPECTUS OR THE REGISTRATION STATEMENT
OF WHICH THIS JOINT PROXY STATEMENT/PROSPECTUS IS A PART.
WHERE YOU CAN FIND MORE INFORMATION
The documents incorporated into this joint proxy statement/prospectus by
reference are available from Veeco upon request. Veeco will provide to you
without charge, upon your written or oral request, a copy of all of the
information that is incorporated in this joint proxy statement/prospectus by
reference, except for exhibits, unless the exhibits are specifically
incorporated into this joint proxy statement/prospectus by reference. YOU SHOULD
MAKE ANY REQUEST FOR DOCUMENTS BY _________ __, 2000 TO ENSURE TIMELY DELIVERY
OF THE DOCUMENTS. Reports, proxy statements and other information regarding CVC
or Veeco may be inspected at:
The National Association of Securities Dealers
1735 K Street, N.W.
Washington, DC 20006
131
<PAGE>
Requests for documents relating to Veeco should be directed to:
Investor Relations
Veeco Instruments, Inc.
Terminal Drive
Plainview, New York 11803
Telephone: (516) 349-8300
Requests for documents relating to CVC should be directed to:
CVC, Inc.
Investor Relations
525 Lee Road
Rochester, New York 14606
Telephone: (716) 458-2550 (x3217)
Veeco and CVC each file reports, proxy statements and other information
with the SEC. Copies of our reports, proxy statements and other information may
be read and copied at the public reference facilities maintained by the SEC:
Judiciary Plaza Citicorp Center
Room 1204 500 West Madison Street
450 Fifth Street, N.W. Suite 1400
Washington, D.C. 20549 Chicago, Illinois 60661
Seven World Trade Center
13th Floor
New York, New York 10048
Copies of these materials can also be obtained by mail at prescribed rates
from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C., 20549 or by calling the SEC at 1-800-SEC-0330. You may obtain
information on the operations of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy
and information statements and other information regarding each of us. The
address of this website is Veeco has filed a registration statement on Form S-4
under the Securities Act with the SEC with respect to Veeco common stock to be
issued to CVC stockholders in the merger. This joint proxy statement/prospectus
constitutes the prospectus of Veeco filed as part of that registration statement
on Form S-4. This joint proxy statement/prospectus does not contain all of the
information set forth in that registration statement on Form S-4 because some
parts of the registration statement are omitted as permitted by the rules and
regulations of the SEC. You may inspect and copy Veeco's registration statement
on Form S-4 at any of the addresses listed above.
OTHER MATTERS
Deadline for Veeco Annual Meeting Proxy Proposals
Veeco stockholder proposals intended to be included in the proxy statement
and form of proxy for Veeco's annual meeting of stockholders to be held in 2001,
in addition to meeting certain eligibility requirements established by the SEC,
must be in writing and received by the Secretary of Veeco at Veeco's principal
executive offices on or before January 13, 2001. Alternate notice deadlines
apply if the date of Veeco's annual meeting differs by more than 30 days from
the date of the previous year's annual meeting.
Deadline for CVC Annual Meeting Proxy Proposals
CVC stockholder proposals intended to be included in the proxy statement
and form of proxy for CVC's annual meeting of stockholders to be held in 2001,
in addition to meeting certain eligibility requirements established by the SEC,
must be in writing and received by the Secretary of CVC and CVC's principal
executive offices on or
132
<PAGE>
before ________ __, 2001. Alternate notice deadlines apply if the date of CVC's
annual meeting differs by more than 30 days from the date of the previous year's
annual meeting. CVC's annual meeting of stockholders for 2001 will not be held
if the merger is completed.
THIS JOINT PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR SOLICITATION OF AN OFFER TO PURCHASE, THE VEECO COMMON STOCK OR THE
SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR
FROM WHOM IT IS UNLAWFUL TO MAKE THE OFFER, SOLICITATION OF AN OFFER OR PROXY
SOLICITATION IN THAT JURISDICTION. NEITHER THE DELIVERY OF THIS JOINT PROXY
STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MEANS, UNDER ANY
CIRCUMSTANCES, THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION CONTAINED IN OR
INCORPORATED IN THIS JOINT PROXY STATEMENT/PROSPECTUS BY REFERENCE OR IN OUR
AFFAIRS SINCE THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS. THE INFORMATION
CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS WITH RESPECT TO CVC AND ITS
SUBSIDIARIES WAS PROVIDED BY CVC AND THE INFORMATION CONTAINED IN THIS JOINT
PROXY STATEMENT/PROSPECTUS WITH RESPECT TO VEECO AND ITS SUBSIDIARIES WAS
PROVIDED BY VEECO.
133
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF CVC, INC.
CVC, INC.
December 31, 1999 (unaudited)
- -----------------------------
Condensed Consolidated Balance Sheets .................................... F-2
Condensed Consolidated Statements of Operations .......................... F-3
Condensed Consolidated Statements of Cash Flows .......................... F-4
Notes to Condensed Consolidated Financial Statements ..................... F-5
September 30, 1999
- ------------------
Report of Independent Accountants ........................................ F-7
Consolidated Balance Sheets .............................................. F-8
Consolidated Statements of Operations .................................... F-9
Consolidated Statements of Stockholders' Equity .......................... F-10
Consolidated Statements of Cash Flows .................................... F-11
Notes to Consolidated Financial Statements ............................... F-12
ACQUIRED COMPANY (COMMONWEALTH SCIENTIFIC CORPORATION)
Report of Independent Public Accountants ................................. F-29
Balance Sheets ........................................................... F-30
Statements of Operations ................................................. F-32
Statements of Stockholders' Equity ....................................... F-33
Statements of Cash Flows ................................................. F-34
Notes to Financial Statements ............................................ F-35
F-1
<PAGE>
CVC, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
At December 31, At September 30,
1999 1999
--------------- ----------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents ....................................... $ 4,171 $ 434
Accounts receivable-trade, less allowance for doubtful
accounts of $1,471 and $887, respectively ....................... 18,870 21,559
Inventories ..................................................... 30,255 29,187
Other current assets ............................................ 3,836 4,215
-------- --------
Total current assets ......................................... 57,132 55,395
Property, plant and equipment, net .............................. 19,089 19,374
Other assets, net ............................................... 1,057 1,148
-------- --------
Total assets ................................................. $ 77,278 $ 75,917
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Short-term borrowings and current portion of long-term debt ..... $ 1,040 $ 13,217
Accounts payable ................................................ 9,866 11,279
Advances from customers ......................................... 1,652 1,483
Other current liabilities ....................................... 5,685 7,312
-------- --------
Total current liabilities .................................... 18,243 33,291
Long-term debt .................................................. 7,346 8,493
Other liabilities ............................................... 2,575 2,540
-------- --------
Total liabilities ............................................ 28,164 44,324
Stockholders' equity:
Preferred stock ................................................. -- 19,895
Common stock .................................................... 116 24
Additional paid-in capital ...................................... 46,073 9,305
Warrant ......................................................... -- 14
Unamortized deferred compensation ............................... (110) (135)
Retained earnings ............................................... 3,329 2,784
Minimum pension liability ....................................... (294) (294)
-------- --------
Total stockholders' equity ................................... 49,114 31,593
-------- --------
Total liabilities & stockholders' equity ..................... $ 77,278 $ 75,917
======== ========
</TABLE>
See the notes to these condensed financial statements.
F-2
<PAGE>
CVC, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended December 31,
-----------------------------
1999 1998
------- -------
(Unaudited)
<S> <C> <C>
Revenues ........................................................... $25,216 $14,655
Cost of goods sold ................................................. 15,505 8,249
------- -------
Gross margin ....................................................... 9,711 6,406
Operating expenses
Research and development ......................................... 3,983 2,439
Sales and marketing .............................................. 2,972 1,930
General and administrative ....................................... 1,539 812
------- -------
Total operating expenses ...................................... 8,494 5,181
Income from operations ............................................. 1,217 1,225
Interest and other expense, net .................................... 277 326
------- -------
Income before income taxes ......................................... 940 899
Income taxes ....................................................... 395 419
------- -------
Net income ......................................................... $ 545 $ 480
======= =======
Net income per share: Basic .................................... $ 0.07 $ 0.45
======= =======
Diluted .................................. $ 0.05 $ 0.07
======= =======
Weighted average shares: Basic .................................... 7,346 1,058
Diluted .................................. 11,903 7,318
</TABLE>
See the notes to these condensed financial statements.
F-3
<PAGE>
CVC, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
--------------------------
1999 1998
--------------------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................................................. $ 545 $ 480
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization ............................................................... 1,311 788
Changes in operating assets and liabilities -
Accounts receivable ...................................................................... 2,689 2,851
Inventories .............................................................................. (1,451) 1,035
Other assets ............................................................................. 379 413
Accounts payable ......................................................................... (1,413) (2,875)
Advances from customers .................................................................. 169 (98)
Other liabilities ........................................................................ (1,591) (1,072)
-------- --------
Total adjustments ...................................................................... 93 1,042
-------- --------
Net cash provided by operating activities .............................................. 638 1,522
-------- --------
Cash flows from investing activities:
Capital expenditures ........................................................................ (528) (851)
-------- --------
Net cash used by investing activities .................................................. (528) (851)
-------- --------
Cash flows from financing activities:
Net payments on line of credit .............................................................. (10,679) (4,139)
Payments on notes payable ................................................................... (891) (71)
Payments on long-term debt and capital lease obligations .................................... (1,754) (309)
Net proceeds from issuance of preferred stock and warrant ................................... -- 9,844
Redemption of preferred stock ............................................................... (10,000) --
Net proceeds from issuance of common stock .................................................. 26,951 --
-------- --------
Net cash provided by financing activities .............................................. 3,627 5,325
-------- --------
Net increase in cash and cash equivalents ...................................................... 3,737 5,996
Cash and cash equivalents, beginning of period ................................................. 434 106
-------- --------
Cash and cash equivalents, end of period ....................................................... $ 4,171 $ 6,102
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Non-cash investing transaction:
Equipment capitalized from inventory ........................................................ $ 383 $ 1,631
Conversion of preferred stock to common stock ............................................... $ 9,834 $ --
Cash paid during the quarter for:
Interest .................................................................................... $ 238 $ 283
Income taxes ................................................................................ $ 647 $ 3
</TABLE>
See the notes to these condensed financial statements.
F-4
<PAGE>
CVC, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The unaudited Condensed Consolidated Financial Statements of CVC, Inc. (the
"Company") have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission.
Accordingly, the Condensed Consolidated Financial Statements do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation (consisting of normal
recurring adjustments) have been included. The results for the interim periods
are not necessarily indicative of the results to be expected for the year. The
accompanying Condensed Consolidated Financial Statements should be read in
conjunction with the audited consolidated financial statements of the Company as
of and for year ended September 30, 1999, as reported in its Annual Report on
Form 10-K filed with the Securities and Exchange Commission.
NOTE 2 - INITIAL PUBLIC OFFERING
On November 12, 1999, the Company completed an initial public offering pursuant
to which 3,000,000 shares of Common Stock, par value $0.01 per share (the
"Common Stock"), were issued and sold for $10.00 per share, less underwriting
discounts and commissions of $0.70 per share. In addition, as part of the
initial public offering, certain stockholders of the Company sold 500,000 shares
of Common Stock. An additional 525,000 shares were sold by these stockholders as
part of the exercise of the underwriters' overallotment option. The Company did
not receive any of the proceeds from the sale of shares by the selling
stockholders.
There were 11,604,819 shares and 2,360,767 shares issued and outstanding at
December 31, 1999 and September 30, 1999, respectively, of the Common Stock. As
part of the initial public offerinG, 162,177 shares of preferred stock were
automatically converted into 6,131,940 shares of Common Stock. During the three
months ended December 31, 1999, 112,136 common shares were issued upon the
exercise of stock options.
NOTE 3 - INVENTORIES
Inventories are recorded at the lower of cost, determined by the first-in,
first-out method, or market value. The Company provides inventory reserves for
excess, obsolete or slow-moving inventory based on changes in customer demand,
technology developments, and other economic factors. Inventories consisted of
the following at December 31, 1999 and September 30, 1999 (in thousands):
December 31, September 30,
1999 1999
-------- --------
Component parts .......................... $ 17,422 $ 15,421
Work-in-process .......................... 11,816 11,674
Finished goods ........................... 2,392 4,117
-------- --------
31,630 31,212
Less - reserve for obsolescence ........ (1,375) (2,025)
-------- --------
$ 30,255 $ 29,187
======== ========
F-5
<PAGE>
CVC, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
NOTE 4 - COMPREHENSIVE INCOME
Total comprehensive income was $545,000 and $480,000 for the three months ended
December 31, 1999 and 1998, respectively. Total comprehensive income is
comprised of minimum pension liability adjustments, net of taxes. As the minimum
pension liability is adjusted annually based on actuarial computations, other
comprehensive income is consistent with net income on an interim basis.
NOTE 5 - EARNINGS PER SHARE
The following table illustrates the calculation of both basic and diluted
earnings per share for the three months ended December 31, 1999 and 1998 (in
thousands):
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Basic earnings per share
Net income available to common shareholders .......................................... $ 545 $ 480
Weighted average number of common shares ............................................. 7,346 1,058
------- -------
Basic earnings per share ............................................................. $ 0.07 $ 0.45
======= =======
Diluted earnings per share
Net income available to common shareholders .......................................... $ 545 $ 480
======= =======
Weighted average number of common shares ............................................. 7,346 1,058
Common equivalent shares related to stock options and convertible preferred stock .... 4,557 6,260
------- -------
Weighted average common and common equivalent shares ................................. 11,903 7,318
======= =======
Diluted earnings per share ........................................................... $ 0.05 $ 0.07
======= =======
</TABLE>
F-6
<PAGE>
Report of Independent Accountants
To Board of Directors and
Stockholders of CVC, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, stockholders' equity and
cash flows present fairly, in all material respects, the financial
position of CVC, Inc. (the "Company") and its subsidiaries at September
30, 1999 and 1998, and the results of their operations and their cash
flows for each of the three years in the period ended September 30, 1999
in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that
we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Rochester, NY
October 18, 1999
F-7
<PAGE>
CVC, Inc.
Consolidated Balance Sheets
(In thousands, except share data)
<TABLE>
<CAPTION>
At September 30,
------------------------------------------
1999 Pro
forma
1998 1999 (Note 1)
-------- -------- --------
(Unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents .................................................... $ 106 $ 434 $ 434
Accounts receivable-trade (includes related party receivables of
$1,397 and $4,105 at September 30, 1998 and 1999, respectively),
less allowance for doubtful accounts of $345 and $887 at
September 30, 1998 and 1999, respectively .................................. 7,026 21,559 21,559
Inventories .................................................................. 18,811 29,187 29,187
Deferred income taxes ........................................................ 1,431 2,819 2,819
Other current assets ......................................................... 1,055 1,396 1,396
-------- -------- --------
28,429 55,395 55,395
Property, plant and equipment, net .............................................. 13,901 19,374 19,374
Goodwill and other intangible assets, net ....................................... 434 1,148 1,148
-------- -------- --------
Total assets ......................................................... $ 42,764 $ 75,917 $ 75,917
======== ======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Short-term borrowings and current portion of long-term debt .................. $ 5,689 $ 13,217 $ 13,217
Accounts payable ............................................................. 7,221 11,279 11,279
Advances from customers (includes related party amounts of $463 at
September 30, 1998) ........................................................ 1,167 1,483 1,483
Other current liabilities ..................................................... 3,448 7,312 7,312
-------- -------- --------
17,525 33,291 33,291
Long-term debt (includes related party note of $1,500 at September 30,
1998) ...................................................................... 11,379 8,493 8,493
Deferred income taxes ........................................................... 1,393 1,554 1,554
Other liabilities ............................................................... 487 986 986
-------- -------- --------
Total liabilities .................................................... 30,784 44,324 44,324
Commitments (Note 14)
Stockholders' equity:
Preferred stock, $.01 par value per share; 502,500 shares
shares issued and outstanding:
Series C-100,000 shares at September 30, 1999 (liquidation
preference of $10,000,000) ................................................. -- 9,855 --
Series D-100,000 shares pro forma (liquidation preference of
$10,000,000) ............................................................... -- -- 10,000
Series B-60,492 shares at September 30, 1998 and 1999 (liquidation
preference of $9,000,000) .................................................. 8,355 8,355 --
Series A-1,685 shares at September 30, 1998 and 1999 (liquidation
preference of $1,685,000) .................................................. 1,685 1,685 --
Common Stock, $.01 par value per share; 50,000,000 shares authorized;
1,057,929 shares issued and outstanding at September 30, 1998 and
2,360,767 shares issued and outstanding at September 30, 1999 .............. 11 24 85
Additional paid-in capital ...................................................... 1,099 9,305 19,139
Warrant ......................................................................... -- 14 --
Unamortized deferred compensation ............................................... (252) (135) (135)
Retained earnings ............................................................... 1,213 2,784 2,798
Minimum pension liability ....................................................... (131) (294) (294)
-------- -------- --------
Total stockholders' equity ...................................................... 11,980 31,593 31,593
-------- -------- --------
Total liabilities and stockholders' equity ...................................... $ 42,764 $ 75,917 $ 75,917
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
CVC, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
<TABLE>
<CAPTION>
For the Year Ended September 30,
--------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Revenues (includes sales to related party of $29,244, $21,322, and $28,408, for the years
September 30, 1997, 1998 and 1999, respectively) .......................................... $ 62,588 $ 68,173 $ 82,915
Cost of goods sold (includes cost of goods sold to related party of $17,352, $11,115, and
for the years ended September 30, 1997, 1998 and 1999, respectively) ...................... 41,286 42,019 50,502
-------- -------- --------
Gross margin ................................................................................... 21,302 26,154 32,413
Operating expenses
Research and development .................................................................... 9,055 12,615 12,630
In-process R&D write-off .................................................................... -- -- 1,174
Sales and marketing ......................................................................... 5,613 7,696 10,081
General and administrative .................................................................. 2,539 3,476 4,822
-------- -------- --------
17,207 23,787 28,707
-------- -------- --------
Income from operations ......................................................................... 4,095 2,367 3,706
Other income/(expense)
Write-off of deferred charges ............................................................... -- (675) --
Interest and other income ................................................................... 11 171 1,037
Interest expense ............................................................................ (604) (1,325) (1,235)
-------- -------- --------
(593) (1,829) (198)
-------- -------- --------
Income before income taxes ..................................................................... 3,502 538 3,508
Income taxes ................................................................................... 1,457 274 1,937
-------- -------- --------
Net income ..................................................................................... $ 2,045 $ 264 $ 1,571
======== ======== ========
Net income per share:
Basic ....................................................................................... $ 2.67 $ 0.26 $ 1.01
======== ======== ========
Diluted ..................................................................................... $ 0.29 $ 0.04 $ 0.18
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE>
CVC, Inc.
Consolidated Statements of Stockholders' Equity
(In thousands, except share data)
<TABLE>
<CAPTION>
Series C Series B Series A
Preferred Preferred Preferred
Stock Stock Stock
-------------------- -------------------- --------------------
Number Number Number
of of of
shares Amount shares Amount shares Amount
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at October 1, 1996 .... 60,492 $8,355 1,685 $1,685
Net income ....................
Minimum pension liability .....
Tax impact on pension liability
Comprehensive earnings .....
Deferred compensation .........
Amortization of deferred
compensation ..............
Issuance of common stock ......
--------- --------- --------- --------- --------- ---------
Balance at September 30, 1997 . 60,492 8,355 1,685 1,685
Net income ....................
Minimum pension liability .....
Tax impact on pension liability
Comprehensive earnings .....
Deferred compensation .........
Amortization of deferred
compensation .............
Issuance of common stock ......
--------- --------- --------- --------- --------- ---------
Balance at September 30, 1998 . 60,492 8,355 1,685 1,685
Net income ....................
Minimum pension liability .....
Tax impact on pension liability
Comprehensive earnings ...
Deferred compensation .........
Amortization of deferred
compensation ............
Issuance of preferred stock and
warrant ................. 100,000 $9,855
Issuance of common stock ......
--------- --------- --------- --------- --------- ---------
Balance at September 30, 1999 . 100,000 $9,855 60,492 $8,355 1,685 $1,685
========= ========= ========= ========= ========= =========
<CAPTION>
Common Stock
--------------------------------
Number Paid Unamortized Minimum
of Par in deferred Retained pension
shares value capital Warrant compensation earnings liability Total
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at October 1, 1996 .... 735,160 $7 $454 $(1,096) $(86) $9,319
Net income .................... 2,045 2,045
Minimum pension liability ..... (2) (2)
Tax impact on pension liability 1 1
---------
Comprehensive earnings ..... 2,044
Deferred compensation ......... 261 $(261) --
Amortization of deferred
compensation .............. 7 7
Issuance of common stock ...... 114,100 2 56 58
--------- --------- --------- --------- --------- --------- --------- ---------
Balance at September 30, 1997 . 849,260 9 771 (254) 949 (87) 11,428
Net income .................... 264 264
Minimum pension liability ..... (74) (74)
Tax impact on pension liability 30 30
---------
Comprehensive earnings ..... 220
Deferred compensation ......... 109 (109) --
Amortization of deferred
compensation ............. 111 111
Issuance of common stock ...... 208,669 2 219 221
--------- --------- --------- --------- --------- --------- --------- ---------
Balance at September 30, 1998 . 1,057,929 11 1,099 -- (252) 1,213 (131) 11,980
Net income .................... 1,571 1,571
Minimum pension liability ..... (271) (271)
Tax impact on pension liability 108 108
---------
Comprehensive earnings ... 1,408
Deferred compensation ......... (12) 12 --
Amortization of deferred
compensation ............ 105 105
Issuance of preferred stock and
warrant ................. $14 9,869
Issuance of common stock ...... 1,302,838 $13 8,218 8,231
--------- --------- --------- --------- --------- --------- --------- ---------
Balance at September 30, 1999 . 2,360,767 $24 $9,305 $14 $(135) $2,784 $(294) $31,593
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE>
CVC, Inc.
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
For the Year Ended September 30,
--------------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income .................................................................... $ 2,045 $ 264 $ 1,571
Adjustments to reconcile net income to net cash provided (used) by operating
activities:
In-process R&D write-off ........................................................... -- -- 1,174
Depreciation and amortization ...................................................... 1,285 2,167 4,180
Provision for deferred taxes ....................................................... 461 (259) (166)
Changes in operating assets and liabilities -
Accounts receivable (including related party) ................................... (3,406) 1,262 (12,046)
Inventories ..................................................................... (5,767) 1,721 1,449
Other assets .................................................................... (405) (931) 456
Accounts payable ................................................................ 4,556 (2,772) 746
Advances from customers (including related party) ............................... 3,035 (7,485) (2,402)
Other liabilities ............................................................... 1,299 (890) 200
-------- -------- --------
Total adjustments ............................................................. 1,058 (7,187) (6,409)
-------- -------- --------
Net cash provided (used) by operating activities .............................. 3,103 (6,923) (4,838)
-------- -------- --------
Cash flows from investing activities:
Capital expenditures ............................................................... (2,805) (4,817) (1,755)
-------- -------- --------
Net cash used by investing activities ......................................... (2,805) (4,817) (1,755)
-------- -------- --------
Cash flows from financing activities:
Net proceeds from line of credit ................................................... 527 3,612 6,540
Payments on notes payable (including related party) ................................ -- (1,127) (1,500)
Proceeds from long-term debt ....................................................... 2,000 8,000 --
Payments on long-term debt and capital lease obligations ........................... (1,452) (1,021) (8,111)
Net proceeds from issuance of preferred stock and warrant .......................... -- -- 9,869
Net proceeds from issuance of common stock ......................................... 58 221 123
-------- -------- --------
Net cash provided by financing activities ..................................... 1,133 9,685 6,921
-------- -------- --------
Net increase (decrease) in cash and cash equivalents .................................. 1,431 (2,055) 328
Cash and cash equivalents, beginning of period ........................................ 730 2,161 106
-------- -------- --------
Cash and cash equivalents, end of period .............................................. $ 2,161 $ 106 $ 434
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Non-cash investing transaction:
Equipment capitalized from inventory ............................................... $ -- $ 1,828 $ 2,258
Equipment transferred to inventory ................................................. -- $ -- $ 198
Net tangible assets acquired by issuing common stock (Note 2) ...................... $ 6,298
Cash paid during the year for:
Interest ........................................................................... $ 542 $ 1,287 $ 1,237
Income taxes ....................................................................... $ 782 $ 1,430 $ 1,100
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE>
CVC, Inc.
Notes to Consolidated Financial Statements
NOTE 1-NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Nature of Operation
The consolidated financial statements of CVC, Inc. and subsidiaries (CVC
or the Company) include the consolidated accounts of CVC, Inc., CVC Products
Inc., Commonwealth Scientific Corporation, since acquisition on May 10, 1999,
and CVC Process Solutions, Inc. CVC is a worldwide supplier of fabrication
equipment providing thin film process solutions for the manufacture of magnetic
recording heads and advanced semiconductor devices for computers and
communications systems. The Company maintains offices in Rochester, New York;
Alexandria, Virginia; Fremont, California; Garland, Texas; Minneapolis,
Minnesota; Japan and Northern Ireland.
All significant intercompany balances and transactions have been
eliminated in consolidation.
Unaudited Pro Forma Balance Sheet
The Company's Series A and Series B Convertible Preferred Stock
automatically convert into common stock and the Company's Series C Convertible
Preferred Stock automatically converts into common stock and Series D Redeemable
Preferred Stock concurrent with the closing of an initial public offering (Note
10). Accordingly, the unaudited pro forma balance sheet has been presented on a
basis to give effect to the automatic conversion of such stock as of the closing
date of the initial public offering which for pro forma purposes is assumed to
occur as of September 30, 1999.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at year-end as well as the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Concentration of Credit Risk
Financial instruments which potentially expose the Company to significant
concentrations of credit risk consist principally of bank deposits, temporary
investments, accounts receivable (including related party receivables-Note 12)
and accrued expenses. Cash is placed primarily in high quality short-term
interest bearing financial instruments.
The Company performs ongoing credit evaluations of its customers'
financial condition and the Company maintains an allowance for uncollectible
accounts receivable based upon the expected collectibility of all accounts
receivable.
Fair Value of Financial Instruments
The carrying amount of the Company's financial instruments, including cash
and cash equivalents, accounts receivable, accounts payable and accrued
expenses, approximates their fair value at September 30, 1998 and 1999, as the
maturities of these instruments are all short term. Due to differences in the
stated interest rates on certain short and long-term debt obligations compared
to prevailing rates, the fair value of these instruments does vary from their
carrying amounts; however, such differences are immaterial.
F-12
<PAGE>
CVC, Inc.
Notes to Consolidated Financial Statements (Continued)
NOTE 1-NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Revenue Recognition
Revenue from the sale of equipment is recognized upon shipment. Provisions
for estimated product warranty and installation costs are recorded at the time
revenue is recognized. The Company generally warrants its new systems for 15
months from the date of shipment. Such warranties provide that new systems are
free from defects in materials and workmanship under normal use.
Amounts received from customers prior to product shipment are classified
as advances from customers.
Cash and Cash Equivalents
Cash and cash equivalents consist of highly liquid debt instruments with
original maturities of three months or less.
Inventories
Inventories, which include materials, labor and overhead, are recorded at
the lower of cost, determined by the first-in, first-out method, or market
value. The Company provides inventory reserves for excess, obsolete or
slow-moving inventory based on changes in customer demand, technology
developments, and other economic factors.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is provided
on a straight-line basis over the estimated useful lives of 3 to 10 years for
equipment, furniture and fixtures and 40 years for buildings. Building
improvements are depreciated over the shorter of 10 years or the remaining life
of the building or the useful life of the improvement. Maintenance and repairs
are expensed as incurred. Improvements which extend the useful life of property,
plant and equipment are capitalized. Upon retirement or disposal of an asset,
the asset and the related accumulated depreciation are eliminated from the
accounts, with any gains or losses from sale recorded in the statement of
operations.
Capitalized Software Costs
The Company capitalizes the costs associated with purchased software for
resale and subsequently amortizes such costs on a units-of-production basis over
their estimated remaining economic life, generally 3 years. These amounts, which
are included in other assets, are reported at the lower of the unamortized cost
or net realizable value and are immaterial.
Asset Impairment
The Company regularly assesses all of its long-lived assets for impairment
when events or circumstances indicate, in accordance with Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The assessment
is accomplished by comparing the estimated undiscounted future cash flows of the
asset grouping with the respective carrying amount as of the date of assessment.
Should aggregate future cash flows be less
F-13
<PAGE>
CVC, Inc.
Notes to Consolidated Financial Statements (Continued)
NOTE 1-NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
than the carrying value of the assets, a write-down would be required, measured
by the difference between the carrying value of the assets and the discounted
future cash flows.
Research and Development
Research and development costs are expensed as incurred.
Income Taxes
The Company accounts for income taxes using the asset and liability
approach which requires recognition of deferred tax liabilities and assets for
the expected future tax consequences of temporary differences between the
financial statement carrying amounts and the tax basis of such assets and
liabilities.
The asset and liability method utilizes enacted statutory tax rates in
effect for the year in which the temporary differences are expected to reverse
and gives immediate effect to changes in income tax rates upon enactment.
Deferred tax assets are recognized, net of any valuation allowance, for
deductible temporary differences and net operating loss and tax credit
carryforwards.
New Accounting Standards
Effective October 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 (SFAS 130), "Reporting Comprehensive Income", which
establishes new rules for the reporting and display of comprehensive income and
its components; however, the adoption had no impact on the Company's net income
or stockholders' equity. SFAS 130 requires changes to the minimum pension
liability, to be included in other comprehensive income. Prior year financial
statements have been reclassified to conform to the requirements of SFAS 130.
In April 1998, the Accounting Standards Executive Committee issued
Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-Up
Activities." Start-up activities are defined broadly as those one-time
activities relating to opening a new facility, introducing a new product or
service, conducting business in a new territory, conducting business with a new
class of customer, commencing some new operation or organizing a new entity.
Under SOP 98-5, the cost of start-up activities should be expensed as incurred.
SOP 98-5 is effective for the Company's fiscal year 2000 financial statements
and the Company does not expect its adoption to have a material effect on the
Company's financial condition or results of operations.
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." The new
standard establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. SFAS No. 133 is effective for all
quarters of fiscal years beginning after June 15, 2000. The Company does not
expect SFAS No. 133 to have a material effect on the Company's financial
condition or results of operations.
F-14
<PAGE>
CVC, Inc.
Notes to Consolidated Financial Statements (Continued)
NOTE 1-NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Stock Splits
On October 14, 1997, the Company declared a 3-for-1 stock split in the
form of a stock dividend to stockholders of record at the close of business on
October 31, 1997. This stock split increased the number of common shares
outstanding by 849,260. All references in the consolidated financial statements
referring to share prices, conversion rates, per share amounts, stock option
plans and common shares issued and outstanding have been adjusted retroactively
for the 3-for-1 stock split.
On August 30, 1999, the Company declared a 2-for-3 reverse stock split to
become effective in connection with the completion of an initial public
offering. This reverse stock split decreased the number of common shares
outstanding by 1,172,688. All references in the consolidated financial
statements referring to share prices, conversion rates, per share amounts, stock
option plans and common shares issued and/or outstanding have been adjusted
retroactively for the 2-for-3 reverse stock split.
NOTE 2-ACQUISITION
On May 10, 1999, the Company acquired Commonwealth Scientific Corporation
(Commonwealth), a Virginia based company which offers ion beam modules and
systems which provide ion beam etching, deposition and diamond-line carbon (DLC)
processes and ion beam sources for research and development (R&D) and original
equipment manufacturer customers. The purchase price of $8,498,000 was comprised
of the issuance of 1,268,799 shares of the Company's common stock, exchanged and
assumed options in Commonwealth for options to purchase 286,228 shares of the
Company's common stock, and related acquisition costs. The issuance of the
Company's stock was recorded at fair market value, and the assumed options were
recorded at fair market value using the Black-Scholes option pricing model. The
acquisition was accounted for using the purchase method of accounting. The
purchase price was allocated as follows (in thousands):
Net tangible assets of Commonwealth .......................... $6,298
Purchased in-process R&D ..................................... 1,174
Intangible assets:
Workforce in place ........................................ 704
Current technology ........................................ 265
Goodwill .................................................. 57
------
Total purchase price ......................................... $8,498
======
The net tangible assets includes a write-up of Commonwealth's property to
fair market value by $600,000 and the recognition of a restructuring liability
approximating $550,000. Approximately $140,000 of the restructuring liability
relates to severance costs associated with the reduction of Commonwealth's
workforce by approximately 20%, or 29 employees. The reduction of the workforce
and the payment of termination benefits was completed by September 30, 1999.
Approximately $410,000 of the restructuring liability relates to existing lease
obligations or cancellation penalties associated with facilities which will be
exited. Lease payments will be made through fiscal 2000. At September 30, 1999,
approximately $200,000 has been charged against the restructuring liability. The
Company believes that the amounts remaining under the restructuring liability
are adequate to cover the remaining lease obligations.
F-15
<PAGE>
CVC, Inc.
Notes to Consolidated Financial Statements (Continued)
NOTE 2-ACQUISITION (CONTINUED)
The purchased in-process R&D includes the value of products in the
development stage, which have not reached technological feasibility and for
which there is no alternative future use. In accordance with applicable
accounting rules, purchased in-process R&D is required to be expensed.
Accordingly, the amount of $1,174,000 was expensed in the third quarter of
fiscal 1999.
The Company used independent professional appraisal consultants to assess
and allocate value to the acquired in-process R&D. The allocated value was
determined using the income approach, which involves estimating the discounted
after-tax cash flows attributable to projects based on the projects' stage of
completion.
A discount rate of 35% was applied to the projects' cash flows and there
were no material changes from historical pricing, margins, and expense levels.
Management believes that the assumptions used in the forecasts were reasonable
at the time of the business combination. No assurance can be given, however,
that the underlying assumptions used to estimate expected project sales,
development costs, or profitability will be realized as estimated. For these
reasons, actual results may vary from the projected results.
Estimated net cash inflows from the acquired in-process technology are
projected to commence in fiscal 2001.
The amortization periods of intangible assets related to workforce in
place, current technology and goodwill are seven years, five years and seven
years, respectively.
The operating results of Commonwealth have been included in the Company's
consolidated statement of operations from the date of acquisition. The unaudited
pro forma results below assume the acquisition occurred on October 1, 1997 (in
thousands):
Pro forma
----------------------------------------
For the year ended For the year ended
September 30, 1998 September 30, 1999
------------------ ------------------
Net sales ................................ $112,060 $101,841
Operating income ......................... 4,782 678
Net income ............................... 1,524 62
Net income per share:
-Basic ................................ $ 0.67 $ 0.03
-Diluted .............................. $ 0.18 $ 0.01
The pro forma results include amortization of the intangibles presented
above and cost reductions related to the restructuring charges, and excludes the
write-off of the in-process R&D in each period. The pro forma results are not
necessarily indicative of what actually would have occurred if the acquisition
had been completed as of the beginning of each of the fiscal periods presented,
nor are they necessarily indicative of future consolidated results.
F-16
<PAGE>
CVC, Inc.
Notes to Consolidated Financial Statements (Continued)
NOTE 3-INVENTORIES
Inventories consisted of the following at September 30, 1998 and 1999 (in
thousands):
1998 1999
-------- --------
Component parts ................................ $ 8,976 $ 15,421
Work-in-process ................................ 5,615 11,674
Finished goods ................................. 4,917 4,117
-------- --------
19,508 31,212
Less-reserve for obsolescence ............ (697) (2,025)
-------- --------
$ 18,811 $ 29,187
======== ========
NOTE 4-PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following at September 30,
1998 and 1999 (in thousands):
1998 1999
-------- --------
Land ......................................... $ 625 $ 2,225
Buildings and improvements ................... 5,954 7,548
Machinery and equipment ...................... 10,358 22,048
-------- --------
16,937 31,821
Less-Accumulated depreciation ............. (4,721) (12,447)
-------- --------
12,216 19,374
Construction-in-process ...................... 1,685 --
-------- --------
$ 13,901 $ 19,374
======== ========
Construction-in-process was mainly comprised of machinery and equipment
which was placed in service subsequent to September 30, 1998.
Included in property, plant and equipment is $2,220,000 and $2,494,000 for
a building and certain equipment held under capital lease agreements at
September 30, 1998 and 1999, respectively. Related accumulated amortization at
September 30, 1998 and 1999 was $403,000 and $558,000, respectively.
Total depreciation and amortization expense on plant and equipment was
$1,215,000, $1,874,000 and $3,697,000 in 1997, 1998 and 1999, respectively.
Total depreciation expense on assets under capital leases was $56,000 in 1997
and 1998 and $102,000 in 1999.
F-17
<PAGE>
CVC, Inc.
Notes to Consolidated Financial Statements (Continued)
NOTE 5-OTHER CURRENT LIABILITIES
Other current liabilities consisted of the following at September 30, 1998
and 1999 (in thousands):
1998 1999
------ ------
Accrued payroll and benefits ................... $ 874 $1,981
Other current liabilities ...................... 2,574 5,331
------ ------
$3,448 $7,312
====== ======
NOTE 6-NOTES PAYABLE AND LONG-TERM DEBT
In August 1974, the Company entered into an agreement with a local
government agency under which the agency's bond proceeds of $2,400,000 were used
to purchase land and construct an operating facility for lease to the Company.
The industrial revenue bond obligation required monthly payments of principal
and interest at 8% (approximately $19,000 in total). In September 1997, the
Company refinanced the remaining principal of the industrial revenue bond with
the proceeds of a new mortgage credit facility with a principal of $2,000,000.
The lease term extends to December 31, 2007, at which time title to the property
passes, upon payment of nominal consideration by the Company. The new mortgage
credit facility requires monthly payments of approximately $16,000 through
October 1, 2007, calculated based upon an amortization period of twenty years.
In addition, on October 1, 2007, the Company will pay a final installment equal
to the outstanding principal and interest on the credit facility based upon the
actual term of this facility which is ten years. The interest rate on $500,000
of the mortgage credit facility is 5.29% until October 1, 1999 after which the
rate increases to 8.29% through September 30, 2002, consistent with the interest
rate on $1,500,000 of the credit facility. Beginning October 1, 2002, the
Company will likely elect to pay interest on the remaining principal at the then
prime rate plus one-half percent, or a rate equal to 225 basis points above the
yield on U.S. treasury bonds. The obligation is secured by certain land and
buildings with a net book value of $2,386,000 at September 30, 1999.
In November 1990, the Company borrowed $1,500,000 from a company whose
president is a director and shareholder of the Company. In December 1991, the
Company borrowed an additional $1,000,000 from this company. The borrowings were
evidenced by notes, which were unsecured and required quarterly interest
payments at 9%. The $1,000,000 note was paid in full in November 1997 and the
$1,500,000 note was paid in full in January 1999. Interest expense on these
notes totaled $225,000, $138,000 and $34,000 in 1997, 1998 and 1999,
respectively.
In September 1996, the Company borrowed $3,000,000 from a commercial bank.
The five year term loan requires monthly payments of principal and interest at
prime plus 1/2% through October 1, 2001. The obligation is secured by certain
equipment and capital assets.
In April 1998, the Company borrowed $8,000,000 from a commercial bank. The
seven year term loan requires monthly payments of principal and interest at
8.39% until April 2005. The obligation is secured by certain personal property
and other intangibles of the Company including patents, patent applications and
trademarks.
In connection with the acquisition of Commonwealth, the Company assumed a
$1,214,000 unsecured note payable to a third party. The 18-month note requires
payments of principal and interest at 8% until October 2000.
F-18
<PAGE>
CVC, Inc.
Notes to Consolidated Financial Statements (Continued)
NOTE 6-NOTES PAYABLE AND LONG-TERM DEBT (Continued)
The Company also has a $15,000,000 bank line of credit at September 30,
1999 which allows for maximum borrowings based on certain financial criteria.
Allowable borrowings based on this criteria at September 30, 1999 were
$13,819,000. Borrowings under the agreements are at an interest rate of prime.
There was approximately $10,679,000 outstanding under the line of credit at
September 30, 1999.
The Company also has available an equipment line of credit at September
30, 1999 which allows for maximum borrowings of $3,000,000 based on certain
financial criteria. Borrowings under the agreement are at an interest rate of
prime. There were no amounts outstanding under the line of credit at September
30, 1999.
The debt agreements contain financial covenants requiring the Company to
maintain certain debt to equity, capital, and current ratios, as well as certain
customer order, income, and operating cash flow levels. The agreement also
imposes limitations on the incurrence of additional debt. The Company was in
compliance with all covenants at September 30, 1998 and 1999.
A summary of the notes payable and long-term debt outstanding at September
30, 1998 and 1999 is as follows (in thousands):
1998 1999
-------- --------
Term loan, 5 year ................................ $ 1,850 $ 1,250
Term loan, 7 year ................................ 7,624 6,723
Notes payable due related party .................. 1,500 --
Mortgage credit facility ......................... 1,955 1,906
Note payable to third party ...................... -- 891
Future minimum payments under capital
leases payable through January 2002 ......... -- 261
Borrowings on line of credit ..................... 4,139 10,679
-------- --------
17,068 21,710
Less-Current portion ....................... (5,689) (13,217)
-------- --------
$ 11,379 $ 8,493
======== ========
The aggregate maturities for debt over the next five years and thereafter
are as follows (in thousands): 2000-$13,217, 2001-$1,900, 2002-$1,296,
2003-$1,313, and 2004-$1,433.
F-19
<PAGE>
CVC, Inc.
Notes to Consolidated Financial Statements (Continued)
NOTE 7-INCOME TAXES
The components of income taxes (benefit) for the years ended September 30,
1997, 1998 and 1999 are as follows (in thousands):
1997 1998 1999
------- ------- -------
Current:
Federal .................. $ 604 $ 417 $ 1,806
State .................... 392 116 297
------- ------- -------
996 533 2,103
Deferred:
Federal .................. 475 (211) (143)
State .................... (14) (48) (23)
------- ------- -------
461 (259) (166)
------- ------- -------
$ 1,457 $ 274 $ 1,937
======= ======= =======
The significant components of deferred tax assets and liabilities at
September 30, 1998 and 1999 are as follows (in thousands):
1998 1999
------- -------
Deferred tax assets:
Net operating loss carryforwards ................. $ 175 $ 344
Inventories ...................................... 455 1,076
State and federal tax credits .................... 122 209
Allowance for doubtful accounts .................. 138 373
Accrued compensation and benefits ................ 240 398
Other accruals ................................... 577 1,053
------- -------
1,707 3,453
------- -------
Deferred tax liabilities:
Unamortized inventory accounting change .......... (605) (424)
Property, plant and equipment .................... (962) (1,343)
------- -------
(1,567) (1,767)
------- -------
Deferred tax asset valuation allowance ........... (102) (421)
------- -------
Net deferred tax asset ........................... $ 38 $ 1,265
======= =======
F-20
<PAGE>
CVC, Inc.
Notes to Consolidated Financial Statements (Continued)
NOTE 7-INCOME TAXES (Continued)
The differences between income taxes (benefit) at the U.S. statutory rate
and the effective rate for the years ended September 30, 1997, 1998 and 1999 are
summarized as follows (in thousands):
1997 1998 1999
------- ------- -------
Provision at federal statutory rate ...... $ 1,191 $ 183 $ 1,193
State taxes, net of federal benefit ...... 213 45 226
Permanent items .......................... 53 101 546
Release of valuation allowance ........... -- (53) (130)
Other .................................... -- (2) 102
------- ------- -------
Income tax expense ....................... $ 1,457 $ 274 $ 1,937
======= ======= =======
During 1998 and 1999, the valuation allowance, which relates to net
operating loss carryforwards and state investment credits, was reduced by
$53,000 and $130,000, respectively, due to the increased likelihood the benefits
will be recognized. As a result of the acquisition of Commonwealth, in 1999, a
number of permanent items were recorded by the Company and the valuation
allowance increased by the assumed amount of $449,000.
The net operating tax loss carryforwards of approximately $820,000 expire
at various times through 2019.
F-21
<PAGE>
CVC, Inc.
Notes to Consolidated Financial Statements (Continued)
NOTE 8-EMPLOYEE BENEFIT PLANS
The Company maintains a 401(k) profit sharing plan covering substantially
all employees who meet certain age and length of service requirements. The
Company contributes a percentage of the amount of salary deferral contributions
made by each participating employee. Any additional contributions by the Company
are discretionary. The amounts charged to expense related to this plan were
approximately $92,000, $222,000 and $278,000 in fiscal years 1997, 1998 and
1999, respectively.
The Company had a noncontributory defined benefit pension plan. The
Company froze this plan effective September 30, 1991 at which time all benefits
became fully vested. Benefits were based on historical compensation levels and
years of service. The Company's funding policy is to contribute annually an
amount, based on actuarial computations, which would satisfy the Internal
Revenue Service's funding standards. Approximately $122,000 and $381,000 is
included in other liabilities at September 30, 1998 and 1999, respectively, for
accrued pension costs. Further, the Company has recorded an additional minimum
pension liability representing the excess of the unfunded accumulated benefit
obligation over plan assets. The additional minimum liability was charged to
stockholders' equity, net of income taxes.
NOTE 9-POSTRETIREMENT HEALTH CARE BENEFITS
The Company provides health care and life insurance benefits to certain
retired hourly employees as well as health care benefits to salaried retirees
employed prior to December 31, 1996. As permitted under SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions," the
Company has elected to amortize the unfunded accrued postretirement benefit
obligation at adoption over a 20-year period.
Details of costs for retiree benefits for the years ended September 30,
1997, 1998 and 1999 are as follows (in thousands):
1997 1998 1999
---- ---- ----
Service cost .................................. $ 68 $ 90 $150
Interest cost on benefit obligation ........... 82 78 90
Amortization .................................. 56 56 60
---- ---- ----
Retiree health care cost ...................... $206 $224 $300
==== ==== ====
An analysis of amounts shown in the consolidated balance sheet at
September 30, 1998 and 1999 is as follows (in thousands):
1998 1999
------- -------
Accumulated postretirement benefit obligation:
Retirees .......................................... $ 810 $ 607
Active participants ............................... 465 787
------- -------
1,275 1,394
Unrecognized prior service cost ...................... (39) (65)
Unrecognized net gain ................................ 73 163
Unrecognized transition obligation ................... (944) (889)
------- -------
Retirement benefit liability ......................... $ 365 $ 603
======= =======
F-22
<PAGE>
CVC, Inc.
Notes to Consolidated Financial Statements (Continued)
NOTE 9-POSTRETIREMENT HEALTH CARE BENEFITS (Continued)
The funding policy for retiree health care and life insurance benefits is
generally to pay covered expenses as they are incurred.
The actuarial calculation assumes a health care average inflation rate of
9.5% in 1999 and grades down uniformly to 4.5% in 2010 and remains level
thereafter. The health care cost trend rate has an effect on the amounts
reported. Increasing the health care inflation rate by 1% would increase the
September 30, 1999 accumulated postretirement benefit obligation by $190,000,
and the 1999 service cost plus interest by $55,000. Decreasing the health care
inflation rate by 1% would decrease the September 30, 1999 accumulated
postretirement benefit obligation by $155,000, and the 1999 service cost plus
interest by $42,000. The weighted average discount rate used in determining the
accumulated postretirement benefit obligation was 7.50%.
NOTE 10-STOCKHOLDERS' EQUITY
In 1990, the Company issued 1,685 shares of 8% Series A Non-Cumulative
Convertible Preferred Stock (Series A Preferred Stock). The Series A Preferred
Stock is convertible at any time at the option of the holder into common stock
at the rate of 1,600 shares of common stock for each share of Series A Preferred
Stock. The liquidation preference of each share of Series A Preferred Stock is
$1,000 and all declared but unpaid dividends. Preferred voting rights are one
vote for each share of common stock into which the preferred shares may be
converted. The Series A Preferred Stock will be automatically converted to
2,696,000 shares of common stock upon the closing of an initial public offering
with a price per share in excess of $12.50 and aggregate gross proceeds of
$10,000,000.
In May 1995, the Company issued 60,492 shares of Series B Non-Cumulative
Convertible Preferred Stock (Series B Preferred Stock). The Series B Preferred
Stock is convertible at any time at the option of the holder into common stock
at the rate of 40 shares of common stock for each share of Series B Preferred
Stock. Preferred voting rights are one vote for each share of common stock into
which the preferred shares may be converted. The Series B Preferred Stock will
be automatically converted to 2,419,680 shares of common stock upon the closing
of an initial public offering with a price per share in excess of $12.50 and
aggregate gross proceeds of $10,000,000.
In connection with the issuance of Series B Preferred Stock, the holder
was granted a seven-year warrant to purchase 19,769 shares of Series B Preferred
Stock at an exercise price of $223.17 per share of Series B Preferred Stock.
Expenses directly associated with this issuance of approximately $645,000 were
netted against proceeds. The liquidation preference of each share of Series B
Preferred Stock is $148.78 and all declared but unpaid dividends. Upon the
automatic conversion of the Company's then outstanding shares of Series B
Preferred Stock coincident to the closing of an initial public offering, the
Company will execute a new warrant to the holder, with terms similar to the
original Series B warrant, to purchase 790,760 shares of the Company's Common
Stock at an exercise price of $5.58 per share in lieu of Series B Preferred
Stock.
In December 1998, the Company issued 100,000 shares of Series C
Non-Cumulative Convertible Preferred Stock (Series C Preferred Stock). The
Series C Preferred Stock is convertible at any time at the option of the holder
into common stock at the rate of 10.1626 shares of common stock for each share
of Series C Preferred Stock. Preferred voting rights are one vote for each share
of common stock into which the preferred shares may be converted. The Series C
Preferred Stock will be automatically converted to 1,016,260
F-23
<PAGE>
CVC, Inc.
Notes to Consolidated Financial Statements (Continued)
NOTE 10-STOCKHOLDERS' EQUITY (Continued)
shares of common stock as well as 100,000 shares of Series D Redeemable
Preferred Stock upon the closing of an initial public offering with a price per
share in excess of $12.50 and aggregate gross proceeds of $10,000,000.
In connection with the issuance of Series C Preferred Stock, the holder
was granted a seven-year warrant to purchase an aggregate of 133,333 shares of
common stock at $15 per share. The warrant cannot be exercised until December
10, 2001. Additionally, the warrant will no longer be exercisable upon an
initial public offering. A fair value of $14,000 was assigned to this warrant at
the time of purchase.
On October 14, 1997, the Company filed a Certificate of Amendment to the
Certificate of Incorporation which increased total authorized common stock to
50,000,000 shares, $.01 par value, and total authorized preferred stock to
502,500 shares, $.01 par value.
The Company grants options to key employees to purchase its common stock,
generally at fair market value as of the date of grant, based upon valuations
obtained contemporaneously from an independent appraiser. Such valuations have
been obtained by the Company, primarily on a quarterly basis, since June 30,
1995. Options generally vest over a 3 to 5 year period and expire after 10 years
from the date of grant.
In October 1997, the Board of Directors and stockholders approved a new
stock option plan, the 1997 Stock Option Plan (the "Plan"), under which options
may be granted to employees of the Company. The Plan permits the grant of stock
options that qualify as incentive stock options under Section 422 of the
Internal Revenue Code, and nonqualified stock options, which do not so qualify.
In 1999, the Board of Directors amended the plan, which increased the amount of
shares authorized under the plan by 1,000,000 shares. Additionally, the Board of
Directors has authorized the Company to increase the number of shares available
for issuance under the plan by an amount equal to five percent of the total
number of shares of common stock issued by the Company during the preceding
fiscal year. As of September 30, 1998 and 1999, the Company has authorized and
reserved 833,333 and 1,833,333 shares, respectively, of common stock for
issuance under the Plan; and, options available for grant under the Plan were
523,333 and 1,283,065 shares, respectively.
During fiscal 1997 and 1998, approximately 203,333 and 160,000 options,
respectively, were granted to employees at an amount which was less than the
fair market value as of the grant date. Accordingly, the Company recorded
unamortized deferred compensation expense for such options which vest over a 3
to 5 year period. Compensation expense is being amortized over the vesting
period and unamortized compensation expense has been recorded as a reduction in
stockholders' equity. During fiscal 1997, 1998 and 1999, compensation expense
recognized in the statements of operations approximated $7,000, $111,000 and
$105,000, respectively.
Under the provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation," the Company has elected to continue to account for its employee
stock plans in accordance with the provisions of APB Opinion No. 25 which
requires compensation costs to be recognized based on the intrinsic value of
options at the grant date. Had compensation cost for the Company's stock option
plan been determined based on the fair value at the grant date for awards in
fiscal years 1997, 1998 and 1999
F-24
<PAGE>
CVC, Inc.
Notes to Consolidated Financial Statements (Continued)
NOTE 10-STOCKHOLDERS' EQUITY (Continued)
consistent with the provisions of SFAS No. 123, the Company's net earnings and
earnings per share would have been the following (in thousands, except per share
amounts):
1997 1998 1999
--------- ------- ---------
Net income (loss):
As reported .............. $ 2,045 $ 264 $ 1,571
Pro forma ................ $ 1,954 $ (12) $ 1,276
Basic earnings per share:
As reported .............. $ 2.67 $ 0.26 $ 1.01
Pro forma ................ $ 2.55 $ (0.01) $ 0.82
Diluted earnings per share:
As reported .............. $ 0.29 $ 0.04 $ 0.18
Pro forma ................ $ 0.28 $ (0.01) $ 0.15
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model (minimum value method) with the
weighted average assumptions of risk free interest rates (based on anticipated
length of time until exercise) ranging from 4.24% to 5.65% and expected lives of
3 to 5 years.
A summary of the status of the Company's stock option plan for the three
years ended September 30, 1999 is as follows:
Number of Weighted-average
Shares Exerise Price
--------- ----------------
Outstanding at October 1, 1996 ................. 1,585,040 $1.32
Granted .................................. 406,600 $4.76
Canceled ................................. (118,000) $1.86
Exercised ................................ (120,200) $0.74
Outstanding at September 30, 1997 .............. 1,753,440 $2.12
Granted .................................. 427,667 $7.80
Canceled ................................. (205,995) $9.08
Exercised ................................ (199,338) $0.84
Outstanding at September 30, 1998 .............. 1,775,774 $2.82
Assumed in acquisition ................... 286,228 $6.00
Granted .................................. 311,669 $7.12
Cancelled ................................ (116,257) $6.28
Exercised ................................ (23,374) $3.15
Outstanding at September 30, 1999 .............. 2,234,040 $3.62
The weighted average fair value of options granted during fiscal 1997 and
1998 was $1.94. The weighted-average fair value of options granted during fiscal
1999 was $1.58.
The weighted-average exercise price of options granted to employees during
1997 and 1998 at an amount which was less than fair market value was $5.30 and
$5.73, respectively. The weighted-average fair value of such options granted in
1997 and 1998 was $2.67 and $2.37, respectively.
During 1999, 57,333 options were issued at a weighted average exercise
price of $6.00 which was higher than fair market value at the date of grant.
F-25
<PAGE>
CVC, Inc.
Notes to Consolidated Financial Statements (Continued)
NOTE 10-STOCKHOLDERS' EQUITY (Continued)
A summary of the options outstanding and exercisable as of September 30,
1999 is as follows:
Options Outstanding Options Exercisable
- -------------------------------------------------------- ---------------------
Weighted Weighted Weighted
average average average
Number of remaining exercise Number of exercise
Range of exercise options contractual price per options price per
prices per share outstanding life in years share outstanding share
- ---------------- ----------- ------------- ----- ----------- -----
$0.63-$ 1.25 840,507 2.3 $0.66 840,507 $0.66
$3.00-$ 4.17 488,624 5.8 $3.59 387,291 $3.57
$4.85-$12.00 904,909 7.5 $6.39 255,671 $6.05
$0.63- 12.00 2,234,040 5.2 $3.62 1,483,469 $2.35
----------- ------------- ----- ----------- -----
NOTE 11-EARNINGS PER SHARE
Basic earnings per share (EPS) is computed by dividing income available to
common shareholders by the weighted average number of common shares actually
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the Company.
The following table illustrates the calculation of both basic and diluted
EPS for the years ended September 30, 1997, 1998 and 1999 (in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
------ ------ ------
<S> <C> <C> <C>
Basic earnings per share
Net income available to common shareholders ............................. $2,045 $ 264 $1,571
Weighted average number of common shares ................................ 765 1,021 1,561
------ ------ ------
Basic earnings per share ................................................ $ 2.67 $ 0.26 $ 1.01
====== ====== ======
Diluted earnings per share
Net income available to common shareholders ............................. $2,045 $ 264 $1,571
====== ====== ======
Weighted average number of common shares ................................ 765 1,021 1,561
Common equivalent shares related to stock options and convertible
preferred stock .................................................... 6,227 6,049 7,028
------ ------ ------
Weighted average common and common equivalent shares .................... 6,992 7,070 8,589
====== ====== ======
Diluted earnings per share .............................................. $ 0.29 $ 0.04 $ 0.18
====== ====== ======
</TABLE>
Certain antidilutive outstanding options and warrants were excluded from
the computation of diluted EPS since their exercise prices exceed the average
market price of the common shares during the period. The antidilutive stock
options and warrants so excluded at the end of September 30, 1997, 1998 and 1999
and their associated exercise prices are summarized below. The options and
warrants expire at various times between 2002 and 2008.
1997 1998 1999
----------- ------------ ------------
Number of options and warrants ..... 815,333 836,000 396,070
Exercise price ..................... $5.58-$5.73 $5.58-$12.00 $6.45-$18.00
F-26
<PAGE>
CVC, Inc.
Notes to Consolidated Financial Statements (Continued)
NOTE 12-TRANSACTIONS WITH RELATED PARTIES
At September 30, 1998, the Company had borrowings of $1,500,000 from a
company whose president is a director and shareholder of the Company (Note 6).
Seagate Technology (Seagate), which provides products for storage,
retrieval, and management of data on computer and data communications systems,
is the Company's largest customer and a significant stockholder. Revenues, cost
of goods sold, accounts receivable and unearned revenue associated with
transactions between the Company and Seagate are reported as related party in
the consolidated statements of operations and balance sheets. Management
believes the selling prices and sales terms of such transactions are
substantially consistent with those for unrelated third parties.
During 1999, the Company's President and Chief Executive Officer, who is
also a shareholder, was elected to the Board of Directors of the Company's
principal lender, M&T Bank.
NOTE 13-SEGMENT DATA, SIGNIFICANT CUSTOMERS AND GEOGRAPHIC INFORMATION
The Company adopted the provisions of SFAS No. 131, "Disclosures About
Segments and Related Information," effective October 1, 1998. In connection with
the adoption of SFAS 131, the Company determined that it operates in one
business segment.
For the year ended September 30, 1997, sales to the Company's two largest
customers comprised 47% and 11% of revenues, respectively. For the year ended
September 30, 1998, sales to the Company's three largest customers comprised
31%, 16% and 11% of revenues, respectively. For the year ended September 30,
1999, sales to the Company's three largest customers comprised 34%, 18% and 14%
of revenues, respectively.
Export sales to customers (including related party sales) outside the
United States represents 31%, 38% and 53% of the Company's revenues for the
fiscal years ended September 30, 1997, 1998 and 1999, respectively. Total sales
were made to the following geographic regions:
<TABLE>
<CAPTION>
Northern
USA Ireland Japan Other Total
----------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
1997 ...................... $43,126,000 5,409,000 9,767,000 4,286,000 $62,588,000
1998 ...................... 42,284,000 13,194,000 9,075,000 3,620,000 $68,173,000
1999 ...................... 39,130,000 11,672,000 20,505,000 11,608,000 $82,915,000
</TABLE>
NOTE 14-COMMITMENTS
The Company leases various equipment and facilities under operating lease
agreements. Rental expense under operating lease agreements was approximately
$289,000, $774,000 and $1,318,000 in fiscal years 1997, 1998 and 1999,
respectively. The future minimum lease payments under non-cancelable lease
agreements are $1,430,000 in 2000, $1,028,000 in 2001, $201,000 in 2002 and
$25,000 in 2003 and $4,000 in 2004.
NOTE 15-WRITE-OFF OF DEFERRED CHARGES
During fiscal 1998, the Company incurred costs related to a potential
initial public offering. These costs were accounted for as a deferred asset with
the intent of deducting such amounts from contributed equity upon receipt of the
proceeds from the initial public offering. During the fourth quarter of fiscal
1998, the Company determined to suspend efforts to complete the public offering
and, accordingly, these costs were charged against current period earnings.
F-27
<PAGE>
CVC, Inc.
Notes to Consolidated Financial Statements (Continued)
NOTE 16-SUBSEQUENT EVENT
In October 1999, the Company's Series C Preferred Stock, Series B
Preferred Stock, Series A Preferred Stock, and Common Stock shareholders
approved an amendment to the Amended and Restated Certificate of Incorporation
which provides for a 2-for-3 reverse stock split (Note 1) as well as the
elimination of the $12.50 price per share requirement for the automatic
conversion of Series C Preferred Stock, Series B Preferred Stock, and Series A
Preferred Stock into common stock upon the closing of an initial public
offering.
F-28
<PAGE>
Report of Independent Public Accountants
To the Stockholders and the Board of Directors of
Commonwealth Scientific Corporation:
We have audited the accompanying balance sheets of Commonwealth Scientific
Corporation (the "Company," a Virginia corporation), a wholly owned subsidiary
of CVC, Inc. (the "Parent," a Delaware corporation), as of March 31, 1998 and
1999, and the related statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended March 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Commonwealth Scientific
Corporation as of March 31, 1998 and 1999, and the results of its operations and
its cash flows for each of the three years in the period ended March 31, 1999,
in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Vienna, Virginia
May 17, 1999
F-29
<PAGE>
Commonwealth Scientific Corporation
Balance Sheets
<TABLE>
<CAPTION>
March 31,
------------------------------
1998 1999
------------ ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents ...................................................................... $ 378,920 $ 326,623
Accounts receivable, net of allowance for doubtful accounts of $233,000 and $300,000 at
March 31, 1998 and 1999, respectively ..................................................... 5,556,183 3,160,366
Inventories .................................................................................... 15,601,983 13,837,715
Prepaid expenses and other current assets ...................................................... 206,630 134,410
Income taxes receivable ........................................................................ -- 732,905
Deferred income taxes .......................................................................... 456,188 539,070
------------ ------------
Total current assets ................................................................... 22,199,904 18,731,089
------------ ------------
Property and equipment, at cost:
Land ........................................................................................... 703,900 703,900
Building and improvements ...................................................................... 839,153 882,025
Leasehold improvements ......................................................................... 476,489 623,896
Manufacturing and test equipment ............................................................... 5,191,647 6,332,468
Office furniture and fixtures .................................................................. 480,691 496,417
------------ ------------
7,691,880 9,038,706
Less-Accumulated depreciation and amortization ................................................. (3,503,079) (4,147,289)
------------ ------------
Net property and equipment ............................................................. 4,188,801 4,891,417
------------ ------------
Other assets ................................................................................... 67,497 55,631
------------ ------------
Total assets ........................................................................... $ 26,456,202 $ 23,678,137
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-30
<PAGE>
Commonwealth Scientific Corporation
Balance Sheets
<TABLE>
<CAPTION>
March 31,
------------------------------
1998 1999
------------ ------------
<S> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable .......................................................................... $ 4,387,666 $ 4,197,963
Accrued expenses .......................................................................... 2,209,071 3,632,967
Lines of credit ........................................................................... 2,584,574 3,393,173
Current portion of long-term obligations .................................................. 308,788 551,540
Deposits on sales contracts ............................................................... 6,109,603 2,796,684
------------ ------------
Total current liabilities .............................................................. 15,599,702 14,572,327
Long-term obligationS, net of current portion .................................................. 1,677,718 2,067,830
Deferred income tax liability .................................................................. 202,620 221,117
------------ ------------
Total liabilities ...................................................................... 17,480,040 16,861,274
------------ ------------
Commitments and contingencies (Note 8)
Stockholders' equity:
Common stock, $1 par value; 10,000,000 shares authorized, 333,180 and 336,680 shares
issued at March 31, 1998 and 1999, respectively ...................................... 333,180 336,680
Additional paid-in capital ................................................................ 751,320 782,820
Retained earnings ......................................................................... 7,902,662 5,708,363
Treasury stock; 6,900 shares at cost ...................................................... (11,000) (11,000)
------------ ------------
Total stockholders' equity ............................................................. 8,976,162 6,816,863
------------ ------------
Total liabilities and stockholders' equity ............................................. $ 26,456,202 $ 23,678,137
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-31
<PAGE>
Commonwealth Scientific Corporation
Statements of Operations
<TABLE>
<CAPTION>
Years Ended March 31,
--------------------------------------------------------------
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Net sales ............................................... $ 35,366,323 $ 33,982,554 $ 43,597,852
Cost of sales ........................................... (23,445,963) (23,344,034) (34,473,248)
------------ ------------ ------------
Gross profit .................................... 11,920,360 10,638,520 9,124,604
------------ ------------ ------------
Operating expenses:
Research and development ............................. 3,645,520 3,746,433 4,005,021
Selling and marketing ................................ 2,376,572 3,013,517 3,408,480
General and administrative ........................... 1,447,319 1,635,329 2,072,667
Commissions .......................................... 1,558,193 1,509,848 1,992,786
------------ ------------ ------------
Total operating expenses ........................ 9,027,604 9,905,127 11,478,954
------------ ------------ ------------
Income (loss) from operations ........................... 2,892,756 733,393 (2,354,350)
Interest expense, net ................................... (163,470) (239,036) (425,949)
------------ ------------ ------------
Income (loss) before income taxes ....................... 2,729,286 494,357 (2,780,299)
Income tax (provision) benefit .......................... (911,000) (151,000) 586,000
------------ ------------ ------------
Net income (loss) ....................................... $ 1,818,286 $ 343,357 $ (2,194,299)
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-32
<PAGE>
Commonwealth Scientific Corporation
Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Additional
Paid-In Retained Treasury
Common Stock Capital Earnings Stock Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, March 31, 1996 .................... $ 318,880 $ 614,900 $ 5,741,019 $ (10,600) $ 6,664,199
Exercise of stock options ............. 4,000 43,720 -- -- 47,720
Net income ............................ -- -- 1,818,286 -- 1,818,286
----------- ----------- ----------- ----------- -----------
Balance, March 31, 1997 .................... 322,880 658,620 7,559,305 (10,600) 8,530,205
Exercise of stock options ............. 10,300 92,700 -- -- 103,000
Purchase of treasury stock ............ -- -- -- (400) (400)
Net income ............................ -- -- 343,357 -- 343,357
----------- ----------- ----------- ----------- -----------
Balance, March 31, 1998 .................... 333,180 751,320 7,902,662 (11,000) 8,976,162
Exercise of stock options ............. 3,500 31,500 -- -- 35,000
Net loss .............................. -- -- (2,194,299) -- (2,194,299)
----------- ----------- ----------- ----------- -----------
Balance, March 31, 1999 .................... $ 336,680 $ 782,820 $ 5,708,363 $ (11,000) $ 6,816,863
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-33
<PAGE>
Commonwealth Scientific Corporation
Statements of Cash Flows
<TABLE>
<CAPTION>
Years Ended March 31,
----------------------------------------------
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income .......................................................... $ 1,818,286 $ 343,357 $ (2,194,299)
Adjustments to reconcile net income to net cash (used in) provided by
operating activities-
Depreciation and amortization ............................................. 620,589 930,211 1,249,908
(Gain) loss on disposal of equipment ...................................... 8,912 7,179 (148,229)
Changes in assets and liabilities:
Accounts receivable ..................................................... (1,215,469) (672,405) 2,395,817
Inventories ............................................................. 538,938 (5,417,308) 1,764,268
Prepaid expenses and other current assets ............................... 38,564 (83,214) 72,220
Income taxes receivable/payable ......................................... -- (217,443) (732,905)
Deferred income taxes ................................................... (81,337) (30,506) (64,385)
Other assets ............................................................ -- -- 11,866
Accounts payable and accrued expenses ................................... 761,920 870,127 1,234,193
Income tax payable ...................................................... (225,416) -- --
Deposits on sales contracts ............................................. (450,043) 2,988,206 (3,312,919)
------------ ------------ ------------
Net cash provided by (used in) operating activities .................. 1,814,944 (1,281,796) 275,535
------------ ------------ ------------
Cash flows from investing activities:
Purchases of property and equipment ........................................ (2,004,735) (1,147,768) (1,952,524)
Proceeds from disposal of equipment ........................................ -- -- 148,229
------------ ------------ ------------
Net cash used in investing activities ................................ (2,004,735) (1,147,768) (1,804,295)
------------ ------------ ------------
Cash flows from financing activities:
Borrowings on line of credit ............................................... 4,256,574 6,854,568 13,878,298
Payments on lines of credit ................................................ (4,080,865) (5,122,408) (13,069,699)
Borrowings on long-term obligations ........................................ 20,000 1,012,000 1,082,140
Payments on long-term obligations .......................................... (248,512) (290,237) (449,276)
Exercise of stock options .................................................. 47,720 103,000 35,000
Purchase of treasury stock ................................................. -- (400) --
------------ ------------ ------------
Net cash (used in) provided by financing activities .................. (5,083) 2,556,523 1,476,463
------------ ------------ ------------
Net (decrease) increase in cash and cash equivalents ............................ (194,874) 126,959 (52,297)
Cash and cash equivalents, beginning of year .................................... 446,835 251,961 378,920
------------ ------------ ------------
Cash and cash equivalents, end of year .......................................... $ 251,961 $ 378,920 $ 326,623
============ ============ ============
Supplemental disclosures of cash flow information:
Cash paid during the year for-
Interest .................................................................. $ 136,650 $ 186,245 $ 355,654
============ ============ ============
Income taxes .............................................................. $ 1,217,747 $ 406,360 $ 205,875
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-34
<PAGE>
Commonwealth Scientific Corporation
Notes to Financial Statements as of March 31, 1999
1. Summary of Significant Accounting Policies:
Business
Commonwealth Scientific Corporation (the "Company"), a wholly owned
subsidiary of CVC, Inc. (the "Parent"), is engaged in the development,
production, sale, service, and repair of precision equipment for the purpose of
etching or deposition at submicron levels by means of ion beam technology. The
Company was acquired by CVC, Inc., on May 10, 1999 (see Note 13). The Parent is
committed to the necessary support of the operations and capital requirements of
the Company.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Significant estimates made by management include the adequacy
of reserves for doubtful accounts, obsolete and excess inventories, and customer
warranty obligations. Actual results could differ from those estimates.
Revenue Recognition
Revenue is recognized when all significant risks of ownership are
transferred and all significant related acts of performance are completed, which
is generally upon shipment of products.
Significant Customer
During fiscal year 1997, 28, 14, and 11 percent of net sales were derived
from three customers. In fiscal year 1999, the Company had one customer who
accounted for 32 percent of net sales. No other customer accounted for more than
10 percent of net sales.
Depreciation and Amortization
Depreciation and amortization are provided using the straight-line method
for financial reporting purposes over the following estimated useful lives:
Building and improvements ............................. 5 to 31.5 years
Manufacturing and test equipment ...................... 5 years
Office furniture and fixtures ......................... 5 to 7 years
Repair and maintenance costs are charged to expense when incurred.
Renewals and betterments that significantly increase the useful life of the
related asset are capitalized. Leasehold improvements are amortized over the
expected useful life or the lease term, whichever is shorter.
The Company implemented Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, "during 1996. As of March 31, 1999,
management determined there had been no impairment of long-lived assets as
defined by SFAS No. 121.
F-35
<PAGE>
Commonwealth Scientific Corporation
Notes to Financial Statements as of March 31, 1999 (Continued)
1. Summary of Significant Accounting Policies: (Continued)
The Company's anticipated gross revenues, the remaining estimated lives of
tangible assets, or both could be reduced significantly in the near term due to
changes in technology, available financing, or competitive pressures in any of
the Company's individual markets. As a result, the carrying amount of long-lived
assets could be reduced materially in the near term.
Research and Development Costs
Research and development costs are recognized as expenses in the period
incurred.
Warranty Services
The Company recognizes the estimated cost of warranty obligations at the
time the related products are sold. A one-year warranty on materials and
workmanship is offered on products sold.
Deposits On Sales Contracts
The Company negotiates progress payments on projects that require
significant engineering development and/or several months to complete.
Cash and Cash Equivalents
For financial reporting purposes, the Company considers demand deposits
and all highly liquid investments with a maturity of three months or less to be
cash and cash equivalents. As of March 31, 1998 and 1999, cash equivalents
consisted principally of investments in overnight reverse repurchase agreements
and commercial paper. The Company maintains bank accounts with federally insured
financial institutions. At times, balances may exceed insured limits.
2. Inventories:
Inventories are stated at the lower of cost (determined on a first-in,
first-out basis) or market. Work in progress and finished goods include
provisions for direct labor and manufacturing overhead. Inventories were
composed of the following as of March 31, 1998 and 1999:
1998 1999
------------ ------------
Raw materials ........................ $ 7,006,170 $ 7,247,963
Work in progress ..................... 8,062,980 6,666,877
Finished goods ....................... 1,035,053 852,875
------------ ------------
16,104,203 14,767,715
Less-Inventory reserve ............... (502,220) (930,000)
------------ ------------
$ 15,601,983 $ 13,837,715
============ ============
The Company's products are subject to technological change and changes in
the Company's competitive market. Management has provided reserves for excess
and obsolete inventories. It is possible that new product launches could result
in unforeseen changes in inventory requirements for which no reserve has been
provided.
F-36
<PAGE>
Commonwealth Scientific Corporation
Notes to Financial Statements as of March 31, 1999 (Continued)
3. Accrued Liabilities:
Accrued liabilities consist of the following:
1998 1999
---------- ----------
Commissions payable .......................... $ 540,162 $ 914,872
Vacation accrual ............................. 406,674 420,683
Installation and warranty accrual ............ 280,000 895,019
Accrued payroll .............................. 462,416 373,397
Other ........................................ 519,819 1,028,996
---------- ----------
Total .................................. $2,209,071 $3,632,967
========== ==========
4. Lines of Credit:
The Company has a bank line of credit, subject to annual approval, which
provides for borrowings up to the lesser of $1,800,000 or an amount equal to 70
percent of eligible accounts receivable that have been outstanding not more than
90 days. Amounts borrowed under the line are payable on demand. Interest accrues
at the bank's prime rate plus 0.5 percent (8.25 percent at March 31, 1999) and
is payable monthly. The amount borrowed on the line of credit was approximately
$1,385,000 and $693,000 at March 31, 1998 and 1999, respectively.
The Company has two bank lines of credit for inventory that provide for
borrowings up to $3,500,000. Amounts borrowed under these lines of credit are
payable on due dates between June 2001 and January 2002. Interest accrues at the
bank's prime rate plus 1.0 percent (8.75 percent at March 31, 1999) and is
payable monthly. The amount borrowed on the line of credit was $1,200,000 and
$2,700,000 at March 31, 1998 and 1999, respectively.
All lines of credit discussed above are collateralized by the same assets
as the notes payable to a bank discussed in Note 5. One of the inventory lines
of credit is personally guaranteed by the president of the Company in an amount
up to $2,000,000. The remaining amounts outstanding under the lines of credit,
together with the long-term obligations described below, are guaranteed by the
president of the Company in an amount up to $1,000,000. As further described in
Note 13, all amounts outstanding under these lines of credit were paid in full
subsequent to March 31, 1999.
F-37
<PAGE>
Commonwealth Scientific Corporation
Notes to Financial Statements As of March 31, 1999 (Continued)
5. Long-term Obligations:
Long-term obligations as of March 31, 1998 and 1999, are summarized as
follows:
<TABLE>
<CAPTION>
1998 1999
----------- -----------
<S> <C> <C>
Equipment loan payable to a bank, bearing interest at the bank's prime rate plus 0.5% (8.25% at
March 31, 1999). Principal payments of $24,764 plus interest are payable monthly. The note
matures in October 2004 ....................................................................... $ 1,956,369 $ 1,659,199
Equipment loan payable to a bank, bearing interest at the bank's prime rate plus 0.5% (8.25% at
March 31, 1999). Principal payments of $11,917 plus interest are payable monthly. The note
matures in November 2003 ...................................................................... -- 638,333
Automobile loan payable to a bank, bearing interest at the bank's prime rate plus 0.5% (8.25% at
March 31, 1999). Principal payments of $417 plus interest are payable monthly. The note
matures in December 2000 ...................................................................... 13,750 8,751
Future minimum payments under capital leases, payable through March 2002 ........................... 18,535 355,105
----------- -----------
1,988,654 2,661,388
Less-Interest included in capital lease payments ................................................... (2,148) (42,018)
----------- -----------
Total ........................................................................................ 1,986,506 2,619,370
Less-Current portion ............................................................................... (308,788) (551,540)
----------- -----------
$ 1,677,718 $ 2,067,830
=========== ===========
</TABLE>
The bank notes and lines of credit are secured by all the Company's
present and future fixtures, equipment, supplies, inventory, work in progress,
accounts receivable and contract rights, and a first lien deed of trust on the
Company's real property and improvements. These borrowings are personally
guaranteed by the president of the Company in an amount up to $1,000,000
pursuant to the guarantee on the lines of credit described in Note 4. According
to the terms of the loan agreements, the Company must satisfy various covenants,
including a debt to equity ratio of less than 2 to 1, a current ratio of greater
than 1 to 1, a net worth of at least $7,500,000, and debt service coverage of
greater than 1 to 1 among other restrictions. The Company was not in compliance
with the tangible net worth and debt service coverage ratios, consignments, sale
and transfer of assets, and capital expenditure and lease obligation covenants
as of March 31, 1999. The Company received a waiver from the bank for these
covenant violations in April 1999.
Future minimum principal payments under long-term obligations are as
follows:
Year Ending
March 31,
----------
2000 ................................................ $ 551,540
2001 ................................................ 553,422
2002 ................................................ 537,386
2003 ................................................ 440,170
2004 ................................................ 363,503
Thereafter .......................................... 173,349
----------
$2,619,370
==========
F-38
<PAGE>
Commonwealth Scientific Corporation
Notes to Financial Statements As of March 31, 1999 (Continued)
5. Long-term Obligations: (Continued)
As further described in Note 13, all amounts due under these bank loans
were paid in full subsequent to March 31, 1999.
6. Stock and Stock Options:
During fiscal year 1985, the Company's stockholders approved a stock
option plan (the "Stock Option Plan") for key employees, officers, and directors
of the Company for 100,000 shares of stock, of which 76,150 shares were granted
as of March 31, 1999. The Company's stock option plan expired in fiscal year
1994. The options outstanding under the Stock Option Plan are fully vested two
years after the grant date and are exercisable for three years.
Options issued after fiscal year 1994 but prior to March 1999 were issued
after the expiration of the Stock Option Plan and are classified as nonqualified
for tax purposes. The terms and conditions of these options are identical to
those options issued under the Stock Option Plan described above.
The options issued in March 1999 were also issued after the expiration of
the Stock Option Plan and are also classified as nonqualified for tax purposes.
These options vest immediately and are exercisable for five years.
The following table summarizes the Company's stock option activity for
each of the three years in the period ended March 31, 1999:
<TABLE>
<CAPTION>
Number of Weighted-Average Price
Shares Exercise Price Per Share
------------------------------------------------------
<S> <C> <C> <C>
Options outstanding at March 31, 1996 ............................ 54,250 $ 12.13 $10.00-$15.00
Granted ......................................................... - - -
Canceled/expired/forfeited ...................................... (8,000) 10.85 10.85
Exercised ....................................................... (4,000) 11.93 11.93
------------------------------------------------------
Options outstanding at March 31, 1997 ............................ 42,250 12.40 10.00- 15.00
Granted ......................................................... - - -
Canceled/expired/forfeited ...................................... (9,700) 10.77 10.00- 15.00
Exercised ....................................................... (10,300) 10.00 10.00
------------------------------------------------------
Options outstanding at March 31, 1998 ............................ 22,250 14.21 10.00- 15.00
Granted ......................................................... 59,254 27.28 26.00- 28.00
Canceled/expired/forfeited ...................................... (7,050) 25.79 15.00- 28.00
Exercised ....................................................... (3,500) 10.00 10.00
------------------------------------------------------
Options outstanding at March 31, 1999 ............................ 70,954 $ 24.18 $10.00-$28.00
======================================================
</TABLE>
As of March 31, 1998 and 1999, 22,250 and 42,354 options, respectively,
are exercisable. The weighted-average remaining life for options outstanding at
March 31, 1999, was approximately four years.
The Financial Accounting Standards Board ("FASB") Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation," defines a fair value based method of accounting for an employee
stock option or similar equity instrument. Under the fair value based method,
compensation cost is measured at the grant date based on the value of the award
and is recognized over the service period.
F-39
<PAGE>
Commonwealth Scientific Corporation
Notes to Financial Statements As of March 31, 1999 (Continued)
6. Stock and Stock Options: (Continued)
SFAS No. 123 allows an entity to continue to use the intrinsic value
method as defined by Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and management has elected to do so.
Under the intrinsic value method, compensation cost is the excess, if any, of
the quoted market price of the stock at grant date or other measurement date
over the amount an employee must pay to acquire the stock. The Company has
elected to continue to apply APB Opinion No. 25 to its stock-based compensation
awards to employees. Entities electing to remain with the accounting in APB
Opinion No. 25 must make pro forma disclosures of net income and earnings per
share as if the fair value based method of accounting had been applied.
Accordingly, net (loss) income would be as follows for each of the three years
in the period ended March 31, 1999:
Year As Reported Pro Forma
Ended Net (Loss) Income Net (Loss) Income
- ----- ----------------- -----------------
1997 ......................... $ 1,818,286 1,811,114
1998 ......................... 343,357 340,489
1999 ......................... (2,194,299) $(2,439,258)
The fair value of each option is estimated using the Black Scholes option
pricing model with the following assumption used for grants: no dividend yield,
no volatility, risk-free interest rate of 5.5 percent, and expected life of 5
years.
7. Income Taxes:
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." SFAS 109 requires the determination of deferred
tax liabilities and assets based on the differences between the financial
statement and income tax basis of assets and liabilities using enacted tax rates
in effect for the year in which the differences are expected to reverse. The
measurement of a deferred tax asset is adjusted by a valuation allowance, if
necessary, to recognize tax benefits only to the extent that based on available
evidence it is more likely than not that they will be realized.
The (benefit) provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Current:
Federal .......................................... $ 933,000 $ 190,000 $ (500,000)
State ............................................ 148,000 30,000 (57,000)
----------- ----------- -----------
1,081,000 220,000 (557,000)
Less-General business income tax credits ............ (116,000) (58,000) --
----------- ----------- -----------
965,000 162,000 (557,000)
----------- ----------- -----------
Deferred:
Federal .......................................... (46,000) (9,000) (26,000)
State ............................................ (8,000) (2,000) (3,000)
----------- ----------- -----------
(54,000) (11,000) (29,000)
----------- ----------- -----------
(Benefit) provision for income taxes ................ $ 911,000 $ 151,000 $ (586,000)
=========== =========== ===========
</TABLE>
F-40
<PAGE>
Commonwealth Scientific Corporation
Notes to Financial Statements As of March 31, 1999 (Continued)
7. Income Taxes: (Continued)
The components of the net deferred tax assets are as follows:
1998 1999
--------- ---------
Deferred tax assets:
Warranty reserves ......................... $ 104,000 $ 305,000
Obsolescence reserves ..................... 186,000 344,000
Bad-debt reserves ......................... 86,000 111,000
Commission accrual ........................ -- 162,000
Vacation accrual .......................... 125,000 104,000
Other ..................................... 55,000 31,000
Valuation allowance ....................... (100,000) (518,000)
--------- ---------
Gross deferred tax assets .................... 456,000 539,000
Deferred tax liabilities:
Depreciation and amortization ............. 202,000 221,000
--------- ---------
Net deferred tax assets ...................... $ 254,000 $ 318,000
========= =========
A reconciliation of the statutory income tax rate to the effective tax
rate included in the statements of operations is as follows:
<TABLE>
<CAPTION>
Year Ended March 31,
-----------------------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Income (Loss) before income tax ..................................... $ 2,729,286 $ 494,357 $(2,780,299)
Tax rate ............................................................ 34% 34% 34%
----------- ----------- -----------
Income tax expense (benefit) at statutory rate ...................... 927,957 168,081 (945,302)
Increases (decreases) in tax resulting from:
State income taxes, net of Federal income tax benefit ............ 97,514 19,920 (37,620)
Other ............................................................ (114,471) (37,001) (21,078)
Change in valuation allowance .................................... -- -- 418,000
-----------
Actual tax expense (benefit) ........................................ $ 911,000 $ 151,000 $ (586,000)
=========== =========== ===========
Effective tax rate .................................................. 33.4% 30.5% 21.1%
=========== =========== ===========
</TABLE>
8. Commitments and Contingencies:
Leases
In addition to the equipment under capital leases discussed in Note 5, the
Company has rental agreements for certain other real property and equipment
expiring at various dates through January 2002.
F-41
<PAGE>
Commonwealth Scientific Corporation
Notes to Financial Statements As of March 31, 1999 (Continued)
8. Commitments and Contingencies: (Continued)
The Company has the option to purchase the equipment at termination of the lease
for $1. The Company incurred approximately $398,000 and $624,697 in rent expense
in fiscal years 1998 and 1999, respectively. Future minimum lease and rental
commitments are as follows:
2000 ................................................ $537,310
2001 ................................................ 242,154
2002 ................................................ 153,762
--------
$933,226
========
Purchase Commitments
At March 31, 1999, the Company had contractual commitments to purchase
approximately $780,000 of inventory to be delivered within six months of fiscal
year end.
9. Geographic Information:
The information below summarizes the Company's product sales, service, and
other income for each of the fiscal years in the period ended March 31, 1999:
1997 1998 1999
----------- ----------- -----------
Domestic ................. $13,913,015 $15,624,769 $27,058,936
International ............ 21,453,308 18,357,785 16,538,916
----------- ----------- -----------
$35,366,323 $33,982,554 $43,597,852
=========== =========== ===========
10. Related Party:
During 1998 and 1999, a company owned by a former officer of the Company
performed research and development activities on the Company's behalf. In
addition, the officer received royalties on sales of certain of the Company's
products. During fiscal years 1998 and 1999, the Company paid approximately
$656,000 and $894,000, respectively, under that arrangement.
11. Employee Benefit Plan:
The Company established an employee contribution plan (the "Benefit
Plan"), effective January 1, 1987, under Section 401(k) of the Internal Revenue
Code. Any employee who has attained age 21 and has completed one year of service
with the Company is eligible to participate. Each participant may contribute
amounts to the Benefit Plan, subject to limits by the Internal Revenue Service,
in pretax contributions ranging from 1 to 15 percent of base salary. The Company
will match 50 percent of each participant's contribution up to $500 per year. At
the end of each fiscal year, the Company may contribute a percentage of its
profits to the Benefit Plan. The Company made discretionary contributions of
$50,000 and $0 to the Benefit Plan for the years ended March 31, 1998 and 1999,
respectively.
F-42
<PAGE>
Commonwealth Scientific Corporation
Notes to Financial Statements As of March 31, 1999 (Continued)
12. The Year 2000 Issue:
The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and if not addressed,
the impact on operations and financial reporting may range from minor errors to
significant systems failure, which could affect an entity's ability to conduct
normal business operations. It is not possible to be certain that all aspects of
the Year 2000 Issue affecting an entity, including those related to the efforts
of customers, suppliers, or other third parties, will be fully resolved.
13. Subsequent Events:
On May 10, 1999, CVC, Inc., acquired all the outstanding common stock of
the Company. As consideration, CVC, Inc., gave to each holder of Company stock
6.03601 shares of its common stock for each share of Company common stock held,
subject to certain adjustments described below. The merger agreement between
CVC, Inc., CVC Acquisition Corp., Commonwealth Scientific Corporation, and
Certain Stockholders Thereof, dated April 1, 1999, provides for 975,000 shares
to be held in escrow pending determination of the final purchase price. As of
May 10, the Company adopted CVC, Inc.'s year-end of September 30, 1999. The
final purchase price is dependent upon a number of representations and
warranties, including minimum net worth requirements and tax and environmental
liability considerations.
In May 1999, CVC, Inc., repaid the entire balance (approximately
$5,700,000 of principal and accrued interest) due under the Company's lines of
credit, as well as the long-term equipment and automobile loans payable to the
Company's bank. No further obligations exist under these debt instruments.
On April 1, 1999, the Company converted approximately $1.2 million in
accounts payable due to a creditor to an unsecured note payable, bearing
interest at 8 percent per annum. Beginning May 15, 1999, principal and interest
payments of $71,790 are payable monthly. Interest will accrue at a rate of 10
percent per annum in the event of the Company's failure to pay the amounts due
within ten days of the due date. Monthly installments shall continue until the
entire indebtedness is repaid; however, any remaining indebtedness, if not
sooner paid, shall be due and payable on October 15, 2000.
F-43
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
AMONG
VEECO INSTRUMENTS INC.,
VEECO ACQUISITION CORP.
AND
CVC, INC.
February 29, 2000
<PAGE>
TABLE OF CONTENTS
Page
----
Section 1. DEFINITIONS......................................................1
1.1. Certain Definitions.....................................1
Section 2. THE MERGER.......................................................8
2.1. The Merger..............................................8
2.2. Effective Time of the Merger............................8
2.3. Closing of the Merger...................................8
2.4. Effects of the Merger...................................9
2.5. Conversion of Shares....................................9
2.6. Closing of the Company's Transfer Books................10
2.7. Exchange of Certificates...............................10
2.8. Tax Consequences.......................................11
2.9. Accounting Consequences................................11
2.10. Further Action.........................................11
2.11. Subsequent Action......................................11
Section 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................12
3.1. Due Organization; Subsidiaries; Etc....................12
3.2. Capitalization.........................................12
3.3. Authorization..........................................12
3.4. Reports................................................13
3.5. No Undisclosed Liabilities.............................13
3.6. Compliance with Law; Governmental Authorizations.......13
3.7. No Conflicts...........................................13
3.8. Contracts..............................................14
3.9. Litigation.............................................15
3.10. Taxes..................................................15
3.11. Absence of Certain Changes.............................16
3.12. Employee Benefit Plans.................................16
3.13. Intellectual Property..................................18
3.14. Environmental Matters..................................21
3.15. Labor Relations........................................21
3.16. Brokers and Finders....................................22
3.17. Accuracy of Representations and Warranties.............22
3.18. Pooling of Interests; Reorganization...................22
3.19. Board of Recommendation................................22
3.20. Fairness Opinion.......................................22
3.21. State Antitakeover Statutes............................22
Section 4. REPRESENTATIONS AND WARRANTIES OF VEECO AND ACQUISITION.........22
4.1. Organization of Veeco and Acquisition..................23
4.2. Capitalization.........................................23
4.3. Non-Contravention......................................23
4.4. Reports................................................24
4.5. Absence of Certain Changes.............................24
4.6. No Undisclosed Liabilities.............................25
4.7. Litigation.............................................25
4.8. Restrictions on Business Activities....................25
4.9. Governmental Authorization.............................25
4.10. Taxes..................................................25
i
<PAGE>
Page
----
4.11. Pooling of Interests; Reorganization...................25
4.12. Brokers and Finders....................................26
4.13. Accuracy of Representations and Warranties.............26
4.14. Board Recommendation...................................26
4.15. Fairness Opinion.......................................26
4.16. Compliance With Laws...................................26
4.17. Environmental Matters..................................26
4.18. Intellectual Property Rights...........................27
Section 5. COVENANTS.......................................................28
5.1. Access.................................................28
5.2. Conduct of the Business of the Parties Pending
the Closing Date.......................................29
5.3. Conduct of Business of the Company and Veeco...........29
5.4. Consents...............................................30
5.5. Stock Options..........................................30
5.6. Employee Benefits......................................31
5.7. Indemnification of Officers and Directors..............31
5.8. Pooling of Interests...................................32
5.9. Environmental Transfer Laws............................32
5.10. Tax Matters............................................32
5.11. Letters of the Parties' Accountants....................33
5.12. Listing................................................33
5.13. Board of Directors; Whitman Employment Agreement.......33
5.14. Notice of Breach; Disclosure...........................33
5.15. Payment of Indebtedness by Affiliates..................33
5.16. No Solicitation -- Company.............................33
5.17. No Solicitation -- Veeco...............................34
5.18. Blue Sky Laws..........................................35
5.19. Additional Agreements..................................35
5.20. Disclosure.............................................35
5.21. Affiliate Agreements...................................36
5.22. Registration Statement; Joint Proxy Statement..........36
5.23. Company Stockholders' Meeting..........................37
5.24. Veeco Stockholders' Meeting............................37
Section 6. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES .........38
6.1. Effectiveness of Registration Statement................38
6.2. Stockholder Approval...................................38
6.3. Pooling Letters........................................38
6.4. Litigation.............................................38
6.5. HSR Act................................................38
6.6. Listing................................................39
Section 7. CONDITIONS PRECEDENT TO VEECO'S AND ACQUISITION'S OBLIGATIONS...39
7.1. Representations and Warranties.........................39
7.2. Performance of Covenants...............................39
7.3. Consents...............................................39
7.4. Agreements and Documents...............................39
7.5. Material Adverse Effect................................39
7.6. Registration Rights Agreement..........................40
ii
<PAGE>
Page
----
Section 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY.............40
8.1. Representations and Warranties........................40
8.2. Performance of Covenants..............................40
8.3. Consents and Approvals................................40
8.4. Material Adverse Effect...............................40
8.5. Documents.............................................40
Section 9. TERMINATION....................................................40
9.1. Termination...........................................40
9.2. Effect of Termination.................................42
9.3. Expenses; Termination Fees............................42
Section 10. MISCELLANEOUS..................................................43
10.1. Successors............................................43
10.2. Amendment.............................................43
10.3. Waiver................................................43
10.4. No Survival of Representations and Warranties;
Survival of Tax Covenants.............................43
10.5. Entire Agreement; Counterparts........................44
10.6. Governing Law.........................................44
10.7. Disclosure Schedules..................................44
10.8. Attorneys' Fees.......................................44
10.9. Assignment............................................44
10.10. Notices...............................................44
10.11. Headings..............................................45
10.12. Exhibits and Schedules................................45
10.13. Severability..........................................45
10.14. No Third-Party Beneficiaries..........................45
EXHIBITS
Exhibit A Company Stockholders Voting Agreement
Exhibit B Veeco Stockholders Voting Agreement
Exhibit C Certificate of Merger
Exhibit D Whitman Employment Agreement
Exhibit E Form of Company Affiliates Agreement
Exhibit F Form of Veeco Affiliates Agreement
SCHEDULES
Schedule A Company Stockholders Subject to Company Stockholder Voting
Agreement
Schedule B Veeco Stockholders Subject to Veeco Stockholder Voting Agreement
Schedule C Company Affiliates
Schedule D Veeco Affiliates
Schedule E Officers of Acquisition Immediately Prior to the Effective Time
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Merger Agreement"), is made
as of February 29, 2000, by and among Veeco Instruments Inc., a Delaware
corporation ("Veeco"), Veeco Acquisition Corp., a Delaware corporation and a
newly-formed wholly-owned first tier subsidiary of Veeco ("Acquisition"), and
CVC, Inc., a Delaware corporation (the "Company").
WHEREAS, The Boards of Directors of the Company, Acquisition and
Veeco have determined that it is advisable and in the best interests of their
respective stockholders for Acquisition to merge with and into the Company, with
the result that the Company shall be the surviving corporation and shall become
a wholly-owned subsidiary of Veeco (the "Merger"), all upon the terms and
conditions set forth herein and in accordance with the provisions of the
Delaware General Corporation Law (the "DGCL").
WHEREAS, Veeco has entered into that certain Voting Agreement in the
form attached hereto as Exhibit A (the "Company Stockholder Voting Agreement"),
dated as of the date hereof, with the stockholders of the Company listed on
Schedule A to this Merger Agreement. Pursuant to the Company Stockholder Voting
Agreement, such stockholders of the Company have granted to Veeco irrevocable
proxies to vote the shares of Company Common Stock (as defined) held by them in
favor of approving this Merger Agreement, the Merger and the other transactions
contemplated hereby, and against any action, any failure to act, or agreement
that would result in a breach of any covenant, representation or agreement of
the Company under this Merger Agreement.
WHEREAS, the Company has entered into that certain Voting Agreement
in the form attached hereto as Exhibit B (the "Veeco Stockholder Voting
Agreement"), dated as of the date hereof, with the stockholders of Veeco listed
on Schedule B to this Merger Agreement. Pursuant to the Veeco Stockholder Voting
Agreement, such stockholders of Veeco have granted to the Company irrevocable
proxies to vote the Veeco Shares (as defined) held by them in favor of approving
this Merger Agreement, the Merger and the other transactions contemplated
hereby, and against any action, any failure to act, or agreement that would
result in a breach of any covenant, representation or agreement of Veeco under
this Merger Agreement.
WHEREAS, the Merger is intended to qualify as a reorganization, as
described in Section 368(a) of the Code (as defined below).
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
SECTION 1. DEFINITIONS.
1.1. Certain Definitions. For purposes of this Merger Agreement, the
following terms shall have the following meanings:
"Acquired Corporations" shall mean the Company, together with each
of its Subsidiaries.
"Acquisition" shall have the meaning set forth in the introductory
paragraph of this Merger Agreement.
"Affiliate" of any Person shall mean a Person which, directly or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, such Person.
"Benefit Plans" shall have the meaning set forth in Section 3.12(a).
"Certificate of Merger" shall have the meaning set forth in Section
2.02
<PAGE>
"Closing" shall have the meaning set forth in Section 2.03.
"Closing Date" shall have the meaning set forth in Section 2.03.
"Closing Price Per Share" shall mean the closing price per Veeco
Share as reported by the NASDAQ on the trading day immediately preceding the
Closing Date.
"COBRA" shall have the meaning set forth in Section 3.12(g).
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"Company" shall have the meaning set forth in the introductory
paragraph to this Merger Agreement.
"Company Acquisition Proposal" shall mean any offer, proposal,
inquiry or indication of interest (other than an offer, proposal, inquiry or
indication of interest by Veeco) contemplating or otherwise relating to any
Company Acquisition Transaction.
"Company Acquisition Transaction" shall mean any transaction or
series of transactions involving:
(a) any merger, consolidation, share exchange, business combination,
issuance of securities, acquisition of securities, tender offer, exchange offer
or other similar transaction (i) in which such the Company or any other Acquired
Corporation is a constituent corporation, (ii) in which a Person or "group" (as
defined in the Exchange Act and the rules promulgated thereunder) of Persons
directly or indirectly acquires beneficial or record ownership of securities
representing more than 20% of the outstanding securities of any class of voting
securities of the Company or another Acquired Corporation, or (iii) in which the
Company or an Acquired Corporation issues securities representing more than 20%
of the outstanding securities of any class of voting securities of the Company
or such Acquired Corporation;
(b) any sale, lease, exchange, transfer, license, acquisition or
disposition of any business or businesses or assets that constitute or account
for 20% or more of the consolidated net revenues, net income or assets of the
Company or any other Acquired Corporation; or
(c) any liquidation or dissolution of the Company or any other
Acquired Corporation.
"Company Affiliate" shall have the meaning set forth in Section
5.21(a).
"Company Affiliate Agreement" shall have the meaning set forth in
Section 5.21(a).
"Company Agent" shall have the meaning set forth in Section 3.13(h).
"Company Board Recommendation" shall have the meaning set forth in
Section 5.23(b).
"Company Broker" shall have the meaning set forth in Section 3.16.
"Company Common Stock" shall mean the common stock of the Company,
par value $0.01 per share.
"Company Disclosure Schedule" shall mean the disclosure schedule
that has been prepared by the Company in accordance with the requirements of
Section 9.07 hereof and that has been delivered by the Company to Veeco on the
date of this Merger Agreement and signed by the President of the Company.
"Company Financial Statements" shall have the meaning set forth in
Section 3.04.
2
<PAGE>
"Company Intellectual Property" shall have the meaning set forth in
Section 3.13(a).
"Company-Owned IP" shall have the meaning set forth in Section
3.13(g).
"Company-Owned IP Registrations" shall have the meaning set forth in
Section 3.13(e).
"Company SEC Documents" shall mean each statement, report,
registration statement (including the related prospectus in the form filed
pursuant to Rule 424(b) of the Securities Act) and definitive proxy statement,
and all other filings filed with the SEC by the Company since November 12, 1999
and prior to the Effective Time.
"Company Stock Certificate shall have the meaning set forth in
Section 2.06.
"Company Stockholder's Meeting" shall have the meaning set forth in
Section 5.23(a).
"Company Stockholder Voting Agreement" shall have the meaning set
forth in the second WHEREAS clause to this Merger Agreement.
"Company Triggering Event" shall be deemed to have occurred if: (i)
the Board of Directors of the Company shall have failed to recommend that the
Company's stockholders vote to adopt this Merger Agreement, or shall have
withdrawn or modified in a manner adverse to Veeco the Company Board
Recommendation; (ii) the Company shall have failed to include in the Joint Proxy
Statement, the Company Board Recommendation or a statement to the effect that
the Board of Directors of the Company has determined and believes that the
Merger is in the best interests of the Company's stockholders; (iii) the Board
of Directors of the Company shall have approved, endorsed or recommended any
Company Acquisition Proposal; (iv) the Company shall have entered into any
letter of intent or similar document or any Contract relating to any Company
Acquisition Proposal; (v) the Company shall have failed to hold the Company
Stockholders' Meeting as promptly as practicable and in any event within 45 days
after the Form S-4 Registration Statement is declared effective under the
Securities Act, unless a stop order shall have been issued by the SEC with
respect to the S-4 Registration Statement or an injunction shall have been
issued by a court of competent jurisdiction or other appropriate Governmental
Authority to restrain or prohibit the consummation of the Merger; or (vi) any of
the Acquired Corporations or any Representative of any of the Acquired
Corporations shall have violated in a material manner any of the restrictions
set forth in Section 5.16.
"Confidential Company IP Information" shall have the meaning set
forth in Section 3.13(k).
"Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any License or governmental
authorization).
"Constituent Corporations" shall have the meaning set forth in
Section 2.01.
"Continuing Employees" shall have the meaning set forth in Section
5.06.
"Contract" shall mean any agreement, arrangement, commitment,
indemnity, indenture, instrument or lease, including any and all amendments,
supplements, and modifications (whether oral or written) thereto, whether or not
in writing.
"DGCL" shall have the meaning set forth in the first WHEREAS clause
to this Merger Agreement.
"Effective Time" shall have the meaning set forth in Section 2.02.
"Environment" shall mean the soil, land surface or subsurface
strata, surface waters (including navigable waters, ocean waters, streams,
ponds, drainage basins and wetlands), groundwaters, drinking water supply,
stream sediments; ambient air (including indoor air), plant and animal life, and
any other environmental medium or natural resource.
3
<PAGE>
"Environmental Laws" shall mean any state, federal or local laws,
ordinances, codes, regulations, statutes, orders, judgments, decrees, permits or
licenses relating to pollution, natural resources, protection of the Environment
or public health and safety, including, without limitation, laws and regulations
relating to the use, treatment, storage, release, disposal or transportation of
Hazardous Substances or the handling and disposal of medical and biological
waste.
"Equity Securities" shall mean any (i) capital stock or any
securities representing any other equity interest or (ii) any securities
convertible into or exchangeable for capital stock or any other equity interest,
or any other rights, warrants or options to acquire any of the foregoing
securities.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall mean, with respect to any Person, (i) any
corporation which is a member of a controlled group of corporations, within the
meaning of Section 414(b) of the Code, of which that Person is a member, (ii)
any trade or business (whether or not incorporated) which is a member of a group
of trades or businesses under common control, within the meaning of Section
414(c) of the Code, of which that Person is a member and (iii) any member of an
affiliated service group, within the meaning of Section 414(m) and (o) of the
Code, of which that Person or any Person described in clause (i) or (ii) is a
member.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Agent" shall have the meaning set forth in Section
2.07(a).
"Exchange Fund" shall have the meaning set forth in Section 2.07(a).
"Exchange Ratio" shall have the meaning set forth in Section
2.05(a).
"Existing Policy" shall have the meaning set forth in Section
5.07(b).
"Form S-4 Registration Statement" shall mean the registration
statement on Form S-4 to be filed with the SEC by Veeco in connection with
issuance of Veeco Shares in the Merger, as said registration statement may be
amended prior to the time it is declared effective by the SEC.
"GAAP" shall mean United States generally accepted accounting
principles.
"Governmental Authority" shall mean any government or any agency,
bureau, board, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether federal, state or
local, domestic or foreign.
"Hazardous Substances" shall mean (i) any hazardous or toxic waste,
substance or material defined as such in (or for the purposes of) any
Environmental Law, (ii) asbestos-containing material, (iii) medical and
biological waste, (iv) polychlorinated biphenyls, (v) petroleum products,
including gasoline, fuel oil, crude oil and other various constituents of such
products and (vi) any other chemicals, materials or substances, exposure of any
living organism to which is prohibited, limited, or regulated by any
Environmental Laws.
"HIPAA" shall have the meaning set forth in Section 3.12(g).
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Incurable Material Adverse Effect" shall have the meaning set forth
in the paragraph following Section 9.01(k).
"Indemnified Persons" shall have the meaning set forth in Section
5.07(a).
4
<PAGE>
"Information Technology" shall mean computer software, computer
firmware, computer hardware (whether general or specific purpose) and other
similar or related items of automated, computerized and/or software systems
developed by or for any Acquired Corporation.
"IRS" shall mean the Internal Revenue Service of the United States
or any successor agency, and, to the extent relevant, the United States
Department of the Treasury.
"Joint Proxy Statement" shall mean the joint proxy
statement/prospectus to be sent to the Company's stockholders in connection with
the Company Stockholders' Meeting and to Veeco's stockholders in connection with
the Veeco Stockholders' Meeting.
"knowledge" shall mean, (i) with respect to an individual, the
actual knowledge of such individual and (ii) with respect to any Person other
than an individual, the actual knowledge of the officers and directors of a
corporate entity or other Persons performing similar functions for any other
type of non-individual Person.
"Law" shall mean any constitutional provision or any statute or
other law, rule or regulation of any Governmental Authority and any decree,
injunction, judgment, order, ruling, assessment or writ.
"Legal Proceeding" shall mean any action, suit, litigation,
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding), hearing, inquiry, audit, examination or
investigation commenced, brought, conducted or heard by or before, or otherwise
involving, any court or other Governmental Authority or any arbitrator or
arbitration panel.
"Licensed-In Agreements" shall have the meaning set forth in Section
3.13(f)(i).
"Licenses" shall have the meaning set forth in Section 3.06(b).
"Lien" shall mean any lien, pledge, mortgage, deed of trust,
security interest, claim, lease, charge, option, right of first refusal,
easement, servitude, encroachment or other survey defect, transfer restriction
or other encumbrance of any nature whatsoever, except for liens for Taxes not
yet due or delinquent.
"Material Adverse Effect" shall mean, with respect to the Company or
Veeco (as applicable), a material adverse effect in the business, financial
condition or results of operations of the Company or Veeco (as applicable) and
their respective Subsidiaries, taken as a whole, provided, that a Material
Adverse Effect shall not be deemed to have occurred primarily as a result of
fluctuations in (i) Veeco's or the Company's (as applicable) order rate,
revenues or net income for any fiscal period prior to the consummation of the
Merger or (ii) the number of full-time employees of Veeco or the Company (as
applicable).
"Material Contract" shall mean any Contract required to be listed on
Schedule 3.08(a) of the Company Disclosure Schedule.
"Merger" shall have the meaning set forth in the first WHEREAS
clause to this Merger Agreement.
"Merger Agreement" shall mean this Agreement and Plan of Merger, as
amended, supplemented or otherwise modified from time to time.
"Merger Consideration" shall have the meaning set forth in Section
2.05(a).
"Multiemployer Plan" shall have the meaning set forth in Section
3.12(a).
"NASDAQ" shall mean The NASDAQ Stock Market, Inc.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
5
<PAGE>
"Person" shall mean any individual, corporation, limited liability
company, partnership, firm, joint venture, association, joint-stock company,
trust, unincorporated organization, or other entity or organization, whether or
not a legal entity, and including, without limitation, any Governmental
Authority.
"Registration Rights Agreement" shall mean that certain Amended and
Restated Registration Rights Agreement, dated as of May 10, 1999, among the
Company and certain holders of its capital stock.
"Release" shall mean any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping, or other releasing, whether intentional
or unintentional.
"Representatives" shall mean officers, directors, employees, agents,
attorneys, accountants, advisors and other representatives.
"Required Company Stockholder Vote" shall mean the affirmative vote
of the holders of a majority of the shares of Company Common Stock outstanding
on the record date for the Company Stockholders Meeting.
"Required Veeco Stockholder Vote" shall mean the affirmative vote of
the holders of more than a majority of the Veeco Shares present and voting at
the Veeco Stockholders Meeting.
"SEC" shall mean the United States Securities and Exchange
Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Subsidiary" A Person shall be deemed to be a "Subsidiary" of
another Person if such Person directly or indirectly owns, beneficially or of
record, (a) an amount of voting securities or other interests in such Person
that is sufficient to enable such Person to elect at least a majority of the
members of such Person's Board of Directors or other governing body, or (b) at
least 50% of the outstanding entity or financial interests of such Person.
"Superior Company Proposal" shall mean an unsolicited, bona fide
written offer made by a third party to purchase all outstanding Company Common
Stock on terms that the Board of Directors of the Company determines to be more
favorable to the Company's stockholders than the terms of the Merger, in its
reasonable judgment, after having taken into account, among other relevant
considerations, a written opinion of an independent financial advisor of
nationally recognized reputation; provided, however, that any such offer shall
not be deemed to be a "Superior Proposal" if any financing required to
consummate the transaction contemplated by such offer is not committed and is
not reasonably capable of being obtained by such third party.
"Superior Veeco Proposal" shall mean an unsolicited, bona fide,
written offer made by a third party to purchase all outstanding Veeco Shares on
terms that the Board of Directors of Veeco determines make it more favorable to
the stockholders of Veeco for Veeco to consummate such Veeco Acquisition
Transaction, than for Veeco to consummate the Merger, in its reasonable
judgement, after having taken into account, among other relevant considerations,
a written opinion of an independent financial advisor of nationally recognized
reputation.
"Surviving Corporation" shall have the meaning set forth in Section
2.01.
"Tax" or "Taxes" shall mean any and all taxes (whether Federal,
state, local or municipal, and whether domestic or foreign), including, without
limitation, income, profits, franchise, gross receipts, payroll, sales,
employment, use, property, withholding, excise, occupation, value added, ad
valorem, transfer and other taxes, duties or assessments of any nature
whatsoever, together with any interest, penalties or additions to tax imposed
with respect thereto.
"Tax Returns" shall mean any returns (including any information
returns), reports and forms required to be filed with any Governmental Authority
in connection with the determination, assessment, collection or payment of any
Taxes or in connection with the administration, implementation or enforcement of
or compliance with any Law relating to any Tax.
6
<PAGE>
"Threatened" A claim, proceeding, dispute, action or other matter
will be deemed to have been "Threatened" if any demand or statement has been
made (orally or in writing) or any notice has been given (orally or in writing)
that would lead a prudent Person to conclude that such a claim, proceeding
dispute, action or other matter is likely to be asserted, commenced, taken or
otherwise pursued in the future.
"Veeco" shall have the meaning set forth in the introductory
paragraph of this Merger Agreement.
"Veeco Affiliate" has the meaning set forth in Section 5.21(b).
"Veeco Affiliate Agreement" has the meaning set forth in Section
5.21(b).
"Veeco Acquisition Proposal" shall mean any offer, proposal, inquiry
or indication of interest contemplating or otherwise relating to any Veeco
Acquisition Transaction.
"Veeco Acquisition Transaction" shall mean any transaction or series
of transactions involving:
(a) any merger, consolidation, share exchange, business combination,
issuance of securities, acquisition of securities, tender offer, exchange offer
or other similar transaction (i) in which Veeco is a constituent corporation,
(ii) in which a Person or "group" (as defined in the Exchange Act and the rules
promulgated thereunder) of Persons directly or indirectly acquires beneficial or
record ownership of securities representing more than 20% of the outstanding
securities of any class of voting securities of Veeco or a Subsidiary thereof,
or (iii) in which Veeco issues securities representing more than 20% of the
outstanding securities of any class of voting securities of Veeco or a
Subsidiary thereof;
(b) any sale, lease, exchange, transfer, license, acquisition or
disposition of any business or businesses or assets that constitute or account
for 20% or more of the consolidated net revenues, net income or assets of Veeco;
or
(c) any liquidation or dissolution of Veeco.
"Veeco Authorizations" shall have the meaning set forth in Section
4.09.
"Veeco Balance Sheet" shall have the meaning set forth in Section
4.06.
"Veeco Balance Sheet Date" shall have the meaning set forth in
Section 4.06.
"Veeco Board Recommendation" shall have the meaning set forth in
Section 5.24(b).
"Veeco Confidential IP Information" shall have the meaning set forth
in Section 4.18(g).
"Veeco Disclosure Schedule" shall mean the disclosure schedule that
has been prepared by Veeco in accordance with the requirements of Section 9.07
hereof and that has been delivered by Veeco to the Company on the date of this
Merger Agreement and signed by the President of Veeco.
"Veeco Financial Statements" shall have the meaning set forth in
Section 4.04.
"Veeco Intellectual Property" shall have the meaning set forth in
Section 4.18(a).
"Veeco Options" shall have the meaning set forth in Section 4.02(b).
"Veeco-Owned IP" shall have the meaning set forth in Section
4.18(e).
"Veeco-Owned IP Registrations" shall have the meaning set forth in
Section 4.18(c).
7
<PAGE>
"Veeco SEC Documents" shall mean each statement, report,
registration statement (including the related prospectus in the form filed
pursuant to Rule 424(b) of the Securities Act) and definitive proxy statement,
and other filings filed with the SEC by Veeco since January 1, 1996 and prior to
the Effective Time.
"Veeco Shares" shall mean the common stock, $.01 par value per
share, of Veeco.
"Veeco Stockholders' Meeting" shall have the meaning set forth in
Section 5.24(a).
"Veeco Stockholder Voting Agreement" shall have the meaning set
forth in the third WHEREAS clause to this Merger Agreement.
"Veeco Triggering Event" shall be deemed to have occurred if: (i)
the Board of Directors of Veeco shall have failed to recommend that Veeco's
stockholders vote to adopt this Merger Agreement, or shall have withdrawn or
modified in a manner adverse to the Company the Veeco Board Recommendation; (ii)
Veeco shall have failed to include in the Joint Proxy Statement the Veeco Board
Recommendation or a statement to the effect that the Board of Directors of Veeco
has determined and believes that the Merger is in the best interests of Veeco's
stockholders; (iii) the Board of Directors of Veeco shall have approved,
endorsed or recommended any Veeco Acquisition Proposal; (iv) Veeco shall have
entered into any letter of intent or similar document or any Contract relating
to a Veeco Acquisition Proposal; (v) Veeco shall have failed to hold the Veeco
Stockholders Meeting on the date of the Company Stockholders Meeting or as
promptly as practicable thereafter and, in any event, within five days after the
date of the Company Stockholders Meeting; or (vi) Veeco or any Representative of
Veeco shall have violated in a material manner any of the restrictions set forth
in Section 5.17.
"Veeco's Broker" shall have the meaning set forth in Section 4.12.
"Whitman Employment Agreement" shall have the meaning set forth in
Section 5.13.
1.2. The words "hereof," "herein," "hereby" and "hereunder," and
words of like import, refer to this Merger Agreement as a whole and not to any
particular Section hereof. References herein to any Section, Schedule or Exhibit
refer to such Section of, or such Schedule or Exhibit to, this Merger Agreement,
unless the context otherwise requires. All pronouns and any variations thereof
refer to the masculine, feminine or neuter gender, singular or plural, as the
context may require. The word "including," when used herein, means "including,
without limitation."
SECTION 2. THE MERGER.
2.1. The Merger. At the Effective Time of the Merger, Acquisition
shall be merged with and into the Company. The separate existence of Acquisition
shall thereupon cease and the Company shall continue its corporate existence as
the surviving corporation (the "Surviving Corporation") under the DGCL Laws of
the State of Delaware under its present name. The Company and Acquisition are
sometimes referred to collectively herein as the "Constituent Corporations."
2.2. Effective Time of the Merger. At the Closing, the parties
hereto shall cause a certificate of merger substantially in the form of Exhibit
C annexed hereto (the "Certificate of Merger") to be executed and filed with the
Secretary of State of the State of Delaware, as provided in Section 252 of the
DGCL, and shall take all such other and further actions as may be required by
Law to make the Merger effective. The Merger shall become effective as of the
date and time of the filing of the Certificate of Merger. The date and time of
such effectiveness are referred to herein as the "Effective Time."
2.3. Closing of the Merger. (a) Unless this Merger Agreement shall
theretofore have been terminated pursuant to the provisions of Section 9.01
hereof, the closing of the Merger (the "Closing") shall take place as promptly
as practicable, but no later than the second business day, following the day on
which the last of the conditions (other than conditions which, by their nature,
are to be satisfied at Closing, but subject to those conditions) set forth in
Articles VI, VII and VIII hereof are fulfilled or waived (by the relevant party
or parties), subject to applicable
8
<PAGE>
Laws (the "Closing Date"), at the offices of Kaye, Scholer, Fierman, Hays &
Handler, LLP, 425 Park Avenue, New York, New York 10022, unless another time,
date or place is agreed to in writing by the parties hereto.
(b) Subject to the provisions of this Merger Agreement, Veeco,
Acquisition and the Company shall cause to be executed and filed at the Closing
the Certificate of Merger, and shall cause the Certificate of Merger to be
recorded in accordance with the provisions of the DGCL and shall take any and
all other lawful actions and do any and all other lawful things to cause the
Merger to become effective.
2.4. Effects of the Merger. At the Effective Time of the Merger:
(a) the separate existence of Acquisition shall cease and
Acquisition shall be merged with and into the Company, which shall be the
Surviving Corporation;
(b) the Certificate of Incorporation and By-Laws of the
Company as in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation and By-Laws of the Surviving Corporation, until
each shall thereafter be amended in accordance with each of their terms and as
provided by Law;
(c) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the respective individuals who are
directors and officers of Acquisition immediately prior to the Effective Time;
(d) the Surviving Corporation shall possess all the rights,
privileges, immunities and franchises, of a public as well as of a private
nature, of each of the Constituent Corporations, and all property, real,
personal, and mixed, and all debts due on whatever account, and all other choses
in action, and all and every other interest of or belonging to or due to each of
the Constituent Corporations shall be taken and deemed to be transferred to and
vested in the Surviving Corporation without further act or deed; and
(e) the Surviving Corporation shall thenceforth be responsible
and liable for all liabilities and obligations of each of the Constituent
Corporations, and any claim existing or action or proceeding pending by or
against either of the Constituent Corporations may be prosecuted as if the
Merger had not taken place or the Surviving Corporation may be substituted in
its place. Neither the rights of creditors nor Liens upon the property of either
of the Constituent Corporations shall be impaired by the Merger.
2.5. Conversion of Shares. As of the Effective Time, by virtue of
the Merger and without any further action on the part of Veeco, Acquisition, the
Company or any holder of any Equity Securities of the Constituent Corporations:
(a) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time shall be converted into the right to
receive 0.43 Veeco Shares (the "Merger Consideration"). Accordingly, 0.43 is
hereinafter referred to as the "Exchange Ratio."
(b) Each share of common stock, par value $0.01 per share, of
Acquisition issued and outstanding immediately prior to the Effective Time shall
be converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock, par value $0.01 per share, of the Surviving
Corporation.
(c) The Merger Consideration shall be adjusted to reflect
fully the effect of any stock split, reverse split, stock dividend (including
any dividend or distribution of securities convertible into Veeco Shares or
Company Common Stock), reorganization, recapitalization or other like change
with respect to Veeco Shares or Company Common Stock occurring after the date of
this Merger Agreement and prior to the Effective Time or after the Effective
Time if the record date with respect thereto is set after the date of this
Merger Agreement and prior to the Effective Time.
(d) No fraction of a Veeco Share will be issued in exchange
for surrendered shares of Company Common Stock, but in lieu thereof each holder
of shares of Company Common Stock who would otherwise
9
<PAGE>
be entitled to a fraction of a Veeco Share (after aggregating all fractional
shares of Veeco Shares to be received by such holder) shall receive from Veeco
an amount of cash (rounded to the nearest whole cent) equal to the product of
(i) such fraction, multiplied by (ii) the Closing Price Per Share.
(e) All Company Common Stock, by virtue of the Merger and
without any action on the part of the holders thereof, shall no longer be
outstanding and shall be canceled and retired and shall cease to exist, and each
holder of a Company Stock Certificate shall thereafter cease to have any rights
with respect to the shares of Company Common Stock represented thereby, except
the right to receive the Merger Consideration for such Company Common Stock upon
the surrender of such Company Stock Certificate in accordance with this Section
and Section 2.07 hereof.
(f) If any shares of Company Common Stock outstanding
immediately prior to the Effective Time are unvested or are subject to a
repurchase option, risk of forfeiture or other condition under any applicable
restricted stock purchase agreement or other agreement with the Company or any
other Acquired Corporation or under which the Company or any other Acquired
Corporation has any rights, then the Veeco Shares issued in exchange for such
shares of Company Common Stock will also be unvested and subject to the same
repurchase option, risk of forfeiture or other condition, and the certificates
representing such Veeco Shares may accordingly be marked with appropriate
legends. The Company shall take all action that may be necessary to ensure that,
from and after the Effective Time, Veeco is entitled to exercise any such
repurchase option or other right set forth in any such restricted stock purchase
agreement or other agreement.
2.6. Closing of the Company's Transfer Books. At the Effective Time,
the stock transfer books of the Company shall be closed with respect to all
shares of Company Common Stock outstanding immediately prior to the Effective
Time. No further transfer of any such shares of Company Common Stock shall be
made on such stock transfer books after the Effective Time. If, after the
Effective Time, a valid certificate previously representing any shares of
Company Common Stock (a "Company Stock Certificate") is presented to the
Exchange Agent or to the Surviving Corporation or Veeco, such Company Stock
Certificate shall be canceled, and shall be exchanged as provided in Section
2.07 hereof.
2.7. Exchange of Certificates.
(a) On or prior to the Closing Date, Veeco shall select a
reputable bank or trust company to act as exchange agent in the Merger (the
"Exchange Agent"). Promptly after the Effective Time, Veeco shall deposit with
the Exchange Agent (i) certificates representing the Veeco Shares issuable
pursuant to this Article II and (ii) cash sufficient to make payments in lieu of
fractional shares in accordance with Section 2.05(d) hereof. The Veeco Shares
and cash amounts so deposited with the Exchange Agent, together with any
dividends or distributions received by the Exchange Agent with respect to such
shares, are referred to herein collectively as the "Exchange Fund."
(b) As soon as reasonably practicable after the Effective
Time, the Exchange Agent will mail to the record holders of Company Stock
Certificates: (i) a letter of transmittal in customary form and containing such
provisions as Veeco may reasonably specify (including a provision confirming
that delivery of Company Stock Certificates shall be effected, and risk of loss
and title to Company Stock Certificates shall pass, only upon delivery of such
Company Stock Certificates to the Exchange Agent), and (ii) instructions for use
in effecting the surrender of Company Stock Certificates in exchange for
certificates representing Veeco Shares as contemplated by this Article II. Upon
surrender of a Company Stock Certificate to the Exchange Agent for exchange,
together with a duly executed letter of transmittal and such other documents as
may be reasonably required by the Exchange Agent or Veeco, (1) the holder of
such Company Stock Certificate shall be entitled to receive in exchange therefor
a certificate representing the number of whole Veeco Shares that such holder has
the right to receive pursuant to the provisions of Section 2.05 hereof (and an
appropriate amount of cash in lieu of any fractional Veeco Share otherwise
issuable), and (2) the Company Stock Certificate so surrendered shall be
canceled. Until surrendered as contemplated by this Section 2.07, each Company
Stock Certificate shall be deemed, from and after the Effective Time, to
represent only the right to receive Veeco Shares (and an appropriate amount of
cash in lieu of any fractional Veeco Share otherwise issuable) as contemplated
by this Article II. If any Company Stock Certificate shall have been lost,
stolen or destroyed, Veeco may, in its discretion and as a condition precedent
to the issuance of any certificate representing Veeco Shares hereunder,
10
<PAGE>
require the owner of such lost, stolen or destroyed Company Stock Certificate to
provide an appropriate affidavit and to deliver a bond (in such sum as Veeco may
reasonably direct) as indemnity against any claim that may be made against the
Exchange Agent, Veeco or the Surviving Corporation with respect to such Company
Stock Certificate.
(c) No certificates representing Veeco Shares shall be issued
in exchange for any Company Stock Certificate to any Person who may be a Company
Affiliate until such Person shall have delivered to Veeco and the Company a duly
executed Company Affiliate Agreement or Veeco Affiliate Agreement (as
applicable), as contemplated by Section 5.21 hereof.
(d) No dividends or other distributions declared or made with
respect to Veeco Shares with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Company Stock Certificate with respect
to the Veeco Shares that such holder has the right to receive in the Merger
until such holder surrenders such Company Stock Certificate in accordance with
this Section 2.07 (at which time such holder shall be entitled, subject to the
effect of applicable escheat or similar Laws, to receive all such dividends and
distributions, without interest).
(e) Any portion of the Exchange Fund that remains
undistributed to holders of Company Stock Certificates as of the date that is
180 days after the Effective Time shall be delivered to Veeco upon demand, and
any holders of Company Stock Certificates who have not theretofore surrendered
their Company Stock Certificates in accordance with this Section 2.07 shall
thereafter look only to Veeco for satisfaction of their claims for Veeco Shares,
cash in lieu of fractional Veeco Shares and any dividends or distributions with
respect to Veeco Shares Common Stock.
(f) Each of the Exchange Agent, Veeco and the Surviving
Corporation shall be entitled to deduct and withhold from any consideration
payable or otherwise deliverable pursuant to this Merger Agreement to any holder
or former holder of Company Common Stock such amounts as may be required to be
deducted or withheld therefrom under the Code or any provision of state, local
or foreign Tax Law or under any other applicable Law. To the extent such amounts
are so deducted or withheld, such amounts shall be treated for all purposes
under this Merger Agreement as having been paid to the Person to whom such
amounts would otherwise have been paid.
(g) Neither Veeco nor the Surviving Corporation shall be
liable to any holder or former holder of Company Common Stock or to any other
Person with respect to any Veeco Shares (or dividends or distributions with
respect thereto), or for any cash amounts, delivered to any public official
pursuant to any applicable abandoned property Law, escheat Law or similar Law.
2.8. Tax Consequences. For federal income tax purposes, the Merger
is intended to constitute a reorganization within the meaning of Section 368 of
the Code with respect to which no gain or loss will be recognized by a
stockholder of the Company upon the conversion of Company Common Stock into
Veeco Shares pursuant to the Merger (except with respect to any cash received in
lieu of a fractional share). The parties to this Merger Agreement hereby adopt
this Merger Agreement as a "plan of reorganization" as described in Sections
1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations.
2.9. Accounting Consequences. For financial reporting purposes, the
Merger is intended to be accounted for as a "pooling of interests."
2.10. Further Action. If, at any time after the Effective Time, any
further action is determined by Veeco to be necessary or desirable to carry out
the purposes of this Merger Agreement or to vest the Surviving Corporation with
full right, title and possession of and to all rights and property of
Acquisition and the Company, the officers and directors of the Surviving
Corporation and Veeco shall be fully authorized (in the name and on behalf of
Acquisition, in the name and on behalf of the Company or otherwise) to take such
action.
2.11. Subsequent Action. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances and any other actions or things are necessary,
desirable or proper to vest, perfect or confirm, of record or otherwise, in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of the Constituent Corporations as a result of, or
in connection with, the Merger, the officers and directors of the Surviving
Corporation shall be authorized to execute and
11
<PAGE>
deliver, in the name and on behalf of the Constituent Corporations or otherwise,
all such deeds, bills of sale, assignments and assurances and to take and do, in
the name and on behalf of the Constituent Corporations or otherwise, all such
other actions and things as may be necessary or desirable to vest, perfect or
confirm any and all right, title and interest in, to and under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out this
Merger Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to Veeco and Acquisition
that, except as set forth in the Company SEC Documents, or in a specific
subsection of the Company Disclosure Schedule:
3.1. Due Organization; Subsidiaries; Etc. (a) The Company has no
Subsidiaries, except for the corporations identified in Schedule 3.01(a) of the
Company Disclosure Schedule (which together constitute all of the Acquired
Corporations); and neither the Company nor any of the other Acquired
Corporations owns any capital stock or Equity Securities of, or any equity
interest of any nature in, any other Person. None of the Acquired Corporations
has agreed or is obligated to make, or is bound by any Contract under which it
may become obligated to make, any future investment in or capital contribution
to any other Person. Since January 1, 1990, none of the Acquired Corporations
has, at any time, been a general partner of any general partnership, limited
partnership or other Person.
(b) Each of the Acquired Corporations is a corporation duly
organized, validly existing and in good standing (in jurisdictions that
recognize such concept) under the Laws of the jurisdiction of its incorporation
and has all necessary power and authority: (i) to conduct its business in the
manner in which its business is currently being conducted; (ii) to own and use
its assets in the manner in which its assets are currently owned and used; and
(iii) to perform its obligations under all Contracts by which it is bound.
(c) Each of the Acquired Corporations is qualified to do
business as a foreign corporation, and is in good standing (in jurisdictions
that recognize such concept), under the laws of all jurisdictions where the
nature of its business requires such qualification, other than such failures to
be so qualified as would not individually or in the aggregate reasonably be
expected to have a Material Adverse Effect on the Company.
3.2. Capitalization. (a) The authorized capital stock of the Company
consists of 50,000,000 shares of Company Common Stock, of which 11,604,819 were
issued and outstanding as of January 31, 2000. All of the outstanding shares of
Company Common Stock have been duly authorized and validly issued and are fully
paid and nonassessable and were issued in conformity with applicable Laws.
(b) As of January 31, 2000, 2,179,080 shares of Company Common
Stock were issuable upon the exercise of options granted under the stock option
plans and other options set forth on Schedule 3.02(b) to the Company Disclosure
Schedule (collectively, the "Company Options"). Except for the Company Options,
there are no outstanding Equity Securities, or other obligations to issue or
grant any rights to acquire any Equity Securities, of the Company, or any
Contracts to restructure or recapitalize the Company. There are no outstanding
Contracts of the Company to repurchase, redeem or otherwise acquire any Equity
Securities of the Company. All outstanding Equity Securities of each of the
Acquired Corporations have been duly authorized and validly issued in conformity
with applicable laws. The Company owns all issued and outstanding Equity
Securities of each other Acquired Corporation.
3.3. Authorization. The Company has full corporate power and
authority to execute, deliver and perform this Merger Agreement and the
Certificate of Merger, and to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Merger Agreement, the
Certificate of Merger and all other documents and agreements to be delivered
pursuant hereto and the consummation of the transactions contemplated hereby
have been duly and validly authorized by the Board of Directors of the Company,
and no other corporate proceedings on the part of the Company (other than the
Required Company Stockholder Vote and the filing of the Certificate of Merger)
are necessary to authorize this Merger Agreement, the Certificate of Merger and
any such related documents or agreements or to consummate the transactions
contemplated hereby. This Merger Agreement has been duly and validly executed
and delivered by the Company and the Certificate of Merger, when executed at the
Closing, will be duly and validly executed and delivered by the Company. This
Merger Agreement, assuming the due authorization, execution and delivery by each
of the other parties hereto, constitutes a legal, valid and binding agreement of
the Company,
12
<PAGE>
enforceable in accordance with its terms, and the Certificate of Merger, when
executed by the Company at the Closing, assuming the due authorization,
execution and delivery by each of the other parties hereto, will be legal, valid
and binding agreements of the Company, enforceable in accordance with their
respective terms except as such enforceability may be limited by applicable
bankruptcy, moratorium, insolvency, reorganization, fraudulent conveyance or
other Laws affecting the enforcement of creditors' rights generally or by
general equitable principles.
3.4. Reports. All documents required to be filed as exhibits to the
Company SEC Documents have been so filed. All Company SEC Documents were filed
as and when required by the Exchange Act or the Securities Act, as applicable.
The Company SEC Documents include all statements, reports and documents required
to be filed by the Company pursuant to the Exchange Act and the Securities Act.
As of their respective filing dates, the Company SEC Documents complied in all
material respects with the requirements of the Exchange Act and the Securities
Act, as applicable, and none of the Company SEC Documents, as of their
respective filing dates, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which they
were made, not misleading, except to the extent corrected by a subsequently
filed Company SEC Document. The financial statements of the Company and its
Subsidiaries, including the notes thereto, included in the Company SEC Documents
(the "Company Financial Statements"), complied in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto as of their respective dates (except as may be
indicated in the notes thereto or, in the case of unaudited statements included
in Quarterly Reports on Form 10-Q, as permitted by Form 10-Q of the SEC). The
Company Financial Statements fairly present the consolidated financial
condition, operating results and cash flows of the Company and its Subsidiaries
at the dates and during the periods indicated therein in accordance with GAAP
consistently applied (subject, in the case of unaudited statements, to normal,
recurring year-end adjustments and additional footnote disclosures). There has
been no material change in the Company's accounting policies except as described
in the notes to the Company Financial Statements. At all times since November
12, 1999, the Company has (i) filed as and when due all documents required to be
filed with NASDAQ, and (ii) otherwise timely performed all of the Company's
obligations pursuant to the rules and regulations of NASDAQ.
3.5. No Undisclosed Liabilities. The Acquired Corporations do not
have any obligation or liability of any nature (matured or unmatured, fixed or
contingent) other than those (i) set forth or adequately provided for in the
balance sheet of the Company as at December 31, 1999, (ii) not required to be
set forth on such balance sheet under GAAP, (iii) incurred in the ordinary
course of business since December 31, 1999, and consistent with past practice or
(iv) which, individually or in the aggregate, would not have a Material Adverse
Effect on the Company.
3.6. Compliance with Law; Governmental Authorizations. (a) Each of
the Acquired Corporations has complied in all material respects with, is not in
violation of, and has not received notices of violation with respect to, any Law
with respect to the conduct of its business, or the ownership or operation of
its business, except for instances of possible noncompliance which, individually
or in the aggregate, would not have a Material Adverse Effect on the Company.
(b) Each of the Acquired Corporations has obtained all
licenses, permits, certificates, consents and approvals from Governmental
Authorities (the "Licenses") that are necessary for its business and operations
except where the failure to obtain such Licenses would not, individually or in
the aggregate, have a Material Adverse Effect on the Company. All such Licenses
are in full force and effect, and no notice of any material violation has been
received by any Acquired Corporation in respect of any such License. The
consummation of the transactions contemplated hereunder and the operation of the
business of the Acquired Corporations by the Surviving Corporation in the manner
in which it is currently operated will not require the transfer of any such
License that may not be transferred to the Surviving Corporation without the
Consent of any Governmental Authority or other Person.
3.7. No Conflicts. (a) No filing or registration with, or permit,
authorization, Consent or approval of, or notification or disclosure to, any
Governmental Authority is required by the Company in connection with the
execution and delivery of this Merger Agreement or the consummation by the
Company of the Merger and the other transactions contemplated hereby, except (i)
in connection with the applicable requirements of the HSR Act, (ii) in
connection with the provisions of the Securities Act and the rules and
regulations promulgated thereunder, the Exchange Act and the rules and
regulations promulgated thereunder and the rules and regulations of the NASDAQ,
(iii) the filing
13
<PAGE>
of appropriate merger documents as required by the DGCL (including the
Certificate of Merger) and (iv) such Consents, approvals, orders, permits,
authorizations, registrations, or declarations and filings as may be required
under the Blue Sky laws of various states.
(b) The execution, delivery and performance by the Company of
this Merger Agreement and the consummation of the Merger and the other
transactions contemplated hereby will not (i) violate any provision of the
Certificate of Incorporation or By-Laws or other organizational documents of the
Company, (ii) violate, or be in conflict with, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default)
under, or result in, or provide the basis for, the termination of, or accelerate
the performance required by, or excuse performance by any Person of any of its
obligations under, or cause the acceleration of the maturity of any debt or
obligation pursuant to, or result in the creation or imposition of any Lien upon
any property or assets of any Acquired Corporation under, any Material Contract
to which any Acquired Corporation is a party or by which any of its property or
assets is bound, or to which any of the property or assets of any Acquired
Corporation is subject, except for Contracts, the other party to which has
consented to the execution and delivery of this Merger Agreement or the
consummation of the Merger (as appropriate under the terms of such Contract),
(iii) violate any Law applicable to any Acquired Corporation or (iv) violate or
result in the revocation or suspension of any License.
3.8. Contracts. (a) Schedule 3.08(a) to the Company Disclosure
Schedule and the Company SEC Documents contain a complete and accurate list, and
the Company has delivered or made available to Veeco true and complete copies
(or, in the case of oral Contracts, summaries), of:
(i) each Contract that is executory in whole or in part and involves
performance of services or delivery of goods or materials by the Company
or any other Acquired Corporation of an amount or value in excess of
$250,000;
(ii) each Contract that is executory in whole or in part and was not
entered into in the ordinary course of business and that involves
expenditures or receipts of the Company or any other Acquired Corporation
in excess of $250,000;
(iii) each lease, rental or occupancy agreement, license agreement,
installment and conditional sale agreement, and any other Contract
affecting the ownership of, leasing of, title to, use of, or any leasehold
or other interest in, any real or personal property of any Acquired
Corporation (except personal property leases and installment and
conditional sales agreements having a value per item or annual payments of
less than $175,000);
(iv) other than licensing agreements entered into in connection with
product sales in the ordinary course of the Company's or the other
Acquired Corporations' business, each material licensing agreement or any
other material Contract with respect to patents, trademarks, copyrights or
other Intellectual Property, including material Contracts with current or
former employees, consultants or contractors regarding the appropriation
or the non-disclosure of any of the Intellectual Property;
(v) each collective bargaining agreement and any other Contract to
or with any labor union or other employee representative of a group of
employees of any Acquired Corporation;
(vi) each joint venture, partnership and any other material Contract
(however named) involving a sharing of profits, losses, costs or
liabilities by an Acquired Corporation with any other Person;
(vii) each Contract containing covenants that in any way purport to
restrict the business activity of an Acquired Corporation or limit the
freedom of an Acquired Corporation to engage in any line of business or to
compete with any Person;
(viii) each Contract providing for material payments to or by any
Person based on sales, purchases or profits, other than direct payments
for goods;
14
<PAGE>
(ix) each power of attorney that is currently effective and
outstanding granted by and relating to an Acquired Corporation;
(x) each Contract that contains or provides for an express
undertaking by an Acquired Corporation to be responsible for consequential
damages;
(xi) each Contract that is executory in whole or in part and
involves capital expenditures by an Acquired Corporation in excess of
$250,000;
(xii) each written warranty, guaranty and/or other similar
undertaking with respect to contractual performance extended by an
Acquired Corporation other than in the ordinary course of business; and
(xiii) each Contract with any employee, director or officer of an
Acquired Corporation.
(b) Each Material Contract is in full force and effect and
enforceable in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, moratorium, insolvency, reorganization,
fraudulent conveyance and other Laws affecting the enforcement of creditors'
rights generally or by general principles of equity.
(c) Each Acquired Corporation has fulfilled in all material
respects all obligations required pursuant to each Material Contract to have
been performed by it.
(d) No Acquired Corporation has received any written notice of
default under any Material Contract, no default (beyond any applicable grace or
cure period) has occurred under any Material Contract on the part of an Acquired
Corporation or, to the Company's knowledge, on the part of any other party
thereto, nor has any event occurred which with the giving of notice or the lapse
of time, or both, would constitute any default on the part of an Acquired
Corporation under any Material Contract nor, to the Company's knowledge, has any
event occurred which with the giving of notice or lapse of time, or both, would
constitute any default on the part of any other party to any Material Contract.
(e) Except as set forth in Schedule 3.08(e) to the Company
Disclosure Schedule, no Consent or approval of any party to any of the Material
Contracts is required for the execution, delivery or performance of this Merger
Agreement or the consummation of the Merger or the other transactions
contemplated hereby to which the Company is a party, except where the failure to
obtain such Consent or approval would not, individually or in the aggregate,
have a Material Adverse Effect on the Company.
(f) To the knowledge of the Company, no officer, director,
agent or employee of the Company is bound by any Contract that purports to limit
the ability of such officer, director, agent or employee to (i) engage in or
continue any conduct, activity or practice relating to the business of an
Acquired Corporation, or (ii) assign to the Company or an Acquired Corporation
to any other Person any rights to any invention, improvement or discovery.
3.9. Litigation. There are no actions, suits or legal,
administrative, arbitration or other Legal Proceedings or governmental
investigations pending or, to the Company's knowledge, Threatened against the
Company or any other Acquired Corporation before or by any Governmental
Authority, except for such as would not individually or in the aggregate either
impair the Company's or any other Acquired Corporation's ability to consummate
the Merger or have or reasonably be expected to have a Material Adverse Effect
on the Company. No Acquired Corporation is a party to or subject to any
judgment, order, writ, injunction, decree or award of any Governmental
Authority, except for those that, individually or in the aggregate, would not
have a Material Adverse Effect on the Company.
3.10. Taxes. Except as set forth in Schedule 3.10 to the Company
Disclosure Schedule:
The Company and each of the Acquired Corporations has filed or
caused to be filed on a timely basis all Tax Returns that are or were required
to be filed by the Company and/or any of the other Acquired Corporations,
15
<PAGE>
either separately or as part of an affiliated group of corporations, pursuant to
the Laws of any Governmental Authority with taxing power over any of the
Acquired Corporations or its assets and business. All Tax Returns filed by any
of the Acquired Corporations are true, correct and complete. The Company and
each of the Acquired Corporations has paid all Taxes that have become due by it
pursuant to those Tax Returns, or otherwise, or pursuant to any assessment
received by any of the Acquired Corporations, except such Taxes, if any, as are
being contested in good faith and as to which adequate reserves have been
provided in the Company Financial Statements. The Company has delivered to Veeco
complete copies of all Tax Returns that any of the Acquired Corporations has
filed for the past three years. All Taxes that the Company or any of the
Acquired Corporations is, or was, required by Law to withhold and collect have
been duly withheld and collected and, to the extent required, have been paid to
the appropriate Governmental Authority. There is no agreement, plan, arrangement
or other contract covering any employee or independent contractor of the Company
or any of the Acquired Corporations that could give rise to the payment of any
amount that could not be deductible by the Company or any of the Acquired
Corporations or Veeco pursuant to Section 280G or Section 162(m) of the Code.
The Company is not a "United States real property holding corporation," as
defined in Section 897(c)(2) of the Code. The charges, accruals and reserves
with respect to Taxes on the Company Financial Statements with respect to each
of the Acquired Corporations (excluding any provision for deferred income taxes
established to reflect timing differences between book and tax income) for all
tax periods (or portions thereof) ending on or before the Closing Date
(including any period for which no Tax Return has yet been filed) are adequate
for GAAP purposes.
3.11. Absence of Certain Changes. Except as disclosed in the Company
SEC Documents, since September 30, 1999, the Acquired Corporations have
conducted their business in the ordinary course consistent with past practice
and there has not occurred: (i) any change, event or condition (whether or not
covered by insurance) that has resulted in, or might reasonably be expected to
result in, a Material Adverse Effect to the Company; (ii) any acquisition, sale
or transfer of any material asset of the Acquired Corporations other than in the
ordinary course of business and consistent with past practice; (iii) any change
in accounting methods or practices (including any change in depreciation or
amortization policies or rates) by the Company or any revaluation by the Company
of any of its assets; (iv) any declaration, setting aside, or payment of a
dividend or other distribution with respect to the shares of the Company, or any
direct or indirect redemption, purchase or other acquisition by the Company of
any of its shares of capital stock; (v) any material Contract entered into by
any Acquired Corporation, other than in the ordinary course of business, or any
material amendment or termination of, or default under, any material Contract to
which any Acquired Corporation is a party or by which any of them is bound; (vi)
any action or failure to act that could reasonably be expected to cause the
Merger to fail to qualify as a reorganization as described in Section 368(a) of
the Code with respect to which no gain or loss will be recognized by a
stockholder of the Company on the conversion of Company Common Stock into Veeco
Shares pursuant to the Merger (except with respect to any cash received in lieu
of a fractional share); or (vii) any agreement by any Acquired Corporation to do
any of the things described in the preceding clauses (i) through (vi) (other
than negotiations with Veeco and its Representatives regarding the transactions
contemplated by this Merger Agreement).
3.12. Employee Benefit Plans. (a) Neither the Company nor any ERISA
Affiliate thereof (i) maintains or contributes to or has any obligation with
respect to, and none of the current or former employees of the Company or any
ERISA Affiliate thereof is covered by, any bonus, deferred compensation,
severance pay, pension, profit-sharing, retirement, insurance, stock purchase,
stock option or other fringe benefit plan, arrangement or practice, written or
otherwise, or any other "employee benefit plan," as defined in Section 3(3) of
ERISA, whether formal or informal (collectively, the "Benefit Plans"). None of
the Benefit Plans is, and the Company (or any of its ERISA Affiliates) has not
during the past five years maintained or had an obligation to contribute to, or
incurred any other obligation with respect to (i) a "multiemployer plan," as
defined in Section 3(37) of ERISA (a "Multiemployer Plan"), (ii) a "multiple
employer plan," as defined in ERISA or the Code or (iii) a funded welfare
benefit plan, as defined in Section 419 of the Code. Neither the Company nor any
ERISA Affiliate thereof has any agreement or commitment to create any additional
Benefit Plan, or to modify or change any existing Benefit Plan.
(b) With respect to each Benefit Plan, the Company has
heretofore delivered or caused to be delivered or made available to Veeco true,
correct and complete copies of (i) all documents which comprise the most current
version of each of such Benefit Plan, including any related trust agreements,
insurance contracts, or other funding or investment agreements and any
amendments thereto, and (ii) with respect to each Benefit Plan that is an
"employee benefit plan," as defined in Section 3(3) of ERISA (A) the three most
recent Annual Reports (Form 5500
16
<PAGE>
Series) and accompanying schedules for each of the Benefit Plans for which such
a report is required, (B) the most current summary plan description (and any
summary of material modifications), (C) the three most recent certified
financial statements and actuarial valuation for each of the Benefit Plans for
which such a statement or actuarial valuation is required or was prepared, (D)
the Forms PBGC-1 filed in each of the three most recent plan years for each of
the Benefit Plans for which such form was required to be filed, (E) for each
Benefit Plan that provides health or other non-pension benefits to retired or
former employees, shareholders or directors (or their beneficiaries), an
actuarial calculation of the liability of the Company and its Subsidiaries
prepared in accordance with Financial Accounting Standard 106 of the Financial
Accounting Standards Board, and (F) for each Benefit Plan intended to be
"qualified" within the meaning of Section 401(a) of the Code, all IRS
determination letters issued with respect to such Plan. Since the date of the
documents delivered, there has not been any material change in the assets or
liabilities of any of the Benefit Plans (other than any Benefit Plans under
which Company Options are issued) or any change in their terms and operations
which could reasonably be expected to affect or alter the tax status or
materially affect the cost of maintaining such Plan, other than any change that
would not have a Material Adverse Effect on the Company, and none of the Benefit
Plans has been or will be amended prior to the Closing Date, other than as
required by Law, regulation or tax qualification requirement.
(c) The Company or the relevant ERISA Affiliate thereof has
performed and complied in all material respects with all of its obligations
under and with respect to the Benefit Plans and each of the Benefit Plans has,
at all times, in form, operation and administration complied in all material
respects with its terms, and, where applicable, the requirements of the Code,
ERISA and all other applicable Laws. Except as set forth on Schedule 3.12(c) of
the Company Disclosure Schedule, each Benefit Plan which is intended to be
"qualified" within the meaning of Section 401(a) of the Code has been determined
by the IRS to be so qualified and, to the knowledge of the Company, nothing has
occurred which could be expected to adversely affect such qualified status.
(d) There are no material unpaid contributions due prior to
the date hereof with respect to any Benefit Plan that are required to have been
made under its terms and provisions, any related insurance contract or any
applicable Law, and there are no unfunded benefit obligations that have not been
accounted for by reserves, or otherwise property footnoted in the Company
Financial Statements as required in accordance with GAAP. No assets of the
Company are allocated or held in a trust or similar funding vehicle, and there
are no reserve assets, surpluses or prepaid premiums with respect to any Benefit
Plan that is a welfare plan.
(e) With respect to each Benefit Plan that is an "employee
pension benefit plan," as defined in Section 3(2) of ERISA, (i) neither the
Company nor any ERISA Affiliate has withdrawn from such Benefit Plan during a
plan year in which it was a "substantial employer," as defined in Section
4001(a)(2) of ERISA, where such withdrawal could result in liability of such
substantial employer pursuant to Section 4062(e) or 4063 of ERISA, (ii) neither
the Company nor any ERISA Affiliate has filed a notice of intent to terminate
any such Benefit Plan or adopted any amendment to treat any such Benefit Plan as
terminated, (iii) the PBGC has not instituted proceedings to terminate any such
Benefit Plan, (iv) to the knowledge of the Company, no other event or condition
has occurred which might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any such Benefit
Plan, (v) all required premium payments to the PBGC have been paid when due,
(vi) no reportable event, as described in Section 4043 of ERISA (whether or not
waived), has occurred, or, to the knowledge of the Company, is reasonably
expected to occur, with respect to any such Benefit Plan, (vii) no material
excise taxes are payable under the Code, (viii) no amendment with respect to
which security is required under Section 307 of ERISA or Section 401(a)(29) of
the Code has been made or is reasonably expected to be made, and (ix) there has
been no event which could subject the Company or any ERISA Affiliate to
liability under Section 4064 or 4069 of ERISA.
(f) With respect to each Benefit Plan that is subject to the
provisions of Section 412 of the Code or Title I, Subtitle B, Part 3 of ERISA,
(i) there has occurred no failure to meet the minimum funding standards of
Section 412 of the Code (whether or not waived in accordance with Section 412(d)
of the Code) or failure to make by its due date a required installment under
Section 412(m) of the Code, (ii) the funding method used in connection with such
Benefit Plan is acceptable under ERISA and the actuarial assumptions used in
connection with funding such Benefit Plan meet the requirements of Section 302
of ERISA, (iii) no accumulated funding deficiency, whether or not waived, exists
with respect to any such Benefit Plan, and no condition has occurred or exists
which by the passage of time would be expected to result in an accumulated
funding deficiency as of the last day of the current
17
<PAGE>
plan year of any such Benefit Plan, and (iv) since the most recent valuation
date for each such Benefit Plan, there has been no amendment or change to such
Benefit Plan that would increase the amount of benefit liabilities thereunder
and there has been no event or occurrence that would materially increase or
decrease the value of such assets or liabilities, other than as would not have a
Material Adverse Effect on the Company. Neither the Company nor any ERISA
Affiliate has incurred any liability or taken any action, and the Company has no
knowledge of any action or event, that could cause any one of them to incur any
liability under Section 412 of the Code or Title IV of ERISA with respect to any
"single-employer plan" (as defined in Section 4001(a)(15) of ERISA) that is not
a Benefit Plan.
(g) All group health plans covering employees of the Company
have been operated in material compliance with the continuation coverage
requirements of Section 4980B of the Code (and any predecessor provisions) and
Part 6 of Title I of ERISA ("COBRA"), the provisions of law enacted by the
Health Insurance Portability and Accountability Act of 1996 ("HIPAA") and any
similar state Law.
(h) Neither the Company nor any other "disqualified person" or
"party in interest," as defined in Section 4975 of the Code and Section 3(14) of
ERISA, respectively, has engaged in any "prohibited transaction," as defined in
Section 4975 of the Code or Section 406 of ERISA, with respect to any Benefit
Plan, nor have there been any fiduciary violations under ERISA which could
subject the Company, any ERISA Affiliate thereof (or any officer, director or
employee thereof) to any material penalty or Tax under Section 502(i) of ERISA
or Sections 4971 and 4975 of the Code.
(i) With respect to any Benefit Plan: (i) no filing,
application or other matter is pending with the IRS, the PBGC, the United States
Department of Labor or any other governmental body, (ii) there is no action,
suit or claim pending or, to the Company's knowledge, Threatened, other than
routine claims for benefits and (iii) there are no outstanding material
liabilities for Taxes, penalties or fees.
(j) Neither the Company nor any ERISA Affiliate has taken any
action, and the Company has no knowledge of any action or event, that could
cause any one of them to incur liability on account of a partial or complete
withdrawal, as defined in Sections 4203 and 4205 of ERISA, respectively, from
any Multiemployer Plan, or on account of any unpaid contributions to any
Multiemployer Plan.
(k) Neither the execution and delivery of this Merger
Agreement nor the consummation of any or all of the contemplated transactions
will: (i) entitle any current or former employee of the Company or any ERISA
Affiliate thereof to severance pay, unemployment compensation or any similar
payment, (ii) accelerate the time of payment or vesting or increase the amount
of any compensation due to any such employee or former employee or (iii)
directly or indirectly result in any payment made or to be made to or on behalf
of any person to constitute a "parachute payment" within the meaning of Section
280G of the Code.
3.13. Intellectual Property. (a) Except as set forth in Schedule
3.13(a) of the Company Disclosure Schedule: the Acquired Corporations own or
have the right to make, have made, use, sell and license all new and useful
inventions, discoveries and all letters patent (including, but not limited to,
all reissues, extensions, renewals, divisions and continuations thereof and
thereto (including continuations-in-part)) and all applications therefor; Use
(as such term is defined below), sell and license all copyrights, mask works,
trademarks and service marks and all registrations and applications for
registration thereof; Use, sell and license all trade secrets, know-how,
inventory, algorithms, methods, processes, protocols, methodologies, computer
software (including, but not limited to, source code in object code and source
code form), design, functional, technical and other specifications (for computer
software and other properties) and all other tangible and intangible proprietary
materials and information required for the conduct of the business of the
Company ("Company Intellectual Property"). For the purposes of this Section 3.13
and of Section 4.18 hereof, "Use" (and, as the context requires, "Used") means
the right to use, execute, distribute, publish, reproduce, perform, display,
transmit, make available, make modifications and prepare derivative works.
(b) With respect to the Intellectual Property which any
Acquired Corporation owns, and to the extent of such Acquired Corporation's
rights therein, after the Merger, the Surviving Corporation shall have the right
to (i) sue for (and otherwise assert claims for) and shall have no limitation on
its ability to recover damages and obtain any and all other appropriate remedies
available at law or equity for any past, present or future infringement,
18
<PAGE>
misappropriation or other violation thereof (and settle all such suits, actions
and proceedings); (ii) seek appropriate protection therefor (including, where
appropriate, the right to seek copyright, trademark and service mark
registrations and letters patent in the United States and all other countries
and governmental divisions); and (iii) claim all rights and priority thereunder,
in each case, to the extent, if any, that such Acquired Corporation is entitled
to do so prior to the Merger notwithstanding any other provisions of this Merger
Agreement.
(c) Schedule 3.13(c) of the Company Disclosure Schedule sets
forth a complete and accurate list (i) in subsection 1, of all letters patent
owned by any Acquired Corporation; (ii) in subsection 2, of all U.S. federal
trademark and service mark registrations owned by any Acquired Corporation;
(iii) in subsection 3, of all material U.S. common law trademarks and service
marks owned by any Acquired Corporation; (iv) in subsection 4, of all U.S.
letters patent owned by any Acquired Corporation which are, as of the date
hereof, subject to a reissue proceeding in the U.S. Patent and Trademark Office
(the "PTO"); (v) in subsection 5, of all applications for U.S. letters patent
filed by and subject to ongoing prosecution by any Acquired Corporation; (vi) in
subsection 6, of all applications for letters patent in jurisdictions other than
the United States filed by and subject to ongoing prosecution by any Acquired
Corporation; (vii) in subsection 7, of all applications for U.S. federal
trademark or service mark registrations filed by and subject to ongoing
prosecution by any Acquired Corporation; (viii) in subsection 8, of all
applications for trademark or service mark registrations in jurisdictions other
than the United States filed by and subject to ongoing prosecution by any
Acquired Corporation; and (ix) in subsection 9, of all patent interference and
similar proceedings in which any Acquired Corporation is involved, including,
but not limited to, interferences and the like asserted against any Acquired
Corporation and interferences and the like which any Acquired Corporation has
provoked.
(d) Except as set forth in Schedule 3.13(c) of the Company
Disclosure Schedule, to the knowledge of the Company, (i) all authorship in the
computer software, documentation, software design, technical and functional
software specifications created by any Acquired Corporation and Used in products
or services created by any Acquired Corporation is original or has not been
unlawfully copied or misappropriated and (ii) all computer software and related
documentation manuals contained or Used in products of (including documentation
and product and user manuals) or services to customers provided by any Acquired
Corporation are owned by or licensed to such Acquired Company, and such licenses
provide such Acquired Company with the right to sublicense or otherwise
authorize Use of the licensed subject matter to their customers and authorized
third party users.
(e) (i) Except for third parties which have rights pursuant to
the agreements set forth in Schedule 3.13(f) of the Company Disclosure Schedule
and except for rights granted to the customers of any Acquired Corporation, each
Acquired Corporation has the sole and exclusive right to Use, sell and license
each of the copyrights owned by such Acquired Corporation and to make, Use, sell
and license each item of Intellectual Property listed in Schedule 3.13 of the
Company Disclosure Schedule, subsections 1 and 2 hereto (the foregoing
collectively referred to as "Company-Owned IP Registrations") and (ii) except as
set forth in Schedule 3.13(c) of the Company Disclosure Schedule, the Company
has no knowledge that any of the Company-Owned IP Registrations are invalid,
unenforceable or not subsisting. With the exception of copyright rights, and
with the exception of Company-Owned IP Registrations no longer used by the
Company or an Acquired Corporation, all material Company-Owned IP Registrations
have been and currently remain duly registered with or issued by the appropriate
governmental agency of the United States or of foreign countries as indicated in
Schedule 3.13(c) of the Company Disclosure Schedule, subsections 1 and 2 hereto,
and all required maintenance and annuity fees have been paid in full to and all
declarations required pursuant to 15 U.S.C. Sections 1058 and 1065 (and foreign
counterparts to the same) have been accepted by, or timely submitted to, the
proper Governmental Authority.
(f) (i) Schedule 3.13(f) of the Company Disclosure Schedule
sets forth a complete and accurate list of the material agreements, including,
but not limited to, material license agreements, and of all parties thereto
under which any Acquired Corporation obtains or is the beneficiary of any
license or right to use any Intellectual Property right of any third party
(singularly or collectively, a "Licensed-In Agreement" or the "Licensed-In
Agreements") with the exception of off-the-shelf software licensed by any
Acquired Corporation and (ii) Schedule 3.13(f) of the Company Disclosure
Schedule sets forth a complete and accurate list of the material agreements,
including, but not limited to, license agreements, to which any Acquired
Corporation is a party and pursuant to which a third party is authorized to Use
any of the Intellectual Property rights of any Acquired Corporation.
19
<PAGE>
(g) Except as set forth in Schedule 3.13(g) to the Company
Disclosure Schedule, each of the copyrights owned by any Acquired Corporation
and each item of Intellectual Property listed in the Schedules to the Company
Disclosure Letter delivered pursuant to Section 3.13(c) hereto (the
"Company-Owned IP") (i) is free and clear of any attachments, liens, security
interests, UCC filings or any other encumbrances; (ii) is not subject to any
outstanding judicial order, decree, judgment or stipulation or to any agreement
restricting the scope of any Acquired Corporation's Use thereof; and (iii)
together with each item of Intellectual Property which such Acquired Corporation
has a right to Use or practice pursuant to one or more Licensed-In Agreements,
is not subject to any suits, actions, claims or demands of any third party and
no action or proceeding, whether judicial, administrative or otherwise, has been
instituted, is pending or, to the Company's knowledge, Threatened which
challenges or affects the rights of such Acquired Corporation in the same.
(h) Except as set forth on Schedule 3.13(h) of the Company
Disclosure Schedule, (i) no Acquired Corporation has received any claim or any
cease and desist or equivalent letter regarding, or any other notice of any
allegation to the effect that any of their products, software, apparatus,
methods or services which such Acquired Corporation makes, Uses, sells, offers
or provides infringes upon, misappropriates or otherwise violates the
intellectual property of any third party; (ii) the Company has no knowledge of
any unauthorized Use by, unauthorized disclosure to or by or infringement,
misappropriation or other violation of any Company Intellectual Property by any
current or former officer, employee, independent contractor, consultant or any
other agent of any Acquired Corporation (a "Company Agent" or the "Company
Agents") or by any third party, other than, with respect to such third parties,
such disclosures, infringements, misappropriations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect on the Company;
(iii) no Acquired Corporation has entered into any agreement to indemnify any
third party against any claim of infringement, misappropriation or other
violation of Intellectual Property rights other than indemnification provisions
contained in purchase orders, customer agreements, Licensed-In Agreements or
software licenses arising in the ordinary course of business; and (iv) since its
formation, no Acquired Corporation has been charged in any suit, action or
proceeding with, or has charged others with, unfair competition, infringement,
misappropriation, wrongful use of or any other violation or improper or illegal
activity with respect to or affecting Intellectual Property or with claims
contesting the validity, ownership or right to make, Use, sell, license or
dispose of Intellectual Property.
(i) To the knowledge of the Company, (a) all computer software
created by employees of the Acquired Corporations within the scope of their
employment by any such Acquired Corporation and used in the products or services
of any Acquired Corporation and all original copyrightable authorship therein is
owned by an Acquired Corporation; (b) all rights in all inventions and
discoveries made, developed or conceived by Company Agents during the course of
their employment (or other retention) by an Acquired Corporation and material to
the business of an Acquired Corporation or made, written, developed or conceived
with the use or assistance of an Acquired Corporation's facilities or resources
and which are the subject of one or more issued letters patent or applications
for letters patent have been assigned in writing to an Acquired Corporation; (c)
the policy of the Acquired Corporation requires each employee of an Acquired
Corporation to sign documents confirming that he or she assign to an Acquired
Corporation all Intellectual Property rights made, written, developed or
conceived by him or her during the course of his or her employment (or other
retention) by an Acquired Corporation and relating to the business of an
Acquired Corporation or made, written, developed or conceived with the use or
assistance of an Acquired Corporation's facilities or resources to the extent
that ownership of any such Intellectual Property rights does not vest in an
Acquired Corporation by operation of law, and to the extent that any employee of
an Acquired Corporation has not executed such documents, the Company will
require such employee to execute such documents at or before the Closing; and
(d) all Intellectual Property rights made, written, developed or conceived by
each Company Agent during the course of his or her retention by an Acquired
Corporation and material to the business of an Acquired Corporation have been
assigned or licensed to an Acquired Corporation.
(j) The Intellectual Property owned by, licensed to or Used by
the Acquired Corporations prior to the execution of this Merger Agreement will
enable the Surviving Corporation subsequent to the Effective Time to fully carry
on all aspects of the business of the Acquired Corporations as and to the extent
such business was carried on by the Acquired Corporations prior to the Merger.
20
<PAGE>
(k) The Company believes that the Acquired Corporations have
taken all reasonable and practicable steps to protect and preserve the
confidentiality of all Intellectual Property (including, without limitation,
trade secrets and source codes, but excluding letters patent, inventory,
copyrights, mask works, trademarks and service marks and registrations and
applications for registration thereof) ("Confidential Company IP Information").
The Company believes that all Use by the Acquired Corporations of Confidential
Company IP Information not owned by the Acquired Corporations has been and is
pursuant to the terms of a written agreement between an Acquired Corporation and
the owner of such Confidential Company IP Information, or is otherwise lawful.
(l) The Company will do all acts necessary or reasonably
requested to be done by Veeco in order to perfect title to the Intellectual
Property in the Surviving Corporation, including, without limitation, to execute
and deliver any and all oaths, assignments, affidavits and other documents in
form and substance as may be requested by Veeco; to communicate all facts known
to the Company relating to the Intellectual Property; to furnish Veeco with any
and all information, documents, materials or records of any kind in its control
relating to the Intellectual Property; and to discharge its obligations under
this subsection (l) promptly but in any event within such time period(s) as is
required to allow the Surviving Corporation to timely preserve or assert its
rights in connection with the maintenance, enforcement or defense of the rights
in Intellectual Property assigned to the Surviving Corporation hereunder. The
rights provided in this subsection (l) are cumulative of any rights of Veeco in
this Merger Agreement and shall be deemed transferable in whole or in part by
Veeco to its successors and assigns.
3.14. Environmental Matters. (a) The Acquired Corporations'
ownership and operation of their business is and has been in material compliance
with all Environmental Laws. The Acquired Corporations have obtained all
approvals necessary or required under all applicable Environmental Laws for the
ownership and operation of their business, all such approvals are in effect, the
Acquired Corporations have not received written notice of any action to revoke
or modify any of such approvals, and, to the Company's knowledge the ownership
and operation of the Acquired Corporations' business is and has been in material
compliance with all terms and conditions thereof. The Acquired Corporations have
not received notice of any pending or Threatened claim or investigation by any
Governmental Authority or any other Person concerning potential liability of any
of the Acquired Corporations under Environmental Laws in connection with the
ownership or operation of its business. To the Company's knowledge, there has
not been a Release of any Hazardous Substance by any Acquired Corporation, nor
by any other Person at, upon, in, from or under any premises now or previously
owned or occupied by an Acquired Corporation or upon which its assets are or
were located at any time during an Acquired Corporation's ownership and/or
occupancy thereof. No Acquired Corporation's real properties (whether owned or
leased) is currently, and, to the Company's knowledge, no such real property has
been, used as a treatment, storage or disposal facility for Hazardous
Substances; and no Hazardous Substances are present on any such real property,
except in such quantities as are handled in material compliance with all
applicable manufacturer's instructions and in material compliance with all
applicable Environmental Laws and as are used in the operation of the Acquired
Corporations' business.
(b) The Company has (i) provided or made available to Veeco
all test results, records, notices, disclosures and reports in an Acquired
Corporation's possession with respect to an Acquired Corporation's real property
(whether owned or leased) and any real property previously owned or occupied by
an Acquired Corporation, including all correspondence with any Governmental
Authority, concerning health, safety and/or environmental issues or concerns and
(ii) made all disclosures, including notice of a Release or Threatened Release
of a Hazardous Substance, required of an Acquired Corporation under any
Environmental Law.
(c) No Acquired Corporation has received notice, or otherwise
obtained knowledge, of the existence of any circumstances or conditions that
have a reasonable likelihood of resulting in any damages for which it could be
liable arising pursuant to any Environmental Law.
(d) To the Company's knowledge, no Acquired Corporation has
material liability with respect to any Hazardous Substance which it has
transported or arranged for the transportation of to premises not owned or
operated by an Acquired Corporation.
3.15. Labor Relations. The Acquired Corporations are conducting
their businesses in material compliance with all applicable Laws relating to
employment or labor, including, without limitation, those Laws relating
21
<PAGE>
to wages, hours, collective bargaining, unemployment insurance, workers'
compensation and equal employment opportunity, except where the failure to be in
compliance would not, individually or in the aggregate, have a Material Adverse
Effect on the Company. No union or other collective bargaining unit has been
certified as representing any of the employees of any Acquired Corporation, nor
has any Acquired Corporation agreed to recognize any union or other collective
bargaining unit. The Company has complied with all material terms of the
collective bargaining agreement between the Company and Local 342, International
Union of Electronic, Electrical, Salaried, Machine & Furniture Workers. There
are no labor disputes pending or Threatened involving strikes, work stoppages,
slowdowns or lockouts. There are no grievance proceedings or claims of unfair
labor practices filed or, to the Company's knowledge, Threatened to be filed
with the National Labor Relations Board against any Acquired Corporation. There
is no union representation or organizing effort pending or Threatened against
any Acquired Corporation.
3.16. Brokers and Finders. Except for Lehman Brothers, Inc.
("Company Broker") previously disclosed to Veeco, no broker, finder, agent or
similar intermediary has acted on the Company's behalf in connection with this
Merger Agreement or the transactions contemplated hereby, and there are no
brokerage commissions, finders' fees or similar fees or commissions payable in
connection therewith based on any Contract with the Company or any action taken
by the Company. The Company shall pay all fees and disbursements of the Company
Broker.
3.17. Accuracy of Representations and Warranties. All
representations and warranties of the Company set forth in this Merger Agreement
and in any agreement, certificate or other document required to be delivered or
given to Veeco or Acquisition by the Company pursuant to this Merger Agreement
will be true and correct at the Closing Date with the same force and effect as
if made on that date.
3.18. Pooling of Interests; Reorganization. Neither the Company nor,
to the knowledge of the Company, any of its directors, officers or stockholders
has taken or failed to take any action which (i) would interfere with Veeco's
ability to account for the Merger as a "pooling of interests", or (ii) could
reasonably be expected to cause the Merger to fail to qualify as a
reorganization as described in Section 368(a) of the Code with respect to which
no gain or loss will be recognized by a stockholder of the Company on the
conversion of Company Common Stock into Veeco Shares pursuant to the Merger
(except with respect to any cash received in lieu of a fractional share).
3.19. Board of Recommendation. The Board of Directors of the Company
has, by a unanimous vote of directors present at a meeting of such Board or
Directors duly held on February 28, 2000, approved and adopted this Merger
Agreement, the Merger and the other transactions contemplated hereby, and prior
to the date hereof has resolved to recommend that the holders of Company Common
Stock approve and adopt this Merger Agreement, the Merger and the other
transactions contemplated hereby.
3.20. Fairness Opinion. The Company has received the opinion of
Lehman Brothers, Inc. to the effect that on the date of delivery thereof, the
Merger Consideration was fair from a financial point of view to the stockholders
of the Company.
3.21. State Antitakeover Statutes. The Company has granted all
approvals and taken all other steps necessary to exempt the Company Stockholder
Voting Agreement, the Merger and the other transactions contemplated hereby from
the requirements and provisions of Section 203 of the DGCL and other state
antitakeover statutes or regulations to the extent applicable such that none of
the provisions of such "business combination," "moratorium," "control share," or
other state antitakeover statute or regulation (x) prohibits or restricts the
Company's ability to perform its obligations under this Merger Agreement or its
ability to consummate the Merger and the other transactions contemplated hereby,
(y) would have the effect of invalidating or voiding this Merger Agreement or
any provisions hereof, or (z) would subject Veeco to any material impediment or
condition in connection with the exercise of any of their respective rights
under this Merger Agreement.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF VEECO AND ACQUISITION.
Veeco and Acquisition, jointly and severally, hereby represent and
warrant to the Company that, except as set forth in the Veeco SEC Documents, or
in a specific subsection of the Veeco Disclosure Schedule:
22
<PAGE>
4.1. Organization of Veeco and Acquisition. (a) Each of Veeco and
Acquisition is a corporation duly organized, validly existing and in good
standing (in jurisdictions which recognize such concept) under the Laws of its
jurisdiction of incorporation, and is qualified or licensed as a foreign
corporation to do business in each other jurisdiction where the failure to so
qualify would have a Material Adverse Effect upon its business or operations.
Each of Veeco and Acquisition has all requisite corporate power to own, operate
and lease its assets and to carry on its business as now being conducted. Veeco
has made available to the Company complete and correct copies of its Certificate
of Incorporation and By-Laws and the Certificate of Incorporation and By-Laws of
Acquisition, in each case as amended to the date hereof.
(b) Each of Veeco and Acquisition has full corporate power and
authority to execute, deliver and perform this Merger Agreement and, in the case
of Acquisition, the Certificate of Merger, and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Merger
Agreement, the Certificate of Merger and all other documents and agreements to
be delivered pursuant hereto and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the boards of
directors of Veeco and Acquisition, and, except for the approval by the
stockholders of Veeco of the issuance of the Veeco Shares pursuant to the
Merger, no other corporate proceedings on the part of Veeco or Acquisition are
necessary to authorize this Merger Agreement, the Certificate of Merger and any
related documents or agreements or to consummate the transactions contemplated
hereby. This Merger Agreement has been duly and validly executed and delivered
by Veeco and Acquisition, and the Certificate of Merger, when executed at the
Closing, will be duly and validly executed and delivered by Acquisition. This
Merger Agreement, assuming the due authorization, execution and delivery by each
other party hereto, constitutes a legal, valid and binding agreement of both
Veeco and Acquisition, enforceable in accordance with its terms, and the
Certificate of Merger, when executed by Veeco and Acquisition at the Closing,
assuming the due authorization, execution and delivery by each other party
hereto, will be legal, valid and binding agreements of Acquisition, enforceable
in accordance with their terms, except as such enforceability may be limited by
bankruptcy, moratorium, insolvency, reorganization, fraudulent conveyance or
other laws affecting the enforcement of creditors' rights generally or by
general equitable principles.
(c) Acquisition is a newly formed wholly-owned first tier
Subsidiary of Veeco and has conducted and will conduct no business or activity
or has incurred or will incur any liability or obligation, other than hereunder
or in accordance with the Merger.
4.2. Capitalization. (a) The authorized capital stock of Veeco
consists of 25,000,000 Veeco Shares, of which 17,627,701 were issued and
outstanding as of December 31, 1999, and 500,000 shares of preferred stock, none
of which are outstanding. All of the outstanding Veeco Shares have been duly
authorized and validly issued and are fully paid and nonassessable and were
issued in conformity with applicable laws.
(b) As of December 31, 1999, 2,119,155 Veeco Shares were
issuable upon the exercise of options granted under the Veeco Instruments Inc.
Amended and Restated 1992 Employees' Stock Option Plan and under the Amended and
Restated Veeco Instruments Inc. 1994 Stock Option Plan for Outside Directors,
and 5,182 Veeco Shares were issuable upon the exercise of options granted to
shareholders of Wyko Corporation in the merger of a wholly-owned subsidiary of
Veeco with and into Wyko Corporation in July 1997 (collectively, the "Veeco
Options"). Except for the Veeco Options and except pursuant to the Veeco
Instruments Inc. Employees Stock Purchase Plan, there are no outstanding Equity
Securities, or other obligations to issue or grant any rights to acquire any
Equity Securities, of Veeco, or any Contracts to restructure or recapitalize
Veeco. There are no outstanding Contracts of Veeco to repurchase, redeem or
otherwise acquire any Equity Securities of Veeco. All outstanding Equity
Securities of Veeco have been duly authorized and validly issued in conformity
with applicable laws.
4.3. Non-Contravention. (a) Except as set forth on Schedule 4.03(a)
to the Veeco Disclosure Schedule, the execution, delivery and performance by
Veeco and Acquisition of this Merger Agreement and the consummation of the
transactions contemplated hereby will not (i) violate any provision of the
Certificate of Incorporation or By-Laws or other organizational documents of
Veeco or Acquisition, (ii) violate, or be in conflict with, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in or provide the basis for the
termination of, or accelerate the performance required by, or excuse performance
by any Person of any of its obligations under, or cause the acceleration of the
maturity of any debt or obligation pursuant
23
<PAGE>
to, or result in the creation or imposition of any Lien upon any property or
assets of Veeco under, any material Contract to which Veeco or Acquisition is a
party or by which any of their respective property or assets are bound, or to
which any of the property or assets of Veeco or Acquisition is subject, except
for Contracts wherein the other party thereto has consented to the consummation
of this transaction, (iii) violate any Law applicable to Veeco or Acquisition or
(iv) violate or result in the revocation or suspension of any material license,
permit, certificate, consent or approval from a Governmental Authority that is
necessary for the business and operations of Veeco or Acquisition.
(b) No filing or registration with, or permit, authorization,
consent or approval of, or notification or disclosure to, any Governmental
Authority is required by Veeco or Acquisition in connection with the execution
and delivery of this Merger Agreement or the consummation by Veeco or
Acquisition of the Merger and the other transactions contemplated hereby, except
(i) in connection with the applicable requirements of the HSR Act, (ii) in
connection with the provisions of the Securities Act and the rules and
regulations promulgated thereunder, and the Exchange Act and the rules and
regulations promulgated thereunder, (iii) the filing of appropriate merger
documents as required by the DGCL, (iv) such consents, approvals, orders,
permits, authorizations, registrations, or declarations and filings as may be
required under the Blue Sky laws of various states.
4.4. Reports. All documents required to be filed as exhibits to the
Veeco SEC Documents have been so filed. All Veeco SEC Documents were filed as
and when required by the Exchange Act or the Securities Act, as applicable. The
Veeco SEC Documents include all statements, reports and documents required to be
filed by Veeco pursuant to the Exchange Act and the Securities Act. As of their
respective filing dates, the Veeco SEC Documents complied in all material
respects with the requirements of the Exchange Act and the Securities Act, as
applicable, and, as of their respective filing dates, none of the Veeco SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading, except to the extent corrected by a subsequently filed Veeco SEC
Document. None of Veeco's subsidiaries is required to file any statements,
reports or documents with the SEC. The financial statements of Veeco and its
subsidiaries, including the notes thereto, included in the Veeco SEC Documents
(the "Veeco Financial Statements"), complied in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto as of their respective dates (except as may be
indicated in the notes thereto or, in the case of unaudited statements included
in Quarterly Reports on Form 10-Q, as permitted by Form 10-Q of the SEC). The
Veeco Financial Statements fairly present the consolidated financial condition,
operating results and cash flows of Veeco and its subsidiaries at the dates and
during the periods indicated therein in accordance with GAAP consistently
applied (subject, in the case of unaudited statements, to normal, recurring
year-end adjustments and additional footnote disclosures). There has been no
material change in Veeco's accounting policies except as described in the notes
to the Veeco Financial Statements. At all times since January 1, 1999 Veeco has
(i) filed as and when due all documents required to be filed with NASDAQ, and
(ii) otherwise timely performed all of Veeco's obligations pursuant to the rules
and regulations of NASDAQ.
4.5. Absence of Certain Changes. Except as disclosed in the Veeco
SEC Documents, since September 30, 1999 (the "Veeco Balance Sheet Date"), Veeco
and its Subsidiaries have conducted their business in the ordinary course
consistent with past practice and there has not occurred: (i) any change, event
or condition (whether or not covered by insurance) that has resulted in, or
might reasonably be expected to result in, a Material Adverse Effect to Veeco;
(ii) any acquisition, sale or transfer of any material asset of Veeco or any of
its subsidiaries other than in the ordinary course of business and consistent
with past practice; (iii) any change in accounting methods or practices
(including any change in depreciation or amortization policies or rates) by
Veeco or any revaluation by Veeco of any of its assets; (iv) any declaration,
setting aside, or payment of a dividend or other distribution with respect to
the shares of Veeco, or any direct or indirect redemption, purchase or other
acquisition by Veeco of any of its shares of capital stock; (v) any material
contract entered into by Veeco or any of its subsidiaries, other than in the
ordinary course of business, or any material amendment or termination of, or
default under, any material contract to which Veeco or any of its subsidiaries
is a party or by which it or any of them is bound; (vi) any action or failure to
act that could reasonably be expected to cause the Merger to fail to qualify as
a reorganization as described in Section 368(a) of the Code with respect to
which no gain or loss will be recognized by a stockholder of the Company on the
conversion of Company Common Stock into Veeco Shares pursuant to the Merger
(except with respect to any cash received in lieu of a fractional share); or
(vii) any agreement by Veeco or any of its subsidiaries to do any of the things
described in the preceding
24
<PAGE>
clauses (i) through (vi) (other than negotiations with the Company and its
representatives regarding the transactions contemplated by this Merger
Agreement).
4.6. No Undisclosed Liabilities. Neither Veeco nor any of its
subsidiaries has any obligations or liabilities of any nature (matured or
unmatured, fixed or contingent) which are material to Veeco and its
subsidiaries, taken as a whole, other than those (i) set forth or adequately
provided for in the Balance Sheet of Veeco and its subsidiaries included in
Veeco's Quarterly Report on Form 10-Q for the period ended September 30, 1999
(the "Veeco Balance Sheet"), (ii) not required to be set forth on the Veeco
Balance Sheet under GAAP, (iii) incurred in the ordinary course of business
since the Veeco Balance Sheet Date and consistent with past practice or (iv)
which individually, or in the aggregate would not have a Material Adverse Effect
on Veeco.
4.7. Litigation. Except as disclosed in the Veeco SEC Documents, (i)
there is no private or governmental action, suit, proceeding, claim, arbitration
or investigation pending before any agency, court or tribunal, foreign or
domestic, or, to the knowledge of Veeco or any of its Subsidiaries, Threatened
against Veeco or any of its Subsidiaries or any of their respective properties
or any of their respective officers or directors (in their capacities as such)
that, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on Veeco, and (ii) there is no judgment, decree or order
against Veeco or any of its Subsidiaries or, to the knowledge of Veeco or any of
its Subsidiaries, any of their respective directors or officers (in their
capacities as such) that could prevent, enjoin, alter or materially delay any of
the transactions contemplated by this Merger Agreement, or that could reasonably
be expected to have a Material Adverse Effect on Veeco.
4.8. Restrictions on Business Activities. There is no material
agreement, judgment, injunction, order or decree binding upon Veeco or any of
its Subsidiaries which has or reasonably could be expected to have the effect of
prohibiting or materially impairing any current or future business practice of
Veeco or any of its Subsidiaries, any acquisition of property by Veeco or any of
its Subsidiaries or the conduct of business by Veeco or any of its Subsidiaries
as currently conducted or as proposed to be conducted by Veeco or any of its
Subsidiaries.
4.9. Governmental Authorization. Veeco and each of its Subsidiaries
have obtained each federal, state, county, local or foreign governmental
consent, license, permit, grant, or other authorization of a Governmental
Authority that is required for the operation of Veeco's or any of its
Subsidiaries' business or the holding of any interest in its properties
(collectively, the "Veeco Authorizations"), and all of such Veeco Authorizations
are in full force and effect, except where the failure to obtain or have any of
such Veeco Authorizations could not reasonably be expected to have a Material
Adverse Effect on Veeco.
4.10. Taxes. Veeco and each of its Subsidiaries have filed or caused
to be filed on a timely basis all Tax Returns that are or were required to be
filed by Veeco and/or any of its Subsidiaries, either separately or as part of
an affiliated group of corporations, pursuant to the Laws of any Governmental
Authority with taxing power over Veeco and/or any of its Subsidiaries or their
assets and business. All Tax Returns filed by Veeco or any of its Subsidiaries
are true, correct and complete. Veeco and each of its Subsidiaries have paid all
Taxes that have become due by it any pursuant to those Tax Returns, or
otherwise, or pursuant to any assessment received by Veeco and/or any Subsidiary
thereof, except such Taxes, if any, as are being contested in good faith and as
to which adequate reserves have been provided on the Veeco Balance Sheet. All
Taxes that Veeco or any of its Subsidiaries is, or was, required by Law to
withhold and collect have been duly withheld and collected and, to the extent
required, have been paid to the appropriate Governmental Authority. There is no
agreement, plan, arrangement or other contract covering any employee or
independent contractor of Veeco or any of its Subsidiaries that could give rise
to the payment of any amount that could not be deductible by Veeco or such
Subsidiary pursuant to Section 280G or Section 162(m) of the Code. The charges,
accruals and reserves with respect to Taxes on the Veeco Balance Sheet with
respect to Veeco and each of its Subsidiaries (excluding any provision for
deferred income taxes established to reflect timing differences between book and
tax income) for all tax periods (or portions thereof) ending on or before the
Closing Date (including any period for which no Tax Return has yet been filed)
are adequate for GAAP purposes.
4.11. Pooling of Interests; Reorganization. Neither Veeco nor any of
its Subsidiaries nor, to the knowledge of Veeco, any of their respective
directors, officers or stockholders has taken or failed to take any action which
(i) would interfere with Veeco's ability to account for the Merger as a "pooling
of interests", or (ii) could
25
<PAGE>
reasonably be expected to cause the Merger to fail to qualify as a
reorganization as described in Section 368(a) of the Code with respect to which
no gain or loss will be recognized by a stockholder of the Company on the
conversion of Company Common Stock into Veeco Shares pursuant to the Merger
(except with respect to any cash received in lieu of a fractional share).
4.12. Brokers and Finders. Except for Banc of America Securities LLC
("Veeco's Broker") or as previously disclosed to the Company, no broker, finder,
agent or similar intermediary has acted on Veeco's or Acquisition's behalf in
connection with this Merger Agreement or the transactions contemplated hereby,
and there are no brokerage commissions, finders' fees or similar fees or
commissions payable in connection therewith based on any Contract with Veeco or
Acquisition or any action taken by Veeco or Acquisition. Veeco shall pay all
fees and disbursements of Veeco's Broker.
4.13. Accuracy of Representations and Warranties. All
representations and warranties of Veeco and Acquisition set forth in this Merger
Agreement and in any agreement, certificate or other document required to be
delivered or given to the Company by Veeco or Acquisition pursuant to this
Merger Agreement will be true and correct at the Closing Date with the same
force and effect as if made on that date.
4.14. Board Recommendation. The Board of Directors of Veeco has, by
a unanimous vote at a meeting of such Board of Directors duly held on February
28, 2000, approved and adopted this Merger Agreement, the Merger and the other
transactions contemplated hereby, and prior to the date hereof has resolved to
recommend that the holders of Veeco Shares approve and adopt this Merger
Agreement, the Merger and the other transactions contemplated hereby.
4.15. Fairness Opinion. Veeco has received the opinion of Banc of
America Securities LLC to the effect that on the date of delivery thereof, the
Merger Consideration was fair from a financial point of view to Veeco.
4.16. Compliance With Laws. Each of Veeco and its Subsidiaries has
complied with, are not in violation of, and have not received any notices of
violation with respect to, any federal, state, local or foreign statute, Law or
regulation with respect to the conduct of its business, or the ownership or
operation of its business, except for such violations or failures to comply as
could not be reasonably expected to have a Material Adverse Effect on Veeco.
4.17. Environmental Matters. (a) Veeco and its Subsidiaries'
ownership and operation of their business is and has been in material compliance
with all Environmental Laws. Veeco and its Subsidiaries have obtained all
approvals necessary or required under all applicable Environmental Laws for the
ownership and operation of their business, all such approvals are in effect,
they have not received written notice of any action to revoke or modify any of
such approvals, and, to Veeco's knowledge the ownership and operation of their
business is and has been in material compliance with all terms and conditions
thereof. Veeco and its Subsidiaries have not received notice of any pending or
Threatened claim or investigation by any Governmental Authority or any other
Person concerning potential liability of any of Veeco and its Subsidiaries under
Environmental Laws in connection with the ownership or operation of its
business. To Veeco's knowledge, there has not been a Release of any Hazardous
Substance by Veeco or its Subsidiaries, nor by any other Person at, upon, in,
from or under any premises now or previously owned or occupied by Veeco or its
Subsidiaries or upon which any of their assets are or were located at any time
during Veeco or its Subsidiaries' ownership and/or occupancy thereof. No real
properties of Veeco or any Subsidiary (whether owned or leased) is currently,
and, to Veeco's knowledge, no such real property has been, used as a treatment,
storage or disposal facility for Hazardous Substances; and no Hazardous
Substances are present on any such real property, except in such quantities as
are handled in material compliance with all applicable manufacturer's
instructions and in material compliance with all applicable Environmental Laws
and as are used in the operation of the business.
(b) Veeco has (i) provided or made available to the Company
all test results, records, notices, disclosures and reports in Veeco or its
Subsidiaries' possession with respect to real property of Veeco or any
Subsidiary (whether owned or leased) and any real property previously owned or
occupied by Veeco or its Subsidiaries, including all correspondence with any
Governmental Authority concerning health, safety and/or environmental issues or
concerns and (ii) made all disclosures, including notice of a Release or
Threatened Release of a Hazardous Substance, required of Veeco or its
Subsidiaries under any Environmental Law.
26
<PAGE>
(c) Neither Veeco nor any Subsidiary thereof has received
notice, or otherwise obtained knowledge, of the existence of any circumstances
or conditions that have a reasonable likelihood of resulting in any damages for
which it could be liable arising pursuant to any Environmental Law.
(d) To Veeco's knowledge, neither Veeco nor any Subsidiary
thereof has material liability with respect to any Hazardous Substance which it
has transported or arranged for the transportation of to premises not owned or
operated by Veeco or any such Subsidiary.
4.18. Intellectual Property Rights. (a) Veeco or a Subsidiary
thereof owns or has the right to make, have made, use, sell and license all new
and useful inventions, discoveries and all letters patent (including, but not
limited to, all reissues, extensions, renewals, divisions and continuations
thereof and thereto (including continuations-in-part)) and all applications
therefor; Use, sell and license all copyrights, mask works, trademarks and
service marks and all registrations and applications for registration thereof;
Use, sell and license all trade secrets, know-how, inventory, algorithms,
methods, processes, protocols, methodologies, computer software (including, but
not limited to, source code in object code and source code form), design,
functional, technical and other specifications (for computer software and other
properties) and all other tangible and intangible proprietary materials and
information required for the conduct of the business of Veeco and its
Subsidiaries ("Veeco Intellectual Property").
(b) To the knowledge of Veeco (i) all authorship in the
computer software, documentation, software design, technical and functional
software specifications created by Veeco or any Subsidiary thereof and Used in
products or services created by Veeco or any such Subsidiary is original or has
not been unlawfully copied or misappropriated and (ii) all computer software and
related documentation manuals contained or Used in products of (including
documentation and product and user manuals) or services to customers provided by
Veeco or any Subsidiary are owned by or licensed to Veeco or such Subsidiary,
and such licenses provide Veeco or such Subsidiary with the right to sublicense
or otherwise authorize Use of the licensed subject matter to their customers and
authorized third party users.
(c) (i) Except for third parties which have rights pursuant to
license agreements and similar agreements relating to the Veeco Intellectual
Property, and except for rights granted to the customers of Veeco or any
Subsidiary thereof, Veeco or a Subsidiary thereof has the sole and exclusive
right to Use, sell and license each of the copyrights owned by Veeco or any
Subsidiary thereof and to make, Use, sell and license each of the letters patent
owned by Veeco or a Subsidiary and each of the U.S. federal trademark and
service mark registrations owned by Veeco or a Subsidiary thereof (the foregoing
collectively referred to as "Veeco-Owned IP Registrations") and (ii) Veeco has
no knowledge that any of the Veeco-Owned IP Registrations are invalid,
unenforceable or not subsisting. With the exception of copyright rights, and
with the exception of Veeco-Owned IP Registrations no longer used by Veeco or
any Subsidiary thereof, all material Veeco-Owned IP Registrations have been and
currently remain duly registered with or issued by the appropriate governmental
agency of the United States or of foreign countries, and all required
maintenance and annuity fees have been paid in full to, and all declarations
required pursuant to 15 U.S.C. Sections 1058 and 1065 (and foreign counterparts
to the same) have been accepted by, or timely submitted to, the proper
Governmental Authority.
(d) Each item of Veeco Intellectual Property owned by Veeco or
a Subsidiary thereof (the "Veeco-Owned IP") (i) is free and clear of any
attachments, liens, security interests, UCC filings or any other encumbrances;
(ii) is not subject to any outstanding judicial order, decree, judgment or
stipulation or to any agreement restricting the scope of Veeco's or such
Subsidiary's Use thereof; and (iii) together with each item of Veeco
Intellectual Property which Veeco or such Subsidiary has a right to Use or
practice pursuant to one or more license or similar agreements, is not subject
to any suits, actions, claims or demands of any third party and no action or
proceeding, whether judicial, administrative or otherwise, has been instituted,
is pending or, to Veeco's knowledge, Threatened, which challenges or affects the
rights of Veeco or such Subsidiary in the same.
(e) (i) Except as set forth in Schedule 4.18(c)(i) of the
Veeco Disclosure Schedule, neither Veeco nor any Subsidiary thereof has received
any claim or any cease and desist or equivalent letter regarding, or any other
notice of any allegation to the effect that any of their products, software,
apparatus, methods or services which Veeco or such Subsidiary makes, Uses,
sells, offers or provides infringes upon, misappropriates or otherwise
27
<PAGE>
violates the intellectual property of any third party; (ii) Veeco has no
knowledge of any unauthorized Use by, unauthorized disclosure to or by or
infringement, misappropriation or other violation of any of Veeco's Intellectual
Property by any current or former officer, employee, independent contractor,
consultant or any other agent of Veeco or any Subsidiary thereof (a "Veeco
Agent" or the "Veeco Agents") or by any third party, other than such third party
disclosures, infringements, misappropriations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect on Veeco; (iii)
neither Veeco nor any Subsidiary thereof has entered into any agreement to
indemnify any third party against any claim of infringement, misappropriation or
other violation of Veeco Intellectual Property rights other than indemnification
provisions contained in purchase orders, customer agreements, license or similar
agreements or software licenses arising in the ordinary course of business; and
(iv) since its formation, none of Veeco or any Subsidiary thereof has been
charged in any suit, action or proceeding with, or has charged others with,
unfair competition, infringement, misappropriation, wrongful use of or any other
violation or improper or illegal activity with respect to or affecting Veeco
Intellectual Property or with claims contesting the validity, ownership or right
to make, Use, sell, license or dispose of Veeco Intellectual Property.
(f) To the knowledge of Veeco, (a) all computer software
created by employees of Veeco or a Subsidiary thereof within the scope of their
employment thereby and used in the products or services of Veeco or a Subsidiary
thereof and all original copyrightable authorship therein is owned by Veeco or a
Subsidiary thereof; (b) all rights in all inventions and discoveries made,
developed or conceived by Veeco Agents during the course of their employment (or
other retention) by Veeco or a Subsidiary thereof and material to the business
of Veeco or a Subsidiary thereof or made, written, developed or conceived with
the use or assistance of Veeco's or a Veeco Subsidiary's facilities or resources
and which are the subject of one or more issued letters patent or applications
for letters patent have been assigned in writing to Veeco or a Subsidiary
thereof; (c) the policy of Veeco or a Subsidiary thereof requires each employee
of Veeco or a Subsidiary thereof to sign documents confirming that he or she
assign to Veeco or a Subsidiary thereof all Veeco Intellectual Property rights
made, written, developed or conceived by him or her during the course of his or
her employment (or other retention) by Veeco or a Subsidiary thereof and
relating to the business of Veeco or a Subsidiary thereof or made, written,
developed or conceived with the use or assistance of Veeco's or a Subsidiary's
facilities or resources to the extent that ownership of any such Veeco
Intellectual Property rights does not vest in Veeco or a Subsidiary thereof by
operation of Law, and (d) all Veeco Intellectual Property rights made, written,
developed or conceived by each Veeco Agent during the course of his or her
retention by Veeco or a Subsidiary thereof and material to the business of Veeco
or a Subsidiary thereof have been assigned or licensed to Veeco or such
Subsidiary thereof.
(g) Veeco believes that Veeco and its Subsidiaries have taken
all reasonable and practicable steps to protect and preserve the confidentiality
of all Veeco Intellectual Property (including, without limitation, trade secrets
and source codes, but excluding letters patent, inventory, copyrights, mask
works, trademarks and service marks and registrations and applications for
registration thereof) ("Veeco Confidential IP Information"). Veeco believes that
all Use by Veeco and its Subsidiaries of Veeco Confidential IP Information not
owned by Veeco and its Subsidiaries has been and is pursuant to the terms of a
written agreement between Veeco or a Subsidiary thereof and the owner of such
Confidential Information, or is otherwise lawful.
SECTION 5. COVENANTS.
5.1. Access. Between the date hereof and the Closing Date, the
Company shall, and shall cause each of the other Acquired Corporations to,
provide Veeco, Acquisition and each of their authorized Representatives with
reasonable access to the properties, books, records, Tax Returns, Contracts,
information, documents and personnel of the Acquired Corporations as they relate
to the Acquired Corporations' business as Veeco or Acquisition may reasonably
request for the purpose of making such investigation of the business,
properties, financial condition and results of operations of the Acquired
Corporations' business as Veeco or Acquisition may deem appropriate or
necessary. Between the date hereof and the Closing Date, Veeco shall, and shall
cause its Subsidiaries to, provide the Company and each of its authorized
Representatives with reasonable access to the properties, books, records, Tax
Returns, Contracts, information, documents and personnel of Veeco and its
Subsidiaries as they relate to Veeco's and its Subsidiaries' businesses as the
Company may reasonably request for the purpose of making such investigation of
the business, properties, financial condition and results of operations of
Veeco's and its Subsidiaries' businesses as the Company may deem appropriate or
necessary. Notwithstanding anything to the contrary herein, if any party is
28
<PAGE>
prohibited from disclosing confidential information to another party by Law or
by preexisting confidentiality obligations, then such party shall inform the
other party of such prohibition and the parties shall work together to resolve
any related due diligence matters without violating such Laws or confidentiality
obligations, including using reasonable best efforts to obtain third party
consents to such disclosure, if appropriate.
5.2. Conduct of the Business of the Parties Pending the Closing
Date. (a) Except as otherwise expressly permitted by this Merger Agreement,
between the date hereof and the Closing Date, the Company shall not, and shall
cause the other Acquired Corporations not to, without the prior consent of
Veeco, take any affirmative action, or fail to take any reasonable action within
their control, as a result of which any of the changes or events listed in
Section 3.11 of this Merger Agreement is reasonably likely to occur.
(b) Except as otherwise expressly permitted by this Merger
Agreement, between the date hereof and the Closing Date, Veeco and Acquisition
shall not, without the prior consent of the Company take any affirmative action,
or fail to take any reasonable action within their control, as a result of which
any of the changes or events listed in Section 4.05 of this Merger Agreement is
reasonably likely to occur.
5.3. Conduct of Business of the Company and Veeco. During the period
from the date of this Merger Agreement and continuing until the earlier of the
termination of this Merger Agreement and the Effective Time, each of the Company
and Veeco agrees (except to the extent expressly contemplated by this Merger
Agreement or as consented to in writing by the other) to, and to cause their
respective Subsidiaries to, carry on its business in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted, to pay
debts and Taxes when due (subject (i) to good faith disputes over such debts or
Taxes and (ii) in the case of Taxes of the Acquired Corporations, to Veeco's
consent (which consent will not be unreasonably withheld or delayed) to the
filing of material Tax Returns if applicable), to pay or perform other
obligations when due, and to use all reasonable efforts consistent with past
practice and policies to preserve intact its present business organization, use
its best efforts consistent with past practice to keep available the services of
its present officers and key employees and agents and use its best efforts
consistent with past practice to preserve its relationships and good will with
customers, suppliers, distributors, licensors, licensees, landlords, creditors,
employees, agents and others having business dealings with it, to the end that
its goodwill and ongoing businesses shall be unimpaired at the Effective Time.
The Company shall confer with Veeco concerning operational matters of the
Acquired Corporations of a material nature and otherwise report periodically to
Veeco concerning the status of the Acquired Corporations' business, operations
and finances. Without limiting the foregoing, except as expressly contemplated
by this Merger Agreement, neither the Company nor Veeco shall do, cause or
permit any of the following without the prior written consent of the other
(which consent will not be unreasonably withheld or delayed):
(a) Charter Documents. Cause or permit any amendments to its
Certificate of Incorporation or Bylaws;
(b) Dividends; Changes in Capital Stock. Declare or pay any
dividends on, or make any other distributions (whether in cash, stock or
property) in respect of, any of its capital stock, or split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, or repurchase or otherwise acquire, directly or indirectly, any
shares of its capital stock except from former employees, directors and
consultants in accordance with currently effective agreements providing for the
repurchase of shares in connection with any termination of service to it or its
Subsidiaries, or sell or otherwise issue any shares of its capital stock or
securities exercisable or exchangeable for or convertible into shares of its
capital stock, other than in accordance with or pursuant to existing option
plans or upon the exercise or conversion of Company Options or Veeco Options (as
applicable) outstanding as of the date of this Merger Agreement or other
convertible or exchangeable securities outstanding as of the date of this Merger
Agreement.
(c) Pooling; Reorganization. Take or fail to take any action
which (i) would interfere with Veeco's ability to account for the Merger as a
"pooling of interests", or (ii) could reasonably be expected to cause the Merger
to fail to qualify as a reorganization as described in Section 368(a) of the
Code with respect to which no gain or loss will be recognized by a stockholder
of the Company on the conversion of Company Common Stock into Veeco Shares
pursuant to the Merger (except with respect to any cash received in lieu of a
fractional share); or
29
<PAGE>
(d) Other. Take, or agree in writing or otherwise to take, any
of the actions described in Sections 5.03(a) through (c) above, or any action
which would make any of its representations or warranties contained in this
Merger Agreement untrue or incorrect in any material respect or prevent it from
performing or cause it not to perform its covenants hereunder in any material
respect.
5.4. Consents. (a) The Company, Veeco and Acquisition shall
cooperate and use their respective reasonable best efforts to obtain, prior to
the Effective Time, all licenses, permits, Consents, approvals, authorizations,
qualifications and orders of Governmental Authorities, parties to the Material
Contracts and any other Persons as are necessary for consummation of the
transactions contemplated by this Merger Agreement and for the Surviving
Corporation to enjoy all rights under such Material Contracts after the
consummation of the transactions contemplated by this Merger Agreement.
(b) The Company and Veeco shall use their respective
reasonable best efforts to file, as soon as practicable after the date of this
Merger Agreement, all notices, reports and other documents required to be filed
with any Governmental Authority with respect to the Merger and the other
transactions contemplated by this Merger Agreement, and to submit promptly any
additional information requested by any such Governmental Authority. Without
limiting the generality of the foregoing, the Company and Veeco shall, promptly
after the date of this Merger Agreement, prepare and file the notifications
required under the HSR Act (within fifteen days following the date of this
Merger Agreement) and any applicable foreign antitrust Laws or regulations in
connection with the Merger. The Company and Veeco shall respond as promptly as
practicable to (i) any inquiries or requests received from the Federal Trade
Commission or the Department of Justice for additional information or
documentation and (ii) any inquiries or requests received from any state
attorney general, foreign antitrust authority or other Governmental Authority in
connection with antitrust or related matters. Each of the Company and Veeco
shall (1) give the other party prompt notice of the commencement or threat of
commencement of any Legal Proceeding by or before any Governmental Authority
with respect to the Merger or any of the other transactions contemplated by this
Merger Agreement, (2) keep the other party informed as to the status of any such
Legal Proceeding or threat, and (3) promptly inform the other party of any
communication to or from the Federal Trade Commission, the Department of Justice
or any other Governmental Authority regarding the Merger. Except as may be
prohibited by any Governmental Authority or by any Law, the Company and Veeco
will consult and cooperate with one another, and will consider in good faith the
views of one another, in connection with any analysis, appearance, presentation,
memorandum, brief, argument, opinion or proposal made or submitted in connection
with any Legal Proceeding under or relating to the HSR Act or any other foreign,
federal or state antitrust or fair trade Law. In addition, except as may be
prohibited by any Governmental Authority or by any Law, in connection with any
Legal Proceeding under or relating to the HSR Act or any other foreign, federal
or state antitrust or fair trade Law or any other similar Legal Proceeding, each
of the Company and Veeco will permit authorized Representatives of the other
party to be present at each meeting or conference relating to any such Legal
Proceeding and to have access to and be consulted in connection with any
document, opinion or proposal made or submitted to any Governmental Authority in
connection with any such Legal Proceeding. At the request of Veeco, the Company
shall agree to divest, sell, dispose of, hold separate or otherwise take or
commit to take any action that limits its freedom of action with respect to its
or its Subsidiaries' ability to retain, any of the businesses, product lines or
assets of the Company or any of its Subsidiaries, provided that any such action
is conditioned upon the consummation of the Merger and such action, when taken
together with any similar action by Veeco, would not have a Material Adverse
Effect on Veeco at and after the Effective Time. If requested by any
Governmental Authority, Veeco shall agree to divest, sell, dispose of, hold
separate or otherwise take or commit to take any action that limits its freedom
of action with respect to its or its Subsidiaries' ability to retain, any of the
businesses, product lines or assets of Veeco or any of its Subsidiaries,
provided, that (i) any such action is conditioned upon the consummation of the
Merger, (ii) in Veeco's reasonable judgment, absent the taking of such action a
required Consent or approval of such Governmental Authority to the consummation
of the Merger will not be obtained and (iii) in the reasonable judgment of
Veeco, such action will not materially affect the business or operations of
Veeco.
5.5. Stock Options. (a) At the Effective Time, all rights with
respect to Company Common Stock under Company Options then outstanding shall be
converted into and become rights with respect to Veeco Shares, and Veeco shall
assume each such Company Option in accordance with the terms (as in effect as of
the date of this Merger Agreement) of the stock option plan or other arrangement
under which it was issued and the terms of the stock option
30
<PAGE>
agreement by which it is evidenced. From and after the Effective Time, (i) each
Company Option assumed by Veeco may be exercised by the holder thereof solely
for Veeco Shares, (ii) the number of Veeco Shares subject to each such Company
Option shall be equal to the product of (A) the number of shares of Company
Common Stock subject to such Company Option immediately prior to the Effective
Time multiplied by (B) the Exchange Ratio, rounding to the nearest whole share,
(iii) the per share exercise price under each such Company Option shall be
adjusted by dividing (x) the per share exercise price under such Company Option
by (y) the Exchange Ratio and rounding to the nearest cent and (iv) any
restriction on the exercise or transfer of any such Company Option shall
continue in full force and effect in accordance with its terms and the term,
exercisability, vesting schedule and other provisions of or relating to such
Company Option shall otherwise remain unchanged; provided, however, that each
Company Option assumed by Veeco in accordance with this Section 5.05(a) shall,
in accordance with its terms, be subject to further adjustment as appropriate to
reflect any stock split, stock dividend, reverse stock split, reclassification,
recapitalization or other similar transaction subsequent to the Effective Time.
Veeco shall file with the SEC, no later than the date on which the Merger
becomes effective, a registration statement on Form S-8 relating to the Veeco
Shares issuable with respect to the Company Options assumed by Veeco in
accordance with this Section 5.05(a).
(b) Prior to the Effective Time, the Company shall take all
action that may be necessary (under the plans pursuant to which Company Options
are outstanding and otherwise) to effectuate the provisions of this Section 5.05
and to ensure that, from and after the Effective Time, holders of Company
Options have no rights with respect thereto other than those specifically
provided in this Section 5.05.
5.6. Employee Benefits. Veeco agrees that all employees of the
Company and its Subsidiaries who continue employment with Veeco, the Surviving
Corporation or any Subsidiary of the Surviving Corporation after the Effective
Time ("Continuing Employees") shall be eligible to continue to participate in
the Surviving Corporation's health, vacation and other non-equity based employee
benefit plans; provided, however, that (a) subject to the terms of any
applicable Collective Bargaining Agreement, nothing in this Section 5.06 or
elsewhere in this Merger Agreement shall limit the right of Veeco or the
Surviving Corporation to amend or terminate any such health, vacation or other
employee benefit plan at any time after the Effective Time, and (b) if Veeco or
the Surviving Corporation terminates any such health, vacation or other employee
benefit plan, then, subject to any necessary transition period, the affected
Continuing Employees shall be eligible to participate in Veeco's health,
vacation and other non-equity based employee benefit plans, to substantially the
same extent as employees of Veeco in similar positions and at similar grade
levels. Nothing in this Section 5.06 or elsewhere in this Merger Agreement shall
be construed to create a right in any employee to employment with Veeco, the
Surviving Corporation or any other Subsidiary of Veeco and, subject to any other
binding agreement between an employee and Veeco, the Surviving Corporation or
any other Subsidiary of Veeco, the employment of each Continuing Employee shall
be "at will" employment.
5.7. Indemnification of Officers and Directors. (a) All rights to
indemnification existing in favor of those Persons who are directors and
officers of the Company as of the date of this Merger Agreement (the
"Indemnified Persons") for acts and omissions occurring prior to the Effective
Time, as provided in the Company's By-Laws (as in effect as of the date of this
Merger Agreement), shall survive the Merger and shall be observed by the
Surviving Corporation to the fullest extent permitted by Delaware law for a
period of six years from the Effective Time.
(b) From the Effective Time until the sixth anniversary of the
Effective Time, the Surviving Corporation shall maintain in effect, for the
benefit of the Indemnified Persons, with respect to acts or omissions occurring
prior to the Effective Time, the existing policy of directors' and officers'
liability insurance maintained by the Company as of the date of this Merger
Agreement in the form disclosed by the Company to Veeco prior to the date of
this Merger Agreement (the "Existing Policy"); provided, however, that (i) the
Surviving Corporation may in its sole discretion determine to substitute for the
Existing Policy a policy or policies of comparable coverage, and (ii) the
Surviving Corporation shall not be required to pay annual premiums for the
Existing Policy (or for any such substitute policies) in excess of 150% of the
premium payable by the Company therefor as of the date of this Merger Agreement,
in the aggregate. In the event any future annual premiums for the Existing
Policy (or any such substitute policies) exceeds 150% of the premium payable by
the Company therefor as of the date of this Merger Agreement, in the aggregate,
the Surviving Corporation shall be entitled to reduce the amount of coverage of
the Existing Policy (or any such substitute policies) to the amount of coverage
that can be obtained for a premium equal to 150% of the premium payable by the
Company therefor as of the date of this Merger Agreement.
31
<PAGE>
5.8. Pooling of Interests. Each of the Company and Veeco agrees, and
agrees to cause their respective Subsidiaries, (a) not to take any action after
the date of this Merger Agreement that would adversely affect the ability of
Veeco to account for the Merger as a "pooling of interests," and (b) to use all
reasonable efforts to attempt to ensure that none of its Affiliates take any
action that could adversely affect the ability of Veeco to account for the
Merger as a "pooling of interests." The Company agrees to provide to
PricewaterhouseCoopers LLP, independent public accountants to the Company, such
letters as shall be reasonably requested by PricewaterhouseCoopers LLP in
connection with the letters referred to in Section 6.03 hereof. Veeco agrees to
provide to Ernst & Young LLP, independent public accountants to Veeco, such
letters as shall be reasonably requested by Ernst & Young LLP, in connection
with the letters referred to in Section 6.03 hereof.
5.9. Environmental Transfer Laws. The Company shall comply in a
timely fashion with the material requirements of all Environmental Laws
applicable to the transfer of the business of the Acquired Corporations and any
licenses associated with the operation of the business of the Acquired
Corporations. The Company shall complete all necessary disclosure statements
required by Environmental Laws applicable to the transfer of the business of the
Acquired Corporations and provide the statements to Veeco prior to Closing, all
in proper form for appropriate recordation and filing.
5.10. Tax Matters. (a) Between the date hereof and the Closing Date,
the Company shall file or cause to be filed on a timely basis all Tax Returns
that are required to be filed by it or by any of the other Acquired
Corporations, either separately or as part of an affiliated group of
corporations, pursuant to the Laws of each Governmental Authority with taxing
power over it or any of the other Acquired Corporations or any of the Acquired
Corporations' assets and businesses. Each of such Tax Returns will be true,
correct and complete in all material respects when filed. Neither the Company
nor any Acquired Corporation shall make any election or file any amended Tax
Return reflecting any position that could result in a material adverse Tax
consequence to Veeco, Acquisition or the Company or any Acquired Corporation for
any period beginning on or after the Effective Time. All transfer, documentary,
gross receipts, sales, use and property gains Taxes, and liabilities similar in
nature, imposed or payable on the sale or transfer of the Acquired Corporations'
business pursuant to this Merger Agreement or the consummation of any of the
transactions contemplated hereby shall be paid by the Company. The Company shall
timely file all required transfer Tax Returns and/or notices of the transfer of
the Acquired Corporations' business with the appropriate Governmental Authority.
Veeco shall cooperate with the Company in connection with the matters
contemplated by this Section 5.10(a), which cooperation shall include, without
limitation, providing information and executing and delivering documents, in
connection with the Company's or any of the Acquired Corporations' obligations
under this Section 5.10(a).
(b) At or prior to the filing of the Form S-4 Registration
Statement, the Company and Veeco shall execute and deliver to Kaye, Scholer,
Fierman, Hays & Handler, LLP, counsel to Veeco, and to Dewey Ballantine LLP,
counsel to the Company, tax representation letters in form and substance
satisfactory to such counsel. Veeco, Acquisition and the Company shall each
confirm to Kaye, Scholer, Fierman, Hays & Handler, LLP and to Dewey Ballantine
LLP the accuracy and completeness as of the Effective Time of the tax
representation letters delivered pursuant to the immediately preceding sentence.
Following delivery of the tax representation letters contemplated pursuant to
the first sentence of this Section 5.10(b), each of Veeco and the Company shall
use its reasonable efforts to cause Kaye, Scholer, Fierman, Hays & Handler, LLP
to deliver to Veeco, and Dewey Ballantine LLP to deliver to the Company, a tax
opinion to the effect that the Merger will qualify as a reorganization as
described in Section 368(a) of the Code and such other matters as are
appropriate for description, and inclusion as exhibits, in the S-4 Registration
Statement and the Joint Proxy Statement, such opinions to be substantially
similar in substance. In rendering such opinions, each of such counsel shall be
entitled to rely on the tax representation letters referred to in this Section
5.10(b).
(c) None of Veeco, Acquisition or the Company (i) have
knowledge of any action or failure to act, and/or (ii) will take or fail to take
any action prior or subsequent to the Effective Time that could reasonably be
expected to cause the Merger to fail to qualify as a reorganization as described
in Section 368(a) of the Code with respect to which no gain or loss will be
recognized by a stockholder of the Company on the conversion of Company Common
Stock into Veeco Shares pursuant to the Merger (except with respect to any cash
received in lieu of a fractional share).
32
<PAGE>
5.11. Letters of the Parties' Accountants. (a) The Company shall use
all reasonable efforts to cause to be delivered to Veeco a letter of
PricewaterhouseCoopers LLP, independent public accountant for the Company, dated
no more than two business days before the date on which the Form S-4
Registration Statement becomes effective (and reasonably satisfactory in form
and substance to Veeco), that is customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the Form S-4 Registration Statement.
(b) Veeco shall use all reasonable efforts to cause to be
delivered to the Company a letter of Ernst & Young LLP, independent public
accountant for Veeco, dated no more than two business days before the date on
which the Form S-4 Registration Statement becomes effective (and reasonably
satisfactory in form and substance to the Company), that is customary in scope
and substance for letters delivered by independent public accountants in
connection with registration statements similar to the Form S-4 Registration
Statement.
5.12. Listing. Veeco shall use reasonable efforts to cause the Veeco
Shares being issued in the Merger to be approved for listing (subject to notice
of issuance) on the Nasdaq National Market.
5.13. Board of Directors; Whitman Employment Agreement. (a) Prior to
the Effective Time, Veeco shall appoint, as of the Effective Time, Christine
Whitman and Doug Kingsley (or, in lieu of Mr. Kingsley, an individual designated
by the Company and mutually acceptable to Veeco and the Company), to become
directors of Veeco, and to cause Christine Whitman to be appointed the President
of Veeco, reporting to the Chairman and Chief Executive Officer of Veeco
pursuant to an Employment Agreement, dated the Closing Date, in the form
attached as Exhibit D hereto (the "Whitman Employment Agreement"), which shall
be executed and delivered by Veeco at or prior to the Effective Time.
(b) Between the date hereof and the Effective Time, Veeco and
Acquisition shall take such actions as may be reasonably necessary to cause the
officers of Acquisition immediately prior to the Effective Time to be the
persons (holding the positions) set forth on Schedule F hereto.
5.14. Notice of Breach; Disclosure. Each party shall promptly notify
the other of (i) any event, condition or circumstance of which such party
becomes aware after the date hereof and prior to the Closing Date that would
constitute a violation or breach of this Merger Agreement (or a breach of any
representation or warranty contained herein) or, if the same were to continue to
exist as of the Closing Date, would constitute the non-satisfaction of any of
the conditions set forth in Article VI, VII or VIII hereof, as the case may be
or (ii) any event, occurrence, transaction, or other item of which such party
becomes aware which would have been required to have been disclosed on any
Schedule or statement delivered hereunder had such event, occurrence,
transaction or item existed as of the date hereof. The disclosure of any matter
as provided in this Section shall not affect the right of any party to terminate
this Merger Agreement under Section 9.01(g) or 9.01(h) on the basis thereof.
5.15. Payment of Indebtedness by Affiliates. The Company shall cause
all indebtedness owed to any Acquired Corporation by any Company Affiliate to be
paid in full prior to Closing, other than advances of, or reimbursements for,
expenses incurred or anticipated to be incurred by officers, directors and
employees of the Acquired Corporations in the ordinary course of business and in
compliance with the relevant Acquired Corporation's policy, if any, relating
thereto.
5.16. No Solicitation -- Company. (a) The Company shall not directly
or indirectly, and shall not authorize or permit any of the other Acquired
Corporations or any Representative of any of the Acquired Corporations directly
or indirectly, to, (i) solicit, initiate, encourage, induce or facilitate the
making, submission or announcement of any Company Acquisition Proposal or take
any action that could reasonably be expected to lead to a Company Acquisition
Proposal, (ii) furnish any information regarding any of the Acquired
Corporations to any Person in connection with or in response to a Company
Acquisition Proposal or an inquiry or indication of interest that could lead to
a Company Acquisition Proposal, (iii) engage in discussions or negotiations with
any Person with respect to any Company Acquisition Proposal, (iv) approve,
endorse or recommend any Company Acquisition Proposal or (v) enter into any
letter of intent or similar document or any Contract contemplating or otherwise
relating to any Company
33
<PAGE>
Acquisition Transaction; provided, however, that prior to the adoption of this
Merger Agreement by the Required Company Stockholder Vote, this Section 5.16(a)
shall not prohibit the Company from engaging in discussions and taking such
other actions as may be reasonably required for the purpose of becoming informed
with respect to a bona fide unsolicited written Company Acquisition Proposal
that is submitted to the Company (and not withdrawn) if the Board of Directors
of the Company reasonably determines in good faith after due consideration that
such Company Acquisition Proposal would reasonably be likely to result in a
Superior Company Proposal and (1) neither the Company nor any Representative of
any of the Acquired Corporations shall have violated any of the restrictions set
forth in this Section 5.16, (2) the Board of Directors of the Company concludes
in good faith that such action is required in order for the Board of Directors
of the Company to comply with its fiduciary obligations to the Company's
stockholders under applicable Law, after having taken into account, among other
relevant considerations, the written advice of its outside legal counsel, and
(3) prior to any such discussion or other action the Company receives from such
Person an executed confidentiality agreement containing customary limitations on
the use and disclosure of all nonpublic written and oral information furnished
to such Person by or on behalf of the Company and containing "standstill"
provisions no less favorable to the Company than the "standstill" provisions
contained in that certain Mutual Confidentiality Agreement, dated
February 10, 2000, between the Company and Veeco. Without limiting the
generality of the foregoing, the Company acknowledges and agrees that any
violation of any of the restrictions set forth in the preceding sentence by any
Representative of any of the Acquired Corporations, whether or not such
Representative is purporting to act on behalf of any of the Acquired
Corporations, shall be deemed to constitute a breach of this Section 5.16 by the
Company.
(b) The Company shall promptly (and in no event later than 24
hours after receipt of any Company Acquisition Proposal, any inquiry or
indication of interest that could lead to a Company Acquisition Proposal or any
request for nonpublic information) advise Veeco orally and in writing of any
Company Acquisition Proposal, any inquiry or indication of interest that could
lead to a Company Acquisition Proposal or any request for nonpublic information
relating to any of the Acquired Corporations (including the identity of the
Person making or submitting such Company Acquisition Proposal, inquiry,
indication of interest or request, and the terms thereof) that is made or
submitted by any Person after the date of this Merger Agreement. The Company
shall keep Veeco fully informed with respect to the status of any such Company
Acquisition Proposal, inquiry, indication of interest or request and any
modification or proposed modification thereto.
(c) On the date hereof, the Company shall immediately cease
and cause to be terminated any existing discussions with any Person that relate
to any Company Acquisition Proposal or Company Acquisition Transaction.
(d) The Company agrees not to release or permit the release of
any Person from, or to waive or permit the waiver of any provision of, any
confidentiality, "standstill" or similar agreement to which any of the Acquired
Corporations is a party, and will use its best efforts to enforce or cause to be
enforced each such agreement at the request of Veeco. The Company also will
promptly request each Person that has executed, within 12 months prior to the
date of this Merger Agreement, a confidentiality agreement in connection with
its consideration of a possible Company Acquisition Transaction or equity
investment, to return all confidential information heretofore furnished to such
Person by or on behalf of any of the Acquired Corporations.
5.17. No Solicitation -- Veeco. (a) Veeco shall not directly or
indirectly, and shall not authorize or permit any Subsidiary of Veeco or any
Representative of Veeco or a Subsidiary thereof, directly or indirectly, to (i)
solicit, initiate, encourage, induce or facilitate the making, submission or
announcement of any Veeco Acquisition Proposal or take any action that could
reasonably be expected to lead to a Veeco Acquisition Proposal, (ii) furnish any
information regarding Veeco to any Person in connection with or in response to a
Veeco Acquisition Proposal or an inquiry or indication of interest that could
lead to a Veeco Acquisition Proposal, (iii) engage in discussions or
negotiations with any Person with respect to any Veeco Acquisition Proposal,
(iv) approve, endorse or recommend any Veeco Acquisition Proposal or (v) enter
into any letter of intent or similar document or any Contract contemplating or
otherwise relating to any Veeco Acquisition Transaction; provided, however, that
prior to the adoption of this Merger Agreement by the Required Veeco Stockholder
Vote, this Section 5.17(a) shall not prohibit Veeco from engaging in discussions
and taking such other actions as may be reasonably required for the purpose of
becoming informed with respect to a bona fide unsolicited written Veeco
Acquisition Proposal that is submitted to Veeco (and not withdrawn) if the Board
of Directors of Veeco reasonably determines in good faith after due
consideration that such Veeco
34
<PAGE>
Acquisition Proposal would reasonably be likely to result in a Superior Veeco
Proposal and (1) neither Veeco nor any Subsidiary of Veeco or any Representative
of Veeco or a Subsidiary of Veeco shall have violated any of the restrictions
set forth in this Section 5.17, and (2) prior to any such discussion or other
action Veeco receives from such Person an executed confidentiality agreement
containing customary limitations on the use and disclosure of all nonpublic
written and oral information furnished to such Person by or on behalf of Veeco
and containing "standstill" provisions no less favorable to Veeco than the
"standstill" provisions contained in that certain Mutual Confidentiality
Agreement, dated February 10, 2000, between the Company and Veeco. Without
limiting the generality of the foregoing, Veeco acknowledges and agrees that any
violation of any of the restrictions set forth in the preceding sentence by any
Representative of Veeco or a Subsidiary thereof, whether or not such
Representative is purporting to act on behalf of any of Veeco or such Subsidiary
thereof, shall be deemed to constitute a breach of this Section 5.17 by Veeco.
(b) Veeco shall promptly (and in no event later than 24 hours
after receipt of any Veeco Acquisition Proposal, any inquiry or indication of
interest that could lead to a Veeco Acquisition Proposal or any request for
nonpublic information) advise the Company orally and in writing of any Veeco
Acquisition Proposal, any inquiry or indication of interest that could lead to a
Veeco Acquisition Proposal or any request for nonpublic information relating to
Veeco and its Subsidiaries (including the identity of the Person making or
submitting such Veeco Acquisition Proposal, inquiry, indication of interest or
request, and the terms thereof) that is made or submitted by any Person after
the date of this Merger Agreement. Veeco shall keep the Company fully informed
with respect to the status of any such Veeco Acquisition Proposal, inquiry,
indication of interest or request and any modification or proposal modification
thereto.
(c) On the date hereof, Veeco shall immediately cease and
cause to be terminated any existing discussions with any Person that relate to
any Veeco Acquisition Proposal or Veeco Acquisition Transaction.
(d) Veeco agrees not to release or permit the release of any
Person from, or to waive or permit the waiver of any provision of, any
confidentiality, "standstill" or similar agreement to which Veeco is a party,
and will use its best efforts to enforce or cause to be enforced each such
agreement at the request of the Company. Veeco also will promptly request each
Person that has executed, within 12 months prior to the date of this Merger
Agreement, a confidentiality agreement in connection with its consideration of a
possible Veeco Acquisition Transaction or equity investment, to return all
confidential information heretofore furnished to such Person by or on behalf of
Veeco.
5.18. Blue Sky Laws. Veeco shall take such steps as may be
reasonably necessary to comply with the securities and blue sky laws of all
jurisdictions which are applicable to the issuance of Veeco Shares in connection
with the Merger. The Company shall use its reasonable efforts to assist Veeco 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 Veeco
Shares in connection with the Merger.
5.19. Additional Agreements. Subject to Section 5.04(b), Veeco and
the Company shall use all reasonable efforts to take, or cause to be taken, all
actions necessary to consummate the Merger and make effective the other
transactions contemplated by this Merger Agreement, as promptly as practicable
following the execution and delivery of this Agreement. Without limiting the
generality of the foregoing, but subject to Section 5.04(b), each party to this
Merger Agreement (i) shall make all filings (if any) and give all notices (if
any) required to be made and given by such party in connection with the Merger
and the other transactions contemplated by this Merger Agreement, (ii) shall use
all reasonable efforts to obtain each Consent (if any) required to be obtained
(pursuant to any applicable Law or Contract, or otherwise) by such party in
connection with the Merger or any of the other transactions contemplated by this
Merger Agreement, and (iii) shall use all reasonable efforts to lift any
restraint, injunction or other legal bar to the Merger. The Company shall
promptly deliver to Veeco a copy of each such filing made, each such notice
given and each such Consent obtained by the Company following the date hereof.
5.20. Disclosure. Veeco and the Company shall consult with each
other before issuing any press release or otherwise making any public statement
with respect to the Merger or any of the other transactions contemplated by this
Merger Agreement. Without limiting the generality of the foregoing, neither
Veeco nor the Company shall, and neither Veeco nor the Company shall permit any
of its Representatives to, make any disclosure regarding the Merger or any of
the other transactions contemplated by this Merger Agreement unless (a) the
other party
35
<PAGE>
shall have approved such disclosure or (b) such party shall have been advised in
writing by its outside legal counsel that such disclosure is required by
applicable Law.
5.21. Affiliate Agreements. (a) The Company shall use all reasonable
efforts to cause each Person identified in Schedule C to this Merger Agreement
and each other Person who is or becomes (or may be deemed to be) an Affiliate of
the Company (each a "Company Affiliate") to execute and deliver to Veeco, prior
to the date of the mailing of the Joint Proxy Statement to the Company's
stockholders, an Affiliate Agreement in the form of Exhibit D hereto (a "Company
Affiliate Agreement"). To the fullest extent legally permissible, Veeco Shares
and shares of Company Common Stock beneficially owned by each Affiliate of the
Company who has not provided a signed Company Affiliate Agreement in accordance
with this Section 5.21(a) shall not be transferable during any period prior to
and after the Effective Time if, as a result of the transfer during any such
period, taking into account the nature, extent and timing of the transfer and
similar transfers by all other Affiliates of Veeco and the Company, the transfer
may, in the reasonable judgment of the independent accountants to Veeco, prevent
Veeco from accounting for the Merger as a "pooling of interests" in accordance
with GAAP, Accounting Principles Board Opinion No. 16 and all published rules,
regulations and policies of the SEC. To the fullest extent legally permissible,
neither Veeco nor the Company shall register, or allow its transfer agent to
register, on its books any transfer of any shares of Veeco Shares or Company
Common Stock of any Company Affiliate who has not provided a signed Affiliate
Agreement in accordance with this Section 5.21(a).
(b) Veeco shall use all reasonable efforts to cause each
Person identified in Schedule E to this Merger Agreement and each other Person
who is or becomes (or may be deemed to be) an Affiliate of Veeco (each a "Veeco
Affiliate") to execute and deliver to Veeco, prior to the date of the mailing of
the Joint Proxy Statement to Veeco's stockholders, an Affiliate Agreement in the
form of Exhibit E hereto (a "Veeco Affiliate Agreement"). To the fullest extent
legally permissible, Veeco Shares and shares of Company Common Stock
beneficially owned by each Affiliate of Veeco who has not provided a signed
Veeco Affiliate Agreement in accordance with this Section 5.21(b) shall not be
transferable during any period prior to and after the Effective Time if, as a
result of the transfer during any such period, taking into account the nature,
extent and timing of the transfer and similar transfers by all other Affiliates
of Veeco and the Company, the transfer may, in the reasonable judgment of the
independent accountants to Veeco, prevent Veeco from accounting for the Merger
as a "pooling of interests" in accordance with GAAP, Accounting Principles Board
Opinion No. 16 and all published rules, regulations and policies of the SEC. To
the fullest extent legally permissible, neither Veeco nor the Company shall
register, or allow its transfer agent to register, on its books any transfer of
any shares of Veeco Shares or Company Common Stock of any Veeco Affiliate who
has not provided a signed Veeco Affiliate Agreement in accordance with this
Section 5.21(b).
5.22. Registration Statement; Joint Proxy Statement. As promptly as
practicable after the date of this Merger Agreement, and in any event, within
twenty-five days thereafter, Veeco and the Company shall prepare and cause to be
filed with the SEC the Joint Proxy Statement and Veeco shall prepare and cause
to be filed with the SEC the Form S-4 Registration Statement, in which the Joint
Proxy Statement will be included as a prospectus. Each of Veeco and the Company
shall use all reasonable efforts to cause the Form S-4 Registration Statement
and the Joint Proxy Statement to comply with the rules and regulations
promulgated by the SEC, to respond promptly to any comments of the SEC or its
staff and to have the Form S-4 Registration Statement declared effective under
the Securities Act as promptly as practicable after it is filed with the SEC.
Veeco will use all reasonable efforts to cause the Joint Proxy Statement to be
mailed to Veeco's stockholders, and the Company will use all reasonable efforts
to cause the Joint Proxy Statement to be mailed to the Company's stockholders,
as promptly as practicable after the Form S-4 Registration Statement is declared
effective under the Securities Act. The Company and Veeco shall promptly furnish
to one another all information concerning the Acquired Corporations and the
Company's stockholders and Veeco and Veeco's stockholders that may be required
or reasonably requested in connection with any action contemplated by this
Section 5.22. If any event relating to any of the Acquired Corporations occurs,
or if the Company becomes aware of any information, that should be disclosed in
an amendment or supplement to the Form S-4 Registration Statement or the Joint
Proxy Statement, then the Company shall promptly inform Veeco thereof and shall
cooperate with Veeco in filing such amendment or supplement with the SEC and, if
appropriate, in mailing such amendment or supplement to the stockholders of the
Company. If any event relating to Veeco occurs, or if Veeco becomes aware of any
information, that should be disclosed in an amendment or supplement to the Form
S-4 Registration Statement or the Joint Proxy Statement, then Veeco shall
promptly inform the Company thereof and shall cooperate with the Company in
filing such
36
<PAGE>
amendment or supplement with the SEC and, if appropriate, in mailing such
amendment or supplement to the stockholders of Veeco.
5.23. Company Stockholders' Meeting. (a) The Company shall take all
action necessary under all applicable Laws to call, give notice of and hold a
meeting of the holders of Company Common Stock to vote on a proposal to adopt
this Merger Agreement (the "Company Stockholders' Meeting"). The Company
Stockholders' Meeting shall be held (on a date selected by Veeco) as promptly as
practicable after the Form S-4 Registration Statement is declared effective
under the Securities Act. The Company shall ensure that all proxies solicited in
connection with the Company Stockholders' Meeting are solicited in compliance
with all applicable Laws.
(b) Subject to Section 5.23(c): (i) the Joint Proxy Statement
shall include a statement to the effect that the Board of Directors of the
Company unanimously recommends that the Company's stockholders vote to adopt
this Merger Agreement at the Company Stockholders' Meeting (such unanimous
recommendation of the Company's Board of Directors that the Company's
stockholders vote to adopt this Merger Agreement being referred to as the
"Company Board Recommendation"); and (ii) the Company Board Recommendation shall
not be withdrawn or modified in a manner adverse to Veeco, and no resolution by
the Board of Directors of the Company or any committee thereof to withdraw or
modify the Company Board Recommendation in a manner adverse to Veeco shall be
adopted or proposed.
(c) Notwithstanding anything to the contrary contained in
Section 5.23(b), at any time prior to the adoption of this Merger Agreement by
the Required Company Stockholder Vote, the Company Board Recommendation may be
withdrawn or modified in a manner adverse to Veeco if: (i) a proposal to acquire
(by merger or otherwise) all of the outstanding shares of Company Common Stock
is made to the Company and is not withdrawn; (ii) the Company provides Veeco
with at least five business days' prior written notice of any meeting of the
Company's Board of Directors at which such Board of Directors will consider and
determine whether such offer is a Superior Proposal; (iii) the Company's Board
of Directors determines in good faith that such offer constitutes a Superior
Proposal (taking into account, among other relevant considerations, a written
opinion of an independent financial advisor of nationally recognized
reputation); (iv) the Company's Board of Directors determines in good faith,
after having taken into account, among other relevant considerations, the
written advice of the Company's outside legal counsel, that, in light of such
Superior Proposal, the withdrawal or modification of the Company Board
Recommendation is required in order for the Company's Board of Directors to
comply with its fiduciary obligations to the Company's stockholders under
applicable Law; and (v) neither the Company nor any of its Representatives shall
have violated any of the restrictions set forth in Section 5.16.
(d) The Company's obligation to call, give notice of and hold
the Company Stockholders' Meeting in accordance with Section 5.23(a) hereof
shall not be limited or otherwise affected by the commencement, disclosure,
announcement or submission of any Superior Proposal or other Acquisition
Proposal, or by any withdrawal or modification of the Company Board
Recommendation.
5.24. Veeco Stockholders' Meeting. (a) Veeco shall take all action
necessary under all applicable Law to call, give notice of and hold a meeting of
the holders of Veeco Shares to vote on the issuance of Veeco Shares in the
Merger (the "Veeco Stockholders' Meeting"). The Veeco Stockholders' Meeting will
be held on the date of the Company Stockholders' Meeting or as promptly
thereafter as is practicable. Veeco shall ensure that all proxies solicited in
connection with the Veeco Stockholders' Meeting are solicited in compliance with
all applicable Laws.
(b) Subject to Section 5.24(c), the Joint Proxy Statement
shall include a statement to the effect that the Board of Directors of Veeco
unanimously recommends that Veeco's stockholders vote to approve the issuance of
Veeco Shares in the Merger (such unanimous recommendation of Veeco's Board of
Directors that Veeco stockholders vote to approve the issuance of Veeco Shares
in the Merger being referred to as the "Veeco Board Recommendation"). The Veeco
Board Recommendation shall not be withdrawn or modified in a manner adverse to
the Company, and no resolution by the Board of Directors of Veeco or any
committee thereof to withdraw or modify the Veeco Board Recommendation in a
manner adverse to the Company shall be adopted or proposed.
37
<PAGE>
(c) Notwithstanding anything to the contrary contained in
Section 5.24(b), at any time prior to the adoption of this Merger Agreement by
the Required Veeco Stockholder Vote, the Veeco Board Recommendation may be
withdrawn or modified in a manner adverse to the Company if: (i) a proposal to
acquire (by merger or otherwise) all of the outstanding Veeco Shares is made to
Veeco and is not withdrawn; (ii) Veeco provides the Company with at least five
business days' prior written notice of any meeting of Veeco's Board of Directors
at which such Board of Directors will consider and determine whether such offer
is a Superior Veeco Proposal; (iii) Veeco's Board of Directors determines in
good faith that such offer constitutes a Superior Veeco Proposal (taking into
account, among other relevant considerations, a written opinion of an
independent financial advisor of nationally recognized reputation); and (iv)
neither Veeco nor any of its Representatives shall have violated any of the
restrictions set forth in Section 5.17.
(d) Veeco's obligation to call, give notice of and hold Veeco
Stockholders' Meeting in accordance with Section 5.24(a) hereof shall not be
limited or otherwise affected by the commencement, disclosure, announcement or
submission of any Superior Veeco Proposal or other Veeco Acquisition Proposal,
or by any withdrawal or modification of the Veeco Board Recommendation.
SECTION 6. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES.
The obligations of the parties to enter into and complete the
Closing are conditioned upon the satis faction or waiver in writing by the
parties, on or before the Closing Date, of the following conditions:
6.1. Effectiveness of Registration Statement. The Form S-4
Registration Statement shall have become effective in accordance with the
provisions of the Securities Act, and no stop order shall have been issued, and
no proceeding for that purpose shall have been initiated or be Threatened, by
the SEC with respect to the Form S-4 Registration Statement.
6.2. Stockholder Approval. This Merger Agreement shall have been
duly adopted by the Required Company Stockholder Vote and the issuance of Veeco
Shares in the Merger shall have been duly approved by the Required Veeco
Shareholder Vote.
6.3. Pooling Letters. The Company and Veeco shall have received
(a) a letter from PricewaterhouseCoopers, LLP dated as of the
Closing Date and addressed to each of Veeco, the Company and Ernst & Young LLP,
reasonably satisfactory in form and substance to Veeco and Ernst & Young LLP, to
the effect that, after reasonable investigation, PricewaterhouseCoopers, LLP is
not aware of any fact concerning the Company or any of the Company's
stockholders or affiliates that could preclude Veeco from accounting for the
Merger as a "pooling of interests" in accordance with GAAP, Accounting
Principles Board Opinion No. 16 and all published rules, regulations and
policies of the SEC; and
(b) a written opinion from Ernst & Young LLP, dated as of the
Closing Date and addressed to Veeco, reasonably satisfactory in form and
substance to Veeco and the Company, to the effect that the Merger can be
accounted for as a "pooling of interests".
6.4. Litigation. No suit, action or other Legal Proceeding by any
domestic Governmental Authority, or injunction or final judgment shall be
pending on the Closing Date before any court or Governmental Authority in which
it is sought to restrain or prohibit or to obtain damages or other relief in
connection with this Merger Agreement or the consummation of the transactions
contemplated hereby.
6.5. HSR Act. (a) The waiting period applicable to the consummation
of the Merger under the HSR Act (as the same may be extended by the agreement of
Veeco or the Company or otherwise) shall have expired or been terminated, and
(b) any similar waiting period under any applicable foreign antitrust law or
regulation to the consummation of the Merger shall have expired or been
terminated, and any Consent required under any applicable foreign antitrust law
or regulation shall have been obtained, except where the failure for such
waiting period to have
38
<PAGE>
expired or been terminated or for such Consent to have been obtained would not
be material to either Veeco or the Company.
6.6. Listing. The Veeco Shares to be issued in the Merger shall have
been approved for listing (subject to notice of issuance) on the Nasdaq National
Market.
SECTION 7. CONDITIONS PRECEDENT TO VEECO'S AND ACQUISITION'S OBLIGATIONS.
The obligations of Veeco and Acquisition to enter into and complete
the Closing are conditioned upon the satisfaction or waiver in writing by Veeco
(on behalf of Veeco and Acquisition), on or before the Closing Date, of the
following conditions:
7.1. Representations and Warranties. The representations and
warranties of the Company contained in this Merger Agreement shall be accurate
in all respects as of the Closing Date as if made on and as of the Closing Date,
except that any inaccuracies in such representations and warranties will be
disregarded if the circumstances giving rise to such inaccuracies do not
constitute, and would not reasonably be expected to have, a Material Adverse
Effect on the Company; provided, however that, for purposes of determining the
accuracy of such representations and warranties, (i) all "Material Adverse
Effect" qualifications and other materiality qualifications, and any similar
qualifications, contained in such representations and warranties shall be
disregarded and (ii) any update of or modification to the Company Disclosure
Schedule made or purported to have been made after the date of this Merger
Agreement shall be disregarded.
7.2. Performance of Covenants. The Company shall have performed and
complied in all material respects with all of the agreements, covenants and
conditions required by this Merger Agreement to be performed and complied with
by it prior to or on the Closing Date.
7.3. Consents. All Consents required to be obtained in connection
with the Merger and the other transactions contemplated by this Merger Agreement
(including the Consents identified in Schedule 7.03 to the Company Disclosure
Schedule) shall have been obtained and shall be in full force and effect other
than such Consents, the failure of which to be obtained would not result,
individually or in the aggregate in a Material Adverse Effect on the Company or
Veeco.
7.4. Agreements and Documents. Veeco and Acquisition shall have
received the following agreements and documents, each of which shall be in full
force and effect:
(a) Company Affiliate Agreements executed by each Company
Affiliate;
(b) the Whitman Employment Agreement executed by Christine
Whitman;
(c) a legal opinion of Kaye, Scholer, Fierman, Hays & Handler,
LLP, counsel to Veeco, dated as of the Closing Date and addressed to Veeco,
confirming its opinion delivered pursuant to Section 5.10(b) (it being
understood that in rendering such opinion, Kaye, Scholer, Fierman, Hays &
Handler, LLP may rely upon tax representation letters, dated the Closing Date,
substantially identical to the tax representation letters referred to in Section
5.10(b) modified to reflect changes in law, if any, and such other matters as
Kaye, Scholer, Fierman, Hays & Handler, LLP and Dewey Ballantine LLP may
reasonably request);
(d) a certificate, dated the Closing Date, executed on behalf
of the Company by its Chief Executive Officer, confirming that the conditions
set forth in Sections 7.01 and 7.02 hereof have been duly satisfied;
7.5. Material Adverse Effect. There shall not have been any Material
Adverse Effect with respect to the Company from the date hereof to the Closing
Date, nor shall there exist any condition which could reasonably be expected to
result in such a Material Adverse Effect.
39
<PAGE>
7.6. Registration Rights Agreement. The Company shall have informed
each party to the Registration Rights Agreement, by delivery thereto of a
writing in form and substance reasonably satisfactory to Veeco, that the Company
believes that, upon the Closing such parties will no longer be entitled to the
rights provided for in the Registration Rights Agreement.
SECTION 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY.
The Company's obligation to enter into and complete the Closing is
conditioned upon the satisfaction or waiver in writing by the Company, on or
before the Closing Date, of all of the following conditions:
8.1. Representations and Warranties. The representations and
warranties of Veeco and Acquisition contained in this Merger Agreement shall be
accurate in all respects as of the Closing Date as if made on and as of the
Closing Date, except that any inaccuracies in such representations and
warranties will be disregarded if the circumstances giving rise to such
inaccuracies do not constitute, and would not reasonably be expected have, a
Material Adverse Effect on Veeco; provided, however, that, for purposes of
determining the accuracy of such representations and warranties as of the
Closing Date, (i) all "Material Adverse Effect" qualifications and other
materiality qualifications, any similar qualifications, contained in such
representations and warranties shall be disregarded and (ii) any update of or
modification to the Veeco Disclosure Schedule hereto made or purported to have
been made after the date of this Merger Agreement shall be disregarded.
8.2. Performance of Covenants. Each of Veeco and Acquisition shall
have performed and complied in all material respects with all of the agreements,
covenants and conditions required by this Merger Agreement to be performed and
complied with by them prior to or on the Closing Date.
8.3. Consents and Approvals. All Consents or approvals of
Governmental Authorities required to be obtained in connection with the Merger
and the transactions contemplated by this Merger Agreement shall have been
obtained other than those Consents or approvals of Governmental Authorities, the
failure of which to obtain would not result, individually or in the aggregate,
in a Material Adverse Effect on Veeco.
8.4. Material Adverse Effect. There shall not have been any Material
Adverse Effect with respect to Veeco from the date hereof to the Closing Date,
nor shall there exist any condition which could reasonably be expected to result
in such a Material Adverse Effect.
8.5. Documents. The Company shall have received the following
documents:
(a) a legal opinion of Dewey Ballantine LLP, counsel to the
Company, dated as of the Closing Date, confirming its opinion delivered pursuant
to Section 5.10(b) (it being understood that in rendering such opinion, Dewey
Ballantine LLP may rely upon tax representation letters dated as of the Closing
Date, and addressed to the Company substantially identical to the tax
representation letters referred to in Section 5.10(b) modified to reflect
changes in law, if any, and such other matters as Kaye, Scholer, Fierman, Hays &
Handler, LLP and Dewey Ballantine LLP may reasonably request),
(b) a certificate executed on behalf of Veeco by an executive
officer of Veeco, confirming that conditions set forth in Sections 8.01 and 8.02
hereof have been duly satisfied, and
(c) Veeco Affiliate Agreements executed by each Veeco
Affiliate.
SECTION 9. TERMINATION.
9.1. Termination. This Merger Agreement may be terminated prior to
the Effective Time (whether before or after adoption of this Merger Agreement by
the Company's stockholders and whether before or after approval of the issuance
of Veeco Shares in the Merger by Veeco's stockholders):
(a) by mutual written consent of Veeco and the Company;
40
<PAGE>
(b) by either Veeco or the Company if the Merger shall not
have been consummated by August 31, 2000 or, if later, the day following the
last day of any cure period under Section 9.01(g) or 9.01(h) (unless the failure
to consummate the Merger is attributable to a failure on the part of the party
seeking to terminate this Merger Agreement to perform any material obligation
required to be performed by such party at or prior to the Effective Time);
(c) by either Veeco or the Company if (i) a court of competent
jurisdiction or other Governmental Authority shall have issued a final and
nonappealable order, decree or ruling, or shall have taken any other action,
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger or (ii) if a suit or action by any domestic Governmental Authority
shall be pending, in which it is sought to restrain or prohibit or to obtain
damages in connection with, this Merger Agreement or the consummation of the
transactions contemplated hereby;
(d) by either Veeco or the Company if (i) the Company
Stockholders' Meeting (including any adjournments and postponements thereof)
shall have been held and completed and the Company's stockholders shall have
taken a final vote on a proposal to adopt this Merger Agreement, and (ii) this
Merger Agreement shall not have been adopted at such meeting by the Required
Company Stockholder Vote (and shall not have been adopted at any adjournment or
postponement thereof); provided, however, that (A) a party shall not be
permitted to terminate this Merger Agreement pursuant to this Section 9.01(d) if
the failure to obtain such stockholder approval is attributable to a failure on
the part of such party to perform any material obligation required to be
performed by such party at or prior to the Effective Time, and (B) the Company
shall not be permitted to terminate this Merger Agreement pursuant to this
Section 9.01(d) unless the Company shall have made the payment required to be
made to Veeco pursuant to Section 9.03(a) and shall have paid to Veeco any fee
required to be paid to Veeco pursuant to Section 9.03(b);
(e) by either Veeco or the Company if (i) the Veeco
Stockholders' Meeting (including any adjournments and postponements thereof)
shall have been held and completed and Veeco's stockholders shall have taken a
final vote on the issuance of Veeco Shares in the Merger, and (ii) the issuance
of Veeco Shares in the Merger shall not have been approved at such meeting (and
shall not have been approved at any adjournment or postponement thereof) by the
Required Veeco Stockholder Vote; provided, however, that (A) a party shall not
be permitted to terminate this Agreement pursuant to this Section 9.01(e) if the
failure to obtain such stockholder vote is attributable to a failure on the part
of the party seeking to terminate this Merger Agreement to perform any material
obligation required to be performed by such party at or prior to the Effective
Time, and (B) Veeco shall not be permitted to terminate this Merger Agreement
pursuant to this Section 9.01(e) unless parent shall have made the payment
required to be made to the Company pursuant to Section 9.03(a);
(f) by Veeco (at any time prior to the adoption of the Merger
Agreement by the Required Company Stockholder Vote) if a Company Triggering
Event shall have occurred;
(g) by Veeco if (i) any of the Company's representations and
warranties contained in this Merger Agreement shall be inaccurate as of the date
of this Merger Agreement, or shall have become inaccurate as of a date
subsequent to the date of this Merger Agreement (as if made on such subsequent
date) (and such breach, if capable of cure, has not been cured within fifteen
days after notice thereof), such that the condition set forth in Section 7.01
would not be satisfied, or (ii) any of the Company's covenants contained in this
Merger Agreement shall have been breached (and any such breach shall not have
been cured within fifteen days after notice thereof) such that the condition set
forth in Section 7.02 would not be satisfied;
(h) by the Company if (i) any of Veeco's representations and
warranties contained in this Merger Agreement shall be inaccurate as of the date
of this Merger Agreement, or shall have become inaccurate as of a date
subsequent to the date of this Merger Agreement (as if made on such subsequent
date) (and such breach, if capable of cure, has not been cured within fifteen
days after notice thereof), such that the condition set forth in Section 8.01
would not be satisfied, or (ii) if any of Veeco's covenants contained in this
Merger Agreement shall have been breached (and any such breach shall not have
been cured within fifteen days after notice thereof) such that the condition set
forth in Section 8.02 would not be satisfied;
41
<PAGE>
(i) (x) by Veeco if, there shall have been any Incurable
Material Adverse Effect (as defined) with respect to the Company from the date
hereof to the Closing Date or there shall exist any condition which could
reasonably be expected to result in such an Incurable Material Adverse Effect
(as defined); or (y) by the Company if from the date hereof to the Closing Date,
there shall have been any Incurable Material Adverse Effect (as defined) with
respect to Veeco from the date hereof to the Closing Date or there shall exist
any condition that could reasonably be expected to result in such an Incurable
Material Adverse Effect (as defined); or
(j) by the Company (at any time prior to the adoption of this
Merger Agreement by the Required Company Stockholder Vote) if a Veeco Triggering
Event shall have occurred.
(k) by Veeco in the event of a Superior Veeco Proposal.
As used in this Section 9.01, an "Incurable Material Adverse Effect"
shall mean a Material Adverse Effect on the Company or Veeco (as applicable),
which Material Adverse Effect is not reasonably capable of being cured prior to
August 31, 2000.
9.2. Effect of Termination. In the event of the termination of this
Merger Agreement as provided in Section 9.01, this Merger Agreement shall be of
no further force or effect; provided, however, that (i) this Section 9.02,
Section 9.03 and Article 10 shall survive the termination of this Merger
Agreement and shall remain in full force and effect, and (ii) the termination of
this Merger Agreement shall not relieve any party from any liability for any
willful breach of any representation, warranty or covenant contained in this
Merger Agreement.
9.3. Expenses; Termination Fees. (a) Except as set forth in this
Section 9.03, all fees and expenses incurred in connection with this Merger
Agreement and the transactions contemplated by this Merger Agreement shall be
paid by the party incurring such expenses, whether or not the Merger is
consummated; provided, however, that: (i) Veeco and the Company shall share
equally all fees and expenses, other than attorneys' fees, incurred in
connection with (A) the filing, printing and mailing of the Form S-4
Registration Statement and the Joint Proxy Statement and any amendments or
supplements thereto and (B) the filing by the parties hereto of the premerger
notification and report forms relating to the Merger under the HSR Act and the
filing of any notice or other document under any applicable foreign antitrust
law or regulation; (ii) if this Merger Agreement is terminated by Veeco pursuant
to Section 9.01(g), then the Company shall make a nonrefundable cash payment to
Veeco, at the time specified in the next sentence, in an amount equal to the
aggregate amount of all fees and reasonable, documented, out-of-pocket expenses
(including with respect to fees, all attorneys' fees, accountants' fees,
financial advisory fees and filing fees) that have been paid or that may become
payable by or on behalf of Veeco in connection with the preparation and
negotiation of this Merger Agreement and otherwise in connection with the
Merger; and (iii) if this Merger Agreement is terminated by the Company pursuant
to Section 9.01(h), then Veeco shall make a nonrefundable cash payment to the
Company, at the time specified in the last sentence of this Section 9.03(a), in
an amount equal to the aggregate amount of all fees and reasonable, documented,
out-of-pocket expenses (including with respect to fees, all attorneys' fees,
accountants fees, financial advisory fees and filing fees) that have been paid
or that may become payable by or on behalf of the Company in connection with the
preparation and negotiation of this Merger Agreement and otherwise in connection
with the Merger. In the case of termination of this Merger Agreement by Veeco
pursuant to Section 9.01(g), the nonrefundable payment referred to in clause
"(ii)" of the proviso to the first sentence of this Section 9.03(a) shall be
made by the Company within two business days after such termination. In the case
of termination of this Merger Agreement by the Company pursuant to Section
9.01(h), the nonrefundable payment referred to in clause "(iii)" of the proviso
to the first sentence of this Section 9.03(a) shall be paid by Veeco within two
business days afer such termination.
(b) If (i) this Merger Agreement is terminated (A) by Veeco or
the Company pursuant to Section 9.01(d) or (B) by Veeco pursuant to Section
9.01(g) and at or prior to the time of such termination a Company Acquisition
Proposal shall have been disclosed, announced, commenced, submitted or made, or
(C) by Veeco pursuant to Section 9.01(f) then the Company shall pay to Veeco (in
lieu of any payment required to be made pursuant to Section 9.03(a)), a
nonrefundable fee in the amount of $14,600,000 (the "Termination Fee"). In the
case of termination of this Merger Agreement by the Company pursuant to Section
9.01(d), the Termination Fee referred to in
42
<PAGE>
the preceding sentence shall be paid by the Company prior to such termination,
and in the case of termination of this Merger Agreement by Veeco pursuant to
Section 9.01(d), Section 9.01(f) or Section 9.01(g), the Termination Fee
referred to in the preceding sentence shall be paid by the Company within two
business days after such termination.
(c) If this Merger Agreement is terminated by Veeco or the
Company pursuant to Section 9.01(e), then Veeco shall pay to the Company (in
lieu of any payment required to be made pursuant to Section 9.03(a)), a
nonrefundable fee in the amount of $4,000,000; provided, however, that if this
Merger Agreement is terminated by Veeco or the Company pursuant to Section
9.01(e), and at or prior to the time of such termination, a Veeco Acquisition
Proposal shall have been disclosed, announced, commenced, submitted or made,
then Veeco shall pay to the Company (in lieu of any payment required to be made
pursuant to Section 9.03(a) and in lieu of the $4,000,000 payment referred to
earlier in this sentence) the Termination Fee. If this Merger Agreement is
terminated by (A) Veeco pursuant to Section 9.01(k), or (B) by the Company
pursuant to Section 9.01(j), then Veeco will pay to the Company (in lieu of any
payment required to be made pursuant to Section 9.03(a)), the Termination Fee.
In the case of termination of this Merger Agreement by Veeco pursuant to Section
9.01(e), the $4,000,000 fee referred to in this Section 9.03(c) or the
Termination Fee (as applicable) shall be paid by Veeco prior to such
termination, and in the case of termination of this Merger Agreement by the
Company pursuant to Section 9.01(e), such $4,000,000 fee or the Termination Fee
(as applicable) shall be paid by Veeco within two business days after such
termination. In the case of termination of this Merger Agreement by Veeco
pursuant to Section 9.01(k), the Termination Fee shall be paid by Veeco prior to
such termination. In the case of termination of this Merger Agreement pursuant
to Section 9.01(j), the Termination Fee shall be paid by Veeco within two
business days after such termination.
SECTION 10. MISCELLANEOUS.
10.1. Successors. This Merger Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
10.2. Amendment. This Merger Agreement may be amended with the
approval of the respective Boards of Directors of the Company and Veeco at any
time (whether before or after adoption of this Merger Agreement by the
stockholders of the Company and whether before or after approval of the issuance
of Veeco Shares in the Merger by Veeco's stockholders); provided, however, that
(i) after any such adoption of this Merger Agreement by the Company's
stockholders, no amendment shall be made which by Law requires further approval
of the stockholders of the Company without the further approval of such
stockholders, and (ii) after any such approval of the issuance of Veeco Shares
in the Merger by Veeco's stockholders, no amendment shall be made which by Law
or NASD regulation requires further approval of Veeco's stockholders without the
further approval of such stockholders. This Merger Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
10.3. Waiver. (a) No failure on the part of any party to exercise
any power, right, privilege or remedy under this Merger Agreement, and no delay
on the part of any party in exercising any power, right, privilege or remedy
under this Merger Agreement, shall operate as a waiver of such power, right,
privilege or remedy; and no single or partial exercise of any such power, right,
privilege or remedy shall preclude any other or further exercise thereof or of
any other power, right, privilege or remedy.
(b) No party shall be deemed to have waived any claim arising
out of this Merger Agreement, or any power, right, privilege or remedy under
this Merger Agreement, unless the waiver of such claim, power, right, privilege
or remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such party; and any such waiver shall not be applicable
or have any effect except in the specific instance in which it is given.
10.4. No Survival of Representations and Warranties; Survival of Tax
Covenants. None of the representations and warranties contained in this Merger
Agreement or in any certificate delivered pursuant to this Merger Agreement
shall survive the Merger. Notwithstanding any other provision of this Merger
Agreement, the covenants contained in Section 5.10(c) shall survive until the
termination or expiration of the relevant statute of limitations.
43
<PAGE>
10.5. Entire Agreement; Counterparts. This Merger Agreement
(together with the agreements, certificates and other documents referred to
herein, the Schedules and Exhibits hereto and the Company Disclosure Schedule
and the Veeco Disclosure Schedule) constitutes the entire agreement among the
parties with respect to its subject matter and supersedes all other prior and
contemporaneous agreements and understandings, both written and oral, among or
between any of the parties with respect to the subject matter hereof, provided,
however, that the certain Mutual Confidentiality Agreement dated
February 10, 2000 between the Company and Veeco shall not be superseded and
shall remain in full force and effect. This Merger Agreement may be executed in
several counterparts, each of which shall be deemed an original and all of which
shall constitute one and the same instrument.
10.6. Governing Law. THIS MERGER AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND PERFORMED IN SUCH STATE AND WITHOUT REGARD TO CONFLICTS OF
LAW DOCTRINES EXCEPT TO THE EXTENT THAT CERTAIN MATTERS ARE PREEMPTED BY FEDERAL
LAW OR ARE GOVERNED BY THE LAW OF THE JURISDICTION OF ORGANIZATION OF THE
RESPECTIVE PARTIES.
10.7. Disclosure Schedules. The Company Disclosure Schedule shall be
arranged in separate parts corresponding to the numbered and lettered Sections
contained in Article III, and the information disclosed in any numbered or
lettered part shall be deemed to relate to and to qualify only the particular
representation or warranty set forth in the corresponding number or lettered
Section in Article III, and shall not be deemed to relate to or to qualify any
other representation or warranty. The Veeco Disclosure Schedule shall be
arranged in separate parts corresponding to the numbered and lettered Sections
contained in Article IV, and the information disclosed in any numbered or
lettered part shall be deemed to relate to and to qualify only the particular
representation or warranty set forth in the corresponding numbered or lettered
Section in Article IV, and shall not be deemed to related to or to qualify any
other representation or warranty.
10.8. Attorneys' Fees. In any action at law or suit in equity to
enforce this Merger Agreement or the rights of any of the parties hereunder, the
prevailing party in such action or suit shall be entitled to receive a
reasonable sum for its attorneys' fees and all other reasonable costs and
expenses incurred in such action or suit.
10.9. Assignment. Neither Veeco, Acquisition nor the Company may
assign this Merger Agreement to any other Person without the prior written
consent of the other parties hereto.
10.10. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given (a) when delivered
personally, (b) when transmitted by telecopy (transmission confirmed), (c) on
the fifth business day following mailing by registered or certified mail (return
receipt requested), or (d) on the next business day following deposit with an
overnight delivery service of national reputation, to the parties at the
following addresses and telecopy numbers (or at such other address or telecopy
number for a party as may be specified by like notice):
If to Veeco or Acquisition:
c/o Veeco Instruments Inc.
Terminal Drive
Plainview, New York 11803
Attention: Edward H. Braun,
Chairman, President and Chief Executive Officer
Telephone: (516) 349-8300
Telecopy: (516) 349-9079
44
<PAGE>
With a copy to:
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Attention: Rory A. Greiss, Esq.
Telephone: (212) 836-8261
Telecopy: (212) 836-7152
If to the Company:
CVC, Inc.
525 Lee Road
Rochester, NY 14606
Attention: Christine Whitman
Chief Executive Officer
Telephone: (716) 458-2550
Telecopy: (716) 458-0426
With a copy to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
Attention: Richard D. Pritz, Esq.
Telephone: (212) 259-6310
Telecopy: (212) 239-6651
10.11. Headings. The headings contained in this Merger Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Merger Agreement.
10.12. Exhibits and Schedules. The Exhibits and Schedules to this
Merger Agreement are incorporated by reference herein and are made a part hereof
as if they were fully set forth herein. References herein to "this Merger
Agreement," "herein," "hereof" and phrases of like import are references to this
Merger Agreement, together with the Exhibits and Schedules hereto, including the
Company Disclosure Schedule and the Veeco Disclosure Schedule.
10.13. Severability. The invalidity of any term or terms of this
Merger Agreement shall not affect any other term of this Merger Agreement, which
shall remain in full force and effect.
10.14. No Third-Party Beneficiaries. Other than the Indemnified
Persons, there are no third party beneficiaries of this Merger Agreement or of
the transactions contemplated hereby and nothing contained herein shall be
deemed to confer upon anyone other than the parties hereto (and their permitted
successors and assigns) and, with respect to the obligations of Veeco pursuant
to Section 5.07 the Indemnified Persons, any right to insist upon or to enforce
the performance of any of the obligations contained herein.
* * * * *
45
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Merger Agreement
as of the date first above written.
VEECO INSTRUMENTS INC.
By: /s/ Edward H. Braun
------------------------------------
Name: Edward H. Braun
Title: Chairman, CEO and President
CVC, INC.
By: /s/Christine B. Whitman
------------------------------------
Name: Christine B. Whitman
Title: Chairman, President and CEO
VEECO ACQUISITION CORP.
By: /s/ Edward H. Braun
------------------------------------
Name: Edward H. Braun
Title: Chairman, CEO and President
<PAGE>
Schedule A
Company Stockholders Party to
Company Stockholders Voting Agreement
Seagate Technology, Inc.
Nikko Tecno Co., Inc.
Advent International Group
Global Private Equity III Limited Partnership
Advent PGGM Global Limited Partnership
Advent Partners GPE III Limited Partnership
Advent Partners (NA) GPE III Limited Partnership
Advent Partners Limited Partnership
Anne G. Whitman
Christine B. Whitman
Emilio O. DiCataldo
Mehrdad M. Moslehi
Christopher J. Mann
<PAGE>
Schedule B
Veeco Stockholders Party to
Veeco Stockholders Voting Agreement
Edward H. Braun
John F. Rein, Jr.
Emanuelle N. Lakios
Joseph Z. Rivlin
<PAGE>
Schedule C
Company Affiliates
Seagate Technology
Nikko Tecno, Inc.
Christine B. Whitman
Giovanni Nocerino
Emilio O. DiCataldo
Mehrdad M. Moslehi
Christopher J. Mann
Richard J. Chicotka
Richard A. Kellogg
Judd C. Prozeller
Robert C. Fink
Douglas A. Kingsley
Seiya Miyanishi
Donald L. Waite
Maurice F. Holmes
<PAGE>
Schedule D
Veeco Affiliates
Edward H. Braun
Walter J. Scherr
Richard A. D'Amore
Paul R. Low
Joel A. Elftman
John F. Rein, Jr.
Francis Steenbeke
Emanuelle N. Lakios
Robert P. Oates
John P. Kiernan
Heinz K. Fridrich
Roger D. McDaniel
Irwin Pfister
Virgil Elings, Ph. D.
Don R. Kania, Ph. D.
Joseph Z. Rivlin
Lloyd J. LaComb
Allen R. Schwartz
Daniel C. Croucher
Thomas J. Cully
<PAGE>
Schedule E
Officers of Acquisition Immediately
Prior to the Effective Time
Officers of Acquisition Position
Edward H. Braun CEO
John F. Rein, Jr. Vice President and Treasurer
Greg Robbins Secretary
Christine Whitman President
Emilio DiCataldo Senior Vice President and Chief Financial Officer
Giovanni Nocerino Executive Vice President, Sales & Service
Mehrdad M. Moslehi Senior Vice President and Chief Technical Officer
Christopher J. Mann Senior Vice President, Marketing
Richard J. Chicotka Vice President, Engineering
Richard A. Kellogg Vice President, Manufacturing
Judd C. Prozeller Vice President, Quality and Human Resources
<PAGE>
Exhibit A
Company Stockholders Voting Agreement
(Attached hereto)
<PAGE>
Exhibit A
COMPANY STOCKHOLDERS
VOTING AGREEMENT
COMPANY STOCKHOLDERS VOTING AGREEMENT (this "Agreement"), dated
February 29, 2000, among each of the individuals and entities listed on Schedule
A to this Agreement (each, a "Company Stockholder" and collectively, the
"Company Stockholders") and Veeco Instruments Inc., a Delaware corporation
("Veeco").
WHEREAS, Veeco Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Veeco ("Acquisition"), and CVC, Inc., a Delaware
corporation (the "Company") propose to enter into an Agreement and Plan of
Merger dated as of the date hereof (as the same may be amended, supplemented or
modified in accordance with its terms, the "Merger Agreement") providing for the
merger of Acquisition into the Company (the "Merger");
WHEREAS, capitalized terms used in this Agreement but not otherwise
defined herein shall have the respective meanings ascribed to such terms in the
Merger Agreement;
WHEREAS, this Agreement is the Company Stockholders Voting Agreement
contemplated by and referred to in the Merger Agreement;
WHEREAS, each Company Stockholder owns the number of Existing
Company Shares (as defined) set forth opposite such Company Stockholder's name
on Schedule A hereto and the Company Stockholders collectively own in the
aggregate 6,086,749 Existing Company Shares (as defined);
WHEREAS, as a condition to the willingness of Veeco to enter into
the Merger Agreement, Veeco has requested that the Company Stockholders enter
into this Agreement.
NOW THEREFORE, to induce Veeco to enter into, and in consideration
of its entering into, the Merger Agreement, and in consideration of the mutual
covenants and agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties to this Agreement, intending to be legally bound, hereby agree as
follows:
SECTION 1. CERTAIN DEFINITIONS.
1.1. "Beneficially Own" or "Beneficial Ownership" with respect to
any securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant to
any agreement, arrangement or understanding, whether or not in writing. Without
duplicative counting of the same securities by the same holder, securities
Beneficially Owned by a Person shall include securities Beneficially Owned by
all other Persons with whom such Person would constitute a "group" within the
meaning of Section 13(d) of the Exchange Act with respect to securities of the
same issuer.
1.2. "Company Shares" with respect to any Company Stockholder, shall
mean such Company Stockholder's Existing Company Shares and any shares of
Company Common Stock and/or other Equity Securities of, or equity interest in,
the Company acquired by the Company Stockholder in any capacity after the date
of this Agreement and prior to the termination of this Agreement, whether upon
the exercise of options, warrants or rights, the conversion or exchange of
convertible or exchangeable securities, or by means of purchase, dividend,
distribution, split-up, recapitalization, combination, exchange of shares or the
like, gift, bequest, inheritance or as a successor in interest in any capacity
or otherwise Beneficially Owned by such Company Stockholder, in each case, if
and to the extent entitled to be voted.
1.3. "Existing Company Shares" with respect to any Company
Stockholder, means all shares of Company Common Stock Beneficially Owned by such
Company Stockholder on the date of this Agreement, in each case, if and to the
extent entitled to be voted.
1
<PAGE>
1.4. "Irrevocable Proxy" shall mean a Company Stockholder Power of
Attorney and Irrevocable Proxy in the form of Exhibit A attached to this
Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES.
2.1. Entity Company Stockholder Representations and Warranties. Each
Company Stockholder that is a legal entity, or otherwise not an individual
Person, hereby represents and warrants to Veeco as follows:
(a) Authority. Such Company Stockholder is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization. Such Company Stockholder has all power and authority necessary to
enable it to enter into this Agreement and to carry out the transactions
contemplated by this Agreement and such Company Stockholder's Irrevocable Proxy.
This Agreement and such Company Stockholder's Irrevocable Proxy have been duly
and validly authorized, executed and delivered by such Company Stockholder and
each constitutes such Company Stockholder's legal, valid and binding obligation,
enforceable against it in accordance with its terms.
(b) Non-Contravention. Neither the execution and delivery of this
Agreement or such Company Stockholder's Irrevocable Proxy, nor consummation of
the transactions contemplated by this Agreement, by such Company Stockholder's
Irrevocable Proxy or by any document to be delivered in accordance herewith or
therewith will violate, result in a breach of, or constitute a default (or an
event which, with notice or lapse of time or both would constitute a default)
under, (i) such Company Stockholder's certificate of incorporation, limited
partnership agreement or other organizational, governing or constating
documents, (ii) any agreement or instrument to which such Company Stockholder is
a party or by which it is bound, or (iii) any Law, or any order, rule or
regulation of any court or Governmental Authority or other regulatory
organization having jurisdiction over it.
(c) Approvals and Consents. No governmental filings, authorizations,
approvals or Consents, or other governmental action is required for (i) the
execution and delivery of this Agreement and such Company Stockholder's
Irrevocable Proxy by such Company Stockholder, (ii) the performance by such
Company Stockholder of its obligations under this Agreement and such Company
Stockholder's Irrevocable Proxy or (iii) the consummation by such Company
Stockholder of the transactions contemplated by this Agreement and such Company
Stockholder's Irrevocable Proxy.
2.2. Individual Company Stockholder Representations and Warranties.
Each Company Stockholder that is an individual hereby represents and warrants to
Veeco as follows:
(a) Authority. Such Company Stockholder has full capacity and
authority to enter into this Agreement and such Company Stockholder's
Irrevocable Proxy, and to carry out the transactions contemplated hereby and
thereby. This Agreement and such Company Stockholder's Irrevocable Proxy have
been duly executed and delivered by such Company Stockholder and each
constitutes a legal, valid and binding obligation of such Company Stockholder
enforceable against such Company Stockholder in accordance with its terms.
(b) Non-Contravention. None of the execution and delivery of this
Agreement or such Company Stockholder's Irrevocable Proxy, nor consummation of
the transactions contemplated by this Agreement, by such Company Stockholder's
Irrevocable Proxy or by any document to be delivered in accordance herewith or
therewith will violate, result in a breach of, or constitute a default (or an
event which, with notice or lapse of time or both would constitute a default)
under, (i) any agreement or instrument to which such Company Stockholder is a
party or by which such Company Stockholder is bound, (ii) any Law, or any order,
rule or regulation of any court or Governmental Authority or other regulatory
organization having jurisdiction over such Company Stockholder.
(c) Approvals and Consents. No governmental filings, authorizations,
approvals or Consents, or other governmental action is necessary or required (i)
for the execution and delivery of this Agreement or such Company Stockholder's
Irrevocable Proxy by such Company Stockholder, (ii) the performance by such
Company Stockholder of such Company Stockholder's obligations under this
Agreement or such Company Stockholder's
2
<PAGE>
Irrevocable Proxy or (iii) the consummation by such Company Stockholder of the
transactions contemplated hereby or by such Company Stockholder's Irrevocable
Proxy.
2.3. Company Stockholder Representations and Warranties. Each
Company Stockholder hereby represents and warrants to Veeco as follows:
(a) Ownership of Existing Company Shares. Such Company Stockholder
is the record and Beneficial Owner of the number of Existing Company Shares set
forth opposite such Company Stockholder's name on Schedule A to this Agreement.
On the date of this Agreement, such Existing Company Shares constitute all of
the shares of Company Common Stock owned of record or Beneficially Owned by such
Company Stockholder.
(b) Liens and Restrictions on Existing Company Shares. Such Company
Stockholder owns the number of Existing Company Shares set forth opposite such
Company Stockholder's name on Schedule A hereto, free and clear of any Liens,
claims, security interests, proxies, voting trusts or agreements, restrictions,
qualifications, limitations, understandings or arrangements which would in any
way restrict or impair such Company Stockholder's right to vote such Existing
Company Shares in his, her or its sole discretion, or could require such Company
Stockholder to sell or transfer any of such Existing Company Shares (whether
upon default on a loan or otherwise) before the Effective Time.
(c) Voting Power Over Existing Company Shares. Such Company
Stockholder has sole voting power and sole power to issue instructions and sole
power to agree to the matters set forth in this Agreement with respect to all of
such Company Stockholder's Existing Company Shares.
(d) Survival. The obligations of such Company Stockholder under this
Agreement shall survive the death, disability or incapacity of such Company
Stockholder.
2.4. Veeco Representations and Warranties. Veeco hereby represents
and warrants to the Company Stockholders as follows:
(a) Authority. Veeco is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Veeco has
all power and authority necessary to enable it to enter into this Agreement and
to carry out the transactions contemplated by this Agreement. This Agreement has
been duly and validly authorized, executed and delivered by Veeco and
constitutes a legal, valid and binding obligation of Veeco enforceable against
Veeco in accordance with its terms.
(b) Non-Contravention. Neither the execution and delivery of this
Agreement by Veeco nor the consummation of the transactions contemplated by this
Agreement will violate, result in a breach of, or constitute a default (or an
event which, with notice or lapse of time or both would constitute a default)
under, the certificate of incorporation or by-laws of Veeco.
(c) Approvals and Consents. No governmental filings, authorizations,
approvals or Consents, or other governmental action is required for (i) the
execution and delivery of this Agreement by Veeco, (ii) the performance by Veeco
of its obligations under this Agreement or (iii) the consummation by Veeco of
the transactions contemplated by this Agreement.
SECTION 3. COVENANTS OF THE COMPANY STOCKHOLDERS.
3.1. Vote for Merger. At any meeting of stockholders of the Company
called to vote upon the Merger and the Merger Agreement or any of the
transactions contemplated by the Merger Agreement, or at any adjournment or
postponement thereof, or in any other circumstances upon which a vote, Consent
or other approval with respect to the Merger and the Merger Agreement is sought,
each Company Stockholder's Company Shares shall be counted as present thereat
for purposes of establishing a quorum and shall be voted or Consented (or caused
to be voted or Consented) in favor of the Merger, the adoption by the Company of
the Merger Agreement, other matters relating
3
<PAGE>
to the approval of the terms of the Merger Agreement and each of the other
transactions contemplated by the Merger Agreement.
3.2. Vote Against Certain Matters. Prior to the Effective Time, at
any meeting of stockholders of the Company or at any adjournment or postponement
thereof or in any other circumstances upon which a Company Stockholder's vote,
Consent or other approval is sought, such Company Stockholder's Company Shares
shall be counted as present thereat for purposes of establishing a quorum and
shall be voted or Consented (or caused to be voted or Consented) against any
proposal or transaction involving the Company or any of its Subsidiaries if such
transaction or proposal would in any manner impede, frustrate, prevent or
nullify the Merger, the Merger Agreement or any of the other transactions
contemplated by the Merger Agreement; provided, that nothing set forth in this
Section 3.2 is intended or shall be construed to restrict or impair the right of
a Company Stockholder to vote or Consent (or cause to be voted or Consented) any
Company Shares owned of record or Beneficially Owned by such Company Stockholder
(i) in favor of any Company Acquisition Proposal or related Company Acquisition
Transaction or (ii) in the election of any director of the Company.
3.3. Execution and Delivery of Irrevocable Proxies. In order to
effectuate the voting arrangements contemplated by Section 3.1 and Section 3.2
hereof, contemporaneously with the execution and delivery by the parties hereto
of this Agreement, and as a condition to such execution and delivery by Veeco,
each Company Stockholder is delivering to Veeco an Irrevocable Proxy duly
executed by or on behalf of such Company Stockholder.
3.4. Transfers; Other Voting Arrangements Inconsistent Actions.
(a) Transferees Bound. It shall be a condition precedent to any
direct or indirect sale, transfer, pledge, assignment or other disposition
of, or entry into any Contract, option or other arrangement with respect to the
sale, transfer, pledge, assignment or other disposition of, any Company Shares
by a Company Stockholder (any of the foregoing, whether voluntary or
involuntary, by operation of Law or otherwise a "Transfer") to any Person (the
"Transferee") that (A) the Company Stockholder desiring to effect such Transfer
provide to the proposed Transferee in connection therewith a copy of this
Agreement and the Irrevocable Proxy and (B) such Transferee shall agree, prior
to the consummation of such Transfer, to become bound by this Agreement and such
Company Stockholder's Irrevocable Proxy and subject to the terms, conditions and
restrictions hereof and thereof in the same manner as the Company Stockholder
desiring to effect such Transfer, by executing a writing to such effect in form
and substance satisfactory to Veeco.
(b) Other Voting Arrangements, Etc. No Company Stockholder shall,
directly or indirectly, enter into any voting arrangement, whether by proxy,
voting arrangement, voting agreement, voting trust or otherwise with respect to
any Company Shares owned of record or Beneficially Owned by such Company
Stockholder other than as contemplated under and as required by this Agreement
and such Company Stockholder's Irrevocable Proxy.
(c) Inconsistent Actions; Non-Interference. No Company Stockholder
shall, directly or indirectly, take any action that would or could reasonably be
expected to (A) make any representation or warranty of the Company Stockholder
contained herein untrue or incorrect, or (B) result in a breach by the Company
Stockholder of its obligations under this Agreement, or (C) result in a breach
by the Company of its obligations under the Merger Agreement, or (D) invalidate
or in any way limit the enforceability by the Proxyholders (as defined in the
Irrevocable Proxy) of such Company Stockholder's Irrevocable Proxy, or (E) have
an effect that would be inconsistent with, or violative of, any provision or
agreement contained in the Merger Agreement.
SECTION 4. COVENANTS RELATING TO CONFIDENTIALITY AND DISCLOSURE.
4.1. Confidentiality. Each Company Stockholder recognizes that
successful consummation of the transactions contemplated by this Agreement and
the Merger Agreement may be dependent upon the maintenance of strict
confidentiality with respect to the matters referred to herein and therein. In
this connection, pending public disclosure thereof by Veeco or the Company, each
Company Stockholder hereby agrees not to disclose or discuss such matters with
anyone not a party to this Agreement or the Merger Agreement (other than to its
and to the Company's
4
<PAGE>
counsel and advisors) without the prior written consent of Veeco, except for
filings, if any, required pursuant to the Exchange Act and the rules and
regulations promulgated thereunder or disclosures that such Company
Stockholder's counsel advises are necessary in order to fulfill such Company
Stockholder's obligations imposed by Law, in which event such Company
Stockholder shall give prior notice of such disclosure to Veeco as promptly as
practicable so as to enable Veeco to seek a protective order from a court of
competent jurisdiction with respect thereto or similar relief in connection
therewith.
4.2. Disclosure. Each Company Stockholder hereby agrees to permit
the Company and Veeco to publish and disclose in the Form S-4 Registration
Statement and the Joint Proxy Statement (including all documents, exhibits and
schedules filed with the SEC), and any press release or other disclosure
document which Veeco or the Company determine to be necessary or desirable in
connection with the Merger and the transactions related thereto, such Company
Stockholder's identity and ownership of Company Common Stock or Veeco Shares, as
the case may be, and the nature of its commitments, arrangements and
understandings under this Agreement and such Company Stockholder's Irrevocable
Proxy.
SECTION 5. CERTAIN ADDITIONAL COVENANTS OF THE COMPANY STOCKHOLDERS.
5.1. No Solicitation. Each Company Stockholder shall not, and shall
cause its Affiliates and Representatives not to, directly or indirectly, take
any action to initiate, solicit, encourage or facilitate the making of any
Company Acquisition Proposal or any inquiry with respect thereto, or engage in
discussions or negotiations with any Person (other than Veeco or any of its
Affiliates or Representatives) relating to any Company Acquisition Proposal or
disclose any non-public information relating to the Company or any Subsidiary of
the Company or afford access to the properties, books or records of the Company
or any Subsidiary of the Company, to any Person that has made a Company
Acquisition Proposal. A Company Stockholder shall notify Veeco orally and in
writing of any offers, proposals or inquiries received by such Company
Stockholder relating to the purchase or acquisition by any Person of any Company
Shares and of any Company Acquisition Proposal actually known to such Company
Stockholder (including, in each case, the material terms and conditions thereof
and the identity of the Person making it), within 24 hours of receipt thereof.
Each Company Stockholder shall and shall cause its Representatives to,
immediately cease and cause to be terminated any and all existing activities,
discussions and negotiations, if any, with any parties conducted heretofore with
respect to any Company Acquisition Proposal, other than discussions or
negotiations with Veeco or its Affiliates or Representatives. Notwithstanding
the restrictions set forth in this Section 5.1, each of the Company and any
Person (including any Company Stockholder) who is an officer or director of the
Company may take any action in such capacity that is consistent with the terms
of the Merger Agreement.
5.2. Reliance. Each Company Stockholder understands and acknowledges
that Veeco is entering into the Merger Agreement in reliance upon such Company
Stockholder's execution and delivery of this Agreement and such Company
Stockholder's Irrevocable Proxy.
5.3. Affiliate Agreement. Each Company Stockholder, if requested by
Veeco prior to the Effective Time, will duly execute and deliver to Veeco a
Company Affiliate Agreement contemplated by Section 5.21(a) of the Merger
Agreement.
SECTION 6. TERMINATION.
6.1. Termination of Agreement. The provisions of this Agreement
shall terminate and be of no further force or effect upon the earlier to occur
of (a) the termination of the Merger Agreement in accordance with its terms and
(b) the Effective Time of the Merger.
5
<PAGE>
SECTION 7. MISCELLANEOUS.
7.1 Expenses. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring the expense.
7.2 Entire Agreement. This Agreement and any documents to be
delivered in accordance with this Agreement (including the Irrevocable Proxies
of the Company Stockholders) contain the entire agreement among the parties
relating to the transactions which are the subject of this Agreement, and all
prior and contemporaneous negotiations, understandings and agreements among the
parties (whether written or oral) with regard to the subject matter of this
Agreement are superseded by this Agreement, and there are no representations,
warranties, understandings or agreements concerning the transactions which are
the subject of this Agreement or those other documents other than those
expressly set forth in this Agreement.
7.3 Captions. The captions of the articles and paragraphs of this
Agreement are for reference only, and do not affect the meaning or
interpretation of this Agreement.
7.4. Binding Agreement; Assignment.
(a) Binding Agreement. Each Company Stockholder agrees that this
Agreement and the obligations hereunder shall attach to the Company Shares and
shall be binding upon any Person to which record or Beneficial Ownership of such
Company Shares shall pass, whether by operation of Law or otherwise, including,
without limitation, the Company Stockholder's heirs, distributees, guardians,
administrators, executors, legal representatives, or successors, partners or
other transferees (for value or otherwise) and any other successors in interest.
Notwithstanding any transfer of Company Shares, the transferor shall remain
liable for the performance of all obligations under this Agreement of the
transferor.
(b) Assignment. Notwithstanding anything to the contrary set forth
herein, no party may assign any of its rights or obligations hereunder, by
operation of Law or otherwise, without the prior written consent of the other
party; provided, that Veeco may assign, in its sole discretion, its rights and
obligations hereunder to any direct or indirect wholly-owned subsidiary of
Veeco, but no such assignment shall relieve Veeco of its obligations hereunder
if such assignee does not perform such obligations.
7.5. Notices and Other Communications. Any notice or other
communication under this Agreement must be in writing and will be deemed given
when delivered in person or sent by facsimile (with proof of receipt at the
number to which it is required to be sent), or on the third business day after
the day on which mailed by first class mail from within the United States of
America, to the following addresses (or such other address as may be specified
after the date of this Agreement by the party to which the notice or
communication is sent):
If to Veeco:
Veeco Instruments Inc.
Terminal Drive
Plainview, New York 11803
Attention: Edward H. Braun
Chairman, President and Chief Executive Officer
Facsimile No: (516) 349-9079
with a copy to:
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022-3598
Attention: Rory Greiss, Esq.
Facsimile No.: (212) 836-8689
6
<PAGE>
If to any Company Stockholder, to such Company Stockholder at the
address set forth under such Company Stockholder's signature on the signature
pages to this Agreement.
with a copy to:
Dewey Ballantine, LLP
1301 Avenue of the Americas
New York, New York 10019
Attention: Richard D. Pritz, Esq.
Facsimile No.: (212) 239-6551
7.6. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO
AGREEMENTS MADE AND PERFORMED IN SUCH STATE AND WITHOUT REGARD TO CONFLICTS OF
LAWS DOCTRINES.
7.7. Amendments. Prior to the Effective Time, this Agreement may be
amended only by a document in writing signed by Veeco and each Company
Stockholder.
7.8. Counterparts. This Agreement may be executed in two or more
counterparts, some of which may contain the signatures of some, but not all, of
the parties hereto. Each of those counterparts will be deemed an original, but
all of them together will constitute one and the same Agreement.
7.9. Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (iv) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
7.10. Enforcement. 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 hereto shall be entitled to an injunction
or injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Federal court located in the
State of Delaware or in a Delaware state court, this being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto (i) consents to the personal jurisdiction of any Federal
court located in the State of Delaware or any Delaware state court in any action
or proceeding relating to or arising out of this Agreement (including, with
respect to a Company Stockholder, such Company Stockholder's Irrevocable Proxy)
or any of the transactions contemplated hereby, (ii) agrees that such party will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court, (iii) agrees that such parties will not
seek to change the venue of any such action or proceeding or otherwise to move
any such action or proceeding to another court, whether because of inconvenience
of the forum or otherwise (provided that nothing in this Section will prevent a
party from removing an action or proceeding from a Delaware state court to a
Federal court located in the State of Delaware), (iv) agrees that such party
will not bring any action relating to this Agreement or any Irrevocable Proxy or
any of the transactions contemplated hereby or thereby in any court other than a
Federal court sitting in the State of Delaware or a Delaware state court and (v)
waives any right to trial by jury with respect to any claim or proceeding
related to or arising out of this Agreement or any Irrevocable Proxy or any of
the transactions contemplated hereby or thereby.
7.11. Further Assurances. From time to time, at the other party's
request and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further lawful
7
<PAGE>
action as may be necessary or desirable to consummate and make effective, in the
most expeditious manner practicable, the transactions contemplated by this
Agreement and the Irrevocable Proxies.
8
<PAGE>
IN WITNESS WHEREOF, each party hereto has caused this Agreement to
be signed by its officer thereunto duly authorized as of the date in the first
paragraph of this Agreement.
VEECO
VEECO INSTRUMENTS INC.
By:
----------------------------
Name:
Title:
COMPANY STOCKHOLDERS
SEAGATE TECHNOLOGY, INC.
By:
----------------------------
Name:
Title:
Seagate Technology, Inc.'s
Address for Notice:
-------------------------------
-------------------------------
-------------------------------
-------------------------------
Attention:_____________________
Facsimile No.:_________________
NIKKO TECNO CO., INC.
By:
----------------------------
Name:
Title:
Nikko Tecno Co., Inc.
Address for Notice
-------------------------------
-------------------------------
-------------------------------
-------------------------------
Attention:_____________________
Facsimile No.:_________________
9
<PAGE>
ADVENT INTERNATIONAL GROUP
By:
----------------------------
Name:
Title:
Advent International Group's
Address for Notice:
-------------------------------
-------------------------------
-------------------------------
-------------------------------
Attention:_____________________
Facsimile No.:_________________
GLOBAL PRIVATE EQUITY III LIMITED
PARTNERSHIP
By: Advent International Group,
its General Partner
By:
----------------------------
Name:
Title:
Global Private Equity III
Limited Partnership's
Address for Notice:
-------------------------------
-------------------------------
-------------------------------
-------------------------------
Attention:_____________________
Facsimile No.:_________________
ADVENT PGGM GLOBAL LIMITED
PARTNERSHIP
By: Advent International Group,
its General Partner
By:
----------------------------
Name:
Title:
Advent PGGM Global Limited
Partnership's Address for Notice:
-------------------------------
-------------------------------
-------------------------------
-------------------------------
Attention:_____________________
Facsimile No.:_________________
10
<PAGE>
ADVENT PARTNERS GPE III LIMITED
PARTNERSHIP
By: Advent International Group,
its General Partner
By:
----------------------------
Name:
Title:
Advent Partners GPE III Limited
Partnership's Address for Notice:
-------------------------------
-------------------------------
-------------------------------
-------------------------------
Attention:_____________________
Facsimile No.:_________________
ADVENT PARTNERS (NA) GPE III LIMITED
PARTNERSHIP
By: Advent International Group,
its General Partner
By:
----------------------------
Name:
Title:
Advent Partners (NA) GPE III
Limited Partnership's
Address for Notice:
-------------------------------
-------------------------------
-------------------------------
-------------------------------
Attention:_____________________
Facsimile No.:_________________
ADVENT PARTNERS LIMITED PARTNERSHIP
By: Advent International Group,
its General Partner
By:
----------------------------
Name:
Title:
11
<PAGE>
Advent Partners Limited Partnership's
Address for Notice:
-------------------------------
-------------------------------
-------------------------------
-------------------------------
Attention:_____________________
Facsimile No.:_________________
-------------------------------
Anne G. Whitman
Anne G. Whitman's
Address for Notice:
-------------------------------
-------------------------------
-------------------------------
-------------------------------
Facsimile No.:_________________
-------------------------------
Christine B. Whitman
Christine B. Whitman's
Address for Notice:
-------------------------------
-------------------------------
-------------------------------
-------------------------------
Facsimile No.:_________________
-------------------------------
Emilio O. DiCataldo
Emilio O. DiCataldo's
Address for Notice:
-------------------------------
-------------------------------
-------------------------------
-------------------------------
Facsimile No.:_________________
-------------------------------
Mehrdad M. Moslehi
12
<PAGE>
Mehrdad M. Moslehi's
Address for Notice:
-------------------------------
-------------------------------
-------------------------------
-------------------------------
Facsimile No.:_________________
-------------------------------
Christopher J. Mann
Christopher J. Mann's
Address for Notice:
-------------------------------
-------------------------------
-------------------------------
-------------------------------
Facsimile No.:_________________
13
<PAGE>
Schedule A
Company Stockholder No. of Existing Company Shares Held
- ------------------- -----------------------------------
Seagate Technology, Inc. 2,428,313
Nikko Tecno Co., Inc. 1,412,316
Global Private Equity III Limited Partnership 853,658
Advent PGGM Global Limited Partnership 130,793
Advent Partners GPE III Limited Partnership 12,907
Advent Partners (NA) GPE III Limited Partnership 3,861
Advent Partners Limited Partnership 15,041
Anne G. Whitman 451,900
Christine B. Whitman 368,000
Emilio O. DiCataldo 50,000
Mehrdad M. Moslehi 304,000
Christopher J. Mann 55,960
Schedule A - Page 1
<PAGE>
Exhibit A
COMPANY STOCKHOLDERS
POWER OF ATTORNEY AND IRREVOCABLE PROXY
Reference is hereby made to that Certain Company Stockholders Voting
Agreement (the "Voting Agreement"), dated as of the date hereof, of which this
Company Stockholders Power of Attorney and Irrevocable Proxy (this "Irrevocable
Proxy") forms a part. Capitalized terms used but not defined in this Irrevocable
Proxy have the respective meanings ascribed to such terms in the Voting
Agreement. This Irrevocable Proxy is being delivered by the undersigned Company
Stockholder (the "Granting Stockholder") pursuant to Section 3.3 of the Voting
Agreement.
The undersigned Granting Stockholder hereby irrevocably appoints Veeco
Instruments Inc., a Delaware corporation ("Veeco"), and each of Veeco's officers
and other designees (each such Person, a "Proxyholder") as the Granting
Stockholder's attorney-in-fact and proxy pursuant to the provisions of Section
212 of the Delaware General Corporation Law, with full power of substitution, in
the Granting Stockholder's name, place and stead, to vote and otherwise act (by
written consent or otherwise) with respect to all of the Company Shares now
owned of record or Beneficially Owned by the Granting Stockholder and of which
the Granting Stockholder may hereafter acquire record or Beneficial Ownership,
and any other securities, if any (the "Other Securities"), which the Granting
Stockholder is entitled to vote at any meeting of the stockholders of the
Company (whether annual or special and whether or not an adjourned or postponed
meeting) or consent in lieu of any such meeting or otherwise:
(a) in favor of the Merger, the adoption by the Company of the
Merger Agreement, other matters relating to the approval of the terms of
the Merger Agreement and each of the other transactions contemplated by
the Merger Agreement; and
(b) against any proposal or transaction involving the Company or any
of its Subsidiaries if any such transaction or proposal would in any
manner impede, frustrate, prevent or nullify the Merger, the Merger
Agreement or any of the other transactions contemplated by the Merger
Agreement; provided, however, that nothing set forth in this paragraph (b)
is intended or shall be construed to grant to any Proxyholder the right to
vote or otherwise act (by written consent or otherwise) with respect to
any Company Shares or Other Securities owned of record or Beneficially
Owned by the Granting Stockholder (i) against any Company Acquisition
Proposal or related Company Acquisition Transaction or (ii) in the
election of any director of the Company.
THIS POWER OF ATTORNEY AND IRREVOCABLE PROXY IS IRREVOCABLE AND COUPLED
WITH AN INTEREST. The Granting Stockholder hereby revokes all other proxies and
powers of attorney with respect to the Company Shares and the Other Securities
that the Granting Stockholder may have heretofore granted, and no subsequent
proxy or power of attorney shall be given or written consent executed (and if
given or executed, shall not be effective) by the Granting Stockholder with
respect thereto. All authority herein conferred or agreed to be conferred shall
survive the death or incapacity of the Granting Stockholder and any obligation
of the Granting Stockholder under this Irrevocable Proxy shall be binding upon
the heirs, personal representatives, successors and assigns of the Granting
Stockholder.
Exhibit A - Page 1
<PAGE>
This Irrevocable Proxy shall be valid and irrevocable until, and shall
terminate upon, the earlier to occur of (a) the termination of the Merger
Agreement in accordance with its terms and (b) the Effective Time of the Merger.
----------------------------------------------------------
(Signature of Granting Stockholder)
----------------------------------------------------------
(Printed Name of Granting Stockholder as it Appears on
Certificate Representing Company Shares)
----------------------------------------
(Date)
Exhibit A - Page 2
<PAGE>
Exhibit B
Veeco Stockholders Voting Agreement
(Attached hereto)
<PAGE>
VEECO STOCKHOLDERS
VOTING AGREEMENT
VEECO STOCKHOLDERS VOTING AGREEMENT (this "Agreement"), dated
February 29, 2000, among each of the individuals and entities listed on Schedule
A to this Agreement (each, a "Veeco Stockholder" and collectively, the "Veeco
Stockholders") and CVC, Inc., a Delaware corporation (the "Company").
WHEREAS, Veeco Acquisition Corp. ("Acquisition"), a Delaware
corporation and a wholly-owned subsidiary of Veeco Instruments Inc. ("Veeco"),
and the Company propose to enter into an Agreement and Plan of Merger dated as
of the date hereof (as the same may be amended, supplemented or modified in
accordance with its terms, the "Merger Agreement") providing for the merger of
Acquisition into the Company (the "Merger");
WHEREAS, capitalized terms used in this Agreement but not otherwise
defined herein shall have the respective meanings ascribed to such terms in the
Merger Agreement;
WHEREAS, this Agreement is the Veeco Stockholders Voting Agreement
contemplated by and referred to in the Merger Agreement;
WHEREAS, each Veeco Stockholder owns the number of Existing Veeco
Shares (as defined) set forth opposite such Veeco Stockholder's name on Schedule
A hereto and the Veeco Stockholders collectively own in the aggregate 128,490
Existing Veeco Shares (as defined);
WHEREAS, as a condition to the willingness of the Company to enter
into the Merger Agreement, the Company has requested that the Veeco Stockholders
enter into this Agreement.
NOW THEREFORE, to induce the Company to enter into, and in
consideration of its entering into, the Merger Agreement, and in consideration
of the mutual covenants and agreements set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties to this Agreement, intending to be legally bound,
hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS.
1.1. "Beneficially Own" or "Beneficial Ownership" with respect to
any securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant to
any agreement, arrangement or understanding, whether or not in writing. Without
duplicative counting of the same securities by the same holder, securities
Beneficially Owned by a Person shall include securities Beneficially Owned by
all other Persons with whom such Person would constitute a "group" within the
meaning of Section 13(d) of the Exchange Act with respect to securities of the
same issuer.
1.2. "Veeco Shares" with respect to any Veeco Stockholder, shall
mean such Veeco Stockholder's Existing Veeco Shares and any Veeco Shares and/or
other Equity Securities of, or equity interest in, Veeco acquired by the Veeco
Stockholder in any capacity after the date of this Agreement and prior to the
termination of this Agreement, whether upon the exercise of options, warrants or
rights, the conversion or exchange of convertible or exchangeable securities, or
by means of purchase, dividend, distribution, split-up, recapitalization,
combination, exchange of shares or the like, gift, bequest, inheritance or as a
successor in interest in any capacity or otherwise Beneficially Owned by such
Veeco Stockholder, in each case, if and to the extent entitled to be voted.
1.3. "Existing Veeco Shares" with respect to any Veeco Stockholder,
means all Veeco Shares Beneficially Owned by such Veeco Stockholder on the date
of this Agreement, in each case, if and to the extent entitled to be voted.
<PAGE>
1.4. "Irrevocable Proxy" shall mean a Veeco Stockholder Power of
Attorney and Irrevocable Proxy in the form of Exhibit A attached to this
Agreement.
SECTION. 2. REPRESENTATIONS AND WARRANTIES.
2.1. Entity Veeco Stockholder Representations and Warranties. Each
Veeco Stockholder that is a legal entity, or otherwise not an individual Person,
hereby represents and warrants to the Company as follows:
(a) Authority. Such Veeco Stockholder is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization. Such Veeco Stockholder has all power and authority necessary to
enable it to enter into this Agreement and to carry out the transactions
contemplated by this Agreement and such Veeco Stockholder's Irrevocable Proxy.
This Agreement and such Veeco Stockholder's Irrevocable Proxy have been duly and
validly authorized, executed and delivered by such Veeco Stockholder and each
constitutes such Veeco Stockholder's legal, valid and binding obligation,
enforceable against it in accordance with its terms.
(b) Non-Contravention. Neither the execution and delivery of this
Agreement or such Veeco Stockholder's Irrevocable Proxy, nor consummation of the
transactions contemplated by this Agreement, by such Veeco Stockholder's
Irrevocable Proxy or by any document to be delivered in accordance herewith or
therewith will violate, result in a breach of, or constitute a default (or an
event which, with notice or lapse of time or both would constitute a default)
under, (i) such Veeco Stockholder's certificate of incorporation, limited
partnership agreement or other organizational, governing or constating
documents, (ii) any agreement or instrument to which such Veeco Stockholder is a
party or by which it is bound, or (iii) any Law, or any order, rule or
regulation of any court or Governmental Authority or other regulatory
organization having jurisdiction over it.
(c) Approvals and Consents. No governmental filings, authorizations,
approvals or Consents, or other governmental action is required for (i) the
execution and delivery of this Agreement and such Veeco Stockholder's
Irrevocable Proxy by such Veeco Stockholder, (ii) the performance by such Veeco
Stockholder of its obligations under this Agreement and such Veeco Stockholder's
Irrevocable Proxy or (iii) the consummation by such Veeco Stockholder of the
transactions contemplated by this Agreement and such Veeco Stockholder's
Irrevocable Proxy.
2.2. Individual Veeco Stockholder Representations and Warranties.
Each Veeco Stockholder that is an individual hereby represents and warrants to
the Company as follows:
(a) Authority. Such Veeco Stockholder has full capacity and
authority to enter into this Agreement and such Veeco Stockholder's Irrevocable
Proxy, and to carry out the transactions contemplated hereby and thereby. This
Agreement and such Veeco Stockholder's Irrevocable Proxy have been duly executed
and delivered by such Veeco Stockholder and each constitutes a legal, valid and
binding obligation of such Veeco Stockholder enforceable against such Veeco
Stockholder in accordance with its terms.
(b) Non-Contravention. None of the execution and delivery of this
Agreement or such Veeco Stockholder's Irrevocable Proxy, nor consummation of the
transactions contemplated by this Agreement, by such Veeco Stockholder's
Irrevocable Proxy or by any document to be delivered in accordance herewith or
therewith will violate, result in a breach of, or constitute a default (or an
event which, with notice or lapse of time or both would constitute a default)
under, (i) any agreement or instrument to which such Veeco Stockholder is a
party or by which such Veeco Stockholder is bound, (ii) any Law, or any order,
rule or regulation of any court or Governmental Authority or other regulatory
organization having jurisdiction over such Veeco Stockholder.
(c) Approvals and Consents. No governmental filings, authorizations,
approvals or Consents, or other governmental action is necessary or required (i)
for the execution and delivery of this Agreement or such Veeco Stockholder's
Irrevocable Proxy by such Veeco Stockholder, (ii) the performance by such Veeco
Stockholder of such Veeco Stockholder's obligations under this Agreement or such
Veeco Stockholder's Irrevocable Proxy or (iii) the
2
<PAGE>
consummation by such Veeco Stockholder of the transactions contemplated hereby
or by such Veeco Stockholder's Irrevocable Proxy.
2.3. Veeco Stockholder Representations and Warranties. Each Veeco
Stockholder hereby represents and warrants to the Company as follows:
(a) Ownership of Existing Veeco Shares. Such Veeco Stockholder is
the record and Beneficial Owner of the number of Existing Veeco Shares set forth
opposite such Veeco Stockholder's name on Schedule A to this Agreement. On the
date of this Agreement, such Existing Veeco Shares constitute all of the Veeco
Shares owned of record or Beneficially Owned by such Veeco Stockholder.
(b) Liens and Restrictions on Existing Veeco Shares. Such Veeco
Stockholder owns the number of Existing Veeco Shares set forth opposite such
Veeco Stockholder's name on Schedule A hereto, free and clear of any Liens,
claims, security interests, proxies, voting trusts or agreements, restrictions,
qualifications, limitations, understandings or arrangements which would in any
way restrict or impair such Veeco Stockholder's right to vote such Existing
Veeco Shares in his, her or its sole discretion, or could require such Veeco
Stockholder to sell or transfer any of such Existing Veeco Shares (whether upon
default on a loan or otherwise) before the Effective Time.
(c) Voting Power Over Existing Veeco Shares. Such Veeco Stockholder
has sole voting power and sole power to issue instructions and sole power to
agree to the matters set forth in this Agreement with respect to all of such
Veeco Stockholder's Existing Veeco Shares.
(d) Survival. The obligations of such Veeco Stockholder under this
Agreement shall survive the death, disability or incapacity of such Veeco
Stockholder.
2.4. Company Representations and Warranties. The Company hereby
represents and warrants to the Veeco Stockholders as follows:
(a) Authority. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
Company has all power and authority necessary to enable it to enter into this
Agreement and to carry out the transactions contemplated by this Agreement. This
Agreement has been duly and validly authorized, executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
(b) Non-Contravention. Neither the execution and delivery of this
Agreement by the Company nor the consummation of the transactions contemplated
by this Agreement will violate, result in a breach of, or constitute a default
(or an event which, with notice or lapse of time or both would constitute a
default) under, the certificate of incorporation or by-laws of the Company.
(c) Approvals and Consents. No governmental filings, authorizations,
approvals or Consents, or other governmental action is required for (i) the
execution and delivery of this Agreement by the Company, (ii) the performance by
the Company of its obligations under this Agreement or (iii) the consummation by
the Company of the transactions contemplated by this Agreement.
SECTION 3. COVENANTS OF THE VEECO STOCKHOLDERS.
3.1. Vote for Merger. At any meeting of stockholders of Veeco called
to vote upon the Merger and the Merger Agreement or any of the transactions
contemplated by the Merger Agreement, or at any adjournment or postponement
thereof, or in any other circumstances upon which a vote, Consent or other
approval with respect to the Merger and the Merger Agreement is sought, each
Veeco Stockholder's Veeco Shares shall be counted as present thereat for
purposes of establishing a quorum and shall be voted or Consented (or caused to
be voted or Consented) in favor of the Merger, the adoption by Veeco of the
Merger Agreement and the issuance in the Merger of the Veeco
3
<PAGE>
Shares, other matters relating to the approval of the terms of the Merger
Agreement and each of the other transactions contemplated by the Merger
Agreement.
3.2. Vote Against Certain Matters. Prior to the Effective Time, at
any meeting of stockholders of Veeco or at any adjournment or postponement
thereof or in any other circumstances upon which a Veeco Stockholder's vote,
Consent or other approval is sought, such Veeco Stockholder's Veeco Shares shall
be counted as present thereat for purposes of establishing a quorum and shall be
voted or Consented (or caused to be voted or Consented) against any proposal or
transaction involving Veeco or any of its Subsidiaries if such transaction or
proposal would in any manner impede, frustrate, prevent or nullify the Merger,
the Merger Agreement or any of the other transactions contemplated by the Merger
Agreement; provided, that nothing set forth in this Section 3.2 is intended or
shall be construed to restrict or impair the right of a Veeco Stockholder to
vote or Consent (or cause to be voted or Consented) any Veeco Shares owned of
record or Beneficially Owned by such Veeco Stockholder (i) in favor of any
Superior Veeco Proposal or related Veeco Acquisition Transaction or (ii) in the
election of any director of Veeco.
3.3. Execution and Delivery of Irrevocable Proxies. In order to
effectuate the voting arrangements contemplated by Section 3.1 and Section 3.2
hereof, contemporaneously with the execution and delivery by the parties hereto
of this Agreement, and as a condition to such execution and delivery by the
Company, each Veeco Stockholder is delivering to the Company an Irrevocable
Proxy duly executed by or on behalf of such Veeco Stockholder.
3.4. Transfers; Other Voting Arrangements; Inconsistent Actions.
(a) Transferees Bound. It shall be a condition precedent to any
direct or indirect sale, transfer, pledge, assignment or other disposition of,
or entry into any Contract, option or other arrangement with respect to the
sale, transfer, pledge, assignment or other disposition of, any Veeco Shares by
a Veeco Stockholder (any of the foregoing, whether voluntary or involuntary, by
operation of Law or otherwise a "Transfer") to any Person (the "Transferee")
that (A) the Veeco Stockholder desiring to effect such Transfer provide to the
proposed Transferee in connection therewith a copy of this Agreement and the
Irrevocable Proxy and (B) such Transferee shall agree, prior to the consummation
of such Transfer, to become bound by this Agreement and such Veeco Stockholder's
Irrevocable Proxy and subject to the terms, conditions and restrictions hereof
and thereof in the same manner as the Veeco Stockholder desiring to effect such
Transfer, by executing a writing to such effect in form and substance
satisfactory to the Company.
(b) Other Voting Arrangements, Etc. No Veeco Stockholder shall,
directly or indirectly, enter into any voting arrangement, whether by proxy,
voting arrangement, voting agreement, voting trust or otherwise with respect to
any Veeco Shares owned of record or Beneficially Owned by such Veeco
Stockholder, other than as contemplated under and as required by this Agreement
and such Veeco Stockholder's Irrevocable Proxy.
(c) Inconsistent Actions; Non-Interference. No Veeco Stockholder
shall, directly or indirectly, take any action that would or could reasonably be
expected to: (A) make any representation or warranty of the Veeco Stockholder
contained herein untrue or incorrect, or (B) result in a breach by the Veeco
Stockholder of its obligations under this Agreement, or (C) result in a breach
by Veeco of its obligations under the Merger Agreement, or (D) invalidate or in
any way limit the enforceability by the Proxyholders (as defined in the
Irrevocable Proxy) of such Veeco Stockholder's Irrevocable Proxy, or (E) have an
effect that would be inconsistent with, or violative of, any provision or
agreement contained in the Merger Agreement.
SECTION 4. COVENANTS RELATING TO CONFIDENTIALITY AND DISCLOSURE.
4.1. Confidentiality. Each Veeco Stockholder recognizes that
successful consummation of the transactions contemplated by this Agreement and
the Merger Agreement may be dependent upon the maintenance of strict
confidentiality with respect to the matters referred to herein and therein. In
this connection, pending public disclosure thereof by Veeco or the Company, each
Veeco Stockholder hereby agrees not to disclose or discuss such matters with
anyone not a party to this Agreement or the Merger Agreement (other than to its
and to Veeco's counsel
4
<PAGE>
and advisors) without the prior written consent of the Company, except for
filings, if any, required pursuant to the Exchange Act and the rules and
regulations promulgated thereunder or disclosures that such Veeco Stockholder's
counsel advises are necessary in order to fulfill such Veeco Stockholder's
obligations imposed by Law, in which event such Veeco Stockholder shall give
prior notice of such disclosure to the Company as promptly as practicable so as
to enable the Company to seek a protective order from a court of competent
jurisdiction with respect thereto or similar relief in connection therewith.
4.2 Disclosure. Each Veeco Stockholder hereby agrees to permit Veeco
and the Company to publish and disclose in the Form S-4 Registration Statement
and the Joint Proxy Statement (including all documents, exhibits and schedules
filed with the SEC), and any press release or other disclosure document which
Veeco or the Company determines to be necessary or desirable in connection with
the Merger and the transactions related thereto, such Veeco Stockholder's
identity and ownership of Company Common Stock or Veeco Shares, as the case may
be, and the nature of its commitments, arrangements and understandings under
this Agreement and such Veeco Stockholder's Irrevocable Proxy.
SECTION 5. CERTAIN ADDITIONAL COVENANTS OF THE VEECO STOCKHOLDERS.
5.1. No Solicitation. Each Veeco Stockholder shall not, and shall
cause its Affiliates and Representatives not to, directly or indirectly, take
any action to initiate, solicit, encourage or facilitate the making of any Veeco
Acquisition Proposal or any inquiry with respect thereto, or engage in
discussions or negotiations with any Person relating to any Veeco Acquisition
Proposal or disclose any non-public information relating to Veeco or any
Subsidiary of Veeco or afford access to the properties, books or records of
Veeco or any Subsidiary of Veeco, to any Person that has made a Veeco
Acquisition Proposal. A Veeco Stockholder shall notify the Company orally and in
writing of any offers, proposals or inquiries received by such Veeco Stockholder
relating to the purchase or acquisition by any Person of any Veeco Shares and of
any Veeco Acquisition Proposal actually known to such Veeco Stockholder
(including, in each case, the material terms and conditions thereof and the
identity of the Person making it), within 24 hours of receipt thereof. Each
Veeco Stockholder shall and shall cause its Representatives to, immediately
cease and cause to be terminated any and all existing activities, discussions
and negotiations, if any, with any parties conducted heretofore with respect to
any Veeco Acquisition Proposal. Notwithstanding the restrictions set forth in
this Section 5.1, each of Veeco and any Person (including any Veeco Stockholder)
who is an officer or director of Veeco may take any action in such capacity that
is consistent with the terms of the Merger Agreement.
5.2. Reliance. Each Veeco Stockholder understands and acknowledges
that the Company is entering into the Merger Agreement in reliance upon such
Veeco Stockholder's execution and delivery of this Agreement and such Veeco
Stockholder's Irrevocable Proxy.
5.3. Affiliate Agreement. Each Veeco Stockholder, if requested by
Veeco prior to the Effective Time, will duly execute and deliver to Veeco a
Veeco Affiliate Agreement contemplated by Section 5.21(b) of the Merger
Agreement.
SECTION 6. TERMINATION.
6.1. Termination of Agreement. The provisions of this Agreement
shall terminate and be of no further force or effect upon the earlier to occur
of (a) the termination of the Merger Agreement in accordance with its terms and
(b) the Effective Time of the Merger.
SECTION 7. MISCELLANEOUS.
7.1. Expenses. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring the expense.
5
<PAGE>
7.2. Entire Agreement. This Agreement and any documents to be
delivered in accordance with this Agreement (including the Irrevocable Proxies
of the Veeco Stockholders) contain the entire agreement among the parties
relating to the transactions which are the subject of this Agreement, and all
prior and contemporaneous negotiations, understandings and agreements among the
parties (whether written or oral) with regard to the subject matter of this
Agreement are superseded by this Agreement, and there are no representations,
warranties, understandings or agreements concerning the transactions which are
the subject of this Agreement or those other documents other than those
expressly set forth in this Agreement.
7.3. Captions. The captions of the articles and paragraphs of this
Agreement are for reference only, and do not affect the meaning or
interpretation of this Agreement.
7.4. Binding Agreement; Assignment.
(a) Binding Agreement. Each Veeco Stockholder agrees that this
Agreement and the obligations hereunder shall attach to the Veeco Shares and
shall be binding upon any Person to which record or Beneficial Ownership of such
Veeco Shares shall pass, whether by operation of Law or otherwise, including,
without limitation, the Veeco Stockholder's heirs, distributees, guardians,
administrators, executors, legal representatives, or successors, partners or
other transferees (for value or otherwise) and any other successors in interest.
Notwithstanding any transfer of Veeco Shares, the transferor shall remain liable
for the performance of all obligations under this Agreement of the transferor.
(b) Assignment. Notwithstanding anything to the contrary set forth
herein, no party may assign any of its rights or obligations hereunder, by
operation of Law or otherwise, without the prior written consent of the other
party.
7.5. Notices and Other Communications. Any notice or other
communication under this Agreement must be in writing and will be deemed given
when delivered in person or sent by facsimile (with proof of receipt at the
number to which it is required to be sent), or on the third business day after
the day on which mailed by first class mail from within the United States of
America, to the following addresses (or such other address as may be specified
after the date of this Agreement by the party to which the notice or
communication is sent):
If to the Company:
CVC, Inc.
525 Lee Road
Rochester, New York 14606
Attention: Christine Whitman
Facsimile No: (716) 458-0426
with a copy to:
Dewey Ballantine, LLP
1301 Avenue of the Americas
New York, New York 10019
Attention: Richard D. Pritz, Esq.
Facsimile No.: (212) 239-6551
If to any Veeco Stockholder, to such Veeco Stockholder at the
address set forth under such Veeco Stockholder's signature on the signature
pages to this Agreement.
6
<PAGE>
with a copy to:
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022-3598
Attention: Rory Greiss, Esq.
Facsimile No.: (212) 836-8689
7.6. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO
AGREEMENTS MADE AND PERFORMED IN SUCH STATE AND WITHOUT REGARD TO CONFLICTS OF
LAWS DOCTRINES.
7.7. Amendments. Prior to the Effective Time, this Agreement may be
amended only by a document in writing signed by the Company and each Veeco
Stockholder.
7.8. Counterparts. This Agreement may be executed in two or more
counterparts, some of which may contain the signatures of some, but not all, the
parties hereto. Each of those counterparts will be deemed an original, but all
of them together will constitute one and the same Agreement.
7.9. Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (iv) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
7.10. Enforcement. 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 hereto shall be entitled to an injunction
or injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Federal court located in the
State of Delaware or in a Delaware state court, this being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto (i) consents to the personal jurisdiction of any Federal
court located in the State of Delaware or any Delaware state court in any action
or proceeding relating to or arising out of this Agreement (including, with
respect to a Veeco Stockholder, such Veeco Stockholder's Irrevocable Proxy) or
any of the transactions contemplated hereby, (ii) agrees that such party will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court, (iii) agrees that such parties will not
seek to change the venue of any such action or proceeding or otherwise to move
any such action or proceeding to another court, whether because of inconvenience
of the forum or otherwise (provided that nothing in this Section will prevent a
party from removing an action or proceeding from a Delaware state court to a
Federal court located in the State of Delaware), (iv) agrees that such party
will not bring any action relating to this Agreement or any Irrevocable Proxy or
any of the transactions contemplated hereby or thereby in any court other than a
Federal court sitting in the State of Delaware or a Delaware state court and (v)
waives any right to trial by jury with respect to any claim or proceeding
related to or arising out of this Agreement or any Irrevocable Proxy or any of
the transactions contemplated hereby or thereby.
7.11. Further Assurances. From time to time, at the other party's
request and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further lawful action as may
be necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement
and the Irrevocable Proxies.
7
<PAGE>
IN WITNESS WHEREOF, each party hereto has caused this Agreement to
be signed by its officer thereunto duly authorized as of the date in the first
paragraph of this Agreement.
THE COMPANY
CVC, INC.
By:
------------------------------
Name:
Title:
VEECO STOCKHOLDERS
---------------------------------
Edward H. Braun
Edward H. Braun's
Address for Notice:
---------------------------------
---------------------------------
---------------------------------
---------------------------------
Facsimile No.:___________________
---------------------------------
John F. Rein, Jr.
John F. Rein's
Address for Notice:
---------------------------------
---------------------------------
---------------------------------
---------------------------------
Facsimile No.:___________________
---------------------------------
Emanuelle N. Lakios
Emanuelle N. Lakios'
Address for Notice:
---------------------------------
---------------------------------
---------------------------------
---------------------------------
Facsimile No.:___________________
8
<PAGE>
---------------------------------
Joseph Z. Rivlin
Joseph Z. Rivlin's
Address for Notice:
---------------------------------
---------------------------------
---------------------------------
---------------------------------
Facsimile No.:___________________
9
<PAGE>
Schedule A
Veeco Stockholder No. of Existing Veeco Shares Held
- ----------------- ---------------------------------
Edward H. Braun 125,019
John F. Rein, Jr. 1,946
Emanuelle N. Lakios 1,232
Joseph Z. Rivlin 293
-------
128,490
Schedule A - Page 1
<PAGE>
Exhibit A
VEECO STOCKHOLDERS
POWER OF ATTORNEY AND IRREVOCABLE PROXY
Reference is hereby made to that Certain Veeco Stockholders Voting
Agreement (the "Voting Agreement"), dated as of the date hereof, of which this
Veeco Stockholders Power of Attorney and Irrevocable Proxy (this "Irrevocable
Proxy") forms a part. Capitalized terms used but not defined in this Irrevocable
Proxy have the respective meanings ascribed to such terms in the Voting
Agreement. This Irrevocable Proxy is being delivered by the undersigned Veeco
Stockholder (the "Granting Stockholder") pursuant to Section 3.3 of the Voting
Agreement.
The undersigned Granting Stockholder hereby irrevocably appoints
CVC, Inc., a Delaware corporation ("CVC"), and each of CVC's officers and other
designees (each such Person, a "Proxyholder") as the Granting Stockholder's
attorney-in-fact and proxy pursuant to the provisions of Section 212 of the
Delaware General Corporation Law, with full power of substitution, in the
Granting Stockholder's name, place and stead, to vote and otherwise act (by
written consent or otherwise) with respect to all of the Veeco Shares now owned
of record or Beneficially Owned by the Granting Stockholder and of which the
Granting Stockholder may hereafter acquire record or Beneficial Ownership, and
any other securities, if any (the "Other Securities"), which the Granting
Stockholder is entitled to vote at any meeting of the stockholders of Veeco
(whether annual or special and whether or not an adjourned or postponed meeting)
or consent in lieu of any such meeting or otherwise:
(a) in favor of the Merger, the adoption by Veeco of the
Merger Agreement and the issuance of Veeco Shares in the Merger,
other matters relating to the approval of the terms of the Merger
Agreement and each of the other transactions contemplated by the
Merger Agreement; and
(b) against any proposal or transaction involving Veeco
or any of its Subsidiaries if any such transaction or proposal would
in any manner impede, frustrate, prevent or nullify the Merger, the
Merger Agreement or any of the other transactions contemplated by
the Merger Agreement; provided, however, that nothing set forth in
this paragraph (b) is intended or shall be construed to grant to any
Proxyholder the right to vote or otherwise act (by written consent
or otherwise) with respect to any Veeco Shares or Other Securities
owned of record or Beneficially Owned by the Granting Stockholder
(i) against any Superior Veeco Proposal or related Veeco Acquisition
Transaction or (ii) in the election of any director of Veeco.
THIS POWER OF ATTORNEY AND IRREVOCABLE PROXY IS IRREVOCABLE AND
COUPLED WITH AN INTEREST. The Granting Stockholder hereby revokes all other
proxies and powers of attorney with respect to Veeco Shares and the Other
Securities that the Granting Stockholder may have heretofore granted, and no
subsequent proxy or power of attorney shall be given or written consent executed
(and if given or executed, shall not be effective) by the Granting Stockholder
with respect thereto. All authority herein conferred or agreed to be conferred
shall survive the death or incapacity of the Granting Stockholder and any
obligation of the Granting Stockholder under this Irrevocable Proxy shall be
binding upon the heirs, personal representatives, successors and assigns of the
Granting Stockholder.
Exhibit A - Page 1
<PAGE>
This Irrevocable Proxy shall be valid and irrevocable until, and
shall terminate upon, the earlier to occur of (a) the termination of the Merger
Agreement in accordance with its terms and (b) the Effective Time of the Merger.
-------------------------------------------------
(Signature of Granting Stockholder)
-------------------------------------------------
(Printed Name of Granting Stockholder as it
Appears on Certificate Representing Veeco
Shares)
-------------------------------------------------
(Date)
Exhibit A - Page 2
<PAGE>
Exhibit C
Certificate of Merger
(Attached hereto)
<PAGE>
Exhibit C
CERTIFICATE OF MERGER
OF
VEECO ACQUISITION CORP.
(a Delaware corporation)
INTO
CVC, INC.
(a Delaware corporation)
Pursuant to Section 251 of the
General Corporation Law of the State of Delaware
The undersigned corporations hereby certify as follows:
1. The names of the constituent corporations are Veeco Acquisition Corp.,
a Delaware corporation ("Acquisition"), and a wholly-owned subsidiary of Veeco
Instruments Inc., a Delaware corporation ("Veeco"), and CVC, Inc. a Delaware
corporation (the "Company").
2. An Agreement and Plan of Merger, dated as of February 29, 2000 (the
"Agreement and Plan of Merger"), among Veeco, Acquisition and the Company has
been approved, adopted, certified, executed and acknowledged by Acquisition and
the Company in accordance with Section 251 of the General Corporation Law of the
State of Delaware.
3. The Company shall be the surviving corporation, and as the surviving
corporation, shall keep the name CVC, Inc. (the "Surviving Corporation").
4. The Certificate of Incorporation of the Company shall constitute the
Certificate of Incorporation of the Surviving Corporation, subject to the
following amendments which shall be effected by the merger:
(a) Article IV of the Certificate of Incorporation is hereby amended
and restated in its entirety to read as follows:
"ARTICLE IV
The Corporation is authorized to issue _____ shares of common
stock, $.01 par value per share."
(b) Article VIII of the Certificate of Incorporation is hereby
deleted in its entirety.
(c) The Articles of the Certificate of Incorporation are
hereby appropriately re-numbered to reflect the deletion of Article
VIII effected hereby.
<PAGE>
5. The executed Agreement and Plan of Merger is on file at the office of
the Surviving Corporation located at 525 Lee Road, Rochester, New York 14606. A
copy of the Agreement and Plan of Merger will be furnished by the Surviving
Corporation, without cost, to any stockholder of Acquisition or the Company who
sends a written request therefor to the Surviving Corporation at its address set
forth in the preceding sentence.
6. The Surviving Corporation agrees that it may be served with process in
the State of Delaware in any proceeding for enforcement of any obligation of
Acquisition, as well as for enforcement of any obligation of the Surviving
Corporation arising from the merger, including any suit or other proceeding to
enforce the right of any stockholders as determined in appraisal proceedings
pursuant to the provisions of Section 262 of the General Corporation Law of the
State of Delaware. The Surviving Corporation irrevocably appoints the Secretary
of State of the State of Delaware as its agent to accept service of process in
any such suit or other proceeding. A copy of such process shall be mailed by the
Secretary of State of the State of Delaware to CVC, Inc., 525 Lee Road,
Rochester, New York 14606, Attention: Secretary.
Dated: ___________ __, 2000.
CVC, INC.
By: _________________________
Name:
Title:
VEECO ACQUISITION CORP.
By: _________________________
Name:
Title:
2
<PAGE>
Exhibit D
Form of
Whitman Employment Agreement
(Attached hereto)
<PAGE>
Exhibit D
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT, dated as of February 29, 2000, is by and
between Christine B. Whitman (the "Employee") and Veeco Instruments Inc., a
Delaware corporation (the "Company").
The Company and the Employee hereby agree as follows:
1. Employment. The Company hereby employs the Employee, and the
Employee hereby accepts employment by the Company, upon the terms and conditions
hereinafter set forth.
2. Term. Subject to the provisions for earlier termination as herein
provided, the employment of the Employee hereunder will be for the period
commencing at the Effective Time of the Agreement and Plan of Merger (the
"Merger Agreement") among CVC, Inc., a Delaware corporation, Veeco Acquisition
Corporation, and the Company, dated February 29, 2000 (the "Effective Date") and
ending on the third anniversary of such date. Effective on the first anniversary
of the date hereof and on each successive anniversary date thereafter, the term
shall automatically be extended by an additional one year unless no later than
90 days prior to any such anniversary date, either the Company or the Employee
gives written notice to the other that the term will not be extended, in which
case the Employee's employment hereunder shall terminate upon the expiration of
the then-current-term. The period of the Employee's employment under this
Agreement, as it may be terminated or extended from time to time as provided
herein, is referred to hereafter as the "Employment Period."
3. Duties and Responsibilities. The Employee will be employed by the
Company in the positions set forth on Annex A, a copy of which is attached
hereto and the terms of which are incorporated herein by reference. The Employee
will faithfully perform the duties and responsibilities of each such office, as
they may be assigned from time to time by the Chief Executive Officer of the
Company as specified on Annex A. In addition, during the Employment Period, the
Company will make best efforts to ensure the Employee is a member of the Board.
4. Time to Be Devoted to Employment. Except for vacation in
accordance with the Company's policy in effect from time to time and absences
due to temporary illness, the Employee shall devote full time, attention and
energy during the Employment Period to the business of the Company. During the
Employment Period, the Employee will not be engaged in any other business
activity which, in the reasonable judgment of the Board or its
<PAGE>
designee, conflicts with the duties of the Employee hereunder, whether or not
such activity is pursued for gain, profit or other pecuniary advantage.
5. Compensation; Reimbursement.
(a) Base Salary. The Company will pay to the Employee an annual base
salary of not less than the amount specified as the Initial Base Salary on Annex
A, payable in accordance with the Company's normal payroll policy. The
Employee's base salary shall be reviewed annually by the Compensation Committee
of the Board (the "Committee") and shall be subject to increase at the option
and sole discretion of the Committee.
(b) Bonus. The Employee shall be eligible to receive, at the sole
discretion of the Committee, an annual cash bonus, with a maximum target as
specified on Annex A, based on the Company's annual business plan as approved by
the Board.
(c) Benefits; Stock Options. In addition to the salary and cash
bonus referred to above, the Employee shall be entitled during the Employment
Period to participate in such employee benefit plans or programs of the Company,
and shall be entitled to such other fringe benefits, as are from time to time
made available by the Company generally to employees of the Employee's position,
tenure, salary, and other qualifications. Without limiting the generality of the
foregoing, the Employee shall be eligible for such awards, if any, under the
Company's stock option plan as shall be granted to the Employee by the Committee
or other appropriate designee of the Board acting in its sole discretion. During
the Employment Period, the Company will lease an automobile for the Employee
comparable to the automobile leased by CVC, Inc. for the Employee at the time of
the execution of the Merger Agreement. Except to the extent provided herein, the
Employee acknowledges and agrees that the Company does not guarantee the
adoption or continuance of any particular employee benefit plan or program or
other fringe benefit during the Employment Period, and participation by the
Employee in any such plan or program shall be subject to the rules and
regulations applicable thereto.
(d) Expenses. The Company will reimburse the Employee, in accordance
with the practices in effect from time to time for other officers or staff
personnel of the Company, for all reasonable and necessary traveling expenses
and other disbursements incurred by the Employee for or on behalf of the Company
in the performance of the Employee's duties hereunder, upon presentation by the
Employee to the Company of appropriate vouchers or
2
<PAGE>
documentation. Such expenses shall include, without limitation, reasonable
expenses to maintain an apartment in any city in which the Employee is required
to spend more than 30 days in any calendar year.
6. Death; Disability. If the Employee dies or is incapacitated or
disabled by accident, sickness or otherwise, so as to render the Employee
mentally or physically incapable of performing the services required to be
performed by the Employee under this Agreement for a period that would entitle
the Employee to qualify for long-term disability benefits under the Company's
then-current long-term disability insurance program or, in the absence of such a
program, for a period of 90 consecutive days or longer (such condition being
herein referred to as a "Disability"), then (i) in the case of the Employee's
death, the Employee's employment shall be deemed to terminate on the date of the
Employee's death or (ii) in the case of a Disability, the Company, at its
option, may terminate the employment of the Employee under this Agreement
immediately upon giving the Employee notice to that effect. Disability shall be
determined by the Board or the Board's designee. In the case of a Disability,
until the Company shall have terminated the Employee's employment hereunder in
accordance with the foregoing, the Employee shall be entitled to receive
compensation provided for herein notwithstanding any such physical or mental
disability.
7. Termination For Cause. The Company may, with the approval of a
majority of the Board, terminate the employment of the Employee hereunder at any
time during the Employment Period for "cause" (such termination being
hereinafter called a "Termination for Cause") by giving the Employee notice of
such termination, upon the giving of which such termination will take effect
immediately. For purposes of this Agreement, "cause" means (i) the Employee's
willful and substantial misconduct, (ii) the Employee's repeated, after written
notice from the Company, neglect of duties or failure to act which can
reasonably be expected to affect materially and adversely the business or
affairs of the Company or any subsidiary or affiliate thereof, (iii) the
Employee's material breach of any of the agreements contained in Section 13, 14,
15 or 16 hereof, (iv) the commission by the Employee of any material fraudulent
act with respect to the business and affairs of the Company or any subsidiary or
affiliate thereof or (v) the Employee's conviction of (or plea of nolo
contendere to) a crime constituting a felony.
8. Termination Without Cause. The Company may terminate the
employment of the Employee hereunder at any time without "cause" (such
termination being hereinafter called a "Termination Without Cause") by giving
the Employee notice of such termination, upon the giving of which such
termination will take effect on the date specified on such notice which shall
not be later than 30 days from the date such notice is given.
3
<PAGE>
9. Good Reason. For purposes of this Agreement, termination for
"Good Reason" shall mean termination by the Employee of her employment with the
Company hereunder based on:
(i) any diminution in the Employee's position, title,
responsibilities, authority or reporting responsibilities;
(ii) the Employee is not at any time during the Employment Period a
member of the Board;
(iii) any person other than the Employee succeeds Edward H. Braun as
Chief Executive Officer of the Company; or
(iv) the breach by the Company of any of its material obligations
under this Agreement.
10. Voluntary Termination. Any termination of the employment of the
Employee hereunder, otherwise than as a result of death or Disability, a
Termination for Cause, a Termination Without Cause or a termination for Good
Reason will be deemed to be a "Voluntary Termination." A Voluntary Termination
will be deemed to be effective immediately upon such termination or, at the
Company's option, up to 30 days following a notice of voluntary termination
given by the Employee.
11. Effect of Termination of Employment.
(a) Termination for Cause, Voluntary Termination. Upon a Termination
for Cause or a Voluntary Termination, neither the Employee nor the Employee's
beneficiaries or estate will have any further rights or claims against the
Company under this Agreement except the right to receive (i) the unpaid portion
of the base salary provided for in Section 5(a) hereof, computed on a pro rata
basis to the date of termination, (ii) payment of her previously accrued but
unpaid rights that are then payable in accordance with the terms of any
incentive compensation, stock option, retirement, employee welfare or other
employee benefit plans or programs of the Company in which the Executive is then
participating in accordance with Sections 5(b) and 5(c) hereof and (iii)
reimbursement for any expenses for which the Employee shall not have theretofore
been reimbursed as provided in Section 5(d) hereof.
(b) Termination Without Cause; Termination for Good Reason. Upon a
Termination Without Cause or a termination for Good Reason, (i) the Employee
shall be entitled to receive the same payments and other rights as provided for
in Section 11(a) hereof, (ii) the Employee shall be entitled to receive a
severance payment in the form of a cash lump sum, paid within 15 days of the
date of termination, with the amount of such payment to be the aggregate amount
of the Employee's base salary as in effect immediately prior to such termination
payable over the
4
<PAGE>
period of months specified in Annex A, (iii) any options held by the Employee as
of such effective date to purchase shares of the Company's stock that were not
vested and exercisable as of such date of termination shall become immediately
and fully vested and exercisable as of such date of termination and (iv) the
Employee shall retain the right to exercise any options to purchase shares of
the Company's stock until the earlier of (a) 12 months following the date of
such termination or (b) the expiration of the original full term of each such
option.
(c) Death; Disability. In the event the Employee's employment is
terminated hereunder on account of death or Disability, (i) the Employee shall
be entitled to receive the same payments and other rights as provided for in
Section 11(a) hereof, (ii) the Employee shall be entitled to receive a severance
payment in the form of a cash lump sum, paid within 15 days of the date of
termination, with the amount of such payment to be the aggregate amount of the
Employee's base salary as in effect immediately prior to such termination
payable over 12 months.
12. Change in Control Provisions.
(a) Effect of Change in Control. In the event of a Change in Control
during the Employment Period, all options held by the Employee to purchase
shares of the Company's stock that are not then vested and exercisable in
accordance with the terms of such options or the terms of any Company stock
option plan shall become immediately and fully vested and exercisable as of the
effective date of the Change in Control; provided, however, that no such vesting
shall occur if provision has been made in writing in connection with such
transaction for (a) the continuation of such plan and/or the assumption of such
options by a successor corporation (or a parent or subsidiary thereof) or (b)
the substitution for such options of new options covering the stock of a
successor corporation (or a parent or subsidiary thereof), with appropriate
adjustments as to the number and kinds of shares and exercise prices. In the
event of any such continuation, assumption or substitution, such plan and/or
such options shall continue in the manner and under the terms so provided.
(b) Definition of Change in Control. For purposes of this Agreement,
a "Change in Control" shall be deemed to have occurred upon:
(i) an acquisition subsequent to the date hereof by any person,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a
"Person"), of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 30% or more of either (A) the then
outstanding shares of common stock of the Company
5
<PAGE>
("Common Stock") or (B) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities");
excluding, however, the following: (1) any acquisition directly from the
Company, other than an acquisition by virtue of the exercise of a
conversion privilege unless the security being so converted was itself
acquired directly from the Company, (2) any acquisition by the Company and
(3) any acquisition by an employee benefit plan (or related trust)
sponsored or maintained by the Company;
(ii) a change in the composition of the Board such that during any
period of two consecutive years, individuals who at the beginning of such
period constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with the Company
to effect a transaction described in clause (i), (iii) or (iv) of this
paragraph) whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds of
the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute at least a
majority of the members thereof;
(iii) the approval by the stockholders of the Company of a merger,
consolidation, reorganization or similar corporate transaction, whether or
not the Company is the surviving corporation in such transaction, in which
outstanding shares of Common Stock are converted into (A) shares of stock
of another company, other than a conversion into shares of voting common
stock of the successor corporation (or a holding company thereof)
representing 80% of the voting power of all capital stock thereof
outstanding immediately after the merger or consolidation or (B) other
securities (of either the Company or another company) or cash or other
property;
(iv) the approval by the stockholders of the Company of (A) the sale
or other disposition of all or substantially all of the assets of the
Company or (B) a complete liquidation or dissolution of the Company; or
(v) the adoption by the Board of a resolution to the effect that any
person has acquired effective control of the business and affairs of the
Company.
13. Nondisclosure of Information. The Employee will not, at any time
during or after the Employment Period, disclose to any person, firm, corporation
or other business entity, except as required by law, any
6
<PAGE>
non-public information concerning the business, products, clients or affairs of
the Company or any subsidiary or affiliate thereof for any reason or purpose
whatsoever, nor will the Employee make use of any of such non-public information
for personal purposes or for the benefit of any person, firm, corporation or
other business entity except the Company or any subsidiary or affiliate thereof.
14. Company Right to Inventions. The Employee will promptly
disclose, grant and assign to the Company, for its sole use and benefit, any and
all inventions, improvements, technical information and suggestions relating in
any way to the business of the Company which the Employee may develop or acquire
during the Employment Period (whether or not during usual working hours),
together with all patent applications, letters patent, copyrights and reissues
thereof that may at any time be granted for or upon any such invention,
improvement or technical information. In connection therewith:
(i) the Employee shall, without charge, but at the expense of the
Company, promptly at all times hereafter execute and deliver such
applications, assignments, descriptions and other instruments as may be
necessary or proper in the opinion of the Company to vest title to any
such inventions, improvements, technical information, patent applications,
patents, copyrights or reissues thereof in the Company and to enable it to
obtain and maintain the entire right and title thereto throughout the
world; and
(ii) the Employee shall render to the Company, at its expense
(including a reasonable payment for the time involved in case the Employee
is not then in its employ), all such assistance as it may require in the
prosecution of applications for said patents, copyrights or reissues
thereof, in the prosecution or defense of interferences which may be
declared involving any said applications, patents or copyrights and in any
litigation in which the Company may be involved relating to any such
patents, inventions, improvements or technical information.
15. Non-Competition.
(a) The Employee hereby agrees that, for the duration of the
Employee's employment with the Company, the Employee will not, without the
consent of the Company, directly or indirectly, engage or invest in, own,
manage, operate, finance, control or participate in the ownership, management,
operation, financing or control of, be employed by, associated with, or in any
manner connected with, lend the Employee's name to, lend the Employee's credit
to or render services or advice to, any business whose products or activities
compete in whole or in part with the former, current or
7
<PAGE>
currently contemplated products or activities of the Company or any of its
subsidiaries, in any country in which the Company or any of its subsidiaries
conducts business; provided, however, that the Employee may purchase or
otherwise acquire up to (but not more than) one percent of any class of
securities of any enterprise (but without otherwise participating in the
activities of such enterprise) if such securities are listed on any national or
regional securities exchange or have been registered under Section 12(g) of the
Securities Exchange Act of 1934, as amended. The Employee agrees that this
covenant is reasonable with respect to its duration, geographical area, and
scope.
(b) The Employee hereby agrees that, for a period of two (2) years
following the termination of the Employee's employment with the Company, the
Employee will not, directly or indirectly, engage or invest in, own, manage,
operate, finance, control or participate in the ownership, management,
operation, financing, or control of, be employed by, associated with, or in any
manner connected with, lend the Employee's name to, lend the Employee's credit
to or render services or advice to, any business whose products or activities
compete in whole or in part with the former, current or currently contemplated
products or activities of the Company or any of its subsidiaries, in any state
of the United States or in any other country in which the Company or any of its
subsidiaries sells products or conducts business; provided, however, that the
Employee may purchase or otherwise acquire up to (but not more than) one percent
of any class of securities of any enterprise (but without otherwise
participating in the activities of such enterprise) if such securities are
listed on any national or regional securities exchange or have been registered
under Section 12(g) of the Securities Exchange Act of 1934, as amended. The
Employee agrees that this covenant is reasonable with respect to its duration,
geographical area, and scope.
(c) In the event of a breach by the Employee of any covenant set
forth in this Section 15, the term of such covenant will be extended by the
period of the duration of such breach.
(d) For a period of two (2) years following the termination of the
Employee's employment with the Company, the Employee will, within ten days after
accepting any employment, advise the Company of the identity of any employer of
the Employee. The Company may serve notice upon each such employer that the
Employee is bound by this Agreement and furnish each such employer with a copy
of this Agreement or relevant portions hereof.
16. Non-Solicitation.
(a) The Employee hereby agrees that, for the duration of the
Employee's employment with the Company and for a period of two (2) years
following the termination of the Employee's employment with the Company:
8
<PAGE>
(i) The Employee will not, directly or indirectly, either for itself
or any other person: (A) induce or attempt to induce any employee of the
Company or any of its subsidiaries to leave the employ of the Company or
such subsidiary, (B) in any way interfere with the relationship between
the Company and its subsidiaries and any employee of the Company or any of
its subsidiaries, (C) employ, or otherwise engage as an employee,
independent contractor or otherwise, any current or former employee of the
Company or any of its subsidiaries, other than such former employees who
have not worked for the Company or any of its subsidiaries for more than
one year or (D) induce or attempt to induce any customer, supplier,
licensee or business relation of the Company or any of its subsidiaries to
cease doing business with the Company or such subsidiary, or in any way
interfere with the relationship between the Company and its subsidiaries
and any customer, supplier, licensee or business relation of the Company
or any of its subsidiaries; and
(ii) The Employee will not, directly or indirectly, either for
herself or any other person, solicit the business of any person known to
the Employee to be a customer of the Company or any of its subsidiaries,
whether or not the Employee had personal contact with such person, with
respect to products or activities which compete in whole or in part with
the former, current or currently contemplated products or activities of
the Company and its subsidiaries or the products or activities of the
Company and its subsidiaries in existence or contemplated at the time of
termination of the Employee's employment.
(b) In the event of a breach by the Employee of any covenant set
forth in this Section 16, the term of such covenant will be extended by the
period of the duration of such breach.
17. Enforcement. It is the desire and intent of the parties hereto
that the provisions of this Agreement be enforceable to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. Accordingly, to the extent that a restriction
contained in this Agreement is more restrictive than permitted by the laws of
any jurisdiction where this Agreement may be subject to review and
interpretation, the terms of such restriction, for the purpose only of the
operation of such restriction in such jurisdiction, will be the maximum
restriction allowed by the laws of such jurisdiction and such restriction will
be deemed to have been revised accordingly herein.
18. Remedies; Survival. (a) A breach of the obligations imposed on
the Employee in Sections 13, 14, 15, and 16 hereof may not be one which is
capable of being easily measured by monetary damages. Consequently,
9
<PAGE>
the Employee specifically agrees that Sections 13, 14, 15, and 16 may be
enforced by injunctive relief. Further, the Employee specifically agrees that,
in addition to such injunctive relief, and not in lieu of it, the Company may
also bring suit for damages incurred by the Company as a result of a breach of
the Employee's obligations under Sections 13, 14, 15, and 16.
(b) Notwithstanding anything contained in this Agreement to the
contrary, the provisions of Sections 13, 14, 15 and 16 hereof will survive the
expiration or other termination of this Agreement until, by their terms, such
provisions are no longer operative.
19. Notices. Notices and other communications hereunder will be in
writing and will be delivered personally or sent by air courier or first class
certified or registered mail, return receipt requested and postage prepaid,
addressed as follows:
if to the Employee: as specified in Annex A
and if to the Company: Veeco Instruments, Inc.
Terminal Drive
Plainview, New York 11803
Attention: Chief Executive Officer
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement will be deemed to have been given on the
date of delivery, if personally delivered; on the business day after the date
when sent, if sent by air courier; and on the third business day after the date
when sent, if sent by mail, in each case addressed to such party as provided in
this Section 19 or in accordance with the latest unrevoked direction from such
party.
20. Binding Agreement; Benefit. The provisions of this Agreement
will be binding upon, and will inure to the benefit of, the respective heirs,
legal representatives and successors of the parties hereto.
21. Governing Law. This Agreement will be governed by, and construed
and enforced in accordance with, the laws of the State of New York, without
reference to conflict of law principles.
22. Waiver of Breach. The waiver by either party of a breach of any
provision of this Agreement by the other party must be in writing and will not
operate or be construed as a waiver of any subsequent breach by such other
party.
23. Entire Agreement; Amendments. This Agreement will be effective
at the Effective Time of the Merger Agreement (the "Effective Time") and, in the
case the Effective Time does not occur, this Agreement will
10
<PAGE>
be of no force and effect. This Agreement (including Annex A) contains the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all prior agreements or understandings among the parties with
respect thereof. This Agreement will not effect the employment agreement between
the Employee and CVC, Inc., dated December 15, 1997 (the "Employment Agreement")
prior to the Effective Time, but will supersede the Employment Agreement
following the Effective Time. This Agreement may be amended only by an agreement
in writing signed by the parties hereto.
24. Headings. The section headings contained in this Agreement are for
reference purposes only and will not affect in any way the meaning or
interpretation of this Agreement.
25. Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction will not invalidate or render unenforceable such provision in any
other jurisdiction.
26. Assignment. This Agreement is personal in its nature and the parties
hereto shall not, without the consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder; provided, that the provisions
hereof (including, without limitation, Sections 13, 14, 15, and 16) will inure
to the benefit of, and be binding upon, each successor of the Company, whether
by merger, consolidation, transfer of all or substantially all of its assets or
otherwise.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above written.
EMPLOYEE VEECO INSTRUMENTS, INC.
- ----------------------------- ----------------------------------
By:
Title:
11
<PAGE>
ANNEX A
to
Employment Agreement
Name of Employee: Christine B. Whitman
1. Position: President and Chief Operating
Officer
2. Board of Directors' Initial
Designee to whom Employee
Shall Report: Chief Executive Officer
3. Initial Base Salary: $300,000
4. Target Bonus: $150,000
5. Number of months used to
calculate lump sum severance
payment in the event of a
Termination Without Cause
or for Good Reason: 24 months
6. Employee's address for notices: 142 Park Road
Pittsford, NY 14534
<PAGE>
Exhibit E
Form of
Company Affiliates Agreement
(Attached hereto)
<PAGE>
Exhibit E
COMPANY
AFFILIATES AGREEMENT
This COMPANY AFFILIATES AGREEMENT (this "Affiliates Agreement") is entered
into as of _________ ___, 2000, between Veeco Instruments Inc., a Delaware
corporation ("Veeco"), and the undersigned stockholder (the "Stockholder") of
CVC, Inc., a Delaware corporation (the "Company").
RECITALS
A. Veeco, Veeco Acquisition Corp., a newly-formed subsidiary of Veeco
("Acquisition"), and the Company plan to enter into or have entered into an
Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which
Acquisition will be merged with and into the Company (the "Merger").
B. Upon consummation of the Merger and in connection therewith, the
undersigned Stockholder will become the owner of shares of common stock, $0.01
par value per share, of Veeco ("Veeco Shares").
C. The parties to the Merger Agreement intend to cause the Merger to be
accounted for as a "pooling of interests" pursuant to APB Opinion No. 16,
Accounting Series Release Nos. 130, 135 and 146 and Staff Accounting Bulletins
Topic Two.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, provisions and covenants set forth in the Merger Agreement and in
this Company Affiliates Agreement, it is hereby agreed as follows:
1. The undersigned Stockholder hereby agrees that:
(a) The undersigned Stockholder may be deemed to be (but does not
hereby admit to be) an "affiliate" of the Company within the meaning of Rule 144
under the Securities Act of 1933, as amended (the "Securities Act"), and
Accounting Series Release No. 130, as amended ("Release No. 130"), of the
Securities and Exchange Commission (the "SEC").
(b) The undersigned Stockholder will not sell, exchange, transfer,
pledge, dispose of or otherwise reduce the undersigned Stockholder's risk
relative to the Veeco Shares or any part thereof until such time after the
Effective Time (as such term is defined in the Merger Agreement) of the Merger
as financial results covering at least thirty (30) days of the combined
operations of Veeco and the Company after the Effective Time of the Merger have
been, within the meaning of said Release No. 130, filed by Veeco with the SEC or
published by Veeco in an Annual Report on Form 10-K, a Quarterly Report on Form
10-Q, a Current Report on Form 8-K, a quarterly earnings report, a press release
or other public issuance that includes combined sales and income of the Company
and Veeco. Veeco agrees to notify the undersigned Stockholder promptly upon
making such filing or publication. The undersigned Stockholder will not, during
the thirty (30) day period prior to the Effective Time of the Merger, sell,
exchange, transfer, pledge, dispose of or otherwise reduce the undersigned
Stockholder's risk relative to the Veeco Shares or any part thereof (including
any disposition within such period of the undersigned Stockholder's shares of
Company Common Stock (as defined in the Merger Agreement)). Except as otherwise
set forth in Appendix A hereto, the undersigned Stockholder has not engaged in a
sale or other disposition of any shares of Company Common Stock since January
31, 2000.
(c) The undersigned Stockholder undertakes and agrees to indemnify
and hold harmless Veeco, Acquisition, the Company and each of their respective
current and future officers and directors and each person, if any, who now or
hereafter controls or may control Veeco, Acquisition or the Company within the
meaning of the Securities Act (an "Indemnified Person"), from and against any
and all claims, demands, actions, causes of action, losses, costs, damages,
liabilities and expenses ("Claims") based upon, arising out of or resulting from
any breach or nonfulfillment of any undertaking, covenant or agreement made by
the undersigned Stockholder in subsection (b) of this Section 1, or caused by or
attributable to the undersigned Stockholder, or the undersigned Stockholder's
agents or employees, or
<PAGE>
representatives, brokers, dealers and/or underwriters insofar as they are acting
on behalf of and in accordance with the instruction of or with the knowledge of
the undersigned Stockholder, in connection with or relating to any offer, sale,
pledge, transfer or other disposition of any of the Veeco Shares or shares of
Company Common Stock by or on behalf of the undersigned Stockholder, which Claim
or Claims result from any breach or nonfulfillment as set forth above. The
indemnification set forth herein shall be in addition to any liability that the
undersigned Stockholder may otherwise have to the Indemnified Persons.
(d) Promptly after receiving definitive notice of any Claim in
respect of which an Indemnified Person may seek indemnification under this
Affiliates Agreement, such Indemnified Person shall submit notice thereof to the
undersigned Stockholder. The omission by the Indemnified Person so to notify the
undersigned Stockholder of any such Claim shall not relieve the undersigned
Stockholder from any liability the undersigned Stockholder may have hereunder
except to the extent that (i) such liability was caused or increased by such
omission, or (ii) the ability of the undersigned Stockholder to reduce or defend
against such liability was actually adversely affected by such omission. The
omission of the Indemnified Person so to notify the undersigned Stockholder of
any such Claim shall not relieve the undersigned Stockholder from any liability
the undersigned Stockholder may have otherwise than hereunder. The Indemnified
Persons and the undersigned Stockholder shall cooperate with and assist one
another in the defense of any Claim and any action, suit or proceeding arising
in connection therewith.
2. Waiver. No waiver by any party hereto of any condition or of any breach
of any provision of this Affiliates Agreement shall be effective unless in
writing.
3. Notices. All notices, requests, demands or other communications that
are required or may be given pursuant to the terms of this Affiliates Agreement
shall be in writing and shall be deemed to have been duly given if delivered by
hand or mailed by registered or certified mail, postage prepaid, as follows:
(a) If to the Stockholder, at the address set forth below the
Stockholder's signature at the end hereof.
(b) If to Veeco, the Company or the other Indemnified Persons:
c/o Veeco Instruments Inc.
Terminal Drive
Plainview, New York 11803
Attention: Chairman, President and Chief Executive Officer
Fax: (516) 349-9079
Tel: (516) 349-8300
with a copy (which shall not constitute notice) to:
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Attention: Rory A. Greiss, Esq.
Fax: (212) 836-7152
Tel: (212) 836-8261
or to such other address as any party hereto or any Indemnified Person may
designate for itself by notice given as herein provided.
4. Counterparts. For the convenience of the parties hereto, this
Affiliates 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.
2
<PAGE>
5. Successors and Assigns. This Affiliates 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. Moreover, this Affiliates Agreement
shall be enforceable by, and shall inure to the benefit of, the Indemnified
Persons 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.
6. Governing Law. This Affiliates Agreement shall be governed by and
construed, interpreted and enforced in accordance with the internal laws of the
State of New York.
7. Termination; Severability. This Affiliates Agreement shall terminate in
the event that the Merger Agreement is terminated in accordance with its terms.
If a court of competent jurisdiction determines that any provision of this
Affiliates Agreement is unenforceable or enforceable only if limited in time
and/or scope, this Affiliates Agreement shall continue in full force and effect
with such provision stricken or so limited.
8. Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction or interpretation of this Company
Affiliates Agreement.
3
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Company Affiliates
Agreement to be executed as of the date first above written.
VEECO INSTRUMENTS INC. STOCKHOLDER
By:
--------------------------------------- -------------------------------
Name: Gregory A. Robbins (Signature)
Title: Vice President and General Counsel
-------------------------------
(Print Name)
-------------------------------
(Print Address)
-------------------------------
(Print Telephone Number)
4
<PAGE>
APPENDIX A TO COMPANY AFFILIATES AGREEMENT
5
<PAGE>
Exhibit F
Form of
Veeco Affiliates Agreement
(Attached hereto)
<PAGE>
Exhibit F
VEECO
AFFILIATES AGREEMENT
This VEECO AFFILIATES AGREEMENT (this "Affiliates Agreement") is entered
into as of ___________ ___, 2000, between Veeco Instruments Inc., a Delaware
corporation ("Veeco"), and the undersigned (the "Stockholder"), who is a
director, officer or holder of shares of common stock, $.01 par value per share
(the "Veeco Shares"), of Veeco.
RECITALS
A. Veeco, Veeco Acquisition Corp., a newly-formed subsidiary of Veeco
("Acquisition"), and CVC, Inc., a Delaware corporation ("Target"), plan to enter
into or have entered into an Agreement and Plan of Merger (the "Merger
Agreement"), pursuant to which Acquisition will be merged with and into Target
(the "Merger").
B. The parties to the Merger Agreement intend to cause the Merger to be
accounted for as a "pooling of interests" pursuant to APB Opinion No. 16,
Accounting Series Release Nos. 130, 135 and 146 and Staff Accounting Bulletins
Topic Two.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, provisions and covenants set forth in the Merger Agreement and in
this Veeco Affiliates Agreement, it is hereby agreed as follows:
1. The undersigned Stockholder hereby agrees that:
(a) The undersigned Stockholder may be deemed to be (but does not
hereby admit to be) an "affiliate" of Veeco within the meaning of Rule 144 under
the Securities Act of 1933, as amended (the "Securities Act"), and Accounting
Series Release No. 130, as amended ("Release No. 130"), of the Securities and
Exchange Commission (the "SEC").
(b) The undersigned Stockholder will not sell, exchange, transfer,
pledge, dispose of or otherwise reduce the undersigned Stockholder's risk
relative to the Veeco Shares or any part thereof until such time after the
Effective Time (as such term is defined in the Merger Agreement) of the Merger
as financial results covering at least thirty (30) days of the combined
operations of Veeco and Target after the Effective Time of the Merger have been,
within the meaning of said Release No. 130, filed by Veeco with the SEC or
published by Veeco in an Annual Report on Form 10-K, a Quarterly Report on
Form 10-Q, a Current Report on Form 8-K, a quarterly earnings report, a press
release or other public issuance that includes combined sales and income of
Target and Veeco. Veeco agrees to notify the undersigned Stockholder promptly
upon making such filing or publication. The undersigned Stockholder will not,
during the thirty (30) day period prior to the Effective Time of the Merger,
sell, exchange, transfer, pledge, dispose of or otherwise reduce the undersigned
Stockholder's risk relative to the Veeco Shares or any part thereof. Except as
otherwise set forth in Appendix A hereto, the undersigned Stockholder has not
engaged in a sale or other disposition of any Veeco Shares since January 31,
2000.
(c) The undersigned Stockholder undertakes and agrees to indemnify
and hold harmless Veeco, Acquisition, Target and each of their respective
current and future officers and directors and each person, if any, who now or
hereafter controls or may control Veeco, Acquisition or Target within the
meaning of the Securities Act (an "Indemnified Person") from and against any and
all claims, demands, actions, causes of action, losses, costs, damages,
liabilities and expenses ("Claims") based upon, arising out of or resulting from
any breach or nonfulfillment of any undertaking, covenant or agreement made by
the undersigned Stockholder in subsection (b) of this Section 1, or caused by or
attributable to the undersigned Stockholder, or the undersigned Stockholder's
agents or employees, or representatives, brokers, dealers and/or underwriters
insofar as they are acting on behalf of and in accordance with the instruction
of or with the knowledge of the undersigned Stockholder, in connection with or
relating to any offer, sale, pledge, transfer or other disposition of any of the
Veeco Shares by or on behalf of the undersigned Stockholder, which
<PAGE>
claim or claims result from any breach or nonfulfillment as set forth above. The
indemnification set forth herein shall be in addition to any liability that the
undersigned Stockholder may otherwise have to the Indemnified Persons.
(d) Promptly after receiving definitive notice of any Claim in
respect of which an Indemnified Person may seek indemnification under this
Affiliates Agreement, such Indemnified Person shall submit notice thereof to the
undersigned Stockholder. The omission by the Indemnified Person so to notify the
undersigned Stockholder of any such Claim shall not relieve the undersigned
Stockholder from any liability the undersigned Stockholder may have hereunder
except to the extent that (i) such liability was caused or increased by such
omission, or (ii) the ability of the undersigned Stockholder to reduce or defend
against such liability was actually adversely affected by such omission. The
omission of the Indemnified Person so to notify the undersigned Stockholder of
any such Claim shall not relieve the undersigned Stockholder from any liability
the undersigned Stockholder may have otherwise than hereunder. The Indemnified
Persons and the undersigned Stockholder shall cooperate with and assist one
another in the defense of any Claim and any action, suit or proceeding arising
in connection therewith.
2. Waiver. No waiver by any party hereto of any condition or of any breach
of any provision of this Affiliates Agreement shall be effective unless in
writing.
3. Notices. All notices, requests, demands or other communications that
are required or may be given pursuant to the terms of this Affiliates Agreement
shall be in writing and shall be deemed to have been duly given if delivered by
hand or mailed by registered or certified mail, postage prepaid, as follows:
(a) If to the Stockholder, at the address set forth below the
Stockholder's signature at the end hereof.
(b) If to Veeco, Target or the other Indemnified Persons:
c/o Veeco Instruments Inc.
Terminal Drive
Plainview, New York 11803
Attention: Chairman, President and Chief Executive Officer
Fax: (516) 349-9079
Tel: (516) 349-8300
with a copy (which shall not constitute notice) to:
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Attention: Rory A. Greiss, Esq.
Fax: (212) 836-7152
Tel: (212) 836-8261
or to such other address as any party hereto or any Indemnified Person may
designate for itself by notice given as herein provided.
4. Counterparts. For the convenience of the parties hereto, this
Affiliates 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.
5. Successors and Assigns. This Affiliates 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. Moreover, this Affiliates Agreement
shall be enforceable by, and shall inure to the benefit of, the Indemnified
Persons 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.
2
<PAGE>
6. Governing Law. This Affiliates Agreement shall be governed by and
construed, interpreted and enforced in accordance with the internal laws of the
State of New York.
7. Termination; Severability. This Affiliates Agreement shall terminate in
the event that the Merger Agreement is terminated in accordance with its terms.
If a court of competent jurisdiction determines that any provision of this
Affiliates Agreement is unenforceable or enforceable only if limited in time
and/or scope, this Affiliates Agreement shall continue in full force and effect
with such provision stricken or so limited.
8. Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction or interpretation of this Affiliates
Agreement.
3
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Veeco Affiliates
Agreement to be executed as of the date first above written.
VEECO INSTRUMENTS INC. STOCKHOLDER
By:
--------------------------------------- --------------------------------
Name: Gregory A. Robbins (Signature)
Title: Vice President and General Counsel
--------------------------------
(Print Name)
--------------------------------
(Print Address)
--------------------------------
(Print Telephone Number)
4
<PAGE>
APPENDIX A TO VEECO AFFILIATES AGREEMENT
5
<PAGE>
APPENDIX B
COMPANY STOCKHOLDERS
VOTING AGREEMENT
COMPANY STOCKHOLDERS VOTING AGREEMENT (this "Agreement"), dated
February 29, 2000, among each of the individuals and entities listed on
Schedule A to this Agreement (each, a "Company Stockholder" and collectively,
the "Company Stockholders") and Veeco Instruments Inc., a Delaware corporation
("Veeco").
WHEREAS, Veeco Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Veeco ("Acquisition"), and CVC, Inc., a Delaware
corporation (the "Company") propose to enter into an Agreement and Plan of
Merger dated as of the date hereof (as the same may be amended, supplemented or
modified in accordance with its terms, the "Merger Agreement") providing for the
merger of Acquisition into the Company (the "Merger");
WHEREAS, capitalized terms used in this Agreement but not otherwise
defined herein shall have the respective meanings ascribed to such terms in the
Merger Agreement;
WHEREAS, this Agreement is the Company Stockholders Voting Agreement
contemplated by and referred to in the Merger Agreement;
WHEREAS, each Company Stockholder owns the number of Existing
Company Shares (as defined) set forth opposite such Company Stockholder's name
on Schedule A hereto and the Company Stockholders collectively own in the
aggregate 6,086,749 Existing Company Shares (as defined);
WHEREAS, as a condition to the willingness of Veeco to enter into
the Merger Agreement, Veeco has requested that the Company Stockholders enter
into this Agreement.
NOW THEREFORE, to induce Veeco to enter into, and in consideration
of its entering into, the Merger Agreement, and in consideration of the mutual
covenants and agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties to this Agreement, intending to be legally bound, hereby agree as
follows:
SECTION 1. CERTAIN DEFINITIONS.
1.1. "Beneficially Own" or "Beneficial Ownership" with respect to
any securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant to
any agreement, arrangement or understanding, whether or not in writing. Without
duplicative counting of the same securities by the same holder, securities
Beneficially Owned by a Person shall include securities Beneficially Owned by
all other Persons with whom such Person would constitute a "group" within the
meaning of Section 13(d) of the Exchange Act with respect to securities of the
same issuer.
1.2. "Company Shares" with respect to any Company Stockholder, shall
mean such Company Stockholder's Existing Company Shares and any shares of
Company Common Stock and/or other Equity Securities of, or equity interest in,
the Company acquired by the Company Stockholder in any capacity after the date
of this Agreement and prior to the termination of this Agreement, whether upon
the exercise of options, warrants or rights, the conversion or exchange of
convertible or exchangeable securities, or by means of purchase, dividend,
distribution, split-up, recapitalization, combination, exchange of shares or
the like, gift, bequest, inheritance or as a successor in interest in any
capacity or otherwise Beneficially Owned by such Company Stockholder, in each
case, if and to the extent entitled to be voted.
1.3. "Existing Company Shares" with respect to any Company
Stockholder, means all shares of Company Common Stock Beneficially Owned by such
Company Stockholder on the date of this Agreement, in each case, if and to the
extent entitled to be voted.
<PAGE>
1.4. "Irrevocable Proxy" shall mean a Company Stockholder Power of
Attorney and Irrevocable Proxy in the form of Exhibit A attached to this
Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES.
2.1. Entity Company Stockholder Representations and Warranties. Each
Company Stockholder that is a legal entity, or otherwise not an individual
Person, hereby represents and warrants to Veeco as follows:
(a) Authority. Such Company Stockholder is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization. Such Company Stockholder has all power and authority necessary to
enable it to enter into this Agreement and to carry out the transactions
contemplated by this Agreement and such Company Stockholder's Irrevocable Proxy.
This Agreement and such Company Stockholder's Irrevocable Proxy have been duly
and validly authorized, executed and delivered by such Company Stockholder and
each constitutes such Company Stockholder's legal, valid and binding obligation,
enforceable against it in accordance with its terms.
(b) Non-Contravention. Neither the execution and delivery of this
Agreement or such Company Stockholder's Irrevocable Proxy, nor consummation of
the transactions contemplated by this Agreement, by such Company Stockholder's
Irrevocable Proxy or by any document to be delivered in accordance herewith or
therewith will violate, result in a breach of, or constitute a default (or an
event which, with notice or lapse of time or both would constitute a default)
under, (i) such Company Stockholder's certificate of incorporation, limited
partnership agreement or other organizational, governing or constating
documents, (ii) any agreement or instrument to which such Company Stockholder is
a party or by which it is bound, or (iii) any Law, or any order, rule or
regulation of any court or Governmental Authority or other regulatory
organization having jurisdiction over it.
(c) Approvals and Consents. No governmental filings, authorizations,
approvals or Consents, or other governmental action is required for (i) the
execution and delivery of this Agreement and such Company Stockholder's
Irrevocable Proxy by such Company Stockholder, (ii) the performance by such
Company Stockholder of its obligations under this Agreement and such Company
Stockholder's Irrevocable Proxy or (iii) the consummation by such Company
Stockholder of the transactions contemplated by this Agreement and such Company
Stockholder's Irrevocable Proxy.
2.2. Individual Company Stockholder Representations and Warranties.
Each Company Stockholder that is an individual hereby represents and warrants to
Veeco as follows:
(a) Authority. Such Company Stockholder has full capacity and
authority to enter into this Agreement and such Company Stockholder's
Irrevocable Proxy, and to carry out the transactions contemplated hereby and
thereby. This Agreement and such Company Stockholder's Irrevocable Proxy have
been duly executed and delivered by such Company Stockholder and each
constitutes a legal, valid and binding obligation of such Company Stockholder
enforceable against such Company Stockholder in accordance with its terms.
(b) Non-Contravention. None of the execution and delivery of this
Agreement or such Company Stockholder's Irrevocable Proxy, nor consummation of
the transactions contemplated by this Agreement, by such Company Stockholder's
Irrevocable Proxy or by any document to be delivered in accordance herewith or
therewith will violate, result in a breach of, or constitute a default (or an
event which, with notice or lapse of time or both would constitute a default)
under, (i) any agreement or instrument to which such Company Stockholder is a
party or by which such Company Stockholder is bound, (ii) any Law, or any order,
rule or regulation of any court or Governmental Authority or other regulatory
organization having jurisdiction over such Company Stockholder.
(c) Approvals and Consents. No governmental filings, authorizations,
approvals or Consents, or other governmental action is necessary or required (i)
for the execution and delivery of this Agreement or such Company Stockholder's
Irrevocable Proxy by such Company Stockholder, (ii) the performance by such
Company Stockholder of such Company Stockholder's obligations under this
Agreement or such Company Stockholder's
2
<PAGE>
Irrevocable Proxy or (iii) the consummation by such Company Stockholder of the
transactions contemplated hereby or by such Company Stockholder's Irrevocable
Proxy.
2.3. Company Stockholder Representations and Warranties. Each
Company Stockholder hereby represents and warrants to Veeco as follows:
(a) Ownership of Existing Company Shares. Such Company Stockholder
is the record and Beneficial Owner of the number of Existing Company Shares set
forth opposite such Company Stockholder's name on Schedule A to this Agreement.
On the date of this Agreement, such Existing Company Shares constitute all of
the shares of Company Common Stock owned of record or Beneficially Owned by such
Company Stockholder.
(b) Liens and Restrictions on Existing Company Shares. Such Company
Stockholder owns the number of Existing Company Shares set forth opposite such
Company Stockholder's name on Schedule A hereto, free and clear of any Liens,
claims, security interests, proxies, voting trusts or agreements, restrictions,
qualifications, limitations, understandings or arrangements which would in any
way restrict or impair such Company Stockholder's right to vote such Existing
Company Shares in his, her or its sole discretion, or could require such Company
Stockholder to sell or transfer any of such Existing Company Shares (whether
upon default on a loan or otherwise) before the Effective Time.
(c) Voting Power Over Existing Company Shares. Such Company
Stockholder has sole voting power and sole power to issue instructions and sole
power to agree to the matters set forth in this Agreement with respect to all of
such Company Stockholder's Existing Company Shares.
(d) Survival. The obligations of such Company Stockholder under this
Agreement shall survive the death, disability or incapacity of such Company
Stockholder.
2.4. Veeco Representations and Warranties. Veeco hereby represents
and warrants to the Company Stockholders as follows:
(a) Authority. Veeco is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Veeco has
all power and authority necessary to enable it to enter into this Agreement and
to carry out the transactions contemplated by this Agreement. This Agreement has
been duly and validly authorized, executed and delivered by Veeco and
constitutes a legal, valid and binding obligation of Veeco enforceable against
Veeco in accordance with its terms.
(b) Non-Contravention. Neither the execution and delivery of this
Agreement by Veeco nor the consummation of the transactions contemplated by this
Agreement will violate, result in a breach of, or constitute a default (or an
event which, with notice or lapse of time or both would constitute a default)
under, the certificate of incorporation or by-laws of Veeco.
(c) Approvals and Consents. No governmental filings, authorizations,
approvals or Consents, or other governmental action is required for (i) the
execution and delivery of this Agreement by Veeco, (ii) the performance by Veeco
of its obligations under this Agreement or (iii) the consummation by Veeco of
the transactions contemplated by this Agreement.
SECTION 3. COVENANTS OF THE COMPANY STOCKHOLDERS.
3.1. Vote for Merger. At any meeting of stockholders of the Company
called to vote upon the Merger and the Merger Agreement or any of the
transactions contemplated by the Merger Agreement, or at any adjournment or
postponement thereof, or in any other circumstances upon which a vote, Consent
or other approval with respect to the Merger and the Merger Agreement is sought,
each Company Stockholder's Company Shares shall be counted as present thereat
for purposes of establishing a quorum and shall be voted or Consented (or caused
to be voted
3
<PAGE>
or Consented) in favor of the Merger, the adoption by the Company of the Merger
Agreement, other matters relating to the approval of the terms of the Merger
Agreement and each of the other transactions contemplated by the Merger
Agreement.
3.2. Vote Against Certain Matters. Prior to the Effective Time, at
any meeting of stockholders of the Company or at any adjournment or postponement
thereof or in any other circumstances upon which a Company Stockholder's vote,
Consent or other approval is sought, such Company Stockholder's Company Shares
shall be counted as present thereat for purposes of establishing a quorum and
shall be voted or Consented (or caused to be voted or Consented) against any
proposal or transaction involving the Company or any of its Subsidiaries if such
transaction or proposal would in any manner impede, frustrate, prevent or
nullify the Merger, the Merger Agreement or any of the other transactions
contemplated by the Merger Agreement; provided, that nothing set forth in this
Section 3.2 is intended or shall be construed to restrict or impair the right of
a Company Stockholder to vote or Consent (or cause to be voted or Consented) any
Company Shares owned of record or Beneficially Owned by such Company Stockholder
(i) in favor of any Company Acquisition Proposal or related Company Acquisition
Transaction or (ii) in the election of any director of the Company.
3.3. Execution and Delivery of Irrevocable Proxies. In order to
effectuate the voting arrangements contemplated by Section 3.1 and Section 3.2
hereof, contemporaneously with the execution and delivery by the parties hereto
of this Agreement, and as a condition to such execution and delivery by Veeco,
each Company Stockholder is delivering to Veeco an Irrevocable Proxy duly
executed by or on behalf of such Company Stockholder.
3.4. Transfers; Other Voting Arrangements; Inconsistent Actions.
(a) Transferees Bound. It shall be a condition precedent to any
direct or indirect sale, transfer, pledge, assignment or other disposition of,
or entry into any Contract, option or other arrangement with respect to the
sale, transfer, pledge, assignment or other disposition of, any Company Shares
by a Company Stockholder (any of the foregoing, whether voluntary or
involuntary, by operation of Law or otherwise a "Transfer") to any Person (the
"Transferee") that (A) the Company Stockholder desiring to effect such Transfer
provide to the proposed Transferee in connection therewith a copy of this
Agreement and the Irrevocable Proxy and (B) such Transferee shall agree, prior
to the consummation of such Transfer, to become bound by this Agreement and such
Company Stockholder's Irrevocable Proxy and subject to the terms, conditions and
restrictions hereof and thereof in the same manner as the Company Stockholder
desiring to effect such Transfer, by executing a writing to such effect in form
and substance satisfactory to Veeco.
(b) Other Voting Arrangements, Etc. No Company Stockholder shall,
directly or indirectly, enter into any voting arrangement, whether by proxy,
voting arrangement, voting agreement, voting trust or otherwise with respect to
any Company Shares owned of record or Beneficially Owned by such Company
Stockholder other than as contemplated under and as required by this Agreement
and such Company Stockholder's Irrevocable Proxy.
(c) Inconsistent Actions; Non-Interference. No Company Stockholder
shall, directly or indirectly, take any action that would or could reasonably be
expected to (A) make any representation or warranty of the Company Stockholder
contained herein untrue or incorrect, or (B) result in a breach by the Company
Stockholder of its obligations under this Agreement, or (C) result in a breach
by the Company of its obligations under the Merger Agreement, or (D) invalidate
or in any way limit the enforceability by the Proxyholders (as defined in the
Irrevocable Proxy) of such Company Stockholder's Irrevocable Proxy, or (E) have
an effect that would be inconsistent with, or violative of, any provision or
agreement contained in the Merger Agreement.
SECTION 4. COVENANTS RELATING TO CONFIDENTIALITY AND DISCLOSURE.
4.1. Confidentiality. Each Company Stockholder recognizes that
successful consummation of the transactions contemplated by this Agreement and
the Merger Agreement may be dependent upon the maintenance of strict
confidentiality with respect to the matters referred to herein and therein. In
this connection, pending public disclosure thereof by Veeco or the Company, each
Company Stockholder hereby agrees not to disclose or discuss such matters with
anyone not a party to this Agreement or the Merger Agreement (other than to its
and to the Company's
4
<PAGE>
counsel and advisors) without the prior written consent of Veeco, except for
filings, if any, required pursuant to the Exchange Act and the rules and
regulations promulgated thereunder or disclosures that such Company
Stockholder's counsel advises are necessary in order to fulfill such Company
Stockholder's obligations imposed by Law, in which event such Company
Stockholder shall give prior notice of such disclosure to Veeco as promptly as
practicable so as to enable Veeco to seek a protective order from a court of
competent jurisdiction with respect thereto or similar relief in connection
therewith.
4.2. Disclosure. Each Company Stockholder hereby agrees to permit
the Company and Veeco to publish and disclose in the Form S-4 Registration
Statement and the Joint Proxy Statement (including all documents, exhibits and
schedules filed with the SEC), and any press release or other disclosure
document which Veeco or the Company determines to be necessary or desirable in
connection with the Merger and the transactions related thereto, such Company
Stockholder's identity and ownership of Company Common Stock or Veeco Shares, as
the case may be, and the nature of its commitments, arrangements and
understandings under this Agreement and such Company Stockholder's Irrevocable
Proxy.
SECTION 5. CERTAIN ADDITIONAL COVENANTS OF THE COMPANY STOCKHOLDERS.
5.1. No Solicitation. Each Company Stockholder shall not, and shall
cause its Affiliates and Representatives not to, directly or indirectly, take
any action to initiate, solicit, encourage or facilitate the making of any
Company Acquisition Proposal or any inquiry with respect thereto, or engage in
discussions or negotiations with any Person (other than Veeco or any of its
Affiliates or Representatives) relating to any Company Acquisition Proposal or
disclose any non-public information relating to the Company or any Subsidiary of
the Company or afford access to the properties, books or records of the Company
or any Subsidiary of the Company, to any Person that has made a Company
Acquisition Proposal. A Company Stockholder shall notify Veeco orally and in
writing of any offers, proposals or inquiries received by such Company
Stockholder relating to the purchase or acquisition by any Person of any Company
Shares and of any Company Acquisition Proposal actually known to such Company
Stockholder (including, in each case, the material terms and conditions thereof
and the identity of the Person making it), within 24 hours of receipt thereof.
Each Company Stockholder shall, and shall cause its Representatives to,
immediately cease and cause to be terminated any and all existing activities,
discussions and negotiations, if any, with any parties conducted heretofore with
respect to any Company Acquisition Proposal, other than discussions or
negotiations with Veeco or its Affiliates or Representatives. Notwithstanding
the restrictions set forth in this Section 5.1, each of the Company and any
Person (including any Company Stockholder) who is an officer or director of the
Company may take any action in such capacity that is consistent with the terms
of the Merger Agreement.
5.2. Reliance. Each Company Stockholder understands and acknowledges
that Veeco is entering into the Merger Agreement in reliance upon such Company
Stockholder's execution and delivery of this Agreement and such Company
Stockholder's Irrevocable Proxy.
5.3. Affiliates Agreement. Each Company Stockholder, if requested by
Veeco prior to the Effective Time, will duly execute and deliver to Veeco a
Company Affiliates Agreement contemplated by Section 5.21(a) of the Merger
Agreement.
SECTION 6. TERMINATION.
6.1. Termination of Agreement. The provisions of this Agreement
shall terminate and be of no further force or effect upon the earlier to occur
of (a) the termination of the Merger Agreement in accordance with its terms and
(b) the Effective Time of the Merger.
5
<PAGE>
SECTION 7. MISCELLANEOUS.
7.1. Expenses. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring the expense.
7.2. Entire Agreement. This Agreement and any documents to be
delivered in accordance with this Agreement (including the Irrevocable Proxies
of the Company Stockholders) contain the entire agreement among the parties
relating to the transactions which are the subject of this Agreement, and all
prior and contemporaneous negotiations, understandings and agreements among the
parties (whether written or oral) with regard to the subject matter of this
Agreement are superseded by this Agreement, and there are no representations,
warranties, understandings or agreements concerning the transactions which are
the subject of this Agreement or those other documents other than those
expressly set forth in this Agreement.
7.3. Captions. The captions of the articles and paragraphs of this
Agreement are for reference only, and do not affect the meaning or
interpretation of this Agreement.
7.4. Binding Agreement; Assignment.
(a) Binding Agreement. Each Company Stockholder agrees that this
Agreement and the obligations hereunder shall attach to the Company Shares and
shall be binding upon any Person to which record or Beneficial Ownership of such
Company Shares shall pass, whether by operation of Law or otherwise, including,
without limitation, the Company Stockholder's heirs, distributees, guardians,
administrators, executors, legal representatives, or successors, partners or
other transferees (for value or otherwise) and any other successors in interest.
Notwithstanding any transfer of Company Shares, the transferor shall remain
liable for the performance of all obligations under this Agreement of the
transferor.
(b) Assignment. Notwithstanding anything to the contrary set forth
herein, no party may assign any of its rights or obligations hereunder, by
operation of Law or otherwise, without the prior written consent of the other
party; provided, that Veeco may assign, in its sole discretion, its rights and
obligations hereunder to any direct or indirect wholly-owned subsidiary of
Veeco, but no such assignment shall relieve Veeco of its obligations hereunder
if such assignee does not perform such obligations.
7.5. Notices and Other Communications. Any notice or other
communication under this Agreement must be in writing and will be deemed given
when delivered in person or sent by facsimile (with proof of receipt at the
number to which it is required to be sent), or on the third business day after
the day on which mailed by first class mail from within the United States of
America, to the following addresses (or such other address as may be specified
after the date of this Agreement by the party to which the notice or
communication is sent):
If to Veeco:
Veeco Instruments Inc.
Terminal Drive
Plainview, New York 11803
Attention: Edward H. Braun
Chairman, President and Chief Executive Officer
Facsimile No.: (516) 349-9079
with a copy to:
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022-3598
Attention: Rory Greiss, Esq.
Facsimile No.: (212) 836-8689
6
<PAGE>
If to any Company Stockholder, to such Company Stockholder at the
address set forth under such Company Stockholder's signature on the signature
pages to this Agreement.
with a copy to:
Dewey Ballantine, LLP
1301 Avenue of the Americas
New York, New York 10019
Attention: Richard D. Pritz, Esq.
Facsimile No.: (212) 239-6551
7.6. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO
AGREEMENTS MADE AND PERFORMED IN SUCH STATE AND WITHOUT REGARD TO CONFLICTS OF
LAWS DOCTRINES.
7.7. Amendments. Prior to the Effective Time, this Agreement may be
amended only by a document in writing signed by Veeco and each Company
Stockholder.
7.8. Counterparts. This Agreement may be executed in two or more
counterparts, some of which may contain the signatures of some, but not all, the
parties hereto. Each of those counterparts will be deemed an original, but all
of them together will constitute one and the same Agreement.
7.9. Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (iv) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
7.10. Enforcement. 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 hereto shall be entitled to an injunction
or injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Federal court located in the
State of Delaware or in a Delaware state court, this being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto (i) consents to the personal jurisdiction of any Federal
court located in the State of Delaware or any Delaware state court in any action
or proceeding relating to or arising out of this Agreement (including, with
respect to a Company Stockholder, such Company Stockholder's Irrevocable Proxy)
or any of the transactions contemplated hereby, (ii) agrees that such party will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court, (iii) agrees that such parties will not
seek to change the venue of any such action or proceeding or otherwise to move
any such action or proceeding to another court, whether because of inconvenience
of the forum or otherwise (provided that nothing in this Section will prevent a
party from removing an action or proceeding from a Delaware state court to a
Federal court located in the State of Delaware), (iv) agrees that such party
will not bring any action relating to this Agreement or any Irrevocable Proxy or
any of the transactions contemplated hereby or thereby in any court other than a
Federal court sitting in the State of Delaware or a Delaware state court and (v)
waives any right to trial by jury with respect to any claim or proceeding
related to or arising out of this Agreement or any Irrevocable Proxy or any of
the transactions contemplated hereby or thereby.
7
<PAGE>
7.11. Further Assurances. From time to time, at the other party's
request and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further lawful action as may
be necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement
and the Irrevocable Proxies.
8
<PAGE>
IN WITNESS WHEREOF, each party hereto has caused this
Agreement to be signed by its officer thereunto duly authorized as of the date
in the first paragraph of this Agreement.
VEECO
VEECO INSTRUMENTS INC.
By: /s/ Edward H. Braun
----------------------------------
Name: Edward H. Braun
Title: Chief Executive Officer
COMPANY STOCKHOLDERS
SEAGATE TECHNOLOGY, INC.
By: /s/ Donald L. Waite
----------------------------------
Name: Donald L. Waite
Title: Executive Vice President
Seagate Technology, Inc.'s
Address for Notice:
920 Disc Drive
Scotts Valley, CA 95067
Attention: William Hudson
Facsimile No.: 831-438-2957
9
<PAGE>
NIKKO TECNO CO., INC.
By: /s/ Seiya Miyanishi
----------------------------------
Name: Seiya Miyanishi
Title: President
Nikko Tecno Co., Inc.'s
Address for Notice:
P.O. Box 261
Central Osaka, Japan (550)
Attention: Seiya Miyanishi
Facsimile No.: +81-6-6449-0511
10
<PAGE>
ADVENT INTERNATIONAL GROUP
By: /s/ Douglas A. Kingsley
----------------------------------
Name: Douglas A. Kingsley
Title: Senior Vice President
Advent International Group's
Address for Notice:
75 State Street
Boston, MA 02109
Attention: Janet Hennessey
Facsimile No.: 617-951-0566
GLOBAL PRIVATE EQUITY III LIMITED
PARTNERSHIP
By: Advent International Group, its
General Partner
By: /s/ Douglas A. Kingsley
----------------------------------
Name: Douglas A. Kingsley
Title: Senior Vice President
Global Private Equity III Limited
Partnership's
Address for Notice:
75 State Street
Boston, MA 02109
Attention: Janet Hennessey
Facsimile No.: 617-951-0566
11
<PAGE>
ADVENT PGGM GLOBAL LIMITED
PARTNERSHIP
By: Advent International Group, its
General Partner
By: /s/ Douglas A. Kingsley
----------------------------------
Name: Douglas A. Kingsley
Title: Senior Vice President
Advent PGGM Global Limited Partnership's
Address for Notice:
75 State Street
Boston, MA 02109
Attention: Janet Hennessey
Facsimile No.: 617-951-0566
ADVENT PARTNERS GPE III LIMITED
PARTNERSHIP
By: Advent International Group, its
General Partner
By: /s/ Douglas A. Kingsley
----------------------------------
Name: Douglas A. Kingsley
Title: Senior Vice President
Advent Partners GPE III Limited
Partnership's
Address for Notice:
75 State Street
Boston, MA 02109
Attention: Janet Hennessey
Facsimile No.: 617-951-0566
12
<PAGE>
ADVENT PARTNERS (NA) GPE III LIMITED
PARTNERSHIP
By: Advent International Group, its
General Partner
By: /s/ Douglas A. Kingsley
----------------------------------
Name: Douglas A. Kingsley
Title: Senior Vice President
Advent Partners (NA) GPE III Limited
Partnership's Address for Notice:
75 State Street
Boston, MA 02109
Attention: Janet Hennessey
Facsimile No.: 617-951-0566
ADVENT PARTNERS LIMITED
PARTNERSHIP
By: Advent International Group, its
General Partner
By: /s/ Douglas A. Kingsley
----------------------------------
Name: Douglas A. Kingsley
Title: Senior Vice President
Advent Partners Limited Partnership's
Address for Notice:
75 State Street
Boston, MA 02109
Attention: Janet Hennessey
Facsimile No.: 617-951-0566
13
<PAGE>
/s/ Anne G. Whitman, by Bradley Whitman, attorney-in-fact
----------------------------------------------------------
Anne G. Whitman
Anne G. Whitman's
Address for Notice:
Justin Doyle
Nixon Peabody, LLP
One Clinton Square
Rochester, NY 14603
Facsimile No.: 716-263-1600
14
<PAGE>
/s/ Christine B. Whitman
----------------------------------
Christine B. Whitman
Christine B. Whitman's
Address for Notice:
CVC, Inc.
525 Lee Road
Rochester, NY 14606
Facsimile No.: 716-458-0426
/s/ Emilio O. DiCataldo
----------------------------------
Emilio O. DiCataldo
Emilio O. DiCataldo's
Address for Notice:
CVC, Inc.
525 Lee Road
Rochester, NY 14606
Facsimile No.: 716-458-0426
/s/ Mehrdad M. Moslehi
----------------------------------
Mehrdad M. Moslehi
Mehrdad M. Moslehi's
Address for Notice:
CVC, Inc.
525 Lee Road
Rochester, NY 14606
Facsimile No.: 716-458-0426
15
<PAGE>
/s/ Christopher J. Mann
----------------------------------
Christopher J. Mann
Christopher J. Mann's
Address for Notice:
CVC, Inc.
525 Lee Road
Rochester, NY 14606
Facsimile No.: 716-458-0426
16
<PAGE>
Schedule A
No. of Existing
Company Stockholder Company Shares Held
- ------------------- -------------------
Seagate Technology, Inc. 2,428,313
Nikko Tecno Co., Inc. 1,412,316
Global Private Equity III Limited Partnership 853,658
Advent PGGM Global Limited Partnership 130,793
Advent Partners GPE III Limited Partnership 12,907
Advent Partners (NA) GPE III Limited Partnership 3,861
Advent Partners Limited Partnership 15,041
Anne G. Whitman 451,900
Christine B. Whitman 368,000
Emilio O. DiCataldo 50,000
Mehrdad M. Moslehi 304,000
Christopher J. Mann 55,960
Schedule A - Page 1
<PAGE>
Exhibit A
COMPANY STOCKHOLDERS
POWER OF ATTORNEY AND IRREVOCABLE PROXY
Reference is hereby made to that Certain Company Stockholders Voting
Agreement (the "Voting Agreement"), dated as of the date hereof, of which this
Company Stockholders Power of Attorney and Irrevocable Proxy (this "Irrevocable
Proxy") forms a part. Capitalized terms used but not defined in this Irrevocable
Proxy have the respective meanings ascribed to such terms in the Voting
Agreement. This Irrevocable Proxy is being delivered by the undersigned Company
Stockholder (the "Granting Stockholder") pursuant to Section 3.3 of the Voting
Agreement.
The undersigned Granting Stockholder hereby irrevocably appoints Veeco
Instruments Inc., a Delaware corporation ("Veeco"), and each of Veeco's officers
and other designees (each such Person, a "Proxyholder") as the Granting
Stockholder's attorney-in-fact and proxy pursuant to the provisions of
Section 212 of the Delaware General Corporation Law, with full power of
substitution, in the Granting Stockholder's name, place and stead, to vote and
otherwise act (by written consent or otherwise) with respect to all of the
Company Shares now owned of record or Beneficially Owned by the Granting
Stockholder and of which the Granting Stockholder may hereafter acquire record
or Beneficial Ownership, and any other securities, if any (the "Other
Securities"), which the Granting Stockholder is entitled to vote at any meeting
of the stockholders of the Company (whether annual or special and whether or not
an adjourned or postponed meeting) or consent in lieu of any such meeting or
otherwise:
(a) in favor of the Merger, the adoption by the Company of the Merger
Agreement, other matters relating to the approval of the terms of the Merger
Agreement and each of the other transactions contemplated by the Merger
Agreement; and
(b) against any proposal or transaction involving the Company or any of
its Subsidiaries if any such transaction or proposal would in any manner impede,
frustrate, prevent or nullify the Merger, the Merger Agreement or any of the
other transactions contemplated by the Merger Agreement; provided, however, that
nothing set forth in this paragraph (b) is intended or shall be construed to
grant to any Proxyholder the right to vote or otherwise act (by written consent
or otherwise) with respect to any Company Shares or Other Securities owned of
record or Beneficially Owned by the Granting Stockholder (i) against any Company
Acquisition Proposal or related Company Acquisition Transaction or (ii) in the
election of any director of the Company.
THIS POWER OF ATTORNEY AND IRREVOCABLE PROXY IS IRREVOCABLE AND COUPLED
WITH AN INTEREST. The Granting Stockholder hereby revokes all other proxies and
powers of attorney with respect to the Company Shares and the Other Securities
that the Granting Stockholder may have heretofore granted, and no subsequent
proxy or power of attorney shall be given or written consent executed (and if
given or executed, shall not be effective) by the Granting Stockholder with
respect thereto. All authority herein conferred or agreed to be conferred shall
survive the death or incapacity of the Granting Stockholder and any obligation
of the Granting Stockholder under this Irrevocable Proxy shall be binding upon
the heirs, personal representatives, successors and assigns of the Granting
Stockholder.
Exhibit A - Page 1
<PAGE>
This Irrevocable Proxy shall be valid and irrevocable until, and shall
terminate upon, the earlier to occur of (a) the termination of the Merger
Agreement in accordance with its terms and (b) the Effective Time of the Merger.
---------------------------------------------------
(Signature of Granting Stockholder)
---------------------------------------------------
(Printed Name of Granting Stockholder as it Appears
on Certificate Representing Company Shares)
----------------------------------
(Date)
Exhibit A - Page 2
<PAGE>
APPENDIX C
VEECO STOCKHOLDERS
VOTING AGREEMENT
VEECO STOCKHOLDERS VOTING AGREEMENT (this "Agreement"), dated
February 29, 2000, among each of the individuals and entities listed on Schedule
A to this Agreement (each, a "Veeco Stockholder" and collectively, the "Veeco
Stockholders") and CVC, Inc., a Delaware corporation (the "Company").
WHEREAS, Veeco Acquisition Corp. ("Acquisition"), a Delaware
corporation and a wholly-owned subsidiary of Veeco Instruments Inc. ("Veeco"),
and the Company propose to enter into an Agreement and Plan of Merger dated as
of the date hereof (as the same may be amended, supplemented or modified in
accordance with its terms, the "Merger Agreement") providing for the merger of
Acquisition into the Company (the "Merger");
WHEREAS, capitalized terms used in this Agreement but not otherwise
defined herein shall have the respective meanings ascribed to such terms in the
Merger Agreement;
WHEREAS, this Agreement is the Veeco Stockholders Voting Agreement
contemplated by and referred to in the Merger Agreement;
WHEREAS, each Veeco Stockholder owns the number of Existing Veeco
Shares (as defined) set forth opposite such Veeco Stockholder's name on Schedule
A hereto and the Veeco Stockholders collectively own in the aggregate 128,490
Existing Veeco Shares (as defined);
WHEREAS, as a condition to the willingness of the Company to enter
into the Merger Agreement, the Company has requested that the Veeco Stockholders
enter into this Agreement.
NOW THEREFORE, to induce the Company to enter into, and in
consideration of its entering into, the Merger Agreement, and in consideration
of the mutual covenants and agreements set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties to this Agreement, intending to be legally bound,
hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS.
1.1. "Beneficially Own" or "Beneficial Ownership" with respect to
any securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant to
any agreement, arrangement or understanding, whether or not in writing. Without
duplicative counting of the same securities by the same holder, securities
Beneficially Owned by a Person shall include securities Beneficially Owned by
all other Persons with whom such Person would constitute a "group" within the
meaning of Section 13(d) of the Exchange Act with respect to securities of the
same issuer.
1.2. "Veeco Shares" with respect to any Veeco Stockholder, shall
mean such Veeco Stockholder's Existing Veeco Shares and any Veeco Shares and/or
other Equity Securities of, or equity interest in, Veeco acquired by the Veeco
Stockholder in any capacity after the date of this Agreement and prior to the
termination of this Agreement, whether upon the exercise of options, warrants or
rights, the conversion or exchange of convertible or exchangeable securities, or
by means of purchase, dividend, distribution, split-up, recapitalization,
combination, exchange of shares or the like, gift, bequest, inheritance or as a
successor in interest in any capacity or otherwise Beneficially Owned by such
Veeco Stockholder, in each case, if and to the extent entitled to be voted.
1.3. "Existing Veeco Shares" with respect to any Veeco Stockholder,
means all Veeco Shares Beneficially Owned by such Veeco Stockholder on the date
of this Agreement, in each case, if and to the extent entitled to be voted.
1
<PAGE>
1.4. "Irrevocable Proxy" shall mean a Veeco Stockholder Power of
Attorney and Irrevocable Proxy in the form of Exhibit A attached to this
Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES.
2.1. Entity Veeco Stockholder Representations and Warranties. Each
Veeco Stockholder that is a legal entity, or otherwise not an individual Person,
hereby represents and warrants to the Company as follows:
(a) Authority. Such Veeco Stockholder is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization. Such Veeco Stockholder has all power and authority necessary to
enable it to enter into this Agreement and to carry out the transactions
contemplated by this Agreement and such Veeco Stockholder's Irrevocable Proxy.
This Agreement and such Veeco Stockholder's Irrevocable Proxy have been duly and
validly authorized, executed and delivered by such Veeco Stockholder and each
constitutes such Veeco Stockholder's legal, valid and binding obligation,
enforceable against it in accordance with its terms.
(b) Non-Contravention. Neither the execution and delivery of this
Agreement or such Veeco Stockholder's Irrevocable Proxy, nor consummation of the
transactions contemplated by this Agreement, by such Veeco Stockholder's
Irrevocable Proxy or by any document to be delivered in accordance herewith or
therewith will violate, result in a breach of, or constitute a default (or an
event which, with notice or lapse of time or both would constitute a default)
under, (i) such Veeco Stockholder's certificate of incorporation, limited
partnership agreement or other organizational, governing or constating
documents, (ii) any agreement or instrument to which such Veeco Stockholder is a
party or by which it is bound, or (iii) any Law, or any order, rule or
regulation of any court or Governmental Authority or other regulatory
organization having jurisdiction over it.
(c) Approvals and Consents. No governmental filings, authorizations,
approvals or Consents, or other governmental action is required for (i) the
execution and delivery of this Agreement and such Veeco Stockholder's
Irrevocable Proxy by such Veeco Stockholder, (ii) the performance by such Veeco
Stockholder of its obligations under this Agreement and such Veeco Stockholder's
Irrevocable Proxy or (iii) the consummation by such Veeco Stockholder of the
transactions contemplated by this Agreement and such Veeco Stockholder's
Irrevocable Proxy.
2.2. Individual Veeco Stockholder Representations and Warranties.
Each Veeco Stockholder that is an individual hereby represents and warrants to
the Company as follows:
(a) Authority. Such Veeco Stockholder has full capacity and
authority to enter into this Agreement and such Veeco Stockholder's Irrevocable
Proxy, and to carry out the transactions contemplated hereby and thereby. This
Agreement and such Veeco Stockholder's Irrevocable Proxy have been duly executed
and delivered by such Veeco Stockholder and each constitutes a legal, valid and
binding obligation of such Veeco Stockholder enforceable against such Veeco
Stockholder in accordance with its terms.
(b) Non-Contravention. None of the execution and delivery of this
Agreement or such Veeco Stockholder's Irrevocable Proxy, nor consummation of the
transactions contemplated by this Agreement, by such Veeco Stockholder's
Irrevocable Proxy or by any document to be delivered in accordance herewith or
therewith will violate, result in a breach of, or constitute a default (or an
event which, with notice or lapse of time or both would constitute a default)
under, (i) any agreement or instrument to which such Veeco Stockholder is a
party or by which such Veeco Stockholder is bound, (ii) any Law, or any order,
rule or regulation of any court or Governmental Authority or other regulatory
organization having jurisdiction over such Veeco Stockholder.
(c) Approvals and Consents. No governmental filings, authorizations,
approvals or Consents, or other governmental action is necessary or required (i)
for the execution and delivery of this Agreement or such Veeco Stockholder's
Irrevocable Proxy by such Veeco Stockholder, (ii) the performance by such Veeco
Stockholder of such Veeco Stockholder's obligations under this Agreement or such
Veeco Stockholder's Irrevocable Proxy or (iii) the
2
<PAGE>
consummation by such Veeco Stockholder of the transactions contemplated hereby
or by such Veeco Stockholder's Irrevocable Proxy.
2.3. Veeco Stockholder Representations and Warranties. Each Veeco
Stockholder hereby represents and warrants to the Company as follows:
(a) Ownership of Existing Veeco Shares. Such Veeco Stockholder is
the record and Beneficial Owner of the number of Existing Veeco Shares set forth
opposite such Veeco Stockholder's name on Schedule A to this Agreement. On the
date of this Agreement, such Existing Veeco Shares constitute all of the Veeco
Shares owned of record or Beneficially Owned by such Veeco Stockholder.
(b) Liens and Restrictions on Existing Veeco Shares. Such Veeco
Stockholder owns the number of Existing Veeco Shares set forth opposite such
Veeco Stockholder's name on Schedule A hereto, free and clear of any Liens,
claims, security interests, proxies, voting trusts or agreements, restrictions,
qualifications, limitations, understandings or arrangements which would in any
way restrict or impair such Veeco Stockholder's right to vote such Existing
Veeco Shares in his, her or its sole discretion, or could require such Veeco
Stockholder to sell or transfer any of such Existing Veeco Shares (whether upon
default on a loan or otherwise) before the Effective Time.
(c) Voting Power Over Existing Veeco Shares. Such Veeco Stockholder
has sole voting power and sole power to issue instructions and sole power to
agree to the matters set forth in this Agreement with respect to all of such
Veeco Stockholder's Existing Veeco Shares.
(d) Survival. The obligations of such Veeco Stockholder under this
Agreement shall survive the death, disability or incapacity of such Veeco
Stockholder.
2.4. Company Representations and Warranties. The Company hereby
represents and warrants to the Veeco Stockholders as follows:
(a) Authority. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
Company has all power and authority necessary to enable it to enter into this
Agreement and to carry out the transactions contemplated by this Agreement. This
Agreement has been duly and validly authorized, executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
(b) Non-Contravention. Neither the execution and delivery of this
Agreement by the Company nor the consummation of the transactions contemplated
by this Agreement will violate, result in a breach of, or constitute a default
(or an event which, with notice or lapse of time or both would constitute a
default) under, the certificate of incorporation or by-laws of the Company.
(c) Approvals and Consents. No governmental filings, authorizations,
approvals or Consents, or other governmental action is required for (i) the
execution and delivery of this Agreement by the Company, (ii) the performance by
the Company of its obligations under this Agreement or (iii) the consummation by
the Company of the transactions contemplated by this Agreement.
SECTION 3. COVENANTS OF THE VEECO STOCKHOLDERS.
3.1. Vote for Merger. At any meeting of stockholders of Veeco called
to vote upon the Merger and the Merger Agreement or any of the transactions
contemplated by the Merger Agreement, or at any adjournment or postponement
thereof, or in any other circumstances upon which a vote, Consent or other
approval with respect to the Merger and the Merger Agreement is sought, each
Veeco Stockholder's Veeco Shares shall be counted as present thereat for
purposes of establishing a quorum and shall be voted or Consented (or caused to
be voted or Consented) in favor of the Merger, the adoption by Veeco of the
Merger Agreement and the issuance in the Merger of the Veeco
3
<PAGE>
Shares, other matters relating to the approval of the terms of the Merger
Agreement and each of the other transactions contemplated by the Merger
Agreement.
3.2. Vote Against Certain Matters. Prior to the Effective Time, at
any meeting of stockholders of Veeco or at any adjournment or postponement
thereof or in any other circumstances upon which a Veeco Stockholder's vote,
Consent or other approval is sought, such Veeco Stockholder's Veeco Shares shall
be counted as present thereat for purposes of establishing a quorum and shall be
voted or Consented (or caused to be voted or Consented) against any proposal or
transaction involving Veeco or any of its Subsidiaries if such transaction or
proposal would in any manner impede, frustrate, prevent or nullify the Merger,
the Merger Agreement or any of the other transactions contemplated by the Merger
Agreement; provided, that nothing set forth in this Section 3.2 is intended or
shall be construed to restrict or impair the right of a Veeco Stockholder to
vote or Consent (or cause to be voted or Consented) any Veeco Shares owned of
record or Beneficially Owned by such Veeco Stockholder (i) in favor of any
Superior Veeco Proposal or related Veeco Acquisition Transaction or (ii) in the
election of any director of Veeco.
3.3. Execution and Delivery of Irrevocable Proxies. In order to
effectuate the voting arrangements contemplated by Section 3.1 and Section 3.2
hereof, contemporaneously with the execution and delivery by the parties hereto
of this Agreement, and as a condition to such execution and delivery by the
Company, each Veeco Stockholder is delivering to the Company an Irrevocable
Proxy duly executed by or on behalf of such Veeco Stockholder.
3.4. Transfers; Other Voting Arrangements Inconsistent Actions.
(a) Transferees Bound. It shall be a condition precedent to any
direct or indirect sale, transfer, pledge, assignment or other disposition of,
or entry into any Contract, option or other arrangement with respect to the
sale, transfer, pledge, assignment or other disposition of, any Veeco Shares by
a Veeco Stockholder (any of the foregoing, whether voluntary or involuntary, by
operation of Law or otherwise a "Transfer") to any Person (the "Transferee")
that (A) the Veeco Stockholder desiring to effect such Transfer provide to the
proposed Transferee in connection therewith a copy of this Agreement and the
Irrevocable Proxy and (B) such Transferee shall agree, prior to the consummation
of such Transfer, to become bound by this Agreement and such Veeco Stockholder's
Irrevocable Proxy and subject to the terms, conditions and restrictions hereof
and thereof in the same manner as the Veeco Stockholder desiring to effect such
Transfer, by executing a writing to such effect in form and substance
satisfactory to the Company.
(b) Other Voting Arrangements, Etc. No Veeco Stockholder shall,
directly or indirectly, enter into any voting arrangement, whether by proxy,
voting arrangement, voting agreement, voting trust or otherwise with respect to
any Veeco Shares owned of record or Beneficially Owned by such Veeco
Stockholder, other than as contemplated under and as required by this Agreement
and such Veeco Stockholder's Irrevocable Proxy.
(c) Inconsistent Actions; Non-Interference. No Veeco Stockholder
shall, directly or indirectly, take any action that would or could reasonably be
expected to: (A) make any representation or warranty of the Veeco Stockholder
contained herein untrue or incorrect, or (B) result in a breach by the Veeco
Stockholder of its obligations under this Agreement, or (C) result in a breach
by Veeco of its obligations under the Merger Agreement, or (D) invalidate or in
any way limit the enforceability by the Proxyholders (as defined in the
Irrevocable Proxy) of such Veeco Stockholder's Irrevocable Proxy, or (E) have an
effect that would be inconsistent with, or violative of, any provision or
agreement contained in the Merger Agreement.
SECTION 4. COVENANTS RELATING TO CONFIDENTIALITY AND DISCLOSURE.
4.1. Confidentiality. Each Veeco Stockholder recognizes that
successful consummation of the transactions contemplated by this Agreement and
the Merger Agreement may be dependent upon the maintenance of strict
confidentiality with respect to the matters referred to herein and therein. In
this connection, pending public disclosure thereof by Veeco or the Company, each
Veeco Stockholder hereby agrees not to disclose or discuss such matters with
anyone not a party to this Agreement or the Merger Agreement (other than to its
and to Veeco's counsel
4
<PAGE>
and advisors) without the prior written consent of the Company, except for
filings, if any, required pursuant to the Exchange Act and the rules and
regulations promulgated thereunder or disclosures that such Veeco Stockholder's
counsel advises are necessary in order to fulfill such Veeco Stockholder's
obligations imposed by Law, in which event such Veeco Stockholder shall give
prior notice of such disclosure to the Company as promptly as practicable so as
to enable the Company to seek a protective order from a court of competent
jurisdiction with respect thereto or similar relief in connection therewith.
4.2. Disclosure. Each Veeco Stockholder hereby agrees to permit
Veeco and the Company to publish and disclose in the Form S-4 Registration
Statement and the Joint Proxy Statement (including all documents, exhibits and
schedules filed with the SEC), and any press release or other disclosure
document which Veeco or the Company determine to be necessary or desirable in
connection with the Merger and the transactions related thereto, such Veeco
Stockholder's identity and ownership of Company Common Stock or Veeco Shares, as
the case may be, and the nature of its commitments, arrangements and
understandings under this Agreement and such Veeco Stockholder's Irrevocable
Proxy.
SECTION 5. CERTAIN ADDITIONAL COVENANTS OF THE VEECO STOCKHOLDERS.
5.1. No Solicitation. Each Veeco Stockholder shall not, and shall
cause its Affiliates and Representatives not to, directly or indirectly, take
any action to initiate, solicit, encourage or facilitate the making of any Veeco
Acquisition Proposal or any inquiry with respect thereto, or engage in
discussions or negotiations with any Person relating to any Veeco Acquisition
Proposal or disclose any non-public information relating to Veeco or any
Subsidiary of Veeco or afford access to the properties, books or records of
Veeco or any Subsidiary of Veeco, to any Person that has made a Veeco
Acquisition Proposal. A Veeco Stockholder shall notify the Company orally and in
writing of any offers, proposals or inquiries received by such Veeco Stockholder
relating to the purchase or acquisition by any Person of any Veeco Shares and of
any Veeco Acquisition Proposal actually known to such Veeco Stockholder
(including, in each case, the material terms and conditions thereof and the
identity of the Person making it), within 24 hours of receipt thereof. Each
Veeco Stockholder shall and shall cause its Representatives to, immediately
cease and cause to be terminated any and all existing activities, discussions
and negotiations, if any, with any parties conducted heretofore with respect to
any Veeco Acquisition Proposal. Notwithstanding the restrictions set forth in
this Section 5.1, each of Veeco and any Person (including any Veeco Stockholder)
who is an officer or director of Veeco may take any action in such capacity that
is consistent with the terms of the Merger Agreement.
5.2. Reliance. Each Veeco Stockholder understands and acknowledges
that the Company is entering into the Merger Agreement in reliance upon such
Veeco Stockholder's execution and delivery of this Agreement and such Veeco
Stockholder's Irrevocable Proxy.
5.3. Affiliate Agreement. Each Veeco Stockholder, if requested by
Veeco prior to the Effective Time, will duly execute and deliver to Veeco a
Veeco Affiliate Agreement contemplated by Section 5.21(b) of the Merger
Agreement.
SECTION 6. TERMINATION.
6.1. Termination of Agreement. The provisions of this Agreement
shall terminate and be of no further force or effect upon the earlier to occur
of (a) the termination of the Merger Agreement in accordance with its terms and
(b) the Effective Time of the Merger.
SECTION 7. MISCELLANEOUS.
7.1. Expenses. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring the expense.
5
<PAGE>
7.2. Entire Agreement. This Agreement and any documents to be
delivered in accordance with this Agreement (including the Irrevocable Proxies
of the Veeco Stockholders) contain the entire agreement among the parties
relating to the transactions which are the subject of this Agreement, and all
prior and contemporaneous negotiations, understandings and agreements among the
parties (whether written or oral) with regard to the subject matter of this
Agreement are superseded by this Agreement, and there are no representations,
warranties, understandings or agreements concerning the transactions which are
the subject of this Agreement or those other documents other than those
expressly set forth in this Agreement.
7.3. Captions. The captions of the articles and paragraphs of this
Agreement are for reference only, and do not affect the meaning or
interpretation of this Agreement.
7.4. Binding Agreement; Assignment.
(a) Binding Agreement. Each Veeco Stockholder agrees that this
Agreement and the obligations hereunder shall attach to the Veeco Shares and
shall be binding upon any Person to which record or Beneficial Ownership of such
Veeco Shares shall pass, whether by operation of Law or otherwise, including,
without limitation, the Veeco Stockholder's heirs, distributees, guardians,
administrators, executors, legal representatives, or successors, partners or
other transferees (for value or otherwise) and any other successors in interest.
Notwithstanding any transfer of Veeco Shares, the transferor shall remain liable
for the performance of all obligations under this Agreement of the transferor.
(b) Assignment. Notwithstanding anything to the contrary set forth
herein, no party may assign any of its rights or obligations hereunder, by
operation of Law or otherwise, without the prior written consent of the other
party.
7.5. Notices and Other Communications. Any notice or other
communication under this Agreement must be in writing and will be deemed given
when delivered in person or sent by facsimile (with proof of receipt at the
number to which it is required to be sent), or on the third business day after
the day on which mailed by first class mail from within the United States of
America, to the following addresses (or such other address as may be specified
after the date of this Agreement by the party to which the notice or
communication is sent):
If to the Company:
CVC, Inc.
525 Lee Road
Rochester, New York 14606
Attention: Christine Whitman
Facsimile No: (716) 458-0426
with a copy to:
Dewey Ballantine, LLP
1301 Avenue of the Americas
New York, New York 10019
Attention: Richard D. Pritz, Esq.
Facsimile No.: (212) 239-6551
If to any Veeco Stockholder, to such Veeco Stockholder at the
address set forth under such Veeco Stockholder's signature on the signature
pages to this Agreement.
6
<PAGE>
with a copy to:
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022-3598
Attention: Rory Greiss, Esq.
Facsimile No.: (212) 836-8689
7.6. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO
AGREEMENTS MADE AND PERFORMED IN SUCH STATE AND WITHOUT REGARD TO CONFLICTS OF
LAWS DOCTRINES.
7.7. Amendments. Prior to the Effective Time, this Agreement may be
amended only by a document in writing signed by the Company and each Veeco
Stockholder.
7.8. Counterparts. This Agreement may be executed in two or more
counterparts, some of which may contain the signatures of some, but not all, the
parties hereto. Each of those counterparts will be deemed an original, but all
of them together will constitute one and the same Agreement.
7.9. Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (iv) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
7.10. Enforcement. 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 hereto shall be entitled to an injunction
or injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Federal court located in the
State of Delaware or in a Delaware state court, this being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto (i) consents to the personal jurisdiction of any Federal
court located in the State of Delaware or any Delaware state court in any action
or proceeding relating to or arising out of this Agreement (including, with
respect to a Veeco Stockholder, such Veeco Stockholder's Irrevocable Proxy) or
any of the transactions contemplated hereby, (ii) agrees that such party will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court, (iii) agrees that such parties will not
seek to change the venue of any such action or proceeding or otherwise to move
any such action or proceeding to another court, whether because of inconvenience
of the forum or otherwise (provided that nothing in this Section will prevent a
party from removing an action or proceeding from a Delaware state court to a
Federal court located in the State of Delaware), (iv) agrees that such party
will not bring any action relating to this Agreement or any Irrevocable Proxy or
any of the transactions contemplated hereby or thereby in any court other than a
Federal court sitting in the State of Delaware or a Delaware state court and (v)
waives any right to trial by jury with respect to any claim or proceeding
related to or arising out of this Agreement or any Irrevocable Proxy or any of
the transactions contemplated hereby or thereby.
7.11. Further Assurances. From time to time, at the other party's
request and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further lawful action as may
be necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement
and the Irrevocable Proxies.
7
<PAGE>
IN WITNESS WHEREOF, each party hereto has caused this Agreement to
be signed by its officer thereunto duly authorized as of the date in the first
paragraph of this Agreement.
THE COMPANY
CVC, INC.
By: /s/ Christine B. Whitman
-------------------------------
Name: Christine B. Whitman
Title: Chief Executive Officer
VEECO STOCKHOLDERS
/s/ Edward H. Braun
-----------------------------------
Edward H. Braun
Edward H. Braun's
Address for Notice:
1 Malcolms Landing
Northport, NY 11768
Facsimile No.:_____________________
/s/ John F. Rein, Jr.
-----------------------------------
John F. Rein, Jr.
John F. Rein's
Address for Notice:
8 Wright Road
Rockville Centre, NY 11570
Facsimile No.:_____________________
8
<PAGE>
/s/ Emanuelle N. Lakios
-----------------------------------
Emanuelle N. Lakios
Emanuelle N. Lakios'
Address for Notice:
21 Waters Edge Lane
Mt. Sinai, NY
Facsimile No.:___________________
/s/ Joseph Z. Rivlin
-----------------------------------
Joseph Z. Rivlin
Joseph Z. Rivlin's
Address for Notice:
511A Centre Island Road
Oyster Bay, NY 11771
Facsimile No.:___________________
9
<PAGE>
Schedule A
Veeco Stockholder No. of Existing Veeco Shares Held
- ----------------- ---------------------------------
Edward H. Braun 125,019
John F. Rein, Jr. 1,946
Emanuelle N. Lakios 1,232
Joseph Z. Rivlin 293
-------
128,490
Schedule A - Page 1
<PAGE>
Exhibit A
VEECO STOCKHOLDERS
POWER OF ATTORNEY AND IRREVOCABLE PROXY
Reference is hereby made to that Certain Veeco Stockholders Voting
Agreement (the "Voting Agreement"), dated as of the date hereof, of which this
Veeco Stockholders Power of Attorney and Irrevocable Proxy (this "Irrevocable
Proxy") forms a part. Capitalized terms used but not defined in this Irrevocable
Proxy have the respective meanings ascribed to such terms in the Voting
Agreement. This Irrevocable Proxy is being delivered by the undersigned Veeco
Stockholder (the "Granting Stockholder") pursuant to Section 3.3 of the Voting
Agreement.
The undersigned Granting Stockholder hereby irrevocably appoints CVC,
Inc., a Delaware corporation ("CVC"), and each of CVC's officers and other
designees (each such Person, a "Proxyholder") as the Granting Stockholder's
attorney-in-fact and proxy pursuant to the provisions of Section 212 of the
Delaware General Corporation Law, with full power of substitution, in the
Granting Stockholder's name, place and stead, to vote and otherwise act (by
written consent or otherwise) with respect to all of the Veeco Shares now owned
of record or Beneficially Owned by the Granting Stockholder and of which the
Granting Stockholder may hereafter acquire record or Beneficial Ownership, and
any other securities, if any (the "Other Securities"), which the Granting
Stockholder is entitled to vote at any meeting of the stockholders of Veeco
(whether annual or special and whether or not an adjourned or postponed meeting)
or consent in lieu of any such meeting or otherwise:
(a) in favor of the Merger, the adoption by Veeco of the Merger
Agreement and the issuance of Veeco Shares in the Merger, other matters
relating to the approval of the terms of the Merger Agreement and each of
the other transactions contemplated by the Merger Agreement; and
(b) against any proposal or transaction involving Veeco or any of
its Subsidiaries if any such transaction or proposal would in any manner
impede, frustrate, prevent or nullify the Merger, the Merger Agreement or
any of the other transactions contemplated by the Merger Agreement;
provided, however, that nothing set forth in this paragraph (b) is
intended or shall be construed to grant to any Proxyholder the right to
vote or otherwise act (by written consent or otherwise) with respect to
any Veeco Shares or Other Securities owned of record or Beneficially Owned
by the Granting Stockholder (i) against any Superior Veeco Proposal or
related Veeco Acquisition Transaction or (ii) in the election of any
director of Veeco.
THIS POWER OF ATTORNEY AND IRREVOCABLE PROXY IS IRREVOCABLE AND COUPLED
WITH AN INTEREST. The Granting Stockholder hereby revokes all other proxies and
powers of attorney with respect to Veeco Shares and the Other Securities that
the Granting Stockholder may have heretofore granted, and no subsequent proxy or
power of attorney shall be given or written consent executed (and if given or
executed, shall not be effective) by the Granting Stockholder with respect
thereto. All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the Granting Stockholder and any obligation of the
Granting Stockholder under this Irrevocable Proxy shall be binding upon the
heirs, personal representatives, successors and assigns of the Granting
Stockholder.
Exhibit A - Page 1
<PAGE>
This Irrevocable Proxy shall be valid and irrevocable until, and shall
terminate upon, the earlier to occur of (a) the termination of the Merger
Agreement in accordance with its terms and (b) the Effective Time of the Merger.
----------------------------------------------------
(Signature of Granting Stockholder)
----------------------------------------------------
(Printed Name of Granting Stockholder as it Appears
on Certificate Representing Veeco Shares)
----------------------------------
(Date)
Exhibit A - Page 2
<PAGE>
APPENDIX D
LEHMAN BROTHERS
February 29, 2000
Board of Directors
CVC, Inc.
525 Lee Road
Rochester, NY 14606
Members of the Board:
We understand that Veeco Instruments Inc. ("Veeco") and CVC, Inc. ("CVC"
or the "Company") are proposing to enter into an Agreement and Plan of Merger,
dated as of February 29, 2000 (the "Agreement"), which provides, among other
things, for the merger (the "Merger") of CVC into Veeco. Upon effectiveness of
the Merger, each issued and outstanding share of the common stock of CVC will be
converted into the right to receive 0.430 shares (the "Exchange Ratio") of newly
issued shares of common stock of Veeco (the "Proposed Transaction"). The terms
and conditions of the Proposed Transaction are set forth in more detail in the
Agreement.
We have been requested by the Board of Directors of the Company to render
our opinion with respect to the fairness, from a financial point of view, to the
Company's stockholders of the Exchange Ratio to be offered to such stockholders
in the Proposed Transaction. We have not been requested to opine as to, and our
opinion does not in any manner address, the Company's underlying business
decision to proceed with or effect the Proposed Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) the Agreement
and the specific terms of the Proposed Transaction, (2) publicly available
information concerning CVC and Veeco that we believe to be relevant to our
analysis, including CVC's Prospectus dated November 12, 1999 and Form 10-Q for
the quarter ended December 31, 1999 and Veeco's Form 10-K for the year ended
December 31, 1998 and Form 10-Q for the quarter ended September 30, 1999, (3)
financial and operating information with respect to the business, operations and
prospects of the Company furnished to us by the Company, (4) financial and
operating information with respect to the business, operations and prospects of
Veeco furnished to us by Veeco, (5) a trading history of the Company's common
stock from November 12, 1999 to the present and a comparison of that trading
history with those of other companies that we deemed relevant, (6) a trading
history of Veeco's common stock from February 26, 1999 to the present and a
comparison of that trading history with those of other companies that we deemed
relevant, (7) a comparison of the historical financial results and present
financial condition of the Company with those of other companies that we deemed
relevant, (8) a comparison of the historical financial results and present
financial condition of Veeco with those of other companies that we deemed
relevant, (9) a comparison of the financial terms of the Proposed Transaction
with the financial terms of certain other transactions that we deemed relevant,
(10) reports prepared by third party research analysts with respect to the
future financial performance of the Company and Veeco and (11) the relative
contributions of the Company and Veeco to the financial results of the combined
company upon consummation of the Proposed Transaction. In addition, we have had
discussions with the management of the Company and Veeco concerning their
respective businesses, operations, assets, financial conditions and prospects
(including the cost savings, operating synergies and strategic benefits expected
by the managements of the Company and Veeco to result from a combination of the
businesses of the Company and Veeco) and have undertaken such other studies,
analyses and investigations as we deemed appropriate.
1
<PAGE>
LEHMAN BROTHERS
CVC, Inc.
February 29, 2000
Page 2
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of the financial and other information used by us without
assuming any responsibility for independent verification of such information and
have further relied upon the assurances of management of the Company that they
are not aware of any facts or circumstances that would make such information
inaccurate or misleading. With respect to the financial projections of the
Company, upon advice of the Company we have assumed that such projections have
been reasonably prepared on a basis reflecting the best currently available
estimates and judgments of the management of the Company as to the future
financial performance of the Company and that the Company will perform
substantially in accordance with such projections. With respect to the financial
projections of Veeco, upon advice of Veeco we have assumed that such projections
have been reasonably prepared on a basis reflecting the best currently available
estimates and judgments of the management of Veeco as to the future financial
performance of Veeco and that Veeco will perform substantially in accordance
with such projections. In arriving at our opinion, we have not conducted a
physical inspection of the properties and facilities of the Company or Veeco and
have not made or obtained any evaluations or appraisals of the assets or
liabilities of the Company or Veeco. In addition, you have not authorized us to
solicit, and we have not solicited, any indications of interest from any third
party with respect to the purchase of all or a part of the Company's business.
We have assumed with your consent that the merger will qualify (i) for
pooling-of-interests accounting treatment and (ii) as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended,
and therefore as a tax-free transaction to the U.S. stockholders of the Company.
Our opinion necessarily is based upon market, economic and other conditions as
they exist on, and can be evaluated as of, the date of this letter.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the Exchange Ratio to be
offered to the stockholders of the Company in the Proposed Transaction is fair
to such stockholders.
We have acted as financial advisor to the Company in connection with the
Proposed Transaction and will receive a fee for our services which is contingent
upon the consummation of the Proposed Transaction. In addition, the Company has
agreed to indemnify us for certain liabilities that may arise out of the
rendering of this opinion. We also have performed various investment banking
services for the Company in the past including acting as underwriter for the
Company's initial public offering in 1999 and have received customary fees for
such services. In the ordinary course of our business, we actively trade in the
equity securities of the Company for our own account and for the accounts of our
customers and, accordingly, may at any time hold a long or short position in
such securities.
This opinion is for the use and benefit of the Board of Directors of the
Company and is rendered to the Board of Directors in connection with its
consideration of the Proposed Transaction. This opinion is not intended to be
and does not constitute a recommendation to any stockholder of the Company as to
how such stockholder should vote with respect to the Proposed Transaction.
Very truly yours,
LEHMAN BROTHERS
2
<PAGE>
APPENDIX E
[LETTERHEAD OF BANC OF AMERICA SECURITIES LLC]
February 28, 2000
Board of Directors
Veeco Instruments Inc.
Terminal Drive
Plainview, New York 11803
Members of the Board:
You have requested our opinion as to the fairness from a financial
point of view to Veeco Instruments Inc., a Delaware corporation (the
"Purchaser") of the exchange ratio provided for in connection with the proposed
merger (the "Merger") of CVC, Inc., a Delaware corporation (the "Company") with
a wholly owned subsidiary of the Purchaser. Pursuant to the terms of the
February 28, 2000 draft Agreement and Plan of Merger (the "Agreement"), to be
entered into among the Company, the Purchaser and Veeco Acquisition Corp., a
Delaware corporation ("Acquisition Sub"), the Company will become a wholly owned
subsidiary of the Purchaser, and stockholders of the Company will receive for
each share of Common Stock, par value $0.01 per share, of the Company (the
"Company Common Stock"), held by them, other than shares held in treasury or
held by the Purchaser or any affiliate of the Purchaser, consideration equal to
0.43 shares (the "Exchange Ratio") of Common Stock, par value $0.01 per share,
of the Purchaser (the "Purchaser Common Stock"). The terms and conditions of the
Merger are more fully set out in the Agreement.
You have informed us, and we have assumed, that the Merger will be
accounted for as a pooling of interests in accordance with U.S. generally
accepted accounting principles and that the Merger will be treated as a tax-
free reorganization and/or exchange, each pursuant to the Internal Revenue Code
of 1986, as amended.
For purposes of the opinion set forth herein, we have:
(i) reviewed publicly available financial statements and other
business and financial information of the Company and the
Purchaser, respectively;
(ii) reviewed internal financial statements and other financial and
operating data concerning the Company and the Purchaser,
respectively;
(iii) analyzed financial forecasts prepared by the managements of
the Company and the Purchaser, respectively;
(iv) reviewed and discussed with senior executives of each of the
Company and the Purchaser information relating to strategic,
financial and operational benefits anticipated from the
Merger, prepared by the managements of the Company and the
Purchaser, respectively;
(v) discussed the past and current operations, financial condition
and prospects of the Company with senior executives of the
Company and discussed the past and current operations,
financial condition and prospects of the Purchaser with senior
executives of the Purchaser;
(vi) reviewed the pro forma impact of the Merger on the Purchaser's
earnings per share, cash flow, consolidated capitalization and
financial ratios;
1
<PAGE>
(vii) reviewed and considered in the analysis, information prepared
by members of senior management of the Company and the
Purchaser relating to the relative contributions of the
Company and the Purchaser to the combined company;
(viii)reviewed the reported prices and trading activity for the
Company Common Stock and the Purchaser Common Stock;
(ix) compared the financial performance of the Company and the
Purchaser and the prices and trading activity of the Company
Common Stock and the Purchaser Common Stock with that of other
publicly traded companies we deemed relevant;
(x) compared financial terms to financial terms, to the extent
publicly available, of other business combination transactions
we deemed relevant;
(xi) participated in discussions and negotiations among
representatives of the Company and the Purchaser and their
financial and legal advisors;
(xii) reviewed the Agreement and related documents; and
(xiii)performed other analyses and considered other factors as we
have deemed appropriate.
We have assumed and relied upon, without independent verification,
the accuracy and completeness of the financial and other information reviewed by
us for the purposes of this opinion. With respect to the financial forecasts,
including information relating to strategic, financial and operational benefits
anticipated from the Merger, we have assumed that they have been reasonably
prepared on bases reflecting the best currently available estimates and good
faith judgments of the future financial performance of the Company and the
Purchaser. In arriving at our opinion, we have relied upon the estimates of the
Purchaser and the Company relating to potential strategic, financial and
operational benefits anticipated from the Merger. We have not made any
independent valuation or appraisal of the assets or liabilities of the Company,
nor have we been furnished with any such appraisals.
BAS has assumed that in connection with the receipt of all the
necessary regulatory approvals for the proposed Merger, no restrictions will be
imposed that would have a material adverse effect on the contemplated benefits
expected to be derived in the proposed Merger.
We have acted as sole financial advisor to the Board of Directors of
the Purchaser in connection with this transaction and will receive a fee for our
services, a portion of which is contingent upon the execution of the Agreement
and a portion of which is contingent upon the consummation of the Merger. In the
past, Banc of America Securities LLC or its affiliates have provided financial
advisory and financing services for the Purchaser and have received fees for the
rendering of these services. In the ordinary course of our businesses, we and
our affiliates may actively trade the debt and equity securities of the Company
and the Purchaser for our own account or for the accounts of customers, and,
accordingly, we or our affiliates may at any time hold long or short positions
in such securities.
It is understood that this letter is for the benefit and use of the
Board of Directors of the Purchaser in connection with and for the purposes of
its evaluation of the Merger and is not on behalf of, and shall not confer
rights or remedies upon, any person other than the Board of Directors. This
opinion may not be disclosed, referred to, or communicated (in whole or in part)
to any third party for any purpose whatsoever except with our prior written
consent in each instance. However, this opinion may be included in its entirety
in any filing made by the Purchaser in respect of the Merger with the Securities
and Exchange Commission, so long as this opinion is reproduced in such filing in
full and any description of or reference to us or summary of this opinion and
the related analysis in such filing is in a form reasonably acceptable to us and
our counsel. In furnishing this opinion, we do not admit that we are experts
within the meaning of the term "experts" as used in the Securities Act of 1933,
as amended (the "Securities Act") and the rules and regulations promulgated
thereunder, nor do we admit that this opinion constitutes a report or valuation
within the meaning of Section 11 of the Securities Act. Our opinion is
necessarily based on economic, market and other conditions as in effect on, and
the information made available to us as of, the date hereof. It should be
understood that subsequent
2
<PAGE>
developments may affect this opinion and we do not have any obligation to
update, revise or reaffirm this opinion. This opinion does not in any manner
address the prices at which the Purchaser Common Stock will trade following
consummation of the Merger. In addition, BAS expresses no opinion or
recommendation as to how the stockholders of the Purchaser and the Company
should vote at the stockholders' meetings held in connection with the Merger.
Based upon and subject to the foregoing, including the various
assumptions and limitations set forth herein, we are of the opinion on the date
hereof that the Exchange Ratio in the proposed Merger is fair from a financial
point of view to the Purchaser.
Very truly yours,
BANC OF AMERICA SECURITIES LLC
By: /s/ Barry Newman
-----------------------------
Name: Barry Newman
Title: Managing Director
3
<PAGE>
APPENDIX F
RESOLUTION APPROVING AMENDMENT TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
RESOLVED, that the Corporation's Amended and Restated Certificate of
Incorporation, as amended to date, is hereby further amended to increase the
number of authorized shares of common stock, $0.01 par value per share, from
25,000,000 shares to 40,000,000 shares, and, therefore, Article 4 be amended to
read in its entirety as follows:
"4. The corporation shall have authority to issue a total of
40,500,000 shares, to be divided into 40,000,000 shares of common stock,
with par value $.01 per share and 500,000 shares of preferred stock with
par value of $.01 per share."
4
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 145 of the DGCL provides that a Delaware corporation may indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Section 145 further
provides that a Delaware corporation similarly may indemnify any such person
serving in any such capacity who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the corporation to procure a judgment in its favor, against expenses actually
and reasonably incurred in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation and except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or such other
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
Article 9 of Veeco's Certificate of Incorporation entitles officers and
directors of Veeco to indemnification to the fullest extent permitted by Section
145 of the DGCL, as the same may be supplemented from time to time.
Section 102(b)(7) of the DGCL permits a corporation to include in its
certificate of incorporation a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided that such provision
shall not eliminate or limit the liability of a director (i) for any breach of
the director's duty of loyalty to the corporation or its stockholder, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL (relating to
unlawful payment of dividends and unlawful stock purchase and redemption) or
(iv) for any transaction from which the director derived an improper personal
benefit.
Veeco's Certificate of Incorporation provides that its directors shall not
be liable to Veeco or its stockholders for monetary damages for breach of
fiduciary duty as a director except to the extent that exculpation from
liabilities is not permitted under the DGCL as in effect at the time such
liability is determined. Such Certificate of Incorporation further provides that
Veeco shall indemnify its directors and officers to the fullest extent permitted
by the DGCL.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling any
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act, and
is therefore unenforceable.
Reference is made to Veeco's Certificate of Incorporation, filed as an
exhibit to Veeco's Annual Report on Form 10-K which is incorporated herein by
reference.
II-1
<PAGE>
Item 21. Exhibits.
Exhibit
Number Exhibit
- ------ -------
2.1 Agreement and Plan of Merger among Veeco Instruments Inc., Veeco
Acquisition Corp. and CVC, Inc., dated February 29, 2000.*
5.1 Opinion of Kaye, Scholer, Fierman, Hays & Handler, LLP with respect
to the legality of the securities registered hereunder (including
consent).***
8.1 Opinion of Kaye, Scholer, Fierman, Hays & Handler, LLP regarding the
federal income tax consequences of the merger (including consent).***
8.2 Opinion of Dewey Ballantine LLP regarding the federal income tax
consequences of the merger (including consent).***
10.1 Veeco Stockholders Voting Agreement, dated February 29, 2000, among
CVC, Inc. and the Veeco stockholders party thereto, together with
related Veeco Stockholders Powers of Attorney and Irrevocable
Proxies.*
10.2 Company Stockholders Voting Agreement, dated February 29, 2000, among
Veeco Instruments Inc. and the CVC stockholders party thereto,
together with related Company Stockholders Powers of Attorney and
Irrevocable Proxies.*
10.3 Employment Agreement, dated February 29, 2000, between Veeco
Instruments Inc. and Christine B. Whitman.**
23.1 Consent of Kaye, Scholer, Fierman, Hays & Handler, LLP. Included in
opinion filed as Exhibit 5.1.***
23.2 Consent of PricewaterhouseCoopers LLP.**
23.3 Consent of Ernst & Young, LLP.**
23.4 Consent of Kaye, Scholer, Fierman, Hays & Handler, LLP. Included in
opinion filed as Exhibit 8.1.***
23.5 Consent of Dewey Ballantine LLP. Included in opinion filed as
Exhibit 8.2.***
23.6 Consent of Bank of America Securities LLC.**
23.7 Consent of Lehman Brothers Inc.**
23.8 Consent of Arthur Anderson LLP.**
23.9 Consent of Arthur Anderson LLP.**
24.1 Power of Attorney (included on the signature page hereto).
99.1 Form of Proxy for Veeco Instruments Inc. special meeting of
stockholders.**
99.2 Form of Proxy for CVC, Inc. special meeting of stockholders.**
- ----------
* Incorporated by reference to the Current Reporting on Form 8-K filed by
Veeco Instruments Inc. with the Securities and Exchange Commission on
March 13, 2000.
** Filed herewith.
*** To be filed by subsequent amendment.
II-2
<PAGE>
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(b) The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(c) The registrant undertakes that every prospectus: (i) that is
filed pursuant to paragraph (b) immediately preceding, or (ii) that purports to
meeting the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(e) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(f) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11 or 13 of this form within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
II-3
<PAGE>
(g) The undersigned registrant hereby undertakes to supply by means
of a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Plainview,
State of New York, on March 15, 2000.
VEECO INSTRUMENTS INC.
By: /s/ Edward H. Braun
---------------------------------------
Edward H. Braun
Chairman, Chief Executive Officer and
President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Edward
H. Braun, John F. Rein, Jr., John P. Kiernan and Gregory A. Robbins, and each of
them acting individually, with full power of substitution and resubstitution,
his true and lawful attorneys-in-fact, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities indicated on March 15, 2000.
Signature Title
- --------- -----
/s/ Edward H. Braun Director, Chairman, Chief Executive Officer
- ------------------------- and President (principal executive officer)
Edward H. Braun
/s/ Richard A. D'Amore Director
- -------------------------
Richard A. D'Amore
/s/ Joel A. Elftman Director
- -------------------------
Joel A. Elftman
/s/ Heinz K. Friedrich Director
- -------------------------
Heinz K. Friedrich
/s/ Paul R. Low Director
- -------------------------
Dr. Paul R. Low
II-5
<PAGE>
/s/ Roger D. McDonnell Director
- -------------------------
Roger D. McDonnell
Director
- -------------------------
Irwin H. Pfister
/s/ Walter J. Scherr Director
- -------------------------
Walter J. Scherr
/s/ John F. Rein, Jr. Vice President-Finance, Chief Financial
- ------------------------- Officer, Treasurer and Secretary (principal
John F. Rein, Jr. financial officer)
/s/ John P. Kiernan Vice President - Corporate Controller
- ------------------------- (principal accounting officer)
John P. Kiernan
II-6
<PAGE>
Exhibit Index
Exhibit
Number Exhibit
- ------ -------
2.1 Agreement and Plan of Merger among Veeco Instruments Inc., Veeco
Acquisition Corp. and CVC, Inc., dated February 29, 2000.*
5.1 Opinion of Kaye, Scholer, Fierman, Hays & Handler, LLP with respect
to the legality of the securities registered hereunder (including
consent).***
8.1 Opinion of Kaye, Scholer, Fierman, Hays & Handler, LLP regarding the
federal income tax consequences of the merger (including consent).***
8.2 Opinion of Dewey Ballantine LLP regarding the federal income tax
consequences of the merger (including consent).***
10.1 Veeco Stockholders Voting Agreement, dated February 29, 2000, among
CVC, Inc. and the Veeco stockholders party thereto, together with
related Veeco Stockholders Powers of Attorney and Irrevocable
Proxies.*
10.2 Company Stockholders Voting Agreement, dated February 29, 2000, among
Veeco Instruments Inc. and the CVC stockholders party thereto,
together with related Company Stockholders Powers of Attorney and
Irrevocable Proxies.*
10.3 Employment Agreement, dated February 29, 2000, between Veeco
Instruments Inc. and Christine B. Whitman.**
23.1 Consent of Kaye, Scholer, Fierman, Hays & Handler, LLP. Included in
opinion filed as Exhibit 5.1.***
23.2 Consent of PricewaterhouseCoopers LLP.**
23.3 Consent of Ernst & Young, LLP.**
23.4 Consent of Kaye, Scholer, Fierman, Hays & Handler, LLP. Included in
opinion filed as Exhibit 8.1.***
23.5 Consent of Dewey Ballantine LLP. Included in opinion filed as
Exhibit 8.2.***
23.6 Consent of Bank of America Securities LLC.**
23.7 Consent of Lehman Brothers Inc.**
23.8 Consent of Arthur Anderson LLP.**
23.9 Consent of Arthur Anderson LLP.**
24.1 Power of Attorney (included on the signature page hereto).
99.1 Form of Proxy for Veeco Instruments, Inc. special meeting of
stockholders.**
99.2 Form of Proxy for CVC, Inc. special meeting of stockholders.**
- --------------
* Incorporated by reference to the Current Report on Form 8-K filed by Veeco
Instruments Inc. with the Securities and Exchange Commission on March 13,
2000.
** Filed herewith.
*** To be filed by subsequent amendment.
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT, dated as of February 29, 2000, is by and
between Christine B. Whitman (the "Employee") and Veeco Instruments Inc., a
Delaware corporation (the "Company").
The Company and the Employee hereby agree as follows:
1. Employment. The Company hereby employs the Employee, and the Employee
hereby accepts employment by the Company, upon the terms and conditions
hereinafter set forth.
2. Term. Subject to the provisions for earlier termination as herein
provided, the employment of the Employee hereunder will be for the period
commencing at the Effective Time of the Agreement and Plan of Merger (the
"Merger Agreement") among CVC, Inc., a Delaware corporation, Veeco Acquisition
Corporation, and the Company, dated February 29, 2000 (the "Effective Date") and
ending on the third anniversary of such date. Effective on the first anniversary
of the date hereof and on each successive anniversary date thereafter, the term
shall automatically be extended by an additional one year unless, no later than
90 days prior to any such anniversary date, either the Company or the Employee
gives written notice to the other that the term will not be extended, in which
case the Employee's employment hereunder shall terminate upon the expiration of
the then-current term. The period of the Employee's employment under this
Agreement, as it may be terminated or extended from time to time as provided
herein, is referred to hereafter as the "Employment Period."
3. Duties and Responsibilities. The Employee will be employed by the
Company in the positions set forth on Annex A, a copy of which is attached
hereto and the terms of which are incorporated herein by reference. The Employee
will faithfully perform the duties and responsibilities of each such office, as
they may be assigned from time to time by the Chief Executive Officer of the
Company as specified on Annex A. In addition, during the Employment Period, the
Company will make best efforts to ensure the Employee is a member of the Board.
4. Time to Be Devoted to Employment. Except for vacation in accordance
with the Company's policy in effect from time to time and absences due to
temporary illness, the Employee shall devote full time, attention and energy
during the Employment Period to the business of the Company. During the
Employment Period, the Employee will not be engaged in any other business
activity which, in the reasonable judgment of the Board or its designee,
conflicts with the duties of the Employee hereunder, whether or not such
activity is pursued for gain, profit or other pecuniary advantage.
5. Compensation; Reimbursement.
(a) Base Salary. The Company will pay to the Employee an annual base
salary of not less than the amount specified as the Initial Base Salary on
Annex A, payable in accordance with the Company's normal payroll policy. The
Employee's base salary shall be reviewed annually by the Compensation Committee
of the Board (the "Committee") and shall be subject to increase at the option
and sole discretion of the Committee.
(b) Bonus. The Employee shall be eligible to receive, at the sole
discretion of the Committee, an annual cash bonus, with a maximum target as
specified on Annex A, based on the Company's annual business plan as approved by
the Board.
(c) Benefits; Stock Options. In addition to the salary and cash
bonus referred to above, the Employee shall be entitled during the Employment
Period to participate in such employee benefit plans or programs of the Company,
and shall be entitled to such other fringe benefits, as are from time to time
made available by the Company generally to employees of the Employee's position,
tenure, salary, and other qualifications. Without limiting the generality of the
foregoing, the Employee shall be eligible for such awards, if any, under the
Company's stock option plan as shall be granted to the Employee by the Committee
or other appropriate designee of the Board
1
<PAGE>
acting in its sole discretion. During the Employment Period, the Company will
lease an automobile for the Employee comparable to the automobile leased by CVC,
Inc. for the Employee at the time of the execution of the Merger Agreement.
Except to the extent provided herein, the Employee acknowledges and agrees that
the Company does not guarantee the adoption or continuance of any particular
employee benefit plan or program or other fringe benefit during the Employment
Period, and participation by the Employee in any such plan or program shall be
subject to the rules and regulations applicable thereto.
(d) Expenses. The Company will reimburse the Employee, in accordance
with the practices in effect from time to time for other officers or staff
personnel of the Company, for all reasonable and necessary traveling expenses
and other disbursements incurred by the Employee for or on behalf of the Company
in the performance of the Employee's duties hereunder, upon presentation by the
Employee to the Company of appropriate vouchers or documentation. Such expenses
shall include, without limitation, reasonable expenses to maintain an apartment
in any city in which the Employee is required to spend more than 30 days in any
calendar year.
6. Death; Disability. If the Employee dies or is incapacitated or disabled
by accident, sickness or otherwise, so as to render the Employee mentally or
physically incapable of performing the services required to be performed by the
Employee under this Agreement for a period that would entitle the Employee to
qualify for long-term disability benefits under the Company's then-current
long-term disability insurance program or, in the absence of such a program, for
a period of 90 consecutive days or longer (such condition being herein referred
to as a "Disability"), then (i) in the case of the Employee's death, the
Employee's employment shall be deemed to terminate on the date of the Employee's
death or (ii) in the case of a Disability, the Company, at its option, may
terminate the employment of the Employee under this Agreement immediately upon
giving the Employee notice to that effect. Disability shall be determined by the
Board or the Board's designee. In the case of a Disability, until the Company
shall have terminated the Employee's employment hereunder in accordance with the
foregoing, the Employee shall be entitled to receive compensation provided for
herein notwithstanding any such physical or mental disability.
7. Termination for Cause. The Company may, with the approval of a majority
of the Board, terminate the employment of the Employee hereunder at any time
during the Employment Period for "cause" (such termination being hereinafter
called a "Termination for Cause") by giving the Employee notice of such
termination, upon the giving of which such termination will take effect
immediately. For purposes of this Agreement, "cause" means (i) the Employee's
willful and substantial misconduct, (ii) the Employee's repeated, after written
notice from the Company, neglect of duties or failure to act which can
reasonably be expected to affect materially and adversely the business or
affairs of the Company or any subsidiary or affiliate thereof, (iii) the
Employee's material breach of any of the agreements contained in Section 13,
14, 15 or 16 hereof, (iv) the commission by the Employee of any material
fraudulent act with respect to the business and affairs of the Company or any
subsidiary or affiliate thereof or (v) the Employee's conviction of (or plea of
nolo contendere to) a crime constituting a felony.
8. Termination Without Cause. The Company may terminate the employment of
the Employee hereunder at any time without "cause" (such termination being
hereinafter called a "Termination Without Cause") by giving the Employee notice
of such termination, upon the giving of which such termination will take effect
on the date specified on such notice which shall not be later than 30 days from
the date such notice is given.
9. Good Reason. For purposes of this Agreement, termination for "Good
Reason" shall mean termination by the Employee of her employment with the
Company hereunder based on:
(i) any diminution in the Employee's position, title,
responsibilities, authority or reporting responsibilities;
(ii) the Employee is not at any time during the Employment
Period a member of the Board;
(iii) any person other than the Employee succeeds Edward H.
Braun as Chief Executive Officer of the Company; or
2
<PAGE>
(iv) the breach by the Company of any of its material
obligations under this Agreement.
10. Voluntary Termination. Any termination of the employment of the
Employee hereunder, otherwise than as a result of death or Disability, a
Termination for Cause, a Termination Without Cause or a termination for Good
Reason will be deemed to be a "Voluntary Termination." A Voluntary Termination
will be deemed to be effective immediately upon such termination or, at the
Company's option, up to 30 days following a notice of voluntary termination
given by the Employee.
11. Effect of Termination of Employment.
(a) Termination for Cause, Voluntary Termination. Upon a Termination
for Cause or a Voluntary Termination, neither the Employee nor the Employee's
beneficiaries or estate will have any further rights or claims against the
Company under this Agreement except the right to receive (i) the unpaid portion
of the base salary provided for in Section 5(a) hereof, computed on a pro rata
basis to the date of termination, (ii) payment of her previously accrued but
unpaid rights that are then payable in accordance with the terms of any
incentive compensation, stock option, retirement, employee welfare or other
employee benefit plans or programs of the Company in which the Executive is then
participating in accordance with Sections 5(b) and 5(c) hereof and (iii)
reimbursement for any expenses for which the Employee shall not have theretofore
been reimbursed as provided in Section 5(d) hereof.
(b) Termination Without Cause; Termination for Good Reason. Upon a
Termination Without Cause or a termination for Good Reason, (i) the Employee
shall be entitled to receive the same payments and other rights as provided for
in Section 11(a) hereof, (ii) the Employee shall be entitled to receive a
severance payment in the form of a cash lump sum, paid within 15 days of the
date of termination, with the amount of such payment to be the aggregate amount
of the Employee's base salary as in effect immediately prior to such termination
payable over the period of months specified in Annex A, (iii) any options held
by the Employee as of such effective date to purchase shares of the Company's
stock that were not vested and exercisable as of such date of termination shall
become immediately and fully vested and exercisable as of such date of
termination and (iv) the Employee shall retain the right to exercise any options
to purchase shares of the Company's stock until the earlier of (a) 12 months
following the date of such termination or (b) the expiration of the original
full term of each such option.
(c) Death; Disability. In the event the Employee's employment is
terminated hereunder on account of death or Disability, (i) the Employee shall
be entitled to receive the same payments and other rights as provided for in
Section 11(a) hereof, (ii) the Employee shall be entitled to receive a severance
payment in the form a cash lump sum, paid within 15 days of the date of
termination, with the amount of such payment to be the aggregate amount of the
Employee's base salary as in effect immediately prior to such termination
payable over 12 months.
12. Change in Control Provisions.
(a) Effect of Change in Control. In the event of a Change in Control
during the Employment Period, all options held by the Employee to purchase
shares of the Company's stock that are not then vested and exercisable in
accordance with the terms of such options or the terms of any Company stock
option plan shall become immediately and fully vested and exercisable as of the
effective date of the Change in Control; provided, however, that no such vesting
shall occur if provision has been made in writing in connection with such
transaction for (a) the continuation of such plan and/or the assumption of such
options by a successor corporation (or a parent or subsidiary thereof) or (b)
the substitution for such options of new options covering the stock of a
successor corporation (or a parent or subsidiary thereof), with appropriate
adjustments as to the number and kinds of shares and exercise prices. In the
event of any such continuation, assumption or substitution, such plan and/or
such options shall continue in the manner and under the terms so provided.
3
<PAGE>
(b) Definition of Change in Control. For purposes of this Agreement,
a "Change in Control" shall be deemed to have occurred upon:
(i) an acquisition subsequent to the date hereof by any
person, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (a "Person"), of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 30% or more of either (A) the
then outstanding shares of common stock of the Company ("Common Stock") or
(B) the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); excluding, however, the
following: (1) any acquisition directly from the Company, other than an
acquisition by virtue of the exercise of a conversion privilege unless the
security being so converted was itself acquired directly from the Company,
(2) any acquisition by the Company and (3) any acquisition by an employee
benefit plan (or related trust) sponsored or maintained by the Company;
(ii) a change in the composition of the Board such that during
any period of two consecutive years, individuals who at the beginning of
such period constitute the Board, and any new director (other than a
director designated by a person who has entered into an agreement with the
Company to effect a transaction described in clause (i), (iii) or (iv) of
this paragraph) whose election by the Board or nomination for election by
the Company's stockholders was approved by a vote of at least two-thirds
of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute at least a
majority of the members thereof;
(iii) the approval by the stockholders of the Company of a
merger, consolidation, reorganization or similar corporate transaction,
whether or not the Company is the surviving corporation in such
transaction, in which outstanding shares of Common Stock are converted
into (A) shares of stock of another company, other than a conversion into
shares of voting common stock of the successor corporation (or a holding
company thereof) representing 80% of the voting power of all capital stock
thereof outstanding immediately after the merger or consolidation or (B)
other securities (of either the Company or another company) or cash or
other property;
(iv) the approval by the stockholders of the Company of (A)
the sale or other disposition of all or substantially all of the assets of
the Company or (B) a complete liquidation or dissolution of the Company;
or
(v) the adoption by the Board of a resolution to the effect
that any person has acquired effective control of the business and affairs
of the Company.
13. Nondisclosure of Information. The Employee will not, at any time
during or after the Employment Period, disclose to any person, firm, corporation
or other business entity, except as required by law, any non-public information
concerning the business, products, clients or affairs of the Company or any
subsidiary or affiliate thereof for any reason or purpose whatsoever, nor will
the Employee make use of any of such non-public information for personal
purposes or for the benefit of any person, firm, corporation or other business
entity except the Company or any subsidiary or affiliate thereof.
14. Company Right to Inventions. The Employee will promptly disclose,
grant and assign to the Company, for its sole use and benefit, any and all
inventions, improvements, technical information and suggestions relating in any
way to the business of the Company which the Employee may develop or acquire
during the Employment Period (whether or not during usual working hours),
together with all patent applications, letters patent, copyrights and reissues
thereof that may at any time be granted for or upon any such invention,
improvement or technical information. In connection therewith:
4
<PAGE>
(i) the Employee shall, without charge, but at the expense of
the Company, promptly at all times hereafter execute and deliver such
applications, assignments, descriptions and other instruments as may be
necessary or proper in the opinion of the Company to vest title to any
such inventions, improvements, technical information, patent applications,
patents, copyrights or reissues thereof in the Company and to enable it to
obtain and maintain the entire right and title thereto throughout the
world; and
(ii) the Employee shall render to the Company, at its expense
(including a reasonable payment for the time involved in case the Employee
is not then in its employ), all such assistance as it may require in the
prosecution of applications for said patents, copyrights or reissues
thereof, in the prosecution or defense of interferences which may be
declared involving any said applications, patents or copyrights and in any
litigation in which the Company may be involved relating to any such
patents, inventions, improvements or technical information.
15. Non-Competition.
(a) The Employee hereby agrees that for the duration of the
Employee's employment with the Company, the Employee will not, without the
consent of the Company, directly or indirectly, engage or invest in, own,
manage, operate, finance, control or participate in the ownership, management,
operation, financing or control of, be employed by, associated with, or in any
manner connected with, lend the Employee's name to, lend the Employee's credit
to or render services or advice to, any business whose products or activities
compete in whole or in part with the former, current or currently contemplated
products or activities of the Company or any of its subsidiaries, in any country
in which the Company or any of its subsidiaries conducts business; provided,
however, that the Employee may purchase or otherwise acquire up to (but not more
than) one percent of any class of securities of any enterprise (but without
otherwise participating in the activities of such enterprise) if such securities
are listed on any national or regional securities exchange or have been
registered under Section 12(g) of the Securities Exchange Act of 1934, as
amended. The Employee agrees that this covenant is reasonable with respect to
its duration, geographical area, and scope.
(b) The Employee hereby agrees that for a period of two (2) years
following the termination of the Employee's employment with the Company, the
Employee will not, directly or indirectly, engage or invest in, own, manage,
operate, finance, control or participate in the ownership, management,
operation, financing, or control of, be employed by, associated with, or in any
manner connected with, lend the Employee's name to, lend the Employee's credit
to or render services or advice to, any business whose products or activities
compete in whole or in part with the former, current or currently contemplated
products or activities of the Company or any of its subsidiaries, in any state
of the United States or in any other country in which the Company or any of its
subsidiaries sells products or conducts business; provided, however, that the
Employee may purchase or otherwise acquire up to (but not more than) one percent
of any class of securities of any enterprise (but without otherwise
participating in the activities of such enterprise) if such securities are
listed on any national or regional securities exchange or have been registered
under Section 12(g) of the Securities Exchange Act of 1934, as amended. The
Employee agrees that this covenant is reasonable with respect to its duration,
geographical area, and scope.
(c) In the event of a breach by the Employee of any covenant set
forth in this Section 15, the term of such covenant will be extended by the
period of the duration of such breach.
(d) For a period of two (2) years following the termination of the
Employee's employment with the Company, the Employee will, within ten days after
accepting any employment, advise the Company of the identity of any employer of
the Employee. The Company may serve notice upon each such employer that the
Employee is bound by this Agreement and furnish each such employer with a copy
of this Agreement or relevant portions hereof.
5
<PAGE>
16. Non-Solicitation.
(a) Employee hereby agrees that, for the duration of Employee's
employment with the Company and for a period of two (2) years following the
termination of Employee's employment with the Company:
(i) Employee will not, directly or indirectly, either for
itself or any other person: (A) induce or attempt to induce any employee
of the Company or any of its subsidiaries to leave the employ of the
Company or such subsidiary, (B) in any way interfere with the relationship
between the Company and its subsidiaries and any employee of the Company
or any of its subsidiaries, (C) employ, or otherwise engage as an
employee, independent contractor or otherwise, any current or former
employee of the Company or any of its subsidiaries, other than such former
employees who have not worked for the Company or any of its subsidiaries
for more than one year or (D) induce or attempt to induce any customer,
supplier, licensee or business relation of the Company or any of its
subsidiaries to cease doing business with the Company or such subsidiary,
or in any way interfere with the relationship between the Company and its
subsidiaries and any customer, supplier, licensee or business relation of
the Company or any of its subsidiaries; and
(ii) Employee will not, directly or indirectly, either for
herself or any other person, solicit the business of any person known to
Employee to be a customer of the Company or any of its subsidiaries,
whether or not Employee had personal contact with such person, with
respect to products or activities which compete in whole or in part with
the former, current or currently contemplated products or activities of
the Company and its subsidiaries or the products or activities of the
Company and its subsidiaries in existence or contemplated at the time of
termination of Employee's employment.
(b) In the event of a breach by Employee of any covenant set forth
in this Section 16, the term of such covenant will be extended by the period of
the duration of such breach.
17. Enforcement. It is the desire and intent of the parties hereto that
the provisions of this Agreement be enforceable to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. Accordingly, to the extent that a restriction
contained in this Agreement is more restrictive than permitted by the laws of
any jurisdiction where this Agreement may be subject to review and
interpretation, the terms of such restriction, for the purpose only of the
operation of such restriction in such jurisdiction, will be the maximum
restriction allowed by the laws of such jurisdiction and such restriction will
be deemed to have been revised accordingly herein.
18. Remedies; Survival.
(a) A breach of the obligations imposed on Employee in Sections 13,
14, 15, and 16 hereof may not be one which is capable of being easily measured
by monetary damages. Consequently, Employee specifically agrees that Sections
13, 14, 15, and 16 may be enforced by injunctive relief. Further, Employee
specifically agrees that, in addition to such injunctive relief, and not in lieu
of it, the Company may also bring suit for damages incurred by the Company as a
result of a breach of Employee's obligations under Sections 13, 14, 15, and 16.
(b) Notwithstanding anything contained in this Agreement to the
contrary, the provisions of Sections 13, 14, 15, and 16 hereof will survive the
expiration or other termination of this Agreement until, by their terms, such
provisions are no longer operative.
19. Notices. Notices and other communications hereunder will be in writing
and will be delivered personally or sent by air courier or first class certified
or registered mail, return receipt requested and postage prepaid, addressed as
follows:
6
<PAGE>
if to the Employee: as specified in Annex A
and if to the Company: Veeco Instruments Inc.
Terminal Drive
Plainview, New York 11803
Attention: Chief Executive Officer
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement will be deemed to have been given on the
date of delivery, if personally delivered; on the business day after the date
when sent, if sent by air courier; and on the third business day after the date
when sent, if sent by mail, in each case addressed to such party as provided in
this Section 19 or in accordance with the latest unrevoked direction from such
party.
20. Binding Agreement; Benefit. The provisions of this Agreement will be
binding upon, and will inure to the benefit of, the respective heirs, legal
representatives and successors of the parties hereto.
21. Governing Law. This Agreement will be governed by, and construed and
enforced in accordance with, the laws of the State of New York, without
reference to conflict of law principles.
22. Waiver of Breach. The waiver by either party of a breach of any
provision of this Agreement by the other party must be in writing and will not
operate or be construed as a waiver of any subsequent breach by such other
party.
23. Entire Agreement; Amendments. This Agreement will be effective at the
Effective Time of the Merger Agreement (the "Effective Time") and, in case the
Effective Time does not occur, this Agreement will be of no force or effect.
This Agreement (including Annex A) contains the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior
agreements or understandings among the parties with respect thereof. This
Agreement will not affect the employment agreement between the Employee and CVC,
Inc., dated December 15, 1997 (the "Employment Agreement") prior to the
Effective Time, but will supercede the Employment Agreement following the
Effective Time. This Agreement may be amended only by an agreement in writing
signed by the parties hereto.
24. Headings. The section headings contained in this Agreement are for
reference purposes only and will not affect in any way the meaning or
interpretation of this Agreement.
25. Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction will not invalidate or render unenforceable such provision in any
other jurisdiction.
26. Assignment. This Agreement is personal in its nature and the parties
hereto shall not, without the consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder; provided, that the provisions
hereof (including, without limitation, Sections 13, 14, 15, and 16) will inure
to the benefit of, and be binding upon, each successor of the Company, whether
by merger, consolidation, transfer of all or substantially all of its assets or
otherwise.
7
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
EMPLOYEE VEECO INSTRUMENTS INC.
/s/ Christine B. Whitman /s/ Edward H. Braun
- ------------------------- ----------------------------------
By: Edward H. Braun
Title: President, Chairman and CEO
8
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-4 of
Veeco Instruments Inc. of our report dated October 18, 1999 relating to the
financial statements of CVC, Inc., which appears in such Registration Statement.
We also consent to the references to us under the headings "Experts" and
"Selected Financial Data" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Rochester, New York
March 15, 2000
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-4 and related joint proxy statement/prospectus
of Veeco Instruments Inc. for the registration of 6,000,000 shares of its common
stock, and to the incorporation by reference therein of our report dated
February 10, 2000, with respect to the consolidated financial statements and
schedule of Veeco Instruments Inc. included in its Annual Report on Form 10-K
for the year ended December 31, 1999, filed with the Securities and Exchange
Commission.
Melville, New York
March 14, 2000 /s/ Ernst & Young LLP
EXHIBIT 23.6
[Banc of America Securities LLC Letterhead]
OPINION INCLUSION CONSENT
March 15, 2000
Members of the Board of Directors
Veeco Instruments Inc.
Terminal Drive
Plainview, New York 11803
Gentlemen:
We hereby consent to the inclusion of our opinion letter dated
February 28, 2000 to the Board of Directors of Veeco Instruments Inc. (the
"Company") regarding the acquisition of CVC, Inc. by the Company, in the
Company's Registration Statement on Form S-4 and the related joint proxy
statement/prospectus (the "Registration Statement") and to the references
therein to our firm and to our opinion, including without limitation, under the
headings: "JOINT PROXY STATEMENT/PROSPECTUS SUMMARY - Opinion of Banc of America
Securities LLC Independent Financial Advisor to Veeco," "THE MERGER - Veeco's
Reasons for the Merger," "THE MERGER - Opinion of Banc of America Securities LLC
Independent Financial Advisor to Veeco" and "THE MERGER AGREEMENT -
Representations and Warranties - Representations and Warranties of Veeco and
Acquisition." In giving the foregoing consent, we do not admit (i) that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended (the "Securities Act"), or the rules and
regulations of the Securities and Exchange Commission promulgated thereunder,
and (ii) that we are experts with respect to any part of the Registration
Statement within the meaning of the term "experts" as used in the Securities Act
and the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
Very truly yours,
/s/ Banc of America Securities LLC
BANC OF AMERICA SECURITIES LLC
EXHIBIT 23.7
CONSENT OF LEHMAN BROTHERS INC.
We hereby consent to the use of our opinion letter dated February 29, 2000
to the Board of Directors of CVC, Inc. (the "Company") attached as Appendix D to
the Company's and Veeco Instruments Inc.'s ("Veeco") joint proxy
statement/prospectus that forms a part of Veeco's registration statement of Form
S-4 (the "Prospectus") and to the references to our firm in the Prospectus,
including under the headings "Joint Proxy Statement/Prospectus Summary - Opinion
of Lehman Brothers Inc. Independent Financial Advisor to CVC," "The Merger -
CVC's Reasons for the Merger" and "The Merger - Opinion of Lehman Brothers Inc.
Independent Financial Advisor to CVC." In giving such consent, we do not admit
that we come within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder and we do not
hereby admit that we are experts with respect to any part of the registration
statement under the meaning of the term "expert" as used in the Securities Act.
LEHMAN BROTHERS INC.
By: /s/ Lehman Brothers Inc.
LEHMAN BROTHERS INC.
New York, New York
March 13, 2000
EXHIBIT 23.8
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated May 17, 1999 on the financial statements of Commonwealth Scientific
Corporation (and to all references to our Firm) included in this Registration
Statement on Form S-4.
/s/ Arthur Andersen LLP
Vienna, Virginia
March 14, 2000
EXHIBIT 23.9
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our report on
the combined financial statements of Digital Instruments, Inc. and affiliates
dated February 28, 1998, and to all references to our Firm included in or made a
part of this registration statement on Form S-4.
/s/ Arthur Andersen LLP
Los Angeles, California
March 14, 2000
Exhibit 99.1
VEECO INSTRUMENTS INC.
Terminal Drive
Plainview, New York 11803
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
______________ ___ 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Edward H. Braun and John F. Rein, Jr. or
either of them, each with full power of substitution and re-substitution,
proxies to vote at the Special Meeting of Stockholders of Veeco Instruments Inc.
to be held on __________ ___, 2000 at 9:30 a.m. (New York City time) at the
Corporate Center, 395 North Service Road, Lower Auditorium, Melville, New York,
and at all adjournments or postponements thereof, all shares of common stock of
Veeco which the undersigned is entitled to vote as directed below, and in their
discretion upon such other matters as may come before the meeting.
The shares represented hereby will be voted in accordance with the choices
specified by the stockholder in writing on the reverse side. If not otherwise
specified by the stockholder, the shares represented by this proxy will be voted
FOR the merger and the issuance of shares of common stock of Veeco in connection
with the merger of Veeco and CVC, FOR the amendment to Veeco's Amended and
Restated Certificate of Incorporation and FOR the other matters described on the
reverse side.
PLEASE DATE, SIGN AND MAIL YOUR PROXY CARD BACK AS SOON AS POSSIBLE!
(Continued and to be signed on the reverse side.)
<PAGE>
Please date, sign and mail your
proxy card back as soon as possible!
Special Meeting of Stockholders
VEECO INSTRUMENTS INC.
______________ ___, 2000
Please Detach and Mail in the Envelope Provided
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
A |X| Please mark your
votes as in this
example
FOR AGAINST ABSTAIN
PROPOSAL I.
Approval of the merger with CVC, Inc. and the
issuance of shares of Veeco common stock
in the merger. |_| |_| |_|
PROPOSAL II.
Approval of amendment to Veeco's Amended and
Restated Certificate of Incorporation, as amended
to date, to increase the authorized shares of
Veeco's common stock from 25,000,000 shares to
40,000,000 shares. |_| |_| |_|
Transaction of such other business as may properly come before the Meeting or
any adjournment thereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Signature ____________________ Signature __________________ Dated ________, 2000
IF HELD JOINTLY
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Exhibit 99.2
CVC, INC.
525 Lee Road
Rochester, New York 14606
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
______________ ___, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Christine B. Whitman and Emilio O.
DiCataldo, and each of them with full power of substitution and re-substitution,
proxies to vote at the Special Meeting of Stockholders of CVC, Inc. to be held
on __________ ___, 2000 at 9:30 a.m. (New York City time) at the Corporate
Center, 395 North Service Road, Lower Auditorium, Melville, New York, and at all
adjournments or postponements thereof, all shares of common stock of CVC which
the undersigned is entitled to vote as directed below, and in their discretion
upon such other matters as may come before the meeting.
The shares represented hereby will be voted in accordance with the choices
specified by the stockholder in writing on the reverse side. If not otherwise
specified by the stockholder, the shares represented by this proxy will be voted
FOR the merger and FOR the other matters described on the reverse side.
PLEASE DATE, SIGN AND MAIL YOUR PROXY CARD BACK AS SOON AS POSSIBLE!
(Continued and to be signed on the reverse side.)
<PAGE>
Please date, sign and mail your
proxy card back as soon as possible!
Special Meeting of Stockholders
CVC, INC.
_____________ ___, 2000
Please Detach and Mail in the Envelope Provided
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
A |X| Please mark your
votes as in this
example
The Board of Directors Recommends a Vote "FOR" Proposal I.
FOR AGAINST ABSTAIN
PROPOSAL I.
Approval and adoption of the Agreement
and Plan of Merger and approval of the merger. |_| |_| |_|
Transaction of such other business as may properly come before the Meeting or
any adjournment thereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Signature ____________________ Signature __________________ Dated ________, 2000
IF HELD JOINTLY
In their discretion, the proxies are authorized to vote upon such other matters
as may properly come before the meeting, all in accordance with the accompanying
joint proxy statement/prospectus, receipt of which is hereby acknowledged.
IF THIS PROXY IS PROPERLY EXECUTED AND RETURNED, THE SHARES REPRESENTED THEREBY
WILL BE VOTED. IF A CHOICE IS SPECIFIED BY THE STOCKHOLDER, THE SHARES WILL BE
VOTED ACCORDINGLY. IF NOT OTHERWISE SPECIFIED, THE SHARES REPRESENTED BY THIS
PROXY WILL BE VOTED FOR PROPOSAL I.
NOTE: SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SIGNING IN A REPRESENTATIVE
CAPACITY, PLEASE GIVE FULL TITLE. JOINT OWNERS (IF ANY) SHOULD EACH SIGN.
