SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM 8-K
-------------------------
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 19, 1996
------------------------
ZYGO CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-12944 06-0864500
- ---------------------------- ----------- ------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
Laurel Brook Road, Middlefield, Conn. 06455
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (860) 347-8506
----------------
Not Applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On August 19, 1996, Zygo Corporation (the "Company") completed the
acquisition of the proprietary products division of Technical Instrument
Company, a California corporation ("TIC"), through a merger between Zygo
Acquisition Corporation, a newly formed California subsidiary of the Company
("ZAC"), and TIC, with TIC, the surviving entity, becoming a wholly-owned
subsidiary of the Company. The acquisition was consummated pursuant to the terms
of the Agreement and Plan of Merger dated as of August 7, 1996 by and among the
Company, TIC, ZAC, and certain then shareholders of TIC. In the transaction, the
Company paid approximately $11.7 million in cash and issued unregistered shares
of its common stock, $.10 par value, valued at $3 million in exchange for all
the outstanding capital stock of TIC.
TIC, located in Sunnyvale, California, is engaged in the business of
designing, developing, assembling, and marketing precision microscope products
and systems used to improve the production efficiency and manufacturing yields
within the semiconductor, data storage, and other high technology industries.
The press release of the Company dated August 20, 1996, is attached hereto as
Exhibit 99.1 and incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
A. FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
1. Financial Statements as of December 31, 1995 and 1994 and for the
three years ended December 31, 1995, 1994 and 1993.
Report of Independent Auditors.
Balance Sheets as of December 31, 1995 and 1994.
Statements of Operations and Retained Earnings for the years
ended December 31, 1995, 1994 and 1993.
Notes to Financial Statements.
-2-
<PAGE>
2. Interim Financial Statements as of March 31, 1996 and for the three-
month periods ended March 31, 1996 and 1995.
Balance Sheet as of March 31, 1996.
Statements of Operations and Retained Earnings for the
three-months ended March 31, 1996 and 1995.
Statement of Cash Flow for the three-months ended March 31, 1996.
Notes to Interim Financial Statements.
It is impracticable for the Company to provide the required Interim
Financial Statements as of June 30, 1996 and for the three-month periods ended
June 30, 1996 and 1995 of the Business Acquired on the date this report is being
filed. The Company intends to file the required Interim Financial Statements
under cover of Form 8-K/A as soon as practicable; but not later than 60 days
after the date this report must have been filed.
B. PRO FORMA FINANCIAL INFORMATION.
It is impracticable for the Company to provide the required pro forma
financial information on the date this report is being filed. The Company
intends to file the required financial statements under cover of Form 8-K/A as
soon as practicable; but not later than 60 days after the date this report must
have been filed.
C. EXHIBITS.
2. The Agreement and Plan of Merger, dated as of August 7, 1996, by and
among Technical Instrument Company, Zygo Corporation, Zygo Acquisition
Corporation, Francis E. Lundy, The Lundy 1996 Charitable Trust, The Sherman
Family Living Trust, Frank J. Scheufele Trust, David Lytle, and Inspectron
Development Partners L.P., a California Limited Partnership.
99.1 Press Release dated August 20, 1996.
-3-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ZYGO CORPORATION
Date: August 30, 1996 By /s/ GARY K. WILLIS
------------------------------
Gary K. Willis
President and Chief Executive Officer
-4-
<PAGE>
TECHNICAL INSTRUMENT COMPANY
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Auditors........................................ 6
Financial Statements:
Balance Sheets............................................... 7
Statements of Earnings....................................... 8
Statements of Cash Flow..................................... 9
Notes to Financial Statements............................... 10
5
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Technical Instrument Company
We have audited the accompanying balance sheets of Technical Instrument
Company as of December 31, 1994 and 1995, and the related statements of
operations and retained earnings, and cash flows for each of the three years in
the period ended December 31, 1995. 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 Technical Instrument Company
as of December 31, 1994 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
GRANT THORNTON LLP
SAN FRANCISCO, CALIFORNIA
JUNE 12, 1996
6
<PAGE>
<TABLE>
TECHNICAL INSTRUMENT COMPANY
BALANCE SHEETS
(000 Omitted)
<CAPTION>
December 31,
1994 1995 March 31, 1996
----- ----- --------------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets
Accounts receivable, less allowance for
doubtful accounts of $51, $103,
and $103 ........................................ $1,558 $1,740 $2,209
Inventories ....................................... 2,124 3,582 4,128
Deferred income taxes ............................. 94 278 278
Other current assets .............................. 30 47 15
Net assets of discontinued operations (note B) .... 3,178 1,648 1,689
------ ------ ------
Total current assets ........................... 6,984 7,295 8,319
Property and equipment, less accumulated depreciation
and amortization .................................. 6 54 120
Investments (note F) ................................ -- -- 60
Goodwill ............................................ 122 108 108
------ ------ ------
$7,112 $7,457 $8,607
====== ====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Note payable to bank .............................. $1,664 $2,000 $2,250
Current portion of long-term debt ................. 304 306 310
Accounts payable .................................. 2,329 1,895 2,429
Accrued liabilities ............................... 196 383 635
------ ------ ------
Total current liabilities ...................... 4,493 4,584 5,624
Long-term debt, less current portion ................ 800 494 417
Shareholders' equity
Common stock, no par value; authorized 10,000
shares; issued and outstanding 2,988 shares ..... 464 464 464
Retained earnings ................................. 1,355 1,915 2,102
------ ------ ------
1,819 2,379 2,566
------ ----- -----
$7,112 $7,457 $8,607
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE>
<TABLE>
TECHNICAL INSTRUMENT COMPANY
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(000 Omitted)
<CAPTION>
Three months
Year ended December 31, Ended March 31,
--------------------------- -----------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues
Product sales ........................... $5,296 $4,744 $7,867 $1,312 $1,528
Product support ......................... 217 246 505 94 87
------ ------ ------ ------ ------
5,513 4,990 8,372 1,406 1,615
Cost of sales .............................. 3,118 2,773 4,721 793 845
------ ------ ------ ------ ------
Gross profit ......................... 2,395 2,217 3,651 613 770
Operating expenses
Selling, general and administrative ..... 2,073 2,413 2,598 576 713
Research and development ................ 653 744 874 198 139
------ ------ ------ ------ ------
2,726 3,157 3,472 774 852
------ ------ ------ ------ ------
Operating profit (loss) ............... (331) (940) 179 (161) (82)
Interest expense ........................... 216 274 318 82 74
------ ------ ------ ------ ------
Loss before income taxes (benefit) and
discontinued operations ............. (547) (1,214) (139) (243) (156)
Income taxes (benefit)
Current ................................. (290) (463) 176 (14) (62)
Deferred ................................ 1 (2) (184) -- --
------ ------ ------ ------ ------
(289) (465) (8) (14) (62)
------ ------ ------ ------ ------
Loss from continuing operations ....... (258) (749) (131) (229) (94)
Discontinued operations (note B)
Income (loss) from discontinued operations
(less applicable income taxes) ......... 315 (124) 691 109 281
------ ------ ------ ------ ------
NET EARNINGS (LOSS) ................... 57 (873) 560 (120) 187
Retained earnings - beginning of year ...... 2,171 2,228 1,355 1,667 1,915
------ ------ ------ ------ ------
Retained earnings - end of year ............ $2,228 $1,355 $1,915 $1,547 $2,102
====== ====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
8
<PAGE>
<TABLE>
TECHNICAL INSTRUMENT COMPANY
STATEMENTS OF CASH FLOW
(000 Omitted)
<CAPTION>
Year Ended December 31, Three Months Ended
--------------------------------------- ------------------
1993 1994 1995 March 31, 1996
------ ------ ------ --------------
(Unaudited)
<S> <C> <C> <C> <C>
Increase (decrease) in cash
Cash flows from operating activities
Net earnings (loss) .......................................... $ 57 $ (873) $ 560 $ 187
(Income) loss of discontinued operations ..................... (315) 124 (691) (281)
Adjustments to reconcile net earnings (loss)
to net cash provided by (used in)
continuing operations
Depreciation and amortization ............................ 26 17 39 6
Deferred taxes ........................................... 1 (2) (184) --
Changes in assets and liabilities
Accounts receivable .................................... (345) (94) (182) (469)
Inventories ............................................ (436) 105 (1,458) (546)
Other current assets ................................... (4) (1) (17) 32
Accounts payable ........................................ 244 1,113 (434) 534
Accrued expenses ........................................ (29) 32 187 252
------- ------- ------- -------
Net cash provided by (used in)
continuing operations ................................. (801) 421 (2,180) (285)
Income (loss) of discontinued
operations ............................................ 315 (124) 691 281
Net assets of discontinued operations ...................... (1,007) (51) 1,530 (41)
------- ------- ------- -------
Net cash provided by (used in)
operating activities .................................. (1,493) 246 41 (45)
Cash flows from investing activities
Purchase of equipment ........................................ (7) -- (73) (72)
Investment ................................................... -- -- -- (60)
------- ------- ------- -------
Net cash used in investing activities ................... (7) -- (73) (132)
Cash flows from financing activities
Net proceeds from (payment of) bank note ..................... 350 (33) 336 250
Proceeds from (payment of) long-term debt .................... 1,150 (213) (304) (73)
Net cash provided by (used in)
financing activities .................................. 1,500 (246) 32 177
------- ------- ------- -------
NET INCREASE IN CASH .................................... -- -- -- --
Cash - beginning of period ..................................... -- -- -- --
------- ------- ------- -------
Cash - end of period ........................................... $ -- $ -- $ -- $ --
------- ------- ------- -------
Cash paid during the period for:
Interest ..................................................... $ 389 $ 334 $ 469 $ 84
Income taxes ................................................. -- 129 -- --
</TABLE>
The accompanying notes are an integral part of these statements.
9
<PAGE>
TECHNICAL INSTRUMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 1993, 1994 and 1995
NOTE A - SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Technical Instrument Company (the Company) designs, manufactures and distributes
microscopes and other precision optical instruments and equipment. The Company
has two divisions: a proprietary products division and a distribution division
(see Note B).
The Company's proprietary products division designs, manufactures and
distributes precision optical equipment used by semiconductors and other high
technology industries. The proprietary products division derives approximately
45% of its revenues from international sales. The Company's distribution
division has an exclusive license to distribute microscopes and other precision
optical instruments in Northern California.
A summary of the Company's significant accounting policies applied in the
preparation of the accompanying financial statements follows:
o Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
o Property and Equipment
Property and equipment are stated at cost and depreciated by the
straight-line method over their estimated useful lives (3 to 10 years).
o Goodwill
The excess of cost over the fair value of net assets acquired of purchased
business at the date of acquisition is amortized by the straight-line
method over 15 years.
o Income Taxes
Income taxes are determined using the liability method of accounting. Under
this method, deferred tax assets and liabilities are determined based on
differences between the financial reporting and tax basis of assets and
liabilities. Additionally, the deferred tax items are measured using
current tax rates. The principal types of differences between assets and
liabilities for financial statement and tax return purposes are allowances,
inventory and certain accrued liabilities.
o Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements, as well as revenues and expenses during the period.
Significant estimates made by management include the allowance for doubtful
accounts and inventory obsolescence. Actual results could differ from those
estimates.
10
<PAGE>
TECHNICAL INSTRUMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1993, 1994 and 1995
NOTE B - DISCONTINUED OPERATIONS
In March 1996, the Company entered into discussions to sell all of its
outstanding common stock. The transaction is expected to be completed in July
1996. In connection with this transaction, the Company's shareholders will form
a new company and purchase the assets and assume liabilities of the Distribution
Division at net book value. The Distribution Division has been treated as a
discontinued operation. Net assets of the Distribution Division are summarized
as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------
1994 1995
------- -----
(000) Omitted
<S> <C> <C>
ASSETS
Current assets
Accounts receivable, less allowance for
doubtful accounts ............................................. $1,512 $1,667
Inventories ..................................................... 4,071 3,128
Deferred income taxes ........................................... 720 621
Refundable income taxes ......................................... 338 -
Prepaid and other ............................................... 195 221
------ ------
Total current assets ....................................... 6,836 5,637
Non-current assets .................................................. 692 683
------ ------
7,528 6,320
LIABILITIES
Current liabilities ................................................. 2,046 2,485
Non-current liabilities ............................................. 2,304 2,187
----- -----
4,350 4,672
------ ------
NET ASSETS ................................................................ $3,178 $1,648
====== ======
</TABLE>
The net assets of the Distribution Division have been classified a current asset
because of the pending sale. Included in net assets of the discontinued
operations is a liability under a defined benefit pension plan (Plan) amounting
to approximately $1 million. Management has notified its employees of the
Company's intent to freeze the Plan as of June 30, 1996, with the intent of
liquidating the Plan. Any benefit or obligation resulting from the liquidation
of the Plan will accrue to the Distribution Division.
11
<PAGE>
TECHNICAL INSTRUMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1993, 1994 and 1995
NOTE B - DISCONTINUED OPERATIONS (continued)
The condensed statements of operations for the Distribution Division are
summarized as follows:
<TABLE>
<CAPTION>
(000 omitted)
Year ended December 31,
--------------------------------
1993 1994 1995
------ ------- -------
<S> <C> <C> <C>
Sales ..................................... $ 7,346 $ 8,008 $ 9,567
Cost of sales ............................. 5,002 6,362 6,894
------- ------- -------
Gross profit ........................... 2,344 1,646 2,673
Operating expenses ........................ 1,477 1,719 1,852
------- ------- -------
Operating profit (loss) ............. 867 (73) 821
Other expenses - net ...................... 199 128 87
------- ------- -------
Income (loss) before income taxes ...... 668 (201) 734
Income taxes (benefit) .................... 353 (77) 43
------- ------- -------
INCOME (LOSS) ........................ $ 315 $ (124) $ 691
======= ======= =======
</TABLE>
12
<PAGE>
TECHNICAL INSTRUMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1993, 1994 and 1995
NOTE C - INVENTORIES
Inventories comprise:
(000 omitted)
December 31,
---------------------
1994 1995
------ ------
Purchased parts and subassemblies ................ $1,778 $2,970
Finished instruments ............................. 346 612
------ ------
$2,124 $3,582
====== ======
13
<PAGE>
TECHNICAL INSTRUMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1993, 1994 and 1995
NOTE D - SHORT-TERM BORROWINGS
The Company has a revolving line of credit for $2.5 million with a bank with
interest at 1.5% above the bank's prime rate (8.5% at December 31, 1995),
payable on a monthly basis. At December 31, 1995, $2 million was outstanding
under the line of credit, which is scheduled to expire on June 1, 1996. The
borrowings are collateralized by accounts receivable and inventory (of both the
continued and discontinued operations), and have been personally guaranteed by
the Company's president. The Company is required to maintain a minimum tangible
net worth, minimum working capital and a minimum quick ratio, in addition to
other covenants, under the line of credit. The Company is in violation of
certain financial covenants as of December 31, 1995. The Bank has not formally
extended the line of credit nor has it waived the covenant violations, but has
indicated it will do so during the week of July 1, 1996, subject to final
approval by the appropriate bank committee.
NOTE E - LONG-TERM DEBT
Long-term debt as of December 31, 1994 and 1995 is as follows:
<TABLE>
<CAPTION>
(000 omitted)
1994 1995
-------- ------
<S> <C> <C>
Note payable to a bank, collateralized by all corporate assets and a personal
guarantee by an officer of the Company. Payments are $22 monthly plus interest
at 1.5% above the bank's prime rate (8.5% at December 31, 1995). The loan
matures on October 15, 1998. ...................................................... $1,009 $746
9% unsecured note payable ......................................................... 26 14
Other ............................................................................. 69 40
------ ----
1,104 800
Less current portion .............................................................. 304 306
------ ----
$ 800 $494
====== ====
</TABLE>
The aggregate annual maturities of long-term debt at December 31, 1995 are as
follows:
Year ending December 31,
- ------------------------
1996 .......................................... $306
1997 .......................................... 274
1998 .......................................... 220
----
Total future payments ......................... $800
====
14
<PAGE>
TECHNICAL INSTRUMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1993, 1994 and 1995
NOTE F - COMMITMENTS
Operating Lease
The Company leases facilities under an operating lease expiring in 2000. Under
terms of the lease, the Company is responsible for common area maintenance
expenses including taxes, insurance and other operating costs. Future minimum
lease payments required under the operating lease are $182,400 per year through
2000.
Total rent expense for the years ended December 31, 1993, 1994 and 1995 were
$122,200, $115,800 and $120,400, respectively.
Other
The Company has an option, for an indefinite period of time, to purchase 50%
interest in a German company for 100 thousand deutsche marks.
Subsequent Event (unaudited)
In July 1996 the Company exercised its option to purchase a 50% interest in
Syncotec GmbH, and accordingly paid DM100,000 ($67,500) to Syncotec's owner.
This 50% interest is an asset of the continuing operations of the Company.
NOTE G - INCOME TAXES
The Company's overall effective income tax rate on its operations is different
from the federal statutory income tax rate because of the following factors:
<TABLE>
<CAPTION>
(000 omitted)
Year ended December 31,
----------------------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Statutory rate ...................................... 34.0% (34.0)% 34.0%
Nondeductible items ................................. 15.7 1.0 5.2
State taxes ......................................... 25.6 (2.4) 5.2
Tax credits ......................................... (60.3) (50.9) --
Valuation allowance on deferred tax assets .......... 60.3 50.9 (32.8)
Adjustment for overaccruals ......................... -- (2.1) (7.4)
Other ............................................... (22.4) (.8) 1.6
---- ---- ----
Effective tax rate .................................. 52.9% (38.3)% 5.8%
==== ==== ====
</TABLE>
15
<PAGE>
TECHNICAL INSTRUMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1993, 1994 and 1995
Income tax expense (benefit) has been allocated to continuing and discontinued
operations proportionately based on their income (loss) before income tax
(benefit).
NOTE G - INCOME TAXES (continued)
Deferred federal and state tax assets and valuation allowance are as follows:
<TABLE>
<CAPTION>
(000 omitted)
Year ended December 31,
--------------------------------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Inventory .............................................. $ 38 $ 37 $ 58
Reserve for bad debt ................................... 18 20 42
Vacation accrual ....................................... 15 16 34
Warranty accrual ....................................... 21 21 21
Research and development credits ....................... 125 197 123
---- ---- ----
217 291 278
Valuation allowance .................................... 125 197 --
---- --- ----
$ 92 $ 94 $278
==== ==== ====
</TABLE>
The valuation allowance increased by $125 and $72 in 1993 and 1994,
respectively, and decreased by $197 in 1995.
NOTE H - STOCK OPTIONS
As of December 31, 1995 there are options to purchase 29,815 shares of common
stock at $4.50 per share, with 20% vesting each year commencing January 1, 1994.
As of December 31, 1995, options to purchase 11,926 shares of common stock are
exercisable.
Accounting for Stock Issued to Employees
The Company has not elected early adoption of Financial Accounting Standard No.
123 ("FAS 123"), Accounting for Stock-Based Compensation. Upon adoption of FAS
123, the Company will continue to measure compensation expense for its
stock-based employee compensation plans using the intrinsic value method
prescribed by APB Opinion No. 25, Accounting for Stock Issued to Employees and
will provide pro forma disclosures of net income and earnings per share as if
the fair value method prescribed by FAS 123 had been applied in measuring
compensation expense.
Subsequent Event (unaudited)
The Company has been informed by the holder of the outstanding stock options
that he
16
<PAGE>
TECHNICAL INSTRUMENT COMPANY
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1993, 1994 and 1995
intends to exercise all options in July 1996.
NOTE I - PRIOR PERIOD ADJUSTMENT
The financial statements for the year ended December 31, 1994 have been adjusted
to reverse the recording of the 50% equity interest in the net earnings of a
foreign subsidiary. In 1995 it was determined that the option to purchase the
50% interest was not properly exercised. The adjustment is as follows:
<TABLE>
<CAPTION>
(000 omitted)
Retained Net
Earnings Loss
-------- ----
<S> <C> <C>
As previously reported ..................................... $1,463 $765
Adjustment for investment recorded on the
equity method ............................................. 108 108
------ ----
As adjusted ................................................ $1,355 $873
====== ====
</TABLE>
NOTE J - FAIR VALUE OF FINANCIAL INSTRUMENTS
The financial instruments of the Company consist mainly of current receivables,
short-term credit, accounts payable, accrued liabilities and long-term debt. In
view of their short-term nature, the fair value of the items included in current
assets and current liabilities approximates their carrying value. The fair value
of the long-term loans approximates their carrying value, since they bear
interest at rates at or close to the prevailing market rates.
17
<PAGE>
EXHIBIT INDEX
No. Description
- ---- -----------
2. The Agreement and Plan of Merger, dated as of August 7, 1996, by
and among Technical Instrument Company, Zygo Corporation, Zygo
Acquisition Corporation, Francis E. Lundy, The Lundy 1996 Charitable
Trust, The Sherman Family Living Trust, Frank J. Scheufele Trust,
David Lytle, and Inspectron Development Partners L.P., a California
Limited Partnership.
99.1 Press Release dated August 20, 1996.
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
by and among
TECHNICAL INSTRUMENT COMPANY,
ZYGO CORPORATION,
ZYGO ACQUISITION CORPORATION,
FRANCIS E. LUNDY,
THE LUNDY 1996 CHARITABLE TRUST,
THE SHERMAN FAMILY LIVING TRUST,
FRANK J. SCHEUFELE TRUST,
DAVID LYTLE,
and
INSPECTRON DEVELOPMENT PARTNERS L.P., a
CALIFORNIA LIMITED PARTNERSHIP
dated as of
August 7, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
RECITALS................................................................... 1
ARTICLE I.
DEFINITIONS
ARTICLE II.
THE MERGER
Section 2.01. The Merger............................................ 8
Section 2.02. Closing and Effective Time............................ 9
Section 2.03. Effects of the Merger................................. 9
Section 2.04. Articles of Incorporation and By-laws................. 9
Section 2.05. Directors............................................. 10
Section 2.06. Officers.............................................. 10
Section 2.07. Conversion of Outstanding Company Stock............... 10
Section 2.08. Cancellation of Company Stock......................... 11
Section 2.09. Exchange of Certificates.............................. 11
Section 2.10. Adjustment to Cash Merger Consideration............... 13
ARTICLE III.
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
Section 3.01. Organization, Etc..................................... 15
Section 3.02. Subsidiaries and Other Company Interests.............. 15
Section 3.03. Capitalization........................................ 15
Section 3.04. Authorization......................................... 16
Section 3.05. No Violation.......................................... 16
Section 3.06. Approvals............................................. 17
Section 3.07. Financial Statements and Other Information............ 17
Section 3.08. No Undisclosed Liabilities............................ 19
Section 3.09. Corporate Action...................................... 19
Section 3.10. Events Subsequent to December 31, 1995................ 19
Section 3.11. Taxes................................................. 20
Section 3.12. Litigation............................................ 22
Section 3.13. Compliance with Laws.................................. 22
Section 3.14. Title to and Condition of Property.................... 22
Section 3.15. Environmental Matters................................. 23
Section 3.16. Contracts............................................. 25
Section 3.17. Employee and Labor Matters and Plans.................. 26
Section 3.18. Insurance Policies.................................... 30
Section 3.19. Records............................................... 30
Section 3.20. Brokerage Fees........................................ 30
<PAGE>
Section 3.21. No Product Liabilities; Product Warranties............ 31
Section 3.22. Suppliers and Customers............................... 31
Section 3.23. Intellectual Properties............................... 32
Section 3.24. Licenses.............................................. 33
Section 3.25. No Illegal or Improper Transactions................... 33
Section 3.26. Restrictive Documents and Territorial Restrictions.... 34
Section 3.27. Bank Accounts......................................... 34
Section 3.28. Contribution and Newco Share Exchange................. 34
Section 3.29. Syncotec Option....................................... 35
Section 3.30. No Misleading Statements.............................. 35
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Section 4.01. Ownership............................................. 35
Section 4.02. Authorization......................................... 36
Section 4.03. No Violation.......................................... 36
Section 4.04. Approvals............................................. 36
Section 4.05. Brokerage Fees........................................ 37
Section 4.06. Litigation............................................ 37
Section 4.07. Securities Act Matters................................ 37
Section 4.08. No Misleading Statements.............................. 37
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF ZYGO AND ZYGO SUB
Section 5.01. Organization, Etc..................................... 38
Section 5.02. Capitalization........................................ 38
Section 5.03. Authorization......................................... 38
Section 5.04. No Violation.......................................... 39
Section 5.05. Approvals............................................. 39
Section 5.06. Commission Filings.................................... 39
Section 5.07. Financial Statement and Other Information............. 40
Section 5.08. Compliance with Laws.................................. 40
Section 5.09. Brokerage Fees........................................ 41
Section 5.10. Opinion of Financial Advisor.......................... 41
Section 5.11. No Misleading Statements.............................. 41
ARTICLE VI.
POST-CLOSING COVENANTS AND AGREEMENTS
Section 6.01. Certain Tax Matters.................................... 41
(a) Sales and Transfer Taxes............................... 41
(b) Tax Returns and Payment of Taxes for Periods through
the Closing Date....................................... 42
(c) Indemnification for Taxes.............................. 42
(d) Tax Audits............................................. 43
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(e) Mutual Cooperation..................................... 43
Section 6.02. Consents of the Company's Accountants. .............. 44
Section 6.03. Issuance of Options to Purchase Zygo Common Stock..... 44
Section 6.04. Beneficial and Record Ownership of the Syncotec
Interest ............................................. 44
ARTICLE VII.
CONDITIONS OF CLOSING
Section 7.01. Conditions to All Parties' Obligations............... 44
(a) Shareholder Approval................................... 44
(b) Illegality or Legal Constraint......................... 45
(c) Governmental Authorizations............................ 45
(d) Valuation.............................................. 45
(e) Escrow Agreement....................................... 45
(f) Distribution and Services Agreement ................... 45
Section 7.02. Conditions to the Obligations of Zygo and Zygo Sub to
Effect the Acquisition...................................... 45
(a) Consents............................................... 45
(b) Opinion of Counsel..................................... 45
(c) Proceedings; Receipt of Documents...................... 46
(d) Options, Warrants and other Convertible Securities..... 46
(e) Employment, Non-Compete, Non-Disclosure and Non-
Solicitation Agreements................................ 46
(f) Fairness Opinion....................................... 46
(g) Audited Financial Statements........................... 46
(h) Comfort Letter......................................... 47
(i) Exercise of Syncotec Option............................ 47
(j) Consent to Use the Company's Audited Financial
Statements............................................. 47
(k) Lock-up Agreement...................................... 47
(l) FIRPTA Affidavit....................................... 48
(m) Supporting Documents................................... 48
Section 7.03. Conditions to the Obligations of the Company and the
Shareholders to Effect the Acquisition...................... 48
(a) Opinion of Counsel..................................... 49
(b) Proceedings; Receipt of Documents...................... 49
(c) Supporting Documents................................... 49
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ARTICLE VIII.
INDEMNIFICATION
Section 8.01. Indemnification by the Shareholders................... 50
(a) Joint Indemnification................................. 50
(b) Several Indemnification............................... 51
Section 8.02. Indemnification by Zygo............................... 51
Section 8.03. Limitations........................................... 51
Section 8.04. Notice and Defense of Claims.......................... 52
Section 8.05. Non-Exclusive Remedy.................................. 53
Section 8.06. Survival of Representations and Warranties............ 53
Section 8.07. Reimbursement......................................... 53
Section 8.08. Other Indemnification Provision....................... 54
Section 8.09. Contribution Among Shareholders....................... 55
ARTICLE IX.
GENERAL PROVISIONS
Section 9.01. Taking of Necessary Action. ......................... 55
Section 9.02. Effect of Due Diligence............................... 55
Section 9.03. Expenses.............................................. 55
Section 9.04. Successors and Assigns................................ 56
Section 9.05. Entire Agreement...................................... 56
Section 9.06. Notices............................................... 56
Section 9.07. Applicable Law....................................... 56
Section 9.08. No Third Party Beneficiaries.......................... 57
Section 9.09. Amendments and Waivers................................ 57
Section 9.10. Severability.......................................... 57
Section 9.11. Construction.......................................... 57
Section 9.12. Counterparts.......................................... 57
Section 9.13. Headings.............................................. 58
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EXHIBITS
Exhibit 2.02(b) Agreement of Merger
Exhibit 7.01(e) Escrow Agreement
Exhibit 7.01(f) Distribution and Services Agreement
Exhibit 7.02(b) Legal Opinion of Pillsbury Madison & Sutro LLP
Exhibit 7.02(e)(1) Form of Employment and Non-Compete Agreement
Exhibit 7.02(e)(2) Employment Agreement with Francis E. Lundy
Exhibit 7.02(e)(3) Non-Compete Agreement with Francis E. Lundy
Exhibit 7.02(k) Lock-up Agreement
Exhibit 7.02(l) FIRPTA Affidavit
Exhibit 7.03(a) Legal Opinion of Fulbright & Jaworski L.L.P.
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SCHEDULES
Schedule 1 TIC Shareholders and Share Information
Schedule 2 TIC Disclosure Schedule
Schedule 3 Zygo Disclosure Schedule
Schedule 4 List of Individuals required to enter into Employment and Non-
Compete Agreements with TIC
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Execution Copy
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 7, 1996 (this
"Agreement"), by and among Technical Instrument Company, a California
corporation (the "Company"), Zygo Corporation, a Delaware corporation ("Zygo"),
Zygo Acquisition Corporation, a California corporation and wholly owned
subsidiary of Zygo ("Zygo Sub"), and the individuals and entities listed on
Schedule 1 hereto, constituting all the holders of capital stock of the Company
(each, a "Shareholder" and collectively, the "Shareholders").
RECITALS
WHEREAS, the respective Boards of Directors of the Company, Zygo and Zygo
Sub have approved the acquisition of the Company by Zygo upon the terms and
subject to the conditions set forth in this Agreement;
WHEREAS, to effect such acquisition, the respective Boards of Directors of
the Company, Zygo and Zygo Sub have approved the merger (the "Merger") of Zygo
Sub with and into the Company, upon the terms and subject to the conditions set
forth in this Agreement, whereby each issued and outstanding share of stock, no
par value, of the Company (the "Company Stock") will be converted into the right
to receive a combination of cash and Unregistered Shares (as hereinafter
defined) of common stock, par value $.10 per share, of Zygo ("Zygo Common
Stock"), upon the terms and conditions set forth herein;
WHEREAS, based upon the representations, warranties and agreements herein
made by Zygo and Zygo Sub and subject to the terms and conditions contained in
this Agreement, the shareholders of the Company have unanimously approved this
Agreement and desire that Zygo Sub be merged with and into the Company and that,
as a result of the Merger, the Company become a wholly owned subsidiary of Zygo;
and
WHEREAS, in contemplation of the Merger, immediately prior to the date
hereof, the Company has contributed (the "Contribution") to Technical Instrument
San Francisco, a California corporation ("Newco"), the assets (but not the
assets which are also related to, utilized in connection with, or useful to the
conduct of the business (the "Business") of the proprietary products division of
the Company (the "Division")), certain of the liabilities related to, and
utilized in connection with, the business of the distribution division of the
Company (the "Distribution Division"), upon the terms and conditions set forth
in the Assignment and Assumption Agreement, dated August 7, 1996, a copy of
which as been delivered to Zygo (the "Contribution Documents"); and
<PAGE>
WHEREAS, the shares of Newco have been distributed by the Company to some
or all of the Shareholders in exchange for shares of Company Stock (the "Newco
Share Exchange").
NOW, THEREFORE, in consideration of the premises, the representations,
warranties and agreements herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
subject to the terms and conditions set forth herein, the parties hereto agree
as follows:
ARTICLE I.
DEFINITIONS
In this Agreement the following words and phrases shall have the meanings
hereinafter set forth:
"Acquisition" shall mean the acquisition of the Shares pursuant to the
terms of this Agreement.
"Affiliate" or "affiliate" shall mean, with respect to any Person, any
other Person that, directly or indirectly, controls or is controlled by or is
under common control with such Person. As used in this definition of
"Affiliate", the term "control" and any derivatives thereof mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting
securities, by contract, or otherwise.
"Agreement" shall mean this Agreement and Plan of Merger.
"Agreement of Merger" shall have the meaning given such term in Section
2.02(b) hereof.
"Audited Financial Statements" shall have the meaning given such term in
Section 3.07 (a) hereof.
"Business" shall have the meaning given such term in the Recitals hereof.
"Business Day" shall mean any day, other than a Saturday, Sunday or legal
holiday under the Federal laws of the United States.
"California Law" shall have the meaning given such term in Section 2.01
hereof.
"Cash Merger Consideration" shall have the meaning given such term in
Section 2.07 hereof.
"Closing" shall have the meaning given such term in Section 2.02 hereof.
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"Closing Date" shall have the meaning given such term in Section 2.02
hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission of the
United States.
"Company Stock" shall have the meaning given such term in the Recitals
hereof.
"Company Interest" shall have the meaning given such term in Section 3.02
hereof.
"Constituent Corporations" shall have the meaning given such term in
Section 2.01 hereof.
"Contaminated Site List" shall mean any list, registry or other
compilation established by any Governmental Entity of sites that require or
potentially require investigation, removal actions, remedial actions or any
other response under any Environmental Laws or treaty covering environmental
matters, as the result of a Release or threatened Release of any Hazardous
Materials.
"Contracts" shall have the meaning given such term in Section 3.16(a)
hereof.
"Contribution" shall have the meaning given such term in the Recitals
hereof.
"Contribution Documents" shall have the meaning given such term in the
Recitals hereof.
"Disclosure Schedule" shall have the meaning given such term in the
preamble to Article III hereof.
"Distribution and Services Agreement" shall mean that certain agreement,
dated the Closing Date, by and between the Company and Newco, in the form of
Exhibit 7.02(n) hereto.
"Distribution Division" shall have the meaning given such term in the
Recitals hereof.
"Division" shall have the meaning given such term in the Recitals hereof.
"Effective Date" shall mean the date that the Secretary of State of the
State of California accepts the Agreement of Merger for filing.
"Effective Time" shall mean the time on the Effective Date when the
Secretary of State of the State of California accepts the Agreement of Merger
for filing.
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"Employee" shall have the meaning given such term in Section 3.17(j)
hereof.
"Employee Plan" shall have the meaning given such term in Section 3.17(a)
hereof.
"Environmental Conditions" shall mean any pollution, contamination,
degradation, damage or injury caused by, related to, arising from or in
connection with the generation, handling, use, treatment, storage,
transportation or Release of any Hazardous Materials.
"Environmental Laws" shall mean all Federal, provincial, state, local and
foreign environmental laws, rules, statutes, regulations, ordinances, decrees or
orders of Canada or the United States or of any federal, provincial, state,
municipality or other subdivision of any thereof relating to pollution,
hazardous substances or protection of the environment, including but not limited
to the Resource Conservation and Recovery Act, 42 U.S.C. ss.6901 et seq.; the
Superfund Amendments and Reauthorization Act, 42 U.S.C. ss.11011 et. seq.; the
Clean Air Act, 42 U.S.C. ss.7401 et seq.; the Clean Water Act, 33 U.S.C. ss.1251
et. seq.; the Federal Water Pollution Control Act, 33 U.S.C. ss.1251 et seq.;
the Toxic Substances Control Act, 15 U.S.C. ss.2601 et seq.; the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. ss.9601 et
seq.; the Occupational Safety and Health Act, 29 U.S.C. ss.651 et seq.; and all
applicable published rules, regulations, directives, guidances and policies of
the EPA and of all similar state and local agency requirements.
"Environmental Liabilities" shall mean any and all liabilities,
responsibilities, claims, suits, losses, costs (including remediation, removal,
response, abatement, clean-up, investigative and/or monitoring costs and any
other related costs and expenses, including without limitation Environmental
Remediation Costs), other causes of action recognized now or at any later time,
damages, settlements, expenses, charges, assessments, liens, penalties, fines,
pre-judgment and post-judgment interest, attorney fees and other legal fees (a)
pursuant to any agreement, order, notice, directive (including directives
embodied in Environmental Laws), injunction, judgment or similar documents
(including settlements) arising under or relating to Environmental Laws, or (b)
pursuant to any claim by a Governmental Entity or other Person for personal
injury, property damage, damage to natural resources, remediation or similar
costs or expenses incurred or asserted by such Governmental Entity or Person,
pursuant to common law or statute, arising under or relating to Environmental
Laws.
"Environmental Remediation Costs" shall mean all costs and expenses of
actions or activities to (a) clean-up or remove Hazardous Materials from the
environment, (b) prevent or minimize the movement, leaching or migration of
Hazardous Materials into the environment, (c) prevent, minimize or mitigate the
Release or threatened Release of Hazardous Materials into the environment, or
injury or damage from such Release, and (d) comply with the requirements of any
Environmental Laws. Environmental Remediation Costs include, without limitation,
costs and expenses payable in connection with the foregoing for legal,
engineering or other consultant
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services, for investigation, testing, sampling and monitoring, for boring,
excavation and construction, for removal, modification or replacement of
equipment or facilities, for labor and material, and for proper storage,
treatment and disposal of Hazardous Materials.
"EPA" shall mean the United States Environmental Protection Agency.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
it now exists and is hereafter amended.
"ERISA Affiliate" shall mean any person, firm or entity (whether or not
incorporated) which, by reason of its relationship with the Company, is required
to be aggregated with the Company under Sections 414(b), 414(c) or 414(m) of the
Code, or which, together with the Company, is a member of a controlled group
within the meaning of Section 4001(a) of ERISA.
"Escrow Agreement" shall mean that certain escrow agreement, dated the
Closing Date, by and among Zygo, each of the Shareholders and Continental Stock
Transfer & Trust Company, as escrow agent, in the form of Exhibit 7.02(m)
hereto.
"Escrowed Shares" shall have the meaning given such term in Section 2.07
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
"Final Closing Date Balance Sheet" shall have the meaning given such term
in Section 2.10(c) hereof.
"Financial Statements" shall have the meaning given such term in Section
3.07(a) hereof.
"Generally accepted accounting principles" shall mean generally accepted
accounting principles in the United States.
"Governmental Entity" shall mean any court, administrative agency or
commission or other federal, state or local government or governmental authority
or instrumentality.
"Hazardous Materials" shall mean any (a) toxic or hazardous materials or
substances; (b) solid wastes, including asbestos, buried contaminants,
chemicals, flammable or explosive materials; (c) radioactive materials; (d)
petroleum wastes and spills or releases of petroleum products; and (e) any other
chemical, pollutant, contaminant, substance or waste that is regulated by any
Governmental Entity under any Environmental Law.
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"Indemnified Party" shall have the meaning given such term in Section 8.04
hereof.
"Indemnifying Party" shall have the meaning given such term in Section
8.04 hereof.
"Indemnity Claim" shall have the meaning given such term in Section 8.07
hereof.
"Intellectual Property" shall have the meaning given such term in Section
3.23 hereof.
"Interim Financial Statements" shall have the meaning given such term in
Section 3.07(a) hereof.
"IRS" shall mean the Internal Revenue Service.
"Knowledge" shall mean, with respect to the Company, the actual present
knowledge of Francis E. Lundy, Dennis Milosky, Todd Draskovich, Nick Doe, John
Pelzl, Jerry Sheeley, Terence Lundy, Horst Groneberg and Bonnie Yoshikawa, and
with respect to Zygo, the actual present knowledge of any executive officer of
Zygo; provided, however, that Knowledge with respect to the Company or Zygo
shall not be deemed to include the Company's (or any such named persons') or
Zygo's (or any of its executive officers'"), as the case may be, possession or
review of a written document or material or past awareness or knowledge of oral
or written information, in the absence of actual present knowledge on the part
of the individuals specified above at the time of the execution of this
Agreement.
"License" shall have the meaning given such term in Section 3.24 hereof.
"Liens" shall mean all liens, charges, security interests, pledges, rights
or claims of others, restraints on transfer or other encumbrances.
"Material Adverse Effect" shall mean, with respect to any Person, a
material adverse effect on the business, prospects, results of operations,
financial condition or assets of such Person and its Subsidiaries, if any, taken
as a whole.
"Merger Consideration" shall mean the Cash Merger Consideration and the
Stock Merger Consideration to be received by a holder of shares of Company Stock
in the Merger.
"Nasdaq National Market" shall mean the National Association of Securities
Dealers Automated Quotation National Market.
"New Certificates" shall have the meaning given such term in Section
2.09(a) hereof.
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"Newco Share Exchange" shall have the meaning given such term in the
Recitals hereof.
"Old Certificates" shall have the meaning given such term in Section
2.09(a) hereof.
"PBGC" shall mean Pension Benefit Guaranty Corporation.
"Person" shall mean an individual, corporation, partnership, joint
venture, trust or unincorporated organization, or a government or any agency or
political subdivision thereof.
"Product Liability" shall have the meaning given such term in Section 3.21
hereof.
"Proposed Closing Date Balance Sheet" shall have the meaning given such
term in Section 2.10(a) hereof.
"Registration Statement" shall have the meaning given such term in Section
5.06 hereof.
"Regulatory Authority" shall mean any foreign, federal, state or local
government or governmental authority the approval of which, or filing with, is
legally required or permitted for consummation of the transactions contemplated
by this Agreement.
"Release" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing into
the environment.
"Requisite Regulatory Approvals" shall have the meaning given such term in
Section 7.01(c) hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations thereunder.
"Shares" shall mean the 2,702,739 issued and outstanding shares of Company
Stock as at the Closing Date, constituting all of the Company's issued and
outstanding capital stock.
"Stock Merger Consideration" shall have the meaning given such term in
Section 2.07 hereof.
"Subsidiary" shall mean, with respect to any entity, any corporation of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are directly or indirectly owned by such entity.
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"Surviving Corporation" shall have the meaning given such term in Section
2.01 hereof.
"Syncotec Option" shall mean the option held by the Company to purchase
the Syncotec Interest.
"Syncotec Interest" shall mean the fifty percent (50%) interest in
Syncotec GMBH, a German company.
"Tax" and "Taxes" shall have the meaning given such terms in Section 3.11
hereof.
"Tax Return(s)" shall have the meaning given such term in Section 3.11
hereof.
"Unaffiliated Firm" shall have the meaning given such term in Section
2.10(b) hereof.
"Unregistered Shares" shall mean shares of stock issued in a transaction
which has not been registered under the Securities Act.
"Zygo 10-K" shall have the meaning given such term in Section 5.07 hereof.
"Zygo 10-Q" shall have the meaning given such term in Section 5.07 hereof.
"Zygo Common Stock" shall have the meaning given such term in the Recitals
hereof.
"Zygo Disclosure Schedule" shall have the meaning given such term in the
preamble to Article V hereof.
"Zygo Exchange Act Filings" shall have the meaning given such term in
Section 5.06 hereof.
"Zygo Subsidiary" shall mean any Subsidiary of Zygo.
ARTICLE II.
THE MERGER
Section 2.01. The Merger. At the Effective Time (as defined in Section
2.02 hereof) and subject to and upon the terms of this Agreement, Zygo Sub shall
be merged with and into the Company in accordance with the provisions of the
General Corporation Law of the State of California ("California Law"). Following
the Merger, the Company shall continue as the surviving corporation (the
"Surviving Corporation") under the corporate name "Technical Instrument Company"
and the separate corporate
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existence of Zygo Sub shall cease. The Company and Zygo Sub are sometimes
collectively referred to as the "Constituent Corporations".
Section 2.02. Closing and Effective Time. (a) The closing (the "Closing")
of the Merger shall take place at _____ p.m., New York time, on the date hereof
(the "Closing Date"), at the offices of Fulbright & Jaworski L.L.P., 666 Fifth
Avenue, New York, New York 10103, unless another time, place or date is agreed
to in writing by the parties hereto.
(b) As soon as practicable on or after the Closing Date, the Company,
Zygo and Zygo Sub shall file an agreement of merger, substantially in the form
of Exhibit 2.02(b) hereof (the "Agreement of Merger"), with the Secretary of
State of the State of California and make all other filings or recordings
required by California Law in connection with the Merger. The Merger shall
become effective at such time as the Agreement of Merger is duly filed with the
Secretary of State of the State of California in accordance with California Law
or at such other time as specified in the Agreement of Merger. The date and time
when the Merger shall become effective are hereinafter referred to as the
"Effective Date" and the "Effective Time," respectively.
Section 2.03. Effects of the Merger. The separate corporate existence of
the Company, as the Surviving Corporation, with all its purposes, objects,
rights, privileges, powers, certificates and franchises, shall continue
unimpaired by the Merger. At the Effective Time, the Surviving Corporation shall
succeed to all the properties and assets of the Constituent Corporations and to
all debts, chooses in action and other interests due or belonging to the
Constituent Corporations and shall be subject to, and responsible for, all the
debts, liabilities and duties of the Constituent Corporations with the effects
provided by applicable provisions of law.
Section 2.04. Articles of Incorporation and By-laws.
(a) The Articles of Incorporation of the Company in effect immediately
prior to the Effective Time shall be the Articles of Incorporation of the
Surviving Corporation until amended in accordance with the provisions of
California Law, except that at the Effective Time the Articles of Incorporation
of the Company shall be amended by striking out Article Five thereof and by
substituting in lieu of said Article the following new Article Five and by
adding Article Six and Article Seven:
"ARTICLE FIVE: This corporation is hereby authorized to
indemnify, whether by bylaw, agreement or otherwise, any
person who is or was a director, officer, employee or other
agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee
or agent of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise, or
was a director, officer, employee or agent of a foreign or
domestic corporation which was a predecessor
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corporation of the corporation or of another enterprise at
the request of the predecessor corporation, in excess of the
indemnification expressly permitted by Section 317 of the
General Corporation Law of California for such agents for
breach of duty to the corporation and its shareholders, to
the fullest extent permissible under California law."
"ARTICLE SIX: Any repeal or modification of the
provisions of Article Four or Article Five by the
shareholders of this corporation shall be prospective only,
and not adversely affect any right or protection of a
director, officer, employee or other agent (including any
person described in Article Five above) of this corporation
existing at the time of such repeal or modification."
"ARTICLE SEVEN: If the General Corporation Law of
California hereafter is amended to authorize the further
elimination or limitation of the liability of directors of
the corporation, then the liability of a director of the
corporation shall be limited to the fullest extent permitted
by the amended General Corporation Law of California; and if
the General Corporation Law of California is amended to
authorize the further indemnification of directors of the
corporation, then the indemnification of a director of the
corporation shall be to the fullest extent permitted by the
General Corporation Law of California."
(b) The By-laws of Zygo Sub as in effect immediately prior to the
Effective Time shall be the By-laws of the Surviving Corporation, until duly
amended in accordance with applicable law, the Articles of Incorporation of the
Surviving Corporation and such By-laws.
Section 2.05. Directors. The directors of Zygo Sub immediately prior to
the Effective Time shall be the directors of the Surviving Corporation from and
after the Effective Time and shall hold office in accordance with the Articles
of Incorporation and By-laws of the Surviving Corporation until their respective
successors are duly elected or appointed and qualified.
Section 2.06. Officers. The officers of Zygo Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation from and after
the Effective Time and shall hold office in accordance with the Articles of
Incorporation and By-laws of the Surviving Corporation until their respective
successors are duly elected or appointed and qualified.
Section 2.07. Conversion of Outstanding Company Stock. Except as provided
in Section 2.08 hereof, as of the Effective Time, by virtue of the Merger and
without
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any action on the part of the holders of any shares of Company Stock, or the
holder of any shares of common stock, without par value, of Zygo Sub ("Zygo Sub
Stock"):
(i) each share of Company Stock issued and outstanding immediately
prior to the Effective Time shall be converted at the Effective Time into
the right to receive in cash (the "Cash Merger Consideration") $4.16587
per share of Company Stock, and .036245 of an Unregistered Share of Zygo
Common Stock (the "Stock Merger Consideration"); and
(ii) each share of Zygo Sub Stock outstanding immediately prior to
the Effective Time shall be converted into one share of common stock of
the Surviving Corporation.
Except as provided in Section 2.09 hereof, as of and after the Effective Time,
no holder of any certificate that immediately before the Effective Time
represented shares of Company Stock, shall have any rights as a holder of
Company Stock, other than to receive the consideration specified in this Section
2.07 in accordance with the terms hereof and the right, if any, to receive
pursuant to Section 2.09(b) hereof cash in lieu of fractional shares into which
such shares of Company Stock have been converted and any distribution or
dividend pursuant to said Section 2.09(c). Of the aggregate Stock Merger
Consideration payable to all holders of Company Stock pursuant to this Section
2.07, 69,841 Unregistered Shares of Zygo Common Stock (the "Escrowed Shares")
shall be deposited by Zygo at the Closing with the Escrow Agent pursuant to the
terms of the Escrow Agreement. The Escrowed Shares shall be allocated among the
Shareholders as indicated on Schedule 1 hereto. The Escrowed Shares will serve
as collateral security for the payment by the Shareholders, if applicable, of
cash to be delivered as provided in Section 2.10 hereof, or for the
indemnification obligations of the Shareholders as provided in Article VIII
hereof.
Section 2.08. Cancellation of Company Stock. At the Effective Time, all
shares of Company Stock that are owned by Zygo or Zygo Sub shall be cancelled
without any consideration being payable therefor.
Section 2.09. Exchange of Certificates.
(a) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, each holder of record of a certificate or certificates that
immediately prior thereto represented issued and outstanding shares of Company
Stock ("Old Certificates") shall surrender such Old Certificates, together with
a properly completed letter of transmittal (specifying that delivery shall be
effected, and that risk of loss and title to the Old Certificates shall pass,
only upon delivery of the Old Certificates to the Surviving Corporation, such
letter of transmittal to be in such form and have such other provisions as the
Company and Zygo may reasonably agree), to the Surviving Corporation in exchange
for the consideration specified in Section 2.07, except as otherwise
specifically provided in this Section 2.09. The Cash Merger Consideration
payable upon the surrender of a holder's Old Certificates shall be paid promptly
(and
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if practicable on the date of such surrender) by corporate check or, at the
request of a Shareholder given to Zygo not less than 24 hours prior to receipt
of confirmation from the Secretary of State of California of the Effective Date,
by wire transfer of immediately available funds, if practicable, and otherwise
of next day funds, in the name of and to the address (if by check) or to the
account (if by wire transfer) specified by such holder in his or its Letter of
Transmittal or otherwise submitted to Zygo in writing. Lost certificates shall
be treated in accordance with the existing By-laws of the Company. Until so
surrendered, the Old Certificates shall represent, after the Effective Time,
solely the right to receive the consideration specified in Section 2.07, except
as otherwise provided in this Section 2.09. Old Certificates surrendered to the
Surviving Corporation shall be cancelled. No interest will be paid or will
accrue on any cash payable upon the surrender of any Old Certificate. If any
certificate or certificates representing shares of Zygo Common Stock issuable
pursuant to Section 2.07 ("New Certificates") is to be issued to a Person other
than the registered holder of the Old Certificate surrendered, it shall be a
condition of such exchange that the Old Certificate so surrendered shall be
properly endorsed or otherwise in proper form for transfer and that the Person
requesting such exchange shall pay any transfer or other taxes required by
reason of the issuance of such New Certificate to the Person other than the
registered holder of the Old Certificate surrendered, or establish to the
satisfaction of Zygo that such tax has been paid or is not applicable.
(b) No Fractional Shares. No fractional shares of Zygo Common Stock
and no certificates or scrip therefor, or other evidence of ownership thereof,
will be issued upon the surrender for exchange of the Old Certificates. In lieu
of any such fractional share, each holder of shares of Company Stock who would
otherwise have been entitled to a fraction of a share of Zygo Common Stock upon
consummation of the Merger shall be paid, upon surrender of such holder's Old
Certificates, cash (rounded to the nearest whole cent), without interest, in an
amount equal to the product of (i) such fraction multiplied by (ii) $30.625
(being the closing price of a share of Zygo Common Stock on June 28, 1996, the
date the letter of intent was executed, appropriately discounted).
(c) Distributions with Respect to Unexchanged Shares. Whenever a
dividend or other distribution is declared by Zygo in respect of Zygo Common
Stock, the record date for which is at or after the Effective Time, that
declaration shall include dividends or other distributions in respect of all
shares of Zygo Common Stock issuable pursuant to this Agreement. No dividends or
other distributions declared or made after the Effective Date on Zygo Common
Stock shall be paid to any Person holding an Old Certificate until such Old
Certificate is surrendered for exchange as provided herein. Subject to the
effect of applicable laws, following surrender of any such Old Certificate by
any holder thereof, there shall be paid to the holder of the New Certificate
issued in exchange therefor, without interest (i) at the time of such surrender,
the amount of dividends or other distributions with a record date after the
Effective Time theretofore payable with respect to the Zygo Common Stock
represented thereby and not paid, less the amount of any withholding taxes which
may be required thereon, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record
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date after the Effective Time but prior to the time of such surrender and a
payment date subsequent to the time of such surrender payable with respect to
the Zygo Common Stock represented thereby, less the amount of any withholding
taxes which may be required thereon.
(d) Closing of Company Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of shares of
Company Stock shall thereafter be made. If, after the Effective Time, Old
Certificates are presented to the Surviving Corporation, they shall be cancelled
and exchanged for the consideration as provided in Section 2.07 hereof.
Section 2.10. Adjustment to Cash Merger Consideration. (a) As soon as
practicable and in any event no later than sixty (60) days after the Closing
Date, Zygo shall deliver to the Shareholders a proposed actual balance sheet of
the Company as of the Closing Date, in accordance with generally accepted
accounting principles applied in a manner consistent with the Financial
Statements (the "Proposed Closing Date Balance Sheet").
(b) During the thirty (30) day period following the receipt of the
Proposed Closing Date Balance Sheet, Zygo shall cause the Surviving Corporation
to provide Francis E. Lundy, as the representative of each of the Shareholders,
with reasonable access to such financial and other records of the Company as may
be requested by Mr. Lundy to confirm the accuracy of the Proposed Closing Date
Balance Sheet. As soon as practicable but in no event later than the end of such
30 day period, a majority in interest of the Shareholders shall inform Zygo in
writing that either the Proposed Closing Date Balance Sheet is acceptable or
object to the Proposed Closing Date Balance Sheet in writing setting forth a
specific description of the Shareholders' objections (it being agreed that the
failure of a majority in interest of the Shareholders to deliver such written
notice to Zygo within such thirty (30) day period shall be deemed acceptance by
the Shareholders). If the Shareholders object as provided above and if Zygo does
not agree with the Shareholders' objections, if any (it being agreed that the
failure of Zygo to deliver written notice to the Shareholders of Zygo's
disagreement with the Shareholders' objections within 30 days of receipt of such
written objection shall be deemed acceptable by Zygo), or such objections are
not resolved by Zygo, on the one hand, and a majority in interest of the
Shareholders, on the other hand, on a mutually agreeable basis within thirty
(30) days after Zygo's receipt of the Shareholders' objections, any such
disagreement shall be promptly submitted to a mutually acceptable "big six"
accounting firm not employed by any of the parties to this Agreement (the
"Unaffiliated Firm"). The Unaffiliated Firm shall determine within thirty (30)
days after said Unaffiliated Firm's engagement by the parties the balance sheet
of the Company as of the Closing Date, prepared in accordance with generally
accepted accounting principles applied in a manner consistent with the Financial
Statements. The decision of such Unaffiliated Firm shall be final and binding
upon, and its fees, costs and expenses shall be shared equally by, Zygo on the
one hand and the Shareholders on the other hand. Zygo and the Shareholders shall
each bear the fees, costs and expenses of its own accountants, if any. Upon
resolution
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of any such dispute, the determination of the Closing Date Balance Sheet shall
be deemed to be final.
(c) The balance sheet of the Company as of the Closing Date, accepted
or determined as provided in subsection (b) above, is hereinafter referred to as
the "Final Closing Date Balance Sheet." If the Final Closing Date Balance Sheet
shows that the "net tangible book value" of the Company (i.e., the tangible book
value of the assets of the Company (after giving effect to the Contribution and
the Newco Share Exchange) less the tangible book value of liabilities of the
Company (after giving effect to the Contribution and the Newco Share Exchange)
as at the Closing Date is greater than or less than $759,256, then Zygo shall
pay to the Shareholders an amount equal to the amount by which such net tangible
book value exceeds $759,256 or the Shareholders shall pay to Zygo an amount
equal to the amount by which $759,256 exceeds such net tangible book value. Such
amount shall, promptly, but in no event later than five (5) Business Days after
determination of the Final Closing Date Balance Sheet, be paid by Zygo to the
Shareholders or paid by the Shareholders to Zygo, as applicable. Each
Shareholder shall be responsible for or shall be entitled to, as the case may
be, that portion of such payment which the number of shares of Zygo Common Stock
into which such Shareholder's Company Stock is converted at the Effective Time
bears to the total number of shares of Zygo Common Stock into which all issued
and outstanding shares of Company Stock are converted at the Effective Time.
(d) To the extent that at the Closing Date the Company does not own
beneficially and of record the Syncotec Interest, Zygo shall pay to each
Shareholder his or its pro rata portion of $140,000 (based on such Shareholder's
percentage interest in Company Stock after the Newco Share Exchange and
immediately prior to the Closing) within five (5) Business Days of receipt of
evidence reasonably satisfactory to Zygo that the Company has acquired
beneficial and record ownership of the Syncotec Interest, free and clear of all
Liens.
(e) Zygo shall also pay to each Shareholder, on a date to be
determined by Zygo but in no event later than fifteen (15) months after the
Closing Date, such Shareholder's pro rata portion of $300,000 (based on such
Shareholder's percentage interest in Company Stock after the Newco Share
Exchange and immediately prior to the Closing) if and only if, prior to the date
which is fifteen (15) months after the Closing Date, the Company has acquired
beneficial and record ownership of the Syncotec Interest, free and clear of all
Liens, and has provided Zygo with evidence thereof reasonably satisfactory to
Zygo.
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
Except as set forth (by reference to the applicable Section of this
Agreement) in the disclosure schedule delivered by the Company and each of the
Shareholders to Zygo on the date hereof (the "Disclosure Schedule"), a copy of
which is attached hereto as Schedule 2, the Company and each Shareholder hereby
jointly and severally represent and warrant to Zygo and Zygo Sub as follows:
Section 3.01. Organization, Etc. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California and has full corporate power and authority to conduct its business as
it is now being conducted and to own, operate or lease the properties and assets
it currently owns, operates or holds under lease. The Company is duly qualified
or licensed to do business and is in good standing as a foreign corporation in
each jurisdiction where the character of its business or the nature of its
properties makes such qualification or licensing necessary, except where the
failure to so qualify or be licensed would not have a Material Adverse Effect on
the Company. All of the jurisdictions in which the Company is qualified or
licensed to do business are set forth on the Disclosure Schedule. The Company
has heretofore delivered to Zygo true and correct copies of the Articles of
Incorporation and By-laws of the Company as in effect on the date hereof.
Section 3.02. Subsidiaries and Other Company Interests. The Company has no
Subsidiaries. The Disclosure Schedule contains a list of all partnerships, joint
ventures and other entities in which the Company has, directly or indirectly,
any legal or beneficial equity interest and indicates for each such partnership,
joint venture or other entity (a "Company Interest"): (i) the percentage and
type of equity securities of or other interest in the Company Interest owned or
controlled by Company; (ii) the identity of any other beneficial or record owner
of any such Company Interest and the percentage and type of such ownership;
(iii) the jurisdiction of incorporation or organization; (iv) each jurisdiction
in which it is qualified or licensed to conduct its business; and (v) in the
case of any joint venture, the identity of each other joint venture partner. The
Company is the direct owner, beneficially and of record, of all such equity
securities or other interests listed as being owned by it, free and clear of all
Liens.
Section 3.03. Capitalization. The authorized, issued and outstanding
capital stock of the Company is as set forth on the Disclosure Schedule. All of
the issued and outstanding shares of capital stock of the Company are owned of
record by the Shareholders, in the respective amounts indicated on Schedule 1
hereto. No Persons other than the Shareholders are or will be entitled to
receive any payment with respect to the Shares. The Company does not hold any
shares in its own capital. The designations, powers, preferences, rights,
qualifications, limitations and restrictions in respect of each class and series
of authorized capital stock of the Company are as set forth in the Company's
Articles of Incorporation, and all such designations, powers,
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preferences, rights, qualifications, limitations and restrictions are valid,
binding and enforceable and in accordance with all applicable corporate laws.
All outstanding shares of capital stock of the Company have been duly authorized
and validly issued and are fully paid and non-assessable. According to the
General Corporation Law of the State of California, any shares of Company Stock
reacquired by the Company are restored to the status of authorized but unissued
shares. All of the outstanding securities of the Company were issued in
compliance with all applicable federal and state securities and corporate laws.
None of the outstanding securities has been issued in violation of any
preemptive rights, rights of first refusal or similar rights. There are no
outstanding options, warrants, convertible securities, calls, rights,
commitments, preemptive rights or agreements or instruments or understandings of
any character to which the Company is a party or by which the Company is bound,
obligating the Company to issue, deliver or sell, or cause to be issued,
delivered or sold, contingently or otherwise, additional shares of its capital
stock or any securities or obligations convertible into or exchangeable for such
shares or to grant, extend or enter into any such option, warrant, convertible
security, call, right, commitment, preemptive right or agreement. There are no
outstanding obligations, contingent or other, of the Company to purchase, redeem
or otherwise acquire any shares of its capital stock. The Company is not a party
to any voting trust agreement or other contract, agreement, arrangement,
commitment, plan or understanding restricting or otherwise relating to voting,
dividend or other rights with respect to any of the capital stock of the
Company.
Section 3.04. Authorization. The Company has all requisite corporate power
and authority to enter into this Agreement and each of the other agreements
contemplated hereby, to carry out its obligations under this Agreement and each
of the other agreements contemplated hereby and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and each of the other agreements contemplated hereby, the consummation of the
transactions contemplated hereby and thereby and the performance by the Company
of its obligations hereunder and thereunder have been duly authorized by all
necessary corporate action on the part of the Company and its shareholders. Each
of this Agreement and the other agreements contemplated hereby have been duly
executed and delivered by the Company and constitute the legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms (except as the enforceability thereof may be limited by any
applicable bankruptcy, insolvency or other laws affecting creditors' rights
generally or by general principles of equity, regardless of whether
enforceability is considered in equity or at law).
Section 3.05. No Violation. The execution and delivery of this Agreement
and each of the other agreements contemplated hereby by the Company does not,
and the consummation by the Company of the transactions contemplated hereby and
thereby, and compliance with the terms hereof and thereof will not, (a) conflict
with, or result in any violation of or default or loss of any benefit under, any
provision of the Company's Articles of Incorporation or By-laws (b) conflict
with, or result in any violation of or default or loss of any benefit under, any
License, grant, statute, law, rule or regulation, or any judgment, decree or
order of any court or other governmental
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agency or instrumentality to which the Company or the Company Subsidiary is a
party or to which any of their respective property is subject; (c) conflict
with, or result in a breach or violation of or default or loss of any benefit
under, or accelerate the performance required by, the terms of any agreement,
contract, indenture or other instrument to which the Company or the Company
Subsidiary is a party or to which any of their respective property is subject,
or constitute a default or loss of any right thereunder or an event which, with
the lapse of time or notice or both, might result in a default or loss of any
right thereunder or the creation of any Lien upon any of the assets or
properties of the Company or the Company Subsidiary; or (d) result in any
suspension, revocation, impairment, forfeiture or nonrenewal of any License.
Section 3.06. Approvals. The execution and delivery of this Agreement and
each of the other agreements contemplated hereby and the consummation of the
transactions contemplated hereby and thereby by the Company will not require the
consent, approval, order or authorization of any Governmental Entity or
Regulatory Authority or any other Person under any statute, law, rule,
regulation, permit, license, agreement, indenture or other instrument to which
the Company is a party or to which any of its property is subject, and no
declaration, filing or registration with any Governmental Entity or Regulatory
Authority is required or advisable by the Company in connection with the
execution and delivery of this Agreement and each of the other agreements
contemplated hereby, the consummation by the Company of the transactions
contemplated hereby and thereby, or the performance by the Company of its
obligations hereunder and thereunder, other than the filing of the Agreement of
Merger in accordance with California Law.
Section 3.07. Financial Statements and Other Information.
(a) The Company has delivered to Zygo (i) true, correct and complete
copies of the audited balance sheets of the Company as of December 31, 1994 and
1995, and the related statements of operations, accumulated deficit and cash
flows (together with the auditors' reports thereon) for each of the years ended
December 31, 1993, 1994 and 1995, together with notes to such financial
statements (the "Audited Financial Statements") and (ii) true, correct and
complete copies of the unaudited balance sheet of the Company as at March 31,
1996, and the related statements of operations, accumulated deficit and cash
flows for the three month periods ended March 31, 1995 and 1996 (the "Interim
Financial Statements"). The Audited Financial Statements and Interim Financial
Statements are herein collectively referred to as the "Financial Statements".
The Audited Financial Statements are the audited financial statements of the
Division except for the line item "income (loss) from discontinued operations
(less applicable income taxes)" and its impact on net earnings (loss).
(b) The Financial Statements are in accordance with the books and
records of the Company, have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods covered
thereby and are in compliance with Commission Regulation S-X, and the balance
sheets included therein present fairly as of their respective dates the
financial condition of the
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Company (subject, in the case of Interim Financial Statements, to year-end
adjustments that may be required upon audit, which adjustments will not have a
Material Adverse Effect on such financial statements). All material liabilities
and obligations, whether absolute, accrued, contingent or otherwise, whether
direct or indirect, and whether due or to become due, which existed at the date
of such Financial Statements have been disclosed in the balance sheets included
in the Financial Statements or in notes to the Financial Statements to the
extent such liabilities were required, under generally accepted accounting
principles, to be so disclosed as of the date such Financial Statements were
prepared. The statements of operations, accumulated deficit and cash flows
included in the Financial Statements present fairly the results of operations,
accumulated deficit and cash flows of the Company for the periods indicated
(subject, in the case of Interim Financial Statements, to year-end adjustments
that may be required upon audit, which adjustments will not have a Material
Adverse Effect on such financial statements), and the notes included in the
Financial Statements present fairly the information purported to be shown
thereby. The statements of operations included in the Financial Statements do
not contain any material items of special or non-recurring income or other
income not earned in the ordinary course of business except as expressly
specified therein.
(c) All properties, investments, tangible assets and deferred costs
reflected in the latest balance sheet included in the Financial Statements,
collectively have a fair market or realizable value at least equal to the value
thereof as reflected therein.
(d) The inventories owned by the Company (which are the inventories
owned by the Division) shown in all balance sheets (including the latest balance
sheet) included in the Financial Statements are properly valued at the lower of
cost or market, determined on a first in, first out basis (FIFO), in accordance
with generally accepted accounting principles consistently applied, are usable
or saleable and not obsolete or represent excess quantities and can reasonably
be anticipated to be used or sold in the ordinary course of business of the
Company. Since December 31, 1995 the inventories of the Division have been
maintained at levels consistent with past practice as reflected on its books and
records, and the Company has not caused the inventories of the Division to be
materially increased or decreased, other than in the ordinary course of business
consistent with past practice.
(e) The accounts and notes receivable of the Company (which are the
accounts and notes receivable of the Division) included in the latest balance
sheet included in the Financial Statements, are collectible in full over the
period of usual trade terms (by use of the Company's normal collection methods
without resort to litigation or reference to a collection agency), and there do
not exist any defenses, counterclaims and set-offs which would materially
adversely affect such receivables, and all such receivables are actual and bona
fide receivables representing obligations for the total dollar amount thereof
shown on the books of the Company. The Company has fully performed all
obligations with respect thereto which it was obligated to perform
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to the date hereof. The Company has delivered to Zygo a true and complete aging
schedule of the Company's accounts receivable as of June 30, 1996.
(f) Since December 31, 1995 there has been no change in the assets or
liabilities, or in the business or condition, financial or otherwise, or in the
results of operations or prospects of the Division, whether as a result of any
legislative or regulatory change, revocation of any License or right to do
business, fire, explosion, accident, casualty, labor trouble, flood, drought,
riot, storm, condemnation or act of God or otherwise, which has had or is
reasonably likely to have a Material Adverse Effect on the Company, other than
changes related to the Division's industry or the economy in any particular
country or region and not specifically related solely to the Division.
Section 3.08. No Undisclosed Liabilities. Except as set forth in the notes
to the Financial Statements, the liabilities on the latest balance sheet
included in the Financial Statements consist solely of accrued obligations and
liabilities incurred by the Company in the ordinary course of its business to
Persons which are not Affiliates of the Company. There are no liabilities of the
Company of any kind whatsoever, whether or not accrued and whether or not
contingent or absolute, determined or determinable or otherwise, including
without limitation documentary or standby letters of credit, bid or performance
bonds, or customer or third party guarantees, and no existing condition,
situation or set of circumstances that could reasonably result in such a
liability, other than (a) liabilities disclosed in the Financial Statements (b)
liabilities which have arisen in the ordinary course of business and consistent
with past practice (none of which is a liability for breach of contract, breach
of warranty (other than chargebacks incurred in the ordinary course of business
and consistent with past practice), tort, infringement claim or lawsuit) which,
individually or in the aggregate, have not had or would not reasonably be
expected to have a Material Adverse Effect on the Company and (c) liabilities
which have been assumed by Newco prior to the Closing Date in connection with
the Contribution and which are specifically set forth in the Contribution
Documents. There are no asserted claims for indemnification by any Person
against the Company under any law or agreement or pursuant to the Articles of
Incorporation or By-laws of the Company and the Company is not aware of any
facts or circumstances that might give rise to the assertion of such a claim
against the Company thereunder.
Section 3.09. Corporate Action. All corporate action of the Board of
Directors and of the shareholders of the Company taken on or prior to the date
hereof has been duly authorized, adopted or ratified in accordance with
applicable law and the Articles of Incorporation and By-laws of the Company and
has been duly recorded in its corporate minute books (true, correct and complete
copies of which have been delivered to or made available for inspection by
Zygo).
Section 3.10. Events Subsequent to December 31, 1995. Except for changes
resulting from the Contribution as specifically disclosed in the Contribution
Documents or from the Newco Share Exchange, since December 31, 1995 the Company
has not (a) issued any stock, bond or other corporate security (including
without limitation securities convertible into or rights to acquire capital
stock of the Company), (b)
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borrowed any amount or incurred or become subject to any liability (absolute,
accrued or contingent) that would be shown on a balance sheet of the Company
(prepared in accordance with generally accepted accounting principles applied in
a manner consistent with the Financial Statements) as of the Closing Date, other
than in the ordinary course of business, (c) discharged or satisfied any Lien,
(d) declared or made any payment or distribution to shareholders or purchased or
redeemed any shares of its capital stock or other securities, or has any
intention to do so, (e) mortgaged, pledged or subjected to Lien any of its
assets, tangible or intangible, other than liens of current real property taxes
not yet due and payable, (f) sold, assigned or transferred any of its tangible
assets except in the ordinary course of business, or canceled any debt or claim,
(g) sold, assigned, transferred or granted any license with respect to any
patent, trademark, trade name, service mark, copyright, trade secret or other
intangible asset, (h) suffered any loss of property or waived any right of
substantial value whether or not in the ordinary course of business, (i)(i)
granted any severance or termination pay to any of its directors, officers,
employees or consultants, (ii) entered into any employment, deferred
compensation or other similar agreement (or any amendment to any such existing
agreement) or arrangement with any of its directors, officers, employees or
consultants, (iii) increased any benefits payable under any existing severance
or termination pay policies or employment agreements, (iv) increased the
compensation, bonus or other benefits payable to any of its directors, officers,
consultants or employees, (j) made any material change in the manner of its
business or operations, (k) made any material change in any method of accounting
or accounting practice, except for any such change required by reason of a
concurrent change in generally accepted accounting principles or disclosed in
the Financial Statements, (l) entered into any transaction except in the
ordinary course of business or as otherwise contemplated hereby or (m) entered
into any commitment (contingent or otherwise) to do any of the foregoing.
Section 3.11. Taxes. Except for matters that would not have a Material
Adverse Effect on the Company, (i) all tax returns (including, without
limitation, income, profit, franchise, sales and use, excise, severance,
occupation, property, gross receipts, payroll and withholding tax returns and
information returns), deposits and reports (all such returns, deposits and
reports herein referred to collectively as "Tax Returns" or singularly as a "Tax
Return") of or relating to any federal, state, local or foreign or other
governmental tax (all, together with any penalties, additions to tax, fines and
interest thereon or related thereto, herein referred to collectively as "Taxes"
or singularly as a "Tax") that are required to be filed or deposited for, by, on
behalf of or with respect to the Company, including, but not limited to, those
relating to the income, business, operations or property of the Company and
those which include or should include the Company have been filed or deposited
duly and on a timely basis and all Taxes and filing fees shown to be due and
payable on such Tax Returns have been paid in full and all installments,
assessments and charges of which the Company is aware or has received notice and
which are due and payable by the Company have been paid in full; (ii) all such
Tax Returns and the information and data contained therein have been properly
and accurately compiled and completed, fairly present the information purported
to be shown therein and reflect all liabilities for Taxes for the periods
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covered by such Tax Returns; (iii) to the Knowledge of the Company, no such Tax
Return or designation contains any misstatement or omits any statement that
should have been included therein; (iv) all Taxes imposed on the Company (or for
which the Company is or could be liable, whether to any Governmental Entity or
to other Persons (as, for example, under tax allocation agreements)), for all
periods up to the Closing Date which are due and payable on or before the
Closing Date, have been paid; (v) none of such Tax Returns are now under audit
or examination by any federal, state, local or foreign or other Governmental
Entity and there are no agreements, waivers or other arrangements providing for
an extension of time with respect to the assessment or collection of any Tax or
deficiency of any nature against the Company or with respect to any such Tax
Return or any suits or other judicial or administrative actions, proceedings,
investigations or claims now pending or, to the Knowledge of the Company,
threatened against the Company with respect to any Tax, governmental charge or
assessment; (vi) the latest balance sheet included in the Financial Statements
reflects and includes adequate provisions for the payment in full of any and all
Taxes for which the Company is or could be liable, whether to any Governmental
Entity or to other Persons (as, for example, under tax allocation agreements),
not yet due for any and all periods up to and including the date of such balance
sheet; (vii) all Taxes for which the Company is or could be liable, whether to
any Governmental Entity or to other Persons (as, for example, under tax
allocation agreements), for periods through the Closing Date (whether or not the
period ends for tax purposes on the Closing Date) have been, or will be, paid
when due or adequately reserved against on the books of the Company on or prior
to the Closing Date; (viii) the Company has withheld and remitted all amounts
required to be withheld and have paid such amounts due to the appropriate
authority on a timely basis and in the form required under the appropriate
legislation; (ix) the Company has not been, and is currently not, required to
file a Tax Return in any jurisdiction other than the United States and the State
of California; and (x) the Company has not acquired property from, or disposed
of property for proceeds less than fair market value thereof to, any Person with
whom it does not deal at arm's length. The March 31, 1996 balance sheet contains
adequate reserves against any liability for Taxes for which the Company could be
liable in respect of any audit or examination set forth on the Disclosure
Schedule. There is no tax Lien, whether imposed by any federal, state, county,
local or foreign taxing authority, outstanding against the assets, properties or
business of the Company other than Liens for current Taxes not yet due for which
adequate reserves have been provided for. All material elections and consents
with respect to any Tax (or the computation thereof) affecting the Company as of
the date hereof are obvious from the Tax Returns or are set forth on the
Disclosure Schedule. After the date hereof, no election or consent with respect
to any Tax (or the computation thereof) affecting the Company will be made
without the written consent of Zygo. The Company has not agreed to make and is
not required to make any adjustment under Section 481(a) of the Code, by reason
of a change in accounting method or otherwise. Other than the employment
agreements delivered pursuant to Section 7.02(e) hereof, the Company is not a
party to any agreement, contract, arrangement or plan that has resulted, or as a
consequence of the transactions contemplated hereby will result, separately or
in the aggregate, in the payment of any excess parachute payments within the
meaning of Section 280G of the Code. The
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Company has not filed a consent under Section 341(f) concerning collapsible
corporations. The Company is not a party to any Tax sharing or allocation
agreement. The Company has not been a member of an affiliated group filing a
consolidated Federal income tax return and has no liability for Taxes under
Treas. Reg. ss. 1.1502-6 (or any similar provision of state, local or foreign
law), as a transferee or successor, by contract or otherwise.
Section 3.12. Litigation. There is no action, suit, investigation,
arbitration or proceeding pending or, to the Knowledge of the Company,
threatened, or to the Knowledge of the Company any basis in fact therefor,
against or involving the Company or any of its officers, directors, employees or
consultants (in all instances, in their capacity as such), assets, business or
products, whether at law or in equity. With respect to each litigation or claim
described in the Disclosure Schedule, copies of all pleadings, filings,
correspondence with opposing parties and their counsel, opinions of counsel,
results of studies, judgments, orders, attachments, impositions of or recordings
of Liens and other documents have been furnished to Zygo.
Section 3.13. Compliance with Laws. The Company has complied in all
material respects with all applicable laws (including rules, regulation, codes,
plans, injunctions, judgments, orders, decrees, rulings and charges thereunder)
of any Governmental Entity relating to or affecting the operation, conduct or
ownership of its properties or business, except where the failure to so comply
has not had, and would not have, a Material Adverse Effect on the Company. No
investigation or review by any Governmental Entity (including without limitation
any audit or similar review by any federal, foreign, state or local taxing
authority) with respect to the Company is pending or, to the Knowledge of the
Company, threatened, nor has any Governmental Entity indicated in writing to the
Company an intention to conduct the same. Neither the Company nor, to the
Knowledge of the Company, any director, officer, consultant or employee of the
Company (in all instances, in their capacity as such), is in default with
respect to any order, writ, injunction or decree known to or served upon the
Company of any Governmental Entity, which default would have a Material Adverse
Effect on the Company. There is no existing law, rule, regulation or order,
whether federal, state, local or foreign, which would prohibit or materially
restrict the Company from, or otherwise materially adversely affect the Company
in, conducting its business in the manner in which it is conducted as of the
date hereof in any jurisdiction in which it is now conducting business or in
which it currently proposes to conduct business.
Section 3.14. Title to and Condition of Property.
(a) The Company does not own any real property. The Disclosure
Schedule identifies all of the rights and interests in leasehold estates owned
by the Company and used in connection with the Division as of the date hereof,
and the nature and amount of its interest therein. To the Knowledge of the
Company, the Company has valid, subsisting and enforceable leases to all
leasehold estates identified and reflected in the Disclosure Schedule (with such
exceptions as are, individually or in the aggregate, not material and do not,
individually or in the aggregate, materially
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interfere with the use made and proposed to be made of such properties by the
Company) and either good and marketable title or rights as lessee to all
personalty of any kind or nature owned or used by the Company in its business,
in each case free and clear of all Liens except for (i) Liens, defects or
irregularities of title identified on the Disclosure Schedule which,
individually or in the aggregate, do not detract from or materially interfere
with the present or reasonably foreseeable use or value of the properties
subject thereto or otherwise have or reasonably could have a Material Adverse
Effect on the Company, and (ii) Liens for non-delinquent Taxes and
non-delinquent statutory liens arising other than by reason of default by the
Company. The Company as lessee has the right under valid leases to occupy, use,
possess and control all property leased by the Company as now occupied, used,
possessed and controlled by the Company in connection with the Business. The
assets and properties owned or leased by the Company are sufficient to operate
and conduct the Business in a manner consistent with at least the same standards
of quality and reliability as have been achieved as of the date hereof.
(b) Each lease or agreement under which the Company is a lessee or
lessor of any property, real or personal, in connection with the Business is a
valid and binding agreement of the Company and, to the Knowledge of the Company,
the other party thereto (in each case with such exceptions as are, individually
or in the aggregate, not material and do not, individually or in the aggregate,
materially interfere with the use made and proposed to be made of such
properties by the Company), without any default by the Company thereunder and,
to the Knowledge of the Company, without any default thereunder by any other
party thereto. No event has occurred and is continuing which, with due notice or
lapse of time or both, would constitute a default or event of default by the
Company under any such lease or agreement or, to the Knowledge of the Company,
by any other party thereto. The Company's possession of such property has not
been disturbed and no claim has been asserted, whether oral or in writing,
against the Company adverse to its rights in such leasehold interests.
(c) All buildings, structures, appurtenances and material items of
machinery, equipment and other material tangible assets used by the Company in
connection with the Business are in good operating condition and repair, normal
wear and tear excepted, are usable in the ordinary course of business, are
adequate and suitable for the uses to which they are being put and conform in
all material respects to all applicable laws, ordinances, codes, rules,
regulations and authorizations relating to their construction, use and
operation, except where such non-compliance would not have a Material Adverse
Effect on the Company. None of the Company's premises or equipment used in
connection with the Business is in need of maintenance or repairs other than
ordinary routine maintenance and repairs which are not material, individually or
in the aggregate, in nature or cost.
Section 3.15. Environmental Matters.
(a) All Licenses required under Environmental Laws that are necessary
to the operations of the Business have been obtained and are in full force and
effect and
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the Company is not aware of any basis for revocation or suspension of any such
licenses, permits, consents or other approvals; and the business of the Company
has at all times been operated in full compliance in all material respects with
such Licenses, and within the production levels or emission levels specified in
such Licenses. To the Knowledge of the Company, no Environmental Laws impose any
obligation upon Zygo, as a result of any transaction contemplated hereby,
requiring prior notification to any Governmental Entity of the transfer of any
License which is necessary to the operations of the Business. All of the
facilities and operations of the Business were constructed, and have been
operated, in all material respects in accordance with the representations and
conditions made or set forth in the License applications and the Licenses.
(b) The Company has at all times operated the Business in compliance
in all material respects with all applicable limitations, restrictions,
conditions, standards, prohibitions, requirements and obligations of
Environmental Laws and related orders of any court or other Governmental Entity.
(c) There are not any existing, pending or, to the Knowledge of the
Company, threatened actions, suits, claims, investigations, inquiries or
proceedings by or before any Governmental Entity directed against the Company in
connection with the operation of its business which pertain or relate to (i) any
remedial obligations under any applicable Environmental Law, (ii) violations by
the Company of any Environmental Law, (iii) personal injury or property damage
claims relating to a release of chemicals or Hazardous Materials by the Company
or (iv) response, removal or remedial costs under the Comprehensive
Environmental Response, Compensation, and Liability Act or any similar state
law.
(d) No portion of the real property owned or leased by the Company
with respect to its business is listed on any Contaminated Site List.
(e) There has been no Release of any Hazardous Materials on or
underlying any real property owned or leased by the Company.
(f) No asbestos-containing materials or polychlorinated biphenyls
("PCBs") are present on or underlying any real property owned or leased by the
Company.
(g) There are no underground storage tanks for Hazardous Materials,
active or abandoned, at any property now or previously owned or leased by the
Company.
(h) The Company has provided to Zygo all engineering, geologic,
environmental and other documents or maps in the possession of the Company
relating to (i) any Environmental Conditions existing on any real property
leased by the Company, or (ii) any violations by the Company of any
Environmental Laws.
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(i) All Hazardous Materials, if any, generated by the Company in its
business have been transported, stored, treated and disposed of by transporters
or carriers, or at treatment, storage and disposal facilities, authorized or
maintaining valid permits under all applicable Environmental Laws.
(j) The Company is not aware of any Environmental Remediation Costs
which are required or have been planned relating to the operation of the
Business for which the Company reasonably anticipates payment or accrual.
Section 3.16. Contracts.
(a) The Disclosure Schedule contains a complete list of all currently
effective written or oral (i) employment contracts, arrangements or policies of
the Company relating to the Business which may not be immediately terminated
without penalty (or any augmentation or acceleration of benefits); (ii) leases,
sales contracts and other agreements with respect to any property, real or
personal, of the Company relating to the Business, except for leases of personal
property involving less than $5,000 individually and $25,000 in the aggregate;
(iii) contracts or commitments for capital expenditures or acquisitions relating
to the Business in excess of $25,000 for one project or set of related projects;
(iv) agreements, contracts, indentures or other instruments relating to the
borrowing of money, or the guarantee of any obligation (third party or
otherwise) for the borrowing of money; (v) contracts or agreements providing for
any covenant not to compete by the Company or otherwise restricting in any way
the Company's engaging in any business activity (including a description of the
businesses to which the covenant not to compete applies); (vi) contracts or
agreements relating to consultancies, professional retentions, agency, sales or
distributorship arrangements pertaining to the Business or its products or
activities; (vii) contracts, agreements or commitments requiring the Company to
indemnify or hold harmless any Person; (viii) all contracts with any customer or
supplier listed on the Disclosure Schedule pursuant to Section 3.22 hereto other
than outstanding purchase orders in the ordinary course of business involving
less than $5,000 individually and $25,000 in the aggregate; and (ix) contracts,
agreements, arrangements or commitments, other than the foregoing, which could
reasonably be considered material to the Business (all contracts, agreements,
arrangements or commitments to which the Company is a party relating to the
Business, whether or not listed on the Disclosure Schedule, being hereinafter
referred to as "Contracts"). True and correct copies of all the Contracts listed
on the Disclosure Schedule have been furnished to Zygo. All Contracts are valid
and binding obligations of the Company and, to the Knowledge of the Company, of
the other respective parties thereto. The Company has duly performed its
obligations under all Contracts in all material respects to the extent such
obligations have accrued, and no breach or default thereunder by the Company or,
to the Knowledge of the Company, any other party thereto has occurred that could
impair the ability of the Company to enforce any material rights thereunder.
There are no material liabilities of the Company or, to the Knowledge of the
Company, any other party to any of the Contracts arising from any breach of or
default in any provision thereof, nor has there occurred any breach or default
thereof by the Company which
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would permit the acceleration of any obligation of any party thereto or the
creation of a Lien upon any asset(s) of the Company.
(b) The consummation of the Acquisition or the other transactions
contemplated hereby will not result in any violation or termination of, default
or loss of benefit under, or give rise to a right of termination under, the
terms of any Contract. There are no negotiations pending or in progress to
revise, in any material respect, any Contract.
(c) (i) No purchase contracts or commitments of the Company continue
for a period of more than twelve (12) months or are in quantities or amounts in
excess of the normal, ordinary, usual and current requirements of its business
or in excess of market prices generally available to purchasers of similar
quantities; (ii) no Contract requires the Company to provide services at a fixed
price; (iii) the Company does not have outstanding any bid, contract, commitment
or proposal either (x) continuing for a period of more than twelve (12) months
or (y) quoting prices which based solely on the Company's past experience will
not result in profit margins consistent with past experience for the particular
type of bid, contract, commitment or proposal; and (iv) none of such Contracts
obligates the Company to sell products or to perform services to third parties
which to the Knowledge of the Company based on its past experience are at a
price which would reasonably be expected to result in a negative margin on the
sale of such products or the provision of services, or are pursuant to terms or
conditions they cannot reasonably expect to satisfy or fulfill in their
entirety.
Section 3.17. Employee and Labor Matters and Plans.
(a) The Disclosure Schedule lists each of the following plans,
contracts, policies and arrangements which is or, within six years prior to the
date hereof, was sponsored, maintained or contributed to by, or otherwise
binding upon the Company or, in the case of an "employee pension plan" (as
defined in Section 3(2) of ERISA), an ERISA Affiliate for the benefit of any
current or former employee, director or other personnel (including any such
plan, contract, policy or arrangement approved or adopted before, but effective
on or after, the date of this Agreement): (i) any "employee benefit plan," as
such term is defined in Section 3(3) of ERISA, whether or not subject to the
provisions of ERISA; (ii) any personnel policy; and (iii) any other employment,
consulting, collective bargaining, stock option, stock bonus, stock purchase,
phantom stock, incentive, bonus, deferred compensation, retirement, severance,
vacation, dependent care, employee assistance, material fringe benefit, medical,
dental, sick leave, death benefit, golden parachute or other compensatory plan,
contract, policy or arrangement which is not an employee benefit plan as defined
in Section 3(3) of ERISA (each such plan, contract, policy and arrangement being
herein referred to as an "Employee Plan").
(b) With respect to each Employee Plan, the Company has delivered to
Zygo true and complete copies of (i) each contract, plan document, policy
statement, summary plan description and other written material governing or
describing the
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Employee Plan and/or any related funding arrangements (including, without
limitation, any related trust agreement or insurance company contract) or, if
there are no such written materials, a summary description of the Employee Plan;
and (ii), where applicable, (1) the last two annual reports (5500 series) filed
with the IRS or the Department of Labor; (2) the most recent balance sheet and
financial statement; (3) the most recent actuarial report or valuation
statement; (4) the most recent determination letter issued by the IRS, as well
as any other determination letter, private letter ruling, opinion letter or
prohibited transaction exemption issued by the IRS or the Department of Labor
within the last six years and any application therefor which is currently
pending; and (5) the last PBGC-1 filed with PBGC.
(c) Each Employee Plan (which, for the purpose of this subsection (c),
includes any plan, contract, policy or arrangement which is otherwise described
in subsection (a)) has been maintained and administered in all material respects
in accordance with its terms and in compliance with the provisions of applicable
law, including, without limitation, applicable disclosure, reporting, funding
and fiduciary requirements imposed by ERISA and/or the Code. All contributions,
insurance premiums, benefits and other payments required to be made through the
Closing Date to or under each Employee Plan have been made timely and in
accordance with the governing documents and applicable law. With respect to each
Employee Plan, (i) no application, proceeding or other matter is pending before
the IRS, the Department of Labor, PBGC or any other governmental agency; (ii) no
action, suit, proceeding or claim (other than routine claims for benefits) is
pending or threatened; and (iii) to the Knowledge of the Company, no facts exist
which could give rise to an action, suit, proceeding or claim which, if
asserted, would result in a material liability or expense to the Company or the
plan assets.
(d) With respect to each Employee Plan which is an "employee benefit
plan" within the meaning of Section 3(3) of ERISA or which is a "plan" within
the meaning of Section 4975(e) of the Code, there has occurred no transaction
which is prohibited by Section 406 of ERISA or which constitutes a "prohibited
transaction" under Section 4975(c) of the Code and with respect to which a
prohibited transaction exemption has not been granted and is not currently in
effect.
(e) The Disclosure Schedule identifies each funded Employee Plan which
is an employee pension plan within the meaning of Section 3(2) of ERISA (other
than a multiemployer plan within the meaning of Section 3(37) of ERISA). With
respect to each such Employee Plan, other than any employee pension plan
transferred to Newco as provided in the Contribution Documents, (i) the Employee
Plan is a qualified plan under Section 401(a) of the Code, and its related trust
is exempt from Federal income taxation under Section 501(a) of the Code; and
(ii) a favorable IRS determination letter is currently in effect and, since the
date of the last determination letter, the Employee Plan has not been amended or
operated in a manner which would adversely affect its qualified status and no
event has occurred which has caused or would cause the loss of such status. With
respect to each such funded Employee Plan (including any pension plan
transferred to Newco pursuant to the Contribution
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Agreement), (i) there has been no termination or partial termination within the
meaning of Section 411(d)(3) of the Code; (ii) with respect to each such
Employee Plan which is covered by Section 412 of the Code, there has been no
accumulated funding deficiency, whether or not waived, within the meaning of
Section 302(a)(2) of ERISA or Section 412 of the Code, and there has been no
failure to make a required installment by its due date under Section 412(m) of
the Code; and (iii) with respect to each such Employee Plan which is covered by
Title IV of ERISA, (1) no reportable event within the meaning of Section 4043(b)
of ERISA and the regulations thereunder has occurred; (2) no notice of intent to
terminate the plan has been provided to participants or filed with the PBGC
under Section 4041 of ERISA, nor has the PBGC instituted or threatened to
institute any proceeding under Section 4042 of ERISA to terminate the plan; (3)
no liability has been incurred under Title IV of ERISA to the PBGC or otherwise
(except for the payment of PBGC premiums) and no event or set of conditions
exists which would subject the assets of the Company to a lien under Section 412
of the Code or under ERISA; and (4) in the case of a defined benefit pension
plan, the value of the plan assets exceeds the total present value of the plan's
benefit liabilities on a plan termination basis based upon actuarial assumptions
and asset valuation principles applied by the PBGC (or applicable foreign law).
The Technical Instrument Company Retirement Plan (the "TIC Retirement Plan") has
been frozen effective June 30, 1996 and no benefits have accrued or will accrue
thereunder subsequent to that date. Neither the Company nor any ERISA Affiliate
has ceased operations at a facility so as to become subject to the provisions of
Section 4068(f) of ERISA, withdrawn as a substantial employer so as to become
subject to the provisions of Section 4063 of ERISA or ceased making
contributions to any Employee Plan which is a pension plan subject to Section
4064(a) of ERISA.
(f) Each trust which is intended to be exempt from federal income
taxation pursuant to Section 501(c)(9) of the Code has been identified as such
on the Disclosure Schedule, and each such trust satisfies the requirements of
that Section and is covered by a favorable IRS determination letter, and neither
the trust nor any related plan has been amended or operated since the date of
the most recent determination letter in a manner which would adversely affect
such exempt status.
(g) No Employee Plan listed on the Disclosure Schedule is a
multiemployer plan within the meaning of Section 3(37) of ERISA. Neither the
Company nor any ERISA Affiliate is, or within six years prior to the date hereof
was, obligated to contribute or otherwise a party to any such multiemployer
plan. Neither the Company nor any ERISA Affiliate has incurred or expects to
incur any withdrawal liability under Title IV of ERISA (either as a contributing
employer or as part of a controlled group which includes a contributing
employer) in connection with a complete or partial withdrawal from a
multiemployer plan, and no ERISA Affiliate has received notice from any such
multiemployer plan that the plan is in reorganization or insolvency pursuant to
Sections 4241 or 4245 or ERISA or that the plan is intended to terminate or has
terminated under Sections 4041A or 4042 of ERISA.
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(h) The Company and its ERISA Affiliates have complied in all material
respects with the provisions of Section 4980B of the Code with respect to any
Employee Plan or benefit arrangement which is a group health plan within the
meaning of Section 5001(b)(1) of the Code. Except as may be required under
Section 4980B of the Code or any similar state law requiring continuous coverage
with respect to health plans, neither the Company nor any ERISA Affiliate
maintains or contributes to, and is not obligated under any plan, contract,
policy or arrangement providing health or death benefits (whether or not
insured) to current or former employees or other personnel beyond the
termination of their employment or other services. Except as specifically
identified in the Disclosure Schedule, each Employee Plan may be unilaterally
terminated and/or amended by the Company or any ERISA Affiliate at any time
without damage or penalty.
(i) The consummation of the transactions contemplated by this
Agreement and each of the other agreements contemplated hereby will not (either
alone or in conjunction with another event, such as a termination of employment
or other services) entitle any employee or other person to receive severance or
other compensation which would not otherwise be payable absent the consummation
of the transactions contemplated by this Agreement or cause the acceleration of
the time of payment or vesting of any award or entitlement under any Employee
Plan, except as contemplated by this Agreement and the Contribution Documents.
(j) The Disclosure Schedule sets forth a complete and accurate list
showing the names, the rate of compensation (and the portions thereof
attributable to salary and bonuses, respectively) and location of all employees
of or consultants to the Company or any ERISA Affiliate (each an "Employee").
Except as set forth on the Disclosure Schedule, there are no covenants,
agreements or restrictions, including but not limited to employee non-compete
agreements, prohibiting, limiting or in any way restricting any Employee from
engaging in any types of business activity in any location. To the Knowledge of
the Company, no Employee and no group of employees of the Company or any ERISA
Affiliate, has any plans to terminate their employment or consultancy. Neither
the Company nor any ERISA Affiliate has instituted any "freeze" of, or delayed
or deferred the grant of, any cost-of-living or other salary adjustments for any
of its Employees.
(k) Prior to the Closing Date, the Company shall transfer sponsorship
of the TIC Retirement Plan to Newco. Effective as of the Closing Date, Newco
shall cause all Employees who remain employed with the Company immediately after
the Closing Date (the "Remaining Employees") to become fully vested in their
accrued benefit under the TIC Retirement Plan. As soon as practicable following
the Closing Date, Newco shall distribute to each Remaining Employee his or her
accrued benefit under the TIC Retirement Plan, subject to applicable law.
(l) None of the Employees are subject to union or collective
bargaining agreements. There have been no audits of the equal employment
opportunity practices of the Company and, to the Knowledge of the Company, no
basis for such claim exists.
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There is no unfair labor practice charge or complaint against the Company
pending before the National Labor Relations Board or similar foreign agency or
strike, dispute, slowdown or stoppage pending or threatened against or involving
the Company and none has occurred since the respective dates of their inception.
No representation question exists respecting the Employees and no collective
bargaining agreement is currently being negotiated by the Company nor is any
grievance procedure or arbitration proceeding pending with respect to any
Employee and no claim therefor has been asserted. The Company has not received
notice from any Employee setting forth demands for representation, elections or
for present or future changes in wages, terms of employment or working
conditions.
(m) The Disclosure Schedule sets forth all outstanding loans and other
advances (other than travel advances in the ordinary course of business which do
not exceed $5,000 per individual) made by the Company to any of its officers,
directors, employees, shareholders or consultants.
Section 3.18. Insurance Policies. The Disclosure Schedule identifies all
insurance policies covering the Company and its business, employees, agents and
assets, copies of which have been provided to Zygo. Each such policy is in full
force and effect and is adequate in coverage and amount to insure fully against
risks to which the Company and its employees, businesses, properties and other
assets may be exposed in the operation of its business prior to the Effective
Time. Such policies shall not, pursuant to their terms, in any way be affected
by, or terminate or lapse by reason of, this Agreement. All retroactive premium
adjustments under any worker's compensation policy of the Company have been
recorded in the Financial Statements in accordance with generally accepted
accounting principles and are reflected in the Financial Statements. All
premiums with respect to such insurance policies have been paid on a timely
basis, and no notice of cancellation or termination has been received with
respect to any such policy. The Company has not failed to give any notice or
present any claim thereunder in due and timely fashion. There are no pending
claims against such insurance by or on behalf of the Company as to which the
insurers have denied coverage or otherwise reserved rights. The Company has not
been refused any insurance with respect to assets or operations, nor has its
coverage been limited, by any insurance carrier to which it has applied for any
such insurance with which it has carried insurance since the date of its
inception.
Section 3.19. Records. The Company has records that accurately and validly
reflect its transactions and accounting controls that are reasonably designed to
insure that such transactions are (a) in all material respects executed in
accordance with its management's general or specific authorization and (b)
recorded in conformity with generally accepted accounting principles.
Section 3.20. Brokerage Fees. Neither the Company nor any of its
Affiliates has retained any financial advisor, broker, agent or finder or paid
or agreed to pay any financial advisor, broker, agent or finder on account of
this Agreement or any of the agreements contemplated hereby or any transaction
contemplated hereby or thereby or
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any transaction of like nature that would be required to be paid by the Company,
other than fees that will be paid to IPC Group, LLC in connection with the
evaluation of the Stock Merger Consideration.
Section 3.21. No Product Liabilities; Product Warranties.
(a) The Company has not incurred, and to the Knowledge of the Company
there is no reason to believe there is any basis for alleging, any liability,
damage, loss, cost or expense as a result of any defect or other deficiency
(whether of design, materials, workmanship, labeling, instructions or otherwise)
("Product Liability") with respect to any product sold or service rendered by
the Company whether such Product Liability is incurred by reason of any express
or implied warranty (including, without limitation, any warranty of
merchantability or fitness), any doctrine of common law (tort, contract or
other), any statutory provision or otherwise and irrespective of whether such
Product Liability is covered by insurance, other than chargebacks incurred in
the ordinary course of business and consistent with past practice and none of
which have, or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company.
(b) The Company has furnished Zygo with the standard forms of purchase
orders for its products and services that are in effect or proposed to be used
by the Company, which forms contain all warranties and guarantees given by the
Company to its customers with respect to their products and services, except for
those warranties imposed by law. There are no pending or, to the Knowledge of
the Company, threatened claims under any warranty or guaranty against the
Company. The Disclosure Schedule lists all credits reflected in the Company's
accounting records made in respect of any such warranty or guaranty (including
without limitation any returns or allowances) in excess of $5,000 since January
1, 1994, indicating the name of each customer, the amount of each payment and a
brief description of the facts relating thereto.
Section 3.22. Suppliers and Customers.
(a) The Disclosure Schedule lists (i) all suppliers of the Business to
which the Company made payments during the year ended December 31, 1995, or
expects to make payments during the year ending December 31, 1996, in excess of
five percent of the cost of sales of the Company as reflected on the Company's
statement of operations for such year, (ii) all customers of the Business that
paid the Company during the year ended December 31, 1995 or that the Company
expects will pay to the Company during the year ending December 31, 1996, more
than five percent of the sales revenues of the Company as reflected on the
Company's statement of operations for such year and (iii) all other suppliers
and customers of the Business the loss of any of which, individually or in the
aggregate with all other suppliers or customers affiliated with such supplier or
customer, would reasonably be expected to have a Material Adverse Effect on the
Company.
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(b) To the Knowledge of the Company, none of the customers or
suppliers of the Company listed on the Disclosure Schedule in Section 3.22 have
expressed an intention to cease purchasing from, selling to or dealing with the
Company nor has any information been brought to its attention by such customer
or supplier which would reasonably lead it to believe any such customer or
supplier intends to alter in any material respect the amount of such purchases,
sales or the extent of dealings with the Company or would alter in any material
respect such purchases, sales or dealings in the event of the consummation of
the Acquisition. To the Knowledge of the Company, all suppliers to the Business
will be able to fulfill outstanding or currently anticipated purchase orders
placed by the Company which, individually or in the aggregate, exceed $25,000.
The Company has no information which might reasonably indicate, nor has any
information been brought to its attention which might reasonably lead it to
believe that, any customer of the Business will cancel any outstanding or
currently anticipated purchase orders placed with the Company which,
individually or in the aggregate, exceed $25,000.
(c) Neither the Company nor, to the Knowledge of the Company, any of
its officers, directors or Affiliates, nor any relative or spouse (or relative
of such spouse) of any such officer, director or Affiliate, nor any entity
controlled by one of more of the foregoing:
(i) owns, directly or indirectly, any interest in (excepting less
than 2% stock holdings for investment purposes in securities of
publicly held and traded companies), or is an officer, director,
employee or consultant of, any Person which is, or is engaged in
business as, a competitor, lessor, lessee, supplier, distributor,
sales agent, customer or client of the Business;
(ii) owns, directly or indirectly, in whole or in part, any
tangible or intangible property that the Business uses in the conduct
of its business; or
(iii) has any cause of action or other claim whatsoever against,
or owes any amount to, the Company, except for claims in the ordinary
course of business such as for accrued vacation pay, accrued benefits
under employee benefit plans, and similar matters and agreements
existing on the date hereof.
Section 3.23. Intellectual Properties. The Disclosure Schedule contains an
accurate and complete list of all domestic and foreign patents, patent
applications, patent licenses, software licenses (other than generally available
pre-packaged "off-the-shelf" software) and know-how licenses, trade names,
trademarks, copyrights, service marks, trademark registrations and applications,
service mark registrations and applications, and copyright registrations and
applications owned (in whole or in part), licensed to any extent or used or
anticipated to be used by the Company in the conduct of the Business, whether in
the name of the Company, any employee or otherwise
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(collectively, the "Intellectual Property"). The Company either owns all right,
title and interest in and to, or possesses the exclusive right to use, the
Intellectual Property, trade secrets and technology used in the conduct of its
business (including, without limitation, the exclusive right to use and license
the same (in the jurisdiction(s) where registered in the case of trademarks,
service marks and copyrights)) and each item constituting part of the
Intellectual Property in which the Company has an ownership or license interest
has been, to the extent indicated on the Disclosure Schedule, duly registered
with, filed in or issued by, as the case may be, the United States Patent and
Trademark Office or such other Governmental Entities as are indicated on the
Disclosure Schedule and such registrations, filings and issuances remain in full
force and effect. No claim of infringement or misappropriation of patents,
trademarks, trade names, service marks, copyrights or trade secrets of any other
Person has been made nor, to the Knowledge of the Company, threatened against
the Company and the Company is not infringing or misappropriating any patents,
trademarks, trade names, service marks, copyrights or trade secrets of any other
Person. Without limiting any other provisions hereof, the Company has not
granted any license, franchise or permit to any Person to use any of the
Intellectual Property of the Company and no other Person has the right to use
the same trademarks, service marks or trade names used by the Company or any
similar trademarks, service marks or trade names likely to lead to confusion.
Since its inception the business conducted by the Company has not been conducted
under any corporate, trade or fictitious name. The Disclosure Schedule sets
forth all trademark registrations and applications, service mark registrations
and applications and copyright registrations and applications abandoned by the
Company since its inception.
Section 3.24. Licenses. The Company has all licenses, permits, consents
and other governmental certificates, authorizations and approvals required by
every federal, state, local and foreign Governmental Entity for the conduct of
the Business and the use of its properties as presently conducted or used
including, without limitation, all licenses required under Environmental Laws
and any federal, state, local or foreign law relating to public health and
safety, or employee health and safety, other than those the failure of which to
hold has not had and would not have a Material Adverse Effect on the Company
(collectively, "Licenses"). The Disclosure Schedule contains a true and complete
list of the Licenses. All of the Licenses are in full force and effect and no
action or claim is pending nor, to the Knowledge of the Company, is threatened
to revoke or terminate any License or declare any License invalid in any
material respect. The Company has taken all necessary action to maintain such
Licenses. The Disclosure Schedule contains a true and complete list of all
federal, state, local and foreign governmental or judicial consents, orders,
decrees and other compliance agreements relating to the Company or any of its
assets or business under which the Company is operating or bound.
Section 3.25. No Illegal or Improper Transactions. Neither the Company nor
any of its directors, officers, employees, agents or Affiliates, has directly or
indirectly used funds or other assets of the Company or made any promise or
undertaking in such regard, for (a) illegal contributions, gifts, entertainment
or other expenses relating to
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political activity; (b) illegal payments to or for the benefit of governmental
officials or employees, whether domestic or foreign; (c) illegal payments to or
for the benefit of any person, firm, corporation or other entity, or any
director, officer, employee, agent or representative thereof; or (d) the
establishment or maintenance of a secret or unrecorded fund; and there have been
no false or fictitious entries made in the books or records of the Company.
Section 3.26. Restrictive Documents and Territorial Restrictions. The
Company is not subject to, or a party to, any charter, by-law, mortgage, Lien,
lease, license, permit, agreement, contract, instrument, law, rule, ordinance,
regulation, order, judgment or decree, or any other restriction of any kind or
character, which materially adversely affects the business, prospects,
operations or condition (financial or otherwise) of the Business or the Division
or any of its assets or property, or the continued operation of the Business
after the date hereof on substantially the same basis as heretofore operated or
which would restrict the ability of the Company to acquire any property or
conduct business in any area.
Section 3.27. Bank Accounts. The Disclosure Schedule contains a true,
correct and complete list of the names and locations of all banks, trust
companies, savings and loan associations and other financial institutions at
which the Company maintains safe deposit boxes or accounts of any nature and the
names of all Persons authorized to draw thereon, make withdrawals therefrom or
have access thereto.
Section 3.28. Contribution and Newco Share Exchange.
(a) The Contribution has been consummated in accordance with, and
subject to the terms and conditions set forth in, the Contribution Documents,
and the Company and Newco are in compliance with the Contribution Documents, and
neither the Company or Newco has breached any representation or warranty or
failed to fulfill any covenant or agreement set forth therein. The Newco Share
Exchange has been completed and Schedule 1 hereto reflects the record ownership
of the Company Stock as of the date hereof, after giving effect to the Newco
Share Exchange.
(b) Neither the execution and delivery of the Contribution Documents
nor the consummation of the transactions contemplated thereby nor compliance by
the Company with any of the provisions thereof nor the consummation of the Newco
Share Exchange, did or will, (a) conflict with, result in a breach or violation
of or constitute (or with notice or lapse of time or both constitute) a default
under, (i) the Articles of Incorporation or By-Laws of the Company or (ii) any
statute, regulation, order, judgment or decree or any instrument, contract or
other agreement to which the Company is a party or by which the Company (or any
of the properties, assets or business of the Company) is subject or bound; (b)
result in the creation of, or give any party the right to create, any Lien upon
the properties or assets of the Company; (c) result in any suspension,
revocation, impairment, forfeiture or non-renewal of any Approval applicable to
the Company; or (d) require the Company to obtain any authorization, consent,
approval or waiver from, or to make any filing with, any
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Governmental Entity or to obtain the approval or consent of any other Person
other than, if required, qualifications or filings under, the Securities Act,
and applicable state securities or "blue sky" laws, which qualifications or
filings, if required, have been made by the Company and will be effective within
the period required by law.
Section 3.29. Syncotec Option.
(a) The Company has exercised the Syncotec Option in full compliance
with the terms of such option.
(b) The Company has not, directly or indirectly, offered, offered to
sell, sold, contracted to sell, granted any option to purchase or otherwise
transferred or disposed of all or any portion of the Syncotec Option.
(c) Upon registration of the shares of Syncotec GmBH received upon
exercise of the Syncotec Option as required in accordance with German Law, the
process of which registration has been initiated and is being pursued, the
Company will acquire good and marketable title to the Syncotec Interest and will
own beneficially and of record the Syncotec Interest, free and clear of all
Liens.
Section 3.30. No Misleading Statements. This Agreement, the information
and schedules referred to herein and the certificates that have been furnished
to Zygo in connection with the transactions contemplated hereby do not include
any untrue statement of a material fact and do not omit to state any material
fact necessary to make the statements contained herein or therein, in light of
the circumstances under which they were made, not misleading. To the Knowledge
of the Company, there is no fact relating to the Company which materially
adversely affects or in the future would be reasonably likely (so far as the
Company can now reasonably foresee) to materially adversely affect the business
condition (financial or otherwise), property or assets of the Business or
Division which is not referred to herein or in this corresponding section of the
Disclosure Schedule, other than those facts affecting the industry in which the
Division operates, the Division's customers and suppliers, the industries of the
Division's customers or suppliers, or facts affecting the economy in any
particular country or region.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each Shareholder hereby severally agrees and represents and warrants to
Zygo and Zygo Sub as follows:
Section 4.01. Ownership. Such Shareholder holds of record and owns
beneficially the number of shares of Company Stock set forth next to his or its
name in Schedule 1 hereto, free and clear of any Liens. There are no outstanding
options,
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warrants, convertible securities, calls, rights, commitments, preemptive rights
or agreements or instruments or understandings of any character to which such
Shareholder is a party or by which he or it is bound, obligating him or it to
issue, deliver or sell, or cause to be issued, delivered or sold, contingently
or otherwise, any shares of Company Stock owned by him or it or any securities
or obligations convertible into or exchangeable for such shares or to grant,
extend or enter into any such option, warrant, convertible security, call,
right, commitment, preemptive right or agreement. Such Shareholder is not a
party to any voting trust, proxy, or other agreement, commitment or
understanding with respect to the voting, dividend rights or disposition of any
capital stock of the Company.
Section 4.02. Authorization. Such Shareholder has all requisite power and
authority to enter into this Agreement and each of the other agreements
contemplated hereby, and to carry out his or its obligations under this
Agreement and each of the other agreements contemplated hereby and to consummate
the transactions contemplated hereby and thereby. The execution and delivery by
such Shareholder of this Agreement and each of the other agreements contemplated
hereby, the consummation of the transactions contemplated hereby and thereby and
the performance by such Shareholder of his or its obligations hereunder and
thereunder have been duly authorized by all necessary corporate or analogous
action on the part of such Shareholder, if applicable. Each of this Agreement
and the other agreements contemplated hereby have been duly executed and
delivered by such Shareholder and constitutes the legal, valid and binding
obligation of such Shareholder enforceable against such Shareholder in
accordance with its terms (except as the enforceability thereof may be limited
by any applicable bankruptcy, insolvency or other laws affecting creditors'
rights generally or by general principles of equity, regardless of whether such
enforceability is considered in equity or at law).
Section 4.03. No Violation. The execution and delivery of this Agreement
and each of the other agreements contemplated hereby by such Shareholder does
not, and the consummation by such Shareholder of the transactions contemplated
hereby and thereby, and compliance with the terms hereof and thereof will not,
(a) conflict with, or result in any violation of or default or loss of any
benefit under, any provision of such Shareholder's Certificate of Incorporation
or By-laws (or other analogous documents), if applicable, (b) conflict with, or
result in a breach or violation of or default or loss of any benefit under, or
accelerate the performance required by, the terms of any law, statute,
regulation, order, judgment or decree or any agreement, contract, indenture or
other instrument to which such Shareholder is a party or to which any of his or
its properties are subject, or constitute a default or loss of any right
thereunder or an event which, with the lapse of time or notice or both, might
result in a default or loss of any right thereunder or the creation of any Lien
upon any of the assets or properties of such Shareholder.
Section 4.04. Approvals. The execution and delivery of this Agreement and
each of the other agreements contemplated hereby and the consummation of the
transactions contemplated hereby and thereby by such Shareholder will not
require the consent,
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approval, order or authorization of any Governmental Entity or Regulatory
Authority or any other Person under any statute, law, rule, regulation, permit,
license, agreement, indenture or other instrument to which such Shareholder is a
party or to which any of his or its properties are subject, and no declaration,
filing or registration with any Governmental Entity or Regulatory Authority is
required by such Shareholder in connection with the execution and delivery of
this Agreement and each of the other agreements contemplated hereby, the
consummation by such Shareholder of the transactions contemplated hereby and
thereby or the performance by such Shareholder of his or its obligations
hereunder and thereunder.
Section 4.05. Brokerage Fees. Such Shareholder has not retained any
financial advisor, broker, agent or finder or paid or agreed to pay any
financial advisor, broker, agent or finder on account of this Agreement or any
transaction contemplated hereby or any transaction of like nature that would be
required to be paid by such Shareholder.
Section 4.06. Litigation. There is no claim, suit, action, proceeding or
investigation (whether at law or equity, before or by any federal, state or
foreign commission, court, tribunal, board, agency or instrumentality, or before
any arbitrator) pending or, to the Knowledge of such Shareholder, threatened
against or affecting such Shareholder, the outcome of which would in any manner
impair his or its ability to perform his or its obligations hereunder or, to the
Knowledge of such Shareholder, against the transactions contemplated by this
Agreement.
Section 4.07. Securities Act Matters.
(a) Such Shareholder understands that the Zygo Common Stock to be
issued to such Shareholder at the Closing has not been registered under the
Securities Act or any state securities laws by reason of its issuance in a
transaction exempt from the registration requirements of the Securities Act and
applicable state securities laws and such Zygo Common Stock must be held
indefinitely unless a subsequent disposition thereof is registered under the
Securities Act and applicable state securities laws or is exempt from such
registration.
(b) Such Shareholder is acquiring the Zygo Common Stock for his or its
own account and not with a view to, or for sale in connection with, directly or
indirectly, any distribution thereof that would require registration under the
Securities Act or applicable state securities laws.
Section 4.08. No Misleading Statements. This Agreement, the information
and schedules referred to herein and the certificates that have been furnished
to Zygo by such Shareholder (in such Shareholder's capacity as such) in
connection with the transactions contemplated hereby do not include any untrue
statement of a material fact and do not omit to state any material fact
necessary to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.
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ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF ZYGO AND ZYGO SUB
Except as set forth (by reference to the applicable Section of this
Agreement) in the disclosure schedule delivered by Zygo and Zygo Sub to the
Company and the Shareholders on the date hereof (the "Zygo Disclosure
Schedule"), a copy of which is attached hereto as Schedule 3, Zygo and Zygo Sub
hereby agree and jointly and severally represent and warrant to the Company and
the Shareholders as follows:
Section 5.01. Organization, Etc.. Zygo is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has full corporate power and authority to conduct its business as it is now
being conducted and to own, operate or lease the properties and assets it
currently owns, operates or holds under lease. Zygo Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California and has full corporate power and authority to conduct its business as
it is now being conducted and to own, operate or lease the properties and assets
it currently owns, operates or holds under lease. Each of Zygo and Zygo Sub is
duly qualified or licensed to do business and is in good standing as a foreign
corporation in each jurisdiction where the character of its business or the
nature of its properties makes such qualification or licensing necessary, except
where the failure to so qualify or be licensed would not have a Material Adverse
Effect on Zygo. Zygo has heretofore made available to the Company and the
Shareholders true and correct copies of its Certificate of Incorporation and
By-laws and the Articles of Incorporation and By-laws of Zygo Sub, in each case
as in effect on the date hereof.
Section 5.02. Capitalization. The authorized capital stock of Zygo
consists of 15,000,000 shares of common stock, of which 4,804,311 shares are
issued and outstanding as of June 30, 1996 and 103,800 are held in treasury. The
shares of Zygo Common Stock to be issued in the Merger at the Closing, when
issued pursuant to this Agreement, will be duly authorized, validly issued,
fully paid and nonassessable and will not have been issued in violation of any
preemptive rights or of any federal or state law. The authorized capital stock
of Zygo Sub consists of 1000 shares of common stock, without par value, all of
which have been validly issued, are fully paid and nonassessable and are owned
by Zygo free and clear of any Liens.
Section 5.03. Authorization. Each of Zygo and Zygo Sub has all requisite
corporate power and authority to enter into this Agreement and each of the other
agreements contemplated hereby, to carry out its obligations under this
Agreement and each of the other agreements contemplated hereby and to consummate
the transactions contemplated hereby and thereby. The execution and delivery by
Zygo and Zygo Sub of this Agreement and each of the other agreements
contemplated hereby, the consummation of the transactions contemplated hereby
and thereby and the performance by Zygo and Zygo Sub of their respective
obligations hereunder and
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thereunder have been duly authorized by all necessary corporate action of the
part of Zygo and Zygo Sub. Each of this Agreement and the other agreements
contemplated hereby have been duly executed and delivered by Zygo and Zygo Sub
and constitute the legal, valid and binding obligation of Zygo and Zygo Sub,
enforceable against Zygo and Zygo Sub in accordance with its terms (except as
the enforceability thereof may be limited by any applicable bankruptcy,
insolvency or other laws affecting creditors' rights generally or by general
principles of equity, regardless of whether such enforceability is considered in
equity or at law).
Section 5.04. No Violation. The execution and delivery of this Agreement
and each of the other agreements contemplated hereby by Zygo and Zygo Sub does
not, and the consummation by Zygo and Zygo Sub of the transactions contemplated
hereby and thereby, and compliance with the terms hereof and thereof will not,
(a) conflict with, or result in any violation of or default or loss of any
benefit under, any provision of Zygo's Certificate of Incorporation or By-laws
or the Articles of Incorporation or By-laws of Zygo Sub; (b) conflict with, or
result in any violation of any statute, law, rule or regulation, or any
judgment, decree or order of any court or other governmental agency or
instrumentality to which Zygo or Zygo Sub is a party or to which any of its
property is subject; (c) conflict with, or result in a breach or violation of or
default or loss of any benefit under, or accelerate the performance required by,
the terms of any material agreement, contract, indenture or other instrument to
which Zygo or Zygo Sub is a party or to which any of their respective properties
are subject, or constitute a default or loss of any right thereunder or an event
which, with the lapse of time or notice or both, might result in a material
default or loss of any material right thereunder or the creation of any Lien
upon any of the assets or properties of Zygo or Zygo Sub; or (d) result in any
suspension, revocation, impairment, forfeiture or nonrenewal of any Zygo
License.
Section 5.05. Approvals. The execution and delivery of this Agreement and
each of the agreements contemplated hereby by Zygo and Zygo Sub and the
consummation of the transactions contemplated hereby and thereby will not
require the consent, approval, order or authorization of any Governmental Entity
or Regulatory Authority or any other Person under any statute, law, rule,
regulation, permit, license, agreement, indenture or other instrument to which
Zygo or Zygo Sub is a party or to which any of their respective properties are
subject, and no declaration, filing or registration with any Governmental Entity
or Regulatory Authority is required or advisable by Zygo or Zygo Sub in
connection with the execution and delivery of this Agreement and each of the
other agreements contemplated hereby, the consummation by Zygo or Zygo Sub of
the transactions contemplated hereby and thereby or the performance by Zygo or
Zygo Sub of their respective obligations hereunder and thereunder, other than
the filing of the Agreement of Merger in accordance with California Law, and (b)
compliance with any applicable requirements under the Exchange Act, the
Securities Act and state securities and "blue sky" laws.
Section 5.06. Commission Filings. Zygo has delivered to the Company and
the Shareholders true, correct and complete copies of (a) its Registration
Statement on
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Form S-3 (No. 33-63775), as declared effective by the Commission on December 12,
1995 (the "Registration Statement"); and (b) each report, schedule and
definitive proxy statement filed by Zygo with the Commission on or after June
30, 1995. Section 5.06 of the Zygo Disclosure Schedule contains a complete list
of all filings made by Zygo pursuant to Sections 13, 14 and 15(d) of the
Exchange Act since June 30, 1995 (the "Zygo Exchange Act Filings"). Zygo has
timely filed in the preceding twelve (12) months all the material required to be
filed by it pursuant to the applicable provisions of the Securities Act and
pursuant to Sections 13, 14 and 15(d) of the Exchange Act. Neither the
Registration Statement, as of the date it became effective, nor the Zygo
Exchange Act Filings (including the documents incorporated by reference
therein), as of their respective filing dates, contained any untrue statement of
a material fact or omitted to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading, and the Zygo Exchange Act Filings were timely filed
and complied when filed in all material respects with the applicable
requirements of the Exchange Act.
Section 5.07. Financial Statement and Other Information.
(a) The audited balance sheet and any related notes and schedules
included or incorporated by reference in Zygo's Annual Report on Form 10-K for
the fiscal year ended June 30, 1995 (the "Zygo 10-K") and the unaudited balance
sheet and any related notes and schedules included in Zygo's Quarterly Report on
Form 10-Q for the quarters ended September 30, 1995, December 31, 1995 and March
31, 1996 (the "Zygo 10-Qs") each presents fairly the consolidated financial
position of Zygo and the Zygo Subsidiaries as of its respective date and the
other financial statements included in the Zygo 10-K and the Zygo 10-Qs present
fairly the consolidated results of operations or other information included
therein of Zygo and the Zygo Subsidiaries for the respective periods or as of
the respective dates therein set forth, subject, in the case of unaudited
statements, to normal year end adjustments which are not material in amount or
effect, in each case in accordance with generally accepted accounting principles
consistently applied during the periods involved (except as otherwise stated
therein).
(b) Except as disclosed in the Zygo Exchange Act Filings, since June
30, 1995 and since March 31, 1996, there has been no change in the assets or
liabilities, or in the business or condition, financial or otherwise, or in the
results of operations or prospects of Zygo and the Zygo Subsidiaries taken as a
whole, whether as a result of any legislative or regulatory change, revocation
of any license or right to do business, fire, explosion, accident, casualty,
labor trouble, flood, drought, riot, storm, condemnation or act of God or
otherwise, which has had or is reasonably likely to have a Material Adverse
Effect on Zygo, other than changes related to Zygo's industry or the economy in
any particular country or region and not specifically related solely to Zygo.
Section 5.08. Compliance with Laws. The business of Zygo and the Zygo
Subsidiaries has not been conducted in violation of any law or any ordinance or
regulation of any Governmental Entity, except for violations that individually
or in the
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aggregate would not and, insofar as may reasonably be foreseen, in the future
will not, have a Material Adverse Effect on Zygo. No investigation or review by
any Governmental Entity (including without limitation any audit or similar
review by any federal, state or local taxing authority) with respect to Zygo or
any Zygo Subsidiary is pending or, to the Knowledge of Zygo, threatened, nor has
any Governmental Entity indicated in writing to Zygo an intention to conduct the
same. Neither Zygo nor any Zygo Subsidiary is in default with respect to any
order, writ, injunction or decree known to or served upon Zygo or any Zygo
Subsidiary of any Governmental Entity, which default would have a Material
Adverse Effect on Zygo.
Section 5.09. Brokerage Fees. Neither Zygo, any Zygo Subsidiary nor any of
their respective Affiliates has retained any financial advisor, broker, agent or
finder or paid or agreed to pay any financial advisor, broker, agent or finder
on account of this Agreement or any transaction contemplated hereby or any
transaction of like nature that would be required to be paid by Zygo or any Zygo
Subsidiary, other than the fees that will be paid by Zygo in connection with the
opinion referred to in Section 5.10 hereof.
Section 5.10. Opinion of Financial Advisor. Zygo has received the written
opinion of Needham and Company, Inc., financial advisor to Zygo, to the effect
that, as of the date hereof, the consideration to be paid in the Acquisition is
fair, from a financial point of view, to Zygo and its stockholders.
Section 5.11. No Misleading Statements. This Agreement, the information
and schedules referred to herein and the certificates that have been furnished
to the Company and the Shareholders by Zygo or Zygo Sub in connection with the
transactions contemplated hereby do not include any untrue statement of a
material fact and do not omit to state any material fact necessary to make the
statements contained herein or therein, in light of the circumstances under
which they were made, not misleading.
ARTICLE VI.
POST-CLOSING COVENANTS AND AGREEMENTS
Section 6.01. Certain Tax Matters. The following provisions shall govern
the allocation of responsibility as between Zygo and Zygo Sub and the Company
and the Shareholders for certain tax matters following the Closing Date:
(a) Sales and Transfer Taxes. All sales and transfer Taxes (including
stock and real estate transfer Taxes), if any, incurred in connection with this
Agreement and the transactions contemplated hereby shall be borne by the
Shareholders. Shareholders shall, at their own expense, file or prepare for
filing all necessary Tax Returns and other documentation with respect to all
such sales or transfer Taxes, and, if required by applicable law or if necessary
to secure any
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applicable exemption, Zygo shall join in the execution of any such Tax Returns
or other documentation.
(b) Tax Returns and Payment of Taxes for Periods through the Closing
Date. The Company shall be responsible for, and shall cause to be prepared and
timely filed, all tax returns for the Company for all Tax periods ending on or
before the Closing Date, and the Company shall cause to be paid when due all
Taxes in respect of such Tax Periods. The cost of the preparation of such tax
returns shall be borne by the Shareholders. Any income or gain of the Company
resulting from the Contribution or the Newco Share Exchange shall be included
for tax purposes in the income of the Company for the period prior to the
Closing Date, shall be reported in the Tax Returns of the Company for the period
which ends prior to its joining the Zygo affiliate group, and any Taxes relating
thereto shall be accrued as an expense on the Closing Date Balance Sheet or paid
by the Shareholders. Without limiting the foregoing, the Company shall not avail
itself of the installment method of accounting, or any other method of
accounting, which would cause any gain resulting from the Contribution or the
Newco Share Exchange to be included in the income of the Company for the period
beginning with the time that the Company is included in a consolidated return as
to which Zygo is the "common parent." In the event that the amount of any Taxes
for Tax periods ending on or before the Closing Date, or for which the
Shareholders are otherwise responsible, exceeds the amount accrued on the
Closing Date Balance Sheet, the Shareholders, jointly and severally, shall pay
to Zygo such excess within ten (10) days after written notice thereof by Zygo.
Zygo shall prepare or cause to be prepared and filed all Tax Returns for the
Company for all Tax periods ending after the Closing Date.
(c) Indemnification for Taxes.
(i) The Shareholders shall, subject to the provisions of Section
8.03, jointly and severally indemnify, defend and hold harmless Zygo and the
Company against (A) all Taxes attributable to the Company with respect to any
Tax period ending on or prior to the Closing Date and the cost of preparation of
all associated tax returns, and (B) all Taxes attributable to the Company with
respect to the portion of any Tax period which begins before and ends after the
Closing Date for which the Shareholders are responsible, less in each case any
amount previously reserved or accrued for Taxes on the Closing Date.
Notwithstanding any other provision of this Agreement, the obligation of the
Shareholders to indemnify and hold harmless Zygo and the Company from Taxes
under this Section 6.01 shall begin on the Closing Date and end upon the
expiration of the statute of limitations (including any extensions thereof)
applicable to the assessment and collection of any Taxes for and against which
Zygo and the Company are indemnified and held harmless by the Shareholders
hereunder, to the extent that a claim for indemnification hereunder has not
theretofore been made in writing. Notwithstanding the first sentence of this
Section 6.01(c), the indemnification obligation of the Shareholders set forth in
this Section 6.01(c) shall not be subject to the "basket" limitation contained
in Section 8.03 hereof to the extent that any liability arises out of or results
from an adjustment to the treatment (or non-
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treatment) of an item shown (or not shown) on a Tax Return for 1995 or 1996,
which treatment (or non-treatment) is not consistent with the Company's prior
practices or, to the extent no prior practice exists, the treatment (or
non-treatment) by the Company was not based on a position it and its independent
auditors determined, in good faith, to be correct.
(ii) In determining the amount of any indemnification payment by
the Shareholders pursuant to this Section 6.01(c), there shall be deducted or
added, respectively, from or to the amount to be paid an amount equal to (A) the
present value of any net Tax benefit (federal, state, local or foreign)
realized, or reasonably expected to be realized, by Zygo or the Company as a
consequence of an event giving rise to any payment pursuant to this section
6.01(c), or (B) the present value of any net Tax detriment (federal, state,
local or foreign) realized, or reasonably expected to be realized, by Zygo or
the Company as a consequence of an event giving rise to any payment pursuant to
this Section 6.01(c). For purposes of this Section 6.01(c)(ii), "present value"
shall be calculated using the applicable annual Federal mid-term rate, as that
term is defined in the Code, as in effect for the month in which the payment is
to be made. For purposes of this Section 6.01(c)(ii), the amount of any "Tax
benefit" and "Tax detriment" shall be calculated using the highest effective Tax
rate applicable or known to be applicable with respect to the Tax period or
periods for which the Tax benefit or the Tax detriment, as the case may be, is
reasonably expected to be realized or incurred.
(d) Tax Audits. Zygo shall notify the Shareholders in writing of any
pending or threatened audit or examination by any Tax authority (a "Tax Audit")
or a Tax assessment for which the Shareholders may be liable for indemnification
under this Agreement within thirty (30) days after Zygo's receipt of notice of
such pending or threatened Tax Audit or assessment. A majority in interest of
the Shareholders shall have the right, at their own expense, to control any Tax
Audit, initiate any claim for refund, contest, resolve and defend against any
assessment, notice of deficiency, or other adjustment or proposed adjustment
relating to any and all Taxes for any Tax period of the Company ending on or
before the Closing Date, provided, however, that the Shareholders shall in no
event take any position in any such proceeding which would subject Zygo or the
Company to any civil fraud or any civil or criminal penalty, and provided,
further, that the Shareholders shall not consent, without the prior written
approval of Zygo, to any change in the treatment of any item which would in any
material respect affect the Tax liability of Zygo or the Company for a period
subsequent to the Closing Date. Zygo shall have the right, at its expense, to
control any other Tax Audit, initiate any other claim for refund, and contest,
resolve and defend against any other assessment, notice of deficiency, or other
adjustment or proposed adjustment relating to Taxes for any Tax period ending
after the Closing Date with respect to the Company.
(e) Mutual Cooperation. The parties shall provide each other with such
assistance as may reasonably be requested by any of them in connection with the
preparation of any Tax Return, any Tax Audit or other examination by any Tax
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authority, or any judicial or administrative proceedings relating to liability
for Taxes, and each will retain and provide the other with any records or
information that may be relevant to such Tax Return, Tax Audit or examination,
proceedings or determination. Such assistance shall include making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder and shall include providing
copies of any relevant Tax Returns and supporting work schedules. The party
requesting assistance hereunder shall reimburse the other for reasonable
expenses incurred in providing such assistance. Without limiting in any way the
foregoing provisions of this Section 6.01, Zygo hereby agrees to retain, until
the appropriate statutes of limitation (including any extensions) expire, copies
of all Tax Returns, supporting work schedules and other records or information
that may be relevant to such Tax Returns of the Company for all Tax periods that
include the dates from January 1, 1990 to the Closing Date, inclusive, and that
it will not destroy or otherwise dispose of such records without first providing
the Shareholders with a reasonable opportunity to review and copy such records.
Section 6.02. Consents of the Company's Accountants. The Shareholders
shall use their best efforts to cause to be delivered by Grant Thornton LLP any
consents which may be required after the Closing Date in connection with any
filing by Zygo under the Securities Act and the Exchange Act.
Section 6.03. Issuance of Options to Purchase Zygo Common Stock. Zygo
agrees that it shall, in consultation with and based upon the recommendations of
Francis E. Lundy, on or immediately after the Closing Date, grant options to
purchase up to an aggregate of 70,000 shares of Zygo Common Stock to executive
officers and key employees of the Company, under Zygo's existing stock option
plan, at an exercise price equal to the fair market value per share of Zygo
Common Stock on the date of grant.
Section 6.04. Beneficial and Record Ownership of the Syncotec Interest.
Each of Zygo and Francis E. Lundy shall take all reasonable actions required to
have the Company acquire beneficial and record ownership of the Syncotec
Interest.
ARTICLE VII.
CONDITIONS OF CLOSING
Section 7.01. Conditions to All Parties' Obligations. The obligations of
all the parties to this Agreement to effect the Acquisition shall be subject to
the fulfillment or satisfaction, at or prior to the execution of this Agreement
of the following conditions or the mutual written waiver by the parties:
(a) Shareholder Approval. The Agreement shall have been unanimously
approved by the shareholders of the Company.
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(b) Illegality or Legal Constraint. No temporary restraining order,
preliminary or permanent injunction or other order or restraint issued by any
court of competent jurisdiction, no statute, rule, regulation, order, decree,
restraint or pronouncement by any Governmental Entity, and no other legal
restraint or prohibition which would prevent or have the effect of preventing
the consummation of the Acquisition shall have been issued or adopted or be in
effect.
(c) Governmental Authorizations. All permits, approvals, filings and
consents required or advisable to be obtained or made prior to the consummation
of the Acquisition under applicable federal laws or applicable laws of any state
or foreign country having jurisdiction over the Acquisition and the other
transactions contemplated herein shall have been obtained or made, as the case
may be, on terms and conditions satisfactory to the Company, the Shareholders,
Zygo and Zygo Sub, acting reasonably, including without limitation (all such
permits, approvals, filings and consents and the lapse of all such waiting
periods being referred to as the "Requisite Regulatory Approvals"), and all such
Requisite Regulatory Approvals shall be in full force and effect.
(d) Valuation. There shall have been delivered by an investment
banking firm reasonably acceptable to Zygo and Francis E. Lundy an appraisal,
dated as of a date reasonably close to the Closing Date, concluding that the
value of the Distribution Division is $1,600,000.
(e) Escrow Agreement. Zygo, the Shareholders and the Escrow Agent
shall have executed the Escrow Agreement in the form of Exhibit 7.01(e) hereof.
(f) Distribution and Services Agreement. Newco and Zygo shall have
executed and delivered to the other the Distribution and Services Agreement in
the form of Exhibit 7.01(f) hereof.
Section 7.02. Conditions to the Obligations of Zygo and Zygo Sub to Effect
the Acquisition. The obligations of Zygo and Zygo Sub under this Agreement to
effect the Acquisition are subject to the fulfillment or satisfaction, at or
prior to the execution of this Agreement, of the following conditions, unless
waived by Zygo and Zygo Sub in their sole discretion:
(a) Consents. Any consent required for the consummation of the
Acquisition under any material Contract or License or for the continued
enjoyment by the Company of the benefits of any such contract or license after
the Acquisition shall have been obtained.
(b) Opinion of Counsel. Zygo shall have received the opinion of
Pillsbury Madison & Sutro LLP, counsel to the Company and the Shareholders,
dated as of the Closing Date, in the form of Exhibit 7.02(b) hereto.
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(c) Proceedings; Receipt of Documents. All corporate and other
proceedings taken or required to be taken in connection with the transactions
contemplated hereby and all documents incident thereto shall be reasonably
satisfactory in form and substance to Zygo and Zygo's counsel, and Zygo and
Zygo's counsel shall have received all such information and such counterpart
originals or certified or other copies of such documents as Zygo or its counsel
may reasonably request. Zygo shall have received such other instruments,
approvals and other documents as it may reasonably request to make effective the
transactions contemplated hereby.
(d) Options, Warrants and other Convertible Securities. All options,
warrants and other convertible securities to purchase shares of Company Stock
shall have been exercised or surrendered to the Company for cancellation without
any further liability on the part of Zygo or the Company.
(e) Employment, Non-Compete, Non-Disclosure and Non-Solicitation
Agreements. Each of the individuals listed on Schedule 4 hereto shall have
entered into an employment and non-compete agreement with the Company, in the
form of Exhibit 7.02(e)(1) hereto; and Francis E. Lundy shall have entered into
an employment agreement with the Company in the form of Exhibit 7.02(e)(2)
hereto and a non-compete, non-disclosure and non-solicitation agreement with
Zygo in the form of Exhibit 7.02(e)(3) hereto.
(f) Fairness Opinion. Zygo shall have received from Needham and
Company, Inc., its financial advisor, an opinion to the effect that, as of the
date hereof, the consideration to be paid in the Acquisition is fair, from a
financial point of view, to Zygo and its stockholders, and Needham and Company,
Inc. shall not have withdrawn such opinion on or prior to the Closing Date.
(g) Audited Financial Statements. Zygo shall have received from the
Company financial statements of the Company prepared in accordance with
generally accepted accounting principles and audited by Grant Thornton LLP or
another accounting firm reasonably acceptable to Zygo with an unqualified
independent auditors' report for the last three fiscal years, together with any
other required financial data, all of which financial statements and data must
comply with the requirements of Commission Regulation S-X for use by Zygo in
complying with the historical financial statement requirements of Form 8-K. The
financial statements will comply with EITF No. 95-18, "Accounting and Reporting
for a Discontinued Business Segment when the Measurement Date occurs after the
Balance Sheet Date but before the Issuance of Financial Statements" and APB No.
30, "Reporting the Results of Operation" whereby the Division will be reported
as a continuing business and the Distribution Division and related segment
results will be reported as a discontinued business. In addition, the Company
shall have provided to Zygo any audited or other financial statements or data,
prepared in accordance with generally accepted accounting principles and
audited, if applicable, by Grant Thornton LLP or another accounting firm
reasonably acceptable to Zygo, required with respect to the Company's historical
or present interest in Syncotec GMBH for use by Zygo in complying with the
historical
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financial statement requirements of Form 8-K, all of which financial statements
and data must comply with the requirements of the Commission Regulation S-X.
(h) Comfort Letter. Zygo shall have received a letter, dated as of the
date hereof, from Grant Thornton LLP, independent public accountants for the
Company, in form and substance reasonably satisfactory to Zygo, to the effect
that (i) they are independent accountants within the meaning of the Securities
Act and the rules and regulations thereunder, (ii) in their opinion, the Audited
Financial Statements of the Company which were reported on by such firm comply
as to form in all material respects with the applicable accounting requirements
of the Securities Act and the Exchange Act and the requirements of Regulation
S-X of the Commission for continued use by Zygo in its financial statements,
Zygo Exchange Act Filings and other filings with the Commission, (iii) on the
basis of limited procedures specified in their letter, which need not constitute
an audit in accordance with generally accepted auditing standards, nothing has
come to their attention which would give them reason to believe that (A) the
unaudited consolidated financial statements of the Company and the Division at
March 31, 1996 and for the three months ended March 31, 1996 and 1995 do not
comply as to form in all material respects with the applicable accounting
requirements of the Securities Act and the Exchange Act, (B) since December 31,
1995 to the date of such letter there has been (1) any change in the outstanding
capital stock (other than as a result of the exercise of outstanding options or
warrants) or rights, securities, options or obligations exercisable for or
convertible into shares of capital stock of the Company (2) any increase in the
long term debt or short term borrowings of the Company or the Division or (3)
any decrease in total assets or working capital of the Company or the Division
or (C) for the period from December 31, 1995 to the end of the month for which
the latest consolidated unaudited financial statements of the Company are
available, there has been any decrease, as compared with the corresponding prior
period, in revenues, gross profit, operating profit or net income, except in all
instances for any such increase, change or decrease contemplated by or disclosed
pursuant to this Agreement.
(i) Exercise of Syncotec Option. The Company shall have exercised the
Syncotec Option in accordance with the terms of the option and shall not have
directly or indirectly, offered, offered to sell, sold, contracted to sell,
granted any option to purchase or otherwise transferred or disposed of all or
any portion of the Syncotec Interest.
(j) Consent to Use the Company's Audited Financial Statements. Zygo
shall have received from Grant Thornton LLP consents to use the Company's
Audited Financial Statements in documents relating to this transaction.
(k) Lock-up Agreement. Zygo shall have received from each of the
Shareholders a written agreement, in the form of Exhibit 7.02(k) hereto,
prohibiting the transfer, sale or other disposition of any of the Zygo Common
Stock issued in the Merger for two years from the Closing Date.
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(l) FIRPTA Affidavit. The Shareholders shall have executed and
delivered to Zygo an affidavit pursuant to Section 1445(b)(3) of the Code in the
form attached hereto as Exhibit 7.02(l).
(m) Supporting Documents. Zygo and its counsel shall have received
copies of the following documents:
(i) (A) the Articles of Incorporation of the Company certified as
of a recent date by the Secretary of State of the State of California,
(B) a certificate of said Secretary dated as of a recent date as to
the due incorporation and good standing of the Company, and listing
all documents of such entity on file with said Secretary, (C) a
certificate from the Secretary of State of each state or jurisdiction
listed on the Disclosure Schedule as to the Company's qualification,
good standing and payment of taxes in each such state;
(ii) a certificate of the Secretary or an Assistant Secretary (or
other officer or director executing such certificate) of the Company
dated the Closing Date and certifying (A) that attached thereto is a
true and complete copy of the By-laws of the Company as in effect on
the date of such certification; (B) that attached thereto is a true
and complete copy of all resolutions adopted by the Board of Directors
and the shareholders of the Company authorizing the execution,
delivery and performance of this Agreement and the other agreements
contemplated hereby to which the Company is a party, and the
consummation of the Agreement and the other agreements contemplated
hereby to which the Company is a party, and that all such resolutions
are in full force and effect and are all the resolutions adopted in
connection with the transactions contemplated hereby, and (C) to the
incumbency and specimen signature of each officer or director of the
Company executing this Agreement and any certificate or instrument
furnished pursuant hereto, and a certification by another officer or
director of the Company as to the incumbency and signature of the
officer or director signing the certificate referred to in this clause
(ii); and
(iii) such additional similar supporting documents and other
information with respect to the operations and affairs of the Company
as Zygo or its counsel may reasonably request.
All such documents shall be satisfactory in form and substance to Zygo and its
counsel.
Section 7.03. Conditions to the Obligations of the Company and the
Shareholders to Effect the Acquisition. The obligations of the Company and the
Shareholders under this Agreement to effect the Acquisition are subject to the
fulfillment or satisfaction, at or prior to the execution of this Agreement of
the
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following conditions, unless waived by the Company and the Shareholders in their
sole discretion:
(a) Opinion of Counsel. The Company and the Shareholders shall have
received the opinion of Fulbright & Jaworski L.L.P., counsel to Zygo, in the
form of Exhibit 7.03(a) hereto.
(b) Proceedings; Receipt of Documents. All corporate and other
proceedings taken or required to be taken in connection with the transactions
contemplated hereby and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Company and the Shareholders and
counsel to the Company and the Shareholders, and the Company, the Shareholders
and counsel to the Company and the Shareholders shall have received all such
information and such counterpart originals or certified or other copies of such
documents as the Company or their counsel may reasonably request. The Company
and the Shareholders shall have received such other instruments, approvals and
other documents as it may reasonably request to make effective the transactions
contemplated hereby.
(c) Supporting Documents. The Company and the Shareholders and their
counsel shall have received copies of the following documents:
(i) a certificate of the Secretary or an Assistant Secretary of Zygo
dated the Closing Date and certifying: (A) that attached thereto is a true
and complete copy of the Certificate of Incorporation and By-laws of Zygo
as in effect on the date of such certification; (B) that attached thereto
is a true and complete copy of all resolutions adopted by the Board of
Directors of Zygo authorizing the execution, delivery and performance of
this Agreement and the other agreements contemplated hereby, and the
consummation of the Agreement and the other agreements contemplated hereby,
and that all such resolutions are in full force and effect and are all the
resolutions adopted in connection with the transactions contemplated
hereby, and (C) to the incumbency and specimen signature of each officer or
director of Zygo executing this Agreement and any certifiable or instrument
furnished pursuant hereto, and a certification by another officer or
director of Zygo as to the incumbency and signature of the officer or
director signing the certificate referred to in this clause (i); and
(ii) (A) the Articles of Incorporation of Zygo Sub, certified as of a
recent date by the Secretary of State of the State of California, and (B) a
certificate of said Secretary dated as of a recent date as to the due
incorporation and good standing of Zygo Sub, the payment of all excise
taxes by Zygo Sub and listing all documents of Zygo Sub on file with said
Secretary;
(iii) a certificate of the Secretary or an Assistant Secretary of Zygo
Sub dated the Closing Date and certifying: (A) that attached thereto is a
true and complete copy of the By-laws of Zygo Sub as in effect on the date
of such certification; (B) that attached thereto is a true and complete
copy of all
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resolutions adopted by the Board of Directors of Zygo Sub authorizing the
execution, delivery and performance of this Agreement and the other
agreements contemplated hereby, and the consummation of the Agreement and
the other agreements contemplated hereby, and that all such resolutions are
in full force and effect and are all the resolutions adopted in connection
with the transactions contemplated hereby, and (C) to the incumbency and
specimen signature of each officer or director of Zygo Sub executing this
Agreement and any certificate or instrument furnished pursuant hereto, and
a certification by another officer or director of Zygo Sub as to the
incumbency and signature of the officer or director signing the certificate
referred to in this clause (iii); and
(iv) such additional supporting documents and other information with
respect to the consummation of the transaction contemplated hereby as the
Company, the Shareholders or their counsel may reasonably request.
ARTICLE VIII.
INDEMNIFICATION
Section 8.01. Indemnification by the Shareholders.
(a) Joint Indemnification. Subject to the provisions of Section 8.03,
the Shareholders shall jointly and severally indemnify, defend and hold harmless
Zygo and its officers, directors, employees, agents and representatives from and
against and in respect of any and all losses, damages, expenses, liabilities,
claims, settlements, assessments and judgments (including reasonable costs and
attorney's fees and other expenses arising out of any claim, or the defense,
settlement or investigation thereof, made with respect to any of the foregoing)
(collectively, "Losses") incurred or suffered by Zygo or the Company, arising
out of, based upon or resulting from
(i) any inaccuracy, misrepresentation or breach of representation
and warranty contained in Article III of this Agreement or non-fulfillment
of any covenant or agreement of the Company or any Shareholder contained in
this Agreement or any certificate or instrument furnished pursuant hereto
(other than any covenant or agreement of a Shareholder contained in Section
2.10 hereof); provided, however, that for purposes of this subsection
8.01(a)(i), all such representations and warranties (other than the
representations and warranties contained in Sections 3.07(f), 3.12, 3.14,
3.16, 3.22, 3.26 and 3.30 hereof), shall be deemed to have been made
without any qualification as to materiality or Knowledge (other than with
respect to Knowledge of a matter that is threatened against the Company);
(ii) any claim relating to the matters described in Section
3.12(Items 1, 3 and 4 only) of the Disclosure Schedule;
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(iii) the Contribution, the Newco Share Exchange or the operation
of the Distribution Division by Newco on or after the Closing Date; and
(iv) arising under the TIC Retirement Plan.
(b) Several Indemnification. Subject to the provisions of Section
8.03, each Shareholder shall severally indemnify, defend and hold harmless Zygo
and its officers, directors, employees, agents and representatives from and
against and in respect of any and all Losses incurred or suffered by Zygo or the
Company, arising out of, based upon or resulting from any inaccuracy,
misrepresentation or breach by such Shareholder of any of his or its
representations and warranties contained in Article IV of this Agreement or any
certificate or instrument furnished pursuant hereto or any covenant or agreement
of such Shareholder contained in Section 2.10 hereof. In addition, subject to
the provisions of Section 8.03, Francis E. Lundy shall indemnify, defend and
hold harmless Zygo and its officers, directors, employees, agents and
representatives from and against and in respect of any and all Losses incurred
or suffered by Zygo or the Company, arising out of, based upon or resulting from
any inaccuracy, misrepresentation or breach by Inspectron Development Partners,
a California Limited Partnership, of any of its representations and warranties
contained in Article IV of this Agreement or any certificate or instrument
furnished pursuant hereto or any covenant or agreement of such Shareholder
contained in Section 2.10 hereof.
Section 8.02. Indemnification by Zygo. Subject to the provisions of
Section 8.03, Zygo shall indemnify, defend and hold harmless each of the
Shareholders and their respective Affiliates, successors and assigns, from and
against and in respect of any Losses incurred or suffered by the Shareholders or
their respective Affiliates, successors and assigns, arising out of, based upon
or resulting from any inaccuracy, misrepresentation or breach by Zygo or Zygo
Sub of any of their representations and warranties or non-fulfillment of any of
their respective covenants or agreements contained in this Agreement or any
certificate or instrument furnished pursuant hereto; provided, however, that for
purposes of this Section 8.02, all such representations, warranties, covenants
and agreements (other than the representations and warranties contained in
Sections 5.06, 5.07(b) and 5.11 hereof) shall be deemed to have been made
without any qualification as to materiality or Knowledge.
Section 8.03. Limitations. (a) No party hereto shall be entitled to make
any claim for indemnification under this Article VIII with respect to the
inaccuracy, misrepresentation or breach of any representation and warranty or
non-fulfillment of any covenant or agreement contained in this Agreement after
the date on which such representation, warranty, covenant or agreement ceases to
survive pursuant to Section 8.06.
(b) Notwithstanding anything to the contrary contained herein, (i) no
Indemnified Party (as defined below) shall be entitled to indemnification from
an
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Indemnifying Party (as defined below) pursuant to any of Sections 8.01(a)(i),
8.01(b) and 8.02 hereof, (x) until the aggregate losses suffered by such
Indemnified Party and for which indemnification is available hereunder exceed
$250,000, whereupon the Indemnified Party shall be entitled to claim
indemnification for all losses suffered by such Indemnified Party and for which
indemnification is available hereunder; provided, however, that this $250,000
threshold shall not be applicable with respect to a breach of any covenant in
Sections 2.09, 2.10 or 3.17 or resulting from a breach of the representations
and warranties contained in Sections 3.03, 3.04, 3.17, 3.20, 3.28, 3.29, 4.01,
4.02, 4.05 and 5.03 of this Agreement or (y) to the extent the Indemnifying
Party can prove that the Indemnified Party had Knowledge of the inaccuracy,
misrepresentation or breach of the representation or warranty for which
indemnification is sought at the time of the Closing and (ii) the aggregate
liability of the Shareholders for indemnification pursuant to Section 8.01(a)(i)
for any breach of the representations and warranties contained in Section 3.08
hereof (a "3.08 Breach") shall be limited to 50% of the aggregate amount of
Losses arising out of, based upon or resulting from such 3.08 Breach, provided
that the facts or circumstances giving rise to such 3.08 Breach do not
constitute a breach of any other representation or warranty contained in Article
III of the Agreement. An Indemnifying Party's maximum liability hereunder shall
be equal to $5.275854 per share multiplied by the number of shares of Company
Stock held by such Indemnifying Party immediately prior to the Effective Time or
in the case of Zygo, $5.275854 multiplied by the total number of shares of
Company Stock held by the Shareholders immediately prior to the Effective Time
and converted at the Effective Time.
(c) Any claim by one party to this Agreement against any other party
to this Agreement for breach of any covenant or representation and warranty in
this Agreement shall be subject to the limitations set forth in this Article
VIII; provided, however, that such limitations shall not apply to any fraud
claim.
Section 8.04. Notice and Defense of Claims. Each party entitled to
indemnification under this Article VIII (the "Indemnified Party") shall give
written notice to the party or parties required to provide indemnification (the
"Indemnifying Party") promptly after such Indemnified Party has actual knowledge
of any claim as to which indemnity may be sought, and, in the event of any claim
or demand asserted by a third party; but the failure of any Indemnified Party to
timely give written notice as provided herein shall not relieve the Indemnifying
Party of its obligations under this Agreement unless such failure to give notice
materially adversely affected the ability of the Indemnifying Party to defend
such claim. Upon receipt of any such notice, the Indemnifying Party may elect to
defend the Indemnified Party against such claim, suit, action or proceeding, at
its own expense, through counsel of its own choice that is reasonably acceptable
to the Indemnified Party, and from and after such election and for so long as
the Indemnifying Party is diligently prosecuting such defense, the Indemnifying
Party shall not be responsible for any legal fees or expenses of the Indemnified
Party, other than reasonable costs of investigation and subject to Section 8.03
hereof. Failing such election or reasonably diligent prosecution, the
Indemnified Party shall have the right to (but shall not be obligated to) pay,
compromise or defend
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the same. In any claim, suit, action or proceeding defended by the Indemnifying
Party, the Indemnified Party may participate, at its expense, in the defense of
the same. The Indemnifying Party in the defense of any such claim, suit, action
or proceeding shall not, except with the consent of the Indemnified Party,
consent to the entry of any judgment or entry into any settlement which (i) does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to the Indemnified Party of a release from all liability in respect to
such claim, suit, action or proceeding or (ii) requires the performance of any
act (other than the payment of moneys for which such Indemnified Party is held
harmless hereunder) or the agreement not to perform any act by the Indemnified
Party. The Indemnified Party shall not settle or compromise any such claim
without the prior written consent of the Indemnifying Party, which consent shall
not be unreasonably withheld. The Indemnified Party shall furnish such
information regarding itself or the claim in question as the Indemnifying Party
may reasonably request in writing and as shall be reasonably required in
connection with defense of such claim, suit, action or proceeding resulting
therefrom.
Section 8.05. Non-Exclusive Remedy. Indemnification pursuant to this
Agreement shall not preclude Zygo, the Shareholders or the Company from
exercising any other remedies it may have, including, without limitation, in the
case of Zygo, pursuant to the Escrow Agreement, subject to the limitations set
forth in Sections 8.03 and 8.04 hereof; provided that the recovery of money
damages for any breach of this Agreement shall in all cases be limited as
provided in Section 8.03 hereof; and provided further that such limitations
shall not apply to any fraud claim. In order to secure the performance by the
Shareholders of their respective obligations hereunder, each Shareholder will
enter into the Escrow Agreement.
Section 8.06. Survival of Representations and Warranties. All of the
representations, warranties and agreements contained in this Agreement shall
survive the Closing and shall remain in full force and effect until the
expiration of eighteen (18) months from the Closing Date and, thereafter, to the
extent a claim, in writing and setting forth the specific facts giving rise to
such claim, is made prior to such expiration with respect to any breach of such
representation, warranty or agreement, until such claim is finally determined or
settled; provided, however, that the representations, warranties and agreements
of the Company and the Shareholders relating to (i) environmental matters and
intellectual property rights shall survive and remain in full force and effect
for three years, (ii) Taxes and governmental assessments shall remain in full
force and effect until the expiration of the applicable statute of limitations
(including any extensions thereof), and provided further that the
representations and warranties set forth in Sections 3.03, 3.05, 3.17 (with
respect to the TIC Retirement Plan only) 3.20, 4.01, 4.03, 4.05 and 5.04 shall
survive and remain in full force and effect forever.
Section 8.07. Reimbursement. Subject to Section 8.03 hereof, at the time
that the Indemnified Party shall suffer a loss because of a breach of any
warranty, representation or covenant by the Indemnifying Party or at the time
the amount of any liability on the part of the Indemnifying Party under this
Agreement is determined
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(which in the case of payment to third persons shall be the earlier of (i) the
date of such payment, provided that the Indemnified Party has fully complied
with Section 8.04, or (ii) the date that a court of competent jurisdiction shall
enter a final judgment, order or decree (after exhaustion or expiration of
appeal rights) establishing such liability) (such loss or amount being
hereinafter referred to as the "Indemnity Claim")), the Indemnifying Party shall
forthwith, upon notice from the Indemnified Party, pay to the Indemnified Party
the amount of the Indemnity Claim. The Indemnity Claim shall be paid in cash. If
such amount is not paid forthwith, then the Indemnified Party may, at its
option, take legal action against the Indemnifying Party for reimbursement in
the amount of its Indemnity Claim. For purposes hereof the Indemnity Claim shall
include the amounts so paid, or determined to be owing by the Indemnified Party
together with costs and reasonable attorney's fees and interest on the foregoing
items (but only to the extent pre-judgment interest due the Indemnified Party is
not already included within such items) at the rate of ten percent (10%) per
annum from the date the Indemnity Claim is due from the Indemnifying Party to
the Indemnified Party as hereinabove provided until the Indemnity Claim shall be
paid.
In addition to its other obligations under this Section 8.07, the
Indemnifying Party agrees that, as an interim measure during the pendency of any
claim, action, investigation, inquiry or other proceeding for which
indemnification may be required pursuant to this Article VIII, it will, if it
does not assume the defense thereof, reimburse the Indemnified Party on a
monthly basis for all reasonable legal fees or the out-of-pocket expenses
reasonably incurred in connection with investigating or defending any such
claim, action, investigation, inquiry or other proceeding, notwithstanding the
absence of a judicial determination as to the propriety and enforceability of
the Indemnifying Party's obligation to indemnify the Indemnifying Party for such
expenses and the possibility that such payments might later be held to have been
improper by a court of competent jurisdiction. To the extent that any such
interim reimbursement payment is so held to have been improper, the Indemnified
Party shall promptly return it to the Indemnifying Party, together with interest
at the rate of ten percent (10%) per annum. Any such interim reimbursement
payments which are not made to the Indemnified Party within thirty (30) days of
a request for reimbursement shall bear interest at the rate of ten percent (10%)
per annum from the date of such request.
Section 8.08. Other Indemnification Provision. Each of the Shareholders
hereby agrees that he or it will not make any claim for indemnification against
the Company by reason of the fact that he or it was a stockholder, director,
officer, employee or agent of the Company or was serving at the request of the
Company as a director, officer, employee or agent of another entity (whether
such claim is for judgments, damages, penalties, fines, costs, amounts paid in
settlement, losses, expenses or otherwise and whether such claim is pursuant to
any statute, charter document, by-law, agreement or otherwise) with respect to
any action, suit, proceeding, complaint, claim or demand brought by Zygo against
such Shareholder (whether such action, suit, proceeding, complaint, claim or
demand is pursuant to this Agreement, applicable law or otherwise).
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<PAGE>
Section 8.09. Contribution Among Shareholders. In the event that any
Shareholder makes an indemnification payment pursuant to Section 8.01(a) hereof
with respect to Losses incurred or suffered by Zygo as a result of any matter
and the amount of such payment exceeds such Shareholder's pro rata portion
(based on the number of shares of Company Stock held by such Shareholder at the
time of the Closing in relation to the total number of shares of Company Stock
held by all Shareholders at such time) of the total Losses suffered or incurred
by Zygo as a result of such matter, then each other Shareholder shall upon
notice thereof, promptly pay to such Shareholder an amount equal to such other
Shareholder's pro rata portion of such Losses (less any amount previously paid
pursuant to Section 8.01(a) hereof by such other Shareholder with respect to
such Losses). Nothing in this Section 8.09 shall affect the indemnification
provisions of this Article VIII as between the Shareholders, on the one hand,
and Zygo, on the other hand.
ARTICLE IX.
GENERAL PROVISIONS
Section 9.01. Taking of Necessary Action. In case at any time after the
Closing any further action is necessary or desirable to carry out the purposes
of this Agreement, each of the parties hereto agrees, subject to applicable
laws, to use all reasonable efforts promptly to take or cause to be taken all
further action and promptly to do or cause to be done all further things
(including the execution and delivery of such further instruments and documents)
as any party reasonably may request.
Section 9.02. Effect of Due Diligence. No investigation by or on behalf of
Zygo or Zygo Sub into the business, operations, prospects, assets or condition
(financial or otherwise) of the Company shall diminish in any way the effect of
any representations or warranties made by the Company or any of the Shareholders
in this Agreement or shall relieve the Company or any of the Shareholders of any
of their obligations under this Agreement. No investigation by or on behalf of
the Company or the Shareholders into the business, operations, prospects, assets
or condition (financial or otherwise) of Zygo and the Zygo Subsidiaries shall
diminish in any way the effect of any representations or warranties made by Zygo
or Zygo Sub in this Agreement or shall relieve Zygo or Zygo Sub of any of their
obligations under this Agreement.
Section 9.03. Expenses. Except as hereinafter provided, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring the same. All costs and
expenses incurred by the Company or the Shareholders shall be paid prior to the
Closing Date or accrued as an expense on the Closing Date Balance Sheet or other
suitable arrangements acceptable to Zygo with respect thereto shall be made.
Notwithstanding the foregoing, Zygo shall reimburse the Company on a current
basis for any incremental accounting fees incurred by the Company which relate
to the exclusion of the Distribution Division from the audited financial
statements of the Company, up to a maximum of $25,000.
-55-
<PAGE>
Section 9.04. Successors and Assigns. This Agreement will inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns, heirs, executors, administrators and legal
representatives. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto without the
prior written consent of the other parties hereto.
Section 9.05. Entire Agreement. This Agreement and the other documents
referred to herein contain the entire agreement among the parties hereto with
respect to the transactions contemplated hereby, and controls and supersedes any
prior understandings, agreements or representations by or between the parties,
written or oral, which conflicts with, or may have related to, the subject
matter hereof in any way, including without limitation that certain letter of
intent, dated June 28, 1996, by and among Zygo, the Company and each of the
Shareholders.
Section 9.06. Notices. All notices or other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered
personally or sent by telefax communication, by recognized overnight courier
marked for overnight delivery, or by registered or certified mail, postage
prepaid, addressed as follows:
(a) If to Technical Instrument Company, 348 Sixth Street, San
Francisco, California; Attention: Francis E. Lundy (telefax number
408-434-0759); with a copy to Pillsbury Madison & Sutro LLP, 235 Montgomery
Street, San Francisco, California 94104, Attention: James M. Canty, Esq.
(telefax number 415-477-4722),
(b) If to Zygo or Zygo Sub, Laurel Brook Road, Middlefield,
Connecticut 06455-0448, Attention: Gary K. Willis (telefax number 203-347-8372);
with a copy to: Fulbright & Jaworski L.L.P., 666 Fifth Avenue, New York, New
York 10103, Attention: Paul Jacobs, Esq. (telefax number 212-752-5958), and
(c) If to the Shareholders, to the address specified in Schedule 1
hereto; with a copy to Pillsbury Madison & Sutro LLP, 235 Montgomery Street, San
Francisco, California 94104, Attention: James M. Canty, Esq. (telefax number
415-477-4722),
or such other addresses as shall be furnished by like notice by such party. All
such notices and communications shall, when telefaxed (immediately thereafter
confirmed by telephone), be effective when telefaxed, or if sent by nationally
recognized overnight courier service, be effective one Business Day after the
same has been delivered to such courier service marked for overnight delivery,
or, if mailed, be effective when received.
Section 9.07. Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Delaware,
without reference to or application of any conflicts of laws principles.
-56-
<PAGE>
Section 9.08. No Third Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the parties and their
respective successors and permitted assigns.
Section 9.09. Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
each of the parties hereto. No waiver by any party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent such
occurrence.
Section 9.10. Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
Section 9.11. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement.
Section 9.12. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-57-
<PAGE>
Section 9.13. Headings. The headings used in this Agreement are for
convenience only and are not to be considered in construing or interpreting any
term or provision of this Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties hereto as of the date first written
above.
TECHNICAL INSTRUMENT COMPANY
By:/s/ Francis E. Lundy
--------------------------------
Name: Francis E. Lundy
Title: President
ZYGO CORPORATION
By:/s/ Gary K. Willis
--------------------------------
Name: Gary K. Willis
Title: President
ZYGO ACQUISITION CORPORATION
By:/s/ Gary K. Willis
--------------------------------
Name: Gary K. Willis
Title: Chairman of the Board
/s/ Francis E. Lundy
------------------------------------
Francis E. Lundy
LUNDY 1996 CHARITABLE TRUST
(UTD June 28, 1996)
By:/s/ Francis E. Lundy
------------------------------
Francis E. Lundy, Co-Trustee
By:/s/ Barbara E. Lundy
------------------------------
Barbara E. Lundy, Co-Trustee
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<PAGE>
By:/s/ Janet Masucci
--------------------------------
Janet Masucci, Co-Trustee
FRANK J. SCHEUFELE TRUST
(UDT dated October 5, 1983)
By:/s/ Frank J. Scheufele
--------------------------------
Frank J. Scheufele, Trustee
THE SHERMAN FAMILY LIVING TRUST
(UDT dated April 22, 1985)
By:/s/ Roger K. Sherman
--------------------------------
Roger K. Sherman, Co-Trustee
By:/s/ Elizabeth R. Sherman
--------------------------------
Elizabeth R. Sherman, Co-Trustee
/s/ David Lytle
-------------------------------------
David Lytle
INSPECTRON DEVELOPMENT
PARTNERS, a California
Limited Partnership
By:/s/ Francis E. Lundy
----------------------------------
Name: Francis E. Lundy
Title: General Partner
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<PAGE>
EXHIBIT 2.02(b)
AGREEMENT OF MERGER
OF
ZYGO ACQUISITION CORPORATION
a California corporation
WITH AND INTO
TECHNICAL INSTRUMENT COMPANY
a California corporation
Agreement of Merger entered into as of this _____ day of August 1996
by Technical Instrument Company, a California corporation ("Surviving
Corporation") and Zygo Acquisition Corporation, a California corporation
("Terminating Corporation").
WHEREAS, Terminating Corporation is a business corporation of the
State of California with registered office therein located at c/o CT Corporation
System, 49 Stevenson Street, Suite 900, San Francisco, California 94105.
WHEREAS, the total number of shares of capital stock which Terminating
Corporation has authority to issue is 1,000 shares of common stock, all of which
are of one class, without par value;
WHEREAS, Surviving Corporation is a business corporation of the State
of California with its principal office therein located at 348 Sixth Street, San
Francisco, California 94103;
WHEREAS, the total number of shares of capital stock which Surviving
Corporation has authority to issue is 100,000,000 shares of stock, all of which
are of one class and without par value; and
WHEREAS, Terminating Corporation and Surviving Corporation and the
Boards of Directors thereof deem it advisable and to the advantage, welfare and
best interests of said corporations and their respective shareholders to merge
Terminating Corporation with and into Surviving Corporation pursuant to the
provisions of the General Corporation Law of the State of California upon the
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements of the parties hereto, being thereunto duly entered into by
Terminating Corporation and approved by resolution of its Board of Directors and
being thereunto duly entered into by Surviving Corporation and approved by a
resolution adopted by its Board of Directors, the Agreement of Merger and the
terms and conditions thereof
<PAGE>
and the mode of carrying the same into effect, together with any provisions
required or permitted to be set forth therein, are hereby determined and agreed
upon as hereinafter in this Agreement set forth.
1. Terminating Corporation and Surviving Corporation will, pursuant to
the provisions of the General Corporation Law of the State of California, be
merged with and into a single corporation, to wit, Technical Instrument Company,
a California corporation, which will be the surviving corporation from and after
the effective time of the merger, and which will continue to exist as said
Surviving Corporation under its present name pursuant to the provisions of the
General Corporation Law of the State of California. The separate corporate
existence of Surviving Corporation, with all its purposes, objects, rights,
privileges, powers, certificates and franchises, will continue unimpaired by the
merger. At the effective time of the merger, Surviving Corporation will succeed
to all the properties and assets of the constituent corporations to the merger
and to all debts, choses in action and other interests due or belonging to the
constituent corporations and will be subject to, and responsible for, all the
debts, liabilities and duties of the constituent corporations with the effects
provided by applicable provisions of the General Corporation Law of the State of
California. The separate existence of Terminating Corporation will cease at said
effective time in accordance with the provisions of the General Corporation Law
of the State of California.
2. The Articles of Incorporation of the Company in effect immediately
prior to the effective time of the merger shall be the Articles of Incorporation
of the Surviving Corporation until amended in accordance with the provisions of
California Law, except that at the effective time of the merger the Articles of
Incorporation of the Company shall be amended by striking out Article Five
thereof and by substituting in lieu of said Article the following new Article
Five and by adding Article Six and Article Seven:
"ARTICLE FIVE: This corporation is hereby authorized to
indemnify, whether by bylaw, agreement or otherwise, any
person who is or was a director, officer, employee or other
agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee
or agent of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise, or
was a director, officer, employee or agent of a foreign or
domestic corporation which was a predecessor corporation of
the corporation or of another enterprise at the request of
the predecessor corporation, in excess of the
indemnification expressly permitted by Section 317 of the
General Corporation Law of California for such agents for
breach of duty to the corporation and its shareholders, to
the fullest extent permissible under California law."
-2-
<PAGE>
"ARTICLE SIX: Any repeal or modification of the
provisions of Article Four or Article Five by the
shareholders of this corporation shall be prospective only,
and not adversely affect any right or protection of a
director, officer, employee or other agent (including any
person described in Article Five above) of this corporation
existing at the time of such repeal or modification."
"ARTICLE SEVEN: If the General Corporation Law of
California hereafter is amended to authorize the further
elimination or limitation of the liability of directors of
the corporation, then the liability of a director of the
corporation shall be limited to the fullest extent permitted
by the amended General Corporation Law of California; and if
the General Corporation Law of California is amended to
authorize the further indemnification of directors of the
corporation, then the indemnification of a director of the
corporation shall be to the fullest extent permitted by the
General Corporation Law of California."
3. The By-laws of Terminating Corporation immediately prior to the
effective time of the merger will be the By-laws of Surviving Corporation and
will continue in full force and effect until changed, altered or amended as
therein provided and in the manner prescribed by the provisions of the General
Corporation Law of the State of California.
4. The directors of Terminating Corporation immediately prior to the
effective time of the merger will be the directors of Surviving Corporation from
and after said effective time and will hold office in accordance with the
Articles of Incorporation and By-laws of Surviving Corporation until their
respective successors are duly elected or appointed and qualified.
5. The officers of Terminating Corporation immediately prior to the
effective time of the merger will be the officers of Surviving Corporation from
and after said effective time and will hold office in accordance with the
Articles of Incorporation and By-laws of Surviving Corporation until their
respective successors are duly elected or appointed and qualified.
6. Except for shares of Surviving Corporation owned by Terminating
Corporation immediately prior to the effective time of the merger, which shares
will be cancelled without any consideration being payable therefor as of the
effective time of the merger and without any action on the part of the holders
of any shares of capital stock of Surviving Corporation, or the holder of any
shares of common stock of Terminating Corporation: (a) each share of stock
issued and outstanding of Surviving Corporation immediately prior to the
effective time of the merger (other than shares held by Terminating Corporation)
will be converted at the effective time into the right to receive in cash
$4.16587 per share of Surviving Corporation stock ("Surviving
-3-
<PAGE>
Corporation Stock"), and .036245 shares of the common stock, $.10 par value per
share ("Zygo Common Stock"), of Zygo Corporation, a Delaware corporation and the
owner of all the outstanding capital stock of Terminating Corporation; and (b)
each share of common stock of the Terminating Corporation outstanding
immediately prior to the effective time of the merger will be converted into one
share of stock of the Surviving Corporation. As of and after the effective time
of the merger, no holder of any certificate that immediately before the
effective time represented shares of Surviving Corporation Stock, shall have any
rights as a holder of common stock of Surviving Corporation, other than to
receive the consideration specified in this paragraph 6.
7. No fractional shares of Zygo Common Stock and no certificates or
scrip therefor, or other evidence of ownership thereof, will be issued upon the
surrender for exchange of the certificates that immediately prior to the
effective time of the merger represented issued and outstanding shares of
Surviving Corporation Common Stock ("Old Certificates"). In lieu of any such
fractional share, each holder of an Old Certificate or Old Certificates who
would otherwise have been entitled to a fraction of a share of Zygo Common Stock
upon consummation of the merger will be paid upon surrender of an Old
Certificate or Old Certificates cash (rounded to the nearest whole cent),
without interest, in an amount equal to the product of (i) such fraction
multiplied by (ii) $30.625.
8. Whenever a dividend or other distribution is declared by Zygo in
respect of Zygo Common Stock, the record date for which is at or after the
effective time of the merger, that declaration shall include dividends or other
distributions in respect of all shares of Zygo Common Stock issuable pursuant to
this Agreement of Merger. No dividends or other distributions declared or made
after the effective time of the merger on Zygo Common Stock will be paid to any
holder of an Old Certificate until such Old Certificate is surrendered for
exchange. Subject to the effect of applicable laws, following surrender of any
such Old Certificate by any holder thereof, there will be paid to the holder of
the new certificate of Zygo Common Stock issued in exchange therefor, without
interest (i) at the time of such surrender, the amount of dividends or other
distributions with a record date after the effective time of the merger
theretofore payable with respect to the Zygo Common Stock represented thereby
and not paid, less the amount of any withholding taxes which may be required
thereon, and (ii) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the effective time of the merger
but prior to the time of such surrender and a payment date subsequent to the
time of such surrender payable with respect to the Zygo Common Stock represented
thereby, less the amount of any withholding taxes which may be required thereon.
9. This Agreement of Merger has been fully approved and adopted upon
behalf of Terminating Corporation in accordance with the provisions of the
General Corporation Law of the State of California and upon behalf of Surviving
Corporation in accordance with the provisions of the General Corporation law of
the State of California, and the said corporations agree that they will cause to
be executed and filed and recorded any document or documents prescribed by the
laws of the State
-4-
<PAGE>
of California, and that they will cause to be performed all necessary acts
within the State of California and elsewhere to effectuate the merger herein
provided for.
10. The Board of Directors and the proper officers of Terminating
Corporation and of Surviving Corporation are hereby authorized, empowered and
directed to do any and all acts and things, and to make, execute, deliver, file,
and record any and all instruments, papers and documents which shall be or
become necessary, proper or convenient to carry out or put into effect any of
the provisions of this Agreement of Merger or of the merger herein provided for.
-5-
<PAGE>
IN WITNESS WHEREOF, this Agreement of Merger is hereby executed upon
behalf of each of the constituent corporations parties thereto.
Dated: August ___, 1996
"Surviving Corporation"
TECHNICAL INSTRUMENT COMPANY, a
California corporation
By:
_________________________________________
Francis E. Lundy, President
By:
_________________________________________
Tamara Decker, Secretary
"Terminating Corporation"
ZYGO ACQUISITION CORPORATION, a
California corporation
By:
_________________________________________
Gary K. Willis, Chairman of the Board
By:
_________________________________________
Mark J. Bonney, Secretary
-6-
<PAGE>
CERTIFICATE OF SECRETARY
OF
TECHNICAL INSTRUMENT COMPANY,
a California corporation
The undersigned, being the Secretary of Technical Instrument Company,
a California corporation, does hereby certify that the holders of all of the
outstanding common stock of said corporation dispensed with a meeting and vote
of shareholders, and all of the shareholders entitled to vote consented in
writing, pursuant to the provisions of Section 603 of the General Corporation
Law of the State of California, to the adoption of the foregoing Agreement of
Merger.
Dated: August ___, 1996
_________________________________________
Tamara Decker, Secretary
<PAGE>
CERTIFICATE OF APPROVAL
OF
AGREEMENT OF MERGER
Gary K. Willis and Mark J. Bonney certify that:
1. They are the Chairman of the Board and the Secretary, respectively,
of Zygo Acquisition Corporation, a California corporation ("Zygo Sub").
2. The Agreement of Merger in the form attached, providing for the
merger of Zygo Sub with Technical Instrument Company, a California corporation,
was duly approved by the board of directors of Zygo Sub.
3. Zygo Sub has only one class of shares and the total number of
shares outstanding and entitled to vote on the merger is 1,000 shares of common
stock, no par value, with a majority of the outstanding shares of such class
required to approve the merger. The principal terms of the Agreement of Merger
in the form attached were approved by the unanimous written consent of Zygo
Sub's sole shareholder, Zygo Corporation, a Delaware Corporation (the "Parent").
4. Equity securities of the Parent are to be issued in the merger and
no vote of the stockholders of the Parent was required.
We further declare under penalty of perjury under the laws of the
State of California that the matters set forth in this certificate are true and
correct of our own knowledge.
Date: August ___, 1996
_________________________________________
Gary K. Willis, Chairman of the Board
_________________________________________
Mark J. Bonney, Secretary
<PAGE>
CERTIFICATE OF APPROVAL
OF
AGREEMENT OF MERGER
Francis E. Lundy and Tamara Decker certify that:
1. They are the President and the Secretary, respectively, of
Technical Instrument Company, a California corporation ("TIC").
2. The Agreement of Merger in the form attached, providing for the
merger of Zygo Acquisition Corporation, a California corporation, with TIC, was
duly approved by the board of directors of TIC.
3. TIC has only one class of shares and the total number of shares
outstanding and entitled to vote on the merger is 2,702,739 shares of stock, no
par value, with a majority of the outstanding shares of such class required to
approve the merger. The principal terms of the Agreement of Merger in the form
attached were approved by the unanimous written consent of the shareholders of
TIC.
We further declare under penalty of perjury under the laws of the
State of California that the matters set forth in this certificate are true and
correct of our own knowledge.
Date: August ___ , 1996
_________________________________________
Francis E. Lundy, President
_________________________________________
Tamara Decker, Secretary
<PAGE>
EXHIBIT 7.01(e)
ESCROW AGREEMENT
ESCROW AGREEMENT, dated August 7, 1996, by and among (i) Zygo Corporation,
a Delaware corporation ("Zygo"), (ii) the individuals and entities listed on
Schedule 1 hereto (the "Shareholders") and (iii) Continental Stock Transfer &
Trust Company (the "Escrow Agent").
B A C K G R O U N D F A C T S:
A. Pursuant to an Agreement and Plan of Merger dated as of August 7, 1996
(the "Merger Agreement"), by and among Zygo, Zygo Acquisition Corporation, a
California corporation and a wholly owned subsidiary of Zygo ("Zygo Sub"),
Technical Instrument Company, a California corporation ("TIC"), and the
Shareholders, Zygo Sub has been merged on the date hereof with and into TIC,
which, as the surviving corporation, has become a wholly owned subsidiary of
Zygo, and the Shareholders received as consideration (the "Merger
Consideration") for the outstanding shares of capital stock of TIC a combination
of cash and shares of the common stock, $.10 par value per share, of Zygo (the
"Zygo Common Stock").
B. Pursuant to the Merger Agreement, the Shareholders agreed to indemnify
Zygo for certain loss contingencies, and it is a requirement under the Merger
Agreement that the Shareholders, Zygo and the Escrow Agent shall have executed
and delivered an agreement in the form hereof.
C. The purpose of this Agreement is to provide collateral security to Zygo
consisting of the shares of Zygo Common Stock delivered in the Merger and
deposited as provided herein for (i) adjustments to the cash consideration paid
in the Merger and (ii) the indemnity furnished by the Shareholders to Zygo
pursuant to the terms of the Merger Agreement.
A G R E E M E N T:
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto agree, as follows:
1. Certain Definitions. For all purposes of this Agreement, the following
terms shall have the following meanings:
(A) The term "Claim Certificate" shall have the meaning set forth in
Section 4 hereof.
<PAGE>
(B) The term "Escrow Certificate" shall have the meaning set forth
in Section 3 hereof.
(C) The term "Escrowed Stock" shall mean the Zygo Common Stock at
any time represented by the Escrow Certificate delivered to the Escrow
Agent as provided in Section 3 and any other Zygo Common Stock received by
the Escrow Agent as provided in Section 8 as well as all other property or
cash obtained by the Escrow Agent in respect of or in exchange for the
Zygo Common Stock.
(D) The term "Escrow Fund" shall mean the sum of the Escrowed Stock
and additional property delivered to the Escrow Agent pursuant to Section
8 hereof.
(E) The term "Final Determination" shall mean the final decision of
any court of competent jurisdiction from which no appeal has been allowed
because of lapse of time or otherwise.
(F) The term "Joint Losses" shall mean any amount for which the
Shareholders are jointly and severally liable arising under Section
8.01(a) of the Merger Agreement.
(G) The term "Losses" shall mean Joint Losses and Several Losses.
(H) The term "Majority Owners" shall mean the Shareholders who, at
the time specified, beneficially own a majority in interest of the
Escrowed Stock.
(I) The term "Other Property" shall have the meaning set forth in
Section 5(b) hereof.
(J) The term "Several Losses" shall mean any amount for which a
Shareholder is severally liable arising under Section 8.01(b) of the
Merger Agreement.
(K) The term "Termination Date" shall mean the date exactly 18
months after the date of this Agreement.
(L) The term "Threshold Amount" shall mean an aggregate of $250,000
of Losses.
(M) Capitalized terms not otherwise defined herein shall have the
meanings assigned to such terms in the Merger Agreement.
2. Escrow Fund. This Agreement has been executed and delivered, and the
Escrow Fund has been established, for the purpose of providing collateral
security for (i) an adjustment to the Cash Merger Consideration in accordance
with Article II of the
-2-
<PAGE>
Merger Agreement and (ii) the indemnification of Zygo in accordance with Article
VIII of the Merger Agreement. The provisions of the Merger Agreement shall
establish the notice requirements and mechanics of defense for all claims of
indemnification for which the Escrow Fund established hereby is available and
are incorporated by reference herein. This Agreement is not intended to create
any rights to indemnification or other payments in addition to those provided
for in the Merger Agreement.
3. Escrowed Stock. On the Closing Date, Zygo shall deliver to the Escrow
Agent, for the account of the Shareholders, a certificate registered in the name
of the Escrow Agent (the "Escrow Certificate") for 69,841 shares of Zygo Common
Stock. The shares of Zygo Common Stock represented by the Escrow Certificate
shall be held by the Escrow Agent in accordance with the terms of this
Agreement, and shall not, except as provided in Sections 5 and 12 hereof, be
sold or disposed of by the Escrow Agent. Zygo shall provide and the Escrow Agent
shall maintain a written record of the name and address of each Shareholder and
the number of shares of Escrowed Stock or amount of other property credited to
his or its account. Initially, the shares of Escrowed Stock shall be credited in
accordance with the instructions of Zygo to the accounts of Shareholders in the
same proportion as shares of Zygo Common Stock are issued to such Shareholders
in the Merger. Thereafter, the accounts of the Shareholders shall be adjusted as
provided in this Agreement. The respective interests of the Shareholders in the
Escrow Fund shall not be transferable or assignable other than (a) to executors,
administrators, legatees or heirs of the Shareholders or (b) in a transaction
involving no change in beneficial ownership. Notice of any transfer permitted by
clause (b) hereof shall be given to Zygo and the Escrow Agent, and no such
transfer shall be valid until such notice is given. To the extent that the
Escrow Fund contains cash, the Escrow Agent may invest such cash in, and only
in, the following instruments and securities: (i) United States government
securities or securities of agencies of the United States government which are
guaranteed by the United States government; (ii) certificates of deposit of the
Escrow Agent; (iii) tax-free municipal bonds of issuers that have a class of
short-term obligations rated in one of the three highest debt rating categories
for short-term debt by Standard & Poors, Moody's or Fitch; and (iv) tax-free
money market mutual funds meeting the requirements of Rule 2a-7 under the
Investment Company Act of 1940, none of which shall have maturities longer that
three months. The cash portion of the Escrow Fund, if any, shall be so invested
by the Escrow Agent in accordance with the signed, written instructions from the
Majority Owners. The Escrow Agent shall not be liable for any loss sustained as
a result of any investment made pursuant to the written instructions of the
Majority Owners or as a result of any liquidation of such investment prior to
its maturity or for failure of the Majority Owners to give the Escrow Agent any
written instruction to invest or reinvest the cash portion of the Escrow Fund or
any earnings thereon.
4. Adjustment to Cash Merger Consideration. If pursuant to Section 2.10 of
the Merger Agreement Zygo is entitled to the return of a portion of the Cash
Merger Consideration received by a Shareholder at the Closing, and Zygo has not
received from
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such Shareholder the portion of the Cash Merger Consideration to which it is
entitled at the time specified in the Merger Agreement, Zygo may, but shall not
be obligated to, deliver simultaneously to the Escrow Agent and such Shareholder
a certificate (a "Claim Certificate"), which shall be signed by the President or
a Vice President of Zygo, to the effect that Zygo is entitled to the return of a
specified portion of the Cash Merger Consideration received by such Shareholder.
Subject to the limitations set forth below in this Section 4, upon receipt of
such Claim Certificate, the Escrow Agent shall, as soon as practicable (but not
earlier than ten (10) Business Days after the delivery to the Escrow Agent of
such Claim Certificate) deliver to Zygo the number of shares of Zygo Common
Stock out of the Escrow Fund with a value (determined as provided in Section
5(b) below) equal to the amount due and payable by the indemnifying Shareholder
to Zygo, as set forth in such Claim Certificate; provided, however, that the
number of shares of Zygo Common Stock delivered by the Escrow Agent from the
Escrow Fund shall not exceed the number of shares credited to the account of the
indemnifying Shareholder. Concurrently with such delivery, the Escrow Agent
shall reduce the number of shares of Zygo Common Stock credited to the account
of the indemnifying Shareholder. Distribution of property from the Escrow Fund
to Zygo shall follow the procedure set forth in Section 5(b) hereof and shall be
subject to the provisions of Section 5(c) hereof.
5. Additional Claims Against Escrow Fund.
(a) Subject to the terms and conditions of this Agreement, the
Escrow Fund shall be available as collateral security for Zygo's right to
payment by a Shareholder or Shareholders for and in respect of Losses. If Zygo
shall suffer or incur Losses, it shall provide such notice to the Indemnifying
Party as is required in the Merger Agreement. In the event that Zygo does not
receive payment of the amount(s) owed by the Indemnifying Party at the time the
amount of any liability for Losses on the part of the Indemnifying Party under
the Merger Agreement is determined, Zygo at its option may, but shall not be
obligated to, deliver simultaneously to the Escrow Agent and the Shareholders a
Claim Certificate, which shall be signed by the President or a Vice President of
Zygo, to the effect that Zygo has suffered or incurred Losses in the amount
specified in such Claim Certificate and setting forth the basis for such Losses.
Subject to paragraph (c) below, upon receipt of any such Claim Certificate, the
Escrow Agent shall, as soon as practicable (but not earlier than ten (10)
Business Days after the delivery to the Escrow Agent of such Claim Certificate),
make a payment to Zygo from the Escrow Fund in accordance with this Section 5.
(b) Whenever the Escrow Agent is required to make a payment out of
the Escrow Fund hereunder, the Escrow Agent shall withdraw from the Escrow Fund
in accordance with a written instruction of Zygo. In the event that the Losses
referred to in a Claim Certificate are Joint Losses, then the Escrow Agent shall
withdraw from the Escrow Fund and deliver to Zygo the full amount of such Joint
Losses (to the extent available in the Escrow Fund) and the accounts of the
Shareholders shall be reduced on a pro rata basis in accordance with the ratio
of the original deposits of Zygo Common Stock initially comprising the Escrow
Fund. In the event that the Losses
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<PAGE>
referred to in a Claim Certificate are Several Losses, then the Escrow Agent
shall withdraw from the Escrow Fund and deliver to Zygo an amount equal to such
Several Losses, provided that the amount so withdrawn shall consist solely of
Escrow Funds then allocated to the account of the Shareholder responsible for
such Several Losses (the "Several Shareholder"). Any withdrawal of property from
the Escrow Fund in accordance herewith shall be made in the following order of
priority: (i) first, any cash comprising the Escrow Fund (which may be deposited
in the Escrow Fund pursuant to Section 8 hereof), (ii) second, to the extent
that there is insufficient cash to pay the Losses, shares of Zygo Common Stock
(valued as set forth below) and (iii) third, to the extent there is an
insufficient number of shares of Zygo Common Stock in the Escrow Fund to pay the
Losses, any other property ("Other Property") comprising the Escrow Fund (which
may be deposited in the Escrow Fund pursuant to Section 8 hereof). The Escrow
Agent shall transfer, deliver and assign to Zygo such cash, number of shares of
Zygo Common Stock (rounded to the next highest whole share) and/or Other
Property held in the Escrow Fund which shall be indicated in the Claim
Certificate of Zygo referred to hereinabove and required to be delivered to the
Escrow Agent. For purposes of determining the number of Shares of Zygo Common
Stock required to pay the Indemnity Claim or the number of shares of Zygo Common
Stock deemed to have been paid if payment is made in cash, the Zygo Common Stock
will be valued at the average last sale price of the Zygo Common Stock, as
reported by the principal securities exchange on which the Zygo Common Stock is
listed or admitted to trading, or, if the Zygo Common Stock is not listed or
admitted to trading on any securities exchange or if any such exchange on which
the Zygo Common Stock is listed is not its principal trading market, the average
closing bid price as furnished by the National Association of Securities Dealers
Inc. through Nasdaq, the OTC Bulletin Board or similar organization, for the
five consecutive trading days ending on and including the trading day
immediately preceding the date of payment. Other Property, if any, shall be
valued in good faith by the Board of Directors of Zygo. The delivery by the
Escrow Agent to Zygo of the shares of Zygo Common Stock determined by Zygo's
computation of their value as stated above shall be effected by surrender to
Zygo, or its transfer agent, of the Escrow Certificate then in its possession,
and Zygo, or its transfer agent, shall promptly issue to the Escrow Agent a new
stock certificate registered in its name for the number of shares of Zygo Common
Stock then remaining in the Escrow Fund as reduced by the number of shares of
Zygo Common Stock surrendered to Zygo.
(c) Unless, within ten (10) Business Days after delivery to the
Shareholders of any Claim Certificate, the Majority Owners (in the case of a
claim in respect of Joint Losses) or the Several Shareholder (in the case of a
claim for Several Losses), as the case may be, give written notice to Zygo and
the Escrow Agent that they question the accuracy of, or matters included in,
such Claim Certificate (including a reasonably detailed explanation as to why
such Majority Owners or Several Shareholders, as the case may be, question the
accuracy of, or matters included in, such Claim Certificate), such Claim
Certificate shall constitute full authority to the Escrow Agent to take the
action provided for in the preceding paragraph and shall be conclusive on all
parties hereto. If the Majority Owners or the Several Shareholder, as the case
may be, give notice questioning the accuracy of, or matters included in, such
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<PAGE>
Claim Certificate, the Escrow Agent shall not assign to Zygo any Escrowed Stock
or make any indemnification payment to Zygo pursuant to this Section 5 until (i)
it receives the written consent of the Majority Owners or the Several
Shareholder, as the case may be, or (ii) there is a Final Determination with
respect to the dispute. After notice by the Majority Owners or the Several
Shareholder, as the case may be, questioning the accuracy of, or matters
included in, a Claim Certificate, either Zygo (on the one hand) or the Majority
Owners or the Several Shareholder, as the case may be (on the other hand), may
seek a declaratory judgment from any court of competent jurisdiction to resolve
the disagreement. The party against whom such declaratory judgment is actually
rendered shall reimburse the other party thereto for the reasonable expenses
incurred by it in the defense, prosecution or investigation of such claim.
(d) Notwithstanding anything herein to the contrary, except as
otherwise provided in the Merger Agreement no payments shall be made out of the
Escrow Fund for indemnity of Losses until such Losses exceed the Threshold
Amount, at which time, all Losses theretofore accrued shall be paid.
(e) If any dispute arises as to any matter arising under this Escrow
Agreement or there arises any uncertainty as to the meaning or applicability of
any of the provisions hereof, or as to the Escrow Agent's duties, rights or
responsibilities hereunder, the Escrow Agent may, at it option at any time
thereafter deposit the Escrowed Stock then being held by it in escrow into a
court having appropriate jurisdiction, and the Escrow Agent shall thereby be
discharged and relieved of all liability hereunder.
(f) This Agreement is not intended to create and does not create any
additional rights to indemnification that is not provided for in the Merger
Agreement.
6. Termination. The Escrow Fund shall terminate on the Termination Date,
or upon written notice from Zygo and the Majority Owners to the Escrow Agent.
Any shares or other assets then held in the Escrow Fund shall be distributed
upon termination by the Escrow Agent in accordance with the provisions of
Section 7 hereof. Notwithstanding the foregoing, if on or before the Termination
Date Zygo has (a) duly delivered a Claim Certificate with respect to a claim
which has not been satisfied pursuant to this Agreement or (b) delivered to the
Escrow Agent and the Shareholders written notice of the specific basis giving
rise to a breach of any representation, warranty or agreement made by TIC or the
Shareholders in the Merger Agreement and for which indemnification is available
under the Merger Agreement and if Zygo has delivered to the Escrow Agent a good
faith written estimate of the maximum potential amount of Losses resulting from
such claim or potential claim, the Escrow Fund shall not terminate with respect
to such claims until all such claims have been fully satisfied or resolved or a
Final Determination has been rendered with respect thereto. Until such
termination, the Escrow Agent shall retain in the Escrow Fund that amount of
Escrowed Stock as instructed in writing by Zygo and having a value allocated and
determined in accordance with the Merger Agreement, which Escrowed Stock shall
equal 100% of Zygo's estimate of Losses resulting from all then outstanding
claims;
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<PAGE>
provided, however, that Zygo shall, by written notice to the Escrow Agent and
the Shareholders, authorize the Escrow Agent to distribute an appropriate amount
of Escrowed Stock if at any time after the Termination Date Zygo determines in
good faith that the value of the Escrowed Stock exceeds 100% of Zygo's estimate
of Losses resulting from all then outstanding claims. In the event that the
value of the shares of Zygo Common Stock and other assets, if any, then
remaining in the Escrow Fund is less than 100% of Zygo's estimate of Losses
resulting from all then outstanding claims, then Zygo shall instruct the Escrow
Agent in writing to retain all remaining assets in the Escrow Fund.
Notwithstanding the foregoing, Escrowed Stock allocated to the account of any
Shareholder who is not liable under the Merger Agreement for an outstanding
claim or whose account under the Escrow Fund exceeds his or its potential
liability for estimated Losses (determined in good faith by Zygo) resulting from
all such claims as of the Termination Date shall not be retained in the Escrow
Fund. Promptly after the Termination Date, any shares or other assets in the
Escrow Fund having a value in excess of that required to be retained in the
Escrow Fund pursuant to the foregoing, or attributable to the account of a
Shareholder whose account under the Escrow Fund exceeds his or its potential
liability for estimated Losses (determined in good faith by Zygo) for
outstanding claims, shall be distributed to the Shareholders in accordance with
Section 7 hereof and shall no longer be subject to this Agreement.
7. Distribution of the Escrowed Stock. Upon the termination of the Escrow
Fund pursuant to Section 6 hereof, and subject to the terms of Section 6, the
Escrow Agent shall, within ten (10) days of such termination distribute to each
of the Shareholders at their last known addresses appearing on the records of
the Escrow Agent, the amount of Escrowed Stock allocated to the account of such
Shareholder. Any delivery of shares of Zygo Common Stock shall be of full
shares, and the Escrow Agent shall, upon instructions received from the Majority
Owners, make such adjustments for fractional share interests as the Majority
Owners in their sole discretion deem appropriate.
8. Delivery and Deposit of Additional Stock or Property. Any cash,
securities or other property distributable or payable to the Shareholders in
respect of, or in exchange for, any of the Escrowed Stock, whether by way of
cash dividends, stock dividends, stock splits, recapitalizations, liquidations,
mergers, consolidations, split-offs, spin-offs, or exchanges or conversions of
shares or the like, or interest or other earnings on the Escrowed Stock shall be
delivered to, and deposited with, the Escrow Agent, who shall hold such cash,
securities and other property in the Escrow Fund, subject to all of the
provisions of this Escrow Agreement relating to the Escrow Fund. Any such
distributions or payments shall be added to the accounts of the Shareholders in
accordance with their respective interests in the Escrow Fund.
9. Voting of Shares and Reports. Each of the Shareholders shall have the
right, in their discretion, to direct the Escrow Agent in writing as to the
exercise of any voting rights pertaining to the Escrowed Stock credited to his
or its account, and the Escrow Agent shall comply with any such directions of
each of the Shareholders. The
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<PAGE>
Escrow Agent shall not vote any shares of the Escrowed Stock as to which no
voting instructions have been given.
10. Representations and Warranties of the Shareholders. Each of the
Shareholders severally represents and warrants to Zygo as follows:
(a) The execution and delivery of this Agreement, and the
consummation and performance of the transactions contemplated hereby, by such
Shareholder has been duly and validly authorized by all necessary proceedings.
Such Shareholder has full right, power and authority to execute and deliver this
Agreement and perform the transactions contemplated hereby. This Agreement has
been duly executed and delivered by such Shareholder and constitutes a legal,
valid and binding obligation of such Shareholder, enforceable against such
Shareholder in accordance with its terms (except as enforceability may be
limited by applicable bankruptcy, insolvency, moratorium or similar laws
affecting creditors' rights generally or by principles governing the
availability of equitable remedies); and
(b) The execution, delivery and performance of this Agreement by
such Shareholder does not violate, conflict with, constitute a default under or
result in the breach of any term, condition or provision of, or require the
consent of any other party to, (i) any note, credit agreement, bond, mortgage,
deed of trust, security interest, indenture, lease, license, contract,
agreement, plan or other instrument or obligation to which such Shareholder is a
party or by which such Shareholder or any of such Shareholder's properties or
assets may be bound or affected or (ii) violate any judgment, order, writ,
injunction, decree, statute, law, ordinance, rule or regulation applicable to
such Shareholder or such Shareholder's properties or assets, except for such
violations, breaches, defaults or rights of termination, cancellation,
acceleration, creation, imposition, suspension, revocation or modification as to
which requisite waivers or consents have been or will be obtained by such
Shareholder on or prior to the Closing Date and copies of which have been or
will be delivered to Zygo.
11. Representations and Warranties of Zygo. Zygo represents and warrants
to the Shareholders as follows:
(a) The execution and delivery of this Agreement, and the
consummation and performance of the transactions contemplated hereby, by Zygo
have been duly and validly authorized by all necessary proceedings. Zygo has
full right, power and authority to execute and deliver this Agreement and
perform the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Zygo and constitutes a legal, valid and binding
obligation of Zygo, enforceable against Zygo in accordance with its terms
(except as enforceability may be limited by applicable bankruptcy, insolvency,
moratorium or similar laws affecting creditors' rights generally or by
principles governing the availability of equitable remedies); and
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<PAGE>
(b) The execution, delivery and performance of this Agreement by
Zygo do not violate, conflict with, constitute a default under or result in the
breach of any term, condition or provision of, or require the consent of any
other party to, (i) any note, credit agreement, bond, mortgage, deed of trust,
security interest, indenture, lease, license, contract, agreement, plan or other
instrument or obligation to which Zygo is a party or by which Zygo or any of its
properties or assets may be bound or affected or (ii) violate any judgment,
order, writ, injunction, decree, statute, law, ordinance, rule or regulation
applicable to Zygo or its properties or assets, except for such violations,
breaches, defaults or rights of termination, cancellation, acceleration,
creation, imposition, suspension, revocation or modification as to which
requisite waivers or consents have been or will be obtained by Zygo on or prior
to the Closing Date and copies of which have been or will be delivered to the
Shareholders.
12. Notice. Unless written designation of a different address is filed
with each of the other parties hereto, all notices and Claim Certificates
required to be given under this Agreement shall be deemed to have been properly
given if in writing and delivered or mailed by registered or certified mail,
postage prepaid. Mailed notices and Claim Certificates shall be deemed given
when duly mailed and addressed as follows:
Zygo:
Zygo Corporation
Laurel Brook Road
Middlefield, Connecticut 06455
Attention: Gary K. Willis
With a copy to:
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
Attention: Paul Jacobs, Esq.
The Shareholders:
To their addresses as set forth on
Schedule 1 hereto
With a Copy to:
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, California 94104
Attention: James M. Canty, Esq.
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<PAGE>
Escrow Agent:
Continental Stock Transfer & Trust Company
2 Broadway
New York, New York 10004
Attention: Compliance Department
13. Liability of the Escrow Agent. The Escrow Agent may act upon any
instrument or other writing believed by it in good faith to be genuine and to be
signed or presented by the proper person and shall not be liable in connection
with the performance by it of its duties pursuant to the provisions of this
Agreement except for its own willful misconduct or gross negligence. The Escrow
Agent may retain counsel and act with respect to this Agreement and its
obligations hereunder on the advice of such counsel. The Escrow Agent shall be,
and hereby is, jointly and severally indemnified and saved harmless by the
parties hereto from all losses, costs and expenses (including reasonable
attorneys' fees) which may be incurred by it as a result of its involvement in
any litigation arising from performance of its duties hereunder, provided that
such litigation or action in interpleader shall not result from any action taken
or omitted by the Escrow Agent and for which it shall have been adjudged to have
acted in bad faith or to have been grossly negligent. Zygo shall be responsible
for determining any requirements for paying taxes or reporting any payments for
tax purposes. Zygo and the Majority Owners may give written directions to the
Escrow Agent to prepare and file tax information or to withhold any payments
hereunder for tax purposes. Zygo and the Shareholders, jointly and severally,
covenant and agree to indemnify and hold the Escrow Agent harmless against all
liability for tax withholding and/or reporting for any payments made by the
Escrow Agent pursuant to this Agreement. The Escrow Agent shall have no duties
or obligations except those expressly set forth in this Escrow Agreement, and no
implied duties or obligations shall be read into this Escrow Agreement against
the Escrow Agent. The Escrow Agent shall have no obligation to make any payment,
investment or disbursement of any type pursuant hereto or to incur any financial
liability in the performance of its duties hereunder unless Zygo shall have
deposited with the Escrow Agent sufficient funds therefor. The Escrow Agent may
conclusively rely upon and shall be protected, indemnified and held harmless by
Zygo and the Shareholders, jointly and severally, in acting upon the written
(which shall include instructions given by telecopier or other
telecommunications device) or oral instructions of any officer or agent of
either of them or of counsel to either of them with respect to any matter
relating to its actions as Escrow Agent hereunder, and the Escrow Agent shall be
entitled to request that further instructions be given by such persons or to
request that instructions be given in writing.
14. Fees and Expenses. Zygo and the Shareholders shall each pay to the
Escrow Agent one-half of its reasonable fees for the services rendered by it
pursuant to the provisions of this Agreement with respect to the Escrow Fund and
will reimburse the Escrow Agent for its reasonable expenses (including
reasonable fees and
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<PAGE>
disbursements of its counsel) incurred in connection with the performance by it
of such services. Zygo and the Shareholders shall each pay one-half of any
transfer taxes incurred as a result of the operation of any provision of this
Agreement relating to the Escrow Fund.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
16. Binding Effect. This Agreement and all action taken hereunder in
accordance with its terms shall be binding upon and inure to the benefit of
Zygo, the Shareholders and the Escrow Agent and their respective heirs,
successors and assigns.
17. Successor Escrow Agent. The Escrow Agent, or any successor to it
hereafter appointed, may at any time resign by giving notice in writing to Zygo
and the Shareholders and shall be discharged of its duties hereunder upon the
appointment of a successor Escrow Agent as hereinafter provided. In the event of
any such resignation, a successor Escrow Agent, which shall be a bank or trust
company organized under the laws of the United States of America or any state
thereof having a combined capital and surplus of not less than $50,000,000,
shall be appointed by Zygo. Any such successor Escrow Agent shall deliver to
Zygo and the Shareholders a written instrument accepting such appointment
hereunder, and thereupon it shall succeed to all the rights and duties of the
Escrow Agent hereunder and shall be entitled to receive all the Escrow Fund.
18. Confirmation of Escrow Agent's Appointment. Zygo and the Shareholders
hereby confirm the appointment of Continental Stock Transfer & Trust Company to
act as Escrow Agent under this Escrow Agreement, and Continental Stock Transfer
& Trust Company hereby accepts such appointment.
19. Entire Agreement. This Agreement and the Merger Agreement contain the
entire agreement among the parties hereto with respect to the transactions
contemplated hereby and supersede all prior agreements and understandings,
whether written or oral, among the parties hereto with respect to the subject
matter of this Agreement.
20. Severability. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect any other provisions, and this
Agreement shall be construed in all respects as though such invalid or
unenforceable provisions were omitted.
21. Amendments. This Agreement may only be amended or modified by a
written instrument executed by Zygo, the Shareholders and the Escrow Agent.
22. Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, and it shall not
be
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<PAGE>
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement
on the day, month and year first written above.
ZYGO CORPORATION
By:__________________________________
Name:
Title:
-------------------------------------
Francis E. Lundy
LUNDY 1996 CHARITABLE TRUST
(UTD June 28, 1996)
By:______________________________
Francis E. Lundy, Co-Trustee
By:______________________________
Barbara E. Lundy, Co-Trustee
By:______________________________
Janet Masucci, Co-Trustee
FRANK J. SCHEUFELE TRUST
(UDT dated October 5, 1983)
By:______________________________
Frank J. Scheufele, Trustee
THE SHERMAN FAMILY LIVING TRUST
(UDT dated April 22, 1985)
By:______________________________
Roger K. Sherman, Co-Trustee
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By:______________________________
Elizabeth R. Sherman, Co-Trustee
-------------------------------------
David Lytle
INSPECTRON DEVELOPMENT
PARTNERS, a California
Limited Partnership
By:__________________________________
Name: Francis E. Lundy
Title: General Partner
Accepted and Agreed:
CONTINENTAL STOCK TRANSFER &
TRUST COMPANY, as Escrow Agent
By:_________________________________
Name:
Title:
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<PAGE>
EXHIBIT 7.01(f)
DISTRIBUTION AND SERVICES AGREEMENT
THIS AGREEMENT is made and entered into as of August 7, 1996, by and
between ZYGO CORPORATION, a Delaware corporation ("Zygo"), TECHNICAL INSTRUMENT
COMPANY, a California corporation (the "Company"), and TECHNICAL INSTRUMENT SAN
FRANCISCO, a California corporation ("Newco").
WHEREAS, the Company is engaged in the business of designing, developing
and assembling precision microscope products and systems used to improve
production efficiency and manufacturing yields within the semiconductor, data
storage and other high technology industries; and
WHEREAS, Newco is engaged in the distribution business, which business was
formerly operated as a division of the Company; and
WHEREAS, in connection with the Agreement and Plan of Merger, dated as of
August 7, 1996, by and among the Company, Zygo, Zygo Acquisition Corporation, a
California corporation, and the persons and entities listed on Schedule 1
thereto, Newco has agreed to enter into this Agreement pursuant to which it will
(i) provide administrative services for the Company during a transition period
of four months following the date of this Agreement (the "Transition Period"),
(ii) distribute modules for the Company, (iii) sell complete instruments for the
Company and (iv) sell to the Company other Newco product lines, all upon the
terms and subject to the conditions contained herein.
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, and intending to be legally bound hereby, the parties agree as
follows:
1. Transition Services
(a) Newco shall perform such administrative services (the
"Transition Services") as the Company shall reasonably determine are necessary
during the Transition Period, including, without limitation, services related to
the collection of accounts receivable, payroll and payroll services and payroll
withholding tax payments, transfer of personnel files, accounts payable for
certain costs currently paid by the Company on a consolidated invoice, employee
benefits and insurance and maintenance of the general ledger. Unless otherwise
agreed, the Transition Services shall be substantially the same as, and shall be
performed in substantially the same manner as, the corporate and administrative
services provided by Newco when it was operated as a business division of the
Company.
(b) Newco shall devote such personnel as the parties hereto shall
deem necessary or appropriate in order to adequately provide the Transition
Services, which shall include up to 50% of Dennis Milosky's time and the
devotion of time by such
<PAGE>
other persons as the Company may reasonably request for a period of four (4)
months. Newco shall be entitled to reimbursement for its actual out-of-pocket
incremental costs (e.g., temporary employees and supplies) incurred in providing
the Transition Services, up to a maximum of $10,000, upon presentation of a
statement of the amount of such expenses to the Company. In addition, the
Company shall advance to Newco upon written request the necessary funds to
discharge payroll tax obligations, insurance premiums and other costs and
expenses which are the Company's obligation or liability and are incurred on
behalf of the Company as part of the Transition Services.
2. Distribution
(a) Newco is hereby appointed as a distributor of the Company's
modules described in Schedule A hereto ("Modules") in the territory set forth in
Schedule B hereto (the "Territory"). Newco hereby accepts the appointment to act
as a distributor of Modules according to the terms of this Agreement. Newco's
appointment as distributor in the Territory is co-exclusive with the Company,
and the Company will not appoint or sell to any third party as its distributor
of Modules in the Territory during the term of this Agreement. Newco shall be
permitted the opportunity to discuss with the Company or its designated
representatives the addition to the Territory of any part of the western region
of the United States which becomes available during the term of this Agreement.
The Company will endeavor to, in general, permit Newco to have the first
opportunity to have such discussions with the Company.
(b) Prices to be paid by Newco to the Company for Modules purchased
by Newco shall be the Company's current list price less 25%. List prices may be
increased only on sixty (60) days' written notice to Newco.
(c) The terms of sale on all sales of Modules to Newco and all
direct customer sales made through the efforts of Newco are set forth in
Schedule C attached hereto and incorporated herein by reference. The terms of
sale may be changed from time to time by the Company, acting in its sole
discretion, upon not less than thirty (30) days' notice to Newco, provided that
such changed term is applied to the Company's distributors generally. Orders
shall not be final and binding until accepted in writing by the Company.
(d) Upon expiration or termination of the distributor rights and
obligations set forth in this Section 2 of this Agreement pursuant to Sections
11 or 12 hereof, except as otherwise provided in this paragraph, Newco shall
forthwith (i) pay the Company all sums due and owing pursuant to this Section 2;
(ii) provide the Company with a current customer list including names, addresses
and telephone numbers; (iii) cease any and all uses of the Company's copyrighted
materials, trademarks, trade names and logos; and (iv) advise all customers, in
a form acceptable to the Company, that Newco no longer distributes Modules.
Further, Newco shall certify to the Company that all of the actions set forth in
(i) through (iv) above have been taken, and shall take no action that will
adversely affect the Company's reputation or goodwill. The Company shall not
unreasonably withhold or delay acceptance of orders or contracts prior to
termination, provided that the Company shall not be
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<PAGE>
required to handle any orders other than in their ordinary and customary way.
For a period of ninety (90) days following expiration or termination of the
distributor rights and obligations set forth in this Agreement, Newco may
continue to market and distribute Modules Newco has remaining in its inventory
as of the effective date of such expiration or termination. At the end of such
ninety-day period, the Company shall repurchase Modules that are in Newco's
inventory at the depreciated book value; Newco shall absorb all costs and
expenses involved in returning Modules to the Company. Newco will actively
participate as mutually agreed during the transition to the Company's
replacement distributor regarding sales to prospects on Newco's aforementioned
sales prospect list for a maximum of one year. Accordingly, prior to the
transition the Company will use its commercially reasonable efforts to
facilitate a negotiation between Newco and the replacement distributor as
regards splitting of profits at the distributor level. Other than previously set
forth, the Company shall not be liable to Newco for any commissions, nor shall
Newco thereafter be entitled to any other compensation or remuneration for
damages, loss of anticipated profits or commissions or otherwise. Upon
termination, all rights of Newco to act as the Company's distributor pursuant to
this Section 2 shall cease except as to claims, rights and obligations arising
prior to termination or as provided in this Section 2, and thereafter neither
party shall have any obligation to the other with respect to this Section 2.
Unless this Agreement has been terminated for Newco's default or expires or
terminates on its scheduled expiration date, at any time up to thirty (30) days
after such non-defaulting or unscheduled termination, Newco can place a
"last-buy" order as reasonably required to satisfy its contractual obligations
outstanding as of such non-defaulting or unscheduled termination date. Any
"last-by" order pursuant to the preceding sentence, and any other orders pending
or on back-order as of the termination of this Agreement (excluding the
termination due to Newco's default), shall be subject to the terms of this
Agreement, even though such order is filled after termination hereof.
3. Sales Representative
(a) The Company hereby appoints Newco as its non-exclusive sales
representative in the Territory for complete instruments manufactured by the
Company as described in Schedule D hereto ("Products"). Newco hereby accepts the
appointment to act as the Company's sales representative according to the terms
of this Agreement.
(b) Commissions earned by Newco pursuant to this Section 3 will be
paid according to Schedule E hereto, less the amount of any adjustments on
commissions previously paid, on or before the last day of the month following
the month in which the Company receives payment from the customer. Commission
rates will be reviewed on not less than an annual basis, remaining in effect for
the following twelve (12) months unless the intention is to increase the
commission percentage.
(c) The terms of sale on all sales of Products to Newco and all
direct customer sales made through the efforts of Newco are set forth in
Schedule F attached hereto and incorporated herein by reference. The terms of
sale may be changed from time to time by the Company, acting in its sole
discretion, upon not less than thirty (30) days' notice to Newco, provided that
such changed term is applied to all the
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Company's sales representatives generally. Orders shall not be final and binding
until accepted in writing by the Company.
(d) Termination of the agent rights and obligations set forth in
this Section 3 of the Agreement by either party pursuant to Sections 11 or 12
hereof shall not affect commissions earned by Newco on orders or contracts
received and accepted by the Company prior to the termination date, regardless
of when shipments were actually made or invoiced. Except in cases where the
Company terminates this Agreement due to breach of contract, failure of Newco to
pay its financial obligations to the Company when due, willful
misrepresentation, fraud or willful damage to the business or reputation of the
Company, Newco shall be entitled to commissions on all orders received and
accepted by the Company within ninety (90) days after the termination of this
Section 3 from customers to whom quotations had been provided by the Company as
of the termination date. Such commissions shall, at the Company's discretion,
either equal the full commissions stated in Schedule E hereto and carry with it
full responsibility for installation and training and free service under
warranty as stipulated herein, or commissions earned during this period shall
equal one-half of the commissions stipulated in Schedule E of this Agreement, in
which case Newco shall be exempt from the obligations of installation training
and free service under warranty as stipulated in this Agreement. The Company
shall not unreasonably withhold or delay acceptance of orders or contracts prior
to termination or cancellation, but the Company shall not be required to handle
any orders other than in their ordinary and customary way. Other than as
previously set forth, the Company shall not be liable to Newco for any
commissions, nor shall Newco thereafter be entitled to any other compensation or
remuneration for damages, loss of anticipated profits or commissions or
otherwise. Upon termination of this Section 3, all rights of Newco to act as
sales representative pursuant to this Section 3 shall cease except as to claims,
rights and obligations arising prior to termination, and thereafter neither
party shall have any obligation to the other with respect to this Section 3.
4. Products of Others
Newco shall have the right to act as a distributor or sales representative
for the products of others. Newco shall furnish the Company with information
regarding the products and companies which it represents. Such information shall
be routinely updated each year on the anniversary of this Agreement. Newco shall
also notify the Company whenever it contemplates representing additional
products or companies. Should the Company reasonably believe that there is a
conflict due to direct competition between the Products and the additional
products or companies in the Territory, it shall so notify Newco. Should such
direct competition in the Territory exist and should Newco nevertheless
represent the conflicting product or company, the Company may, at its option,
terminate this Agreement or portions of this Agreement in accordance with the
provisions of Section 12 hereof.
5. Legal Relationship
It is acknowledged and understood that Newco shall not be the legal
representative of the Company for any purpose whatsoever and has no right or
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authority to assume or create any obligation of any kind, express or implied, on
behalf of the Company, or to bind it in any respect whatsoever, except as may be
reasonably required to perform the Transition Services.
6. Covenants of Newco
Newco shall act as the Company's distributor and sales representative and
otherwise represent the interests of the Company in accordance with the terms of
this Agreement and in the performance of such duties in a commercially
reasonable manner Newco shall:
(a) Diligently promote the sale of, solicit orders for and stimulate
interest in Modules and Products; and Newco shall maintain an adequate staff of
sales personnel who are sufficiently knowledgeable regarding Modules and
Products to enable them to effectively promote the sale of Modules and Products
and solicit orders therefor.
(b) Provide adequate and competent technical assistance to customers
and potential customers, including counseling customers on placing orders for
Modules and Products, assisting customers in the proper use of Modules and
Products, and solving customers' technical applications problems.
(c) Handle promptly on Newco's own letterhead all inquiries and
correspondence from customers and potential customers.
(d) Advise the Company on market potential, trends, competition and
marketing techniques within the Territory, and changes in proceedings governing
the importation of Modules and Products into the Territory, if applicable.
(e) Assist and cooperate as mutually agreed with the Company's
scientists, engineers, service and sales personnel.
(f) Have service responsibility (which shall be limited, in general,
to on-site service and repairs and, if necessary, removal of the defective
components for return to and replacement by the Company) in the Territory for
Modules and Products. To fulfill this obligation, Newco shall maintain on its
staff at all times qualified personnel having technical competence and knowledge
regarding Modules and Products sufficient to carry out the service
responsibility. It is the intent of this Agreement that as the market in said
Territory expands, Newco will take whatever steps appear necessary to expand its
technical knowledge and service capability to meet this expansion. When
repairing Modules and Products that are no longer covered by warranty as
described in Section 7, Newco is expected to provide service consistent with the
Company's quality standards and be reimbursed by the customer at the normal rate
for both labor and materials.
(g) Maintain and utilize an up-to-date mailing list of potential
customers in the Territory and periodically report to the Company Newco's direct
mail and promotional activity with respect to Modules and Products.
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(h) Maintain a complete record showing customers names, dates of
sale and addresses. This information shall be supplied to the Company within the
first week of each of the Company's fiscal quarters (July, October, January,
April).
(i) Promote sales of Modules and Products, including, when agreed to
by the Company, the exhibition and demonstration of Modules and Products in all
appropriate exhibitions and conferences in which Newco exhibits the products it
distributes and sells. If both the Company and Newco plan to exhibit and
demonstrate the Products and/or the Modules at the same exhibition or
conference, they will consult regarding coordinating their respective efforts
and activities.
(j) Refrain from selling any Modules or Products to or for the use
of any ultimate purchasers which the Company cannot deal with under the laws and
regulations of the United States Departments of Commerce, Defense, State and
Treasury. Newco shall comply with all other laws and regulations of the United
States relating to the sale of Modules and Products. Newco will comply with
reasonable and equitable procedures of the Company regarding splitting with the
Company's other distributors and sales representatives of profits and/or sales
commissions (as applicable) on sales originated inside of the Territory but
shipped to locations outside the Territory (and vice versa), provided such
procedures are applied to all distributors and sales representatives of the
Company generally.
(k) Refrain from using the name Zygo, Zygo Corporation or Technical
Instrument Company or any of their respective product or trade names or any
abbreviation or modification thereof as part of Newco's firm or corporate name.
The foregoing notwithstanding, Newco may use "Technical Instrument San
Francisco" as its corporate name and trade name and in its trademarks.
(l) Agree to keep confidential, both during and subsequent to the
term of this Agreement, any confidential or proprietary information or data of
Zygo or the Company, including, without limitation, any unpublished commercial,
technical, servicing or other information pertaining to Zygo's or the Company's
products or customers, including the identity of customers of Zygo or the
Company. The Company shall use its good faith efforts to inform Newco that any
given information and data is confidential or proprietary and therefore subject
to this provision; provided, however, that the provisions of this Section 6(l)
shall be applicable, regardless of the Company's so informing Newco, with
respect to any such information or data which Newco knew or should reasonably
have been expected to know was confidential or proprietary. Upon the final
termination of this Agreement, Newco shall forthwith deliver to the Company any
of such confidential or proprietary information or data which it has in its
possession. Newco's obligation under this Section 6(l) shall be limited to
maintaining the confidentiality of the Company's confidential or proprietary
information or data in the same manner as Newco maintains the confidentiality of
comparable information or data of its own.
(m) On a monthly basis, during the last week of the month, provide
the Company with a 12 month rolling sales forecast for Modules and Products
using a
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template supplied by the Company, showing forecasted sales in dollars and units
by product and customer.
(n) Provide the Company annually, during the month of June, with a
written business plan for the promotion and sale of Modules and Products (e.g.
potential advertising trade shows, seminars, etc.) describing the steps planned
for meeting forecasted goals for the next Company fiscal year.
7. Covenants of the Company
In connection with the appointment of Newco as distributor and sales
representative, the Company shall:
(a) Subject to restrictions imposed by law, provide Newco with
application engineering support, product training, product information,
technical data and promotional materials for Modules and Products, information
on delivery and availability of Modules and Products, and other data or
information pertinent to promoting Modules and Products, soliciting, obtaining,
processing and completing an order.
(b) Warrant all Modules and Products to be free from defects in
material and workmanship for a period of six months from the date of receipt of
the Module or Product by Newco. In the case of supplemental or complementary
items obtained from outside equipment manufacturers and sold by the Company, the
original equipment manufacturer's warranty shall apply.
8. Replacement Parts
(a) In order to provide replacement parts for the performance of
warranty repairs, Newco should submit to the Company, along with its order,
detailed information as to the Module or Product, the customer's name and
address, a detailed account of the nature of the problem, the action taken to
solve the problem and an itemized list of parts used or needed. Newco shall be
solely responsible for labor and travel costs necessary to provide warranty
service. The Company shall reimburse Newco for shipping and duties on warranty
replacement parts.
(b) The Company's obligation is limited to replacing parts or
components which prove to be defective during the warranty period. The Company
shall not be liable for consequential damages.
(c) The Company agrees to keep confidential, both during and
subsequent to the term of this Agreement, any confidential or proprietary
information or data of Newco including, without limitation, any unpublished
commercial, technical, servicing or other information pertaining to Newco's
products or customers, including the identity of customers of Newco. Newco shall
use its good faith efforts to inform the Company that any given information and
data is confidential or proprietary and therefore subject to this provision;
provided, however, that the provisions of this Section 8(c) shall be applicable,
regardless of Newco's so informing the Company, with
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respect to any such information or data which the Company knew or should
reasonably have been expected to know was confidential or proprietary. Upon the
final termination of this Agreement, the Company shall forthwith deliver to
Newco any of such confidential or proprietary information or data which it has
in its possession. The Company's obligation under this Section 8(c) shall be
limited to maintaining the confidentiality of Newco's confidential or
proprietary information or data in the same manner as the Company maintains the
confidentiality of comparable information or data of its own.
(d) The Company will supply Newco, on the same basis it supplies its
distributors generally, with brochures, data and/or specification sheets,
promotional materials and catalogs for the Modules and Products as reasonably
required by Newco from time-to-time.
9. Claims
The Company agrees to indemnify and hold harmless Newco from claims, fees
or other costs arising out of any suit, proceeding, claim or action involving
Newco based upon a claim that the distribution of Modules or the sale of
Products or the sale or use of either infringes any patent, copyright, trademark
or other proprietary right, provided that the Company is notified promptly in
writing of any notice of claim or of any threatened or actual suit and Newco
transfers control of the defense to the Company. Newco agrees to indemnify and
hold harmless the Company from claims, fees or other costs attributable to any
act or omission of Newco, its agents or employees and shall defend the same at
Newco's expense.
10. Purchase by the Company From Newco's Other Product Lines
Newco hereby grants to the Company the right to purchase products from
Newco that Newco sells or distributes under contract with third parties at
Newco's current list price, less normal dealer discounts as set forth on
Schedule G hereto.
11. Term of Agreement
This Agreement shall remain in full force and effect from the date hereof
for a period of: (a) four (4) months with respect to the Transition Services to
be provided by Newco pursuant to Section 1; (b) one (1) year with respect to
Newco's distribution of Modules pursuant to Section 2; (c) one (1) year with
respect to Newco's rights and obligations as sales representative for Products
pursuant to Section 3; and (d) one (1) year with respect to the Company's right
to purchase products from Newco pursuant to Section 10. Each of Sections 2, 3
and 10 of this Agreement shall be automatically renewed for successive
additional periods of one (1) year each unless Newco or the Company shall give
the other party written notice of non-renewal not less than ninety (90) days
prior to the end of the original term or of any such renewal period with respect
to any of the Sections 2, 3 or 10; provided, however, that the Company's right
to purchase other product lines from Newco, as set forth in Section 10 hereof,
may be cancelled by the Company, in its sole discretion, upon thirty (30) days
prior written notice of such intent to cancel. The termination of any of
Sections 2, 3 or 10 shall not
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terminate the rights and obligations of the parties under any other Section of
this Agreement, and this Agreement shall continue in full force and effect
subsequent to the termination or cancellation of any one or more of such
Sections as if such terminated or cancelled Section were not part of this
Agreement; provided, however, such survival of provisions shall not apply if all
of Sections 2, 3 and 10 are terminated. In the event all of Sections 2, 3 and 10
are terminated, then Sections 6(l), 8(c) and 9 shall survive such termination,
and the provisions of this Agreement regarding the payment of money shall
survive until performed in full. Any of the Schedules hereto other than Schedule
G can be revised, deleted or added to at any time upon not less than thirty (30)
days' notice to Newco, provided that such changed term is applied to the
Company's distributors and sales representatives generally.
12. Termination
(a) In the event that either party hereto shall be in default of, or
in breach of, any condition or covenant of this Agreement, the aggrieved party
may at its election serve notice in writing upon the party considered to be in
default of its intention to terminate this Agreement on the expiration of thirty
(30) days from the date of such notice and if such default shall continue for
such thirty-day period after such notice the party who has so given notice of
default may thereafter terminate this Agreement forthwith by giving to the other
party hereto written notice of termination.
(b) Any other provision of this Agreement to the contrary
notwithstanding, this Agreement may be terminated any time by mutual consent.
Termination of this Agreement shall not relieve either party of any obligations
owing to the other at the date of such termination.
13. Ownership or Control
The Company may terminate this Agreement at its option if the ownership or
control of Newco is transferred to a third party.
14. Bankruptcy
The Company and Newco may terminate this Agreement if any proceeding in
bankruptcy, or for the appointment of a receiver or trustee, or if any other
proceeding under any law for the relief of debtors shall be instituted by or
against the other party.
15. Waiver
Any waiver on the part of any party hereto of any rights or interest
hereunder shall not apply to any subsequent breach nor constitute a waiver of
any right or interest.
16. Force Majeure
Neither party shall be liable for its failure to perform hereunder due to
contingencies beyond its reasonable control including but not limited to
strikes, riots,
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wars, fire, acts of God, acts in compliance with any law, regulation or order,
whether valid or invalid, of the United States of America or any other cognizant
governmental body or of any instrumentality thereof.
17. Ownership of Newco
This Agreement has been entered into by the Company relying upon Newco's
present organization and personnel. Newco shall immediately advise the Company
of any changes which significantly affect Newco's ability to perform hereunder
or any changes affecting the ownership of control of Newco.
18. Limitations of Agreement
No rights to manufacture are granted by this Agreement. Moreover, no
licenses are granted to or implied by this Agreement under any patents owned or
controlled by the Company or under which the Company has rights except the right
to sell and use products furnished by the Company and to otherwise perform its
obligations and to exercise its rights under this Agreement.
19. Assignment of Agreement
No part of this Agreement may be assigned, transferred or hypothecated by
Newco or the Company, in whole or in part, directly or indirectly, by operation
of law or otherwise, without the prior written consent of the other party, which
consent shall not be unreasonably withheld. Notwithstanding the foregoing, it is
understood and agreed that this Agreement may be assigned by the Company to an
affiliate of the Company without the prior written consent of Newco.
20. Entire Understanding
This Agreement is the entire and sole Agreement and understanding of the
parties hereto with respect to the subject matter hereof and supersedes all
other prior agreements, understandings, and communications, whether oral or
written. Newco understands and agrees that this Agreement shall neither be
binding on or in any way affect any subsidiaries or affiliates of Zygo not a
party hereto.
21. Notices
All notices or other communications hereunder shall be in writing and
shall be deemed to have been duly given if delivered personally or sent by
telefax communication, by recognized overnight courier marked for overnight
delivery, or by registered or certified mail, postage prepaid, addressed as
follows: if to Zygo Corporation, Laurel Brook Road, Middlefield, Connecticut
06455-0448, Attention: Gary K. Willis; if to Technical Instrument Company, 650
North Mary Avenue, Sunnyvale, California 94086, Attention: Francis E. Lundy,
with a copy to Zygo Corporation, Laurel Brook Road, Middlefield, Connecticut
06455-0448, Attention: Gary K. Willis; and if to Technical Instrument San
Francisco, 348 Sixth Street, San Francisco, California 94103, Attention: Francis
E. Lundy.
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22. Applicable Law
This contract shall be governed by, and construed in accordance with, the
laws of the State of Delaware, without reference to or application of any
conflicts of law principles.
23. Headings
The section and other headings contained in this Agreement are for
references purposes only and shall not affect in any way the meaning and
interpretation of this Agreement.
24. Severability
If any provision of this Agreement is held to be unenforceable for any
reason, or if any Section of this Agreement expires or is terminated pursuant to
Sections 11 or 12 hereof, this Agreement shall be adjusted and shall remain in
full force and effect as adjusted in order to achieve the intent of the parties
hereto to the extent possible. In any event, all other provisions of this
Agreement shall be deemed valid and enforceable to the full extent possible.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first herein above written.
TECHNICAL INSTRUMENT COMPANY TECHNICAL INSTRUMENT
SAN FRANCISCO
By:_________________________________ By:_________________________________
Name: Francis E. Lundy Name: Francis E. Lundy
Title: President Title: President
ZYGO CORPORATION
By:_________________________________
Name: Gary K. Willis
Title: President
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EXHIBIT 7.02(b)
August 7, 1996
Zygo Corporation
Laurel Brook Road
P.O. Box 448
Middlefield, CT 06455-0448
Ladies and Gentlemen:
We have acted as counsel to Technical Instrument Company, a California
corporation (the "Company"), in connection with the negotiation and execution of
that certain Agreement and Plan of Merger, dated as of August 7, 1996 (the
"Merger Agreement"), by and among you, Zygo Acquisition Corporation, the Company
and the Shareholders of the Company listed on Schedule I thereto. Terms not
otherwise defined herein shall have the same meanings as set forth in the Merger
Agreement. This opinion is rendered pursuant to Section 7.02(b) of the Merger
Agreement.
We have examined executed copies of the Merger Agreement, as well as the
Distribution and Services Agreement (the "Distribution Agreement"), the
Agreement of Merger (the "Agreement of Merger"), the Escrow Agreement (the
"Escrow Agreement"), and the letter agreements of each Shareholder with respect
to restrictions on the transfer of Zygo Common Stock (the "Lock-up Agreements"
and together with the Distribution Agreement, the Agreement of Merger and the
Escrow Agreement, the "Related Agreements"), the forms of which are attached as
Exhibit 7.01(f), Exhibit 2.02(b), Exhibit 7.01(e) and Exhibit 7.02(k),
respectively, to the Merger Agreement. We have also examined such other
documents and such certificates of public officials and representatives of the
Company as we have deemed necessary as a basis for the opinions expressed
herein. As to questions of fact material to such opinions, we have, when
relevant facts were not independently established, relied upon certificates of
officers of the Company.
We have assumed the genuineness of all signatures and documents submitted
as originals, that all copies submitted to us conform to the originals, the
legal capacity of all natural persons and as to documents executed by entities
or persons other than the Company or the Shareholders, that each such entity or
person had the power to enter into and perform its or his obligations under such
documents and that such documents
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Zygo Corporation
August 7, 1996
Page 2
have been duly authorized, executed and delivered by, and are binding upon and
enforceable against, such entities or persons.
We assume that you know of no agreements between the parties not set forth
in the Merger Agreement or any of the Related Agreements that would modify the
terms or rights and obligations of the parties thereunder.
We express no opinion as to the law of any jurisdiction other than the
State of California and the United States, or as to the effect on the
transaction of the antitrust laws of either.
Based on the foregoing and subject to the qualifications set forth below,
it is our opinion that:
1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of California.
2. The Company has full corporate power and authority to own, operate or
lease its properties and to carry on its business in the manner currently
conducted.
3. To our knowledge, the Company has no Subsidiaries, nor does it have any
interest in any partnership, limited liability company or other legal entity,
except those identified in the Contribution Documents and any interest the
Company may have in an entity referred to by the Company as "Checkpoint
Technology," as to which we express no opinion.
4. The authorized capital stock of the Company consists of 100,000,000
shares of stock, without par value. To our knowledge, there are no outstanding
options, warrants, convertible securities, calls, rights, commitments,
preemptive rights, or agreements or instruments or understandings of any
character to which the Company is a party or by which the Company is bound,
obligating the Company to issue, deliver or sell, or cause to be issued,
delivered or sold, contingently or otherwise, additional shares of its capital
stock or any securities or obligations convertible into or exchangeable for such
shares or to grant, extend or enter into any such option, warrant, convertible
security, call, right, commitment preemptive right or agreement. To our
knowledge, there are no outstanding obligations, contingent or other, of the
Company to purchase, redeem or otherwise acquire any shares of its capital
stock. The Company does not hold any shares of Company Stock in
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Zygo Corporation
August 7, 1996
Page 3
its treasury. To our knowledge, no shares of Company Stock have been transferred
to trustees pursuant to a voting trust agreement.
5. The Company has full corporate power and authority to execute, deliver
and perform its obligations under the Merger Agreement and the Related
Agreements to which it is a party. The execution, delivery and performance by
the Company of the Merger Agreement and the Related Agreements to which the
Company is a party have been authorized by all necessary corporate action on the
part of the Company and the Shareholders. Each of the Merger Agreement and the
Related Agreements to which the Company is a party has been duly executed and
delivered by the Company and is a valid and binding obligation of the Company
enforceable in accordance with its terms.
6. The execution and delivery by the Company of the Merger Agreement and
the Related Agreements to which the Company is a party and performance by the
Company of its obligations thereunder do not conflict with or violate (i) the
Company's Articles of Incorporation or By-laws; (ii) any applicable statute, law
or regulation (other than ordinances and regulations of counties and political
subdivisions thereof as to which we express no opinion) or any order, judgment
or decree of a court known to us; or (iii) except as set forth in Item 1 of
Section 3.06 of the Company Disclosure Schedule, any contract known to us to
which the Company is a party.
7. No consent, approval, authorization or other action by any Governmental
Entity or, to our knowledge, other Person or filing with any such Governmental
Entity or, to our knowledge, other Person which has not been obtained or
accomplished is required in connection with the execution, delivery and
performance by the Company of the Merger Agreement and the Related Agreements to
which the Company is a party, except as set forth in Item 1 of Section 3.06 of
the Company Disclosure Schedule and other than the matters referred to in
paragraph 9 below.
8. To our knowledge, there are no actions, suits or proceedings pending or
threatened against the Company or any of its assets before any court or
administrative agency other than those identified in Section 3.12 of the Company
Disclosure Schedule.
9. Upon filing of the Agreement of Merger with the
Secretary of State of California, together with a certificate of
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Zygo Corporation
August 7, 1996
Page 4
satisfaction of the California Franchise Tax Board that all taxes imposed on
Zygo Sub under the Bank and Corporation Tax Law have been paid or secured, the
Merger shall thereupon become effective.
10. To our knowledge, there are no outstanding options, warrants,
convertible securities, calls, rights, commitments, preemptive rights or
agreements or instruments or understandings of any character to which any
Shareholder is a party or by which any Shareholder is bound, obligating him or
it to issue, deliver or sell, or cause to be issued, delivered or sold,
contingently or otherwise, any shares of Company Stock owned by him or it or any
securities or obligations convertible into or exchangeable for such shares or to
grant, extend or enter into any such option, warrant, convertible security,
call, right, commitment, preemptive right or agreement. To our knowledge, none
of the Shareholders is a party to any voting trust, proxy, or other agreement,
commitment or understanding with respect to the voting, dividend rights or
disposition of any capital stock of the Company except as provided in or
contemplated by the Merger Agreement.
11. Each Shareholder has all requisite power and authority to enter into
the Merger Agreement and the Related Agreements to which such Shareholder is a
party, to carry out his or its obligations under the Merger Agreement and the
Related Agreements to which such Shareholder is a party and to consummate the
transactions contemplated thereby. The execution and delivery by each of the
Shareholders of the Merger Agreement and the Related Agreements to which such
Shareholder is a party, the consummation of the transactions contemplated
thereby and the performance by each of the Shareholders of his or its
obligations thereunder have been duly authorized by all necessary corporate or
analogous action on the part of each of the Shareholders, if applicable. Each of
the Merger Agreement and the Related Agreements to which the Shareholders are
parties have been duly executed and delivered by each of the Shareholders and
constitute the legal, valid and binding obligation of each of the Shareholders
enforceable against each Shareholder in accordance with its terms.
12. The execution and delivery of the Merger Agreement and the Related
Agreements to which the Shareholders are parties and the performance by each
Shareholder of his or its obligations thereunder do not conflict with or violate
any provision of any Shareholder's Certificate of Incorporation or By-laws (or
other analogous documents), if applicable, (b) any applicable law,
<PAGE>
Zygo Corporation
August 7, 1996
Page 5
statute or regulation, or to our knowledge, any order, judgment or decree of a
court, or (c) to our knowledge, the terms of any agreement, contract, indenture
or other instrument to which any of the Shareholders is a party or to which any
of his or its properties are subject.
13. To our knowledge, no consent, approval, authorization or other action
by any Governmental Entity or Person or filing with any such Governmental Entity
or Person which has not been obtained or accomplished is required in connection
with the execution, delivery and performance by any Shareholder of the Merger
Agreement and the Related Agreements to which such Shareholder is a party.
To our knowledge, there is no action, suit or proceeding pending or
threatened against or affecting any of the Shareholders.
The opinions set forth above are subject to the following qualifications:
(a) Our opinions in paragraphs 5 and 11 above are subject to and limited
by: (i) the effect of bankruptcy, insolvency, reorganization, receivership,
conservatorship, arrangement, moratorium or other laws affecting or relating to
the rights of creditors generally; and (ii) the rules governing the availability
of specific performance, injunctive relief or other equitable remedies and
general principles of equity, regardless of whether considered in a proceeding
in equity or at law.
(b) Our opinion in paragraph 11 above with respect to Section 1 of each of
the Lock-up Agreements is subject to the effect of laws which restrict or
prohibit unreasonable restraints on alienation of property.
(c) We express no opinion as to the effect of the provisions of Section
9.07 of the Merger Agreement and corresponding provisions of certain of the
Related Agreements specifying that the law of Delaware governs such documents.
The opinions set forth herein are based upon the assumption that the internal
law of California applies to the Merger Agreement and the Related Agreements and
the transactions evidenced thereby.
(d) Whenever a statement herein is qualified by "known to us," "to our
knowledge" or similar phrase, it indicates that in the course of our
representation of the Company no information that would give us current actual
knowledge of the inaccuracy of
<PAGE>
Zygo Corporation
August 7, 1996
Page 6
such statement has come to the attention of the attorneys in this firm who have
rendered legal services in connection with this transaction. We have not made
any independent investigation to determine the accuracy of such statement,
except as expressly described herein.
(e) Our opinions in paragraphs 5 and 9 above assume the accuracy of the
Certificate of Francis E. Lundy of even date herewith, a copy of which has been
provided to you.
(f) Our opinions in paragraphs 10 through 14 above are based, as to
factual matters, solely on certificates and other written representations
provided to us by the Shareholders and on our review of (i) the Sherman Family
Living Trust, dated April 22, 1985, as amended and restated September 18, 1995,
(ii) the Frank J. Scheufele Trust, dated October 5, 1983, and (iii) the Lundy
1996 Charitable Trust, dated June 28, 1996, and any agreements or other
documents or matters known to us. For purposes of the opinions in paragraphs 10
through 14, the term Shareholders does not include Inspectron Development
Partners, a California Limited Partnership.
This opinion is rendered solely for your information in connection with
the transaction described above and may not be relied upon by any other person
for any purpose without our prior written consent.
Very truly yours,
PILLSBURY MADISON & SUTRO LLP
<PAGE>
EXHIBIT 7.02(e)(1)
EMPLOYMENT AGREEMENT
AGREEMENT, made as of August 7, 1996, between TECHNICAL INSTRUMENT COMPANY,
a California corporation with an office at 650 North Mary Avenue, Sunnyvale,
California 94086 (the "Company"), and _________________________, residing at
_______________________ ____________________ ("Employee").
W I T N E S S E T H:
WHEREAS, the Company desires that Employee be employed by the Company, and
Employee desires to be so employed by the Company upon the terms and conditions
herein set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises, representations and covenants herein contained, the parties hereto
agree as follows:
1. EMPLOYMENT.
The Company hereby employs Employee and Employee hereby accepts such
employment, subject to the terms and conditions herein set forth. Employee shall
hold the position of _____________ of Technical Instrument Company, a business
unit initially being operated in the form of a subsidiary of Zygo Corporation
("Zygo").
2. TERM.
The initial term of employment under this Agreement shall begin on August
7, 1996 (the "Employment Date") and shall continue for a period of two (2) years
from that date, subject to prior termination in accordance with the terms
hereof. Thereafter, this Agreement shall automatically be renewed for successive
one year terms unless either party shall give the other sixty (60) days' prior
written notice of its or his intent not to renew this Agreement. The initial
term together with all such additional one-year period(s) of employment, if any,
are collectively referred to herein as the "term" of this Agreement.
3. COMPENSATION.
As compensation for the employment services to be rendered by Employee
hereunder, the Company agrees to pay, or cause to be paid, to Employee, and
Employee agrees to accept, an annual salary of $_________ or such higher amount
as the President of Zygo may determine from time to time, subject to such
payroll deductions as are required by law and deductions for applicable employee
contributions to the
<PAGE>
normal benefit programs of the Company. The annual salary provided for hereunder
shall be payable in equal installments commencing at the Employment Date, in
accordance with the Company's practice.
4. EXPENSES.
The Company shall pay or reimburse Employee, upon presentment of suitable
vouchers, for all reasonable business and travel expenses which may be incurred
or paid by Employee in connection with his employment hereunder. Employee shall
comply with restrictions and shall keep records in compliance with the Company's
policy and procedure related to travel and entertainment expenses.
5. INSURANCE AND OTHER BENEFITS.
(a) Employee shall be entitled to such vacations and to participate
in and receive any other health and welfare (including insurance) benefits
customarily provided by the Company for its employees generally, all as
determined from time to time by the Board of Directors of the Company or Zygo or
appropriate committee thereof; provided that the health and welfare benefits in
the aggregate, provided to Employee, are at least substantially comparable to
the benefits provided by the Company to Employee prior to the date hereof, all
of which benefits Employee represents are set forth in Schedule 5(a) attached
hereto. The Company currently intends to initially afford Employee the same
health and welfare benefits as are set forth in said Schedule 5(a); i.e., those
benefits provided by the Company to Employee prior to the date hereof. Unused
annual vacations may be carried over to the extent permitted by Company policy.
(b) Employee acknowledges and agrees that notwithstanding anything
to the contrary contained in any health or welfare benefit plan maintained by
Zygo, except as may be otherwise agreed to by Employee and Zygo, Employee shall
not be entitled to participate in any of Zygo's employee benefit plans by virtue
of his being employed by the Company or by Zygo (if and when applicable).
6. DUTIES.
(a) Employee shall perform such duties and functions as the
President, Chief Executive Officer or Chief Operating Officer of Zygo and the
Board of Directors of the Company or Zygo shall from time to time determine and
Employee shall comply in the performance of his duties with the policies of, and
be subject to, the direction of such officers and such Boards of Directors.
(b) Employee agrees to devote his entire working time, attention and
energies to the performance of the business of the Company and of any of its
subsidiaries or affiliates by which he may be employed; and Employee shall not,
directly or indirectly, alone or as a member of any partnership or other
organization, or as an officer, director or employee of any other corporation,
partnership or other
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<PAGE>
organization, be actively engaged in or concerned with any other duties or
pursuits which interfere with the performance of his duties hereunder, or which,
even if non- interfering, may be inimical, or contrary, to the best interests of
the Company, except those duties or pursuits specifically authorized by the
Board of Directors of the Company or Zygo.
7. TERMINATION OF EMPLOYMENT; EFFECT OF TERMINATION.
(a) Employee's employment hereunder may be terminated at any time
upon written notice from the Company to Employee,
(i) upon the determination by the President, Chief Executive
Officer or Chief Operating Officer of Zygo or the Board of Directors
of the Company or Zygo that Employee's performance of his duties has
not been fully satisfactory for any reason which would not
constitute justifiable cause (as hereinafter defined) upon five (5)
days' prior written notice to Employee; or
(ii) immediately upon determination by the Board of Directors
of the Company or Zygo that justifiable cause exists for such
termination.
(b) Employee's employment shall terminate upon:
(i) the death of the Employee; or
(ii) the "disability" of Employee (as hereinafter defined
pursuant to subsection (d) herein).
(c) Employee's employment hereunder may be terminated at any time
upon thirty (30) days' prior written notice from the Employee to the Company.
(d) For the purposes of this Agreement, the term "disability" shall
mean the inability of Employee, due to illness, accident or any other physical
or mental incapacity, to perform his duties in a normal manner for a period of
three (3) consecutive months or for a total of four (4) months (whether or not
consecutive) in any twelve (12) month period during the term of this Agreement.
(e) For the purposes hereof, the term "justifiable cause" shall mean
and be limited to: any repeated failure or refusal by Employee to perform, or
willful neglect by Employee of, any of his duties pursuant to this Agreement;
Employee's conviction (which, through lapse of time or otherwise, is not subject
to appeal) of any crime or offense involving money or other property of the
Company, Zygo or any of their respective subsidiaries or affiliates or which
constitutes a felony in the jurisdiction involved; Employee's performance of any
act or his failure to act, for which if he were prosecuted and convicted, a
crime or offense involving money or property of the Company, Zygo or any of
their respective subsidiaries or affiliates, or which constitutes
-3-
<PAGE>
a felony in the jurisdiction involved, would have occurred; any disclosure by
Employee to any person, firm or corporation other than the Company, Zygo, any of
their respective subsidiaries or affiliates and its and their directors,
officers and employees, of any confidential information or trade secret of the
Company, Zygo or any of their respective subsidiaries or affiliates or any other
breach by Employee of any of the provisions of Section 9, 10 or 11 hereof; any
attempt by Employee to secure any personal profit in connection with the
business of the Company, Zygo or any of their respective subsidiaries or
affiliates; or the engaging by Employee in any business or activities other than
the business of the Company, Zygo and their respective subsidiaries or
affiliates which interferes with the performance of his duties hereunder. Upon
termination of Employee's employment by the Company for justifiable cause or
upon termination of Employee's employment by Employee pursuant to Section 7(c)
hereof, this Agreement shall terminate immediately and Employee shall not be
entitled to any amounts or benefits hereunder other than such portion of
Employee's annual salary and reimbursement of expenses pursuant to Section 4
hereof as has been accrued through the date of his termination of employment.
(f) If Employee shall die during the term of his employment
hereunder, this Agreement shall terminate immediately. In such event, the estate
of Employee shall thereupon be entitled to receive such portion of Employee's
annual salary and reimbursement of expenses pursuant to Section 4 hereof as has
been accrued through the date of his death.
(g) Upon Employee's "disability," the Company shall have the right
to terminate Employee's employment. Notwithstanding any inability to perform his
duties, Employee shall be entitled to receive his compensation as provided
herein until the termination of his employment for disability. Any termination
pursuant to this subsection (g) shall be effective on the date thirty (30) days
after which Employee shall have received written notice of the Company's
election to terminate. Notwithstanding anything to the contrary contained
herein, during any period that Employee fails to perform his duties hereunder as
a result of his disability (but prior to receiving the notice of termination
specified in this Section 7(g), (i) Employee shall continue to receive his full
salary at the rate then in effect and all benefits provided in Section 5 hereof,
provided that payments made to Employee pursuant to this Section 7(f) shall be
reduced by the sum of the amounts, if any, payable to Employee at or prior to
the time of any such payment under any disability benefit plan or program of, or
provided by, the Company or Zygo, and (ii) the Company shall have the right to
hire any other individual or individuals to perform such duties and functions as
the Company shall desire, including those duties heretofore performed by
Employee.
(h) Notwithstanding any provision to the contrary contained herein,
in the event that Employee's employment is terminated by the Company at any time
for any reason other than justifiable cause, disability or death, the parties
hereto agree that damages to Employee shall be difficult to ascertain in any
such event, but in order to limit the liability of the Company and Zygo in any
such event, Employee shall be entitled to receive as liquidated damages and not
as a penalty, and the Company shall
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<PAGE>
pay to Employee, Employee's salary (payable in such amount and in such manner as
set forth in Section 3 herein) from and after the date of such termination for a
period ending (i) at the end of the two year initial term of this Agreement if
such termination occurs during such initial two year term, provided, however,
that in the event termination occurs within the last six (6) months of the
initial two year term, Employee would be entitled to his salary for a period
ending six (6) months from the date of such termination, or (ii) six (6) months
from the date of termination if such termination occurs during any renewal term
subsequent to such initial two year term, which amount shall be in lieu of any
and all other payments due and owing to Employee under the terms of this
Agreement or otherwise.
8. REPRESENTATIONS AND AGREEMENTS OF EMPLOYEE.
(a) Employee represents and warrants that he is free to enter into
this Agreement and to perform the duties required hereunder, and that there are
no employment contracts or understandings, restrictive covenants or other
restrictions, whether written or oral, preventing the performance of his duties
hereunder. Employee further represents and warrants that he is in full
compliance with all existing agreements between himself and the Company or Zygo.
(b) Employee agrees to submit to a medical examination and to
cooperate and supply such other information and documents as may be required by
any insurance company in connection with the Employees' inclusion in any
insurance or fringe benefit plan or program as the Company shall determine from
time to time to obtain, or in connection with, in the Company's sole discretion,
the Company's or Zygo's obtaining life insurance for its benefit on the life of
Employee.
9. NON-COMPETITION.
(a) Employee agrees that during his employment by the Company (which
shall be deemed to include the period in which Employee is receiving any
severance payments set forth in Section 7(h) hereto) (the "Non-Competitive
Period"), Employee shall not, directly or indirectly, as owner, partner, joint
venturer, stockholder, employee, broker, agent, principal, trustee, corporate
officer, director, licensor, or in any capacity whatsoever engage in, become
financially interested in, be employed by, render any consultation or business
advice with respect to, or have any connection with, any business engaged in the
research, development, testing, design, manufacture, sale, lease, marketing,
utilization or exploitation of any products or services which are designed for
the same purpose as, are similar to, or are otherwise competitive with, products
or services of the Company, Zygo or any of their respective subsidiaries or
affiliates, in any geographic area where, at the time of the termination or
expiration of his employment hereunder, the business of the Company, Zygo or any
of their respective subsidiaries or affiliates was being conducted or was
proposed to be conducted in any manner whatsoever; provided, however, that
Employee may own any securities of any corporation which is engaged in such
business and is publicly owned and traded but in an amount not to exceed at any
one time one percent (1%) of any class of stock or
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<PAGE>
securities of such corporation. In addition, Employee shall not, directly or
indirectly, during the Non-Competitive Period, request or cause contracting
parties, suppliers or customers with whom the Company, Zygo or any of their
respective subsidiaries or affiliates has a business relationship to cancel or
terminate any such business relationship with the Company, Zygo or any of their
respective subsidiaries or affiliates or solicit, interfere with or entice from
the Company, Zygo or any of their respective subsidiaries or affiliates any
employee (or former employee) of the Company, Zygo or any of their respective
subsidiaries or affiliates. Notwithstanding the foregoing, in the event
Employee's employment hereunder is terminated by the Company for justifiable
cause pursuant to Section 7(a) or is terminated by Employee pursuant to Section
7(c) hereof, the Non-Competitive Period shall continue through the expiration of
the scheduled term of this Agreement as provided in Section 2 hereof.
(b) If any portion of the restrictions set forth in this Section 9
should, for any reason whatsoever, be declared invalid by a court of competent
jurisdiction, the validity or enforceability of the remainder of such
restrictions shall not thereby be adversely affected.
(c) Employee acknowledges that the Company and/or Zygo conducts
business on a world-wide basis, that its sales and marketing prospects are for
continued expansion into world markets and that, therefore, the territorial and
time limitations set forth in this Section 9 are reasonable and properly
required for the adequate protection of the business of the Company, Zygo and
their respective subsidiaries. In the event any such territorial or time
limitation is deemed to be unreasonable by a court of competent jurisdiction,
Employee agrees to the reduction of the territorial or time limitation to the
area or period which such court deems reasonable.
(d) The existence of any claim or cause of action by Employee
against the Company, Zygo or any of their respective subsidiaries or affiliates
shall not constitute a defense to the enforcement by the Company, Zygo or any
such subsidiary or affiliate of the foregoing restrictive covenants, but such
claim or cause of action shall be litigated separately.
10. INVENTIONS AND DISCOVERIES.
(a) Employee shall promptly and fully disclose to Zygo, and with all
necessary detail for a complete understanding of the same, all developments,
know-how, discoveries, inventions, improvements, concepts, ideas, writings,
formulae, processes and methods (whether copyrightable, patentable or otherwise)
made, received, conceived, acquired or written during working hours, or
otherwise, by Employee (whether or not at the request or upon the suggestion of
Zygo) during the period of his employment with the Company, Zygo or any of their
respective subsidiaries or affiliates, solely or jointly with others, in all
instances in or relating to any activities of the Company, Zygo or their
respective subsidiaries or affiliates known to him as a consequence of his
employment hereunder (collectively the "Subject Matter").
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<PAGE>
(b) Employee hereby assigns and transfers, and agrees to assign and
transfer, to Zygo, all his rights, title and interest in and to the Subject
Matter, and Employee further agrees to deliver to Zygo any and all drawings,
notes, specifications and data relating to the Subject Matter, and to execute,
acknowledge and deliver all such further papers, including applications for
copyrights or patents, as may be necessary to obtain copyrights and patents for
any thereof in any and all countries and to vest title thereto to Zygo. Employee
shall assist Zygo in obtaining such copyrights or patents during the term of
this Agreement, and any time thereafter on reasonable notice, and Employee
agrees to testify in any prosecution or litigation involving any of the Subject
Matter (provided that if such testimony occurs after termination of this
Agreement, Employee shall be reasonably compensated for his time and reimbursed
for any out-of-pocket expense).
11. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
(a) Employee shall not, during the term of this Agreement or at any
time following termination or expiration of this Agreement, directly or
indirectly, disclose or permit to be known (other than as is required in the
regular course of his duties or required by law (in which case Employee shall
give Zygo prior written notice of such required disclosure) or with the prior
written consent of the President of Zygo), to any person, firm or corporation,
any confidential information acquired by Employee during the course of, or as an
incident to, his employment hereunder, relating to the Company, Zygo or any of
their respective subsidiaries or affiliates, the directors of the Company, Zygo
or any of their respective subsidiaries or affiliates, any client of the
Company, Zygo or any of their respective subsidiaries or affiliates, or any
corporation, partnership or other entity owned or controlled, directly or
indirectly, by any of the foregoing, or in which any of the foregoing has a
beneficial interest, including, but not limited to, the business affairs of each
of the foregoing. Such confidential information shall include, but shall not be
limited to, proprietary technology, trade secrets, patented processes, research
and development data, know-how, market studies and forecasts, competitive
analyses, pricing policies, employee lists, personnel policies, the substance of
agreements with customers, suppliers and others, marketing or dealership
arrangements, servicing and training programs and arrangements, customer lists
and any other documents embodying such confidential information. This
confidentiality obligation shall not apply to any confidential information which
thereafter becomes publicly available other than pursuant to a breach of this
Section 11(a), directly or indirectly, by Employee.
(b) All information and documents relating to the Company, Zygo and
their respective subsidiaries or affiliates as hereinabove described (or other
business affairs) shall be the exclusive property of the Company or Zygo, as the
case may be, and Employee shall use commercially reasonable best efforts to
prevent any publication or disclosure thereof. Upon termination of Employee's
employment with the Company, all documents, records, reports, writings and other
similar documents containing confidential information, including copies thereof,
then in Employee's possession or control shall be returned and left with the
Company.
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<PAGE>
(c) Employee will execute the form of "Technical Instrument Company
Non-Disclosure and Non-Solicitation Agreement" in the form of Exhibit A hereto,
all the terms and provisions of which are incorporated herein as if fully set
forth herein.
12. RIGHT TO INJUNCTION.
Employee recognizes that the services to be rendered by him hereunder are
of a special, unique, unusual, extraordinary and intellectual character
involving skill of the highest order and giving them peculiar value the loss of
which cannot be adequately compensated for in damages. In the event of a breach
of this Agreement by Employee, the Company shall be entitled to injunctive
relief or any other legal or equitable remedies. Employee agrees that the
Company may recover by appropriate action the amount of the actual damage caused
the Company by any failure, refusal or neglect of Employee to perform his
agreements, representations and warranties herein contained. The remedies
provided in this Agreement shall be deemed cumulative and the exercise of one
shall not preclude the exercise of any other remedy at law or in equity for the
same event or any other event.
13. AMENDMENT OR ALTERATION.
No amendment or alteration of the terms of this Agreement shall be valid
unless made in writing and signed by both of the parties hereto.
14. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Delaware,
applicable to agreements made and to be performed therein.
15. SEVERABILITY.
The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect.
16. NOTICES.
Any notices required or permitted to be given hereunder shall be
sufficient if in writing, and if delivered by hand, or sent by certified mail,
return receipt requested, to the addresses set forth above or such other address
as either party may from time to time designate in writing to the other, and
shall be deemed given as of the date of the delivery or mailing.
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<PAGE>
17. WAIVER OR BREACH.
It is agreed that a waiver by either party of a breach of any provision of
this Agreement shall not operate, or be construed, as a waiver of any subsequent
breach by that same party.
18. ENTIRE AGREEMENT AND BINDING EFFECT.
This Agreement, together with the Agreement Plan of Merger, dated as of
August 7, 1996, by and among the Company, Zygo Acquisition Corporation, Zygo and
the persons and entities listed on Schedule I thereto and all agreements and
exhibits referred to therein, contains the entire agreement of the parties with
respect to the subject matter hereof and shall be binding upon and inure to the
benefit of the parties hereto and their respective legal representatives, heirs,
distributors, successors and assigns. Notwithstanding the foregoing, all prior
agreements between Employee and the Company relating to the confidentiality of
information, trade secrets and patents shall not be affected by this Agreement.
19. SURVIVAL.
The termination of Employee's employment hereunder shall not affect the
enforceability of Sections 7, 8(a), 9, 10, 11, 12 and 14 hereof.
20. NON-ASSIGNABILITY.
This Agreement is entered into in consideration of the personal qualities
of Employee and may not be, nor may any right or interest hereunder be, assigned
by him without the prior written consent of the Company. It is expressly
understood and agreed that this Agreement, and the rights accruing and
obligations owed to the Company hereunder, and the obligations to be performed
by the Company hereunder, may be assigned by the Company at any time without the
consent of Employee to Zygo or any of the Company's successors or assigns. In
the event that this Agreement is assigned by the Company to Zygo pursuant to
this Section 20, all references in this Agreement to "Company" shall refer to
Zygo except that the references thereto contained in Section 5(a) hereof shall
refer to Technical Instrument Company, a business unit of Zygo.
21. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original but all of which together shall constitute one
and the same instrument.
22. FURTHER ASSURANCES.
The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.
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<PAGE>
23. HEADINGS.
This Section headings appearing in this Agreement are for the purposes of
easy reference and shall not be considered a part of this Agreement or in any
way modify, demand or affect its provisions.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
TECHNICAL INSTRUMENT COMPANY
By:_________________________________
Name: Gary K. Willis
Title: Chairman of the Board
EMPLOYEE
------------------------------------
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<PAGE>
EXHIBIT A
TECHNICAL INSTRUMENT COMPANY
NON-DISCLOSURE AND NON-SOLICITATION AGREEMENT
AGREEMENT, dated as of August 7, 1996, by and between TECHNICAL
INSTRUMENT COMPANY, a California corporation (the "Company"), and
___________________ (the "Employee")
W I T N E S S E T H:
In consideration of the Company's employment of the Employee and in
consideration of the covenants contained herein, the parties hereby agree as
follows:
1. The Employee agrees that he will not directly or indirectly disclose or
use at any time any knowledge, information or material relating to any,
business, customer, machine, design, apparatus or system of the Company,
Zygo or any of their respective subsidiaries or affiliates, or any of the
methods of conducting any part of their respective business or the like
which may become known to the Employee by reason of his employment or
otherwise except as may be reasonably necessary to the performance of his
assigned duties as an employee of the Company.
2. The Employee agrees to promptly and completely disclose in writing to such
person as the Company may designate all ideas, developments, inventions
and improvements heretofore or hereafter made, developed, perfected,
devised, conceived or acquired by the Employee either solely or jointly
with others during the Employee's employment by the Company and within
ninety (90) days after any termination thereof, whether or not during
regular working hours, relating in any way to the actual or anticipated
business, research, developments or products of the Company; and if so
requested by the Company, to assign, transfer and convey to the Company
all right, title and interest in and to all such ideas, developments,
inventions and improvements.
3. The Employee agrees, at the request and expense of the Company, to make,
execute and deliver any and all papers, documents and instruments,
including applications for patents in any and all countries and reissues
and extensions thereof, and to assist and cooperate (without expense to
the Employee) with the Company or its representative in any controversy or
legal proceedings relating to said ideas, developments, inventions and
improvements, and the patents which may be procured thereon.
<PAGE>
4. The Company does not assume any responsibility for the prosecution or
defense of any application for patents in any countries arising from
ideas, developments, inventions and improvements disclosed to the Company
pursuant to this Agreement.
5. The Employee represents and warrants that he/she is free to enter into the
employment arrangements and, if applicable, the employment agreement, to
be entered into with the Company and to perform the duties required of the
Employee in connection with his/her employment by the Company; and that,
except as indicated on Exhibit 1 hereto, there are no employment
agreements, confidentiality agreements, restrictive covenants or other
agreements or restrictions binding on the Employee or to which the
Employee is a party which limit, prohibit or prevent the full performance
by the Employee of his/her employment duties and arrangements with the
Company or which would preclude the Employee from disclosing or otherwise
limit the Employee's right to disclose to the Company any ideas,
inventions, discoveries or other information.
6. The Employee represents and warrants that he/she has not brought and
agrees that he/she will not bring to the Company or use in the performance
of his/her employment responsibilities at the Company any materials,
documents, trade secrets or confidential information of a former employer
or any other person which are of a confidential nature or which are not
generally available to the public. The Employee agrees that he/she has not
and will not disclose to the Company or seek to induce the Company to use
any such confidential information, materials, documents or trade secrets.
7. The Employee agrees that during his/her employment by the Company and
following the termination of such employment, the Employee will not,
directly or indirectly, request or cause any suppliers or customers with
whom the Company, Zygo or any of their respective subsidiaries or
affiliates has a business relationship to cancel or terminate any such
business relationship with the Company, Zygo or any of their respective
subsidiaries or affiliates or solicit, interfere with or entice from the
Company or Zygo any employee or former employee of the Company or Zygo.
8. Neither this Agreement nor any benefits hereunder are assignable by the
Employee, but the terms and provisions hereof shall inure to the benefit
of the Company's successors and assigns.
9. This Agreement is not a contract of employment; it does not give the
Employee any rights to any employment with the Company, and it in no way
abridges, alters, amends or modifies any rights the Company may otherwise
have to terminate its employment of the Employee.
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<PAGE>
10. This Agreement, together with the Employment Agreement, dated August 7,
1996, by and between the Employee and the Company and the Agreement and
Plan of Merger, dated as of August 7, 1996, by and among the Company,
Zygo Acquisition Corporation, Zygo Corporation and the persons and
entities listed on Schedule I thereto and all agreements and exhibits
referred to therein, contains the entire understanding and agreement of
the parties with respect to the matters herein contained, and no waiver or
modification hereof shall be binding unless in writing and subscribed by
the parties hereto.
11. If any paragraph, clause, or phrase of this Agreement shall, by any
federal, state or other law or by any decision of any court, be declared
or held illegal, void or unenforceable, the remaining portions of this
Agreement shall continue to be valid and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
TECHNICAL INSTRUMENT COMPANY
By:_________________________________
Name: Gary K. Willis
Title: Chairman of the Board
EMPLOYEE
------------------------------------
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EXHIBIT 7.02(e)(2)
EMPLOYMENT AGREEMENT
AGREEMENT, made as of August 7, 1996, between TECHNICAL INSTRUMENT
COMPANY, a California corporation with an office at 650 North Mary Avenue,
Sunnyvale, California 94086 (the "Company"), and Francis E. Lundy, residing at
Six-Friars Lane, Mill Valley, California 94941 ("Employee").
W I T N E S S E T H:
WHEREAS, the Company desires that Employee be employed by the Company, and
Employee desires to be so employed by the Company upon the terms and conditions
herein set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises, representations and covenants herein contained, the parties hereto
agree as follows:
1. EMPLOYMENT.
The Company hereby employs Employee and Employee hereby accepts such
employment, subject to the terms and conditions herein set forth. Employee shall
hold the position of President of Technical Instrument Company, a business unit
initially being operated in the form of a subsidiary of Zygo Corporation
("Zygo").
2. TERM.
The initial term of employment under this Agreement shall begin on August
7, 1996 (the "Employment Date") and shall continue for a period of three (3)
years from that date, subject to prior termination in accordance with the terms
hereof. Thereafter, this Agreement shall automatically be renewed for successive
one year terms unless either party shall give the other sixty (60) days' prior
written notice of its or his intent not to renew this Agreement. The initial
term together with all such additional one-year period(s) of employment, if any,
are collectively referred to herein as the "term" of this Agreement.
3. COMPENSATION.
As compensation for the employment services to be rendered by Employee
hereunder, the Company agrees to pay, or cause to be paid, to Employee, and
Employee agrees to accept, an annual salary of $150,000 or such higher amount as
the President of Zygo may determine from time to time, subject to such payroll
deductions as are
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required by law and deductions for applicable employee contributions to the
normal benefit programs of the Company. The annual salary provided for hereunder
shall be payable in equal installments commencing at the Employment Date, in
accordance with the Company's practice. In addition, Employee shall be entitled
to additional incentive compensation from time to time. Such compensation will
be based on the Company's overall performance and will be awarded at the
discretion of the President of Zygo with the approval of the Board of Directors
of the Company or Zygo.
On or before August 14, 1996, Employee shall receive a grant of options to
purchase 20,000 shares of Common Stock of Zygo with an exercise price equal to
the fair market value on the date of grant, vesting in four equal installments
and otherwise in accordance with the terms of Zygo's Amended and Restated
Non-Qualified Stock Option Plan.
4. EXPENSES.
The Company shall pay or reimburse Employee, upon presentment of suitable
vouchers, for all reasonable business and travel expenses which may be incurred
or paid by Employee in connection with his employment hereunder. Employee shall
comply with restrictions and shall keep records in compliance with the Company's
policy and procedure related to travel and entertainment expenses.
5. INSURANCE AND OTHER BENEFITS.
(a) Employee shall be entitled to such vacations and to participate
in and receive any other health and welfare (including insurance) benefits
customarily provided by the Company for its employees generally, all as
determined from time to time by the Board of Directors of the Company or Zygo or
appropriate committee thereof; provided that the health and welfare benefits in
the aggregate provided to Employee are at least substantially comparable to the
benefits provided by the Company to Employee set forth on Schedule 5(a) attached
hereto, all of which benefits Employee represents are benefits provided by the
Company to Employee prior to the date hereof. The Company currently intends to
initially afford Employee the same health and welfare benefits as are set forth
in Schedule 5(a). Unused annual vacations may be carried over to the extent
permitted by Company policy.
(b) Employee acknowledges and agrees that notwithstanding anything
to the contrary contained in any health or welfare benefit plan maintained by
Zygo, except as may be otherwise agreed to by Employee and Zygo, Employee shall
not be entitled to participate in any of Zygo's employee benefit plans by virtue
of his being employed by the Company or Zygo (if and when applicable).
6. DUTIES.
(a) Employee shall perform such duties and functions as the
President, Chief Executive Officer or Chief Operating Officer of Zygo and the
Board of Directors
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of the Company or Zygo shall from time to time determine and Employee shall
comply in the performance of his duties with the policies of, and be subject to,
the direction of such officers and such Boards of Directors. Neither the Company
nor Zygo shall relocate Employee's office outside of the San Francisco Bay Area
without Employee's consent and any such relocation not consented to by Employee
shall be deemed a termination of Employee's employment by the Company for
purposes of Section 7(h) hereof.
(b) Employee agrees to devote his entire working time, attention and
energies to the performance of the business of the Company and of any of its
subsidiaries or affiliates by which he may be employed; and Employee shall not,
directly or indirectly, alone or as a member of any partnership or other
organization, or as an officer, director or employee of any other corporation,
partnership or other organization, be actively engaged in or concerned with any
other duties or pursuits which interfere with the performance of his duties
hereunder, or which, even if non- interfering, may be inimical, or contrary, to
the best interests of the Company, except those duties or pursuits specifically
authorized by the Board of Directors of the Company or Zygo.
7. TERMINATION OF EMPLOYMENT; EFFECT OF TERMINATION.
(a) Employee's employment hereunder may be terminated at any time
upon written notice from the Company to Employee,
(i) upon the determination by the President, Chief Executive
Officer or Chief Operating Officer of Zygo or the Board of Directors
of the Company or Zygo that Employee's performance of his duties has
not been fully satisfactory for any reason which would not
constitute justifiable cause (as hereinafter defined) upon five (5)
days' prior written notice to Employee; or
(ii) immediately upon determination by the Board of Directors
of the Company or Zygo that justifiable cause exists for such
termination.
(b) Employee's employment shall terminate upon:
(i) the death of the Employee; or
(ii) the "disability" of Employee (as hereinafter defined
pursuant to subsection (d) herein).
(c) Employee's employment hereunder may be terminated at any time
upon thirty (30) days' prior written notice from the Employee to the Company.
(d) For the purposes of this Agreement, the term "disability" shall
mean the inability of Employee, due to illness, accident or any other physical
or mental
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incapacity, to perform his duties in a normal manner for a period of three (3)
consecutive months or for a total of four (4) months (whether or not
consecutive) in any twelve (12) month period during the term of this Agreement.
(e) For the purposes hereof, the term "justifiable cause" shall mean
and be limited to: any repeated failure or refusal by Employee to perform or
willful neglect by Employee of, any of his duties pursuant to this Agreement;
Employee's conviction (which, through lapse of time or otherwise, is not subject
to appeal) of any crime or offense involving money or other property of the
Company, Zygo or any of their respective subsidiaries or affiliates or which
constitutes a felony in the jurisdiction involved; Employee's performance of any
act or his failure to act, for which if he were prosecuted and convicted, a
crime or offense involving money or property of the Company, Zygo or any of
their respective subsidiaries or affiliates, or which constitutes a felony in
the jurisdiction involved, would have occurred; any disclosure by Employee to
any person, firm or corporation other than the Company, Zygo or any of their
respective subsidiaries or affiliates and its and their directors, officers and
employees, of any confidential information or trade secret of the Company, Zygo
or any of their respective subsidiaries or affiliates or any other breach by
Employee of any of the provisions of Section 10 hereof; any attempt by Employee
to secure any personal profit in connection with the business of the Company,
Zygo or any of their respective subsidiaries or affiliates; or the engaging by
Employee in any business or activities other than the business of the Company,
Zygo and their respective subsidiaries or affiliates which interferes with the
performance of his duties. Upon termination of Employee's employment by the
Company for justifiable cause or upon termination of Employee's employment by
Employee pursuant to Section 7(c) hereof, this Agreement shall terminate
immediately and Employee shall not be entitled to any amounts or benefits
hereunder other than such portion of Employee's annual salary and reimbursement
of expenses pursuant to Section 4 hereof as has been accrued through the date of
his termination of employment.
(f) If Employee shall die during the term of his employment
hereunder, this Agreement shall terminate immediately. In such event, the estate
of Employee shall thereupon be entitled to receive such portion of Employee's
annual salary and reimbursement of expenses pursuant to Section 4 hereof as has
been accrued through the date of his death.
(g) Upon Employee's "disability," the Company shall have the right
to terminate Employee's employment. Notwithstanding any inability to perform his
duties, Employee shall be entitled to receive his compensation as provided
herein until the termination of his employment for disability. Any termination
pursuant to this subsection (g) shall be effective on the date thirty (30) days
after which Employee shall have received written notice of the Company's
election to terminate. Notwithstanding anything to the contrary contained
herein, during any period that Employee fails to perform his duties hereunder as
a result of his disability (but prior to receiving the notice of termination
specified in this Section 7(g), (i) Employee shall continue to receive his full
salary at the rate then in effect and all benefits provided in Section 5
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hereof, provided that payments made to Employee pursuant to this Section 7(g)
shall be reduced by the sum of the amounts, if any, payable to Employee at or
prior to the time of any such payment under any disability benefit plan or
program of, or provided by, the Company or Zygo, and (ii) the Company shall have
the right to hire any other individual or individuals to perform such duties and
functions as the Company shall desire, including those duties heretofore
performed by Employee.
(h) Notwithstanding any provision to the contrary contained herein,
in the event that Employee's employment is terminated by the Company at any time
for any reason other than justifiable cause, disability or death, the parties
hereto agree that damages to Employee shall be difficult to ascertain in any
such event, but in order to limit the liability of the Company and Zygo in any
such event, Employee shall be entitled to receive as liquidated damages and not
as a penalty, and the Company shall pay to Employee, Employee's salary (payable
in such amount and in such manner as set forth in Section 3 herein) from and
after the date of such termination for a period ending (i) at the end of the
three year initial term of this Agreement if such termination occurs during such
initial three year term, provided, however, that in the event termination occurs
within the last six (6) months of the initial three year term, Employee would be
entitled to his salary for a period ending six (6) months from the date of such
termination, or (ii) six (6) months from the date of termination if such
termination occurs during any renewal term subsequent to such initial three year
term, which amount shall be in lieu of any and all other payments due and owing
to Employee under the terms of this Agreement or otherwise.
8. REPRESENTATIONS AND AGREEMENTS OF EMPLOYEE.
(a) Employee represents and warrants that he is free to enter into
this Agreement and to perform the duties required hereunder, and that there are
no employment contracts or understandings, restrictive covenants or other
restrictions, whether written or oral, preventing the performance of his duties
hereunder. Employee further represents and warrants that he is in full
compliance with all existing agreements between himself and the Company or Zygo.
(b) Employee agrees to submit to a medical examination and to
cooperate and supply such other information and documents as may be required by
any insurance company in connection with the Employees' inclusion in any
insurance or fringe benefit plan or program as the Company shall determine from
time to time to obtain, or in connection with, in the Company's sole discretion,
the Company's or Zygo's obtaining life insurance for its benefit on the life of
Employee.
9. INVENTIONS AND DISCOVERIES.
(a) Employee shall promptly and fully disclose to Zygo, and with all
necessary detail for a complete understanding of the same, all developments,
know-how, discoveries, inventions, improvements, concepts, ideas, writings,
formulae, processes and methods (whether copyrightable, patentable or otherwise)
made, received, conceived,
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acquired or written during working hours, or otherwise, by Employee (whether or
not at the request or upon the suggestion of Zygo) during the period of his
employment with the Company, Zygo or any of their respective subsidiaries or
affiliates, solely or jointly with others, in all instances in or relating to
any activities of the Company, Zygo or any of their respective subsidiaries or
affiliates known to him as a consequence of his employment hereunder
(collectively the "Subject Matter").
(b) Employee hereby assigns and transfers, and agrees to assign and
transfer, to Zygo, all his rights, title and interest in and to the Subject
Matter, and Employee further agrees to deliver to Zygo any and all drawings,
notes, specifications and data relating to the Subject Matter, and to execute,
acknowledge and deliver all such further papers, including applications for
copyrights or patents, as may be necessary to obtain copyrights and patents for
any thereof in any and all countries and to vest title thereto to Zygo. Employee
shall assist Zygo in obtaining such copyrights or patents during the term of
this Agreement, and any time thereafter on reasonable notice, and Employee
agrees to testify in any prosecution or litigation involving any of the Subject
Matter (provided that if such testimony occurs after termination of this
Agreement, Employee shall be reasonably compensated for his time and reimbursed
for any out-of-pocket expenses).
10. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
(a) Employee shall not, during the term of this Agreement or at any
time following termination or expiration of this Agreement, directly or
indirectly, disclose or permit to be known (other than as is required in the
regular course of his duties or required by law (in which case Employee shall
give Zygo prior written notice of such required disclosure) or with the prior
written consent of the President of Zygo), to any person, firm or corporation,
any confidential information acquired by Employee during the course of, or as an
incident to, his employment hereunder, relating to the Company, Zygo or any of
their respective subsidiaries or affiliates, the directors of the Company, Zygo
or any of their respective subsidiaries or affiliates, any client of the
Company, Zygo or any of their respective subsidiaries or affiliates, or any
corporation, partnership or other entity owned or controlled, directly or
indirectly, by any of the foregoing, or in which any of the foregoing has a
beneficial interest, including, but not limited to, the business affairs of each
of the foregoing. Such confidential information shall include, but shall not be
limited to, proprietary technology, trade secrets, patented processes, research
and development data, know-how, market studies and forecasts, competitive
analyses, pricing policies, employee lists, personnel policies, the substance of
agreements with customers, suppliers and others, marketing or dealership
arrangements, servicing and training programs and arrangements, customer lists
and any other documents embodying such confidential information. This
confidentiality obligation shall not apply to any confidential information which
thereafter becomes publicly available other than pursuant to a breach of this
Section 10(a), directly or indirectly, by Employee.
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(b) All information and documents relating to the Company, Zygo and
their respective subsidiaries or affiliates as hereinabove described (or other
business affairs) shall be the exclusive property of the Company or Zygo, as the
case may be, and Employee shall use commercially reasonable best efforts to
prevent any publication or disclosure thereof. Upon termination of Employee's
employment with the Company, all documents, records, reports, writings and other
similar documents containing confidential information, including copies thereof,
then in Employee's possession or control shall be returned and left with the
Company.
(c) Employee will execute the form of "Technical Instrument Company
Non-Disclosure and Non-Solicitation Agreement" in the form of Exhibit A hereto,
all the terms and provisions of which are incorporated herein as if fully set
forth herein.
11. RIGHT TO INJUNCTION.
Employee recognizes that the services to be rendered by him hereunder are
of a special, unique, unusual, extraordinary and intellectual character
involving skill of the highest order and giving them peculiar value the loss of
which cannot be adequately compensated for in damages. In the event of a breach
of this Agreement by Employee, the Company shall be entitled to injunctive
relief or any other legal or equitable remedies. Employee agrees that the
Company may recover by appropriate action the amount of the actual damage caused
the Company by any failure, refusal or neglect of Employee to perform his
agreements, representations and warranties herein contained. The remedies
provided in this Agreement shall be deemed cumulative and the exercise of one
shall not preclude the exercise of any other remedy at law or in equity for the
same event or any other event.
12. AMENDMENT OR ALTERATION.
No amendment or alteration of the terms of this Agreement shall be valid
unless made in writing and signed by both of the parties hereto.
13. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Delaware
applicable to agreements made and to be performed therein.
14. SEVERABILITY.
The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect.
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15. NOTICES.
Any notices required or permitted to be given hereunder shall be
sufficient if in writing, and if delivered by hand, or sent by certified mail,
return receipt requested, to the addresses set forth above or such other address
as either party may from time to time designate in writing to the other, and
shall be deemed given as of the date of the delivery or mailing.
16. WAIVER OR BREACH.
It is agreed that a waiver by either party of a breach of any provision of
this Agreement shall not operate, or be construed, as a waiver of any subsequent
breach by that same party.
17. ENTIRE AGREEMENT AND BINDING EFFECT.
This Agreement, together with the Agreement and Plan of Merger, dated as
of August 7, 1996, by and among the Company, Zygo Acquisition Corporation, Zygo
and the persons and entities listed on Schedule I thereto and all agreements and
exhibits referred to therein, contains the entire agreement of the parties with
respect to the subject matter hereof and shall be binding upon and inure to the
benefit of the parties hereto and their respective legal representatives, heirs,
distributors, successors and assigns. Notwithstanding the foregoing, all prior
agreements between Employee and the Company or Zygo relating to the
confidentiality of information, trade secrets and patents shall not be affected
by this Agreement.
18. SURVIVAL.
The termination of Employee's employment hereunder shall not affect the
enforceability of Sections 7, 8(a), 9, 10, 11 and 13.
19. NON-ASSIGNABILITY.
This Agreement is entered into in consideration of the personal qualities
of Employee and may not be, nor may any right or interest hereunder be, assigned
by him without the prior written consent of the Company. It is expressly
understood and agreed that this Agreement, and the rights accruing and
obligations owed to the Company hereunder, and the obligations to be performed
by the Company hereunder, may be assigned by the Company at any time without the
consent of Employee to Zygo or any of the Company's successors or assigns. In
the event that this Agreement is assigned by the Company to Zygo pursuant to
this Section 19, all references in this Agreement to "Company" shall refer to
Zygo except that the references thereto contained in Section 5(a) hereof and the
reference to the "Company's overall performance" in the last sentence of the
first paragraph of Section 3 hereof shall refer to Technical Instrument Company,
a business unit of Zygo.
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20. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original but all of which together shall constitute one
and the same instrument.
21. FURTHER ASSURANCES.
The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.
22. HEADINGS.
This Section headings appearing in this Agreement are for the purposes of
easy reference and shall not be considered a part of this Agreement or in any
way modify, demand or affect its provisions.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
TECHNICAL INSTRUMENT COMPANY
By:_________________________________
Name: Gary K. Willis
Title: Chairman of the Board
------------------------------------
Francis E. Lundy
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EXHIBIT A
TECHNICAL INSTRUMENT COMPANY
NON-DISCLOSURE AND NON-SOLICITATION AGREEMENT
AGREEMENT, dated as of August 7, 1996, by and between TECHNICAL INSTRUMENT
COMPANY, a California corporation (the "Company"), and Francis E. Lundy (the
"Employee").
W I T N E S S E T H:
In consideration of the Company's employment of the Employee and in
consideration of the covenants contained herein, the parties hereby agree as
follows:
1. The Employee agrees that he will not directly or indirectly disclose or
use at any time any knowledge, information or material relating to any
business, customer, machine, design, apparatus or system of the Company,
Zygo or any of their respective subsidiaries or affiliates, or any of the
methods of conducting any part of their respective businesses or the like
which may become known to the Employee by reason of his employment or
otherwise except as may be reasonably necessary to the performance of his
assigned duties as an employee of the Company.
2. The Employee agrees to promptly and completely disclose in writing to such
person as the Company may designate all ideas, developments, inventions
and improvements heretofore or hereafter made, developed, perfected,
devised, conceived or acquired by the Employee either solely or jointly
with others during the Employee's employment by the Company and within
ninety (90) days after any termination thereof, whether or not during
regular working hours, relating in any way to the actual or anticipated
business, research, developments or products of the Company; and if so
requested by the Company, to assign, transfer and convey to the Company
all right, title and interest in and to all such ideas, developments,
inventions and improvements.
3. The Employee agrees, at the request and expense of the Company, to make,
execute and deliver any and all papers, documents and instruments,
including applications for patents in any and all countries and reissues
and extensions thereof, and to assist and cooperate (without expense to
the Employee) with the Company or its representative in any controversy or
legal proceedings relating to said ideas, developments, inventions and
improvements, and the patents which may be procured thereon.
4. The Company does not assume any responsibility for the prosecution or
defense of any application for patents in any countries arising from
ideas, developments,
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inventions and improvements disclosed to the Company pursuant to this
Agreement.
5. The Employee represents and warrants that he is free to enter into the
employment arrangements and, if applicable, the employment agreement, to
be entered into with the Company and to perform the duties required of the
Employee in connection with his employment by the Company; and that,
except as indicated on Exhibit 1 hereto, there are no employment
agreements, confidentiality agreements, restrictive covenants or other
agreements or restrictions binding on the Employee or to which the
Employee is a party which limit, prohibit or prevent the full performance
by the Employee of his employment duties and arrangements with the Company
or which would preclude the Employee from disclosing or otherwise limit
the Employee's right to disclose to the Company any ideas, inventions,
discoveries or other information.
6. The Employee represents and warrants that he has not brought and agrees
that he will not bring to the Company or use in the performance of his
employment responsibilities at the Company any materials, documents, trade
secrets or confidential information of a former employer or any other
person which are of a confidential nature or which are not generally
available to the public. The Employee agrees that he has not and will not
disclose to the Company or seek to induce the Company to use any such
confidential information, materials, documents or trade secrets.
7. The Employee agrees that during his employment by the Company and
following the termination of such employment, the Employee will not,
directly or indirectly, request or cause any suppliers or customers with
whom the Company, Zygo or any of their respective subsidiaries or
affiliates has a business relationship to cancel or terminate any such
business relationship with the Company, Zygo or any of their respective
subsidiaries or affiliates or solicit, interfere with or entice from the
Company or Zygo any employee or former employee of the Company or Zygo.
8. Neither this Agreement nor any benefits hereunder are assignable by the
Employee, but the terms and provisions hereof shall inure to the benefit
of the Company's successors and assigns.
9. This Agreement is not a contract of employment; it does not give the
Employee any rights to any employment with the Company, and it in no way
abridges, alters, amends or modifies any rights the Company may otherwise
have to terminate its employment of the Employee.
10. This Agreement, together with the Employment Agreement, dated August 7,
1996, by and between the Employee and the Company and the Agreement and
Plan of Merger, dated as of August 7, 1996, by and among the Company, Zygo
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Acquisition Corporation, Zygo Corporation and the persons and entities
listed on Schedule I thereto and all agreements and exhibits referred to
therein, contains the entire understanding and agreement of the parties
with respect to the matters herein contained, and no waiver or
modification hereof shall be binding unless in writing and subscribed by
the parties hereto.
11. If any paragraph, clause, or phrase of this Agreement shall, by any
federal, state or other law or by any decision of any court, be declared
or held illegal, void or unenforceable, the remaining portions of this
Agreement shall continue to be valid and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
TECHNICAL INSTRUMENT COMPANY
By:_________________________________
Name: Gary K. Willis
Title: Chairman of the Board
------------------------------------
Francis E. Lundy
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EXHIBIT 7.02(e)(3)
ZYGO CORPORATION
NON-COMPETE AGREEMENT
AGREEMENT, dated as of August 7, 1996, by and between ZYGO CORPORATION, a
Delaware corporation with an office at Laurel Brook Road, Middlefield,
Connecticut 06455 (the "Company"), and Francis E. Lundy residing at Six-Friars
Lane, Mill Valley, CA 94941 ("Lundy").
W I T N E S S E T H:
WHEREAS, the Company, Technical Instrument Company, a California
corporation ("TIC"), Zygo Acquisition Corporation, a wholly owned subsidiary of
the Company ("Zygo Sub"), and certain individuals and entities are parties to an
Agreement and Plan of Merger (the "Merger Agreement") providing for the merger
of Zygo Sub with and into TIC and as a result thereof the Company's acquisition
of all the issued and outstanding capital stock of TIC; and
WHEREAS, Lundy is a principal shareholder of TIC; and
WHEREAS, under Section 7.03(e) of the Merger Agreement it is a condition
to the obligation of the Company and Zygo Sub to consummate the Merger that
Lundy execute and deliver this Agreement, and Lundy is entering into this
Agreement to satisfy such condition, to induce the Company to consummate the
transactions contemplated by the Merger Agreement and for the consideration to
be received by Lundy pursuant to the Merger Agreement; and
WHEREAS, the Company will not consummate the Merger transactions
contemplated by the Merger Agreement unless and until Lundy has executed and
delivered this Agreement; and
WHEREAS, the Company desires that Lundy be employed by TIC and Lundy
desires to be so employed by TIC upon the terms and conditions of that certain
Employment Agreement dated of even date herewith (the "Employment Agreement").
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements herein contained, the parties hereto agree as follows:
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1. Covenant Not to Compete.
(a) Lundy agrees that during his employment by TIC (which shall be
deemed to include the period in which Lundy is receiving any severance payments
set forth in Section 7(g) of the Employment Agreement), and for a period of
three (3) years after the later to occur of the termination or expiration of
Lundy's employment under the Employment Agreement (the "Non-Competitive
Period"), Lundy shall not, directly or indirectly, as owner, partner, joint
venturer, stockholder, employee, broker, agent, principal, trustee, corporate
officer, director, licensor, or in any capacity whatsoever engage in, become
financially interested in, be employed by, render any consultation or business
advice with respect to, or have any connection with, any business engaged in the
research, development, testing, design, manufacture, sale, lease, marketing,
utilization or exploitation of any products or services which are designed for
the same purpose as, are similar to, or are otherwise competitive with, products
or services of the Company or any of its subsidiaries or affiliates, which
products or services were sold or provided or under research and development by,
or otherwise contemplated to be added to the product line by acquisition by the
Company or any such subsidiary or affiliate, in any geographic area where, at
the time of the termination or expiration of his employment under the Employment
Agreement, the business of the Company or any of its subsidiaries or affiliates
was being conducted or was proposed to be conducted in any manner whatsoever;
provided, however, that the foregoing shall not restrict in any manner any of
the following: (i) the ownership, directly or indirectly, of any securities of
any corporation which is engaged in such business and is publicly owned and
traded but in an amount not to exceed at any one time one percent (1%) of any
class of stock or securities of such corporation; (ii) any research and
development activities of General Nanotechnology relating to atomic force
microscopy or the inspection and repair of wafers; (iii) any research and
development activities of Danish Micro Engineering A/S ("DME") relating to
atomic force microscopy or scanning probe microscopy; or (iv) any resale
distribution by Technical Instrument San Francisco of products purchased from
Nikon or DME. In addition, Lundy shall not, directly or indirectly, during the
NonCompetitive Period, request or cause contracting parties, suppliers or
customers with whom the Company or any of its subsidiaries or affiliates has a
business relationship to cancel or terminate any such business relationship with
the Company or any of its subsidiaries or affiliates or solicit, interfere with
or entice from the Company or any of its subsidiaries or affiliates any employee
(or former employee) of the Company or any of its subsidiaries or affiliates.
(b) Lundy acknowledges that TIC and the Company conducts business on
a world-wide basis, that its sales and marketing prospects are for continued
expansion into world markets and that, therefore, the territorial and time
limitations set forth in this Section 1 are reasonable and properly required for
the adequate protection of the business of the Company and its subsidiaries and
affiliates, that any violation of such restrictions will result in irreparable
injury to the Company and its subsidiaries and affiliates (including after the
Closing TIC) that the remedy at law for any breach of the foregoing restrictions
will be inadequate, and that, in the event of any such breach, the Company and
its subsidiaries and affiliates (including after the Closing
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<PAGE>
TIC), in addition to any other relief available to each of them, shall be
entitled to temporary injunctive relief before trial from any court of competent
jurisdiction as a matter of course and to permanent injunctive relief without
the necessity of proving actual damages. If the Company is required to obtain
injunctive relief to enforce the provisions of this Section 1, then the duration
of any covenant shall be tolled for the period necessary for the Company to
obtain such injunctive relief. Lundy further specifically acknowledges and
agrees that the Company and its subsidiaries and affiliates (including after the
Closing TIC) shall be entitled to an equitable accounting of all earnings,
profits and other benefits arising from any such breach by Lundy, and further
agrees that, if Lundy is determined to have violated the restrictions in Section
1(a), Lundy will pay the reasonable legal fees and expenses incurred by the
Company or any successor or assignee thereof in enforcing such restrictions. In
the event any such territorial or time limitation is deemed to be unreasonable
by a court of competent jurisdiction, Lundy agrees to the reduction of the
territorial or time limitation to the area or period which such court deems
reasonable.
(c) The existence of any claim or cause of action by Lundy against
the Company or any of its subsidiaries or affiliates shall not constitute a
defense to the enforcement by the Company or any of its subsidiaries or
affiliates of the foregoing restrictive covenants, but such claim or cause of
action shall be litigated separately.
3. Amendment or Alteration. No amendment or by alteration of the terms of
this Agreement shall be valid unless made in writing and signed by both parties
hereto.
4. Governing Law. This Agreement shall be construed in accordance with,
and governed by, the laws of the State of Delaware, applicable to agreements
made and to be performed therein.
5. Severability. The holding of any provision of this Agreement to be
invalid or unenforceable by a court of competent jurisdiction shall not affect
any other provision of this Agreement, which shall remain in full force and
effect.
6. Notices. Any notices required or permitted to be given hereunder shall
be sufficient if in writing, and if delivered by hand, or sent by certified
mail, return receipt requested, to the addresses set forth above or such other
address as either party may from time to time designate in writing to the other,
and shall be deemed given as of the date of the delivery or mailing.
7. Entire Agreement and Binding Effect. This Agreement, together with the
Merger Agreement and all agreements and exhibits referred to therein (including
the Employment Agreement) contains the entire agreement of the parties with
respect to the subject matter hereof and shall be binding upon and inure to the
benefit of the parties hereto and their respective legal representatives, heirs,
distributors, successors and assigns. Notwithstanding the foregoing, all prior
agreements between Lundy and
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<PAGE>
the Company or TIC relating to the confidentiality of information, trade secrets
and patents shall not be affected by this Agreement.
8. Survival. The termination of Lundy's employment under the Employment
Agreement shall not affect the enforceability of this Agreement.
9. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
ZYGO CORPORATION
By:_________________________________
Name: Gary K. Willis
Title: President
____________________________________
Francis E. Lundy
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<PAGE>
EXHIBIT 7.02(k)
August 7, 1996
Zygo Corporation
Laurel Brook Lane
Middlefield, Connecticut 06455
Gentlemen:
The undersigned is the record and beneficial owner of capital stock of
Technical Instrument Company, a California corporation ("TIC"). The undersigned,
Zygo Corporation ("Zygo"), Zygo Acquisition Corporation, which is a wholly owned
subsidiary of Zygo, TIC and the other shareholders of TIC are entering into an
Agreement and Plan of Merger (the "Merger Agreement") dated as of the date
hereof. All terms not otherwise defined herein shall have the same meanings as
in the Merger Agreement.
1. Pursuant to the Merger Agreement and upon the consummation of the
transactions contemplated thereby, the undersigned will receive cash and
Unregistered Shares of Zygo Common Stock in exchange for the undersigned's
capital stock of TIC. The undersigned agrees that should the Merger be effected,
the undersigned will not, directly or indirectly, offer, offer to sell, sell,
contract to sell, grant any option to purchase or otherwise transfer or dispose
of (each, a "Transfer") any shares of Zygo Common Stock received by the
undersigned in connection with the Merger without the prior consent of Zygo for
a period commencing on the Closing Date and ending two years from such date;
provided, however, that the foregoing shall not restrict any Transfer by will or
pursuant to the laws of descent and distribution or to the intra-family
beneficiary of a trust so long as each and every such transferee, as a condition
to the effectiveness of such Transfer, executes and delivers to Zygo a copy of
this letter agreement ("Letter").
2. In exchange for the restrictions on the transferability of the shares
of Zygo Common Stock described in Section 1 and the purchase by Zygo of TIC
pursuant to the Merger Agreement, the undersigned acknowledges that the
undersigned has received Unregistered Shares of Zygo Common Stock at a discount
of thirty percent off the market price as of the last trading day (June 28,
1996) prior to the execution of the letter of intent with respect to the
transactions contemplated by the Merger Agreement. Zygo reserves the right to
cancel 30% of the number of shares of Zygo Common Stock received by the
undersigned pursuant to the Merger Agreement if for any reason the undersigned
makes a Transfer prohibited by this Letter. In such an event, in order to effect
the cancellation, the undersigned agrees to execute any necessary documentation
to cause the Transfer to Zygo of thirty percent of the Zygo Common Stock
received by the undersigned.
<PAGE>
3. During the period when the foregoing restrictions are in effect with
respect to the shares of Zygo Common Stock received pursuant to the Merger
Agreement, the undersigned shall retain all rights as a stockholder of Zygo,
including without limitation, the right to vote the shares of Zygo Common Stock.
4. The undersigned also understands and agrees that stop transfer
instructions will be given to Zygo's transfer agent with respect to certificates
evidencing the restricted Zygo Common Stock subject to Section 1 of this Letter,
and that the restricted Zygo Common Stock subject to Section 1 of this Letter
will contain a legend in a form substantially as follows: "The stock represented
by this certificate is subject to limitations on transfer set forth in an
agreement dated as of August 7, 1996 between the Company and the holder of the
Shares." Zygo agrees to remove promptly such stop transfer instructions and
legend upon full compliance with this Letter by the undersigned or the
undersigned's permitted transferees.
5. This Letter shall be governed, construed and enforced in accordance
with the laws of the State of Delaware as applied to contracts entered into
solely between residents of, and to be performed entirely in, such state.
6. The undersigned hereby confirms the undersigned's understanding that
Zygo will rely upon the representations and agreements set forth in this Letter
in proceeding with the execution, delivery and performance of the Merger
Agreement. The provisions of this Letter shall be binding on the undersigned and
the undersigned's successors, heirs, personal representatives and assigns.
Very truly yours,
____________________________
Name:
<PAGE>
EXHIBIT 7.02(l)
TECHNICAL INSTRUMENT COMPANY
348 Sixth Street
San Francisco, California 94103
August 7, 1996
Zygo Corporation
Laurel Brook Road
Middlefield, Connecticut 06455
Attention: Mr. Gary K. Willis
Re: Statement under Treas. Reg. ss.ss. 91.897-2(h)(1) and 1.1445-2(c)(3).
Gentlemen:
I, Francis E. Lundy, President of Technical Instrument Company (the
"Company"), hereby certify that:
1. The Company is not and has not been at any time during the five year
period preceding the date of this statement a "United States real property
holding corporation" within the meaning of section 897(c)(2) of the Internal
Revenue Code of 1986, as amended (the "Code"); and
2. None of the Company's outstanding shares of capital stock are or have
been during the five-year period preceding the date of this statement "United
States real property interests" within the meaning of section 897(c)(1)(A) of
the Code.
Under penalties of perjury, I verify that this notice is correct to my
knowledge and belief.
_______________________________________
Francis E. Lundy
President, Technical Instrument Company
<PAGE>
TECHNICAL INSTRUMENT COMPANY
348 Sixth Street
San Francisco, California 94103
August 7, 1996
Assistant Commissioner (International)
Director, Office of Compliance
Internal Revenue Service
OP:I:C:E:666
950 L'Enfant Plaza South, S.W.
COMSAT Building
Washington, D.C. 20024
Re: Technical Instrument Company
Gentlemen:
In accordance with Treasury Reg. ss.ss. 1.897-2(h)(2) and 1.1445-2(c)(3),
Technical Instrument Company (the "Company") hereby notifies you of the
following:
1. This is a notice provided pursuant to the requirements of Treas. Reg.
ss.ss. 1.897-2(h)(2) and 1.1445-2(c)(3).
2. This notice is being provided by the Company, at 348 Sixth Street, San
Francisco, California 94103, Employer Identification Number 94-3247517.
3. This notice is being provided voluntarily by the Company in response to
a request from Zygo Corporation, Laurel Brook Road, Middlefield, Connecticut
06455, Employer Identification Number 06-0864500, the proposed transferee of all
of the Company's capital stock, pursuant to Treasury Reg. ss. 1.1445-2(c)(3)(i)
(Last sentence).
4. There are no foreign shareholders of the Company.
5. The Company is not and has not been at any time during the five year
period preceding the date of this statement a "United States real property
holding corporation" within the meaning of section 897(c)(2) of the Internal
Revenue Code of 1986, as amended (the "Code"); and
<PAGE>
6. The shares of capital stock of the Company are not "United States real
property interests" within the meaning of the Internal Revenue Code of 1986, as
amended.
Under penalties of perjury, I verify that this notice is correct to my
knowledge and belief.
_______________________________________
Francis E. Lundy
President, Technical Instrument Company
<PAGE>
EXHIBIT 7.03(a)
August 7, 1996
To Technical Instrument Company
and each of the individuals and
entities listed on Schedule 1 to
the Merger Agreement (as defined
below)
Ladies and Gentlemen:
We have acted as counsel to Zygo Corporation, a Delaware corporation
("Zygo"), and its wholly-owned subsidiary, Zygo Acquisition Corporation, a
California corporation ("Zygo Sub"), in connection with the negotiation and
execution of that certain Agreement and Plan of Merger, dated as of August 7,
1996 (the "Merger Agreement"), by and among Technical Instrument Company
("TIC"), Zygo, Zygo Sub and the individuals and entities listed on Schedule 1
thereto. This opinion letter is being delivered to you pursuant to Section
7.03(a) of the Merger Agreement. Capitalized terms used without definition
herein shall have the same respective meanings herein as in the Merger
Agreement.
In connection with this opinion letter we have examined copies of the
Merger Agreement, the Distribution and Services Agreement, the Agreement of
Merger and the Escrow Agreement (collectively, the "Agreements") and have made
such legal and factual examinations and inquiries as we have deemed advisable or
necessary for the purpose of rendering the opinions expressed herein. In
addition, we have examined originals or copies of such corporate records of Zygo
and Zygo Sub, certificates of public officials and officers of Zygo and Zygo Sub
and such other documents which we have deemed necessary or appropriate for the
purpose of rendering the opinions expressed herein. In such examination, we have
assumed the genuineness of all signatures on original documents of the parties
thereto (other than of Zygo and Zygo Sub with respect to the Agreements to which
either of them is a party), the authenticity and completeness of all documents
submitted to us as originals and the conformity to original documents of all
copies submitted to us.
In rendering the opinions expressed herein, we have assumed, without
investigation, that:
(a) each person named in the Agreements as a party thereto (other
than Zygo and Zygo Sub ) (i) if not a natural person, has been duly
organized,
<PAGE>
August 27, 1996
Page 2
is validly existing and has the corporate or other requisite power to
execute and deliver, and to perform its obligations under each of the
Agreements to which it is a party, and (ii) if a natural person, has the
legal capacity to execute each of the Agreements to which he or she is a
party;
(b) the execution and delivery of each of the Agreements by each
person named therein as a party thereto (other than Zygo and Zygo Sub)
have been duly authorized by all necessary corporate or other equivalent
action on the part of such person;
(c) each person named in any Agreement as a party thereto (other
than Zygo and Zygo Sub) has duly and validly executed and delivered each
of the Agreements in which such person is named as a party; and
(d) each person named in any Agreement as a party thereto (other
than Zygo and Zygo Sub) have (i) satisfied any legal requirements that are
applicable to such person to the extent necessary to make such Agreement
enforceable against such person, and (ii) complied with any other legal
requirement pertaining to the status of such person to enforce such
Agreement against each other person that is named as a party to such
Agreement; and
(e) each person named in any Agreement knows of no agreement between
the parties not set forth in the Agreements that would modify the terms or
rights and obligations of the parties thereunder.
Based upon and subject to the foregoing and subject to the qualifications
set forth below, we advise you that in our opinion:
1. Zygo is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and has full corporate power
and authority to conduct its business as it is now being conducted and to own,
operate or lease the properties it currently owns, operates or holds under
lease. Zygo Sub is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of California and has full corporate power
and authority to conduct its business as it is now being conducted and to own,
operate or lease the properties it currently owns, operates or holds under
lease.
2. The authorized capital stock of Zygo consists of 15,000,000 shares of
common stock, $0.10 par value. The shares of Zygo Common Stock to be issued in
the Merger at the Closing, when issued pursuant to the Merger Agreement, will be
duly authorized, validly issued, fully paid and nonassessable and will not have
been issued in violation of any preemptive rights or of any federal or state
law. The authorized
<PAGE>
August 27, 1996
Page 3
capital stock of Zygo Sub consists of 1000 shares of common stock, without par
value, all of which have been validly issued, are fully paid and nonassessable
and are owned by Zygo free and clear of any Liens.
3. Each of Zygo and Zygo Sub has all requisite corporate power and
authority to enter into the Agreements to which it is a party, to carry out its
obligations under the Agreements and to consummate the transactions contemplated
thereby. The execution and delivery by Zygo and Zygo Sub of the Agreements to
which each of them is a party, the consummation of the transactions contemplated
thereby and the performance by Zygo and Zygo Sub of their respective obligations
thereunder have been duly authorized by all necessary corporate action on the
part of Zygo and Zygo Sub. Each of the Agreements to which either Zygo or Zygo
Sub is a party has been duly executed and delivered by Zygo and Zygo Sub and
constitute the legal, valid and binding obligation of Zygo and Zygo Sub,
enforceable against Zygo and Zygo Sub in accordance with its terms.
4. The execution and delivery by Zygo and Zygo Sub of the Agreements to
which Zygo and Zygo Sub, respectively, are a party and the performance by Zygo
and Zygo Sub of their respective obligations thereunder do not conflict with or
violate (a) Zygo or Zygo Sub's Certificate of Incorporation or By-laws, as the
case may be; (b) any applicable statute, law or regulation (other than
ordinances and regulations of counties and political subdivisions thereof, as to
which we express no opinion) or any order, judgment or decree of a court known
to us; or (c) any material contract known to us to which Zygo or Zygo Sub, as
the case may be, is a party.
We express no opinion as to the law of any jurisdiction other than the
State of New York and the Federal laws of the United States of America, as each
is in effect and force as of the date hereof or as to the effect on the
transaction of the antitrust laws of either. We have assumed that Delaware law
and California law are the same as New York law with respect to all matters
contemplated by this opinion.
In rendering the opinion expressed in paragraph 1 above regarding
existence and good standing, we have relied solely on certificates of public
officials and have conducted no further investigation.
The opinion in paragraph 3 above regarding enforceability is subject to
the following:
(i) The enforceability of the Agreements may be limited or affected by
(a) bankruptcy, insolvency, reorganization, moratorium, liquidation,
rearrangement, probate, conservatorship, fraudulent transfer,
fraudulent conveyance and other similar laws (including court
<PAGE>
August 27, 1996
Page 4
decisions) now or hereafter in effect and affecting the rights and
remedies of creditors generally or providing for the relief of
debtors, (b) the refusal of a particular court to grant (i)
equitable remedies, including, without limiting the generality of
the foregoing, specific performance and injunctive relief, or (ii) a
particular remedy sought under an Agreement, as opposed to another
remedy provided for therein or another remedy available at law or in
equity, (c) general principles of equity (regardless of whether such
remedies are sought in a proceeding in equity or at law), and (d)
judicial discretion.
(ii) We express no opinion as to the availability of certain equitable
remedies, including specific performance, and further, we express no
opinion as to the legality, validity, enforceability or binding
effect of provisions of the Agreements relating to indemnities and
rights of contribution to the extent prohibited by public policy or
which might require indemnification for losses or expenses caused by
negligence, gross negligence, willful misconduct, fraud or
illegality of an indemnified party.
Our opinion expressed in paragraph 4 above as to no conflict with or
violation of any applicable statute, law, regulation, order, judgment or decree
is based upon a review of those statutes, laws, regulations, orders, judgments
and decrees that, in our experience, are normally applicable to the transactions
contemplated by the Merger Agreement.
We express no opinion with respect to the compliance or noncompliance with
the antifraud provisions of state and federal laws, rules and regulations
concerning the issuance of securities.
As to various questions of fact relevant to the opinions expressed herein,
we have made no independent investigation, and have relied upon, and assume the
completeness and accuracy of, representations and warranties and certificates
and verbal or written statements and other information of or from public
officials and officers of Zygo and Zygo Sub. No inference as to our knowledge of
the existence or absence of any fact should be drawn from our representation of
Zygo and Zygo Sub or the rendering of the opinions set forth above.
When an opinion includes a qualification such as "to our knowledge" or
"known to us" or other similar language, the relevant knowledge is limited to
the actual
<PAGE>
August 27, 1996
Page 5
current knowledge of the individual lawyers in the Firm who have devoted
substantive attention to the transactions to which this opinion relates which
they have obtained from (i) their review of the documents referred to in the
second paragraph of this letter in connection with rendering this opinion, and
the due diligence performed in connection therewith, which review and due
diligence were limited to reviewing the Agreements, certain documents filed with
the Securities and Exchange Commission and certain corporate records of Zygo and
Zygo Sub, and which due diligence did not include any examination of courts,
boards, other tribunals of public records with respect to any judgments, orders
or decrees, in any event applicable to Zygo or Zygo Sub or any of their
respective properties; and (ii) representations and warranties of Zygo or Zygo
Sub set forth in the Agreements, or otherwise made to us in certificates and
other writings.
The opinions expressed herein are solely for your benefit and may not be
relied upon in any manner or for any purpose by any other person without our
written consent. In rendering these opinions, we do not undertake to advise you
or any other person of any change in law or fact that may occur after the date
hereof.
Very truly yours,
[ZYGO LETTERHEAD]
For Further Information
Please Call:
Gary K. Willis
President and Chief Executive Officer
For Immediate Release
ZYGO CORPORATION ANNOUNCES
ACQUISITION OF TECHNICAL INSTRUMENT COMPANY
MIDDLEFIELD, CONNECTICUT (AUGUST 20, 1996).......Zygo Corporation (NASDAQ:ZIGO)
today announced that it has completed the acquisition of the proprietary
products division of Technical Instrument Company ("TIC"). In the transaction,
Zygo paid approximately $11.7 million in cash and issued unregistered shares of
its common stock valued at $3 million in exchange for all the outstanding
capital stock of TIC.
TIC, located in Sunnyvale, California, is engaged in the business of
designing, developing, assembling, and marketing precision microscope products
and systems used to improve the production efficiency and manufacturing yields
within the semiconductor, data storage, and other high technology industries.
Gary K. Willis, president and chief executive officer of Zygo, noted,
"TIC's confocal microscopy technology complements Zygo's interferometric
measurement capabilities and broadens both of our abilities to provide enhanced
measurement and yield improvement solutions to our customers." He added, "With
TIC's strong relationships with manufacturing plants in the semiconductor and
data storage industries on the West Coast and in the Pacific Rim, the
acquisition will strengthen Zygo's presence and capabilities to serve customers
in those areas."
<PAGE>
Frank E. Lundy, president of TIC, added, "The merger with Zygo allows us
to more effectively pursue the rapidly growing opportunities for us in our
served markets, while further accelerating our growth opportunities as we
provide enhanced solutions to those markets with our combined technologies."
For the year ended December 31, 1995, TIC's proprietary products business
had approximately $8.4 million in net sales, and a net loss of $131,000. TIC's
unaudited results for the six months ended June 30, 1996 included net sales of
approximately $5.4 million, and net earnings of $939,000. Zygo's results for the
nine months ended March 31, 1996 included net sales of $38.3 million, an
increase of 77% from the comparable nine-month period of a year earlier, and net
earnings of $1.04 per share, a 167% increase from the $.39 per share reported in
the comparable nine-month fiscal 1995 period. Zygo closed its fiscal year on
June 30, 1996 and has not yet reported its audited financial results for the
full year.
The Company also announced that it is progressing with its previously
announced acquisition of NexStar Automation, Inc. To this end, definitive merger
documentation has been signed, preliminary approval of the Supreme Court of
British Columbia has been received, and the Management Information Circular and
proxies have been mailed to NexStar's shareholders. The NexStar shareholder's
meeting is scheduled for September 11, 1996, and it is anticipated that the
acquisition will be consummated shortly thereafter. NexStar is engaged in the
business of designing, developing, and manufacturing automation parts handling
equipment to improve production efficiency and manufacturing yields within the
data storage, semiconductor, and medical disposables markets.
Zygo Corporation designs, develops, manufactures, and markets precision
measurement and automation equipment and components used to enhance production
yields in high technology industries. The firm is based in Middlefield,
Connecticut, and also has operations in Sunnyvale, California.
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