<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment No. 1)
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
GENUS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction: $25,000,000
-----------------------------------------------------------------------
(5) Total fee paid: $5,000
-----------------------------------------------------------------------
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
GENUS, INC.
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 1998
------------------------
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Genus,
Inc. (the "Company") will be held on , , 1998 at 2:00
p.m., local time, at The Network Meeting Center located at 5201 Great America
Parkway, Suite 122 in Santa Clara, California, 95054, for the following
purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected.
2. To approve the sale of the Company's ion implantation systems business,
including the assets, properties and intellectual property related
thereto, pursuant to the terms and conditions of the Asset Purchase
Agreement, dated as of April 15, 1998, between Varian Associates, Inc.
("Varian") and the Company and the transactions contemplated thereby
(collectively, the "Proposed Transactions").
3. To approve the conversion of securities exceeding 20% of the outstanding
Common Stock.
4. To approve an amendment to the 1989 Employee Stock Purchase Plan
increasing the number of shares reserved for issuance thereunder by
300,000 shares.
5. To ratify the appointment of Coopers & Lybrand L.L.P. as independent
auditors of the Company's financial statements for the fiscal year ending
December 31, 1998.
6. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on , 1998
are entitled to vote at the meeting.
All shareholders are cordially invited to attend the meeting in person.
However, to ensure your representation at the meeting you are urged to mark,
sign, date, and return the enclosed proxy card as promptly as possible in the
self-addressed stamped envelope enclosed for that purpose. Any shareholder
attending the meeting may vote in person even if he or she returned a proxy.
FOR THE BOARD OF DIRECTORS
WILLIAM W. R. ELDER
CHAIRMAN OF THE BOARD
Sunnyvale, California
, 1998
<PAGE>
GENUS, INC.
----------------
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
---------------------
The enclosed Proxy is solicited on behalf of the Board of Directors of
Genus, Inc., a California corporation (the "Company") for use at the Annual
Meeting of Shareholders to be held , , 1998, at 2:00 p.m.,
local time, or at any adjournment thereof, for the purposes set forth herein and
in the accompanying Notice of Annual Meeting of Shareholders. The Annual Meeting
will be held at The Network Meeting Center at 5201 Great America Parkway, Suite
122 in Santa Clara, California, 95054. The principal executive offices of the
Company are located at 1139 Karlstad Drive, Sunnyvale, California 94089. The
Company's telephone number at that location is (408) 747-7120.
These proxy solicitation materials were mailed on or about ,
1998, to all shareholders entitled to vote at the meeting.
INFORMATION CONCERNING SOLICITATION AND VOTING
RECORD DATE AND SHARE OWNERSHIP
Shareholders of record at the close of business on , 1998, are
entitled to vote at the meeting. At the record date, shares of the
Company's Common Stock, no par value, were issued and outstanding.
VOTING
Each share of Common Stock outstanding on the record date is entitled to one
vote. In addition, each shareholder on the record date, or his or her proxy, may
cumulate such shareholder's votes and give one candidate a number of votes equal
to the number of directors to be elected multiplied by the number of shares held
by such shareholder, or distribute the shareholder's votes on the same principle
among as many candidates as the shareholder may select, provided that votes
cannot be cast for more than six candidates. No shareholder or proxy, however,
shall be entitled to cumulate votes for a candidate unless such candidate's name
has been placed in nomination prior to the voting and the shareholder, or any
other shareholder, has given notice at the meeting, prior to the voting, of the
shareholder's intention to cumulate votes. If any shareholder gives such notice,
all shareholders may cumulate their votes for candidates in nomination.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The affirmative vote of a majority of the Votes Cast will be required under
California law to approve the first, third, fourth and fifth proposals in this
Proxy Statement. The affirmative vote of a majority of the outstanding shares of
Common Stock on the record date will be required under California law to approve
the second proposal in this Proxy Statement. For this purpose, the "Votes Cast"
are defined under California law to be the shares of the Company's Common Stock
represented and "voting" at the Annual Meeting. In addition, the affirmative
votes must constitute at least a majority of the required quorum, which quorum
is majority of the shares outstanding on the Record Date. Votes that are cast
against the proposal will be counted for purposes of determining (i) the
presence or absence of a quorum and (ii) the total number of Votes Cast with
respect to the proposal.
While there is no definitive statutory or case law authority in California
as to the proper treatment of abstentions in the counting of votes with respect
to a proposal, the Company believes that abstentions
1
<PAGE>
should be counted for purposes of determining both (i) the presence or absence
of a quorum for the transaction of business and (ii) the total number of Votes
Cast with respect to the proposal. In the absence of controlling precedent to
the contrary, the Company intends to treat abstentions in this manner.
Accordingly, abstentions will have the same effect as a vote against the
proposal. Broker non-votes will be counted for purposes of determining the
presence or absence of a quorum for the transaction of business, but will not be
counted for purposes of determining the number of Votes Cast with respect to the
proposal.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company (Attention:
Mary F. Bobel, Executive Vice President, Chief Financial Officer) a written
notice of revocation or a duly executed proxy bearing a later date or by
attending the meeting and voting in person.
SOLICITATION
The cost of soliciting proxies will be borne by the Company. The Company is
retaining the services of Corporate Investor Communications, Inc. to solicit
proxies for a cost of approximately $10,000 plus out-of-pocket expenses. In
addition, the Company may reimburse brokerage firms and other persons
representing beneficial owners of shares for their expenses in forwarding
solicitation material to such beneficial owners. Proxies may also be solicited
by certain of the Company's directors, officers and regular employees, without
additional compensation, personally or by telephone, telegram or facsimile.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company
regarding beneficial ownership of the Company's Common Stock as of March 31,
1998, by (i) each of the Company's directors, (ii) each executive officer named
in the Summary Compensation Table appearing herein, (iii) all directors and
executive officers of the Company as a group and (iv) each person known by the
Company to beneficially own more than 5% of the Company's Common Stock:
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME OF BENEFICIAL OWNER SHARES(1) CLASS(2)
- ---------------------------------------------------------------------- ---------- -------------
<S> <C> <C>
The Parnassus Fund ................................................... 1,150,000 6.71%
244 California Street, Ste. 400
San Francisco, CA 94111
Anthony T. Winn ...................................................... 1,000,000 5.84%
c/o Herbert H. Davis III, Esq.
1200 17th Street Suite 3000
Denver, CO 80202
Bachow Investment Partners III, L.P.(3) .............................. 997,876 5.83%
3 Bala Plaza East, Suite 502
Bala Cynwyd, PA 19004
Dimensional Fund Advisors ............................................ 868,400 5.07%
1299 Ocean Ave
11th Floor
Santa Monica, CA
William W.R. Elder(4)................................................. 230,599 1.35%
James T. Healy........................................................ 5,000 *
Paul S. Bachow Co-Investment Fund, L.P.(5) ........................... 138,671 *
3 Bala Plaza East, Suite 502
Bala Cynwyd, PA 19004
Paul S. Bachow(6) .................................................... 63,392 *
3 Bala Plaza East, Suite 502
Bala Cynwyd, PA 19004
Mary F. Bobel(7)...................................................... 27,032 *
Mario M. Rosati(8).................................................... 11,500 *
Thomas E. Seidel...................................................... 3,841 *
John E. Aldeborgh..................................................... 2,593 *
Stephen F. Fisher(9).................................................. 0 *
G. Frederick Forsyth.................................................. 0 *
Todd S. Myhre......................................................... 0 *
All directors and executive officers as a group (11 persons)(10)...... 1,485,076 8.67%
</TABLE>
- ------------------------
* Less than 1%.
(1) Except as otherwise indicated in the footnotes to this table and pursuant
to applicable community property laws, the persons named in the table have
sole voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them.
(2) Applicable percentage ownership is based on 17,129,260 shares of Common
Stock outstanding as of March 31, 1998 together with applicable options for
such shareholder. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission, based on factors including
voting and investment power with respect to shares. Shares of Common Stock
3
<PAGE>
subject to the options currently exercisable, or exercisable within 60 days
after March 31, 1998, are deemed outstanding for computing the percentage
ownership of the person holding such options, but are not deemed
outstanding for computing the percentage ownership of any other person.
(3) Does not include 138,671 shares held by Paul S. Bachow Co-Investment Fund,
L.P. and 63,392 shares held by Paul S. Bachow, as to which Bachow
Investment Partners III, L.P. disclaims beneficial ownership.
(4) Consists of 230,599 shares held in William R. Elder and Gloria S. Elder
Family Trust.
(5) Does not include 977,876 shares held by Bachow Investment Partners III,
L.P. and 63,392 shares held by Paul S. Bachow, as to which Paul S. Bachow
Co-Investment Fund, L.P. disclaims beneficial ownership.
(6) Does not include 977,876 shares held by Bachow Investment Partners III,
L.P. and 138,671 shares held by Paul S. Bachow Co-Investment Fund, L.P., as
to which Paul S. Bachow disclaims beneficial ownership.
(7) Consists of 2,032 shares of Common Stock and options to purchase 25,000
shares of Common Stock exercisable within 60 days of March 31, 1998.
(8) Consists of 2,500 shares held by Mr. Rosati, 9,000 shares held by WS
Investments 92A and options to purchase 5,000 shares of Common Stock
exercisable within 60 days of March 31, 1998. Mr. Rosati is a general
partner of WS Investments 92A and disclaims beneficial ownership of the
shares held by such entity except to the extent of his proportionate
partnership interest therein.
(9) On April 3, 1995, pursuant to the terms of a Stock Purchase Agreement dated
February 10, 1995 (the "Stock Purchase Agreement") by and among the Company
and Bachow Investment Partners III, L.P., Paul S. Bachow Co-Investment
Fund, L.P. and Paul S. Bachow, (collectively the "Bachow Group"), Mr.
Fisher was elected as a representative of the Bachow Group to fill an
existing vacancy on the Company's Board of Directors. This figure does not
include the 1,179,939 shares held by the Bachow Group, as to which shares
Mr. Fisher has neither voting nor investment power.
(10) Includes options to purchase 25,000 shares of Common Stock exercisable
within 60 days of March 31, 1998.
4
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
The Company's Bylaws provide for a variable board of four to seven
directors, with the number currently fixed at four. Unless otherwise instructed,
the proxy holders will vote the proxies received by them for the Company's four
nominees named below, all of whom are presently directors of the Company. In the
event that any nominee of the Company is unable or declines to serve as a
director at the time of the Annual Meeting, the proxies will be voted for any
nominee who shall be designated by the present Board of Directors to fill the
vacancy. It is not expected that any nominee listed below will be unable or will
decline to serve as a director. In the event that additional persons are
nominated for election as directors, the proxy holders intend to vote all
proxies received by them in such a manner in accordance with cumulative voting
as will assure the election of as many of the nominees listed below as possible,
and, in such event, the specific nominees to be voted for will be determined by
the proxy holders. The term of office of each person elected as a director will
continue until the next Annual Meeting of Shareholders or until his successor
has been elected and qualified.
The names of the nominees, and certain information about them, are set forth
below.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
- --------------------------------- --- -------------------------------------------------------------- -----------
<S> <C> <C> <C>
William W.R. Elder............... 59 President, Chief Executive Officer and Chairman of the Board 1981
of the Company
Todd S. Myhre.................... 52 President and Chief Executive Officer of GameTech 1994
International
G. Frederick Forsyth............. 54 President, Professional Products Division of Iomega, Inc. 1996
Mario M. Rosati.................. 50 Member of Wilson Sonsini Goodrich & Rosati, P.C. 1981
</TABLE>
Except as set forth below, each of the nominees has been engaged in his
principal occupation set forth above during the past five years. There are no
family relationships among any directors or executive officers of the Company.
Mr. Elder, a founder of the Company, is the Chairman of the Board, President
and Chief Executive Officer of the Company. From October 1996 to April 1998, he
served only as Chairman of the Board. From April 1990 to September 1996, he was
Chairman of the Board, President and Chief Executive Officer of the Company.
From November 1981 to April 1990, he was President and a director of the
Company.
Mr. Myhre has served as a director of the Company since January 1994. Since
April 1998, and from September 1995 to January 1996, Mr. Myhre has served as
President and Chief Executive Officer of GameTech International, an electronic
gaming manufacturer. From September 1995 to March 1998, Mr. Myhre was an
international business consultant. From January 1993 to August 1993, from August
1993 to December 1993 and from January 1994 to August 1995, Mr. Myhre served as
Vice President and Chief Financial Officer of the Company, as Executive Vice
President and Chief Operating Officer of the Company and as President and a
director of the Company, respectively.
Mr. Forsyth has been a director of the Company since February 1996. Since
August 1997, Mr. Forsyth has served as President, Professional Products Division
of Iomega, Inc. From June 1989 to February 1997, Mr. Forsyth was associated with
Apple Computer, Inc., a personal computer manufacturer, in various senior
management positions, most recently as Senior Vice President and General
Manager, Macintosh Product Group.
5
<PAGE>
Mr. Rosati has been Secretary of the Company since May 1996 and a director
of the Company since the Company's inception in November 1981. He is also a
director of Aehr Test Systems, a manufacturer of semiconductor test equipment;
CATS Software Inc., a supplier of client/server software products for financial
risk management; Meridian Data, Inc., a developer of compact disc-read only
memory (CD-ROM) and compact disc-recordable (CD-R) systems and related software
for both networks and personal computers; Ross Systems, Inc., a supplier of
enterprise-wide business systems and related services to companies installing
open systems/client server software products; and Sanmina Corporation, an
electronics manufacturer of multilayered printed circuit boards, backplane
assemblies, subassemblies, and printed circuit board assemblies. He is a member
of Wilson Sonsini Goodrich & Rosati, P.C., general counsel to the Company.
VOTE REQUIRED
The four nominees receiving the highest number of affirmative votes of the
Votes Cast will be elected as directors of the Company for the ensuing year.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
SHAREHOLDERS VOTE FOR THE ELECTION OF THE NOMINEES.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of 7 meetings during the
year ended December 31, 1997. The Board of Directors has an Audit Committee and
a Compensation Committee. It does not have a nominating committee or a committee
performing the functions of a nominating committee.
During the year ended December 31, 1997, the Audit Committee of the Board of
Directors consisted of directors Fisher, Forsyth and Rosati and held one
meeting. As of March 31, 1998 the Audit Committee consisted of directors
Forsyth, Myhre and Rosati. The Audit Committee recommends engagement of the
Company's independent accountants and is primarily responsible for approving the
services performed by the Company's independent accountants and for reviewing
and evaluating the Company's accounting principles and its system of internal
accounting controls.
During the year ended December 31, 1997, the Compensation Committee of the
Board of Directors consisted of directors Fisher, Forsyth and Rosati and held
three meetings. As of March 31, 1998 the Compensation Committee consisted of
directors Forsyth, Myhre and Rosati. The Compensation Committee makes
recommendations to the Board of Directors regarding the Company's executive
compensation policy. See "Compensation Committee Report on Executive
Compensation."
No director serving in the year ended December 31, 1997, attended fewer than
75% of the aggregate number of meetings of the Board of Directors and meetings
of the committees of the Board on which he or she serves.
DIRECTOR COMPENSATION
The Company currently pays to its directors who are not employees a fee of
$1,000 per meeting and $500 per telephonic meeting. In addition, the Company
pays non-employee members of the board an annual fee of $10,000. The Company
also reimburses directors for reasonable expenses incurred in attending
meetings. Under the Company's 1991 Option Plan, each of the non-employee
directors receives an automatic grant of an option to purchase 5,000 shares of
Common Stock on the date of his or her appointment or election to the Board and,
for so long as he or she continues to serve as a director, an automatic grant of
an option to purchase 5,000 shares of Common Stock on February 7 of each year.
6
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1997, the Company paid legal fees and expenses to Wilson Sonsini Goodrich
& Rosati, Professional Corporation, general counsel to the Company. The amounts
paid by the Company to Wilson Sonsini Goodrich & Rosati were less than 5% of the
law firm's total gross revenues for its last completed fiscal year. Mario M.
Rosati, a director and Secretary of the Company, is a member of the law firm of
Wilson Sonsini Goodrich & Rosati.
EXECUTIVE OFFICERS
The executive officers of the Company, who are elected by and serve at the
discretion of the Board of Directors, and their ages at March 31, 1998, are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
William W.R. Elder................................... 59 President, Chief Executive Officer and Chairman of
the Board
John E. Aldeborgh.................................... 41 Executive Vice President, Chief Customer Satisfaction
Officer
Thomas E. Seidel, Ph.D............................... 62 Executive Vice President, Chief Technical Officer
Mary F. Bobel........................................ 48 Executive Vice President, Chief Financial Officer
Frederick E. Heslet, Ed.D............................ 58 Vice President, Chief Quality Officer
James McEleney....................................... 40 Vice President, General Manager, Ion Technology
Products
</TABLE>
Except as set forth below, all of the executive officers have been
associated with the Company in their present or other capacities for more than
the past five years. Officers are elected annually by the Board of Directors and
serve at the discretion of the Board. There are no family relationships among
executive officers of the Company.
Mr. Elder's background is summarized under "Election of Directors" above.
Mr. Aldeborgh joined the Company in June 1989 and serves as the Executive
Vice President and Chief Customer Satisfaction Officer. From January 1997 to
September 1997, Mr. Aldeborgh served as Executive Vice President and Chief
Operating Officer. From January 1993 to January 1997, he was Vice President and
General Manager, Ion Technology Division of the Company. From June 1989 to
January 1993, he was the Director of Operations of Ion Technology Products. From
May 1983 to May 1989, Mr. Aldeborgh was with LTX Corporation, a manufacturer of
semiconductor test equipment, in various management positions, most recently as
Director of Manufacturing for the Linear Manufacturing Division.
Dr. Seidel joined the Company in January 1996 and is the Executive Vice
President and Chief Technical Officer of the Company. From July 1988 to January
1996, Dr. Seidel was associated with SEMATECH, a semiconductor-industry
consortium, in various senior management positions, most recently as Chief
Technologist and Director of Strategic Technology.
Ms. Bobel joined the Company in March 1997 as Executive Vice President and
Chief Financial Officer. From October 1994 to September 1996, Ms. Bobel served
as Vice President and Chief Financial Officer at Educational Publishing
Corporation, a publisher of supplementary educational materials. From March 1990
to September 1994, she was employed at Adobe Systems, a publicly held software
company, most recently as Vice President and Corporate Controller.
7
<PAGE>
Dr. Heslet joined the Company in November 1996 as Chief Quality Officer and
Executive Vice President, Human Resources. In addition, he also is employed by
California State University, Hayward, where he has been a professor of
educational psychology since 1968. From November 1990 to December 1996, he
served as Vice President of Quality and Development at Credence Systems
Corporation, a manufacturer of semiconductor test equipment.
Mr. McEleney joined the Company in April 1996 as Vice President, Marketing,
Ion Technology Products and was promoted to Vice President and General Manager
of Ion Technology Products in March 1998. From January 1995 to April 1996, Mr.
McEleney was the Director, Sales & Marketing for Thermadics Detection, Inc., a
manufacturer of precision analytical instruments. From December 1984 to January
1995, Mr. McEleney held various sales and marketing positions for Teradyne,
Inc., a manufacturer of automatic test equipment.
TRANSACTIONS WITH MANAGEMENT
CHANGE OF CONTROL SEVERANCE AGREEMENTS
Certain executive officers and key employees have severance agreements with
the Company that provide severance benefits in the event that the officer's or
employee's employment with the Company is "Involuntarily Terminated" or
otherwise terminated without "Cause" within a specified period of time (either
six months or one year) following a "Change of Control." The severance benefits
include a cash payment of a specified percentage (either 600% or 1200%) of the
executive's or employee's monthly base pay. The severance agreements define
"Cause" to include an act of dishonesty intended to result in substantial gain
or personal enrichment; conviction of an illegal act with respect to his or her
employment by the Company; and willful violations of the executive's or key
employee's obligations to the Company. The severance agreements define
"Involuntary Termination" to include a reduction in base compensation; a
relocation of the executive or key employee to a location more than 50 miles
from the executive or key employee's present location; a material reduction in
benefits or a material increase in the executive's or employee's cost of
benefits; significant reduction of the executive's or key employee's duties or
responsibilities; or the failure or refusal of a successor company to assume the
Company's obligations under the severance agreements. The severance agreements
define "Change of Control" to mean the occurrence of any of the following
events: (i) any person becomes the beneficial owner of securities of the Company
representing 50% or more of the total voting power represented by the Company's
then outstanding voting securities; or (ii) a change in the composition of the
Board of Directors occurring within a two-year period, as a result of which
fewer than a majority of the directors are incumbent directors; or (iii) the
shareholders of the Company approve a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent at least 50% of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the shareholders
of the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
the Company's assets. The applicability of the change of control severance
benefits to any specific executive officer or key employee is dependent on
whether the Proposed Transaction as described in Proposal Two is deemed to be a
sale of substantially all the assets of the Company and whether the shareholders
approve the Proposed Transaction. The Company believes that the Proposed
Transaction is a sale of substantially all the assets of the Company for
purposes of the Change of Control Severance Agreements.
TERMINATION OF EMPLOYMENT AGREEMENT
On April 20, 1998, the Company entered into a Settlement Agreement and
Mutual Release with James T. Healy (the "Healy Agreement") in connection with
Mr. Healy's resignation from the positions of President and Chief Executive
Officer of the Company effective as of April 30, 1998. Pursuant to the Healy
Agreement, the Company will continue to pay Mr. Healy $25,000 per month, less
applicable withholding,
8
<PAGE>
for nine months from the date of his resignation. Mr. Healy will not be entitled
to the accrual or continuation of any employee benefits, including but not
limited to, vacation benefits and bonuses. The exercise of any stock options
will continue to be subject to the terms and conditions of the Company's Stock
Option Plan and the applicable Stock Option Agreement between Mr. Healy and the
Company.
TRANSITION AGREEMENT
On April 30, 1996, the Company entered into a Management Transition
Agreement with William W. R. Elder (the "Elder Agreement"). The Elder Agreement
provides for the cessation of Mr. Elder's services to the Company in his
capacity as Chief Executive Officer, the continuation of his role as Chairman of
the Board and the commencement of his role as an employee of the Company until
December 31, 1997 and as a consultant to the Company until December 31, 1999.
The terms of the Elder Agreement provide for Mr. Elder to continue to receive
his salary as in effect on April 30, 1996 until December 31, 1997 and $100,000
per year for the period of January 1, 1998 to December 31, 1999, provided Mr.
Elder does not cease to be an employee of or consultant to the Company prior to
such dates. In addition, the Elder Agreement provides that Mr. Elder will
receive all of the employee benefits that he received as of April 30, 1996 while
an employee of the Company, and will receive only health benefits and an
automobile allowance while a consultant to the Company. Mr. Elder's options to
purchase Common Stock of the Company will be governed by the provisions of the
applicable option agreements between Mr. Elder and the Company, and the vesting,
post-termination exercisability, and other provisions of such options shall not
be affected by the Elder Agreement.
Following the resignation of Mr. Healy, Mr. Elder resumed the position of
President and Chief Executive Officer and will continue as Chairman of the
Board. Accordingly, beginning in May 1998, Mr. Elder began receiving his
previous salary of $300,000 per year.
See also "Compensation Committee Interlocks and Insider Participation"
above.
SECTION 16(a) REPORTS
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities, to file certain reports regarding ownership
of, and transactions in, the Company's securities with the Securities and
Exchange Commission (the "SEC"). Such officers, directors and 10% shareholders
are also required by SEC rules to furnish the Company with copies of all Section
16(a) reports that they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons, the Company believes
that during 1997, its executive officers, directors and 10% shareholders filed
all required Section 16(a) reports on a timely basis with the following
exceptions: John Aldeborgh filed a Form 5 disclosing one transaction that should
have been reported earlier on a Form 4; and Thomas Seidel filed a Form 5
disclosing two transactions that should have been reported earlier on Form 4.
9
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table discloses compensation received by the Company's Chief
Executive Officer and the four other most highly compensated executive officers
of the Company (the "Named Executive Officers") for the three fiscal years ended
December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS(2)
ANNUAL COMPENSATION -------------------------------
---------------------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) OPTIONS(#) COMPENSATION($)(3)
- -------------------------------------------------- -------- -------- ----------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
William W.R. Elder................................ 1997 305,000 -- -- 43,890
Chairman of the Board 1996 304,167 -- 50,000 2,947
1995 282,917 42,750 100,000 18,422
James T. Healy.................................... 1997 300,000 90,000 -- 11,500
President and Chief Executive 1996(4) 87,500 -- 250,000 --
Officer
Mary F. Bobel..................................... 1997(5) 137,500 16,500 75,000 6,539
Executive Vice President and
Chief Financial Officer
John E. Aldeborgh................................. 1997 206,845 20,976 30,000 8,716
Executive Vice President, Chief 1996 182,390 -- 50,000 --
Customer Satisfaction Officer 1995 152,096 30,000 62,500 9,816
Thomas E. Seidel.................................. 1997 209,200 21,000 5,000 8,692
Executive Vice President and 1996(4) 183,333 -- 125,000 948
Chief Technical Officer
</TABLE>
- ------------------------
(1) Except as otherwise noted, all bonuses were earned by the named officer in
fiscal year indicated and paid to the named officer early in the subsequent
year pursuant to the Company's Management Incentive Plan.
(2) The Company did not make any awards of restricted stock or make any payments
under long-term incentive plans during the periods covered in the table.
(3) Represents amounts contributed to the Company's 401(k) plan on behalf of the
officer by the Company and automobile allowances. Premiums in the amount of
$2,947 and $3,540 were also paid by the Company on behalf of Mr. Elder for a
term life insurance policy (the proceeds of which are payable to his named
beneficiaries) in fiscal 1996 and fiscal 1997, respectively.
(4) Mr. Healy and Mr. Seidel were not employed by the Company prior to fiscal
1996. Mr. Healy joined the Company in September 1996 and resigned in April
1998. Mr. Seidel joined the Company in January 1996.
(5) Ms. Bobel was not employed by the Company prior to fiscal 1997. Ms. Bobel
joined the Company in March 1997.
10
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants made in fiscal
1997 to the Named Executive Officers. No SARs were granted.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------------- VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK
OPTIONS PRICE APPRECIATION
GRANTED TO EXERCISE FOR
EMPLOYEES OR BASE OPTION TERM(3)
OPTIONS IN FISCAL PRICE PER EXPIRATION ---------------------
NAME GRANTED(1) YEAR(2) SHARE DATE 5% 10%
- ------------------------------------------- ----------- --------------- ----------- ------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
William W.R. Elder......................... -- -- -- -- -- --
James T. Healy............................. -- -- -- -- -- --
Mary F. Bobel.............................. 75,000 14 3.87 2002 $ 80,191 $ 177,201
John E. Aldeborgh.......................... 30,000 6 5.25 2002 43,514 96,155
Thomas E. Seidel........................... 5,000 1 5.25 2002 7,252 16,026
</TABLE>
- ------------------------
(1) The indicated options were granted at various dates in 1997, vest at the
rate of 1/3 per year and become fully exercisable at various dates in 2000.
(2) The Company granted options to purchase 537,000 shares to employees in
fiscal 1997.
(3) Potential realizable value assumes that the stock price increases from the
date of grant until the end of the option term (5 years) at the annual rate
specified (5% and 10%). This assumption is based on SEC rules and does not
necessarily represent the expected rate of appreciation.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table provides information on option exercises in fiscal 1997
by the Named Executive Officers and the number and value of such officers'
unexercised options at December 31, 1997. No SARs have been granted.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN-THE- MONEY
NUMBER OF UNEXERCISED OPTIONS
SHARES AT 12/31/97 OPTIONS AT 12/31/97(2):
ACQUIRED ON VALUE ----------------------------- ----------------------------------
NAME EXERCISE REALIZED(1) (EXERCISABLE) (UNEXERCISABLE) (EXERCISABLE) (UNEXERCISABLE)
- -------------------------------------- ----------- ----------- ------------- -------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
William W.R. Elder.................... 20,000 61,260 99,999 50,001 -- --
James T. Healy........................ 83,325 166,675 -- --
Mary F. Bobel......................... 25,000 50,000 -- --
John E. Aldeborgh..................... 58,311 61,670 -- --
Thomas E. Seidel...................... 68,327 61,673 -- --
</TABLE>
- ------------------------
(1) Fair market value of the Company's Common Stock on the date of exercise
minus the exercise price.
(2) Market value of underlying securities based on the closing price of
Company's Common Stock on December 31, 1997, on NASDAQ of $3.334, less the
exercise price.
The Company has not established any long-term incentive plans or defined
benefit or actuarial plans covering any of the Named Executive Officers.
11
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The objectives of the overall executive compensation program are to attract,
retain, motivate and reward Company executives while aligning their compensation
with the achievements of key business objectives, maximization of shareholder
value and optimal satisfaction of customers.
The Compensation Committee is responsible for:
1. Determining the specific executive compensation methods to be used by
the Company and the participants in each of those specific programs;
2. Determining the evaluation criteria and timeliness to be used in those
programs;
3. Determining the processes that will be followed in the ongoing
administration of the programs; and
4. Determining their role in the administration of the programs.
All of the actions take the form of recommendations to the full Board of
Directors where final approval, rejection or redirection will occur. The
Compensation Committee is responsible for administering the compensation
programs for all Company officers. The Compensation Committee has delegated the
responsibility of administering the compensation programs for all other Company
employees to the Company's officers.
Currently, the Company uses the following executive compensation vehicles:
- Cash-based programs: Base salary, Annual Incentive Bonus Plan, Annual
Profit Sharing Plan, and a Sales Incentive Commission Plan; and
- Equity-based programs: 1991 Incentive Stock Option Plan and the 1989
Employee Stock Purchase Plan.
These programs apply to the Chief Executive Officer and all executive level
positions, except for the Sales Incentive Commission Plan, which only includes
executives directly responsible for sales activities. Periodically, but at least
once near the close of each fiscal year, the Compensation Committee reviews the
existing plans and recommends those that should be used for the subsequent year.
The criteria for determining the appropriate salary level, bonus and stock
option grants for the Chief Executive Officer and each of the executive officers
include (a) Company performance as a whole, (b) business unit performance (where
appropriate) and (c) individual performance objectives. Company performance and
business unit performance are measured against both strategic and financial
goals. Examples of these goals are to obtain: operating profit, revenue growth,
timely new product introduction, and shareholder value (usually measured by the
Company stock price). Individual performance is measured to specific objectives
relevant to the individual's position and a specific time frame.
These criteria are usually related to a fiscal year time period, but may, in
some cases, be measured over a shorter or longer time frame.
The processes used by the Compensation Committee include the following
steps:
1. The Compensation Committee periodically receives information comparing
the Company's pay levels to other companies in similar industries, other
leading companies (regardless of industry) and competitors. Primarily
national and regional compensation surveys are used.
2. At or near the start of each evaluation cycle, the Compensation
Committee meets with the Chief Executive Officer to review, revise as
needed, and agree on the performance objectives set for the other
executives reporting to the Chief Executive Officer. The Chief Executive
Officer and Compensation Committee jointly set the Company objectives to
be used. The business unit and individual objectives are formulated
jointly by the Chief Executive Officer and the specific
12
<PAGE>
individual. The Compensation Committee also, with the Chief Executive
Officer, jointly establishes and agrees on their respective performance
objectives.
3. Throughout the performance cycle review, feedback is provided by the
Chief Executive Officer, the Compensation Committee and full Board, as
appropriate.
4. At the end of the performance cycle, the Chief Executive Officer
evaluates each executive's relative success in meeting the performance
goals. The Chief Executive Officer makes recommendations on salary, bonus
and stock options, utilizing the comparative results as a factor. Also
included in the decision criteria are subjective factors such as
teamwork, leadership contributions and ongoing changes in the business
climate. The Chief Executive Officer reviews the recommendations and
obtains Compensation Committee approval. The Compensation Committee also
determines the level of salary and bonus and the terms of stock option
grants for the Chief Executive Officer.
5. The final evaluations and compensation decisions are discussed with each
executive by the Chief Executive Officer or Compensation Committee, as
appropriate.
The Compensation Committee feels that the compensation vehicles used by the
company, generally administered through the process as outlined above, provide a
fair and balanced executive compensation program related to the proper business
issues. In addition, it should be noted that compensation vehicles will be
reviewed and, as appropriate, revised in order to attract and retain new
executives in addition to rewarding performance on the job.
Respectfully submitted by:
Todd S. Myhre
G. Frederick Forsyth
Mario M. Rosati
13
<PAGE>
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total shareholder
return from the last trading day before the beginning of the Company's 1993
Fiscal Year (December 31, 1992) through 1997 Fiscal Year End for the Company,
the NASDAQ Stock Market-US Index and the H & Q Technology Index. The graph
assumes that $100 was invested in the Company's Common Stock, in the NASDAQ
Stock Market-US Index and the H & Q Technology Index on December 31, 1992 and
all dividends were reinvested. Historic stock price performance is not
necessarily indicative of future stock price performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GENUS, INC. NASDAQ STOCK MARKET (U.S.) H & Q TECHNOLOGY
<S> <C> <C> <C>
12/92 $100 $100 $100
12/93 112 115 117
12/94 298 112 141
12/95 279 159 211
12/96 205 195 262
12/97 124 240 307
</TABLE>
14
<PAGE>
PROPOSAL TWO
APPROVAL OF THE PROPOSED TRANSACTION
GENERAL
Pursuant to the terms of the Asset Purchase Agreement, dated April 15, 1998,
by and between Varian and the Company (the "Agreement"), the Company will sell
to Varian most of its physical assets and assign its rights and obligations to
Varian under its existing contracts related to its ion implantation systems
business (the "Business"). Additionally, as a condition to consummation of the
sale of selected assets and transfer of selected liabilities of the Business
contemplated by the Agreement, the Company and Varian will enter into a
Cross-License Agreement (the "License Agreement"), pursuant to which the Company
will grant a royalty free, nonexclusive, irrevocable, worldwide, perpetual
license to Varian covering the Company's intellectual property related to the
Business (the "Intellectual Property"), other than any such intellectual
property primarily used in the conduct of the Company's chemical vapor and thin
film deposition systems business (the "CVD Business"). The Company will retain
ownership of certain intellectual property rights primarily used in the
development, manufacture, testing and sale of the products of the Company's CVD
Business (the "Licensed Intellectual Property") and will grant Varian a license
under these intellectual property rights pursuant to the License Agreement.
The detailed terms of, and conditions to, the Proposed Transaction are
contained in the Asset Purchase Agreement. The statements made in this Proxy
Statement with respect to the terms of the Proposed Transaction and related
transactions are qualified in their entirety by reference to the more complete
information set forth in the Asset Purchase Agreement, a copy of which is
attached to this Proxy Statement as Appendix A and which is incorporated herein
by reference. All material elements of the Agreement are described in this Proxy
Statement.
BACKGROUND OF THE TRANSACTION
The Company, which was formed in 1981 and completed its initial public
offering in 1988, has two primary lines of business: its chemical vapor thin
film deposition systems business and its high energy ion implantation systems
business. Both of these businesses involve the design, development, manufacture
and marketing of capital equipment for the semiconductor industry.
Beginning in mid-1996, the semiconductor capital equipment industry entered
a cyclical downturn. As a result of this downturn, Company management began to
explore opportunities for consolidation, either as a buyer or seller. In March
1996, Smith Barney Inc. (now associated with Salomon Brothers Inc and
collectively doing business with Salomon Brothers Inc as, and referred to herein
as, Salomon Smith Barney) was retained as the Company's financial advisor to
assist in these efforts.
During the period from May through July 1996, approximately 10 companies,
other than four direct competitors of the Company, were contacted as to their
possible interest in a transaction with the Company. Three of the companies
contacted expressed preliminary interest. In August 1996, one of the Company's
direct competitors was also contacted. This company expressed no interest in
pursuing a transaction.
During August and September 1996, Company management held several meetings
with the three companies that had expressed a preliminary level of interest.
Following these initial meetings, Company management and companies then in
discussion determined that there was no compelling rationale for a transaction,
and neither Company nor such parties had interest in further pursuing
discussions.
During the fourth quarter of 1996, the Company observed continuing weakness
in its business, which was largely attributable to the cyclical downturn in the
semiconductor equipment industry. As a result, in February 1997, the Company
reported a net loss for the fourth quarter of 1996 and the Company's management
elected to resume efforts to seek a strategic transaction.
15
<PAGE>
Accordingly, during the period from February through June 1997,
approximately eight companies that were not approached in 1996, including Varian
and two other competitors of the Company, were contacted. During the period from
June 1997 through September 1997, Company management held a series of meetings
with four companies which had expressed interest in a possible transaction with
the Company, including Varian and one other competitor of the Company ("Company
A"). Two of the companies were not interested in pursuing a transaction with the
Company. Company A expressed interest at a small premium to the Company's then
current market price and Varian submitted a proposal at a valuation below the
Company's market price. In September 1997, the Company determined that these
proposals were inadequate and ceased discussions with these companies.
During the fourth quarter of 1997, the Company experienced a significant
further downturn in its business. This downturn was due in large part to
economic conditions in Asia which caused several of the Company's customers in
this region to cancel orders or reschedule delivery dates for products they had
ordered. In addition, the Company incurred a net charge of $2.9 million for bad
debt expense as a result of a sale to a Malaysian customer which was
uncollectable. As a result, sales for the fourth quarter of 1997 fell below
sales for the fourth quarter of 1996, and the Company reported a loss of $1.20
per share in the fourth quarter of 1997 as compared to a loss of $0.14 per share
in the fourth quarter of 1996.
Accordingly, in the first quarter of 1998, the Company sought both to obtain
additional financing and to seek a strategic transaction. In February 1998, the
Company completed a financing in which $5,000,000 of convertible preferred stock
was issued. However, notwithstanding this additional financing, the Company's
working capital needs continued to increase, due in large part to the effects of
cancellation and rescheduling of orders by the Company's Asian customers.
In March 1998, discussions with Varian and Company A regarding a strategic
transaction were reinitiated by Varian. In addition, approximately five other
prospective acquirors were contacted, none of which expressed any interest.
During March 1998, Company A submitted a proposal to acquire the Company in a
stock-for-stock merger transaction valued at the then current market price of
the Company's Common Stock. As a result of this offer, the Company entered into
discussions with Company A. During these discussions, Company A advised the
Company that its initial proposal contained an error in the exchange ratio
calculation and that Company A would be willing to proceed only at a price less
than the Company's then current market value. At meetings held on March 2, 1998,
March 18, 1998 and March 21, 1998, the Board was updated as to the status of
negotiations with Company A and the negotiations that were underway with Varian.
The Varian proposal involved an acquisition of the assets of the Business for
cash. The Board met on March 27, 1998 to review the status of negotiations with
both Company A and Varian. The Board considered both companies' proposals,
including the consideration being offered. Although Company A's proposal
presented the possibility of a tax-free reorganization as well as an acquisition
of the entire Company, the Board noted that Company A was faced with challenges
in acceptance of its new products while also experiencing weak demand for its
current products. The Company believed these factors would have a negative
impact on Company A's stock value thereby decreasing shareholder value for its
shareholders. The Company believed that the cash offer from Varian transaction
represented a higher valuation based on the ratio of stock being offered by
Company A and the assumed risk in Company A's share value. In addition, the
Varian transaction would provide the Company with funds with which to continue
the development of several new thin film products currently being developed.
In April 1998, negotiations continued with both companies. Company A was
again approached and responded with the same below-market offer. Negotiations
and disclosures of operating information with Varian continued during the first
two weeks of April. Upon discussion of a wide range of transaction structures,
Varian's only interest was in a cash transaction for the assets of the ion
implant group. The material negotiating points between Varian and the Company
included the purchase price, a contingent payout, exclusion of accounts
receivable from assets to be purchased, assumption of various liabilities,
assignment of a key vendor agreement, and acceptance of Varian employment offers
by certain key ion
16
<PAGE>
implantation employees. On April 10, 1998, the Board approved the Agreement with
Varian, which was executed on April 15, 1998 and the transaction was publicly
announced on April 15, 1998. Varian does not compete with the Company's ion
implantation or CVD business. While Varian sells ion implantation equipment, its
products address mid current and high current requirements, while the Company
supplies equipment for the high energy segment of the market where Varian does
not have a presence.
RECOMMENDATION OF THE BOARD AND REASONS FOR THE TRANSACTION
The Board unanimously approved the Proposed Transaction with Varian and
recommends that shareholders approve the Proposed Transaction. In addition, the
Company's Board of Directors unanimously determined that the terms of the
Proposed Transaction are fair and in the best interest of the Company and its
Shareholders and recommends a vote in favor of the Proposed Transaction. In the
course of reaching its decision to approve the Proposed Transaction, the Board
consulted with its legal and financial advisors as well as the Company's
management and considered the following factors, such factors being all of the
material factors considered by the Board:
(1) The effect on the Company on the deteriorating economic environment
in Asia, which was causing the Company to incur increased operating losses.
This situation, as well as the Company's cash position, made completion of a
transaction that would provide liquidity in a short time frame imperative.
(2) The deterioration in the Company's financial condition and the
qualification by the Company's auditors of the certification of the
Company's financial statements by noting "substantial doubt about its
ability to continue as a going concern," thereby decreasing the Company's
other financing alternatives.
(3) The absence of any serious offers from any other third parties
regarding a possible acquisition of the Company's assets or a possible
merger with the Company, other than the proposals made by Company A, which
the Board rejected in favor of the Proposed Transaction because of the
uncertainties associated with the proposed consideration in Company A's
transaction as well as the higher overall valuation reflected by the Varian
proposal.
(4) The anticipated positive effects upon the Company's balance sheet
and results of operations from the use of the net proceeds of the Proposed
Transaction to retire indebtedness and expand the Company's ability to
develop its new thin film products. (See "--Application of Sale Proceeds").
(5) The opinion dated April 15, 1998 of Salomon Smith Barney rendered to
the Board of Directors of the Company, to the effect that, as of such date
and based upon and subject to certain matters set forth in such opinion, the
Consideration (as defined below under the caption "--Purchase Price") to be
received by the Company in the Proposed Transaction was fair, from a
financial point of view, to the Company, and the financial analyses
performed by Salomon Smith Barney in connection with such opinion (See
"--Opinion of the Company's Financial Advisor").
(6) The Board's belief that Genus is well positioned to contribute and
engage in the several growing thin film segments of the semiconductor
equipment business. Genus' strategy for its continuing thin film business
includes seeking to achieve growth of its WSix CVD business, further
development of the company's enabling WN films technology for multiple
applications and development of new ultra-thin film capabilities to meet the
industry's future needs.
(7) The willingness of Varian to continue to employ the substantial
majority of the workforce involved in the Business. (See "--Effect on
Employees").
(8) The potential competitive disadvantage of a smaller company in an
industry dominated by multi-billion dollar companies, and the possibility
that customers will view the Company as lacking critical mass.
17
<PAGE>
(9) The risks associated with the fact that Samsung Electronics is the
only customer for the Company's current generation of thin film products.
Considering all of the above factors, the Board of Directors concluded that
the Company should become focused on developing its new thin film products with
a significantly downsized workforce. The infusion of cash provided by the
Proposed Transaction will give the Company the resources to fund the development
of thin film products, and the smaller resulting Company will be able to sharply
focus its development activities. The Board did not independently establish a
value for the Proposed Transaction, but based on all the above factors
determined that the Proposed Transaction was fair and reasonable to the Company
and its Shareholders. The Board did not assign a weight for the individual
factors considered in evaluating the Proposed Transaction. The Board did not
perform any material financial analyses in addition to the analyses performed by
its financial advisor, Salomon Smith Barney. (See "--Opinion of the Company's
Financial Advisor"). The Board also considered a liquidation sale of assets, but
determined that the Proposed Transaction will result in higher shareholder
value. The value of the Company's significant intellectual property and seasoned
engineering team would not be realized in a liquidation. The Board believes that
with the cash to be obtained from the Proposed Transaction, the Company will be
better positioned to develop next generation thin film products, thereby
creating the potential for increased revenues from CVD products. The Board
consulted with counsel for the Company regarding whether the Proposed
Transaction is a sale of substantially all the assets of the Company, and based
on the percentage of revenues and assets being transferred in the Proposed
Transaction, such counsel advised the Company that the Proposed Transaction
should be considered a sale of substantially all the assets of the Company. The
Board did not obtain a formal written opinion of such counsel to such effect.
The Board did not seek such a formal written opinion because the question of
whether the Proposed Transaction constitutes a sale of substantially all of the
assets is primarily a factual determination and, in light of the percentage of
revenues and assets being transferred, such determination was relatively free
from doubt.
PURCHASE PRICE
The terms of the Proposed Transaction require Varian to pay an aggregate
purchase price of $25.0 million cash, subject to adjustment if, prior to the
closing of the Proposed Transaction (the "Closing"), the Company exercises its
option to sell Varian certain machinery consisting of two ion implantation
systems valued at approximately $1.5 million each, plus an additional contingent
cash amount equal to one-third of the amount, if any, by which (x) gross
revenues generated from the sale by Varian or the Company of (i) high energy MeV
ion implantation systems during the calendar year 1998 and (ii) service and
spare parts for such systems, in each case during the calendar year 1998 and
actually collected from the customer (the "Booked Revenue") shall exceed (y)
$30.0 million (collectively, the "Consideration").
ASSETS TO BE SOLD AND RETAINED BY THE COMPANY
The assets of the Company to be sold to Varian consist of all raw materials
and inventories; all machinery, equipment, computers, tapes, data bases,
furniture, automobiles, trucks, vehicles, tools, supplies and parts and other
tangible personal property, whether owned, leased or subleased, which are used
primarily in the conduct of the Business; all written contracts entered into in
the ordinary course of business and necessary for the conduct of the Business,
and that are for the sale and non-warranty service after the Closing of products
of the Business, all rights, indemnification, warrants, claims and causes of
action against third persons; all security, utility or similar deposits and
prepaid expenses related primarily to the Business; all letters of credit issued
in favor of the Company that related to any contract; to the extent permitted by
law, all governmental licenses, permits approvals, license applications, license
amendment applications and product registrations with respect to the conduct of
the Business; real property leased by the Company, together with all
improvements thereon and fixtures thereto; all Intellectual Property, other than
the Licensed Intellectual Property; all books and records related to the assets
to be
18
<PAGE>
sold to Varian; all rights to causes of action, claims, lawsuits, arbitrations,
orders, judgements, decrees, awards and injunctions available to or being
pursued by the Company; and the goodwill of the Business. Assets retained by the
Company include the Company's cash or cash equivalents and any business,
operation, subsidiary or division of the Company other than the Business, which
consists primarily of the CVD Business.
INTELLECTUAL PROPERTY TO BE RETAINED FOR LICENSING BY THE COMPANY
Pursuant to the Agreement, the Company will retain ownership of the Licensed
Intellectual Property, and will grant Varian a license under these intellectual
property rights pursuant to the terms of the License Agreement. The license
allows Varian to manufacture and sell products, other than CVD products under
the Licensed Intellectual Property. The license is royalty free and extends
through the term of the last to expire patent included within the Licensed
Intellectual Property. In addition, Varian will grant to the Company a license
relating to the Business or used or held for use by the Company in the conduct
of the Business or that otherwise constitutes a part of the Other Intellectual
Property. The License Agreement does not transfer any ownership rights to Varian
in the Licensed Intellectual Property and does not transfer any ownership rights
to the Company in the Owned Intellectual Property. Varian does not currently
compete with the Company's CVD Business. To the Company's knowledge, Varian has
no plans to compete with the Company's CVD Business. The Company has not sold,
nor does it have any plans to sell, any equipment or other assets pertaining to
the CVD Business to Varian.
UNAUDITED PRO-FORMA FINANCIAL DATA
The following unaudited pro forma condensed balance sheet of March 31, 1998,
and unaudited pro forma condensed statement of operations for the year ended
December 31, 1997 and the three months ended March 31, 1998 give pro forma
effect to the estimated financial effects of the Asset Purchase Agreement (the
"Agreement") with Varian. The pro forma condensed balance sheet as of March 31,
1998 gives pro forma effect to the Agreement as if such transaction was
consummated on that date. The pro forma condensed statements of operations for
the year ended December 31, 1997 and the three months ended March 31, 1998,
present the results of operations of the Company as if the transaction
contemplated by the Agreement occurred on January 1, 1997 and January 1, 1998,
respectively. The pro forma information is based on the historical financial
statements of the Company giving effect to the assumptions and adjustments set
forth in the accompanying notes.
19
<PAGE>
GENUS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, 1998
------------------------------------------------------
PRO FORMA
AFTER SALE
PRO FORMA PRO FORMA OF
GENUS, INC. ADJUSTMENTS NOTE BUSINESS
----------- ----------- --------------- -----------
<S> <C> <C> <C> <C>
Assets
Cash and cash equivalents.................................. $ 3,683 $ 21,200 (1) $ 24,883
Accounts receivable, net................................... 11,858 11,858
Inventories................................................ 9,709 9,709
Net Assets held for sale................................... 30,500 (25,000) (2) 5,500
Other current assets....................................... 1,001 1,001
----------- ----------- -----------
Total current assets..................................... 56,751 (3,800) 52,951
Property and equipment, net................................ 6,406 6,406
Other assets, net.......................................... 2,025 2,025
----------- ----------- -----------
Total assets............................................. $ 65,182 $ (3,800) $ 61,382
----------- ----------- -----------
----------- ----------- -----------
Liabilities and shareholders' equity
Total current liabilities.................................. $ 19,073 $ (2,800) (1) $ 16,273
Long-term debt............................................. 74 74
Shareholders' equity....................................... 46,035 (1,000) (1) 45,035
----------- ----------- -----------
Total liabilities and shareholders' equity............... $ 65,182 $ (3,800) $ 61,382
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
20
<PAGE>
GENUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998
-----------------------------------
PRO FORMA
AFTER SALE
OF
GENUS, INC. BUSINESS BUSINESS
----------- --------- -----------
<S> <C> <C> <C>
Net sales.................................................................... $ 7,238 $ (5,823) $ 1,415
Cost and expenses:
Cost of goods sold......................................................... 6,941 (4,986) 1,955
Research and Development................................................... 3,332 (1,744) 1,588
Selling, general and administrative........................................ 4,223 (2,750) 1,473
----------- -----------
Income (loss) from operations............................................ (7,258) (3,657) (3,601)
Other, net................................................................... (156) (80) (76)
----------- -----------
Loss before income taxes................................................... (7,414) (3,737) (3,677)
Provision for (benefit from) income taxes
Net loss................................................................... (7,414) (3,737) $ (3,677)
Deemed dividend on preferred stock......................................... $ 1,829 -- $ 1,829
Net loss available to common shareholders.................................. $ (9,243) (3,737) $ (5,506)
----------- --------- -----------
----------- --------- -----------
Pro forma net loss per share--basic and diluted.............................. $ (0.32)
-----------
-----------
Shares used in per share calculations........................................ 17,125
-----------
-----------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
------------------------------------
PRO FORMA
AFTER SALE
OF
GENUS, INC. BUSINESS BUSINESS
----------- ---------- -----------
<S> <C> <C> <C>
Net sales................................................................... $ 84,286 $ (57,102) $ 27,184
Cost and expenses:
Cost of goods sold........................................................ 54,762 (38,022) $ 16,740
Research and Development.................................................. 12,327 (6,599) $ 5,728
Selling, general and administrative....................................... 20,326 (12,808) $ 7,518
----------- ---------- -----------
Income (loss) from operations........................................... (3,129) (327) (2,802)
Other, net.................................................................. (1,363) (829) (534)
----------- ---------- -----------
Income (loss) before income taxes......................................... (4,492) (1,156) (3,336)
Provision for (benefit from) income taxes................................... 14,844 -- 14,844
----------- ---------- -----------
Net income (loss)......................................................... $ (19,336) $ (1,156) $ (18,180)
----------- ---------- -----------
----------- ---------- -----------
Pro forma net income (loss) per share--basic and diluted.................... $ (1.08)
Shares used in per share calculations....................................... 16,860
</TABLE>
PRO FORMA NOTES:
(1) Reflects proceeds of $25 million from Varian, the repayment of $2.8
million of short-term bank borrowings, and the payment of transaction expenses
estimated to be $1 million. Since transaction expenses represent non-recurring
charges resulting directly from the Proposed Transaction that will be included
in the operating results of the Company within the 12 months succeeding the
Proposed Transaction, these transaction expenses were not considered in the pro
forma condensed statements of operations for the year ended December 31, 1997
and the three months ended March 31, 1998.
21
<PAGE>
(2) Transfer of $25 million of net assets held for sale to Varian. After
giving effect to the sale of the Business, pro forma net assets held for sale of
$5.5 million represent planned sales of inventory and scheduled repayments of
capital lease obligations of the Business prior to the Closing.
The unaudited pro forma condensed financial data have been prepared by
Company management and are not necessarily indicative of how the Company's
balance sheet and results of operations would have been presented had the
transaction with Varian actually been consummated at the assumed dates, nor are
they necessarily indicative of the presentation of the Company's balance sheet
and results of operations for any future period. The unaudited pro forma
condensed financial data should be read in conjunction with the financial
statements and related notes thereto and Management's Discussion and Analysis of
Financial Condition and Results of Operations incorporated herein by reference.
TRADING RANGE OF COMMON SOCK
On April 14, 1998, the date preceding public announcement of the Proposed
Transaction, the high and low sales prices for the Common Stock on the Nasdaq
National Market were $2.50 and $2.375, respectively. The high and low sales
prices for the Common Stock on , 1998, the last trading day before the
printing of this Proxy Statement were $ and $ , respectively.
DISPUTE RESOLUTION
The Agreement dictates that any dispute, controversy or claim relating to,
arising out of or in connection with the Agreement or the License Agreement (or
any subsequent agreements or amendments thereto) shall be settled in binding
arbitration under the Commercial Rules of the American Arbitration Association
(the "Rules"). Any arbitration would be held in Santa Clara, California before a
panel of three arbitrators, who shall be selected under the normal procedures
prescribed in the Rules, except that one such arbitrator shall be a certified
public accountant and one arbitrator (who shall chair the arbitration panel)
shall be a member of the American College of Trial Lawyers.
SHAREHOLDER APPROVAL
The affirmative vote of a majority of the shares of the Company's Common
Stock outstanding at the Record Date is required to approve the Proposed
Transaction.
CERTAIN INFORMATION CONCERNING VARIAN
Varian, a publicly-held company, is a high-technology enterprise engaged in
the research, development, manufacture and marketing of products and services
for health care, industrial, scientific and industrial research and
environmental monitoring. Varian's principal business segments are health care
systems, instruments and semiconductor +production equipment. With headquarters
in Palo Alto, California and subsidiaries throughout the world, Varian employs
more than 6,500 people worldwide. For fiscal 1997 (ended September 26, 1997),
Varian reported sales of $1.4 billion, during the most recent fiscal quarter
(ended April 3, 1998), Varian reported sales of $373.0 million and net earnings
of $23.0 million. Additionally, Varian had $142 million in cash and cash
equivalents at year end. Varian's Common Stock is traded on the New York Stock
Exchange. Prior to the proposed transaction, Varian and the Company had no
affiliation.
OPINION OF THE COMPANY'S FINANCIAL ADVISOR
Salomon Smith Barney was retained by the Company to act as its financial
advisor in connection with the Proposed Transaction. On April 15, 1998, at a
meeting of the Board of Directors of the Company held to evaluate the proposed
Transaction, Salomon Smith Barney delivered an oral opinion (which opinion was
subsequently confirmed by delivery of a written opinion dated April 15, 1998) to
the Board of Directors of
22
<PAGE>
the Company to the effect that, as of the date of such opinion and based upon
and subject to certain matters stated therein, the Consideration was fair, from
a financial point of view, to the Company.
In arriving at its opinion, Salomon Smith Barney reviewed the Proposed
Transaction and held discussions with certain senior officers, directors and
other representatives and advisors of the Company and certain senior officers
and other representatives and advisors of Varian concerning the operations and
prospects of the Business. Salomon Smith Barney examined certain available
business and financial information relating to the Business as well as certain
financial forecasts and other information and data for the Business which were
provided to or otherwise discussed with Salomon Smith Barney by the management
of the Company. Salomon Smith Barney reviewed the financial terms of the
Proposed Transaction as set forth in the Agreement in relation to, among other
things, the historical and projected earnings and other operating data of the
Business and the financial condition of the Business, including the near-term
liquidity needs of, and capital resources available with respect to, the
Business. Salomon Smith Barney considered, to the extent publicly available, the
financial terms of certain other transactions recently effected which Salomon
Smith Barney considered relevant in evaluating the Proposed Transaction and
certain financial, stock market and other publicly available information
relating to the businesses of other companies whose operations Salomon Smith
Barney considered relevant in evaluating those of the Business. In connection
with its engagement, Salomon Smith Barney was requested to approach, and held
discussions with, third parties to solicit indications of interest in the
acquisition of the Company. In addition to the foregoing, Salomon Smith Barney
conducted such other analyses and examinations and considered such other
financial, economic and market criteria as Salomon Smith Barney deemed
appropriate in arriving at its opinion. Salomon Smith Barney noted that its
opinion was necessarily based upon information available, and financial, stock
market and other conditions and circumstances existing and disclosed, to Salomon
Smith Barney as of the date of its opinion.
In rendering its opinion, Salomon Smith Barney assumed and relied, without
independent verification, upon the accuracy and completeness of all financial
and other information and data publicly available or furnished to or otherwise
reviewed by or discussed with Salomon Smith Barney. With respect to financial
forecasts and other information and data provided to or otherwise reviewed by or
discussed with Salomon Smith Barney, the management of the Company advised
Salomon Smith Barney that such forecasts and other information and data were
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the management of the Company as to the future financial
performance of the Business. Salomon Smith Barney did not make and was not
provided with an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of the Business nor did Salomon Smith
Barney make any physical inspection of the properties or assets of the Business.
Salomon Smith Barney was not requested to evaluate, and did not evaluate, the
potential financial impact of the Proposed Transaction on the Company or the
redeployment of all or any part of the Consideration received by the Company in
connection with the Proposed Transaction. Salomon Smith Barney did not express
any opinion as to the price at which the Company Common Stock will trade upon
announcement or consummation of the Proposed Transaction, nor did Salomon Smith
Barney express any opinion as to the relative merits of the Proposed Transaction
as compared to any alternative business strategies that might exist for the
Company or the effect of any other transaction in which the Company might
engage. No other limitations were imposed by the Company on Salomon Smith Barney
with respect to the investigations made or procedures followed by Salomon Smith
Barney in rendering its opinion.
THE FULL TEXT OF THE WRITTEN OPINION OF SALOMON SMITH BARNEY DATED APRIL 15,
1998, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS
ON THE REVIEW UNDERTAKEN, IS ATTACHED HERETO AS APPENDIX B AND SHOULD BE READ
CAREFULLY IN ITS ENTIRETY. SALOMON SMITH BARNEY HAS CONSENTED TO THE INCLUSION
OF ITS OPINION LETTER TO THE BOARD OF DIRECTORS OF THE COMPANY AS APPENDIX B
HERETO. IN GIVING SUCH CONSENT, SALOMON SMITH BARNEY DOES NOT ADMIT THAT IT
COMES WITHIN THE CATEGORY OF PERSONS WHOSE CONSENT IS REQUIRED UNDER SECTION 7
OF THE SECURITIES ACT, OR THE RULES AND REGULATIONS OF THE COMMISSION
THEREUNDER, NOR DOES IT THEREBY ADMIT THAT IT IS AN EXPERT WITH RESPECT TO ANY
PART OF THIS PROXY STATEMENT WITHIN THE MEANING OF THE TERM "EXPERTS" AS USED IN
THE SECURITIES ACT, OR THE RULES AND REGULATIONS OF THE COMMISSION
23
<PAGE>
THEREUNDER. THE OPINION OF SALOMON SMITH BARNEY IS DIRECTED TO THE BOARD OF
DIRECTORS OF THE COMPANY AND RELATES ONLY TO THE FAIRNESS OF THE CONSIDERATION
FROM A FINANCIAL POINT OF VIEW TO THE COMPANY, DOES NOT ADDRESS ANY OTHER ASPECT
OF THE PROPOSED TRANSACTION OR RELATED TRANSACTIONS AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE
ANNUAL MEETING. THE SUMMARY OF THE OPINION OF SALOMON SMITH BARNEY SET FORTH IN
THIS PROXY STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF SUCH OPINION.
In preparing its opinion, Salomon Smith Barney performed a variety of
financial and comparative analyses, including those described below. The summary
of such analyses does not purport to be a complete description of the analyses
underlying Salomon Smith Barney's opinion. The preparation of a fairness opinion
is a complex analytic process involving various determinations as to the most
appropriate and relevant methods of financial analyses and the application of
those methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to summary description. Accordingly, Salomon Smith
Barney believes that its analyses must be considered as a whole and that
selecting portions of its analyses and factors, without considering all analyses
and factors, could create a misleading or incomplete view of the processes
underlying such analyses and opinion. In its analyses, Salomon Smith Barney made
numerous assumptions with respect to the Business, industry performance, general
business, economic, market and financial conditions and other matters, many of
which are beyond the control of the Company, such as, among other things, the
impact of competition on the business of the Company and the semiconductor
capital equipment industry generally, industry growth, the current distressed
financial condition and prospects of the Company, the volatility of the
semiconductor capital equipment industry and the absence of any material adverse
change in the financial markets in general. The estimates contained in such
analyses and the valuation ranges resulting from any particular analysis are not
necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than those suggested
by such analyses. In addition, analyses relating to the value of businesses or
securities do not purport to be appraisals or to reflect the prices at which
businesses or securities actually may be sold. Accordingly, such analyses and
estimates are inherently subject to substantial uncertainty. Salomon Smith
Barney's opinion and analyses were only one of many factors considered by the
Board of Directors of the Company in its evaluation of the Proposed Transaction
and should not be viewed as determinative of the views of the Board of Directors
or management of the Company with respect to the Consideration or the Proposed
Transaction.
The following is a summary of the material analyses performed by Salomon
Smith Barney in connection with its opinion dated April 15, 1998:
LIQUIDATION ANALYSIS. Given the financially distressed condition of the
Company, Salomon Smith Barney analyzed the estimated liquidation value of the
Business based on internal estimates of, and discussions with, Company
management. For purposes of such analysis, Salomon Smith Barney reviewed with
Company management the estimated book value at March 31, 1998 of each of the
assets, and related liabilities, of the Business in order to ascertain the net
realizable value which Company management believed could be obtained upon the
sale or other disposition of such assets to a third party. This analysis
indicated a net realizable value for the Business of approximately $11.9 million
to $17.5 million, as compared to the Consideration of $25.0 million, subject to
the adjustment that may be made if the Booked Revenue exceeds $30,000,000.
SELECTED COMPANY ANALYSIS. Using publicly available information, Salomon
Smith Barney analyzed, among other things, the market values and trading
multiples of the following selected publicly traded companies in the
semiconductor capital equipment industry: Aehr Test Systems, AG Associates,
Inc., Aseco Corporation, BTU International, Inc., Submicron Systems Corporation,
Trikon Technologies, Inc. and Tegal Corporation (the "Selected Companies").
Salomon Smith Barney compared market values as a multiple of, among other
things, latest 12 months net income, and adjusted market values (market value,
plus total debt, less cash) as multiples of latest 12 months and estimated
calendar 1998 revenues, latest 12 months earnings before interest, taxes,
depreciation and amortization ("EBITDA") and earnings before
24
<PAGE>
interest and taxes ("EBIT"). All multiples were based on closing stock prices as
of April 13, 1998. Net income estimates for the Selected Companies were based on
estimates of selected investment banking firms and net income estimates for the
Business were based on internal estimates of Company management. The implied
enterprise reference range of the Business based on the latest 12 months net
income, EBITDA and EBIT of the Selected Companies was not meaningful given the
lack of profitability in the operations of the Business during the past two
calendar years. Applying a range of multiples for the Selected Companies of
latest 12 months and estimated calendar 1998 revenue of 0.3x to 0.9x and 0.3x to
0.4x, respectively, to corresponding financial data for the Business resulted in
an enterprise reference range for the Business of approximately $13.7 million to
$29.9 million, as compared to the Consideration of $25.0 million, subject to the
adjustment that may be made if the Booked Revenue exceeds $30,000,000.
No company or business used in the "Selected Company Analysis" as a
comparison is identical to the Company or the Proposed Transaction. Accordingly,
an analysis of the results of the foregoing is not entirely mathematical;
rather, it involves complex considerations and judgments concerning differences
in financial and operating characteristics and other factors that could affect
the public trading or other values of the Selected Companies or the business
segment, company or transaction to which they are being compared.
SELECTED MERGER AND ACQUISITION TRANSACTIONS ANALYSIS. Using publicly
available information, Salomon Smith Barney analyzed the implied purchase prices
and transaction value multiples in approximately
17 selected merger and acquisition transactions in the semiconductor capital
equipment industry. Salomon Smith Barney compared purchase prices as multiples
of latest 12 months net income and latest reported tangible book value, and
transaction values as multiples of latest 12 months revenues, EBITDA, EBIT and
current assets. All multiples were based on publicly available information at
the time of announcement of such transaction. Due to the lack of profitability
of the Business and, accordingly, the inherent differences between the
businesses, operations and prospects of the Business and the acquired businesses
analyzed, Salomon Smith Barney did not consider the quantitative results of such
analysis particularly meaningful and therefore did not derive an enterprise
reference range for the Business based on such analysis.
DISCOUNTED CASH FLOW ANALYSIS. Salomon Smith Barney did not consider a
discounted cash flow analysis, which is performed for purposes of analyzing the
unlevered, after-tax free cash flows of an entity or business on a stand-alone
basis, a relevant valuation methodology for purposes of evaluating the Business
given, among other things, the current negative and future projected cash flows
of the Business, the volatility of the semiconductor capital equipment industry
and the unpredictability of positive cash flows generated by companies in such
industry.
OTHER FACTORS AND COMPARATIVE ANALYSES. In rendering its opinion, Salomon
Smith Barney considered certain other factors and conducted certain other
comparative analyses, including, among other things, a review of (i) indications
of interests received from third parties other than Varian; (ii) historical and
projected financial results of the Business, including the financially
distressed condition of the Company; (iii) the history of trading prices and
volume for Company Common Stock and the relationship between movements in
Company Common Stock, movements in the common stock of selected companies in the
semiconductor capital equipment industry and movements in the Semiconductor
Equipment Index, the Semiconductor Index and the S&P Industrial 500 Index; and
(iv) consolidation trends in the semiconductor capital equipment industry.
Pursuant to the terms of Salomon Smith Barney's engagement, the Company has
agreed to pay Salomon Smith Barney for its services in connection with the
Proposed Transaction an aggregate financial advisory fee based on a percentage
of the total consideration (including liabilities assumed) payable in the
Proposed Transaction. The fee payable to Salomon Smith Barney is currently
estimated to be approximately $800,000. The Company also has agreed to reimburse
Salomon Smith Barney for reasonable travel and other out-of-pocket expenses
incurred by Salomon Smith Barney in performing its services, including the
reasonable fees and expenses of its legal counsel, and to indemnify Salomon
Smith Barney and related
25
<PAGE>
persons against certain liabilities, including liabilities under the federal
securities laws, arising out of Salomon Smith Barney's engagement.
Salomon Smith Barney has advised the Company that, in the ordinary course of
business, Salomon Smith Barney and its affiliates may actively trade or hold the
securities of the Company and Varian for their own account or for the account of
customers and, accordingly, may at any time hold a long or short position in
such securities. Salomon Smith Barney has in the past provided investment
banking services to the Company unrelated to the Proposed Transaction, for which
services Salomon Smith Barney has received compensation. In addition, Salomon
Smith Barney and its affiliates (including Travelers Group Inc. and its
affiliates) may maintain relationships with the Company, Varian and their
respective affiliates.
Salomon Smith Barney is an internationally recognized investment banking
firm and was selected by the Company based on its experience, expertise and
familiarity with the Company and its business. Salomon Smith Barney regularly
engages in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes.
INTEREST OF MANAGEMENT IN THE TRANSACTION
The foregoing discloses all material interests, direct or indirect, of
directors and executive officers of the Company in the Proposed Transaction. One
Company officer, James McEleney, Vice President and General Manager, Ion
Technology Products, and 120 other Company employees are proposed to be hired by
Varian. It is not contemplated that any other of the Company's executive
management will become employees of Varian as a result of this transaction.
Certain members of management and key employees have severance agreements with
the Company that provide severance benefits in the event that their employment
is Involuntarily Terminated or otherwise terminated without Cause within a
specified period of time following a Change of Control. In the event that such
individuals (including Mr. McEleney) are hired by Varian and Involuntarily
Terminated or terminated without Cause within the specified period, such
individuals will receive the cash payments specified in their respective
severance agreements.
EFFECT ON EMPLOYEES.
The Company anticipates that Varian will hire approximately 120 of the 190
employees of the Company (the "Designated Employees") currently engaged in the
operation of the Business. The employment of the remaining employees of the
Company engaged in the operation of the Business will be terminated prior to or
contemporaneously with the Closing. The costs associated with such reduction in
force is estimated to be approximately $500,000. In connection with the sale of
the Business, the Company will restructure the operations of the CVD Business
and will also significantly reduce its workforce by approximately 24 employees
or approximately 20% worldwide. Accordingly, the Company anticipates that an
additional reduction in headcount will occur contemporaneously with the sale.
APPLICATION OF SALE PROCEEDS
Of the net proceeds from the Proposed Transaction, the Company expects to
use approximately $2.8 million to pay down short-term borrowings. The remainder
of the proceeds will be used for general working capital purposes with respect
to its remaining business operations. The Company has no present intent to pay a
dividend to Shareholders or to otherwise distribute to its Shareholders any
proceeds received from the Proposed Transaction. As a result of the
restructuring, including the reduction in force, the Company is positioned to be
minimally profitable during the second half of 1998 and does not anticipate
further operating losses. Additionally, the Company will have cash reserves and
expects to operate at a cash-neutral level upon completion of the Proposed
Transaction.
26
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
All transfer and other similar taxes imposed in connection with the transfer
of the Assets whether such taxes are assessed initially against Varian or the
Company shall be borne and paid 50% by the Buyer and 50% by the Seller.
For tax purposes, the Company may recognize income or gain as a result of
the Proposed Transaction. Notwithstanding, the Company determined that any
income tax related to the Proposed Transaction will not be significant because
such income or gain will be offset by current year net operating loss or prior
year net operating loss carry forwards. The Company determined that the Proposed
Transaction will not have any federal income tax consequences to the
Shareholders.
The above tax discussion was developed by the Company after consultation
with its tax and legal advisors.
REPRESENTATIONS AND WARRANTIES
The Company has made certain customary representations and warranties in the
Agreement relating to the Company, the authorization, validity and the
enforceability of the Agreement and similar corporate matters. The Company has
also made certain representations and warranties regarding execution, delivery
and performance of the Agreement; execution and delivery of the Agreement not
violating or conflicting with any provision of the charter or bylaws of the
Company or any provisions of law, rules, regulations or government orders;
financial statements; title of the assets beings sold; the payment of taxes;
pending and threatened claims and litigation; identity of suppliers; compliance
with laws and regulations; environmental matters; condition of the assets being
sold; contracts to be assumed by Varian; pending or threatened proceedings
related to employees; and completeness and accuracy of representations and
warranties.
COVENANTS AND CONDITIONS TO THE PROPOSED TRANSACTION
The Company has agreed, until Closing, among other things, to conduct its
business in the ordinary course consistent with past practices; to preserve and
maintain the assets being sold to Varian; to perform obligations required to be
performed by the Company under the contracts to be assumed by Varian; to give
prompt notice to Varian of any failure likely to cause any representation or
warranty to be inaccurate; not to sell, transfer, lease or otherwise dispose any
of the assets being sold to Varian except in the ordinary course of business and
consistent with past practice; to provide Varian with access to the Company's
facilities, properties and books and records; not to pursue another agreement
for the sale of the assets subject to the Agreement; not to compete, directly or
indirectly, with the Business for a period of five years; and to pay, on a
monthly basis, to the Company an amount equal to one-third of the amount, if
any, by which (a) gross revenues generated from the sale by Varian or the
Company of (i) high energy MeV ion implantation systems manufactured by the
Company prior to Closing (or substantially similar high energy MeV ion
implantation systems derived therefrom and manufactured by Varian after the
Closing) and (ii) service and spare parts for such systems in each case during
the calendar year 1998 and actually collected from the customer shall exceed (b)
$30,000,000.
Consummation of the Proposed Transaction is subject to approval by the
Shareholders and to a number of other conditions, including: (a) all
representations and warranties made by the other party in the Agreement being
true and correct, and all agreements, covenants and conditions required having
been performed under the Agreement, as of the Closing, (b) each party's receipt
at the Closing of certain closing certificates and legal opinions, (c) the
absence of any temporary or permanent order, writ, rule or judgement by any
governmental authority prohibiting or making unlawful the Proposed Transaction
and (d) the acceptance by at least 18 of the 24 employees, that Varian and the
Company have determined to be key employees of the Business, of Varian's offer
of employment.
27
<PAGE>
INDEMNIFICATION
The Company has agreed to indemnify and hold harmless Varian, its
subsidiaries and affiliates, and each officer, director, employee, agent and
representative of the foregoing (the "Indemnified Parties") from and against,
and pay or reimburse the Indemnified Parties for, any and all losses, actions,
liabilities, damages, claims, costs and expenses, interests, awards, judgements,
penalties and encumbrances suffered or incurred by any of the Indemnified
Parties arising in whole or in part from (a) any breach of any representation or
warranty of the Company or its affiliates in the Agreement, (b) any breach of
any covenant, obligation or agreement of the Company or its affiliates in the
Agreement, (c) any liability remaining the sole responsibility of the Company
and (d) any liability relating to (i) any employee related at any time during
the 12-month period immediately preceding April 15, 1998 to the Business (a
"Business Employee") who is not a Designated Employee but whose employment or
employment-related rights transfer to Varian as a result of the Proposed
Transaction and (ii) any compensation rights, employment benefits or other terms
of employment of Business Employees that Varian will become obligated to pay or
assume by operation of law or contract as a result of the Proposed Transaction.
TERMINATION OF THE PROPOSED TRANSACTION
At any time prior to Closing, the Agreement may be terminated under certain
circumstances, including the following: (a) by mutual written consent of Varian
and the Company, (b) by either party if the Closing shall not have occurred by
September 30, 1998, (c) by Varian, if there has been a material breach on the
part of the Company in its representation and warranties, subject to a right to
cure, (d) by Varian, if any action seeking a decree or order for relief in
respect of the Company under any bankruptcy, insolvency or other similar law is
instituted, (e) by the Company, if there has been a material breach on the part
of Varian in its representation and warranties, subject to a right to cure, (f)
by either party if Shareholder approval is not obtained or (g) by the Company,
if the Board of Directors reasonably determines that a proposal or offer by a
third party for an acquisition of the Business is more favorable to the Company
than the Proposed Transaction.
EXPENSES
Total costs to the Company associated with the Proposed Transaction are
estimated at $1,000,000. Such amount represents primarily legal and advisory
fees and will be paid by the Company. Costs incurred by Varian will be paid by
Varian.
BUSINESS PLAN FOR THE POST-SALE COMPANY
Upon completion of the Proposed Transaction, the Company will focus
exclusively on CVD technologies. With the restructuring, the Company is
positioned to break even on a reduced sales level of approximately $7 million
per quarter.
The Company's CVD Business experienced a decline in 1996 in absolute dollars
and again in 1997 primarily due to the overcapacity in the dynamic random access
memory ("DRAM") market. At the same time, the ion implant equipment that is used
in other applications such as logic and microprocessors in addition to DRAMs
grew on a year-to-year basis, resulting in such business comprising a larger
percentage of the total Company.
The CVD Business has developed a three year business plan that indicates the
Company will be minimally profitable in the second half of 1998 as a standalone
business and continue to be profitable through 1999. The Company's main product
line is the Lynx2, which is in volume production depositing Tungsten Silicide in
all of Samsung's memory products from 4m DRAMs through 64m DRAMs. The Company
announced a new thin film in late 1997, tungsten nitride, which has several
applications in advanced logic and memory chips. The Company is currently
involved with several customers with this new
28
<PAGE>
film. The Company expects to be cash flow neutral during the second half of 1998
while investing approximately 18% to 20% of revenue into research and
development.
In addition, the Company was awarded an S.B.I.R. grant from the Department
of Defense for an advanced ultra thin film product. The semiconductor equipment
industry is highly competitive. The ability of the Company to compete is
dependent on not only its technology, but also its ability to protect its
proprietary information from competitors. The markets addressed by the three
thin film products discussed above position the Company to compete in most thin
film applications required by the semiconductor industry worldwide.
The semiconductor manufacturing industry is concentrated in a limited number
of generally larger companies, and the Company expects that a significant
portion of its future product sales will be concentrated with a limited number
of customers. None of these customers has entered into a long-term agreement
requiring it to purchase the Company's products. Furthermore, sales to these
customers may decrease in the future when those customers complete their current
semiconductor equipment purchasing requirements for new or expanded fabrication
facilities. The loss of a significant customer, including reduction in orders
from a significant customer, reductions due to customer departures from recent
buying patterns, market, economic or competitive conditions in the semiconductor
industry or in the industries that manufacture products utilizing integrated
circuits, could have a material adverse effect on the Company's business,
financial condition and results of operations.
The foregoing statements regarding the Company's business plan for the CVD
business for the remainder of 1998 and 1999 constitute "forward-looking
statements" within the meaning of the Securities Act of 1933, as amended and the
Securities Exchange Act of 1934, as amended. The Company's ability to achieve
the objectives of its business plan for the CVD business for the remainder of
1998 and 1999 is subject to risks and uncertainties. Such risks include risks
associates with international concentration of the Company's revenues, including
in particular sales to customers in South Korea, the dependence of the Company
on a relatively small number of customers, the cyclical nature of the
semiconductor industry and the semiconductor equipment industry, and competition
within the semiconductor equipment industry including in particular the market
for CVD products. Accordingly, as a result of these factors, there can be no
assurance that the Company will be able to achieve its business objectives for
the CVD business for the remainder of 1998 and 1999.
VOTE REQUIRED
Affirmative vote of a majority of the shares of the Company's outstanding
Common Stock will be required to approve and ratify the terms of the Proposed
Transaction.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS
VOTE FOR THE APPROVAL OF THE PROPOSED TRANSACTION.
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PROPOSAL THREE
APPROVAL OF THE CONVERSION OF SECURITIES
EXCEEDING 20% OF THE OUTSTANDING COMMON STOCK
BACKGROUND
THE 20% RULE. The By-laws of the National Association of Securities
Dealers, Inc. (the "NASD") require the Company to obtain shareholder approval in
connection with a transaction other than a public offering involving the sale or
issuance by the Company of Common Stock (or securities convertible into or
exercisable for Common Stock) equal to 20% or more of the Common Stock
outstanding before the issuance for less than the greater of book value or
market value of the Common Stock.
THE SERIES A FINANCING. On February 2, 1998, the Company entered into a
Stock Purchase Agreement (the "Agreement") with certain investors (the
"Investors"), pursuant to which the Company issued, on February 12, 1998, to the
Investors an aggregate of 100,000 shares of its 6% Series A Convertible
Preferred Stock (the "Series A Stock") and warrants to purchase an aggregate of
up to 300,000 shares of its Common Stock at an exercise price of $3.67 per share
(collectively, the "Warrants"), all for an aggregate purchase price of $5
million in cash. The shares of Common Stock issuable upon conversion of the
Series A Stock and upon exercise of the Warrants constituted approximately
14.34% of the outstanding Common Stock at the time of the issuance of the Series
A Stock and the Warrants.
THE SERIES B FINANCING. Under the terms of the Agreement, upon fulfillment
of certain conditions, the Investors have committed to providing an additional
$5 million in equity financing through the purchase of 6% Series B Convertible
Preferred Stock (the "Series B Stock") and warrants to purchase an aggregate of
up to 300,000 shares of its Common Stock on terms substantially the same as
those of the Series A Stock. Among the conditions that must be satisfied before
the Company may require the purchase of the Series B Stock are the following:
(a) the closing bid price per share of the Common Stock of the Company shall be
no less than $4.00 for the 30 trading days prior to the Company's notice to the
Investors of its intention to require their purchase of the Series B Stock; (b)
such notice by the Company may not be given sooner than 90 days after the
effectiveness date for the shares registered pursuant to a Registration
Statement on Form S-3 (the "Series A Registration") and no suspension or stop
order may have been entered against such Series A Registration; (c) the closing
bid price for the Common Stock of the Company shall not, in the 30 trading days
prior to the completion of the sale of the Series B Stock, have decreased by
greater than 35% from the highest closing bid price during such period, (d) the
maintenance of a waiver in connection with existing bank line of credit and (e)
no change of control of the Company shall have occurred. "Change of control" is
defined as, (i) the acquisition of more than 50% of the voting securities of the
Company, (ii) the replacement of more than one-half the members of the Board of
Directors, (iii) the merger of the Company with or into another entity, (iv) the
sale of all or substantially all of the assets of the Company, or (v) the
execution of any agreement providing for any of (i), (ii), (iii), or (iv)
above). Accordingly, if the Proposed Transaction set forth in Proposal Two
above, is deemed to be a sale of substantially all of the assets of the Company,
the Company can not require the Investors to purchase the Series B Stock nor can
the Investors require the Company to sell the Series B Stock.
TERMS OF THE PREFERRED STOCK
PURCHASE PRICE; CONVERSION RIGHTS. Each share of the Series A Stock was
sold at a purchase price of $50 and a stated value of $50 (the "Stated Value").
Each holder of shares of Series A Stock has the right at any time, and from time
to time, to convert some or all such shares into fully paid and nonassessable
shares of Common Stock.
Any conversion shall occur according to the following conversion formula:
The number of shares of Common Stock issuable upon conversion of each share of
Series A Stock will equal (i) the sum of (A) the Stated Value per share and (B)
accrued and unpaid dividends on such share, divided by (ii) the Conversion
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Price. The Conversion Price shall be equal to the lesser of: (a) 110% of the
Closing Bid Price for the trading day immediately preceding the original issue
date of the Series A Stock, provided that such price shall not be less than
$3.47; or (b) 82% of the average of 15 Closing Bid Prices during the 45 trading
days prior to the date of the conversion notice, which 15 closing bid prices
shall be chosen by the holder converting such shares of Series A Stock. The
Closing Bid Price shall mean the closing bid price of the Common Stock as
reported on the Nasdaq National Market or other market or exchange on which the
Common Stock is then listed or traded.
On or after the second anniversary of the original issue date of the Series
A Stock, the Company may require the conversion of all of the then outstanding
and unconverted shares of Series A Stock, provided that certain conditions have
been satisfied, including that the Closing Bid Price of the Common Stock for at
least 20 of the 30 trading days preceding the date of such Company Conversion
Date shall have been at least $3.48 and such conversion shall be effectuated at
the Conversion Price then in effect. On and after such conversion, all dividends
on the Series A Stock shall cease to accrue and the shares represented thereby
shall no longer be deemed outstanding and all rights of the holders thereof as
shareholders of the Company shall cease and terminate, except the right to
receive the shares of Common Stock upon conversion.
PREFERENTIAL CUMULATIVE DIVIDENDS. The holders of Series A Stock shall be
entitled to receive, when and as declared by the Board of Directors out of funds
legally available therefor, and the Company shall pay, cumulative dividends at
the rate per share equal to 6% per annum of the Stated Value per share (6% of
$50 = $3 per share) payable in cash or shares of Common Stock at the option of
the Company, before any dividend or other distribution will be paid or declared
and set apart for payment on any shares of any Common Stock or other class of
stock junior to the Series A Stock (the Common Stock and such junior stock being
hereafter collectively the "Junior Stock"). The dividends on the Series A Stock
shall be due and payable on each yearly anniversary of the original issue date
("Dividend Payment Date"), and any dividends not paid on any Dividend Payment
Date shall accrue and shall be due and payable upon conversion of the Series A
Stock. No dividends shall be due and payable for any partial year period for
which the Dividend Payment Date has not yet occurred. A party that holds shares
of Series A Stock on a Dividend Payment Date will be entitled to receive such
dividend payment and any other accrued and unpaid dividends which accrued prior
to such Dividend Payment Date, without regard to any sale or disposition of such
Series A Stock subsequent to the applicable record date. If dividends are paid
in shares of Common Stock, the number of shares of Common Stock payable as such
dividend to each holder shall be equal to the cash amount of such dividend
payable to such holder on such Dividend Payment Date divided by the Closing Bid
Price of the Common Stock on the trading day prior to such Dividend Payment Date
("Dividend Conversion Price"), provided that the Dividend Conversion Price shall
not be less than $3.47.
LIQUIDATION RIGHTS. In the event of the dissolution, liquidation or
winding-up of the Company, whether voluntary or involuntary, the holders of the
Series A Stock will be entitled to receive before any payment or distribution
will be made on the Junior Stock, out of the assets of the Company available for
distribution to shareholders, the Stated Value per share of Series A Stock and
all accrued and unpaid dividends to and including the date of payment thereof.
Upon the payment in full of all amounts due to holders of the Series A Stock,
then the holders of the Junior Stock of the Company will receive, ratably, all
remaining assets of the Company legally available for distribution. If the
assets of the Company available for distribution to the holders of the Series A
Stock are insufficient to permit payment in full of the amounts payable as
aforesaid to the holders of Series A Stock upon such liquidation, dissolution or
winding-up, whether voluntary or involuntary, then all such assets of the
Company will be distributed to the exclusion of the holders of shares of Junior
Stock ratably among the holders of Series A Stock.
A sale, conveyance or disposition of all or substantially all of the assets
of the Company or the effectuation by the Company of a transaction or series of
related transactions in which more than 50% of the voting power of the Company
is disposed of, or a consolidation or merger of the Company with or into
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any other company or companies shall not be deemed to be a liquidation,
dissolution or winding-up of the Company for the purposes of the liquidation
rights that would be available to the holders of Series A Stock.
REDEMPTION PROVISIONS. On or after the fifth anniversary of the original
issue date of the Series A Stock, the Company may elect to redeem all or part of
the Stated Value of the Series A Stock upon payment of an amount of dollars
equal to the number of shares of Common Stock that could be obtained by
converting into the Company's Common Stock that amount of Stated Value plus
accrued but unpaid dividends and any other sums payable in respect to that
Stated Value at the conversion price in effect on the fifth anniversary of the
original issue date of the Series A Stock (the "Redemption Date") multiplied by
the average of the Closing Bid Price of the Common Stock for the five trading
days immediately preceding (a) such Redemption Date or (b) the date of payment
in full by the Company of the redemption price, whichever is greater. The
Company may not redeem any amount that a holder of Series A Stock has elected to
convert, including a notice of conversion given after the Redemption Date but
prior to receipt by the holder of Series A Stock of the payment under the
redemption provisions.
In addition, upon the occurrence of certain triggering events, the holders
of Series A Stock shall have the right, at each such holder's option, to require
the Company to redeem all or a portion of the Stated Value of such holder's
Series A Stock upon payment of an amount of dollars equal to the number of
shares of Common Stock that could be obtained by converting into the Company's
Common Stock that amount of Stated Value of such holder's Series A Stock plus
accrued but unpaid dividends and any other sums payable in respect to that
Stated Value at the conversion price in effect on the date of the triggering
event multiplied by the average of the Closing Bid Prices of the Common Stock
for the five trading days immediately preceding (a) the date of such triggering
event or (b) the date of payment in full by the Company of such redemption
price, whichever is greater. A "Triggering Event" shall be deemed to have
occurred at such time as any of the following events: (i) the failure of the
Registration Statement to be declared effective by the Commission on or prior to
the date that is 180 days after the original issue date; (ii) while the
Registration Statement is required to be maintained effective pursuant to the
terms of the Registration Rights Agreement, the effectiveness of the
Registration Statement lapses for any reason (including, without limitation, the
issuance of a stop order) or is unavailable to the holder of the Series A Stock
for sale of the Registrable Securities (as defined in the Registration Rights
Agreement) other than in accordance with the terms of the Registration Rights
Agreement, provided that the cause of such lapse or unavailability is not due to
factors solely within the control of such holder seeking to be redeemed; (iii)
the failure of the Common Stock to be listed on the Nasdaq Stock Market, The New
York Stock Exchange, Inc. or The American Stock Exchange, Inc. for a period of
seven consecutive days; or (iv)the Company's notice to any holder of Series A
Stock, including by way of public announcement, at any time, of its intention
not to comply with proper requests for conversion of any Series A Stock into
shares of Common Stock.
VOTING RIGHTS. The shares of Common Stock into which the Series A Stock is
converted will have full voting rights. Except as otherwise required by law, the
Series A Stock has no voting rights.
REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION. The Company has
prepared and filed with the Securities and Exchange Commission, a registration
statement registering the resale of the shares of Common Stock into which the
Series A Stock is convertible, which registration statement has not yet been
declared effective. The Company will use its best efforts to have it declared
effective and to maintain the effectiveness of the registration statement until
the earlier of (i) the date on which all such shares have been sold or may be
sold without volume restrictions pursuant to Rule 144 of the Securities Act
("Rule 144") or (ii) the second anniversary of the effectiveness date of such
registration statement.
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PENALTY FOR FAILURE TO OBTAIN SHAREHOLDER APPROVAL OF THE CONVERSION OF THE
SERIES A STOCK IN EXCESS OF THE 20% RULE
Before voting, each shareholder should consider the following factors with
respect to the conversion of the Series A Stock in excess of the 20% Rule. If
the Company fails to obtain shareholder approval, the Conversion Price will be
decreased by 2% each month for two months following the date of such failure to
obtain shareholder approval. Commencing on the second month anniversary of such
failure to obtain shareholder approval , the Company shall also pay to the
Series A Shareholders $50,000 in cash on the first day of each month until the
Company cures the failure to obtain shareholder approval. Any decrease in the
Conversion Price shall continue notwithstanding the fact that the event causing
such decrease has been subsequently cured. Sales by the holders of the Series A
Stock may depress the per share price of the Common Stock of the Company.
Conversion of the shares of Series A Stock to Common Stock (especially in light
of the conversion formula that may result in large numbers of shares being
issued upon conversion) and sale of those converted shares, may depress the per
share price of the Common Stock of the Company.
SHAREHOLDER APPROVAL
Based on the recent prices of the Company's Common Stock, it is anticipated
that the number of shares of Common Stock issuable upon conversion of the Series
A Stock may be equal to or greater than 20% of the Common Stock outstanding
immediately prior to the Series A Financing. The terms of the Series A Stock
will allow the holders of the Series A Stock to obtain shares of Common Stock at
a price below the current market value, and the Investors can impose certain
penalties and are entitled to adjustments to the Conversion Price if the Company
does not obtain shareholder approval. See "Terms of Preferred Stock" below.
Therefore, the Board of Directors has determined that it is advisable to obtain
the approval of the Company's shareholders at this time.
Shareholders are requested in this Proposal Two to approve the conversion of
securities exceeding 20% of the outstanding shares of Common Stock of the
Company.
VOTE REQUIRED
Affirmative votes constituting a majority of the Votes Cast will be required
to approve and ratify the terms of the Financings.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS
VOTE FOR THE APPROVAL OF THE CONVERSION OF SECURITIES
EXCEEDING 20% OF THE OUTSTANDING COMMON STOCK.
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PROPOSAL FOUR
AMENDMENT OF 1989 EMPLOYEE STOCK PURCHASE PLAN
GENERAL
The 1989 Employee Stock Purchase Plan ("Purchase Plan") was adopted by the
board of Directors in March 1989 and approved by the shareholders in May 1990.
In January 1998, the Board of Directors amended the Purchase Plan, subject to
shareholder approval, to increase the number of shares of Common Stock reserved
for issuance thereunder by 300,000 shares, from 1,750,000 to 2,050,000 shares.
As of March 31, 1998, 1,625,086 shares had been issued under the Purchase Plan,
and 124,914 shares remained available for future issuances under the Purchase
Plan.
PURPOSE
The purpose of the Purchase Plan is to provide employees of the Company (and
any of its subsidiaries which are designated by the Board of Directors) who
participate in the plan with an opportunity to purchase Common Stock of the
company through payroll deductions.
ADMINISTRATION
The Purchase Plan may be administered by the Board of Directors or a
committee appointed by the Board. All questions of interpretation or application
of the plan are determined at the sole discretion of the Board of Directors or
its committee. The Purchase Plan is currently being administered by the Board of
Directors. Members of the Board of Directors who are eligible employees are
permitted to participate in the Purchase Plan but may not vote on any matter
affecting the administration of the plan or the grant of any option pursuant to
the plan, or be a member of any committee appointed to administer the plan. No
charges for administrative or other costs may be made against the payroll
deductions of a participant in the plan. Members of the Board of Directors
receive no additional compensation for their services in connection with the
administration of the Purchase Plan.
ELIGIBILITY
Any person who is employed by the Company (or by any of its subsidiaries
which are designated from time to time by the Board) for at least twenty hours
per week and more than five months in a calendar year on the date his or her
participation in the plan is effective is eligible to participate in the
Purchase Plan. As of March 31, 1998, approximately 250 employees were eligible
to participate in the Purchase Plan.
OFFERING DATE
The Purchase Plan is implemented by overlapping 24-month offering periods
containing four six-month purchase periods. New offering periods commence every
six months. The purchase periods generally commence on July 1 and January 1 of
each year. The Board of Directors may change the duration of the offering
periods without shareholder approval.
PURCHASE PRICE
The purchase price per share at which shares are sold under the Purchase
Plan is the lower of 85% of fair market value of the Common Stock on the date of
commencement of the 24-month offering period or 85% of the fair market value of
the Common Stock on the last day of the six-month purchase period. Eligible
employees are automatically re-enrolled in the offering period with the lower of
85% of fair market value of the Common Stock on the date of commencement of such
24-month offering period. The fair market value of the Common Stock on a given
date shall be determined by the Board of Directors based upon the reported
closing rice in the NASDAQ National Market System on such date.
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PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions during
the offering period. The deductions may not exceed 10% of a participant's
eligible compensation. A participant may discontinue his or her participation in
the plan or may decrease, but not increase, the rate of payroll deductions at
any time during the offering period.
All payroll deductions are credited to the participant's account under the
plan and are deposited with the general funds of the Company. All payroll
deductions received or held by the Company may be used by the Company for any
corporate purpose.
PURCHASE OF STOCK; EXERCISE OF OPTION
At the beginning of each offering period, by executing a subscription
agreement to participate in the Purchase Plan, each employee is in effect
granted an option to purchase shares of Common Stock. The maximum number of
shares placed under option to a participant in an offering is determined by
dividing the compensation which such participant has elected to have withheld
during the offering period by 85% of the fair market value of the Common Stock
at the beginning of the offering period or ending of a purchase period,
whichever is lower.
WITHDRAWAL
While each participant in the Purchase Plan is required to sign a
subscription agreement authorizing payroll deductions, the participant's
interest in a given offering may be terminated in whole, but not in part, by
signing and delivering to the Company a notice of withdrawal from the plan. Such
withdrawal may be elected at any time prior to the end of the applicable
24-month offering period. A participant's withdrawal from an offering does not
have any effect upon such participant's eligibility to participate in subsequent
offerings under the Purchase Plan.
TERMINATION OF EMPLOYMENT
Termination of a participant's employment for any reason, including
retirement or death, cancels his or her participation in the Purchase Plan
immediately. In such event, the payroll deductions credited to the participant's
account will be returned to such participant or, in the case of death, to the
person or persons entitled thereto as specified by the employee in the
subscription agreement.
CHANGES
In the event of any change, such as stock splits or stock dividends, made in
the capitalization of the Company that results in an increase or decrease in the
number of shares of Common Stock outstanding without receipt of consideration by
the Company, appropriate adjustments will be made by the Company in the number
of shares subject to purchase and in the purchase price per share, subject to
any required action by the shareholders of the Company.
AMENDMENT AND TERMINATION OF THE PLAN
The Board of Directors may at any time amend or terminate the Purchase Plan,
except that such termination shall not affect options previously granted nor may
any amendment make any change in an option granted prior thereto which adversely
affects the rights of any participant. No amendment may be made to the Purchase
Plan without approval of the shareholders of the Company if such amendment would
increase the number of shares reserved under the plan. The Purchase Plan will by
its terms terminate in 2009.
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TAX INFORMATION
The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Sections 421 and 423
of the Code. Under these provisions, no income will be taxable to a participant
until the shares purchased under the Plan are sold or otherwise disposed of.
Upon sale or other disposition of the shares, the participant will generally be
subject to tax and the amount of the tax will depend upon the holding period. If
the shares are sold or otherwise disposed of more than two years from the first
day of the offering period and one year from the date the shares are purchased,
the participant will recognize ordinary income measured as the lesser of (a) the
excess of the fair market value of the shares at the time of such sale or
disposition over the purchase price, or (b) an amount equal to 15% of the fair
market value of the shares as of the first day of the offering period. Any
additional gain will be treated as long-term capital gain. If the shares are
sold or otherwise disposed of before the expiration of these holding periods,
the participant will recognize ordinary income generally measured as the excess
of the fair market value of the shares on the date the shares are purchased over
the purchase price. Any additional gain or loss on such sale or disposition will
be long-term or short-term capital gain or loss, depending on the holding
period. The Company is not entitled to a deduction for amounts taxed as ordinary
income or capital gain to a participant except to the extent of ordinary income
recognized by participants upon a sale or disposition of shares prior to the
expiration of the holding period(s) described above.
The foregoing is only a summary of the effect of federal income taxation
upon the participant and the Company with respect to the shares purchased under
the Purchase Plan. Reference should be made to the applicable provisions of the
Code. In addition, the summary does not discuss the tax consequences of a
participant's death or the income tax laws of any state or foreign country in
which the participant may reside.
VOTE REQUIRED
The approval of the amendment to the Purchase Plan requires the affirmative
vote of a majority of the Votes Cast.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
SHAREHOLDERS VOTE FOR THE APPROVAL OF THE AMENDMENT
TO THE 1989 EMPLOYEE STOCK PURCHASE PLAN.
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PROPOSAL FIVE
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Coopers & Lybrand L.L.P., independent
accountants, to audit the financial statements of the Company for the year
ending December 31, 1998, and recommends that the shareholders vote for
ratification of such appointment. In the event of a negative vote on such
ratification, the Board of Directors will reconsider its selection. Coopers &
Lybrand L.L.P. has audited the Company's financial statements since the year
ended December 31, 1982. Representatives of Coopers & Lybrand L.L.P. are
expected to be present at the meeting with the opportunity to make a statement
if they desire to do so, and are expected to be available to respond to
appropriate questions.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company which are intended to be presented
by such shareholders at the Company's 1999 Annual Meeting of Shareholders must
be received by the Company no later than , 1998, in order that they
may be included in the proxy statement and form of proxy relating to that
meeting.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares they represent as
the Board of Directors may recommend.
THE BOARD OF DIRECTORS
Dated: , 1997
37
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
GENUS, INC.
1998 ANNUAL MEETING OF SHAREHOLDERS
The undersigned shareholder of GENUS, INC., a California corporation
(the "Company"), hereby acknowledges receipt of the Notice of Annual Meeting
of Shareholders and Proxy Statement, each dated ________, 1998, and hereby
appoints William W. R. Elder and Mary F. Bobel proxies and attorneys-in-fact,
with full power of substitution, on behalf and in the name of the
undersigned, to represent the undersigned at the 1998 Annual Meeting of
Shareholders of Genus, Inc. to be held on __________, __________, 1998, at
2:00 p.m., local time, at The Network Meeting Center located at 5201 Great
America Parkway, Suite 122, in Santa Clara, California, 95054, and any
continuation(s) or adjournment(s) thereof, and to vote all shares of Common
Stock which the undersigned would be entitled to vote if then and there
personally present, on the matters set forth below.
- FOLD AND DETACH HERE -
<PAGE>
Please mark
your choice / X /
like this
----------
COMMON
FOR all nominees listed WITHHOLD authority to vote
below (except as indicated) for all nominees listed below.
1. Election of directors: / / / /
IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THAT NOMINEE'S NAME IN THE LIST BELOW:
William W. R. Elder, Todd S. Myhre, G. Frederick Forsyth, and Mario M. Rosati
2. To approve the sale of the Company's ion implantation systems business,
including the assets, properties and intellectual property related thereto,
pursuant to the terms and conditions of the Asset Purchase Agreement, dated
as of April 15, 1998, between Varian Associates, Inc. and the Company and
the transactions contemplated thereby.
FOR AGAINST ABSTAIN
/ / / / / /
3. Proposal to approve the conversion of securities exceeding 20% of the
outstanding shares of Common Stock.
FOR AGAINST ABSTAIN
/ / / / / /
4. Proposal to approve the amendment of the Company's 1989 Employee Stock
Purchase Plan to increase the number of shares of Common Stock reserved for
issuance thereunder by 300,000 shares.
FOR AGAINST ABSTAIN
/ / / / / /
5. Proposal to ratify the appointment of Coopers & Lybrand L.L.P. as the
independent public accountants of the Company's financial statements for the
fiscal year ending December 31, 1998.
FOR AGAINST ABSTAIN
/ / / / / /
6. In the discretion of the proxy holders, upon such other matter or matters
which may properly come before the meeting and any continuation(s) or
adjournment(s) thereof.
FOR AGAINST ABSTAIN
/ / / / / /
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO
CONTRARY DIRECTION IS INDICATED, WILL BE VOTED FOR
THE ELECTION OF DIRECTORS, FOR THE SALE OF THE
COMPANY'S ION IMPLANTATION SYSTEMS BUSINESS FOR THE
AMENDMENT OF THE 1989 EMPLOYEE STOCK PURCHASE PLAN,
FOR THE CONVERSION OF SECURITIES EXCEEDING 20% OF
THE OUTSTANDING COMMON STOCK, FOR THE RATIFICATION
OF THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS
INDEPENDENT PUBLIC ACCOUNTANTS, AND IN THE
DISCRETION OF THE PROXY HOLDERS, UPON SUCH OTHER
MATTER OR MATTERS WHICH MAY PROPERLY COME BEFORE THE
MEETING AND ANY CONTINUATION(S) OR ADJOURNMENT(S)
THEREOF.
Signature(s) Date , 1998
--------------------------------------------- ----------
(This Proxy should be dated, signed by the shareholder(s) exactly as his or her
name appears hereon, and returned promptly in the enclosed envelope. Persons
signing in a fiduciary capacity should so indicate. If shares are held by joint
tenants or as community property, both should sign.)
- FOLD AND DETACH HERE -
<PAGE>
ANNEX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
by and between
Varian Associates, Inc.,
a Delaware corporation,
and
Genus, Inc.,
a California corporation
Dated As Of April 15, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Certain Defined Terms. . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE II - PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . . . . . . . . 7
2.1 Purchase of U.S. Assets. . . . . . . . . . . . . . . . . . . . . . 7
2.2 Purchase of Foreign Assets . . . . . . . . . . . . . . . . . . . . 9
2.3 Excluded Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4 Purchase Price and Payment . . . . . . . . . . . . . . . . . . . .10
2.5 Full Possession. . . . . . . . . . . . . . . . . . . . . . . . . .10
2.6 No Assignment in Certain Circumstances . . . . . . . . . . . . . .10
ARTICLE III - ASSUMPTION OF LIABILITIES. . . . . . . . . . . . . . . . . . . .11
3.1 Assumption of Liabilities. . . . . . . . . . . . . . . . . . . . .11
3.2 Retained Liabilities . . . . . . . . . . . . . . . . . . . . . . .11
3.3 Liabilities of Affiliates of Seller. . . . . . . . . . . . . . . .13
ARTICLE IV - CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
4.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
4.2 Seller Obligations at Closing. . . . . . . . . . . . . . . . . . .14
4.3 Buyer's Obligations at Closing . . . . . . . . . . . . . . . . . .14
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . .15
5.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . .15
5.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . .15
5.3 Non-Contravention. . . . . . . . . . . . . . . . . . . . . . . . .16
5.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . .16
5.5 SEC Documents. . . . . . . . . . . . . . . . . . . . . . . . . . .17
5.6 Title to Assets. . . . . . . . . . . . . . . . . . . . . . . . . .18
5.7 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . .18
5.8 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . .19
5.9 Litigation; Legal Matters. . . . . . . . . . . . . . . . . . . . .19
5.10 Employees; Employee Benefit Plans; Labor . . . . . . . . . . . . .20
5.11 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . .20
5.12 Contracts and Commitments. . . . . . . . . . . . . . . . . . . . .21
5.13 Permits and Other Operating Rights . . . . . . . . . . . . . . . .22
5.14 Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . .23
5.15 Warranty Obligations; Product Liability. . . . . . . . . . . . . .23
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<CAPTION>
<S> <C>
5.16 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
5.17 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
5.18 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . .24
ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . .25
6.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . .25
6.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . .25
6.3 Non-Contravention. . . . . . . . . . . . . . . . . . . . . . . . .25
ARTICLE VII - CERTAIN COVENANTS. . . . . . . . . . . . . . . . . . . . . . . .26
7.1 Access to Information. . . . . . . . . . . . . . . . . . . . . . .26
7.2 Conduct of Business Pending Closing. . . . . . . . . . . . . . . .26
7.3 No Solicitation of Transactions. . . . . . . . . . . . . . . . . .27
7.4 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . .28
7.5 Authorizations . . . . . . . . . . . . . . . . . . . . . . . . . .28
7.6 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . .29
7.7 Bulk Sales Compliance. . . . . . . . . . . . . . . . . . . . . . .30
7.8 Agreement Not to Compete . . . . . . . . . . . . . . . . . . . . .30
7.9 Notification . . . . . . . . . . . . . . . . . . . . . . . . . . .31
7.10 Transition Services. . . . . . . . . . . . . . . . . . . . . . . .32
7.11 Shared Space . . . . . . . . . . . . . . . . . . . . . . . . . . .32
7.12 Separate Sale of Machines. . . . . . . . . . . . . . . . . . . . .33
7.13 Earnout. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
ARTICLE VIII - CONDITIONS TO THE OBLIGATIONS OF BUYER. . . . . . . . . . . . .34
8.1 Accuracy of Representations and Warranties . . . . . . . . . . . .34
8.2 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . .34
8.3 HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
8.4 Absence of Governmental Orders . . . . . . . . . . . . . . . . . .35
8.5 Perfection Actions . . . . . . . . . . . . . . . . . . . . . . . .35
8.6 Certain Consents to Assignment . . . . . . . . . . . . . . . . . .35
8.7 Environmental Review . . . . . . . . . . . . . . . . . . . . . . .35
8.8 Key Employees. . . . . . . . . . . . . . . . . . . . . . . . . . .35
8.9 Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . .35
ARTICLE IX - CONDITIONS TO THE OBLIGATIONS OF SELLER . . . . . . . . . . . . .35
9.1 Accuracy of Representations and Warranties . . . . . . . . . . . .35
9.2 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . .36
9.3 HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
9.4 Absence of Governmental Orders . . . . . . . . . . . . . . . . . .36
9.5 Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . .36
ARTICLE X - INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . .36
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10.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
10.2 Indemnification by Seller. . . . . . . . . . . . . . . . . . . . .36
10.3 Indemnification by Buyer . . . . . . . . . . . . . . . . . . . . .37
10.4 General Indemnification Provisions . . . . . . . . . . . . . . . .38
10.5 Limitations on Indemnification . . . . . . . . . . . . . . . . . .39
10.6 Right to Set-Off . . . . . . . . . . . . . . . . . . . . . . . . .40
ARTICLE XI - TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . .40
11.1 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . .40
11.2 Taxes Relating to Transactions Contemplated by This Agreement. . .40
ARTICLE XII - EMPLOYEES AND EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . .40
12.1 Designated Employees . . . . . . . . . . . . . . . . . . . . . . .40
12.2 COBRA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
12.3 Modification of Confidentiality and Related Agreements . . . . . .41
ARTICLE XIII - TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . .42
13.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . .42
13.2 Written Notice . . . . . . . . . . . . . . . . . . . . . . . . . .43
13.3 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . .43
13.4 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
13.5 Termination Fee. . . . . . . . . . . . . . . . . . . . . . . . . .43
ARTICLE XIV - GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . .43
14.1 Expenses, Taxes, Etc.. . . . . . . . . . . . . . . . . . . . . . .43
14.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
14.3 Disclosure Schedule. . . . . . . . . . . . . . . . . . . . . . . .44
14.4 Interpretation; Conflict Between Agreements. . . . . . . . . . . .45
14.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . .45
14.6 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
14.7 No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . .46
14.8 Amendment, Other Remedies and Waiver . . . . . . . . . . . . . . .46
14.9 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . .46
14.10 Mutual Drafting. . . . . . . . . . . . . . . . . . . . . . . . . .47
14.11 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . .47
14.12 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . .47
14.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . .48
14.14 Public Announcements . . . . . . . . . . . . . . . . . . . . . . .48
14.15 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . .48
</TABLE>
Exhibit 1.1(a) - Cross-License Agreement
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Schedule 2.1(c) - Contracts
Schedule 2.1(g) - Lease
Schedule 2.3 - Excluded Assets
Disclosure Schedule 5
Schedule 6.2(b) - Consents
Schedule 7.13 - 1998 Booking Analysis
Schedule 14.4(c) - Knowledge Group
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<PAGE>
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of April 15, 1998, by and between Varian
Associates, Inc., a Delaware corporation, and Genus, Inc., a California
corporation.
RECITALS
WHEREAS, Seller, directly and indirectly through various foreign and
domestic Affiliates of Seller, is engaged in the business of designing,
manufacturing, selling and servicing ion implantation systems (the "Business");
and
WHEREAS, Seller and such Affiliates of Seller desire to sell and cause to
be transferred to Buyer (including either existing Affiliates of Buyer or those
organized for that purpose), and Buyer (including such Affiliates) desires to
purchase and accept the transfer from Seller and such Affiliates of Seller,
substantially all of the assets and properties of Seller and such Affiliates of
Seller used primarily in the Business, as hereinafter specifically provided;
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties and agreements herein contained, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. As used in this Agreement, the following
terms shall have the following meanings (such definitions to be equally
applicable to both the singular and plural forms of the terms defined):
"ACCOUNTS RECEIVABLE" has the meaning specified in subsection 2.1(d).
"ACTION" means any notice of noncompliance or violation, or any claim,
demand, action, suit, audit, assessment or arbitration, or any other request
(including any request for information), proceeding or investigation, by or
before any Governmental Authority or any nongovernmental arbitration, mediation
or other nonjudicial dispute resolution body.
"ADDITIONAL CLOSINGS" has the meaning specified in subsection 4.1(b).
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
under the Securities Exchange Act of 1934, as amended.
"AGREEMENT" means this Asset Purchase Agreement, including all schedules
and exhibits hereto, as it may be further amended from time to time as herein
provided.
"AGREEMENT DATE" means April 15, 1998.
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"ANCILLARY AGREEMENT" means the Cross-License Agreement substantially in
the form attached hereto as Exhibit 1.1(a) which is required by this Agreement
to be executed and delivered by the parties hereto at or before the Closing.
"ASSETS" means, collectively, the U.S. Assets and the Foreign Assets.
"ASSUMED LIABILITIES" has the meaning specified in Section 3.1.
"BOOKS AND RECORDS" means all of the following which pertain to the conduct
of the Business: books, records, manuals and other materials, accounting books
and records, continuing property records for property, plant and equipment,
files, computer tapes, disks, other storage media and records, advertising
matter, catalogues, price lists, correspondence, mailing lists, lists of
customers and suppliers, distribution lists, photographs, production data, sales
and promotional materials and records, purchasing materials and records,
personnel records, credit records, manufacturing and quality control records and
procedures, blueprints, research and development files, data and laboratory
books, patent and trademark files and disclosures, media materials and plates,
sales order files, litigation files, and any deeds, easements and other
instruments relating to the Real Property.
"BUSINESS" has the meaning specified in the Recitals to this Agreement.
"BUSINESS EMPLOYEES" has the meaning specified in subsection 5.10(a).
"BUYER" means Varian Associates, Inc., a Delaware corporation, and, as
applicable, Affiliates of Buyer used or formed for the purpose of consummating
the transactions contemplated by this Agreement.
"BUYER INDEMNIFIED PARTIES" has the meaning specified in Section 10.2.
"BUYER LOSS" has the meaning specified in Section 10.2.
"BYLAWS" means a corporation's bylaws, code of regulations or equivalent
document.
"CHARTER" means a company's articles of incorporation, certificate of
incorporation or equivalent organizational documents.
"CLOSING" means the closing of the transactions contemplated by this
Agreement as specified in Section 4.1.
"CLOSING DATE" has the meaning specified in Section 4.1.
"CODE" means the Internal Revenue Code of 1986 and any successor statute
thereto, as amended. Reference to a specific Section of the Code shall include
such section, any valid regulation promulgated
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thereunder, and any comparable provision of any future legislation amending,
supplementing or superseding such section.
"COMPETITIVE BUSINESS" has the meaning specified in subsection 7.8(a).
"CONTRACTS" has the meaning specified in subsection 2.1(c).
"CVD BUSINESS" means Seller's business other than the Business.
"DESIGNATED EMPLOYEES" has the meaning specified in subsection 12.1(a).
"DISCLOSURE SCHEDULE" means the Disclosure Schedule dated as of the date
hereof delivered to Buyer by Seller and forming a part of this Agreement.
"ENCUMBRANCE" means any interest (including any security interest), pledge,
mortgage, lien (including environmental liens), charge, claim (including any
adverse claim) or other right of third Persons, whether created by law or in
equity, including any such restriction on the use, voting, transfer, receipt of
income or other exercise of any attributes of ownership.
"ENVIRONMENTAL LAWS" means all laws, regulations, ordinances, codes,
policies, Governmental Orders and consent decrees, and any judicial or
administrative interpretations thereof, of Governmental Authorities, or any
common law doctrines, in effect from time to time relating to pollution or
protection of the environment, natural resources or protection of health from
Hazardous Material exposure, including those relating to emissions, discharges,
releases or threatened releases of Hazardous Material into the environment
(including ambient air, surface water, groundwater or land), or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Material.
"ENVIRONMENTAL PERMITS" means all permits, approvals, agreements,
identification numbers, licenses and other authorizations required under any
applicable Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974 and any
successor statute thereto, as amended. Reference to a specific Section of ERISA
shall include such section, any valid regulation promulgated thereunder, and any
comparable provision of any future legislation amending, supplementing or
superseding such section.
"EXCHANGE ACT" means the Securities and Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"EXCLUDED ASSETS" has the meaning specified in Section 2.3.
"FINANCIAL STATEMENTS" has the meaning specified in Section 5.4.
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"FIXED ASSETS" has the meaning specified in subsection 2.1(b).
"FOREIGN ASSETS" has the meaning specified in subsection 2.2(a).
"FOREIGN SELLERS" means the following Affiliates of Seller: Genus Europa
SARL, Genus, KK, and Genus Korea, Ltd., and any other Affiliate of Seller
(excluding Affiliates organized in the United States) owning assets to be sold
pursuant to this Agreement, individually and collectively, except where the
context otherwise requires.
"GAAP" means United States generally accepted accounting principles applied
on a consistent basis.
"GOVERNMENTAL AUTHORITY" means any international, national, federal, state,
territorial or provincial, municipal or local government, governmental
authority, regulatory or administrative agency, governmental commission,
department, board, bureau, agency or instrumentality, political subdivision,
court, tribunal, official, arbitrator or arbitral body.
"GOVERNMENTAL ORDER" means any order, writ, rule, judgment, injunction,
decree, stipulation, determination, award, citation or notice of violation
entered by or with any Governmental Authority.
"HAZARDOUS MATERIAL" means (a) all substances, materials, chemicals,
compounds, pollutants or wastes regulated by, under or pursuant to any
Environmental Laws, including the Resource Conservation and Recovery Act, 42
U.S.C. Sections 6901 ET SEQ., the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, 42 U.S.C. Sections 9601 ET SEQ., the
Clean Water Act, 33 U.S.C. Sections 1251 ET SEQ., the Clean Air Act, 42 U.S.C.
Sections 7401 ET SEQ., the Toxic Substances Control Act, 15 U.S.C. Sections
2601 ET SEQ., the Emergency Planning and Community Right-to-Know Act of 1986,
Title III of Public Law 99-499, the Safe Drinking Water and Toxic Enforcement
Act, Cal. Health and Safety Code Sections 25249.5 ET SEQ., and any and all
foreign (whether national, provincial or local), state or local counterparts
thereto or other similar foreign (whether national, provincial or local), state
or local laws and orders, including any and all rules and regulations
promulgated thereunder, or any common law theory based on nuisance, negligence,
product liability, trespass, ultrahazardous activity or strict liability; and
(b) asbestos, petroleum, any fraction or product of crude oil or petroleum,
radioactive materials and polychlorinated biphenyls.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"INTELLECTUAL PROPERTY" means, collectively, the Owned Intellectual
Property and the Licensed Intellectual Property.
"INVENTORIES" has the meaning specified in subsection 2.1(a).
"LANDLORD" has the meaning specified in subsection 4.2(d).
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"LEASE" has the meaning specified in subsection 2.1(g).
"LIABILITIES" means any and all debts, liabilities and obligations of any
nature whatsoever, whether accrued or fixed, absolute or contingent, mature or
unmatured or determined or determinable, including those arising under any law,
rule, regulation, Action, Governmental Order, and those arising under any
contract, agreement, commitment or undertaking.
"LICENSED INTELLECTUAL PROPERTY" means intellectual property owned or
controlled by the Seller Group, or licensed by a third Person to the Seller
Group, that is used in the Business (but primarily used in the CVD Business),
which intellectual property is to be licensed to Buyer under the License
Agreement.
"LICENSE AGREEMENT" means the License Agreement substantially in the form
attached hereto as Exhibit 1.1(a).
"MATERIAL ADVERSE EFFECT" means any event(s) with respect to, change(s) in,
or effect(s) on, the Assets or the Business which, individually or in the
aggregate, may be adverse to the Business or the results of operations, the
condition (financial or otherwise), assets, properties, Liabilities or prospects
of the Business in a manner that is material to the Business taken as a whole.
"NON-U.S. BUSINESS EMPLOYEES" has the meaning specified in
subsection 5.10(a).
"OWNED INTELLECTUAL PROPERTY" has the meaning specified in Section 2.1(h).
"PERMITTED LIENS" means any (a) mechanics', carriers', workers' and other
similar liens arising in the ordinary course of business and consistent with
past practice that, in the aggregate, are not material in amount and do not
interfere with the present use of the Assets to which they relate; (b) liens for
current Taxes not yet due and payable; and (c) easements, covenants, rights of
way or other restrictions that do not materially adversely affect the uses of
the property to which they relate or the operation of the Business.
"PERSON" shall include any individual, trustee, firm, corporation,
partnership, limited liability company, Governmental Authority or other entity,
whether acting in an individual, fiduciary or any other capacity.
"PRO FORMA BALANCE SHEETS" has the meaning specified in Section 5.4.
"PURCHASE AND SALE AGREEMENTS" means any necessary Purchase and Sale
Agreements entered into between a Foreign Seller and Buyer or any of its
Affiliates, which provide for the transfer of the applicable Foreign Assets and
the assumption of the applicable Assumed Liabilities, the terms and conditions
of which shall be in all respects consistent with the terms and conditions of
this Agreement.
"PURCHASE PRICE" has the meaning specified in Section 2.4.
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"REAL PROPERTY" has the meaning specified in subsection 2.1(g).
"RETAINED LIABILITIES" has the meaning specified in Section 3.2.
"SEC" means the U.S. Securities and Exchange Commission.
"SEC DOCUMENTS" has the meaning specified in subsection 5.5(a).
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SELLER" means Genus, Inc., a California corporation.
"SELLER GROUP" means, collectively, the U.S. Seller and the Foreign
Sellers.
"SELLER INDEMNIFIED PARTIES" has the meaning specified in Section 10.3.
"SELLER LOSS" has the meaning specified in Section 10.3.
"TAX" means any federal, state, local, or foreign income, gross receipts,
license, payroll, parking, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated tax, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not, including
Liability therefor as a transferee or successor-in-interest.
"TAX RETURN" means any return, report, information return, schedule,
certificate, statement or other document (including any related or supporting
information) filed or required to be filed with a Taxing Authority in connection
with any Tax, or, where none is required to be filed with a Taxing Authority,
the statement or other document issued by a Taxing Authority in connection with
any Tax.
"TAXING AUTHORITY" means any Governmental Authority responsible for the
imposition or collection of any Tax.
"TRANSITION PERIOD" has the meaning specified in subsection 7.10(a).
"TRANSITION SERVICES" has the meaning specified in subsection 7.10(a).
"U.S. ASSETS" has the meaning specified in Section 2.1.
"U.S. BUSINESS EMPLOYEES" has the meaning specified in subsection 5.10(a).
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"U.S. SELLER" means Seller and General Ionex Corporation, a Massachusetts
corporation, and Ionex/HEI Corporation, a Massachusetts corporation,
individually or collectively, except where the context otherwise requires.
1.2 OTHER DEFINED TERMS. In addition to the terms defined in
Section 1.1, certain other terms are defined elsewhere in this Agreement and,
whenever such terms are used in this Agreement, they shall have their respective
defined meanings.
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 PURCHASE OF U.S. ASSETS. Upon the terms and subject to the
conditions herein set forth, in reliance upon the representations and warranties
contained herein and in consideration of the payment of the Purchase Price, at
the Closing Seller shall, and shall cause each U.S. Seller to, sell, convey,
assign, transfer and deliver to Buyer, and Buyer shall purchase and acquire from
the U.S. Seller, all of the rights, title and interests of the U.S. Seller in
and to the assets, operations and businesses and all other rights and privileges
of every nature, kind and description, whether tangible or intangible (including
goodwill), whether accrued, contingent or otherwise, relating primarily to or
used or held for use primarily in the Business as conducted by the U.S. Seller,
whether or not appearing on the books of the U.S. Seller (other than the
Excluded Assets and the Foreign Assets, collectively, the "U.S. Assets"),
including all the rights, title and interest of the U.S. Seller in, to or under
any and all of the following:
(a) all raw materials and inventories, including inventories of
work in process, stores, supplies and finished goods, which are used primarily
in the conduct of the Business (collectively, the "Inventories");
(b) all machinery, equipment, computers, tapes, data bases,
furniture, furnishings, automobiles, trucks, vehicles, tools (including tools
used in the conduct of the Business which are in the possession of employees of
the Business or Persons rendering services for the benefit of the Business),
supplies and parts and other tangible personal property (including any of the
foregoing purchased subject to any conditional sales or title retention
agreement in favor of any other Person), whether owned, leased or subleased,
which are used primarily in the conduct of the Business (collectively, the
"Fixed Assets");
(c) all written contracts entered into in the ordinary course of
business and necessary for the conduct of the Business, and that are (i) for the
sale and non-warranty service after the Closing of products of the Business (but
excluding distributor and representative agreements), or (ii) set forth on
Schedule 2.1(c) (collectively, the "Contracts"); and all rights to
indemnification, warranties, claims and causes of action against third Persons
(and under insurance policies relating primarily to the conduct of the
Business), including any right to receive payment for products sold or services
rendered pursuant to, and to receive goods and services pursuant to, such
Contracts and to assert claims and take other rightful actions in respect of
breaches, defaults and other violations of such Contracts and otherwise;
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(d) all security, utility or similar deposits and prepaid expenses
(including the prepaid rent under the Lease) related primarily to the Business;
(e) all letters of credit (and proceeds thereof) issued in favor
of the U.S. Seller that relates to any Contract; and all amounts prepaid to the
U.S. Seller (and not yet earned by the U.S. Seller) pursuant to Contracts (which
unearned amounts in the case of service contracts will be determined based on
the number of months remaining under each such contract compared to the full
term of such contract, without regard to any renewal options), which prepaid
amounts Seller shall pay in cash to Buyer within 90 days after the Closing Date;
(f) to the extent their transfer is permitted by law, all
governmental licenses, permits, approvals, license applications, license
amendment applications and product registrations with respect to the conduct of
the Business;
(g) the real property leased by Seller pursuant to the Lease set
forth on Schedule 2.1(g) (the "Lease"), together with all improvements thereon
and fixtures thereto (collectively, the "Real Property");
(h) (1) all patents, pending patent applications, patent
applications in process but not yet filed, and pending invention disclosures
throughout the world, (2) all registered and unregistered trademarks, trade
names and service marks and applications therefor throughout the world, (3) all
copyrights and applications therefor throughout the world, (4) all know-how,
trade secrets, confidential information, software, firmware, technical
information, process technology, plans, drawings, designs, inventions, research
records, procedures, manuals and blue prints, and (5) all licenses relating to
any of the foregoing, in each case relating to the Business or used or held for
use by the Seller Group in the conduct of the Business or that otherwise
constitute a part of the technology, intellectual property or proprietary
information usable in or related to the Business, other than any such
intellectual property primarily used in the CVD Business (collectively, the
"Owned Intellectual Property");
(i) all Books and Records, including all Books and Records
maintained at the facilities of the U.S. Seller in Newburyport, Massachusetts or
in Sunnyvale California, and all leases, contracts and rights included in the
Assets;
(j) all rights to causes of action, claims, lawsuits,
arbitrations, orders, judgments, decrees, awards and injunctions available to or
being pursued by the U.S. Seller with respect to the U.S. Assets or the Business
conducted therewith; and
(k) the goodwill of the Business.
Except as set forth on Schedule 2.1(c), Seller or its Affiliates, as
applicable, at the Closing shall sell, transfer, deliver and assign the U.S.
Assets and the Foreign Assets to Buyer or its Affiliates, as applicable, free
and clear of all Encumbrances other than Permitted Liens.
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2.2 PURCHASE OF FOREIGN ASSETS.
(a) Upon the terms and subject to the conditions herein set forth
and in any Purchase and Sale Agreements entered into by the Foreign Sellers and
Buyer and its Affiliates, and in consideration of the payment of the portion of
the Purchase Price allocable to the Foreign Assets in accordance with
Section 11.1 and the assumption by Buyer's Affiliates of the Assumed Liabilities
which are Liabilities of the Foreign Sellers, on the Closing Date, Seller shall
cause the Foreign Sellers to sell, assign, transfer and deliver to Buyer's
Affiliates, and Buyer's Affiliates shall purchase from the Foreign Sellers, all
of the rights, title and interests of the Foreign Sellers in and to the assets,
properties, operations and businesses and all other rights and privileges of
every nature, kind and description, whether tangible or intangible (including
goodwill), whether accrued, contingent or otherwise, used or held for use
primarily in the conduct of the Business by the Foreign Sellers as such assets,
properties, operations, businesses, rights and privileges may exist as of the
Closing Date (or such later date, as the case may be), including all assets that
are used or held for use by the Foreign Sellers primarily in the conduct of the
Business and that fall within a category comparable to any of the categories
enumerated in subsections 2.1(a) through 2.1(k) above (collectively, the
"Foreign Assets").
(b) Upon the terms herein set forth and subject to the conditions
herein and in any Purchase and Sale Agreements entered into by the Foreign
Sellers and Buyer and its Affiliates, (i) Seller shall cause the Foreign Sellers
to consummate the transfers of the Foreign Assets to Buyer and its Affiliates as
provided herein and therein and otherwise to comply with the Purchase and Sale
Agreements, and (ii) Buyer shall cause its Affiliates accepting such Assets to
consummate such transfers as provided herein and therein and otherwise to comply
with the Purchase and Sale Agreements. Seller shall be responsible for, and
shall indemnify Buyer and its Affiliates against, all Liabilities Buyer and such
Affiliates incur and all claims therefor asserted against Buyer and such
Affiliates as a result of any matter arising from such transfers that relate to
or are based upon any fraudulent conveyance Action, withholding Tax Action or
other comparable Action asserted under the law, statute or regulation of any
jurisdiction, domestic or foreign, pertaining to Seller's allocation or payment
of a portion of the Purchase Price to the Foreign Sellers.
(c) Notwithstanding the provisions of Section 2.1 and this
Section 2.2, if requested by Buyer, certain Foreign Assets identified in such
request shall be transferred at a date later than the Closing Date to an
Affiliate of Buyer when and as directed by Buyer. Until such Assets are so
transferred, the Affiliate of Seller holding such Assets shall continue to
conduct the Business associated therewith for the account and benefit of Buyer
in accordance with an operating agreement with respect thereto entered into
between Buyer and Seller on the Closing Date.
2.3 EXCLUDED ASSETS. Except as expressly set forth in subsections
2.1(d) and 2.1(e), Buyer shall not acquire hereby, (a) any right, title or
interest to or in any cash, cash deposits, other cash equivalent investments,
cash refunds, or bank accounts; (b) any business, operation, subsidiary or
division of Seller and its Affiliates other than the Business; (c) any
distributor agreements; (d) any accounts or notes receivable; or (e) any of the
assets or rights listed on Schedule 2.3 (collectively, the "Excluded Assets").
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2.4 PURCHASE PRICE AND PAYMENT. Upon the terms and subject to the
conditions herein set forth, and in consideration of the sale, assignment,
transfer and delivery to Buyer and its Affiliates of the Assets, at the Closing
Buyer or its Affiliates shall pay to Seller (acting on behalf of itself and as
agent for the Foreign Sellers) an aggregate of TWENTY FIVE MILLION DOLLARS
($25,000,000), subject to the adjustment that may be made pursuant to
Section 7.12 (as so adjusted, the "Closing Payment") and subject to the
adjustment that may be made pursuant to Section 7.13 (as so further adjusted,
the "Purchase Price"); and Buyer shall, or shall cause its Affiliates to,
assume, as of the Closing, the Assumed Liabilities as and to the extent provided
in Article III. The Purchase Price (including the Assumed Liabilities) shall be
allocated in accordance with Section 11.1.
2.5 FULL POSSESSION. Subject to the terms and conditions of this
Agreement, at the Closing, Seller shall, and shall cause its Affiliates to, put
Buyer and its Affiliates into full and actual possession, enjoyment and
operating control of the Business and the Assets. The sale of the Business and
the Assets contemplated hereby shall be effected by instruments of conveyance,
transfer and assignment as Buyer may request that are necessary to vest in
(a) Buyer all of the rights, title and interests of the U.S. Seller in the U.S.
portion of the Business and the U.S. Assets and, subject to the obtaining of any
required authorizations, approvals, consents and waivers, and the satisfaction
or termination of any required waiting periods under any applicable law, to such
sale of the U.S. portion of the Business and the U.S. Assets, to put Buyer in
full and actual possession, enjoyment and operating control of the U.S. portion
of the Business and the U.S. Assets; and (b) Buyer or Buyer's Affiliates all of
the rights, title and interests of the Foreign Sellers in the foreign portion of
the Business and the Foreign Assets and, subject to the obtaining of any
required authorizations, approvals, consents and waivers, and the satisfaction
or termination of any required waiting periods under any applicable law, to such
sale of the foreign portion of the Business and the Foreign Assets, to put Buyer
or such Affiliates in full and actual possession, enjoyment and operating
control of the foreign portion of the Business and the Foreign Assets.
2.6 NO ASSIGNMENT IN CERTAIN CIRCUMSTANCES. Notwithstanding anything
else contained in this Agreement to the contrary, this Agreement shall not
constitute an agreement to sell, convey, assign, transfer or deliver any
interest in any instrument, commitment, contract, lease, permit or other
agreement or arrangement or any claim, right or benefit arising thereunder or
resulting therefrom, if a sale, conveyance, assignment, transfer or delivery or
an attempt to make such a sale, conveyance, assignment, transfer or delivery
without the authorization, approval, consent or waiver of a third Person would
constitute a breach or violation thereof or affect adversely the rights of
Buyer, Buyer's Affiliates or the Seller Group thereunder; and any sale,
conveyance, assignment, transfer or delivery to Buyer or an Affiliate of Buyer
of any interest under any such instrument, commitment, contract, lease, permit
or other agreement or arrangement that requires the authorization, approval,
consent or waiver of a third Person shall be made subject to such authorization,
approval, consent or waiver being obtained. In the event that any such
authorization, approval, consent or waiver is not obtained on or prior to the
Closing Date, Seller shall, and it shall cause its Affiliates to, use its best
efforts to obtain any such authorization, approval, consent or waiver (provided
that, in obtaining any such authorization, approval, consent or waiver, Seller
shall not, and shall cause its Affiliates not to, agree to any amendment,
modification or supplement of any such instrument, commitment, contract, lease,
permit or other agreement or arrangement, except with Buyer's consent, which
consent shall not be unreasonably withheld), and
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Seller (at its cost and expense) shall, and it shall cause its Affiliates to, to
the greatest extent permitted by law and any such instrument, commitment,
contract, lease, permit or other agreement or arrangement (including by acting
as an agent of Buyer or its Affiliates), (a) hold such instrument, commitment,
contract, lease, permit or other agreement or arrangement or any claim, right or
benefit arising thereunder or resulting therefrom in trust for the benefit of
Buyer, its Affiliates or otherwise for the exclusive use and benefit of Buyer or
its Affiliates, and (b) take such other actions as are necessary to ensure that
Buyer and its Affiliates receive the interest of the Seller Group in the
benefits therefrom until such time as such authorization, approval, consent or
waiver is obtained.
ARTICLE III
ASSUMPTION OF LIABILITIES
3.1 ASSUMPTION OF LIABILITIES. Effective as of the Closing, Buyer (or
its Affiliates, as provided in Section 3.3) shall, without any further
responsibility or Liability of or recourse to Seller or any of Seller's
Affiliates, subsidiaries, shareholders, officers, directors, employees, agents,
successors or assigns, absolutely and irrevocably assume, pay, perform and be
liable and responsible for only the following Liabilities of the Seller Group
(collectively, the "Assumed Liabilities"):
(a) all obligations remaining to be performed after the Closing
Date under the Contracts; and
(b) all repair and replacement obligations remaining to be
performed after the Closing Date under Seller's standard express written
warranty provisions set forth in any product sales or service contracts with
respect to products of the Business shipped prior to the Closing or services
provided by the Business prior to the Closing.
3.2 RETAINED LIABILITIES. Except as provided in Section 3.1, Buyer and
its Affiliates shall not assume and shall not be responsible for, and there
shall not be transferred to or assumed by Buyer or any of its Affiliates, any
Liabilities of Seller or any of its Affiliates (or any predecessor thereof)
arising from or relating to, in whole or in part, (x) the operations,
activities, conduct or transactions of the Business or the use, operation,
ownership, lease, possession, control, occupancy, maintenance or condition of
the Assets up through and including the Closing Date (or the date of any
Additional Closing with respect to the Business and Assets transferred thereat),
and (y) any and all other operations, activities or transactions of Seller and
its Affiliates or the use, operation, ownership, lease, possession, control,
occupancy, maintenance or condition of any other assets or properties of Seller
and its Affiliates, at any time, all of which Liabilities shall be and remain
the sole responsibility of Seller and its Affiliates, including without
limitation all of the following (collectively, all of the Liabilities described
in this Section 3.2 being referred to in this Agreement as the "Retained
Liabilities"):
(a) any Liability associated with the breach of any Contract by
Seller or any Affiliate thereof before the Closing;
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(b) any Liability associated with (i) the presence of any
Hazardous Material in any products sold, supplied, serviced or disposed of by or
on behalf of the Business or in the fixtures, structures, soils, groundwater,
surface water or air on, under or about or emanating from the properties
currently or formerly used, operated, owned, leased, controlled, possessed,
occupied or maintained by Seller or any of its Affiliates, or any predecessor
thereof, including the Assets, any properties adjoining such properties, and any
properties at which any of such products has been located; (ii) the use,
generation, production, manufacture, treatment, storage, disposal, release,
threatened release, discharge, spillage, loss, seepage or filtration of
Hazardous Material from, on, under or about such products or properties or from
the Business or the presence therein or thereunder of any underground or
above-ground tanks for the storage of Hazardous Material; (iii) the violation or
noncompliance or alleged violation or noncompliance of any Environmental Law,
Environmental Permit or Governmental Order arising from or related to the use,
operation, ownership, lease, possession, control, occupancy, maintenance or
condition of any of such products or properties; (iv) the failure to have
obtained or maintained in effect any Environmental Permit required by any
Environmental Law or Governmental Order required as a result of the operation of
the Business, the sale, supply, servicing or disposition of such products or the
use, operation, ownership, lease, control, possession, occupancy, maintenance or
condition of such properties; and (v) Governmental Orders or claims arising
under any Environmental Law, in each case to the extent relating to the period
up to and including the Closing Date;
(c) without limiting Buyer's obligations as expressly set forth in
Section 12.1, any Liability associated with labor or employment matters,
including those relating to severance pay, accrued vacation pay, wrongful
discharge, employee grievances, unfair labor practices, violations of any
applicable law, rule, regulation, ordinance or Governmental Order relating to
any employees of Seller or its Affiliates, agents, representatives or
contractors, the termination of any employees (whether union or nonunion), or
the termination or violation of any collective bargaining agreement;
(d) any Liability associated with the employee benefit plans or
policies of Seller or any of its Affiliates;
(e) any Liability associated with employee or customer health or
safety;
(f) any Liability associated with accounts payable, trade payables
and indebtedness for borrowed money of Seller or any of its Affiliates;
(g) any Liability associated with implied warranties or unwritten
warranties on products or services of the Business;
(h) any Liability imposed upon or incurred by Buyer or its
Affiliates by operation of any applicable law, rule, regulation, ordinance or
Governmental Order which Liability, if not for the operation of such law, rule,
regulation, ordinance or Governmental Order, would have been a Retained
Liability;
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(i) any Liability associated with personal injury or property
damage caused or alleged to have been caused by any product, service or other
activity of Seller or any of its Affiliates prior to the Closing, including
those arising from any alleged design defect, manufacturing defect, failure to
warn or negligence; and
(j) any Liability associated with any of the Excluded Assets.
3.3 LIABILITIES OF AFFILIATES OF SELLER. Buyer acknowledges that
certain of the Assumed Liabilities are Liabilities of the Foreign Sellers.
Accordingly, at the Closing and in consideration of the transfer of the Foreign
Assets to Buyer and its Affiliates, Buyer and the respective Affiliates of Buyer
acquiring particular Assets shall assume the Assumed Liabilities associated with
such Assets from the applicable Foreign Sellers, as the case may be, on the same
terms as the Assumed Liabilities assumed by Buyer from Seller pursuant to
Section 3.1; PROVIDED, HOWEVER, notwithstanding any other provision of this
Agreement, Buyer and its Affiliates shall not assume or become responsible for
any Assumed Liabilities related to any Foreign Assets and the Business conducted
therewith unless and until such Business and Foreign Assets actually are sold,
conveyed, assigned, transferred and delivered to Buyer or its designated
Affiliates pursuant to this Agreement or any applicable Purchase and Sale
Agreement.
ARTICLE IV
CLOSING
4.1 CLOSING.
(a) The consummation of the purchase and sale of the U.S. Assets
(the "Closing") shall take place at Buyer's principal executive offices located
at 3050 Hansen Way, Palo Alto, California, at 7:00 a.m., local time, on June 26,
1998 or on such date thereafter that is five business days after the
satisfaction of all conditions to Closing set forth in Article VIII and
Article IX. The consummation of the purchase and sale of the Foreign Assets
which may be sold, conveyed, assigned, transferred and delivered to Buyer or its
designated Affiliates concurrently therewith in accordance with this Agreement
and the Purchase and Sale Agreements shall take place simultaneously at Buyer's
principal executive offices located at 3050 Hansen Way, Palo Alto, California,
at 7:00 a.m., local time, or such other location or locations as may be required
to comply with applicable law. The consummation of such transactions is herein
collectively referred to as the "Closing." The date and time of the Closing are
sometimes referred to herein as the "Closing Date."
(b) The consummation of the purchase and sale of the Foreign
Assets not consummated on the Closing Date shall take place as soon as
practicable thereafter at one or more closings at such date(s), time(s) and/or
location(s) as shall be directed by Buyer (the "Additional Closings"). The
Additional Closings shall not take place unless and until the Foreign Assets to
be transferred at an Additional Closing and the Business associated therewith
can be purchased and sold in accordance with this Agreement and any applicable
Purchase and Sale Agreement.
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4.2 SELLER OBLIGATIONS AT CLOSING. At the Closing, Seller shall deliver
or cause to be delivered to Buyer:
(a) All warranty deeds, bills of sale and other instruments of
conveyance, transfer and assignment (in recordable form with respect to real
property interests, and including the appropriate certification under Section
1445(b)(2) of the Code) and agreements as Buyer may request that are necessary
to vest in Buyer all of the rights, title and interests of the U.S. Seller in
the U.S. Assets and in Buyer or its Affiliates all of the rights, title and
interests of the Foreign Sellers in the Foreign Assets to be transferred at such
time, free and clear of all Encumbrances, other than Permitted Liens, and to
reflect the allocation provided for in Section 11.1;
(b) The opinion of Wilson Sonsini Goodrich & Rosati, P.C., counsel
to Seller, in a form reasonably acceptable to Buyer;
(c) Such officers' certificates certifying as to compliance with
the conditions set forth in Article VIII as may be reasonably requested by
Buyer;
(d) An estoppel certificate and consent to assignment from the
landlord of the Real Property (the "Landlord"), dated as of the Closing Date,
certifying (i) that the Lease is unmodified and in full force and effect (or, if
there have been modifications, that the Lease is in full force and effect, as
modified, and stating the modifications), (ii) the dates, if any, to which all
rental due under the Lease has been paid, (iii) whether there are then existing
any charges offsets or defenses against the enforcement by Landlord or any
agreement, covenant or condition of the Lease on the part of Seller to be
performed or observed (and, if so, specifying the same), (iv) whether there are
then existing any defaults by Seller in the performance or observance by Seller
of any agreement, covenant or condition of the Lease on the part of Seller to be
performed or observed and whether any notice has been given to Seller of any
default under the Lease that has not been cured (and, if so, specifying the
same); and (v) that the Landlord consents to the assignment of the Lease by
Seller to Buyer;
(e) The unconditional written commitments, dated as of the Closing
Date, from a title insurance company satisfactory to Buyer to issue at Buyer's
sole expense an ALTA Leasehold Owner's Title Insurance Policy dated as of the
Closing Date with respect to the Real Property, in such amount as may be
specified by Buyer, showing the leasehold estate to be vested in Buyer free and
clear of all Encumbrances (including any liens and mortgages encumbering the
Landlord's fee interest unless such lender has executed a non-disturbance and
attornment agreement reasonably acceptable to Buyer with respect to the Lease),
except Permitted Liens, and containing such extended coverage over the general
exceptions and containing such endorsements as Buyer may reasonably request; and
(f) The Ancillary Agreements, duly executed by Seller or its
Affiliates, as the case may be.
4.3 BUYER'S OBLIGATIONS AT CLOSING. At the Closing, Buyer shall deliver
or cause to be delivered to Seller:
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(a) The Closing Payment, which shall be delivered to Seller
(acting on behalf of itself and as agent for the Foreign Sellers) by wire
transfer of immediately available funds to an account or accounts designated in
writing by Seller;
(b) The opinion of the General Counsel to Buyer in a form
reasonably acceptable to Seller;
(c) Such officers' certificates certifying as to compliance with
the conditions set forth in Article IX as may be reasonably requested by Seller;
and
(d) The Ancillary Agreements, duly executed by Buyer or its
Affiliates, as the case may be.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
5.1 ORGANIZATION. Seller, each other U.S. Seller and each Foreign
Seller is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation and has full corporate power
and authority to own its assets and properties and to conduct its business as
and where it is being conducted, including to own the Assets owned by it and
conduct the Business as and where it is being conducted by it.
5.2 AUTHORIZATION.
(a) Seller has full corporate power and authority to enter into
this Agreement and the Ancillary Agreements and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Seller. This Agreement has been duly executed
and delivered by Seller. This Agreement constitutes, and upon the execution and
delivery thereof by Seller each Ancillary Agreement will constitute, a legal,
valid and binding obligation of Seller, enforceable against Seller in accordance
with its terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and general principles
of equity (regardless of whether enforceability is considered in a proceeding at
law or in equity).
(b) Each of the Foreign Sellers has full corporate power and
authority to enter into the Ancillary Agreements to which it will be a party and
to consummate the transactions contemplated thereby. The execution and delivery
of such Ancillary Agreements and the consummation of the transactions
contemplated thereby have been duly authorized by all necessary corporate action
on the part of each of the Foreign Sellers. When executed and delivered by the
Foreign Sellers, each such
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Ancillary Agreement will constitute a legal, valid and binding obligation of the
Foreign Sellers which are parties thereto, enforceable against such Foreign
Sellers in accordance with its terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and
general principles of equity (regardless of whether enforceability is considered
in a proceeding at law or in equity).
(c) Except as set forth in Disclosure Schedule Section 5.2(c), no
consent, waiver, approval, order or authorization of, notice to, or
registration, declaration, designation, qualification or filing with, any
Governmental Authority or third Person, domestic or foreign, is or has been or
will be required on the part of the Seller Group in connection with the
execution and delivery of this Agreement or any Ancillary Agreement or the
consummation by them of the transactions contemplated hereby or thereby, other
than where the failure to obtain such consents, waivers, approvals, orders or
authorizations or to make or effect such registrations, declarations,
designations, qualifications or filings does not have a Material Adverse Effect.
5.3 NON-CONTRAVENTION. Neither the execution and delivery of this
Agreement or any Ancillary Agreement, nor the consummation of the transactions
contemplated hereby or thereby, will violate or conflict with or provide a right
of termination to any Person under (a) any provision of the Charters or Bylaws
of any member of the Seller Group, (b) in any material respect any law, rule,
regulation or Governmental Order to which the Seller Group or the Business and
the Assets are bound or subject or (c) any agreement, indenture, undertaking,
permit, license or other instrument to which the Seller Group is a party or by
which any of them or any of their properties may be bound or affected, other
than (x) the requirements of any applicable bulk sales or bulk transfer laws or
(y) as set forth in Disclosure Schedule Section 5.3.
5.4 FINANCIAL STATEMENTS. Disclosure Schedule Section 5.4 sets forth
the (a) unaudited balance sheets for the Business as at December 31, 1997 and
March 31, 1998, (b) unaudited statement of operations of the Business for the
one-year period ended December 31, 1997 and (c) unaudited PRO FORMA balance
sheets for the Assets, Assumed Liabilities and related reserves, as of
December 31, 1997 and March 31, 1998, which shall be prepared based on the form
of the balance sheets for the Business (collectively, the "PRO FORMA Balance
Sheets" and together with the foregoing financial statements for the Business,
the "Financial Statements"). Except as set forth in Disclosure Schedule
Section 5.4, the Financial Statements (other than the PRO FORMA Balance Sheets)
have been prepared in accordance, in all material respects, with GAAP. Except
as set forth in Disclosure Schedule Section 5.4, the balance sheets included in
the Financial Statements (other than the PRO FORMA Balance Sheets) present
fairly in all material respects in accordance with GAAP the financial condition
of the Business as at their respective dates and the statement of operations
included in the Financial Statements presents fairly in all material respects in
accordance with GAAP the results of operations of the Business for the period
covered thereby. The Financial Statements for the period ended March 31, 1998
were prepared on a basis consistent with the Financial Statements for the period
ended December 31, 1997. The Financial Statements (other than the PRO FORMA
Balance Sheets) were prepared on a basis consistent with the audited
consolidated financial statements of Seller for such periods. The books and
records of Seller from which the Financial Statements were prepared were
complete and accurate in all material respects
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at the time of such preparation. Seller maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (a) material
transactions are executed in accordance with management's general or specific
authorization; (b) material transactions are recorded as necessary to permit
preparation of financial statements in conformity, in all material respects,
with GAAP and to maintain accountability for material assets; (c) access to
material assets is permitted only in accordance with management's general or
specific authorization; and (d) the recorded accountability for material assets
is compared with the existing material assets at reasonable intervals and
appropriate action is taken with respect to any material differences. Except to
the extent reflected on or reserved against on the face of the PRO FORMA Balance
Sheet as of March 31, 1998 (which reserves are appropriate and reasonable),
neither Seller nor any of its Affiliates has any Liabilities arising from or
relating to the Business, and none of the Assets are subject to or bound by any
Liabilities, other than such Liabilities incurred in the ordinary course of
business and consistent with past practice since the date of the PRO FORMA
Balance Sheet as of March 31, 1998. The balance sheets included in the
Financial Statements, as at their respective dates, include all provisions for
Liabilities and commitments which, in accordance in all material respects with
GAAP subject to omission of footnotes and normal year-end audit adjustments, are
required to have been accrued or otherwise provided for.
5.5 SEC DOCUMENTS. During the three-year period preceding the Agreement
Date:
(a) Seller has filed with the SEC all reports, schedules, forms,
statements and other documents (including exhibits and all other information
incorporated therein) required to be filed by it under the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof (the "SEC Documents");
(b) as of their respective dates, the SEC Documents complied in
all material respects with the requirements of the Securities Act, and the
Exchange Act, and, except to the extent superceded by a later filed SEC
Document, none of the SEC Documents contains any untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial statements included
in the SEC Documents comply as to form, as of their respective dates of filing,
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved and fairly present in all
material respects the consolidated financial position of Seller and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended; and
(c) Except as disclosed in Seller's Report on Form 10-K for the
period ended December 31, 1997, Seller knows of no material information adverse
to the Business that would be required to be set forth in management's
discussion and analysis for a Report on Form 10-K if the Exchange Act required
Seller to file such a report for the one-year period ending on the Agreement
Date.
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5.6 TITLE TO ASSETS.
(a) Except as set forth in Disclosure Schedule Section 5.6(a), the
Seller Group has good and marketable title to all of the properties and assets
of the Business (real, personal and mixed, tangible and intangible), including
the Assets, all the properties and assets reflected in the PRO FORMA Balance
Sheet as of March 31, 1998 (except for properties and assets sold since the date
of the PRO FORMA Balance Sheet as of March 31, 1998 in the ordinary course of
business and consistent with past practice and accounts receivable and notes
receivable paid in full subsequent to the date of the PRO FORMA Balance Sheet as
of March 31, 1998) and all properties and assets purchased or otherwise acquired
by any of the Seller Group since the date of the PRO FORMA Balance Sheet as of
March 31, 1998. Except for Permitted Liens or as otherwise explained on
Disclosure Schedule Section 5.6(a), none of the Assets is subject to any
Encumbrance of any kind.
(b) Except as set forth in Disclosure Schedule Section 5.6(b), the
tangible personal property included in the Assets are in good operating
condition and repair, and are safe and are adequate for the uses to which they
are intended and are being put. None of such Assets is in need of maintenance
or repairs, except for ordinary, routine maintenance and repairs due to normal
wear and tear and not cause by faulty workmanship. Seller has no warranty
claims pending, and, to Seller's knowledge, Seller has no basis for making any
warranty claim, against any third Person relating to any of such Assets.
5.7 REAL PROPERTY.
(a) Disclosure Schedule Section 5.7(a) contains accurate and
complete lists and descriptions of all real property owned or leased by each of
the Seller Group for use in the operation of the Business as well as all
buildings and other structures and material improvements located on such real
property which are used in the operation of the Business.
(b) All such leases of real property, including the Lease, are
valid, binding and enforceable in accordance with their terms and are in full
force and effect. There are no existing defaults under the applicable lease by
any of the Seller Group or, to the knowledge of the Seller Group, any other
party thereto, and no event of default on the part of the Seller Group or, to
the knowledge of the Seller Group, on the part of any other party thereto has
occurred which (whether with or without notice, lapse of time or the happening
or occurrence of any other event) would constitute a default thereunder. Seller
has made available to Buyer true and correct copies of the Lease.
(c) Except as set forth in Disclosure Schedule Section 5.7(c), the
improvements and fixtures among the Real Property are in good operating
condition and repair, and are safe and are adequate for the uses to which they
are intended and are being put. None of such Assets is in need of maintenance
or repairs, except for ordinary, routine maintenance and repairs due to normal
wear and tear and not caused by faulty workmanship.
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5.8 INTELLECTUAL PROPERTY.
(a) Disclosure Schedule Section 5.8(a) contains an accurate and
complete list of the Owned Intellectual Property. The Seller Group is the sole
and exclusive owner or licensee of, with all right, title and interest in and to
(free and clear of any Encumbrances), the Owned Intellectual Property. The
Seller Group has the sole and exclusive right to use, sell, assign, transfer,
license or dispose of all the Owned Intellectual Property. The Seller Group has
the sole and exclusive right to license all the Licensed Intellectual Property
in accordance with the terms of the License Agreement.
(b) Except as set forth in Disclosure Schedule Section 5.8(b),
there is no pending Action or, to the knowledge of the Seller Group, threatened
Action contesting the validity, ownership or right to use, sell, license or
dispose of any Intellectual Property and none of the Seller Group knows of any
valid grounds for any BONA FIDE Action of any such kind. There is no material
unauthorized use, infringement or misappropriation of any of the Intellectual
Property by any third Person. None of the Intellectual Property is subject to
any Governmental Order, stipulation or agreement restricting in any manner the
licensing thereof.
(c) To the knowledge of the Seller Group, the conduct of the
Business by the Seller Group does not infringe upon the intellectual property
rights of any third Person. Neither Seller nor any of its Affiliates has
received any written notice alleging that the conduct of the Business by the
Seller Group infringes the intellectual property rights of any third Person.
The use of the Intellectual Property in the conduct of the Business does not
violate any contract, agreement or commitment between Seller or any of its
Affiliates and any third Person. Except as set forth in Disclosure Schedule
Section 5.8(c), there is no pending Action or, to the knowledge of the Seller
Group, threatened Action alleging that the conduct of the Business infringes the
intellectual property rights of any third Person and none of the Seller Group
knows of any valid grounds for any BONA FIDE Action of any such kind.
(d) The Intellectual Property constitutes all the technology,
intellectual property and proprietary information necessary for the continued
operation of the Business as conducted by the Seller Group.
5.9 LITIGATION; LEGAL MATTERS. Except as set forth on Disclosure
Schedule Section 5.9, with respect to the Business or the Assets, there is no
Action pending or, to the knowledge of the Seller Group, threatened against or
involving any of the Seller Group or any of the officers, directors,
shareholders, properties, assets or businesses of any the Seller Group, whether
at law or in equity, or before or by any Governmental Authority, nor any
Governmental Order of any Governmental Authority against or affecting or which
could affect (without regard to the availability of insurance) any of the Seller
Group with respect to the Business, the Assets, any product sold, supplied,
serviced or disposed by or on behalf of the Business, or any of the officers,
directors, shareholders, employees, properties, assets or activities of the
Business.
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5.10 EMPLOYEES; EMPLOYEE BENEFIT PLANS; LABOR.
(a) Disclosure Schedule Section 5.10(a) contains a complete and
correct list of all employees of Seller and its Affiliates whose employment
related at any time during the 12-month period immediately preceding the
Agreement Date primarily to the Business, including each such employee's title,
work location and date of hire. For purposes of this Agreement, (i) the term
"U.S. Business Employees" refers to all such employees whose principal work
location is within the United States of America, (ii) the term "Non-U.S.
Business Employees" refers to all such employees whose principal work location
is outside of the United States of America, and (iii) the term "Business
Employees" refers to all such employees (i.e., to U.S. Business Employees and
Non-U.S. Business Employees collectively).
(b) Disclosure Schedule Section 5.10(b) contains a complete and
correct list of all collective bargaining, labor and employment agreements or
other similar arrangements that pertain to any Business Employee.
(c) None of the Seller Group has ever maintained, administered or
contributed to any plan subject to Title IV of ERISA with respect to any
Business Employee.
(d) Except for the collective bargaining agreements listed in
Disclosure Schedule Section 5.10(b), no Business Employee is covered under any
other collective bargaining agreement. With respect to the conduct of the
Business and the use of the Assets: (a) there is no unfair labor practice
complaint against any of the Seller Group pending or, to the knowledge of the
Seller Group, threatened before the National Labor Relations Board or any
comparable foreign, state or local Governmental Authority; (b) there is no labor
strike, dispute, slowdown or stoppage actually pending or, to the knowledge of
the Seller Group, threatened against or directly affecting any of the Seller
Group; (c) no union representation question exists or negotiations regarding
union representation have taken place or are ongoing respecting the employees of
any of the Business and no notice or demand for union recognition has been
received by any of the Seller Group; (d) no grievance or any Action arising out
of or under collective bargaining agreements is pending and no claims therefor
exist; (e) no collective bargaining agreement which is binding on any of the
Seller Group prevents it from relocating or closing any of its operations;
(f) none of the Seller Group has experienced any work stoppage or other labor
difficulty since January 1, 1996; and (g) there are no pending or, to the
knowledge of the Seller Group, threatened unfair employment practice charges or
administrative proceedings relating to any past or present employees of the
Business.
5.11 ENVIRONMENTAL MATTERS. Except as set forth in Disclosure Schedule
Section 5.11:
(a) each of the Seller Group is, and the Seller Group currently
operates and maintains the Business and the Assets, in compliance with all
applicable Environmental Laws and Governmental Orders and the requirements of
all Environmental Permits held or required to be held by the Seller Group and no
member of the Seller Group has received a notice of violation or other demand
from a third Person alleging that the Business is in violation of any
Environmental Law;
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(b) Environmental Permits are in effect for (1) any activities
currently conducted by or on behalf of the Business, (2) any products sold,
supplied, serviced or disposed of by or on behalf of the Business, including the
Assets, and (3) any properties at which any of such activities are conducted or
products are located, including the Real Property (the "Properties");
(c) there are no underground storage tanks at the Real Property
containing Hazardous Materials or which formerly contained Hazardous Materials;
(d) Neither the Real Property nor, to Seller's knowledge, any
properties adjoining the Real Property are listed or proposed for listing on the
U.S. National Priorities List under the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, 42 U.S.C. Sections 9601 ET SEQ. or on
the Comprehensive Environmental Response Compensation Liability Information
System or any foreign or state list of sites requiring investigation,
remediation or cleanup;
(e) there are no Governmental Orders outstanding, no claims have
been instituted or filed, and none are pending or, to the Seller Group's
knowledge, threatened with respect to any of the Retained Liabilities referred
to in subsection 3.2(b);
(f) to Seller's knowledge, with respect to the conduct of the
Business and the use of the Assets, or the sale, supply, servicing and disposal
of products containing Hazardous Materials in connection with the conduct of the
Business, the Seller Group has disposed of all such products containing
Hazardous Materials, any wastes and all Hazardous Material in compliance with
all applicable Environmental Laws, Environmental Permits and Governmental
Orders, and none of the Seller Group has received any notice or claim of
Liability as a result of any such disposal;
(g) there is no Hazardous Material in quantities and under
conditions likely to require Buyer to conduct an investigation or remediation
under applicable Environmental Laws in any of the fixtures, structures, soils,
groundwater, surface water or air on, under or about or emanating from the
Assets or the Real Property, or to Seller's knowledge any properties adjoining
such properties; and
(h) the Seller Group has provided Buyer with true, accurate and
complete copies of any Governmental Orders applicable to the Assets, the
Business or the Real Property, any written assessments of the environmental
conditions at the Real Property, and any written reports of releases of
Hazardous Materials on, under, about, or emanating from the Real Property in
Seller's or any of its Affiliates' possession or reasonable control.
5.12 CONTRACTS AND COMMITMENTS.
(a) Except as set forth in Disclosure Schedule Section 5.12(a),
none of the Contracts contain a provision (1) restricting any of the Seller
Group from carrying on the Business or any part thereof anywhere in the world;
(2) relating to the proposed acquisition of any operating business or any assets
outside the ordinary course of business; or (3) relating to indebtedness for
borrowed money, including capital leases and any security agreements relating
thereto.
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(b) Disclosure Schedule Section 5.12(b) sets forth a complete and
accurate list of each Contract:
(i) relating to the supply of tandem accelerators; and
(ii) with terms and conditions for services to be rendered
by Seller that are different from Seller's standard terms and conditions for the
service of products of the Business.
(c) Disclosure Schedule Section 5.12(c) sets forth a complete and
accurate list of all contracts, agreements, arrangements and commitments
(whether or not a Contract) to which Seller or any of its Affiliates is a party
and which relate to the Business: (i) for sales agency, representation or
distribution; (ii) for consulting services; (iii) for research and development;
and (iv) licenses to Seller or any Affiliate from any third Person of any
intellectual property used in the Business or any licenses from Seller or any
Affiliate to any third Person of any Intellectual Property.
(d) True and complete copies of all documents (together with all
ancillary documents thereto, including any amendments, consents for alterations
and documents regarding variations) set forth in Disclosure Schedule Sections
5.12(a), 5.12(b) and 5.12(c) have been delivered to Buyer.
(e) Except as set forth in Disclosure Schedule Section 5.12(e),
with respect to the Contracts, (i) each is a legal, valid and binding obligation
of the Seller Group and, to the knowledge of the Seller Group, each other party
thereto and in full force and effect, (ii) none of the Seller Group and, to the
knowledge of the Seller Group, no other party thereto is in default in the
performance of any of its obligations thereunder or in the payment of any
principal of or interest on any indebtedness for borrowed money, (iii) no
default of the Seller Group and, to the knowledge of the Seller Group, no other
party thereto has occurred which (whether with or without notice, lapse of time,
or both, or the happening or the occurrence of any other event) would constitute
an event of default thereunder, (iv) upon consummation of the transactions
contemplated by this Agreement without providing notice to or obtaining consent
from any Person, each such contract, agreement, commitment or restriction will
continue in full force and effect without penalty or other adverse consequence
and shall be unaffected by such transactions, and (v) no such contract,
agreement, commitment or restriction has been amended or otherwise affected by
any side letter, interpretation or correspondence relating thereto.
5.13 PERMITS AND OTHER OPERATING RIGHTS. Except as set forth in
Disclosure Schedule Section 5.13 or Disclosure Schedule 5.11 with respect to
Environmental Permits, none of the Seller Group requires the consent of any
third Person to permit each of the Seller Group to operate the Business in the
manner in which it currently is being conducted, and each of the Seller Group
possesses all permits, health and safety permits, licenses, orders, approvals
and authorizations from third Persons, including Governmental Authorities,
currently required by applicable provisions of any law, statute, regulation,
existing judicial decision or Governmental Order, or by the property and
contract rights of third Persons, necessary to permit the operation of the
Business and the Assets in the manner in which it currently is being conducted
and used, and to permit the occupancy of its properties. Disclosure Schedule
Section 5.13 sets forth a true and complete list of all such permits, licenses,
orders, approvals and authorizations in the possession of each of the Seller
Group which are material to the operation of the Business, accurate and complete
copies of which have been provided to Buyer. All such permits, licenses,
orders, approvals
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and authorizations are in full force and effect and, except as explained in
Disclosure Schedule Section 5.13, will remain in full force and effect following
the consummation of the transactions contemplated hereby, no suspension or
cancellation of any of them is threatened, and no such permit, license, order,
approval or authorization will be materially and adversely affected by the
consummation of the transactions contemplated by this Agreement. Disclosure
Schedule Section 5.13 also specifically identifies those of such permits,
licenses, orders, approvals and authorizations that require consent,
notification or other action to remain in full force and effect following the
consummation of the transactions contemplated hereby. Except as disclosed in
Disclosure Schedule Section 5.13, there is no existing practice, action or plan
of any of the Seller Group with respect to the operations, activities, conduct
or transactions of the Business or the use, operation, ownership, lease,
possession, control, occupancy, maintenance or condition of the Assets and no
existing condition of the Assets that may give rise to any civil or criminal
Liability under, or violate or prevent compliance with, any health or
occupational safety or other applicable statute, law, regulation or Governmental
Order.
5.14 COMPLIANCE WITH LAWS. To the knowledge of the Seller Group, except
as set forth on Disclosure Schedule Section 5.14, the Seller Group has complied
with all laws, statutes, regulations and Governmental Orders in the operations,
activities, conduct and transactions of the Business and their use, operation,
ownership, lease, possession, control, occupancy and maintenance of the Assets.
None of the use, ownership, lease, possession, control, occupancy, maintenance
or condition of any the properties or assets of the Business, including the
Assets, nor the operations, activities, conduct or transactions of the Business,
conflicts with the rights of any other Person or violates, or with or without
the giving of notice or passage of time, or both, will violate, conflict with or
result in a default, right to accelerate or loss of rights under, any terms or
provisions of any Encumbrance, lease, license, agreement, contract, agreement,
commitment or understanding or any law, statute, regulation or Governmental
Order to which any of the Seller Group is a party or by which any of the Seller
Group or any of the properties or assets of the Business, including the Assets,
may be bound or affected.
5.15 WARRANTY OBLIGATIONS; PRODUCT LIABILITY.
(a) Disclosure Schedule Section 5.15(a) contains the Business's
standard forms of product warranties and guarantees, and a description of
unexpired, non-standard product warranties and guarantees, given to customers by
Seller and its Affiliates in connection with the products or operation of the
Business. Seller's costs to repair or replace products of the Business under
warranties (whether written or oral, or express or implied) did not exceed in
the aggregate $2,200,000 in Seller's fiscal year ended December 31, 1997. Each
of the products of the Business is capable of meeting all of Seller's published
specifications and any applicable Contract specifications, and no Product
improvement or new product development is necessary to perform any Contract.
(b) Except as set forth in Disclosure Schedule Section 5.15(b), no
product liability, warranty or similar Actions have been made, threatened or
commenced against Seller or any of its Affiliates with respect to the products
distributed, sold, serviced, repaired or assembled, or services
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rendered, by Seller or any of its Affiliates in connection with the operations,
activities, conduct or transactions of the Business or the use, operation,
ownership, lease, possession, control, occupancy, maintenance or condition of
the Assets. Except as described in Disclosure Schedule Section 5.15(b), there
is no fact or circumstance, whether individual or recurring, known to Seller or
any Affiliate thereof, and there have been no events or information which have
come to the attention of Seller or any Affiliate thereof, which might reasonably
give rise to any Liability for bodily injury as a result of any alleged,
suspected or actual defects, hazards or failures to warn in, or conditions of,
products designed, manufactured, distributed, sold, serviced, repaired or
assembled, or in the design of any of such products, or any services rendered,
by or on behalf of Seller or any Affiliate thereof in connection with the
operations, activities, conduct or transactions of the Business or the use,
operation, ownership, lease, possession, control, occupancy, maintenance or
condition of the Assets.
5.16 INVENTORY. All of the Inventories consists of a quality and
quantity usable and salable in the ordinary course of business, except for
obsolete items and items of below-standard quality, all of which have been
written off or written down to net realizable value on the accounting records of
the Seller Group with respect to the Business in a manner consistent with the
past practices of the Business consistently applied. All of the Inventories not
so written off have been valued at the lower of cost or market on a first in,
first out basis. The quantities of each item of Inventory held by the Seller
Group for use in the Business (whether raw materials, work-in-process or
finished goods) are not excessive, but are reasonable in the present
circumstances of the Business. None of the Inventory is defective or
adulterated and all of the Inventory may be safely used in the equipment
serviced, repaired or assembled by the Business. Seller has no warranty claims
pending, and, to Seller's knowledge, Seller has no basis for making any warranty
claim, against any third Person relating to any of the Inventories.
5.17 DISCLOSURE. No representations or warranties by Seller or any of
its Affiliates, singly or collectively, in this Agreement or any Ancillary
Agreement and no statement contained in any document (including, without
limitation, financial statements and the Schedules hereto), certificate or other
writing furnished or to be furnished by Seller or any Affiliate thereof to Buyer
or any Affiliate thereof pursuant to the provisions hereof or in connection with
the transactions contemplated hereby, contain or will contain any untrue
statement of material fact or omit or will omit to state any material fact
necessary in order to make the statements herein or therein not misleading. All
projections, forecasts or other forward looking information that were furnished
to Buyer by or on behalf of Seller or any Affiliate thereof were prepared in
good faith and based upon reasonable estimates and all the facts and
circumstances then known to Seller or any such Affiliate.
5.18 TAX MATTERS. Each U.S. Seller and Foreign Seller has, or prior to
the Closing will have, accurately prepared and duly and timely filed all Tax
Returns that they were required to file on or before the date of the Closing and
have paid all Taxes shown as required to be paid with respect to the periods
covered by such Tax Returns. No deficiencies for any Taxes have been asserted
in writing or assessed against any U.S. Seller or Foreign Seller that remain
unpaid. There are no agreements, waivers or arrangements providing for the
extension of time with respect to the assessment of any Tax owed by any U.S.
Seller or Foreign Seller. There are no Tax liens upon any of the Assets. No
U.S. Seller or Foreign Seller is a party to any Tax allocation or sharing
agreement. No U.S. Seller is a "foreign person" within
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the meaning of Section 1445 of the Code. None of the Foreign Assets is
considered a "United States real property interest" within the meaning of
Section 897(c) of the Code.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
6.1 ORGANIZATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
6.2 AUTHORIZATION.
(a) Buyer has full corporate power and authority to enter into
this Agreement and the Ancillary Agreements and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Buyer. This Agreement has been duly executed
and delivered by Buyer. This Agreement constitutes, and upon the execution and
delivery thereof by Buyer, each Ancillary Agreement will constitute, a legal,
valid and binding obligation of Buyer, enforceable against Buyer in accordance
with its terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and general principles
of equity (regardless of whether enforceability is considered in a proceeding at
law or in equity).
(b) Except as described in Schedule 6.2(b), no consent, waiver,
approval, order or authorization of, notice to, or registration, declaration,
designation, qualification or filing with, any Governmental Authority or third
Person, domestic or foreign, is or has been or will be required on the part of
Buyer or any of its Affiliates in connection with the execution and delivery of
this Agreement or any Ancillary Agreement or the consummation of the
transactions contemplated hereby or thereby, other than where the failure to
obtain such consents, waivers, approvals, orders or authorizations or to make or
effect such registrations, declarations, designations, qualifications or filings
is not reasonably likely to (i) prevent or materially delay consummation of the
transactions contemplated by this Agreement or (ii) prevent Buyer and its
Affiliates from performing their obligations under this Agreement.
6.3 NON-CONTRAVENTION. Neither the execution and delivery of this
Agreement or any Ancillary Agreement, nor the consummation of the transactions
contemplated hereby or thereby, will violate or conflict with (a) any provision
of the Charter or Bylaws of Buyer or any of its Affiliates, (b) in any material
respect any law, rule, regulation or Governmental Order to which Buyer or any
such Affiliate or any of their business or assets are bound or subject or
(c) any agreement, indenture, undertaking, permit, license or other instrument
to which Buyer or any such Affiliate is a party or by which any of them or any
of their properties may be bound or affected, other than such violations and
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conflicts which are not reasonably likely to (i) prevent or materially delay
consummation of the transactions contemplated by this Agreement or (ii) prevent
Buyer and its Affiliates from performing their obligations under this Agreement.
ARTICLE VII
CERTAIN COVENANTS
7.1 ACCESS TO INFORMATION. From the date hereof until the Closing, but
subject to any rights of third Persons, upon reasonable notice, Seller shall
(a) afford the officers, employees and authorized agents and representatives of
Buyer reasonable access (including such access as is necessary for Buyer to
complete a Phase II environmental review of the Real Property) during normal
business hours to the offices, properties, personnel and Books and Records of
the Seller Group relating to the Assets and the Business and (b) furnish to the
officers, employees and authorized agents and representatives of Buyer such
additional financial and operating data and other information regarding the
Assets and the Business (or legible copies thereof) as Buyer may from time to
time reasonably request; PROVIDED, HOWEVER, that such investigation shall not
unreasonably interfere with any of the businesses or operations of the Seller
Group. Without limiting the generality of the foregoing, the Seller Group shall
cooperate fully with Buyer's investigation of the Assets and the Business and
provide copies of such documents in its possession as Buyer may reasonably
request to confirm the title to any and all properties or assets used in the
Business. No investigation by Buyer or knowledge by Buyer of a breach of a
representation or warranty of Seller shall affect the representations and
warranties of Seller or Buyer's recourse under any provision of this Agreement
(including Article X) or the Ancillary Agreements with respect thereto.
7.2 CONDUCT OF BUSINESS PENDING CLOSING. From the Agreement Date until
the Closing, except as required or permitted by this Agreement or otherwise
consented to or approved by Buyer in writing, and except for any transactions
reasonably related to the Excluded Assets which do not materially affect the
Business, the Assets or the Assumed Liabilities:
(a) Except as set forth in Schedule 7.2(a), Seller shall and shall
cause the Seller Group to operate the Business only in its usual, regular and
ordinary manner and substantially in the same manner as heretofore conducted.
Seller shall and shall cause the Seller Group to use commercially reasonable
efforts to (i) preserve the Business, including its relationships with customers
and suppliers, and (ii) keep available to Buyer the services of the present
officers, employees, agents and independent contractors of the Business.
(b) With respect to the Assets and the Business, Seller shall not,
and shall cause the Seller Group not to, without the prior written consent of
Buyer, which consent shall not be unreasonably withheld:
(i) permit or allow any of the Assets to be subject to any
additional Encumbrance (other than Permitted Liens) or sell, transfer,
lease or otherwise dispose of any such Assets, except in the ordinary
course of business and consistent with past practice;
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(ii) terminate any Designated Employee or grant any increase
or make any decrease in salaries or commissions payable or to become
payable to any employee of the Business, or to any sales agent or
representative of the Business, except normal increases in salaries and
commissions in accordance with Seller's existing compensation practice;
(iii) license, sell, transfer, pledge, modify, disclose,
dispose of or permit to lapse any right under or respecting, or enter into
any settlement regarding the breach or infringement of, any Intellectual
Property;
(iv) amend, modify or supplement any Contract;
(v) establish or change any pricing terms with respect to
products or services of the Business;
(vi) accept any orders or issue any quotations for sales of
any products or services of the Business; or
(vii) agree, whether in writing or otherwise, to do any of
the foregoing.
7.3 NO SOLICITATION OF TRANSACTIONS. From the Agreement Date through
the Closing Date, neither Seller nor any of its representatives, Affiliates,
directors, officers, employees, subsidiaries or agents will solicit or encourage
any Acquisition Proposal or assist any third Person in preparing or soliciting
such an Acquisition Proposal. Seller shall not, and shall cause such
representatives, Affiliates, directors, officers, employees, subsidiaries and
agents not to, engage in any discussions, conversations, negotiations or other
communication with any Person(s) relating to an Acquisition Proposal; PROVIDED,
HOWEVER, that Seller may engage in discussions or negotiations with, and furnish
information concerning Seller and the Business to, any third Person that makes
an unsolicited Acquisition Proposal if the Board of Directors of Seller
concludes in good faith after consultation with its outside counsel that such
action likely is required to satisfy the fiduciary duties of such Board under
California law. Seller will promptly, but in no event later than 24 hours,
notify Buyer of the receipt of any Acquisition Proposal, including the material
terms and conditions thereof, and will promptly, but in no event later than 24
hours, notify Buyer of any determination by Seller's Board of Directors that a
Superior Proposal has been made. For purposes of this Agreement, the term
"Acquisition Proposal" shall mean any proposal or offer, or any expression of
interest by any third Person relating to Seller's willingness or ability to
receive or discuss a proposal or offer, for an acquisition of the Assets (other
than in the ordinary course) or the Business (whether directly or indirectly,
including through a sale or purchase of more than 50% of the voting securities
of Seller or a merger with Seller). For purposes of this Agreement, the term
"Superior Proposal" shall mean any bona fide Acquisition Proposal which is on
terms that a majority of the members of the Board of Directors of Seller
determines in their good faith reasonable judgment (based on the advice of legal
counsel and of a financial advisor of nationally recognized reputation), after
taking into account all factors deemed relevant by the Board of Directors, which
factors shall include any conditions to such Acquisition Proposal, the nature of
the consideration offered, the liabilities assumed,
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the timing of the closing thereof, the risk of nonconsummation and any required
governmental or other consents, filings and approvals, to be more favorable to
Seller than the transactions contemplated hereby.
7.4 CONFIDENTIALITY. During the period between the Agreement Date and
the Closing Date, Buyer shall, and shall cause its representatives, Affiliates
and employees, and after the Closing Date, Seller shall, and shall cause its
representatives, Affiliates and employees: (a) to use commercially reasonable
efforts to treat and hold as confidential (and not to disclose or provide access
to any Person to) any information relating to the Business or the Assets or any
other confidential information with respect to the Business or the Assets;
(b) in the event that any of them becomes legally compelled to disclose any such
information, to provide the other party with prompt written notice of such
requirement so that such other party or an Affiliate thereof may seek a
protective order or other remedy or waive compliance with this Section 7.4;
(c) in the event that such protective order or other remedy is not obtained, or
such other party waives compliance with this Section 7.4, to furnish only that
portion of such information which is legally required to be provided and to
exercise its best efforts to obtain assurances that confidential treatment will
be accorded such information; (d) to the extent permitted by law, to promptly
furnish (prior to, at, or as soon as practicable following, the Closing) to the
other party any and all copies (in whatever form or medium) of all such
information and to destroy any and all additional copies of such information and
any analyses, compilations, studies or other documents prepared, in whole or in
part, on the basis thereof; PROVIDED, HOWEVER, that this sentence shall not
apply to any information which, at the time of disclosure, is available publicly
and was not disclosed in breach of this Agreement. Each party agrees and
acknowledges that remedies at law for any breach of its obligations under this
Section 7.4 may be inadequate and that in addition thereto the other party (or
its Affiliate) shall be entitled to seek equitable relief, including injunction
and specific performance, in the event of any such breach.
7.5 AUTHORIZATIONS.
(a) Buyer and Seller, as promptly as commercially practicable
after the Agreement Date, shall and shall cause their respective Affiliates to
(i) deliver, or cause to be delivered, all notices and make, or cause to be
made, all such declarations, designations, registrations, filings and
submissions under all laws, rules and regulations applicable to it as may be
required for it to consummate the transfer of the Assets and the other
transactions contemplated hereby in accordance with the terms of this Agreement;
(ii) use commercially reasonable efforts to obtain, or cause to be obtained, all
authorizations, approvals, orders, consents and waivers from all Persons
necessary to consummate the foregoing; and (iii) use commercially reasonable
efforts to take, or cause to be taken, all other actions necessary, proper or
advisable in order for it to fulfill its respective obligations hereunder and to
carry out the intentions of the parties expressed herein. Each party shall use
its commercially reasonable efforts to satisfy the conditions to Closing
applicable to it in Articles VIII and IX as soon as commercially practicable.
(b) If required by the HSR Act, Buyer and Seller shall comply
promptly with the notice and reporting requirements of the HSR Act and shall
reasonably cooperate with one another with respect thereto. Buyer and Seller
shall comply substantially with any additional requests for information,
including requests for production of documents and production of witnesses for
interviews
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or depositions, by the Antitrust Division of the United States Department of
Justice, the United States Federal Trade Commission or the antitrust or
competition law authorities of any other jurisdiction (whether U.S., foreign or
multi-national) (collectively, the "Antitrust Authorities").
(c) Buyer and Seller shall exercise commercially reasonable
efforts, and shall cooperate with each other, to prevent the entry in any Action
brought by an Antitrust Authority or any other Person of any Governmental Order
which would prohibit, make unlawful or delay the consummation of the
transactions contemplated by this Agreement.
(d) Buyer and Seller each shall cooperate in good faith with the
Antitrust Authorities and undertake promptly any and all commercially reasonable
actions to facilitate the completion lawfully of the transactions contemplated
by this Agreement.
(e) Unless Seller receives a Superior Proposal, Seller shall
(i) cause a meeting of its shareholders to be duly called and held as soon as
practicable (and in any event no later than June 26, 1998) for the purpose of
voting on the transactions contemplated hereby to the extent required by
Section 1001 of the General Corporation Law of the State of California;
(ii) actively recommend the approval of such transactions by such shareholders;
(iii) use commercially reasonable efforts to obtain such approval; (iv) prepare
and file with the Securities and Exchange Commission related preliminary proxy
materials as soon as practicable; (v) use commercially reasonable efforts to
promptly satisfy any comments of the staff of the SEC; and (vi) use commercially
reasonable efforts to mail definitive proxy materials to it shareholders as soon
as practicable.
7.6 BOOKS AND RECORDS. From and after the Closing Date until the
[seventh] anniversary of the Closing Date, and without limiting the parties'
rights under the Ancillary Agreements, Buyer and Seller shall, and shall cause
their respective Affiliates to, at the request of the other party, make
available to such other party from time to time on a reasonable basis the Books
and Records in their possession. Notwithstanding the foregoing, if the party to
which a request for access to Books and Records is directed indicates that it
believes that the Books and Records requested relate to a matter as to which the
parties are adverse (including any claim for indemnification pursuant to
Article X of this Agreement), then such party may deny access to those Books and
Records, unless the requesting party reasonably establishes that it requires
such access in order to assess or discharge a Retained Liability, in the case of
Seller or any Affiliate of Seller, or an Assumed Liability, in the case of Buyer
or any Affiliate of Buyer; PROVIDED, HOWEVER, that nothing herein shall prevent
a party from obtaining access to Books and Records through legal process,
including discovery. Books and Records shall be held by the party in possession
thereof for seven years after the Closing Date (provided that the inadvertent
failure by either party or its Affiliates, after the exercise of reasonably good
faith efforts, to retain such Books and Records shall not give rise to any
Liability of such party or its Affiliates) and the other party shall have the
right, at its expense, to inspect and make copies of such Books and Records upon
such party's request; PROVIDED, HOWEVER, that (i) all such access and copying
shall be done in such a manner so as not to unreasonably interfere with the
normal conduct of the operations of the party requested to provide access to
such Books and Records and (ii) the party requesting access to such Books and
Records shall, pursuant to Section 7.4 treat the same and the contents thereof
as confidential and not disclose such
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Books and Records or the contents thereof to any Person except as required by
applicable law or Governmental Authority. A party so gaining access to such
Books and Records shall (i) hold them in strict confidence, except as required
by applicable law, Governmental Authority or subpoena; (ii) not make any copies
thereof; and (iii) not provide such Books and Records or copies thereof, or
reveal the contents thereof, to any of its Affiliates, employees,
representatives or agents, other than those who need to know such information in
order to perform duties for or provide services to such party, or to any other
Person, including any Governmental Authority. In addition, after the Closing
Date, at Seller's request, Buyer shall make available to Seller and its
Affiliates, representatives and agents those employees of the Business then
employed by Buyer requested by Seller in connection with any Action, other than
an Action between Buyer and Seller or any Action as to which the interests of
Buyer and Seller are adverse, including to provide testimony, to be deposed, to
act as witnesses and to assist counsel; PROVIDED, HOWEVER, that (x) such access
to such employees shall not unreasonably interfere with the normal conduct of
the operations of Buyer or any Affiliate thereof and (y) Seller shall reimburse
Buyer or any Affiliate thereof, as the case may be, for the out-of-pocket costs
reasonably incurred by Buyer or any Affiliate thereof in making such employees
available to Seller. Also, after the Closing Date, at Buyer's request, Seller
shall, and shall cause its Affiliates to, make available to Buyer and its
Affiliates, representatives and agents those former employees of the Business,
as well as such other employees of Seller and its Affiliates whose
responsibilities before the Closing related in any significant respect to the
Business, in each case only if then employed by Seller or an Affiliate thereof
and requested by Buyer in connection with any Action, other than an Action
between Buyer and Seller or any Action as to which the interests of Buyer and
Seller are adverse, including to provide testimony, to be deposed, to act as
witnesses and to assist counsel; PROVIDED, HOWEVER, that (x) such access to such
employees shall not unreasonably interfere with the normal conduct of the
operations of Seller and its subsidiaries and Affiliates and (y) Buyer shall
reimburse Seller or its subsidiaries and Affiliates, as the case may be, for the
out-of-pocket costs reasonably incurred by Seller or such subsidiaries and
Affiliates in making such employees available to Buyer. The parties intend that
the transfer of Books and Records to Buyer and its Affiliates pursuant to this
Agreement shall not constitute a waiver of any legal privilege relating to any
documents included in such Books and Records.
7.7 BULK SALES COMPLIANCE. Seller shall take all steps necessary to
comply with the provisions of any bulk sales or transfers law or similar law of
any jurisdiction in respect of the transactions contemplated by this Agreement
and the Ancillary Agreements.
7.8 AGREEMENT NOT TO COMPETE.
(a) For a period of five years from the Agreement Date, Seller
shall not, and Seller shall cause each of its Affiliates not to, own, lease,
manage, operate or control, or participate in the ownership, lease, management,
operation or control of, or have any interest in (as a shareholder, director,
officer, employee, agent, partner, creditor or otherwise), any Person which
owns, leases, manages, operates or controls, any business or activity, anywhere
in the world, which is similar to or competes in any way, directly or
indirectly, with the Business in any geographic area where Seller or any of its
Affiliates engaged in the Business or otherwise established its goodwill (a
"Competitive Business"); PROVIDED, HOWEVER, that nothing in the foregoing shall
prevent Seller and/or its Affiliates from owning,
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in the aggregate, not more than five percent (5%) of the outstanding voting
stock or other equity interests in any Person with shares or equity interests
registered pursuant to Sections 12(b) or 12(g) of the Exchange Act; PROVIDED
FURTHER, that the restrictions set forth in this subsection 7.8(a) shall not
apply in the case of a direct or indirect acquisition by Seller or any Affiliate
thereof (as long as the Competitive Business represents less than five percent
(5%) of the total annual sales volume of such Person or business for such
Person's or business' most recent full fiscal year), or a merger, reorganization
(as defined in Section 181 of the California Corporations Code) or consolidation
of Seller or any Affiliate thereof with, another Person or business engaged in a
Competitive Business.
(b) For a period of one year from the Agreement Date, Seller shall
not, and Seller shall cause each of its Affiliates not to, (i) solicit, hire or
retain as an employee, consultant or independent contractor any employee of
Buyer or any of its Affiliates who was engaged in the Business (whether before
or after the Closing Date), unless such employee has ceased to be employed by
Buyer or any of its Affiliates for at least six months, or (ii) solicit, suggest
or encourage any former, current or future employee of or consultant or
independent contractor to the Business to work for, consult with or provide
services to (whether before of after any such relationship with Buyer
terminates) or for any person or business that engages in any business or
activity which is similar to or competes in any way, directly or indirectly,
with the Business.
(c) Seller acknowledges that the restrictions set forth in this
Section 7.8 are reasonable in duration and geographic scope, and that Seller
engaged in the Business or otherwise established its goodwill throughout the
United States, the European Community, Japan, The Republic of South Korea,
Taiwan, Australia, Singapore, Thailand and Malaysia. Buyer and Seller each
intend that this Section 7.8 be enforced to the fullest extent permitted by
applicable law, and Buyer and Seller each hereby waive any rule or law that
would render any provision, portion of any provision or scope of any provision
of this Section 7.8 contrary to law, invalid, illegal, unenforceable or
unreasonable.
(d) Without limiting the generality of Section 14.5, if the final
judgment of a Governmental Authority of competent jurisdiction declares that any
term or provision of this Section 7.8 is invalid or unenforceable, the
Governmental Authority making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration or area of
such term or provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision of this Section 7.8 with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
7.9 NOTIFICATION. Seller shall give prompt notice to Buyer, and Buyer
shall give prompt notice to Seller, of (a) the occurrence, or failure to occur,
of any known event which occurrence or failure would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the Agreement Date through
the Closing Date; or (b) any known failure of Seller or Buyer to comply with,
perform or satisfy in any material respect any covenant or comply with, perform
or satisfy any condition contained in this Agreement to be complied with,
performed or satisfied by either such party. From time to time prior to the
Closing Date, Seller
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will promptly supplement or amend the Disclosure Schedule with respect to any
matter hereafter arising or discovered which, if existing or occurring at or
discovered prior to the Agreement Date, would have been required to be set forth
or described in the Disclosure Schedule or which is necessary to correct any
information in the Disclosure Schedule or in any representation and warranty of
Seller contained in Article V which has been rendered inaccurate thereby;
PROVIDED, HOWEVER, that no supplement or amendment to the Disclosure Schedule
shall affect Buyer's rights and remedies for a breach of any representation or
warranty based upon the content of the Disclosure Schedule as originally
prepared and attached to this Agreement as of the Agreement Date.
7.10 TRANSITION SERVICES.
(a) For the period after the Closing Date until Buyer otherwise
notifies Seller in writing, such period not to exceed six months after the
Closing Date (the "Transition Period"), Seller shall provide to Buyer any
administrative services reasonably requested by Buyer in order to continue the
Business (the "Transition Services"); PROVIDED, HOWEVER, that the Transition
Services shall not include (i) any services not provided by Seller to the
Business in the ordinary course as of the Closing, or (ii) any legal,
environmental, medical, emergency response, OSHA compliance or import-export
services. During the Transition Period, Buyer shall use its commercially
reasonable efforts to cease the Transition Services by eliminating the need for,
providing to itself, or otherwise obtaining such services.
(b) Buyer shall reimburse Seller for all of Seller's (i) normal
direct labor charges (including overtime) for actual time devoted to performance
of the Transition Services requested by Buyer, plus an allocation (based on such
actual time) of fringe benefit costs, then multiplied by a factor of 1.2 for
overhead, and (ii) out-of-pocket expenses (including materials costs consumed in
providing such services), all to the extent reasonably incurred and necessary to
provide the Transition Services. Any reimbursement required to be made by Buyer
to Seller under this Section 7.10 shall be made to Seller within 30 days after
Buyer's receipt of Seller's invoice therefor, which invoice shall include
supporting documentation providing, in reasonable detail, a description of all
amounts subject to reimbursement.
7.11 SHARED SPACE.
(a) During the period from the Closing Date until Seller ceases
leasing any real property used in the Business other than the Real Property (the
"Shared Space"), but in any event not longer than six months after the Closing
Date (the "Use Period"), Buyer shall have the right to continue using the Shared
Space to the same extent and for the same purposes that the Business used the
Shared Space as of the Closing Date. On or before the Closing Date, Seller
shall deliver to Buyer a schedule specifying the locations and square footage of
the Shared Space. Buyer shall pay to Seller, on the first day of each calendar
month during the Use Period (prorated for the first and last months) an amount
calculated on the same basis as costs were allocated to the Business as of the
Closing Date or based upon the percentage of the square feet in each Seller
Office occupied by the Shared Space located therein (the "Office Payments"),
whichever is less. On or before the Closing Date, Seller shall deliver to Buyer
a schedule specifying the estimated monthly Office Payments calculated in
accordance with the above.
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(b) Seller shall have no obligation to continue leasing, occupying
or using any or all of the Shared Space. Subject to this subsection 7.11(b),
Seller may elect, to terminate its lease of, or cease occupying or using, the
Shared Space at any time, whether or not Seller's occupancy agreement or lease
with respect to any Seller Office has terminated or any option periods or
renewal or other rights remain with respect to the Shared Space. Buyer may,
from time to time, vacate any or all of the Shared Space upon 30 days prior
written notice to Seller, and shall thereafter have no obligation to pay Office
Payments with respect to such vacated Shared Space. In the event Seller elects
to discontinue leasing or occupying any of the Shared Space, Seller shall give
Buyer notice of such election concurrently with any notice that Seller delivers
to the owner of such Shared Space. Buyer shall have a right of first refusal
with respect to obtaining an assignment of the lease, sublease or occupancy
agreement to Buyer, to the extent such assignment is permitted under the lease,
sublease or occupancy agreement, and applicable law, PROVIDED THAT Buyer shall
not be required to pay any amounts to Seller, as consideration or otherwise, for
such assignment.
7.12 SEPARATE SALE OF MACHINES.
(a) During the period between the Agreement Date and the Closing
Date, Seller shall have the option (the "Put Option"), exercisable upon five
business days prior written notice to Buyer (the "Sale Notice"), of selling to
Buyer two new Kestrel 750 machines out of finished goods Inventories that are of
a merchantable quality in the ordinary course of business and include Seller's
standard warranty for such machines (the "Machines"). On or before the fifth
business day after Buyer's receipt of the Sale Notice, Seller shall sell,
transfer, deliver and assign the Machines to Buyer free and clear of all
Encumbrances and Buyer shall pay to Seller by wire transfer of immediately
available funds to an account designated in writing by Seller, the amount of
$3,000,000 as payment in full for the Machines. In the event Seller elects to
exercise the Put Option, the Closing Payment payable under Section 2.4 shall be
reduced by an amount equal to $3,000,000. The sale of the Machines pursuant to
the Put Option shall be final and binding in all events except as set forth in
subsection 7.12(c).
(b) Notwithstanding the foregoing, prior to the earlier of (i) the
Closing, (ii) the termination of this Agreement by Buyer pursuant to subsections
13.1(c) or 13.1(d), or (iii) the expiration of the Exercise Period (defined
below), Buyer shall not operate, disassemble or sell the Machines to any third
Person and shall keep the Machines in a segregated secure facility in Buyer's
warehouse and not permit access to the Machines without Seller's consent and
will not encumber the Machines. Upon expiration of the foregoing restrictions,
Seller shall grant to Buyer a license under any applicable intellectual property
rights owned or controlled by Seller to modify, use or sell the Machines, alone
or in combination with other components.
(c) In the event that the sale of the Machines pursuant to the Put
Option is consummated and this Agreement shall be terminated or either party
shall have the right to terminate prior to Closing for any reason other than by
Buyer pursuant to subsections 13.1(c) or 13.1(d), then Seller shall have the
further option (exercisable within 20 business days of any such termination or
event resulting in a right to terminate (the "Exercise Period")), upon five
business days prior written notice to Buyer (the "Repurchase Notice"), to
repurchase the Machines from Buyer. On or before the fifth
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business day after Buyer's receipt of the Repurchase Notice, Buyer shall deliver
the Machines to Seller and Seller shall pay to Buyer by wire transfer of
immediately available funds to an account designated in writing by Buyer, the
amount of $3,000,000.
7.13 EARNOUT. On a monthly basis (in arrears) beginning on the first day
of the month on the second month following the Closing Date, as and to the
extent that any portion of the Booked Revenue (as defined below) is actually
collected from the customer during each such monthly period by Buyer, Buyer
shall pay to Seller by wire transfer of immediately available funds to an
account designated in writing by Seller, an amount equal to one-third of the
amount (if any) by which (a) gross revenues generated from the sale by Buyer or
Seller of (i) high energy MeV ion implantation systems manufactured by Seller
prior to the Closing (or substantially similar high energy MeV ion implantation
systems derived therefrom and manufactured by Buyer after the Closing) and
(ii) service and spare parts for such systems, in each case during the calendar
year 1998 and actually collected from the customer (the "Booked Revenue") shall
exceed (b) $30,000,000; PROVIDED, HOWEVER, that (x) during the period between
the Agreement Date and the Closing Date, Booked Revenue by Seller shall only
include revenues from sales on terms not outside the ordinary course of business
and at the projected sales prices set forth on Schedule 7.13, (y) Booked Revenue
shall not include the revenue, if any, generated by the resale of the Machines
pursuant to subsection 7.12(c), and (z) after the first $30,000,000 in Booked
Revenue is achieved, Booked Revenue thereafter shall not include revenues
generated from the sale of service or spare parts. Any amounts paid pursuant to
this subsection 7.13 shall be treated by the parties as an adjustment to the
Purchase Price.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF BUYER
The obligations of Buyer to effect the transactions contemplated herein
shall be subject to the fulfillment satisfaction or waiver, on or before the
Closing Date, of each of the following conditions:
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller contained in Article V shall be true and correct in all
material respects at and as of the Closing Date with the same effect as though
made at and as of the Closing Date, except that representations and warranties
made as of, or in respect of, only a specified date or period shall be true and
correct in all material respects in respect of, or as of, such date or period.
8.2 PERFORMANCE. Seller shall have performed and complied in all
material respects with all agreements and obligations required by this Agreement
to be performed or complied with by it on or prior to the Closing Date,
including delivery of each deliverable specified in Section 4.2.
8.3 HSR ACT. Any waiting period (and any extension thereof) under the
HSR Act applicable to the transactions contemplated hereby shall have expired or
shall have been terminated.
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8.4 ABSENCE OF GOVERNMENTAL ORDERS. No temporary or permanent
Governmental Order shall be in effect that prohibits or makes unlawful
consummation of the transactions contemplated hereby.
8.5 PERFECTION ACTIONS. On or prior to the Closing Date, the Seller
shall take all actions, including making all filings with the appropriate filing
offices, reasonably requested by Buyer in order to perfect, under applicable
law, the transfer of the Assets to the Buyer pursuant to the Agreement.
8.6 CERTAIN CONSENTS TO ASSIGNMENT. Without modification of the terms
of any such assigned contract or lease, Seller shall have obtained and delivered
to Buyer (i) the written consent of High Voltage Engineering Europa, B.V. to the
assignment from Seller to Buyer of the Joint Technology Development Agreement,
dated as of September 13, 1996, between Seller and High Voltage Engineering
Europa, B.V., and (ii) the written consent of the Landlord to the assignment
from Seller to Buyer of the Lease.
8.7 ENVIRONMENTAL REVIEW. Buyer shall have completed, and shall be
reasonably satisfied, based on a Phase II environmental review of the Real
Property, that there are no significant actual or potential Liabilities revealed
by such review.
8.8 KEY EMPLOYEES. At least 18 of the 24 Designated Employees that
Buyer and Seller have separately determined to be key employees of the Business
shall have accepted Buyer's offer of employment to commence at and after the
Closing Date. Such offer of employment shall be made in substantially the form
separately provided to Seller by Buyer; PROVIDED that Buyer shall be entitled to
increase the compensation or benefits in any such offer to any Designated
Employee.
8.9 SHAREHOLDER APPROVAL. The transactions contemplated hereby shall
have been approved by the shareholders of Seller as and to the extent required
by Section 1001(a)(2) of the California Corporations Code.
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF SELLER
The obligations of Seller to effect the transactions contemplated herein
shall be subject to the fulfillment, satisfaction or waiver, on or before the
Closing Date, of each of the following conditions:
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer contained in Article VI shall be true and correct in all
material respects at and as of the Closing Date with the same effect as though
made at and as of the Closing Date, except that representations and warranties
made as of, or in respect of, only a specified date or period shall be true and
correct in all material respects in respect of, or as of, such date, or period.
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9.2 PERFORMANCE. Buyer shall have performed and complied in all
material respects with all agreements and obligations required by this Agreement
to be performed or complied with by it on or prior to the Closing Date,
including delivery of each deliverable specified in Section 4.3.
9.3 HSR ACT. Any waiting period (and any extension thereof) under the
HSR Act applicable to the transactions contemplated hereby shall have expired or
shall have been terminated.
9.4 ABSENCE OF GOVERNMENTAL ORDERS. No temporary or permanent
Governmental Order shall be in effect that prohibits or makes unlawful
consummation of the transactions contemplated hereby.
9.5 SHAREHOLDER APPROVAL. The transactions contemplated hereby shall
have been approved by the shareholders of Seller as and to the extent required
by Section 1001(a)(2) of the California Corporations Code.
ARTICLE X
INDEMNIFICATION
10.1 SURVIVAL. All representations and warranties of Seller and Buyer
and their Affiliates contained in this Agreement and the Ancillary Agreements
(including all schedules and exhibits hereto and thereto and all certificates,
documents, instruments and undertakings furnished pursuant to this Agreement and
the Ancillary Agreements) shall survive the consummation of the transactions
contemplated hereby and thereby only through and until the expiration of one
year after the Closing Date (except for the representations and warranties set
forth in subsection 5.18 which shall survive for the applicable statute of
limitations). If written notice of a claim for breach of such representations
and warranties has been given on or before the expiration of one year after the
Closing Date (or prior to the expiration of the applicable statute of
limitations with respect to the representations and warranties set forth in
subsection 5.18), by a party in whose favor such representations and warranties
have been made to the party that made such representations and warranties, then
the relevant representations and warranties shall survive as to such claim,
until the claim has been finally resolved. Except as provided in Section 10.5,
all indemnification obligations of Seller and Buyer in this Agreement or the
Ancillary Agreements (including all schedules and exhibits thereto and all
certificates, documents, instruments and undertakings furnished pursuant to this
Agreement and the Ancillary Agreements) shall survive indefinitely. All
covenants, obligations and agreements of Buyer and Seller and their Affiliates
contained in this Agreement and the Ancillary Agreements (including all
schedules and exhibits hereto and thereto and all certificates, documents,
instruments and undertakings furnished pursuant to this Agreement and the
Ancillary Agreements) shall survive the consummation of the transactions
contemplated hereby and thereby.
10.2 INDEMNIFICATION BY SELLER. Except as otherwise limited by this
Article X, Seller shall indemnify and hold harmless Buyer, its subsidiaries and
Affiliates, any assignee or successor thereof, and each officer, director,
employee, agent and representative of each of the foregoing (collectively, the
"Buyer Indemnified Parties") from and against, and pay or reimburse the Buyer
Indemnified Parties for,
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any and all losses, Actions, Liabilities, damages, claims, costs and expenses
(including reasonable expenses of investigation and legal fees and costs in
connection therewith), interest, awards, judgments, penalties and Encumbrances
suffered or incurred by any of the Buyer Indemnified Parties (hereinafter a
"Buyer Loss") arising in whole or in part out of or resulting directly or
indirectly from:
(a) any breach of any representation or warranty of Seller or its
Affiliates in this Agreement or the Ancillary Agreements (including all
schedules and exhibits hereto and thereto and all certificates, documents,
instruments and undertakings furnished pursuant to this Agreement and the
Ancillary Agreements or made in connection herewith or therewith);
(b) any breach of any covenant, obligation or agreement of Seller
or its Affiliates in this Agreement or the Ancillary Agreements (including all
schedules and exhibits hereto and thereto and all certificates, documents,
instruments and undertakings furnished pursuant to this Agreement and the
Ancillary Agreements or made in connection herewith and therewith);
(c) any Retained Liability; and
(d) any Liability relating to (i) any Business Employee who is not
a Designated Employee but whose employment or employment-related rights transfer
to Buyer or any of its Affiliates by operation of law or contract (other than
this Agreement) as a result of the consummation of the transactions contemplated
hereby (including Liabilities for all costs reasonably incurred by Buyer,
including any severance payments, in connection with Buyer's termination of the
employment of any such Business Employee within 90 days after the Closing Date);
and (ii) any compensation rights, employment benefits or other terms of
employment of Business Employees that Buyer or any of its Affiliates becomes
obligated to pay, provide or assume by operation of law or contract (other than
this Agreement) as a result of the consummation of the transactions contemplated
hereby and that are inconsistent with the terms set forth in subsections 12.1(a)
and 12.1(c).
10.3 INDEMNIFICATION BY BUYER. Except as otherwise limited by this
Article X, Buyer shall indemnify and hold harmless Seller, its subsidiaries and
Affiliates, any assignee or successor thereof, and each officer, director,
employee, agent and representative of each of the foregoing (collectively, the
"Seller Indemnified Parties") from and against, and pay or reimburse the Seller
Indemnified Parties for, any and all losses, Actions, Liabilities, damages,
claims, costs and expenses (including reasonable expenses of investigation and
legal fees and costs in connection therewith), interest, awards, judgments,
penalties and Encumbrances suffered or incurred by any of the Seller Indemnified
Parties (hereinafter a "Seller Loss") arising solely out of or resulting
directly from:
(a) any breach of any representation or warranty of Buyer or its
Affiliates in this Agreement or the Ancillary Agreements (including all
schedules and exhibits hereto and thereto and all certificates, documents,
instruments and undertakings furnished pursuant to this Agreement and the
Ancillary Agreements or made in connection herewith and therewith);
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(b) any breach of any covenant, obligation or agreement of Buyer
or its Affiliates in this Agreement or the Ancillary Agreements (including all
schedules and exhibits hereto and thereto and all certificates, documents,
instruments or undertakings furnished pursuant to this Agreement and the
Ancillary Agreements or made in connection herewith and therewith); and
(c) any Assumed Liability.
10.4 GENERAL INDEMNIFICATION PROVISIONS.
(a) For the purposes of this Section 10.4 and Section 10.5, the
term "Indemnitee" shall refer to the Person or Persons indemnified, or entitled,
or claiming to be entitled, to be indemnified, pursuant to the provisions of
Section 10.2 or 10.3, as the case may be; the term "Indemnitor" shall refer to
the Person having the obligation to indemnify pursuant to such provisions; and
"Losses" shall refer to Seller Losses or Buyer Losses, as the case may be.
(b) Within a reasonable time following the determination thereof,
an Indemnitee shall give the Indemnitor written notice of any matter which such
Indemnitee has determined has given rise to a right of indemnification under
this Agreement (regardless of whether a claim for indemnification otherwise
would be limited or prohibited by subsection 10.5(a)), stating the amount of the
Loss, if known, and method of computation thereof, all with reasonable
particularity and containing a reference to the provisions of this Agreement in
respect of which such right of indemnification is claimed or arises (subject to
the last sentence of this subsection). The obligations and Liabilities of any
party under this Article X with respect to Losses arising from claims,
assertions, events or proceedings of any third party (including claims by any
assignee or successor of the Indemnitee or any Governmental Authority), which
are subject to the indemnification provided for in this Article X ("Third Party
Claims") shall be governed by and be subject to the following additional terms
and conditions: If any Indemnitee shall receive written notice of any Third
Party Claim, the Indemnitee shall promptly give the Indemnitor written notice of
such Third Party Claim (subject to the last sentence of this subsection) and
shall permit the Indemnitor, at its option, to participate in the defense of
such Third Party Claim by counsel of its own choice and at its expense. If the
Indemnitor acknowledges in writing its obligation to indemnify the Indemnitee
hereunder against any Loss (without limitation) that may result from such Third
Party Claim, then the Indemnitor shall be entitled, at its option, to assume and
control the defense against such Third Party Claim at its expense and through
counsel of its choice if it gives written notice of its intention to do so to
the Indemnitee within 15 calendar days of the receipt of notice of such Third
Party Claim from Indemnitee, unless, in the reasonable opinion of counsel for
the Indemnitee, there is a conflict or a potential conflict of interest between
the Indemnitee and the Indemnitor in such Action, in which event the Indemnitee
shall be entitled to direct the defense with respect to those issues as to which
such conflict exists with separate counsel of its choice reasonably acceptable
to the Indemnitor. The fees and expenses of any such separate counsel shall be
borne by the Indemnitor. In the event that the Indemnitor exercises its right
to undertake the defense against any such Third Party Claim as provided above,
the Indemnitee shall cooperate with the Indemnitor in such defense and make
available to the Indemnitor, at Indemnitor's expense, all witnesses, pertinent
records, materials and information in its possession or under its control
reasonably relating thereto as is required by the Indemnitor. Similarly,
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in the event the Indemnitee is, directly or indirectly, conducting the defense
against any Third Party Claim, the Indemnitor shall cooperate with the
Indemnitee in such defense and make available to it all witnesses, pertinent
records, materials and information in its possession or under its control
reasonably relating thereto as is reasonably required by the Indemnitee. No
such Third Party Claim, except the settlement thereof which involves the payment
of money only either by a party other than the Indemnitee or for which the
Indemnitee is totally indemnified (without limitation) by the Indemnitor and
the unconditional release from all related liability of the Indemnitee, may be
settled by the Indemnitor without the written consent of the Indemnitee. In the
event that an Indemnitee reasonably determines, and gives notification to the
Indemnitor, that the failure to resolve a Third Party Claim is having a material
adverse effect on the Indemnitee's ongoing business, and as a result the
Indemnitee wishes to propose a settlement of the Third Party Claim and the third
party will unconditionally release the Indemnitor from any and all Liabilities
relating to or arising from such Third Party Claim, then the Indemnitor shall
not unreasonably withhold its consent to such settlement. If the Indemnitor
does not consent to such settlement, the Indemnitee may settle the Third Party
Claim on the terms proposed without discharging the Indemnitor from its
liability hereunder with respect to such Third Party Claim. The foregoing
notwithstanding, the failure of any Indemnitee to give any notice required to be
given hereunder shall not affect such Indemnitee's right to indemnification
hereunder except to the extent the Indemnitor from whom such indemnity is sought
shall have been actually and materially prejudiced in its ability to defend the
claim or action for which such indemnification is sought by reason of such
failure.
(c) Payment by an Indemnitee to a third party with respect to a
Loss shall not affect such Indemnitee's rights to indemnification pursuant to
this Article X.
10.5 LIMITATIONS ON INDEMNIFICATION.
(a) Notwithstanding any provision to the contrary in this
Agreement or any of the Ancillary Agreements, there shall be no time, dollar or
other limitation on indemnification claims of Buyer made pursuant to clauses
(b), (c) or (d) of Section 10.2 or of Seller made pursuant to clauses (b) or (c)
of Section 10.3.
(b) No Indemnitor shall be liable for an indemnification claim
made under clause (a) of Section 10.2 or clause (a) of Section 10.3, as the case
may be, (x) to the extent the asserted Seller Losses (in the aggregate) or Buyer
Losses (in the aggregate), as the case may be, exceed an amount equal to 50% of
the Purchase Price or (y) for which notice of a matter for which indemnification
would be owed hereunder is not given on or before the expiration of one year
after the Closing Date (or the expiration of the applicable statute of
limitations with respect to the representations and warranties set forth in
subsection 5.18). The foregoing limitations shall not affect or apply to any
other indemnification provided by this Agreement.
(c) In addition to the time and dollar limitations set forth in
subsection 10.5(b), no Indemnitor shall be liable for any Seller Loss or Buyer
Loss, as the case may be, until such Seller Losses (in the aggregate) or Buyer
Losses (in the aggregate), as the cased by be, related to breaches of
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representations and warranties contained in Article V or Article VI, as the case
may be, exceed an amount equal to $1,000,000, in which case, the Indemnitor
shall be liable for all such Losses from the first dollar thereof.
10.6 RIGHT TO SET-OFF. The provisions of this Article X notwithstanding,
at its sole discretion and without limiting any other rights of Buyer or any of
its Affiliates under this Agreement or any Ancillary Agreement or at law or
equity, Buyer may satisfy an outstanding Buyer Loss in whole or in part by
reducing the amount of any payment due to Seller or any Affiliate thereof
pursuant to any agreement or arrangement between Buyer or any Affiliate thereof,
on the one hand, and Seller or any Affiliate thereof, on the other hand,
including any amounts owed by either Buyer or any Affiliate thereof pursuant to
any outstanding Seller Loss.
ARTICLE XI
TAX MATTERS
11.1 ALLOCATION OF PURCHASE PRICE. As soon as practicable after the
Closing Date, and in any event within 60 days of such date, Buyer shall prepare
and submit to Seller a computation of the sale price of the Assets in accordance
with the terms hereof and the allocation of such sale price among such Assets.
Such allocation shall be conclusive and binding on the parties hereto. All
values contained in such allocation shall be consistently reported by the
parties hereto and their Affiliates for Tax purposes in accordance with the
procedures reflected herein. Buyer and Seller hereby agree that such allocation
represents the fair market value of the Assets and will be made in accordance
with Section 1060 of the Code.
11.2 TAXES RELATING TO TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. All
Taxes imposed in connection with the transfer of the Assets, whether such Taxes
are assessed initially against Buyer or any Affiliate of Buyer or the Seller
Group, shall be borne and paid 50% by Seller and 50% by Buyer.
ARTICLE XII
EMPLOYEES AND EMPLOYEE BENEFIT PLANS
12.1 DESIGNATED EMPLOYEES.
(a) On or before the Closing Date, Buyer shall offer to employ,
effective as of the Closing Date, 120 Business Employees, to be identified by
Buyer in its sole discretion (collectively, the "Designated Employees"), from
the 143 Business Employees Buyer and Seller have separately identified. For any
Designated Employee, such employment shall be offered on terms which include
(i) the rate of wages or salary which the Designated Employee enjoyed with
Seller immediately prior to his or her termination, (ii) eligibility for all
employee benefit plans of Buyer (under the terms of those plans) to the same
extent as any similarly situated and geographically located employee of Buyer or
its Affiliates and (iii) credit for service with Seller for purposes of
(1) accruals under Buyer's Paid Personal
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Leave policy, (2) severance under Buyer's written severance policies and
(3) waiting periods for enrollment in Buyer's standard benefit plans.
(b) Seller and its Affiliates will use their best efforts to cause
the Designated Employees so offered employment to accept Buyer's offers of
employment. Between the Agreement Date and the Closing Date, (i) Seller shall
not decrease the rate of compensation, work schedule, benefits or other terms
and conditions of employment of any Designated Employee and (ii) Seller will
give notice to Buyer promptly after receiving any notice any Designated Employee
of any such Designated Employee's intention to resign his or her employment with
Seller or any Affiliate.
(c) Buyer and Seller shall offer Designated Employees the
following options with respect to vacation leave accrued with Seller as of the
date such Designated Employee's employment with Seller terminates: (i) be paid
directly by Seller an amount equal to the value of all such accrued vacation
time; (ii) have such accrued vacation time transferred to Buyer for an
equivalent amount of time under Buyer's Paid Personal Leave policy (provided
that such transferred vacation time shall not exceed 280 hours); or (iii) have
an amount equal to the value of some portion of such accrued vacation time paid
directly by Seller and have the remaining accrued vacation time transferred to
Buyer for an equivalent amount of time under Buyer's Paid Personal Leave policy
(provided that such amount of time shall not exceed 280 hours). Within 90 days
after Buyer hires any Designated Employee, Seller shall pay to Buyer an amount
equal to the value of any accrued vacation time such Designated Employee elects
to transfer to Buyer pursuant to the option given under this subsection.
12.2 COBRA. With respect to Designated Employees who are U.S. Business
Employees, Seller shall continue to provide for "continuation coverage" to or
for the benefit of each "covered employee" and each "qualified beneficiary"
entitled thereto by applicable law (as such terms are defined in Code
Section 4980B) for a period of at least 18 months after the Closing Date and
shall otherwise comply in all respects with the requirements (including notice
requirements) of Code Section 4980B as to each such covered employee and each
such qualified beneficiary with respect to whom a "qualifying event" (as defined
in Code Section 4980B) has occurred (or will occur) through the Closing Date,
including any such qualifying event that may occur as of the Closing or as a
result of the consummation of the transactions contemplated by this Agreement.
Buyer shall reimburse Seller for any actual premium costs paid by Seller in
connection with providing such continuation coverage to or for the benefit of
any Designated Employees pursuant to this Section 12.2, but excluding any
premium adjustment based on actual loss experience.
12.3 MODIFICATION OF CONFIDENTIALITY AND RELATED AGREEMENTS. Seller
agrees that disclosure of any information or provision of any services by any
Person who becomes an employee of Buyer or its Affiliates in connection with the
transactions contemplated hereby (a "New Employee") to Buyer or its Affiliates
shall not be a violation of any provision of any trade secret, confidentiality,
non-compete or comparable agreements entered into prior to the Closing between
Seller or its Affiliates, on the one hand, and any New Employee, on the other
hand.
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ARTICLE XIII
TERMINATION
13.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing:
(a) by the mutual written consent of Buyer and Seller; or
(b) by either Buyer or Seller, if the Closing shall not have
occurred by September 30, 1998; PROVIDED, HOWEVER, that the right to terminate
this Agreement pursuant to this subsection 13.1(b) shall not be available to any
party or parties whose failure to fulfill any obligation under this Agreement
shall have been the cause of, or shall have resulted in, the failure of the
Closing to occur prior to such date; or
(c) by Buyer, upon the breach in any material respect of any of
the representations and warranties of Seller contained herein or the failure by
Seller to perform and comply in any material respect with any of the agreements
and obligations required by this Agreement to be performed or complied with by
Seller, provided that such breach or failure is not cured within 30 days of
Seller's receipt of a written notice from Buyer that such a breach or failure
has occurred; or
(d) by Buyer, upon the institution of any Action, whether
voluntary or involuntary, seeking a decree or order for relief in respect of
Seller or its Affiliates under any bankruptcy, insolvency or other similar law
now or hereafter in effect, or for the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of Seller or
its Affiliates or for any part of its or their property or assets, or for the
winding-up or liquidation of Seller's or its Affiliates' affairs; or by Buyer if
Seller or its Affiliates shall make a general assignment for the benefit of
creditors, or shall fail generally to pay its or their debts as they become due,
or shall take any corporate action in furtherance of any of the foregoing; or
(e) by Seller, upon the breach in any material respect of any of
the representations and warranties of Buyer contained herein or the failure by
Buyer to perform and comply in any material respect with any of the agreements
and obligations required by this Agreement to be performed or complied with by
Buyer, provided that such breach or failure is not cured within 30 days of
Buyer's receipt of a written notice from Seller that such a breach or failure
has occurred; or
(f) by Buyer or Seller, if the approval of the shareholders of
Seller contemplated by this Agreement shall not have been obtained by reason of
the failure to obtain the required vote at a duly held meeting of shareholders
or of any adjournment thereof; or
(g) by Seller, if the Board of Directors of Seller reasonably
determines that an Acquisition Proposal constitutes a Superior Proposal;
PROVIDED, HOWEVER, that Seller may not terminate this Agreement pursuant to this
subsection 13.1(g) unless and until five business days have elapsed following
delivery to Buyer of a written notice of such determination by the Board of
Directors of Seller and during such five business day period Seller (x) informs
Buyer of the terms and conditions of the
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Acquisition Proposal and (y) otherwise fully cooperates with Buyer with respect
thereto with the intent of enabling Buyer to agree to a modification of the
terms and conditions of this Agreement so that the transactions contemplated
hereby may be effected; and PROVIDED, FURTHER, that Seller may not terminate
this Agreement pursuant to this subsection 13.1(g) unless at the end of such
five business day period the Board of Directors of Seller continues to
reasonably believe that the Acquisition Proposal constitutes a Superior
Proposal, such Board of Directors concludes in good faith after consultation
with its outside counsel that termination of this Agreement by Seller likely is
required to satisfy the fiduciary duties of such Board under California law, and
simultaneously with such termination Seller pays to Buyer the Termination Fee as
provided in Section 13.5 and enters into a definitive acquisition agreement to
effect the Superior Proposal.
13.2 WRITTEN NOTICE. In order to terminate this Agreement pursuant to
Section 13.1, the party so acting shall give written notice of such termination
to the other party, specifying the grounds thereof.
13.3 EFFECT OF TERMINATION. In the event of the termination of this
Agreement in accordance with Section 13.1, this Agreement (other than
Article XIV, which shall survive the termination hereof) shall become void and
have no effect, with no liability on the part of any party or its Affiliates,
directors, officers, employees, shareholders or agents in respect thereof;
PROVIDED, HOWEVER, that nothing herein shall relieve any party hereto from
liability for any breach of this Agreement.
13.4 WAIVER. At any time prior to the Closing, Buyer and Seller may by
mutual written agreement (a) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto or (c) waive compliance with any of the agreements or
conditions contained herein.
13.5 TERMINATION FEE. If this Agreement is terminated by Seller pursuant
to subsection 13.1(g), concurrently with such termination Seller shall pay to
Buyer a fee (the "Termination Fee") of $3,000,000 in cash, such payment to be
made by wire transfer of immediately available funds to an account designated by
Buyer.
ARTICLE XIV
GENERAL PROVISIONS
14.1 EXPENSES, TAXES, ETC. Except as otherwise provided in this
Agreement, each party will pay all fees and expenses incurred by it in
connection with this Agreement, the Ancillary Agreements and the transactions
contemplated hereby and thereby.
14.2 NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered or mailed if delivered personally or mailed by
registered or certified mail (postage prepaid, return receipt requested), or
sent by facsimile transmission, (confirmation received) to the parties at the
following addresses and facsimile transmission numbers (or at such other address
or number for a party as shall be specified by
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like notice), except that notices after the giving of which there is a
designated period within which to perform an act and notices of changes of
address or number shall be effective only upon receipt:
(a) If to Seller:
Genus, Inc.
1139 Karlstad Drive
Sunnyvale, CA 94089-2117
Attention: Chief Financial Officer
Telecopy No.:(408) 747-7198
Telephone No.: (408) 747-7120
with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, CA 94304-1050
Attention: Mr. Mario M. Rosati, Esq.
Telecopy No.:(650) 493-6811
Telephone No.: (650) 493-9300
(b) if to Buyer:
Varian Associates, Inc.
3050 Hansen Way
Palo Alto, CA 94304-1000
Attention: Chief Financial Officer
Telecopy No.:(415) 424-5754
Telephone No.: (415) 424-5320
with a copy to:
Varian Associates, Inc.
3050 Hansen Way
Palo Alto, CA 94304-1000
Attention: General Counsel
Telecopy No.:(415) 858-2018
Telephone No.: (415) 424-5352
14.3 DISCLOSURE SCHEDULE. The Disclosure Schedule shall be divided into
sections corresponding to the sections and subsections of this Agreement.
Disclosure of any fact or item in any Section of the Disclosure Schedule shall
be deemed to be disclosed and incorporated into any other Section where such
disclosure would be appropriate; PROVIDED, that specific cross-references shall
have been made for any information deemed to be included in one Disclosure
Schedule Section by reference to a different Disclosure Schedule Section;
PROVIDED, FURTHER that any Section or subsection herein for which there is no
specific exception in the Disclosure Schedule and lacks a disclosure in the
corresponding Section of the Disclosure Schedule shall be construed to have been
made without any such disclosure. Disclosure of any matter in the Disclosure
Schedule shall not constitute an admission
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or raise any inference that such matter constitutes a violation of law or an
admission of liability or facts supporting liability.
14.4 INTERPRETATION; CONFLICT BETWEEN AGREEMENTS.
(a) When a reference is made in this Agreement to Sections,
subsections, Schedules or Exhibits, such reference shall be to a Section,
subsection, Schedule or Exhibit to this Agreement unless otherwise indicated.
The words "include," "includes" and "including" when used herein shall be deemed
in each case to be followed by the words "without limitation." The word
"herein" and similar references mean, except where a specific Section or
Article reference is expressly indicated, the entire Agreement rather than any
specific Section or Article. The table of contents and the headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. Except as otherwise
expressly provided herein, all monetary amounts referenced in this Agreement
shall mean U.S. dollars.
(b) In the event of any inconsistency, conflict or ambiguity as to
the rights and obligations of the parties under this Agreement and any Ancillary
Agreement, the terms of this Agreement shall control and supersede any such
inconsistency, conflict or ambiguity.
(c) Any references in this Agreement to the "best knowledge" or
"knowledge" of Seller or the Seller Group or to matters "known" to Seller or the
Seller Group, shall mean the actual knowledge without inquiry or investigation
(other than reviewing this Agreement) of only the Persons listed on Schedule
14.4(c).
14.5 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of statute, law,
regulation, Governmental Order or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner adverse to any party. In such event, any
such term or provision shall be deemed, without further action on the part of
the parties hereto, modified, amended and limited to the extent necessary to
render the same and the remainder of this Agreement valid, enforceable and
lawful.
14.6 ASSIGNMENT. This Agreement may not be assigned by operation of law
or otherwise, except that Buyer (including its Affiliates) may assign its rights
and benefits hereunder and under the Ancillary Agreements (provided that Buyer
or its Affiliates, as applicable, shall remain responsible for its obligations
hereunder) (a) to any Affiliate of Buyer, (b) to any Person acquiring all or
substantially all of the assets and properties of the Business, as such Business
is then conducted by Buyer and its Affiliates or (c) to any Person acquiring a
distinct line or division of such Business, with respect to the rights and
benefits of Buyer hereunder that pertain thereto. Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects upon and
inure to the benefit of the successors and permitted assigns of Buyer and
Seller.
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14.7 NO THIRD-PARTY BENEFICIARIES. This Agreement is for the sole
benefit of the parties hereto and their permitted assigns and nothing herein
expressed or implied shall give or be construed to give to any Person, other
than the parties hereto and such assigns, any legal or equitable rights
hereunder.
14.8 AMENDMENT, OTHER REMEDIES AND WAIVER.
(a) This Agreement may not be amended or modified except by an
instrument in writing signed by Seller and Buyer.
(b) The rights and remedies of the parties to this Agreement are
cumulative and not alternative of any other remedy conferred hereby or by law or
equity, and the exercise of any remedy will not preclude the exercise of any
other.
(c) Neither the failure nor any delay by any party in exercising
any right, power or privilege under this Agreement or any Ancillary Agreement
will operate as a waiver of such right, power or privilege, and single or
partial exercise of any such right, power or privilege will preclude any other
or further exercise of such right, power or privilege or the exercise of any
other right, power or privilege. To the maximum extent permitted by law, (i) no
Action or right arising out of this Agreement or the Ancillary Agreements can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
Action or right unless in a writing signed by the other party; (ii) no waiver
that may be given by a party will be applicable except in the specific instance
for which it is given; and (iii) no notice to or demand on one party will be
deemed to be a waiver of any obligation of such party or of the right of the
party giving such notice or demand to take further action without notice or
demand as provided in this Agreement or the documents referred to in this
Agreement.
14.9 FURTHER ASSURANCES. Each of Buyer and Seller agrees to
(a) cooperate fully with the other party, and to cause its Affiliates to
cooperate fully, (b) execute and cause such Affiliates to execute such further
instruments, documents and agreements, and (c) give such further written
assurances as may be reasonably requested by Buyer or Seller, as the case may
be, to evidence and reflect the transactions described herein and contemplated
hereby and to carry into effect the intents and purposes of this Agreement. If
at any time and from time to time after the Closing Date (without limitation as
to time or otherwise) Buyer reasonably determines that all of Seller's or its
Affiliate's rights, title and interests in and to an Asset has failed to be
fully transferred and conveyed in accordance with this Agreement, Buyer or an
Affiliate thereof, as the case may be, then Seller shall cause such Asset to be
transferred and conveyed to Buyer or an Affiliate thereof in accordance with
this Agreement as soon as reasonably practicable after notice from Buyer to
Seller. If requested by Buyer, Seller shall prosecute or otherwise enforce in
its own name (or that of an Affiliate thereof) for the benefit of Buyer any
claims, rights or benefits that are transferred to Buyer and its Affiliates by
this Agreement and that require prosecution or enforcement in the name of Seller
(or any such Affiliate). Any prosecution or enforcement of claims, rights or
benefits under this Section 14.9 shall be solely at Buyer's expense, unless the
prosecution or enforcement is made necessary by a breach of this Agreement by
Seller or any Affiliate thereof. Following the Closing Date, Seller and its
Affiliates shall refer to Buyer and its Affiliates, as
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appropriate, as promptly as practicable, any telephone calls, letters, orders,
notices, requests, inquiries and other communications relating to the Assets and
the Business.
14.10 MUTUAL DRAFTING. This Agreement is the joint product of Buyer and
Seller and each provision hereof has been subject to the mutual consultation,
negotiation and agreement of Buyer and Seller and shall not be construed for or
against any party hereto.
14.11 GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of California (without giving effect
to its choice of law principles).
14.12 DISPUTE RESOLUTION. Any dispute, controversy or claim between the
parties relating to, arising out of or in connection with this Agreement or the
Ancillary Agreements (or any subsequent agreements or amendments thereto),
including as to their existence, enforceability, validity, interpretation,
performance, indemnification, breach or damages, including claims in tort,
whether arising before or after the termination of this Agreement, shall be
settled only by binding arbitration pursuant to the Commercial Arbitration
Rules, as then amended and in effect, of the American Arbitration Association
(the "Rules"), subject to the following:
(a) The arbitration shall take place in Santa Clara County,
California, and in no other place.
(b) There shall be three arbitrators, who shall be selected under
the normal procedures prescribed in the Rules, except that one such arbitrator
shall be a certified public accountant and one arbitrator (who shall chair the
arbitration panel) shall be a member of the American College of Trial Lawyers.
(c) Subject to legal privileges, each party shall be entitled to
discovery in accordance with the Federal Rules of Civil Procedure.
(d) The arbitrators shall comply with Section 14.11, provided that
the procedural law shall be the U.S. Arbitration Act, as amended, to the extent
not inconsistent with the Rules and this Section 14.12.
(e) At the arbitration hearing, each party may make written and
oral presentations to the arbitrator, present testimony and written evidence and
examine witnesses.
(f) The arbitrators' decision shall be in writing, shall be
binding and final and may be entered and enforced in any court of competent
jurisdiction.
(g) The arbitrators shall have the authority to grant injunctive
relief and order specific performance.
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(h) No party shall be eligible to receive, and the arbitrators
shall not have the authority to award, exemplary or punitive damages.
(i) Each party to the arbitration shall bear their own attorney's
fees and costs, but shall pay one-half of the fees and expenses of the
arbitrators and the American Arbitration Association.
14.13 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
14.14 PUBLIC ANNOUNCEMENTS. Neither Buyer, Seller nor the representatives
of either of them shall issue to the media any news release or other public
announcement with respect to this Agreement or the transactions contemplated
hereby without the prior written consent of the other party hereto. The
foregoing notwithstanding, any such news release or other public announcement
may be made if required by applicable law or a securities exchange rule,
provided that the party required to make such news release or other public
announcement shall confer with the other party concerning the timing and content
of such news release or other public announcement before the same is made.
Buyer and Seller will consult with each other concerning the means by which
employees, customers and suppliers and others having dealings with Seller and
its Affiliates with respect to the Business will be informed of the transactions
contemplated hereby, and Buyer shall be allowed to have present for any such
communication a representative of Buyer.
14.15 ENTIRE AGREEMENT. This Agreement, together with all Schedules and
Exhibits hereto, and the documents and instruments and other agreements among
the parties delivered pursuant hereto, as well as the letter agreement between
Buyer and Seller entered into concurrently herewith, constitute the entire
agreement and supersede all prior agreements and undertakings, both written and
oral, among Buyer and Seller with respect to the subject matter hereof and are
not intended to confer upon any other Person any rights or remedies hereunder,
except as otherwise expressly provided herein.
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IN WITNESS WHEREOF, Buyer and Seller have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
VARIAN ASSOCIATES, INC.,
a Delaware corporation
By: /s/ J. Tracy O'Rourke
-------------------------------------
Name: J. Tracy O'Rourke
Title: Chairman and
Chief Executive Officer
GENUS, INC.
a California corporation
By: /s/ James T. Healy
-------------------------------------
Name: James T. Healy
Title: President and
Chief Executive Officer
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EXHIBIT 1.1(a)
CROSS-LICENSE AGREEMENT
BETWEEN
VARIAN ASSOCIATES, INC.
("VARIAN")
AND
GENUS, INC.
("GENUS")
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. License Grants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Genus To Varian . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Varian To Genus . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. Ownership of Intellectual Property. . . . . . . . . . . . . . . . . . . . 3
4. Enforcement of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
6. Term and Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7. Assignment of License . . . . . . . . . . . . . . . . . . . . . . . . . . 5
8. Extent of Certain Obligations . . . . . . . . . . . . . . . . . . . . . . 5
9. Miscellaneous Provisions. . . . . . . . . . . . . . . . . . . . . . . . . 6
9.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
9.2 Section 365(n) of the U.S. Bankruptcy Code. . . . . . . . . . . . . 6
9.3 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
9.4 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
9.5 No Third-Party Beneficiaries. . . . . . . . . . . . . . . . . . . . 7
9.6 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
9.7 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . 7
9.8 Mutual Drafting . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9.10 Dispute Resolution. . . . . . . . . . . . . . . . . . . . . . . . . 8
9.11 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9.12 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
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<PAGE>
CROSS-LICENSE AGREEMENT BETWEEN VARIAN AND GENUS
CROSS-LICENSE AGREEMENT (the "Cross License Agreement") dated as of
________, 1998, by and between Varian Associates, Inc., a Delaware corporation
("Varian"), and Genus, Inc., a California corporation ("Genus"). This Cross
License Agreement shall be effective as of the Closing Date of the Asset
Purchase Agreement referenced below (the "Effective Date").
RECITALS
A. Genus, directly and indirectly through various foreign and domestic
affiliates of Genus, is engaged in the business of developing, manufacturing and
distributing ion implant systems through the Business (as defined in the Asset
Purchase Agreement, for purposes hereof, the "Business");
B. Genus, directly and indirectly through various foreign and domestic
affiliates of Genus, is also engaged in the business of developing,
manufacturing and distributing chemical vapor deposition thin film deposition
systems, through its CVD Business (the "CVD Business");
C. Pursuant to the Asset Purchase Agreement, dated as of April 15, 1998
(the "Asset Purchase Agreement"), by and between Genus and Varian, Genus has
agreed to sell and cause to be transferred to Varian, and Varian has agreed to
purchase and accept the transfer from Genus and Genus's Affiliates, certain of
the assets and properties used in the Business, including the Owned Intellectual
Property.
D. Pursuant to the Asset Purchase Agreement, Genus retains ownership of
certain intellectual property rights primarily used in the development,
manufacture, testing and sale of the products of the CVD Business (the "Licensed
Intellectual Property"), and is willing to grant Varian a license under these
intellectual property rights.
E. Genus desires to receive, and Varian is willing to grant, a license
under the Owned Intellectual Property transferred to Varian pursuant to the
terms of this Cross License Agreement.
F. Varian desires to receive, and Genus is willing to grant, a license
under the Licensed Intellectual Property pursuant to the terms of this Cross
License Agreement.
THEREFORE, in consideration of these premises and the respective
representations, warranties and agreements contained herein, the parties agree
as follows:
<PAGE>
1. DEFINITIONS
1.1 "Asset Purchase Agreement" means the Asset Purchase Agreement
effective April 15, 1998, by and between Genus and Varian, by which Varian is
purchasing from Genus certain of the assets and business of the Business.
1.2 "Assets" has the same meaning as the term Assets as defined in
the Asset Purchase Agreement.
1.3 "Closing Date" has the same meaning as the term Closing Date
as defined in the Asset Purchase Agreement.
1.4 "CVD Business" has the same meaning as the term CVD Business
as defined in the Asset Purchase Agreement.
1.5 "CVD Products" means the products or components thereof
manufactured by the CVD Business as a current part of its business operation as
of the Effective Date, and products currently in development by the CVD Business
and derivative products thereof and improvement products thereof.
1.6 "Excluded Assets" has the same meaning as the term Excluded
Assets as defined in the Asset Purchase Agreement.
1.7 "Genus Field of Use" means: thin film deposition products,
including CVD Products.
1.8 "Genus Licensed Products" means: semiconductor manufacturing
equipment in the Genus Field of Use developed, manufactured, sold or used by
Genus and its Subsidiaries, excluding Implant Products.
1.9 "Implant Products" means the products or components thereof
manufactured by the Business as a current part of its business operation as of
the Effective Date, and products currently in development by the Business and
derivative products thereof and improvement products thereof.
1.10 "Licensed Intellectual Property" has the same meaning as the
term Licensed Intellectual Property as defined in the Asset Purchase Agreement.
1.11 "Owned Intellectual Property" has the same meaning as the term
Owned Intellectual Property as defined in the Asset Purchase Agreement.
1.12 "Subsidiary" means, with respect to a specified company, an
entity controlled, directly or indirectly, by such company on the date hereof or
thereafter through ownership, directly or indirectly by such company, of 50% or
more of such entity's outstanding voting stock.
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<PAGE>
1.13 "Term" means the period starting with the Effective Date and
continuing until the termination or expiration of this Cross License Agreement,
as provided in Section 6.1.
1.14 "Varian Field of Use" means: products other than CVD Products.
1.15 "Varian Licensed Products" means any semiconductor
manufacturing equipment in the Varian Field of Use developed, manufactured, sold
or used by Varian and its Subsidiaries and shall include without limitation, the
Implant Products.
2. LICENSE GRANTS
2.1 GENUS TO VARIAN: Genus hereby grants to Varian, upon the
terms and conditions herein specified, a royalty free, nonexclusive,
irrevocable, world wide, perpetual license under the Licensed Intellectual
Property to make, have made, use and sell Varian Licensed Products, and
components thereof.
2.1.1 Genus hereby grants to Varian a sublicense, without the
right to grant further sublicenses, of all sublicensable rights granted to Genus
in licenses from third parties that are Excluded Assets, but which relate to the
ownership or use of the Owned Intellectual Property and the Licensed
Intellectual Property, that are required to permit Varian to conduct business in
the Varian Field of Use.
2.2 VARIAN TO GENUS: Varian hereby grants to Genus, upon the
terms and conditions herein specified, a royalty free, nonexclusive,
irrevocable, world wide, perpetual license under the Owned Intellectual Property
to make, have made, use and sell Genus Licensed Products, and components
thereof.
2.2.1 Varian hereby grants to Genus a sublicense, without the
right to grant further sublicenses, of all sublicensable rights granted to Genus
in licenses from third parties that are Assets transferred to Varian, but which
relate to the ownership or use of the Licensed Intellectual Property and are
required to permit Genus to conduct business in the Genus Field of Use.
2.3 SUBSIDIARIES. The license rights granted hereunder to each of
Genus and Varian shall extend to and may be exercised by Subsidiaries of either
party. References herein to a party in this Section 2 and Section 5 below shall
be deemed to refer to such party and each of its Subsidiaries. Each party shall
be liable and responsible for full compliance with this Cross License Agreement
by each of its Subsidiaries.
3. OWNERSHIP OF INTELLECTUAL PROPERTY
3.1 Genus shall retain ownership of the Licensed Intellectual
Property subject to the licenses granted in Section 1.15 of this Cross License
Agreement. This Cross License Agreement shall
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<PAGE>
not transfer any ownership rights to Varian in the Licensed Intellectual
Property, and shall not transfer any ownership rights to Genus in the Owned
Intellectual Property.
3.2 The licenses granted hereunder shall not extend to any
improvements, enhancements, modifications or inventions developed or created by
a party after the Effective Date, and the party developing or creating such
improvements, enhancements or inventions after the Effective Date shall be the
sole and exclusive owner thereof.
4. ENFORCEMENT OF RIGHTS
4.1 Genus may, at its sole option and expense, take action against
any infringement or misappropriation of the Licensed Intellectual Property. Any
recovery by Genus as a result of such action shall belong exclusively to Genus.
4.2 Varian may, at its sole option and expense, take action
against any infringement or misappropriation of the Owned Intellectual Property.
Any recovery by Varian as a result of such action shall belong exclusively to
Varian.
5. CONFIDENTIALITY
5.1 Varian shall throughout the Term of this Cross License
Agreement hold all confidential information relating to Licensed Intellectual
Property received from Genus in confidence, and shall preserve such confidential
information against any disclosure to third parties except as otherwise
expressly provided herein, using the same degree of care it exercises with its
own proprietary information of a like nature; provided, however, that
confidentiality shall not apply to information which is or becomes published or
publicly known through no fault of Varian; or which is rightfully received by
Varian from a third party without an obligation of secrecy; and, provided,
further, that Varian shall not be obliged to keep in confidence any information
that is inherently disclosed by the sale of CVD Products or of Varian Licensed
Products.
5.2 Genus shall throughout the Term of this Cross License
Agreement hold all confidential information relating to Owned Intellectual
Property in confidence, and shall preserve such confidential information against
any disclosure to third parties, except as otherwise expressly provided herein,
using the same degree of care it exercises with its own proprietary information
of a like nature; provided, however, that confidentiality shall not apply to any
information which is or becomes published or publicly known through no fault of
Genus; or which is rightfully received by Genus from a third party without an
obligation of secrecy; and, provided, further, that Genus shall not be obliged
to keep in confidence any such information that is inherently disclosed by the
sale of Varian Licensed Products or of CVD Products.
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<PAGE>
5.3 Notwithstanding the foregoing, Genus shall have the right to
disclose the confidential information relating to the Owned Intellectual
Property and Varian shall have the right to disclose the confidential
information relating to the Licensed Intellectual Property as is reasonably
required in the exercise of its license rights hereunder provided the recipient
of such information agrees in writing to be bound by confidentiality provisions
no less restrictive than this Section 5 with respect to any such confidential
information so disclosed.
6. TERM AND TERMINATION
6.1 The Term of this Cross License Agreement shall be begin on the
Effective Date, and shall continue until the expiration of the last to expire
patent included in the Owned Intellectual Property or in the Licensed
Intellectual Property, provided, however, that if the Asset Purchase Agreement
shall terminate pursuant to Section 13.1 thereof, this Cross License Agreement
shall terminate concurrently with the termination of the Asset Purchase
Agreement.
7. ASSIGNMENT OF LICENSE
7.1 Varian may (i) assign its rights and obligations under this
Cross License Agreement to a successor in ownership of all or substantially all
the assets of Varian's ion implant business or (ii) sublicense its rights and
obligations under this Cross License Agreement to a successor in ownership of
substantially all the assets relating to the manufacture, sale or service of a
product line of the Varian Licensed Products, in both cases, on the condition
that such successor shall assume the performance of all the terms and conditions
of this Cross License Agreement to be performed by Varian as if the successor
were named herein in the place of Varian.
7.2 Genus may not assign its rights and obligations under this
Cross License Agreement without obtaining prior written permission from Varian,
provided that, without obtaining permission from Varian, (i) Genus may assign
its rights and obligations under this Cross License Agreement to a successor in
ownership of all or substantially all the assets of the CVD Business, or
(ii) Genus may sublicense its rights and obligations under this Cross License
Agreement to a successor in ownership of substantially all the assets relating
to a product line of the CVD Business, in both cases, on the condition that such
successor shall assume the performance of all the terms and conditions of this
Cross License Agreement to be performed by Genus as if such successor were named
herein in the place of Genus.
8. EXTENT OF CERTAIN OBLIGATIONS
8.1 Nothing in this Cross License Agreement shall be construed as
conferring upon Genus or Varian any license or any other right unless expressly
granted by the terms of this Cross License Agreement.
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<PAGE>
8.2 Genus represents that it has the full right and power to enter
into this Cross License Agreement and to perform its obligations pursuant to the
terms hereof. Varian represents that it has the full right and power to enter
into this Cross License Agreement and to perform its obligations pursuant to the
terms hereof; provided that Varian shall have no responsibility for any breach
of the foregoing representation that is primarily the result of a breach by
Genus of any term or condition of the Asset Purchase Agreement.
9. MISCELLANEOUS PROVISIONS
9.1 NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered or mailed if delivered personally or mailed by
registered or certified mail (postage prepaid, return receipt requested), or
sent by facsimile transmission (confirmation received) to the parties at the
following addresses and facsimile transmission numbers (or at such other address
or number for a party as shall be specified by like notice), except that notices
after the giving of which there is a designated period within which to perform
an act and notices of changes of address or number shall be effective only upon
receipt:
IF TO VARIAN: with a copy to:
Varian Associates, Inc. Varian Associates, Inc.
3050 Hansen Way 3050 Hansen Way
Palo Alto, California 94304-1000 Palo Alto, California 94304-1000
Attention: Chief Financial Officer Attention: General Counsel
Telecopy No.: (415) 424-5754 Telecopy No.: (415) 858-2018
Telephone No.: (415) 424-5320 Telephone No.: (415) 424-5352
IF TO GENUS: with a copy to:
Genus, Inc. Wilson Sonsini Goodrich & Rosati
1139 Karlstad Drive 650 Page Mill Road
Sunnyvale, CA 94089-2117 Palo Alto, CA 94304-6811
Attention: Chief Financial Officer Attention: Christopher D.
Mitchell. Esq.
Telecopy No.: 408-747-7140 Telecopy No.: 650-493-6811
Telephone No.: 408-747-7120 Telephone No.: 650-493-9300
9.2 SECTION 365(n) OF THE U.S. BANKRUPTCY CODE. All rights and
licenses granted pursuant to this Agreement by a licensor to a licensee are, and
shall otherwise be deemed to be, for purposes of Section 365(n) of the U.S.
Bankruptcy Code, licenses of rights to "intellectual property" as defined under
Section 101 of the Bankruptcy Code. The parties agree that a licensee, as a
licensee of such rights under this Agreement, may elect to retain and fully
exercise all of its rights and elections under the Bankruptcy Code, including
without limitation Section 365(n). The parties further agree that, in the event
of a commencement of a bankruptcy proceeding by or against a licensor under the
Bankruptcy Code, the licensee shall have the right, even in the event that such
licensee has otherwise
-6-
<PAGE>
terminated this Agreement, and notwithstanding any purported rejection of this
Agreement by the licensor or any trustee for the estate of the licensor, to
retain and enforce its rights under this Agreement without any obligation to
make any payments to the licensor (it being acknowledged by the licensor that
all such rights and licenses are fully paid up and are not royalty or fee
bearing). In addition to the foregoing, the parties agree that, in the event of
a commencement of a bankruptcy proceeding by or against a licensor under the
Bankruptcy Code, upon the written request of the licensee, the licensor (or any
trustee for the estate of the licensor) (i) shall promptly deliver to the
licensee a complete duplicate of any such intellectual property and all
embodiments of such intellectual property, if not already the possession of the
licensee; and (ii) shall not interfere with the rights of the licensee as
provided in this Agreement. Provided, however, that unless or until the
licensor (or any trustee for the estate of the licensor) rejects this Agreement,
on the written request of the licensee, the licensor (or any trustee for the
estate of the licensor) shall (a) either (i) perform under this Agreement; or
(ii) promptly deliver to the licensee a complete duplicate of any such
intellectual property and all embodiments of such intellectual property, if not
already the possession of the licensee; and (b) not interfere with the rights
of the licensee as provided in this Agreement.
9.3 INTERPRETATION. When a reference is made in this Cross License
Agreement to paragraphs or Exhibits, such reference shall be to a paragraph or
Exhibit to this Cross License Agreement unless otherwise indicated. The words
"include," "includes" and "including" when used herein shall be deemed in each
case to be followed by the words "without limitation." The table of contents
and the headings contained in this Cross License Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Cross License Agreement.
9.4 SEVERABILITY. If any term or other provision of this Cross
License Agreement is invalid, illegal or incapable of being enforced by any rule
of law or public policy, all other conditions and provisions of this Cross
License Agreement shall nevertheless remain in full force and effect so long as
the economic or legal substance of the transactions contemplated hereby is not
affected in any manner adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Cross License
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the greatest extent possible.
9.5 NO THIRD-PARTY BENEFICIARIES. This Cross License Agreement is
for the sole benefit of the parties hereto and their permitted assigns and
nothing herein expressed or implied shall give or be construed to give to any
Person, other than the parties hereto and such assigns, any legal or equitable
rights hereunder.
9.6 AMENDMENT. This Cross License Agreement may not be amended or
modified except by an instrument in writing signed by Genus and Varian.
9.7 FURTHER ASSURANCES. Each party agrees to cooperate fully with
the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by any other party to evidence and reflect the transactions
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<PAGE>
described herein and contemplated hereby and to carry into effect the intents
and purposes of this Cross License Agreement.
9.8 MUTUAL DRAFTING. This Cross License Agreement is the joint
product of Varian and Genus and each provision hereof has been subject to the
mutual consultation, negotiation and agreement of Varian and Genus and shall not
be construed for or against any party hereto.
9.9 GOVERNING LAW. This Cross License Agreement shall be governed
by, and construed in accordance with, the laws of the State of California
(without giving effect to its choice of law principles).
9.10 DISPUTE RESOLUTION. Any dispute, controversy or claim between
the parties relating to, arising out of or in connection with this Cross
License Agreement (or any subsequent agreements or amendments thereto),
including as to its existence, enforceability, validity, interpretation,
performance, breach or damages, including claims in tort, whether arising before
or after the termination of this Cross License Agreement, shall be settled in
accordance with the procedures set forth in Section 14.12 of the Asset Purchase
Agreement.
9.11 COUNTERPARTS. This Cross License Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
9.12 ENTIRE AGREEMENT. This Cross License Agreement, together with
Exhibits hereto, and the documents and instruments and other agreements among
the parties delivered pursuant hereto, constitute the entire agreement and
supersede all prior agreements and undertakings, both written and oral, other
than the Asset Purchase Agreement, between Genus and Varian with respect to the
subject matter hereof and are not intended to confer upon any other person or
entity any rights or remedies hereunder, except as otherwise expressly provided
herein. This Cross License Agreement is subject to the terms of the Asset
Purchase Agreement, including the noncompete covenant in Section 7.8 of the
Asset Purchase Agreement.
IN WITNESS WHEREOF, Genus and Varian have caused this Cross License
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
VARIAN ASSOCIATES, INC.,
a Delaware corporation
By
-----------------------------------------
Name:
Title:
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<PAGE>
GENUS, INC.
a California corporation
By
-----------------------------------------
Name:
Title:
<PAGE>
ANNEX B
[LETTERHEAD OF SALOMON SMITH BARNEY]
April 15, 1998
The Board of Directors
Genus, Inc.
1139 Karlstad Drive
Sunnyvale, California 94089
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to Genus, Inc. ("Genus") of the consideration to be received by Genus
pursuant to the terms and subject to the conditions set forth in the Asset
Purchase Agreement, dated as of April 15, 1998 (the "Agreement"), between
Varian Associates, Inc. ("Varian") and Genus. As more fully described in the
Agreement, Genus will sell to Varian substantially all of the assets of Genus
used primarily in the Ion Implant Division of Genus (the "Ion Business" and,
such transaction, the "Asset Sale") for an aggregate purchase price of $25.0
million in cash, subject to adjustment as specified in the Agreement if,
prior to the closing of the Asset Sale, Genus exercises its put option to
sell to Varian certain machinery, plus an additional contingent cash amount
equal to one-third of the amount, if any, by which (x) gross revenues
generated from the sale by Varian or Genus of (i) high energy MeV ion
implantation systems manufactured by Genus prior to the closing of the Asset
Sale (or substantially similar high energy MeV ion implantation systems
derived therefrom and manufactured by Varian after the closing) and (ii)
service and spare parts for such systems, in each case during the calendar
year 1998 and actually collected from the customer exceed (y) $30.0 million
(the "Consideration").
In arriving at our opinion, we reviewed the Agreement and held discussions
with certain senior officers, directors and other representatives and
advisors of Genus and certain senior officers and other representatives and
advisors of Varian concerning the operations and prospects of the Ion
Business. We examined certain available business and financial information
relating to the Ion Business as well as certain financial forecasts and other
information and data for the Ion Business which were provided to or otherwise
discussed with us by the management of Genus. We reviewed the financial
terms of the Asset Sale as set forth in the Agreement in relation to, among
other things, the historical and projected earnings and other operating data
of the Ion Business and the financial condition of the Ion Business,
including the near-term liquidity needs of, and capital resources available
with respect to, the Ion Business. We considered, to the extent publicly
available, the financial terms of certain other transactions recently
effected which we considered relevant in evaluating the Asset Sale and
certain financial, stock market and other publicly available information
relating to the businesses of other companies whose operations we considered
relevant in evaluating those of the Ion Business. In connection with our
engagement, we were requested to approach, and we held discussions with,
third parties to solicit indications of interest in the acquisition of Genus.
In addition to the foregoing, we conducted such other analyses and
examinations and considered such other financial, economic and market
criteria as we deemed appropriate in arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed
by or discussed with us. With respect to financial forecasts and other
information and data provided to or otherwise reviewed by or discussed with
us, we have been advised by the management of Genus that such forecasts and
other information and data were reasonably prepared on bases reflecting the
best currently available estimates and judgments of the
<PAGE>
The Board of Directors
Genus, Inc.
April 15, 1998
Page 2
management of Genus as to the future financial performance of the Ion
Business. We have not made or been provided with an independent evaluation
or appraisal of the assets or liabilities (contingent or otherwise) of the
Ion Business nor have we made any physical inspection of the properties or
assets of the Ion Business. We have not been requested to evaluate, and have
not evaluated, the potential financial impact of the Asset Sale on Genus or
the redeployment of all or any part of the Consideration received by Genus in
connection with the Asset Sale. We express no opinion as to the price at
which the common stock of Genus will trade upon announcement or consummation
of the Asset Sale, nor are we expressing any opinion as to the relative
merits of the Asset Sale as compared to any alternative business strategies
that might exist for Genus or the effect of any other transaction in which
Genus might engage. Our opinion is necessarily based upon information
available to us, and financial, stock market and other conditions and
circumstances existing and disclosed to us, as of the date hereof.
Smith Barney Inc. and Salomon Brothers Inc (collectively doing business as
Salomon Smith Barney) have acted as financial advisors to Genus in connection
with the Asset Sale and will receive a fee contingent upon the consummation
of the Asset Sale. We also will receive a fee upon the delivery of this
opinion. In the ordinary course of our business, we and our affiliates may
actively trade or hold the securities of Genus and Varian for our own account
or for the account of our customers and, accordingly, may at any time hold a
long or short position in such securities. We have in the past provided
investment banking services to Genus unrelated to the proposed Asset Sale,
for which services we have received compensation. In addition, we and our
affiliates (including Travelers Group Inc. and its affiliates) may maintain
relationships with Genus, Varian and their respective affiliates.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of Genus in its evaluation of the
proposed Asset Sale, and our opinion is not intended to be and does not
constitute a recommendation to any stockholder as to how such stockholder
should vote on the proposed Asset Sale. Our opinion may not be published or
otherwise used or referred to, nor shall any public reference to Salomon
Smith Barney be made, without our prior written consent.
Based upon and subject to the foregoing, our experience as investment
bankers, our work as described above and other factors we deemed relevant, we
are of the opinion that, as of the date hereof, the Consideration to be
received by Genus in the Asset Sale is fair, from a financial point of view,
to Genus.
Very truly yours,
SALOMON SMITH BARNEY
