U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
QUARTERLY PERIOD ENDED MARCH 31, 1996
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
TRANSITION PERIOD FROM___ TO ___
Commission File Number 0-23840
Micrion Corporation
(Exact name of Registrant as specified in its charter)
Massachusetts 04-2892070
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Corporation Way, Peabody, Massachusetts 01960-7990
(Address of principal executive offices) (Zip Code)
(508) 531-6464
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year, if changed since
last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
As of May 10, 1996, the Company had 4,028,064 shares of Common
Stock, no par value, outstanding.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
Page 1
MICRION CORPORATION
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1995 and
March 31, 1996 (unaudited) 3
Consolidated Statements of Operations - Three months
ended March 31, 1995 and 1996 (unaudited) and Nine
months ended March 31, 1995 and 1996 (unaudited) 4
Consolidated Statements of Cash Flows - Nine months
ended March 31, 1995 and 1996 (unaudited) 5
Notes to Consolidated Financial Statements -
March 31, 1996 6
Item 2. Management's Discussion and Analysis or Plan of
Operation 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities - None 12
Item 3. Defaults Upon Senior Securities - None 12
Item 4. Submission of Matters to a Vote of Security
Holders - None 12
Item 5. Other Information - None 12
Item 6. Exhibits and Reports on Form 8-K 13
Page 2
MICRION CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(unaudited)
June 30 March 31
ASSETS 1995 1996
(in thousands)
CURRENT ASSETS:
Cash and cash equivalents $ 6,851 $ 3,382
Accounts receivable 9,771 14,061
Inventories (note 3) 11,263 15,333
Prepaid expenses and other current
assets 271 418
Deferred tax asset, net of valuation
allowance 470 470
Total current assets 28,626 33,664
PROPERTY AND EQUIPMENT, net (note 4) 1,562 2,781
OTHER ASSETS, net 298 243
Total assets $30,486 $36,688
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable 3,262 5,418
Accrued expenses 1,625 2,354
Accrued warranty expenses 541 1,023
Current installments of obligations under
capital leases 40 255
Customer deposits and deferred income 355 624
Total current liabilities 5,823 9,674
OBLIGATIONS UNDER CAPITAL LEASES, net of
current installments 26 833
STOCKHOLDERS' EQUITY:
Preferred stock, no par value; authorized
5,000,000 shares - -
Common stock, no par value; authorized
12,300,000 shares, issued and
outstanding 3,901,326 and 3,907,862
shares, respectively 28,814 28,873
Accumulated deficit (4,176) (2,663)
Other equity (1) (29)
Total stockholders' equity 24,637 26,181
Total liabilities and
stockholders' equity $ 30,486 $ 36,688
Page 3
MICRION CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited) (unaudited)
Three Months Nine Months
March 31, March 31,
1995 1996 1995 1996
(in thousands except for per share data)
REVENUES:
Product revenues $ 7,418 $ 9,457 $ 18,669 $ 26,117
Contract revenues 507 258 1,893 1,040
Total revenues 7,925 9,715 20,562 27,157
COST OF REVENUES:
Cost of product revenues 4,828 5,800 11,467 16,236
Cost of contract revenues 433 236 1,599 1,047
Total cost of revenues 5,261 6,036 13,066 17,283
Gross profit 2,664 3,679 7,496 9,874
OPERATING EXPENSES:
Selling, general and
administrative expenses 1,166 1,834 3,551 4,931
Research and development
expenses 837 1,209 2,060 2,819
Total operating expenses 2,003 3,043 5,611 7,750
Income from operations 661 636 1,885 2,124
OTHER INCOME (EXPENSE):
Interest income 171 57 252 188
Interest expense (7) (26) (15) (35)
Other (23) 15 (27) 46
Total other income 141 46 210 199
Income before provision
for income taxes 802 682 2,095 2,323
PROVISION FOR INCOME TAXES 92 236 240 810
Net income $ 710 $ 446 $ 1,855 1,513
NET INCOME PER SHARE $ .18 $ .11 $ .55 $ .38
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT
SHARES OUTSTANDING 3,941 4,054 3,391 4,020
Page 4
MICRION CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
Nine months ended March 31,
1995 1996
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,855 $1,513
Adjustments to reconcile net income to net
cash used by operating activities:
Depreciation and amortization 445 497
Non-cash compensation 31 13
Changes in assets and liabilities:
Accounts receivable (5,407) (4,449)
Inventories (3,195) (4,070)
Prepaid expenses and other current (172) (34)
assets
Accounts payable 1,115 2,121
Accrued expenses 644 746
Accrued warranty expenses (10) 486
Customer deposits and deferred income (11) 269
Net cash used by operating activities (4,705) (2,908)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (898) (1,653)
Decrease in other assets (80) --
Net cash used by investing activities (978) (1,653)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of capital lease obligations (30) (84)
Proceeds from capital lease financing -- 1,106
Proceeds from sale of common stock, net 11,055 59
Repurchase of common stock, net (1) --
Net cash provided by financing activities 11,024 1,081
EFFECT OF EXCHANGE RATE CHANGES ON CASH 24 11
INCREASE (DECREASE) IN CASH AND CASH 5,365 (3,469)
EQUIVALENTS
CASH AND CASH EQUIVALENTS, beginning of 3,238 6,851
period
CASH AND CASH EQUIVALENTS, end of period $8,603 $3,382
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $14 $26
Income taxes $258 $125
Page 5
MICRION CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1996
(1) NATURE OF BUSINESS
Micrion Corporation and its subsidiaries (collectively "the
Company") are engaged in the development, production and
marketing of capital equipment used in the manufacturing and
processing of semiconductor devices and other applications
outside of the semiconductor business.
(2) BASIS OF PRESENTATION
The accompanying unaudited financial statements have been
prepared in accordance with the instructions to Form 10-QSB and
Article 2 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for fair
presentation have been included. The accompanying financial
statements should be read in conjunction with the consolidated
financial statements and footnotes thereto included in the
Company's annual report 10-KSB filing with the U.S. Securities
and Exchange Commission for the year ended June 30, 1995. The
Company's first, second, and third fiscal quarters end on the
Saturday closest to September 30, December 31 and March 31,
respectively. For ease of reference, such quarter end dates are
used herein.
(3) INVENTORIES
Inventories consist of:
(unaudited)
June 30, March 31,
1995 1996
(in thousands)
Raw materials and manufactured partes, net $5,993 $9,691
Work in process 4,817 4,828
Finished goods 453 814
Total inventories $11,263 $15,333
(4) PROPERTY AND EQUIPMENT, net
(unaudited)
June 30, March 31,
1995 1996
(in thousands)
Furniture and fixtures $471 $536
Computer, engineering and production 2,737 3,288
equipment
Sales demonstration systems 345 345
Leasehold improvements 193 167
Property under capital leases 778 1,884
$4,524 $6,220
Accumulated depreciation and amortization (2,962) (3,439)
Net property and equipment $1,562 $2,781
Page 6
MICRION CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1996
At June 30, 1995 and March 31, 1996, accumulated amortization under
capital leases was approximately $743,000 and $804,000, respectively.
(5) SUBSEQUENT EVENT
On May 7, 1996, the Company reached a negotiated settlement with
KLA Instruments Corporation (KLA) of litigation initiated by KLA
in December, 1993, and which was described in the Company's 10-
KSB filing with the U.S. Securities and Exchange Commission for
the year ended June 30, 1995.
In the non-cash settlement, KLA will receive 119,202 shares of
Micrion common stock from the Company and 95,798 shares from
other parties involved in the litigation. An irrevocable proxy
vests all voting rights of these shares in Dr. Nicholas P.
Economou, Micrion's President and CEO. Micrion has agreed to
register these shares for sale under the Securities Act of 1933
at KLA's expense. As part of the settlement, KLA, the Company
and other parties have agreed to dismiss all claims filed in the
litigation.
The settlement is expected to result in a charge during the
quarter ending June 30, 1996 of approximately $2.7 million, or
$.65 per share, which is based upon the estimated fair market
value of the shares to be issued by the Company and other
associated costs related to the settlement.
This document contains forward-looking information within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Act of 1934, as amended, and is
subject to the "safe harbor" created by these sections. The
Company's actual results for future periods could differ
materially from those projected in such forward-looking
information. Factors that could cause actual results to differ
include, but are not limited to, the following: settlement costs
may be increased based on actual legal or other expenses related
to the litigation and/or based on the valuation of the stock
involved in the transaction. The Company undertakes no
obligation to publicly release the result of any revisions to
these forward-looking statements which may be made to reflect the
events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
Page 7
Item 2. Management's Discussion and Analysis or Plan of Operation
Micrion Corporation and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Three Months Ended March 31, 1996 Compared to Three Months Ended
March 31, 1995
Revenues. Total revenues increased by 22.6% to $9.7 million
for the three months ended March 31, 1996 from $7.9 million for
the same period ended March 31, 1995.
Product revenues consist of revenues from the sale of focused
ion beam (FIB) systems, spare and replacement parts and service
contracts provided with respect to systems. Product revenues
increased 27.5% to $9.5 million for the three-month period ended
March 31, 1996 from $7.4 million for the same period ended March
31, 1995. The increase was due to increased sales of FIB systems
resulting from increased capital spending by semiconductor
companies and the continued market acceptance of the Company s
FIB products and other applications outside of the semiconductor
business.
Contract revenues decreased 49.1% to $0.3 million for the
three-month period ended March 31, 1996 from $0.5 million for the
same period ended March 31, 1995. The decrease was due to a
decreased level of activity on existing government contracts and
the completion of a commercial contract.
Gross Margin. The Company's gross margin on product revenues
increased to 38.7% for the three-month period ended March 31,
1996 from 34.9% for the same period ended March 31, 1995. The
increase was due to changes in the mix of foreign and domestic
shipments during the period. Domestic sales generally yield
higher gross margins than foreign sales.
The Company's gross margin on contract revenues decreased to
8.5% for the three-month period ended March 31, 1996 from 14.6%
for the same period ended March 31, 1995. This decrease was due
to completion of a higher margin commercial contract during the
three-month period ended March 31, 1995. The Company expects a
higher proportion of contract revenues to be derived from
government contracts in the future, which will yield a lower
gross margin.
Selling, General and Administrative Expenses. Selling,
general and administrative expenses increased 57.3% to $1.8
million for the three-month period ended March 31, 1996 from $1.2
million for the same period ended March 31, 1995. The increase is
Page 8
attributable to the rapid ramp up of the Company's manufacturing
capacity in order to produce FIB systems for a new manufacturing
application, which has required additional personnel in
applications support and sales, customer support personnel to
support FIB systems and increases in administrative personnel.
Also, the increase is a result of increases in compensation
levels and litigation costs.
Research and Development Expense. The Company's research
and development expense increased 44.4% to $1.2 million for the
three-month period ended March 31, 1996 from $.8 million for the
same period ended March 31, 1995. The increase was due to the
Company's additional development activity for new products and
applications. The level of research and development expense is
expected to increase over the remainder of fiscal 1996 due to
management's decision to address certain production applications
for its FIB products.
Other Income and Expense. Other income and expense,
primarily interest related, although not material, decreased to
$.05 million for the three-month period ended March 31, 1996 as
compared to $.14 million for the same period ended March 31,
1995. The decrease is due to a lower cash position during the
period ended March 31, 1996.
Provision for Income Taxes. The Company's effective tax
rate for the three-month period ended March 31, 1996 reflects the
use of a tax rate on income of 35%. This compares to an
effective tax rate of 11.5% for the three-month period ended
March 31, 1995 as the Company previously recognized the use of
net operating loss carryforwards as they were earned. The
Company continues to re-evaluate the recoverability of deferred
tax assets.
Nine Months Ended March 31, 1996 Compared to Nine Months Ended
March 31 ,1995
Revenues. Total revenues increased by 32.1% to $27.2 million
for the nine months ended March 31, 1996 from $20.6 million for
the same period ended March 31, 1995.
Product revenues consist of revenues from the sale of focused
ion beam (FIB) systems, spare and replacement parts and service
contracts provided with respect to systems. Product revenues
increased 39.9% to $26.1 million for the nine-month period ended
March 31, 1996 from $18.7 million for the same period ended March
31, 1995. The increase was due to increased sales of FIB systems
resulting from increased capital spending by semiconductor
companies and the continued market acceptance of the Company s
FIB products and other applications outside of the semiconductor
business.
Contract revenues decreased 45.1% to $1.0 million for the
nine-month period ended March 31, 1996 from $1.9 million for the
same period ended March 31, 1995. The decrease was due to a
decreased level of activity on existing government contracts and
the completion of a higher margin commercial contract. The
Company expects a higher
Page 9
proportion of contract revenues to be derived from government
contracts in the future, which will yield a lower gross margin.
Gross Margin. The Company's gross margin on product revenues
decreased to 37.8% for the nine-month period ended March 31, 1996
from 38.6% for the same period ended March 31, 1995. The decrease
was due to changes in the mix of foreign and domestic shipments
during the period. Foreign sales generally yield lower gross
margins than domestic sales. In addition, a significant level of
engineering costs for specific customer systems were charged to
cost of sales during the period.
The Company's gross margin on contract revenues decreased to
negative 0.6% for the nine-month period ended March 31, 1996 from
15.5% for the same period ended March 31, 1995. The decrease in
gross margin was due to completion of a commercial contract and
additional costs related to that contract which were not
anticipated during the period ended March 31, 1996. The Company
expects a higher proportion of contract revenues to be derived
from government contracts in the future, which will yield a lower
gross margin.
Selling, General and Administrative Expenses. Selling,
general and administrative expenses increased 38.9% to $4.9
million for the nine-month period ended March 31, 1996 from $3.6
million for the same period ended March 31, 1995. The increase is
primarily attributable to the rapid ramp up of the Company s
manufacturing capacity in order to produce the FIB systems for a
new manufacturing application, which has required additional
personnel in applications support and sales, customer support
personnel to support FIB systems and increases in administrative
personnel. Also, the increase is a result of increases in
compensation levels and litigation costs.
Research and Development Expense. The Company's research
and development expense increased 36.8% to $2.8 million for the
nine-month period ended March 31, 1996 from $2.1 million for the
same period ended March 31, 1995. The increase was due to the
Company's additional development activity for new products and
applications, which has required additional personnel. The level
of research and development expenses is expected to increase over
the remainder of fiscal 1996 due to management's decision to
address certain production applications for its FIB products.
Other Income and Expense. Other income and expense,
primarily interest related, although not material, decreased to
$.20 million for the nine-month period ended March 31, 1996 as
compared to $.21 million for the same period ended March 31,
1995. The decrease is due to a lower cash position during the period.
Provision for Income Taxes. The Company's effective tax rate
for the nine-month period ended March 31, 1996 reflects the use
of a tax rate on income of 35%. This compares to an effective
tax rate of 11.5% for the nine-month period ended March 31, 1995
as the Company previously recognized the use of net operating
loss carryforwards as they were earned. The Company continues to
re-evaluate the recoverability of deferred tax assets.
Page 10
Liquidity and Capital Resources
At March 31, 1996 the Company had working capital of $24.0
million as compared to $22.8 million at June 30, 1995,
reflecting an increase in working capital of $1.2 million. The
increase is primarily attributable to an increase in accounts
receivable due to increased product sales and an increase in
inventories to meet expected customer demand for FIB systems
offset in part by an increase in accounts payable and accrued
expenses. Cash and cash equivalents were $3.4 million as of
March 31, 1996 as opposed to $6.9 million as of June 30, 1995.
Net cash used by operating activities for the nine months ended
March 31, 1996 was $2.9 million and consisted primarily of
increases in accounts receivable and inventories, offset by
increases in accounts payable and accrued expenses. Accounts
payable increased due to the level of activity of increased
inventory purchases due to the ramp-up of manufacturing
activities to meet expected demand. Accounts receivable
increased due to the number of FIB systems shipped toward the end
of the three-month period ended March 31, 1996.
The Company's accounts receivable increased to $14.1 million at
March 31, 1996 as compared to $9.8 million at June 30, 1995 due
to the number of FIB systems accepted by and shipped to customers
near the end of the quarter ended March 31, 1996.
The Company's inventories increased to $15.3 million at March
31, 1996 as compared to $11.3 million at June 30, 1995. The
increase is due to management's decision to escalate the
manufacturing of FIB systems meet current and expected customer
demand for FIB systems.
Net cash used by investing activities for the nine months ended
March 31, 1996 was $1.7 million and consisted of purchases of
capital equipment to be used for research and development, and
other operating department requirements.
Net cash provided by financing activities for the nine months
ended March 31, 1996 was $1.1 million and consisted primarily of
proceeds from a lease line of credit used to fund capital
purchases.
The Company has a working capital line of credit with a bank
which provides for borrowings up to $5.0 million and has
recently completed negotiations to increase the borrowing
capacity to $10.0 million. Amounts borrowed bear interest at the
bank's prime rate. The line of credit expires on December 1,
1996 and will be extended to December 31, 1997 under the revised
line of credit , as negotiated. As of March 31, 1996, no amount
is outstanding against the available line of credit.
The Company believes that it has the necessary liquidity and
capital resources to sustain existing operations for the next
twelve months.
Page 11
Part II. Other Information
Item 1. Legal Proceedings.
On May 7, 1996, the Company reached a negotiated settlement
with KLA Instruments Corporation (KLA) of litigation initiated by
KLA in December, 1993, and which was described in the Company's
10-KSB filing with the U.S. Securities and Exchange Commission
for the year ended June 30, 1995.
In the non-cash settlement, KLA will receive 119,202 shares of
Micrion common stock from the Company and 95,798 shares from
other parties to the litigation. An irrevocable proxy vests all
voting rights of these shares in Dr. Nicholas P. Economou,
Micrion's President and CEO. Micrion has agreed to register these
shares for sale under the Securities Act of 1933 at KLA's
expense. As part of the settlement, KLA, the Company and other
parties have agreed to dismiss all claims filed in the
litigation.
The settlement is expected to result in a charge during the
quarter ending June 30, 1996 approximating $2.7 million, or $.65
per share, which is based upon the estimated fair market value of
the shares to be issued by the Company and other associated costs
related to the settlement.
Please refer to the statement on page 7 of this document
regarding forward looking information.
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Page 12
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Each Exhibit number corresponds to the number assigned
to such exhibit in the Exhibit Table of Item 601 of Regulation S-B.
Exhibit
Number Description
4.1 Irrevocable Proxy from KLA Instruments
Corporation
10 Settlement Agreement By and
Among KLA Instruments Corporation,
the Company and Other
Parties Dated May 7, 1996.
11 Statement of Computation of
Per Share Earnings
27.1 Financial Data Schedule
(b) Reports on Form 8-K
A report on Form 8-K was filed by the Company on March 18,
1996.
Page 13
Signatures
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
MICRION CORPORATION
(Registrant)
Date: May 14, 1996 /s/ Nicholas P. Economou
Nicholas P. Economou
President and Chief Executive Officer
Date: May 14, 1996 /s/ David M. Hunter
David M. Hunter
Vice President, Finance and Administration
Page 14
EXHIBIT 4
IRREVOCABLE PROXY
KNOW ALL BY THESE PRESENTS that KLA INSTRUMENTS CORPORATION (the
"Stockholder") does hereby make, constitute and appoint NICHOLAS P. ECONOMOU
("Economou"), or, in the event that Economou is no longer serving as President
of Micrion Corporation, the person who is then serving as the President of
Micrion Corporation (the "Corporation"), for it and in its stead to act as its
proxy in respect of the 215,000 shares of Common Stock, no par value, or such
other number of shares then owned by the Stockholder (the "Shares"), of the
Corporation acquired by the Stockholder in connection with the settlement of
certain litigation in the Essex County Superior Court, Salem, Massachusetts,
entitled KLA Instruments Corporation v. Micrion Corporation, et al., Civil
Action No. 93-2942A, giving and granting Economou (or any successor) full
power and authority to (i) vote all of the Shares beneficially owned by the
Stockholder, either in person or by proxy, or give written consent in lieu of
voting thereof, (ii) waive any notice of any regular or special meeting of
stockholders of the Corporation and (iii) call meetings of stockholders of the
Corporation, as the Stockholder might or could do if personally present with
full power of substitution, appointment and revocation.
At all times hereafter, the Stockholder shall have the right to transfer
the Shares, in whole or in part, to any third party not controlling,
controlled by, or under common control with the Stockholder, and upon such
sale or transfer the transferred shares shall no longer be subject to this
irrevocable proxy.
This proxy is coupled with an interest (which interest includes, among
other things, the settlement of the above-referenced litigation and the
agreements between the Corporation, of which Economou is the President, and
the Stockholder in connection therewith), is irrevocable and shall be binding
upon the Stockholder and its representatives, successors and assigns.
IN WITNESS WHEREOF, the undersigned has executed this irrevocable proxy
as of the 6th day of May, 1996.
KLA INSTRUMENTS CORPORATION
By:/s/ Christopher Stoddart
Name: Christopher Stoddart
Title: Treasurer
Accepted as of the date hereof
/s/ Nicholas P. Economou
Nicholas P. Economou
President of Micrion Corporation
EXHIBIT 10
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT (this "Agreement") is made by and between KLA
Instruments Corporation, a Delaware corporation ("KLA"), and Kenneth Levy as
third party defendant ("Levy"), on one hand, and Micrion Corporation, a
Massachusetts corporation ("Micrion"), Hambrecht & Quist Group, a California
corporation ("H&Q"), EG&G Inc., a Massachusetts corporation ("EG&G"), DeMuth,
Folger & Terhune, a New York partnership ("DF&T"), Peter W. Wallace
("Wallace"), Louis P. Valente ("Valente"), Thomas W. Folger ("Folger"),
Nicholas P. Economou ("Economou"), John A. Doherty ("Doherty"), and Charles E.
Minihan ("Minihan"), on the other hand (Micrion, H&Q, DF&T, Wallace, Valente,
Folger, Economou, Doherty and Minihan are referred to collectively as the
"Defendants"), and shall be effective as of May 7, 1996 (the "Effective
Date"), for all purposes upon execution of this Agreement by all of the
foregoing parties.
R E C I T A L S
A. WHEREAS, on or about December 22, 1993, KLA filed a Complaint (the
"Complaint") against the Defendants and EG&G in Massachusetts Superior Court,
Essex County (the "Court"), Civil Action No. 93-2942A (the "Lawsuit");
B. WHEREAS, EG&G was subsequently dismissed as a defendant in the Lawsuit
without prejudice.
C. WHEREAS, on or about August 22, 1994, the Defendants filed an Amended
Answer to the Complaint. At that time, the Defendants also filed a
Counterclaim against KLA (for abuse of process, breach of fiduciary duty and
breach of implied covenant of good faith and fair dealing) (the
"Counterclaim"), and a Third-Party Complaint against Levy (for aiding and<PAGE>
abetting an abuse of process, a breach of fiduciary duty and a breach of
implied covenant of good faith and fair dealing) (the "Third-Party
Complaint"). Additionally, in the Lawsuit, Micrion contended that KLA and
Levy caused substantial damages exceeding $5,000,000 to Micrion resulting from
the pendency of the Lawsuit at the time of Micrion's Initial Public Offering,
including damages in excess of $1,000,0000 attributable to the pendency of the
cause of action under M.G.L. Ch.93A by itself.
D. WHEREAS, prior to the recapitalization and refinancing of Micrion, which
occurred in June and August 1993 (the "Refinancing"), KLA owned 710,808 shares
of preferred stock of Micrion that represented 244 shares of Micrion common
stock as of May 11, 1994 (the effective date of Micrion's initial public
offering of common stock) as a result of the Refinancing and a subsequent
reverse stock split.
E. WHEREAS, KLA and Levy, on one hand, and the Defendants and EG&G, on the
other hand, while denying any liability to each other from any and all claims
concerning all counts of the Complaint, Counterclaim and Third-Party Complaint
in the Lawsuit, decided to resolve those claims and counts without the
necessity of further litigation.
A G R E E M E N T
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto hereby agree as
follows:
I. Terms of Settlement. To finally and irrevocably settle the Lawsuit, the
Defendants and EG&G shall issue and deliver an aggregate of Two Hundred
Fifteen Thousand (215,000) shares of common stock of Micrion (the "Shares") to
2
KLA, and KLA agrees to accept the Shares in settlement of the Lawsuit at the
Closing as provided in this Agreement. Subject to the provisions of this
Agreement, the parties hereto hereby acknowledge and agree that the Shares to
be issued and delivered to KLA at the Closing under this Agreement will not
have been registered under the Securities Act of 1933, as amended (the "Act")
as of the date thereof and are further subject to the voting restrictions of
the irrevocable proxy executed and delivered concurrently with the issuance of
the Shares, as provided in Section 5 of this Agreement (the "Proxy").
II. Characterization of Settlement. The parties hereto hereby acknowledge
that for all relevant purposes (i) KLA intends to characterize its receipt of
the Shares under this Agreement as an issuance and transfer of such Shares
solely in exchange for the release of claims based on the diminution in the
value of KLA's interest in its original shares of Micrion preferred stock, as
described in Recital D; (ii) KLA intends to take the position that such
issuance and transfer is intended to restore the ownership interest of KLA in
Micrion to its condition as it existed immediately prior to the Refinancing,
and for no other purposes; and (iii) KLA intends to take the position that KLA
shall be deemed to have owned the Shares as if the Shares were a part of KLA's
ownership interest in Micrion prior to the Refinancing. Without adopting
KLA's position as its own and without admitting any liability under the
Complaint or otherwise in the Lawsuit, each of the Defendants and EG&G hereby
agree not to take any position, except as they may be required to by law,
before any federal, state, county, municipal or other local government,
government agency, instrumentality or department, or in any administrative,
regulatory or judicial proceeding, or in any report, filing, certificate, tax
return, declaration, instrument or other document submitted to or contained
3
in, as the case may be, any of the foregoing that is contrary to any of the
positions to be taken by KLA as described in this Section 2. The Defendants
further agree not to file, except as they may be required to by law, any
Internal Revenue Service Form 1099, or any comparable federal, state or local
tax form, with any federal, state or local taxing agency or authority
reporting the delivery of the Shares or any payment or other consideration
made under this Agreement to KLA to the Internal Revenue Service, or any state
or local taxing authority.
III. Securities Law Compliance.
A. Schedule 13D Filing. Within the required period under the rules
and regulations promulgated by the SEC, KLA and the holder of the proxy (the
"Proxyholder") shall prepare and file separate reports on SEC Schedule 13D of
their holdings of the Shares to the SEC.
B. Press Release and Form 8-K Report. Immediately after the
Effective Date, Micrion shall issue a press release relating to the settlement
of the Lawsuit, substantially in the form as set forth in Exhibit A, for
immediate release in compliance with Schedule D to the Bylaws of the NASD, and
Micrion shall promptly file a report with the SEC on Form 8-K relating to the
settlement of the Lawsuit and attaching thereto a copy of the press release.
KLA hereby warrants that it will not issue a press release relating to the
settlement of the Lawsuit.
C. Disposition of Shares. At all times hereafter, subject to
compliance with the Act and the rules and regulations of the SEC promulgated
thereunder, Micrion acknowledges and agrees that the Shares shall be subject
to transfer by KLA without restriction except as provided in subsection (d),
below. In particular, Micrion acknowledges that KLA may sell the Shares upon
4
satisfaction of all the conditions of any applicable exemption from the
registration requirements under Section 5 of the Act, including the exemption
provided by SEC Rule 144, and that (i) upon the satisfaction of all such
conditions, or (ii) upon delivery to Micrion of an opinion of counsel
reasonably satisfactory to Micrion or (iii) upon delivery to Micrion of a
letter from the SEC addressed to Micrion or to KLA to the effect that the SEC
will not take any action with respect to the transfer of the Shares in the
absence of a registration statement then in effect with respect to such
Shares, Micrion will approve the transfer of the Shares by KLA, and will so
instruct Micrion's transfer agent and any other person having legal
responsibilities with respect to the transfer of Shares of Micrion common
stock.
D. The parties agree that at the Closing, and until KLA shall satisfy
the conditions of Rule 144(k) with respect to the Shares, the certificate or
certificates evidencing the Shares shall bear one or both of the following
legends:
E. A legend referring to the transfer restrictions under the Act,
identical or substantially similar to the legend set forth below:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT, OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED, OR A LETTER
FROM THE SECURITIES AND EXCHANGE COMMISSION TO THE COMPANY OR TO
THE HOLDER HEREOF TO THE EFFECT THAT THE COMMISSION WILL NOT TAKE
ANY ACTION WITH RESPECT TO THE TRANSFER OF THE SECURITIES IN THE
ABSENCE OF A REGISTRATION STATEMENT THEN IN EFFECT WITH RESPECT TO
SUCH SECURITIES UNDER SUCH ACT, OR UNLESS SOLD OR TRANSFERRED
PURSUANT TO RULE 144 OF SUCH ACT.
F. A legend referring to the voting restrictions set forth in the
Proxy, substantially similar to the legend set forth below:
5
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
IRREVOCABLE PROXY ISSUED IN ACCORDANCE WITH MASSACHUSETTS LAW.
G. S-3 Registration. At the written request of KLA to Micrion,
delivered at any time after the Closing Date but not later than May 14, 1996,
Micrion shall prepare and file with the SEC by no later than May 22, 1996 a
registration statement on Form S-3 or an equivalent form (such registration
statement and the prospectus included therein and all documents incorporated
by reference therein being referred to as the "Registration Statement") for
resale of as many of the Shares as shall be requested in writing by KLA.
Micrion shall use its best efforts to have the Registration Statement declared
effective under the Act as promptly as practicable after such filing and shall
persist in such efforts until the Registration Statement has been declared
effective under the Act. During the period commencing with the effectiveness
of the Registration Statement and continuing until (i) KLA has sold all of the
Shares, or (ii) KLA is entitled, in the opinion of counsel acceptable to
Micrion, to sell all remaining shares pursuant to Rule 144 promulgated under
the Act, Micrion shall use its best efforts to cause the Registration
Statement to continue to be effective and to update the prospectus contained
therein as required by applicable SEC rules and regulations, including Rule
415, to enable KLA to resell the Shares on the Nasdaq Stock Market or any
securities exchange or other stock market in which shares of Micrion common
stock may be traded. Micrion shall also take all actions required to be taken
under any applicable state securities laws in connection with registration or
qualification of the Shares and the resale of the Shares pursuant to the
Registration Statement or any applicable form of qualification or exemption
under such state securities laws. Micrion shall provide sufficient copies of
the Registration Statement and the prospectus related thereto to KLA or
6
underwriters and selling brokers, if any, for distribution by KLA or the
underwriters or selling brokers, if any, to comply with the requirements under
the rules and regulations promulgated under the Act with respect to the
delivery of the prospectus. Notwithstanding the foregoing, Micrion shall not
be required to undertake special audits or engage experts in connection with
the preparation of the Registration Statement and any prospectus related
thereto. To the extent permitted by law, KLA shall indemnify Micrion, its
officers and directors, each underwriter and selling broker, if any, and each
person, if any, who controls Micrion, against liability (including liability
under the Act and the Securities and Exchange Act of 1934, as amended (the
"Exchange Act")) arising by reason of any statement contained in the
Registration Statement that KLA provided to Micrion in writing explicitly for
use in the Registration Statement, being false or misleading or omitting to
state a material fact necessary to be stated in order that the statements made
in the Registration Statement, in the circumstances in which they are made,
not be misleading. To the extent permitted by law, Micrion shall indemnify
KLA and each underwriter and selling broker, if any, against liability
(including liability under the Act and the Exchange Act) arising by reason of
any statement (other than a statement provided by KLA as described above)
contained in the Registration Statement included therein being false or
misleading or omitting to state a material fact necessary to be stated in
order that the statements made in or incorporated by reference in the
Registration Statement, in the circumstances in which they are made, not to be
misleading. KLA shall pay or reimburse Micrion for all of the reasonable
printing expenses, registration expenses, selling expenses, selling
commissions, "blue sky" qualification and filing fees payable in connection
7
with the preparation and filing of the Registration Statement and related
"blue sky" filings, and shall reimburse Micrion for all of its attorneys' fees
in connection therewith, such attorneys' fees not to exceed $10,000. The
covenants of Micrion contained in this Section 4 are material to KLA and the
parties hereto but do not constitute a condition to the effectiveness of this
Settlement Agreement, and the failure of Micrion to obtain or maintain the
effectiveness of any Registration Statement as provided in this Section 4
shall not vitiate any release given pursuant to this Agreement or otherwise
constitute a basis for rescission of this Agreement by KLA.
H. Proxy. All of the Shares initially shall be subject to the terms
of the Proxy substantially in the form attached hereto as Exhibit B. Economou
shall be designated as the initial Proxyholder, for so long as he remains the
President of Micrion; thereafter, the Proxyholder shall be the President of
Micrion. The Shares shall be released from the terms of the Proxy upon their
sale or transfer to a third party which is not controlling, controlled by, or
under common control with, KLA. Upon request by any such third party, Micrion
shall cause its transfer agent to issue a new certificate for such shares
without the legend referred to in Section 3(d)(ii). KLA shall execute and
deliver the Proxy at the Closing, and KLA agrees that KLA shall not dispute
the validity or enforceability of the Proxy at any time thereafter.
I. Closing. The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at 2:00 p.m. E.D.T. on May 7,
1996, or at such other time as the parties hereto may agree (the time and date
of the Closing is referred to herein as the "Closing Date"). The Closing
shall be held at the offices of Choate, Hall & Stewart, Exchange Place, 53
8
State Street, Boston, Massachusetts 02109 or such other place as the parties
may agree upon in writing. At the Closing:
J. KLA and each of the Defendants and EG&G, through their respective
counsel, shall execute and deliver a Stipulated Dismissal with Prejudice,
under Rules 41(a)(1)(ii) and (c) of the Massachusetts Rules of Civil
Procedure, of the Complaint, the Counterclaim and the Third-Party Complaint,
substantially in the form attached hereto as Exhibit C. Each of counsel to
KLA and counsel to the Defendants and EG&G is authorized to execute and file
with the Court the Stipulated Dismissal with Prejudice;
K. KLA and each of the Defendants and EG&G shall jointly execute and
deliver this Agreement;
L. KLA and the Proxyholder shall jointly execute and deliver the
Proxy;
M. Micrion shall issue and cause to be delivered to KLA one or more
share certificates evidencing One Hundred Nineteen Thousand Two Hundred Two
(119,202) Shares;
N. H&Q shall cause to be delivered to KLA one or more share
certificates evidencing Ninety-Five Thousand Seven Hundred Ninety-Eight
(95,798) Shares, duly endorsed for transfer;
O. KLA, on one hand, and the Defendants and EG&G, on the other hand,
shall execute and deliver such other certificates, receipts and documentation
as may be reasonably requested by counsel for each party to effectuate the
terms, conditions, purposes and aims of this Agreement.
P. Representations and Warranties of Micrion. In connection with the
execution and delivery of this Agreement, and the issuance and delivery of the
9
Shares, Micrion represents and warrants to KLA, effective on the date of this
Agreement and on the Closing Date, as follows:
Q. Corporate Power. Micrion has all requisite legal and corporate
power (i) to issue and deliver the Shares to be issued and delivered by
Micrion hereunder, (ii) to release the Released Matters (as defined in Section
11), and (iii) to carry out and perform its other obligations under the terms
of this Agreement.
R. Capitalization. The authorized capital of Micrion (prior to the
issuance of the 119,202 shares referred to in Section 6(d) above) consists of
12,300,000 shares of common stock, of which approximately 3,907,987 are duly
and validly issued and outstanding, and 5,000,000 shares of preferred stock,
of which none is issued and outstanding. The Shares to be issued and
delivered pursuant to the terms of this Agreement, when issued and delivered
in accordance with the terms hereof, will be duly and validly issued, fully
paid and nonassessable, and will be issued in compliance with federal,
Massachusetts and California securities laws.
S. Corporate Action. All corporate action on the part of Micrion,
its officers, directors and shareholders necessary for (i) the issuance and
delivery of the Shares pursuant hereto, (ii) the release by Micrion of the
Released Matters, and (iii) the performance of Micrion obligations hereunder,
have been duly taken or will have been duly taken prior to the issuance of the
Shares to be issued by Micrion hereunder.
T. Valid and Binding Obligations. This Agreement and the related
documentation have been duly and validly authorized, executed and delivered by
Micrion, and constitute valid, legal and binding contractual obligations of
Micrion.
10
U. Disclosure. As of their respective filing dates (except as
thereafter amended), all documents (other than preliminary material) that
Micrion has filed with the SEC since January 1, 1995 (collectively the "SEC
Filings") complied in all material respects with all applicable requirements
of the Act and the Exchange Act.
V. S-3 Eligibility. Micrion currently meets the eligibility
requirements set forth in General Instruction I.A. of the General Instructions
for the use of the Form S-3 Registration Statement and will use its best
efforts to continue to meet such requirements as long as KLA's registration
rights as set forth in Section 4 remain in effect.
W. Assignment. Micrion has not assigned, sold, transferred or
disposed of any of its respective interests in any of the Released Matters.
X. Reliance. The foregoing representations and warranties are made
by Micrion with the knowledge and expectation that KLA is placing reliance
thereon.
Y. Representations and Warranties of H&Q. In connection with the
execution and delivery of this Agreement, and the issuance and delivery of the
Shares, H&Q represents and warrants to KLA, effective on the date of this
Agreement and on the Closing Date, as follows:
Z. Corporate Power; Shares. H&Q has all requisite legal and
corporate power (i) to transfer the Shares to be transferred by such Defendant
hereunder, (ii) to release the Released Matters (as defined in Section 11),
and (iii) to carry out and perform its other obligations under the terms of
this Agreement. The Shares to be issued and delivered pursuant to the terms
of this Agreement, when issued and delivered in accordance with the terms
11
hereof, will be duly and validly issued, fully paid and nonassessable, and
will be issued in compliance with federal, Massachusetts and California
securities laws.
AA. Corporate Action. All corporate action on the part of H&Q, and
its officers, directors and shareholders necessary for (i) the transfer and
delivery of the Shares pursuant hereto, (ii) the release by H&Q of the
Released Matters, and (iii) the performance of H&Q of its obligations
hereunder, have been duly taken or will have been duly taken prior to the
transfer of the Shares to be transferred to KLA hereunder.
AB. Valid and Binding Obligations. This Agreement and the related
documentation have been duly and validly authorized, executed and delivered by
H&Q and constitute valid, legal and binding contractual obligations of H&Q.
AC. Assignment. H&Q has not assigned, sold, transferred or disposed
of any of its respective interests in any of the Released Matters.
AD. Reliance. The foregoing representations and warranties are made
by H&Q with the knowledge and expectation that KLA is placing reliance
thereon.
AE. Representations and Warranties of the Other Defendants. In
connection with the execution and delivery of this Agreement, each of the
Defendants other than Micrion and H&Q (the "Other Defendants") and EG&G
represents and warrants to KLA, effective on the date of this Agreement and on
the Closing Date, as follows:
AF. Corporate Power. Each of the Other Defendants and EG&G has all
requisite legal and corporate power, if appropriate, to release the Released
Matters (as defined in Section 11), and to carry out and perform its other
obligations under the terms of this Agreement.
12
AG. Corporate Action. If appropriate, all corporate action on the
part of the Other Defendants and EG&G and their officers, directors and
shareholders necessary for the release by the Other Defendants and EG&G of the
Released Matters, and the performance of their obligations hereunder, have
been duly taken.
AH. Valid and Binding Obligations. This Agreement and the related
documentation have been duly and validly authorized, executed and delivered by
the Other Defendants and EG&G and constitute valid, legal and binding
contractual obligations of each of the Other Defendants and EG&G.
AI. Assignment. None of the other Defendants nor EG&G has assigned,
sold, transferred or disposed of any of its respective interests in any of the
Released Matters.
AJ. Reliance. The foregoing representations and warranties are made
by the Other Defendants and EG&G with the knowledge and expectation that KLA
is placing reliance thereon.
IV. Representations and Warranties of KLA. In connection with the execution
and delivery of this Agreement, KLA represents and warrants to the Defendants
and EG&G, effective on the date of this Agreement and on the Closing Date, as
follows:
A. Corporate Power. KLA has all requisite legal and corporate power
to release the Released Matters (as defined in Section 11), and to carry out
and perform its other obligations under the terms of this Agreement.
B. Corporate Action. All corporate action on the part of KLA and its
officers, directors and shareholders necessary for the release by KLA of the
Released Matters, and the performance of its obligations hereunder, have been
duly taken.
13
C. Valid and Binding Obligations. This Agreement and the related
documentation have been duly, validly authorized, executed and delivered by
KLA and constitute valid, legal and binding contractual obligations of KLA.
D. Assignment. KLA has not assigned, sold, transferred or disposed
of any of its respective interests in any of the Released Matters.
E. Reliance. The foregoing representations and warranties are made
by the KLA with the knowledge and expectation that the Defendants and EG&G are
placing reliance thereon.
V. General Releases.
A. Related Parties. As used in this Agreement, the term "Related
Parties" shall mean any past, present and future successor, affiliate,
subsidiary, agent, attorney, employee, employer, officer, director, sharehold-
er, owner, alter ego, heir, executor, administrator, estate, representative,
successor, predecessor, assignee, assignor, joint venturer, partner, spouse,
parent or affiliated entity, pension plan, insurer, accountant, agent, or
trustee of the party or any affiliate thereof to which reference is being
made.
B. Released Matters. As used in this Agreement, the term "Released
Matters" shall mean any and all claims, liens, demands, obligations, actions,
causes of actions, counts, damages, liabilities, losses, fees, costs or
expenses, of any nature whatsoever, known or unknown, past or present,
ascertained or unascertained, suspected or unsuspected, existing or claimed to
exist, (including, without limitation, any and all claims for contribution or
indemnification) which the party giving the release has had or now has against
any party hereto, insofar as those matters to be released hereby in any way
relate to either: (i) the claims raised by, the issues presented by or the
14
subject matter of the Complaint, Counterclaim, Third-Party Complaint or the
Lawsuit, including, without limitation, the matters described in the Recitals
to this Agreement; or (ii) the relationship between KLA and Levy, on one hand,
and the Defendants and EG&G, on the other hand, insofar as the relationship
relates in any way to Micrion, including without limitation any and all
contracts or agreements to which both KLA and Micrion are or were parties.
Notwithstanding anything contained in the foregoing provisions to the
contrary, none of the parties to this Agreement shall be released from any
claim, liability or obligation created by or arising under this Agreement.
C. Releases. In consideration of the issuance of the Shares, of the
dismissal with prejudice of the Complaint, Counterclaim and Third-Party
Complaint, and of each and every other obligation undertaken by the parties to
this Agreement, which the parties hereto agree and acknowledge is adequate,
good, legal and valuable consideration, each of KLA and Levy, on one hand, and
each of the Defendants and EG&G, on the other hand, hereby releases, remises
and forever discharges each other such party and its or his respective Related
Parties, from the Released Matters. Further, each of the Defendants and EG&G,
for itself or himself and on behalf of its or his Related Parties, hereby
releases, remises and forever discharges each other and its or his respective
Related Parties from the Released Matters, except for any obligations created
by or arising under any underwriting, investment banking or financial advisory
agreement.
D. Waiver of Claims. This Agreement is a full and final release with
respect to the Released Matters. Each of KLA and Levy, for itself or himself,
and each of the Defendants and EG&G, for itself or himself, expressly waives
any right or claim of right he or it may have under the provisions of
15
California Civil Code Section 1542 or similar provisions of federal or any
state, statutory or common law. The parties understand that California Civil
Code Section 1542 provides as follows:
A general release does not extend to the claims which the creditor
does not know or expect to exist in his favor at the time of
executing the release, which if known by him must have materially
affected his settlement with the debtor.
Each party acknowledges and agrees that this Agreement is a complete
compromise of matters involving disputed issues of law and fact and fully
assumes the risk that the investigation it or he has conducted, if any,
relating to the Released Matters, may be inadequate and that the facts with
respect to which this Agreement is executed may hereafter be found to be
different from the facts that such party now believes to be true. Each party
assumes the risk of such possible differences of facts and hereby agrees that
this Agreement shall remain in effect, notwithstanding such differences of
fact. Each party further recognizes that the other party to this Agreement
may have information or facts of which it/he are not aware and agrees and
acknowledges that in entering into this Agreement it/he is not relying on the
representations of any other party regarding the facts and circumstances
relating to the Released Matters.
VI. Fees and Costs. KLA and Levy, on one hand, and the Defendants and EG&G,
on the other hand, shall bear its or their own fees and costs, including
attorney's fees, incurred in connection with the Lawsuit, the disputes between
the parties hereto as described in the Recitals, and negotiation, drafting,
execution, delivery and performance of this Agreement and the related
documentation except as otherwise provided in Section 4.
VII. Understanding of Agreement. Each party affirms and acknowledges that it
or he has both read this Agreement and had an opportunity to have this
16
Agreement fully explained by counsel of choice, and fully understands and
appreciates the words and terms used in this Agreement and their effect. Each
party further affirms and acknowledges that this Agreement is a full and final
compromise, release and settlement of the Released Matters, and that each
party signs this Agreement of its and his own free will. Each party, and/or
the respective attorneys of each party, has carefully and fully reviewed and
revised, or has had an opportunity to revise, this Agreement. Accordingly,
the parties agree that the normal rule of construction that any ambiguities
are to be resolved against the drafting party shall not be utilized in the
interpretation of this Agreement.
VIII. No Admission of Liability. Each party affirms and acknowledges that
this Agreement is a compromise of disputed claims and is not intended to be
and shall not be construed as, an admission of liability on the part of any
party hereto to any other party.
IX. Effect of Captions. The titles to the various provisions of this
Agreement are used for convenience or reference only and are not intended to
and shall not in any way enlarge or diminish the rights and obligations of the
parties hereto or effect the meaning or construction of this Agreement.
X. Partial Invalidity. Should any part, term, provision or portion of this
Agreement be decided by a court of competent jurisdiction to be illegal or in
conflict with any laws of any state, or of the United States, and on account
thereof, or for any other reason, be rendered unenforceable or ineffectual,
the validity of the remaining parts, terms, portions or provisions shall be
enforceable and shall not be affected thereby.
XI. Successors and Assigns. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective permitted
17
successors and assigns of the parties. The rights and obligations under this
Agreement are not assisgnable without the written consent of each of the
parties to this Agreement or their authorized representatives, except to the
successor of all or substantially all of the business of the assigning party
(regardless of the form of the transfer thereof, e.g. by way of merger, sale
of assets or similar transaction), and provided that nothing contained herein
shall be deemed to restrict KLA's transfer of the Shares as otherwise
permitted under this Agreement.
XII. Notices. Any and all written communications required or permitted by
this Agreement, or by law, to be served upon or given to any party hereto by
another party, shall be in writing and shall be personally served or given by
facsimile or overnight courier mail at the addresses indicated below:
If to KLA or Levy: KLA Instruments Corporation
160 Rio Robles
San Jose, CA 95161-9055
Attention: V.P. Finance and
Administration, CFO
with a copy to: Graham & James LLP
600 Hansen Way
Palo Alto, CA 94304
Attention: Michael Kalkstein, Esq.
If to Micrion: Micrion Corporation
One Corporation Way
Peabody, MA 01960-7990
Attention: President
If to H&Q: Hambrecht & Quist Group, Inc.
One Bush Street
San Francisco, CA 94104
Attention: General Counsel
If to the Other Defendants: c/o Micrion Corporation
One Corporation Way
Peabody, MA 01960-7990
Attention: President
18
If to EG&G: EG&G, Inc.
45 William Street
Wellesley, MA 02181
Attention: General Counsel
with copies in each case to: Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, MA 02109-2891
Attention: Kevin Lesinski, Esq.
XIII. Complete Agreement, Modification and Waiver. This Agreement together
with the Exhibits hereto and the documents delivered pursuant hereto or
referred to herein contain the entire agreement between the parties hereto
with respect to the transactions contemplated herein and supersede all
previous negotiations, commitments and writings. This Agreement may be
modified only by a writing signed by each of the parties to this Agreement or
by their authorized representatives. No waiver of any provision of this
Agreement shall be effective unless made in writing. No waiver of any breach
of this Agreement shall constitute a waiver of any previous or subsequent
breach of the same or any other provision of this Agreement.
XIV. Applicable Law. This Agreement shall be governed in all respects by the
laws of the Commonwealth of Massachusetts without regard to the conflicts of
laws provisions thereof.
XV. Counterpart Signatures. This Agreement may be executed in any number of
counterparts and by facsimile, with the same effect as if all parties have
signed the same document, and each such executed counterpart shall be deemed
to be an original instrument. All such executed counterparts together shall
constitute one and the same instrument. True and correct copies may be used
in lieu of the original.
SIGNATURE PAGES TO THE SETTLEMENT AGREEMENT
19
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year set forth in the heading hereof.
KLA INSTRUMENTS CORPORATION DEMUTH, FOLGER & TERHUNE
By: Robert J. Boehlke By: Thomas W. Folger
Vice President and CFO General Partner of the General
Partner of DEMUTH, FOLGER & TERHUNE
KENNETH LEVY, THIRD-PARTY PETER W. WALLACE
DEFENDANT
MICRION CORPORATION LOUIS P. VALENTE
By: NICHOLAS P. ECONOMOU
President and Chief Executive Officer
THOMAS W. FOLGER
HAMBRECHT & QUIST GROUP
By: Stephen M. Machtinger
Vice President, General Counsel
and Secretary NICHOLAS P. ECONOMOU,
Individually and as the Proxyholder
EG&G, INC. JOHN A. DOHERTY
By: John F. Alexander, II
Sr. Vice President and CHARLES E. MINIHAN
Chief Financial Officer
APPROVED AS TO FORM:
GRAHAM & JAMES LLP,
COUNSEL TO KLA AND LEVY
By: Michael Kalkstein
APPROVED AS TO FORM:
CHOATE, HALL & STEWART,
COUNSEL TO THE DEFENDANTS AND EG&G
By: Kevin J. Lesinski
MICRION CORPORATION AND EXHIBIT 11
SUBSIDIARIES
Statement of Computation of Per
Share Earnings
(unaudited) (unaudited)
For the three months For the nine months
ended March 31, ended March 31,
1995 1996 1995 1996
(in thousands except per share data)
Net Income $710 $446 $1,855 $1,513
(a) Computation of Primary
Earnings per Share:
Weighted average common
equivalent shares
outstanding Common stock 3,901 3,907 3,272 3,905
Common stock equivalents:
Warrants(1) 37 53 117 49
Options (2) 3 94 2 66
Weighted average common and
common equivalent shares
outstanding 3,941 4,054 3,391 4,020
Primary Earnings per Share $0.18 $0.11 $0.55 $0.38
(b) Computation of Fully
Diluted Earnings per Share:
Weighted average common
equivalent shares
outstanding Common
stock 3,901 3,907 3,272 3,905
Common stock equivalents:
Warrants(1) 39 55 124 51
Options (2) - 107 16 78
Weighted average common and
common equivalent shares
outstanding 3,940 4,069 3,412 4,034
Fully Diluted Earnings
per Share $0.18 $0.11 $0.54 $0.38
(1) Warrants issued 7/93 for 160,000 shares and 5/94 for 100,000
shares, less shares reacquired under the treasury stock method.
(2) Options granted 11/94, 12/94, 5/95, 12/95 and 1/96 under option
plan, less shares required under the treasury stock method.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Registrant's Condensed Consolidated Financial Statements appearing in the
Registrant's quarterly report on Form 10-Q for the quarter ended March 31,
1996, to which this schedule is an exhibit, and is qualified in its entirety
by reference to such quarterly report.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,382
<SECURITIES> 0
<RECEIVABLES> 14,061
<ALLOWANCES> 0
<INVENTORY> 15,333
<CURRENT-ASSETS> 33,664
<PP&E> 6,220
<DEPRECIATION> 3,439
<TOTAL-ASSETS> 36,688
<CURRENT-LIABILITIES> 9,674
<BONDS> 0
0
0
<COMMON> 28,873
<OTHER-SE> (2,692)
<TOTAL-LIABILITY-AND-EQUITY> 36,688
<SALES> 26,117
<TOTAL-REVENUES> 27,157
<CGS> 16,236
<TOTAL-COSTS> 17,283
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35
<INCOME-PRETAX> 2,323
<INCOME-TAX> 810
<INCOME-CONTINUING> 1,513
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,513
<EPS-PRIMARY> .38
<EPS-DILUTED> .38
</TABLE>
