EXHIBIT 10
SETTLEMENT AGREEMENT AND MUTUAL
RELEASE
This Settlement Agreement and Mutual
Release (the “Settlement Agreement”) dated as of
April 2, 2009, is entered into by and among Electro Scientific
Industries, Inc., an Oregon corporation, and Zirkon Merger Sub,
LLC, a Delaware limited liability company wholly owned by Electro
Scientific Industries, Inc. (collectively “ESI”), and
Zygo Corporation, a Delaware corporation
(“Zygo”).
RECITALS
1. ESI and Zygo are parties to the Agreement and
Plan of Merger and Reorganization dated as of October 15, 2008
(the “Merger Agreement”). ESI and Zygo are also parties
to confidentiality agreements dated June 12, 2008 and
September 30, 2008 (the “NDAs”).
2. In connection with the Merger Agreement, on
December 8, 2008, ESI and Zygo filed a Form S-4 Registration
Statement with the Securities and Exchange Commission (the
“Registration Statement”).
3. ESI, Zygo and members of Zygo’s board of
directors are defendants in a lawsuit filed by Andy Bamber,
purportedly on behalf of himself and similarly situated holders of
Zygo common stock, in the Superior Court for the State of
Connecticut (the “Bamber Litigation”). The Bamber
Litigation challenges the proposed merger of ESI and Zygo on the
terms set forth in the Merger Agreement.
4. On January 20, 2009, Zygo’s board of
directors withdrew its recommendation in favor of the merger of ESI
and Zygo on the terms set forth in the Merger Agreement (the
“Zygo Withdrawal”).
5. ESI and Zygo disagree with respect to their
respective rights and obligations under the Merger Agreement
following the Zygo Withdrawal.
6. ESI and Zygo, without admitting that the
position of the other is correct with respect to their respective
rights and obligations following the Zygo Withdrawal, have executed
this Settlement Agreement so as to avoid the delay, uncertainty and
expense of prolonging their disagreement.
Terms of
Agreement
NOW, THEREFORE
, in consideration of the mutual
promises, covenants, and obligations set forth below, for valuable
consideration, ESI and Zygo agree as follows:
1. Termination of Merger
Agreement .
On ESI’s receipt of the
Termination Fee required in paragraph 3 of this Settlement
Agreement, the Merger Agreement is terminated, except with respect
to those obligations set forth in Section 6.3(b) of the Merger
Agreement. To the extent the NDAs remain in force, they shall
survive termination of the Merger Agreement.
2. Withdrawal of Registration
Statement .
Within ten (10) days of
ESI’s receipt of the Termination Fee required in paragraph 3
of this Settlement Agreement, ESI shall file a Request for
Withdrawal of the Registration Statement in accordance with Rule
477 adopted by the Securities and Exchange Commission pursuant to
the Securities Act of 1933, as amended.
3. Termination Fee
.
Within one (1) business day of
the execution of this Settlement Agreement, Zygo shall wire the sum
of FIVE MILLION FOUR HUNDRED THOUSAND DOLLARS ($5,400,000.00) to
ESI in full settlement of the Termination Fee required by
Section 8.3 of the Merger Agreement. Zygo shall comply with
the following wire instructions:
Wells Fargo Bank, N.A.
Routing Number: 121000248
Account Number:
4950024190
Account Name: Electro Scientific
Industries, Inc.
4. Additional Termination
Fee .
If within six months of ESI’s
receipt of the Termination Fee required by paragraph 3 of this
Settlement Agreement, Zygo announces that its Board of Directors
has approved a “Proposal,” then Zygo shall immediately
wire to ESI, in accordance with the instructions in paragraph 2 of
this Settlement Agreement, the amount of ONE MILLION TWO HUNDRED
THOUSAND DOLLARS ($1,200,000.00) as an additional Termination Fee.
If no such announcement is made within six months of ESI’s
receipt of the Termination Fee, Zygo shall have no obligation to
pay an additional Termination Fee. For purposes of this
Section 4, a “Proposal” shall mean a proposal from
a party other than ESI to acquire, directly or indirectly, more
than 50% of the shares of Zygo Common Stock then outstanding or all
or substantially all of the assets of Zygo on a consolidated
basis.
5. Press Release
.
Following ESI’s receipt of the
Termination Fee required by paragraph 3 of this Settlement
Agreement, the parties shall issue a joint press release in the
form attached hereto as Exhibit A .
6. General Release by
ESI .
Except with respect to the
obligations of Zygo under this Settlement Agreement and the NDAs,
ESI, for itself and for each of its employees, officers, directors,
corporate parents, subsidiaries, divisions, successors and assigns,
remise, release, acquit and forever discharge Zygo and each of
Zygo’s current and former parent corporations, owners,
shareholders, subsidiaries, affiliates and their respective past
and present officers, directors, and employees, as well as the
heirs, executors, administrators, attorneys, insurers and
co-insurers, predecessors,
successors, and assigns of any of
them (jointly and severally the “Zygo Releasees”), of
and from any and all manner of claims set forth in, arising out of,
or related in any manner whatsoever to, the Merger Agreement or the
transactions contemplated therein, or the Zygo Withdrawal
(hereafter “ESI Claims”), whether such ESI Claims be
presently known or unknown, discoverable or undiscoverable, which
ESI ever had, now has, or which it or its successors or assigns
hereafter can, shall, or may have against the Zygo
Releasees.
7. General Release by
Zygo .
Except with respect to the
obligations of ESI under this Settlement Agreement and the NDAs,
Zygo, for itself and for each of its employees, officers,
directors, corporate parents, subsidiaries, divisions, successors
and assigns, remise, release, acquit and forever discharge
ESI
