Execution Copy
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,
2
the Merger Agreement or the transactions
contemplated therein, or the Zygo Withdrawal (her
