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[Option from TENCOR to KLA]
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT dated as of January 14, 1997 (the "AGREEMENT")
is entered into by and between Tencor Instruments, a California corporation
("TENCOR"), and KLA Instruments Corporation, a Delaware corporation ("KLA").
RECITALS
WHEREAS, concurrently with the execution and delivery of this Agreement,
Tencor, KLA and Tiger Acquisition Corp., a California corporation and a wholly
owned subsidiary of KLA ("SUB"), are entering into an Agreement and Plan of
Reorganization (the "MERGER AGREEMENT"), which provides that, among other
things, upon the terms and subject to the conditions thereof, Tencor and KLA
will to enter into a business combination transaction to pursue their long-term
business strategies (the "MERGER"); and
WHEREAS, as a condition to KLA's willingness to enter into the Merger
Agreement, KLA has requested that Tencor agree, and Tencor has so agreed, to
grant to KLA an option to acquire shares of Tencor's Common Stock, no par value,
upon the terms and subject to the conditions set forth herein;
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein and in the Merger Agreement and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
1. GRANT OF OPTION
Tencor hereby grants to KLA an irrevocable option (the "OPTION") to
acquire up to a number of shares of the Common Stock, no par value, of Tencor
("TENCOR SHARES") equal to 19.9% of the issued and outstanding shares as of the
first date, if any, upon which an Exercise Event (as defined in Section 2(a)
below) shall occur (the "OPTION SHARES") (provided that the Option Shares shall
not upon timely issuance constitute more than 19.9% of the then issued and
outstanding Tencor Shares), in the manner set forth below (i) by paying cash at
a price of $40.00 per share (the "EXERCISE PRICE") and/or, at KLA's election,
(ii) by exchanging therefor shares of the Common Stock, par value $0.001 per
share, of KLA ("KLA SHARES") at a rate (the "EXERCISE RATIO"), for each Option
Share, of a number of KLA Shares equal to the Exercise Price divided by the
closing sale price of KLA Shares on the Nasdaq National Market for the trading
day immediately preceding the date of the Closing (as
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defined below) of the particular Option exercise. All references in this
Agreement to KLA Shares hereunder shall be deemed to include the associated KLA
Rights. Capitalized terms used in this Agreement but not defined herein shall
have the meanings ascribed thereto in the Merger Agreement.
2. EXERCISE OF OPTION; MAXIMUM PROCEEDS
(a) The Option may be exercised by KLA, in whole or in part, at any
time or from time to time, (i) immediately prior to the consummation of a tender
or exchange offer for 25% or more of any class of Tencor's capital stock, (ii)
upon the occurrence of all of the events specified in Section 7.3(b)(ii) of the
Merger Agreement, (iii) if and when the Board of Directors of Tencor shall have
withheld, withdrawn or modified in a manner adverse to KLA its recommendation in
favor of approving the issuance of the shares of Tencor Common Stock by virtue
of the Merger after receipt of and in connection with an Acquisition Proposal
with respect to Tencor or (iv) if and when the Board of Directors of Tencor
recommends a Tencor Superior Proposal to the shareholders of Tencor (any of the
events specified in clauses (i), (ii), (iii)or (iv) of this sentence being
referred to herein as an "EXERCISE EVENT"). In the event KLA wishes to exercise
the Option, KLA shall deliver to Tencor a written notice (each an "EXERCISE
NOTICE") specifying the total number of Option Shares it wishes to acquire and
the form of consideration to be paid. Each closing of a purchase of Option
Shares (a "CLOSING") shall occur on a date and at a time prior to the
termination of the Option designated by KLA in an Exercise Notice delivered at
least two business days prior to the date of such Closing, which Closing shall
be held at the principal offices of Tencor.
(b) Notwithstanding the foregoing, upon the commencement of a tender
or exchange offer for 25% or more of any class of Tencor's capital stock (and/or
during any time which such a tender or exchange offer remains open), KLA may
deliver to Tencor an Exercise Notice (a "CONDITIONAL EXERCISE NOTICE")
specifying that it wishes to exercise and close a purchase of Option Shares
immediately prior to the consummation of such tender or exchange offer. Unless
the Conditional Exercise Notice is withdrawn by KLA, the Closing of a purchase
of Option Shares specified in a Conditional Exercise Notice shall take place
immediately prior to the consummation of such tender or exchange offer. In the
event that such tender or exchange offer is not consummated prior to termination
of the Option, such Conditional Exercise Notice shall be void and of no further
force and effect.
(c) The Option shall terminate upon the earliest of (i) the
Effective Time, (ii) 180 days following the termination of the Merger Agreement
pursuant to Article VII thereof if an Exercise Event shall have occurred on or
prior to the date of such termination, (iii) 12 months following the date on
which the Merger Agreement is terminated pursuant to Article VII thereof if (x)
there shall have been a Tencor Negative Vote and (y) prior to such Tencor
Negative Vote there shall have occurred an Acquisition Proposal with respect to
Tencor which shall have been publicly disclosed and not withdrawn, (iv) 12
months following the date on which the Merger Agreement is terminated pursuant
to Article VII thereof if prior thereto there shall have commenced a tender or
exchange offer for 25% or more of any class of Tencor's capital stock and (v)
the date on which the Merger Agreement is terminated if neither an Exercise
Event , nor both of the events specified in subclauses (x) and (y) of clause
(iii), nor the commencement of a tender or exchange offer for 25% or
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more of any class of Tencor's capital stock shall have occurred on or prior to
such date of termination; provided, however, that if the Option cannot be
exercised by reason of any applicable government order or because the waiting
period related to the issuance of the Option Shares under the HSR Act shall not
have expired or been terminated, then the Option shall not terminate until the
tenth business day after such impediment to exercise shall have been removed or
shall have become final and not subject to appeal. Notwithstanding the
foregoing, the Option may not be exercised if (i) KLA shall have breached in any
material respect any of its covenants or agreements contained in the Merger
Agreement or (ii) the representations and warranties of KLA contained in the
Merger Agreement shall not have been true and correct in all material respects
on and as of the date when made.
(d) If KLA receives in the aggregate pursuant to Section 7.3(b) of
the Merger Agreement together with proceeds in connection with any sales or
other dispositions of Option Shares and any dividends received by KLA declared
on Option Shares, more than the sum of (x) $40,000,000 plus (y) the Exercise
Price multiplied by the number of Tencor Shares purchased by KLA pursuant to the
Option, then all proceeds to KLA in excess of such sum shall be remitted by KLA
to Tencor.
3. CONDITIONS TO CLOSING
The obligation of Tencor to issue Option Shares to KLA hereunder is
subject to the conditions that (a) any waiting period under the HSR Act
applicable to the issuance of the Option Shares hereunder shall have expired or
been terminated; (b) all material consents, approvals, orders or authorizations
of, or registrations, declarations or filings with, any Federal, state or local
administrative agency or commission or other Federal state or local governmental
authority or instrumentality, if any, required in connection with the issuance
of the Option Shares hereunder shall have been obtained or made, as the case may
be; and (c) no preliminary or permanent injunction or other order by any court
of competent jurisdiction prohibiting or otherwise restraining such issuance
shall be in effect. It is understood and agreed that at any time during which
the Option is exercisable or if KLA shall have delivered to Tencor a Conditional
Exercise Notice, the parties will use their respective best efforts to satisfy
all conditions to Closing, so that a Closing may take place as promptly as
practicable, and in any event, prior to consummation of a tender or exchange
offer for shares of Tencor capital stock; provided that neither Tencor nor KLA
nor any subsidiary or affiliate thereof will be required to agree to any
divestiture by itself or any of its affiliates of shares of capital stock or of
any business, assets or property, or the imposition of any material limitation
on the ability of any of them to conduct their businesses or to own or exercise
control of such assets, properties and stock.
4. CLOSING
At any Closing, (a) Tencor shall deliver to KLA a single certificate in
definitive form representing the number of Tencor Shares designated by KLA in
its Exercise Notice, such certificate to be registered in the name of KLA and to
bear the legend set forth in Section 10 hereof, against delivery of (b) payment
by KLA to Tencor of the aggregate purchase price for the Tencor Shares so
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designated and being purchased by delivery of (i) a certified check or bank
check and/or, at KLA's election, (ii) a single certificate in definitive form
representing the number of KLA Shares being issued by KLA in consideration
therefor (based on the Exercise Ratio), such certificate to be registered in the
name of Tencor and to bear the legend set forth in Section 10 hereof.
5. REPRESENTATIONS AND WARRANTIES OF TENCOR
Tencor represents and warrants to KLA that (a) Tencor is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California and has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder; (b) the execution and
delivery of this Agreement by Tencor and consummation by Tencor of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Tencor and no other corporate proceedings on the
part of Tencor are necessary to authorize this Agreement or any of the
transactions contemplated hereby; (c) this Agreement has been duly executed and
delivered by Tencor and constitutes a legal, valid and binding obligation of
Tencor and, assuming this Agreement constitutes a legal, valid and binding
obligation of KLA, is enforceable against Tencor in accordance with its terms,
except as enforceability may be limited by bankruptcy and other laws affecting
the rights and remedies of creditors generally and general principles of equity;
(d) except for any filings required under the HSR Act, Tencor has taken all
necessary corporate and other action to authorize and reserve for issuance and
to permit it to issue upon exercise of the Option, and at all times from the
date hereof until the termination of the Option will have reserved for issuance,
a sufficient number of unissued Tencor Shares for KLA to exercise the Option in
full and will take all necessary corporate or other action to authorize and
reserve for issuance all additional Tencor Shares or other securities which may
be issuable pursuant to Section 9(a) upon exercise of the Option, all of which,
upon their issuance and delivery in accordance with the terms of this Agreement,
will be validly issued, fully paid and nonassessable; (e) upon delivery of the
Tencor Shares and any other securities to KLA upon exercise of the Option, KLA
will acquire such Tencor Shares or other securities free and clear of all
material claims, liens, charges, encumbrances and security interests of any kind
or nature whatsoever, excluding those imposed by KLA; (f) the execution and
delivery of this Agreement by Tencor do not, and the performance of this
Agreement by Tencor will not, (i) violate the Articles of Incorporation or
By-Laws of Tencor, (ii) conflict with or violate any order applicable to Tencor
or any of its subsidiaries or by which they or any of their property is bound or
affected or (iii) result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give rise to any right of termination, amendment, acceleration or cancellation
of, or result in the creation of a lien or encumbrance on any of the property or
assets of Tencor or any of its subsidiaries pursuant to, any contract or
agreement to which Tencor or any of its subsidiaries is a party or by which
Tencor or any of its subsidiaries or any of their property is bound or affected,
except, in the case of clauses (ii) and (iii) above, for violations, conflicts,
breaches, defaults, rights of termination, amendment, acceleration or
cancellation, liens or encumbrances which would not, individually or in the
aggregate, have a Material Adverse Effect on Tencor; (g) the execution and
delivery of this Agreement by Tencor does not, and the performance of this
Agreement by Tencor will not, require any consent, approval, authorization or
permit of, or filing with, or notification to, any Governmental Entity except
pursuant to the HSR Act; and (h) any KLA Shares acquired pursuant to this
Agreement will not be acquired by
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Tencor with a view to the public distribution thereof and Tencor will not sell
or otherwise dispose of such shares in violation of applicable law or this
Agreement.
6. REPRESENTATIONS AND WARRANTIES OF KLA
KLA represents and warrants to Tencor that (a) KLA is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder; (b) the execution and
delivery of this Agreement by KLA and the consummation by KLA of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of KLA and no other corporate proceedings on the
part of KLA are necessary to authorize this Agreement or any of the transactions
contemplated hereby; (c) this Agreement has been duly executed and delivered by
KLA and constitutes a legal, valid and binding obligation of KLA and, assuming
this Agreement constitutes a legal, valid and binding obligation of Tencor, is
enforceable against KLA in accordance with its terms, except as enforceability
may be limited by bankruptcy and other laws affecting the rights and remedies of
creditors generally and general principles of equity; (d) except for any filings
required under the HSR Act, KLA has taken (or will in a timely manner take) all
necessary corporate and other action to authorize and reserve for issuance and
to permit it to issue upon exercise of the Option and will take all necessary
corporate or other action to authorize and reserve for issuance all additional
KLA Shares or other securities which may be issuable pursuant to Section 9(b)
upon exercise of the Option, all of which, upon their issuance and delivery in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable; (e) upon delivery of KLA Shares to Tencor in consideration of
any acquisition of Tencor Shares pursuant hereto, Tencor will acquire such KLA
Shares free and clear of all material claims, liens, charges, encumbrances and
security interests of any kind or nature whatsoever, excluding those imposed by
Tencor; (f) the execution and delivery of this Agreement by KLA do not, and the
performance of this Agreement by KLA will not, (i) violate the Certificate of
Incorporation or By-Laws of KLA, (ii) conflict with or violate any order
applicable to KLA or any of its subsidiaries or by which they or any of their
property is bound or affected or (iii) result in any breach of or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give rise to any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the property or assets of KLA or any of its subsidiaries
pursuant to, any contract or agreement to which KLA or any of its subsidiaries
is a party or by which KLA or any of its subsidiaries or any of their property
is bound or affected, except, in the case of clauses (ii) and (iii) above, for
violations, conflicts, breaches, defaults, rights of termination, amendment,
acceleration or cancellation, liens or encumbrances which would not,
individually or in the aggregate, have a Material Adverse Effect on KLA; (g) the
execution and delivery of this Agreement by KLA does not, and the performance of
this Agreement by KLA will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Entity except
pursuant to the HSR Act; and (h) any Tencor Shares acquired upon exercise of the
Option will not be acquired by KLA with a view to the public distribution
thereof and KLA will not sell or otherwise dispose of such shares in violation
of applicable law or this Agreement.
7. CERTAIN RIGHTS
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(a) KLA PUT. At the request of and upon notice by KLA (the "PUT
NOTICE"), at any time during the period during which the Option is exercisable
pursuant to Section 2 (the "PURCHASE PERIOD") or in accordance with subparagraph
(iv) below, Tencor (or any successor entity thereof) shall purchase from KLA the
Option, to the extent not previously exercised, at the price set forth in
subparagraph (i) below (as limited by subparagraph (iii) below), and the Option
Shares, if any, acquired by KLA pursuant thereto, at the price set forth in
subparagraph (ii) below (as limited by subparagraph (iii) below):
(i) The difference between the "MARKET/TENDER OFFER PRICE" for
Tencor Shares as of the date KLA gives notice of its intent to
exercise its rights under this Section 7(a) (defined as the higher
of (A) the highest price per share offered as of such date pursuant
to any Acquisition Proposal which was made prior to such date and
not terminated or withdrawn as of such date and (B) the highest
closing sale price of Tencor Shares on the Nasdaq National Market
during the twenty (20) trading days ending on the trading day
immediately preceding such date) and the Exercise Price, multiplied
by the number of Tencor Shares purchasable pursuant to the Option,
but only if the Market/Tender Offer Price is greater than the
Exercise Price. For purposes of determining the highest price
offered pursuant to any Acquisition Proposal which involves
consideration other than cash, the value of such consideration shall
be equal to the higher of (x) if securities of the same class of the
proponent as such consideration are traded on any national
securities exchange or by any registered securities association, a
value based on the closing sale price or asked price for such
securities on their principal trading market on such date and (y)
the value ascribed to such consideration by the proponent of such
Acquisition Proposal, or if no such value is ascribed, a value
determined in good faith by the Board of Directors of Tencor.
(ii) The Exercise Price paid by KLA for Tencor Shares acquired
pursuant to the Option plus the difference between the Market/Tender
Offer Price and such Exercise Price (but only if the Market/Tender
Offer Price is greater than the Exercise Price) multiplied by the
number of Tencor Shares so purchased. If KLA issued KLA Shares in
connection with any exercise of the Option, the Exercise Price in
connection with such exercise shall be calculated as set forth in
the last sentence of Section 4 as if KLA had exercised its right to
pay cash instead of issuing KLA Shares.
(iii) Notwithstanding subparagraphs (i) and (ii) above, pursuant to
this Section 7 Tencor shall not be required to pay KLA in excess of
an aggregate of (x) $40,000,000 plus (y) the Exercise Price paid by
KLA for Tencor Shares acquired pursuant to the Option minus (z) any
amounts paid to KLA by Tencor pursuant to Section 7.3(b) of the
Merger Agreement.
(iv) Notwithstanding the foregoing, upon the commencement of a
tender or exchange offer for 25% or more of any class of Tencor's
capital stock (and/or during any time which such a tender or
exchange offer remains open), KLA may deliver to Tencor a Put Notice
(a "CONDITIONAL PUT NOTICE") specifying that it wishes to
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exercise and close immediately prior to the consummation of such
tender or exchange offer, a sale to Tencor pursuant to this Section
7(a) of the Option, to the extent not previously exercised, and the
Option Shares, if any, acquired by KLA pursuant thereto,. Unless the
Conditional Put Notice is withdrawn by KLA, the Closing of any such
sale specified in a Conditional Put Notice shall take place
immediately prior to the consummation of such tender or exchange
offer. In the event that such tender or exchange offer is not
consummated prior to termination of the Option, such Conditional Put
Notice shall be void and of no further force and effect.
(b) REDELIVERY OF KLA SHARES. If KLA has acquired Tencor Shares
pursuant to exercise of the Option by the issuance and delivery of KLA Shares,
then Tencor shall, if so requested by KLA, in fulfillment of its obligation
pursuant to the first clause of Section 7(a)(ii) with respect to the Exercise
Price paid in the form of KLA Shares only, redeliver the certificate(s) for such
KLA Shares to KLA, free and clear of all claims, liens, charges, encumbrances
and security interests of any kind or nature whatsoever, other than those
imposed by KLA.
(c) PAYMENT AND REDELIVERY OF OPTION OR SHARES. In the event KLA
exercises its rights under Sections 7(a) or (b), Tencor shall, within ten
business days after KLA delivers notice pursuant to Section 7(a), pay the
required amount to KLA in immediately available funds (and KLA Shares, if
applicable) and KLA shall surrender to Tencor the Option and the certificates
evidencing the Tencor Shares purchased by KLA pursuant thereto, and KLA shall
represent and warrant that such shares are then free and clear of all claims,
liens, charges, encumbrances and security interests of any kind or nature
whatsoever, other than those imposed by Tencor.
(d) TENCOR CALL. If KLA has acquired Option Shares pursuant to
exercise of the Option (the date of any Closing relating to any such exercise
herein referred to as an "EXERCISE DATE") and no Acquisition Proposal with
respect to Tencor has been consummated at any time after the date of this
Agreement and prior to the date one year following such Exercise Date (nor has
Tencor entered into a definitive agreement or letter of intent with respect to
such an Acquisition Proposal which agreement or letter of intent remains in
effect at the end of such year), then, at any time after the date one year
following such Exercise Date and prior to the date eighteen months following
such Exercise Date, Tencor may require KLA, upon delivery to KLA of written
notice, to sell to Tencor any Tencor Shares held by KLA as of the day that is
ten business days after the date of such notice, up to a number of shares equal
to the number of Option Shares acquired by KLA pursuant to exercise of the
Option in connection with such Exercise Date. The per share purchase price for
such sale (the "TENCOR CALL PRICE") shall be equal to the Exercise Price less
any dividends paid on the Tencor Shares to be purchased by Tencor pursuant to
this Section 7(d). The closing of any sale of Tencor Shares pursuant to this
Section 7(d) shall take place at the principal offices of Tencor at a time and
on a date designated by Tencor in the aforementioned notice to KLA, which date
shall be no more than 20 and no less than 12 business days from the date of such
notice. The Tencor Call Price shall be paid in immediately available funds,
provided that, in the event KLA has acquired Option Shares pursuant to exercise
of the Option by issuance and delivery of KLA Shares, at the option of Tencor,
the Tencor Call Price for part or all of any purchase of Tencor Shares pursuant
to this Section 7(d), up to a number of such shares equal to the number of
Option Shares acquired by
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KLA by issuance and delivery of KLA Shares, shall be paid by delivery of a
number of KLA Shares equal to the Tencor Call Price divided by the closing sale
price of KLA Shares on the Nasdaq National Market for the trading day
immediately preceding the date of the Exercise Date on which the Option Shares
to be purchased by Tencor pursuant to this Section 7(d) were originally issued
to KLA.
(e) RESTRICTIONS ON TRANSFER. Until the expiration of the Purchase
Period, Tencor shall not sell, transfer or otherwise dispose of any KLA Shares
acquired by it pursuant to this Agreement.
8. REGISTRATION RIGHTS
(a) Following the termination of the Merger Agreement, each party
hereto (a "HOLDER") may by written notice (a "REGISTRATION NOTICE") to the other
party (the "REGISTRANT") request the Registrant to register under the Securities
Act all or any part of the shares acquired by such Holder pursuant to this
Agreement (the "REGISTRABLE SECURITIES") in order to permit the sale or other
disposition of such shares pursuant to a bona fide firm commitment underwritten
public offering in which the Holder and the underwriters shall effect as wide a
distribution of such Registrable Securities as is reasonably practicable and
shall use reasonable efforts to prevent any person or group from purchasing
through such offering shares representing more than 1% of the outstanding shares
of Common Stock of the Registrant on a fully diluted basis (a "PERMITTED
OFFERING"); provided, however, that any such Registration Notice must relate to
a number of shares equal to at least 2% of the outstanding shares of Common
Stock of the Registrant on a fully diluted basis and that any rights to require
registration hereunder shall terminate with respect to any shares that may be
sold pursuant to Rule 144(k) under the Securities Act. The Registration Notice
shall include a certificate executed by the Holder and its proposed managing
underwriter, which underwriter shall be an investment banking firm of nationally
recognized standing (the "MANAGER"), stating that (i) the Holder and the Manager
have a good faith intention to commence a Permitted Offering and (ii) the
Manager in good faith believes that, based on the then prevailing market
conditions, it will be able to sell the Registrable Securities at a per share
price equal to at least 80% of the per share average of the closing sale prices
of the Registrant's Common Stock on the Nasdaq National Market for the twenty
trading days immediately preceding the date of the Registration Notice. The
Registrant shall thereupon have the option exercisable by written notice
delivered to the Holder within ten business days after the receipt of the
Registration Notice, irrevocably to agree to purchase all or any part of the
Registrable Securities for cash at a price (the "OPTION PRICE" equal to the
product of (i) the number of Registrable Securities so purchased and (ii) the
per share average of the closing sale prices of the Registrant's Common Stock on
the Nasdaq National Market for the twenty trading days immediately preceding the
date of the Registration Notice. Any such purchase of Registrable Securities by
the Registrant hereunder shall take place at a closing to be held at the
principle executive offices of the Registrant or its counsel at any reasonable
date and time designated by the Registrant in such notice within 10 business
days after delivery of such notice. The payment for the shares to be purchased
shall be made by delivery at the time of such closing of the Option Price in
immediately available funds.
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(b) If the Registrant does not elect to exercise its option to
purchase pursuant to Section 8(a) with respect to all Registrable Securities,
the Registrant shall use all reasonable efforts to effect, as promptly as
practicable, the registration under the Securities Act of the unpurchased
Registrable Securities requested to be registered in the Registration Notice;
provided, however, that (i) neither party shall be entitled to more than an
aggregate of two effective registration statements hereunder and (ii) the
Registrant will not be required to file any such registration statement during
any period of time (not to exceed 40 days after a Registration Notice in the
case of clause (A) below or 90 days after a Registration Notice in the case of
clauses (B) and (C) below) when (A) the Registrant is in possession of material
non-public information which it reasonably believes would be detrimental to be
disclosed at such time and, in the written opinion of counsel to such
Registrant, such information would have to be disclosed if a registration
statement were filed at that time; (B) such Registrant is required under the
Securities Act to include audited financial statements for any period in such
registration statement and such financial statements are not yet available for
inclusion in such registration statement; or (C) such Registrant determines, in
its reasonable judgment, that such registration would interfere with any
financing, acquisition or other material transaction involving the Registrant.
If consummation of the sale of any Registrable Securities pursuant to a
registration hereunder does not occur within 180 days after the filing with the
SEC of the initial registration statement therefor, the provisions of this
Section 8 shall again be applicable to any proposed registration, it being
understood that neither party shall be entitled to more than an aggregate of two
effective registration statements hereunder. The Registrant shall use all
reasonable efforts to cause any Registrable Securities registered pursuant to
this Section 8 to be qualified for sale under the securities or blue sky laws of
such jurisdictions as the Holder may reasonably request and shall continue such
registration or qualification in effect in such jurisdictions; provided,
however, that the Registrant shall not be required to qualify to do business in,
or consent to general service of process in, any jurisdiction by reason of this
provision.
(c) The registration rights set forth in this Section 8 are subject
to the condition that the Holder shall provide the Registrant with such
information with respect to such Holder's Registrable Securities, the plan for
distribution thereof, and such other information with respect to such Holder as,
in the reasonable judgment of counsel for the Registrant, is necessary to enable
the Registrant to include in a registration statement all material facts
required to be disclosed with respect to a registration thereunder.
(d) A registration effected under this Section 8 shall be effected
at the Registrant's expense, except for underwriting discounts and commissions
and the fees and expenses of counsel to the Holder, and the Registrant shall
provide to the underwriters such documentation (including certificates, opinions
of counsel and "comfort" letters from auditors) as are customary in connection
with underwritten public offerings and as such underwriters may reasonably
require. In connection with any registration, the Holder and the Registrant
agree to enter into an underwriting agreement reasonably acceptable to each such
party, in form and substance customary for transactions of this type with the
underwriters participating in such offering.
(e) Indemnification
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(i) The Registrant will indemnify the Holder, each of its
directors and officers and each person who controls the Holder within the
meaning of Section 15 of the Securities Act, and each underwriter of the
Registrant's securities, with respect to any registration, qualification or
compliance which has been effected pursuant to this Agreement, against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading, or any violation by the Registrant of any rule or regulation
promulgated under the Securities Act applicable to the Registrant in connection
with any such registration, qualification or compliance, and the Registrant will
reimburse the Holder and, each of its directors and officers and each person who
controls the Holder within the meaning of Section 15 of the Securities Act, and
each underwriter for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, provided that the Registrant will not be liable in
any such case to the extent that any such claim, loss, damage, liability or
expense arises out of or is based on any untrue statement or omission or alleged
untrue statement or omission, made in reliance upon and in conformity with
written information furnished to the Registrant by such Holder or director or
officer or controlling person or underwriter seeking indemnification.
(ii) The Holder will indemnify the Registrant, each of its
directors and officers and each underwriter of the Registrant's securities
covered by such registration statement and each person who controls the
Registrant within the meaning of Section 15 of the Securities Act, against all
claims, losses, damages and liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any violation by
the Holder of any rule or regulation promulgated under the Securities Act
applicable to the Holder in connection with any such registration, qualification
or compliance, and will reimburse the Registrant, such directors, officers or
control persons or underwriters for any legal or any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Registrant by the Holder
for use therein, provided that in no event shall any indemnity under this
Section 8(e) exceed the gross proceeds of the offering received by the Holder.
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(iii) Each party entitled to indemnification under this
Section 8(e) (the "INDEMNIFIED PARTY") shall give notice to the party required
to provide indemnification (the "INDEMNIFYING PARTY") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense; provided, however, that the Indemnifying Party
shall pay such expense if representation of the Indemnified Party by counsel
retained by the Indemnifying Party would be inappropriate due to actual or
potential differing interests between the Indemnified Party and any other party
represented by such counsel in such proceeding, and provided further that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 8(e) unless
the failure to give such notice is materially prejudicial to an Indemnifying
Party's ability to defend such action. No Indemnifying Party, in the defense of
any such claim or litigation shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation. No Indemnifying Party shall be required to
indemnify any Indemnified Party with respect to any settlement entered into
without such Indemnifying Party's prior consent (which shall not be unreasonably
withheld).
9. ADJUSTMENT UPON CHANGES IN CAPITALIZATION; RIGHTS PLANS
(a) In the event of any change in the Tencor Shares by reason of
stock dividends, stock splits, reverse stock splits, mergers (other than the
Merger), recapitalizations, combinations, exchanges of shares and the like, the
type and number of shares or securities subject to the Option, the Exercise
Ratio and the Exercise Price shall be adjusted appropriately, and proper
provision shall be made in the agreements governing such transaction so that KLA
shall receive, upon exercise of the Option, the number and class of shares or
other securities or property that KLA would have received in respect of the
Tencor Shares if the Option had been exercised immediately prior to such event
or the record date therefor, as applicable.
(b) At any time during which the Option is exercisable, and at any
time after the Option is exercised (in whole or in part, if at all), Tencor
shall not adopt a shareholders rights plan (a so-called "poison pill"), and KLA
shall not amend the KLA Rights Plan or adopt a new shareholders rights plan,
that contains provisions for the distribution of rights thereunder as a result
of the other party being the beneficial owner of shares of the first party by
virtue of the Option being exercisable or having been exercised (or as a result
of such other party beneficially owning shares issuable in respect of any Option
Shares). It is understood, however, that following termination (if any) of the
Merger Agreement, a party may adopt (or in the case of KLA, adopt and/or amend)
a shareholders rights plan, that contains provisions for the distribution of
rights thereunder as a result of the other
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party being the beneficial owner of shares of the first party in addition to
those that may be beneficially owned by virtue of the Option being exercisable
or having been exercised (or as a result of such other party beneficially owning
shares issuable in respect of any Option Shares).
10. RESTRICTIVE LEGENDS
Each certificate representing Option Shares issued to KLA hereunder, and
each certificate representing KLA Shares delivered to Tencor at a Closing, shall
include a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD
ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER AS SET FORTH IN THE STOCK OPTION AGREEMENT DATED AS OF JANUARY
14, 1997, A COPY OF WHICH MAY BE OBTAINED FROM THE ISSUER.
11. LISTING AND HSR FILING
Tencor, upon the request of KLA, shall promptly file an application to
list the Tencor Shares to be acquired upon exercise of the Option for quotation
on the Nasdaq National Market and shall use its best efforts to obtain approval
of such listing as soon as practicable. KLA, upon the request of Tencor, shall
promptly file an application to list the KLA Shares issued and delivered to
Tencor pursuant to Section 4 for quotation on the Nasdaq National Market and
shall use its best efforts to obtain approval of such listing as soon as
practicable. Promptly after the date hereof, each of the parties hereto shall
promptly file with the Federal Trade Commission and the Antitrust Division of
the United States Department of Justice all required premerger notification and
report forms and other documents and exhibits required to be filed under the HSR
Act to permit the acquisition of the Tencor Shares subject to the Option at the
earliest possible date.
12. BINDING EFFECT
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. Nothing
contained in this Agreement, express or implied, is intended to confer upon any
person other than the parties hereto and their respective successors and
permitted assigns any rights or remedies of any nature whatsoever by reason of
this Agreement. Any shares sold by a party in compliance with the provisions of
Section 8 shall, upon consummation of such sale, be free of the restrictions
imposed with respect to such shares by this Agreement and any transferee of such
shares shall not be entitled to the rights of such party. Certificates
representing shares sold in a registered public offering pursuant to Section 8
shall not be required to bear the legend set forth in Section 10.
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13. SPECIFIC PERFORMANCE
The parties recognize and agree that if for any reason any of the
provisions of this Agreement are not performed in accordance with their specific
terms or are otherwise breached, immediate and irreparable harm or injury would
be caused for which money damages would not be an adequate remedy. Accordingly,
each party agrees that in addition to other remedies the other party shall be
entitled to an injunction restraining any violation or threatened violation of
the provisions of this Agreement. In the event that any action shall be brought
in equity to enforce the provisions of the Agreement, neither party will allege,
and each party hereby waives the defense, that there is an adequate remedy at
law.
14. ENTIRE AGREEMENT
This Agreement and the Merger Agreement (including the appendices thereto)
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
15. FURTHER ASSURANCES
Each party will execute and deliver all such further documents and
instruments and take all such further action as may be necessary in order to
consummate the transactions contemplated hereby.
16. VALIDITY
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of the other provisions of this
Agreement, which shall remain in full force and effect. In the event any
Governmental Entity of competent jurisdiction holds any provision of this
Agreement to be null, void or unenforceable, the parties hereto shall negotiate
in good faith and shall execute and deliver an amendment to this Agreement in
order, as nearly as possible, to effectuate, to the extent permitted by law, the
intent of the parties hereto with respect to such provision.
17. NOTICES
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally or by commercial delivery service,
or sent via telecopy (receipt confirmed) to the parties at the following
addresses or telecopy numbers (or at such other address or telecopy numbers for
a party as shall be specified by like notice):
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(1) if to Tencor, to:
Tencor Instruments
Xxx Xxxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: President
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
with a copy to:
Heller, Ehrman, White & XxXxxxxxx
000 Xxxxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxx X. X'Xxxx, Esq.
Telephone No.: 000-000-0000
Telecopy No.: 000-000-0000
(2) if to KLA, to:
KLA Instruments Corporation
160 Rio Xxxxxx
X.X. Xxx 00000
Xxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Chief Executive Officer
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
with a copy to:
KLA Instruments Corporation
160 Rio Xxxxxx
X.X. Xxx 00000
Xxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: General Counsel
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
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with another copy to:
Wilson, Sonsini, Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
18. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of California applicable to agreements made and to be
performed entirely within such State.
19. COUNTERPARTS
This Agreement may be executed in two counterparts, each of which shall be
deemed to be an original, but both of which, taken together, shall constitute
one and the same instrument.
20. EXPENSES
Except as otherwise expressly provided herein or in the Merger Agreement,
all costs and expenses incurred in connection with the transactions contemplated
by this Agreement shall be paid by the party incurring such expenses.
21. AMENDMENTS; WAIVER
This Agreement may be amended by the parties hereto and the terms and
conditions hereof may be waived only by an instrument in writing signed on
behalf of each of the parties hereto, or, in the case of a waiver, by an
instrument signed on behalf of the party waiving compliance.
22. ASSIGNMENT
Neither of the parties hereto may sell, transfer, assign or otherwise
dispose of any of its rights or obligations under this Agreement or the Option
created hereunder to any other person, without the express written consent of
the other party, except that the rights and obligations hereunder shall inure to
the benefit of and be binding upon any successor of a party hereto.
[Remainder of Page Intentionally Blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective duly authorized officers as of the date first
above written.
TENCOR INSTRUMENTS
By: /s/ Xxx X. Xxxxxxxx
--------------------------------------------
Name: Xxx X. Xxxxxxxx
Title: President and Chief Executive Officer
KLA INSTRUMENTS CORPORATION
By: /s/ Xxxxxxx Xxxx
--------------------------------------------
Name: Xxxxxxx Xxxx
Title: Chief Executive Officer
***STOCK OPTION AGREEMENT***
(TENCOR option to KLA)
