August Technology reaffirms commitment to Nanometrics transaction

February 14, 2005 — August Technology Corp.’s Board of Directors, after carefully reviewing KLA-Tencor’s acquisition proposal with financial advisors on Friday, concluded that the proposed merger with Nanometrics provides greater opportunity for growth in value to August Technology shareholders than a cash or stock offer at $11.50/share and therefore reaffirmed its commitment to the proposed transaction with Nanometrics.

The Board of Directors made this decision after reviewing a letter from KLA-Tencor Corp. in which KLA-Tencor proposed to acquire August Technology in a transaction in which the August shareholders would receive $11.50 in cash for each share of August common stock. In its letter, KLA-Tencor also stated, “We would also be willing to consider using stock as consideration if that would be attractive to you.”

“August Technology’s Board of Directors has not changed or modified its recommendation with respect to the Nanometrics merger and the Nanometrics merger agreement remains in effect,” said Jeff O’Dell, August Technology’s chairman and CEO. “We believe the interest from KLA-Tencor and Rudolph, two of our competitors, is driven at least in part by recognition of the strong market position the combined August Nanometrics will hold. As we have consistently said, our business is not for sale. We continue to believe that our proposed strategic merger of equals with Nanometrics represents the best opportunity to significantly increase shareholder value over 2005, 2006 and beyond.”

The Board further concluded that while it had no interest in considering KLA’s cash offer, in order to fulfill its fiduciary obligations it would investigate the alternative of a transaction in which the consideration to August Technology shareholders would consist of KLA-Tencor stock at an exchange ratio per share which reflects the intrinsic value of August Technology. The Board also believes that several issues, including anti-trust concerns, will need to be considered and resolved before any transaction with KLA-Tencor could be completed.

August Technology will request that KLA-Tencor enter into a confidentiality agreement having provisions that are no less favorable to August Technology than those contained in the confidentiality agreement between August Technology and Nanometrics. Assuming such a confidentiality agreement is executed, August Technology will explore the proposal from KLA-Tencor.


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