CASCADE MICROTECH INC

On February 3, 2016, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with FormFactor, Inc., a Delaware corporation (“FormFactor”), and Cardinal Merger Subsidiary, Inc., an Oregon corporation and a wholly owned subsidiary of FormFactor (“Merger Sub”). The Merger Agreement provides for, among other things, the merger of Merger Sub with and into Cascade Microtech, Inc., with Cascade Microtech, Inc. continuing as the surviving corporation (the “Merger”). Subject to the terms and conditions of the Merger Agreement, each outstanding share of our common stock will be converted into the right to receive (a) $16.00 in cash, without interest, and (b) 0.6534 shares of FormFactor common stock, subject to adjustment. Our board of directors, by unanimous vote, approved the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement. In addition, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) for the Merger Agreement expired on March 21, 2016.

A description of the Merger Agreement is included in our Current Report on Form 8-K filed with the SEC on February 9, 2016, and a copy of the Merger Agreement is attached as Exhibit 2.1 to that report.

Since the public announcement of the proposed Merger between us and FormFactor on February 4, 2016, plaintiffs have filed two putative shareholder class action lawsuits against us, our directors, FormFactor and Merger Sub in connection with our entry into the Merger Agreement with FormFactor. The first lawsuit was filed in Washington County Circuit Court in the State of Oregon on March 8, 2016. The second lawsuit was filed in Multnomah County Circuit Court in the State of Oregon on April 8, 2016.

The plaintiffs in both lawsuits allege that the individual members of our board of directors breached their fiduciary duties to our shareholders by approving the proposed Merger for inadequate consideration; approving the Merger to obtain unique benefits not shared equally with our other shareholders; failing to take steps to maximize the value paid to our shareholders; failing to take steps to ensure a fair process leading up to the proposed Merger; and agreeing to preclusive deal protection devices in the Merger Agreement. The lawsuits also allege claims against FormFactor and Merger Sub for aiding and abetting our directors’ alleged breaches of their fiduciary duties. The second lawsuit also includes allegations that our directors breached their fiduciary duties by failing to disclose material information about the Merger in the Form S-4/proxy statement/prospectus filed by FormFactor with the SEC on April 1, 2016. The plaintiffs seek, among other things, injunctive relief prohibiting completion of the Merger, rescission of the Merger if it is completed, and an accounting by defendants, plaintiffs’ attorney’s fees and costs, and other relief.

Based on the early stage of the second lawsuit, the amount or range of reasonably possible losses to which we may be exposed cannot be estimated and the ultimate resolution of this matter and the associated financial impact to us, if any, remains uncertain at this time. We maintain a directors and officers insurance policy that provides coverage for claims such as those alleged in the complaint, subject to coverage defenses, policy limits and a deductible. Regardless of the outcome of the claims, the defense of the claims may cause us to incur costs and divert resources and the attention of management from our business.

In April 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-10, “Revenue from Contracts with Customers (Topic 606) - Identifying Performance Obligations and Licensing.” ASU 2016-10 clarifies aspects of Topic 606 related to identifying performance obligations and the licensing implementation guidance, while retaining the related core principles for those areas. The effective date and transition requirements for ASU 2016-10 are the same as the effective date and transition requirements in ASU 2014-09. While we do not expect the adoption of ASU 2016-10 to have a material effect on our business, we are still evaluating any potential impact that adoption of ASU 2016-10 may have on our financial position, results of operations or cash flows.