-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ODJsFuRzrVLO09D19CoMpXe4+IW51NtKg5r4M950Fk7ooYAFwK+Da8+J+dRSTVH0 +XC6xQ3Rxe1PXK6X08P0FQ== 0000891618-96-000334.txt : 19960509 0000891618-96-000334.hdr.sgml : 19960509 ACCESSION NUMBER: 0000891618-96-000334 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960508 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SILICON VALLEY GROUP INC CENTRAL INDEX KEY: 0000712752 STANDARD INDUSTRIAL CLASSIFICATION: SPECIAL INDUSTRY MACHINERY, NEC [3559] IRS NUMBER: 942264681 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11348 FILM NUMBER: 96558023 BUSINESS ADDRESS: STREET 1: 101 METRO DRIVE STREET 2: SUITE 400 CITY: SAN JOSE STATE: CA ZIP: 95110 BUSINESS PHONE: 4084675910 MAIL ADDRESS: STREET 1: 101 METRO DRIVE STREET 2: SUITE 400 CITY: SAN JOSE STATE: CA ZIP: 95110 10-Q 1 FORM 10-Q FOR QUARTER ENDED MARCH 31, 1996 1 =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended March 31, 1996. ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the period from to . -------- -------- Commission File Number 0-11348 SILICON VALLEY GROUP, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 94-2264681 (State of incorporation) (IRS Employer Identification No.) 101 METRO DRIVE, SUITE 400, SAN JOSE, CALIFORNIA 95110 (Address of principal executive offices) (Zip Code) (408) 441-6700 (Registrant's telephone number, including area code) 2240 RINGWOOD AVENUE, SAN JOSE, CALIFORNIA 95131 (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares outstanding of the Registrant's Common Stock as of April 19, 1996 was 29,280,491. =============================================================================== 2 SILICON VALLEY GROUP, INC. INDEX PART I. FINANCIAL INFORMATION
PAGE NO. -------- Consolidated Condensed Balance Sheets as of March 31, 1996 and September 30, 1995 3 Consolidated Condensed Income Statements for the Quarters and the Six Month Periods Ended March 31, 1996 and 1995 4 Consolidated Condensed Statements of Cash Flows for the Six Months Ended March 31, 1996 and 1995 5 Notes to Consolidated Condensed Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION 15 SIGNATURES 17
2 3 PART I. FINANCIAL INFORMATION SILICON VALLEY GROUP, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (DOLLARS IN THOUSANDS)
March 31, September 30, 1996 1995 --------- ------------- (Unaudited) ASSETS CURRENT ASSETS: Cash and equivalents $241,074 $166,790 Temporary investments 53,640 13,733 Accounts receivable (net of allowance for doubtful accounts of $4,784 and $4,107, respectively) 138,472 122,849 Inventories 187,510 153,973 Prepaid expenses 9,698 7,389 Deferred taxes 1,500 1,000 -------- -------- Total current assets 631,894 465,734 PROPERTY AND EQUIPMENT - NET 44,690 27,619 DEPOSITS AND OTHER ASSETS 2,755 2,097 INTANGIBLE ASSETS - NET 2,743 2,820 -------- -------- TOTAL $682,082 $498,270 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of capital lease obligations $ 701 $ 885 Accounts payable 47,502 40,219 Accrued liabilities 116,263 99,427 Income taxes payable 1,494 2,177 -------- -------- Total current liabilities 165,960 142,708 CAPITAL LEASE OBLIGATIONS 783 654 DEFERRED LIABILITIES 398 685 MINORITY INTEREST 4,211 3,976 STOCKHOLDERS' EQUITY: Common Stock - shares outstanding: March 31, 1996: 29,264,444 September 30, 1995: 25,233,170 375,901 249,552 Retained earnings 134,829 100,695 -------- -------- Stockholders' equity 510,730 350,247 -------- -------- TOTAL $682,082 $498,270 ======== ========
See Notes to Consolidated Condensed Financial Statements. 3 4 SILICON VALLEY GROUP, INC. CONSOLIDATED CONDENSED INCOME STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
Quarters Ended Six Months Ended March 31, March 31, 1996 1995 1996 1995 ---- ---- ---- ---- NET SALES $170,668 $109,380 $328,948 $195,351 COST OF SALES 100,254 67,849 193,133 120,618 -------- -------- -------- -------- GROSS PROFIT 70,414 41,531 135,815 74,733 OPERATING EXPENSES: Research, development and related engineering 17,118 9,816 32,624 18,094 Marketing, general and administrative 29,234 21,088 56,933 38,710 -------- -------- -------- -------- OPERATING INCOME 24,062 10,627 46,258 17,929 INTEREST AND OTHER INCOME - NET 3,411 1,146 6,870 2,344 INTEREST EXPENSE (117) (150) (252) (295) -------- -------- -------- -------- INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 27,356 11,623 52,876 19,978 PROVISION FOR INCOME TAXES 9,575 4,184 18,507 7,192 MINORITY INTEREST 128 (48) 235 (31) -------- -------- -------- -------- NET INCOME $ 17,653 $ 7,487 $ 34,134 $ 12,817 ======== ======== ======== ======== PREFERRED STOCK DIVIDEND $ -- $ 239 $ -- $ 537 ======== ======== ======== ======== NET INCOME PER SHARE $ 0.58 $ 0.33 $ 1.12 $ 0.58 ======== ======== ======== ======== SHARES USED IN PER SHARE COMPUTATIONS 30,520 22,811 30,516 21,624 ======== ======== ======== ========
See Notes to Consolidated Condensed Financial Statements. 4 5 SILICON VALLEY GROUP, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
Six Months Ended March 31, 1996 1995 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 34,134 $ 12,817 Reconciliation to net cash provided by (used for) operating activities: Depreciation and amortization 5,558 5,841 Amortization of intangibles 77 208 Minority interest 235 (31) Changes in assets and liabilities: Accounts receivable (15,623) (29,908) Inventories (33,537) (33,179) Prepaid expenses (2,309) (39) Deposits and other assets (658) 45 Accounts payable 7,283 14,632 Accrued and deferred liabilities 17,111 15,390 Income taxes (1,183) (1,108) -------- ------- Net cash provided by (used for) operating activities 11,088 (15,332) -------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of temporary investments (68,642) -- Maturities of temporary investments 28,735 90,089 Purchases of property and equipment (22,629) (9,348) -------- ------- Net cash used for investing activities (62,536) (9,348) -------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of debt (440) (377) Sale of Common Stock 126,349 90,089 Sale of Preferred Stock -- 29,800 Collection of receivable from sale of Common Stock warrants -- 8,204 -------- ------- Net cash provided by financing activities 125,909 127,716 -------- ------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (177) (154) -------- ------- INCREASE IN CASH AND EQUIVALENTS 74,284 102,882 CASH AND EQUIVALENTS: Beginning of period 166,790 87,829 -------- ------- End of period $241,074 $190,711 ======== ======== NON-CASH INVESTING AND FINANCING ACTIVITIES: Preferred Stock dividend $ -- $ 537 ======== ======== Preferred Stock Series A converted to Common Stock $ -- $ 17,000 ======== ======== Preferred Stock Series B converted to Common Stock $ -- $ 29,800 ======== ========
See Notes to Consolidated Condensed Financial Statements. 5 6 SILICON VALLEY GROUP, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS The accompanying consolidated condensed financial statements have been prepared by the Company without audit and reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the financial position and the results of operations for the interim periods. The statements have been prepared in accordance with the regulations of the Securities and Exchange Commission, but omit certain information and footnote disclosures necessary to present the statements in accordance with generally accepted accounting principles. For further information, refer to the Consolidated Financial Statements and Notes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 1995. 2. INVENTORIES Inventories consist of:
March 31, September 30, 1996 1995 --------- ------------- (In thousands) Raw materials $ 85,190 $ 63,803 Work-in-process 99,857 87,060 Finished goods 2,463 3,110 -------- -------- $187,510 $153,973 ======== ========
3. BANK LINE OF CREDIT In December 1995, the Company replaced its then existing bank credit facility with a $75,000,000 unsecured revolving bank credit agreement that expires in December 1998. Advances under the new facility will bear interest at either the prime rate or LIBOR plus 1%. The agreement includes certain covenants regarding financial ratios and prohibits the payment of cash dividends. 4. STOCK OFFERING During the first quarter of fiscal 1996, the Company sold 4,025,000 shares of its Common Stock through an underwritten public offering. The net proceeds of the offering were approximately $126,200,000. 6 7 SILICON VALLEY GROUP, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 5. RECENTLY ISSUED ACCOUNTING STANDARD The Company is required to adopt Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, in fiscal 1997. SFAS No. 123 establishes accounting and disclosure requirements using a fair value based method of accounting for stock based employee compensation plans. Under SFAS No. 123 the Company may either adopt the new fair value based accounting method or continue the intrinsic value based method and provide pro forma footnote disclosures of net income and earnings per share as if the accounting provisions of SFAS No. 123 had been adopted. The Company plans to adopt only the footnote disclosure requirements of SFAS No. 123; therefore such adoption will have no effect on the Company's consolidated net earnings or cash flows. 7 8 SILICON VALLEY GROUP, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This discussion and analysis contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those projected in the forward-looking statements as a result of the risk factors set forth below, as well as risk factors included in the Company's Annual Report on Form 10K for the fiscal year ended September 30, 1995. RESULTS OF OPERATIONS The Company designs, markets, and services semiconductor processing equipment used in the fabrication of integrated circuits. The Company's products are used in photolithography for exposure and photoresist processing, and in deposition for oxidation/diffusion and low pressure chemical vapor deposition ("LPCVD"). The Company manufactures and markets its photolithography exposure products through its majority owned subsidiary, SVG Lithography Systems, Inc. ("SVGL"), its photoresist processing products through its Track Systems Division ("Track"), and its oxidation/diffusion and LPCVD products through its Thermco Systems Division ("Thermco"). The semiconductor industry into which the Company sells its products is highly cyclical and has, historically, experienced periodic downturns which have had a severe effect on the semiconductor industry's demand for semiconductor processing equipment. In recent months there have been indications of a potential slowdown in the semiconductor industry growth rate. During the second quarter of fiscal 1996, the Company recorded customer bookings (orders for the Company's products) at its highest rate ever. However, as shipments increased, the Company's book to bill ratio was lower than during the preceding quarters. Additionally, beginning in the second fiscal quarter, certain customers have delayed scheduled shipment dates on specific orders, primarily into early calendar 1997 and all within twelve months of the date the company was notified of the delay. However, there can be no assurance that such dates will not be further rescheduled or the orders canceled. Prior semiconductor downturns have resulted in significant reductions in the Company's net sales, gross margin and net income. Moreover, the Company's operations as a whole will continue to be dependent on the current and anticipated demand for integrated circuits and products utilizing integrated circuits. Any future weakness in demand in the semiconductor industry is likely to have an adverse effect on the Company's business and results of operations. Further, the Company believes that it will continue to rely on a limited number of major customers for a substantial percentage of its net sales (three such customers accounted for 47% of the Company's sales in fiscal 1995 and a similar trend exists thus far in fiscal 1996). The loss of a significant customer, a delay in shipment due to rescheduling by a significant customer or any substantial reduction in orders by a significant customer, including reductions in orders due to market, economic or competitive conditions in the semiconductor industry, could adversely affect the Company's business and results of operations. Net sales for the second fiscal quarter ended March 31, 1996 were $170,668,000, an 8% increase over net sales of $158,280,000 for the preceding quarter and 56% above net sales of $109,380,000 during the second quarter of fiscal 1995. For the first half of fiscal 1996, net 8 9 sales were $328,948,000, a 68% increase over net sales of $195,351,000 during the first half of fiscal 1995. The growth in net sales over the preceding quarter was primarily the result of increased shipments of Thermco and SVGL products. In both the second quarter and first six months of fiscal 1996, net sales in each of the Company's product groups were above the year-earlier levels. During the second quarter of fiscal 1996, the Company had bookings of $193,541,000 which represented a book to bill ratio of 1.13 to 1. At March 31, 1996 the Company had a backlog of $441,283,000 compared to $391,439,000 at September 30, 1995. The Company records in backlog only those orders for which a customer purchase order has been received, all specifications, terms and conditions have been finalized and the specified delivery is within twelve months of the date the order is recorded. At March 31, 1996, the backlog included orders for a total of 37 Micrascan photolithography systems, certain of which were for the current version of the system and others for the next generation .25 micron product. In April 1996, a first-time Micrascan customer withdrew its single unit order for a .25 micron system, which it had placed in the second quarter of fiscal 1996, thereby reducing backlog to 36 Micrascan photolithography systems. Gross margin was 41% in both the second and first quarters of fiscal 1996 and 38% in the second quarter of fiscal 1995. For the first six months of fiscal 1996, gross margin was 41% compared to 38% for the first half of fiscal 1995. The improvement in fiscal 1996 second quarter and first-half gross margins over the year-earlier periods was primarily due to increased manufacturing volumes and efficiencies related to SVGL's Micrascan photolithography system, and a higher percentage of the Company's sales consisting of Track systems, which are typically the highest gross margin products the Company manufactures. Research, development and related engineering (R&D) was $17,118,000 (10% of net sales) during the second quarter of fiscal 1996, $15,506,000 (10% of net sales) during the preceding quarter and $9,816,000 (9% of net sales) during the second quarter of fiscal 1995. The Company's R&D expenditures are net of funding received from outside parties under development agreements. Neither the spending nor the recognition of the funding related to the development milestones, contained in the agreements, is ratable over the term of the agreements. Substantially all of the funding was received by SVGL from SEMATECH. During the second and first quarters of fiscal 1996 and the second quarter of fiscal 1995, such funding totaled $1,889,000, $2,959,000 and $2,592,000, respectively. New product development at SVGL was the primary factor in the increase in R&D over the preceding quarter and a primary factor in the increase over the year-earlier quarter. SVGL increased its development expenditures associated with its new Micrascan products and recognized less outside funding under its development agreements with SEMATECH. In addition to the increased SVGL development, costs incurred to support increased product shipments in all of the product groups were a primary factor in the increase over the year-earlier quarter. During the first six months of fiscal 1996 R&D was $32,624,000, up from $18,094,000 during the same period of fiscal 1995. The increase was primarily due to new product development activities in all of the Company's product groups and costs incurred to support increased product shipments. During the six month periods ended March 31, 1996 and 1995, funding received under joint development agreements of $4,848,000 and $4,674,000, respectively, was offset against R&D expenditures. 9 10 Marketing, general and administrative expenses (MG&A) were $29,234,000 (17% of net sales) during the second quarter of fiscal 1996 compared to $27,699,000 (18% of net sales) during the preceding quarter and $21,088,000 (19% of net sales) during the second quarter of fiscal 1995. The increase in MG&A from the preceding quarter was primarily due to the expansion of the Company's marketing and administrative functions and costs associated with the relocation of its corporate offices, in part to facilitate the expansion of the Track manufacturing capacity. In comparison to the year-earlier quarter, increased MG&A expenditures were principally the result of costs related to the higher level of shipments, the Company's expanded marketing and technical customer training and support functions, and administrative costs incurred in supporting the Company's operations. The decrease in MG&A as a percentage of sales compared to each of the earlier quarters was the result of the increase in net sales. During the first six months of fiscal 1996 MG&A was $56,933,000 (17% of net sales) compared to $38,710,000 (20% of net sales) during the first half of fiscal 1995. The primary reasons for the increased dollar expenditures and the decrease as a percentage of net sales correspond to those in the comparison of the second quarters of fiscal 1996 and 1995 above. Operating income was $24,062,000 (14% of net sales) for the second quarter of fiscal 1996 compared to $22,196,000 (14% of net sales) for the preceding quarter and $10,627,000 (10% of net sales) for the second quarter of fiscal 1995. First half fiscal 1996 operating income was $46,258,000 (14% of net sales) compared to $17,929,000 (9% of net sales) for the first six months of fiscal 1995. In comparing the second quarter and first half of fiscal 1996 to the earlier periods, gross profits from higher net sales exceeded the growth of R&D and MG&A, resulting in increased operating income. Interest and other income was $3,411,000 during the second quarter of fiscal 1995 compared to $3,459,000 for the preceding quarter and $1,146,000 for the year-earlier quarter. For the first six months of fiscal 1996, interest and other income was $6,870,000 compared to $2,344,000 for the first six months of fiscal 1995. In comparison to the year-earlier periods, the increases were due to higher cash balances available for investment as a result of an underwritten public offering of the Company's Common Stock in October 1995. See Liquidity and Capital Resources. Interest expense was $117,000 during the second quarter of fiscal 1996, compared to $135,000 during the preceding quarter and $150,000 during the year-earlier quarter. During the first six months of fiscal 1996, interest expense was $252,000, down from $295,000 during the first half of fiscal 1995. The Company recorded a 35% provision for income taxes for the first six months of fiscal 1996, compared to a 36% provision for all of fiscal 1995. Variations in the Company's effective tax rate relate primarily to changes in the geographic distribution of the Company's pretax income. The minority interest represented that share of SVGL's operating results attributable to its minority shareholder. For the second and first quarters of fiscal 1996, minority interest represented reductions from income of $128,000 and $107,000, respectively, compared to an addition to income for minority interest of $48,000 during the second quarter of fiscal 1995. For 10 11 the first six months of fiscal 1996, minority interest represented a reduction from income of $235,000, compared to an addition to income of $31,000 for the first half of fiscal 1995. The Company had net income of $17,653,000 ($0.58 per share), $16,481,000 ($0.54 per share) and $7,487,000 ($0.33 per share) for the second and first quarters of fiscal 1996 and the second quarter of fiscal 1995, respectively. First half fiscal 1996 and 1995 net income was $34,134,000 ($1.12 per share) and $12,817,000 ($0.58 per share), respectively. FLUCTUATIONS IN QUARTERLY RESULTS AND DEPENDENCE ON NEW PRODUCT DEVELOPMENT The Company has, at times during its existence, experienced quarterly fluctuations in its operating results. Due to the relatively small number of systems sold during each fiscal quarter and the relatively high revenue per system, production or shipping delays or customer order rescheduling can significantly affect quarterly revenues and profitability. The Company has experienced, and may again experience, quarters during which a substantial portion of the Company's net sales are realized near the end of the quarter. Accordingly, delays in shipments near the end of a quarter can cause quarterly net sales to fall short of anticipated levels. Since most of the Company's expenses are fixed in the short term, such shortfalls in net sales could have a material adverse effect on the Company's business and results of operations. The Company's operating results may also vary from quarter to quarter based upon numerous factors including the timing of new product introductions, product mix, level of sales, the relative proportions of domestic and international sales, activities of competitors, acquisitions, international events, and problems obtaining materials or components on a timely basis. In light of these factors and the nature of semiconductor industry cycles, the Company could again experience variability in quarterly operating results. Semiconductor manufacturing equipment and processes are subject to rapid technological change. The Company believes that its future success will depend in part upon its ability to continue to enhance its existing products and their process capabilities and to develop and manufacture new advanced products with improved process capabilities that enable semiconductor manufacturers to fabricate semiconductors more efficiently. Failure to introduce new advanced products successfully in a timely manner could result in the loss of competitive position and reduced sales of existing products. In particular, the Company believes that advanced logic devices and DRAMs will require increasingly finer line widths. As a consequence, it is important to develop and introduce a version of the Micrascan capable of exposing line widths of .25 micron during the second half of calendar 1996. In addition, new product introductions could contribute to quarterly fluctuations in operating results as orders for new products commence and increase the potential for a decline in orders of existing products, particularly if new products are delayed. Furthermore, the inability to produce such products, attain acceptable manufacturing efficiencies in the production of such products, or failure to achieve market acceptance could have a material adverse effect on the Company's business and results of operations. The Company believes that the photolithography exposure equipment market is one of the largest segments of the semiconductor processing equipment industry and that its Micrascan II is currently the most technically advanced machine shipping in multiple quantities to global semiconductor manufacturers. While the recent volume of orders for Micrascan systems has been encouraging, they are not necessarily indicative of industry-wide acceptance of the 11 12 Micrascan technology. The Company is relatively new to the photolithography exposure business and does not share the same level of financial resources as its competitors. As a result, major customers may be unwilling to rely on SVGL to be the primary source of this advanced technology. The Company believes that advanced semiconductor manufacturers will not require volume quantities of production equipment as advanced as Micrascan until late fiscal 1996, and that substantial sales of Micrascan systems will not begin until late calendar 1996 or 1997. Additionally, if manufacturers of traditional I-line or Deep UV steppers are able to further enhance their machines to achieve finer line widths sufficiently to erode Micrascan's expected yield, throughput, and line width advantages, demand may not develop as the Company expects. As a result of its fourth quarter operating results, SVGL had a marginal profit for fiscal 1995. Although SVGL was modestly profitable during the first half of fiscal 1996, the Company believes that with the costs associated with the continued development of the Micrascan technology, the expansion of SVGL's manufacturing capacity and the additional manpower requirements related to the expanded capacity, there can be no assurance that SVGL will be able to operate profitably in the future. The Company believes that for SVGL to succeed in the long term, it must sell its Micrascan products on a global basis. The Japanese and Pacific Rim markets (including fabrication plants located in other parts of the world which are operated by Japanese and Pacific Rim semiconductor manufacturers) represent a substantial portion of the overall market for photolithography exposure equipment and to date neither SVGL, Track nor Thermco has been successful in obtaining a substantial share of these markets. In many instances, Japanese and Pacific Rim semiconductor manufacturers fabricate devices, such as DRAM's, with potentially different economic cycles than those effecting the sales of devices manufactured by the majority of the Company's US and European customers. Failure to secure customers in these markets may limit the market share available to the Company and may increase the Company's vulnerability to industry or geographic downturns. The Company is currently expanding the manufacturing capacity of SVGL to meet potential future demand for its advanced lithography products. Presently, manufacturing capacity is insufficient to meet multiple customer demands for the Micrascan family of products and the Company believes that its ability to supply systems in volume will be a major factor in customer decisions to commit to the Micrascan technology. Accordingly, the Company must now commence facility and capital improvements and the related staffing and administrative costs necessary to meet expected shipment volumes in 1997 and 1998. From time to time, the Company has experienced difficulty in ramping up production or effecting transitions to new products and, consequently, has suffered delays in product deliveries. There can be no assurance that the Company will not experience manufacturing problems as a result of capacity constraints or ramping up production by upgrading or expanding existing operations. These issues could result in product delivery delays and a subsequent loss of future revenues. In particular, the Company believes that protracted delays in delivering initial quantities of Micrascan products to multiple customers could result in semiconductor manufacturers electing to install competitive equipment in their advanced fabrication facilities, which could preclude acceptance of the Micrascan products on an industry-wide basis. In addition, the Company's operating results could also be adversely affected by the increase in fixed costs and operating expenses related to increases in production capacity if net sales do not increase commensurably. 12 13 The Company depends on external funding to assist in the high cost of development in its photolithography operation. To that end, the Company and SEMATECH entered into a series of agreements whereby SEMATECH agreed to assist in funding both the development of the Micrascan technology and the increase of SVGL's manufacturing capability and capacity. The agreements with SEMATECH included the sale of warrants to purchase the Company's Common Stock ("the Warrants") and, based upon the Company achieving certain performance milestones, provide for $22,000,000 of such funding through 1997, all of which the Company expects would be an offset to its research and development expenditures. Subsequent to the issuance of the Warrants, the net number of common shares into which they are exercisable has been included in the shares used in earnings per share computations. In April 1996, SEMATECH notified the Company that it would exercise the Warrants through a net issuance provision contained in the applicable agreement, which will result in the issuance of approximately 702,000 shares of Common Stock with no further cash inflow to the Company. As of March 31, 1996, the Company had recognized $18,480,000 of such SEMATECH funding. There are no assurances that the Company will be able to attain the remaining SEMATECH milestones or that SEMATECH will be capable of providing the agreed upon funding. In the event that the Company does not receive the contracted SEMATECH funding for any reason, it would be required to either curtail development of photolithography products or make up the shortfall from its own funds or other sources. If the Company were required to use its own funds, its research and development expenses would increase significantly and its operating income would be reduced correspondingly. Additionally, under the agreements with SEMATECH, the Company was obligated to fund, from its own resources, 120% of amounts received from SEMATECH up to $36,000,000. Through the first quarter of fiscal 1996, the Company had funded sufficient qualifying expenditures to fulfill its contractual obligation. In February 1995, the Company entered into an agreement with Intel Corporation, Motorola Inc., and Texas Instruments Incorporated (the "Investors") related to the Company's Micrascan photolithography products under which the Investors purchased an aggregate of $30,000,000 of the Company's newly issued Series B Preferred Stock (which was subsequently converted to Common Stock) and received certain rights to purchase future generations of the Company's Micrascan products. In turn, the Company agreed to utilize the proceeds of the transaction for research and development related to its Micrascan technology and the expansion of its manufacturing capacity as well as working capital for its Micrascan products. The agreement with the investors also obligates the Company to fund, during the five year period ending February 2000, an amount such that the total it funds under the agreements with both SEMATECH and the Investors is not less than $25,000,000. Were the Company not to fulfill certain obligations under the agreement, it could be required to repurchase the Common Stock held by the Investors. LIQUIDITY AND CAPITAL RESOURCES In October 1995, the Company sold 4,025,000 shares of its Common Stock through an underwritten public offering. The net proceeds of the offering were approximately $126,200,000. At March 31, 1995 cash and cash equivalents and temporary investments totaled $294,714,000 compared to the September 30, 1995 total of $180,523,000, an increase of 13 14 $114,191,000. The increase resulted from the Common Stock offering discussed above. Through the first six months of fiscal 1996, the Company used approximately $12,000,000 in cash financing additional accounts receivable resulting from the Company's increased shipments, higher inventory levels required to satisfy the current backlog of customer orders, and the purchase of property and equipment. During the first half of fiscal 1996 the Company provided SVGL, its 94%-owned subsidiary, with approximately $14,600,000 in funding, all of which was recorded as intercompany loans. The Company believes that for the foreseeable future it will have to continue providing SVGL with a significant amount of funding. In connection with its acquisition of SVGL in 1990, the Company committed to purchase under certain circumstances, additional SVGL securities ("the SVGL Calls") in an amount up to $23,200,000 at any time through May 1997. To the extent the SVGL Calls are not exercised, the Company has the option to purchase up to $15,000,000 of SVGL Common Stock under similar terms. The Company may choose to continue funding SVGL through intercompany loans or it may choose to make an additional equity investment in SVGL. In December 1995, the Company replaced its then existing bank credit facility with a $75,000,000 unsecured revolving bank credit agreement which expires in December 1998. Under the new facility, advances will bear interest at either the U.S. prime rate or the LIBOR rate plus 1%. At May 7, 1996, there were no borrowings outstanding under the agreement. The Company believes that it has sufficient working capital and available bank credit to sustain operations and provide for the expansion of its business for the foreseeable future. 14 15 PART II. OTHER INFORMATION SILICON VALLEY GROUP, INC. ITEM 1. LEGAL PROCEEDINGS. None. ITEM 2. CHANGES IN SECURITIES. None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. (a) The Annual Meeting of Shareholders of the Company was held on February 22, 1996 (the "Annual Meeting"). The vote of holders of record of 29,268,078 shares of the Company's Common Stock outstanding at the close of business on December 22, 1995 was solicited by proxy pursuant to Regulation 14A under the Securities Exchange Act of 1934. (b) The following persons were elected Directors of the Company at the Annual Meeting:
VOTES WITHHOLDING VOTES FOR AUTHORITY ---------- ----------------- Papken S. Der Torossian 25,746,231 120,538 William A. Hightower 25,761,824 104,945 William L. Martin 25,758,819 107,950 Larry W. Sonsini 25,630,689 236,080 Nam P. Suh 25,760,904 105,865
(c) The Company's Certificate of Incorporation was amended to increase its authorized shares of Common Stock to 100,000,000 from 40,000,000. The Stockholders' vote on such amendment was 20,081,591 shares FOR, 5,602,002 shares AGAINST, and 74,295 shares ABSTAINED from voting. (d) The Company's 1996 Employee Stock Purchase Plan was adopted and 1,000,000 shares of Common Stock were reserved for issuance thereunder. The Stockholders' vote on such adoption was 23,873,065 shares FOR, 1,776,642 shares AGAINST, and 108,181 shares ABSTAINED from voting. 15 16 ITEM 5. OTHER INFORMATION. None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits 3.1 Certificate of Incorporation, as amended to date. 10.13 1996 Employee Stock Purchase Plan. 27 Financial Data Schedule. 16 17 SILICON VALLEY GROUP, INC. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SILICON VALLEY GROUP, INC. .......................... (Registrant) Date: May 8, 1996 By:/s/ Papken S. Der Torossian ----------------------- Papken S. Der Torossian Chief Executive Officer and Chairman of the Board Date: May 8, 1996 By:/s/ Russell G. Weinstock ----------------------- Russell G. Weinstock Vice President Finance and Chief Financial Officer 17 EX-3.1 2 CERTIFICATE OF INCORPORATION, AS AMENDED TO DATE. 1 CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION OF SILICON VALLEY GROUP, INC. Russell G. Weinstock and Robert T. Clarkson certify that: 1. They are the Vice President and Assistant Secretary, respectively, of Silicon Valley Group, Inc., a Delaware corporation. 2. The first paragraph of Article IV of the Restated Certificate of Incorporation is hereby amended to read as follows; "Capitalization. This corporation is authorized to issue two classes of shares, designated "Common Shares" and "Preferred Shares," respectively. The number of Common Shares authorized to be issued is 100,000,000, and the par value of each such share is $.01. The number of Preferred Shares authorized to be issued is 1,000,000, and the par value of each such shares is $.01." 3. The above statement of amendment has been duly approved by the board of directors and the stockholders of Silicon Valley Group, Inc. pursuant to Section 242 of the Delaware General Corporation Law and Article VI of the Restated Certificate of Incorporation in effect immediately preceding this Certificate of Amendment. The undersigned, being the vice president and assistant secretary named above, do make this certificate and declare and certify under penalty of perjury that this is their act and deed, and that the facts stated herein are true, and accordingly have set their hands hereto this 22nd day of February, 1996. /s/ RUSSELL G. WEINSTOCK ------------------------------------------ Russell G. Weinstock, Vice President /s/ ROBERT T. CLARKSON ------------------------------------------ Robert T. Clarkson, Assistant Secretary EX-10.13 3 1996 EMPLOYEE STOCK PURCHASE PLAN 1 SILICON VALLEY GROUP, INC. 1996 EMPLOYEE STOCK PURCHASE PLAN 1. Purpose. The purpose of the Plan is to provide employees of the Company and its Designated Subsidiaries with an opportunity to purchase Common Stock of the Company through accumulated payroll deductions. It is the intention of the Company to have the Plan qualify as an "Employee Stock Purchase Plan" under Section 423 of the Code. The provisions of the Plan, accordingly, shall be construed so as to extend and limit participation in a manner consistent with the requirements of that section of the Code. 2. Definitions. (a) "Board" shall mean the Board of Directors of the Company. (b) "Code" shall mean the Internal Revenue Code of 1986, as amended. (c) "Common Stock" shall mean the Common Stock of the Company. (d) "Company" shall mean Silicon Valley Group, Inc. and any Designated Subsidiary. (e) "Compensation" shall mean all cash compensation, including, but not limited to, salaries, incentive bonuses and commissions. (f) "Designated Subsidiaries" shall mean the Subsidiaries which have been designated by the Board from time to time in its sole discretion as eligible to participate in the Plan. (g) "Employee" shall mean any individual who is an Employee of the Company for tax purposes whose customary employment with the Company is at least twenty (20) hours per week and more than five (5) months in any calendar year. For purposes of the Plan, the employment relationship shall be treated as continuing intact while the individual is on sick leave or other leave of absence approved by the Company. Where the period of leave exceeds ninety (90) days and the individual's right to reemployment is not guaranteed either by statute or by contract, the employment relationship shall be deemed to have terminated on the 91st day of such leave. (h) "Enrollment Date" shall mean the first day of each Offering Period. (i) "Exercise Date" shall mean the last day of each Offering Period. (j) "Fair Market Value" shall mean, as of any date, the value of Common Stock determined as follows: (1) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price 2 for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system on the date of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable, or; (2) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean of the closing bid and asked prices for the Common Stock on the date of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable, or; (3) In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Board. (k) "Offering Period" shall mean a period of approximately twelve (12) months, commencing on the first Trading Day on or after April 1 and terminating on the last Trading Day in the period ending the following September 30, or commencing on the first Trading Day on or after October 1 and terminating on the last Trading Day in the period ending the following March 31, during which an option granted pursuant to the Plan may be exercised. The duration of Offering Periods may be changed pursuant to Section 4 of this Plan. (l) "Plan" shall mean this Employee Stock Purchase Plan. (m) "Purchase Price" shall mean an amount equal to eighty-five percent (85%) of the Fair Market Value of a share of Common Stock on the Enrollment Date or on the Exercise Date, whichever is lower. (n) "Reserves" shall mean the number of shares of Common Stock covered by each option under the Plan which have not yet been exercised and the number of shares of Common Stock which have been authorized for issuance under the Plan but not yet placed under option. (o) "Subsidiary" shall mean a corporation, domestic or foreign, of which not less than fifty percent (50%) of the voting shares are held by the Company or a Subsidiary, whether or not such corporation now exists or is hereafter organized or acquired by the Company or a Subsidiary. (p) "Trading Day" shall mean a day on which national stock exchanges and the Nasdaq System are open for trading. 3. Eligibility. (a) Any Employee (as defined in Section 2(g)), who has been employed by the Company for at least thirty (30) days on a given Enrollment Date shall be eligible to participate in the Plan. (b) Any provisions of the Plan to the contrary notwithstanding, no Employee shall be granted an option under the Plan (i) to the extent that, immediately after the grant, such Employee -2- 3 (or any other person whose stock would be attributed to such Employee pursuant to Section 424(d) of the Code) would own capital stock of the Company and/or hold outstanding options to purchase such stock possessing five percent (5%) or more of the total combined voting power or value of all classes of the capital stock of the Company or of any Subsidiary, or (ii) to the extent that his or her rights to purchase stock under all employee stock purchase plans of the Company and its subsidiaries accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of stock (determined at the fair market value of the shares at the time such option is granted) for each calendar year in which such option is outstanding at any time. 4. Offering Periods. The Plan shall be implemented by consecutive Offering Periods with a new Offering Period commencing on the first Trading Day on or after April 1 and October 1 each year, or on such other date as the Board shall determine, and continuing thereafter until terminated in accordance with Section 19 hereof. The Board shall have the power to change the duration of Offering Periods (including the commencement dates thereof) with respect to future offerings without stockholder approval if such change is announced at least five (5) days prior to the scheduled beginning of the first Offering Period to be affected thereafter. 5. Participation. (a) An eligible Employee may become a participant in the Plan by completing a subscription agreement authorizing payroll deductions in the form of Exhibit A to this Plan and filing it with the Company prior to the applicable Enrollment Date. (b) Payroll deductions for a participant shall commence on the first payroll following the Enrollment Date and shall end on the last payroll in the Offering Period to which such authorization is applicable, unless sooner terminated by the participant as provided in Section 10 hereof. 6. Payroll Deductions. (a) At the time a participant files his or her subscription agreement, he or she shall elect to have payroll deductions made on each pay day during the Offering Period in an amount not exceeding ten percent (10%) of the Compensation which he or she receives on each pay day during the Offering Period. If a participant is enrolled in multiple offering periods under this and/or any of the Company's employee stock purchase plans, his or her deductions under such offering periods shall be counted against the ten percent (10%) limit set forth in this Section 6(a) so that no more than ten percent (10%) of Compensation in the aggregate shall be deducted under all such offering periods. (b) All payroll deductions made for a participant shall be credited to his or her account under the Plan and shall be withheld in whole percentages only. A participant may not make any additional payments into such account. (c) A participant may discontinue his or her participation in the Plan as provided in Section 10 hereof, or may increase or decrease the rate of his or her payroll deductions during the -3- 4 Offering Period by completing or filing with the Company a new subscription agreement authorizing a change in payroll deduction rate. The Board may, in its discretion, limit the number of participation rate changes during any Offering Period. The change in rate shall be effective with the first full payroll period following five (5) business days after the Company's receipt of the new subscription agreement unless the Company elects to process a given change in participation more quickly. A participant's subscription agreement shall remain in effect for successive Offering Periods unless terminated as provided in Section 10 hereof. (d) Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's payroll deductions may be decreased to zero percent (0%) at such time during any Offering Period which is scheduled to end during the current calendar year (the "Current Offering Period") that the aggregate of all payroll deductions which were previously used to purchase stock under the Plan (or another employee stock purchase plan of the Company) in a prior offering period which ended during that calendar year plus all payroll deductions accumulated with respect to the current offering period or periods equal $21,250. Payroll deductions shall recommence at the rate provided in such participant's subscription agreement at the beginning of the first Offering Period which is scheduled to end in the following calendar year, unless terminated by the participant as provided in Section 10 hereof. (e) At the time the option is exercised, in whole or in part, or at the time some or all of the Company's Common Stock issued under the Plan is disposed of, the participant must make adequate provision for the Company's federal, state, or other tax withholding obligations, if any, which arise upon the exercise of the option or the disposition of the Common Stock. At any time, the Company may, but shall not be obligated to, withhold from the participant's compensation the amount necessary for the Company to meet applicable withholding obligations, including any withholding required to make available to the Company any tax deductions or benefits attributable to sale or early disposition of Common Stock by the Employee. 7. Grant of Option. On the Enrollment Date of each Offering Period, each eligible Employee participating in such Offering Period shall be granted an option to purchase on the Exercise Date of such Offering Period (at the applicable Purchase Price) up to a number of shares of the Company's Common Stock determined by dividing such Employee's payroll deductions accumulated prior to such Exercise Date and retained in the Participant's account as of the Exercise Date by the applicable Purchase Price; provided that in no event shall an Employee be permitted to purchase during each Offering Period more than a number of Shares determined by dividing $25,000 by the Fair Market Value of a share of the Company's Common Stock on the Enrollment Date, and provided further that such purchase shall be subject to the limitations set forth in Sections 3(b), 6(a) and 12 hereof. Exercise of the option shall occur as provided in Section 8 hereof, unless the participant has withdrawn pursuant to Section 10 hereof. The Option shall expire on the last day of the Offering Period. 8. Exercise of Option. Unless a participant withdraws from the Plan as provided in Section 10 hereof, his or her option for the purchase of shares shall be exercised automatically on the Exercise Date, and the maximum number of full shares subject to option shall be purchased for such -4- 5 participant at the applicable Purchase Price with the accumulated payroll deductions in his or her account. No fractional shares shall be purchased; any payroll deductions accumulated in a participant's account which are not sufficient to purchase a full share shall be retained in the participant's account for the subsequent Offering Period, subject to earlier withdrawal by the participant as provided in Section 10 hereof. Any other monies left over in a participant's account after the Exercise Date shall be returned to the participant. During a participant's lifetime, a participant's option to purchase shares hereunder is exercisable only by him or her. 9. Delivery. As promptly as practicable after each Exercise Date on which a purchase of shares occurs, the Company shall arrange the delivery to each participant, as appropriate, of a certificate representing the shares purchased upon exercise of his or her option. 10. Withdrawal; Termination of Employment. (a) A participant may withdraw all but not less than all the payroll deductions credited to his or her account and not yet used to exercise his or her option under the Plan at any time by giving written notice to the Company in the form of Exhibit B to this Plan. All of the participant's payroll deductions credited to his or her account shall be paid to such participant promptly after receipt of notice of withdrawal and such participant's option for the Offering Period shall be automatically terminated, and no further payroll deductions for the purchase of shares shall be made for such Offering Period. If a participant withdraws from an Offering Period, payroll deductions shall not resume at the beginning of the succeeding Offering Period unless the participant delivers to the Company a new subscription agreement. (b) Upon a participant's ceasing to be an Employee (as defined in Section 2(g) hereof) for any reason, he or she shall be deemed to have elected to withdraw from the Plan and the payroll deductions credited to such participant's account during the Offering Period but not yet used to exercise the option shall be returned to such participant or, in the case of his or her death, to the person or persons entitled thereto under Section 14 hereof, and such participant's option shall be automatically terminated. The preceding sentence notwithstanding, a participant who receives payment in lieu of notice of termination of employment shall be treated as continuing to be an Employee for the participant's customary number of hours per week of employment during the period in which the participant is subject to such payment in lieu of notice. (c) A participant's withdrawal from an Offering Period shall not have any effect upon his or her eligibility to participate in any similar plan which may hereafter be adopted by the Company or in succeeding Offering Periods which commence after the termination of the Offering Period from which the participant withdraws. 11. Interest. No interest shall accrue on the payroll deductions of a participant in the Plan. -5- 6 12. Stock. (a) The maximum number of shares of the Company's Common Stock which shall be made available for sale under the Plan shall be one million (1,000,000) shares, subject to adjustment upon changes in capitalization of the Company as provided in Section 18 hereof. If, on a given Exercise Date, the number of shares with respect to which options are to be exercised exceeds the number of shares then available under the Plan, the Company shall make a pro rata allocation of the shares remaining available for purchase in as uniform a manner as shall be practicable and as it shall determine to be equitable. (b) The participant shall have no interest or voting right in shares covered by his option until such option has been exercised. (c) Shares to be delivered to a participant under the Plan shall be registered in the name of the participant or in the name of the participant and his or her spouse. 13. Administration. (a) Administrative Body. The Plan shall be administered by the Board or a committee of members of the Board appointed by the Board. The Board or its committee shall have full and exclusive discretionary authority to construe, interpret and apply the terms of the Plan, to determine eligibility and to adjudicate all disputed claims filed under the Plan. Every finding, decision and determination made by the Board or its committee shall, to the full extent permitted by law, be final and binding upon all parties. (b) Rule 16b-3 Limitations. Notwithstanding the provisions of Subsection (a) of this Section 13, in the event that Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any successor provision ("Rule 16b-3") provides specific requirements for the administrators of plans of this type, the Plan shall be administered only by such a body and in such a manner as shall comply with the applicable requirements of Rule 16b-3. Unless permitted by Rule 16b-3, no discretion concerning decisions regarding the Plan shall be afforded to any committee or person that is not "disinterested" as that term is used in Rule 16b-3. 14. Designation of Beneficiary. (a) A participant may file a written designation of a beneficiary who is to receive any shares and cash, if any, from the participant's account under the Plan in the event of such parti cipant's death subsequent to an Exercise Date on which the option is exercised but prior to delivery to such participant of such shares and cash. In addition, a participant may file a written designation of a beneficiary who is to receive any cash from the participant's account under the Plan in the event of such participant's death prior to exercise of the option. If a participant is married and the designated beneficiary is not the spouse, spousal consent shall be required for such designation to be effective. -6- 7 (b) Such designation of beneficiary may be changed by the participant at any time by written notice. In the event of the death of a participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such participant's death, the Company shall deliver such shares and/or cash to the executor or administrator of the estate of the participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such shares and/or cash to the spouse or to any one or more dependents or relatives of the participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate. 15. Transferability. Neither payroll deductions credited to a participant's account nor any rights with regard to the exercise of an option or to receive shares under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as provided in Section 14 hereof) by the participant. Any such attempt at assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw funds from an Offering Period in accordance with Section 10 hereof. 16. Use of Funds. All payroll deductions received or held by the Company under the Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such payroll deductions. 17. Reports. Individual accounts shall be maintained for each participant in the Plan. Statements of account shall be given to participating Employees at least annually, which statements shall set forth the amounts of payroll deductions, the Purchase Price, the number of shares purchased and the remaining cash balance, if any. 18. Adjustments Upon Changes in Capitalization, Liquidation, Dissolution, Merger or Asset Sale. (a) Changes in Capitalization. Subject to any required action by the stockholders of the Company, the Reserves as well as the price per share of Common Stock covered by each option under the Plan which has not yet been exercised shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an option. -7- 8 (b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Offering Period shall terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Board. (c) Merger or Asset Sale. In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, the Offering Period then in progress shall be shortened by setting a new Exercise Date (the "New Exercise Date") immediately prior to the consummation of such transaction. If the Offering Period then in progress is shortened in the event of a merger or sale of assets, the Board shall notify each participant in writing, at least five (5) business days prior to the New Exercise Date, that the Exercise Date for his option has been changed to the New Exercise Date and that his option shall be exercised automatically on the New Exercise Date, unless prior to such date he has withdrawn from the Offering Period as provided in Section 10 hereof. 19. Amendment or Termination. (a) The Board of Directors of the Company may at any time and for any reason terminate or amend the Plan. Except as provided in Section 18 hereof, no such termination can affect options previously granted, provided that an Offering Period may be terminated by the Board of Directors on any Exercise Date if the Board determines that the termination of the Plan is in the best interests of the Company and its stockholders. Except as provided in Section 18 hereof, no amendment may make any change in any option theretofore granted which adversely affects the rights of any participant. To the extent necessary to comply with Rule 16b-3 or under Section 423 of the Code (or any successor rule or provision or any other applicable law or regulation), the Company shall obtain stockholder approval in such a manner and to such a degree as required. (b) Without stockholder consent and without regard to whether any participant rights may be considered to have been "adversely affected," the Board (or its committee) shall be entitled to change the Offering Periods, limit the frequency and/or number of changes in the amount withheld during an Offering Period, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a participant in order to adjust for delays or mistakes in the Company's processing of properly completed withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each participant properly correspond with amounts withheld from the participant's Compensation, and establish such other limitations or procedures as the Board (or its committee) determines in its sole discretion advisable which are consistent with the Plan. 20. Notices. All notices or other communications by a participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof. -8- 9 21. Conditions Upon Issuance of Shares. Shares shall not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. As a condition to the exercise of an option, the Company may require the person exercising such option to represent and warrant at the time of any such exercise that the shares are being pur chased only for investment and without any present intention to sell or distribute such shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law. 22. Term of Plan. The Plan shall become effective upon April 1, 1996, subject to approval by the stockholders of the Company. It shall continue in effect for a term of ten (10) years unless sooner terminated under Section 19 hereof. -9- 10 EXHIBIT A SILICON VALLEY GROUP, INC. 1996 EMPLOYEE STOCK PURCHASE PLAN SUBSCRIPTION AGREEMENT _____ Original Application Enrollment Date: __________ _____ Change in Payroll Deduction Rate _____ Change of Beneficiary(ies) 1. _____________________________________ hereby elects to participate in the Silicon Valley Group, Inc. 1996 Employee Stock Purchase Plan (the "Employee Stock Purchase Plan") and subscribes to purchase shares of the Company's Common Stock in accordance with this Subscription Agreement and the Employee Stock Purchase Plan. 2. I hereby authorize payroll deductions from each paycheck in the amount of ____% of my Compensation on each payday (not to exceed 10%, including amounts deferred under other employee stock purchase plans of the Company) during the Offering Period in accordance with the Employee Stock Purchase Plan. (Please note that no fractional percentages are permitted.) 3. I understand that said payroll deductions shall be accumulated for the purchase of shares of Common Stock at the applicable Purchase Price determined in accordance with the Employee Stock Purchase Plan. I understand that if I do not withdraw from an Offering Period, any accumulated payroll deductions will be used to automatically exercise my option. 4. I understand that the Internal Revenue Code limits the amount that may be purchased under all employee stock purchase plans of the Company to a maximum of $25,000 worth of Company stock, based on the fair market value of the stock on the first day of the Offering Period, per calendar year. 5. I have received a copy of the complete Employee Stock Purchase Plan. I understand that my participation in the Employee Stock Purchase Plan is in all respects subject to the terms of the Plan. I understand that my ability to exercise the option under this Subscription Agreement is subject to stockholder approval of the Employee Stock Purchase Plan. 6. Shares purchased for me under the Employee Stock Purchase Plan should be issued in the name(s) of (Employee or Employee and Spouse only): _________________________. 7. I understand that if I dispose of any shares received by me pursuant to the Plan within 2 years after the Enrollment Date (the first day of the Offering Period during which I purchased such shares) or one year after the Exercise Date, I will be treated for federal income tax purposes as having received ordinary income at the time of such disposition in an amount equal to the 11 excess of the fair market value of the shares at the time such shares were purchased by me over the price which I paid for the shares. I hereby agree to notify the Company in writing within 30 days after the date of any disposition of my shares and I will make adequate provision for Federal, state or other tax withholding obligations, if any, which arise upon the disposition of the Common Stock. The Company may, but will not be obligated to, withhold from my compensation the amount necessary to meet any applicable withholding obligation including any withholding necessary to make available to the Company any tax deductions or benefits attributable to sale or early disposition of Common Stock by me. If I dispose of such shares at any time after the expiration of the 2-year and 1-year holding periods, I understand that I will be treated for federal income tax purposes as having received income only at the time of such disposition, and that such income will be taxed as ordinary income only to the extent of an amount equal to the lesser of (1) the excess of the fair market value of the shares at the time of such disposition over the purchase price which I paid for the shares, or (2) 15% of the fair market value of the shares on the first day of the Offering Period. The remainder of the gain, if any, recognized on such disposition will be taxed as capital gain. 8. I hereby agree to be bound by the terms of the Employee Stock Purchase Plan. The effectiveness of this Subscription Agreement is dependent upon my eligibility to participate in the Employee Stock Purchase Plan. 9. In the event of my death, I hereby designate the following as my beneficiary(ies) to receive all payments and shares due me under the Employee Stock Purchase Plan: NAME: (Please print) ______________________________________________________ (First) (Middle) (Last) _________________________ ______________________________________________ Relationship ______________________________________________ (Address) Employee's Social Security Number: ______________________________________________ Employee's Address: ______________________________________________ ______________________________________________ ______________________________________________ -2- 12 I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME. Dated: ______________ _____________________________________________________ Signature of Employee _____________________________________________________ Spouse's Signature (If beneficiary other than spouse) -3- 13 EXHIBIT B SILICON VALLEY GROUP, INC. 1996 EMPLOYEE STOCK PURCHASE PLAN NOTICE OF WITHDRAWAL The undersigned participant in the Offering Period of the Silicon Valley Group, Inc. 1996 Employee Stock Purchase Plan which began on ___________ 19____ (the "Enrollment Date") hereby notifies the Company that he or she hereby withdraws from the Offering Period. He or she hereby directs the Company to pay to the undersigned as promptly as practicable all the payroll deductions credited to his or her account with respect to such Offering Period. The undersigned understands and agrees that his or her option for such Offering Period will be automatically terminated. The undersigned understands further that no further payroll deductions will be made for the purchase of shares in the current Offering Period and the undersigned shall be eligible to participate in succeeding Offering Periods only by delivering to the Company a new Subscription Agreement. Name and Address of Participant: ____________________________________________ ____________________________________________ ____________________________________________ Signature: ____________________________________________ Date: ______________________________________ EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS FOR THE SECOND QUARTER OF FISCAL 1996 AS FILED IN THE COMPANY'S FORM 10Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996. 1000 3-MOS SEP-30-1996 JAN-01-1996 MAR-31-1996 241,074 53,640 143,256 4,784 187,510 631,894 106,936 62,246 682,082 109,432 0 0 0 375,901 134,829 682,082 170,668 170,668 100,254 100,254 0 0 117 27,356 9,575 17,653 0 0 0 17,653 0.58 0 MINORITY INTEREST OF $128,000 IS DEDUCTED FROM AFTER-TAX INCOME IN ARRIVING AT NET INCOME OF $17,653,000.
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