-----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, T32drYgXXnss7YVXp6WXhSXvUrwfNi7ija162GmNv5W0A6u8DVgmgUOn2YysiUQO kvfYxsitdfFPi10M0poIDA== 0000891618-98-000099.txt : 19980113 0000891618-98-000099.hdr.sgml : 19980113 ACCESSION NUMBER: 0000891618-98-000099 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980219 FILED AS OF DATE: 19980112 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: DEF 14A SEC ACT: SEC FILE NUMBER: 000-11348 FILM NUMBER: 98505095 BUSINESS ADDRESS: STREET 1: 101 METRO DRIVE STREET 2: SUITE 400 CITY: SAN JOSE STATE: CA ZIP: 95110 BUSINESS PHONE: 4084416700 MAIL ADDRESS: STREET 1: 101 METRO DRIVE STREET 2: SUITE 400 CITY: SAN JOSE STATE: CA ZIP: 95110 DEF 14A 1 DEFINITIVE PROXY MATERIALS 1 SCHEDULE 14A (RULE 14A-101) INFORMATION REQUIRED IN PROXY STATEMENT SCHEDULE 14A INFORMATION PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ) Filed by the Registrant [X] Filed by a Party other than the Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [X] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Silicon Valley Group, Inc. - -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] No fee required. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. (1) Title of each class of securities to which transaction applies: (2) Aggregate number of securities to which transaction applies: (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): (4) Proposed maximum aggregate value of transaction: (5) Total fee paid: [ ] Fee paid previously with preliminary materials: [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: (2) Form, Schedule or Registration Statement No.: (3) Filing Party: (4) Date Filed: 2 SILICON VALLEY GROUP, INC. ------------------------ NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD FEBRUARY 19, 1998 The Annual Meeting of Stockholders of SILICON VALLEY GROUP, INC., a Delaware corporation (the "Company"), will be held at the Company's offices located at 2240 Ringwood Avenue, San Jose, California 95131, on Thursday, February 19, 1998, at 3:00 p.m., Pacific Time, for the following purposes: 1. To elect five directors. 2. To transact such other business as may properly come before the meeting or any adjournment thereof. Stockholders of record at the close of business on December 23, 1997 will be entitled to vote at the meeting. By Order of the Board of Directors /s/ LARRY W. SONSINI ------------------------------ Larry W. Sonsini Secretary San Jose, California January 12, 1998 - -------------------------------------------------------------------------------- IMPORTANT: TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING PLEASE FILL IN, DATE, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY IN THE POSTAGE-PREPAID ENVELOPE PROVIDED. IF YOU ATTEND THE MEETING, YOU MAY CHOOSE TO VOTE IN PERSON EVEN THOUGH YOU HAVE SENT IN YOUR PROXY. - -------------------------------------------------------------------------------- 3 SILICON VALLEY GROUP, INC. 101 METRO DRIVE, SUITE 400 SAN JOSE, CALIFORNIA 95110 ------------------------ PROXY STATEMENT GENERAL The accompanying proxy is solicited by the Board of Directors of Silicon Valley Group, Inc., a Delaware corporation (the "Company"), for use at the Annual Meeting of Stockholders to be held on February 19, 1998, at 3:00 p.m., Pacific Time, or at any adjournment thereof. The meeting will be held at the Company's offices located at 2240 Ringwood Avenue, San Jose, California 95131. The Company's telephone number at that address is (408) 434-0500. At the meeting, only stockholders of record at the close of business on December 23, 1997 will be entitled to vote. On that date, the Company's outstanding capital stock consisted of 32,278,583 shares of Common Stock. This Proxy Statement and form of proxy were first sent or given to stockholders on or about January 12, 1998, together with the Company's 1997 Annual Report to Stockholders. VOTING AND SOLICITATION Each stockholder is entitled to one vote for each share of Common Stock held on all matters presented at the meeting. However, if any stockholder at the meeting and prior to the voting gives notice of the stockholder's intention to cumulate votes for the election of directors, then all stockholders may (i) cumulate their votes and give any one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which their shares are entitled; or (ii) distribute their votes on the same principle among as many candidates as they choose, up to a maximum of five candidates. The cost of solicitation of proxies will be borne by the Company. The Company may also reimburse brokerage houses and other custodians, nominees and fiduciaries for their expenses incurred in forwarding solicitation materials to the beneficial owners of shares held of record by such persons. It is contemplated that proxies will be solicited principally through the mail, but directors, officers and regular employees of the Company may, without additional compensation, solicit proxies personally or by telephone, facsimile or special letter. REVOCABILITY OF PROXIES Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before its use by delivering to the Secretary of the Company a written notice of revocation or a duly executed proxy bearing a later date, or by attending the meeting and voting in person. QUORUM; ABSTENTIONS; BROKER NON-VOTES The required quorum for the transaction of business at the Annual Meeting is a majority of the votes eligible to be cast by holders of shares of Common Stock issued and outstanding on the Record Date. Shares that are voted "FOR," "AGAINST" or "WITHHELD FROM" a matter are treated as being present at the meeting for purposes of establishing a quorum and are also treated as shares entitled to vote at the Annual Meeting (the "Votes Cast") with respect to such matter. While there is no definitive statutory or case law authority in Delaware as to the proper treatment of abstentions, the Company believes that abstentions should be counted for purposes of determining both (i) the presence or absence of a quorum for the transaction of business and (ii) the total number of Votes Cast with respect to a proposal (other than the election of directors). In the absence of controlling precedent to the contrary, the Company intends to treat abstentions in this manner. Accordingly, abstentions will have the same effect as a vote against the proposal. 4 In a 1988 Delaware case, Berlin v. Emerald Partners, the Delaware Supreme Court held that, while broker non-votes should be counted for purposes of determining the presence or absence of a quorum for the transaction of business, broker non-votes should not be counted for purposes of determining the number of Votes Cast with respect to the particular proposal on which the broker has expressly not voted. Accordingly, the Company intends to treat broker non-votes in this manner. Thus, a broker non-vote will not affect the outcome of the voting on a proposal. PROPOSAL: ELECTION OF DIRECTORS The persons named in the enclosed proxy will vote to elect as directors the five nominees named below, unless the proxy is marked otherwise. All nominees are currently directors of the Company. If a person other than a management nominee is nominated, the proxy holders may choose to cumulate their votes and allocate them among such nominees of management as the proxy holders shall determine in their discretion in order to elect as many nominees of management as possible. The five candidates receiving the highest number of votes will be elected. The proxy holders have also advised that, in the event any nominee is unavailable for election, which is not currently anticipated, they may vote in accordance with their judgment for the election of a substitute nominee designated by the Board. All five directors will be elected for a one-year term expiring at the 1999 Annual Meeting of Stockholders, subject to the election and qualification of their successors, or to their earlier death, resignation or removal. The following table sets forth information concerning the nominees for director.
YEAR DIRECTOR NAME BORN SINCE PRINCIPAL OCCUPATION ----------------------------- ----- -------- --------------------------------------- Papken S. Der Torossian(1)... 1938 1984 Chairman of the Board of Directors since 1991; Director since 1984; Chief Executive Officer since February 1986; President from 1984 to 1991. Mr. Der Torossian had previously held a variety of management and executive positions, including 12 years in engineering management at Hewlett-Packard Company. William A. Hightower......... 1943 1994 Appointed President and Chief Operating Officer in August 1997. Chairman of the Board of Directors of Cadnet Corp. from 1996 to July 1997. Prior to joining Cadnet in 1996, Mr. Hightower was President and Chief Executive Officer of Telematics International, Inc. Mr. Hightower also serves as a director of Jotan, Inc. William L. Martin(1)(2)(3)... 1923 1986 Private investor; Chief Executive Officer of Plantronics, Inc. prior to his retirement in 1980; founder and Chief Executive Officer of Zehntel, Inc. until 1978.
2 5
YEAR DIRECTOR NAME BORN SINCE PRINCIPAL OCCUPATION ----------------------------- ----- -------- --------------------------------------- Nam P. Suh(1)................ 1936 1994 Cross Professor of Manufacturing and Mechanical Engineering, Head of the Department of Mechanical Engineering and Director of the Manufacturing Institute at the Massachusetts Institute of Technology since 1991. Dr. Suh is also the Founder and a member of the Board of Trexel, Inc. Dr. Suh served as Assistant Director of the National Science Foundation from 1984 to 1988. Lawrence Tomlinson (2)(3).... 1940 1996 Vice President-Treasurer of Hewlett-Packard Company since 1993; Director of Finance and Administration for Hewlett-Packard's European operations from 1989 to 1993. Mr. Tomlinson was appointed to the board in December 1996.
- --------------- (1) Member of the Technical Advisory Committee. (2) Member of the Compensation Committee. (3) Member of the Audit Committee. See also "Stock Ownership of Certain Beneficial Owners and Management." A description of the business experience of the other executive officers of the Company is contained in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1997 filed with the Securities and Exchange Commission. There are no family relationships between any of the Company's directors or executive officers. The Board of Directors held four meetings during fiscal 1997. The standing committees of the Board include a Technical Advisory Committee, a Compensation Committee and an Audit Committee. There is no Nominating Committee. The Technical Advisory Committee held two meetings in fiscal 1997. The Technical Advisory Committee is responsible for monitoring and assessing the state of the Company's technical operations. The Compensation Committee held three meetings in fiscal 1997. The Compensation Committee monitors the nature and levels of compensation paid by the Company to its executive personnel and administers the Company's stock option plans and employee stock purchase plan. The Audit Committee held three meetings in fiscal 1997. The functions of the Audit Committee include recommending appointment of the Company's independent auditors to the Board of Directors and reviewing (i) the scope of the independent auditors' annual audit and their compensation; (ii) the general policies and procedures of the Company with respect to internal auditing, accounting and financial controls; and (iii) any change in accounting principles, significant audit adjustments proposed by the auditors and any recommendations that the auditors may have with respect to policies and procedures. During fiscal 1997 (or such portion of fiscal 1997 during which a director served as a member of the Board of Directors), no director attended fewer than 75 percent of the aggregate of (i) the total number of meetings of the Board of Directors held and (ii) the total number of meetings held by all committees of the Board of Directors on which such director served. 3 6 STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information regarding the Company's Common Stock beneficially owned as of November 28, 1997 by (i) each person who is known by the Company to own beneficially more than 5% of the Company's Common Stock, (ii) the Chief Executive Officer of the Company, (iii) each director of the Company; (iv) each of the four most highly paid executive officers of the Company earning more than $100,000 in fiscal 1997 (together with the Chief Executive Officer, the "Named Executive Officers") and (v) all directors and executive officers of the Company as a group.
AMOUNT AND NATURE OF BENEFICIAL NAME OWNERSHIP PERCENT(1) - ------------------------------------------------------------- ---------------------- ------- Capital Guardian Trust Company............................... 2,375,000 7.6% Papken S. Der Torossian...................................... 511,840(2) 1.7% William A. Hightower......................................... 5,000(3) * William L. Martin............................................ 9,300(4) * Lawrence Tomlinson........................................... 2,500(5) * Nam P. Suh................................................... 8,500(6) * Robert J. Richardson(7)...................................... 5,252(8) * Edward A. Dohring............................................ 37,500(9) * Russell G. Weinstock......................................... 46,153(10) * Jeffrey M. Kowalski.......................................... 27,900(11) * All directors and executive officers as a group (14 persons)................................................... 842,566(12) 2.6%
- --------------- * Less than 1% (1) Computed on the basis of 31,183,527 shares of Common Stock outstanding as of November 28, 1997 plus, with respect to those persons holding warrant or options to purchase Common Stock exercisable within 60 days of November 28, 1997, the number of shares of Common Stock that are issuable upon exercise thereof. (2) Includes 327,231 shares subject to options which are exercisable within 60 days after November 28, 1997, 3,400 shares held by Mr. Der Torossian's daughter, as to which shares he disclaims beneficial ownership and 2,000 shares held by Bayshore Lyric Opera Company, a charitable organization of which he is a member of the board of directors, as to which shares he disclaims beneficial ownership. (3) Includes 5,000 shares subject to options which are exercisable within 60 days of November 28, 1997. (4) Includes 6,100 shares subject to options which are exercisable within 60 days after November 28, 1997. (5) Includes 2,500 shares subject to options which are exercisable within 60 days after November 28, 1997. (6) Includes 8,500 shares subject to options which are exercisable within 60 days after November 28, 1997. (7) Mr. Richardson's employment with the Company terminated effective as of November 7, 1997. (8) Includes 2,500 shares subject to options which are exercisable within 60 days after November 28, 1997. (9) Includes 37,500 shares subject to options which are exercisable within 60 days after November 28, 1997. (10) Includes 39,752 shares subject to options which are exercisable within 60 days after November 28, 1997. (11) Includes 26,077 shares subject to options which are exercisable within 60 days after November 28, 1997. (12) Includes 612,759 shares subject to options which are exercisable within 60 days after November 28, 1997. COMPLIANCE WITH SECTION 16(a) FILING REQUIREMENTS Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires the Company's directors, officers and beneficial owners of more than 10% of the Company's Common Stock to file with the Securities and Exchange Commission (the "SEC") initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Based solely on its 4 7 review of the copies of such reports received by it or written representations from reporting persons, the Company believes that during the fiscal year ended September 30, 1997, its officers, directors and holders of more than 10% of the Company's Common Stock complied with all Section 16(a) filing requirements, except that during fiscal 1997, Mr. Der Torossian did not report timely on Form 4 the sale of common stock and a gift of common stock in September 1997, and Mr. John Matthews, Vice President, World Wide Service, did not report timely on Form 4 the exercise of options to purchase common stock in September 1997. Such transactions were reported on Form 4 in October 1997 by Mr. Matthews and on Form 4 in December 1997 by Mr. Der Torossian. EXECUTIVE COMPENSATION DIRECTOR COMPENSATION Fees of $1,500 per Board meeting attended and a $2,500 quarterly retainer are paid to directors who are not employees of the Company. Directors are also reimbursed for reasonable expenses incurred in attending Board and committee meetings. Members of the Board committees who are not part of the Company's management receive $500 per committee meeting attended. During fiscal 1997, the Company granted Mr. Hightower an option to purchase 5,000 shares of Common Stock at an exercise price per share of $21.25 pursuant to the 1987 Stock Option Plan in connection with his service as a director and an option to purchase 200,000 shares of Common Stock pursuant to the 1996 Stock Plan at an exercise price per share of $31.25 upon his appointment as President and Chief Operating Officer of the Company. During fiscal 1997, directors Martin and Suh, who were not employees of the Company, were each granted an option to purchase 5,000 shares of Common Stock, in the case of Mr. Martin, pursuant to the 1996 Stock Plan, and, in the case of Dr. Suh, pursuant to the 1987 Stock Option Plan, at per share exercise prices of $32.00 and $16.625, respectively. Upon his first becoming a director in December 1996, Mr. Tomlinson was granted an option to purchase 10,000 shares of Common Stock pursuant to the 1987 Stock Option Plan at a per share exercise price of $21.50. During fiscal 1997, Mr. Hightower (prior to becoming an officer in August 1997), Mr. Martin and Dr. Suh each performed certain consulting services for the Company for which they received fees of $20,000, $21,500 and $79,200, respectively. EXECUTIVE EMPLOYMENT AGREEMENTS On August 1, 1997, the Company entered into a new seven-year employment agreement (the "Employment Agreement") with Papken S. Der Torossian, Chairman of the Board and Chief Executive Officer of the Company. The Employment Agreement provides for a base salary of $600,000 per annum, or such higher rate as the Company's Board of Directors may determine from time to time, along with such performance bonus amounts and car allowances, if any, as the Board shall authorize, in its discretion, from time to time, and provides that Mr. Der Torossian shall be eligible to participate in the employee benefit plans and executive compensation programs maintained by the Company. In the event of Mr. Der Torossian's (i) termination of employment by the Company without cause; (ii) termination by the Company within twelve (12) months of a change in control; (iii) death or disability; or (iv) voluntary termination due to a material reduction in salary or benefits or a material change in responsibilities or a requirement to relocate, Mr. Der Torossian shall be paid an amount equal to 300% of the base salary in effect on the date of such termination plus an amount equal to 300% of the aggregate bonus and car allowance, if any, paid to Mr. Der Torossian for the immediately preceding fiscal year or during the preceding twelve month period, whichever is greater. On August 1, 1997, the Company entered into a new seven-year employment agreement (the "Hightower Agreement") with William A. Hightower, President and Chief Operating Officer of the Company. The Hightower Agreement provides for a base salary of $375,000 per annum, or such higher rate as the Company's Board of Directors may determine from time to time, along with a target performance bonus of $243,750 for the fiscal year ended September 30, 1998, which may be adjusted by the Board of Directors, and such other performance bonus amounts and car allowances, if any, as the Board shall authorize, in its discretion, from time to time. The Hightower Agreement provides that Mr. Hightower shall be eligible to participate in the 5 8 employee benefit plans and executive compensation programs maintained by the Company. In the event of Mr. Hightower's (i) termination of employment by the Company without cause; (ii) termination by the Company within twelve (12) months of a change in control; (iii) death or disability; or (iv) voluntary termination due to a material reduction in salary or benefits or a material change in responsibilities or a requirement to relocate, Mr. Hightower shall be paid an amount equal to 300% of the base salary in effect on the date of such termination plus an amount equal to 300% of the aggregate bonus and car allowance, if any, paid to Mr. Hightower for the immediately preceding fiscal year or during the preceding twelve month period, whichever is greater. On August 1, 1997, the Company entered into a new seven-year employment agreement (the "Weinstock Agreement") with Russell G. Weinstock, Vice President of Finance, Chief Financial Officer and Assistant Secretary of the Company. The Weinstock Agreement provides for a base salary of $300,000 per annum, or such higher rate as the Company's Board of Directors may determine from time to time, along with such performance bonus amounts and car allowances, if any, as the Board shall authorize, in its discretion, from time to time (collectively, the "Base Compensation"), and provides that Mr. Weinstock shall be eligible to participate in the employee benefit plans and executive compensation programs maintained by the Company. In the event of Mr. Weinstock's (i) termination of employment by the Company without cause or (ii) death or disability, Mr. Weinstock shall be paid an amount equal to 200% of the Base Compensation in effect on the date of such termination. On August 1, 1997, the Company entered into a new seven-year employment agreement (the "Lipkin Agreement") with Boris Lipkin, Vice President, Corporate of the Company. The Lipkin Agreement provides for a base salary of $275,000 per annum, or such higher rate as the Company's Board of Directors may determine from time to time, along with such performance bonus amounts and car allowances, if any, as the Board shall authorize, in its discretion, from time to time (collectively, the "Base Compensation"), and provides that Mr. Lipkin shall be eligible to participate in the employee benefit plans and executive compensation programs maintained by the Company. In the event of Mr. Lipkin's (i) termination of employment by the Company without cause or (ii) death or disability, Mr. Lipkin shall be paid an amount equal to 200% of the Base Compensation in effect on the date of such termination. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The members of the Compensation Committee of the Board of Directors during fiscal 1997 were Messrs. Tomlinson and Martin. All members are or were non-employee directors. No member of the Compensation Committee has a relationship that would constitute an interlocking relationship with executive officers or directors of another entity. COMPENSATION COMMITTEE REPORT The Compensation Committee sets, reviews and administers the executive compensation program of the Company and is comprised of the individuals listed below, all of whom are non-employee directors of the Company. The role of the Compensation Committee is to establish and approve salaries and other compensation paid to the executive officers of the Company and to administer the Company's stock option plans and employee stock purchase plan. Compensation Philosophy. The Company's compensation philosophy is that cash compensation should be directly linked to the short-term performance of the Company and that longer-term incentives, such as stock options, should be aligned with the objective of enhancing stockholder value over the long term. The use of stock options clearly links the interests of the officers and employees of the Company to the interests of the stockholders. In addition, the Compensation Committee believes that the total compensation package must be competitive with other companies in the industry to ensure that the Company can continue to attract, retain and motivate key employees who are critical to the long-term success of the Company. Under federal tax laws, the Company is not allowed a federal income tax deduction for compensation paid to certain executive officers to the extent that compensation exceeds $1 million per officer in any fiscal year. No officer of the Company, with the exception of Mr. Der Torossian, has received compensation in 6 9 excess of $1 million to date. The Compensation Committee may consider adopting policies with respect to this limitation on deductibility when appropriate. Components of Executive Compensation. The principal cash components of executive compensation are base salary and cash bonuses. Base salary is set based on competitive factors and the historic salary structure for various levels of responsibility within the Company. The Compensation Committee annually conducts surveys of companies in the industry in which the Company competes in order to determine whether the Company's executive base salaries are in a competitive range. Generally, salaries are set at the middle of the range. A significant portion of each executive's total compensation is intended to be variable and to relate to and be contingent upon Company performance. Bonuses are paid semi-annually to executive officers as recommended by the Chief Executive Officer and reviewed and approved by the Compensation Committee. In establishing the overall level of executive bonuses, the Compensation Committee considers data from surveys of the bonus amounts paid by other companies in similar businesses. The amount of bonus for each executive consists of an amount which is based upon the operating profit plan and cash flow objectives of the Company approved by the entire Board of Directors at the beginning of the fiscal year. An additional smaller portion of the bonus is discretionary, based upon that executive meeting certain objectives set out for that executive relating to his or her area of activity. The operating profit and cash flow components of the bonus plan emphasize the Compensation Committee's belief that, when the Company is successful, the executive's compensation should be higher, but that, conversely, if the Company is not successful and is not profitable, bonuses should be minimal. Depending upon the level of the executive, the Company targets between 40% and 65% of the total compensation to be variable and based upon the Company meeting 100% of its budgetary performance plan. If operating profits fell below 70% of plan, no performance bonus would be paid. Each individual executive officer's bonus is determined, based upon the executive's base salary, profitability of the Company, attainment of cash flow objectives and the executive's individual performance. The principal equity component of executive compensation is the stock option program. Stock options are generally granted when an executive joins the Company and periodically thereafter. Options vary with the responsibility level of the executive. The initial option granted to the executive vests over a period of four or five years. This provides a method of retention and motivation for the senior level executives of the Company and also aligns senior management's objectives with long-term stock price appreciation. This approach is designed to encourage the creation of stockholder value over the long term since no benefit is realized from the stock option grant unless the price of the Common Stock rises over a number of years. In addition to the stock option program, all eligible employees of the Company may participate in payroll deduction employee stock purchase plans pursuant to which stock may be purchased at 85% of the fair market value at the beginning or end of each one-year offering period, whichever is less (up to a maximum of $25,000 worth for each calendar year in each enrollment period or 10% of annual compensation under all such plans, whichever is less). Other elements of executive compensation are participation in a split-life insurance program, a Company-wide life insurance program and a Company-wide long term disability plan as well as Company-wide medical benefits and the ability to defer compensation pursuant to a 401(k) plan and a nonqualified deferred compensation plan. The Company makes matching contributions under both deferred compensation plans based on the amount of the employee's compensation, up to a maximum of 3% of compensation in the case of the 401(k) plan and up to a maximum of 5% of compensation in the case of the nonqualified deferred compensation plan. The Compensation Committee believes that the compensation levels of the Company's executive officers are competitive and in line with those of comparable companies. Compensation Committee of the Board of Directors William L. Martin, Chairman Lawrence Tomlinson 7 10 EXECUTIVE COMPENSATION The following table sets forth the compensation paid during the last three fiscal years to the Company's Chief Executive Officer and to the four other Named Executive Officers: SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION ANNUAL COMPENSATION(1) ------------ ------------------------------------------ STOCK OPTION FISCAL OTHER ANNUAL GRANTS ALL OTHER NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) COMPENSATION(3) (# OF SHS.) COMPENSATION - ---------------------------------- ------ --------- ----------- ------------------ ------------ --------------- Papken S. Der Torossian........... 1997 $ 586,153 $ 525,722 $ 16,441 78,199(4) $ 117,215(5)(6) Chairman of the Board and 1996 510,191 431,598 27,125 65,000(7) 9,082(5) Chief Executive Officer 185,000(8) 1995 444,133 445,927 19,733 150,000 2,359(5) Robert J. Richardson(9)........... 1997 293,075 132,930 17,734 32,583(4) 28,211(5)(6) Vice President, New Business 1996 249,249 130,644 18,020 30,000(7) 942(5) Development and Corporate 60,000(8) Marketing 1995 206,922 133,659 17,762 48,840 52,459(10) Edward A. Dohring................. 1997 286,502 133,597 19,004 24,645(4) 120,810(6)(11) Vice President, Silicon Valley 1996 248,462 139,231 16,851 30,000(7) 45,742(12) Group, Inc. and President, 50,000(8) SVG Lithography Systems, Inc. 1995 213,172 137,585 15,420 30,000 13,735(10) Russell G. Weinstock.............. 1997 287,998 138,359 18,804 31,398(4) 28,831(5)(6) Vice President of Finance and 1996 245,287 142,442 16,920 30,000(7) 1,151(5) Chief Financial Officer 60,000(8) 1995 213,173 147,018 15,420 30,000 832(5) Jeffrey M. Kowalski............... 1997 280,383 128,705 18,458 22,749(4) 22,076(6) Vice President, Silicon Valley 1996 231,922 124,919 17,779 30,000(7) 181,823(13) Group, Inc. and President, 80,000(8) Thermco Systems Division 1995 130,338 121,896 10,991 50,000 --
- --------------- (1) Excludes certain perquisites and other amounts, which, for any executive officer, in the aggregate did not exceed the lesser of $50,000 or 10% of the total annual salary and bonus for such executive officer. (2) Includes bonus and profit sharing amounts earned during the fiscal year indicated even if such amounts are paid in another fiscal year. (3) Represents Company matching contributions to the Named Executive Officer's 401(k) plan account, automobile allowances and reimbursement of tax return preparation fees. (4) Represents options granted under the Company's 1996 Stock Plan. (5) Represents income related to split-life insurance premiums paid by the Company for the benefit of the named executive officer, and in the case of Mr. Der Torossian's 1996 compensation, additional income of $5,910 in whole life insurance. (6) Includes approximate income related to matching contributions and to above market interest paid on compensation deferred by the employee pursuant to the Company's nonqualified deferred compensation plan. (7) Represents options granted under the Company's 1987 Stock Option Plan. (8) Represents grants of options in exchange for cancellation of previously outstanding options with higher exercise prices. (9) Mr. Richardson's employment with the Company terminated effective as of November 7, 1997. (10) For Messrs. Richardson and Dohring, represents $51,783 and $12,198, respectively, for relocation expenses and $676 and $1,537, respectively, for split-life insurance premiums paid by the Company for the benefit of such executive officers. 8 11 (11) For Mr. Dohring, represents $92,188 for relocation expenses and $3,180 for split-life insurance premiums paid by the Company for Mr. Dohring's benefit. (12) For Mr. Dohring, represents $43,605 for relocation expenses and $2,137 for split-life insurance premiums paid by the Company for Mr. Dohring's benefit. (13) For Mr. Kowalski, represents $181,823 for relocation expenses. OPTIONS GRANTED AND OPTIONS EXERCISED IN THE LAST FISCAL YEAR The following tables set forth information regarding stock options granted to and exercised by the Named Executive Officers during the last fiscal year, as well as options held by such officers as of October 3, 1997: OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE OF -------------------------------------------- ASSUMED ANNUAL RATES OF % OF STOCK PRICE APPRECIATION TOTAL EXERCISE (THROUGH EXPIRATION DATE)(1) OPTIONS OPTIONS PRICE EXPIRATION -------------------------------- NAME GRANTED(2) GRANTED ($/SH) DATE 5% PER YEAR 10% PER YEAR - ------------------------------ ---------- ------- -------- ---------- -------------- --------------- Papken S. Der Torossian....... 78,199 23.3% $23.00 4/8/2007 $1,133,104 $ 2,859,737 Robert J. Richardson(3)....... 32,583 9.6% 23.00 4/8/2007 472,128 1,191,560 Edward A. Dohring............. 24,645 7.2% 23.00 4/8/2007 357,106 901,268 Russell G. Weinstock.......... 31,398 9.2% 23.00 4/8/2007 454,957 1,148,225 Jeffrey M. Kowalski........... 22,749 6.8% 23.00 4/8/2007 329,633 831,931
- --------------- (1) The Potential Realizable Values are calculated based on the fair market value on the date of grant, which is equal to the exercise price of the options granted in fiscal 1997, assuming that the stock appreciates in value from the date of grant until the end of the option term at the annual rate specified (5% and 10%). Potential Realizable Values are net of the option exercise price. The assumed rates of appreciation are specified in rules of the Securities and Exchange Commission, and do not represent the Company's estimate or projection of its future stock price. Actual gains, if any, resulting from stock option exercises and Common Stock holdings are dependent on the future performance of the Common Stock, overall stock market conditions, as well as the option holder's continued employment through the exercise/ vesting period. There can be no assurance that the amounts reflected in this table will be achieved. (2) These options were granted under the Company's 1996 Stock Plan and have an exercise price equal to the fair market value of the Company's Common Stock as of the date of grant. Each of the options vests cumulatively over a period of four years from the date of grant. (3) Mr. Richardson's employment with the Company terminated effective as of November 7, 1997. OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED OPTIONS AT FISCAL OPTIONS AT FISCAL SHARES YEAR END YEAR END(1) ACQUIRED ON VALUE ------------------ ----------------------- NAME EXERCISE REALIZED VESTED UNVESTED VESTED UNVESTED - -------------------------------- ----------- ----------- ------- -------- ---------- ---------- Papken S. Der Torossian......... 25,000 $ 699,375 327,231 279,088 $7,237,828 $5,508,695 Robert J. Richardson(2)......... 20,304 480,904 2,500 0 0 1,466,108 Edward A. Dohring............... 19,549 539,992 37,500 73,644 987,687 1,288,489 Russell G. Weinstock............ 8,000 173,899 39,752 86,646 911,522 1,461,380 Jeffrey M. Kowalski............. 0 0 26,077 84,372 532,842 1,421,818
- --------------- (1) Represents the difference between the exercise price of the options and the closing price of the Company's Common Stock as reported on the Nasdaq National Market on September 30, 1997. (2) Mr. Richardson's employment with the Company terminated effective as of November 7, 1997. 9 12 The following table summarizes stock options granted to the executive officers of the Company that have been repriced during the past ten fiscal years:
MARKET NUMBER OF PRICE SECURITIES OF EXERCISE UNDERLYING STOCK PRICE LENGTH OF ORIGINAL OPTIONS AT AT NEW OPTION TERM REPRICING REPRICED TIME OF TIME OF EXERCISE REMAINING AT DATE NAME DATE (#) REPRICING REPRICING PRICE OF REPRICING - --------------------------------- --------- ------------- ------- ------- ------- -------------------- Papken S. Der Torossian.......... 7/16/96 150,000 $16.125 $26.875 $16.125 5 years, 275 days Chairman of the Board 7/16/96 35,000 16.125 23.375 16.125 6 years, 273 days and Chief Executive Officer 10/29/87 100,000 5.750 13.625 5.750 5 years, 342 days Robert J. Richardson............. 7/16/96 30,000 16.125 26.875 16.125 5 years, 275 days Former Vice President, New 7/16/96 30,000 16.125 23.375 16.125 6 years, 273 days Business Development and Corporate Marketing Edward A. Dohring................ 7/16/96 30,000 16.125 23.375 16.125 6 years, 273 days Vice President, Silicon 7/16/96 20,000 16.125 26.875 16.125 5 years, 275 days Valley Group, Inc. and President, SVG Lithography Systems, Inc. Russell G. Weinstock............. 7/16/96 30,000 16.125 23.375 16.125 6 years, 273 days Vice President, Finance and 7/16/96 20,000 16.125 26.875 16.125 5 years, 275 days Chief Financial Officer 7/16/96 10,000 16.125 19.625 16.125 5 years, 108 days 10/29/87 1,000 5.750 7.750 5.750 5 years, 176 days 10/29/87 1,000 5.750 13.625 5.750 5 years, 342 days Steven L. Jensen................. 7/16/96 20,000 16.125 26.875 16.125 5 years, 275 days Vice President, Worldwide 7/16/96 20,000 16.125 23.375 16.125 6 years, 273 days Sales and Service Jeffrey M. Kowalski.............. 7/16/96 30,000 16.125 22.625 16.125 5 years, 200 days Vice President, Silicon 7/16/96 30,000 16.125 23.375 16.125 6 years, 273 days Valley Group, Inc. and 7/16/96 10,000 16.125 35.438 16.125 6 years, 97 days President, Thermco Worldwide 7/16/96 10,000 16.125 26.875 16.125 5 years, 275 days Division Boris Lipkin..................... 7/16/96 30,000 16.125 26.875 16.125 5 years, 275 days Vice President, Corporate 7/16/96 20,000 16.125 23.375 16.125 6 years, 273 days 7/16/96 10,000 16.125 35.438 16.125 6 years, 97 days John W. Matthews................. 7/16/96 5,000 16.125 26.875 16.125 5 years, 275 days Vice President, Worldwide 7/16/96 5,000 16.125 35.438 16.125 6 years, 97 days Service Edward R. Ward................... 7/16/96 10,000 16.125 23.375 16.125 6 years, 273 days Former Vice President, 7/16/96 5,000 16.125 35.438 16.125 6 years, 97 days Corporate Technology 7/16/96 5,000 16.125 26.875 16.125 5 years, 275 days David R. Bartlett................ 10/29/87 3,500 5.750 8.000 5.750 5 years, 110 days Former Vice President, 10/29/87 3,500 5.750 9.000 5.750 5 years, 250 days Human Resources Charles Desmond.................. 10/29/87 2,000 5.750 7.750 5.750 5 years, 176 days Former Vice President, 10/29/87 3,500 5.750 9.000 5.750 5 years, 250 days Sales and Service James E. Herlinger............... 10/29/87 3,500 5.750 8.000 5.750 5 years, 110 days Former Vice President and 10/29/87 3,500 5.750 9.000 5.750 5 years, 250 days General Manager, CVD Division Byron F. McMillan................ 10/29/87 125,000 5.750 9.000 5.750 5 years, 243 days Former Executive Vice President and Chief Operating Officer Anthony R. Muller................ 10/29/87 3,500 5.750 8.000 5.750 5 years, 110 days Former Vice President, Finance 10/29/87 3,500 5.750 9.000 5.750 5 years, 250 days and Chief Financial Officer Patrick C. O'Connor.............. 10/29/87 3,500 5.750 8.000 5.750 5 years, 110 days Former Senior Vice President, 10/29/87 3,500 5.750 9.000 5.750 5 years, 250 days Corporate Development Arthur G. Silver................. 10/29/87 3,500 5.750 8.000 5.750 5 years, 110 days Former Vice President and 10/29/87 3,500 5.750 9.000 5.750 5 years, 250 days General Manager, Track Division
10 13 COMPARISON OF TOTAL CUMULATIVE STOCKHOLDER RETURN The following graph sets forth the Company's total cumulative stockholder return as compared to the S&P 500 Index and the Russell 2000 Index for the past five fiscal years. The total stockholder return assumes $100 invested at the beginning of the period in Common Stock of the Company, the S&P 500, and the Russell 2000 Index. Total return assumes reinvestment of dividends. Historical stock price performance is not necessarily indicative of future stock price performance. COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* AMONG SILICON VALLEY GROUP, INC., THE S&P INDEX AND THE RUSSELL 2000 INDEX
MEASUREMENT PERIOD 'SILICON VALLEY (FISCAL YEAR COVERED) GROUP, INC.' S & P 500 RUSSELL 2000 SEP-92 100 100 100 SEP-93 220 113 133 SEP-94 288 117 137 SEP-95 773 152 169 SEP-96 355 183 191 SEP-97 711 254 257
11 14 CERTAIN TRANSACTIONS TRANSACTIONS WITH PERKIN-ELMER In July 1992, the Company purchased all 1,990,000 shares of the common stock of SVG Lithography Systems, Inc. ("SVGL") held by Perkin-Elmer and a promissory note in the aggregate principal amount of $8,200,000 payable by SVGL to Perkin-Elmer. The purchase price for such shares and note was 10,000 shares of the Company's Series A Preferred Stock. On March 14, 1995, the Series A Preferred Stock was converted into 1,000,000 shares of the Company's Common Stock. The Series A Preferred Stock accrued cumulative quarterly dividends of 7% per annum. During fiscal 1995, the Company issued 27,692 Shares of Common Stock in satisfaction of the quarterly dividend amounts due. On March 23, 1995, the Company filed a Registration Statement on Form S-3 pursuant to which the Company sold 3,192,606 shares of Common Stock and Perkin-Elmer sold its entire holding of 1,807,394 shares of Common Stock, including 1,000,000 shares from the conversion of the Series A Preferred Stock. AGREEMENTS WITH EXECUTIVE OFFICERS See "Executive Compensation -- Executive Employment Agreements." STOCKHOLDER PROPOSALS TO BE PRESENTED AT THE NEXT ANNUAL MEETING Proposals of stockholders intended to be presented at the next Annual Meeting of Stockholders of the Company (i) must be received by the Company at 101 Metro Drive, Suite 400, San Jose, California 95110 no later than September 11, 1998 and (ii) must satisfy the conditions established by the Securities and Exchange Commission for stockholder proposals to be included in the Company's Proxy Statement for that meeting. INDEPENDENT AUDITORS The Board has selected Deloitte & Touche LLP, independent auditors, to audit the financial statements of the Company for the fiscal year ending September 30, 1997. Representatives of Deloitte & Touche LLP are expected to be present at the Annual Meeting and will have the opportunity to make a statement if they desire to do so. Such representatives are also expected to be available to respond to any questions. OTHER BUSINESS At this time management knows of no other matters that may be brought before the meeting. However, if any other matters are properly brought before the meeting, the proxy holders named in the accompanying proxy intend to vote the proxies on such matters in accordance with their best judgment. By Order of the Board of Directors January 12, 1998 12 15 [SVG LOGO] printed on recycled paper 16 PROXY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS SILICON VALLEY GROUP, INC. PROXY FOR 1998 ANNUAL MEETING OF STOCKHOLDERS FEBRUARY 19, 1998 The undersigned stockholder of Silicon Valley Group, Inc. (the "Company") hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement for the 1998 Annual Meeting of Stockholders of the Company to be held on February 19, 1998 at 3:00 p.m., Pacific Time, at the Company's offices located at 2240 Ringwood Avenue, San Jose, California (telephone (408) 434-0500), and hereby revokes all previous proxies and appoints Papken S. Der Torossian and Russell G. Weinstock, or either of them, with full power of substitution, Proxies and Attorneys-in-Fact, on behalf and in the name of the undersigned, to vote and otherwise represent all of the shares registered in the name of the undersigned at said Annual Meeting, or any adjournment thereof, with the same effect as if the undersigned were present and voting such shares, on the following matters and in the following manner: (CONTINUED AND TO BE SIGNED ON REVERSE SIDE) - ------------------------------------------------------------------------------ [ARROW UP] FOLD AND DETACH HERE [ARROW UP] 17 Please mark your vote as indicated in [X] this example.
FOR WITHHOLD all nominees AUTHORITY listed below to vote for all In their discretion, the Proxies are entitled (except as indicated). nominees listed below. to vote upon such other matters as may properly 1. Election of directors. [ ] [ ] come before the meeting or any adjournments thereof. If you wish to withhold authority to vote for any individual nominee, I plan to attend the meeting: [ ] strike a line through that nominee's name in the list below: PAPKEN S. DER TOROSSIAN, WILLIAM A. HIGHTOWER, WILLIAM L. MARTIN, NAM P. SUH, LAWRENCE TOMLINSON. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE. IF NO SPECIFICATION IS MADE, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR EACH OF THE ABOVE PERSONS, AND FOR SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING AS THE PROXYHOLDERS DEEM ADVISABLE. TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE MARK, SIGN AND DATE THIS PROXY AND RETURN IT AS PROMPTLY AS POSSIBLE.
Signature(s): __________________________________________ Dated ___________, 1998 (This proxy should be marked, dated and signed by each stockholer exactly as such stockholder's name appears hereon, and returned promptly in the enclosed envelope. Persons signing in a fiduciary capacity should so indicate. A corporation is requested to sign its name by its President or other authorized officer, with the office held designated. If shares are held by joint tenants or as community property, both holders should sign.) - -------------------------------------------------------------------------------- [ARROW UP] FOLD AND DETACH HERE [ARROW UP] -----END PRIVACY-ENHANCED MESSAGE-----