<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
February 21, 1995
Date of Report (Date of earliest event reported)
SILICON VALLEY GROUP, INC.
(Exact name of registrant as specified in its charter)
California 0-11348 94-2264681
- ------------------------------------------------------------------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
2240 Ringwood Avenue, San Jose, California 95131
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(408) 434-0500
(Registrant's telephone number,
including area code)
<PAGE> 2
ITEM 5. OTHER EVENTS
On February 21, 1995, Silicon Valley Group, Inc. (the "Company")
entered into a business relationship with Intel Corporation ("Intel"),
Motorola Inc. ("Motorola") and Texas Instruments Incorporated ("TI")
(together, the "Investors").
As part of this business relationship, the Investors purchased equal
shares of an aggregate of 14,943 shares of the Company's newly designated
Series B Convertible Redeemable Preferred Stock (the "Series B Preferred") at a
price of $2,008 per share, for an aggregate purchase price of $30,005,544. As
part of this business relationship, the Company also agreed to certain
covenants with respect to the use of the proceeds, the rights to purchase
initial units of future generations of Micrascan photolithography equipment
and the development of the Micrascan technology, all of which are described
in more detail below.
Business Agreement. Pursuant to the terms of a Business Agreement by
and among the Company, the Investors and SVG Lithography Systems, Inc. ("SVGL")
dated as of February 21, 1995 (the "Business Agreement"), the Company agreed to
invest the proceeds from the sale of the Series B Preferred in SVGL solely to
(i) increase SVGL's production capacity and to fund SVGL's research and
development related to the development and production of Micrascan
photolithography equipment, (ii) design and engineer such equipment, (iii)
provide funding to purchase capital equipment and inventory directly related to
or required to produce Micrascan photolithography equipment or develop and
support Micrascan technology and (iv) improve facilities. The Company also
agreed that Intel, Motorola, TI and International Business Machines Corporation
("IBM") will have certain rights to purchase future generations of the
Company's Micrascan products.
The Company has also agreed to use commercially reasonable efforts to
obtain grants of $5 million per year for five years from the Department
of Defense or the Advanced Research Projects Agency ("ARPA") to assist in the
research, development and engineering of Micrascan equipment, which grants if
obtained are to be used within 5 years of the date of the Business Agreement.
The Company further agreed to invest at least an additional $25 million over a
five year period to enable SVGL to significantly expand its manufacturing
capacity, to enable SVGL to meet its commitments to customers to produce and
deliver Micrascan equipment, to expand research and development, to develop
and acquire tooling to produce Micrascan equipment and to provide sufficient
working capital. This funding must come from sources other than proceeds from
the sale of the Series B Preferred or grants from the Department of
Defense or ARPA.
The Company and SVGL further agreed to use commercially reasonable
efforts to reach the product development milestones set forth in the Company's
development agreements with SEMATECH Inc. ("SEMATECH"), and to fulfill all
other conditions to receiving additional grants from SEMATECH.
-2-
<PAGE> 3
Pursuant to the terms of the Business Agreement, in the event the
Company licenses its Micrascan technology to a third party and the Company's
equipment fails to meet certain performance or delivery criteria, the Company
is obligated to use commercially reasonable efforts to purchase equipment from
the licensee for resale to the Investors, and if the Company fails to do so,
the Investors have certain rights to purchase equipment from such third party
where any geographic use restrictions or market exclusivity provisions imposed
on such third party would otherwise have limited such purchase. The Company
has agreed to certain restrictions on any merger, consolidation, or sale of
assets, including any purchase of SVGL by IBM pursuant to the terms of the 1990
Stockholders Agreement among IBM, SVGL, the Company and The Perkin-Elmer
Corporation, unless, in the good faith reasonable judgment of the Investors, a
successor to the Company is as capable of meeting the Company's obligations
under the Business Agreement as the Company and SVGL. The Investors have
certain rights to attend and receive notices of and materials related to
meetings of the Company's Board of Directors.
If the Company breaches any covenant under the Business Agreement, so
long as an Investor holds all of the Series B Preferred (or Common into which
it is convertible) originally purchased, the holders of two thirds of the
Series B Preferred (or Common into which it is convertible) will have the right
to cause the Company to immediately redeem all such shares. In such event, the
redemption price for the Series B Preferred will be the greater of (i)
$2,208.80 plus accrued and unpaid dividends and (ii) 100 times the average of
the closing sale prices of the Common Stock for the 10 trading days preceding
the date of the uncured breach in the case of Series B Preferred. The
redemption price for the Common Stock will be the greater of (i) $22.08 plus
accrued and unpaid dividends and (ii) the average of the closing sale price of
the Common Stock for the 10 trading days preceding the date of the uncured
breach.
Pursuant to the terms of the Series B Convertible Redeemable Stock
Purchase Agreement, the Investors have agreed not to sell or otherwise dispose
of any Common Stock of the Company for up to 210 days following the issuance of
the Series B Preferred, subject to certain conditions, and to observe the
trading policies with regard to the Company's Common Stock applicable to the
Company's officers and principal stockholders. However, in connection with
the proposed public offering the Investors have agreed not to sell their shares
during the period from the date of the public offering through November 22,
1995. See "Registration Statement" below.
Terms of the Series B Convertible Redeemable Preferred Stock. The
Series B Preferred may be converted into Common Stock at any time at the
holder's option. So long as the Company completes an underwritten public
offering with net proceeds to the Company of at least $35 million by August 21,
1995 (the "Qualified Offering") the Series B Preferred will automatically
convert into Common Stock at the applicable conversion price on the date of
effectiveness of a resale-shelf registration statement with respect to the
shares of Common Stock into which the Series B Preferred is convertible.
Currently, each share of Series B Preferred is convertible into 100 shares of
Common Stock. If the price to public in the Qualified Offering is less than
$20.08 per share, the conversion price will be adjusted to equal the price to
public in the Qualified Offering. The conversion price is also adjustable for
other customary events, including (i) if the Company pays a dividend on any
class of capital stock other than on the Series A Convertible Redeemable
Preferred Stock, (ii) if the Company subdivides the shares of Common
Stock outstanding, (iii) if the Company issues rights or warrants to all
holders of Common Stock entitling them to purchase Common Stock at a price per
share less than the average of the closing price for the Common Stock on the
Nasdaq National Market for
-3-
<PAGE> 4
the 20 trading days prior to the date on which the warrants or rights are
issued, or (iv) if the Company issues certain evidences of indebtedness or
assets to holders of its Common Stock, by dividend or otherwise.
Commencing December 31, 1997, the holders of the Series B Preferred
are entitled to receive cumulative dividends of $100.40 per annum per share
payable quarterly. Holders of the Series B Preferred are entitled to a
liquidation preference of $2,008 per share plus all accrued dividends (whether
or not earned or declared) on such stock, in the event of a liquidation,
dissolution, winding-up, merger or consolidation of the Company or SVGL, or
upon the sale of all or substantially all of the assets of the Company or SVGL.
The Series B Preferred ranks senior to the Series A Preferred Stock and Common
Stock of the Company.
Holders of the Series B Preferred, voting together as a single class,
have the right to a separate two-thirds (2/3) class vote with respect to (i)
any amendment, alteration or repeal of any provision of the Certificate of
Incorporation or Bylaws or any designation of a new series of preferred stock
of the Company that adversely affects the rights, preferences and privileges of
the Series B Preferred or any of the provisions of the Series B Preferred, (ii)
the authorization, designation or creation of, or the increase in the
authorized amount of, any additional shares of Series B Preferred Stock, or
shares of any class, or any security convertible into shares of any class,
ranking senior to or on a parity with the Series B Preferred in the
distribution of assets on any liquidation, dissolution or winding up of the
Company, in the payment of dividends or in redemption rights, (iii) any
corporate or shareholder action which reclassifies any outstanding shares into
shares that have a preference to or are on parity with Series B Preferred as to
the right to receive dividends as assets, (iv) the liquidation or dissolution of
the Company or SVGL and (v) payment of dividends (other than in Common Stock)
on the Common Stock. On all other matters submitted to a vote of the Company's
stockholders, the holders of Series B Preferred vote with the holders of the
Common Stock on an as converted basis, except as required by law.
The Series B Preferred Stock may be redeemed at the option of the
Company at any time after July 21, 1996. The redemption price will equal the
greater of (i) $2,208.80 plus all accrued and unpaid dividends; or (ii) the sum
determined by multiplying the number of Common Shares into which each share of
Series B Preferred is then convertible by the average of the closing sales
prices of the Common Shares for the ten trading days ending on the date of the
redemption notice. Any such redemption may be made in a single payment or in
equal annual installments over three years. If the Company has called for a
redemption and elects to pay over three years and one of the transactions
listed below occurs, then all shares of Series B Preferred shall be redeemed
prior to the consummation of any such transaction: (i) SVGL sells all or
substantially all of its assets to an entity other than the Company or an
entity controlled by the Company or holders of the Company's Common Stock, (ii)
SVGL consummates a merger consolidation or other transaction in which neither
the Company, nor stockholders of the Company hold a majority of the voting
power of the surviving entity, (iii) the Company sells all or substantially all
of its assets to an entity as to which neither the Company nor a majority of
-4-
<PAGE> 5
the stockholders nor the Company and a majority of its stockholders hold a
majority of the voting power, or (iv) the Company consummates a merger pursuant
to which the stockholders of the Company fail to hold a majority of the voting
securities of the surviving entity.
Registration Statement. On March 2, 1995, the Company filed a
Registration Statement on Form S-3 with respect to the proposed underwritten
public offering of 5,000,000 shares of Common Stock (of which approximately
3,200,000 shares would be offered by the Company and 1,800,000 shares would be
offered by a selling stockholder). The Investors have agreed with the
underwriters that they will not sell the shares of Common Stock into which the
Series B Preferred would convert from the date of the proposed public offering
until November 22, 1995.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
4.1 Certificate of Designation of Series B Convertible Redeemable
Preferred Stock of Silicon Valley Group, Inc.
-5-
<PAGE> 6
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 hereunto duly authorized.
Dated: March 2, 1995 SILICON VALLEY GROUP, INC.
By: /s/ Russell G. Weinstock
----------------------------------------
Russell G. Weinstock
Vice President and
Chief Financial Officer
<PAGE> 1
EXHIBIT 4.1
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
DESIGNATION OF "SILICON VALLEY GROUP, INC.", FILED IN THIS OFFICE ON THE
TWENTY-FIRST DAY OF FEBRUARY, A.D. 1995, AT 1 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW
CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
EDWARD J. FREEL
[SEAL] -----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 7415694
DATE: 02-21-95
<PAGE> 2
CERTIFICATE OF DESIGNATION OF SERIES B
CONVERTIBLE REDEEMABLE PREFERRED STOCK
OF
SILICON VALLEY GROUP, INC.
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
We, the undersigned duly authorized officers of SILICON VALLEY GROUP,
INC., a corporation organized and existing under the General Corporation Law of
the State of Delaware (the "Corporation"), in accordance with the provisions of
Section 103 thereof, and pursuant to Section 151 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors
by the Certificate of Incorporation of the Corporation, the Board of Directors
of the Corporation on February 15, 1995, adopted the following resolution
creating a series of 14,943 shares of Series B Convertible Redeemable Preferred
Stock, par value $0.01 per share:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of its
Certificate of Incorporation, a series of Series B Convertible Redeemable
Preferred Stock of the Corporation be and it hereby is created, and that the
designation and amount thereof and the preferences and relative, optional and
other special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as follows:
1. Designation of the Series; Rank. The shares of such series
shall be designated as Series B Convertible Redeemable Preferred Stock (the
"Series B Preferred Stock") and the number of shares constituting such series
shall be 14,943. The Series B Preferred Stock shall rank senior to all Series
A Preferred Stock, par value $0.01 per share of the Corporation ("Series A
Preferred Stock"), and all common stock, including the Common Shares, par value
$0.01 per share, of the Corporation (the "Common Shares"), with respect to the
payment of dividends and as to the distribution of assets upon liquidation,
dissolution or winding up. Subject to Section 3 hereof, the Board of Directors
may by resolution issue and designate additional series or classes of preferred
stock which may rank senior to, junior to, or on parity with the Series B
Preferred Stock with respect to the payment of dividends, the distribution of
assets upon liquidation, dissolution or winding up, redemption rights and the
other rights, preferences and privileges of such preferred stock.
2. Dividends and Distributions.
(a) Subject to the prior and superior rights of the
holders of any shares of any series of preferred stock ranking senior to, or on
a parity with, the shares of Series B Preferred Stock with respect to
dividends, the holders of shares of Series B Preferred Stock, in preference
-1-
<PAGE> 3
to the holders of any and all other classes of stock, whether common or
preferred, including the Series A Preferred Stock and the Common Shares shall
be entitled to receive, as declared by the Board of Directors out of funds
legally available therefor, quarterly dividends payable in cash. Dividends
shall begin to accrue and shall be cumulative commencing December 31, 1997 and
be payable on the fifteenth calendar day of March, June, September and December
in each year, beginning on March 15, 1998, or, if such day is not a business
day of the Corporation, on the next succeeding business day (each such payment
date being referred to herein as a "Quarterly Dividend Payment Date"), at an
annual rate of $100.40 per share of Series B Preferred Stock, calculated on the
basis of a year of 360 days consisting of twelve 30-day months. The amount of
dividends payable per share for each full dividend period shall be computed by
dividing by four the $100.40 annual rate (rounding such amount to the nearest
cent). Any quarterly dividend (whether or not earned or declared) not paid in
full upon the relevant Quarterly Dividend Payment Date shall bear interest at
the Interest Rate (as defined below) per annum, calculated as provided above,
commencing at the close of business on such Quarterly Dividend Payment Date and
continuing until such quarterly dividend is paid in full. Dividends paid on
shares of Series B Preferred Stock in an amount less than the total amount of
such dividends at the time accumulated and payable on the Series B Preferred
Stock shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a record date
for the determination of holders of shares of Series B Preferred Stock entitled
to receive payment of a dividend or distribution declared thereon, which record
date shall be no more than sixty (60) nor less than ten (10) calendar days
prior to the date fixed for the payment thereof.
(b) If a dividend (whether or not earned or declared) or
any redemption or repurchase payment upon any shares of Series B Preferred
Stock (or any interest thereon), or any other outstanding preferred stock of
the Corporation ranking on a parity with the Series B Preferred Stock as to
dividends, is in arrears, then no dividend or other distribution may be
declared and no redemption or repurchase payment may be made (and no interest
thereon may be paid) on any such shares of Series B Preferred Stock or such
other preferred stock, unless amounts are paid or distributed in respect of all
such arrearages pro rata, so that (i) the amounts so paid or distributed per
share of each such series bear to each other the same ratio that the amounts in
arrears per share of each such series bear to each other and (ii) the
percentage of each such amount in arrears which is paid or distributed in cash
per share of Series B Preferred Stock is no lower than the percentage of the
amount in arrears which is paid or distributed in cash per share of any such
other series. So long as any shares of Series B Preferred Stock remain
outstanding, no dividend shall be paid or declared and no distribution made on
any stock of the Corporation ranking junior to the Series B Preferred Stock as
to dividends or upon liquidation, dissolution or winding up (other than a
dividend payable in stock of the Corporation ranking junior to the Series B
Preferred Stock as to dividends, upon liquidation, dissolution and winding up
and upon redemption ("Junior Stock")), and no shares of stock of the
Corporation ranking junior to the Series B Preferred Stock as to dividends or
upon liquidation, dissolution or winding up or upon redemption or repurchase
shall be purchased, redeemed or otherwise acquired for consideration by the
Corporation, directly or indirectly (other than as a result of a
-2-
<PAGE> 4
reclassification of Junior Stock, or the exchange or conversion of one Junior
Stock for or into another Junior Stock, or other than through the use of the
proceeds of a substantially contemporaneous sale of other Junior Stock), unless
in each case (i) all dividends (whether or not earned or declared) on the
Series B Preferred Stock then accrued and in arrears for all past quarterly
dividend periods (and any interest thereon) are first paid in full in cash and
the full dividend thereon for the then-current quarterly dividend period is
paid or declared and set apart for payment in cash and (ii) the Corporation
first pays in full all amounts then due and payable in connection with any
matured redemption obligation on the Series B Preferred Stock (provided that,
if such redemption obligation is in default, such redemption obligation is
first paid in full in cash) or sets aside all such payable amounts (in cash, if
applicable), separate and apart from its other funds, in trust for the pro rata
benefit of the holders of the shares subject to such redemption so as to
continue to be available therefor. Subject to the foregoing, and not otherwise,
such dividends (payable in cash, stock or otherwise) as may be determined by
the Board of Directors may be declared and paid on any Junior Stock, or shares
of Junior Stock may be purchased, redeemed or otherwise acquired for
consideration by the Corporation, from time to time out of any funds legally
available therefor. Subject to the prior and superior rights of the holders of
any shares of any series of preferred stock ranking senior to the shares of
Series B Preferred Stock with respect to dividends, after any dividend has been
declared and paid in full with respect to the Series A Preferred Stock, the
Series B Preferred Stock, but not the Series A Preferred Stock, shall be
entitled to participate in any dividend with respect to any Junior Stock other
than the Series A Preferred Stock (a "Junior Stock Dividend"). Each holder of
Series B Preferred Stock will participate in a Junior Stock Dividend based on
the number of Common Shares into which the Series B Preferred Stock is
convertible on the record date of the Junior Stock Dividend.
3. Voting Rights.
(a) Except as otherwise required by law, each share of
Series B Preferred Stock issued and outstanding shall at any time have a number
of votes equal to the number of Common Shares into which the Series B Preferred
Stock is then convertible pursuant to Section 6 hereof, and the holders of
Series B Preferred Stock shall be entitled to vote with the holders of Common
Shares on all matters submitted to a vote of stockholders (whether at a meeting
or by written consent); provided that the Series B Preferred Stock shall be
entitled to vote as a series (the affirmative vote or consent of the holders of
at least a majority of the outstanding shares of Series B Preferred Stock being
required) or as part of a class (together with other series of Preferred Stock)
on any matter with respect to which a series vote by the Series B Preferred
Stock or a class vote of the Series B Preferred Stock together with other
series of Preferred Stock, as the case may be, shall be expressly required by
law, and any such class or series vote may be given in person or by proxy,
either in writing without a meeting or by vote at any meeting called for the
purpose.
(b) So long as any shares of Series B Preferred Stock are
outstanding, then, in addition to any other vote or consent of stockholders
required by law or by the certificate of
-3-
<PAGE> 5
incorporation, the consent of the holders of two thirds of the shares of Series
B Preferred Stock at the time outstanding, given in person or by proxy, either
in writing without a meeting or by vote at any meeting called for the purpose,
shall be necessary for effecting or validating:
(i) Any amendment, alteration or repeal of any of
the provisions of the certificate of incorporation, or of the by-laws,
or any designation of any new series of preferred stock, of the
Corporation, which affects adversely the voting powers, rights,
preferences, privileges or powers of, or restrictions provided for the
benefit of, the holders of Series B Preferred Stock; provided,
however, that the amendment, alteration or repeal of the provisions of
the certificate of incorporation so as to authorize or create, or to
increase the authorized amount of any Junior Stock shall not be deemed
to affect adversely the voting powers, rights or preferences of the
holders of Series B Preferred Stock;
(ii) The authorization, designation or creation
of, or the increase in the authorized amount of, any additional shares
of Series B Preferred Stock, or shares of any class, or any security
convertible into shares of any class, ranking senior to or on a parity
with the Series B Preferred Stock in the distribution of assets on any
liquidation, dissolution or winding up of the Corporation, in the
payment of dividends or in redemption rights;
(iii) Any corporate or shareholder action which
reclassifies any outstanding shares of the Corporation into shares
having a preference or priority right to receive dividends or assets
senior to or on a parity with the preference of the Series B Preferred
Stock;
(iv) The liquidation or dissolution of the
Corporation or SVG Lithography Systems, Inc. ("SVGL"); or
(v) The declaration or payment of a dividend on
the Common Shares of the Corporation (other than a dividend payable
solely in Common Shares).
4. Redemption Rights.
(a) Optional Redemption. At any time after July 21,
1996, the Corporation may, at its sole option and election, redeem all, but not
less than all, of the outstanding Shares of Series B Preferred Stock, out of
any source of funds legally available therefor, at a redemption price per share
equal to the greater of (i) $2,208.80 plus all dividends (whether or not earned
or declared) accrued and unpaid to such redemption date, or (ii) the sum
determined by multiplying the number of Common Shares into which each share of
Series B Preferred Stock is then convertible, as provided in Section 6, by the
average of the closing sales prices of the Common Shares for the 10 trading
days ending on the date of the redemption notice given pursuant to Section
4(c)(i) (the "Redemption Price"). Such redemption may be made, at the
-4-
<PAGE> 6
option of the Corporation, in a single payment or in equal annual installments
over a period of not more than three years (the "Redemption Period"). Holders
of Series B Preferred Stock may convert any of their unredeemed shares of
Series B Preferred Stock in accordance with the provisions of Section 6 hereof
prior to or during the Redemption Period at any time prior to the fifth
business day prior to the redemption date for any remaining outstanding shares
of Series B Preferred Stock.
(b) Accelerated Redemption. (i) If the Corporation has
given notice of redemption pursuant to Section 4(c) below, and such redemption
notice provides for the redemption to be made in three annual installments,
and, prior to the time when all shares of Series B Preferred have been redeemed
in accordance with the redemption notice, a Transaction (as defined below)
shall occur, the Corporation shall redeem all outstanding Series B Preferred at
or prior to the consummation of such Transaction and (ii) for purposes of this
Section 4(b), a Transaction shall be deemed to have occurred if:
(A) SVGL sells all or substantially all of its assets to an entity
other than the Corporation or an entity as to which neither the Corporation,
nor the stockholders of the Corporation immediately prior to the consummation
of such sale, nor the Corporation and such stockholders together, hold voting
securities representing a majority of the voting power of such entity;
(B) SVGL consummates a merger, consolidation or other transaction or
series of transactions pursuant to which neither the Corporation nor the
stockholders of the Corporation immediately prior to such consummation, nor the
Corporation and such stockholders together, hold voting securities representing
a majority of the voting power of the surviving entity;
(C) The Corporation sells all or substantially all of its assets to
an entity as to which neither the Corporation, nor the stockholders of the
Corporation immediately prior to such sale, nor the Corporation and such
stockholders together, hold voting securities representing a majority of the
voting power of the surviving entity; or
(D) The Corporation consummates a merger consolidation or other
transaction or series of transactions pursuant to which the stockholders of the
Corporation immediately prior to such consummation fail to hold voting
securities representing a majority of the voting power of the surviving entity.
(c) Mechanics of Redemption.
(i) Notice of any redemption of the Series B
Preferred Stock shall be mailed thirty (30) calendar days prior to the initial
date fixed for redemption to each holder of Series B Preferred Stock, at such
holder's address as it appears on the books of the Corporation. To facilitate
the redemption of the Series B Preferred Stock, the Board of Directors may fix
a record date for the determination of holders of Series B Preferred Stock to
be redeemed, which
-5-
<PAGE> 7
date shall not be more than sixty (60) nor less than ten (10) calendar days
prior to the date fixed for such redemption. Such notice of redemption shall
state the Redemption Period, each date on which a redemption will be
effectuated and the number of shares to be redeemed on each such date (all in
accordance with the provisions of paragraph 4(a) above), and shall inform the
holders of the Series B Preferred Stock of their right to convert their shares
prior to or during the Redemption Period at any time prior to the fifth
business day prior to the redemption date for any remaining outstanding shares
of Series B Preferred Stock.
(ii) The holder of any shares of Series B
Preferred Stock redeemed pursuant to this Section 4 shall not be entitled to
receive payment of the redemption price for such shares until such holder shall
cause to be delivered to the place specified in the notice given with respect
to such redemption (i) the certificates representing such shares of Series B
Preferred Stock and (ii) appropriate endorsements and transfer documents
sufficient to transfer such shares of Series B Preferred Stock to the
Corporation free of any adverse interest. In the event the redemption amount
payable on any redeemed share of Series B Preferred Stock is not paid in full
within two (2) business days after the holder is entitled to receive such
payment as provided herein, then the unpaid portion of the amount payable upon
redemption of such share shall bear interest at a rate per annum equal to the
rate of interest in effect on such second day as publicly announced from time
to time by Bank of America in San Francisco, California, as its "reference
rate" plus 1% (the "Interest Rate"), commencing at the close of business on
such second day and continuing until the redemption price on such share is paid
in full. Interest shall be computed on the basis of a 360-day year consisting
of twelve 30-day months and shall be payable on demand.
(iii) Upon each redemption date specified in the
notice of redemption given pursuant to paragraph (i), and if all funds
necessary for such redemption shall have been paid or set aside by the
Corporation separate and apart from its other funds in trust for the pro rata
benefit of the holders of the shares called for redemption, so as to be and
continue to be available therefor, then the shares so called for redemption on
such date shall no longer be deemed outstanding, the rights to receive
dividends thereon shall cease to accrue from and after the date of redemption
designated in the notice of redemption, and all rights of the holders of the
shares of Series B Preferred Stock called for redemption on such date shall
cease and terminate, excepting only the right to receive the redemption price
therefor (including any accrued and unpaid dividends, whether or not earned or
declared, to the date fixed for redemption), without interest except as
provided in Section 4(c)(ii) hereof.
5. Liquidation. Subject to the prior and superior rights of the
holders of any shares of any series of preferred stock ranking senior to the
shares of Series B Preferred Stock with respect to liquidation preference, in
the event of any voluntary or involuntary dissolution, liquidation or winding
up of the Corporation (for the purposes of this Section 5, a "Liquidation"),
before any distribution of assets shall be made to the holders of the Series A
Preferred Stock, the Common Shares or the holders of any other stock that ranks
junior to the Series B Preferred Stock in respect of distributions upon a
Liquidation of the Corporation, the holder of each share of Series B Preferred
Stock then outstanding shall be entitled to be paid out of the
-6-
<PAGE> 8
assets of the Corporation available for distribution to its stockholders, an
amount in cash equal to $2,008 per share plus all dividends (whether or not
earned or declared) accrued and unpaid on such share to the date fixed for the
distribution of assets of the Corporation in liquidation to the holders of
Series B Preferred Stock.
Subject to the superior rights of the holders of any shares of any
series of preferred stock ranking senior to the shares of Series B Preferred
with respect to liquidation preference, if upon any Liquidation, the aggregate
assets available for distribution to the holders of the Series B Preferred
Stock and any other stock of the Corporation ranking on a parity with the
Series B Preferred Stock upon Liquidation which shall then be outstanding
(hereinafter in this paragraph called the "Total Amount Available") shall be
insufficient to pay to the holders of all outstanding shares of Series B
Preferred Stock and all other such parity stock the full amounts (including all
dividends accrued and unpaid) to which they shall be entitled by reason of such
Liquidation of the Corporation, then there shall be paid to the holders of the
Series B Preferred Stock in connection with such Liquidation an amount equal to
the product derived by multiplying the Total Amount Available times a fraction,
the numerator of which shall be the full amount to which the holders of the
Series B Preferred Stock shall be entitled under the terms of the preceding
paragraph by reason of such Liquidation and the denominator of which shall be
the total amount which would have been distributed by reason of such
Liquidation with respect to the Series B Preferred Stock and all other stock
ranking on a parity with the Series B Preferred Stock upon Liquidation then
outstanding had the Corporation possessed sufficient assets to pay the maximum
amount which the holders of all such stock would be entitled to receive in
connection with such Liquidation.
A Transaction shall be deemed to be a Liquidation of the Corporation
for the purpose of this Section 5 but not for purposes of Section 3(b)(iv).
The holder of any shares of Series B Preferred Stock shall not be
entitled to receive any payment owed for such shares under this Section 5 until
such holder shall cause to be delivered to the Corporation (i) the
certificate(s) representing such shares of Series B Preferred Stock and (ii)
transfer instrument(s) satisfactory to the Corporation and sufficient to
surrender such shares to the Corporation free of any adverse interest.
After payment of the full amount of the liquidating distribution to
which they are entitled, the holders of shares of the Series B Preferred Stock
will not be entitled to any further participation in any distribution of assets
by the Corporation.
6. Conversion Rights.
(a) Optional Conversion. The holder of any share of
Series B Preferred Stock shall have the right, at such holder's option at any
time (but if such share is called for redemption, then in respect of such share
only to and including but not after the close of business on the fifth business
day immediately preceding the date fixed for such redemption,
-7-
<PAGE> 9
provided that no default by the Corporation in the payment of the applicable
redemption price (including any accrued and unpaid dividends) of such share
shall have occurred and be continuing), to convert such share into that number
of shares of fully paid and non-assessable Common Shares (calculated as to each
holder to the nearest 1/100th of a share) obtained by dividing $2,008 by the
Conversion Price then in effect. The Conversion Price shall initially be
$20.08 per share, and shall be subject to adjustment as set forth below.
(b) Automatic Conversion. In the event that (i) the
Corporation undertakes a firm commitment underwritten public offering of Common
Shares pursuant to an effective registration statement under the Securities Act
of 1933, as amended, covering the offer and sale of Common Shares to the public
with net proceeds (after deducting underwriting discounts but before deducting
expenses of the offering) to the Corporation of at least $35,000,000 that is
closed within six months after the date on which a share of Series B Preferred
Stock is first issued (a "Qualified Offering") and (ii) within five business
days of the closing of such Qualified Offering the Corporation files a resale
registration statement covering that number of shares into which the Series B
Preferred Stock is then convertible, then effective as of the date immediately
prior to the effective date of such resale registration statement, each share
of Series B Preferred Stock shall automatically, without any action by the
holder thereof, be converted into that number of shares of fully paid and
non-assessable Common Shares (calculated as to each holder to the nearest
1/100th of a share) obtained by dividing $2,008 by the Conversion Price in
effect immediately prior to such effective date.
(c) Procedure for Conversion. To exercise the optional
conversion privilege set forth in Section 6(a) hereof, the holder of shares of
Series B Preferred Stock shall surrender the shares to be converted,
accompanied by instruments of transfer satisfactory to the Corporation and
sufficient to transfer the Series B Preferred Stock being converted to the
Corporation free of any adverse interest, at the principal offices of the
Corporation or any of the offices or agencies maintained for such purpose by
the Corporation ("Conversion Agent") and shall give written notice (by
registered or certified mail, overnight courier or hand delivery) to the
Corporation or such Conversion Agent that the holder elects to convert such
shares. Such notice shall also state the name or names, together with address
or addresses, in which the certificate or certificates for Common Shares which
shall be issuable on such conversion shall be issued. As promptly as
practicable after the surrender of such shares of Series B Preferred Stock as
aforesaid, the Corporation or its Conversion Agent shall issue and deliver to
such holder, or on his written order, a certificate or certificates for the
number of full Common Shares issuable upon the conversion of such shares in
accordance with the provisions hereof. Balance certificates will be issued for
the remaining shares of Series B Preferred Stock in any case in which fewer
than all of the shares of Series B Preferred Stock represented by a certificate
are converted. In the event of an automatic conversion pursuant to Section
6(b) hereof, the outstanding shares of Series B Preferred Stock shall be
converted automatically without any further action by the holders of such
shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its Conversion Agent, and provided further
that the Corporation shall not be obligated to issue certificates evidencing
the
-8-
<PAGE> 10
shares of Common Shares issuable upon such automatic conversion unless and
until the certificates evidencing such shares of Series B Preferred Stock are
either delivered to the Corporation or its Conversion Agent as provided above,
or the holder notifies the Corporation or its Conversion Agent that such
certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the corporation to indemnify the Corporation from any loss
incurred by it in connection with such certificates.
Each conversion pursuant to Section 6(a) hereof shall be deemed to
have been effected immediately prior to the close of business on the date on
which the shares of Series B Preferred Stock shall have been so surrendered and
such notice shall have been received by the Corporation as aforesaid. Each
conversion pursuant to Section 6(b) hereof shall be deemed to have been
effected immediately prior to the close of business on the date immediately
prior to the date of effectiveness of the resale registration statement
contemplated by Section 6(b). In each such case, the person or persons in
whose name or names any certificate or certificates for Common Shares shall be
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the Common Shares represented thereby at the effective
date of such conversion, unless the stock transfer books of the Corporation
shall be closed on such date, in which event such conversion shall be deemed to
have been effected immediately prior to the open of business on the next
succeeding day on which such stock transfer books are open, and such person or
persons shall be deemed to have become such holder or holders of record of the
Common Shares at the open of business on such later day. In each case of
conversion pursuant to Section 6(a) hereof, the conversion shall be at the
Conversion Price in effect on the effective date of the conversion as
determined above. In each case of conversion pursuant to Section 6(b) hereof,
the conversion shall be at the lower of the Conversion Price in effect on the
effective date of the conversion as determined above and the Public Offering
Price. No payment or adjustment shall be made on conversion for any dividends
payable on the Common Shares delivered on conversion. Effective as of any such
conversion, the Corporation shall be excused from paying any dividends on the
shares of Series B Preferred Stock converted, except for any dividends accrued
(whether or not earned or declared) through the day of conversion, which shall
be paid on the next succeeding Quarterly Dividend Date.
In lieu of any fractional interest in a Common Share which would
otherwise be deliverable upon the conversion of any share or shares of Series B
Preferred Stock, the Corporation shall pay cash in an amount equal to such
fraction times the fair market value of a Common Share on the date of
conversion, which shall be deemed to be equal to the Redemption Price (as
defined in Section 4(a)) of a Common Share as of the fifth market trading day
prior to the day of conversion. If more than one certificate representing
shares of Series B Preferred Stock is to be converted at one time by the same
holder, the number of full Common Shares issuable upon conversion thereof shall
be computed on the basis of the aggregate number of shares of Series B
Preferred Stock represented by such certificates, or the specified portions
thereof to be converted.
-9-
<PAGE> 11
(d) Adjustment of Conversion Price. The Conversion Price
shall be adjusted from time to time, in respect of any of the following events
occurring on or after the Closing Date (as defined below), as follows:
(i) In case the Corporation shall pay or make a
dividend or other distribution on any class of capital stock of the Corporation
in Common Shares, other than the Series A Preferred Stock, the Conversion Price
in effect at the opening of business on the day following the date fixed for
the determination of stockholders entitled to receive such dividend or other
distribution shall be reduced by multiplying such Conversion Price by a
fraction, of which the numerator shall be the number of Common Shares
outstanding at the close of business on the date fixed for such determination
and the denominator shall be the sum of such number of shares and the total
number of shares constituting such dividend or other distribution, such
reduction to become effective immediately after the opening of business on the
day following the date fixed for such determination. For the purposes of this
paragraph (i), the number of Common Shares at any time outstanding shall not
include shares held in the treasury of the Corporation but shall include shares
issuable in respect of scrip certificates issued in lieu of fractions of Common
Shares. The Corporation will not pay any dividend or make any distribution on
Common Shares held in the treasury of the Corporation.
(ii) In case outstanding Common Shares shall be
subdivided into a greater number of Common Shares (other than any such
subdivision which is effected pursuant to a dividend or distribution for which
adjustment to the Conversion Price is made under paragraph (i) above), the
Conversion Price in effect at the opening of business on the day following the
day upon which such subdivision becomes effective shall be proportionately
reduced, and conversely, in case outstanding Common Shares shall each be
combined into a smaller number of Common Shares, the Conversion Price in effect
at the opening of business on the day following the day upon which such
subdivision or combination becomes effective shall be proportionately
increased, such reduction or increase, as the case may be, to become effective
immediately after the opening of business on the day following the day upon
which such subdivision or combination becomes effective.
(iii) In case the Corporation shall issue rights or
warrants to all holders of its Common Shares entitling them to subscribe for or
purchase Common Shares at a price per share less than the Effective Price (as
defined below) per share of the Common Shares on the date fixed for the
determination of stockholders entitled to receive such rights or warrants, the
Conversion Price in effect at the opening of business on the day following the
date fixed for such determination shall be reduced by multiplying such
Conversion Price by a fraction, of which the numerator shall be the number of
Common Shares outstanding at the close of business on the date fixed for such
determination plus the number of Common Shares which the aggregate of the
offering price of the total number of Common Shares so offered for subscription
or purchase would purchase at such Effective Price and the denominator shall be
the number of Common Shares outstanding at the close of business on the date
fixed for such determination plus the number of Common Shares so offered for
subscription or purchase, such reduction to
-10-
<PAGE> 12
become effective immediately after the opening of business on the day following
the date fixed for such determination. For the purposes of this paragraph
(iii), the number of Common Shares at any time outstanding shall not include
shares held in the treasury of the Corporation but shall include shares
issuable in respect of scrip certificates issued in lieu of fractions of Common
Shares. "Effective Price" shall mean the average of the closing sale prices of
the Common Shares for the 10 trading days ending on the trading day prior to
the date fixed for the determination of stockholders entitled to receive such
rights or warrants.
(iv) In case the Corporation shall, by dividend or
otherwise, distribute to all holders of its Common Shares evidences of its
indebtedness or assets (including securities, but excluding (A) any rights or
warrants referred to in paragraph (iii) above, (B) any dividend or distribution
paid in cash out of the retained earnings of the Corporation and (C) any
dividend or distribution referred to in paragraph (i) above), the Conversion
Price shall be adjusted so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the close of
business on the date fixed for the determination of stockholders entitled to
receive such distribution by a fraction, of which the numerator shall be the
Effective Price on the date fixed for such determination less the then fair
market value (as determined by the Board of Directors, whose determination
shall be conclusive) of the portion of the assets or evidences of indebtedness
so distributed applicable to one Common Share and the denominator shall be such
Effective Price, such adjustment to become effective immediately prior to the
opening of business on the day following the date fixed for the determination
of stockholders entitled to receive such distribution.
(v) In case the Corporation consummates a firm
commitment underwritten public offering and the price to the public ("Public
Offering Price") of the shares sold pursuant to such offering is less than the
Conversion Price in effect on the closing of such offering, the Conversion
Price shall be adjusted, as of such closing, to equal the Public Offering
Price.
(vi) The reclassification (including any
reclassification upon a merger in which the Corporation is the continuing
corporation) of Common Shares into securities which include securities other
than Common Shares shall be deemed to involve (a) a distribution of such
securities other than Common Shares to all holders of Common Shares (and the
effective date of such reclassification shall be deemed to be "the date fixed
for the determination of stockholders entitled to receive such distribution"
and "the date fixed for such determination" within the meaning of paragraph
(iv) above), and (b) to the extent such reclassification also involves the
issuance of Common Shares, a subdivision or combination, as the case may be, of
the number of Common Shares outstanding immediately prior to such
reclassification into the number of Common Shares outstanding immediately
thereafter (and the effective date of such reclassification shall be deemed to
be "the day upon which such subdivision becomes effective" or "the day upon
which such combination becomes effective," as the case may be, and "the day
upon which such subdivision or combination becomes effective" within the
meaning of paragraph (ii) above).
-11-
<PAGE> 13
(vii) If, as a result of an adjustment made, the
holder of any share of Series B Preferred Stock thereafter converted shall
become entitled to receive shares of two or more classes of Common Shares of
the Corporation (as defined in paragraph (xiv) below), the Board of Directors
(whose determination shall be conclusive and shall be described in a statement
filed with any Conversion Agent) shall determine for accounting purposes the
allocation of the adjusted Conversion Price between or among such classes of
Common Shares.
(viii) The Corporation shall not, by amendment of
its Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issuance or sale of securities, or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by the
Corporation, but shall at all times in good faith assist in the carrying out of
all the provisions of this Section 6 and in the taking of all such action as
may be necessary or appropriate in order to protect the conversion rights of
the Series B Preferred Stock against impairment. The Corporation may in its
sole discretion make such reductions in the Conversion Price, in addition to
those required by paragraphs (i), (ii), (iii), (iv) and (v) above, as it
considers to be advisable in order that any event treated for Federal income
tax purposes as a dividend of stock or stock rights shall not be taxable to the
recipient.
(ix) Whenever the Conversion Price is adjusted as
herein provided, (A) the Corporation shall promptly file with any Conversion
Agent a certificate of a firm of independent public accountants setting forth
the Conversion Price after such adjustment and setting forth a brief statement
of the facts requiring such adjustment and the manner of computing the same,
and (B) a notice stating that the Conversion Price (and such automatic
conversion price threshold) has been adjusted and setting forth the adjusted
Conversion Price (and such automatic conversion price threshold) shall
forthwith be given by the Corporation to any Conversion Agent and mailed by the
Corporation to each holder of shares of Series B Preferred Stock at their last
address as the same appears on the books of the Corporation.
(x) In case, at any time after the date of
issuance of the Series B Preferred Stock (the "Closing Date"), (A) the
Corporation shall declare a dividend or other distribution on its Common
Shares, other than in cash out of earned surplus, (B) the Corporation shall
authorize a distribution of assets or property to all holders of its Common
Stock, (C) the Corporation shall authorize the issuance to all holders of its
Common Stock of rights or warrants entitling them to subscribe for or purchase
any Common Shares or any other subscription rights or warrants, (D) the
Corporation shall reclassify its capital stock (other than a subdivision or
combination of its outstanding Common Shares), (E) the Corporation shall effect
any consolidation or merger for which approval of any shareholders of the
Corporation is required, (F) the Corporation shall effect any sale, lease,
exchange or other disposition of all or substantially all the property and
assets of the Corporation or (G) the Corporation shall voluntarily or
involuntarily effect any liquidation, dissolution or winding up of Corporation,
then the Corporation shall cause to be mailed to each transfer agent for the
Series B Preferred Stock and to the holders of record of the outstanding shares
of Series B Preferred Stock, at least twenty
-12-
<PAGE> 14
(20) days (or ten (10) days in any case specified in clauses (A), (B) or (C)
above) prior to the applicable record or effective date hereinafter specified,
a notice stating (x) the date as of which the holders of record of Common
Shares to be entitled to such dividend, distribution, rights or warrants are to
be determined, or (y) the date on which such reclassification, consolidation,
merger, sale, leased exchange, disposition, liquidation, dissolution or winding
up is expected to become effective, and the date as of which it is expected
that holders of record of Common Shares shall be entitled to exchange their
shares for securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, sale, lease, exchange, disposition,
liquidation, dissolution or winding up. The failure to give the notice
required by this paragraph, or any defect therein, shall not affect the
legality or validity of any such dividend, distribution, right, warrant,
reclassification, consolidation, merger, sale, lease, exchange, disposition,
liquidation, dissolution or winding up, or the vote on any action authorizing
such.
(xi) In the event that at any time as a result of
an adjustment made, the holder of any share of Series B Preferred Stock
thereafter converted shall become entitled to receive any shares of the
Corporation other than Common Shares, thereafter the Conversion Price of such
other shares so receivable upon conversion of any share of Series B Preferred
Stock shall be subject to readjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to
Common Shares contained herein.
(xii) The Corporation will pay any and all
documentary, stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of Common Shares on conversion of shares of the Series B
Preferred Stock pursuant hereto, provided, however, that the Corporation shall
not be required to pay any tax which may be payable in respect of any transfer
involved in the issue or delivery of Common Shares in a name other than that of
the holder of the shares of Series B Preferred Stock to be converted and no
such issue or delivery shall be made unless and until the person requesting
such issue or delivery has paid to the Corporation the amount of any such tax
or has established, to the satisfaction of the Corporation, that such tax has
been paid.
(xiii) The Corporation shall at all times reserve
and keep available, free from preemptive rights, out of its authorized but
unissued Common Shares, for the purpose of issuance upon conversion of the
Series B Preferred Stock, the maximum number of Common Shares then deliverable
upon the conversion of all shares of Series B Preferred Stock then outstanding.
All Common Shares issued upon conversion of the Series B Preferred Stock, or in
payment of dividends or of the redemption price therefor or otherwise thereon,
shall be newly issued and, when issued, shall be duly authorized, validly
issued, fully paid and nonassessable, and free and clear of any liens or
encumbrances.
(xiv) For the purpose of this paragraph (d), the
term "Common Shares" shall include any shares of the Corporation of any class
or series which has no preference or priority in the payment of dividends or in
the distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation and which is not subject to
-13-
<PAGE> 15
redemption by the Corporation. However, upon conversion of Series B Preferred
Stock, the Corporation shall issue Common Shares consisting only of shares of
the class designated as Common Shares as of the Closing Date, or shares of the
Corporation of any classes or series resulting from any reclassification or
reclassifications thereof and which have no preference in respect of dividends
or in the distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation and which are not subject to
redemption by the Corporation, provided that if at any time there shall be more
than one such resulting class or series, the shares of each such class and
series then so issuable shall be substantially in the proportion which the
total number of shares of such class and series resulting from all such
reclassifications bears to the total number of shares of all such classes and
series resulting from all such reclassifications.
7. Status of Reacquired Shares of Series B Preferred Stock.
Shares of Series B Preferred Stock issued and reacquired by the Corporation
(including, without limitation, shares of Series B Preferred Stock which have
been redeemed pursuant to Section 4 hereof and shares of Series B Preferred
Stock which have been converted into Common Shares pursuant to Section 6
hereof) shall have the status of authorized and unissued shares of preferred
stock, undesignated as to series, subject to later issuance.
8. Listing of Common Stock. So long as any Series B Preferred
Stock is outstanding, the Company shall maintain the listing of its Common
Shares (or such other security as shall be issuable at any time upon conversion
of the Series B Preferred Stock in lieu of the Common Shares, pursuant to the
provisions of Section 6(c) hereof) on the Nasdaq National Market or shall
obtain the listing of its Common Shares (or such other security) on a national
securities exchange.
-14-
<PAGE> 16
IN WITNESS WHEREOF, SILICON VALLEY GROUP, INC. has caused its
corporate seal to be hereunto affixed and this certificate to be signed by its
Vice President and attested by its Assistant Secretary, on this 21st day of
February, 1995.
SILICON VALLEY GROUP, INC
By: ___________________________
Russell G. Weinstock,
Vice President, Finance
ATTEST:
By: _________________________
Larry W. Sonsini,
Secretary
-15-
