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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended March 31, 1995.
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the period from ________ to ________.
Commission File Number 0-11348
SILICON VALLEY GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 94-2264681
(State of incorporation) (IRS Employer Identification No.)
2240 RINGWOOD AVENUE, SAN JOSE, CALIFORNIA 95131
(Address of principal executive offices) (Zip Code)
(408) 434-0500
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
The number of shares outstanding of the Registrant's Common Stock as of
April 24, 1995 was 25,033,589.
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SILICON VALLEY GROUP, INC.
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Consolidated Condensed Balance Sheets as of
March 31, 1995 and September 30, 1994 3
Consolidated Condensed Income Statements
for the Quarters and the Six Month Periods
Ended March 31, 1995 and 1994 4
Consolidated Condensed Statements of Cash Flows
for the Six Months Ended March 31, 1995 and 1994 5
Notes to Consolidated Condensed Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION 14
SIGNATURES 16
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
SILICON VALLEY GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, September 30,
1995 1994
--------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 190,711 $ 87,829
Accounts receivable (net of allowance for doubtful
accounts of $3,173 and $2,630, respectively) 96,717 66,809
Receivable from sale of stock warrants -- 8,204
Inventories 119,610 86,829
Prepaid expenses 3,671 3,632
Deferred taxes 750 169
------------- -------------
Total current assets 411,459 253,472
PROPERTY AND EQUIPMENT - NET 17,218 13,313
DEPOSITS AND OTHER ASSETS 1,739 1,784
INTANGIBLE ASSETS - NET 2,897 3,105
------------- -------------
TOTAL $ 433,313 $ 271,674
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt and current portion of long-term debt $ 863 $ 828
Accounts payable 34,886 20,254
Accrued liabilities 68,767 53,644
Income taxes payable 4,916 5,443
------------- -------------
Total current liabilities 109,432 80,169
LONG-TERM DEBT AND CAPITAL LEASES 1,098 1,510
DEFERRED LIABILITIES 1,057 998
MINORITY INTEREST 3,751 3,782
STOCKHOLDERS' EQUITY:
Convertible Redeemable Preferred Stock -- 17,000
Common Stock--shares outstanding:
March 31, 1995: 25,008,909
September 30, 1994: 18,967,276 243,459 105,978
Retained earnings 74,516 62,237
------------- -------------
Stockholders' equity 317,975 185,215
------------- -------------
TOTAL $ 433,313 $ 271,674
============= =============
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
3
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SILICON VALLEY GROUP, INC.
CONSOLIDATED CONDENSED INCOME STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Quarters Ended Six Months Ended
March 31, March 31,
----------------- -----------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $ 109,380 $ 85,300 $ 195,351 $ 156,217
COST OF SALES 67,849 52,876 120,618 96,735
--------- --------- --------- ---------
GROSS PROFIT 41,531 32,424 74,733 59,482
OPERATING EXPENSES:
Research, development and
related engineering 9,816 7,675 18,094 14,221
Marketing, general and
administrative 21,088 16,951 38,710 32,787
--------- --------- --------- ---------
OPERATING INCOME 10,627 7,798 17,929 12,474
INTEREST AND OTHER INCOME 1,146 163 2,344 265
INTEREST EXPENSE (150) (127) (295) (481)
--------- --------- --------- ---------
INCOME BEFORE INCOME
TAXES AND MINORITY INTEREST 11,623 7,834 19,978 12,258
PROVISION FOR INCOME TAXES 4,184 3,132 7,192 4,902
MINORITY INTEREST (48) (40) (31) (105)
--------- --------- --------- ---------
NET INCOME $ 7,487 $ 4,742 $ 12,817 $ 7,461
========= ========= ========= =========
PREFERRED STOCK DIVIDEND $ 239 $ 297 $ 537 $ 595
========= ========= ========= =========
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE $ 0.33 $ 0.23 $ 0.58 $ 0.39
========= ========= ========= =========
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES 22,811 19,032 21,624 17,716
========= ========= ========= =========
</TABLE>
See Notes to Consolidated Condensed Financial Statements
4
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SILICON VALLEY GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
------------------
1995 1994
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 12,817 $ 7,461
Reconciliation to net cash provided by
(used for) operating activities:
Depreciation and amortization 4,975 3,896
Amortization of intangibles 208 386
Minority interest (31) (105)
Changes in assets and liabilities:
Accounts receivable (29,908) 1,567
Inventories (32,781) (1,257)
Prepaid expenses (39) (86)
Deposits and other assets 45 (494)
Accounts payable 14,632 (3,104)
Accrued and deferred liabilities 15,390 1,559
Income taxes (1,108) 4,597
--------- ---------
Net cash provided by (used for) operating activities (15,800) 14,420
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (8,880) (511)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit agreements -- 8,000
Repayment of debt (377) (22,578)
Sale of Common Stock 90,089 31,096
Sale of Preferred Stock 29,800 --
Collection of receivable from sale of
Common Stock warrants 8,204 --
--------- ---------
Net cash provided by financing activities 127,716 16,518
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (154) 15
--------- ---------
INCREASE IN CASH AND EQUIVALENTS 102,882 30,442
CASH AND EQUIVALENTS:
Beginning of period 87,829 17,617
--------- ---------
End of period $ 190,711 $ 48,059
========= =========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Preferred Stock dividend $ 537 $ 595
========= =========
Preferred Stock Series A converted to Common Stock $ 17,000 $ --
========= =========
Preferred Stock Series B converted to Common Stock $ 29,800 $ --
========= =========
</TABLE>
See Notes to Consolidated Condensed Financial Statements
5
<PAGE> 6
SILICON VALLEY GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The accompanying consolidated condensed financial statements have been prepared
by the Company without audit and reflect all adjustments which are, in the
opinion of management, necessary to a fair statement of the financial position
and the results of operations for the interim periods. The statements have been
prepared in accordance with the regulations of the Securities and Exchange
Commission, but omit certain information and footnote disclosures necessary to
present the statements in accordance with generally accepted accounting
principles. For further information, refer to the Consolidated Financial
Statements and Notes thereto included in the Company's Annual Report on Form
10-K for the year ended September 30, 1994.
2. INVENTORIES
Inventories are comprised of:
<TABLE>
<CAPTION>
March 31, September 30,
1995 1994
--------- -------------
(In thousands)
<S> <C> <C>
Raw materials $ 51,916 $ 33,096
Work-in-process 62,412 44,558
Finished goods 5,282 4,175
--------- --------
$ 119,610 $ 86,829
========= ========
</TABLE>
3. STOCK OFFERING
During the second quarter of fiscal 1995, the Company sold 3,192,606 shares of
its Common Stock through an underwritten public offering. The net proceeds of
the offering were approximately $87,700,000. As a part of the same public
offering, The Perkin Elmer Corporation ("Perkin Elmer") sold 1,807,394 shares of
Common Stock, including 1,000,000 shares from the conversion of the Company's
Series A Convertible Preferred Stock, all of which was held by Perkin Elmer.
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<PAGE> 7
4. SALE AND SUBSEQUENT CONVERSION OF PREFERRED STOCK
In February 1995 the Company entered into a business agreement with Intel
Corporation, Motorola Inc. and Texas Instruments Incorporated (the "Investors")
related to the Company's Micrascan photolithography products. As part of this
agreement, the Investors purchased in equal amounts an aggregate of
approximately $30,000,000 of the Company's newly issued Series B Convertible
Preferred Stock (the "Series B Preferred") and received certain rights to
purchase future generations of the Company's Micrascan products. In accordance
with the terms of its issuance, the Series B Preferred automatically converted
into 1,494,300 shares of Common Stock as the result of a registration statement
which was effective concurrent with the Company's public stock offering
discussed in Note 3.
The agreement with the Investors obligates the Company to use the $30,000,000
received from the Investors, to fund increased Micrascan production capacity,
increased research and development of the Micrascan technology, the purchase of
additional capital equipment and to augment working capital for growth of the
Company's Micrascan photolithography operations. Under such agreement, the
Company is obligated, subject to the requirements of certain agreements with
SEMATECH, to fund from its own accounts an amount not less than $25,000,000 at
any time over a five year period. The agreements with SEMATECH are discussed in
Note 13 to the Consolidated Financial Statements included in the Company's
Annual Report on Form l0K for the year ended September 30, 1994. During the term
of the SEMATECH agreements, the Company is obligated to fund from its own
resources 120% of the total amount received from SEMATECH, up to a maximum of
$36,000,000, to further the development of Micrascan technology and to increase
the manufacturing capability and capacity for the Micrascan products.
7
<PAGE> 8
SILICON VALLEY GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company designs, manufactures, markets and services semiconductor processing
equipment used in the fabrication of integrated circuits. The Company's products
are used in photolithography for exposure and photoresist processing, and in
deposition for oxidation/diffusion and low pressure chemical vapor deposition
("LPCVD"). The Company manufactures and markets its photolithography exposure
products through its majority owned subsidiary, SVG Lithography Systems, Inc.
("SVGL"), its photoresist processing products through its Track Systems Division
("Track") and its oxidation/diffusion and LPCVD products through its Thermco
Systems Division ("Thermco").
The semiconductor industry to which the Company sells its products is highly
cyclic and has, historically, experienced downturns. These downturns have had a
severe effect on the semiconductor industry's demand for semiconductor
processing equipment. Future weakness in demand in the semiconductor industry
can be expected to have an adverse effect on the Company's business and results
of operations. Further, the Company relies on a limited number of major
customers for a substantial percentage of its net sales (three such customers
accounted for 50% of the Company's sales in fiscal 1994 and this trend continued
into the first half of fiscal 1995). The loss of or any substantial reduction in
orders by any such customer could adversely affect the Company's business and
results of operations.
Net sales for the second fiscal quarter ended March 31, 1995 were $109,380,000,
a 27% increase over net sales of $85,971,000 for the preceding quarter and 28%
above net sales of $85,300,000 during the second quarter of fiscal 1994. The
growth in net sales over the preceding quarter was primarily the result of
increased shipments of Thermco and Track products. Higher Thermco and SVGL
shipping levels resulted in the increased net sales compared to the year-earlier
quarter.
For the first half of fiscal 1995, net sales were $195,351,000, a 25% increase
over net sales of $156,217,000 during the first half of fiscal 1994. The higher
fiscal 1995 net sales were primarily due to increased shipments of Thermco and
SVGL products.
During the second quarter of fiscal 1995, the Company had bookings of
$161,270,000 which represented a book to bill ratio of 1.47 to 1, approximately
equal to the preceding three quarters. At March 31, 1995 the Company had a
backlog of $303,866,000 compared to $209,119,000 at September 30, 1994.
Gross margins were 38% in the second quarter of fiscal 1995, compared to 39%
during the preceding quarter, and 38% in the second quarter of fiscal 1994.
During the second quarter of fiscal 1995, Thermco shipments, which have
historically had lower gross margins than those associated with Track products,
comprised a greater percentage of the Company's net sales than during the
preceding quarter, resulting in the lower overall gross margins. The decrease
was offset in part by volume efficiencies associated with increased Track
shipments. In comparing
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the second quarters of fiscal 1995 and 1994, overall gross margins were
approximately level. Improvements in Thermco's margins from the year-earlier
quarter were offset by less favorable margins on aftermarket products shipped by
Track.
Comparing the six-month periods of fiscal 1995 and 1994, gross margins remained
relatively unchanged at approximately 38%, primarily due to improved Thermco
margins offset by lower shipments of higher margin Track products during the
first half of fiscal 1995.
Research, development and related engineering (R&D) was $9,816,000 (9% of net
sales) during the second quarter of fiscal 1995, $8,278,000 (10% of net sales)
during the preceding quarter and $7,675,000 (9% of net sales) during the second
quarter of fiscal 1994. The Company's R&D expenditures exclude funding received
from outside parties under joint development agreements, the majority of which
is received by SVGL from SEMATECH. During the second and first quarters of
fiscal 1995 and the second quarter of fiscal 1994, such funding totalled
$2,592,000, $2,082,000 and $72,000, respectively. The increase in R&D over both
the preceding and year-earlier quarters was primarily the result of new product
development, costs incurred to support increased product shipments and further
design improvements on Thermco's AVP.
During the first six months of fiscal 1995 R&D was $18,094,000, up from
$14,221,000 during the same period of fiscal 1994. R&D expenditures for the six
month periods ended March 31, 1995 and 1994 exclude funding received under joint
development agreements of $4,674,000 and $311,000, respectively. The increase
over the year-earlier period corresponds to the quarter to quarter increases
discussed above.
Marketing, general and administrative expenses (MG&A) were $21,088,000 (19% of
net sales) during the second quarter of fiscal 1995 compared to $17,622,000 (21%
of net sales) during the preceding quarter and $16,951,000 (20% of net sales)
during the second quarter of fiscal 1994. In comparison to both earlier
quarters, the increased second quarter fiscal 1995 expenditures were primarily
the result of selling costs related to the higher level of shipments and
administrative costs incurred in supporting the Company's operations. The
decrease in MG&A as a percentage of sales compared to the earlier quarters was
the result of the significant increase in net sales.
During the first six months of fiscal 1995 MG&A was $38,710,000 (20% of net
sales) compared to $32,787,000 (21% of net sales) during the first half of
fiscal 1994. The primary reasons for the increased dollar expenditures and the
decrease as a percentage of net sales corresponds to the quarterly discussion
above.
Operating income was $10,627,000 for the second quarter of fiscal 1995 compared
to $7,302,000 for the preceding quarter and $7,798,000 for the second quarter of
fiscal 1994. First half fiscal 1995 operating income was $17,929,000 compared to
$12,474,000 for the first six months of fiscal 1994. For both the quarter and
six month comparisons, gross profits from the higher net sales exceeded the
growth of R&D and MG&A, resulting in increased operating income.
Interest and other income was $1,146,000 during the second quarter of fiscal
1995 compared to $1,198,000 for the preceding quarter and $163,000 for the
year-earlier quarter. For the first six months of fiscal 1995, interest and
other income was $2,344,000 compared to $265,000 for the
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<PAGE> 10
first six months of fiscal 1994. The increased fiscal 1995 interest and other
income amounts were primarily due to higher cash balances available for
investment at more favorable prevailing interest rates.
Interest expense was $150,000 during the second quarter of fiscal 1995, compared
to $145,000 during the preceding quarter and $127,000 during the year-earlier
quarter. During the first six months of fiscal 1995, interest expense was
$295,000, down from $481,000 during the first half of fiscal 1994. The
year-earlier period included interest expense related to borrowings outstanding
under the Company's bank line of credit during the first several months of
fiscal 1994.
The Company recorded a 36% provision for income taxes for the first six months
of fiscal 1995, compared to a 38% provision for all of fiscal 1994. Variations
in the Company's effective tax rate relate primarily to changes in the
geographic distribution of the Company's pretax income.
The minority interest represented that share of SVGL's operating results
attributable to its minority shareholder. For the second quarters of fiscal 1995
and 1994, minority interest represented additions of $48,000 and $40,000,
respectively, compared to a reduction for minority interest of $17,000 during
the first quarter of fiscal 1995. For the first six months of fiscal 1995 and
1994, minority interest represented additions of $31,000 and $105,000,
respectively.
The Company had net income of $7,487,000 ($0.33 per share), $5,330,000 ($0.25
per share) and $4,742,000 ($0.23 per share) for the second and first quarters of
fiscal 1995 and the second quarter of fiscal 1994, respectively. First half
fiscal 1995 and 1994 net income was $12,817,000 ($0.58 per share) and $7,461,000
($0.39 per share), respectively. Net income per share amounts for the second
quarter of fiscal 1994 and the first quarter of fiscal 1995 were computed after
deducting, from net income, Series A Preferred Stock ("Series A Preferred")
dividends of $297,000 and $298,000, respectively. Until the second quarter of
fiscal 1995, such dividends have been deducted because the effect thereof has
been more dilutive than the effect of increasing the weighted average common and
common equivalent shares by the as-converted equivalent common shares into which
the Series A Preferred was convertible. Earnings per share for the second
quarter of fiscal 1995 were computed using the as-converted method which was
more dilutive.
FLUCTUATIONS IN QUARTERLY RESULTS AND DEPENDENCE ON THE
DEVELOPMENT AND SALES OF NEW PRODUCTS
The Company has, at times during its existence, experienced quarterly
fluctuations in its operating results. Due to the relatively small number of
systems sold during each fiscal quarter and the relatively high revenue per
system, production or shipping delays or customer order rescheduling can
significantly affect quarterly revenues and profitability. The Company has
experienced, and may again experience, quarters during which a substantial
portion of the Company's net sales are realized near the end of the quarter.
Accordingly, delays in shipments near the end of a quarter can cause quarterly
net sales to fall significantly short of anticipated levels. Since most of the
Company's expenses are fixed in the short term, such shortfalls in net sales
could have a material adverse effect on the Company's business and results of
operations. The Company's operating results may also vary from quarter to
quarter based upon numerous factors including the timing of new product
introductions, product mix, level of sales, the
10
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relative proportions of domestic and international sales, activities of
competitors and problems obtaining materials or components on a timely basis. In
light of these factors and the nature of semiconductor industry cycles, the
Company could again experience variability in quarterly operating results.
Semiconductor manufacturing equipment and processes are subject to rapid
technological change. The Company believes that its future success will depend
in part upon its ability to continue to enhance its existing products and their
process capabilities and to develop and manufacture new products with improved
process capabilities that enable semiconductor manufacturers to fabricate
semiconductors more efficiently. New product introductions could contribute to
quarterly fluctuations in operating results as orders for new products commence
and increase the potential for a decline in orders of existing products. Failure
to introduce new products successfully in a timely manner could result in loss
of competitive position and reduced sales of existing products. Furthermore, the
inability to produce such products or any failure to achieve market acceptance
could have a material adverse effect on the Company's business and results of
operations.
The Company believes that the photolithography exposure equipment market is one
of the largest segments of the semiconductor processing equipment industry and
that its Micrascan II is currently the most technically advanced machine
shipping in multiple quantities to global semiconductor manufacturers. While the
recent volume of orders for Micrascan II systems have been encouraging, they are
not necessarily indicative of industry-wide acceptance of the Micrascan
technology. In addition, the Company believes semiconductor manufacturers will
not require volume quantities of production equipment as advanced as Micrascan
until at least 1996, and that substantial sales of Micrascan systems will not
begin until late 1996 or 1997. Further, SVGL was not profitable for fiscal 1994,
nor during the first half of fiscal 1995 and there can be no assurance that it
will be able to operate profitably in the future.
The Company believes that for SVGL to succeed in the long term, it must sell its
Micrascan products on a global basis. The Japanese and Pacific Rim markets
(including fabrication plants located in other parts of the world which are
operated by Japanese and Pacific Rim semiconductor manufacturers) represent a
substantial portion of the overall market for photolithography exposure
equipment and to date neither SVGL nor the Company has been successful in
securing a substantial share of these markets. The Company is relatively new to
the photolithography exposure business and does not share the same level of
financial resources as its competitors. As a result, major customers may be
unwilling to rely on SVGL to be the sole source of this advanced technology,
which could have an adverse effect on the Company's business and results of
operations.
The Company is currently expanding its manufacturing capacity to meet current
and expected demand levels. From time to time, the Company has experienced
difficulty in ramping up production or effecting transitions to new products
and, consequently, has suffered delays in product deliveries. There can be no
assurance that the Company will not experience manufacturing problems as a
result of capacity constraints or ramping up production by upgrading or
expanding existing operations. These issues could result in product
delivery delays, causing a loss of future revenues and the associated profits.
In particular, the Company believes that protracted delays in delivering
Micrascan products could result in semiconductor manufacturers electing to
install competitive equipment in their advanced fabrication facilities, which
could impede acceptance of the Micrascan products on an industry-
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wide basis. The Company's operating results could also be adversely affected by
the increase in fixed costs and operating expenses related to increases in
production capacity if net sales do not increase commensurately.
The Company depends on external funding to assist in the high cost of
development in its photolithography operation. On September 30, 1994, SEMATECH
entered into the first of a series of agreements with the Company to assist in
funding both the development of the Micrascan technology and to increase SVGL's
manufacturing capability and capacity. The agreements with SEMATECH included
the sale of warrants to purchase the Company's Common Stock and established
certain milestones upon which the funding is based. If the Company achieves all
milestones, the SEMATECH agreements provide for an additional $21,000,000 of
such funding during fiscal 1995, 1996 and 1997, all of which the Company
expects would be an offset to its research and development expenditures. In the
event that the Company does not receive the contracted SEMATECH funding for any
reason, it would be required to either curtail development of photolithography
products or make up the shortfall from its own funds or other sources. If the
Company were required to make up these funds, its research and development
expenses would increase significantly and its operating income would be reduced
correspondingly. Under the agreements with SEMATECH the Company is obligated, at
some time over a three-year period, to fund, from its own resources, 120% of
amounts received from SEMATECH up to $36,000,000.
In February 1995 the Company entered an agreement with Intel Corporation,
Motorola Inc. and Texas Instruments Incorporated (the "Investors") related to
the Company's Micrascan photolithography products. As part of this agreement,
the Investors purchased an aggregate of $30,000,000 of the Company's newly
issued Series B Preferred Stock (which was subsequently converted to Common
Stock) and received certain rights to purchase future generations of the
Company's Micrascan products. In turn, the Company agreed to utilize the
proceeds from the sale of the Preferred Stock for research and development,
manufacturing capacity expansion and working capital related to it's Micrascan
technology and products. If, in fulfilling the SEMATECH agreements, the Company
is required to fund less than $25,000,000, the Company is obligated under its
agreement with the Investors, at some time over a five year period, to fund an
amount such that the total it funds under the agreements with both SEMATECH and
the Investors is not less than $25,000,000.
There are no assurances that the Company will be able to attain the SEMATECH
milestones or that SEMATECH will be capable of providing the agreed upon
funding, either of which could have an unfavorable impact on future
photolithography development. If the Company is able to attain such milestones,
no assurance can be given that the Company will be able to obtain the necessary
funding to meet its commitments under either the SEMATECH agreement or its
agreement with the Investors. Were the Company not to fulfill certain
obligations under such agreements, it could be required to repay all funds
received from SEMATECH and it could be required to repurchase the Common Stock
held by the Investors, either or both of which could have a material adverse
effect on the Company. Conversely, the Company could be required to provide its
portion of the funding regardless of the success of the project. As a result,
the Company may be required to use its financial resources to comply with these
commitments even if it believes that such resources would be better utilized in
other areas.
12
<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES
In March 1995, the Company sold 3,192,606 shares of its Common Stock through an
underwritten public offering. The net proceeds of the offering were
approximately $87,700,000. As part of the same public offering, The Perkin Elmer
Corporation sold 1,807,394 shares of Common Stock (including 1,000,000 shares
which it received upon the conversion of the Company's Series A Preferred Stock
and 807,394 shares which it previously owned).
In February 1995 the Investors purchased an aggregate of $30,000,000 of the
Company's newly issued Series B Preferred Stock. In accordance with the terms of
its issuance, the Series B Preferred automatically converted into 1,494,300
shares of Common Stock upon the effectiveness of a registration statement filed
concurrently with the Company's public offering discussed above.
At March 31, 1995 cash and cash equivalents were $190,711,000 compared to the
September 30, 1994 balance of $87,829,000, an increase of $102,882,000. During
the first six months of fiscal 1995, the Company received a total of
$128,093,000 from the sale of both Common Stock (including stock options
exercised by employees) and the Series B Preferred, as well as the collection of
the proceeds from the sale of Common Stock warrants subscribed during the fourth
quarter of fiscal 1994. These cash inflows were offset by $15,800,000 of cash
used for operating activities and $8,880,000 used for the purchase of property
and equipment. The cash used for operating activities was required to finance
increased accounts receivable resulting from the Company's increased shipments,
the majority of which occurred late in the quarter, and higher inventory levels
required to satisfy the current backlog of customer orders.
At May 11, 1995, the Company had $50,000,000 of credit available under its bank
revolving line of credit.
The Company believes that it has sufficient working capital and available bank
credit to sustain operations and provide for the future expansion of its
business for the foreseeable future.
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PART II. OTHER INFORMATION
SILICON VALLEY GROUP, INC.
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The Annual Meeting of Shareholders of the Company was
held on February 23, 1995 (the "Annual Meeting"). The
vote of holders of record of 19,173,809 shares of the
Company's Common Stock and 10,000 shares of Series A
Convertible Redeemable Preferred Stock outstanding at
the close of business on December 28, 1994 was
solicited by proxy pursuant to Regulation 14A under
the Securities Exchange Act of 1934.
(b) The following persons were elected Directors of the
Company at the Annual Meeting:
<TABLE>
<CAPTION>
VOTES WITHHOLDING
VOTES FOR AUTHORITY
---------- -----------------
<S> <C> <C>
Papken S. Der Torossian 17,093,453 423,152
William A. Hightower 17,092,765 423,840
William L. Martin 17,093,600 423,005
John B. McBennett 17,096,515 420,090
Larry W. Sonsini 17,034,192 482,413
Nam P. Suh 17,092,815 423,790
</TABLE>
14
<PAGE> 15
(c) The Company's 1987 Stock Option Plan (the "Option
Plan") was amended to (i) extend the term of the
Option Plan to December 31, 2000, (ii) increase the
number of shares available for grant thereunder by
1,000,000 shares, to an aggregate of 3,200,000
shares, (iii) increase the number of options granted
to directors, (iv) increase the term of options
granted to the directors, and (v) adjust the vesting
schedules of options granted to directors. The
stockholders' vote on such amendment was 12,518,584
shares FOR, 2,321,546 shares AGAINST, and 62,880
shares ABSTAINED from voting.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
10.1* Business Agreement dated as of February 21,
1995, among the Company, SVG Lithography
Systems, Inc., Intel Corporation, Motorola
Inc. and Texas Instruments Incorporated.
10.2 Series B Convertible Redeemable Preferred
Stock Purchase Agreement dated as of February
21, 1995, among the Company, Intel
Corporation, Motorola Inc. and Texas
Instruments Incorporated.
10.3 Registration Rights Agreement dated as of
February 21, 1995, among the Company, Intel
Corporation, Motorola Inc. and Texas
Instruments Incorporated.
27 Financial Data Schedule
(b) Report on Form 8-K filed March 2, 1995, relating to
the Certificate of Designation of Series B
Convertible Redeemable Preferred Stock and the terms
of the investment in the Company by Intel
Corporation, Motorola Inc. and Texas Instruments
Incorporated.
*Confidential Treatment Requested
15
<PAGE> 16
SILICON VALLEY GROUP, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SILICON VALLEY GROUP, INC.
..........................
(Registrant)
Date: May 11, 1995 By: /s/ Papken S. Der Torossian
----------------------------
Papken S. Der Torossian
Chief Executive Officer and
Chairman of the Board
Date: May 11, 1995 By: /s/ Russell G. Weinstock
----------------------------
Russell G. Weinstock
Vice President Finance and
Chief Financial Officer
16
<PAGE> 1
EXHIBIT 10.1
SILICON VALLEY GROUP, INC.
------------------
Business Agreement
------------------
February 21, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1 - Agreements of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Use of Proceeds; Additional Investments . . . . . . . . . . . . . . . . . 1
1.2 Covenants Regarding Development of the Equipment . . . . . . . . . . . . . 2
1.3 [*] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.5 Statement of Applications of Funds; Audit . . . . . . . . . . . . . . . . 4
1.6 No Sale, Merger, Consolidation, etc. of the Company . . . . . . . . . . . 5
1.7 Board Visitation Rights . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.8 SVGL Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.9 IBM Ownership of SVGL . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.10 Redemption Upon Breach of Covenant . . . . . . . . . . . . . . . . . . . . 7
SECTION 2 - Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 Delays or Omissions . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Waivers and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.3 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.4 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.5 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.6 Notices, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.9 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.10 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.11 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.12 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.13 Expiration of Agreement and Select Provisions . . . . . . . . . . . . . . 10
</TABLE>
* Confidential Treatment Requested
<PAGE> 3
BUSINESS AGREEMENT
This Agreement is made as of February 21, 1995, by and among Silicon
Valley Group, Inc., a Delaware corporation (the "Company"), SVG Lithography
Systems, Inc., a Delaware corporation and a majority owned subsidiary of the
Company ("SVGL"), Intel Corporation, a Delaware corporation (together with its
wholly-owned subsidiaries, "Intel"), Motorola Inc., a Delaware corporation
(together with its wholly-owned subsidiaries, "Motorola") and Texas Instruments
Incorporated, a Delaware corporation (together with its wholly-owned
subsidiaries, "Texas Instruments") (individually, an "Investor," and
collectively, the "Investors").
WHEREAS, SVGL develops, manufactures and markets photolithography
equipment; and
WHEREAS, the Investors wish to assist SVGL's development, manufacturing
and marketing of the photolithography equipment; and
WHEREAS, simultaneously with the execution of this Agreement, the
Investors are purchasing shares of the Company's Series B Convertible Redeemable
Preferred Stock ("Series B Preferred Stock") pursuant to a Series B Convertible
Redeemable Preferred Stock Purchase Agreement dated as of the date of this
Agreement (the "Purchase Agreement").
NOW, THEREFORE, in consideration of the Investors' agreement to
purchase Series B Preferred Stock pursuant to the Purchase Agreement, the
Company undertakes as follows:
SECTION 1
Agreements of the Company
1.1 Use of Proceeds; Additional Investments.
(a) The Company will cause the proceeds received from the
Investors upon the sale of the Series B Preferred Stock to be invested 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, [*] with the goal of achieving development and
production of high quality and state-of-the-art Equipment, (ii) to design and
engineer equipment, and (iii) to provide funding to purchase capital equipment
and inventory directly related to or required to produce the Equipment or
develop and support Micrascan technology and to improve facilities.
* Confidential Treatment Requested
<PAGE> 4
(b) The Company agrees to use commercially reasonable efforts
to obtain grants of $5,000,000 per year for five years following the Closing
Date (as defined in the Purchase Agreement) from the Department of Defense or
the Advanced Research Projects Agency ("ARPA") which grants will be designated
for the research, development and engineering of Equipment by SVGL. In the event
the Company is successful in obtaining such grants the Company will use and
cause SVGL to use the first $25,000,000 of the proceeds of any grants or funds
it receives from ARPA within five years of the Closing Date and which are
designated for photolithography purposes for development and design of
Equipment.
(c) The Company agrees to use and cause SVGL to use
commercially reasonable efforts to continue the development of Equipment and to
timely reach the milestones set forth in its development agreements dated as of
September 30, 1994, October 24, 1994 and December 22, 1994 with Sematech, Inc.
("Sematech") and to fulfill all conditions required to receive the additional
grants from Sematech designated for photolithography purposes contemplated by
such agreements.
(d) In addition to the obligations set forth under Sections
1.1(a), (b) and (c) above, the Company agrees to invest in SVGL funds reasonably
sufficient (and in any event not less than $25 million during the five-year
period commencing on the Closing Date) (i) to enable SVGL to significantly
expand its manufacturing capacity to meet orders for Equipment from customers
and to expand its research and development capacity, (ii) to enable SVGL to meet
its commitments to customers to produce and deliver Equipment, [*] (iv) to
provide sufficient working capital.
1.2 Covenants Regarding Development of the Equipment.
The Company, SVGL and the Investors contemplate that the
Company or SVGL may enter into one or more agreements with third parties
pursuant to which the Company and/or SVGL and such third party will agree to
jointly develop one or more future generations of the Equipment. Any such third
party is referred to herein as a "Future Licensee". The Company and SVGL agree
to use commercially reasonable efforts to cause any agreement under which the
Company and/or SVGL licenses its Micrascan technology to a Future Licensee to
include a provision under which such Future Licensee will agree that if it has
[*]. The Company and SVGL further agree that the terms of any such agreement
will provide [*]. The Company will also use and shall cause SVGL to use
commercially reasonable efforts to ensure that any such license agreement
provides that [*].
* Confidential Treatment Requested
-2-
<PAGE> 5
1.3 [*]
(a) The Company and SVGL agree that with respect to each
successive generation of Equipment [*].
(b) The Company will offer or cause SVGL [*] taking into
account and giving consideration to the investment and support provided, and
risk taken, by the Investors. [*] The Company agrees to provide, or cause SVGL
to provide, all necessary maintenance and support of the Equipment purchased by
Investors on [*].
(c) In the event the Company or SVGL licenses the Micrascan
technology to a Future Licensee, the Company will use commercially reasonable
efforts to, or cause SVGL to, [*]. The Investors agree to work in good faith
with the Company and SVGL to improve the Company's current generation of
Equipment and any future generation of Equipment, to achieve the goals set forth
in the preceding sentence.
(d) Nothing in this Agreement shall be deemed an obligation on
the part of the Investors to purchase Equipment or to refrain from purchasing
photolithography equipment from other sources.
1.4 Contingencies.
(a) Each of the events set forth in clauses (i), (ii) and (iii)
of this Section 1.4(a) will be deemed to be a Contingency. Upon the occurrence
of a Contingency each Investor will have the rights set forth in Section 1.4 (b)
below.
(i) [*];
(ii) At any time after the Company or SVGL has
licensed the Micrascan technology to a Future Licensee, an Investor desires to
purchase Equipment from the Company or SVGL and SVGL or the Company is unable
(whether for bankruptcy or any other reason) or unwilling to meet any Investor's
demand for Equipment ; or
(iii) At any time after the Company or SVGL has
licensed the Micrascan technology to a Future Licensee, an Investor [*].
(b) Upon the occurrence of a Contingency, each Investor
shall have the following rights:
* Confidential Treatment Requested
-3-
<PAGE> 6
(i) For a period of 90 days following receipt of
written notice from an Investor that a Contingency has occurred (a "Contingency
Notice"), the Company or SVGL shall use [*]. Every 90 days, the Company or SVGL,
as the case may be and such Investor shall evaluate whether the Contingency
still exists. [*] If the Company or SVGL desires to exercise the rights set
forth in this Section 1.4(b)(i), the Company or SVGL, as the case may be, shall
so inform such Investor in writing within 30 days following receipt of the
Contingency Notice from such Investor.
(ii) [*] Every 90 days, the Company or SVGL and such
Investor will evaluate whether the Contingency still exists. [*] The Company and
SVGL agree to take whatever actions are necessary to allow [*] pursuant to this
Section 1.4(b)(ii) and further agree not to take any action against an Investor
who exercises its right hereunder [*] seeking to prohibit such Investor from
exercising its rights hereunder.
(iii) In the event that the remedies granted hereby
are insufficient to cure a Contingency, [*].
(c) In the event the Micrascan technology has not been
licensed to a Future Licensee, SVGL is unable to meet an Investor's demand and
the Company or SVGL is the subject to bankruptcy, insolvency or other similar
proceedings, then upon the request of such Investor, [*].
1.5 Statement of Applications of Funds; Audit.
(a) At least one time every six months until the proceeds
of the sale of Series B Preferred Stock have been exhausted, the Company shall
cause SVGL to provide each Investor a Statement of Applications of Funds
("Statement"). Such Statement shall set forth the use of proceeds from the sale
of Series B Preferred Stock to the Investors.
(b) Each Investor shall have the right to verify that any
such Statement accurately describes SVGL's and the Company's use of such
proceeds by having an audit conducted, during normal business hours, of the
books and records of the Company and SVGL.
Such audit shall be performed by a nationally recognized independent
accounting firm mutually acceptable to the Company or SVGL and all participating
Investors, which consent shall not be unreasonably withheld. Any Investor may
exercise the audit right set forth herein by sending written notice to the
Company and all other Investors. The other Investors shall have 20 days in which
to elect to pay a pro rata portion of the expenses of such audit, and thereby be
entitled to participate in the selection of the accounting firm. The costs of
such audit will be
* Confidential Treatment Requested
-4-
<PAGE> 7
borne by the participating Investors pro rata according to their relative
holdings of Series B Preferred Stock. Each participating Investor shall receive
one copy of the audit report generated by the audit firm. Only one audit may be
conducted with respect to any particular Statement.
1.6 No Sale, Merger, Consolidation, etc. of the Company. Until the
third anniversary of the Closing Date, the Company shall not, without the prior
consent of two of the Investors, enter into a Transaction; provided, that if the
surviving entity of a Transaction assumes all of SVG or SVGL's, as the case may
be, obligations under this Agreement and such surviving entity is, in the good
faith reasonable judgment of the Investors, as capable of meeting such
obligations after the Transaction as the Company or SVGL was before the
Transaction, a Transaction will not require the prior consent of the Investors.
For the purposes of this Section 1.6, a Transaction shall mean:
(a) The sale by the Company or SVGL of all or substantially all
of its assets to an entity (other than the Company) as to which neither the
Company, nor the stockholders of the Company immediately prior to the
consummation of such sale, nor the Company and such stockholders together, hold
voting securities representing 50% or more of the voting power of such entity
immediately following the consummation of such sale;
(b) The consummation by SVGL of a merger, consolidation or
other transaction or series of transactions pursuant to which neither the
Company nor the stockholders of the Company immediately prior to such
consummation, nor the Company and such stockholders together, hold voting
securities representing a majority of the voting power of the surviving entity
immediately following such consummation;
(c) A sale by the Company or SVGL of all or substantially all
of their assets to any entity as to which neither the Company, nor the
stockholders of the Company immediately prior to such sale, nor the Company and
such stockholders together, hold voting securities representing a majority of
the voting power of the surviving entity immediately following such sale; or
(d) The consummation by the Company or SVGL of a merger,
consolidation or other transaction or series of transactions pursuant to which
the stockholders of the Company immediately prior to such consummation fail to
hold voting securities representing a majority of the voting power of the
surviving entity immediately following such consummation.
(e) Until such time as the Stockholders Agreement by and among
IBM, SVGL, The Perkin-Elmer Corporation and the Company dated May 15, 1990 (the
"IBM Agreement") shall have terminated, any event or transaction that would
trigger IBM's right to purchase SVGL pursuant to Section 8.1 of the IBM
Agreement and any event or transaction that would trigger IBM's right of first
refusal pursuant to Section 9.2 of the IBM Agreement; provided, that if IBM
agrees in writing not to exercise its rights under the IBM Agreement, no
Transaction shall be deemed to have occurred for purposes of this Section
1.6(e).
-5-
<PAGE> 8
1.7 Board Visitation Rights.
(a) For so long as an Investor holds 100% of the shares of
Series B Preferred Stock purchased pursuant to the Purchase Agreement (or such
number of shares of common stock of the Company ("Common Stock") into which the
Series B Preferred Stock is convertible) such Investor shall have the right to
receive notice of all meetings of the Company's Board of Directors and a copy of
all materials sent to each director in connection with meetings of the Board of
Directors and to send one (1) representative to attend all meetings of the
Company's Board of Directors as an observer, upon the terms and subject to the
conditions hereof. Such representative shall not participate in the
deliberations of the Board of Directors and shall have no power to vote on
matters considered by the Board.
(b) Each Investor acknowledges that the Company's Board of
Directors may from time to time discuss matters involving a conflict of interest
on the part of such Investor such as discussions concerning competitors of the
Investor or relations between the Company and the Investor or may from time to
time discuss personnel matters. Accordingly, the Company shall have the right
(upon exercise of the good faith judgment of the Company's Board of Directors)
to cause the representative of such Investor to excuse himself or herself from
such discussions. In the event the Company shall cause the representative to be
so excused, the Company shall refrain from sending or providing to such
representative any information otherwise disseminated to the directors of the
Company concerning the matter from which the representative has been excused.
(c) Each Investor acknowledges that by receipt of the materials
and by participation in the meetings described above, such Investor may learn
material, nonpublic information about the Company and that, as a result, such
Investor may be precluded from selling any securities of the Company until such
information has been publicly disclosed. Each Investor agrees that, for so long
as it is receiving such material or such Investor's representative is attending
such meetings, such Investor will abide by the trading window and other
restrictions of the Company's insider trading policies as they apply, from time
to time, to directors of the Company.
(d) The right set forth in this Section 1.7 shall be personal
to each Investor and shall not be transferable or assignable.
1.8 SVGL Employees. The Company and SVGL agree to use reasonable
efforts to cause all employees of SVGL to sign SVGL's standard proprietary
invention and confidential information agreement.
1.9 IBM Ownership of SVGL. The Company and SVGL agree to use best
efforts to cause IBM to exchange its shares of capital stock of SVGL for shares
of Common Stock under commercially reasonable financial terms and to amend, to
the mutual satisfaction of the Company and the Investors, the terms of the Asset
Purchase Agreement dated as of May 15,
-6-
<PAGE> 9
1990, among the Company, SVGL, IBM and the Perkin-Elmer Corporation and the
terms of the IBM Agreement within nine months of the Closing Date.
1.10 Redemption Upon Breach of Covenant. In the event that the Company
or SVGL breaches any covenant contained in this Agreement or the Purchase
Agreement, and such breach is not cured within 30 days following receipt of
written notice of such breach, and as long as an Investor owns 100% of the
Series B Preferred (or the Common Stock into which it is convertible) purchased
pursuant to the Purchase Agreement (the "Original Purchase"), holders of
two-thirds of the Series B Preferred (or Common Stock in to which it is
convertible) constituting their Original Purchase shall have the right to
require the Company to immediately redeem all such Original Purchase shares. The
redemption price per share of Series B Preferred shall be the greater of (i)
$2,208.80 (as adjusted for stock splits, combinations, etc.) plus all dividends
(whether or not earned or declared) accrued and unpaid to the date of the breach
of the covenant set forth in the written notice, 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 breach set forth in the written notice to the Company. The
redemption price per share of Common Stock shall be the greater of $22.08 (as
adjusted for stock splits, combinations, etc.) plus all dividends (whether or
not earned or declared) accrued and unpaid to the date of the breach of the
Covenant set forth in the written notice, and (ii) the average of the closing
sale price of the Common Stock for the 10 trading days preceding the date of the
breach set forth in the written notice to the Company. The closing of the
redemption of the Series B Preferred (or the Common Stock into which it has been
converted) shall occur no later than 30 days after delivery of written notice of
the Purchasers' election to require the Company to redeem the outstanding shares
of Series B Preferred (or the Common Stock into which it has been converted).
Notwithstanding the foregoing, if such redemption is prohibited by law, the
Company shall not be required to effect such redemption until such time as such
redemption is no longer prohibited by law.
SECTION 2
Miscellaneous
2.1 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to the Company or the Investors, upon any breach or
default under this Agreement, shall impair any such right, power or remedy, nor
shall it be construed to be a waiver of any such breach or default, or any
acquiescence therein, or of any similar breach or default thereafter occurring;
nor shall any waiver of any single breach or default be deemed a waiver of any
other breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character by the Company or any Investor of
any breach or default under this Agreement, or any waiver by the Company or any
Investor of any provisions or conditions of this Agreement, must be in writing
and shall be effective only to the extent specifically set forth in writing, and
all remedies, either under this Agreement, or by law or otherwise afforded to
the Company or Investors, shall be cumulative and not alternative.
-7-
<PAGE> 10
2.2 Waivers and Amendments. The obligations and rights of the Company
and the Investors under this Agreement may be waived or this Agreement may be
amended upon the written consent of the Company and the Investors; provided that
with respect to any waiver, any individual Investor can waive its respective
rights without the consent of any other Investor. This Agreement and the
provisions hereof may not be waived or amended except pursuant to a written
instrument signed by the required party or parties as aforesaid.
2.3 Public Announcements. The Company shall obtain the consent of each
of the Investors and any Investor must obtain the consent of the Company and
each other Investor prior to any public announcement relating to this Agreement,
provided that the Company shall be permitted to make any public announcement
which is required pursuant to the Securities Act or the Exchange Act or the
rules or regulations thereunder, however the Company shall, upon an Investor's
request, seek confidential treatment of such materials or information that an
Investor may designate.
2.4 Severability. In the event that any provision of this Agreement
shall be deemed to be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby.
2.5 Successors and Assigns. This Agreement and the rights hereunder
may not be assigned by any Investor without the prior written consent of the
Company.
2.6 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be delivered (a) personally;
(b) by facsimile transmission (with verification of transmission without error,
and with copy promptly sent by national postal service (airmail delivery) or
Federal Express or similar courier); (c) by Federal Express or similar overnight
courier; or (d) by airmail, via the national postal service; in each case with
all delivery or postal charges pre-paid. Notices shall be addressed (a) if to
Intel, at Intel's address as set forth on the signature page of this Agreement,
Attention: F. Thomas Dunlap, Vice-President and General Counsel (Telephone:
(408) 765-1126; Fax (408) 765-1809), with a copy to Arvind Sodhani, Treasurer,
at the same address, (b) if to Motorola Inc., at 6501 William Canon West, Mail
IR 03-60, Austin, Texas 78735 as set forth on the signature page of this
Agreement, attention Bill Walker, Corporate Vice President (telephone: (512)
891-4919; Fax (512) 891- 8379, with a copy to Linda B. Valentine, Vice President
(708) 576-3921; Fax (708) 576-2818 at the address as set forth on the signature
page of this Agreement, (c) if to Texas Instruments, at Texas Instruments'
address as set forth on the signature page of this Agreement, Attention Charles
D. Tobin (Telephone: (214) 917-3810; Fax: (214) 917-3804, with a copy to Texas
Instruments Incorporated, P.O. Box 655474, M/S 241, Dallas, Texas 75265,
attention Richard J. Agnich and Richard L. Thurston (telephone (214) 995-4855;
Fax: (214) 957-3511, (d) if to SVGL, at 2240 Ringwood Avenue, San Jose,
California 95131 attention Russell G. Weinstock (telephone: (408) 434-0500; Fax:
(408) 954-1233) with a copy to Robert T. Clarkson at Wilson, Sonsini, Goodrich &
Rosati, 650 Page Mill Road, Palo Alto, California 94304 (Telephone (415)
493-9300, Fax: (415) 493-6811), or (e) if to the Company, at the Company's
-8-
<PAGE> 11
address set forth on the signature page of this Agreement, Attention: Chief
Financial Officer (telephone number (408) 434-0500; facsimile number (408)
954-1233), with copy to the attention of Robert T. Clarkson at Wilson, Sonsini,
Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California 94304 (telephone
number (415) 493-9300; facsimile number (415) 493-6811), or at such other
address as the Company shall have furnished to the Investors (or transferees, as
aforesaid) in writing.
Each such notice or communication, addressed and posted as
aforesaid, shall for all purposes of this Agreement be treated as effective or
having been given (a) when delivered, if delivered personally; (b) the business
day on which the notice or communication is sent, if delivered by facsimile
transmission as provided above; (c) upon the earlier of its receipt or two (2)
business days after the business day of deposit with Federal Express or similar
overnight courier, if delivered by such means; or (d) upon the earlier of its
receipt or five (5) business days after the business day of deposit with the
national postal service for airmail delivery, if delivered by such means.
2.7 Entire Agreement. This Agreement, constitutes the full and entire
understanding and agreement among the parties with regard to the subjects hereof
and thereof, and supersedes any and all prior agreements and understandings
among the parties.
2.8 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of California and the
Federal laws of the United States as they apply to contracts entered into and
wholly to be performed within the State of California by California residents.
2.9 Expenses. The Company and the Investors shall each bear all
expenses that such respective party has incurred or incurs in connection with
this Agreement and the transactions contemplated hereby, and any amendments or
waivers hereto.
2.10 Attorneys' Fees. In the event of any litigation in a court of
competent jurisdiction arising in connection with this Agreement and the
transactions contemplated hereby, the prevailing party in judgment shall be
entitled to recover reasonable legal fees and costs in connection with such
action.
2.11 Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
2.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which together shall
constitute one instrument.
-9-
<PAGE> 12
2.13 Expiration of Agreement and Select Provisions. This Agreement
shall expire and be of no further force or effect at such time as the Company or
SVGL has shipped 8 units of 0.18 micron Equipment. Sections 1.1 and 1.5 shall
terminate six months after SVGL provides the Investors a Statement indicating
that the Company has expended the proceeds of the sale of Series B Preferred
Stock to the Investors in accordance with Section 1.1(a).
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first written above.
COMPANY: SILICON VALLEY GROUP, INC.
a Delaware corporation
By: /s/ Papken S. Der Torossian
------------------------------------
Papken Der Torossian,
Chairman and Chief Executive Officer
Address: 2240 Ringwood Avenue
San Jose, California 95131
SVGL: SVG LITHOGRAPHY SYSTEMS, INC.
a Delaware corporation
By: /s/ Russell G. Weinstock
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Title: Vice President, Finance
--------------------------------
Address: 77 Danbury Road
Wilton, CN 06897-0877
INVESTORS: INTEL CORPORATION
a Delaware corporation
By: /s/ Arvind Sodhani
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Title: Vice President and Treasurer
--------------------------------
Address: 2200 Mission College Blvd.
Santa Clara, CA 95052
M/S SC4 - 210
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MOTOROLA INC.
a Delaware Corporation
By: /s/ Larry Gartin
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Title: Sr. Vice President and
Dir. of Finance, SPS
--------------------------------
Address: 1303 East Algonquin
Schaumburg, IL 60196
TEXAS INSTRUMENTS INCORPORATED
a Delaware corporation
By: /s/ Jerry R. Junkins
---------------------------------
Title: Chairman, President and CEO
-------------------------------
Address: 7839 Churchill Way
P.O. Box 650311, M/S 399
Dallas, TX 75265
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EXHIBIT 10.2
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SILICON VALLEY GROUP, INC.
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Series B Convertible Redeemable Preferred Stock
Purchase Agreement
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February 21, 1995
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TABLE OF CONTENTS
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PAGE
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SECTION 1 - Authorization and Sale of the Shares . . . . . . . . . . . . . . . . . 1
1.1 Authorization of the Shares . . . . . . . . . . . . . . . . . . . 1
1.2 Sale of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2 - Closing Date; Delivery . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3 - Company Representations and Warranties . . . . . . . . . . . . . . . . 2
3.1 Organization and Standing . . . . . . . . . . . . . . . . . . . . 2
3.2 Corporate Power . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.4 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.5 Conversion Stock . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.6 Accuracy of Reports . . . . . . . . . . . . . . . . . . . . . . . 3
3.7 Financial Statements and Changes . . . . . . . . . . . . . . . . . 3
3.8 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . 4
3.9 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.10 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.11 Governmental Consents . . . . . . . . . . . . . . . . . . . . . . 5
3.12 Patents, Trademarks, etc . . . . . . . . . . . . . . . . . . . . . 6
SECTION 4 - Purchaser Representations and Warranties and
Restrictions on Transfer Imposed by the
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . 6
4.1 Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . 6
4.2 Corporate Power . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.3 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.4 Governmental Consents . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 5 - Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.1 Conditions to Purchasers' Obligations at Closing . . . . . . . . . 7
5.2 Conditions to Company's Obligations . . . . . . . . . . . . . . . 8
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
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PAGE
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SECTION 6 - Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.1 Required Registration . . . . . . . . . . . . . . . . . . . . . . . 9
6.2 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.3 Additional Registration Rights . . . . . . . . . . . . . . . . . . . 13
6.4 "Stand-Off" Agreement . . . . . . . . . . . . . . . . . . . . . . . 13
6.5 Information Rights . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.6 Right of First Offer . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 7 - Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.1 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . 15
7.2 Finder's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.3 Delays or Omissions . . . . . . . . . . . . . . . . . . . . . . . . 15
7.4 Waivers and Amendments . . . . . . . . . . . . . . . . . . . . . . . 16
7.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.6 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.7 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . 16
7.8 Notices, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.9 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.11 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.12 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.13 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . . 17
7.14 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
EXHIBITS
Exhibit A--Schedule of Purchasers
Exhibit B--Certificate of Designation of Series B Convertible Redeemable
Preferred Stock
Exhibit C--Schedule of Exceptions
Exhibit D--Registration Rights Agreement
Exhibit E--Legal Opinion of Wilson, Sonsini, Goodrich & Rosati
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SILICON VALLEY GROUP, INC.
SERIES B CONVERTIBLE REDEEMABLE PREFERRED STOCK
PURCHASE AGREEMENT
This Agreement is made as of February 21, 1995, by and among Silicon
Valley Group, Inc., a Delaware corporation (the "Company"), and the purchasers
listed on the Schedule of Purchasers (the "Schedule of Purchasers") attached
hereto as Exhibit A (individually, a "Purchaser," and collectively, the
"Purchasers").
SECTION 1
Authorization and Sale of the Shares
1.1 Authorization of the Shares. The Company has authorized, or before
the Closing (as defined below) will have authorized, a new series of preferred
stock, designated Series B Convertible Redeemable Preferred Stock (the "Series B
Preferred"), such series having the respective rights, preferences and
privileges provided for in the Company's Certificate of Designation of Series B
Convertible Redeemable Preferred Stock attached hereto as Exhibit B (the "Series
B Certificate"). In addition, prior to the Closing, the Company will have
authorized the issuance and sale to the Purchasers of an aggregate of 14,943
shares (the "Shares") of the Series B Preferred at a purchase price of $2,008
per share, or an aggregate purchase price of $30,005,544 (the "Purchase Price").
1.2 Sale of Shares. Subject to the terms and conditions hereof, at the
Closing specified in Section 2.1 below, the Company will issue and sell to each
Purchaser, severally and not jointly, and each Purchaser will severally purchase
from the Company the respective number of Shares set forth opposite such
Purchaser's name on the Schedule of Purchasers. The common stock of the Company
("Common Stock") issued or issuable upon conversion of the Shares is referred to
as the "Conversion Stock." The Shares, the Conversion Stock and any other
securities issued or issuable in respect of the Shares are collectively referred
to as the "Securities."
SECTION 2
Closing Date; Delivery
2.1 Closing Date. The purchase and sale of the Shares shall occur at a
Closing to be held at such time as shall be designated by the Company by written
notice of at least two (2) business days and agreed to by Purchasers purchasing
at least a majority of the Shares (the "Closing Date"). The Closing will take
place at the offices of Wilson, Sonsini, Goodrich &
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Rosati, legal counsel to the Company, 650 Page Mill Road, Palo Alto, California
94304 or at such other place as shall be designated by the Company and agreed to
by Purchasers purchasing at least a majority of the Shares.
2.2 Delivery. At the Closing, the Company shall deliver to each
Purchaser a certificate, in such denomination and registered in Purchaser's name
as set forth on the Schedule of Purchasers, representing the number of Shares
which such Purchaser is purchasing from the Company against delivery to the
Company of a check or wire transfer payable to the order of the Company in the
amount of the purchase price of the Shares to be purchased by such Purchaser.
SECTION 3
Company Representations and Warranties
Except as set forth in the Schedule of Exceptions to the
representations and warranties of the Company attached hereto as Exhibit C, the
Company represents and warrants to the Purchasers as set forth in this Section
3.
3.1 Organization and Standing. The Company is a corporation duly
organized and validly existing under the laws of the State of Delaware and is in
good standing as a domestic corporation under the laws of said state. The
Company has all requisite corporate power and authority to own and lease its
properties and to conduct its business as presently conducted. The Company is
duly qualified or licensed to do business as a foreign corporation in good
standing in each jurisdiction in which failure to be so qualified would have a
material adverse effect on the Company's business as now conducted.
3.2 Corporate Power. The Company has all requisite legal and corporate
power to execute and deliver this Agreement, the Registration Rights Agreement
by and among the Company and the Purchasers in the form attached hereto as
Exhibit D (the "Rights Agreement"), and the Business Agreement dated as of
February 21, 1995 among the Company, SVG Lithography Systems, Inc. ("SVGL") and
the Purchasers (the "Business Agreement"), to sell and issue the Shares
hereunder, to issue the Conversion Stock issuable upon conversion of the Shares,
and to carry out and perform its obligations under the terms of this Agreement,
the Rights Agreement and the Business Agreement.
3.3 Capitalization. The authorized capital stock of the Company upon
the filing of the Series B Certificate with the Secretary of State of the State
of Delaware will consist of 40,000,000 shares of Common Stock, of which
19,173,809 shares are issued and outstanding, and 1,000,000 shares of Preferred
Stock, of which 10,000 shares have been designated Series A Convertible
Redeemable Preferred Stock (the "Series A Preferred"), all of which are issued
and outstanding, and of which 14,943 shares have been designated Series B
Preferred, all of which will be sold to the Purchasers at the Closing. All of
the outstanding shares of Common Stock
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and Series A Preferred have been, and all of the shares of Series B Preferred,
when issued and sold at the Closing will be, validly issued, fully paid and
nonassessable. The Series B Preferred shall have the rights, preferences,
privileges and restrictions set forth in the Series B Certificate. No
subscription, warrant, option or other right to purchase or acquire any shares
of any class of capital stock of the Company or securities convertible into or
exchangeable for such capital stock are outstanding other than: (i) 1,493,000
shares of Common Stock reserved for issuance upon conversion of the Shares, (ii)
1,000,000 shares of Common Stock reserved for issuance upon conversion of the
Series A Preferred, (iii) 1,200,000 shares of Common Stock reserved for issuance
pursuant to the Company's Employee Stock Purchase Plan, (iv) an aggregate of
4,480,000 shares of Common Stock reserved for issuance pursuant to the Company's
1981 Amended Stock Option Plan, 1982 Employee Stock Option Plan, 1984 Stock
Option Plan and 1987 Stock Option Plan, of which an aggregate of 2,503,706
shares of Common Stock were subject to outstanding options or available for
future grant as of December 31, 1994 and (v) 1,750,000 shares of Common Stock
reserved for issuance upon exercise of a warrant dated September 30, 1994 issued
to Sematech, Inc. ("Sematech").
3.4 Authorization. The execution, delivery and performance of this
Agreement, the Business Agreement and the Rights Agreement by the Company have
been duly authorized by all requisite corporate action, and this Agreement, the
Rights Agreement and the Business Agreement constitute valid and binding
obligations of the Company enforceable in accordance with their respective
terms, subject to laws of general application relating to bankruptcy, insolvency
and the relief of debtors, and rules of law governing specific performance,
injunctive relief or other equitable remedies.
3.5 Conversion Stock. The Conversion Stock (i) has been duly and
validly reserved for issuance, (ii) is not subject to preemptive or any other
similar rights of stockholders of the Company, and (iii) when issued in
accordance with the terms of the Series B Certificate, will be validly issued
and outstanding, fully paid and nonassessable, and free of any liens or
encumbrances, other than liens or encumbrances created by or imposed upon the
holders through no action of the Company.
3.6 Accuracy of Reports. All reports (the "SEC Reports") required to be
filed by the Company during the period from October 2, 1993 (the commencement of
fiscal year 1994) to the date of this Agreement under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), copies of which have been
furnished to the Purchasers, have been duly filed, were in substantial
compliance with the requirements of their respective forms, were complete and
correct in all material respects as of the dates at which the information was
furnished, and none contained (as of their respective dates of filing) any
untrue statement of a material fact nor omitted to state a material fact
necessary in order to make the statements made therein, in light of the
circumstances in which made, not misleading.
3.7 Financial Statements and Changes. The Company has delivered to the
Purchasers its consolidated balance sheets as of September 30, 1993 and
September 30, 1994 and the related
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statements of operations, stockholders equity and cash flows and notes thereto
for the fiscal years ended September 30, 1993 and September 30, 1994, each of
which was accompanied by a related audit opinion of the Company's independent
certified public accountants, Deloitte & Touche (or its predecessor)
(collectively, the "Audited Financial Statements"). The Company has made
available to the Purchasers its Quarterly Report on Form 10-Q for the period
ended December 31, 1994. The unaudited balance sheet, statements of operations,
stockholders equity and cash flows of the Company contained in the Quarterly
Report on Form 10-Q for the period ended December 31, 1994 together with the
Audited Financial Statements are herein referred to as the "Financial
Statements." The Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods covered by such statements (except as may be stated in
the notes to the Audited Financial Statements or the related reports of
independent accountants) and present fairly the Company's financial condition
and results of operations and changes in financial position as of the dates and
for the fiscal periods indicated.
Except as otherwise disclosed herein, in the Financial Statements or in
the SEC Reports, since December 31, 1994, there has not been:
(a) any change in the assets, liabilities, financial condition,
business or results of operations of the Company from that reflected in the
Financial Statements except changes in the ordinary course of business which
have not been, either in any individual case or in the aggregate, materially
adverse;
(b) any change in the contingent obligations of the Company,
whether by way of guaranty, endorsement, indemnity, warranty or otherwise,
except such other changes as do not, either individually or in the aggregate,
constitute a material and adverse change in the financial condition of the
Company;
(c) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties or business of the
Company;
(d) any declaration or payment of any dividend or other
distribution of the assets or securities of the Company in respect of
outstanding Common Stock; or,
(e) to the Company's knowledge, any other event or condition of
any character that has materially and adversely affected, or that could
reasonably be expected to materially and adversely affect the Company's assets,
liabilities, prospects, financial condition, business or results of operations.
3.8 Registration Rights. Except as set forth (i) herein, (ii) in the
Rights Agreement, (iii) in the warrant issued to Sematech, (iv) in the
Registration Rights Agreement between the Company and The Perkin-Elmer
Corporation ("Perkin-Elmer") dated as of August 29, 1990, as
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amended by Section 7 of the Series AA Convertible Redeemable Preferred Stock
Purchase Agreement between the Company and Perkin-Elmer dated as of July 31,
1992, and (v) in the Letter Agreement dated February 9, 1995 between the Company
and Perkin-Elmer, and except for the continuing practice of the Company to
register its employee stock plans on Form S-8, the Company is not under any
obligation to register any of its presently outstanding securities or any of its
securities which may hereafter be issued under the Securities Act of 1933, as
amended (the "Securities Act").
3.9 Disclosure. No representation or warranty of the Company contained
in this Agreement or the exhibits attached hereto (when read together and taken
as a whole) contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading.
3.10 No Conflict. The Company is not in violation or breach of any term
of its Certificate of Incorporation or Bylaws, or to its knowledge in violation
or breach of any material term of any indenture, mortgage, deed of trust or
other agreement, instrument, court order, judgment, decree, statute, rule or
regulation (each a "Term" and collectively the "Terms") to which it is a party
or by which it is bound, the violation or breach of which would be materially
adverse to the business of the Company or the consummation of the transactions
contemplated hereby. The provisions of the Series B Certificate do not
constitute any such violation, or conflict with or constitute a default under
any such Term. The execution, delivery and performance of and compliance with
this Agreement, the Rights Agreement and the Business Agreement, the issuance of
the Securities pursuant to the terms hereof and the performance of the Company's
obligations hereunder and thereunder (i) will not result in any violation or be
in conflict with or constitute a default under any Term; (ii) will not result in
the creation of any mortgage, pledge, lien, encumbrance or charge upon any of
the properties or assets of the Company pursuant to any such Term, in any such
case in a manner which would be materially adverse to the business of the
Company or the consummation of the transactions contemplated hereby; (iii) are
not in violation or breach of, and will not conflict with or constitute a
default under, any Term; and (iv) will not, to the knowledge of the Company,
conflict with or violate any applicable law, rule, regulation, judgment, order
or decree of any government, governmental instrumentality or court having
jurisdiction over the Company or any of its assets or properties.
3.11 Governmental Consents. No consent, approval or authorization of,
or designation, declaration or filing with, any Federal or state governmental
authority in the United States is required on the part of the Company in
connection with the valid execution and delivery of this Agreement, the offer,
sale or the issuance of the Securities or the consummation of any other
transaction contemplated hereby, except (a) the filing of the Series B
Certificate in the office of the Delaware Secretary of State, which will be
completed prior to the Closing, and (b) if required, qualifications or filings
in connection with exemptions under any applicable state "blue sky" laws and
Federal securities laws, which qualifications or exemptions, if required, will
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have been obtained and will be effective on the Closing Date, or will be
obtained or filed after the Closing Date within the prescribed time in order to
secure such exemptions or qualifications.
3.12 Patents, Trademarks, etc. The Company owns or has the right, or
prior to the Closing will own or have the right, to use, free and clear of all
liens, charges, claims and restrictions, all patents, trademarks, service marks,
trade names, copyrights, licenses and rights necessary to its business as now
conducted, and, to the best of its knowledge, is not infringing upon or
otherwise acting adversely to the right or claimed right of, any person under or
with respect to any of the foregoing. The Company has not received any written
communications alleging that the Company has violated any patent, trademark,
service mark, trade name, copyright or trade secret or other proprietary right
of any other person or entity. The Company is not aware that any of its
employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere with
the Company's employment of such employees. Neither the execution nor delivery
of this Agreement, the Rights Agreement, or the Business Agreement, nor the
carrying on of the Company's business by the employees of the Company will, to
the Company's knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated. The
Company does not believe it is necessary to utilize any inventions of any of its
employees made prior to their employment by the Company.
SECTION 4
Purchaser Representations and Warranties and
Restrictions on Transfer Imposed by the Securities Act
Each Purchaser, severally and not jointly, represents and warrants to
the Company with respect to the Shares to be purchased by such Purchaser
hereunder, as follows:
4.1 Investment Intent.
(a) Purchaser has substantial experience in business and
financial matters and is capable of evaluating the merits and risks of its
investment in the Company and is able to bear the economic risks of its
investment.
(b) Purchaser is an accredited investor as defined in
Regulation D of the Securities Act.
(c) Purchaser is acquiring the Securities for investment for
its own account and not with a view to, or for resale in connection with, any
distribution thereof. Purchaser understands that the Securities have not been
registered under the Securities Act by reason of a
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specific exemption from the registration provisions of the Securities Act which
depends upon, among other things, the bona fide nature of the investment intent
as expressed herein.
(d) Purchaser acknowledges that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. Purchaser is aware of the
provisions of Rule 144 promulgated under the Securities Act ("Rule 144") which
permits limited resale of securities purchased in a private placement subject to
the satisfaction of certain conditions, including the existence of a public
market for the shares, the availability of certain current public information
about the company, the resale occurring not less than two years after a party
has purchased and paid for the security to be sold, the sale being through a
"broker's transaction" or in a transaction directly with a "market maker" (as
provided by Rule 144(f)) and the number of shares being sold during any
three-month period not exceeding specified limitations.
4.2 Corporate Power. Purchaser has all requisite legal and corporate
power to execute and deliver this Agreement and the Rights Agreement and to
carry out and perform its obligations under the terms of this Agreement and the
Rights Agreement.
4.3 Authorization. The execution, delivery and performance of this
Agreement and the Rights Agreement by the Purchaser has been duly authorized by
all requisite corporate action, and this Agreement and the Rights Agreement
constitute valid and binding obligations of Purchaser enforceable in accordance
with their respective terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors, and rules of law governing
specific performance, injunctive relief or other equitable remedies.
4.4 Governmental Consents. No consent, approval or authorization of, or
designation, declaration or filing with, any federal or state governmental
authority in the United States is required on the part of Purchaser in
connection with the valid execution and delivery of this Agreement or the
consummation of any other transaction contemplated hereby, except for such
filings as may be required under the Exchange Act and the related rules and
regulations thereunder subsequent to the issuance of the Shares.
SECTION 5
Conditions to Closing
5.1 Conditions to Purchasers' Obligations at Closing. The obligation of
the Purchasers to purchase the Shares at the Closing is subject to the
fulfillment to the satisfaction of the Purchasers on or prior to the Closing
Date of the following conditions any of which may be waived in whole or in part
by Purchasers purchasing at least a majority of the Shares:
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(a) The representations and warranties made by the Company in
Section 3 hereof shall be true and correct in all material respects when made,
and shall be true and correct in all material respects on the Closing Date.
(b) All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to the Closing Date shall
have been performed or complied with in all material respects.
(c) The Purchasers shall have received from Wilson, Sonsini,
Goodrich & Rosati, counsel to the Company, an opinion addressed to the
Purchasers, dated the Closing Date, in substantially the form attached hereto as
Exhibit E.
(d) The Company shall have delivered to the Purchasers a
certificate, executed on the Company's behalf by the Chief Executive Officer or
Chief Financial Officer of the Company, dated the Closing Date and certifying to
the fulfillment of the conditions specified in paragraphs (a) and (b) of this
Section 5.1.
(e) The Company shall have obtained all necessary state "blue
sky" law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Securities.
(f) The Series B Certificate shall have been filed with the
Delaware Secretary of State.
(g) All material matters of a legal nature which pertain to
this Agreement, and the transactions contemplated hereby, shall have been
reasonably approved by counsel to the Purchasers.
(h) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, promulgated or issued or deemed
applicable to the proposed transactions by any legislature, administrative
agency, court or other governmental authority which would make consummation of
the proposed transactions pursuant to this Agreement illegal or render the
Company or Purchasers unable to consummate the proposed transactions nor shall
there have been filed any proceeding in a court of competent jurisdiction
seeking to enjoin or restrain the transactions contemplated by this Agreement.
5.2 Conditions to Company's Obligations. The Company's obligation
to sell and issue the Shares to the Purchasers at the Closing is subject to the
fulfillment to the Company's satisfaction on or prior to the Closing Date of the
following conditions, any of which may be waived in whole or in part by the
Company:
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(a) The representations and warranties made by the Purchasers
in Section 4 hereof shall be true and correct in all material respects when
made, and shall be true and correct in all material respects on the Closing
Date.
(b) All covenants, agreements and conditions contained in this
Agreement to be performed by the Purchasers on or prior to the Closing Date
shall have been performed or complied with in all material respects.
(c) The Company shall have obtained all necessary state "blue
sky" law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Securities.
(d) The Series B Certificate shall have been filed with the
Delaware Secretary of State.
(e) All material matters of a legal nature which pertain to
this Agreement, and the transactions contemplated hereby, shall have been
reasonably approved by counsel to the Company.
(f) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, promulgated or issued or deemed
applicable to the proposed transactions by any legislature, administrative
agency, court or other governmental authority which would make consummation of
the proposed transactions pursuant to this Agreement illegal or render the
Company or Purchasers unable to consummate the proposed transactions nor shall
there have been filed any proceeding in a court of competent jurisdiction
seeking to enjoin or restrain the transactions contemplated by this Agreement.
SECTION 6
Covenants
6.1 Required Registration.
(a) If within six months following the Closing Date the Company
completes a firm commitment underwritten public offering of its Common Stock
with aggregate gross proceeds to the Company of at least $35,000,000 (a
"Qualified Offering") the Company shall, no later than 60 days after the closing
date of such Qualified Offering, prepare and file a registration statement with
the SEC under the Securities Act to register the resale of the Conversion Stock
by the Purchasers (the "Registration Statement") and cause the shares to be
automatically converted into Conversion Stock in accordance with the provisions
of Section 6(b) of the Series B Certificate.
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<PAGE> 13
(b) The Company shall pay all Registration Expenses (as defined
below) in connection with any registration, qualification or compliance
hereunder, and each Purchaser shall pay all Selling Expenses (as defined below)
and other expenses that are not Registration Expenses relating to the Conversion
Stock resold by such Purchaser. "Registration Expenses" shall mean all expenses,
except for Selling Expenses, incurred by the Company in complying with the
registration provisions herein described, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, fees and disbursements of a
single counsel for all Purchasers, blue sky fees and expenses and the expense of
any special audits incident to or required by any such registration. "Selling
Expenses" shall mean all underwriting discounts, selling commissions, and stock
transfer taxes applicable to the Conversion Stock and all fees and disbursements
of any counsel to the Purchasers other than the firm designated to represent all
of the Purchasers in such registration.
(c) In the case of the registration effected by the Company
pursuant to these registration provisions, the Company will use its best efforts
to, at its expense: (i) keep such registration effective until the earlier of
(A) such date as all of the Conversion Stock has been resold and (B) such time
as all of the Conversion Stock held by the Purchasers can be disposed of without
volume limitations pursuant to Rule 144(k) under the Securities Act; (ii)
prepare and file with the Securities Exchange Commission (the "SEC") such
amendments and supplements to the Registration Statement and the prospectus used
in connection with the Registration Statement as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by the Registration Statement; (iii) furnish such number of
prospectuses and other documents incident thereto, including any amendment of or
supplement to the prospectus, as a Purchaser from time to time may reasonably
request; (iv) cause all Conversion Stock registered as described herein to be
listed on each securities exchange and quoted on each quotation service on which
similar securities issued by the Company are then listed or quoted; (v) provide
a transfer agent and registrar for all Conversion Stock registered pursuant to
the Registration Statement and a CUSIP number for all such Conversion Stock;
(vi) otherwise use its best efforts to comply with all applicable rules and
regulations of the SEC; (vii) file the documents required of the Company and
otherwise use its best efforts to maintain requisite blue sky clearance in (A)
all jurisdictions in which any shares of the Conversion Stock are originally
sold and (B) any other state specified in writing by a Purchaser, provided as to
clause (B), that the Company shall not be required to qualify to do business or
consent to service of process in any state in which it is not at the time of
such request so qualified or has not at the time of such request so consented;
and (viii) to the extent reasonably requested by the managing underwriter for
such offering or the Purchasers, participate in customary efforts to sell the
securities under the offering, including, without limitation, participating in
"road shows".
(d) The Company shall furnish to each Purchaser upon a request
a reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary in order to facilitate the public sale or other
disposition of all or any of the Conversion Stock held by the Purchaser.
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<PAGE> 14
(e) With a view to making available to the Purchasers the
benefits of Rule 144 promulgated under the Securities Act ("Rule 144") and any
other rule or regulation of the SEC that may at any time permit a Purchaser to
sell Conversion Stock to the public without registration or pursuant to a
registration on Form S-3, the Company covenants and agrees to: (i) make and keep
public information available, as those terms are understood and defined in Rule
144, until such date as all of the Conversion Stock shall have been resold; (ii)
file with the SEC in a timely manner all reports and other documents required of
the Company under the Securities Act and Exchange Act; and (iii) furnish to any
Purchaser upon request, as long as the Purchaser owns any Conversion Stock, (A)
a written statement by the Company that it has complied with the reporting
requirements of the Securities Act and the Exchange Act, (B) a copy of the most
recent annual or quarterly report of the Company, and (C) such other information
as may be reasonably requested in order to avail any Purchaser of any rule or
regulation of the SEC that permits the selling of any such Conversion Stock
without registration or pursuant to such Form S-3.
(f) At any time the Company may refuse to permit a Purchaser to
resell any shares of Conversion Stock pursuant to the Registration Statement;
provided, that in order to exercise this right, the Company must deliver a
certificate in writing to the Purchasers to the effect that withdrawal of the
right to sell pursuant to such Registration Statement is necessary because a
sale pursuant to the Registration Statement in its then-current form could
constitute a violation of the federal securities laws because there exists
material nonpublic information about the Company that the Company is required to
disclose. In such an event, the Company shall use its best efforts to amend the
Registration Statement if necessary and take all other actions necessary to
allow such sale under the federal securities laws, and shall notify the
Purchasers promptly after it has determined that such sale may be made.
Notwithstanding the foregoing, the Company shall not under any circumstances be
entitled to exercise its right to refuse to permit a Purchaser to resell
pursuant to the Registration Statement more than once in any twelve (12) month
period, and the period during which such Registration Statement may be withdrawn
shall not exceed fifteen (15) calendar days. Each Purchaser hereby covenants and
agrees that it will not sell any shares of Conversion Stock pursuant to the
Registration Statement during the periods the right to sell pursuant to the
Registration Statement is withdrawn as set forth in this Section 6.1(f).
6.2 Indemnification.
(a) The Company will indemnify each Purchaser, each of its
officers and directors and each person controlling such Purchaser within the
meaning of Section 15 of the Securities Act, with respect to any registration,
qualification or compliance which has been effected pursuant to this Agreement,
and each underwriter, if any, and each person who controls any underwriter
within the meaning of Section 15 of the Securities Act, against all expenses,
claims, losses, damages and liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation, arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement,
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<PAGE> 15
prospectus, offering circular or other document, or any amendment or supplement
thereto, incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, or any
violation by the Company of any rule or regulation promulgated under the
Securities Act applicable to the Company and relating to action or inaction
required of the Company in connection with any such registration, qualification
or compliance, and will reimburse each such Purchaser, each of its officers and
directors and each person controlling such Purchaser, each such underwriter and
each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission or alleged untrue statement or omission, made in reliance
upon and in conformity with information furnished to the Company by such
Purchaser or underwriter and stated to be specifically for use therein.
(b) Each Purchaser will, if shares of Conversion Stock held by
such Purchaser are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers and each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Purchaser, each of its officers and
directors and each person controlling such Purchaser within the meaning of
Section 15 of the Securities Act, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company, such Purchasers, such directors,
officers, underwriters or control persons for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with information furnished to the Company by such Purchaser and
stated to be specifically for use therein; provided, however, that the
obligations of such Purchasers hereunder shall be limited to an amount equal to
the net proceeds to each such Purchaser.
(c) Each party entitled to indemnification under this Section
6.2 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved
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<PAGE> 16
by the Indemnified Party (whose approval shall not be unreasonably withheld),
and the Indemnified Party may participate in such defense at such party's
expense, and provided further that, (i) the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Agreement, except to the extent, but only to the extent,
that the Indemnifying Party's ability to defend against such claim or litigation
is impaired as a result of such failure to give notice and (ii) the Indemnifying
Party shall not assume the defense of matters as to which there is a conflict of
interest or separate and different defenses, but shall instead pay, in all such
instances, all reasonable legal fees and expenses incurred by counsel (including
local counsel) for the Indemnified Party. No Indemnifying Party, in the defense
of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation.
6.3 Additional Registration Rights. If the Company is unable to
complete a Qualified Offering but two of the Purchasers elect to convert the
Series B Preferred within 30 days of the failure of such Qualified Offering, the
Company shall, no later than 60 days after receipt of the Purchasers written
request, file a Registration Statement with respect to the Conversion Stock.
Thereafter, the Purchasers' rights to have shares of Conversion Stock registered
pursuant to the terms of this Agreement shall terminate and the Purchasers shall
have only those rights set forth in, and the Company will be bound by the terms
of, the Rights Agreement.
6.4 "Stand-Off" Agreement. In connection with the filing of a
Registration Statement pursuant to Section 6.1 or 6.3, each Purchaser shall
agree not to sell publicly or otherwise transfer or dispose of any Conversion
Stock or other Common Stock of the Company held by such Purchaser for a
specified period of time (not to exceed 210 days) following the date hereof;
provided, the Purchasers may sell the Conversion Stock or any other securities
of the Company without regard to the provisions of this Section 6.4 if (i) a
tender or exchange offer is made (as evidenced by the filing with the SEC of a
Schedule 14D-1 (or any successor form promulgated or adopted for such purpose by
the SEC) and the actual dissemination of tender offer materials to security
holders) by another person, entity or group to purchase or exchange for cash or
other consideration any shares of Common Stock or rights, warrants or options
therefor which, if successful, would result in such person, entity or group
beneficially owning or having the right to acquire more than a majority of the
voting shares of the Company; (ii) in the event of a Transaction (as defined in
the Business Agreement) upon the earlier of (x) the public announcement or
disclosure or (y) consummation of a Transaction; or (iii) in the event of a
material breach of any covenant in the Business Agreement.
6.5 Information Rights. The Company will furnish the following
reports to each Purchaser for so long as such Purchaser is a holder of any
shares of Series B Preferred.
(a) As soon as practicable after the end of each fiscal year,
and in any event within ninety (90) days thereafter, consolidated balance sheets
of the Company and its
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<PAGE> 17
subsidiaries, if any, as of the end of such fiscal year, and consolidated
statements of income and consolidated statements of cash flows of the Company
and its subsidiaries, if any, for such year, prepared in accordance with
generally accepted accounting principles consistently applied and certified by
independent public accountants of national standing selected by the Company.
(b) As soon as practicable after the end of the first, second
and third quarterly accounting periods in each fiscal year of the Company and in
any event within forty-five (45) days thereafter, an unaudited consolidated
balance sheet of the Company and its subsidiaries, if any, as of the end of each
such quarterly period, and unaudited consolidated statements of income and
unaudited consolidated statements of cash flows of the Company and its
subsidiaries for such period prepared in accordance with generally accepted
accounting principles consistently applied, subject to changes resulting from
year-end audit adjustments and the absence of footnotes.
6.6 Right of First Offer. For so long as any Purchaser holds
any shares of Series B Preferred Stock, if one or more Purchasers join together
in a partnership, limited partnership, syndicate, or otherwise act in concert
for the purpose of disposing of more than 5% of the shares (as adjusted for
stock splits or similar events after the date hereof) of the voting stock of the
Company to a single person or transferee or any group of affiliated persons or
transferees, the Purchasers proposing to sell such shares (the "Sellers") shall
give the Company the opportunity to purchase such stock, in the following
manner:
(a) The Seller(s) shall give notice (the "Transfer Notice") to
the Company in writing of such intention, specifying the number and kind of
securities proposed to be sold or transferred, the proposed price per share
therefor (the "Transfer Price") and the other material terms, upon which such
disposition is proposed to be made, including the names of the proposed
purchasers or transferees if such persons have been identified.
(b) The Company shall have the right, exercisable by written
notice given by the Company to the Seller(s), to purchase all, but not less than
all, the shares specified in such Transfer Notice upon the terms specified in
such Transfer Notice. The purchase of the shares by the Company must be
completed within 30 calendar days from the receipt of the transfer notice. The
Company and the Seller(s) shall use their best efforts to secure during such
period any approvals required on their respective parts in connection therewith.
The Company shall have the right to pay for such shares specified in the
Transfer Notice: (a) the same amount in cash, if the consideration to be paid
consists of cash, or (b) to the extent that the consideration to be paid does
not consist of cash, consideration per share equivalent to that set forth in the
Transfer Notice, or an amount of cash having equivalent value, as determined by
mutual agreement of the Company and the Seller(s).
(c) If the Company (or its assignees) does not exercise its
right of first offer hereunder within the time specified for such exercise, the
Seller(s) shall be free, during the period of six (6) months following the date
of the Transfer Notice, to sell the shares specified in
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<PAGE> 18
such Transfer Notice for such consideration and on such other material terms as
shall be no more favorable to the purchaser of the shares than the terms
specified in such Transfer Notice.
(d) The provisions of this Section 6.6 shall terminate upon the
earlier to occur of (i) the conversion of the Series B Preferred Stock into
Common Stock as set forth in Section 6.1(a) and 6.3 of this Agreement and (ii)
such time as the Purchasers no longer cumulatively hold 5% of the voting
securities of the Company.
SECTION 7
Miscellaneous
7.1 Public Announcements. The Company shall obtain the consent
of each of the Purchasers and any Purchaser shall obtain the consent of the
Company and each other Purchaser prior to any public announcement relating to
this Agreement, provided that the Company shall be permitted to make any public
announcement which is required pursuant to the Securities Act or the Exchange
Act or the rules or regulations thereunder, however the Company shall, upon a
Purchaser's request, seek confidential treatment of such materials or
information that a Purchaser may designate.
7.2 Finder's Fee.
(a) The Company (i) represents and warrants that the Company
has retained no finder or broker in connection with the transactions
contemplated by this Agreement and (ii) hereby agrees to indemnify and to hold
the Purchasers harmless of and from any liability for commission or compensation
in the nature of a finder's fee to any broker or other person or firm (and the
costs and expenses of defending against such liability or asserted liability)
for which the Company, or any of its employees or representatives, are
responsible.
(b) Each Purchaser (i) represents and warrants that such
Purchaser has retained no finder or broker in connection with the transactions
contemplated by this Agreement and (ii) hereby agrees to indemnify and to hold
the Company and the other Purchasers harmless of and from any liability for any
commission or compensation in the nature of a finder's fee to any broker or
other person or firm (and the costs and expenses of defending against such
liability or asserted liability) for which such Purchaser, or any of its
employees or representatives, is responsible.
7.3 Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to the Company or the Purchasers, upon any
breach or default under this Agreement, shall impair any such right, power or
remedy, nor shall it be construed to be a waiver of any such breach or default,
or any acquiescence therein, or of any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
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<PAGE> 19
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character by the Company or
any Purchaser of any breach or default under this Agreement, or any waiver by
the Company or any Purchaser of any provisions or conditions of this Agreement,
must be in writing and shall be effective only to the extent specifically set
forth in writing, and all remedies, either under this Agreement, or by law or
otherwise afforded to the Company or Purchasers, shall be cumulative and not
alternative.
7.4 Waivers and Amendments. The obligations and rights of the
Company and the Purchasers under this Agreement may be waived or this Agreement
may be amended upon the written consent of the Company and the Purchasers. This
Agreement and the provisions hereof may not be waived or amended except pursuant
to a written instrument signed by the required party or parties as aforesaid.
7.5 Severability. In the event that any provision of this
Agreement shall be deemed to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions hereof shall not in any
way be affected or impaired thereby.
7.6 Survival. The representations, warranties, covenants and
agreements made here in shall survive any investigation made by Purchasers and
the Company and the Closing of the transactions contemplated hereby.
7.7 Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.
7.8 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be delivered (a) personally;
(b) by facsimile transmission (with verification of transmission without error,
and with copy promptly sent by national postal service (airmail delivery) or
Federal Express or similar courier); (c) by Federal Express or similar overnight
courier; or (d) by airmail, via the national postal service; in each case with
all delivery or postal charges pre-paid. Notices shall be addressed (a) if to
Intel, at Intel's address as set forth on the signature page of this Agreement,
Attention: F. Thomas Dunlap, Vice-President and General Counsel (Telephone:
(408) 765-1126; Fax (408) 765-1809), with a copy to Arvind Sodhani, Treasurer,
at the same address, (b) if to Motorola Inc., to 6501 William Canon West,
Austin, Texas 78735 as set forth on the signature page of this Agreement,
Attention: Bill Walker, Corporate Vice President (Telephone (512) 891-4919, Fax:
(512) 891-8379, with a copy to Linda B. Valentine, Vice President (708)
576-3921; Fax (708) 576-2818 at the address as set forth on the signature page
of this Agreement, (c) if to Texas Instruments Incorporated, at Texas
Instruments' address as set forth on the signature page of this Agreement,
Attention: Charles D. Tobin (Telephone (214) 917-3810, Fax: (214) 917-3804, with
a copy to Texas Instruments Incorporated, P.O. Box 655474, M/S 241, Dallas,
Texas 75265, Attention: Richard J. Agnich, Esq. and Richard L. Thurston, Esq.
(Telephone (214) 995-4855, Fax: (214) 995-3511), (d) if to any permitted
transferee of Series B Preferred hereunder, then to
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<PAGE> 20
Purchaser's address or such other address as the transferee shall furnish to the
Company in writing pursuant to the provisions hereof, or (e) if to the Company,
at the Company's address set forth on the signature page of this Agreement,
Attention: Chief Financial Officer (telephone number (408) 434-0500; facsimile
number (408) 954-1233), with copy to the attention of Robert T. Clarkson at
Wilson, Sonsini, Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California
(telephone number (415) 493-9300; facsimile number (415) 493-6811), or at such
other address as the Company shall have furnished to the Purchasers (or
transferees, as aforesaid) in writing.
Each such notice or communication, addressed and posted as
aforesaid, shall for all purposes of this Agreement be treated as effective or
having been given (a) when delivered, if delivered personally; (b) the business
day on which the notice or communication is sent, if delivered by facsimile
transmission as provided above; (c) upon the earlier of its receipt or two (2)
business days after the business day of deposit with Federal Express or similar
overnight courier, if delivered by such means; or (d) upon the earlier of its
receipt or five (5) business days after the business day of deposit with the
national postal service for airmail delivery, if delivered by such means.
7.9 Entire Agreement. This Agreement, the Rights Agreement and
the other documents delivered pursuant hereto constitute the full and entire
understanding and agreement among the parties with regard to the subjects hereof
and thereof, and supersede any and all prior agreements and understandings among
the parties.
7.10 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of California
and the Federal laws of the United States as they apply to contracts entered
into and wholly to be performed within the State of California by California
residents.
7.11 Expenses. The Company and the Purchasers shall each bear
all expenses that such respective party has incurred or incurs in connection
with this Agreement and the transactions contemplated hereby, and any amendments
or waivers hereto.
7.12 Attorneys' Fees. In the event of any litigation in a court
of competent jurisdiction arising in connection with this Agreement and the
transactions contemplated hereby, the prevailing party in judgment shall be
entitled to recover reasonable legal fees and costs in connection with such
action.
7.13 Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
7.14 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original and all of which together
shall constitute one instrument.
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<PAGE> 21
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first written above.
COMPANY: SILICON VALLEY GROUP, INC.
a Delaware corporation
By: /s/ Papken Der Torossian
-------------------------------
Papken Der Torossian,
Chairman and
Chief Executive Officer
Address: 2240 Ringwood Avenue
San Jose, CA 95131
PURCHASERS: INTEL CORPORATION
a Delaware corporation
By: /s/ Arvind Sodhani
--------------------------------
Title: Vice President and Treasurer
-----------------------------
Address: 2200 Mission College Boulevard
Santa Clara, CA 95052
M/S
MOTOROLA INC.
a Delaware corporation
By: /s/ Larry Gartin
-------------------------------
Title: Sr. Vice President and
Dir. of Finance, SPS
----------------------------
Address: 1303 East Algonquin
Schaumburg, IL 60196
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<PAGE> 22
TEXAS INSTRUMENTS INCORPORATED
a Delaware corporation
By: /s/ Jerry R. Junkins
-----------------------------
Title: Chairman, President & CEO
--------------------------
Address: 7839 Churchill Way
P.O. Box 650311, M/S 3995
Dallas, Texas 75265
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<PAGE> 23
EXHIBIT A
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
AGGREGATE NUMBER OF
NAME AND ADDRESS OF PURCHASER PURCHASE PRICE SHARES
- --------------------------------------------------- -------------- ---------
<S> <C> <C>
Intel Corp. $ 10,001,848 4,981
2200 Mission College Boulevard
Santa Clara, CA 95052
Attention: Randy Tinsley
Motorola, Inc. 10,001,848 4,981
1303 East Algonquin
Schaumberg, IL 60196
Attention: Paul Reidy
10,001,848 4,981
Texas Instruments, Inc.
13510 North Central Expressway
MS 241
Dallas, TX 75243
Attention: Richard Thurston
------------ ------
TOTAL $ 30,005,544 14,943
============ ======
</TABLE>
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<PAGE> 1
EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made as of this
21st day of February 1995 by and among Silicon Valley Group, Inc., a Delaware
corporation (the "Company"), and Intel Corporation, a Delaware corporation,
Motorola Inc., a Delaware corporation and Texas Instruments Incorporated, a
Delaware corporation (individually a "Purchaser" and collectively, the
"Purchasers").
Recitals
A. The Company and the Purchasers have entered into that certain
Series B Convertible Redeemable Preferred Stock Purchase Agreement dated as of
the date hereof (the "Purchase Agreement") pursuant to which the Company shall
sell the Purchasers 14,943 shares of its Series B Convertible Redeemable
Preferred Stock (the "Series B Preferred").
B. The obligation of the Purchasers to purchase the Series B
Preferred under the Purchase Agreement is conditioned upon, among other things,
the execution and delivery of this Agreement.
Agreement
1. Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission
or any successor agency.
"Holder" shall mean each Purchaser and any transferee of
Registrable Securities who is entitled to registration rights hereunder.
"Restricted Securities" shall mean the securities of the
Company required to bear the legend set forth in Section 3 hereof (or any
similar legend).
"Registrable Securities" shall mean (i) shares of the Company's
Common Stock issued or issuable upon the conversion of the Series B Preferred;
(ii) shares of the Company's Common Stock or other securities issued or issuable
with respect to, or in exchange for or in replacement of the Series B Preferred
or the shares of the Company's Common Stock issued upon conversion of the Series
B Preferred upon any stock split, stock dividend, recapitalization, or similar
event; provided, a security is not a Registrable Security after (a) it has been
registered and disposed of under the Securities Act, (b) it has been publicly
sold pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act, or (c) it is capable of being disposed of without volume
limitations pursuant to Rule 144(k) (or any similar provision then in force)
under the Securities Act.
<PAGE> 2
The terms "register," "registered" and "registration" refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by the
Company in complying with Sections 5, 6 and 9 hereof, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, fees and
disbursements of a single counsel for all Holders participating in the
registration, blue sky fees and expenses, and the expense of any special audits
incident to or required by any such registration, but excluding all Selling
Expenses.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Selling Expenses" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the securities
registered by the Holders as well as any fees and disbursements of any counsel
to the Holders other than Counsel designated to represent all of the Holders in
such registration.
2. Restrictions on Transferability. The Restricted Securities
shall not be transferable except upon the conditions specified in this
Agreement, which conditions are intended to ensure compliance with the
provisions of the Securities Act. Each Holder of Restricted Securities will
cause any proposed transferee of the Restricted Securities held by such Holder
to agree to take and hold such Restricted Securities subject to the provisions
and upon the conditions specified in this Agreement.
3. Restrictive Legend. Each certificate representing (i) the
Series B Preferred, (ii) shares of the Company's Common Stock issued upon
conversion of the Series B Preferred, and (iii) any other securities issued in
respect, or in exchange for, or in replacement of, of the Series B Preferred or
Common Stock issued upon conversion of the Series B Preferred upon any stock
split, stock dividend, recapitalization, merger, consolidation or similar event,
shall be stamped or otherwise imprinted with a legend in substantially the
following form (in addition to any legend required under applicable state
securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
LAWS OF ANY STATE. THESE SECURITIES MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF SUCH REGISTRATION OR
AN AVAILABLE EXEMPTION THEREFROM. COPIES OF THE AGREEMENT
COVERING THE PURCHASE OF THESE SECURITIES AND RESTRICTING THEIR
TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY
THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY
-2-
<PAGE> 3
OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
CORPORATION.
provided, that no such certificate shall be required to bear the foregoing
legend (a) after the security evidenced thereby has been registered and disposed
of under the Securities Act, (b) after the security evidenced thereby has been
sold pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act, or (c) to the extent so provided by the opinion of counsel or
"No action" letter contemplated by Section 4.
4. Notice of Proposed Transfers. The Holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 4. Prior to any proposed transfer
of any Restricted Securities, unless there is in effect a registration statement
under the Securities Act covering the proposed transfer, the Holder thereof
shall give written notice to the Company of such Holder's intention to effect
such transfer. Each such notice shall describe the manner and circumstances of
the proposed transfer in sufficient detail, and, if the Company so requests,
shall be accompanied by either (i) written opinion of legal counsel who shall be
reasonably satisfactory to the Company, addressed to the Company and reasonably
satisfactory in form and substance to the Company's counsel, to the effect that
the proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act, or (ii) a "No Action" letter from the
Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the Holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by the Holder to the
Company.
5. Requested Registration.
(a) Request for Registration. If at any time after the Company
shall receive from any Holder or group of Holders holding at least 30% of the
Registrable Securities a written request that the Company effect any
registration, qualification or compliance with respect to such Registrable
Securities, the Company will:
(x) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders; and
(y) as soon as practicable, use its best efforts to effect such
registration, qualification or compliance (including, without limitation, the
execution of an undertaking to file post-effective amendments, appropriate
qualification under applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under the Securities
Act and any other governmental requirements or regulations) as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any
-3-
<PAGE> 4
Holder or Holders joining in such request as are specified in a written request
received by the Company within ten (10) days after receipt of such written
notice from the Company;
Provided, however, that the Company shall not be obligated to
take any action to effect any such registration, qualification or compliance
pursuant to this Section 5:
(A) In any particular jurisdiction in which the Company would
be required to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction and except as may be required by the Securities
Act; or
(B) After the Company has effected three (3) such registrations
pursuant to this Section 5, such registrations have been declared or ordered
effective and the securities offered pursuant to such registration have been
sold.
Subject to the foregoing clauses (A), (B) and paragraph (c)
below, the Company shall file a registration statement covering the Registrable
Securities so requested to be registered as soon as practicable and in any event
within 80 days after receipt of the request or requests of any Holder or Holders
(the "Required Filing Date").
(b) Underwriting. If the Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
Section 5(a) and the Company shall include such information in the written
notice referred to in Section 5(a)(x). The right of any Holder to registration
pursuant to Section 5 shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable Securities in
the underwriting to the extent provided herein.
The Company shall (together with all Holders proposing to
distribute their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by the Holders, which managing underwriter shall be a
nationally recognized investment banking firm. Notwithstanding any other
provision of this Section 5, if the managing underwriter advises the Holders in
writing that marketing factors require a limitation of the number of shares to
be underwritten, then the number of shares of Registrable Securities that may be
included in the registration and underwriting shall be allocated among all
Holders requesting inclusion in the registration in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Holders at the time of filing the registration statement.
If any Holder of Registrable Securities disapproves of the
terms of the underwriting, such Holder may elect to withdraw therefrom by
written notice to the Company, the managing underwriter and the other Holders.
The Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration; provided, however, that if by the withdrawal of
such Registra-
-4-
<PAGE> 5
ble Securities a greater number of Registrable Securities held by
other Holders may be included in such registration (up to the maximum of any
limitation imposed by the underwriters), then the Company shall offer to all
Holders who have included Registrable Securities in the registration the right
to include additional Registrable Securities in the same proportion used in
determining the underwriter limitation in this Section 5(b). If the registration
does not become effective due to the withdrawal of Registrable Securities, then
either (1) the Holders requesting registration shall reimburse the Company for
expenses incurred in complying with the request or (2) the aborted registration
shall be treated as effected for purposes of Section 5(a)(B).
(c) Deferral of Filing. The Company may defer the filing (but
not the preparation) of a registration statement required by this Section 5
until a date not later than 120 days after the Required Filing Date (or, if
longer, 90 days after the effective date of the registration statement
contemplated by clause (ii) below) if (i) at the time the Company receives the
request for registration pursuant to this Section 5, the Company is engaged in
confidential negotiations or other confidential business activities, disclosure
of which would be required in such registration statement (but would not be
required if such registration statement were not filed), and the Board of
Directors of the Company determines in good faith that such disclosure would be
materially detrimental to the Company and its stockholders or would have a
material adverse effect on any such confidential negotiations or other
confidential business activities, or (ii) prior to receiving the request for
registration pursuant to this Section 5, the Board of Directors had determined
to effect a registered underwritten public offering of the Company's securities
for the Company's account and the Company had taken substantial steps
(including, but not limited to, selecting a managing underwriter for such
offering) and is proceeding with reasonable diligence to effect such offering. A
deferral of the filing of a registration statement pursuant to this Section 5(c)
shall be lifted, and the requested registration statement shall be filed
forthwith, if, in the case of a deferral pursuant to a clause (i) of the
preceding sentence, the negotiations or other activities are disclosed or
terminated, or, in the case of a deferral pursuant to (ii) clause of the
preceding sentence, the proposed registration for the Company's account is
abandoned. In order to defer the filing of a registration statement pursuant to
this Section 5(c), the Company shall promptly (but in any event within 10 days),
upon determining to seek such deferral, deliver to each requesting Holder a
certificate signed by an executive officer of the Company stating that the
Company is deferring such filing pursuant to this Section 5(c) and a general
statement of the reason for such deferral and an approximation of the
anticipated delay. Within 20 days after receiving such certificate, Holders
holding a majority of the Registrable Shares for which registration was
previously requested may withdraw such request by giving notice to the Company;
if withdrawn, the request shall be deemed not to have been made for all purposes
of this Agreement.
(d) Priority on Demand Registration. No securities to be sold
for the account of any person (including the Company and any other holder which
has contracted with the Company for "piggyback" registration rights) other than
a Holder shall be included in a registration effected pursuant to this Section 5
unless the managing underwriter or underwriters shall advise the Holders
-5-
<PAGE> 6
in writing that the inclusion of such securities will not materially and
adversely affect the price or success of the offering.
6. Company Registration.
(a) Notice of Registration. If the Company shall determine to
register any of its securities, either for its own account or the account of a
security holder or holders exercising their respective demand registration
rights, other than (i) a registration relating solely to employee benefit plans,
(ii) a registration on any registration form which does not permit secondary
resales or does not include substantially the same information as would be
required to be included in a registration statement covering the sale of
Registrable Securities (including a registration statement solely for the
purpose of registering securities to be issued in a merger or like transaction,
including a Commission Rule 145 transaction), or (iii) a registration requested
by The Perkin-Elmer Corporation ("Perkin-Elmer") pursuant to the Registration
Rights Agreement between the Company and Perkin-Elmer dated as of August 29,
1990 (the "P-E Agreement") and converted by the Company into a company
registration by the Company pursuant to the terms of the P-E Agreement, the
Company will:
(i) promptly give to each Holder written notice
thereof; and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within ten (10) days after receipt of such written notice from
the Company, by any Holder or Holders. Notwithstanding any other provision of
this Section 6, if the Company or the managing underwriter advises the Holders
in writing that marketing factors require a limitation of the number of shares
to be underwritten, then the number of shares of Registrable Securities that may
be included in the registration and underwriting shall be allocated among all
Holders requesting inclusion in the registration in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Holders at the time of filing the registration statement, provided however, (i)
that the number of shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all shares held by officers, directors
and employees of the Company which are not Registrable Securities are first
entirely excluded from the Underwriting, and (ii) that the number of Registrable
Securities included in such registration shall be no less than 25% of the number
of shares of the Registrable Securities requested to be included in such
registration.
7. Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Sections 5, 6 and 9 hereof shall be borne by the Company. All Selling Expenses
relating to securities registered by the Holders shall be borne by the Holders
of such securities.
-6-
<PAGE> 7
8. Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Agreement,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. In addition, at its expense the Company will:
(a) Keep such registration, qualification or compliance
effective for a period of 180 days or until the Holder or Holders have completed
the distribution described in the registration statement relating thereto,
whichever first occurs;
(b) Furnish such number of prospectuses and other documents
incident thereto as a Holder from time to time may reasonably request;
(c) To the extent reasonably requested by the managing
underwriter for the offering or the Holders, participate in customary efforts to
sell the securities under the offering, including, without limitation,
participating in "road shows";
(d) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(e) Use reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions;
(f) Cause all such Registrable Securities registered to be
listed on each securities exchange or system on which similar securities issued
by the Company are then listed; and
(g) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the underwriters of such offering.
9. Registration on Form S-3. In addition to the rights set forth
in Sections 5 and 6 hereof, if a Holder or Holders request that the Company
file a registration statement on Form S-3 (or any successor thereto) for a
public offering of shares of Registrable Securities the reasonably anticipated
aggregate price to the public of which would exceed $5,000,000, and the Company
is a registrant entitled to use Form S-3 to register securities for such an
offering, the Company shall use its best efforts to cause such shares to be
registered for the offering on such form (or any successor thereto). The
Company shall not be obligated to take any action to effect any registration
-7-
<PAGE> 8
statement pursuant to this Section 9 after the Company effected three (3) such
registration statements, such registrations have been declared or ordered
effective and the securities offered pursuant to such registration have been
sold. Further, the Company shall not be required to file more than one (1) such
registration statement during any twelve (12) month period.
10. Termination of Registration Rights. The registration rights
granted pursuant to this Agreement shall terminate upon the earlier to occur of
(i) the automatic conversion of the Series B Preferred pursuant to the terms of
the Series B Certificate or (ii) the seventh anniversary of the date of this
Agreement; provided, that if the Company fails to keep effective the resale
registration statement provided for in Section 6.1(a) of the Purchase Agreement
until such time as either (i) all of the Registrable Securities shall have been
sold thereunder or (ii) all the Registrable Securities can be disposed of
without volume limitations pursuant to Rule 144(k) (or any similar provision
then in force) under the Securities Act, the registration rights granted herein
shall revive and be in full force and effect until the seventh anniversary of
the date of this Agreement.
11. Lockup Agreement. In consideration for the Company agreeing to
its obligations under this Agreement, each Holder of Registrable Securities
agrees, in connection with any public offering of the Company's securities
pursuant to Sections 5,6 or 9, upon request of the underwriters managing any
underwritten offering of the Company's securities, not to sell, make any short
sale of, loan, grant any option for the purchase of, or otherwise dispose of any
Registrable Securities (other than those included in the registration) without
the prior written consent of the Company or such underwriters, as the case may
be, for such period of time (not to exceed 180 days) from the effective date of
such offering as the underwriters may specify. Each Holder agrees that the
Company may instruct its transfer agent to place stop transfer notations in its
records to enforce the provisions of this Section 11.
12. Indemnification.
(a) The Company will indemnify each Holder, each of its
officers and directors and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Agreement, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages and liabilities (or actions in respect thereof), including any
of the foregoing incurred in settlement of any litigation, arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation by the Company of any rule or
regulation promulgated under the Securities Act applicable to the Company and
relating to action or inaction required of the Company in connection with any
such registration, qualification or compliance, and will reimburse each such
Holder, each of its officers and directors and each person controlling such
Holder, each
-8-
<PAGE> 9
such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, loss, damage, liability or
action, provided that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with information furnished to
the Company by such Holder or underwriter and stated to be specifically for use
therein.
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers and each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its officers and directors
and each person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company, such Holders, such directors, officers, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with information furnished to the
Company by such Holder and stated to be specifically for use therein; provided,
however, that the obligations of such Holders hereunder shall be limited to an
amount equal to the net proceeds to each such Holder of Registrable Securities
sold as contemplated herein.
(c) Each party entitled to indemnification under this Section
12 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that (i) the failure of any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying Party
of its obligations under this Agreement, except to the extent, but only to the
extent, that the Indemnifying Party's ability to defend against such claim or
litigation is impaired as a result of such failure to give notice and (ii) the
Indemnifying Party shall not assume the defense of matters as to which there is
a conflict of interest or separate and different defenses, but shall instead
pay, in all such instances, all reasonable legal fees and
-9-
<PAGE> 10
expenses incurred by counsel (including local counsel) for the Indemnified
Party. No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
13. Information by Holder. Any Holder of Registrable Securities
included in any registration shall furnish to the Company such information
regarding such Holder and the distribution proposed by such Holder as the
Company may request and as shall be required in connection with any
registration, qualification or compliance referred to in this Agreement.
14. Transfer of Registration Rights. The right to cause the Company to
register securities granted to the Holders hereunder may be assigned to a
transferee or assignee who acquires at least 1,660 shares (as adjusted for stock
splits or similar events after the date hereof) of Series B Preferred (or Common
Stock issued on conversion of Series B Preferred), provided that the Company is
given written notice of such assignment prior to such assignment.
15. Governing Law. This Agreement and the legal relations among the
parties arising hereunder shall be governed by and interpreted in accordance
with the laws of the State of California. The parties hereto agree to submit to
the jurisdiction of the federal and state courts of the State of California with
respect to the breach or interpretation of this Agreement or the enforcement of
any and all rights, duties, liabilities, obligations, powers, and other
relations between the parties arising under this Agreement.
16. Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties regarding the subject matter
hereof. Except as otherwise expressly provided herein, the provisions hereof
shall inure to the benefit of, and be binding upon, the successors, assigns,
heirs, executors and administrators of the parties hereto.
17. Notices etc.. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
upon delivery to the party to be notified in person or by courier service or
five (5) days after deposit with the United States mail, by registered or
certified mail, postage prepaid, addressed (a) if to a Purchaser, to such
Purchaser's address set forth in the Purchase Agreement, or at such other
address as such Purchaser shall have furnished to the Company in writing, or (b)
if to any other holder of any Registrable Securities, to such address as such
holder shall have furnished the Company in writing, or, until any such holder so
furnishes an address to the Company, then to and at the address of the last
holder of such Securities who has so furnished an address to the Company, or (c)
if to the Company, to its address set forth on the signature page of this
Agreement the attention of the Chief Financial Officer or at such other address
as the Company shall have furnished to the Holders, with a copy to Wilson
Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California 94304,
Attention: Robert T. Clarkson.
-10-
<PAGE> 11
18. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
-11-
<PAGE> 12
IN WITNESS WHEREOF, the undersigned have executed this agreement as of
the date set forth above.
"COMPANY"
SILICON VALLEY GROUP, INC.
2240 Ringwood Avenue
San Jose, CA 95131
By: /s/ Russell Weinstock
---------------------------------------------
Title: Vice President, Finance
------------------------------------------
"PURCHASERS"
INTEL CORPORATION
By: /s/ Arvind Sodhani
---------------------------------------------
Title: Vice President and Treasurer
------------------------------------------
Address: 2200 Mission College Boulevard
Santa Clara, CA 95052
M/S SC4 - 210
MOTOROLA INC.
By: /s/ Larry Gartin
---------------------------------------------
Title: Sr. Vice President & Dir. of Finance, SPS
------------------------------------------
Address: 1303 East Algonquin
Schaumburg, IL 60196
-12-
<PAGE> 13
TEXAS INSTRUMENTS INCORPORATED
By: /s/ Jerry R. Junkins
----------------------------------------
Title: Chairman, President and CEO
-------------------------------------
Address: 7839 Churchill Way
P.O. Box 650311, M/S 3995
Dallas, TX 75265
-13-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE SECOND QUARTER OF FISCAL 1995 AS FILED IN THE
COMPANY'S FORM 10Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FORM 10Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 190,711
<SECURITIES> 0
<RECEIVABLES> 96,717
<ALLOWANCES> 3,173
<INVENTORY> 119,610
<CURRENT-ASSETS> 411,459
<PP&E> 64,351
<DEPRECIATION> (47,133)
<TOTAL-ASSETS> 433,313
<CURRENT-LIABILITIES> 109,432
<BONDS> 0
<COMMON> 243,459
0
0
<OTHER-SE> 74,516
<TOTAL-LIABILITY-AND-EQUITY> 433,313
<SALES> 109,380
<TOTAL-REVENUES> 109,380
<CGS> 67,849
<TOTAL-COSTS> 67,849
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 150
<INCOME-PRETAX> 11,623
<INCOME-TAX> 4,184
<INCOME-CONTINUING> 7,487
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,487
<EPS-PRIMARY> 0.33
<EPS-DILUTED> 0
<FN>
MINORITY INTEREST OF $48,000 IS ADDED BACK TO AFTER-TAX INCOME IN ARRIVING AT
NET INCOME OF $7,487,000.
</FN>
</TABLE>
