<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 2, 1995
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SILICON VALLEY GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 94-2264681
(STATE OR OTHER JURISDICTION OF INCORPORATION (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
OR ORGANIZATION)
</TABLE>
2240 RINGWOOD AVENUE
SAN JOSE, CALIFORNIA 95131
(408) 434-0500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
PAPKEN S. DER TOROSSIAN
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
2240 RINGWOOD AVENUE
SAN JOSE, CALIFORNIA 95131
(408) 434-0500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
LARRY W. SONSINI, ESQ. WILLIAM D. SHERMAN, ESQ.
ROBERT T. CLARKSON, ESQ. PETER E. WILLIAMS III, ESQ.
ELIZABETH R. FLINT, ESQ. C. JEFFREY CHAR, ESQ.
ADELE C. FREEDMAN, ESQ. MORRISON & FOERSTER
WILSON, SONSINI, GOODRICH & ROSATI 755 PAGE MILL ROAD
PROFESSIONAL CORPORATION PALO ALTO, CALIFORNIA 94304
650 PAGE MILL ROAD (415) 813-5600
PALO ALTO, CALIFORNIA 94304
(415) 493-9300
</TABLE>
------------------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF OFFERING PRICE AGGREGATE
SECURITIES AMOUNT TO BE PER OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(2) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------
Common Stock, $0.01 par
value....................... 5,750,000 shares $21.69 $124,717,500 $43,006
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</TABLE>
(1) Includes 750,000 shares which the Underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457 under the Securities Act of 1933.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE> 2
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectuses: one to be
used in connection with an offering in the United States and the other to be
used in connection with a concurrent international offering (the "International
Prospectus"). The two prospectuses are identical except for the outside and
inside front cover pages. The alternate pages for the International Prospectus
are included herein and labeled "Alternate Page."
<PAGE> 3
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may
not be sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This prospectus shall not
constitute an offer to sell or the solicitation of an offer
to buy nor shall there be any sale of these securities in any State in
which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such State.
PROSPECTUS (Subject to Completion)
Issued March 2, 1995
5,000,000 Shares
(logo) (LOGO)
COMMON STOCK
------------------------
OF THE 5,000,000 SHARES OF COMMON STOCK BEING OFFERED, 4,000,000 SHARES ARE
BEING OFFERED INITIALLY IN THE UNITED STATES AND CANADA BY THE U.S.
UNDERWRITERS AND 1,000,000 SHARES ARE BEING OFFERED INITIALLY OUTSIDE OF THE
UNITED STATES AND CANADA BY THE INTERNATIONAL UNDERWRITERS. SEE
"UNDERWRITERS." OF THE 5,000,000 SHARES OF COMMON STOCK BEING OFFERED
HEREBY, 3,175,000 SHARES ARE BEING SOLD BY SILICON VALLEY GROUP, INC.
AND 1,825,000 SHARES ARE BEING SOLD BY THE SELLING STOCKHOLDER. SEE
"PRINCIPAL AND SELLING STOCKHOLDERS." THE COMPANY WILL NOT RECEIVE
ANY OF THE PROCEEDS FROM THE SALE OF SHARES BY THE SELLING
STOCKHOLDER. THE COMPANY'S COMMON STOCK IS TRADED IN THE
OVER-THE-COUNTER MARKET UNDER THE NASDAQ NATIONAL MARKET SYMBOL
"SVGI." THE LAST SALE PRICE FOR THE COMMON STOCK ON FEBRUARY
28, 1995, AS REPORTED ON THE NASDAQ NATIONAL MARKET, WAS
$23 7/16 PER SHARE. SEE "PRICE RANGE OF COMMON STOCK."
------------------------
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
PRICE $ A SHARE
------------------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDER
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Per Share.................... $ $ $ $
Total(3)..................... $ $ $ $
</TABLE>
- ------------
(1) The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriters."
(2) Before deducting expenses payable by the Company estimated at $400,000.
(3) The Company has granted to the Underwriters an option, exercisable
within 30 days of the date hereof, to purchase up to 750,000 additional
Shares at the price to public less underwriting discounts and
commissions for the purpose of covering over-allotments, if any. If the
Underwriters exercise such option in full, the total price to public,
underwriting discounts and commissions and proceeds to Company will be
$ , $ , and $ , respectively. See
"Underwriters."
------------------------
The Shares are offered subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to approval of certain legal matters
by Morrison & Foerster, counsel for the Underwriters. It is expected that
delivery of the Shares will be made on or about , 1995 at the
offices of Morgan Stanley & Co. Incorporated, New York, N.Y., against payment
therefor in New York funds.
------------------------
MORGAN STANLEY & CO.
Incorporated
PRUDENTIAL SECURITIES INCORPORATED
COWEN & COMPANY
, 1995
<PAGE> 4
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, AND ANY INFORMATION OR REPRESENTATION NOT
CONTAINED OR INCORPORATED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDER OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO
MAKE SUCH AN OFFERING OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
AT ANY TIME NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE IMPLY THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
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PAGE
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Incorporation of Certain Documents by Reference............................................ 2
Prospectus Summary......................................................................... 3
The Company................................................................................ 4
Recent Developments........................................................................ 5
Risk Factors............................................................................... 6
Use of Proceeds............................................................................ 11
Price Range of Common Stock................................................................ 12
Dividend Policy............................................................................ 12
Capitalization............................................................................. 13
Selected Consolidated Financial Data....................................................... 14
Business................................................................................... 16
Principal and Selling Stockholders......................................................... 23
Underwriters............................................................................... 24
Legal Matters.............................................................................. 26
Experts.................................................................................... 26
Available Information...................................................................... 27
</TABLE>
------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the Securities
and Exchange Commission (the "Commission") pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act") are incorporated herein by
reference: (1) the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1994; (2) the Company's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1994; (3) the Company's Current Report on Form
8-K filed on March 2, 1995; and (4) the Company's Registration Statement on Form
8-A filed with the Commission on November 23, 1983.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Common Stock hereunder shall be deemed to
be incorporated by reference herein and to be a part hereof from the date of the
filing of such reports and documents. The Company will provide a copy of any or
all of such documents (exclusive of exhibits unless such exhibits are
specifically incorporated by reference herein), without charge, to each person
to whom this Prospectus is delivered, upon written or oral request to the Chief
Financial Officer at the corporate headquarters of the Company, 2240 Ringwood
Avenue, San Jose, California 95131 (telephone 408-434-0500).
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document that also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
THE U.S. SHARES MAY NOT BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, OUTSIDE
THE UNITED STATES OR CANADA OR TO ANY PERSON WHO IS NOT A UNITED STATES OR
CANADIAN PERSON, AS PART OF THE DISTRIBUTION OF THE U.S. SHARES. FOR A
DESCRIPTION OF THIS AND OTHER RESTRICTIONS ON THE OFFERING AND SALE OF THESE
SHARES, SEE "UNDERWRITERS."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE
"UNDERWRITERS."
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere or incorporated by
reference in this Prospectus.
THE COMPANY
Silicon Valley Group designs, manufactures, markets and services
semiconductor fabrication equipment for the worldwide semiconductor industry.
The Company has three principal product groups which focus primarily on
photolithography, photoresist processing, and deposition for oxidation/diffusion
and low pressure chemical vapor deposition. The Company's products incorporate
proprietary technologies and unique processes, and focus on providing process
and product technologies and productivity enhancements to its customers. Silicon
Valley Group believes that its Micrascan step and scan photolithography exposure
system, which utilizes a deep ultraviolet light source allowing line widths of
.35 micron and below, is the most technologically advanced machine currently
being shipped to global semiconductor manufacturers. The Company supports its
reliable, cost-effective products through a network of worldwide service and
technical support organizations. The Company's customers consist of leading
semiconductor manufacturers including Advanced Micro Devices, Hewlett-Packard,
Intel, IBM, Motorola, National Semiconductor, SGS-Thomson, Samsung and Texas
Instruments.
The Company works closely with its existing and potential customers,
industry consortia and research institutions to improve current processes and to
define opportunities for new product development. These relationships enable the
Company to participate in the development of new technologies and fabrication
processes and to position itself as a principal supplier for volume equipment
orders. As evidence of the Company's commitment to its customers, in February
1995 the Company entered into a business relationship with Intel, Motorola, and
Texas Instruments. As part of this relationship, these companies purchased, in
equal amounts, an aggregate of $30 million of the Company's Series B Convertible
Redeemable Preferred Stock and received certain rights to purchase future
generations of the Company's Micrascan photolithography products. The Company
has agreed to use the $30 million proceeds, plus $25 million of additional
Company funds at any time over a five year period, 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. See
"Recent Developments."
THE OFFERING
U.S. Offering...........................
4,000,000 Shares
International Offering..................
1,000,000 Shares
Total(1).......................
5,000,000 Shares (of which 3,175,000
Shares are offered by the Company and
1,825,000 Shares are offered by the
Selling Stockholder).
Common Stock to be outstanding after the
Offering................................
24,968,749 Shares(1)(2)
Use of proceeds.........................
For certain capital expenditures, working
capital, research and development and
other general corporate purposes. See
"Use of Proceeds."
The Nasdaq National Market symbol.......
SVGI
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED SEPTEMBER 30, DECEMBER 31,
-------------------------------------------------------- ------------------
1990(3) 1991 1992 1993 1994 1993 1994
-------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT DATA:
Net sales..................................... $184,289 $234,798 $192,457 $240,633 $319,922 $70,917 $85,971
Gross profit.................................. 73,848 85,461 77,161 93,426 124,411 27,058 33,202
Operating income.............................. 8,269 4,796 1,608 7,384 26,451 4,676 7,302
Net income (loss)............................. 4,449 1,641 (292) 4,485 16,764 2,719 5,330
Net income (loss) applicable to Common
Stock....................................... 4,449 1,641 (501) 3,295 15,574 2,421 5,032
Net income (loss) per share................... $ 0.42 $ 0.12 $ (0.03) $ 0.22 $ 0.84 $ 0.15 $ 0.25
Shares used in per share computation.......... 10,708 13,166 14,754 15,277 18,538 16,400 20,322
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1994
---------------------------------
PRO FORMA(4) AS ADJUSTED(5)
------------ --------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and equivalents........................................................................ $106,302 $176,967
Working capital............................................................................. 208,602 279,267
Total assets................................................................................ 322,425 393,090
Short-term debt and current portion of long-term debt....................................... 846 846
Long-term debt and capital leases........................................................... 1,299 1,299
Stockholders' equity........................................................................ 221,791 292,456
</TABLE>
- ---------------
(1) Assumes the Underwriters' over-allotment option to purchase 750,000 shares
from the Company is not exercised. See "Underwriters."
(2) Based on shares outstanding on February 28, 1995. Includes 2,494,300 shares
issuable upon conversion of the outstanding Series A and Series B
Convertible Redeemable Preferred Stock ("Series A Preferred Stock" and
"Series B Preferred Stock", respectively) upon the closing of this offering.
Excludes (i) 1,219,775 shares issuable upon exercise of outstanding stock
options at a weighted average exercise price of $10.14 per share (ii)
1,750,000 shares issuable upon exercise of a warrant with an exercise price
of $13.625 per share and (iii) approximately 15,000 shares expected to be
issued on March 15, 1995 in payment of the regular quarterly dividend on the
Series A Preferred Stock.
(3) Includes the results of operations of one of the Company's subsidiaries, SVG
Lithography Systems, Inc. ("SVGL") from May 1, 1990.
(4) Pro forma to reflect the sale of Series B Preferred Stock in February 1995.
(5) Adjusted to give effect to the sale of the 3,175,000 shares offered hereby
by the Company at an assumed per share offering price of $23 7/16 (the last
reported sale price of the Common Stock on February 28, 1995), the
conversion of all of the Series A and Series B Preferred Stock upon the
closing of this offering and the anticipated use of the net proceeds
therefrom.
3
<PAGE> 6
THE COMPANY
Silicon Valley Group ("SVG" or the "Company") designs, manufactures,
markets and services semiconductor fabrication equipment for the worldwide
semiconductor industry. The Company has three principal product groups which
focus primarily on photolithography, photoresist processing, deposition for
oxidation/diffusion and low pressure chemical vapor deposition ("LPCVD"). The
Company works closely with its existing and potential customers, industry
consortia and research institutions to improve current processes, to define
opportunities for new product development and fabrication processes and to
position itself as a principal supplier for volume equipment orders. The Company
supports its reliable, cost-effective products through a network of worldwide
service and technical support organizations. The Company's customers consist of
leading semiconductor manufacturers including Advanced Micro Devices, Hewlett-
Packard, Intel, IBM, Motorola, National Semiconductor, SGS-Thomson, Samsung and
Texas Instruments.
The Company's products incorporate proprietary technologies and unique
processes and focus on providing process and product technologies and
productivity enhancements to customers. The Company manufactures and markets its
photolithography exposure products through its majority owned subsidiary, SVG
Lithography Systems ("SVGL"), its photoresist processing products through its
Track Systems Division ("Track") and its oxidation/diffusion and LPCVD products
through its Thermco Systems Division ("Thermco").
SVG LITHOGRAPHY SYSTEMS designs, manufactures, markets and services
advanced photolithography exposure systems. SVGL has two broad families,
Micrascan step and scan systems and the more mature Micralign scanning
projection aligners. The Company believes that its Micrascan
photolithography exposure system provides the greater resolution required
for the next generation of complex, fine geometry integrated circuits
through its use of a deep ultraviolet ("Deep UV") light source and
overcomes the throughput and yield limitations of steppers by combining the
elements of both steppers and scanners into the Micrascan's "step and scan"
technology. The Company also believes that its Micrascan step and scan
photolithography exposure system is the most technologically advanced
machine currently being shipped to global semiconductor manufacturers. In
addition, it believes that as larger and more complex logic and memory
devices move from development to production, semiconductor manufacturers
will have a greater incentive to purchase SVGL's step and scan systems
rather than steppers to achieve higher yields and faster throughput.
TRACK SYSTEMS DIVISION designs, manufacturers, markets and services
equipment which performs all the steps necessary to process semiconductor
wafers prior to photolithography exposure, including cleaning, adhesion
promotion and photoresist coating, and which performs all the steps
required to treat wafers after photolithography exposure prior to etching,
including developing and baking. As photoresist processing technology has
evolved, the Company has developed increasingly advanced products for this
market, which are capable of handling integrated circuits with line widths
as narrow as 0.35 micron. Track's most advanced product line, the 90
Series, offers a proprietary wafer transfer system to increase throughput,
features substantially improved contamination control specifications as
compared to the Company's previous products and provides features allowing
it to interface with factory automation systems. The Company believes it is
the only manufacturer to offer a cluster which integrates its
photolithography and photoresist products. In addition, the Track products
are designed to interface with all stepper products in the industry.
THERMCO SYSTEMS DIVISION designs, manufactures, markets and services
large batch thermal products which address the oxidation/diffusion and
LPCVD steps of the semiconductor fabrication process. Thermco products are
used for a broad range of processing applications required in the
fabrication of most semiconductor devices, including growing insulating
layers on wafers, diffusing dopants into the silicon structure and
depositing insulating or conducting films on the wafer surface. Thermco's
products incorporate proprietary technology it has developed in the areas
of thermal control, gas handling, particle control and automated wafer
handling. Thermco offers a full range of both horizontal and vertical
processing systems. The most advanced product currently offered by the
Company is the Series 8000 Advanced Vertical Processor ("AVP"). The Series
8000 single tube systems include
4
<PAGE> 7
advanced process control, leading software for data acquisition and
display, advanced automation, a proprietary process chamber design and an
option for atmosphere control within the wafer handling area.
Because of the highly technical nature of its products, the Company markets
its products primarily through a direct sales force with sales, service and
spare parts offices worldwide. The Company believes that its field service and
process support capabilities are an important factor in its selection as an
equipment supplier. Increasingly, semiconductor manufacturers are requiring
seven-day, around the clock, on site or on call support. To meet this need, the
Company is expanding its field service organization, increasing its technical
and process support personnel and enhancing its training programs. Service
personnel are based in field offices throughout the United States, Western
Europe, Japan and the Pacific Rim and increasingly on site at particularly large
customer locations. In addition, each customer has a single designated service
account manager for all its support needs.
The Company's principal executive office is located on 2240 Ringwood
Avenue, San Jose, California 95131, and its telephone number is (408) 434-0500.
RECENT DEVELOPMENTS
As part of the Company's continuing commitment to work closely with
existing and potential customers to improve the Company's current products and
processes, in February 1995 the Company entered into a business relationship
with Intel Corporation, Motorola Inc. and Texas Instruments Incorporated (the
"Investors") related to the Company's Micrascan photolithography products. As
part of this relationship, the Investors purchased in equal amounts an aggregate
of $30 million of the Company's newly issued Series B Preferred Stock,
convertible into approximately 1,494,300 shares of Common Stock, and received
certain rights to purchase future generations of the Company's Micrascan
products. The Company is obligated to use the $30 million received from the
Investors, as well as an additional $25 million of Company funds at any time
over a five year period, 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. The Company has also agreed to
use commercially reasonable efforts to obtain up to an additional $25 million in
grants from certain agencies of the United States government to further assist
in the research, development and engineering of Micrascan equipment. Assuming
the concurrent effectiveness of a separate registration statement registering
the shares of Common Stock issuable upon conversion of the Series B Preferred
Stock, all of the Series B Preferred Stock will automatically convert into
1,494,300 shares of Common Stock upon the closing of the offering made hereby.
5
<PAGE> 8
RISK FACTORS
Prospective purchasers of Shares offered hereby should carefully consider
the following risk factors in addition to the other information presented in
this Prospectus.
Cyclical Nature of the Semiconductor Industry. The semiconductor industry
into which the Company sells its products is highly cyclical and has
historically experienced periodic downturns, which often have had a severe
effect on the semiconductor industry's demand for semiconductor processing
equipment. Prior semiconductor industry downturns have resulted in significant
reductions in the Company's net sales, gross margin and net income. For example,
due in part to weakness in the semiconductor market, demand for the Company's
semiconductor processing equipment declined during fiscal 1992 and the Company
was not profitable for the year. While the Company has been profitable for the
past 12 quarters, there is no assurance that the Company will be able to
maintain profitability. Moreover, the Company's operations as a whole will
continue to be dependent on the capital expenditures of semiconductor
manufacturers, which in turn will be largely dependent on the current and
anticipated market demand for integrated circuits and products utilizing
integrated circuits. Any future weakness in demand in the semiconductor industry
is likely to have a material adverse effect on the Company's business and
results of operations.
Uncertain Development of Market for Micrascan Products. The development of
a market for the Company's Micrascan photolithography products will be highly
dependent on the continued trend towards finer line widths in integrated
circuits and the inability of traditional I-Line stepper manufacturers to keep
pace with this trend through either enhanced technologies or improved processes.
The market for the Company's Micrascan photolithography products has developed
more slowly than the Company anticipated at the time the Company acquired SVGL
in May 1990. From fiscal 1990 to fiscal 1993, SVGL sold an aggregate of 26
Micrascan systems, 20 of which were sold to IBM, a minority shareholder in SVGL,
and three of which were sold to SEMATECH, Inc. ("SEMATECH"). In fiscal 1994
through the first quarter of fiscal 1995, SVGL shipped seven systems to five
customers, only one of which was shipped in the first quarter of fiscal 1995. At
December 31, 1994, SVGL had a backlog of 20 Micrascan units for shipment to five
global semiconductor manufacturers. While such orders are encouraging, they are
not necessarily indicative of industry-wide acceptance of the Micrascan
technology. The Company and many industry observers initially believed that
I-Line steppers, the most advanced photolithography exposure equipment in
widespread production use at the time the Company acquired SVGL, could not be
modified to be capable of fabricating complex semiconductor devices with line
widths of less than 0.5 micron, such as 64 and 256 megabit dynamic random access
memories ("DRAMs"). Since 1990, however, stepper manufacturers have extended the
capability of their I-Line steppers to 0.5 micron or finer line widths. The
Company believes that, as a consequence, many manufacturers of complex devices
are likely to continue to use steppers for fabricating such devices. The Company
believes that as devices increase in size and complexity and require finer line
widths, the technical advantages of Micrascan systems as compared to steppers
will enable semiconductor manufacturers to achieve finer line widths, higher
yields and increased throughput. The Company believes, however, that these
larger and more complex devices will not be produced in volume until 1996 or
1997. It is possible that the demand for these larger and more complex devices,
and the fabrication equipment to manufacture them, may never develop or may
develop even later than 1997. The Company believes semiconductor manufacturers
will not require production equipment as advanced as Micrascan until at least
1996, and that substantial sales of the Company's Micrascan systems will not
begin until late 1996 or 1997, if at all. Stepper manufacturers have enhanced
their machines in the past, and in the future may further enhance their machines
to achieve finer line widths, sufficiently to erode Micrascan's expected yield
and throughput advantages. If this occurs, demand for Micrascan systems may not
develop as the Company expects. SVGL was not profitable in fiscal 1994 or the
first quarter of fiscal 1995 and there can be no assurance that it will be able
to operate profitably in the future. Failure of SVGL to achieve substantial
sales of Micrascan systems or a delay in achieving such sales could have a
material adverse effect on the Company's ability to continue to operate
profitably.
Fluctuations in Quarterly Operating Results. The Company has historically
experienced substantial quarterly fluctuations in its operating results. Due to
the relatively small number of systems sold during each fiscal quarter and the
relatively high revenues per system, production or shipping delays or customer
order rescheduling can significantly affect quarterly revenues and
profitability. The Company has experienced and
6
<PAGE> 9
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,
levels of sales, proportions of domestic and international sales, activities of
competitors, acquisitions, international events and problems in obtaining
adequate materials or components on a timely basis. Historically, gross margins
in the Thermco and SVGL businesses have been lower than in the Track business.
To the extent sales of Micrascan products, and to a lesser extent Thermco
products, increase as a percentage of total net sales, the Company's overall
gross margins may be unfavorably impacted. In light of these factors and the
cyclical nature of the semiconductor industry, the Company expects to continue
to experience variability in quarterly operating results.
Need to Increase Manufacturing Capacity. 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. This could result
in product delivery delays and a subsequent loss of future revenues. 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-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.
Dependence on New Products and Processes; Importance of Timely Product
Introductions and Enhancements. 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.
Failure to introduce new products or enhancements in a timely manner could
result in loss of competitive position and reduced sales of existing products.
In particular, the Company believes that advanced logic devices and DRAMs will
require increasingly finer line widths. As a consequence, it is important to
develop and introduce a version of the Micrascan capable of exposing line widths
of less than 0.35 micron in the first half of 1996. In addition, new product
introductions could contribute to quarterly fluctuations in operating results as
orders for new products commence and increase the potential for a decline in
orders of existing products, particularly if new products are delayed. In the
past, the Company has experienced significant delays in the introduction of
certain of its products and product enhancements due to technical, manufacturing
and other difficulties and may experience similar delays in the future.
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.
Significant delays can occur between a product's introduction and the
commencement by the Company of volume production of such product. There can be
no assurance that the Company will be successful in the introduction and volume
production of new and enhanced products or that the Company will be able to
develop and introduce new and enhanced products and processes which satisfy a
broad range of customer needs and achieve market acceptance. See
"Business--Products" and "-- Research and Development."
Research and Development Funding; Certain Capital Commitments. The Company
believes that in selecting a photolithography equipment manufacturer, customers
look for a long term product development strategy and the ability to fund that
development because photolithography exposure equipment can represent a
substantial portion of the equipment cost of a fabrication facility.
Semiconductor manufacturers may be unwilling to rely on a relatively small
supplier such as the Company for a critical element of the fabrication process
if the supplier does not have sufficient capital to implement its product
development strategy. The Company depends in part on external sources to fund
its development efforts and capital equipment
7
<PAGE> 10
expenditures. SEMATECH has entered into agreements with the Company to provide a
portion of this funding, but there can be no assurance that the Company will be
able to attain the milestones required by the agreements for such incremental
funding 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 achieves all milestones, the SEMATECH agreements
provide for an additional $21 million 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. Were the Company not to fulfill certain
obligations under its agreement with SEMATECH, the Company could be required to
repay all funds received under the agreements. In the event that the Company
does not receive 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 was required to make up these
funds, its research and development expenses would increase significantly and
its operating income would be reduced correspondingly. See "Business -- Research
and Development."
In part to address customer concerns about adequately capitalizing the
photolithography business, the Company is obligated under its agreements with
SEMATECH and the Investors to commit funds to the development and production of
Micrascan photolithography equipment, and a portion of the net proceeds of this
offering may be used to satisfy these requirements. Under the terms of its
agreement with SEMATECH, the Company is obligated to fund from its own resources
not less than 120%, up to a maximum of $36 million at any time over a three year
period, of the total amount received from SEMATECH to further the development of
Micrascan technology, to increase the manufacturing capability and capacity for
Micrascan products and to fund related inventory costs. Under the terms of its
agreements with the Investors, the Company is obligated to use the $30 million
from the sale of the Series B Preferred Stock, as well as an additional $25
million of Company funds at any time over a five year period, 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 Micrascan photolithography operations.
No assurance can be given that the Company will be able to obtain the necessary
funding to meet its commitments under these agreements. The Company is obligated
to invest these funds, 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. Were the Company to breach any of its obligations under its
agreement with the Investors, the Investors could cause the Company to
repurchase their shares, which could have a material adverse effect on the
Company. See "Recent Developments."
Customer Concentration. The Company relies on a limited number of customers
for a substantial percentage of its net sales. In fiscal 1994, Intel, Motorola
and SGS-Thomson represented 20%, 19% and 11%, respectively, of net sales. The
Company's top five customers represented 58% of the 1994 sales, a trend which
continued into the first quarter of fiscal 1995. In fiscal 1994 and the first
quarter of fiscal 1995, Intel represented a significant percentage of Track
sales. Track operations were responsible for a substantial portion of the
Company's profits in both periods. The loss of a significant customer (and in
particular the loss of Intel as a Track customer), a delay in shipment due to
customer rescheduling or any substantial reduction in orders by a significant
customer, including reductions in orders due to market, economic or competitive
conditions in the semiconductor industry, could adversely affect the Company's
business and results of operations. See "Business -- Customers."
Competition. The semiconductor processing equipment industry is highly
competitive. The Company faces substantial competition both in the United States
and in other countries for all of its products. The trend toward consolidation
in the semiconductor processing equipment industry has made it increasingly
important to have the financial resources necessary to compete effectively
across a broad range of product offerings, to fund customer service and support
on a worldwide basis and to invest in both product and process research and
development. Significant competitive factors include product performance, price
and reliability, familiarity with each particular manufacturer's products,
established relationships between suppliers and customers, particulate
contamination control and product availability. While the Company believes that
outside Japan and the Pacific Rim it competes favorably with respect to most of
these factors, it has on occasion been subject to intense price competition with
respect to particular orders and has had difficulty establishing new
8
<PAGE> 11
relationships with certain customers who have long-standing relationships with
other suppliers. Certain of the Company's existing and potential competitors
have substantially greater name recognition, financial, engineering,
manufacturing and marketing resources and customer service and support
capabilities than the Company. Due to the Company's position in the
photolithography market, an announcement of a new product by any of these large
competitors may cause customers to delay purchases until the new product is
introduced. See "-- Dependence on New Products and Processes; Importance of
Timely Product Introductions and Enhancements" and "Business -- Competition."
The Company believes that its competitors will continue to improve the design
and performance of their current products and processes, and to introduce new
products and processes with improved price and performance characteristics. For
example, both Nikon and Canon have announced photolithography products using
step and scan technology and a Deep UV illumination source, and Nikon has
indicated that it expects to deliver prototypes in early 1996. In addition, the
Company believes that other potential competitors, including ASM Lithography,
are developing step and scan technologies. There can be no assurance that the
Company will be able to compete effectively in the future.
Importance of the Japanese and Pacific Rim Market. The Japanese and Pacific
Rim market (including fabrication facilities operated outside these areas by
Japanese and Pacific Rim semiconductor manufacturers) represent a substantial
portion of the overall market for semiconductor equipment. To date, the Company
has not been successful in securing an adequate share of these markets. The
Company believes that the Japanese companies with which it competes have a
competitive advantage because their dominance of the Japanese and Pacific Rim
semiconductor equipment market provides them with the sales and technology base
to compete more effectively throughout the rest of the world. The Company is not
engaged in any collaborative effort with any Japanese or Pacific Rim
semiconductor manufacturer regarding process and equipment development. As a
result, the Company may be at a competitive disadvantage to the Japanese
equipment suppliers which are engaged in such collaborative efforts with
Japanese and Pacific Rim semiconductor manufacturers. There can be no assurance
that the Company will be able to compete successfully in the future in Japan,
the Pacific Rim or elsewhere in the world or that competitive pressures will not
adversely affect the Company's results of operations. See
"Business -- Competition."
Termination of Canon Letter of Intent. In April 1993, the Company entered
into a letter of intent with Canon, Inc. ("Canon"), a major Japanese company,
for the purpose of establishing a worldwide strategic alliance based on SVGL's
Micrascan technology. The Company and Canon were unable to reach agreement and
the letter of intent expired on November 30, 1994. Although Canon is
contractually prohibited until April 2003 from manufacturing a specifically
defined step and scan photolithography machine or disclosing related
information, Canon could introduce a product that includes certain step and scan
technology without violating this prohibition. As a result of the expiration of
the letter of intent, the Company believes that Canon has accelerated its
previously suspended development of a step and scan photolithography product
which will compete with Micrascan. See " -- Uncertain Development of Market for
Micrascan Products," and "Business -- Competition."
Patents and Licenses. As is typical in the semiconductor equipment
industry, the Company has from time to time received, and may in the future
receive, communications from third parties asserting patents or copyrights on
certain of the Company's products and technologies. At least one of the
Company's customers has put the Company on notice that it has received a notice
of infringement from Jerome H. Lemelson, alleging that equipment used in the
manufacture of electronic devices infringes patents issued to Mr. Lemelson
relating to "machine vision" or "barcode reader" technologies. The customer has
put the Company on notice it intends to seek indemnification from the Company
for any damages and expenses resulting from this matter if found liable or if
the customer settles the claim. The Company cannot predict the outcome of this
or any similar claim or its effect upon the Company, and there can be no
assurance that any such litigation or claim would not have a material adverse
effect upon the Company's financial condition or results of operations.
Dependence on Key Employees. The Company's future success is dependent upon
its ability to attract and retain qualified management, technical, sales and
support personnel. The competition for such personnel is intense. The loss of
certain key people or the Company's inability to attract and retain new key
employees could materially adversely affect the Company's business and results
of operations.
9
<PAGE> 12
Dependence on Sole or Limited Source Suppliers. Certain of the raw
materials, components and subassemblies included in the Company's products are
obtained from single sources or a limited group of suppliers. Although the
Company seeks to reduce its dependence on these sole and limited source
suppliers, disruption or termination of certain of these sources could occur and
such disruptions could have at least a temporary adverse effect on the Company's
business and results of operations. Moreover, a prolonged inability to obtain
certain components could have a material adverse effect on the Company's
business and results of operations and could result in damage to customer
relationships.
Volatility of Stock Price. The public offering price of the Common Stock
offered hereby may not be indicative of prices that will prevail in the trading
market for the Common Stock. The stock market has from time to time experienced
significant price and volume fluctuations that are unrelated to the operating
performance of particular companies. In addition, the market price of the
Company's Common Stock has been and is likely to be highly volatile. Factors
such as fluctuations in the Company's operating results, shortfalls in revenue
or earnings from levels expected by securities analysts, announcements of
technological innovations or new products by the Company or its competitors,
governmental regulation, developments with respect to patents or proprietary
rights and litigation relating thereto and general market conditions may have a
significant adverse effect on the market price of the Common Stock. See "Price
Range of Common Stock."
Shares Eligible for Future Sale. After completion of this offering, the
Company will have approximately 24,968,749 shares of Common Stock outstanding,
of which 24,830,318 shares will be freely tradeable without restriction. The
Company's executive officers and directors beneficially own 1,049,446 shares of
Common Stock, including 911,015 shares issuable upon exercise of options. Such
shares will be restricted from sales until 90 days after this offering pursuant
to agreements with the Underwriters. Thereafter, such shares can be sold in the
public market subject to certain volume and other resale restrictions of Rule
144 under the Securities Act. In addition, SEMATECH holds a warrant exercisable
for 1,750,000 shares of Common Stock which, unless registered for resale by
SEMATECH, will not become freely tradeable until September 1996 at the earliest.
SEMATECH has certain registration rights with respect to the shares of Common
Stock issuable upon exercise of the warrant.
The Company intends to register for resale, concurrently with this
offering, the 1,494,300 shares of Common Stock issuable upon conversion of the
Series B Preferred Stock held by the Investors. The Investors have agreed that
they will not, without the prior written consent of Morgan Stanley & Co.
Incorporated, sell or otherwise dispose of these shares from the date of the
offering until November 22, 1995. After November 22, 1995, the Investors could
sell the 1,494,300 shares freely in the market.
Sales of a substantial number of shares in the public market could
adversely affect the market price of the Common Stock and the Company's ability
to raise additional capital at a price favorable to the Company. See
"Underwriters."
10
<PAGE> 13
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
3,175,000 shares of Common Stock offered by the Company hereby are estimated to
be approximately $70,665,000 ($87,453,000 if the Underwriters' over-allotment
option is exercised in full).
The Company intends to use the proceeds of this offering primarily for
general corporate purposes, including purchases of capital equipment, working
capital and research and development for SVGL, Track and Thermco. A portion of
the net proceeds may also be used for future acquisitions of complementary
businesses or product lines as such opportunities may arise, although no such
acquisitions are currently pending or in negotiation. Pending such applications,
the net proceeds from this offering will be invested in bank deposits and short
term and medium term investment grade, interest bearing securities.
Giving proforma effect to the receipt of the $30,000,000 proceeds from the
sale of the Series B Preferred Stock in February 1995, as of December 31, 1994,
the Company had approximately $106,302,000 in cash and cash equivalents. After
giving effect to the receipt of the anticipated net proceeds of this offering,
the Company would have had $177,000,000 in cash as of such date. The Company is
obligated under its agreements with SEMATECH and the Investors to commit funds
to further the development of the Company's Micrascan photolithography
equipment, and a portion of the net proceeds of this offering may be used to
satisfy these requirements. Under the terms of its agreement with SEMATECH, the
Company is obligated to fund from its own resources not less than 120%, up to a
maximum of $36,000,000 at any time over a three year period, of the total amount
received from SEMATECH to further the development of Micrascan technology, to
increase the manufacturing capability and capacity for Micrascan products and to
fund related inventory costs. See "Business -- Research and Development." Under
the terms of its agreements with the Investors, the Company is obligated to use
the $30,000,000 received from the Investors, as well as an additional
$25,000,000 of Company funds at any time over a five year period, 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 Micrascan photolithography operations.
11
<PAGE> 14
PRICE RANGE OF COMMON STOCK
The following table sets forth the range of high and low sales prices of
the Company's Common Stock for the indicated periods, as reported by The Nasdaq
National Market. On February 28, 1995, the last reported sale price for the
Common Stock on The Nasdaq National Market was $23 7/16 per share. As of
December 31, 1994, there were approximately 668 holders of record of the Common
Stock.
<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
Fiscal year ended September 30, 1993:
First Quarter........................................... $7 1/4 $4 1/2
Second Quarter.......................................... 8 5/8 6
Third Quarter........................................... 11 1/8 6 1/8
Fourth Quarter.......................................... 12 7/8 9 3/8
Fiscal year ended September 30, 1994:
First Quarter........................................... 12 1/8 9 1/4
Second Quarter.......................................... 13 3/8 9 1/2
Third Quarter........................................... 12 3/8 9 1/4
Fourth Quarter.......................................... 14 7/8 11 3/8
Fiscal year ending September 30, 1995:
First Quarter........................................... 21 1/4 14
Second Quarter (through February 28, 1995).............. 23 7/8 18 3/8
</TABLE>
DIVIDEND POLICY
To date the Company has not declared or paid cash dividends on its Common
Stock. The Board of Directors of the Company presently intends to retain all
earnings for use in the Company's business and therefore does not anticipate
declaring or paying any cash dividends on its Common Stock in the foreseeable
future. The Company's revolving credit facility prohibits the payment of cash
dividends on Common Stock.
12
<PAGE> 15
CAPITALIZATION
The following table sets forth, on an unaudited basis, the actual cash and
equivalents, short-term debt and capitalization of the Company at December 31,
1994, pro forma to reflect the sale of the Company's Series B Preferred Stock in
February 1995 and as adjusted to give effect to the conversion of all of the
Company's outstanding Series A and Series B Preferred Stock into an aggregate of
2,494,300 shares of Common Stock upon the closing of this offering, the sale by
the Company of the 3,175,000 shares of Common Stock offered hereby, and the
application of the net proceeds therefrom.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1994
--------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Cash and equivalents...................................... $ 76,502 $ 106,302 $ 176,967
======== ======== =========
Short-term debt and current portion of long-term debt..... $ 846 $ 846 $ 846
======== ======== =========
Long-term debt and capital leases......................... $ 1,299 $ 1,299 $ 1,299
Minority interest in SVGL................................. 3,799 3,799 3,799
Stockholders' equity:
Series A Convertible Redeemable Preferred Stock, $0.01
par value, 1,000,000 shares authorized; 10,000 shares
outstanding actual and pro forma, none as adjusted;
actual and pro forma aggregate liquidation preference
of $17,000........................................... 17,000 17,000 --
Series B Convertible Redeemable Preferred Stock, $0.01
par value, 1,000,000 shares authorized; none actual
and as adjusted; 14,943 shares outstanding pro forma;
pro forma aggregate liquidation preference of
$30,000.............................................. -- 29,800 --
Common Stock, $0.01 par value, 40,000,000 shares
authorized; 19,173,809 shares outstanding actual and
pro forma; 24,843,109 shares outstanding as
adjusted(1).......................................... 107,722 107,722 225,187
Retained earnings....................................... 67,269 67,269 67,269
-------- --------- -----------
Total stockholders' equity......................... 191,991 221,791 292,456
-------- --------- -----------
Total capitalization............................ $197,089 $ 226,889 $ 297,554
======== ======== =========
</TABLE>
- ---------------
(1) Includes 2,494,300 shares of Common Stock issuable upon conversion of the
Series A and Series B Preferred Stock upon closing of this offering.
Excludes (i) as of February 28, 1995, 1,219,775 shares issuable upon
exercise of outstanding options at an average exercise price of $10.14 per
share, (ii) as of February 28, 1995, 1,750,000 shares issuable upon exercise
of a warrant with an exercise price of $13.625 per share and (iii)
approximately 15,000 shares expected to be issued on March 15, 1995 in
payment of the regular quarterly dividend on the Series A Preferred Stock.
13
<PAGE> 16
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below as of September
30, 1993 and 1994 and for each of the years in the three year period ended
September 30, 1994 have been derived from the consolidated financial statements
of the Company, which have been audited by Deloitte & Touche LLP, independent
auditors, which financial statements are incorporated by reference herein. The
selected consolidated financial data as of September 30, 1990, 1991 and 1992 and
for each of the years in the two year period ended September 30, 1991 have also
been derived from audited consolidated financial statements of the Company but
which are not incorporated by reference herein. The selected consolidated
financial data presented below as of December 31, 1994, and for the three month
periods ended December 31, 1993 and 1994, and for each of the nine quarters in
the period ended December 31, 1994, have been derived from unaudited
consolidated financial statements of the Company. In the opinion of the
Company's management, such unaudited consolidated financial data include all
adjustments, consisting of only normal recurring adjustments, necessary to
fairly state the information set forth therein. The following consolidated
financial data should be read in conjunction with the consolidated financial
statements, related notes and other financial information incorporated by
reference herein. See "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED SEPTEMBER 30, DECEMBER 31,
-------------------------------------------------------- ------------------
1990(1) 1991 1992 1993 1994 1993 1994
-------- -------- -------- -------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT DATA:
Net sales................................. $184,289 $234,798 $192,457 $240,633 $319,922 $70,917 $85,971
Cost of sales............................. 110,441 149,337 115,296 147,207 195,511 43,859 52,769
-------- -------- -------- -------- -------- ------- -------
Gross profit.............................. 73,848 85,461 77,161 93,426 124,411 27,058 33,202
Research, development and related
engineering............................. 25,292 30,004 27,009 26,332 30,443 6,546 8,278
Marketing, general and administrative..... 40,287 50,661 48,544 59,710 67,517 15,836 17,622
-------- -------- -------- -------- -------- ------- -------
Operating income.......................... 8,269 4,796 1,608 7,384 26,451 4,676 7,302
Interest and other income (expense),
net..................................... (342) (1,458) (44) (464) 369 (252) 1,053
-------- -------- -------- -------- -------- ------- -------
Income before income taxes and minority
interest................................ 7,927 3,338 1,564 6,920 26,820 4,424 8,355
Provision (credit) for income taxes....... 3,106 (781) 1,089 2,076 10,191 1,770 3,008
Minority interest......................... 372 2,478 767 359 (135) (65) 17
-------- -------- -------- -------- -------- ------- -------
Net income (loss)......................... $ 4,449 $ 1,641 $ (292) $ 4,485 $ 16,764 $ 2,719 $ 5,330
======== ======== ======== ======== ======== ======= =======
Preferred Stock dividend.................. -- -- $ 209 $ 1,190 $ 1,190 $ 298 $ 298
======== ======== ======== ======== ======== ======= =======
Net income (loss) applicable to Common
Stock................................... $ 4,449 $ 1,641 $ (501) $ 3,295 $ 15,574 $ 2,421 $ 5,032
======== ======== ======== ======== ======== ======= =======
Net income (loss) per share............... $ 0.42 $ 0.12 $ (0.03) $ 0.22 $ 0.84 $ 0.15 $ 0.25
======== ======== ======== ======== ======== ======= =======
Shares used in per share computations..... 10,708 13,166 14,754 15,277 18,538 16,400 20,322
======== ======== ======== ======== ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
AS OF
AS OF SEPTEMBER 30, DECEMBER 31,
-------------------------------------------------------- ------------
1990 1991 1992 1993 1994 1994
-------- -------- -------- -------- -------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and equivalents........................... $ 30,699 $ 34,070 $ 32,743 $ 17,617 $ 87,829 $ 76,502
Working capital................................ 60,403 84,959 93,084 110,512 173,303 178,802
Property and equipment, net.................... 33,686 28,994 26,861 18,664 13,313 14,709
Total assets................................... 183,423 192,317 180,777 212,284 271,674 292,625
Short-term debt and current portion of
long-term debt............................... 4,367 2,043 4,407 14,971 828 846
Long-term debt and capital leases.............. 26,533 8,200 1,652 2,338 1,510 1,299
Retained earnings.............................. 42,927 44,568 43,651 46,946 62,237 67,269
Stockholders' equity........................... 70,234 103,800 121,116 126,997 185,215 191,991
</TABLE>
- ---------------
(1) Includes the results of operations of SVGL from May 1, 1990.
14
<PAGE> 17
The following table presents unaudited quarterly results in dollar amounts
and as a percentage of net sales for the last nine quarters.
<TABLE>
<CAPTION>
FISCAL
FISCAL 1993 FISCAL 1994 1995
----------------------------------------- ----------------------------------------- -------
DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31
------- ------- ------- -------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT
DATA:
Net sales..................... $54,136 $51,602 $64,396 $70,499 $70,917 $85,300 $81,725 $81,980 $85,971
Cost of sales................. 34,198 30,845 39,250 42,914 43,859 52,876 48,991 49,785 52,769
------- ------- ------- -------- ------- ------- ------- -------- -------
Gross profit.................. 19,938 20,757 25,146 27,585 27,058 32,424 32,734 32,195 33,202
Research, development and
related engineering......... 5,734 6,517 7,016 7,065 6,546 7,675 8,454 7,768 8,278
Marketing, general and
administrative.............. 13,101 13,247 16,416 16,946 15,836 16,951 17,516 17,214 17,622
------- ------- ------- -------- ------- ------- ------- -------- -------
Operating income.............. 1,103 993 1,714 3,574 4,676 7,798 6,764 7,213 7,302
Interest and other income
(expense), net.............. 28 (137 ) (116 ) (239 ) (252 ) 36 166 419 1,053
------- ------- ------- -------- ------- ------- ------- -------- -------
Income before income taxes and
minority interest........... 1,131 856 1,598 3,335 4,424 7,834 6,930 7,632 8,355
Provision for income taxes.... 340 257 479 1,000 1,770 3,132 2,773 2,516 3,008
Minority interest............. 100 158 60 41 (65 ) (40 ) (162 ) 132 17
------- ------- ------- -------- ------- ------- ------- -------- -------
Net income.................... $ 691 $ 441 $1,059 $ 2,294 $2,719 $4,742 $4,319 $ 4,984 $5,330
======= ======= ======= ======= ======= ======= ======= ======= =======
Preferred Stock dividend...... $ 298 $ 297 $ 298 $ 297 $ 298 $ 297 $ 298 $ 297 $ 298
======= ======= ======= ======= ======= ======= ======= ======= =======
Net income applicable to
common stock................ $ 393 $ 144 $ 761 $ 1,997 $2,421 $4,445 $4,021 $ 4,687 $5,032
======= ======= ======= ======= ======= ======= ======= ======= =======
Net income per share.......... $ 0.03 $ 0.01 $ 0.05 $ 0.13 $ 0.15 $ 0.23 $ 0.21 $ 0.24 $ 0.25
======= ======= ======= ======= ======= ======= ======= ======= =======
Shares used in per share
computations................ 14,824 14,951 15,298 15,499 16,400 19,032 19,205 19,515 20,322
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
AS A PERCENTAGE OF NET SALES
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales..................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales................. 63.2 59.8 61.0 60.9 61.8 62.0 59.9 60.7 61.4
------- ------- ------- -------- ------- ------- ------- -------- -------
Gross profit.................. 36.8 40.2 39.0 39.1 38.2 38.0 40.1 39.3 38.6
Research, development and
related engineering......... 10.6 12.6 10.9 10.0 9.2 9.0 10.3 9.5 9.6
Marketing, general and
administrative.............. 24.2 25.7 25.5 24.0 22.3 19.9 21.4 21.0 20.5
------- ------- ------- -------- ------- ------- ------- -------- -------
Operating income.............. 2.0 1.9 2.7 5.1 6.6 9.1 8.3 8.8 8.5
Interest and other income
(expense), net.............. 0.1 (0.3 ) (0.2 ) (0.3 ) (0.4 ) -- 0.2 0.5 1.2
------- ------- ------- -------- ------- ------- ------- -------- -------
Income before income taxes and
minority interest........... 2.1 1.7 2.5 4.7 6.2 9.2 8.5 9.3 9.7
Provision for income taxes.... 0.6 0.5 0.7 1.4 2.5 3.7 3.4 3.1 3.5
Minority interest............. 0.2 0.3 0.1 0.1 (0.1 ) -- (0.2 ) 0.2 --
------- ------- ------- -------- ------- ------- ------- -------- -------
Net income.................... 1.3% 0.9% 1.6% 3.3% 3.8% 5.6% 5.3% 6.1% 6.2%
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
15
<PAGE> 18
BUSINESS
Silicon Valley Group designs, manufactures, markets and services
semiconductor fabrication equipment for the worldwide semiconductor industry.
The Company has three principal product groups which focus primarily on
photolithography, photoresist processing, and deposition for oxidation/diffusion
and LPCVD. The Company's products incorporate proprietary technologies and
unique processes, and focus on providing process and product technologies and
productivity enhancements to its customers. The Company believes that its
Micrascan step and scan photolithography exposure system, which utilizes a Deep
UV light source allowing line widths of .35 micron and below, is the most
technologically advanced machine currently being shipped to global semiconductor
manufacturers. The Company supports its reliable, cost-effective products
through a network of worldwide service and technical support organizations. The
Company's customers consist of leading semiconductor manufacturers including
Advanced Micro Devices, Hewlett-Packard, Intel, IBM, Motorola, National
Semiconductor, SGS-Thomson, Samsung and Texas Instruments.
The Company works closely with its existing and potential customers,
industry consortia and research institutions to improve current processes and to
define opportunities for new product development. These relationships enable the
Company to participate in the development of new technologies and fabrication
processes and to position itself as a principal supplier for volume equipment
orders. As evidence of the Company's commitment to its customers, in February
1995 the Company entered into a business relationship, whereby the Investors
purchased, in equal amounts, an aggregate of $30,000,000 of the Company's Series
B Preferred Stock and received certain rights to purchase future generations of
the Company's Micrascan products. The Company is obligated to use the
$30,000,000 proceeds, plus $25,000,000 of additional Company funds at any time
over a five year period, 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
Micrascan photolithography operations.
INDUSTRY BACKGROUND
Continuous improvements in semiconductor process and design technologies
have led to the production of smaller, more complex and more reliable devices at
a lower cost per function. As performance has increased and size and cost have
decreased, the demand for semiconductors has expanded beyond the primary market
in computer systems to include applications in telecommunications systems,
automotive products, consumer goods and industrial automation and control
systems. Semiconductor content as a percentage of system cost has also
increased. In addition, the demand for electronic systems has expanded
geographically with the emergence of new markets, particularly in the Pacific
Rim. Consequently, semiconductor sales have increased significantly over the
long term (growing at a compound rate of approximately 16% from 1983 to 1993)
but have experienced significant variation in growth rates. The Company believes
that these long-term trends will continue and will be accompanied by a growing
demand for semiconductor production equipment that can produce advanced
integrated circuits in high volumes at the lowest cost of ownership.
The rapid development of advanced semiconductor applications requires
semiconductor manufacturers to continually improve their core technology and
manufacturing capabilities to remain competitive within the industry. As a
consequence, semiconductor manufacturers demand increasingly sophisticated, cost
effective processing equipment from semiconductor equipment suppliers. The
increasing diversity and complexity of semiconductor products, the demands of
technological change and the costs associated with keeping pace with industry
developments have contributed to the emergence of cooperative development and
manufacturing alliances with semiconductor equipment suppliers. The Company
believes it is essential to have customer alliances to provide access to
valuable product and process technologies. These factors result in customers
concentrating their business with a small number of key suppliers.
SILICON VALLEY GROUP
The Company designs and manufactures sophisticated semiconductor
manufacturing systems for advanced fabrication facilities. The Company has three
principal product groups which focus on photolithography, photoresist processing
and deposition for oxidation/diffusion and LPCVD. The Company believes that
16
<PAGE> 19
its Micrascan step and scan photolithography exposure system, which utilizes a
Deep UV light source allowing line widths of .35 micron and below, is the most
technologically advanced machine currently being shipped to global semiconductor
manufacturers. The Company's products incorporate proprietary technologies and
unique processes, and focus on providing process and product technologies and
productivity enhancements to customers. Silicon Valley Group's products are
based on proprietary technologies in photolithography, control software, optics,
and particulate control.
The Company's objective is to strengthen its position as a leading
worldwide semiconductor equipment supplier by offering a broad line of
technologically advanced products and expending substantial resources on
research and development to create new, innovative products and processes. The
Company has close working relationships with leading semiconductor manufacturers
so that it may design its products in conjunction with the development of the
semiconductor manufacturers' advanced processes. The Company works closely with
its existing and potential customers, industry consortia and research
institutions to improve current products and processes and to define new product
development opportunities. These efforts enable the Company to participate in
the development of new technologies, to influence the design of new fabrication
processes and to position itself as a principal supplier for volume equipment
orders. The Company supports its reliable, cost-effective products through a
network of worldwide service and technical support organizations. The Company
believes that these strategies, together with its current market position and
product portfolio, will enable the Company to enhance its position as a leading
global semiconductor equipment supplier.
Silicon Valley Group's business is organized into three principal product
groups. The Company manufactures and markets its photolithography exposure
products through SVGL, its photoresist processing products through Track and its
oxidation/diffusion and LPCVD products through Thermco.
SVG LITHOGRAPHY SYSTEMS, INC.
SVGL designs, manufactures, markets and services advanced photolithography
exposure systems. Photolithography is one of the most critical and expensive
steps in integrated circuit fabrication, representing approximately one-third of
the fabrication cost. Consequently, integrated circuit manufacturers focus on
obtaining photolithography equipment to help them produce increasingly complex
devices reliably, efficiently and cost-effectively.
In the photolithography step of the fabrication process, the integrated
circuit patterns are projected through masks, or reticles, onto the silicon
wafers. As semiconductors have become more complex, the patterns have become
finer, with line widths as narrow as 0.35 micron (approximately 15 millionths of
an inch) in many of today's more advanced integrated circuits. As the patterns
become finer, photolithography exposure systems must be capable of projecting
the patterns through the masks with ever finer resolution. The resolution
capability of a photolithography exposure system is a function of its depth of
focus, numerical aperture (a measure of its light gathering characteristics) and
the wavelength of the light used in pattern projections.
Historically, there have been two major approaches to photolithographic
exposure systems: full field scanners and conventional refractive systems. The
full field scanners project a full scale mask image onto full wafers while the
refractive systems (steppers) sequentially expose small sections of a wafer in a
stepped sequence of exposures, but do so by reducing the size of a mask image by
several fold (typically 5 times). Thus, scanners offer large exposure fields
while steppers offer masks that are easier to make and have a lower cost. These
strengths are combined in the step and scan system.
Other trends are the reduction in wavelength from G-line (436 nanometer) to
I-line (365 nanometer) to Deep UV (248-193 nanometer) and the increase in
numerical aperture from 0.2 to 0.6.
Micrascan. The Company believes that its Micrascan photolithography
exposure system provides the greater resolution required for the next generation
of complex, fine geometry integrated circuits through its use of a Deep UV light
source and overcomes the throughput and yield limitations of steppers by
combining the elements of both steppers and scanners into the Micrascan's "step
and scan" technology.
The Micrascan combines advantages of scanning projection aligners and
steppers by scanning only a portion of the wafer, then "stepping" to another
portion of the wafer and repeating the process as necessary.
17
<PAGE> 20
Each scan has the capability to expose a larger segment of the wafer, or
"field," than a stepper can expose in a single step. The large exposure field
enables Micrascan to fabricate larger devices in a single scan than steppers,
thus avoiding the necessity of "stitching" a circuit together through two
different exposures. In addition, Micrascan continuously modifies the position
of the wafer surface during the scan to keep the wafer in the optimal focal
plane, thereby providing Micrascan a larger usable depth of focus field than
steppers. The larger the usable depth of focus field is, the more tolerant of
variations in the wafer surface the equipment will be. The Company believes
Micrascan's greater tolerance of wafer surface variations can reduce the number
of defective devices on a wafer, thereby contributing to higher yields. Scanning
across the field instead of exposing the entire field at one time also enables
Micrascan to achieve greater uniformity of resolution across the entire exposure
field and contributes to higher yields.
The Company believes that SVGL has substantial technological expertise and
process knowledge in developing Deep UV step and scan photolithography systems.
SVGL has developed internal capability to design and fabricate optical lenses,
mirrors and coatings. This includes its own proprietary optical metrology using
phase measuring interferometry to precisely measure and test the optical
elements it produces. Micrascan incorporates both mirrors and lenses in its
optical system, which the Company believes allows for a higher power optical
projection system, is less sensitive to environmental variants and accommodates
the use of light sources with broader spectral bandwidth (than refractive
optics) with the benefits of reduced running cost and increased reliability.
In addition to the optical system technology described above, SVGL has
developed certain proprietary mechanical systems incorporated in the Micrascan
to control the alignment of the wafer and the reticles prior to and during the
wafer exposure step. These alignment systems contribute to the Micrascan's
ability to scan the exposure field at speeds of 50mm per second or greater with
no significant loss of resolution, thereby increasing the throughput capability
of the machine.
The Company believes that many of the more complex semiconductor devices
currently under development, such as the most advanced microprocessors and
DRAMs, fit within the larger exposure field scanned by the Micrascan but do not
fit within the exposure field of the most advanced steppers currently in
widespread production use. In addition, these more complex devices feature
increasingly narrow line widths, which require greater resolution in exposing
the photoresist. The Company believes that, as these larger and more complex
logic and memory devices move from development to production, the technical
advantages of Deep UV step and scan systems over existing I-Line steppers will
provide a greater incentive to semiconductor manufacturers to purchase step and
scan systems rather than steppers in order to achieve higher yields and faster
throughput. The Company believes, however, that these devices will not be
produced in volume until late 1996 or 1997. Micrascan systems currently sell for
up to approximately $4,500,000, depending upon configuration.
Micralign. SVGL also sells a family of scanning projection aligners known
as "Micralign". The most advanced product in this family, the Micralign 700, is
used primarily in the production of semiconductor devices with minimum feature
sizes above 1.25 microns, or in the fabrication of less critical layers within
more sophisticated semiconductor devices. Micralign products, which have
historically accounted for a significant portion of the revenues of SVGL, are a
mature product family. Sales of Micralign products have declined in recent years
as steppers have supplanted projection aligners. Even with the current upturn in
the semiconductor industry and the resulting expansion of existing facilities,
the Company anticipates that such a decline in sales will continue. A large
installed base of Micralign systems exists throughout the world and a majority
of SVGL's Micralign related revenues is derived from servicing that installed
base and the sales of spare parts and refurbished systems. The list price of
Micralign 700 is approximately $995,000 and refurbished Micralign systems sell
for lesser amounts.
TRACK SYSTEMS DIVISION
Track designs, manufactures, markets and services photoresist processing
equipment which performs all the steps necessary to process semiconductor wafers
prior to photolithography exposure, including cleaning, adhesion promotion and
photoresist coating, and which performs all the steps required to treat wafers
after
18
<PAGE> 21
photolithography exposure prior to etching, including developing and baking. As
photoresist processing technology has evolved, the Company has developed
increasingly advanced product lines for this market, which are capable of
handling integrated circuits with line widths as narrow as 0.35 micron. Each
product line includes the principal processing capabilities described above and
is generally sold in customer-specified configurations that can include
specially engineered features and capabilities. All of the Track products are
available in fully automated cassette-to-cassette configurations either as
stand-alone processing stations or as in-line integrated manufacturing systems.
The equipment is modular in design to allow configuration to customer
requirements. Each semiconductor manufacturer may require certain of the
processing stations to effect its proprietary or specialized processes. The
Company believes it is the only manufacturer to offer a cluster which integrates
its photolithography and photoresist products. In addition, Track products are
designed to interface with all stepper products in the industry.
Track offers three product lines, each corresponding to the development of
successive generations of wafer processing technologies. In general, it has been
the Company's experience that introduction of new Track products has been
followed by lower order levels for older products.
90 Series. Introduced in May 1990, the 90 Series photoresist processing
system is designed for use in advanced fabrication processes for integrated
circuits with line widths as narrow as 0.35 micron, such as is required for 64
and 256 megabit DRAMs. The 90 Series incorporates a proprietary wafer transfer
system to increase throughput, features substantially improved contamination
control specifications as compared to the Company's previous products and
provides features allowing it to interface with factory automation systems, such
as those using automated guided vehicles. The 90 Series can process wafers up to
eight inches in diameter. In June 1992, an additional model of the 90 Series,
the 90-S, was introduced. The 90-S requires less floor space and, in certain
applications, may provide greater productivity than a conventional 90 Series
system. Prices of the 90 Series range from approximately $650,000 to $1,500,000.
8800 Series. The 8800 Series, introduced in late 1987, is designed to meet
market needs for photoresist contamination control and photoresist processing
down to 0.8 micron line widths. The 8800 Series incorporates such automation
features as beltless wafer handling, compatibility with low contamination wafer
storage and movement techniques, advanced software and communications
capabilities and certain process control improvements. The 8800 Series can
process wafers from three to six inches in diameter. Prices of the 8800 Series
range from approximately $350,000 to $750,000.
8600 Series. The 8600 Series is a belt-based wafer transport system capable
of processing wafers with diameters of three to six inches and of supporting the
needs of photoresist processing down to 1.0 micron line widths. The 8600 Series
is typically purchased for expansion of current fabrication capacity. Prices of
the 8600 Series range from approximately $200,000 to $400,000.
THERMCO SYSTEMS DIVISION
Thermco designs, manufactures, markets and services large batch thermal
products which address the oxidation/diffusion and LPCVD steps of the
semiconductor fabrication process. Thermco products are used for a broad range
of processing applications required in the fabrication of most semiconductor
devices, including growing insulating layers on the wafers, diffusing dopants
into the silicon structure and depositing insulating or conducting films on the
wafer surface. Thermco's products incorporate proprietary technology it has
developed in the areas of thermal control, gas handling, particle control and
automated wafer handling.
There are two major configurations of thermal processing equipment,
commonly referred to as vertical and horizontal, corresponding to the
orientation of their reaction chamber(s). Vertical processing systems represent
an increasing portion of the market for oxidation/diffusion and LPCVD processing
equipment. Vertical reactors generally consist of a single, fully automated
cylindrical reaction chamber, individually controlled by a dedicated computer
control system. Vertical systems generally provide greater process uniformity
and lower particle contamination than do horizontal systems, due to improved
thermal control and an increased ability to maintain environmental integrity,
thereby achieving higher yields in wafer processing. Additionally, vertical
systems provide more flexibility in manufacturing configurations. Horizontal
thermal
19
<PAGE> 22
processing systems, which are typically much larger and less automated than
vertical reactors, were the standard of the semiconductor processing equipment
industry and are still used for a broad range of processes.
Series 8000 Advanced Vertical Processor ("AVP"). Initially shipped in
September 1992, the AVP is a vertical furnace designed to meet the eight inch
wafer requirements of sub-half micron processing. The Series 8000 single tube
systems include advanced process control, data acquisition software, advanced
automation, a proprietary process chamber design and an option for atmospheric
control within the wafer handling area. The Company has incorporated design
improvements to address shortcomings of the initial production units. Although
the Company recently began shipping units to customers that it believes satisfy
these shortcomings, no assurance can be given that these improved products will
be successful in meeting customer requirements. The typical price range of an
AVP system is $700,000 to $1,000,000 depending on process configuration.
Vertical Thermal Reactor ("VTR"). Thermco's VTR processes wafers from 100mm
to 200mm in diameter. It operates under computer control, providing specialized
process recipe introduction, cassette-to-cassette automation, monitoring of
critical system functions and automated loading of wafers into the reaction
chamber. In general, the VTR offers comparable reliability, lower contamination
and better process uniformity than horizontal reactors. The VTR can be installed
through-the-wall in a customer's clean room facility and is compatible with
industry standard software interfaces. During fiscal 1994, the Company began
shipping an enhanced version of VTR 7000PLUS. The enhanced VTR 7000PLUS offers
improved process control, uniformity, reduced particle levels, higher
throughput, internal storage capabilities and the industry's standard mechanical
interface (SMIF). The typical price for the Company's VTR products is
approximately $500,000 to $900,000.
Horizontal Processing Systems. The typical horizontal system consists of
four separately controlled cylindrical reaction chambers which are mounted
horizontally, one directly above the other. Horizontal systems are a mature
product family. Sales of these systems have been declining in recent years, as
semiconductor manufacturers have increasingly installed vertical reactors in
their newer fabrication facilities. Thermco expects this decline to continue
despite the current capacity expansion being undertaken by semiconductor
manufacturers. However, manufacturers of less complex devices will continue to
have some need for horizontal processing systems for the foreseeable future. In
addition, a large installed base of horizontal processing systems enables the
Company to generate revenues through the sale of spare parts, upgrades and
retrofits to the installed customer base. Prices for horizontal systems range
from approximately $400,000 to $900,000.
CUSTOMERS
By working closely with its established customer base, the Company is able
to identify new product development opportunities. Repeat sales to existing
customers represent a significant portion of the Company's processing equipment
sales. The Company believes that its installed customer base represents a
significant competitive advantage. The Company's major semiconductor customers
during fiscal 1994 included the following:
<TABLE>
<S> <C>
Advanced Micro Devices Motorola
Atmel National Semiconductor
Harris Semiconductor SGS-Thomson
Hewlett-Packard Samsung
Intel Siemens
IBM Texas Instruments
</TABLE>
The Company relies on a limited number of customers for a substantial
percentage of its net sales. See "Risk Factors -- Customer Concentration." In
fiscal 1994 Intel, Motorola and SGS-Thomson represented 20%, 19% and 11%,
respectively, of net sales. The Company's top five customers represented 58% of
the 1994 sales. In fiscal 1993 and 1994, Intel represented a significant
percentage of Track sales and Track operations were responsible for a
substantial portion of the Company's profits in both fiscal years.
20
<PAGE> 23
SALES, SERVICE AND SUPPORT
Because of the highly technical nature of its products, the Company markets
its products primarily through a direct sales force with sales, service and
spare parts offices worldwide. The Company believes that its field service and
process support capabilities are an important major factor in its selection as
an equipment supplier. Increasingly, semiconductor manufacturers are requiring
seven-day, around the clock, on site or on call support. To meet this need, the
Company is expanding its field service organization, increasing its technical
and process support personnel and enhancing its training programs. Service
personnel are based in field offices throughout the United States, Western
Europe, Japan and the Pacific Rim and increasingly on site at particularly large
customer locations. In addition, each customer has a single designated service
account manager for all its support needs.
BACKLOG
At December 31, 1994, the Company had a backlog of $252,000,000, which
includes 20 Micrascan units from five customers. Backlog increased from
approximately $146,000,000 at September 30, 1993 to approximately $209,000,000
at September 30, 1994 as a result of substantial increases in orders for SVGL
and Thermco products. The Company includes in backlog only those orders to which
a purchase order number has been assigned by the customer and for which delivery
has been specified within 12 months. Such orders are subject to cancellation by
the customer with limited charges. Because of the possibility of customer
changes in delivery schedules, cancellation of orders and potential delays in
product shipments, the Company's backlog as of any particular date may not be
representative of actual sales for any succeeding period.
RESEARCH AND DEVELOPMENT
The market served by the Company is characterized by rapid technological
change. Accordingly, the Company's product and process development programs are
devoted to the development of new systems and processes, including new
generations of products for existing markets, enhancements and extensions of
existing products and custom engineering for specific customers. The Company
believes that its future success will depend, in part, upon its ability to
successfully introduce and manufacture new and enhanced, cost effective
products, which satisfy a broad range of customer needs and achieve market
acceptance. Accordingly, the Company works closely with semiconductor
manufacturers, industry consortia, and research institutions to respond to the
industry's evolving product and process requirements. The Company's research
staff collaborates with key customers in order to evaluate designs,
specifications and prototypes of the Company's new products.
On September 30, 1994, SEMATECH, as part of an overall funding agreement,
purchased warrants for $8,204,000 under which SEMATECH has the right to purchase
1,750,000 shares of the Company's Common Stock at an exercise price of $13.625
per share. The proceeds from the sale of the warrants were received in October
1994 and are to be utilized to increase SVGL's manufacturing capacity to satisfy
anticipated demand for the current and future versions of the Micrascan product.
Additionally, at any time over a three-year period, SEMATECH agreed to fund,
upon SVGL's completion of certain milestones, approximately $22,000,000 for the
future development of Micrascan technology and the increased manufacturing
capacity to build the Micrascan product. During the term of the agreement the
Company is obligated to fund, from its own resources, not less than 120% of the
total amount received from SEMATECH (including the proceeds of the sale of the
warrants) up to a maximum of $36,000,000. To fulfill the Company's obligations,
such amounts must be incurred to further the development of Micrascan
technology, to increase manufacturing capability and capacity for Micrascan
products and to fund related inventory costs.
The Company has historically devoted a significant portion of its personnel
and financial resources to research and development programs. For fiscal years
1992, 1993 and 1994, total gross research and development expenditures were
approximately $42,000,000, $34,000,000, and $32,000,000, respectively, of which
approximately $15,000,000, $8,000,000, and $1,500,000, respectively, was funded
primarily by IBM and SEMATECH for Micrascan technologies and offset against
research and development expenses.
21
<PAGE> 24
COMPETITION
The semiconductor equipment industry is intensely competitive. The Company
faces substantial competition both in the United States and other countries in
all of its products. The trend toward consolidation in the semiconductor
processing equipment industry has made it increasingly important to have the
financial resources necessary to compete effectively across a broad range of
product offerings, to fund customer service and support on a worldwide basis and
to invest in both product and process research and development. Significant
competitive factors include product performance, price and reliability,
familiarity with particular manufacturers' products, established relationships
between suppliers and customers, particulate contamination control and product
availability. While the Company believes that outside Japan and the Pacific Rim
it competes favorably with respect to most of these factors, it has occasionally
been subject to intense price competition with respect to particular orders and
has had difficulty establishing new relationships with certain customers who
have long-standing relationships with other suppliers. Certain of the Company's
existing and potential competitors have substantially greater name recognition,
financial, engineering, manufacturing and marketing resources and customer
service and support capabilities than the Company. Due to the Company's position
in the photolithography market, an announcement of a new product by any of these
large competitors may cause customers to delay purchases until the new product
is introduced.
The Company's competitors can be expected to continue to improve the design
and performance of their current products and processes and to introduce new
products and processes with improved price/performance characteristics. There
can be no assurance that the Company will be able to compete effectively in the
future. The Company faces substantial foreign and domestic competition,
including that from Tokyo Electron, Ltd. ("TEL") and DaiNippon Screen Mfg. Co.,
Ltd. in photoresist processing equipment and TEL and Kokusai Electric Co., Ltd.
in oxidation/diffusion and LPCVD equipment. SVGL competes with other suppliers
of photolithography exposure equipment, including manufacturers of steppers and
projection aligners. SVGL's Micralign products are generally not competitive
with steppers for fabrication of semiconductor devices with line widths smaller
than 1.25 microns. In marketing Micrascan systems, SVGL faces competition from
suppliers employing other technologies, principally I-Line steppers, including
Nikon Corp., Canon and ASM Lithography. Certain stepper manufacturers have
utilized techniques, such as the use of off-axis illumination and phase shift
mask technology, to extend the capabilities of steppers beyond their previously
estimated limits. Although the Company believes that its step and scan system
will compete favorably with steppers employing these techniques, the status of
the development of such techniques is uncertain and the Company expects the
competition from such stepper manufacturers to be intense. For example, both
Nikon and Canon have announced photolithography products using step and scan
technology and a Deep UV illumination source and Nikon has indicated that it
expects to deliver prototypes in early 1996. In addition, the Company believes
that other potential competitors, including ASM Lithography, are developing step
and scan technologies.
22
<PAGE> 25
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the Common
Stock beneficially owned as of February 28, 1995 by (i) each person known by the
Company to own beneficially more than 5% of the Company's Preferred Stock or
Common Stock, (ii) each director of the Company, (iii) the Company's Chief
Executive Officer and each of the other executive officers with an expected
annual compensation in excess of $100,000 and (iv) all directors and executive
officers of the Company as a group. Unless otherwise indicated in the footnotes
to the table below, the persons or entities identified in this table, based on
information provided by such persons, have sole voting and investment power with
respect to all shares shown as beneficially owned by them, subject to community
property laws, where applicable.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO OFFERING(1) AFTER OFFERING(1)
---------------------- SHARES BEING ----------------------
DIRECTORS, OFFICERS AND 5% STOCKHOLDERS NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------------------------------------------- --------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
FMR Corporation........................................ 2,452,300(2) 11.25% -- 2,452,300(2) 9.82%
82 Devonshire Street
Boston, MA 02109-3614
The Perkin-Elmer Corporation........................... 1,825,000(3) 8.37 1,825,000(4) -- --
761 Main Avenue
Norwalk, CT 06859-0071
SEMATECH, Inc.......................................... 1,750,000(4) 7.43 -- 1,750,000(5) 6.55
2706 Montopolis Drive
Austin, TX 78741-6499
T. Rowe Price Associates, Inc.......................... 1,434,500(5) 6.58 -- 1,434,500(3) 5.75
100 East Pratt Street
Baltimore, MD 21202
Intel Corporation...................................... 498,100(6) 2.29 -- 498,100(6) 1.99
2200 Mission College Boulevard
Santa Clara, CA 95052
Motorola Inc........................................... 498,100(6) 2.29 -- 498,100(6) 1.99
1303 East Algonquin
Schaumberg, IL 60195
Texas Instruments Incorporated......................... 498,100(6) 2.29 -- 498,100(6) 1.99
7839 Churchill Way
P.O. Box 650311
Dallas, TX 75265
Papken S. Der Torossian................................ 417,322(7) 1.89 -- 417,322(7) 1.65
Edward A. Dohring...................................... 9,000(8) * -- 9,000(8) *
William A. Hightower................................... -- -- -- --
Steven L. Jensen....................................... 31,000(9) * -- 31,000(9) *
William L. Martin...................................... 3,600(10) * -- 3,600(10) *
John B. McBennett(11).................................. -- * -- -- --
Robert J. Richardson................................... 7,000(12) * -- 7,000(12) *
Larry W. Sonsini....................................... 6,900(13) * -- 6,900(13) *
Nam P. Suh............................................. -- * -- -- *
Russell G. Weinstock................................... 44,574(14) * -- 44,574(14)
All directors and executive officers as a group
(13 persons)(15)..................................... 547,396 2.47 -- 547,396 2.16
</TABLE>
- ---------------
* Less than one percent of the outstanding Common Stock.
(1) Assumes conversion, upon the closing of the offering made hereby, of all
the outstanding shares of Series A and Series B Preferred Stock.
(2) Based on information in a Schedule 13G dated January 6, 1995 filed by FMR
Corporation.
(3) Includes 1,000,000 shares of Common Stock issuable upon conversion upon the
closing of the Offering of the Series A Preferred Stock held by
Perkin-Elmer. See Note (11).
(4) Represents shares of common stock issuable upon exercise of a warrant to
purchase Common Stock at an exercise price of $13.625 per share.
(5) Based on information in a Schedule 13G dated February 14, 1995 filed by T.
Rowe Price Associates, Inc.
(6) Represents shares of Common Stock issuable upon conversion of the Series B
Preferred Stock upon the closing of the offering made hereby.
(7) Includes 283,215 shares subject to options which are exercisable within 60
days after February 28, 1995.
(8) Includes 9,000 shares subject to options which are exercisable within 60
days after February 28, 1995.
(9) Includes 31,000 shares subject to options which are exercisable within 60
days after February 28, 1995.
(10) Includes 2,100 shares subject to options which are exercisable within 60
days after February 28, 1995.
(11) Does not include 1,825,000 shares held by Perkin-Elmer, as to which Mr.
McBennett disclaims beneficial ownership. See note (3)
(12) Includes 7,000 shares subject to options which are exercisable within 60
days after February 28, 1995.
(13) Includes 10,900 shares subject to options which are exercisable within 60
days after February 28, 1995.
(14) Includes 41,750 shares subject to options which are exercisable within 60
days after February 28, 1995.
(15) Does not include 1,825,000 shares held by Perkin-Elmer, as to which Mr.
McBennett disclaims beneficial ownership. Includes 408,965 shares subject
to options which are exercisable within 60 days after February 28, 1995.
23
<PAGE> 26
UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof, each of the U.S. Underwriters named below, for
whom Morgan Stanley & Co. Incorporated, Prudential Securities Incorporated and
Cowen & Company are acting as U.S. Representatives (the "U.S. Underwriters"),
have severally agreed to purchase, and the Company and the Selling Stockholder
have severally agreed to sell to them, and the International Underwriters named
below, for whom Morgan Stanley & Co. International Limited, Prudential-Bache
Securities (U.K.) Inc. and Cowen & Company are serving as International
Representatives (the "International Underwriters"), have severally agreed to
purchase, and the Company and the Selling Stockholder have severally agreed to
sell to them, the respective number of shares of Common Stock set forth opposite
their respective names below:
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
- -------------------------------------------------------------------------------- -----------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated.............................................
Prudential Securities Incorporated............................................
Cowen & Company...............................................................
-----------
Subtotal...................................................................... 4,000,000
-----------
International Underwriters:
Morgan Stanley & Co. International Limited....................................
Prudential-Bache Securities (U.K.) Inc........................................
Cowen & Company...............................................................
-----------
Subtotal...................................................................... 1,000,000
-----------
Total................................................................. 5,000,000
==========
</TABLE>
The U.S. Underwriters and International Underwriters are collectively
referred to as the "Underwriters." The Underwriting Agreement provides that the
obligations of the several Underwriters to pay for and accept delivery of the
shares of Common Stock offered hereby are subject to the approval of certain
legal matters by their counsel and to certain other conditions. The Underwriters
are obligated to take and pay for all of the shares of Common Stock offered
hereby (other than those covered by the over-allotment option described below)
if any such shares are taken.
Pursuant to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions set
forth below, (a) it is not purchasing any U.S. Shares (as defined below) for the
account of anyone other than a United States or Canadian Person (as defined
below) and (b) it has not offered or sold, and will not offer or sell, directly
or indirectly, any U.S. Shares or distribute this Prospectus outside the United
States or Canada or to anyone other than a United States or Canadian Person.
Pursuant to the Agreement Between U.S. and International Underwriters, each
International Underwriter has represented and agreed that, with certain
exceptions set forth below, (a) it is not purchasing any International Shares
(as defined below) for the account of any United States or Canadian
24
<PAGE> 27
Person and (b) it has not offered or sold, and will not offer or sell, directly
or indirectly, any International Shares or distribute this Prospectus within the
United States or Canada or to any United States or Canadian Person. The
foregoing limitations do not apply to stabilization transactions or to certain
other transactions specified in the Agreement Between U.S. and International
Underwriters. As used herein, "United States or Canadian Person" means any
national or resident of the United States or Canada or any corporation, pension,
profit-sharing or other trust or other entity organized under the laws of the
United States or Canada or of any political subdivision thereof (other than a
branch located outside of the United States and Canada of any United States or
Canadian Person) and includes any United States or Canadian branch of a person
who is not otherwise a United States or Canadian Person, and "United States"
means the United States of America, its territories, its possessions and all
areas subject to its jurisdiction. All shares of Common Stock to be offered by
the U.S. Underwriters and International Underwriters under the Underwriting
Agreement are referred to herein as the "U.S. Shares" and the "International
Shares," respectively.
Pursuant to the Agreement Between U.S. and International Underwriters,
sales may be made between the U.S. Underwriters and the International
Underwriters of any number of shares of Common Stock to be purchased pursuant to
the Underwriting Agreement as may be mutually agreed. The per share price of any
shares of Common Stock so sold shall be the public offering price set forth on
the cover page hereof, in United States dollars, less an amount not greater than
the per share amount of the concession to dealers set forth below.
Pursuant to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has agreed
not to offer or sell, any shares of Common Stock, directly or indirectly, in
Canada in contravention of the securities laws of Canada or any province or
territory thereof and has represented that any offer of such shares in Canada
will be made only pursuant to an exemption from the requirement to file a
prospectus in the province or territory of Canada in which such offer is made.
Each U.S. Underwriter has further agreed to send to any dealer who purchases
from it any shares of Common Stock a notice stating in substance that, by
purchasing such shares, such dealer represents and agrees that it has not
offered or sold, and will not offer or sell, directly or indirectly, any of such
shares in Canada in contravention of the securities laws of Canada or any
province or territory thereof and that any offer of shares of Common Stock in
Canada will be made pursuant to an exemption from the requirement to file a
prospectus in the province or territory of Canada in which such offer is made,
and that such dealer will deliver to any other dealer to whom it sells any of
such shares a notice to the foregoing effect.
Pursuant to the Agreement Between U.S. and International Underwriters, each
International Underwriter has represented that (i) it has not offered or sold
and will not offer or sell any shares of Common Stock in the United Kingdom by
means of any document (other than to persons whose ordinary business it is to
buy and sell securities or debentures, whether as principal or agent, or in
circumstances that do not constitute an offer to the public within the meaning
of the Companies Act 1985), (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to such shares in, from or otherwise involving
the United Kingdom, and (iii) it has only issued or passed on and will only
issue or pass on in the United Kingdom any document received by it in connection
with the issue of such shares, to any person of a kind described in Article 9(3)
of the Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1988, or to any person to whom the document may otherwise lawfully be
issued or passed on.
Pursuant to the Agreement Between U.S. and International Underwriters, each
International Underwriter has represented and agreed that it has not offered or
sold, and will not offer or sell, directly or indirectly, in Japan or to or for
the account of any resident thereof, any shares of Common Stock acquired in
connection with this offering, except for offers or sales to Japanese
International Underwriters and except pursuant to any exemption from the
registration requirements of the Securities and Exchange Law of Japan. Each
International Underwriter has further agreed to send to any dealer who purchases
from it any of such shares of Common Stock a notice stating in substance that
such dealer may not offer or sell any of such shares, directly or indirectly, in
Japan or to or for the account of any resident thereof, except pursuant to any
exemption from the registration requirements of the Securities and Exchange Law
of Japan, and that such dealer will send to any other dealer to whom it sells
any of such shares a notice to the foregoing effect.
25
<PAGE> 28
The Underwriters initially propose to offer part of the shares directly to
the public at the public offering price set forth on the cover page hereof and
part to certain dealers at a price that represents a concession not in excess of
$ per share under the public offering price. Any Underwriter may allow, and
such dealers may reallow, a concession not in excess of $ per share to other
Underwriters or to certain other dealers.
The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to an additional 750,000
shares of Common Stock at the public offering price set forth on the cover page
hereof, less underwriting discounts and commissions. The Underwriters may
exercise such option solely for the purpose of covering over-allotments, if any,
made in connection with this offering. To the extent such option is exercised,
each Underwriter will become obligated, subject to certain conditions, to
purchase approximately the same percentage of such additional shares as the
number set forth next to such Underwriter's name in the preceding table bears to
the total number of shares of Common Stock offered hereby.
The Company, the Selling Stockholder and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act of 1933, as amended (the "Securities Act").
See "Risk Factors -- Shares Eligible for Future Sale" for a description of
certain arrangements pursuant to which all officers and directors and certain
other stockholders of the Company have agreed that they will not, without the
prior written consent of Morgan Stanley & Co. Incorporated, sell or otherwise
dispose of Common Stock of the Company for 90 days after the date of this
Prospectus. In addition, the Investors have agreed that they will not, without
the prior written consent of Morgan Stanley & Co. Incorporated, sell or
otherwise dispose of Common Stock of the Company until November 22, 1995. The
Company has agreed in the Underwriting Agreement that it will not, without the
prior written consent of Morgan Stanley & Co. Incorporated, offer, sell,
contract to sell or otherwise dispose of any shares of Common Stock or any
securities convertible into or exchangeable for Common Stock for a period of 90
days after the date of this Prospectus, except pursuant to existing employee
benefit plans and existing warrants.
In connection with this offering, certain Underwriters and selling group
members (if any) or their respective affiliates who are qualified registered
market makers on The Nasdaq National Market, may engage in passive market making
transactions in the Common Stock on The Nasdaq National Market in accordance
with Rule 10b-6A under the Exchange Act during the two business day period
before commencement of offers or sales of the Common Stock. The passive market
making transactions must comply with applicable volume and price limits and be
identified as such. In general, a passive market maker may display its bid at a
price not in excess of the highest independent bid for the security; if all
independent bids are lowered below the passive market maker's bid, however, such
bid must then be lowered when certain purchase limits are exceeded.
LEGAL MATTERS
Wilson, Sonsini, Goodrich & Rosati, P.C., Palo Alto, California, counsel to
the Company, will render an opinion that the shares offered hereby will be duly
authorized, validly issued, fully paid and nonassessable. Larry W. Sonsini, a
member of such firm, is a director of and Secretary of the Company and holds
options to purchase 14,500 shares of Common Stock. Certain legal matters in
connection with the Offering, will be passed upon for the Underwriters by
Morrison & Foerster, Palo Alto, California.
EXPERTS
The consolidated financial statements and a related financial statement
schedule of the Company as of September 30, 1993 and 1994 and for each of the
three years in the period ended September 30, 1994 incorporated by reference in
this Prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports which are incorporated by reference, and
have been so incorporated in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.
26
<PAGE> 29
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-3 (referred to herein, together with all amendments and exhibits, as the
"Registration Statement") under the Securities Act, with respect to the
securities offered by this Prospectus. This Prospectus does not contain all of
the information set forth in the Registration Statement, certain parts of which
have been omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the
securities offered hereby, reference is made to the Registration Statement.
Statements made in this Prospectus as to the contents of any contract or other
document referred to herein are not necessarily complete and, in each instance
in which a copy of such contract is filed as an exhibit to the Registration
Statement, reference is made to such copy and each such statement shall be
deemed qualified in all respects by such reference. Copies of the Registration
Statement may be inspected, without charge, at the offices of the Commission, or
obtained at prescribed rates from the Public Reference Section of the Commission
at the address set forth below.
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities of the Commission located at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's regional offices at Seven World
Trade Center, New York, New York 10048 and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
also can be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Company's
Common Stock is quoted for trading on The Nasdaq National Market and reports,
proxy statements and other information concerning the Company may be inspected
at the offices of the National Association of Securities Dealers, Inc., 9513 Key
West Avenue, Rockville, Maryland 20850.
27
<PAGE> 30
[LOGO]
<PAGE> 31
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may
not be sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This prospectus shall not
constitute an offer to sell or the solicitation of an offer
to buy nor shall there be any sale of these securities in any State in
which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such State.
[Alternate Page]
PROSPECTUS (Subject to Completion)
Issued March 2, 1995
5,000,000 Shares
(LOGO)
COMMON STOCK
------------------------
OF THE 5,000,000 SHARES OF COMMON STOCK BEING OFFERED, 1,000,000 SHARES ARE
BEING OFFERED INITIALLY OUTSIDE OF THE UNITED STATES AND CANADA BY THE
INTERNATIONAL UNDERWRITERS AND 4,000,000 SHARES ARE BEING OFFERED INITIALLY
IN THE UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS. SEE
"UNDERWRITERS." OF THE 5,000,000 SHARES OF COMMON STOCK OFFERED HEREBY,
3,175,000 SHARES ARE BEING SOLD BY SILICON VALLEY GROUP, INC. AND
1,825,000 SHARES ARE BEING SOLD BY THE SELLING STOCKHOLDER. SEE
"PRINCIPAL AND SELLING STOCKHOLDERS." THE COMPANY WILL NOT RECEIVE
ANY OF THE PROCEEDS FROM THE SALE OF SHARES BY THE SELLING
STOCKHOLDER. THE COMPANY'S COMMON STOCK IS TRADED IN THE
OVER-THE-COUNTER MARKET UNDER THE NASDAQ NATIONAL MARKET SYMBOL
"SVGI." THE LAST SALE PRICE FOR THE COMMON STOCK ON FEBRUARY
28, 1995, AS REPORTED ON THE NASDAQ NATIONAL MARKET, WAS
$23 7/16 PER SHARE. SEE "PRICE RANGE OF COMMON STOCK."
------------------------
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
PRICE $ A SHARE
------------------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDER
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Per Share.................... $ $ $ $
Total(3)..................... $ $ $ $
</TABLE>
- ------------
(1) The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriters."
(2) Before deducting expenses payable by the Company estimated at $400,000.
(3) The Company has granted to the Underwriters an option, exercisable
within 30 days of the date hereof, to purchase up to 750,000 additional
Shares at the price to public less underwriting discounts and
commissions for the purpose of covering over-allotments, if any. If the
Underwriters exercise such option in full, the total price to public,
underwriting discounts and commissions and proceeds to Company will be
$ , $ , and $ , respectively. See
"Underwriters."
------------------------
The Shares are offered subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to approval of certain legal matters
by Morrison & Foerster, counsel for the Underwriters. It is expected that
delivery of the Shares will be made on or about , 1995 at the offices
of Morgan Stanley & Co. Incorporated, New York, N.Y., against payment therefor
in New York funds.
------------------------
MORGAN STANLEY & CO. INTERNATIONAL LIMITED
PRUDENTIAL-BACHE SECURITIES
COWEN & COMPANY
, 1995
<PAGE> 32
[ALTERNATE PAGE]
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, AND ANY INFORMATION OR REPRESENTATION NOT
CONTAINED OR INCORPORATED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDER OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO
MAKE SUCH AN OFFERING OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
AT ANY TIME NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE IMPLY THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Documents by Reference............................................ 2
Prospectus Summary......................................................................... 3
The Company................................................................................ 4
Recent Developments........................................................................ 5
Risk Factors............................................................................... 6
Use of Proceeds............................................................................ 11
Price Range of Common Stock................................................................ 12
Dividend Policy............................................................................ 12
Capitalization............................................................................. 13
Selected Consolidated Financial Data....................................................... 14
Business................................................................................... 16
Principal and Selling Stockholders......................................................... 23
Underwriters............................................................................... 24
Legal Matters.............................................................................. 26
Experts.................................................................................... 26
Available Information...................................................................... 27
</TABLE>
------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the Securities
and Exchange Commission (the "Commission") pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act") are incorporated herein by
reference: (1) the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1994; (2) the Company's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1994; (3) the Company's Current Report on Form
8-K filed on March 2, 1995; and (4) the Company's Registration Statement on Form
8-A filed with the Commission on November 23, 1983.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Common Stock hereunder shall be deemed to
be incorporated by reference herein and to be a part hereof from the date of the
filing of such reports and documents. The Company will provide a copy of any or
all of such documents (exclusive of exhibits unless such exhibits are
specifically incorporated by reference herein), without charge, to each person
to whom this Prospectus is delivered, upon written or oral request to the Chief
Financial Officer at the corporate headquarters of the Company, 2240 Ringwood
Avenue, San Jose, California 95131 (telephone 408-434-0500).
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document that also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
THE INTERNATIONAL SHARES MAY NOT BE OFFERED OR SOLD, DIRECTLY OR
INDIRECTLY, IN THE UNITED STATES OR CANADA OR TO ANY PERSON WHO IS A UNITED
STATES OR CANADIAN PERSON, AS PART OF THE DISTRIBUTION OF THE INTERNATIONAL
SHARES. ALL APPLICABLE PROVISIONS OF THE FINANCIAL SERVICES ACT 1986 AND THE
COMPANIES ACT 1985 MUST BE COMPLIED WITH. FOR A DESCRIPTION OF THESE AND OTHER
RESTRICTIONS ON THE OFFERING AND SALE OF SUCH SHARES. SEE "UNDERWRITERS."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE
"UNDERWRITERS."
2
<PAGE> 33
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
SEC Registration Fee........................................................... $ 43,006
NASD Filing Fee................................................................ 12,972
The Nasdaq National Market Listing Fee......................................... 17,500
Blue Sky Fees and Expenses..................................................... 10,000
Legal Fees and Expenses........................................................ 125,000
Accounting Fees and Expenses................................................... 100,000
Printing and Engraving Expenses................................................ 55,000
Transfer Agent and Registrar Fees.............................................. 2,500
Miscellaneous.................................................................. 34,022
--------
Total................................................................ $400,000
========
</TABLE>
All of the amounts shown other than the SEC, NASD and Nasdaq fee are
estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware General Corporation Law authorizes a court to award, or a
corporation's Board of Directors to grant, indemnity to directors and officers
in terms sufficiently broad to permit such indemnification under certain
circumstances for liabilities (including reimbursement for expenses incurred)
arising out of the Securities Act of 1933, as amended (the "Securities Act").
Article VI of the Company's Bylaws provides for indemnification of its
directors, officers, employees and other agents to the maximum extent permitted
by the Delaware General Corporation Law. The Underwriting Agreement (Exhibit
1.1) provides for the indemnification by the Underwriters, of the Registrant and
its officers and directors, and by the Registrant of the Underwriters, for
certain liabilities arising under the Securities Act, or otherwise.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
------
<C> <S>
1.1 Form of Underwriting Agreement.
5.1 Opinion of Wilson, Sonsini, Goodrich & Rosati, P.C. as to the legality of the
shares of common stock being registered
23.1 Consent of Deloitte & Touche LLP (see page II-4)
25.1 Power of Attorney (see page II-3)
</TABLE>
II-1
<PAGE> 34
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the Delaware Corporation Law, the Underwriting Agreement
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person the Registrant in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered hereunder, the Registrant will,
unless in the opinion of its counsel the question has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4), or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) For the purpose of determining any liability under the Act, each
filing of the Registrant's annual report pursuant to Section 13(a) or 15(d)
of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in
the Registration Statement shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-2
<PAGE> 35
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Jose, State of California, on the 1st day of
March, 1995.
SILICON VALLEY GROUP, INC.
By: /s/ Russell G. Weinstock
Russell G. Weinstock
Vice President, Finance and
Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Russell G. Weinstock, his
attorney-in-fact, with the power of substitution, for him in any and all
capacities, to sign any and all amendments to this Registration Statement
(including post-effective amendments), and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ---------------------------------- ------------------
<S> <C> <C>
/s/ Papken S. Der Torossian Chairman of the Board and Chief March 1, 1995
(Papken S. Der Torossian) Executive Officer
/s/ Russell G. Weinstock Vice President, Finance and Chief March 1, 1995
(Russell G. Weinstock) Financial Officer
/s/ William A. Hightower Director March 1, 1995
(William A. Hightower)
/s/ Nam P. Suh Director March 1, 1995
(Nam P. Suh)
/s/ William L. Martin Director March 1, 1995
(William L. Martin)
/s/ John B. McBennett Director March 1, 1995
(John B. McBennett)
/s/ Larry W. Sonsini Director March 1, 1995
(Larry W. Sonsini)
</TABLE>
II-3
<PAGE> 36
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Silicon Valley Group,
Inc. on Form S-3 of our reports dated October 22, 1994 included and incorporated
by reference in the Annual Report on Form 10-K of Silicon Valley Group, Inc. for
the year ended September 30, 1994. We also consent to the reference to us under
the headings "Selected Consolidated Financial Data" and "Experts" in such
Prospectus.
DELOITTE & TOUCHE LLP
San Jose, California
February 28, 1995
II-4
<PAGE> 37
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ------------------------------------------------------------- -------------
<C> <S> <C>
1.1 Form of Underwriting Agreement.
5.1 Opinion of Wilson, Sonsini, Goodrich & Rosati, P.C.
23.1 Consent of Deloitte & Touche LLP (see page II-4).
25.1 Power of Attorney (see Page II-3).
</TABLE>
<PAGE> 1
5,000,000 SHARES
SILICON VALLEY GROUP, INC.
COMMON STOCK ($0.01 PER SHARE PAR VALUE)
UNDERWRITING AGREEMENT
March , 1995
Morgan Stanley & Co. Incorporated
Prudential Securities Incorporated
Cowen & Company
as Representatives of the several U.S. Underwriters
named in Schedule I herein
c/o Morgan Stanley & Co. Incorporated
1251 Avenue of the Americas
New York, New York 10020
Morgan Stanley & Co. International Limited
Prudential-Bache Securities (U.K.) Inc.
Cowen & Company
as Representatives of the several International
Underwriters named in Schedule II herein
c/o Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
England
Dear Sirs:
Silicon Valley Group, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to the several Underwriters (as defined below), and
The Perkin-Elmer Corporation (the "Selling Stockholder") proposes to sell to the
several Underwriters, an aggregate of 5,000,000 shares of the Common Stock
($0.01 per share par value) of the Company (the "Firm Shares"), of which
[3,175,000] shares are to be issued and sold by the Company and [1,825,000]
shares are to be sold by the Selling Stockholder, which shall be all of the
shares of Common Stock ($0.01 per share par value) of the Company owned by the
Selling Stockholder on the Closing Date, as hereinafter defined.
It is understood that, subject to the conditions hereinafter stated,
4,000,000 Firm Shares (the "U.S. Firm Shares") will be sold to the several U.S.
Underwriters named in Schedule I hereto (the "U.S. Underwriters") in connection
with the offering and sale of such U.S. Firm Shares in the United States and
Canada to United States and Canadian Persons (as such terms are defined in the
Agreement Between U.S. and International Underwriters of even date herewith),
and 1,000,000 Firm Shares (the "International Shares") will be sold to the
several International Underwriters named in Schedule II hereto (the
"International Underwriters") in connection with the offering and sale of such
International Shares outside the United States and Canada to persons other than
United States and Canadian Persons. Morgan Stanley & Co. Incorporated,
Prudential Securities Incorporated and Cowen & Company shall act as
representatives (the "U.S. Representatives") of the several U.S. Underwriters,
and Morgan Stanley & Co. International Limited, Prudential-Bache Securities
(U.K.) Inc. and Cowen & Company shall act as representatives (the "International
Representatives") of the several International Underwriters. The U.S.
Underwriters and the International Underwriters are hereinafter collectively
referred to as the Underwriters.
1
<PAGE> 2
The Company also proposes to issue and sell to the several U.S.
Underwriters not more than an additional 750,000 shares of its Common Stock
($0.01 per share par value) (the "Additional Shares") if and to the extent that
the U.S. Representatives shall have determined to exercise, on behalf of the
U.S. Underwriters, the right to purchase such shares of common stock granted to
the U.S. Underwriters in Article III hereof. The Firm Shares and the Additional
Shares are hereinafter collectively referred to as the Shares. The shares of
Common Stock ($0.01 per share par value) of the Company to be outstanding after
giving effect to the sales contemplated hereby are hereinafter referred to as
the Common Stock. The Company and the Selling Stockholder are hereinafter
sometimes collectively referred to as the Sellers.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement relating to the Shares. The registration
statement contains two prospectuses to be used in connection with the offering
and sales of the Shares: the U.S. prospectus, to be used in connection with the
offering and sale of Shares in the United States and Canada to United States and
Canadian Persons, and the international prospectus, to be used in connection
with the offering and sale of Shares outside the United States and Canada to
persons other than United States and Canadian Persons. The international
prospectus is identical to the U.S. prospectus except for the outside and inside
front cover pages. The registration statement as amended at the time it becomes
effective, including the information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Securities Act of 1933, as amended (the "Securities Act"), is hereinafter
referred to as the Registration Statement; the U.S. prospectus and the
international prospectus in the respective forms first used to confirm sales of
Shares are hereinafter collectively referred to as the Prospectus (including, in
the case of all references to the Registration Statement and the Prospectus,
documents incorporated therein by reference).
I.
The Company represents and warrants to each of the Underwriters that:
(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect,
and no proceedings for such purpose are pending before or threatened by the
Commission.
(b) (i) Each document, if any, filed or to be filed pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and
incorporated by reference in the Prospectus complied or will comply when so
filed in all material respects with the Exchange Act and the applicable
rules and regulations of the Commission thereunder, (ii) each part of the
Registration Statement, when such part became effective, did not contain
and each such part, as amended or supplemented, if applicable, will not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading, (iii) the Registration Statement and the Prospectus
comply and, as amended or supplemented, if applicable, will comply in all
material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder and (iv) the Prospectus does not
contain and, as amended or supplemented, if applicable, will not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the representations
and warranties set forth in this paragraph 1(b) do not apply to statements
or omissions in the Registration Statement or the Prospectus based upon
information relating to any Underwriter furnished to the Company in writing
by such Underwriter through you expressly for use therein.
(c) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its property
and to conduct its business as described in the Prospectus and is duly
qualified to transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the failure
to be so qualified or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
2
<PAGE> 3
(d) Each subsidiary of the Company has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to
own its property and to conduct its business as described in the Prospectus
and is duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent that
the failure to be so qualified or be in good standing would not have a
material adverse effect on the Company and its subsidiaries, taken as a
whole.
(e) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.
(f) The shares of Common Stock (including the Firm Shares to be sold
by the Selling Stockholder) outstanding prior to the issuance of the Shares
to be sold by the Company have been duly authorized and are validly issued,
fully paid and non-assessable.
(g) The Shares to be sold by the Company have been duly authorized
and, when issued and delivered in accordance with the terms of this
Agreement, will be validly issued, fully paid and non-assessable, and the
issuance of such Shares will not be subject to any preemptive or similar
rights.
(h) This Agreement has been duly authorized, executed and delivered by
the Company.
(i) The execution and delivery by the Company of, and the performance
by the Company of its obligations under, this Agreement will not contravene
any provision of applicable law or the certificate of incorporation or
by-laws of the Company or any agreement or other instrument binding upon
the Company or any of its subsidiaries that is material to the Company and
its subsidiaries, taken as a whole, or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company or
any subsidiary, and no consent, approval, authorization or order of or
qualification with any governmental body or agency is required for the
performance by the Company of its obligations under this Agreement, except
such as may be required by the securities or Blue Sky laws of the various
states in connection with the offer and sale of the Shares.
(j) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from that
set forth in the Prospectus.
(k) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party or to
which any of the properties of the Company or any of its subsidiaries is
subject that are required to be described in the Registration Statement or
the Prospectus and are not so described or any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not described or filed as required.
(l) Each of the Company and its subsidiaries has all necessary
consents, authorizations, approvals, orders, certificates and permits of
and from, and has made all declarations and filings with, all federal,
state, local and other governmental authorities, all self-regulatory
organizations and all courts and other tribunals, to own, lease, license
and use its properties and assets and to conduct its business in the manner
described in the Prospectus, except to the extent that the failure to
obtain or file would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole.
(m) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Securities Act, complied when so filed in
all material respects with the Securities Act and the rules and regulations
of the Commission thereunder.
(n) The Company is not an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended.
3
<PAGE> 4
(o) The Company and its subsidiaries are (i) in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and
conditions of such permits, licenses or approvals would not, singly or in
the aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(p) In the ordinary course of its business, the Company conducts a
periodic review of the effect of Environmental Laws on the business,
operations and properties of the Company and its subsidiaries, in the
course of which it identifies and evaluates associated costs and
liabilities (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance
with Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties). On the basis of such review, the Company has reasonably concluded
that such associated costs and liabilities would not, singly or in the
aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(q) The Company has complied with all provisions of Section 517.075,
Florida Statutes (Chapter 92-198, Laws of Florida).
II.
The Selling Stockholder represents and warrants to each of the Underwriters
that:
(a) This Agreement has been duly authorized, executed and delivered by
or on behalf of the Selling Stockholder.
(b) The execution and delivery by the Selling Stockholder of, and the
performance by the Selling Stockholder of its obligations under, this
Agreement will not contravene any provision of applicable law, or the
certificate of incorporation or by-laws of the Selling Stockholder, or any
agreement or other instrument binding upon the Selling Stockholder or any
judgment, order or decree of any governmental body, agency or court having
jurisdiction over the Selling Stockholder, and no consent, approval,
authorization or order of or qualification with any governmental body or
agency is required for the performance by the Selling Stockholder of its
obligations under this Agreement, except such as may be required by the
securities or Blue Sky laws of the various states or other jurisdictions in
connection with the offer and sale of the Shares.
(c) The Selling Stockholder has, and on the Closing Date will have,
valid marketable title to the Firm Shares to be sold by the Selling
Stockholder and the legal right and power, and all authorization and
approval required by law, to enter into this Agreement and to sell,
transfer and deliver the Firm Shares to be sold by the Selling Stockholder.
(d) Delivery of the Firm Shares to be sold by the Selling Stockholder
pursuant to this Agreement will pass marketable title to such Firm Shares
free and clear of any security interests, claims, liens, equities and other
encumbrances.
(e) All information furnished in writing by or on behalf of the
Selling Stockholder for use in the Registration Statement and Prospectus
is, and on the Closing Date will be, true, correct, and complete, and does
not, and on the Closing Date will not, contain any untrue statement of a
material fact or omit to state any material fact necessary to make such
information not misleading.
(f) To the best of the Selling Stockholder's knowledge after due
inquiry, each of the Company's representations and warranties set forth in
Article I hereof is true and correct.
4
<PAGE> 5
III.
Each of the Sellers, severally and not jointly, hereby agrees to sell to
the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from such
Sellers at $ a share (the purchase price) the respective number of Firm
Shares (subject to such adjustments to eliminate fractional shares as you may
determine) that bears the same proportion to the number of Firm Shares to be
sold by such Seller as the aggregate number of Firm Shares set forth in
Schedules I and II hereto opposite the name of such Underwriter bears to the
total number of Firm Shares.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the U.S. Underwriters the Additional Shares, and the U.S. Underwriters shall
have a one-time right to purchase, severally and not jointly, up to 750,000
Additional Shares at the purchase price. Additional Shares may be purchased as
provided in Article V hereof solely for the purpose of covering over-allotments
made in connection with the offering of the Firm Shares. If any Additional
Shares are to be purchased, each U.S. Underwriter agrees, severally and not
jointly, to purchase the number of Additional Shares (subject to such
adjustments to eliminate fractional shares as you may determine) that bears the
same proportion to the total number of Additional Shares to be purchased as the
number of Firm Shares set forth in Schedule I hereto opposite the name of such
U.S. Underwriter bears to the total number of Firm Shares.
The Company hereby agrees that, without the prior written consent of Morgan
Stanley & Co., Incorporated, it will not offer, sell, contract to sell or
otherwise dispose of any shares of common stock of the Company or any securities
convertible into or exercisable or exchangeable for such common stock for a
period of ninety (90) days after the date of the public offering of the Shares,
other than (i) the Shares to be sold hereunder and (ii) any shares of such
common stock which may be sold by the Company upon the exercise of an option or
warrant or the conversion of a security in any such case only to the extent such
security was outstanding on the date hereof.
IV.
The Sellers are advised by you that the Underwriters propose to make a
public offering of their respective portions of the Shares as soon after the
Registration Statement and this Agreement have become effective as in your
judgment is advisable. The Sellers are further advised by you that the Shares
are to be offered to the public at $ a share (the public offering
price) and to certain dealers selected by you at a price that represents a
concession not in excess of $ a share under the public offering price,
and that any Underwriter may allow, and such dealers may reallow, a concession,
not in excess of $ a share, to any Underwriter or to certain other
dealers.
Each U.S. Underwriter hereby makes to and with the Sellers the
representations and agreements of such U.S. Underwriter contained in the fifth
and sixth paragraphs of Article III of the Agreement Between U.S. and
International Underwriters of even date herewith. Each International Underwriter
hereby makes to and with the Sellers the representations and agreements of such
International Underwriter contained in the seventh, eighth, ninth and tenth
paragraphs of Article III of such Agreement.
V.
Payment for the Firm Shares to be sold by each Seller shall be made by
certified or official bank check or checks payable to the order of such Seller
in New York Clearing House funds at the office of Wilson, Sonsini, Goodrich &
Rosati, 650 Page Mill Road, Palo Alto, California 94304-1050, at 7:00 A.M.,
local time, on March , 1995, or at such other time on the same or such other
date, not later than April , 1995, as shall be designated in writing by you.
The time and date of each such payment are hereinafter referred to as the
Closing Date.
5
<PAGE> 6
Payment for any Additional Shares shall be made by certified or official
bank check or checks payable to the order of the Company in New York Clearing
House funds at the office of Wilson, Sonsini, Goodrich & Rosati, 650 Page Mill
Road, Palo Alto, California 94304-1050, at 7:00 A.M., local time, on such date
(which may be the same as the Closing Date but shall in no event be earlier than
the Closing Date nor later than ten (10) business days after the giving of the
notice hereinafter referred to) as shall be designated in a written notice from
you to the Company of your determination, on behalf of the Underwriters, to
purchase a number, specified in said notice, of Additional Shares, or on such
other date, in any event not later than May , 1995, as shall be designated in
writing by you. The time and date of such payment are hereinafter referred to as
the Option Closing Date. The notice of the determination to exercise the option
to purchase Additional Shares and of the Option Closing Date may be given at any
time within thirty (30) days after the date of this Agreement.
Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than two (2) full business days prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the purchase price therefor.
VI.
The obligations of the Sellers and the several obligations of the
Underwriters hereunder are subject to the condition that the Registration
Statement shall have become effective not later than the date hereof.
The several obligations of the Underwriters hereunder are subject to the
following further conditions:
(a) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, there shall not have occurred any change, or any
development involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations, of the Company and
its subsidiaries, taken as a whole, from that set forth in the Registration
Statement, that, in your judgment, is material and adverse and that makes
it, in your judgment, impracticable to market the Shares on the terms and
in the manner contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of
the Company, to the effect that the representations and warranties of the
Company contained in this Agreement are true and correct as of the Closing
Date and that the Company has complied with all of the agreements and
satisfied all of the conditions on its part to be performed or satisfied
hereunder on or before the Closing Date. The officer signing and delivering
such certificate may rely upon the best of his knowledge as to proceedings
threatened.
(c) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by the Selling Stockholder,
to the effect that the representations and warranties of the Selling
Stockholder contained herein are true and correct as of the Closing Date
and the Selling Stockholder shall have complied with all of the agreements
and satisfied all of the conditions on its part to be performed or
satisfied hereunder on or before the Closing Date.
(d) You shall have received on the Closing Date an opinion of Wilson,
Sonsini, Goodrich & Rosati, counsel for the Company, dated the Closing
Date, to the effect that:
(i) the Company has been duly incorporated, is validly existing as
a corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its property
and to conduct its business as described in the Prospectus and is duly
qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent
that the failure to
6
<PAGE> 7
be so qualified or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole;
(ii) each subsidiary of the Company has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority
to own its property and to conduct its business as described in the
Prospectus and is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or
its ownership or leasing of property requires such qualification, except
to the extent that the failure to be so qualified or be in good standing
would not have a material adverse effect on the Company and its
subsidiaries taken as a whole;
(iii) the authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus;
(iv) the shares of Common Stock (including the Firm Shares to be
sold by the Selling Stockholder) outstanding prior to the issuance of
the Shares to be sold by the Company have been duly authorized and are
validly issued, fully paid and non-assessable;
(v) the Shares to be sold by the Company have been duly authorized
and, when issued and delivered in accordance with the terms of this
Agreement, will be validly issued, fully paid and non-assessable, and
the issuance of such Shares will not be subject to any preemptive or, to
the best of such counsel's knowledge, similar rights;
(vi) this Agreement has been duly authorized, executed and
delivered by the Company;
(vii) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement will
not contravene any provision of applicable law or the certificate of
incorporation or by-laws of the Company or, to the best of such
counsel's knowledge, any agreement or other instrument binding upon the
Company or any of its subsidiaries that is material to the Company and
its subsidiaries, taken as a whole, or, to the best of such counsel's
knowledge, any judgment, order or decree of any governmental body,
agency or court having jurisdiction over the Company or any subsidiary,
and no consent, approval, authorization or order of or qualification
with any governmental body or agency is required for the performance by
the Company of its obligations under this Agreement, except such as may
be required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Shares;
(viii) the statements (1) in the Prospectus under the caption
"Underwriters," (2) regarding the Company's Common Stock set forth in
the Company's Registration Statement on Form 8-A, and (3) in the
Registration Statement in Item 15, in each case insofar as such
statements constitute summaries of the legal matters, documents or
proceedings referred to therein, fairly present the information called
for with respect to such legal matters, documents and proceedings and
fairly summarize the matters referred to therein in all material
respects;
(ix) after due inquiry, such counsel does not know of any legal or
governmental proceeding pending or threatened to which the Company or
any of its subsidiaries is a party or to which any of the properties of
the Company or any of its subsidiaries is subject that are required to
be described in the Registration Statement or the Prospectus and are not
so described or of any statutes, regulations, contracts or other
documents that are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not described or filed as required;
(x) the Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in
the Investment Company Act of 1940, as amended;
(xi) such counsel is of the opinion that the Company is (1) in
compliance with any and all applicable Environmental Laws, (2) has
received all permits, licenses or other approvals required of it under
applicable Environmental Laws to conduct its business, and (3) is in
compliance with all terms and conditions of any such permit, license or
approval, except where such noncompliance with
7
<PAGE> 8
Environmental Laws, failure to receive required permits, licenses or
other approvals or failure to comply with the terms and conditions of
such permits, licenses or approvals would not, singly or in the
aggregate, have a material adverse effect of the Company; and
(xii) such counsel (1) is of the opinion that each document, if
any, filed pursuant to the Exchange Act and incorporated by reference in
the Registration Statement and the Prospectus (except for financial
statements and schedules as to which such counsel need not express any
opinion) complied when so filed as to form in all material respects with
the Exchange Act, and the applicable rules and regulations of the
Commission thereunder, (2) is of the opinion that the Registration
Statement and Prospectus (except for financial statements and schedules
included therein as to which such counsel need not express any opinion)
comply as to form in all material respects with the Securities Act and
the rules and regulations of the Commission thereunder, (3) believes
that (except for financial statements and schedules as to which such
counsel need not express any belief) the Registration Statement and the
prospectus included therein at the time the Registration Statement
became effective did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (4) believes
that (except for financial statements and schedules as to which such
counsel need not express any belief) the Prospectus does not contain any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(e) You shall have received on the Closing Date an opinion of counsel
for the Selling Stockholder, dated the Closing Date, to the effect that:
(i) this Agreement has been duly authorized, executed and delivered
by or on behalf of the Selling Stockholder;
(ii) the execution and delivery by the Selling Stockholder of, and
the performance by the Selling Stockholder of its obligations under,
this Agreement will not contravene any provision of applicable law, or
the certificates of incorporation or by-laws of the Selling Stockholder,
or, to the best of such counsel's knowledge, any agreement or other
instrument binding upon the Selling Stockholder or, to the best of such
counsel's knowledge, any judgment, order or decree of any governmental
body, agency or court having jurisdiction over the Selling Stockholder,
and no consent, approval, authorization or order of or qualification
with any governmental body or agency is required for the performance by
the Selling Stockholder of its obligations under this Agreement, except
such as may be required by the Securities Act or the securities or Blue
Sky laws of the various states in connection with the offer and sale of
the U.S. Firm Shares by the U.S. Underwriters;
(iii) the Selling Stockholder has valid marketable title to the
Firm Shares to be sold by the Selling Stockholder and has the legal
right and power, and all authorization and approval required by law, to
enter into this Agreement to sell, transfer and deliver the Firm Shares
to be sold by the Selling Stockholder; and
(iv) delivery of the Firm Shares to be sold by the Selling
Stockholder pursuant to this Agreement will pass marketable title to
such Firm Shares free and clear of any security interests, claims,
liens, equities and other encumbrances.
(f) You shall have received on the Closing Date an opinion of Morrison
& Foerster, counsel for the Underwriters, dated the Closing Date, covering
the matters referred to in subparagraphs (v), (vi) and (viii) (but only as
to the statements in the Prospectus under the caption "Underwriters") and
clauses (3) and (4) of (xii) of paragraph (d) above.
With respect to subparagraph (xii) of paragraph (d) above, Wilson, Sonsini,
Goodrich & Rosati and Morrison & Foerster may make such statement based upon
their participation in the preparation of the Registration Statement and
Prospectus and any amendments or supplements thereto (other than the documents
incorporated by reference) and upon review and discussion of the contents
thereof, but are without independent check or verification except as specified.
8
<PAGE> 9
The opinions of Wilson, Sonsini, Goodrich & Rosati and counsel to the
Selling Stockholder described in paragraphs (d) and (e) above shall be rendered
to you at the request of the Company or the Selling Stockholder, as the case may
be, and shall so state therein.
(f) You shall have received, on each of the date hereof and the
Closing Date, a letter dated the date hereof or the Closing Date, as the
case may be, in form and substance satisfactory to you, from Deloitte &
Touche LLP, independent public accountants, containing statements and
information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and
certain financial information contained in, or incorporated by reference
into, the Registration Statement and the Prospectus.
(g) The "lock-up" agreements between you and certain shareholders,
officers and directors of the Company relating to sales of shares of Common
Stock of the Company or any securities convertible into or exercisable or
exchangeable for such Common Stock, delivered to you on or before the date
hereof, shall be in full force and effect on the Closing Date.
The several obligations of the Underwriters to purchase Additional Shares
hereunder are subject to the delivery to you on the Option Closing Date of such
documents as you may reasonably request with respect to the good standing of the
Company, the due authorization and issuance of the Additional Shares, other
matters related to the issuance of the Additional Shares and an opinion of
counsel in form and substance satisfactory to counsel for the Underwriters.
VII.
In further consideration of the agreements of the Underwriters herein
contained, the Company covenants as follows:
(a) To furnish you, without charge, seven (7) signed copies of the
Registration Statement (including exhibits thereto and documents
incorporated by reference therein) and to each other Underwriter a copy of
the Registration Statement (without exhibits thereto but including
documents incorporated by reference therein) and, during the period
mentioned in paragraph (c) below, as many copies of the Prospectus, any
documents incorporated by reference therein, and any supplements and
amendments thereto as you may reasonably request. The terms "supplement"
and "amendment" or "amend" as used in this Agreement shall include all
documents subsequently filed by the Company with the Commission pursuant to
the Exchange Act, that are deemed to be incorporated by reference in the
Prospectus.
(b) Before amending or supplementing the Registration Statement or the
Prospectus, to furnish to you a copy of each such proposed amendment or
supplement and to file no such proposed amendment or supplement to which
you reasonably object.
(c) If, during such period after the first date of the public offering
of the Shares as in the opinion of your counsel the Prospectus is required
by law to be delivered in connection with sales by an Underwriter or
dealer, any event shall occur or condition exist as a result of which it is
necessary to amend or supplement the Prospectus in order to make the
statements therein, in the light of the circumstances when the Prospectus
is delivered to a purchaser, not misleading, or if, in the opinion of your
counsel, it is necessary to amend or supplement the Prospectus to comply
with law, forthwith to prepare, file with the Commission and furnish, at
its own expense, to the Underwriters and to the dealers (whose names and
addresses you will furnish to the Company) to which Shares may have been
sold by you on behalf of the Underwriters and to any other dealers upon
request, either amendments or supplements to the Prospectus so that the
statements in the Prospectus as so amended or supplemented will not, in the
light of the circumstances when the Prospectus is delivered to a purchaser,
be misleading or so that the Prospectus, as amended or supplemented, will
comply with law.
(d) To use reasonable efforts to qualify the Shares for offer and sale
under the securities or Blue Sky laws of such jurisdictions as you shall
reasonably request.
9
<PAGE> 10
(e) To make generally available to the Company's security holders and
to you as soon as practicable an earning statement covering the
twelve-month period ending June 30, 1996 that satisfies the provisions of
Section 11(a) of the Securities Act and the rules and regulations of the
Commission thereunder.
(f) To pay all expenses incident to the performance of its obligations
under this Agreement, including (i) the preparation of filing and the
Registration Statement and the Prospectus and all amendments and
supplements thereto, (ii) the preparation, issuance and delivery of the
Shares, including any transfer taxes payable in connection with the
transfer of the Shares to the Underwriters, (iii) the fees and
disbursements of the Company's counsel and accountants, (iv) the
qualification of the Shares under state securities or Blue Sky laws in
accordance with the provisions of paragraph (d) above, including filing
fees and the fees and disbursements of counsel for the Underwriters in
connection therewith and in connection with the preparation of any Blue Sky
or Legal Investment Memoranda, (v) the printing and delivery to the
Underwriters, in quantities as hereinabove stated, copies of the
Registration Statement and all amendments thereto and of each preliminary
prospectus and the Prospectus and any amendments or supplements thereto,
(vi) the printing and delivery to the Underwriters of copies of any Blue
Sky or Legal Investment Memoranda, (vii) the filing fees and expenses if
any, incurred with respect to any filing with the National Association of
Securities Dealers, Inc., made in connection with the offering of the
Shares, (viii) any expenses incurred by the Company in connection with a
"road show" presentation to potential investors and (ix) the listing of the
Common Stock on The Nasdaq National Market.
VIII.
The Selling Stockholder, agrees to pay or cause to be paid (i) all taxes,
if any, on the transfer and sale of the Firm Shares being sold by the Selling
Stockholder and (ii) if the Company shall not have otherwise paid such costs and
expenses, the Selling Stockholder's pro rata share of all costs and expenses
incident to the performance of the obligations of the Selling Stockholder and
the Company under this Agreement, including, but not limited to, all expenses
incident to the delivery of the Shares, the fees and expenses of counsel and
accountants for the Selling Stockholder and the Company, the costs and expenses
incident to the preparation, printing and filing of the Registration Statement
(including all exhibits thereto) and the Prospectus and any amendments or
supplements thereto, the expenses of qualifying the Shares under the securities
or Blue Sky laws of various jurisdictions, all fees payable in connection with
any review of the offering of the Shares by the National Association of
Securities Dealers, Inc., and the cost of furnishing to the Underwriters the
required copies of the Registration Statement and Prospectus and any amendments
or supplements thereto. Nothing herein shall affect any agreement between the
Company and the Selling Stockholder with respect to the payment for or
reimbursement of such costs and expenses.
IX.
The Company agrees to indemnify and hold harmless each Underwriter and the
Selling Stockholder, its directors and officers and each person, if any, who
controls any Underwriter or the Selling Stockholder within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, from and
against any and all losses, claims, damages and liabilities (including, without
limitation, any legal or other expenses reasonably incurred in connection with
defending or investigating any such action or claim) caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any amendment thereof, any preliminary prospectus or
the Prospectus (as amended or supplemented if the Company shall have furnished
any amendments or supplements thereto), or caused by 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, except insofar as such
losses, claims, damages or liabilities are caused by any such untrue statement
or omission or alleged untrue statement or omission based upon information
relating to any Underwriter furnished to the Company in writing by such
Underwriter through you expressly for use therein.
The Selling Stockholder agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of either Section 15 of the Securities Act or Section 20 of
10
<PAGE> 11
the Exchange Act and the Company, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the Company within
the meaning of either such Section, from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating any
such action or claim) caused by any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or any amendment
thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), or caused by 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; provided however, that the Selling Stockholder shall not
be required to provide indemnity to the Underwriters or controlling persons
hereunder until the Underwriters or controlling persons seeking indemnification
shall have first made a demand on the Company for payment with respect to any
such loss, claim, damage, liability or expense and the Company shall have either
rejected such demand or failed to make such requested payment within thirty (30)
days after receipt thereof; and provided further, that the Selling Stockholder
shall not be required to provide indemnity to the Company, its directors, its
officers who sign the Registration Statement or persons, if any, who control the
Company, except with reference to information relating to the Selling
Stockholder furnished to the Company in writing by the Selling Stockholder
expressly for use in the Registration Statement, any preliminary prospectus, the
Prospectus or any amendments or supplements thereto.
Each Underwriter agrees, severally and not jointly, to indemnify and hold
harmless the Company, the Selling Stockholder, the directors of the Company, the
officers of the Company who sign the Registration Statement and each person, if
any, who controls the Company or the Selling Stockholder within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act from
and against any and all losses, claims, damages and liabilities (including,
without limitation, any legal or other expenses reasonably incurred in
connection with defending or investigating any such action or claim) caused by
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any amendment thereof, any preliminary prospectus
or the Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto), or caused by 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, but only with
reference to information relating to such Underwriter furnished to the Company
in writing by such Underwriter through you expressly for use in the Registration
Statement, any preliminary prospectus, the Prospectus or any amendments or
supplements thereto.
In case any proceeding (including any governmental investigation) shall be
instituted involving any person in respect of which indemnity may be sought
pursuant to any of the three preceding paragraphs, such person (the "indemnified
party") shall promptly notify the person against whom such indemnity may be
sought (the "indemnifying party") in writing and the indemnifying party, upon
request of the indemnified party, shall retain counsel reasonably satisfactory
to the indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for (a) the fees and expenses of more than one separate firm (in
addition to any local counsel) for all Underwriters and all persons, if any, who
control any Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, (b) the fees and expenses of
more than one separate firm (in addition to any local counsel) for the Company,
its directors, its officers who sign the Registration Statement and each person,
if any, who controls the Company within the meaning of either such Section and
(c) the fees and expenses of more than one separate firm (in addition to any
local counsel) for the Selling Stockholder and all persons, if any, who control
the Selling Stockholder within the meaning of either such Section, and that all
such fees and
11
<PAGE> 12
expenses shall be reimbursed as they are incurred. In the case of any such
separate firm for the Underwriters and such control persons of Underwriters,
such firm shall be designated in writing by Morgan Stanley & Co. Incorporated.
In the case of any such separate firm for the Company, and such directors,
officers and control persons of the Company, such firm shall be designated in
writing by the Company. In the case of any such separate firm for the Selling
Stockholder and such controlling persons of the Selling Stockholder, such firm
shall be designated in writing by the Selling Stockholder. The indemnifying
party shall not be liable for any settlement of any proceeding effected without
its written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by the second
and third sentences of this paragraph, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than thirty (30)
days after receipt by such indemnifying party of the aforesaid request and (ii)
such indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all liability
on claims that are the subject matter of such proceeding.
If the indemnification provided for in the first, second or third paragraph
of this Article IX is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities referred to therein, then
each indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party or parties on the other hand from the offering of the Shares
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the indemnifying party or parties on the one hand and of the indemnified party
or parties on the other hand in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by the Sellers
on the one hand and the Underwriters on the other hand in connection with the
offering of the Shares shall be deemed to be in the same respective proportions
as the net proceeds from the offering of the Shares (before deducting expenses)
received by each Seller and the total underwriting discounts and commissions
received by the Underwriters, in each case as set forth in the table on the
cover of the Prospectus, bear to the aggregate public offering price of the
Shares. The relative fault of the Sellers on the one hand and the Underwriters
on the other hand shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Sellers or by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Underwriters' respective obligations to contribute
pursuant to this Article IX are several in proportion to the respective number
of Shares they have purchased hereunder, and not joint.
The Sellers and the Underwriters agree that it would not be just or
equitable if contribution pursuant to this Article IX were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Article IX, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages that such Underwriter
has otherwise been
12
<PAGE> 13
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Article IX are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
The indemnity and contribution provisions contained in this Article IX and
the representations and warranties of the Company and the Selling Stockholder
contained in this Agreement shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement, (ii) any investigation made
by or on behalf of any Underwriter or any person controlling any Underwriter,
the Selling Stockholder or any person controlling the Selling Stockholder, or
the Company, its officers or directors or any person controlling the Company and
(iii) acceptance of and payment for any of the Shares.
Anything in this Agreement to the contrary notwithstanding, the liability
of the Selling Stockholder under the Selling Stockholder's representations and
warranties contained in Article II hereof and under the indemnity, contribution
and reimbursement agreements contained in the provisions of this Article IX
shall be limited to an amount equal to the net proceeds received upon the sale
of Firm Shares sold by the Selling Stockholder to the Underwriters. the Company
and the Selling Stockholder may agree, as between themselves and without
limiting the rights of the Underwriters under this Agreement, as to the
respective amounts of such liability for which they each shall be responsible.
X.
This Agreement shall be subject to termination by notice given by you to
the Company, if (a) after the execution and delivery of this Agreement and prior
to the Closing Date (i) trading generally shall have been suspended or
materially limited on or by, as the case may be, any of the New York Stock
Exchange, the American Stock Exchange, the National Association of Securities
Dealers, Inc., the Chicago Board of Options Exchange, the Chicago Mercantile
Exchange or the Chicago Board of Trade, (ii) trading of any securities of the
Company shall have been suspended on any exchange or in any over-the-counter
market, (iii) a general moratorium on commercial banking activities in New York
shall have been declared by either Federal or New York State authorities, or
(iv) there shall have occurred any outbreak or escalation of hostilities or any
change in financial markets or any calamity or crisis that, in your judgment, is
material and adverse and (b) in the case of any of the events specified in
clauses (a)(i) through (iv), such event singly or together with any other such
event makes it, in your judgment, impracticable to market the Shares on the
terms and in the manner contemplated in the Prospectus.
XI.
This Agreement shall become effective upon the later of (x) execution and
delivery hereof by the parties hereto and (y) release of notification of the
effectiveness of the Registration Statement by the Commission.
If, on the Closing Date or the Option Closing Date, as the case may be, any
one or more of the Underwriters shall fail or refuse to purchase Shares that it
or they have agreed to purchase hereunder on such date, and the aggregate number
of Shares which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase is not more than one-tenth of the aggregate number of the
Shares to be purchased on such date, the other Underwriters shall be obligated
severally in the proportions that the number of Firm Shares set forth opposite
their respective names in Schedules I and II bears to the aggregate number of
Firm Shares set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as you may specify, to purchase the
Shares which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase on such date; provided that in no event shall the number of
Shares that any Underwriter has agreed to purchase pursuant to Article III be
increased pursuant to this Article XI by an amount in excess of one-ninth of
such number of Shares without the written consent of such Underwriter. If, on
the Closing Date or the Option Closing Date, as the case may be, any Underwriter
or Underwriters shall fail or refuse to purchase Shares and the aggregate number
of Shares with respect to which
13
<PAGE> 14
such default occurs is more than one-tenth of the aggregate number of Shares to
be purchased on such date, and arrangements satisfactory to you, the Company and
the Selling Stockholder (or, in the case of the Option Closing Date, you and the
Company) for the purchase of such Shares are not made within thirty-six (36)
hours after such default, this Agreement shall terminate without liability on
the part of any non-defaulting Underwriter, the Company or the Selling
Stockholder. In any such case either you or the relevant Sellers shall have the
right to postpone the Closing Date or the Option Closing Date, as the case may
be, but in no event for longer than seven days, in order that the required
changes, if any, in the Registration Statement and in the Prospectus or in any
other documents or arrangements may be effected. Any action taken under this
paragraph shall not relieve any defaulting Underwriter from liability in respect
of any default of such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of them,
because of any failure or refusal on the part of any Seller to comply with the
terms or to fulfill any of the conditions of this Agreement, or if for any
reason any Seller shall be unable to perform its obligations under this
Agreement, the Sellers will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
expenses (including the fees and disbursements of their counsel) reasonably
incurred by such Underwriters in connection with this Agreement or the offering
contemplated hereunder.
This Agreement may be signed in two or more counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument.
14
<PAGE> 15
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of New York.
Very truly yours,
SILICON VALLEY GROUP, INC.
By
--------------------------------------
Title
--------------------------------------
THE PERKIN-ELMER CORPORATION
By
--------------------------------------
Title
--------------------------------------
Accepted, March , 1995
Morgan Stanley & Co. Incorporated
Prudential Securities Incorporated
Cowen & Company
Acting severally on behalf of
themselves and the
several U.S. Underwriters named in
Schedule I
herein.
By Morgan Stanley & Co. Incorporated
By
- --------------------------------------
Morgan Stanley & Co. International
Limited
Prudential-Bache Securities (U.K.)
Inc.
Cowen & Company
Acting severally on behalf of
themselves and the
several International Underwriters
named in
Schedule II herein.
By Morgan Stanley & Co. International
Limited
By
- --------------------------------------
15
<PAGE> 16
SCHEDULE I
U.S. UNDERWRITERS
<TABLE>
<CAPTION>
NUMBER OF
U.S. FIRM SHARES
UNDERWRITER TO BE PURCHASED
- --------------------------------------------------------------------------- -----------------
<S> <C>
Morgan Stanley & Co. Incorporated..........................................
Prudential Securities Incorporated.........................................
Cowen & Company............................................................
-----------------
Total U.S. Firm Shares........................................... 4,000,000
=============
</TABLE>
<PAGE> 17
SCHEDULE II
INTERNATIONAL UNDERWRITERS
<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL SHARES
UNDERWRITER TO BE PURCHASED
- -------------------------------------------------------------------------- --------------------
<S> <C>
Morgan Stanley & Co. International Limited................................
Prudential-Bache Securities (U.K.), Inc...................................
Cowen & Company...........................................................
--------------------
Total International Shares...................................... 1,000,000
==============
</TABLE>
<PAGE> 1
Exhibit 5.1
March 1, 1995
Silicon Valley Group, Inc.
2240 Ringwood Avenue
San Jose, CA 95131
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 to be filed by
you with the Securities and Exchange Commission on March 2, 1995, (the
"Registration Statement") in connection with the registration under the
Securities Act of 1933, as amended, of 5,750,000 shares of your Common Stock
(the "Shares"). The Shares include an over-allotment option granted to the
Underwriters to purchase 750,000 shares and are to be sold to the Underwriters
as described in the Registration Statement for resale to the public. As your
counsel in connection with this transaction, we have examined the proceedings
taken and are familiar with the proceedings proposed to be taken by you in
connection with the sale and issuance of the Shares.
It is our opinion that upon conclusion of the proceedings being taken
or contemplated by us, as your counsel, to be taken prior to the issuance of
the Shares, and upon completion of the proceedings being taken in order to
permit such transactions to be carried out in accordance with the securities
laws of the various states where required, the Shares, when issued and sold in
the manner described in the Registration Statement, will be legally and validly
issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the
Registration Statement, and further consent to the use of our name wherever
appearing in the Registration Statement, including the prospectus constituting
a part thereof, and any amendment thereto.
Very truly yours,
WILSON, SONSINI, GOODRICH & ROSATI
Professional Corporation
