<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 1996.
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the period from to .
-------- --------
Commission File Number 0-11348
SILICON VALLEY GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 94-2264681
(State of incorporation) (IRS Employer Identification No.)
101 METRO DRIVE, SUITE 400, SAN JOSE, CALIFORNIA 95110
(Address of principal executive offices) (Zip Code)
(408) 441-6700
(Registrant's telephone number, including area code)
2240 RINGWOOD AVENUE, SAN JOSE, CALIFORNIA 95131
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
The number of shares outstanding of the Registrant's Common Stock as of
April 19, 1996 was 29,280,491.
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SILICON VALLEY GROUP, INC.
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Consolidated Condensed Balance Sheets as of
March 31, 1996 and September 30, 1995 3
Consolidated Condensed Income Statements
for the Quarters and the Six Month Periods
Ended March 31, 1996 and 1995 4
Consolidated Condensed Statements of Cash Flows
for the Six Months Ended March 31, 1996 and 1995 5
Notes to Consolidated Condensed Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION 15
SIGNATURES 17
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
SILICON VALLEY GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
--------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $241,074 $166,790
Temporary investments 53,640 13,733
Accounts receivable (net of allowance for doubtful
accounts of $4,784 and $4,107, respectively) 138,472 122,849
Inventories 187,510 153,973
Prepaid expenses 9,698 7,389
Deferred taxes 1,500 1,000
-------- --------
Total current assets 631,894 465,734
PROPERTY AND EQUIPMENT - NET 44,690 27,619
DEPOSITS AND OTHER ASSETS 2,755 2,097
INTANGIBLE ASSETS - NET 2,743 2,820
-------- --------
TOTAL $682,082 $498,270
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of capital lease obligations $ 701 $ 885
Accounts payable 47,502 40,219
Accrued liabilities 116,263 99,427
Income taxes payable 1,494 2,177
-------- --------
Total current liabilities 165,960 142,708
CAPITAL LEASE OBLIGATIONS 783 654
DEFERRED LIABILITIES 398 685
MINORITY INTEREST 4,211 3,976
STOCKHOLDERS' EQUITY:
Common Stock - shares outstanding:
March 31, 1996: 29,264,444
September 30, 1995: 25,233,170 375,901 249,552
Retained earnings 134,829 100,695
-------- --------
Stockholders' equity 510,730 350,247
-------- --------
TOTAL $682,082 $498,270
======== ========
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
3
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SILICON VALLEY GROUP, INC.
CONSOLIDATED CONDENSED INCOME STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Quarters Ended Six Months Ended
March 31, March 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $170,668 $109,380 $328,948 $195,351
COST OF SALES 100,254 67,849 193,133 120,618
-------- -------- -------- --------
GROSS PROFIT 70,414 41,531 135,815 74,733
OPERATING EXPENSES:
Research, development and
related engineering 17,118 9,816 32,624 18,094
Marketing, general and
administrative 29,234 21,088 56,933 38,710
-------- -------- -------- --------
OPERATING INCOME 24,062 10,627 46,258 17,929
INTEREST AND OTHER INCOME - NET 3,411 1,146 6,870 2,344
INTEREST EXPENSE (117) (150) (252) (295)
-------- -------- -------- --------
INCOME BEFORE INCOME
TAXES AND MINORITY INTEREST 27,356 11,623 52,876 19,978
PROVISION FOR INCOME TAXES 9,575 4,184 18,507 7,192
MINORITY INTEREST 128 (48) 235 (31)
-------- -------- -------- --------
NET INCOME $ 17,653 $ 7,487 $ 34,134 $ 12,817
======== ======== ======== ========
PREFERRED STOCK DIVIDEND $ -- $ 239 $ -- $ 537
======== ======== ======== ========
NET INCOME PER SHARE $ 0.58 $ 0.33 $ 1.12 $ 0.58
======== ======== ======== ========
SHARES USED IN PER SHARE
COMPUTATIONS 30,520 22,811 30,516 21,624
======== ======== ======== ========
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
4
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SILICON VALLEY GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 34,134 $ 12,817
Reconciliation to net cash provided by
(used for) operating activities:
Depreciation and amortization 5,558 5,841
Amortization of intangibles 77 208
Minority interest 235 (31)
Changes in assets and liabilities:
Accounts receivable (15,623) (29,908)
Inventories (33,537) (33,179)
Prepaid expenses (2,309) (39)
Deposits and other assets (658) 45
Accounts payable 7,283 14,632
Accrued and deferred liabilities 17,111 15,390
Income taxes (1,183) (1,108)
-------- -------
Net cash provided by (used for) operating activities 11,088 (15,332)
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of temporary investments (68,642) --
Maturities of temporary investments 28,735 90,089
Purchases of property and equipment (22,629) (9,348)
-------- -------
Net cash used for investing activities (62,536) (9,348)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt (440) (377)
Sale of Common Stock 126,349 90,089
Sale of Preferred Stock -- 29,800
Collection of receivable from sale of
Common Stock warrants -- 8,204
-------- -------
Net cash provided by financing activities 125,909 127,716
-------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (177) (154)
-------- -------
INCREASE IN CASH AND EQUIVALENTS 74,284 102,882
CASH AND EQUIVALENTS:
Beginning of period 166,790 87,829
-------- -------
End of period $241,074 $190,711
======== ========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Preferred Stock dividend $ -- $ 537
======== ========
Preferred Stock Series A converted to Common Stock $ -- $ 17,000
======== ========
Preferred Stock Series B converted to Common Stock $ -- $ 29,800
======== ========
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
5
<PAGE> 6
SILICON VALLEY GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The accompanying consolidated condensed financial statements have been prepared
by the Company without audit and reflect all adjustments which are, in the
opinion of management, necessary to a fair statement of the financial position
and the results of operations for the interim periods. The statements have been
prepared in accordance with the regulations of the Securities and Exchange
Commission, but omit certain information and footnote disclosures necessary to
present the statements in accordance with generally accepted accounting
principles. For further information, refer to the Consolidated Financial
Statements and Notes thereto included in the Company's Annual Report on Form
10-K for the year ended September 30, 1995.
2. INVENTORIES
Inventories consist of:
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
--------- -------------
(In thousands)
<S> <C> <C>
Raw materials $ 85,190 $ 63,803
Work-in-process 99,857 87,060
Finished goods 2,463 3,110
-------- --------
$187,510 $153,973
======== ========
</TABLE>
3. BANK LINE OF CREDIT
In December 1995, the Company replaced its then existing bank credit facility
with a $75,000,000 unsecured revolving bank credit agreement that expires in
December 1998. Advances under the new facility will bear interest at either the
prime rate or LIBOR plus 1%. The agreement includes certain covenants regarding
financial ratios and prohibits the payment of cash dividends.
4. STOCK OFFERING
During the first quarter of fiscal 1996, the Company sold 4,025,000 shares of
its Common Stock through an underwritten public offering. The net proceeds of
the offering were approximately $126,200,000.
6
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SILICON VALLEY GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
5. RECENTLY ISSUED ACCOUNTING STANDARD
The Company is required to adopt Statement of Financial Accounting Standards
(SFAS) No. 123, Accounting for Stock-Based Compensation, in fiscal 1997. SFAS
No. 123 establishes accounting and disclosure requirements using a fair value
based method of accounting for stock based employee compensation plans. Under
SFAS No. 123 the Company may either adopt the new fair value based accounting
method or continue the intrinsic value based method and provide pro forma
footnote disclosures of net income and earnings per share as if the accounting
provisions of SFAS No. 123 had been adopted. The Company plans to adopt only the
footnote disclosure requirements of SFAS No. 123; therefore such adoption will
have no effect on the Company's consolidated net earnings or cash flows.
7
<PAGE> 8
SILICON VALLEY GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis contains certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Actual results could differ materially from
those projected in the forward-looking statements as a result of the risk
factors set forth below, as well as risk factors included in the Company's
Annual Report on Form 10K for the fiscal year ended September 30, 1995.
RESULTS OF OPERATIONS
The Company designs, markets, and services semiconductor processing equipment
used in the fabrication of integrated circuits. The Company's products are used
in photolithography for exposure and photoresist processing, and in deposition
for oxidation/diffusion and low pressure chemical vapor deposition ("LPCVD").
The Company manufactures and markets its photolithography exposure products
through its majority owned subsidiary, SVG Lithography Systems, Inc. ("SVGL"),
its photoresist processing products through its Track Systems Division
("Track"), and its oxidation/diffusion and LPCVD products through its Thermco
Systems Division ("Thermco").
The semiconductor industry into which the Company sells its products is highly
cyclical and has, historically, experienced periodic downturns which have had a
severe effect on the semiconductor industry's demand for semiconductor
processing equipment. In recent months there have been indications of a
potential slowdown in the semiconductor industry growth rate. During the second
quarter of fiscal 1996, the Company recorded customer bookings (orders for the
Company's products) at its highest rate ever. However, as shipments increased,
the Company's book to bill ratio was lower than during the preceding quarters.
Additionally, beginning in the second fiscal quarter, certain customers have
delayed scheduled shipment dates on specific orders, primarily into early
calendar 1997 and all within twelve months of the date the company was notified
of the delay. However, there can be no assurance that such dates will not be
further rescheduled or the orders canceled. Prior semiconductor downturns have
resulted in significant reductions in the Company's net sales, gross margin and
net income. Moreover, the Company's operations as a whole will continue to be
dependent on the current and anticipated demand for integrated circuits and
products utilizing integrated circuits. Any future weakness in demand in the
semiconductor industry is likely to have an adverse effect on the Company's
business and results of operations. Further, the Company believes that it will
continue to rely on a limited number of major customers for a substantial
percentage of its net sales (three such customers accounted for 47% of the
Company's sales in fiscal 1995 and a similar trend exists thus far in fiscal
1996). The loss of a significant customer, a delay in shipment due to
rescheduling by a significant customer or any substantial reduction in orders by
a significant customer, including reductions in orders due to market, economic
or competitive conditions in the semiconductor industry, could adversely affect
the Company's business and results of operations.
Net sales for the second fiscal quarter ended March 31, 1996 were $170,668,000,
an 8% increase over net sales of $158,280,000 for the preceding quarter and 56%
above net sales of $109,380,000 during the second quarter of fiscal 1995. For
the first half of fiscal 1996, net
8
<PAGE> 9
sales were $328,948,000, a 68% increase over net sales of $195,351,000 during
the first half of fiscal 1995. The growth in net sales over the preceding
quarter was primarily the result of increased shipments of Thermco and SVGL
products. In both the second quarter and first six months of fiscal 1996, net
sales in each of the Company's product groups were above the year-earlier
levels.
During the second quarter of fiscal 1996, the Company had bookings of
$193,541,000 which represented a book to bill ratio of 1.13 to 1. At March 31,
1996 the Company had a backlog of $441,283,000 compared to $391,439,000 at
September 30, 1995. The Company records in backlog only those orders for which a
customer purchase order has been received, all specifications, terms and
conditions have been finalized and the specified delivery is within twelve
months of the date the order is recorded. At March 31, 1996, the backlog
included orders for a total of 37 Micrascan photolithography systems, certain of
which were for the current version of the system and others for the next
generation .25 micron product. In April 1996, a first-time Micrascan customer
withdrew its single unit order for a .25 micron system, which it had placed in
the second quarter of fiscal 1996, thereby reducing backlog to 36 Micrascan
photolithography systems.
Gross margin was 41% in both the second and first quarters of fiscal 1996 and
38% in the second quarter of fiscal 1995. For the first six months of fiscal
1996, gross margin was 41% compared to 38% for the first half of fiscal 1995.
The improvement in fiscal 1996 second quarter and first-half gross margins over
the year-earlier periods was primarily due to increased manufacturing volumes
and efficiencies related to SVGL's Micrascan photolithography system, and a
higher percentage of the Company's sales consisting of Track systems, which are
typically the highest gross margin products the Company manufactures.
Research, development and related engineering (R&D) was $17,118,000 (10% of net
sales) during the second quarter of fiscal 1996, $15,506,000 (10% of net sales)
during the preceding quarter and $9,816,000 (9% of net sales) during the second
quarter of fiscal 1995. The Company's R&D expenditures are net of funding
received from outside parties under development agreements. Neither the spending
nor the recognition of the funding related to the development milestones,
contained in the agreements, is ratable over the term of the agreements.
Substantially all of the funding was received by SVGL from SEMATECH. During the
second and first quarters of fiscal 1996 and the second quarter of fiscal 1995,
such funding totaled $1,889,000, $2,959,000 and $2,592,000, respectively. New
product development at SVGL was the primary factor in the increase in R&D over
the preceding quarter and a primary factor in the increase over the year-earlier
quarter. SVGL increased its development expenditures associated with its new
Micrascan products and recognized less outside funding under its development
agreements with SEMATECH. In addition to the increased SVGL development, costs
incurred to support increased product shipments in all of the product groups
were a primary factor in the increase over the year-earlier quarter.
During the first six months of fiscal 1996 R&D was $32,624,000, up from
$18,094,000 during the same period of fiscal 1995. The increase was primarily
due to new product development activities in all of the Company's product groups
and costs incurred to support increased product shipments. During the six month
periods ended March 31, 1996 and 1995, funding received under joint development
agreements of $4,848,000 and $4,674,000, respectively, was offset against R&D
expenditures.
9
<PAGE> 10
Marketing, general and administrative expenses (MG&A) were $29,234,000 (17% of
net sales) during the second quarter of fiscal 1996 compared to $27,699,000 (18%
of net sales) during the preceding quarter and $21,088,000 (19% of net sales)
during the second quarter of fiscal 1995. The increase in MG&A from the
preceding quarter was primarily due to the expansion of the Company's marketing
and administrative functions and costs associated with the relocation of its
corporate offices, in part to facilitate the expansion of the Track
manufacturing capacity. In comparison to the year-earlier quarter, increased
MG&A expenditures were principally the result of costs related to the higher
level of shipments, the Company's expanded marketing and technical customer
training and support functions, and administrative costs incurred in supporting
the Company's operations. The decrease in MG&A as a percentage of sales compared
to each of the earlier quarters was the result of the increase in net sales.
During the first six months of fiscal 1996 MG&A was $56,933,000 (17% of net
sales) compared to $38,710,000 (20% of net sales) during the first half of
fiscal 1995. The primary reasons for the increased dollar expenditures and the
decrease as a percentage of net sales correspond to those in the comparison of
the second quarters of fiscal 1996 and 1995 above.
Operating income was $24,062,000 (14% of net sales) for the second quarter of
fiscal 1996 compared to $22,196,000 (14% of net sales) for the preceding quarter
and $10,627,000 (10% of net sales) for the second quarter of fiscal 1995. First
half fiscal 1996 operating income was $46,258,000 (14% of net sales) compared to
$17,929,000 (9% of net sales) for the first six months of fiscal 1995. In
comparing the second quarter and first half of fiscal 1996 to the earlier
periods, gross profits from higher net sales exceeded the growth of R&D and
MG&A, resulting in increased operating income.
Interest and other income was $3,411,000 during the second quarter of fiscal
1995 compared to $3,459,000 for the preceding quarter and $1,146,000 for the
year-earlier quarter. For the first six months of fiscal 1996, interest and
other income was $6,870,000 compared to $2,344,000 for the first six months of
fiscal 1995. In comparison to the year-earlier periods, the increases were due
to higher cash balances available for investment as a result of an underwritten
public offering of the Company's Common Stock in October 1995. See Liquidity and
Capital Resources.
Interest expense was $117,000 during the second quarter of fiscal 1996, compared
to $135,000 during the preceding quarter and $150,000 during the year-earlier
quarter. During the first six months of fiscal 1996, interest expense was
$252,000, down from $295,000 during the first half of fiscal 1995.
The Company recorded a 35% provision for income taxes for the first six months
of fiscal 1996, compared to a 36% provision for all of fiscal 1995. Variations
in the Company's effective tax rate relate primarily to changes in the
geographic distribution of the Company's pretax income.
The minority interest represented that share of SVGL's operating results
attributable to its minority shareholder. For the second and first quarters of
fiscal 1996, minority interest represented reductions from income of $128,000
and $107,000, respectively, compared to an addition to income for minority
interest of $48,000 during the second quarter of fiscal 1995. For
10
<PAGE> 11
the first six months of fiscal 1996, minority interest represented a reduction
from income of $235,000, compared to an addition to income of $31,000 for the
first half of fiscal 1995.
The Company had net income of $17,653,000 ($0.58 per share), $16,481,000 ($0.54
per share) and $7,487,000 ($0.33 per share) for the second and first quarters of
fiscal 1996 and the second quarter of fiscal 1995, respectively. First half
fiscal 1996 and 1995 net income was $34,134,000 ($1.12 per share) and
$12,817,000 ($0.58 per share), respectively.
FLUCTUATIONS IN QUARTERLY RESULTS AND DEPENDENCE ON NEW PRODUCT DEVELOPMENT
The Company has, at times during its existence, experienced quarterly
fluctuations in its operating results. Due to the relatively small number of
systems sold during each fiscal quarter and the relatively high revenue per
system, production or shipping delays or customer order rescheduling can
significantly affect quarterly revenues and profitability. The Company has
experienced, and may again experience, quarters during which a substantial
portion of the Company's net sales are realized near the end of the quarter.
Accordingly, delays in shipments near the end of a quarter can cause quarterly
net sales to fall short of anticipated levels. Since most of the Company's
expenses are fixed in the short term, such shortfalls in net sales could have a
material adverse effect on the Company's business and results of operations. The
Company's operating results may also vary from quarter to quarter based upon
numerous factors including the timing of new product introductions, product mix,
level of sales, the relative proportions of domestic and international sales,
activities of competitors, acquisitions, international events, and problems
obtaining materials or components on a timely basis. In light of these factors
and the nature of semiconductor industry cycles, the Company could again
experience variability in quarterly operating results.
Semiconductor manufacturing equipment and processes are subject to rapid
technological change. The Company believes that its future success will depend
in part upon its ability to continue to enhance its existing products and their
process capabilities and to develop and manufacture new advanced products with
improved process capabilities that enable semiconductor manufacturers to
fabricate semiconductors more efficiently. Failure to introduce new advanced
products successfully in a timely manner could result in the loss of competitive
position and reduced sales of existing products. In particular, the Company
believes that advanced logic devices and DRAMs will require increasingly finer
line widths. As a consequence, it is important to develop and introduce a
version of the Micrascan capable of exposing line widths of .25 micron during
the second half of calendar 1996. In addition, new product introductions could
contribute to quarterly fluctuations in operating results as orders for new
products commence and increase the potential for a decline in orders of existing
products, particularly if new products are delayed. Furthermore, the inability
to produce such products, attain acceptable manufacturing efficiencies in the
production of such products, or failure to achieve market acceptance could have
a material adverse effect on the Company's business and results of operations.
The Company believes that the photolithography exposure equipment market is one
of the largest segments of the semiconductor processing equipment industry and
that its Micrascan II is currently the most technically advanced machine
shipping in multiple quantities to global semiconductor manufacturers. While the
recent volume of orders for Micrascan systems has been encouraging, they are not
necessarily indicative of industry-wide acceptance of the
11
<PAGE> 12
Micrascan technology. The Company is relatively new to the photolithography
exposure business and does not share the same level of financial resources as
its competitors. As a result, major customers may be unwilling to rely on SVGL
to be the primary source of this advanced technology. The Company believes that
advanced semiconductor manufacturers will not require volume quantities of
production equipment as advanced as Micrascan until late fiscal 1996, and that
substantial sales of Micrascan systems will not begin until late calendar 1996
or 1997. Additionally, if manufacturers of traditional I-line or Deep UV
steppers are able to further enhance their machines to achieve finer line widths
sufficiently to erode Micrascan's expected yield, throughput, and line width
advantages, demand may not develop as the Company expects. As a result of its
fourth quarter operating results, SVGL had a marginal profit for fiscal 1995.
Although SVGL was modestly profitable during the first half of fiscal 1996, the
Company believes that with the costs associated with the continued development
of the Micrascan technology, the expansion of SVGL's manufacturing capacity and
the additional manpower requirements related to the expanded capacity, there can
be no assurance that SVGL will be able to operate profitably in the future.
The Company believes that for SVGL to succeed in the long term, it must sell its
Micrascan products on a global basis. The Japanese and Pacific Rim markets
(including fabrication plants located in other parts of the world which are
operated by Japanese and Pacific Rim semiconductor manufacturers) represent a
substantial portion of the overall market for photolithography exposure
equipment and to date neither SVGL, Track nor Thermco has been successful in
obtaining a substantial share of these markets. In many instances, Japanese and
Pacific Rim semiconductor manufacturers fabricate devices, such as DRAM's, with
potentially different economic cycles than those effecting the sales of devices
manufactured by the majority of the Company's US and European customers. Failure
to secure customers in these markets may limit the market share available to the
Company and may increase the Company's vulnerability to industry or geographic
downturns.
The Company is currently expanding the manufacturing capacity of SVGL to meet
potential future demand for its advanced lithography products. Presently,
manufacturing capacity is insufficient to meet multiple customer demands for the
Micrascan family of products and the Company believes that its ability to supply
systems in volume will be a major factor in customer decisions to commit to the
Micrascan technology. Accordingly, the Company must now commence facility and
capital improvements and the related staffing and administrative costs necessary
to meet expected shipment volumes in 1997 and 1998. From time to time, the
Company has experienced difficulty in ramping up production or effecting
transitions to new products and, consequently, has suffered delays in product
deliveries. There can be no assurance that the Company will not experience
manufacturing problems as a result of capacity constraints or ramping up
production by upgrading or expanding existing operations. These issues could
result in product delivery delays and a subsequent loss of future revenues. In
particular, the Company believes that protracted delays in delivering initial
quantities of Micrascan products to multiple customers could result in
semiconductor manufacturers electing to install competitive equipment in their
advanced fabrication facilities, which could preclude acceptance of the
Micrascan products on an industry-wide basis. In addition, the Company's
operating results could also be adversely affected by the increase in fixed
costs and operating expenses related to increases in production capacity if net
sales do not increase commensurably.
12
<PAGE> 13
The Company depends on external funding to assist in the high cost of
development in its photolithography operation. To that end, the Company and
SEMATECH entered into a series of agreements whereby SEMATECH agreed to assist
in funding both the development of the Micrascan technology and the increase of
SVGL's manufacturing capability and capacity. The agreements with SEMATECH
included the sale of warrants to purchase the Company's Common Stock ("the
Warrants") and, based upon the Company achieving certain performance milestones,
provide for $22,000,000 of such funding through 1997, all of which the Company
expects would be an offset to its research and development expenditures.
Subsequent to the issuance of the Warrants, the net number of common shares into
which they are exercisable has been included in the shares used in earnings per
share computations. In April 1996, SEMATECH notified the Company that it would
exercise the Warrants through a net issuance provision contained in the
applicable agreement, which will result in the issuance of approximately 702,000
shares of Common Stock with no further cash inflow to the Company. As of March
31, 1996, the Company had recognized $18,480,000 of such SEMATECH funding. There
are no assurances that the Company will be able to attain the remaining SEMATECH
milestones or that SEMATECH will be capable of providing the agreed upon
funding. In the event that the Company does not receive the contracted SEMATECH
funding for any reason, it would be required to either curtail development of
photolithography products or make up the shortfall from its own funds or other
sources. If the Company were required to use its own funds, its research and
development expenses would increase significantly and its operating income would
be reduced correspondingly. Additionally, under the agreements with SEMATECH,
the Company was obligated to fund, from its own resources, 120% of amounts
received from SEMATECH up to $36,000,000. Through the first quarter of fiscal
1996, the Company had funded sufficient qualifying expenditures to fulfill its
contractual obligation.
In February 1995, the Company entered into an agreement with Intel Corporation,
Motorola Inc., and Texas Instruments Incorporated (the "Investors") related to
the Company's Micrascan photolithography products under which the Investors
purchased an aggregate of $30,000,000 of the Company's newly issued Series B
Preferred Stock (which was subsequently converted to Common Stock) and received
certain rights to purchase future generations of the Company's Micrascan
products. In turn, the Company agreed to utilize the proceeds of the transaction
for research and development related to its Micrascan technology and the
expansion of its manufacturing capacity as well as working capital for its
Micrascan products. The agreement with the investors also obligates the Company
to fund, during the five year period ending February 2000, an amount such that
the total it funds under the agreements with both SEMATECH and the Investors is
not less than $25,000,000. Were the Company not to fulfill certain obligations
under the agreement, it could be required to repurchase the Common Stock held by
the Investors.
LIQUIDITY AND CAPITAL RESOURCES
In October 1995, the Company sold 4,025,000 shares of its Common Stock through
an underwritten public offering. The net proceeds of the offering were
approximately $126,200,000.
At March 31, 1995 cash and cash equivalents and temporary investments totaled
$294,714,000 compared to the September 30, 1995 total of $180,523,000, an
increase of
13
<PAGE> 14
$114,191,000. The increase resulted from the Common Stock offering discussed
above. Through the first six months of fiscal 1996, the Company used
approximately $12,000,000 in cash financing additional accounts receivable
resulting from the Company's increased shipments, higher inventory levels
required to satisfy the current backlog of customer orders, and the purchase of
property and equipment.
During the first half of fiscal 1996 the Company provided SVGL, its 94%-owned
subsidiary, with approximately $14,600,000 in funding, all of which was recorded
as intercompany loans. The Company believes that for the foreseeable future it
will have to continue providing SVGL with a significant amount of funding. In
connection with its acquisition of SVGL in 1990, the Company committed to
purchase under certain circumstances, additional SVGL securities ("the SVGL
Calls") in an amount up to $23,200,000 at any time through May 1997. To the
extent the SVGL Calls are not exercised, the Company has the option to purchase
up to $15,000,000 of SVGL Common Stock under similar terms. The Company may
choose to continue funding SVGL through intercompany loans or it may choose to
make an additional equity investment in SVGL.
In December 1995, the Company replaced its then existing bank credit facility
with a $75,000,000 unsecured revolving bank credit agreement which expires in
December 1998. Under the new facility, advances will bear interest at either the
U.S. prime rate or the LIBOR rate plus 1%. At May 7, 1996, there were no
borrowings outstanding under the agreement.
The Company believes that it has sufficient working capital and available bank
credit to sustain operations and provide for the expansion of its business for
the foreseeable future.
14
<PAGE> 15
PART II. OTHER INFORMATION
SILICON VALLEY GROUP, INC.
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The Annual Meeting of Shareholders of the Company was
held on February 22, 1996 (the "Annual Meeting"). The
vote of holders of record of 29,268,078 shares of the
Company's Common Stock outstanding at the close of
business on December 22, 1995 was solicited by proxy
pursuant to Regulation 14A under the Securities
Exchange Act of 1934.
(b) The following persons were elected Directors of the
Company at the Annual Meeting:
<TABLE>
<CAPTION>
VOTES WITHHOLDING
VOTES FOR AUTHORITY
---------- -----------------
<S> <C> <C>
Papken S. Der Torossian 25,746,231 120,538
William A. Hightower 25,761,824 104,945
William L. Martin 25,758,819 107,950
Larry W. Sonsini 25,630,689 236,080
Nam P. Suh 25,760,904 105,865
</TABLE>
(c) The Company's Certificate of Incorporation was
amended to increase its authorized shares of Common
Stock to 100,000,000 from 40,000,000. The
Stockholders' vote on such amendment was 20,081,591
shares FOR, 5,602,002 shares AGAINST, and 74,295
shares ABSTAINED from voting.
(d) The Company's 1996 Employee Stock Purchase Plan was
adopted and 1,000,000 shares of Common Stock were
reserved for issuance thereunder. The Stockholders'
vote on such adoption was 23,873,065 shares FOR,
1,776,642 shares AGAINST, and 108,181 shares
ABSTAINED from voting.
15
<PAGE> 16
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
3.1 Certificate of Incorporation, as amended to
date.
10.13 1996 Employee Stock Purchase Plan.
27 Financial Data Schedule.
16
<PAGE> 17
SILICON VALLEY GROUP, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SILICON VALLEY GROUP, INC.
..........................
(Registrant)
Date: May 8, 1996 By:/s/ Papken S. Der Torossian
-----------------------
Papken S. Der Torossian
Chief Executive Officer and
Chairman of the Board
Date: May 8, 1996 By:/s/ Russell G. Weinstock
-----------------------
Russell G. Weinstock
Vice President Finance and
Chief Financial Officer
17
<PAGE> 1
CERTIFICATE OF AMENDMENT OF
RESTATED CERTIFICATE OF INCORPORATION OF
SILICON VALLEY GROUP, INC.
Russell G. Weinstock and Robert T. Clarkson certify that:
1. They are the Vice President and Assistant Secretary, respectively,
of Silicon Valley Group, Inc., a Delaware corporation.
2. The first paragraph of Article IV of the Restated Certificate of
Incorporation is hereby amended to read as follows;
"Capitalization. This corporation is authorized to issue two classes of
shares, designated "Common Shares" and "Preferred Shares,"
respectively. The number of Common Shares authorized to be issued is
100,000,000, and the par value of each such share is $.01. The number
of Preferred Shares authorized to be issued is 1,000,000, and the par
value of each such shares is $.01."
3. The above statement of amendment has been duly approved by the board
of directors and the stockholders of Silicon Valley Group, Inc. pursuant to
Section 242 of the Delaware General Corporation Law and Article VI of the
Restated Certificate of Incorporation in effect immediately preceding this
Certificate of Amendment. The undersigned, being the vice president and
assistant secretary named above, do make this certificate and declare and
certify under penalty of perjury that this is their act and deed, and that the
facts stated herein are true, and accordingly have set their hands hereto this
22nd day of February, 1996.
/s/ RUSSELL G. WEINSTOCK
------------------------------------------
Russell G. Weinstock, Vice President
/s/ ROBERT T. CLARKSON
------------------------------------------
Robert T. Clarkson, Assistant Secretary
<PAGE> 1
SILICON VALLEY GROUP, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Code. The provisions of the Plan, accordingly, shall be
construed so as to extend and limit participation in a manner consistent with
the requirements of that section of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" shall mean the Common Stock of the Company.
(d) "Company" shall mean Silicon Valley Group, Inc. and any
Designated Subsidiary.
(e) "Compensation" shall mean all cash compensation,
including, but not limited to, salaries, incentive bonuses and commissions.
(f) "Designated Subsidiaries" shall mean the Subsidiaries
which have been designated by the Board from time to time in its sole discretion
as eligible to participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of
the Company for tax purposes whose customary employment with the Company is at
least twenty (20) hours per week and more than five (5) months in any calendar
year. For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds ninety (90)
days and the individual's right to reemployment is not guaranteed either by
statute or by contract, the employment relationship shall be deemed to have
terminated on the 91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each
Offering Period.
(i) "Exercise Date" shall mean the last day of each Offering
Period.
(j) "Fair Market Value" shall mean, as of any date, the value
of Common Stock determined as follows:
(1) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price
<PAGE> 2
for such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system on the date of determination, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable, or;
(2) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean of the closing bid and asked prices for the
Common Stock on the date of determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable, or;
(3) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Board.
(k) "Offering Period" shall mean a period of approximately
twelve (12) months, commencing on the first Trading Day on or after April 1 and
terminating on the last Trading Day in the period ending the following September
30, or commencing on the first Trading Day on or after October 1 and terminating
on the last Trading Day in the period ending the following March 31, during
which an option granted pursuant to the Plan may be exercised. The duration of
Offering Periods may be changed pursuant to Section 4 of this Plan.
(l) "Plan" shall mean this Employee Stock Purchase Plan.
(m) "Purchase Price" shall mean an amount equal to eighty-five
percent (85%) of the Fair Market Value of a share of Common Stock on the
Enrollment Date or on the Exercise Date, whichever is lower.
(n) "Reserves" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
(o) "Subsidiary" shall mean a corporation, domestic or
foreign, of which not less than fifty percent (50%) of the voting shares are
held by the Company or a Subsidiary, whether or not such corporation now exists
or is hereafter organized or acquired by the Company or a Subsidiary.
(p) "Trading Day" shall mean a day on which national stock
exchanges and the Nasdaq System are open for trading.
3. Eligibility.
(a) Any Employee (as defined in Section 2(g)), who has been
employed by the Company for at least thirty (30) days on a given Enrollment Date
shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan (i) to
the extent that, immediately after the grant, such Employee
-2-
<PAGE> 3
(or any other person whose stock would be attributed to such Employee pursuant
to Section 424(d) of the Code) would own capital stock of the Company and/or
hold outstanding options to purchase such stock possessing five percent (5%) or
more of the total combined voting power or value of all classes of the capital
stock of the Company or of any Subsidiary, or (ii) to the extent that his or her
rights to purchase stock under all employee stock purchase plans of the Company
and its subsidiaries accrues at a rate which exceeds Twenty-Five Thousand
Dollars ($25,000) worth of stock (determined at the fair market value of the
shares at the time such option is granted) for each calendar year in which such
option is outstanding at any time.
4. Offering Periods. The Plan shall be implemented by consecutive
Offering Periods with a new Offering Period commencing on the first Trading Day
on or after April 1 and October 1 each year, or on such other date as the Board
shall determine, and continuing thereafter until terminated in accordance with
Section 19 hereof. The Board shall have the power to change the duration of
Offering Periods (including the commencement dates thereof) with respect to
future offerings without stockholder approval if such change is announced at
least five (5) days prior to the scheduled beginning of the first Offering
Period to be affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the Plan
by completing a subscription agreement authorizing payroll deductions in the
form of Exhibit A to this Plan and filing it with the Company prior to the
applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the
first payroll following the Enrollment Date and shall end on the last payroll in
the Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding ten percent (10%) of the
Compensation which he or she receives on each pay day during the Offering
Period. If a participant is enrolled in multiple offering periods under this
and/or any of the Company's employee stock purchase plans, his or her deductions
under such offering periods shall be counted against the ten percent (10%) limit
set forth in this Section 6(a) so that no more than ten percent (10%) of
Compensation in the aggregate shall be deducted under all such offering periods.
(b) All payroll deductions made for a participant shall be
credited to his or her account under the Plan and shall be withheld in whole
percentages only. A participant may not make any additional payments into such
account.
(c) A participant may discontinue his or her participation in
the Plan as provided in Section 10 hereof, or may increase or decrease the rate
of his or her payroll deductions during the
-3-
<PAGE> 4
Offering Period by completing or filing with the Company a new subscription
agreement authorizing a change in payroll deduction rate. The Board may, in its
discretion, limit the number of participation rate changes during any Offering
Period. The change in rate shall be effective with the first full payroll period
following five (5) business days after the Company's receipt of the new
subscription agreement unless the Company elects to process a given change in
participation more quickly. A participant's subscription agreement shall remain
in effect for successive Offering Periods unless terminated as provided in
Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a
participant's payroll deductions may be decreased to zero percent (0%) at such
time during any Offering Period which is scheduled to end during the current
calendar year (the "Current Offering Period") that the aggregate of all payroll
deductions which were previously used to purchase stock under the Plan (or
another employee stock purchase plan of the Company) in a prior offering period
which ended during that calendar year plus all payroll deductions accumulated
with respect to the current offering period or periods equal $21,250. Payroll
deductions shall recommence at the rate provided in such participant's
subscription agreement at the beginning of the first Offering Period which is
scheduled to end in the following calendar year, unless terminated by the
participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part,
or at the time some or all of the Company's Common Stock issued under the Plan
is disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period,
each eligible Employee participating in such Offering Period shall be granted an
option to purchase on the Exercise Date of such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Offering Period more than a
number of Shares determined by dividing $25,000 by the Fair Market Value of a
share of the Company's Common Stock on the Enrollment Date, and provided further
that such purchase shall be subject to the limitations set forth in Sections
3(b), 6(a) and 12 hereof. Exercise of the option shall occur as provided in
Section 8 hereof, unless the participant has withdrawn pursuant to Section 10
hereof. The Option shall expire on the last day of the Offering Period.
8. Exercise of Option. Unless a participant withdraws from the Plan as
provided in Section 10 hereof, his or her option for the purchase of shares
shall be exercised automatically on the Exercise Date, and the maximum number of
full shares subject to option shall be purchased for such
-4-
<PAGE> 5
participant at the applicable Purchase Price with the accumulated payroll
deductions in his or her account. No fractional shares shall be purchased; any
payroll deductions accumulated in a participant's account which are not
sufficient to purchase a full share shall be retained in the participant's
account for the subsequent Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date on
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. Withdrawal; Termination of Employment.
(a) A participant may withdraw all but not less than all the
payroll deductions credited to his or her account and not yet used to exercise
his or her option under the Plan at any time by giving written notice to the
Company in the form of Exhibit B to this Plan. All of the participant's payroll
deductions credited to his or her account shall be paid to such participant
promptly after receipt of notice of withdrawal and such participant's option for
the Offering Period shall be automatically terminated, and no further payroll
deductions for the purchase of shares shall be made for such Offering Period. If
a participant withdraws from an Offering Period, payroll deductions shall not
resume at the beginning of the succeeding Offering Period unless the participant
delivers to the Company a new subscription agreement.
(b) Upon a participant's ceasing to be an Employee (as defined
in Section 2(g) hereof) for any reason, he or she shall be deemed to have
elected to withdraw from the Plan and the payroll deductions credited to such
participant's account during the Offering Period but not yet used to exercise
the option shall be returned to such participant or, in the case of his or her
death, to the person or persons entitled thereto under Section 14 hereof, and
such participant's option shall be automatically terminated. The preceding
sentence notwithstanding, a participant who receives payment in lieu of notice
of termination of employment shall be treated as continuing to be an Employee
for the participant's customary number of hours per week of employment during
the period in which the participant is subject to such payment in lieu of
notice.
(c) A participant's withdrawal from an Offering Period shall
not have any effect upon his or her eligibility to participate in any similar
plan which may hereafter be adopted by the Company or in succeeding Offering
Periods which commence after the termination of the Offering Period from which
the participant withdraws.
11. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
-5-
<PAGE> 6
12. Stock.
(a) The maximum number of shares of the Company's Common Stock
which shall be made available for sale under the Plan shall be one million
(1,000,000) shares, subject to adjustment upon changes in capitalization of the
Company as provided in Section 18 hereof. If, on a given Exercise Date, the
number of shares with respect to which options are to be exercised exceeds the
number of shares then available under the Plan, the Company shall make a pro
rata allocation of the shares remaining available for purchase in as uniform a
manner as shall be practicable and as it shall determine to be equitable.
(b) The participant shall have no interest or voting right in
shares covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan
shall be registered in the name of the participant or in the name of the
participant and his or her spouse.
13. Administration.
(a) Administrative Body. The Plan shall be administered by the
Board or a committee of members of the Board appointed by the Board. The Board
or its committee shall have full and exclusive discretionary authority to
construe, interpret and apply the terms of the Plan, to determine eligibility
and to adjudicate all disputed claims filed under the Plan. Every finding,
decision and determination made by the Board or its committee shall, to the full
extent permitted by law, be final and binding upon all parties.
(b) Rule 16b-3 Limitations. Notwithstanding the provisions of
Subsection (a) of this Section 13, in the event that Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
any successor provision ("Rule 16b-3") provides specific requirements for the
administrators of plans of this type, the Plan shall be administered only by
such a body and in such a manner as shall comply with the applicable
requirements of Rule 16b-3. Unless permitted by Rule 16b-3, no discretion
concerning decisions regarding the Plan shall be afforded to any committee or
person that is not "disinterested" as that term is used in Rule 16b-3.
14. Designation of Beneficiary.
(a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such parti cipant's death
subsequent to an Exercise Date on which the option is exercised but prior to
delivery to such participant of such shares and cash. In addition, a participant
may file a written designation of a beneficiary who is to receive any cash from
the participant's account under the Plan in the event of such participant's
death prior to exercise of the option. If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be required for
such designation to be effective.
-6-
<PAGE> 7
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.
15. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
16. Use of Funds. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts shall be maintained for each
participant in the Plan. Statements of account shall be given to participating
Employees at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
18. Adjustments Upon Changes in Capitalization, Liquidation,
Dissolution, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action
by the stockholders of the Company, the Reserves as well as the price per share
of Common Stock covered by each option under the Plan which has not yet been
exercised shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an option.
-7-
<PAGE> 8
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period shall terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board.
(c) Merger or Asset Sale. In the event of a proposed sale of
all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date")
immediately prior to the consummation of such transaction. If the Offering
Period then in progress is shortened in the event of a merger or sale of assets,
the Board shall notify each participant in writing, at least five (5) business
days prior to the New Exercise Date, that the Exercise Date for his option has
been changed to the New Exercise Date and that his option shall be exercised
automatically on the New Exercise Date, unless prior to such date he has
withdrawn from the Offering Period as provided in Section 10 hereof.
19. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and
for any reason terminate or amend the Plan. Except as provided in Section 18
hereof, no such termination can affect options previously granted, provided that
an Offering Period may be terminated by the Board of Directors on any Exercise
Date if the Board determines that the termination of the Plan is in the best
interests of the Company and its stockholders. Except as provided in Section 18
hereof, no amendment may make any change in any option theretofore granted which
adversely affects the rights of any participant. To the extent necessary to
comply with Rule 16b-3 or under Section 423 of the Code (or any successor rule
or provision or any other applicable law or regulation), the Company shall
obtain stockholder approval in such a manner and to such a degree as required.
(b) Without stockholder consent and without regard to whether
any participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
20. Notices. All notices or other communications by a participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
-8-
<PAGE> 9
21. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being pur chased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
22. Term of Plan. The Plan shall become effective upon April 1, 1996,
subject to approval by the stockholders of the Company. It shall continue in
effect for a term of ten (10) years unless sooner terminated under Section 19
hereof.
-9-
<PAGE> 10
EXHIBIT A
SILICON VALLEY GROUP, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: __________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. _____________________________________ hereby elects to participate in
the Silicon Valley Group, Inc. 1996 Employee Stock Purchase Plan (the
"Employee Stock Purchase Plan") and subscribes to purchase shares of
the Company's Common Stock in accordance with this Subscription
Agreement and the Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount
of ____% of my Compensation on each payday (not to exceed 10%,
including amounts deferred under other employee stock purchase plans of
the Company) during the Offering Period in accordance with the Employee
Stock Purchase Plan. (Please note that no fractional percentages are
permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise
my option.
4. I understand that the Internal Revenue Code limits the amount that may
be purchased under all employee stock purchase plans of the Company to
a maximum of $25,000 worth of Company stock, based on the fair market
value of the stock on the first day of the Offering Period, per
calendar year.
5. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is
in all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is
subject to stockholder approval of the Employee Stock Purchase Plan.
6. Shares purchased for me under the Employee Stock Purchase Plan should
be issued in the name(s) of (Employee or Employee and Spouse only):
_________________________.
7. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after
the Exercise Date, I will be treated for federal income tax purposes as
having received ordinary income at the time of such disposition in an
amount equal to the
<PAGE> 11
excess of the fair market value of the shares at the time such shares
were purchased by me over the price which I paid for the shares. I
hereby agree to notify the Company in writing within 30 days after the
date of any disposition of my shares and I will make adequate provision
for Federal, state or other tax withholding obligations, if any, which
arise upon the disposition of the Common Stock. The Company may, but
will not be obligated to, withhold from my compensation the amount
necessary to meet any applicable withholding obligation including any
withholding necessary to make available to the Company any tax
deductions or benefits attributable to sale or early disposition of
Common Stock by me. If I dispose of such shares at any time after the
expiration of the 2-year and 1-year holding periods, I understand that
I will be treated for federal income tax purposes as having received
income only at the time of such disposition, and that such income will
be taxed as ordinary income only to the extent of an amount equal to
the lesser of (1) the excess of the fair market value of the shares at
the time of such disposition over the purchase price which I paid for
the shares, or (2) 15% of the fair market value of the shares on the
first day of the Offering Period. The remainder of the gain, if any,
recognized on such disposition will be taxed as capital gain.
8. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent
upon my eligibility to participate in the Employee Stock Purchase Plan.
9. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print) ______________________________________________________
(First) (Middle) (Last)
_________________________ ______________________________________________
Relationship
______________________________________________
(Address)
Employee's Social
Security Number: ______________________________________________
Employee's Address: ______________________________________________
______________________________________________
______________________________________________
-2-
<PAGE> 12
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated: ______________ _____________________________________________________
Signature of Employee
_____________________________________________________
Spouse's Signature (If beneficiary other than spouse)
-3-
<PAGE> 13
EXHIBIT B
SILICON VALLEY GROUP, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Silicon
Valley Group, Inc. 1996 Employee Stock Purchase Plan which began on ___________
19____ (the "Enrollment Date") hereby notifies the Company that he or she hereby
withdraws from the Offering Period. He or she hereby directs the Company to pay
to the undersigned as promptly as practicable all the payroll deductions
credited to his or her account with respect to such Offering Period. The
undersigned understands and agrees that his or her option for such Offering
Period will be automatically terminated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to participate
in succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.
Name and Address of Participant:
____________________________________________
____________________________________________
____________________________________________
Signature:
____________________________________________
Date: ______________________________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE SECOND QUARTER OF FISCAL 1996 AS FILED IN THE
COMPANY'S FORM 10Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM
10Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 241,074
<SECURITIES> 53,640
<RECEIVABLES> 143,256
<ALLOWANCES> 4,784
<INVENTORY> 187,510
<CURRENT-ASSETS> 631,894
<PP&E> 106,936
<DEPRECIATION> 62,246
<TOTAL-ASSETS> 682,082
<CURRENT-LIABILITIES> 109,432
<BONDS> 0
0
0
<COMMON> 375,901
<OTHER-SE> 134,829
<TOTAL-LIABILITY-AND-EQUITY> 682,082
<SALES> 170,668
<TOTAL-REVENUES> 170,668
<CGS> 100,254
<TOTAL-COSTS> 100,254
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 117
<INCOME-PRETAX> 27,356
<INCOME-TAX> 9,575
<INCOME-CONTINUING> 17,653
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,653<F1>
<EPS-PRIMARY> 0.58
<EPS-DILUTED> 0
<FN>
<F1>MINORITY INTEREST OF $128,000 IS DEDUCTED FROM AFTER-TAX INCOME IN ARRIVING
AT NET INCOME OF $17,653,000.
</FN>
</TABLE>
