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