<PAGE>
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED OCTOBER 31, 1997 COMMISSION FILE NUMBER: 0-26968
----------------
ETEC SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 94-3094580
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
26460 CORPORATE AVENUE, HAYWARD, CALIFORNIA 94545
(ADDRESS AND ZIP CODE OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (510)783-9210
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
21,878,384 shares of Common Stock were outstanding as of November 30, 1997.
This report, including exhibits, consists of 44 pages. The Index of Exhibits
is found on page 15.
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I--FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets at October 31, 1997 and July 31, 1997.... 3
Consolidated Statements of Income for the three months ended
October 31, 1997 and 1996............................................ 4
Consolidated Statements of Cash Flows for the three months ended
October 31, 1997 and 1996............................................ 5
Notes to Consolidated Financial Statements........................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 9
PART II--OTHER INFORMATION
Item 1. Legal Proceedings.................................................... N/A
Item 2. Changes in Securities................................................ N/A
Item 3. Defaults Upon Senior Securities...................................... N/A
Item 4. Submission of Matters to a Vote of Security Holders.................. N/A
Item 5. Other Information.................................................... N/A
Item 6. Exhibits and Reports on Form 8-K..................................... 13
Signature.................................................................... 14
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
ETEC SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(Unaudited)
<TABLE>
<CAPTION>
OCTOBER JULY 31,
31, 1997 1997
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $ 57,866 $ 55,975
Marketable securities................................... 40,872 34,262
Accounts receivable, less allowance for doubtful
accounts of $1,208 and $1,136.......................... 63,607 54,879
Inventory............................................... 69,455 67,202
Deferred tax assets..................................... 22,822 22,822
Other current assets.................................... 4,486 3,322
--------- ---------
Total current assets................................... 259,108 238,462
Property, plant and equipment, net....................... 44,400 42,013
Other assets............................................. 4,308 4,068
--------- ---------
$ 307,816 $ 284,543
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................ $ 16,952 $ 20,830
Accrued and other liabilities........................... 68,109 53,028
Taxes payable........................................... 8,789 8,301
--------- ---------
Total current liabilities.............................. 93,850 82,159
Deferred gain on sale of asset........................... 2,804 2,871
Other liabilities........................................ 1,898 1,872
--------- ---------
Total liabilities...................................... 98,552 86,902
--------- ---------
Commitments and Contingencies
Stockholders' equity:
Preferred Stock, par value $0.01 per share; 10,000,000
shares authorized; none issued and outstanding......... -- --
Common Stock, par value $0.01 per share; 40,000,000
shares authorized; 21,877,046 and 21,679,636 issued and
outstanding............................................ 219 217
Warrants................................................ 600 631
Additional paid-in capital.............................. 201,339 198,557
Cumulative translation adjustments...................... (1,118) (719)
Net unrealized gain on investments...................... 41 --
Retained earnings (Accumulated deficit)................. 8,183 (1,045)
--------- ---------
Total stockholders' equity............................. 209,264 197,641
--------- ---------
$ 307,816 $ 284,543
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
ETEC SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
OCTOBER 31,
----------------
1997 1996
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<S> <C> <C>
Revenue:
Products................................................... $58,971 $36,402
Services................................................... 9,394 8,485
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68,365 44,887
------- -------
Cost of revenue:
Products................................................... 27,747 17,552
Services................................................... 7,084 6,552
------- -------
34,831 24,104
------- -------
Gross profit................................................. 33,534 20,783
------- -------
Operating expenses:
Research, development and engineering...................... 10,777 6,481
Selling, general and administrative........................ 9,277 5,895
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20,054 12,376
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Income from operations....................................... 13,480 8,407
Interest expense............................................. (199) (244)
Other income, net............................................ 1,025 794
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Income before income tax provision........................... 14,306 8,957
Income tax provision......................................... 5,078 1,973
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Net income................................................... $ 9,228 $ 6,984
======= =======
Net income per share......................................... $ 0.41 $ 0.33
======= =======
Number of weighted average common equivalent shares used in
per share calculation....................................... 22,618 21,118
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
ETEC SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
OCTOBER 31
----------------
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net income................................................. $ 9,228 $ 6,984
Adjustments to reconcile net income to net cash provided by
(used in)
operating activities:
Depreciation, amortization, and other noncash charges.... 1,889 1,033
Deferred taxes........................................... -- (1,162)
Changes in assets and liabilities:
Accounts receivable.................................... (15,483) (6,534)
Factoring of accounts receivable....................... 6,200 --
Inventory.............................................. (2,142) (9,289)
Other assets........................................... (1,489) (839)
Accounts payable....................................... (3,868) 3,977
Accrued and other liabilities.......................... 17,098 (5,166)
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Net cash provided by (used in) operating activities.. 11,433 (10,996)
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Cash flows from investing activities:
Purchases of marketable securities, net.................... (6,610) (7,842)
Capital expenditures for property and equipment, net....... (4,265) (4,159)
New building construction costs............................ -- (1,271)
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Net cash used in investing activities................ (10,875) (13,272)
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Cash flows from financing activities:
Repayment of debt and capital leases....................... (37) (932)
Financing from intermediary, net of repayments............. 114 3,627
Repurchase of warrants..................................... -- (2,633)
Collection of notes receivable from stockholders........... 200 --
Proceeds from issuance of Common Stock..................... 1,334 236
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Net cash provided by financing activities............ 1,611 298
------- -------
Effect of exchange rate changes on cash...................... (278) 225
------- -------
Net change in cash and cash equivalents...................... 1,891 (23,745)
Cash and cash equivalents at the beginning of the period..... 55,975 44,472
------- -------
Cash and cash equivalents at the end of the period........... $57,866 $20,727
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for interest..................... $ 93 $ 194
======= =======
Cash paid during the period for income taxes................. $ 3,371 $ 2,930
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
ETEC SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--BASIS OF PRESENTATION
In the opinion of the management of Etec Systems, Inc. ("Etec" or the
"Company"), the unaudited consolidated interim financial statements included
herein have been prepared on the same basis as the July 31, 1997 audited
consolidated financial statements and include all adjustments, consisting of
normal recurring adjustments, necessary for a fair presentation of the interim
period results.
The results of operations for current interim periods are not necessarily
indicative of results to be expected for the current year or any other period.
These consolidated financial statements should be read in conjunction with
the audited consolidated financial statements and notes thereto for the fiscal
year ended July 31, 1997 included in the Company's Annual Report on Form 10-K
(File No. 0-26968). The July 31, 1997 balance sheet included herein was
derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
Recent Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128).
This statement is effective for all periods ending after December 15, 1997.
The Statement redefines earnings per share under generally accepted accounting
principles. Under the new standard, primary earnings per share is replaced by
basic earnings per share and fully diluted earnings per share is replaced by
diluted earnings per share. If the Company had adopted SFAS 128 as of the
beginning of fiscal 1996, pro forma earnings per share for the quarters ended
October 31, 1997 and 1996, respectively, would have been as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
OCTOBER 31,
------------------
1997 1996
--------- ---------
<S> <C> <C>
Basic earnings per share............................. $ 0.42 $ 0.35
========= =========
Diluted earnings per share........................... $ 0.41 $ 0.33
========= =========
</TABLE>
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
130) and Statement of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information" (SFAS 131). SFAS 130
establishes standards for reporting and display of comprehensive income within
a financial statement. This Statement requires the Company to report
additional information on comprehensive income to supplement the reporting of
income. SFAS 130 is effective for all periods beginning after December 15,
1997. Comparative financial statements provided for earlier periods are
required to be reclassified so that comprehensive income is displayed in a
comparative format for all periods presented. The Company will adopt SFAS 130
for the second quarter of fiscal 1998 and does not expect its provisions to
have a material effect on the Company's presentation of its consolidated
financial statements.
SFAS 131 establishes standards for reporting information about operating
segments in annual and interim financial statements. This statement also
establishes standards for related disclosures about products and services,
6
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ETEC SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
geographic areas and major customers. SFAS 131 is effective for financial
statements for fiscal years beginning after December 15, 1997. The Company
will adopt SFAS 131 in fiscal 1999 and is currently studying its provisions.
Capitalization of Software
The Company capitalizes certain costs related to the purchase of software
for internal use and its implementation which include purchased software,
consulting fees, and use of certain specified Company resources. As of October
31, 1997, approximately $10.0 million of costs (net of accumulated
depreciation) associated with internal use software had been capitalized.
These costs are being depreciated using an estimated useful life of seven
years.
In November 1997, the Emerging Issues Task Force ("EITF") of the Financial
Accounting Standards Board reached a final consensus on Issue 97-13,
"Accounting for Costs Incurred in Connection with a Consulting Contract That
Combines Business Process Reengineering and Information Technology
Transformation." The EITF consensus is that business reengineering costs
incurred in connection with an overall information technology transformation
project should be expensed as incurred. Activities deemed to be business
process reengineering include the following: current state assessments,
configuring and prototyping, process reengineering, and work force
restructuring. The consensus is effective for quarter ends which include
November 20, 1997. The consensus requires that the unamortized amounts of such
costs previously capitalized as of the beginning of the quarter which includes
November 20, 1997 be charged off during that quarter as the cumulative effect
of a change in accounting principle. The Company will adopt the consensus
during its second fiscal quarter ended January 31, 1998. The Company is
currently studying the consensus and its potential effects.
NOTE 2--CASH EQUIVALENTS AND MARKETABLE SECURITIES
At October 31, 1997, the Company's investments were classified as available-
for-sale. The difference between the cost and fair value of those investments
is shown as a separate component of stockholders' equity. At October 31, 1997,
approximately $87.1 million of the Company's investments were classified as
cash and cash equivalents or marketable securities on the balance sheet. The
investment portfolio at October 31, 1997 is comprised of money market funds,
corporate debentures, asset-backed obligations, U.S. Government agency
securities, certificates of deposit, commercial paper, auction-rate
preferreds, and municipal obligations.
NOTE 3--CERTAIN BALANCE SHEET COMPONENTS
<TABLE>
<CAPTION>
OCTOBER 31, JULY 31,
1997 1997
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(IN THOUSANDS)
<S> <C> <C>
Accounts receivable:
Accounts receivable*............................... $55,035 $46,421
Financed receivables**............................. 8,572 8,458
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$63,607 $54,879
======= =======
</TABLE>
- --------
* During the quarter ended October 31, 1997, the Company factored
approximately $6.2 million of accounts receivable.
** Accounts receivable, net, at October 31, 1997 and July 31, 1997, has been
offset by a liability of $8.6 million and $8.5 million, respectively,
which is due to a trading partner as a result of third-party financing
arrangements.
7
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ETEC SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3--CERTAIN BALANCE SHEET COMPONENTS--(Continued)
<TABLE>
<CAPTION>
OCTOBER 31, JULY 31,
1997 1997
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(IN THOUSANDS)
<S> <C> <C>
Inventory:
Purchased parts.................................... $22,228 $20,325
Work-in-process.................................... 34,762 35,972
Spares............................................. 12,465 10,905
------- -------
$69,455 $67,202
======= =======
</TABLE>
NOTE 4--SALE AND LEASEBACK TRANSACTION
In October 1997, the Company completed two sale and leaseback transactions
with two leasing companies. The sale and leaseback transactions generated
financing proceeds of $3.7 million. Under the leasing arrangements, equipment
purchased for the Hayward facility with a net book value at the time of the
sale and leaseback transaction of $3.7 million was sold to the leasing
companies and leased back for use at the Hayward facility under leases
classified as operating leases.
NOTE 5--INCOME TAXES
The Company recorded provisions for income taxes for the quarters ended
October 31, 1997 and 1996 of $5.1 million and $2.0 million, respectively. The
Company's provision for income taxes for the quarter ended October 31, 1997
reflects the utilization of tax credits and tax benefits from the use of a
foreign sales corporation, partially offset by foreign earnings taxed at higher
rates. Reflected in the provision for the quarter ended October 31, 1996 is a
tax benefit of $1.2 million. The benefit reflects the discrete release in the
first quarter of fiscal 1997 of $1.2 million of valuation allowances previously
recorded against the Company's deferred tax assets. Management's evaluation of
the recoverability of the Company's deferred tax assets is based in part upon
the current product backlog and the Company's presumed ability to increase
manufacturing capacity. Management will continue to evaluate the recoverability
of the deferred tax assets in future periods.
NOTE 6--SUBSEQUENT EVENT
In August 1997, the Company entered into an agreement to purchase
approximately 15.2 acres of land in Hillsboro, Oregon. In November 1997, the
Company completed this purchase at a cost of approximately $2.4 million. The
Company plans to have a new facility constructed on this site to meet
development and manufacturing requirements for its advanced laser mask pattern
generation products.
8
<PAGE>
ETEC SYSTEMS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
A. RESULTS OF OPERATIONS
QUARTERS ENDED OCTOBER 31, 1997 AND OCTOBER 31, 1996
Revenue. Revenues are primarily comprised of sales of ALTA, MEBES, and CORE
systems, accessories and upgrades, and sales of technical support, maintenance
and other services. The Company derives most of its revenues from the sale of
a small number of systems and upgrades and any delay in the recognition of
revenue for a single system or upgrade can have a material adverse effect on
the Company's consolidated results of operations in a particular quarter.
Product revenue increased 62% to $59.0 million from $36.4 million for the
quarters ended October 31, 1997 and 1996, respectively. This increase reflects
the sale of four additional systems, generally higher average selling prices,
and an increase in the sales of upgrades and accessories.
Service revenue increased 11% to $9.4 million from $8.5 million for the
quarters ended October 31, 1997 and 1996, respectively, due primarily to
generally higher service activity caused by an increase in the number of
systems under service contracts.
Gross Profit. The Company's gross profit on product revenue increased 66% to
$31.2 million from $18.9 million for the quarters ended October 31, 1997 and
1996, respectively. The increase in gross profit on product revenue was due to
an increase in product revenue and a higher gross margin on product revenue,
which increased to 53% from 52% for the quarter ended October 31, 1997
compared to the quarter ended October 31, 1996. The increase in product gross
margin is primarily attributable to generally higher average selling prices
for the Company's products and an increase in the sales of accessories (which
tend to have higher gross margins). There can be no assurance that the Company
will be able to maintain the increase in gross margin on product revenue in
future periods.
The Company's gross profit on service revenue increased 20% to $2.3 million
from $1.9 million for the quarters ended October 31, 1997 and 1996,
respectively. Gross margin on service revenue was 25% and 23% for the quarters
ended October 31, 1997 and 1996, respectively. The increases in gross profit
and gross margin reflect increased revenues from an increase in the number of
systems under service contract and increased productivity. There can be no
assurance that the Company will be able to maintain an increase in gross
margin on service revenue in future periods.
Research, Development and Engineering. The Company's spending in research,
development and engineering expenses continues to reflect its commitment to
increased levels of product development effort. These expenses, net of third-
party funding under cooperative development agreements, increased to $10.8
million, representing 16% of revenue, from $6.5 million, representing 14% of
revenue, for the quarters ended October 31, 1997 and 1996, respectively.
Approximately $1.1 million of the first quarter of fiscal 1998 expenses
related to the writing down of certain Etec Polyscan inventories to net
realizable value. The Company also experienced an increase in funding of $1.2
million in the first quarter of fiscal 1998 over the first quarter of fiscal
1997. This increase is attributable to the achievement of milestones under a
multi-million dollar cost reimbursement and development agreement with a
private consortium. The Company expects future increases in net spending due
to its commitment to product development.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $9.3 million, representing 14% of revenue, from $5.9
million, representing 13% of revenue, for the quarters ended October 31, 1997
and 1996, respectively. Selling, general and administrative expenses increased
primarily due to market development fees and sales commissions associated with
increased laser beam system sales in Asia and administrative costs associated
with Ebetech.
9
<PAGE>
ETEC SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- (CONTINUED)
Income Tax Provision. The Company recorded provisions for income taxes for
the quarters ended October 31, 1997 and 1996 of $5.1 million and $2.0 million,
respectively. The Company's provision for income taxes for the quarter ended
October 31, 1997 reflects the utilization of tax credits and tax benefits from
the use of a foreign sales corporation, partially offset by foreign earnings
taxed at higher rates. Reflected in the provision for the quarter ended
October 31, 1996 is a tax benefit of $1.2 million. The benefit reflects the
discrete release in the first quarter of fiscal 1997 of $1.2 million of
valuation allowances previously recorded against the Company's deferred tax
assets. Management's evaluation of the recoverability of the Company's
deferred tax assets is based in part upon the current product backlog and the
Company's presumed ability to increase manufacturing capacity. Management will
continue to evaluate the recoverability of the deferred tax assets in future
periods.
B. LIQUIDITY AND CAPITAL RESOURCES
In addition to its operational cash flows, in fiscal 1997 and fiscal 1996,
the Company raised approximately $108.0 million from its initial public
offering, two additional public offerings, and a private placement. In fiscal
1997, the Company received proceeds of $5.0 million from the sale and
leaseback financing of its headquarters campus.
The Company has spent approximately $4.3 million for net capital
expenditures in the first quarter of fiscal 1998 primarily to purchase
testing, process lab and other equipment, upgrade its manufacturing
facilities, and continue to implement an enterprise-wide business software
system. The Company has budgeted a total of approximately $80.0 million for
capital expenditures in fiscal 1998, approximately $40.0 million of which the
Company intends to finance through various mechanisms. In October 1997, the
Company purchased approximately 4.2 acres of land in Hayward, California for
$0.9 million. This site provides the Company flexibility for future expansion
of its Hayward-based operations. In addition, in August 1997, the Company
entered into an agreement to purchase approximately 15.2 acres of land in
Hillsboro, Oregon. In November 1997, the Company completed the purchase of
this land for approximately $2.4 million. The Company plans to have a new
facility constructed on the site to meet development and manufacturing
requirements for its advanced laser mask pattern generation products.
As of October 31, 1997, the Company had cash and cash equivalents and
marketable securities of $98.7 million. The Company believes that existing
cash balances (including cash equivalents and marketable securities), together
with existing sources of liquidity, including cash flows from operating
activities and amounts available under the existing $50.0 million revolving
line of credit, will provide adequate cash to fund its operations for at least
the next twelve months. The Company also believes that success in its industry
requires substantial capital in order to maintain the flexibility to take
advantage of opportunities as they arise. As such, the Company may effect
additional equity or debt financings in the future to fund such activities.
0perating Activities
Net cash provided by operating activities for the three months ended October
31, 1997 was $11.4 million. Net cash used in operating activities for the
three months ended October 31, 1996 was $11.0 million.
Cash flows from operating activities for the three months ended October 31,
1997 primarily reflected net income of $9.2 million; increases in noncash
items (which include depreciation and amortization) of $1.9 million; and
increases in accounts receivable of $15.5 million, factoring of accounts
receivable of $6.2 million, increases in inventory of $2.1 million, decreases
in accounts payable of $3.9 million, and increases in accrued and other
liabilities of $17.1 million (primarily due to increases in advances from
customers of $13.0 million).
10
<PAGE>
ETEC SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
Cash flows used in operating activities for the three months ended October
31, 1996 primarily reflected net income of $7.0 million; decreases in noncash
items (which include $1.2 million of deferred taxes, largely offset by
depreciation and by amortization of $1.0 million); increases in accounts
receivable of $6.5 million, inventory of $9.3 million, and accounts payable of
$4.0 million; and decreases in accrued and other liabilities of $5.2 million.
Fluctuations in accounts receivable, inventory, and current liabilities for
the above periods were caused primarily by the timing of system orders, the
timing of revenue recognition, the increase in unit shipments, the factoring
of accounts receivable and the timing of payments to vendors. Prior to the
shipment of a system, the Company receives payment for a portion of the system
sales price. Such payments are generally received when the Company receives an
order and at various agreed-upon times when the system is being manufactured
and installed. Therefore, the amount of customer advances at each reporting
period fluctuates based on the number of systems that are on order, the timing
of when orders are received, and each systems status within the manufacturing
cycle. Advances from customers increased to $24.5 million at October 31, 1997
from $11.5 million at July 31, 1997.
Investing Activities
Net cash used in investing activities for the three months ended October 31,
1997 was $10.9 million compared to $13.3 million for the three months ended
October 31, 1996. Cash flows from investing activities for the three months
ended October 31, 1997 reflected net purchases of investments of $6.6 million
and capital expenditures of $4.3 million. Cash flows from investing activities
for the three months ended October 31, 1996 reflected net purchases of
investments of $7.8 million, increases in capital expenditures of $4.2
million, and increases in costs associated with the construction of the
Company's new administrative facility totaling $1.3 million.
Financing Activities
Net cash provided by financing activities for the three months ended October
31, 1997 was $1.6 million compared to the three months ended October 31, 1996
of $0.3 million. Cash flows from financing activities for the three months
ended October 31, 1997 primarily reflected proceeds from issuance of Common
Stock of $1.3 million. Cash flows from financing activities for the three
months ended October 31, 1996 primarily reflected net financing from an
intermediary of $3.6 million partially offset by the repurchase of warrants
for $2.6 million in connection with the financing of the Company's new
administrative building.
C. CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
Statements in this report which are prefaced with words such as "expects,"
"anticipates," "believes" and similar words and other statements of similar
sense, are forward-looking statements. These statements are based on the
Company's current expectations and estimates as to prospective events and
circumstances which may or may not be within the Company's control and as to
which there can be no firm assurances given. These forward-looking statements,
like any other forward-looking statements, involve risks and uncertainties
that could cause actual results to differ materially from those projected or
anticipated.
In addition to other risks and uncertainties that may be described elsewhere
in this document, certain risks and uncertainties that could affect the
Company's financial results include the following: potential delays in
shipments; cyclicity of the maskmaking and semiconductor equipment industries;
the capital spending decisions of customers or potential customers; the
development, market acceptance and successful production of new
11
<PAGE>
ETEC SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- (CONTINUED)
products and enhancements; competitors' product introductions and
enhancements; dependence on key suppliers and availability of critical
components; risks associated with any future acquisitions, including the
Company's ability to successfully integrate acquired businesses, products, or
technologies; risks associated with stock market volatility; risks associated
with the inability of the Company to accurately estimate the cost of systems
preparation for Year 2000 compliance; risks associated with a reduction in
cooperative development funding; and risks associated with foreign operations,
such as foreign exchange risk, import-export controls, and political risks.
12
<PAGE>
PART II. OTHER INFORMATION
ETEC SYSTEMS, INC.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a)The following exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.1 Purchase and Sale Agreement by and between Registrant and Standard
Insurance Corporation dated August 13, 1997.
10.2 Purchase Agreement by and between Registrant and Comerica Bank-
California dated October 31, 1997.
11 Statement of computation of earnings per common share and
equivalents.
27 Financial Data Schedule.
</TABLE>
See Exhibit Index on page 15.
(b)Reports on Form 8-K
None.
13
<PAGE>
ETEC SYSTEMS, INC.
SIGNATURE
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, on December 4, 1997.
Etec Systems, inc.
(Registrant)
/s/ William D. Snyder
By___________________________________
William D. Snyder
Vice President and Chief Financial
Officer
(Principal Financial Officer and
Principal Accounting Officer)
14
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ETEC SYSTEMS, INC.
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
10.1 Purchase and Sale Agreement by and between Registrant and
Standard Insurance Corporation dated August 13, 1997. 16
10.2 Purchase Agreement by and between Registrant and Comerica Bank-
California dated October 31, 1997. 29
11 Statement of computation of earnings per common share and
equivalents. 43
27 Financial Data Schedule. *
</TABLE>
* For Financial Data Schedule, refer to EDGAR version filed with the Securities
and Exchange Commission.
15
<PAGE>
EXHIBIT 10.1
PURCHASE AND SALE AGREEMENT
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Lots 1 and 2
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Tanasbourne Commerce Center
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1. Summary of Terms.
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<TABLE>
<S> <C> <C> <C>
1.1 Date of this Agreement: August 13, 1997
1.2 Parties: PURCHASER: Etec Systems, Inc., a Nevada Corporation
c/o Ms. Yvone Hobbs, Director of Facilities
26460 Corporate Avenue
Hayword, CA 94545
Telephone: (510) 783-9210 Facsimile: (510) 780-3845
SELLER: Standard Insurance Company, an Oregon corporation
c/o Jan Espy
1100 SW Sixth Avenue
Portland, OR 97204
Telephone: (503) 321-7006
Property/Location: Lots 1 and 2
(Paragraph 3) Tanasbourne Commerce Center
Hillsboro, Oregon
Purchase Price: $3.64 per net usable square foot, as surveyed
(Paragraph 4) $2,398,065.00
Terms: (a) Cash earnest money, cash at close of escrow
(Paragraph 4) (b) Purchase is approximately 15.12 acres
Deposit: $50,000.00 cash at opening of escrow
(Paragraph 5.a)
Escrow Holder: First American Title Insurance Company
(Paragraph 6) 200 SW Market Street
Portland, OR 97201-5786
Telephone: (503) 795-7600
Closing Date: Wednesday, November 12, 1997
(Paragraph 6)
Contingency Period: Tuesday, September 30, 1997
(Paragraph 8)
Option to Extend: One (1) Thirty day option to extend Contingency Period
(Paragraph 8) Additional Deposit of $25,000, cash, extend to
October 29, 1997
Right to Repurchase: SELLER Right to Repurchase if construction fails to
(Paragraph 25) commence within thirty-six (36) months
</TABLE>
The summary of terms included in this paragraph is for reference purposes only,
and each term shall be construed in conjunction and limited by references
appearing in other provisions of this Purchase and Sale Agreement. In the event
of any conflict between the summary and the more specific description appearing
in the following paragraphs of the document, the detailed provisions which
follow shall apply.
<PAGE>
2. PARTIES. THIS AGREEMENT is made and entered into by and between STANDARD
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INSURANCE COMPANY, an Oregon corporation, (hereinafter referred to as
"SELLER"), and ETEC SYSTEMS, INC., a Nevada corporation and/or assigns
(hereinafter referred to as "PURCHASER") as of the date specified in
Paragraph 1.1.
3. PROPERTY. PURCHASER will purchase from SELLER and SELLER will sell to
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PURCHASER the Property on the terms herein set forth. The term
"Property" means collectively the following: Lot 1 and Lot 2,
Tanasbourne Commerce Center in Hillsboro, Oregon, described on Exhibit
"A" attached hereto and all rights, privileges and appurtenances
thereunto belonging or appertaining, including all rights, title and
interest of SELLER in and to the streets, alleys and rights-of-way
adjacent thereto and any easements benefiting such land ("Real
Property"); all improvements and fixtures located on the Real Property
("Improvements"); all assignable continuing contracts, business
licenses, utility contracts, plans and specifications, warranties,
governmental approvals and development rights (if any) related to the
Real Property and/or the Improvements and/or any part thereof (the
"Intangible Property").
(a) REDUCTION OF LANDSCAPE AND SIGN EASEMENT. Prior to closing SELLER, at
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SELLER'S expense, shall construct a retaining wall and reduce the
Landscape and Sign Easement area at the southwest corner of Lot 1, to
increase the useable area of Lot 1 to approximately 5.457 acres.
4. PURCHASE PRICE. The total purchase price ("Purchase Price") shall be
--------------
calculated by using the exact net usable square footage as surveyed,
multiplied by $4.00 per square foot for areas outside the Bonneville
Power Administration (BPA) easement areas, Landscape and Sign
Maintenance Areas and $2.50 per square foot for the land inside the
forgoing areas. The BPA Access roadway shall not be included in the
pricing. Sales price is approximately Two Million Thirty Thousand Four
Hundred Nineteen Dollars ($2,030,419) for the useable portions of Lots 1
and 2, and approximately Three Hundred Sixty Seven Thousand Six Hundred
Six Dollars ($367,646) for the BPA easement area, Landscape and Sign
Easement areas, for a total Purchase Price of approximately TWO MILLION
THREE HUNDRED NINETY EIGHT THOUSAND SIXTY FIVE DOLLARS ($2,398,065),
paid in cash at closing.
5. PAYMENT OF PURCHASE PRICE. Purchase Price shall be paid by PURCHASER to
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SELLER through "Escrow Holder" (as defined below) as follows:
(a) DEPOSIT. Upon execution of this Agreement, PURCHASER shall deposit in
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"Escrow" (as defined below) an earnest money deposit in the amount of
Fifty Thousand Dollars ($50,000.00) (the "Deposit"). The Escrow
Holder shall invest the Deposit held by it in a federally insured,
interest-bearing account. The accrued interest shall be treated as
part of the Deposit. If the Deposit is retained by the SELLER, the
SELLER shall receive the interest. If the Deposit is returned to the
PURCHASER, the PURCHASER shall receive the interest. At Closing, the
Deposit, together with interest on it, shall be credited toward
payment of the Purchase Price.
(b) BALANCE OF PURCHASE PRICE DUE ON CLOSING. At the "Close of Escrow" (as
----------------------------------------
defined below), PURCHASER shall pay into Escrow, by certified or bank
check or wire transfer, for SELLER'S account the balance of the
Purchase Price, which, when added to the Deposit, shall be equal to
the Purchase Price referenced in Paragraph 4. PURCHASER shall also
pay into Escrow such additional amounts as are assessed against
PURCHASER as "Closing Costs" as defined in Paragraph 14 and
"Prorations" as described in Paragraph 15.
6. ESCROW AND CLOSING DATES. The "Escrow Holder" shall be First American Title
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Insurance Company, 200 SW Market Street, Portland, OR 97201-5786,
Attention: Ms. Patricia Parsons, Vice President, telephone number (503-
795-7600). SELLER shall deliver a fully executed copy of this Agreement
to Escrow Holder within five (5) days of receipt of the Agreement
executed by PURCHASER. The "Opening of Escrow" shall be deemed to be
that date on which SELLER delivers to escrow the fully executed
documents. The "Close of Escrow" or "Closing Date" shall be no later
than WEDNESDAY, NOVEMBER 12, 1997, unless extended pursuant to the
<PAGE>
terms of this Agreement. This Agreement shall serve as escrow instructions.
Supplementary instructions may be provided in writing and executed by both
SELLER and PURCHASER.
7. PRELIMINARY TITLE REPORT AND TITLE INSURANCE. The "Title Company" shall be
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First American Title Insurance Company, 200 SW Market Street, Portland,
OR 97201-5786, telephone number (503-795-7600). SELLER will cause the
Title Company to issue its commitment to insure PURCHASER'S title in an
amount equal to the Purchase Price ("Commitment"), and shall cause the
same, with copies of all documents referred to therein, to be delivered
to PURCHASER within ten business (10) days from Opening of Escrow. At
the Close of Escrow, SELLER shall cause the Title Company, at SELLER'S
sole expense, to issue to PURCHASER an ALTA extended coverage owners'
policy of title insurance showing good and marketable fee title to the
Property vested in PURCHASER (the "Title Policy"). PURCHASER shall pay
for any endorsements to the Title Policy. The issued Title Policy shall
contain a liability limit in an amount equal to the Purchase Price and
shall contain only those exceptions approved by PURCHASER as provided in
Paragraph 6(c) ("Permitted Exceptions").
8. CONDITIONS PRECEDENT. In addition to any other requirements or conditions to
--------------------
Close of Escrow, PURCHASER'S obligations hereunder to purchase and pay
for the Property shall be subject to the conditions precedent set forth
in this Paragraph 8, which shall be satisfied or waived on or before the
time and date specified below or before Closing if no time is specified.
If they are not so satisfied or waived, this Agreement and the Escrow
shall, at PURCHASER'S option, terminate; and Escrow Agent shall return
the Deposit to PURCHASER.
(a) PHYSICAL AND ECONOMIC SUITABILITY. PURCHASER shall have until 5:00 PM,
---------------------------------
TUESDAY, SEPTEMBER 30, 1997 (the "Inspection Period") to inspect the
Property and make whatever other inquiry it deems appropriate to
determine the physical and economic suitability of the Property for
PURCHASER'S intended use and the environmental condition of the
Property. PURCHASER may engage consultants or engineers of the
PURCHASER'S choosing to conduct studies of the Property as the
PURCHASER deems necessary. The PURCHASER or its agents shall have the
right to enter the Property at reasonable times to make such tests,
inspections, studies, and other investigations as the PURCHASER may
require, at the PURCHASER'S expense and risk. The PURCHASER shall
indemnify and hold the SELLER harmless from any loss, damage, or
claim arising out of the PURCHASER'S access to the Property for the
purpose of making tests, inspections, studies, and other
investigations. PURCHASER shall notify SELLER in writing on or before
the end of the Inspection Period whether or not the results of
PURCHASER'S inspection satisfy PURCHASER that the Property is
suitable for its intended use. In the event PURCHASER elects to
terminate this Agreement, PURCHASER shall provide SELLER with copies
of any such tests, studies and other investigations conducted by
PURCHASER under the provisions of this paragraph. PURCHASER may, upon
deposit of an additional Twenty Five Thousand Dollars ($25,000.00) in
cash and not later than Tuesday, September 30, 1997, extend this
contingency period by an additional thirty (30) days to 5:00 PM,
Wednesday, October 29, 1997. Said additional deposit and the Deposit
shall be non-refundable in the event this transaction fails to close
through no fault of SELLER, but shall be fully applicable to the
Purchase Price at Close of Escrow.
(b) SURVEY AND LOT SIZE. No later than fifteen (15) business days after the
-------------------
Opening of Escrow, SELLER, at its expense, shall deliver to PURCHASER
four (4) copies of an ALTA survey of the Property prepared by and
certified by a licensed surveyor or engineer.
(i) PURCHASER shall notify SELLER in writing of any objections to the
survey within fifteen (15) business days of receipt of the survey.
Failure of PURCHASER to so notify SELLER shall constitute
PURCHASER'S acceptance of the survey; and election to proceed with
the purchase.
(ii) The Purchase Price will be determined by multiplying the land prices
described in Paragraph 3 by the net usable square footage of the
Property. Net usable square footage means total square footage
less portions below the 100 year flood plain.
(c) REVIEW OF COMMITMENT. PURCHASER shall have fifteen (15) business days
--------------------
after receipt of the Commitment and copies of all documents mentioned
therein within which to notify SELLER and Escrow Holder in writing of
PURCHASER'S approval or disapproval of any exceptions shown therein. All
approved exceptions shall be permitted exceptions
<PAGE>
("Permitted Exceptions"). Prior to Closing, SELLER shall satisfy all
exceptions not accepted by PURCHASER which can be removed at Closing by
the payment of money. In the event of disapproval of any other
exceptions, SELLER shall have ten (10) business days within which to
advise PURCHASER whether or not it will eliminate any disapproved
exceptions from the policy of title insurance to be issued in favor of
PURCHASER. If SELLER fails to notify PURCHASER within such ten (10)
business day period or notifies PURCHASER that it elects not to
eliminate any disapproved exception, or if PURCHASER is not satisfied,
in its discretion, with SELLER S means of eliminating all exceptions,
PURCHASER may determine on or before the end of the Inspection Period
whether or not it elects to proceed with the purchase. PURCHASER shall
notify SELLER and Escrow Holder in writing if it elects not to purchase
the Property.
(d) NO MATERIAL CHANGES. At the Closing Date, there shall have been no
-------------------
material adverse changes related to or connected to the Property since
the end of the Inspection Period.
(e) SELLER DELIVERIES. Within ten (10) business days after the Opening of
-----------------
Escrow, SELLER shall provide to PURCHASER without any warranty or
representation complete copies of any of the following in SELLER'S
possession relating to the Property:
(i) Environmental reports on the Property, if available.
(ii) Wetlands reports or flood plain analysis performed on the Property.
(iii) Soils or geotechnical reports performed on the Property.
(iv) All applicable governmental permits, approvals, orders, and related
documents.
9. SELLER'S REPRESENTATIONS AND WARRANTIES. SELLER makes the following
---------------------------------------
representations and warranties to PURCHASER:
(a) SELLER is the owner of all right, title and interest in the Property and
has the absolute right, power and authority to sell, transfer and
assign the Property to PURCHASER. All requisite action (corporate,
trust, partnership, or otherwise) has been taken by the SELLER in
connection with entering into this Agreement, the instruments
referred to herein, and the consummation of the transactions
contemplated herein. No further consent of any partner, shareholder,
creditor, investor, judicial or administrative body, governmental
authority, or other party is required.
(b) The persons executing this Agreement and the instruments referred to
herein on behalf of the SELLER and the partners, officers, or
trustees of the SELLER, if any, have the legal power, right, and
actual authority to bind the SELLER to the terms and conditions of
this Agreement.
(c) This Agreement and all documents required to be executed by the SELLER
are and shall be valid, legally binding obligations of and
enforceable against the SELLER in accordance with their terms.
(d) Neither the execution and delivery of this Agreement and documents
referred to herein, nor the incurring of the obligations set forth
herein, nor the consummation of the transactions herein contemplated,
nor compliance with the terms of this Agreement and the documents
referred to herein conflict with or result in the material breach of
any terms, conditions, or provisions of, or constitute a default
under any bond, note, or other evidence of indebtedness, or any
contract, indenture, mortgage, deed of trust, loan, partnership
agreement, lease, or other agreements or instruments to which the
SELLER is a party or affecting the Property.
(e) The SELLER represents and warrants that, to the best of SELLER'S
knowledge and belief, there is:
(i) No current or proposed action by any governmental body to condemn or
acquire through eminent domain any portion of the Property;
<PAGE>
(ii) SELLER has received no notice from any governmental body that the
Property is in violation of any applicable law, ordinance or
regulation, nor does SELLER know of any facts which constitute a
violation; and
(iii) There is no litigation pending or threatened against SELLER or any
other facts known to SELLER that would have any material adverse
impact on the value of the Property or prevent SELLER from engaging
in this transaction.
(f) The information contained in the recitals is true and correct.
(g) The SELLER represents that, to the best of SELLER'S knowledge and belief
but without undertaking any inspection, no Hazardous Substance has
been placed , stored, spilled, leaked, released or in any way allowed
to contaminate the Property during SELLER'S ownership of the
Property. The SELLER further represents and warrants that during the
term of SELLER'S ownership of the Property, SELLER has not placed,
stored, spilled, leaked, or released any Hazardous Substance on the
Property. Hazardous Substance shall be defined, for purposes of this
Agreement, as any hazardous, toxic, infectious or radioactive
substance, waste or material as defined or listed by any
Environmental Law and shall include, without limitation, petroleum
oil and its fractions. Environmental Law shall be defined, for
purposes of this Agreement, as any federal, state or local statute,
regulation or ordinance or any judicial or other governmental order
pertaining to the protection of health, safety or the environment
(h) The SELLER is the legal and beneficial fee simple titleholder of the
Property and has good, marketable, and insurable title to the
Property, free and clear of all liens, encumbrances, claims,
covenants, conditions, restrictions, easements, rights of way,
options, judgments, or other matters, except as disclosed by the
preliminary title report. There shall be no change in the ownership,
operation, or control of the SELLER from the date of this Agreement
until the Closing Date.
(i) The SELLER'S representations and warranties contained herein are true
and accurate, and are not misleading. The SELLER'S representations
and warranties contained herein shall be continuing and shall be true
and correct as of the Closing Date with the same force and effect as
if remade by the SELLER in a separate certificate at that time. The
SELLER S representations and warranties contained herein shall
survive the close of escrow and shall not merge into the deed and the
recordation of the deed in the official records. SELLER agrees to
indemnify, defend, protect and hold harmless PURCHASER from and
against any claims, demands, lawsuits, liabilities, costs and
expenses (including attorney's fees) arising out of any inaccuracy in
or breach of any representation or warranty of SELLER under this
Paragraph 9, provided that a claim by PURCHASER arising from breach
of representation or warranty under this Paragraph 9 shall be barred
unless PURCHASER gives SELLER notification of such claim within one
year following the closing date.
10. PURCHASER'S REPRESENTATIONS AND WARRANTIES. In addition to any express
------------------------------------------
agreements of the PURCHASER contained herein, the following constitute
representations and warranties of the PURCHASER to the SELLER:
(a) The PURCHASER has the legal power, right, and authority to enter into
this Agreement and the instruments referred to herein and to
consummate the transactions contemplated herein.
<PAGE>
(b) All requisite action (corporate, trust, partnership, or otherwise)
has been taken by the PURCHASER in connection with entering into
this Agreement and the instruments referred to herein and the
consummation of the transactions contemplated herein. No further
consent of any partner, shareholder, creditor, investor, judicial
or administrative body, governmental authority, or other party is
required.
(c) The persons executing this Agreement and the instruments referred to
herein on behalf of the PURCHASER have the legal power, right, and
actual authority to bind the PURCHASER to the terms and conditions of
this Agreement.
(d) This Agreement and all documents required by it to be executed by the
PURCHASER are and shall be valid, legally binding obligations of, and
enforceable against the PURCHASER in accordance with their terms.
(e) Neither the execution and delivery of this Agreement and documents
referred to herein, nor the incurring of the obligations set forth
herein, nor the consummation of the transactions contemplated, nor
compliance with the terms of this Agreement and the documents
referred to herein conflicts with or results in the material breach
of any terms, conditions, or provisions of or constitute a default
under any bond, note, or other evidence of indebtedness, or any
contract, indenture, mortgage, deed of trust, loan, partnership
agreement, lease, or other agreements or instruments to which the
PURCHASER is a party.
11. FORFEITABILITY OF DEPOSIT. Upon the passage of the Inspection Period with
-------------------------
PURCHASER'S satisfaction of the conditions in Paragraph 8 or waiver of any
objections, and if the sale and purchase of the Property fails to Close, and
such failure is not due to a default under the terms of this Agreement by
SELLER, or failure of any condition to Closing, the Deposit and any option
fees shall be paid to SELLER and PURCHASER authorizes and instructs Escrow
Agent to deliver the Deposit to SELLER. SELLER and PURCHASER acknowledge
that SELLER S damage would be difficult or impossible to ascertain in the
event of PURCHASER S default under its obligation to purchase the Property
and that the Deposit is a reasonable estimate of those damages. SELLER and
PURCHASER intend the Deposit to be liquidated damages and not a penalty.
SELLER and PURCHASER acknowledge that the amount of the Deposit has been set
taking into account various factors, including the potential for change in
value of the Property. The estimate of damages that could result from a
breach by PURCHASER, as reflected in the amount of the Deposit, is not
intended to be adjusted because of future increase or decrease in the value
of the Property. If PURCHASER objects to title exceptions and such
objections are not satisfied by SELLER or accepted by PURCHASER in the time
provided or if PURCHASER objects to any aspect of the Property during the
Inspection Period, or if the sale and purchase of the Property fails due to
SELLER S default, or failure of any condition to Closing, the Deposit and
the option fees shall be returned to PURCHASER.
12. ITEMS TO BE DELIVERED TO ESCROW HOLDER ON OR BEFORE CLOSE OF ESCROW:
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(a) By SELLER:
(i) DEED. An Oregon Statutory Warranty Deed to the Property (the "Deed")
----
in the form of Exhibit "B" in favor of PURCHASER with title
vesting in PURCHASER, duly executed and acknowledged by SELLER,
conveying fee title to the Subject Property subject only to
Permitted Exceptions.
(ii) CERTIFICATION OF NON-FOREIGN STATUS. A certificate dated as of the
-----------------------------------
Closing Date, addressed to PURCHASER, duly executed by SELLER
under penalty of perjury, regarding SELLER'S non-foreign status,
in the form of Exhibit "C", hereunto annexed and made a part
hereof.
(iii) CERTIFICATION AS TO REPRESENTATIONS. A certificate dated as of the
-----------------------------------
Closing Date, addressed to PURCHASER, duly executed by SELLER,
stating that the representations and warranties made by SELLER in
this Agreement are true and complete on the Closing Date as if
made again on the Closing Date.
(iv) ASSIGNMENT OF EASEMENTS AND AGREEMENTS. Specific assignment in favor
---------------------------------------
of PURCHASER of the Property not conveyed by the Deed duly
executed and acknowledged by SELLER in the form of Exhibit "D",
hereto annexed and made a part hereof.
<PAGE>
(b) By PURCHASER:
(i) PURCHASE PRICE. The Purchase Price as provided in Paragraph 4 and
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PURCHASER'S share of the Closing Costs and Prorations as defined
in Paragraphs 14 and 15.
13. CLOSING PROCEDURE. At the Close of Escrow, when Escrow Holder has
-----------------
received the funds and the items to be delivered by SELLER and PURCHASER
described in Paragraph 12 above, and is prepared to issue and deliver the
Title Policy in the form required by this Agreement, Escrow shall:
(a) Collect from PURCHASER the Closing Costs described in Paragraph 14, and
such additional amounts, if any, as are assessed against PURCHASER as
a result of Prorations pursuant to Paragraph 15;
(b) Record the Deed;
(c) Deliver to SELLER the Cash Payment Due on Closing after deducting the
Closing Costs pursuant to Paragraph 14, any portion of the Deposit
previously released to SELLER, and such additional amounts
attributable to SELLER as a result of Prorations pursuant to
Paragraph 15;
(d) Deliver to PURCHASER its title policy.
(e) Deliver to SELLER and to PURCHASER the items each is to receive at Close
of Escrow as listed in Paragraph 12.
14. CLOSING COSTS. SELLER and PURCHASER shall each pay one-half of the escrow
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fees of Escrow Holder. If the Escrow is terminated because of failure of any
of the conditions set forth herein, Escrow Holder's cancellation fee, if
any, shall be equally divided by SELLER and PURCHASER; provided that if
Escrow is terminated because of the failure of either party to perform its
duties as required hereunder, the nonperforming party shall pay the entire
cancellation fee, if any, of Escrow Holder. SELLER shall pay all documentary
and transfer taxes and the cost of the Title Policy. PURCHASER shall pay the
cost of any endorsements for the Title Policy. SELLER shall pay the real
estate commission described in Paragraph 19.
15. PRORATIONS. Real property taxes and assessments shall be prorated at
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Closing. SELLER shall pay any deferred taxes or charges due as a result of
the Property having been classified as farm use property, whether assessed
before or after Closing.
16. CONDITION OF PROPERTY AND IMPROVEMENTS. SELLER is conveying, and PURCHASER
--------------------------------------
shall accept, the Property "AS IS" except for the representations and
warranties contained herein and in the Deed. As of the Closing, PURCHASER
shall have inspected the Property to determine if it is physically and
economically suited for its intended use. PURCHASER acknowledges that
PURCHASER S inspection shall consider but not be limited to soils and
environmental assessment and any other aspect of the Property as reasonably
required for PURCHASER to evaluate the Property. PURCHASER further
acknowledges that, except as provided in this Agreement, SELLER has made no
other representations, warranties or agreements relating to the condition of
the Property, or the Improvements, including without limitation, the
development potential of the Property, the present status of zoning or other
governmental requirements affecting the Property, the availability of water
or other services, or compliance with environmental laws and regulations.
THIS AGREEMENT WILL NOT ALLOW USE OF THE PROPERTY IN VIOLATION OF APPLICABLE
LAND USE OR ZONING LAWS AND REGULATIONS. BEFORE SIGNING OR ACCEPTING THIS
AGREEMENT, PURCHASER SHOULD CHECK WITH THE APPROPRIATE CITY OR COUNTY PLANNING
DEPARTMENT TO VERIFY APPROVED USES.
17. SELLER'S ARCHITECTURAL APPROVAL AND SITE PLAN APPROVAL. PURCHASER shall
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submit, not later than thirty (30) days prior to application for a building
permit, to SELLER, or the then in effect Declarant defined by the CC&R's,
for SELLER'S written approval, which shall not be unreasonably withheld,
plans for PURCHASER'S exterior design of improvements and development of the
Property, consisting of at least site elevations, landscapes, signage
location, exterior lighting, building setbacks, parking including parking
spaces, building ratio, curbs,
<PAGE>
sidewalks and building exteriors including colors, material and roof-top
mechanical. SELLER will give PURCHASER its written approval or disapproval
of PURCHASER'S design within five (5) business days of their receipt. SELLER
shall act in its capacity as Declarant under any CC&Rs now or hereafter
adopted when approving the plans submitted hereunder, all to the end that
the improvements to be constructed shall be deemed to be in compliance with
any such CC&Rs if the same are constructed substantially in accordance with
the plans approved by SELLER.
18. RISK OF LOSS. The risk of loss or damage to the Property until closing
------------
shall be borne by the SELLER. If, prior to closing, the Property shall be
destroyed or damaged by any occurrence, or any action with respect to the
Property shall be instituted or threatened for condemnation pursuant to any
power of eminent domain, SELLER shall promptly notify PURCHASER thereof and
PURCHASER shall have the option to terminate this Agreement by delivering
written notice of its election to terminate to SELLER within ten (10) days
after PURCHASER is so notified by SELLER. If PURCHASER elects to terminate
this Agreement, any sums paid by PURCHASER hereunder shall be refunded in
full and the Agreement shall thereafter be null and void and of no further
force and effect. If PURCHASER does not so elect to terminate this
Agreement and closing is held and the Purchase Price has been paid,
PURCHASER shall be entitled to any award pursuant to any condemnation or
eminent domain proceedings and to settle any loss with insurance carriers
and to receive the proceeds of all insurance applicable to the loss.
19. COMMISSIONS.
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(a) At the Close of Escrow, SELLER shall pay any brokerage commission and
fees owed to National Properties. SELLER hereby represents and warrants
that other than as provided in the Listing Agreement with National
Properties, SELLER has not incurred any obligation for the payment of
any real estate broker's commission, finder's fee or like sum in
connection with the sale of the Property to PURCHASER.
(b) PURCHASER hereby represents and warrants to SELLER that other than
Corporate Realty Advisors, PURCHASER has not incurred any obligation for
the payment of any real estate broker's commission, finder's fee or
other like sum in connection with the sale of the Property to PURCHASER,
and PURCHASER hereby agrees to indemnify and hold SELLER harmless from
and against any and all claims, demands, causes of action and costs,
including attorneys' fees and costs, made, brought or sought against or
from SELLER arising out of any agreement for the payment of a real
estate broker's commission, finder's fee or other like sum entered into
between PURCHASER and any other third party in connection with the sale
of the Property to PURCHASER.
(c) At Closing, SELLER shall pay to National Properties and Corporate Realty
Advisors each fifty percent (50%) of the total commission due pursuant
to SELLER S listing agreement with National.
20. DEVELOPMENT APPROVALS. SELLER will cooperate with and assist PURCHASER in
---------------------
obtaining governmental approvals necessary for development of the Property
and will execute all plats, applications, instruments and documents
requested by PURCHASER in connection with obtaining governmental approvals.
SELLER will not be obligated to expend any funds in connection with
obtaining governmental approvals except that SELLER shall complete all lot
line adjustments or other proceedings necessary to make the Real Property
legal lots of record at SELLER S expense on or before closing.
21. EFFECT OF ACCEPTANCE. Upon acceptance, this offer will become an Agreement
--------------------
binding upon and inuring to the benefit of PURCHASER and SELLER and their
respective heirs, legal representatives, successors and assigns, and will be
deemed to contain all the terms and conditions agreed upon, it being agreed
that there are no conditions, representations, warranties, covenants, or
agreements not contained herein or in the Exhibits hereto. Any subsequent
conditions, representations, warranties, covenants or agreements will not be
valid and binding upon the parties unless in writing and signed by both
parties.
22. NO WAIVER. Except as herein expressly provided, no waiver by a party of any
---------
breach of this Agreement or of any warranty or representation hereunder by
the other party shall be deemed to be a waiver of any other breach by such
other party (whether preceding or succeeding and whether or not of the same
or similar nature), and no acceptance of payment or performance by
<PAGE>
a party after any breach of this Agreement or of any representation or
warranty hereunder by such other party, whether or not the first party knows
of such breach at the time it accepts such payment or performance shall be a
waiver of any preceding breach other than the failure to pay the amount so
accepted or the failure to perform the tasks accepted. No failure or delay
by a party to exercise any right it may have by reason of the default of the
other party shall operate as a waiver of default or modification of this
Agreement or shall prevent the exercise of any right by the first party
while the other party continues to be so in default.
23. NOTICES. All notices, requests, demands and other communications hereunder,
-------
shall be in writing and shall be delivered by hand, transmitted by facsimile
transmission (provided sender obtains an electronic confirmation and also
delivers a copy by mail or overnight delivery service), sent prepaid by
Federal Express (or a comparable overnight delivery service), or sent by the
United States Mail, certified, postage prepaid, return receipt requested, at
the addresses and with such copies designated below. Any notice, request,
demand or other communication delivered or sent in the manner aforesaid,
shall be deemed given or made (as the case may be), when actually delivered
to the intended recipient:
If to SELLER: Standard Insurance Company
Attention: Ms. Jan Espy, Standard RE Investors, L.L.C.
1100 SW 6th Avenue
Portland, Oregon 97204
With a Copy to: Robert D. Rankin
McEwen, Gisvold, Rankin, Carter & Streinz
1600 Standard Plaza
1100 SW Sixth Avenue Portland, OR 97204
Telephone: (503) 226-7321 Facsimile: (503) 243-2687
If to PURCHASER: Etec Systems, Inc.
Attention: Yvone Hobbs, Director of Facilities
26460 Corporate Avenue
Hayward, CA 94545
Telephone: (510) 887-3314 Facsimile: (510) 887-2870
With a Copy to: Etec Systems, Inc.
Director, Legal and Corporate Services
Attention: Saul Arnold
26460 Corporate Avenue
Hayward, CA 94545
Telephone: (510) 887-3550 Facsimile: (510) 780-3845
Either party may, by written notice as aforesaid, designate a different address
for notices.
24. ASSIGNMENT. In the event PURCHASER should desire to assign this Agreement,
----------
PURCHASER shall have the right to assign only to a developer, owner, or
financing entity specifically designated by Etec Systems, Inc., for the sole
purpose of developing a building or buildings to be 100% occupied by Etec
Systems, Inc. For an assignment other than the foregoing, PURCHASER shall
give SELLER written notice of such desire at least fifteen (15) days prior
to the date of on which PURCHASER wishes to make such assignment. PURCHASER
shall provide the name of the proposed assignee together with such other
information regarding the proposed assignees financial status and experience
as SELLER may request. SELLER shall then have the right, in its sole
discretion, within fifteen (15) days of receipt of PURCHASER'S notice, to
terminate this Agreement. Should SELLER consent to an assignment of this
Agreement the assignee shall assume all of the obligations of PURCHASER
under this Agreement and the Escrow, and no such assignment shall release or
relieve PURCHASER from its obligations under this Agreement.
25. SELLER'S POST CLOSING RIGHT TO REPURCHASE AND RIGHT OF FIRST REFUSAL.
---------------------------------------------------------------------
(a) SELLER'S Right to Repurchase. PURCHASER shall commence construction of
a building or buildings on the Property within thirty-six (36) months of
the Close of Escrow. In the event PURCHASER fails to commence construction
within such thirty-six (36) -month period, SELLER shall have an option to
repurchase the Property for the same price and financial terms
<PAGE>
as provided in this Agreement provided however, that the price shall be
increased by an amount equal to eighteen percent (18%) of the Purchase
Price. SELLER'S option to repurchase may be exercised only by notice (a
"Repurchase Notice") to PURCHASER within thirty (30) days following
PURCHASER'S failure to commence construction within the thirty-six (36)
month period described in this paragraph; and if exercised shall be closed
within thirty (30) days of delivery of SELLER'S Repurchase Notice to
PURCHASER. The term "commence construction" as used herein, shall mean the
completion of footings and slab for the improvements.
(b) The thirty-six (36)-month period described in Paragraph 25 (a) shall be
extended for the period of time that one of the following events has
rendered impossible or reasonably impracticable such commencement of
construction by PURCHASER: strikes, lockouts, labor disputes, natural
disasters or acts of God, inability to obtain labor, materials or
reasonable substitutes therefor; governmental restrictions, regulations or
controls; judicial orders; enemy or hostile governmental action; civil
commotions; fire or other casualty; any failure or defect in the supply,
quantity or character of electricity, gas, water or other utilities
furnished to the Property; the failure of SELLER to perform its obligations
under this Agreement when required to do so; and causes beyond the
reasonable control of PURCHASER (excluding financial inability). Should the
work performed by PURCHASER or its contractor result in a strike, lockout
or labor dispute, such strike, lockout or labor dispute shall not excuse
PURCHASER performance.
(c) SELLER's Right of First Refusal. Purchaser agrees not to sell,
transfer, exchange, grant an option to purchase, lease, or otherwise
dispose of the Property or any part of, or interest in, the Property for a
purpose other than one hundred percent (100%) occupancy by Purchaser
without first offering the Property to SELLER on the terms and conditions
set forth in this Paragraph 25(c). As used in this paragraph, the term
"sell" includes a ground lease of the Property with primary and renewal
terms of more than 15 years in the aggregate.
(i) If Purchaser desires to sell the Property for a purpose other than
its own exclusive use it shall notify SELLER of any offer ("Offer") it
receives and provide SELLER with a copy of the Offer. SELLER shall have
the prior and preferential right to purchase the Property (or the part
of or interest in the Property covered by the Offer, as the case may be)
at the same price and on the same terms and conditions as are contained
in the Offer, except that if SELLER exercises the right of first refusal
by electing to purchase the Property then (1) the closing of the
transaction contemplated by the Offer shall take place no later than 90
days after the date that SELLER elects to exercise the right of first
refusal, and
<PAGE>
(2) SELLER shall receive a credit against the sale price of the
Property in an amount equal to any brokerage commission that Purchaser may
save by selling the Property to SELLER rather than the Third-Party
Offeror.
(ii) SELLER shall have 15 days from the date SELLER receives the notice
and a copy of the Offer to notify Purchaser whether SELLER elects to
purchase the Property pursuant to the terms of the Offer. If SELLER
elects to exercise its right to purchase the Property, then, in addition
to giving Purchaser written notice of its election within the 15-day
period, SELLER also shall tender an amount equal to the earnest money
deposit, if any, specified in the Offer, which will be held and used in
accordance with the terms of the Offer.
(iii) If SELLER fails to timely exercise its right to purchase the
Property pursuant to the terms of this Agreement, then Purchaser shall be
entitled to sell the Property according to the terms of the Offer to the
Third-Party Offeror, subject to the terms of subparagraph (iv) below.
(iv) If SELLER fails to timely exercise its right to purchase the
Property pursuant to the terms of this Agreement, and for any reason
Purchaser shall not sell or convey the Property to the Third-Party Offeror
on the terms contained in the Offer within six months of SELLER's election
not to purchase, then Purchaser must resubmit the Offer as well as any
other offer to SELLER before selling the Property, and such offers shall
be subject to SELLER's right of first refusal under this Agreement;
however, notwithstanding the foregoing, if Seller and Purchaser enter into
a binding earnest money agreement on the terms contained in the Offer and
are diligently attempting to close the sale six (6) months after Seller's
election not to purchase, the time for closing before resubmitting the
offer to Seller shall be extended three (3) more months for a total of
nine (9) months in which to close.
(v) The term of this Right of First Refusal commences as of the date of
this Agreement and terminates on the earlier to occur of (1) SELLER's
occupancy of the completed improvements on the Property, (2) the
expiration of five (5) years after the Effective Date, or (3) the
consummation of a sale of the Property to a third party as provided in
subparagraph (iv) above. SELLER shall subordinate its right of first
refusal to the first lien of SELLER's construction and/or permanent
lenders and cooperate in providing Purchaser with any instruments that
Purchaser reasonably may require for the purpose of removing from the
public record any cloud on title to the Property attributable in any
manner to the grant or existence of this right of first refusal.
26. ATTORNEY FEES. In the event action is instituted to enforce any term of
-------------
this Agreement, the prevailing party shall recover from the losing party
reasonable attorney fees incurred in such action as set by the trial court
and, in the event of an appeal, as set by the appellate courts.
27. SELLER DEFAULT. In the event of any default in performance of SELLER'S
--------------
obligations under this Agreement, PURCHASER shall be entitled to all of its
remedies under this Agreement, at law and in equity, including the right to
specific performance and injunctive relief as a matter of right.
28. GOVERNING LAW. This Agreement is governed by and will be construed in
-------------
accordance with the laws of the State of Oregon.
29. DEFINITION OF "CLOSING". The word "Closing" or words of similar import as
-----------------------
used in this Agreement will be construed to mean the originally fixed time
and Closing Date specified herein or any earlier or adjourned date agreed to
in writing by the parties.
30. TIME OF ESSENCE. Time is of the essence of each of the obligations of each
---------------
party hereunder.
<PAGE>
31. INVALIDITY OF PROVISIONS. If any provision of this Agreement is found to be
------------------------
invalid or unenforceable, the invalidity or unenforceability of such
provision shall not affect the validity of and enforceability of the
remaining provisions of this Agreement.
THE PROPERTY DESCRIBED IN THIS INSTRUMENT MAY NOT BE WITHIN A FIRE PROTECTION
DISTRICT PROTECTING STRUCTURES. THE PROPERTY IS SUBJECT TO LAND USE LAWS AND
REGULATIONS, WHICH, IN FARM OR FOREST ZONES, MAY NOT AUTHORIZE CONSTRUCTION OR
SITING OF A RESIDENCE AND WHICH LIMIT LAWSUITS AGAINST FARMING OR FOREST
PRACTICES AS DEFINED IN ORS 30.930 IN ALL ZONES. BEFORE SIGNING OR ACCEPTING
THIS INSTRUMENT, THE PERSON ACQUIRING FEE TITLE TO THE PROPERTY SHOULD CHECK
WITH THE APPROPRIATE CITY OR COUNTY PLANNING DEPARTMENT TO VERIFY APPROVED USES
AND EXISTENCE OF FIRE PROTECTION FOR STRUCTURES.
IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute this Agreement in four duplicate originals as of the
date first above written.
<TABLE>
<CAPTION>
<S> <C>
"PURCHASER" "SELLER"
ETEC SYSTEMS, INC., A NEVADA CORPORATION STANDARD INSURANCE COMPANY,
AND/OR ASSIGNS AN OREGON CORPORATION
By: /s/ Melanie J. Mock By: /s/ Eric E. Parsons
Its: Treasurer Vice President
ATTEST:
By: /s/ Saul E. Arnold By:/s/ Trond Ingvaldsen
Its: Assistant Secretary Assistant Secretary
</TABLE>
Exhibit List:
"A" Legal Description of Property
"B" Oregon Statutory Warranty Deed
"C" Certificate of Non-Foreign Status
"D" Assignment of Easements and Agreements
<PAGE>
EXHIBIT 10.2
PURCHASE AGREEMENT
------------------
THIS PURCHASE AGREEMENT (the "Agreement") is made as of October 31, 1997,
---------
between ETEC SYSTEMS, INC. ("Seller") and COMERICA BANK- CALIFORNIA ("Buyer").
------ -----
RECITALS
--------
Seller desires to sell certain of its accounts receivables from time to
time, and Buyer is willing to purchase from Seller such accounts receivable on
the terms set forth herein.
AGREEMENT
---------
1. Sale and Purchase.
-----------------
(a) Sale. Seller, from time to time during the period commencing on
----
the date hereof and terminating on November 1, 1998, may submit to Buyer a
request (a "Request") that it purchase from Seller the Eligible Receivables
-------
described in the Request. Buyer, in its sole discretion, may elect to accept or
reject a Request and if Buyer accepts a Request, then, subject to satisfaction
of the conditions precedent set forth in subsection (b) of this section, Buyer
shall purchase, and Seller shall sell, all of Seller's right, title and interest
(but none of Seller's obligations) with respect to such Eligible Receivables as
of the Purchase Date with respect to such Eligible Receivables (such Eligible
Receivables sold collectively the "Purchased Receivables"). Buyer will not
---------------------
purchase Eligible Receivables that Seller offers to the extent that the
aggregate purchase price paid by Buyer for Purchased Receivables would exceed
Ten Million Dollars ($10,000,000). Each purchase of Purchased Receivables shall
be evidenced by an Instrument of Transfer and Assignment in substantially the
form of Exhibit "A" attached hereto (the "Assignment").
----------- ----------
(b) Conditions Precedent. Buyer, assuming that it has accepted a
--------------------
Request, shall not be obligated to purchase Eligible Receivables described in
such Request unless on the Purchase Date therefor:
(i) Buyer has received all of the Receivables Documentation for such
Eligible Receivables and such other supporting documentation that Buyer has
reasonably requested;
(ii) Seller's representations, warranties and covenants herein are true and
accurate in all material respects on such Purchase Date;
1
<PAGE>
(iii) No Event of Repurchase exists on such Purchase Date with respect to
which Seller has not repurchased, and paid the full purchase price therefor, the
affected Purchased Receivables to the extent required to do so in accordance
with Section 7; and
(iv) No default or event of default exists under the Seller's credit
facility with ABN AMRO Bank, Comerica Bank and Industrial Bank of Japan or any
other agreement for indebtedness for borrowed money with respect to which the
Seller is the borrower or lessee thereunder, and no default or event of default
would be caused under any of the foregoing agreements as a result of the
purchase of the Eligible Receivables on such Purchase Date.
(c) Purchase Price. The purchase price for Purchased Receivables (the
--------------
"Purchase Price") purchased on a Purchase Date shall be ninety-six and sixty-
--------------
six-one hundredths percent (96.66%) of the aggregate Net Invoice Amount of such
Purchased Receivables (the "Aggregate Net Invoice Amount"). Buyer shall pay
----------------------------
the Purchase Price, denominated in U.S. dollars, to Seller in immediately
available funds on the Purchase Date.
(d) No Recourse. Except as otherwise provided in Section 7, each
-----------
purchase of the Purchased Receivables is made without recourse to Seller and
Seller shall have no liability to Buyer for any Eligible Customer's failure to
pay any of its Purchased Receivables when it is due and payable under the terms
of the applicable Receivables Documentation.
(e) Collection Expenses Account. On the initial Purchase Date, Buyer
---------------------------
shall establish an interest-bearing account (the "Collection Expenses Account")
---------------------------
into which it shall deposit funds equal to one half of one percent (.5%) of the
Net Invoice Amount of the Purchased Receivables acquired on such Purchase Date.
On each subsequent Purchase Date, Buyer shall deposit into the Collection
Expenses Account funds equal to one half of one percent (.5%) of the Net Invoice
Amount of the Purchased Receivables acquired on such Purchase Date. Seller, so
long as it acts as the collection agent in accordance with Section 5, shall have
the right to draw funds from the Collection Expenses Account from time to time
to cover the Collection Expenses that it incurs as the collection agent. Upon
Buyer's request, Seller shall provide Buyer with written evidence of the
Collection Expenses for which it has received reimbursement from the Collection
Expenses Account. Upon Buyer's receipt of all payments due with respect to the
Purchased Receivables purchased
2
<PAGE>
on a Purchase Date (the "Purchase Date Receivables"), whether through payments
-------------------------
made by or on behalf of the Approved Customers and/or payments made under the
Insurance Policy and/or payments made by Seller hereunder, Seller shall be
entitled to receive, as compensation for the collection agent services performed
hereunder with respect to such Purchased Receivables, the Net Funds. "Net Funds"
---------
means, with respect to the Purchase Date Receivables for each Purchase Date the
amount determined by multiplying the aggregate amount deposited in the
Collection Expenses Account as of the date that the Net Funds are being
determined (the "Calculation Date") by a fraction, the numerator of which is the
----------------
Net Invoice Amount of the Purchase Date Receivables and the denominator of which
is the Aggregate Net Invoice Amount of all the Purchased Receivables sold
hereunder as of the Calculation Date. On the date that no further purchase
transactions are authorized hereunder Seller, as compensation for the collection
agent services performed hereunder, shall be entitled to all funds remaining in
the Collection Expenses Account.
(f) Rebate. Upon Buyer's receipt of all payments due with respect to
------
the Purchased Receivables purchased on a Purchase Date, whether through payments
made by or on behalf of the Approved Customers and/or payments made under the
Insurance Policy and payments made by Seller hereunder, Buyer and Seller shall
determine the Average Collection Days for such Purchased Receivables. If the
Average Collection Days is less than one hundred twenty (120) days (the
"Projected Collection Days"), then Buyer shall pay to Seller the amount equal to
- --------------------------
the result obtained by multiplying 0.02111% times the Net Invoice Amount of the
subject Purchased Receivables times the difference between the Projected
Collection Days less the Average Collection Days.
2. Seller Representations and Warranties. Seller represents and
-------------------------------------
warrants to Buyer on each Purchase Date that:
(a) Purchased Receivables. Exhibit "B" attached hereto, as
--------------------- -----------
supplemented from time to time, contains a true and correct list of the Approved
Customers, the purchase order numbers, and the invoice numbers (the invoices and
all documentation relating to the Purchased Receivables collectively the
"Receivables Documentation"), and the unpaid amounts due in respect thereof
- --------------------------
which comprise the Purchased Receivables on such Purchase Date. Buyer has
received true and correct copies of all the Receivables Documentation relating
to each of the Purchased Receivables. None of the Purchased Receivables are
currently evidenced by chattel paper or instruments. Each of the Purchased
Receivables is in full force and effect and is the valid and
3
<PAGE>
binding obligation of the parties thereto, enforceable in accordance with its
terms, and constitutes the applicable Approved Customer's legal, valid and
binding obligation to pay to Seller the amount of the Purchased Receivables,
subject, as to enforcement of such Approved Customer's payment obligation, to
bankruptcy, insolvency, reorganization, arrangement, moratorium and other laws
of general applicability relating to or affecting creditors' rights. Neither
Seller nor any of the Approved Customers is in default in the performance of any
of the provisions of the Receivables Documentation applicable to its
transactions included within the Purchased Receivables. Seller has delivered to
each Approved Customer all equipment and related materials and performed all
services required to be so delivered or performed by the terms of the
Receivables Documentation for its Purchased Receivable. The payments due with
respect to each Purchased Receivable are not contingent upon Seller's
fulfillment of any obligation;
(b) The Assignment; No Offset; No Liens. When executed and delivered
-----------------------------------
pursuant hereto, the Assignment will vest in Buyer all of Seller's right, title
and interest (but none of Seller's obligations) with respect to the Purchased
Receivables covered thereby. The Purchased Receivables are not subject to any
offset, counterclaim or other defense, whether arising out of the transactions
contemplated by the Receivables Documentation or independently thereof. Seller
is transferring the Purchased Receivables free and clear of all security
interests, liens, charges or encumbrances and without any Disputes;
(c) Insurance Policy. If the Purchased Receivables include Eligible
----------------
Receivables of Approved Foreign Customers, the Insurance Policy is in full force
and effect and each Purchased Foreign Receivable meets each requirement for an
insured transaction thereunder. Seller has complied with all terms, provisions
and obligations under the Insurance Policy, and (i) all premiums under the
Insurance Policy which are due and payable on or before such Purchase Date have
been fully paid and (ii) Buyer is entitled to the benefits as a loss payee under
the Insurance Policy; and
(d) Compliance; No Default. This Agreement constitutes the binding
----------------------
agreement of Seller, enforceable in accordance with its terms and Seller has
taken all necessary corporate action to authorize the execution and delivery
hereof. This Agreement does not conflict with, or cause a default under, or
result in the creation of any security interest pursuant to, any other agreement
to which Seller is a party or is subject; nor does it breach any judgment,
decree, order or permit applicable
4
<PAGE>
to Seller.
3. Seller Covenants. Seller agrees during the term hereof to:
----------------
(a) Further Assistance. From time to time, upon Buyer's request,
------------------
promptly and duly execute and deliver all such further documents and render all
such assistance as Buyer requires to enable Buyer to obtain the full benefit of
each Purchased Receivable;
(b) Perform Terms. Duly perform and comply with all terms under each
-------------
contract relating to the Purchased Receivables and promptly inform Buyer of any
breach or default by Seller or any Approved Customer of any of the terms
thereof;
(c) Not Adversely Affect Buyer's Rights. Refrain from any act or
-----------------------------------
omission which might in any way prejudice or limit Buyer's rights under any of
the Purchased Receivables, the Insurance Policy or this Agreement, or cause a
Purchased Foreign Receivable to cease to satisfy each requirement of an insured
transaction under the Insurance Policy, including extending the payment terms
under any Purchased Foreign Receivables, unless approved in advance by both
Buyer and the Insurer; not have the Approved Foreign Customer with respect to a
Purchased Foreign Receivable become an affiliate or subsidiary of Seller for
purposes of the Insurance Policy;
(d) Insurance Policy. Maintain (if the Purchased Receivables included
----------------
Eligible Receivables of Approved Foreign Customers) the Insurance Policy in full
force and effect (and not amend or alter it without Buyer's prior written
consent, given in its sole discretion) with an aggregate coverage amount of the
dollar amount required from time to time in accordance with Exhibit "D",
-----------
attached hereto, as amended on each Purchase Date; comply with all requirements
thereunder, including paying of all premiums thereunder, and provide Buyer
promptly upon receipt copies of all notices (including all notices of any change
in the terms or conditions) received from the Insurer; upon Buyer's demand,
reimburse Buyer for all costs it is required to pay pursuant to the Insurance
Policy and indemnify and hold harmless Buyer against all costs it incurs in
respect of the Insurance Policy, including premiums paid by Buyer, and credit
insurance deductibles and retentions provided for under the Insurance Policy;
reimburse Buyer for the co-insurance portion of the Purchased Foreign
Receivables and the deductible amount for claims, if any, under the Insurance
Policy;
5
<PAGE>
(e) File Insurance Claims. In the event of any Approved Foreign
---------------------
Customer's non-payment of its Purchased Foreign Receivable, at the expiration of
the Waiting Period (as defined in the Insurance Policy) file a claim for
reimbursement under the Insurance Policy, and concurrently deliver to Buyer a
copy of such notice of claim; and
(f) Receivables Reports. Deliver to Buyer on the last day of each
-------------------
month, a report by Seller summarizing, as of the last day of the previous month,
the aging of the Purchased Receivables and such other information in summary
form as Buyer requires, as well as a certification as to Seller's compliance
with all terms and provisions contained herein.
4. Tax Indemnification. Seller shall pay, and indemnify and hold Buyer
-------------------
harmless from and against, any taxes that may at any time be asserted in respect
of the purchase transactions (including any sales, occupational, excise, gross
receipts, general corporation, personal property, privilege or license taxes,
but not including taxes imposed upon Buyer with respect to its income arising
out of the purchase transactions) and costs, expenses and reasonable counsel
fees in defending against the same, whether arising by reason of the acts to be
performed by Seller hereunder or otherwise.
5. Seller as Collection Agent.
--------------------------
(a) Appointment. Buyer appoints Seller, and Seller accepts such
-----------
appointment, as Buyer's collection agent with respect to collection and
administration of the Purchased Receivables. As agent, Seller shall insure that
all amounts owing on the Purchased Receivables by the Approved Customers
thereunder are paid to Seller, for Buyer's benefit. Such funds shall be Buyer's
exclusive property, and Seller, upon receiving such funds in its lockbox account
or otherwise, shall promptly place them in a segregated account, in trust for
Buyer's exclusive benefit. Seller shall not, directly or indirectly, utilize any
of such funds for its own purposes or commingle, other than in Seller's lockbox
account for the period authorized in the preceding sentence, any of such funds
with Seller's funds, and shall not have any right to pledge any of such funds as
collateral for any obligations of Seller or any other party.
(b) Disputes. So long as Seller is collection agent hereunder, it
--------
will promptly notify Buyer of, and promptly settle, all Disputes. The fees and
expenses that Seller incurs in handling Disputes, including attorneys' fees,
shall constitute Collection Expenses. However, if (i) Seller does not settle a
6
<PAGE>
Dispute (A) in the case of a Purchased Foreign Receivable, during the applicable
Waiting Period (as defined in the Insurance Policy) or within such shorter
period as Buyer determines, in its sole discretion, or (B) in the case of a
Purchased Domestic Receivable, within such period as Buyer determines, in its
sole discretion, and (ii) an Event of Repurchase has occurred and Seller has not
made the full payments required with respect to such Event of Repurchase in
accordance with Section 7, then Buyer may settle, compromise or litigate such
Dispute in Buyer's or Seller's name, upon such terms as Buyer, in its sole
discretion, deems advisable and for Buyer's account and risk.
(c) Removal.
-------
(i) Procedure. Seller may resign from the performance of all its
---------
functions and duties hereunder as collection agent at any time by giving Buyer
at least five (5) Business Days' prior written notice. Such resignation shall
take effect upon the successor collection agent's acceptance of its appointment
by Buyer. Buyer, in its sole discretion and upon five (5) Business Days' prior
written notice to Seller (or immediately, upon the occurrence of an Event of
Repurchase), may remove Seller as collection agent hereunder, which removal
shall take effect on the date specified in Buyer's notice.
(ii) Effect. On the date that Seller's duties as collection
------
agent are terminated in accordance with subsection (c)(i) of this section,
Seller shall receive, from the Collection Expenses Account, the sum of (A) the
amount equal to all Collection Expenses that Seller has incurred through such
date, but for which is has not previously been reimbursed, and (B) the amount
determined by multiplying the funds remaining in the Collection Expenses Account
after such final Collection Expenses reimbursement by a fraction, the numerator
of which is the aggregate dollar value of the Purchased Receivables for which
payment has been received as of such date, and the denominator of which is one
hundred percent (100%) of the invoice amount of all the Purchased Receivables as
of the date that Buyer purchased them in accordance with Section 1(a).
(d) Collection Expenses. Seller, in accordance with Section 1(e),
-------------------
shall be reimbursed from the Collection Expenses Account for all Collection
Expenses that it incurs in performing its duties as collection agent hereunder.
If the Collection Expenses exceed the amount deposited in the Collection
Expenses Account, Seller shall be solely responsible for such excess Collection
Expenses and shall not have any right to seek reimbursement thereof from Buyer.
7
<PAGE>
(e) Payment. Until Buyer has been paid all amounts to which it is
-------
entitled as to any Purchased Receivable, Seller shall (i) hold in trust for
Buyer and turn over to Buyer upon receipt all payments made to Seller with
respect to such Purchased Receivable and (ii) turn over to Buyer upon receipt
all instruments, chattel paper and other proceeds of such Purchased Receivable;
provided, however, that unless an Event of Repurchase has occurred, Seller may
- -------- -------
remit to Buyer amounts received by Seller and due to Buyer on Friday of each
week or the next Business Day if such Friday is not a Business Day (each, a
"Settlement Date"). On each Settlement Date, Seller shall deliver to Buyer a
- ----------------
report, in form and substance acceptable to Buyer, of the account activity
(including dates and amounts of payments) and changes in account status for each
Purchased Receivable. Seller shall pay all amounts due to Buyer in immediately
available funds.
(f) Notice. So long as Seller is acting as Buyer's collection agent,
------
it shall give Buyer prompt notice of the occurrence of any circumstance(s) that
reasonably could be expected to have a material adverse effect on Seller's
business operations or financial condition or its ability to perform its
obligations hereunder.
(g) Audit. So long as Seller is acting as Buyer's collection agent
-----
and for the one hundred eighty (180) day period commencing on termination of
Seller's collection agent responsibilities, Buyer shall have a right to audit
Seller's books for an accounting of the proceeds of the Purchased Receivables.
6. Public Notice. Buyer shall not directly notify the Approved Customers
-------------
or any other party of Buyer's rights in any of the Purchased Receivables, unless
and until an Event of Repurchase has occurred and Seller has not paid all
amounts due to Buyer under Section 7 as a result of such Event of Repurchase
within ten (10) days of Buyer's demand to Seller for payment of such amounts.
The foregoing notwithstanding, Buyer is hereby authorized to file UCC financing
statements with the appropriate government offices to give notice of its
purchase of the Purchased Receivables from Seller, signed only by Buyer. Seller
also hereby grants to Buyer a power of attorney, which shall be deemed coupled
with an interest and shall be irrevocable, to sign Seller's name on any such UCC
financing statement or any amendments thereto relating to this Agreement.
7. Events of Repurchase.
--------------------
8
<PAGE>
If any of the following events ("Events of Repurchase") occurs and is
--------------------
continuing:
(a) any representation or warranty by Seller hereunder with respect to
(i) any of the Purchased Receivables or (ii) the Insurance Policy is incorrect
in any material respect when made or deemed made and shall have an adverse
effect on the ability to collect such Purchased Receivables;
(b) Seller fails to perform or observe any other term, covenant or
agreement contained herein with respect to any of the Purchased Receivables or
the Insurance Policy and such failure shall have an adverse effect on the
ability to collect such Purchased Receivables, whether from the applicable
Approved Customers, the Insurer or otherwise;
(c) the amount payable with respect to a Purchased Receivable is
reduced as a result of any discount, adjustment, offset, counterclaim, warranty
issue or refusal of an Approved Customer to pay due to lack of performance of
Seller or of the product sold or other act or omission by Seller or its
authorized agents (other than a discount or adjustment granted with Buyer's
written approval); or
(d) Buyer does not receive all amounts owing with respect to a
Purchased Receivable on the date due and payable under the Receivables
Documentation with respect thereto; then, Seller shall, at the time, in the
manner and otherwise as hereinafter set forth, repurchase and pay for the
Purchased Receivables then outstanding affected by such Event of Repurchase at
Buyer's option and demand, to the extent that Buyer, in the case of a Purchased
Foreign Receivable, is not entitled to receive payment with respect to such
Purchased Foreign Receivables under the Insurance Policy; provided, however,
-------- -------
that Seller shall not be obligated to repurchase Purchased Receivables under
clause (d) to the extent that the aggregate repurchase price for Purchased
Receivables repurchased pursuant to such clause would exceed the then Repurchase
Limit, and in any case in which such non-payment of Purchase Receivables exceeds
the Repurchase Limit, then Buyer, in its sole discretion, shall determine which
Purchased Receivables Seller repurchases. The repurchase price for a Purchased
Receivable shall be the amount equal to the unpaid invoiced amount thereof plus
unpaid interest accrued in accordance with the terms of the Receivables
Documentation thereto through the repurchase date. The repurchase price of a
Purchased Receivable repurchased by Seller pursuant to this section shall be
paid to Buyer in immediately
9
<PAGE>
available funds without recourse to or warranty by Buyer.
8. Notices. Unless otherwise provided herein, all communications by
-------
either party relating hereto or any other agreement entered into in connection
herewith shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail, postage prepaid)
shall be personally delivered or sent by a recognized overnight delivery
service, certified mail, postage prepaid, return receipt requested, or by
telecopier (with confirmed receipt) to Seller or Buyer, as the case may be, at
its address set forth below:
If to Seller: Etec Systems, Inc.
26460 Corporate Avenue
Hayward, California 94545
Attention:
FAX:
If to Buyer: Comerica Bank-California
55 Almaden Boulevard
San Jose, California 95113
Attention: Mary Beth Suhr
FAX: 408-271-4021
A party may change the address at which it is to receive notices hereunder by
written notice in the foregoing manner given to the other.
9. Survival. All covenants, representations and warranties made herein
--------
shall continue in full force and effect so long as any Purchased Receivables
remain outstanding. Seller's obligations is to indemnify Buyer with respect to
the expenses, damages, losses, costs and liabilities shall survive until all
applicable statute of limitations periods with respect to actions that may be
brought against Buyer have run.
10. Expenses. Seller shall reimburse Buyer for all reasonable costs
--------
(including reasonable attorneys' fees and expenses) Buyer incurs in connection
with the preparation, negotiation, administration and enforcement hereof.
11. No Representation By Buyer. Buyer makes no representation or warranty
--------------------------
to Seller or any other party with respect to the characterization of the
transactions hereunder as a sale under applicable laws, rules or accounting
principles or guidelines.
12. Definitions. As used herein, the following terms shall
-----------
10
<PAGE>
have the following meanings:
"Approved Customers": those account debtors of Receivables generated by
------------------
Seller listed in Part 2 of Exhibit "C".
-----------
"Approved Domestic Customers": those Approved Customers which have their
---------------------------
chief executive or principal office located in the United States.
"Approved Foreign Customers": those Approved Customers which do not
--------------------------
constitute Approved Domestic Customers.
"Average Collection Days": the number obtained by the dividing the
-----------------------
Aggregate Collection Amounts by the aggregate Purchased Receivables Payments
Received. The Aggregate Collection Amounts is the sum of the Collection Amounts
for all of the Purchased Receivables Payments Received. The Collection Amount
with respect to a Purchased Receivables Payment Received is amount obtained by
multiplying such Purchased Receivable Payment Received by the number of days
from the Purchase Date to the date that Buyer received such Purchased Receivable
Payment Received (expressed as dollar days). Purchased Receivables Payments
Received are the payments that Buyer receives with respect to the amounts owed
by the Approved Customers with respect to the Purchased Receivables, whether
such payments are (i) the payments made by or on behalf of the Approved
Customers, (ii) the payments made with respect to the Purchased Foreign
Receivables under the Insurance Policy, or (iii) the payments made by Seller
hereunder with respect to the Purchased Receivables.
"Business Day": any day that is not a Saturday, Sunday or other day on
------------
which banks in California are required or permitted to close.
"Collection Expenses Account": See Section 1(e).
---------------------------
"Collection Expenses": all the fees and expenses incurred in collecting the
-------------------
Purchased Receivables, including all reasonable attorneys' fees and expenses
incurred in enforcing Buyer's rights and remedies as the owner of the Purchased
Receivables.
"Dispute": any dispute, deduction, claim, offset, defense or counterclaim
-------
of any kind relating to the Purchased Receivables, regardless of whether the
same (i) is in an amount greater than, equal to or less than the Purchased
Receivables concerned, (ii) is bona fide or not, or (iii) arises by reason of an
act of God, civil, strife, war, currency restrictions, foreign political
11
<PAGE>
restrictions or regulations or any other circumstance beyond the control of
Seller or the applicable Approved Customer.
"Eligible Receivables": Eligible Domestic Receivables and Eligible Foreign
--------------------
Receivables, collectively.
"Eligible Domestic Receivables": Receivables owing by Approved Domestic
-----------------------------
Customers with standard sales terms.
"Eligible Foreign Receivables": Receivables owing by Approved Foreign
----------------------------
Customers that are located in Approved Countries, as listed in Part 1 of Exhibit
-------
"C", with standard sales terms, that are insured for their full face value (less
- ---
deductibles and risk retention) under the Insurance Policy.
"Events of Repurchase": see Section 7 hereof.
--------------------
"Insurance Policy": one or more irrevocable insurance policies, in form and
----------------
substance satisfactory to Buyer, in its sole discretion, which shall insure
Seller against any Buyer-approved risk or any non-payment by a Foreign Customer
of any Receivables, the terms of which shall remain in effect through the first
anniversary of the date hereof and under which Buyer shall be the loss payee.
"Insurer": the insurance company or companies that issue the Insurance
-------
Policy.
"Net Invoice Amount": the amount of the applicable Purchased Receivable
------------------
shown on the invoice for such Purchased Receivable as the total amount payable
by the Approved Customers (net of any discounts, credits or other allowances
shown on such invoice).
"Purchase Date": each date on which Buyer purchases Eligible Receivables.
-------------
"Purchased Receivables": those Eligible Receivables which Buyer has
---------------------
purchased hereunder.
"Receivables": all accounts, instruments, documents, contract rights,
-----------
general intangibles, chattel paper and all other forms of obligations owing to
Seller, whether now existing or hereafter created that represent bona fide
obligations of Approved Customer arising out of Seller's sale and delivery of
goods and services in the ordinary course of business and all tax refunds,
proceeds of insurance and other proceeds thereof.
"Receivables Documentation": see Section 2(a).
-------------------------
12
<PAGE>
"Repurchase Limit": as of any date, five percent (5%) of the Net Invoice
----------------
Amount of all the Purchased Receivables purchased hereunder through such date.
13. General Provisions
------------------
This Agreement shall be governed by California law, without giving effect
to conflicts of law principles. This Agreement represents the parties' final
agreement with respect to the subject matter hereof and supersedes all prior and
contemporaneous understandings and agreements with respect to such subject
matter. No provision of this Agreement may be amended or waived except by a
writing signed by the parties hereto. This Agreement shall bind and inure to
the benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that Buyer may not assign any of its rights
-------- -------
hereunder without Buyer's prior written consent, given in its sole discretion.
Buyer shall have the right without the consent of or notice to Seller to sell,
transfer, negotiate, or grant participation in all or any part of, or any
interest in, Buyer's obligations, rights and benefits hereunder. Each provision
of this Agreement shall be severable from every other provision hereof for the
purpose of determining the legal enforceability of any specific provision. This
Agreement may be executed in any number of counterparts and by different parties
on separate counterparts, each of which, when executed and delivered, shall be
deemed to be an original, and all of which, when taken together, shall
constitute but one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
ETEC SYSTEMS, INC.
By: /s/ Melanie J. Mock
Title: Treasurer
COMERICA BANK-CALIFORNIA
By: /s/ Mary Beth Suhr
Title: Vice President
13
<PAGE>
EXHIBIT "A"
-----------
Instrument of Transfer and Assignment
-------------------------------------
The undersigned Etec Systems, Inc. (the "Seller"), for valuable
------
consideration which is hereby acknowledged, hereby sells, assigns, sets over and
transfers to Comerica Bank-California ("Buyer"), all of Seller's right, title
-----
and interest in and to the Accounts listed on Attachment "1" attached hereto.
--------------
This assignment and transfer is made without recourse, warranty or
representation, except as expressly set forth in the Purchase Agreement, dated
as of October 31, 1997, between Seller and Buyer.
ETEC SYSTEMS, INC.
By: /s/ Melanie J. Mock
Title: Treasurer
14
<PAGE>
EXHIBIT 11
ETEC SYSTEMS, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE AND EQUIVALENTS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
OCTOBER 31,
----------------------------------------
1997 1996
---------------- ----------------
<S> <C> <C>
Weighted average common shares outstanding 21,734 19,719
Weighted average common stock equivalents calculated by the
treasury stock method applied to options and warrants issued 884 1,399
---------------- ----------------
Weighted average common shares and equivalents 22,618 21,118
================ ================
Net income $ 9,228 $ 6,984
================ ================
Net income per share $ 0.41 $ 0.33
================ ================
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> OCT-31-1997
<CASH> 57,866
<SECURITIES> 40,872
<RECEIVABLES> 64,815
<ALLOWANCES> 1,208
<INVENTORY> 69,455
<CURRENT-ASSETS> 259,108
<PP&E> 60,996
<DEPRECIATION> 16,596
<TOTAL-ASSETS> 307,816
<CURRENT-LIABILITIES> 93,850
<BONDS> 0
0
0
<COMMON> 219
<OTHER-SE> 209,045
<TOTAL-LIABILITY-AND-EQUITY> 307,816
<SALES> 58,971
<TOTAL-REVENUES> 68,365
<CGS> 27,747
<TOTAL-COSTS> 34,831
<OTHER-EXPENSES> 10,777<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 199
<INCOME-PRETAX> 14,306
<INCOME-TAX> 5,078
<INCOME-CONTINUING> 9,228
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,228
<EPS-PRIMARY> 0.41
<EPS-DILUTED> 0.41
<FN>
<F1>EXCLUDES SG&A AS SG&A IS PART OF 5-03(b)(4)
</FN>
</TABLE>
