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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, 1998 COMMISSION FILE NUMBER: 0-26968
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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
21,161,945 shares of Common Stock were outstanding as of December 7, 1998.
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<PAGE>
Part 1. 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 31, July 31,
1998 1998
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $47,062 $63,600
Marketable securities.............................. 37,210 36,689
Accounts receivable, less allowance for
doubtful accounts of $1,276 and $1,226............ 73,945 84,529
Inventory.......................................... 87,784 86,512
Deferred tax assets................................ 17,902 17,902
Other current assets............................... 8,485 11,322
------------ ------------
Total current assets.............................. 272,388 300,554
Property, plant and equipment, net................. 49,607 48,970
Other assets....................................... 9,145 8,990
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$331,140 $358,514
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................... $23,230 $26,506
Accrued and other liabilities...................... 47,506 60,804
Taxes payable...................................... 16,051 18,132
------------ ------------
Total current liabilities......................... 86,787 105,442
Deferred gain on sale of asset..................... 2,605 2,649
Other liabilities.................................. 4,059 3,754
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Total liabilities................................. 93,451 111,845
------------ ------------
Commitments and contingencies
Stockholders' equity:
Preferred Stock, par value $0.01 per share;
10,000 shares authorized;
none issued and outstanding....................... -- --
Common Stock, par value $0.01 per share; 60,000,000
shares authorized; 21,158,732 and 21,977,070
issued and outstanding............................ 212 220
Warrants........................................... 600 600
Additional paid-in capital......................... 181,689 201,327
Cumulative translation adjustments................. 17 (1,200)
Retained earnings.................................. 55,171 45,722
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Total stockholders' equity........................ 237,689 246,669
------------ ------------
$331,140 $358,514
============ ============
</TABLE>
See the accompanying notes to these consolidated financial statements.
<PAGE>
ETEC SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
October 31,
-------------------
1998 1997
--------- ---------
<S> <C> <C>
Revenue:
Products..................................... $68,829 $58,971
Services..................................... 10,069 9,394
--------- ---------
78,898 68,365
--------- ---------
Cost of revenue:
Products...................................... 31,194 27,747
Services...................................... 8,007 7,084
--------- ---------
39,201 34,831
--------- ---------
Gross profit.................................... 39,697 33,534
--------- ---------
Operating expenses:
Research, development and
engineering.................................. 17,132 10,777
Selling, general and
administrative............................... 8,990 9,277
--------- ---------
26,122 20,054
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Income from operations.......................... 13,575 13,480
Interest expense................................ (153) (199)
Interest income and other, net................. 894 1,025
--------- ---------
Income before income tax provision.............. 14,316 14,306
Income tax provision............................ 4,867 5,078
--------- ---------
Net income...................................... $9,449 $9,228
========= =========
Net income per share - basic.................... $0.44 $0.42
========= =========
Shares used in per-share calculation - basic..... 21,699 21,734
========= =========
Net income per share - diluted................... $0.43 $0.41
========= =========
Shares used in per-share calculation - diluted .. 22,174 22,618
========= =========
</TABLE>
See the accompanying notes to these consolidated financial statements.
<PAGE>
ETEC SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
October 31,
---------------------
1998 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income............................................... $9,449 $9,228
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.......................... 3,771 1,889
Changes in assets and liabilities:
Accounts receivable.................................... 11,253 (15,483)
Factoring of accounts receivable....................... -- 6,200
Inventory.............................................. (505) (2,142)
Other assets........................................... 2,634 (1,489)
Accounts payable....................................... (3,276) (3,868)
Accrued and other liabilities.......................... (1,367) 17,098
---------- ----------
Net cash provided by operating activities.. 21,959 11,433
---------- ----------
Cash flows from investing activities:
Purchases of marketable securities, net................ (521) (6,610)
Capital expenditures for property and equipment, net... (4,360) (4,265)
---------- ----------
Net cash used in investing activities................ (4,881) (10,875)
---------- ----------
Cash flows from financing activities:
Repayment of debt and capital leases................... (37) (37)
Financing from (repayment to) intermediary............. (13,751) 114
Issuance of notes receivable to stockholders........... -- 200
Repurchase of Common Stock ............................ (19,823) --
Proceeds from issuance of Common Stock................. 143 1,334
---------- ----------
Net cash provided by (used in)financing activities... (33,468) 1,611
---------- ----------
Effect of exchange rate changes on cash.................. (148) (278)
---------- ----------
Net change in cash and cash equivalents.................. (16,538) 1,891
Cash and cash equivalents at the beginning
of the period.......................................... 63,600 55,975
---------- ----------
Cash and cash equivalents at the end of the period....... $47,062 $57,866
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest................. $191 $93
========== ==========
Cash paid during the period for income taxes............. $7,444 $3,371
========== ==========
SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES:
Tax benefits from stock option transactions.............. $34 $1,101
========== ==========
See the accompanying notes to these consolidated financial statements.
<PAGE>
ETEC SYSTEMS, INC.
NOTES TO CONSOLIDATED 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, 1998 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 for 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, 1998 included in the Company's Annual Report on
Form 10-K (File No. 0-26968). The July 31, 1998 balance sheet included
herein was derived from audited consolidated financial statements, but does
not include all disclosures required by generally accepted accounting
principles.
For purposes of presentation, the Company has indicated its interim
fiscal periods as ending October 31, 1998 and October 31, 1997.
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.
Net Income Per Share
The Company adopted Statement of Financial Accounting Standards No. 128 (SFAS
128), "Earnings Per Share," in the second quarter of fiscal 1998. Under the
provisions of SFAS 128, primary earnings per share have been replaced by basic
net income per share, which does not include the dilutive effect of stock
options in its calculation. In addition, fully diluted earnings per share have
been replaced by diluted net income per share. All prior period earnings per
share amounts have been restated to reflect the requirements of SFAS 128.
Basic net income per share has been computed using the weighted average number
of common shares outstanding during the period. Diluted net income per share
has been computed using the weighted average number of common shares and
equivalents (representing the dilutive effect of stock options) outstanding
during the period. Net income has not been adjusted for any period presented
for purposes of computing basic and diluted net income per share.
For purposes of computing diluted net income per share, weighted average
potential common shares do not include stock options with an exercise price
that exceeds the average fair market value of the Company's common stock for
the period. The number of shares excluded from the computation for the
respective quarters ended October 31, 1998 and 1997 were 1,944,375 and 134,670
shares at an average market price of $29.15 and $57.03, respectively.
Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS 131). SFAS 131 establishes standards
for reporting information about operating segments in annual and interim
financial statements and also establishes standards for related disclosures
about products and services, geographic areas and major customers. SFAS 131
is effective for fiscal years beginning after December 15, 1997. The Company
is currently studying its provisions.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133). SFAS 133 establishes new
standards of accounting and reporting for derivative instruments and hedging
activities. SFAS 133 requires that all derivatives be recognized at their fair
value in the statement of financial position and the corresponding gains or
losses be either reported in the statement of operations or as a component of
comprehensive income, depending on the type of hedging relationship that
exists. The Company has not yet determined the effect of adopting SFAS 133,
which will be effective for the Company's fiscal year 2000.
NOTE 2 - CASH EQUIVALENTS AND MARKETABLE SECURITIES
The Company considers all highly liquid debt instruments having a maturity of
three months or less on the date of purchase to be cash equivalents.
The Company has classified all investments as available for sale. Investments
classified as available for sale are recorded at fair value and any temporary
difference between an investment's cost and fair value is recorded as a
separate component of stockholders' equity. At October 31, 1998, these
available for sale securities totaling approximately $54.3 million were
included in cash and cash equivalents or marketable securities. The
investment portfolio at October 31, 1998 is comprised of money market funds,
corporate debentures, and municipal obligations. Temporary differences
between cost and fair value at October 31, 1998 and July 31, 1998 were not
material.
NOTE 3 - INVENTORY
</TABLE>
<TABLE>
<CAPTION>
October 31, July 31,
1998 1998
----------- -----------
(in thousands)
<S> <C> <C>
Purchased parts............................ $27,154 $30,407
Work-in-process............................ 35,671 35,554
Spares..................................... 24,959 20,551
----------- -----------
$87,784 $86,512
=========== ===========
</TABLE>
NOTE 4 - STOCKHOLDERS' EQUITY
In June 1998, the Board of Directors authorized the repurchase of up to $30.0
million of Common Stock. Shares may be repurchased at prevailing market
prices from time to time. In the first quarter of fiscal 1999, the Company
repurchased 840,000 shares of Common Stock for approximately $19.8 million. As
of October 31, 1998, the Company had repurchased a total of 1,005,000 shares
for approximately $25.4 million.
NOTE 5 - INCOME TAXES
The Company recorded provisions for income taxes for the three months ended
October 31, 1998 and 1997 of $4.9 million and $5.1 million, respectively.
The Company's provision for income taxes for the three months ended October
31, 1998 reflects the utilization of research and development tax credits and
tax benefits from the use of a foreign sales corporation, partially offset by
foreign earnings taxed at higher rates. Management will continue to evaluate
the recoverability of the deferred tax assets in future periods.
NOTE 6 - COMPREHENSIVE INCOME
As of the first quarter of fiscal 1999, the Company adopted Statement of
Financial Accounting Standards No. 130 (SFAS 130), "Reporting Comprehensive
Income," which establishes standards for the reporting and display of
comprehensive income and its components. SFAS 130 requires that unrealized
gains or losses on investments and foreign currency translation adjustments be
included in other comprehensive income. The components of comprehensive
income, net of tax, are as follows:
<TABLE>
<CAPTION>
Three Months Ended
October 31,
------------------------
1998 1997
----------- -----------
(in thousands)
<S> <C> <C>
Net income................................. $9,449 $9,228
Change in cumulative translation
adjustments................................ 1,217 (399)
----------- -----------
Total comprehensive income................. $10,666 $8,829
=========== ===========
</TABLE>
NOTE 7 - SUBSEQUENT EVENT
In April 1997, the Company entered into an amendment to its existing credit
agreement with ABN-AMRO Bank, N.V. to expand its $20.0 million revolving
credit line expiring May 31, 1998 to a $50.0 million line of credit expiring
May 31, 1999. In April 1998, the term of this credit line was extended to
November 1999. In November 1998, the term of this credit line was further
extended to November 30, 2000.
<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, 1998 and October 31, 1997
Revenue. Total revenue increased 15% from $68.4 million in the first quarter
of fiscal 1998 to $78.9 million in the first quarter of fiscal 1999. Revenues
comprise primarily sales of the Company's MEBES(R), CORE(R), and ALTA(R) mask
pattern generation systems, accessories and upgrades, and the provision of
technical support, maintenance and other services on such products. Product
sales, as a percentage of total revenue, increased from 86% in the quarter
ended October 31, 1997 to 87% in the quarter ended October 31, 1998, while
service revenues decreased from 14% to 13% of total revenue over the same
period. Service revenue has not increased at the same rate as product revenue,
because average sales prices for the Company's products have risen faster than
the prices that the Company has been able to negotiate on service contracts.
Moreover, revenue from service contracts does not begin until after the
expiration of the product warranty period, which is typically one year. The
Company derives most of its revenues from the sale of a small number of
systems and upgrades. As such, 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 period.
Product revenue increased 17% to $68.8 million from $59.0 million for the
quarters ended October 31, 1998 and 1997, respectively. This increase reflects
a change in mix towards new products, which have higher selling prices
because of the significant improvements they offer. However, weak global
demand for semiconductors has translated into reduced demand for masks and for
the Company's products, which will result in reduced revenue for at least the
next quarter in comparison to the second quarter of the prior fiscal year.
Thereafter, the duration and impact of the reduced demand is unclear, but the
Company expects to have better insight by April 1999, when the Japanese
semiconductor companies traditionally establish their capital spending plans
for the following twelve month period.
Service revenue increased 7% to $10.1 million from $9.4 million for the
quarters ended October 31, 1998 and 1997, respectively, due primarily to an
increase in the number of systems under service contracts.
Gross Profit. Overall gross margin improved to 50% for the first quarter of
fiscal 1999, compared to 49% for the first quarter of fiscal 1998. This
reflects an increase in product gross margin, partially offset by a decline in
service gross margin. The Company's gross profit on product revenue increased
21% to $37.6 million from $31.2 million for the quarters ended October 31,
1998 and 1997, respectively. The increase results from an increase in product
revenue and the higher product gross margin, which increased to 55% from 53%
for the quarters ended October 31, 1998 and 1997, respectively. The increase
in product gross margin is primarily attributable to changes in product mix
towards the Company's newer products, which generally have higher gross
margins than older products. This was partially offset by increases in
inventory reserves resulting from a reduced demand forecast and costs
associated with the production ramp in the Interconnect Products Group. The
Company anticipates that gross margin will decline for at least the second
quarter of fiscal 1999. Margins will be negatively impacted by lower volumes
than previously expected. Thereafter, margins will be affected by the extent
of recovery of shipment volume as well as additional costs associated with
new manufacturing facilities starting in the fourth quarter of fiscal 1999.
Margins could also be adversely affected by product mix skewing towards older,
less expensive mask pattern generation equipment or lower than anticipated
margins in its new laser direct imaging business (the Company's Interconnect
Products Group), where the Company is still building its base of experience.
Additional pressure on margins could come from continued deterioration of
Asian currencies relative to the dollar, which would increase the effective
cost of the Company's products to its customers in that region.
The Company's gross profit on service revenue declined 11% to $2.1 million
from $2.3 million for the quarters ended October 31, 1998 and 1997,
respectively. Gross margin on service revenue was 20% and 25% for the quarters
ended October 31, 1998 and 1997, respectively. The decreased gross profit and
gross margin reflect higher costs due to increased personnel required to
service the growing installed base and to improve customer satisfaction.
Margins were also negatively impacted by the amortization of the additional
spares inventory required to improve the Company's response to customer
service needs.
Research Development and Engineering. The Company's research, development and
engineering expenses continue to reflect its commitment to higher levels of
product development effort. These expenses, net of third-party funding under
cooperative development agreements, increased to $17.1 million, representing
22% of revenue, from $10.8 million, representing 16% of revenue, for the
quarters ended October 31, 1998 and 1997, respectively. The increase is
primarily due to expenses incurred in the development of future generation
ALTA and MEBES systems, together with costs associated with preparing the
initial beta versions of the Company's new DigiRite TM 2000 laser direct
imaging system for shipment from the Interconnect Products Group. Funding
received under cooperative development contracts was $2.1 million and $1.6
million for the quarters ended October 31, 1998 and 1997, respectively. The
Company intends to continue its research and development effort for the
remainder of fiscal 1999 at a similar rate. However, research and development
expense for the balance of fiscal 1999 could be higher than currently
expected to the extent that the Company is unable to meet milestones necessary
to secure funding under its cooperative development contracts.
Selling, General and Administrative. Selling, general and administrative
expenses decreased 3% to $9.0 million, representing 11% of revenue, from $9.3
million, representing 14% of revenue, for the quarters ended October 31, 1998
and 1997, respectively. The decrease in selling, general and administrative
expenses was primarily due to reduced sales commissions payable on sales into
Asia due to the expiration of some agreements during fiscal 1998. For the
remainder of fiscal 1999, selling, general and administrative expenses are
expected to increase due to a number of factors, including higher distribution
overhead for the direct laser imaging products and the costs of implementing
improved management information systems.
Interest Expense. Interest expense for the quarters ended October 31, 1998 and
1997 was $0.2 million in each quarter.
Interest Income and Other, Net. Interest and other income was $0.9 million for
the quarter ended October 31, 1998, compared with $1.0 million in the quarter
ended October 31, 1997. The small decrease is mainly due to lower average cash
balances available for investment.
Income Tax Provision. The Company recorded provisions for income taxes for the
quarters ended October 31, 1998 and 1997 of $4.9 million and $5.1 million,
respectively. The Company's effective tax rate decreased from 35.5% in the
quarter ended October 31, 1997 to 34% in the quarter ended October 31, 1998,
primarily due to increased research and development tax credits and increased
benefits from the use of a foreign sales corporation.
B. Liquidity and Capital Resources
In addition to its operational cash flows, in fiscal 1998 the Company entered
into agreements with its landlords under which they agreed to make
investments of up to $121.0 million for the construction of additional
manufacturing facilities under operating lease arrangements. The Company has
used $38.0 million of the $121.0 million total in fiscal 1998 and the first
quarter of fiscal 1999. In fiscal years 1996 and 1997, the Company raised
approximately $108.0 million from sales of its common stock in an initial
public offering, two additional public offerings, and a private placement. In
fiscal 1997, the Company also received $5.0 million from the sale and
leaseback of its headquarters campus.
The Company has spent approximately $4.4 million for net capital expenditures
in the quarter ended October 31,1998, primarily to purchase testing and
process equipment.
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 November 1997, the Company completed the purchase of approximately 15.2
acres of land in Hillsboro, Oregon for approximately $2.4 million. The
Company is having a new facility constructed on this site to meet development
and manufacturing requirements for its laser mask pattern generation products
and to back up its electron-beam manufacturing capabilities in Hayward,
California. The new facilities in Hayward and Hillsboro are scheduled to be
completed in the middle of calendar year 1999. The amortization of the cost of
these facilities will increase the Company's manufacturing costs, starting in
the fourth quarter of fiscal 1999. There can be no assurance that revenue
growth and maintenance of product price levels will be adequate to completely
offset these costs.
As of October 31, 1998, the Company had cash, cash equivalents and marketable
securities of $84.3 million. The Company believes that existing cash balances
(including cash equivalents and marketable securities), together with other
sources of liquidity, including cash flows from operating activities and
amounts available under the existing $50.0 million revolving line of credit
(all of which was available at October 31, 1998), 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 to maintain
the flexibility to take advantage of opportunities as they arise. As such,
the Company may effect additional equity or debt financings from time to time
in the future.
Cash Flows from Operations
Net cash provided by operations for the three months ended October 31, 1998
and 1997 was $22.0 million and $11.4 million, respectively.
Cash flows from operating activities in the three months ended October 31,
1998 primarily reflected net income of $9.4 million, depreciation and
amortization of $3.8 million, and decreases in accounts receivable of $11.3
million, offset by decreases in accounts payable of $3.3 million.
Cash flows from operating activities for the three months ended October 31,
1997 primarily reflected net income of $9.2 million; depreciation and
amortization of $1.9 million; increases in accounts receivable of $15.5
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).
Fluctuations in accounts receivable and current liabilities for the previously
mentioned periods were caused primarily by the timing of system orders, the
timing of revenue recognition, variations in unit shipments and the timing of
payments to vendors. The decrease in accounts receivable in the three months
ended October 31, 1998 is due to an increased rate of collections during the
quarter. However, in the remainder of fiscal 1999 receivables could increase
disproportionately to revenues due to slower than normal collections from the
Company's customers. The Company is actively managing its inventory balances
to ensure they are appropriate to meet current and forecast demand levels.
However, inventories for the balance of fiscal 1999 could be adversely
affected by some further deterioration in order rates, coupled with an
inability to cancel or delay orders for raw materials.
Prior to the shipment of a system, the Company generally receives payment
covering a portion of the system sales price. Partial payments are usually
received when the Company accepts an order and at various points while a
system is being installed and thereafter. Therefore, the amount of customer
advances at each reporting period fluctuates based on the number of systems
that are on order, the timing of order acceptance, and the status of each
system within the manufacturing cycle. Advances from customers decreased to
$6.1 million at October 31, 1998 from $10.3 million at July 31, 1998.
Cash Flows from Investing Activities
Net cash used in investing activities for the three months ended October 31,
1998 and 1997 was $4.9 million and $10.9 million, respectively. Cash flows
used in investing activities in the three months ended October 31, 1998
consisted of net purchases of marketable securities of $0.5 million and net
capital expenditures of $4.4 million. Cash flows used in investing activities
for the three months ended October 31, 1997 consisted of net purchases of
marketable securities of $6.6 million and net capital expenditures of $4.3
million.
Cash Flows from Financing Activities
Net cash used in financing activities for the three months ended October 31,
1998 was $33.5 million. Net cash provided by financing activities for the
three months ended October 31, 1997 was $1.6 million. Cash flows used in
financing activities for the three months ended October 31, 1998 primarily
reflected repayments of $13.8 million to a third-party financing intermediary
and open market purchases of the Company's stock which totaled $19.8 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.
Certain Factors that May Affect Future Results
Statements in this report that 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 that may or may not be within the Company's control and as to
which there can be no firm assurances. 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, but are not limited to, the following:
significant variations in quarterly or annual results due to factors
affecting even a small number of systems, such as a delay in completion of
manufacturing or testing of a single system to a future fiscal period;
reduced orders or backlog due to changes in capital spending decisions of
customers or potential customers; the timely development, market acceptance
and successful production of new products and enhancements in an environment
of rapid technological change; damage to the Company's manufacturing
facilities caused by an earthquake or other natural disaster; the ability of
the Company to successfully integrate acquired businesses and their
technologies into its operations; and risks associated with foreign
operations, such as foreign exchange risk, general market conditions, import-
export controls and political risks. (See additional discussion contained in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Other Factors Affecting Company Results," set forth in Part II,
Item 7 of the Company's Report on Form 10-K for the year ended July 31, 1998,
which is incorporated herein by reference.)
Year 2000 Readiness Disclosure
Computer programs and systems that make use of dates represented by only two
digits (98 rather than 1998) may not operate properly after the year 2000.
Two-digit fields can cause problems with sorting, mathematical calculations
and comparisons when working with years outside the range of 1900 through
1999. The problem also potentially extends to any systems or devices that
include embedded technology, such as microchips.
The Company has established a formal project with a project office and project
team to address this issue and achieve Year 2000 (Y2K) readiness. The Company
has chosen the U.S. Government Accounting Office (GAO) Program Management
Model, as modified, to manage and measure its progress. The project focuses
on four key readiness areas: 1) product readiness, addressing product
functionality; 2) supplier readiness, addressing the preparedness of our
suppliers; 3) internal infrastructure readiness, addressing mission-critical
internal information technology (IT) and non-IT systems; and 4) customer
readiness, addressing customer preparedness and the Company's customer
support. For each readiness area, the Company is systematically performing an
enterprise-wide risk assessment, implementing the GAO Program Management
Model as a project and developing contingency plans to mitigate unknown risk.
The Company is also communicating with its customers, suppliers, employees,
and other third-party business partners to reinforce awareness and to inform
them of its progress toward Y2K readiness. The Company is doing this through
a variety of media, including regular updates to the Y2K section of the
corporate web site (www.Etec.com). The Awareness and Assessment phases of the
project have been substantially completed and the Renovation phase commenced
in May 1998. The Company has engaged a third party to assist in its effort to
ensure a comprehensive effort is made to address the Y2K issue.
Product Readiness: A single test suite is used to test all of the Company's
products. This provides a complete assessment of potential Y2K impacts and
precludes inefficient use of resources that would result from the performance
of individual customer test suites. Etec is performing its testing in
accordance with SEMATECH Year 2000 Test Scenarios. The Company has
communicated to its customers the current status for each of its products, as
well as a proposed remediation plan and schedule.
Customer Readiness: The Company plans to commence making Y2K compliant updates
to its customers' systems through its standard Service Update Plan process by
January 1999, with completion planned by June 1999. A Monitoring phase of the
program is planned as well, which provides for the contingency of customers
experiencing issues with the validation and implementation phases of the
project.
Supplier Readiness: This aspect of the program is focused on minimizing risk
associated with the Company's suppliers in two areas: first, the supplier's
capability to provide Y2K compliant products and second, the supplier's
business capability to continue to provide the required products and
services. The Company is using the SEMATECH Year 2000 Readiness Supplier
Questionnaire as an aid in assessing risk. A supplier action list and
contingency plans are being developed based on this assessment. Supplier
issues that potentially affect the Company's products are targeted to be
resolved by December 1998.
Internal Infrastructure Readiness: The Company has completed an assessment of
its IT and non-IT applications and its business processes. Some applications
and processes have already been made Y2K compliant, while others are being
prioritized and assigned resources based upon their importance to the
Company's ability to conduct business. All implementations are scheduled to be
completed no later than July 1999.
The Company estimates that the total Y2K costs will range from $5 to $8
million, with the majority of these costs to be incurred over the next five
fiscal quarters. The Company is continuing its assessment and is developing
alternatives that will result in a further refinement of this estimate over
time. There can be no assurance that actual costs will not differ materially
from the current estimate.
If computer systems used by the Company or its suppliers, or the software
applications used in systems manufactured and sold by the Company, fail or
experience significant difficulties, the Company's results of operations could
be materially adversely affected.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's market risk exposures as set forth in Item 7A of its Annual
Report on Form 10-K for the year ended July 31, 1998 have not changed
significantly.
Part II - Other Information
Item 2. Changes in Securities
On September 9, 1998, the Board of Directors adopted a number of changes to
the Company's Bylaws. Such changes were recommended by counsel and did not
require shareholder approval under the terms of the Bylaws or under the Nevada
General Corporation Law. A copy of the complete Bylaws, as amended, is filed
with this Quarterly Report on Form 10-Q as Exhibit 3.1.
The amendments included: (i) the elimination of the ability of shareholders
to act by written consent in most cases; (ii) the elimination of the right
of holders of 10% or more of the outstanding stock to call a shareholder
meeting; (iii) the addition of a requirement for advance notice of
shareholder business to be brought before a meeting and of persons proposed to
be nominated for director by a shareholder from the floor at the annual
shareholder meeting; (iv) the expansion of permissible methods of giving
notice of Board meetings and shareholder meetings; (v) the elimination of
the ability of shareholders to participate in meetings by conference
telephone; (vi) amendment of the director removal provisions so as to permit
the removal of directors by the shareholders only with a two-thirds vote of
all outstanding shares; (vii) the deletion of some antiquated provisions;
and (viii) additional changes designed generally to conform the Company's
Bylaws more closely to the Nevada General Corporation Law, as currently in
effect. For the details of these changes, reference is made to Exhibit 3.1
filed herewith.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed herewith:
Exhibit
No. Description
3.1 Amended and Restated By-Laws of the Registrant dated September
9, 1998.
10.1 Amendment dated September 29, 1998 to Participation Agreement
(Tranche A) by and between Etec Systems, Inc. and Lease Plan North
America, Inc. and the Participants Named Herein and ABN Amro Bank,N.V.,
as agent for the Participants dated December 5, 1997.
10.2 Amendment dated September 29, 1998 to Credit Agreement among Registrant
and the Lender named therein and ANB-AMRO Bank, N.V. as agent for
Lenders, dated May 24, 1996.
27 Financial Data Schedule.
See Echibit Index on page 17.
(b) Reports on Form 8-K.
None.
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 11, 1998.
ETEC SYSTEMS, INC.
(Registrant)
By /s/ William D. Snyder
William D. Snyder
Vice President and Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
<PAGE>
ETEC SYSTEMS, INC.
INDEX OF EXHIBITS
Exhibit
No. Description
3.1 Amended and Restated By-Laws of the Registrant dated September
9, 1998.
10.1 Amendment dated September 29, 1998 to Participation Agreement
(Tranche A) by and between Etec Systems, Inc. and Lease Plan North
America, Inc. and the Participants Named Herein and ABN Amro Bank,N.V.,
as agent for the Participants dated December 5, 1997.
10.2 Amendment dated September 29, 1998 to Credit Agreement among Registrant
and the Lender named therein and ANB-AMRO Bank, N.V. as agent for
Lenders, dated May 24, 1996.
27 Financial Data Schedule.
EXHIBIT 3.1
ARTICLE 1. Offices
Section 1. Principal Executive Office. The Board of Directors is authorized
to establish the principal executive office of the corporation, which may (but
need not) be at the same location as the registered office or at any other
location designated by the Board of Directors. The principal executive office
need not be in the state of Nevada.
Section 2. Other Offices. Other offices may at any time be established by the
Board of Directors at such place or places as may be determined by the Board
of Directors from time to time.
ARTICLE 2. Meetings of Shareholders
Section 1. Place of Meetings. Meetings of shareholders shall be held either
at the principal executive office of the corporation or at such other place
within or without the State of Nevada as may be designated by the Board of
Directors. However, if no place is stated or so fixed, shareholder meetings
shall be held at the principal executive office of the corporation.
Section 2. Annual Meetings. An annual meeting of the shareholders shall be
held for the election of directors at such date and time as is determined by
the Board of Directors.
Notice of each annual meeting of shareholders, signed by the Chairman of the
Board, the Chief Executive Officer, the President, a Vice President, the
Secretary, an Assistant Secretary, or such other natural person or persons as
the Directors shall designate, shall be given in writing to each shareholder
entitled to vote, either personally or by mail or other means of written or
electronic communication permitted by applicable laws, charges prepaid,
addressed to such shareholder at his or her address appearing on the books of
the corporation or given by the shareholder to the corporation for the purpose
of notice. All such notices shall be sent to each shareholder entitled
thereto not less than ten (10) nor more than sixty (60) days before each
annual meeting, and shall specify the purpose or purposes for which the
meeting is called and the place, the date and the time of such meeting. The
signature on such notice may be a facsimile or conformed signature and need
not be an original signature. If mailed, notice shall be addressed to the
shareholder at his or her address as it appears upon the records of the
corporation. Upon mailing, the service of notice is complete and the time of
the notice begins to run from the date upon which it is deposited in the mail.
Personal delivery of any notice to any officer of a corporation or
association, or to any partner of a partnership, constitutes delivery of the
notice to the corporation, association or partnership. Any shareholder may
waive notice of any meeting by a writing signed by such shareholder or by a
duly authorized attorney-in-fact of such shareholder, either before or after
the meeting.
Section 3. Special Meetings. Special meetings of the shareholders, for any
purpose or purposes whatsoever, may be called at any time by the Chairman of
the Board, the Chief Executive Officer, the President, a Vice President, the
Secretary or by a majority of the Board of Directors. Except in special cases
where other express provision is made by statute, notice of such special
meetings shall be given in the same manner as for annual meetings of
shareholders. Notices of any special meeting shall specify the place, date
and time of such meeting, and the purpose or purposes for which the meeting is
called.
Section 4. Adjourned Meetings and Notice Thereof. Any shareholders meeting,
annual or special, whether or not a quorum is present, may be adjourned from
time to time by the vote of the holders of a majority of the shares present
in person or represented by proxy thereat, but in the absence of a quorum no
other business may be transacted at any such meeting.
When any shareholders meeting, either annual or special, is adjourned for
thirty (30) days or more, notice of the adjourned meeting shall be given as in
the case of an original meeting. Save as aforesaid, it shall not be
necessary to give any notice of an adjournment or of the business to be
transacted at an adjourned meeting, other than by announcement at the meeting
at which such adjournment is taken of the date, time and place of the
reconvened meeting.
Section 5. Entry of Notice. Whenever any shareholder entitled to vote has
been absent from any meeting of shareholders, whether annual or special,
provided that proper notice has been given, an entry in the minutes to the
effect that notice has been duly given shall be conclusive and
incontrovertible evidence that due notice of such meeting was given to such
shareholders, as required by law and the By-Laws of the corporation.
Section 6. Voting. At all meetings of shareholders, every shareholder
entitled to vote shall have the right to vote in person or by proxy the number
of shares standing in his or her own name on the stock records of the
corporation. There shall be no cumulative voting. Such vote may be by voice
or by ballot, at the election of the chair of the meeting.
Section 7. Quorum. The presence in person or by proxy of the holders of a
majority of the shares entitled to vote at any meeting shall constitute a
quorum for the transaction of business.
Section 8. Proxies. Every person entitled to vote shall have the right to do
so either in person or by an agent or agents authorized by a written proxy
executed by such person or his or her duly authorized agent and filed with
the Secretary of the corporation; provided that no such proxy shall be valid
after the expiration of six (6) months from the date of its execution, unless
(i) the shareholder executing it specifies therein the length of time for
which such proxy is to continue in force, which in no case shall exceed seven
(7) years from the date of its execution, or (ii) the proxy is coupled with an
interest.
Section 9. Action Without a Meeting. Except as provided in Article VI,
Section 1 hereof, the shareholders of the corporation may not take action by
written consent without a meeting; rather, any such shareholder actions must
be taken at a duly called annual or special shareholders meeting.
Section 10. Advance Notice of Shareholder Business. To be properly brought
before the meeting, business must be of a nature that is appropriate for
consideration at a shareholders meeting and must be (i) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors, (ii) otherwise properly brought before the meeting by
or at the direction of the Board of Directors, or (iii) otherwise properly
brought before the meeting by a shareholder.
In addition to any other applicable requirements, for business to be properly
brought before the annual meeting by a shareholder, the shareholder must have
given timely notice thereof in writing to the Secretary of the corporation.
To be timely, each such notice must be given either by personal delivery or by
United States mail, postage prepaid, to the Secretary of the corporation and
received by the Secretary not later than sixty (60) days prior to the first
anniversary of the date on which notice of the prior year's annual meeting was
mailed to shareholders. The notice provided to the Secretary shall set
forth: (i) a brief description of the business desired to be brought before
the meeting and the reasons for conducting such business at the meeting; (ii)
information concerning the shareholder, including the shareholder's name and
address; (iii) a lawful representation that the shareholder is entitled to
vote at such meeting and intends to appear in person or by proxy at the
meeting to present the matter specified in the notice; (iv) any material
interest of the shareholder in such business; and (v) such other information
with respect to such matter as would be required to be included in a proxy
statement soliciting proxies for the presentation of such matter to the
meeting.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
transacted at a shareholders meeting except in accordance with the procedures
set forth in this section; provided, however, that nothing in this section
shall be deemed to preclude discussion by any shareholder of any business
properly brought before a meeting in accordance with these Bylaws. The person
presiding over the shareholders meeting shall, if the facts warrant, determine
and declare at the meeting that business was not properly brought before the
meeting in accordance with the provisions of this Section, and, if he or she
should so determine, he or she shall so declare at the meeting that any such
business not properly brought before the meeting shall not be transacted.
Section 11. Advance Notice of Shareholder Nominees. Nominations of persons
for election to the Board of Directors of the corporation may be made at a
meeting of shareholders by or at the direction of the Board of Directors or
by any shareholder of the corporation entitled to vote in the election of
directors at the meeting who complies with the notice procedures set forth in
this Section. Such nominations, other than those made by or at the direction
of the Board of Directors, shall be made pursuant to timely notice in writing
to the Secretary of the corporation.
To be timely, a shareholder's notice shall be delivered to or mailed and
received at the principal executive offices of the corporation not later than
sixty (60) days prior to the first anniversary of the date on which notice of
the prior year's annual meeting was mailed to shareholders. Such
shareholder's notice shall set forth (a) as to each person, if any, whom the
shareholder proposes to nominate for election or re-election as a director:
(i) the name, age, business address and residence address of such person, (ii)
the principal occupation or employment of such person, (iii) the class and
number of shares of the corporation that are beneficially owned by such
person, (iv) any other information relating to such person that would be
required by law to be disclosed in solicitations of proxies for election of
directors, and (v) such person's written consent to being named as a nominee
and to serving as a director if elected; and (b) as to the shareholder giving
the notice: (i) the name and address, as they appear on the corporation's
books, of such shareholder, and (ii) the class and number of shares of the
corporation that are beneficially owned by such shareholder, and (iii) a
description of all arrangements or understandings between such shareholder,
each nominee and any other person or persons (naming such person or persons)
relating to the shareholder's nomination. At the request of the Board of
Directors, any person nominated by the Board for election as a director shall
furnish to the Secretary of the corporation that information required to be
set forth in the shareholder's notice of nomination that pertains to the
nominee.
No person shall be eligible for election as a director of the corporation
unless nominated in accordance with the procedures set forth in this Section.
The person presiding at the shareholder meeting shall, if the facts warrant,
determine and declare at the meeting that a nomination was not made in
accordance with the procedures prescribed by these Bylaws, and if he or she
should so determine, he or she shall so declare at the meeting and the
defective nomination shall be disregarded.
Section 12. Shareholder Participation by Telephone. Shareholders shall not
be permitted to participate in shareholder meetings by telephone or other
electronic means. Votes may only be cast in person at the meeting by the
shareholder or by a duly appointed proxy of the shareholder who appears in
person at the meeting.
ARTICLE 3. Directors
Section 1. Powers. Subject to limitations of the Articles of Incorporation,
the By-Laws and the provisions of the Nevada General Corporation Law as to
action to be authorized or approved by the shareholders, and subject to the
duties of Directors as prescribed by the By-Laws, all corporate powers shall
be exercised by or under the authority of, and the business and affairs of the
corporation shall be managed by, the Board of Directors.
Section 2. Committees.
(a) Executive Committee. The Board of Directors shall have the power to and
shall appoint and maintain an Executive Committee. Such committee shall
consist of one or more members of the Board of Directors, including either the
Chairman of the Board or, if he or she is a member of the Board of Directors,
the President. Such committee shall have and may exercise all the powers and
authority of the Board of Directors, except as the Board may specifically
reserve by resolution, and may authorize the seal of the corporation to be
affixed to all papers that may require it.
(b) Compensation, Audit and Finance Committees. The Board of Directors shall
have the power to and shall appoint and maintain Compensation, Audit, and
Finance Committees of the Board. Each such committee shall consist of one or
more members of the Board of Directors, none of whom shall be officers of the
corporation. The committees shall have only such authority as the Board may
specifically delegate by resolution.
(c) Other Committees. The Board of Directors, by resolution or resolutions
adopted by a majority of the members of the whole Board, shall have the power
to and may also appoint and maintain such other committees as it may deem
appropriate. Each such committee shall consist of one or more members of the
Board of Directors and shall have only such authority as the Board may
specifically delegate by resolution.
(d) Powers Withheld. No committee shall have the power or authority in
reference to amending the Articles of Incorporation, adopting an agreement of
merger or consolidation, recommending to the shareholders a dissolution of the
corporation or a revocation of a dissolution, or amending the By-Laws of the
corporation; and, unless the resolution, By-Laws or Articles of Incorporation
expressly so provide, no committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock.
(e) Committee Operation and Structure. A majority of each committee may
determine its action and may fix the time and place of its meetings, unless
provided otherwise by the Board of Directors. Subject to paragraphs (a) and
(b) above, the Board of Directors shall have the power at any time to fill
vacancies in, and to change the size or membership of any such committee. No
member of the committee shall continue to be a member of it after he or she
ceases to be a Director of the corporation.
(f) Written Record. Each committee shall keep a written record of its acts
and proceedings and shall submit such record to the Board of Directors at such
times as requested by the Board of Directors. Failure to submit such record,
or failure of the Board of Directors to approve any action indicated therein,
will not, however, invalidate such action to the extent it has been carried
out by the corporation prior to the time the record of such action was, or
should have been, submitted to the Board of Directors as herein provided.
Section 3. Number and Qualification of Directors. The authorized number of
Directors of the corporation shall initially be nine. The number of Directors
may be increased or decreased by a resolution of the Board of Directors duly
adopted by 75% of all Directors. The number of Directors shall not be less
than one.
Section 4. Election and Term of Office. The Board of Directors may, by
resolution, establish a staggered or classified Board of Directors, which
resolution shall set forth the initial terms and the standard terms of office
for each class of directors. At least one-fourth of the Directors shall be
elected at each annual meeting of shareholders, but if any such annual meeting
is not held, or the Directors are not elected at such meeting, the Directors
may be elected at any special meeting of shareholders. All Directors shall
hold office until their respective successors are elected or until their
resignation, death or removal.
Section 5. Vacancies. Vacancies in the Board of Directors may be filled by a
majority of the remaining Directors, though less than a quorum, or by a sole
remaining Director, and each Director so elected shall hold office until his
or her successor is elected at an annual or a special meeting of the
shareholder.
A vacancy or vacancies in the Board of Directors shall be deemed
to exist in case of the death, resignation or removal of any Director, or if
the authorized number of Directors is increased, or if the shareholders fail
at any annual or special meeting of shareholders at which any Director or
Directors are elected to elect the full authorized number of Directors to be
voted for at that meeting, or if the original incorporators shall fail to
designate the total authorized number of Directors for the initial Board of
Directors.
The shareholders may elect a Director or Directors at any time to
fill any vacancy or vacancies not filled by the Directors. If the Board of
Directors accepts the resignation of a Director tendered to take effect at a
future time, the Board or the shareholders shall have power to elect a
successor to take office when the resignation is to become effective.
Section 6. Place of Meeting. Regular meetings of the Board of Directors shall
be held at any place within or without the State of Nevada that has been
designated from time to time by resolution of the Board or by written consent
of all members of the Board. In the absence of such designation, regular
meetings shall be held at the principal executive office of the corporation.
Special meetings of the Board may be held either at a place so designated or
at the principal executive office.
Section 7. Organization Meeting. Immediately following each annual meeting of
shareholders, the Board of Directors shall hold a regular meeting for the
purpose of organization, election of officers, and the transaction of other
business. Notice of such meetings is hereby dispensed with.
Section 8. Special Meetings. Special meetings of the Board of Directors for
any purpose or purposes may be called at any time by the Chairman of the
Board, the Chief Executive Officer, the President, or, if they are absent or
unable or refuse to act, by the Secretary or any Vice President or by any two
Directors.
Notice of the time and place of special meetings shall be delivered
personally to the Directors or sent to each Director by mail or other form of
written or electronic communication, charges prepaid, addressed to him or her
at his or her address as it is shown upon the records of the corporation, or
if it is not so shown on such records or is not readily ascertainable, at the
place in which the meetings of the Directors are regularly held. In case
such notice is mailed or sent by telegraph, it shall be deposited in the
United States mail or delivered to the telegraph company in the place in which
the principal executive office of the corporation is located at least
forty-eight (48) hours prior to the time of the holding of the meeting. In
case such notice is delivered personally, by telephone, by voicemail message,
by electronic mail or by other electronic means, it shall be so delivered at
least twenty-four (24) hours prior to the time of the holding of the meeting.
Such mailing, telegraphing, personal delivery or other communication as above
provided shall constitute due, legal and personal notice to such Director.
Section 9. Participation in Meetings. Members of the Board of Directors, or
of any committee designated by the Board of Directors, may participate in a
meeting of the Board of Directors or committee by means of a conference
telephone network, video conference or a similar communications method by
which all persons participating in the meeting can hear each other.
Participation in a meeting pursuant to this Section constitutes presence in
person at such meeting.
Section 10. Notice of Adjournment. Notice of the date, time and place of
reconvening an adjourned meeting need not be given to absent Directors if the
date, time and place is fixed at the meeting that is being adjourned.
Section 11. Entry of Notice. Whenever any Director has been absent from any
special meeting of the Board of Directors, provided that proper notice has
been given, an entry in the minutes to the effect that notice has been duly
given shall be conclusive and incontrovertible evidence that due notice of
such special meeting was given to such Director, as required by law and the
By-Laws of the corporation.
Section 12. Waiver of Notice. The transactions of any meeting of the Board of
Directors, however called and noticed or wherever held, shall be valid as
though had at a meeting duly held after regular call and notice, if a quorum
is present and if: (i) either before or after the meeting, each of the
Directors not present signs a written waiver of notice or a consent to holding
such meeting or an approval of the minutes thereof or (ii) such other actions
as are sufficient to cure the defective notice under the Nevada General
Corporation Law are taken. All such waivers, consents or approvals shall be
filed with the corporate records or made a part of the minutes of the meeting.
Section 13. Action Without a Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting if a written consent thereto is signed by all the
members of the Board or of such committee. Such written consent shall be
filed with the minutes of proceedings of the Board or committee.
Section 14. Quorum. A majority of the number of Directors actually in office
shall be necessary to constitute a quorum for the transaction of business,
except as to adjournment as hereinafter provided. Every act or decision done
or made by a majority of the Directors present at a meeting duly held at which
a quorum is present shall be regarded as the act of the Board of Directors,
unless a greater number is required by law or by the Articles of Incorporation
or by these By-Laws.
Section 15. Adjournment. A quorum of the Directors may adjourn any Directors
meeting to meet again at a stated date and time; provided, however, that in
the absence of a quorum, a majority of the Directors present at any Directors
meeting, either regular or special, may adjourn from time to time until the
time fixed for the next regular meeting of the Board.
Section 16. Fees and Compensation. Directors shall receive such fees and/or
other compensation, if any, for their services as Directors as may be
authorized from time to time by the Board of Directors. In addition,
Directors shall receive reasonable out-of-pocket expenses incurred to attend
meetings of the Board or any committee thereof. Nothing herein contained
shall be construed to preclude any Director from serving the corporation in
any other capacity, such as an officer, agent, employee or consultant, and
receiving compensation in such capacity.
Section 17. Removal. Any or all of the directors may be removed without cause
if such removal is approved by not less than two-thirds of the issued and
outstanding shares entitled to vote; provided, however, that (i) if the
Articles of Incorporation or an amendment thereto provide for the election of
directors by cumulative voting, no director shall be removed from office
except upon the vote or written consent of shareholders owning sufficient
shares to have prevented his or her election to office in the first instance,
(ii) the Articles of Incorporation may require the concurrence of a larger
percentage of the stock entitled to voting power in order to remove a
director, and (iii) when by the provisions of the Articles of Incorporation
the holders of the shares of any class or series, voting as a class or series,
are entitled to elect one or more directors, any director so selected may be
removed only by the applicable vote of the holders of the shares of that class
or series.
Section 18. Restrictions on Transactions Involving Interested Directors. The
corporation shall not enter into any contract or other transaction with any
corporation, firm or association of which one of the Directors is an
employee, officer or agent, which contract or transaction could involve
payments by the corporation to such corporation, firm or association
aggregating $100,000 or more (other than interest or dividend payments),
unless such contract or transaction has been approved by a majority of the
disinterested Directors.
ARTICLE 4. Officers
Section 1. Officers. The officers of the corporation shall be a Chairman of
the Board of Directors, a President, a Chief Financial Officer, a Secretary
and a Treasurer. The corporation may also have, at the discretion of the
Board of Directors, a Chief Executive Officer, one or more Vice Presidents,
one or more Assistant Secretaries, one or more Assistant Treasurers, and such
other officers as may be appointed in accordance with the provisions of
Section 3 of this Article. Officers other than the Chairman of the Board need
not be Directors. One person may hold two or more offices.
Section 2. Election. The officers of this corporation, except such officers
as may be appointed in accordance with the provisions of Section 3 or Section
5 of this Article, shall be chosen annually by the Board of Directors and
each shall hold office until he or she shall resign or shall be removed or
otherwise disqualified to serve, or his or her successor shall be elected and
qualified.
Section 3. Subordinate Officers. The Board of Directors may appoint such
other officers as the business of the corporation may require, each of whom
shall hold office for such period, have such authority and perform such
duties as are provided in the By-Laws or as the Board of Directors may from
time to time determine.
Section 4. Removal and Resignation. Any officer may be removed, either with
or without cause, by the Board of Directors at the time in office, at any
regular or special meeting of the Board.
Any officers may resign at any time by giving written notice to the Board of
Directors or to the Chairman of the Board, the Chief Executive Officer, the
President, or the Secretary of the corporation. Any such resignation shall
take effect at the date of the receipt of such notice or at any later time
specified therein; and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 5. Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification or any other cause shall be filled in the manner
prescribed in the By-Laws for regular appointments to such office.
Section 6. Chairman of the Board. The Chairman of the Board shall, subject to
the control of the Board of Directors, have general supervision, direction and
control of the business and officers of the corporation. He or she shall
preside at all meetings of the shareholders and at all meetings of the Board
of Directors. The Chairman of the Board shall exercise and perform such other
powers and duties as may be from time to time assigned to him or her by the
Board of Directors or prescribed by the By-Laws.
Section 7. President. The President shall have the general powers and duties
of management usually vested in the office of president of a corporation, and
shall have such other powers and duties as may be prescribed by the Board of
Directors or by the By-Laws. In the absence of the Chairman of the Board and
the Chief Executive Officer (if there be one), the President shall preside at
all meetings of the shareholders and at all meetings of the Board of
Directors. If the President is unable to preside at such a meeting for any
reason, then the Board of Directors may appoint any other person that it deems
appropriate to preside over the meeting.
Section 8. Vice Presidents. In the absence or disability of the President,
the Vice President or Vice Presidents, if any, in order of their rank as fixed
by the Board of Directors, shall perform all the duties of the President, and
when so acting shall have all the powers of, and be subject to all the
restrictions upon, the President. The Vice Presidents shall have such other
powers and perform such other duties as from time to time may be prescribed
for them by the Board of Directors or the By- Laws.
Section 9. Secretary. The Secretary shall keep, or cause to be kept, a book
of minutes at the principal executive office, or such other place as the Board
of Directors may order, of all meetings of Directors and shareholders, with
the date, time and place of holding, whether regular or special, and if
special, how authorized, the notice thereof given, the names of those present
at Directors' meetings, the number of shares present or represented at
shareholders meetings and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the registered office in
Nevada, a share register, or a duplicate share register, revised at least once
annually, showing the names of the shareholders (alphabetically arranged) and
their addresses and the number and classes of shares held by each.
Alternatively, the Secretary may keep on file at the registered office of the
corporation a statement setting forth the name and address of the custodian
of the share register, which may be the transfer agent. The corporation may
appoint a transfer agent to maintain the official share register and stock
transfer records of the corporation and to process original issuances of
stock certificates and subsequent transfers thereof. Such records shall
include the name and address of each shareholder; the number and class of
shares held by each; the number and date of certificates issued for the same;
and the number and date of cancellation of every certificate surrendered for
cancellation.
The Secretary shall give, or cause to be given, notice of all the meetings of
the shareholders and of the Board of Directors required by the By-Laws or by
law to be given, and he or she shall keep the seal of the corporation in safe
custody, and shall have such other powers and perform such other duties as may
be prescribed by the Board of Directors or the By-Laws.
Section 10. Chief Financial Officer. The Chief Financial Officer shall keep
and maintain, or cause to be kept and maintained, adequate and correct
accounts of the properties and business transactions of the corporation,
including accounts of its assets, liabilities, receipts, disbursements, gains,
losses and shares. The books of account shall at all times be open to
inspection by any Director. The Chief Financial Officer shall also render to
the Chairman of the Board, the Chief Executive Officer, the President and
Directors, whenever any such person requests it, an account of the financial
condition of the corporation and shall have such other powers and perform
such other duties as may be prescribed by the Board of Directors or the
By-Laws.
Section 11. Treasurer. The Treasurer shall deposit all monies and other
valuables in the name and to the credit of the corporation with such
depositaries as may be designated by the Board of Directors. The Treasurer
shall disburse the funds of the corporation as may be ordered by the Board of
Directors, shall render to the Chairman of the Board, the Chief Executive
Officer, the President and Directors, whenever any such person requests it, an
account of all transactions of the Treasurer as such an officer, and shall
have such other powers and perform such other duties as may be prescribed by
the Board of Directors or the By-Laws. In the event that the Board of
Directors has not appointed a person as Treasurer, the Chief Financial
Officer shall be deemed to also serve as Treasurer and shall be responsible
for performing the duties of the Treasurer.
ARTICLE 5. Miscellaneous
Section 1. Record Date and Closing Stock Books. The Board of Directors may
fix a record date at a time, in the future, (i) not more than sixty (60) nor
less than ten (10) days preceding the date of any meeting of shareholders, and
(ii) not more than sixty (60) nor less than ten (10) days preceding the date
fixed for the payment of any dividend or distribution or for the allotment of
rights, or when any change or conversion or exchange of shares shall go into
effect. Such record date shall be the date fixed for the determination of the
shareholders entitled to notice of and to vote at any such meeting, or
entitled to receive any such dividend or distribution, or any such allotment
of rights, or to exercise the rights in respect to any such change,
conversion or exchange of shares, and in such case only shareholders of record
on the date so fixed shall be entitled to notice of and to vote at such
meetings, or to receive such dividend, distribution or allotment of rights,
or to exercise such rights, as the case may be, notwithstanding any transfer
of any shares on the books of the corporation after any record date fixed as
aforesaid. The Board of Directors may (but need not) close the books of the
corporation against transfers of shares during the whole or any part of any
such period.
Section 2. Inspection of Corporate Records. Shareholders shall have the right
to inspect such corporate records at such times and based upon such
limitations of such rights as may be set forth in the Nevada General
Corporation Law from time to time.
Section 3. Checks and Other Monetary Obligations. All checks, drafts or other
orders for payment of money, notes or other evidences of indebtedness, issued
in the name of or payable to the corporation, shall be signed or endorsed by
such person or persons and in such manner as, from time to time, shall be
determined by resolution of the Board of Directors.
Section 4. Annual Report. Except as may be required by applicable law, the
corporation need not provide an annual report to the shareholders.
Section 5. Certificates of Stock. A certificate or certificates for shares of
the capital stock of the corporation shall be issued to each shareholder when
any such shares are fully paid up. All such certificates (a) shall be signed
by (i) the Chairman of the Board, the Chief Executive Officer, the President
or a Vice President and (ii) the Secretary or an Assistant Secretary, or (b)
shall be authenticated by facsimiles (i) of the signature of the Chairman of
the Board, the Chief Executive Officer, the President or a Vice President and
(ii) the signature of the Secretary or an Assistant Secretary. Every
certificate authenticated by a facsimile of a signature must be countersigned
by a transfer agent or transfer clerk and a registrar.
Certificates for shares purposes as the Board of Directors or the By-Laws may
provide; provided, however, that any such certificate so issued prior to full
payment shall state the amount remaining unpaid and the terms of payment
thereof.
Section 6. Representation of Shares of Other Corporations. The Chairman of
the Board, the Chief Executive Officer, the President or any Vice President
and the Secretary or Assistant Secretary of this corporation are authorized
to vote, represent and exercise on behalf of this corporation all rights
incident to any and all shares of any other corporation or corporations
standing in the name of this corporation. The authority herein granted to
said officers to vote or represent on behalf of this corporation any and all
shares held by this corporation in any other corporation or corporations may
be exercised either by such officers in person or by any person authorized so
to do by proxy or power of attorney duly executed by said officers.
Section 7. Inspection of By-Laws. The corporation shall keep in its
registered office in Nevada the original or a copy of the By-Laws as amended
or otherwise altered to date, certified by the Secretary, which shall be open
to inspection by the shareholders at all reasonable times during office hours.
ARTICLE 6. Amendments
Section 1. Power of Shareholders. New By-Laws may be adopted or these By-Laws
may be amended or repealed by the vote of the shareholders entitled to
exercise a majority of the voting power of the corporation or by the written
consent of such shareholders, except as otherwise provided in the Articles of
Incorporation.
Section 2. Power of Directors. Subject to the right of shareholders as
provided in Section 1 of this Article VI to adopt, amend or repeal By-Laws,
and except for Article III, Sections 2, 3 and 18, Article VI, Section 2 and
Article VII, By-Laws may be adopted, amended or repealed by the Board of
Directors.
ARTICLE 7. Indemnification
Every person who was or is a party or is threatened to be made a party to or
is involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or she or a
person of whom he or she is the legal representative is or was a Director or
officer of the corporation or is or was serving at the request of the
corporation or for its benefit as a director or officer of another
corporation, or as its representative in a partnership, joint venture, trust
or other enterprise, shall be indemnified and held harmless to the fullest
extent legally permissible under the General Corporation Law of the State of
Nevada from time to time against all expenses, liability and loss (including
attorneys' fees, judgments, fines and amounts paid or to be paid in
settlement) reasonably incurred or suffered by him or her in connection
therewith. Such right of indemnification shall be a contract right that may
be enforced in any manner desired by such person. Such right of
indemnification shall not be exclusive of any other right that such directors,
officers or representatives may have or hereafter acquire and, without
limiting the generality of such statement, they shall be entitled to their
respective rights of indemnification under any By- Law, agreement, vote of
shareholders, provision of law or otherwise, as well as their rights under
this Article.
The Board of Directors may cause the corporation to purchase and maintain
insurance on behalf of any person who is or was a Director or officer of the
corporation, or as its representative in a partnership, joint venture, trust
or other enterprise against any liability asserted against such person and
incurred in any such capacity or arising out of such status, whether or not
the corporation would have the power to indemnify such person.
The Board of Directors may from time to time adopt further By-Laws with
respect to indemnification and may amend these and such By-Laws to provide at
all times the fullest indemnification permitted by the General Corporation
Law of the State of Nevada.
CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
(1) That I am duly elected and acting Secretary of ETEC SYSTEMS, INC., a
Nevada corporation; and
(2) That the foregoing Amended and Restated Bylaws, comprising ___ pages,
constitute the Amended and Restated Bylaws of said corporation in full force
and effect as of the date of this certification.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of
said corporation this ___ day of September, 1998.
W. Russel Wayman, Secretary
EXHIBIT 10.1
Lease Plan North America, Inc
c/o ABN AMRO Bank N.V. as Agent
Capital Markets-Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
1. Reference is made to that certain Participation Agreement, dated as of
December 5, 1997 (the "Participation Agreement"), among Etec Systems, Inc.
("Lessee"), Lease Plan North America, Inc. ("Lessor"), the financial
institutions listed in Schedule I to the Participation Agreement, (the
"Participants") and ABN AMRO Bank N.V., as agent for the Participants (in such
capacity, "Agent"). Unless otherwise indicated, all terms defined in the
Participation Agreement have the same respective meanings when used herein.
2. Pursuant to Subparagraph 2.09(a) of the Participation Agreement,
Lessee hereby irrevocably requests Lessor to extend (and the Participants to
consent to such extension) the Unused 364-Day Commitment $10,000,000 for an
additional six (6) months by extending the current 364-Day Commitment
Termination Date from December 4, 1998 to June 4, 1999.
3. Lessee hereby certifies to the Lessor Parties that, on the date of this
364-Day Commitment Extension Request and after giving effect to the extension
requested hereby:
(a). The representation and warranties of Lessee set forth in Paragraph 4.01
of the Participation Agreement and in the other Operative Documents are true
and correct in all material respects as if made on such date (except for
representations and warranties expressly made as of a specified date, which
shall be true as of such date);
(b) No Default has occurred and is continuing; and
(c) All of the Operative Documents are in full force and effect.
By: /S/ Richard W. Powell
- ------------------------------
Richard W. Powell
Corporate Treasurer
Etec Systems, Inc.
Consented to and Acknowledged by:
Signature:Mary Beth Suhr
- ------------------------------
Name: Mary Beth Suhr
- ------------------------------
Title: V. P.
- ------------------------------
Bank: Comerica
- ------------------------------
EXHIBIT 10.2
ABN AMRO Bank N.V. as Agent
101 California St Suite 4550
San Francisco, Ca 94111-5812
Attn: Robin Yim
Pursuant to Subparagraph 2.01 (h) of the Credit Agreement dated as of
May 24, 1996 (the "Credit Agreement"), among Etec Systems, Inc. ("Borrower"),
the financial institutions listed in Schedule I to the Credit Agreement (the
"Lenders"), and ABN AMRO Bank, N.V., as Agent for the Lenders, Borrower
hereby requests the Lenders to extend the Revolving Loan Maturity Date (as
defined in the Credit Agreement) for an additional one-year period. If a
Lender, in its sole and absolute discretion, consents to such request, such
Lender shall evidence such consent by executing this letter in the space
provided and returning to Agent two copies of this letter.
Upon the execution of a copy of this letter by each Lender, the return
thereof to Agent and the written notification thereof by Agent to Borrower
and Lenders, the Revolving Loan Maturity Date, as defined in Paragraph 1.01
of the Credit Agreement, shall be amended by changing the date "November 30,
1999" to "November 30, 2000".
Except as specifically amended hereby, all terms, covenants and conditions of
the Credit Agreement shall remain in full force and effect.
Very truly yours,
By:/s/ Richard W. Powell
- ------------------------------
Richard W. Powell
Corporate Treasurer
Etec Systems, Inc.
Systems, Inc.
Consented to and Acknowledged by:
Signature: /s/ Mary Beth Suhr
- ------------------------------
Name: Mary Beth Suhr
- ------------------------------
Title: V. P.
- ------------------------------
Bank: Comerica
- ------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE ACCOMPANYING FINANCIAL STATEMENTS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1998
<PERIOD-END> OCT-31-1998
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<SECURITIES> 37,210
<RECEIVABLES> 75,221
<ALLOWANCES> 1,276
<INVENTORY> 87,784
<CURRENT-ASSETS> 272,388
<PP&E> 49,607
<DEPRECIATION> 0
<TOTAL-ASSETS> 331,140
<CURRENT-LIABILITIES> 86,787
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0
0
<COMMON> 212
<OTHER-SE> 237,477
<TOTAL-LIABILITY-AND-EQUITY> 331,140
<SALES> 68,829
<TOTAL-REVENUES> 78,898
<CGS> 31,194
<TOTAL-COSTS> 39,201
<OTHER-EXPENSES> 17,132 <F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 153
<INCOME-PRETAX> 14,316
<INCOME-TAX> 4,867
<INCOME-CONTINUING> 14,316
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,449
<EPS-PRIMARY> $0.44
<EPS-DILUTED> $0.43
<FN>
<F1> EXCLUDES SG&A AS SG&A IS PART OF 5-03(b)(4).
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