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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000912057-01-008533.txt : 20010328
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ACCESSION NUMBER: 0000912057-01-008533
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 8
CONFORMED PERIOD OF REPORT: 20001231
FILED AS OF DATE: 20010327
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: CYMER INC
CENTRAL INDEX KEY: 0000897067
STANDARD INDUSTRIAL CLASSIFICATION: PHOTOGRAPHIC EQUIPMENT & SUPPLIES [3861]
IRS NUMBER: 330175463
STATE OF INCORPORATION: NV
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT:
SEC FILE NUMBER: 000-21321
FILM NUMBER: 1580923
BUSINESS ADDRESS:
STREET 1: 16750 VIA DEL CAMPO COURT
CITY: SAN DIEGO
STATE: CA
ZIP: 92127
BUSINESS PHONE: 6194517300
MAIL ADDRESS:
STREET 1: 16275 TECHNOLOGY DR
CITY: SAN DIEGO
STATE: CA
ZIP: 92127-1815
FORMER COMPANY:
FORMER CONFORMED NAME: CYMER LASER TECHNOLOGIES
DATE OF NAME CHANGE: 19960608
</SEC-HEADER>
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<TYPE>10-K405
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<DESCRIPTION>10-K405
<TEXT>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO _________.
Commission File Number 0-21321
CYMER, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 33-0175463
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16750 Via Del Campo Court, San Diego, CA 92127
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (858) 385-7300
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Name of each Exchange
Title of each class on which registered
------------------- -------------------
Common Stock, $.001 par value Nasdaq National Market
Preferred Share Purchase Rights Nasdaq National Market
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
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing price of $25 for shares of the
registrant's Common Stock on March 23, 2001 as reported on the Nasdaq
National Market, was approximately $715,636,850. In calculating such
aggregate market value, shares of Common Stock owned of record or
beneficially by officers, directors, and persons known to the registrant to
own more than five percent of the registrant's voting securities (other than
such persons of whom the Company became aware only through the filing of a
Schedule 13G filed with the Securities and Exchange Commission) were excluded
because such persons may be deemed to be affiliates. The registrant disclaims
the existence of control or any admission thereof for any other purpose.
Number of shares of Common Stock outstanding as of March 23, 2001: 29,643,748.
DOCUMENTS INCORPORATED BY REFERENCE
The following document is incorporated by reference in Part III of this
Annual Report on Form 10-K: portions of registrant's proxy statement for its
annual meeting of stockholders to be held on May 17, 2001.
<PAGE>
CYMER, INC.
2000 Annual Report on Form 10-K
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PART I...............................................................................................................1
Item 1. Business...........................................................................................1
Item 2. Properties........................................................................................12
Item 3. Legal Proceedings.................................................................................13
Item 4. Submission of Matters to a Vote of Security Holders...............................................13
PART II.............................................................................................................14
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters..............................14
Item 6. Selected Financial Data...........................................................................14
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.............15
Item 7A. Quantitative and Qualitative Disclosures About Market Risk........................................31
Item 8. Financial Statements and Supplementary Data.......................................................32
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..............32
PART III............................................................................................................32
Item 10. Directors and Executive Officers of the Registrant................................................32
Item 11. Executive Compensation............................................................................33
Item 12. Security Ownership of Certain Beneficial Owners and Management....................................33
Item 13. Certain Relationships and Related Transactions....................................................33
PART IV.............................................................................................................33
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K..................................33
</TABLE>
CYMER is a registered trademark of Cymer, Inc.
<PAGE>
STATEMENTS IN THIS ANNUAL REPORT ON FORM 10-K THAT ARE NOT STRICTLY
HISTORICAL IN NATURE ARE FORWARD-LOOKING STATEMENTS. THESE STATEMENTS INCLUDE,
BUT ARE NOT LIMITED TO, REFERENCES TO MANUFACTURING ACTIVITIES; EXPECTED PRODUCT
SALES AND DEVELOPMENT; SERVICE AND SUPPORT; RESEARCH AND DEVELOPMENT
EXPENDITURES; EXPECTED PRODUCT DEVELOPMENT; EXPECTED INTERNATIONAL PRODUCT
SALES, DEVELOPMENT AND REVENUE; ADEQUACY OF CAPITAL RESOURCES AND INVESTMENTS;
EFFECTS OF THE SEMICONDUCTOR BUSINESS; COMPETITIVE POSITIONING; AND CONTINUING
RELATIONSHIPS WITH THIRD-PARTY MANUFACTURERS FOR PRODUCT MANUFACTURING. THESE
STATEMENTS INCLUDE, WITHOUT LIMITATION, STATEMENTS CONTAINING THE WORDS
"BELIEVES," "ANTICIPATES," "EXPECTS," AND WORDS OF SIMILAR IMPORT. THESE
STATEMENTS ARE ONLY PREDICTIONS BASED ON CURRENT INFORMATION AND EXPECTATIONS
AND INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES. ACTUAL EVENTS OR RESULTS MAY
DIFFER MATERIALLY FROM THOSE PROJECTED IN SUCH STATEMENTS DUE TO VARIOUS
FACTORS, INCLUDING, BUT NOT LIMITED TO, THOSE SET FORTH UNDER THE CAPTIONS
"BUSINESS," "RISK FACTORS" AND "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS," AND ELSEWHERE CONTAINED IN THIS
REPORT. CYMER ASSUMES NO OBLIGATION TO UPDATE ANY FORWARD-LOOKING STATEMENTS
CONTAINED IN THIS REPORT.
PART I
ITEM 1. BUSINESS
GENERAL
Cymer is the world's leading supplier of excimer laser illumination
sources, the essential light source for deep ultraviolet ("DUV")
photolithography systems used in the manufacture of semiconductors. DUV
lithography is a key enabling technology which has allowed the semiconductor
industry to meet the exacting specifications and manufacturing requirements
for volume production of today's most advanced semiconductor chips. Cymer's
lasers are incorporated into step-and-repeat and step-and-scan
photolithography systems for use in the manufacture of semiconductors with
critical feature sizes below 0.35 microns. Cymer believes that its excimer
lasers constitute a substantial majority of all excimer lasers incorporated
in DUV photolithography tools. Cymer's customers include all five
manufacturers of DUV photolithography systems: ASM Lithography, Canon, Nikon,
SVG Lithography and Ultratech Stepper. Photolithography systems incorporating
Cymer's excimer lasers have been purchased by each of the world's 20 largest
semiconductor manufacturers: Advanced Micro Devices ("AMD"), Fujitsu,
Hitachi, Hyundai, IBM, Infineon, Intel, Lucent, Matsushita, Micron,
Mitsubishi, Motorola, NEC, Philips, Samsung, Sharp, Sony, ST
Microelectronics, Texas Instruments, and Toshiba. Cymer is a Nevada
corporation, incorporated on July 12, 1996.
PRODUCTS
Cymer's products consist of photolithography light sources, replacement
parts and service.
PHOTOLITHOGRAPHY LASER PRODUCTS
Cymer's photolithography lasers produce narrow bandwidth pulses of
short wavelength light. The lasers permit very fine feature resolution and high
throughput. Cymer has designed its lasers to be highly reliable, easy to install
and compatible with existing semiconductor manufacturing processes.
248 nm KrF PRODUCT FAMILY
6000 SERIES - The 6000 Series lasers represents Cymer's most advanced
light sources within its 248 nanometer ("nm") Krypton Fluoride ("KrF") portfolio
and is designed for the production of semiconductor devices down to 130 nm (0.13
micron) design rules and below.
ELS-6010 - The newest addition to the 6000 Series, the ELS-6010 is a 20
watt KrF excimer laser with a repetition rate of 2500 Hertz ("Hz").
Designed for 200 milometer ("mm") and 300 mm lithography steppers and
scanners with greater than 0.70 Numerical Aperture ("NA") lens
designs, the ELS-6010 is designed to be a key enabler in the production
of semiconductor devices with 130 nm and below design rules. The
ELS-6010 delivers advanced line-narrowed spectral bandwidth of less
than 0.5 picometer ("pm") Full Width Half Maximum ("FWHM") and less
than 1.4 pm (95% energy integral). The
1
<PAGE>
ELS-6010, which is based on the production proven ELS-6000(TM), also
incorporates power and chamber module advances for superior dose
stability improving Critical Dimension ("CD") control and process
yield.
ELS-6000 - The production proven ELS-6000 is a 2000 Hz excimer laser
designed for advanced 200 mm and 300 mm steppers and scanners for the
production of devices with 180 nm and below geometries. The 20 watt
ELS-6000 is designed for advanced optical systems with up to 0.70 NA
lens designs. Incorporating advances in the laser chamber, pulse power
and optics modules, the ELS-6000 enables significant improvements in
throughput rates and CD control through its less than +0.4% energy
dose stability, less than 0.6 bandwidth FWHM, and less than 2.0 pm
bandwidth at 95% energy integral.
5000 SERIES - With a repetition rate of 1000 Hz, this solid state
pulse power KrF 248 nm excimer laser was engineered using modular
construction. Enabling higher device yields by delivering improved energy
stability, this series is designed specifically for use in manufacturing
semiconductors with 250 nm and smaller design rules. This series includes
three models:
ELS-5010 - Designed for steppers and scanners with numerical apertures
as high as 0.7, the ELS-5010 provides 10 watts of output power,
controls bandwidth to less than 2.0 pm at 95% energy integral, and
delivers energy dose stability to less than +0.6%.
ELS-5005 UPGRADE - Designed for the installed base of ELS-5000 lasers,
the upgrade contains improved, longer lifetime ELS-5010 core modules
and can lower the laser's cost of consumables (CoC) by up to 63%
compared to its predecessor, the ELS-5000.
ELS-5000 - The ELS-5000 delivers 10 watts of output power and is
designed for stepper and scanner applications with optical designs
requiring bandwidths of less than 0.8 pm.
EX-5000 - With 15 watts of output power, this model is used for scanner
applications with catadioptric lens designs.
193 nm ArF PRODUCT FAMILY
Cymer continues to develop, and offer for sale to its customers, its
next generation argon fluoride ("ArF") excimer laser. The 193 nm ArF product
line represents Cymer's most advanced light sources within the product
portfolio and is designed for the production of semiconductor devices with
design rules below 130 nm (0.13 micron).
NANOLITH(TM)7000 - The NanoLith 7000 is currently being developed and
has been offered to customers. The built-in laser metrology will provide
pulse-to-pulse data acquisition and feedback control to minimize transient
wavelength instabilities, thereby enhancing exposure latitude and CD-control. In
actual tests, the new laser core technology revealed a potential for up to 80%
cost of consumables (CoC) reduction compared to the ELX-5000A predecessor.
Improved thermal management in the discharge chamber and optimized gas flow
allows the NanoLith 7000 to deliver 20 watts. The NanoLith 7000 is built on an
extended version of Cymer's highly reliable ELS-6000 platform.
ELS-6010A - The ELS-6010A is a highly line-narrowed, high power 193 nm
light source for lithography tools. The ELS-6010A has been designed to meet
resolution image contrast, and wafer throughput requirements in semiconductor
chip production at the less than 130 nm node. The shorter wavelength enables
chip design to shrink, leading to higher processor speed, more memory per
chip, and better yield per wafer. The ELS-6010A, 2kHz 10 watt ArF production
laser for 193 nm step-and-scan tool provides leading edge optical performance.
With a highly line-narrowed bandwidth, the ELS-6010A enables high contrast
imaging from lithography scanners using NA lenses. The ELS-6010A ArF laser
model incorporates new technological solutions in the area of laser discharge
chamber and wavelength stabilization, and enables tighter control of exposure
dose (less than +0.3%).
ELX-5000A - With a repetition rate of 1000 Hz, this solid-state pulse
power excimer laser series is engineered using modular construction. Enabling
higher device yields by delivering improved energy stability, this series is
designed specifically for use in the manufacture of semiconductors with 250 nm
and smaller design rules. Designed for steppers and scanners with numerical
apertures as high as 0.70,
2
<PAGE>
the ELX-5000A provides 10 watts of output power, controls bandwidth to less
than 2.0 pm at 95% energy integral, and delivers an energy dose stability to
less than +0.6%.
Cymer's lasers incorporate advanced software control and diagnostic
systems. The control system provides users with on-line monitoring of laser
operating conditions, with diagnostic readings (including flow rate,
temperatures, pressures and light quality), that are automatically monitored by
the photolithography tool's control system. Additionally, configurable
parameters can be adjusted to optimize the laser's performance for each
customer's system. A portable computer attached to the laser logs this data,
automatically providing critical information about performance and reliability.
The lasers are also designed for easy serviceability, with most major modules
and components articulated for easy swing-out or roll-out motion to facilitate
inspection and replacement.
Revenues generated from laser systems amounted to approximately $145.7
million, $148.9 million, and $255.8 million during 1998, 1999, and 2000,
respectively.
REPLACEMENT PARTS
Certain components and subassemblies included in Cymer's lasers require
replacement or refurbishment following continued operation. For example, the
discharge chamber of Cymer's lasers has an expected life of approximately one to
seven billion pulses, depending on the model. Cymer estimates that a laser used
in a semiconductor production environment will require one to two replacement
chambers per year. Similarly, certain optical components of the laser
deteriorate with continued exposure to DUV light and require periodic
replacement. Cymer provides these and other spare and replacement parts for its
photolithography lasers as needed by its customers. On a limited basis, Cymer
also refurbishes and resells complete laser systems.
Revenues generated from replacement parts amounted to approximately
$34.8 million, $66.6 million, and $101.8 million during 1998, 1999, and 2000,
respectively.
SERVICE
As Cymer's installed base of lasers in production at chipmakers exceeds
the original warranty periods, some chipmakers request service contracts from
Cymer. Additionally, Cymer provides service contracts directly to semiconductor
equipment manufacturers. These contracts require Cymer to maintain and/or
service these lasers either on an on-call or regular interval basis or both.
Revenues generated from service and service contracts amounted to
approximately $1.9 million, $2.9 million, and $7.4 million during 1998, 1999,
and 2000, respectively.
CUSTOMERS AND END USERS
Cymer sells its photolithography laser products to each of the five
manufacturers of DUV photolithography tools:
ASM Lithography Nikon Ultratech Stepper
Canon SVG Lithography
Cymer believes that maintaining and strengthening customer
relationships will play an important role in maintaining its leading position in
the photolithography market. Cymer works closely with its customers to integrate
Cymer's products into their photolithography tools. Sales to ASM Lithography,
Canon, and Nikon accounted for 30%, 19% and 28%, respectively, of total revenue
in 2000.
Revenues generated from customers within the United States amounted
to $21.1 million, $33.0 million and $69.2 million during 1998, 1999 and 2000,
respectively. Revenues generated from customers outside of the United States
amounted to $164.0 million, $187.6 million and $298.2 million during 1998,
1999 and 2000, respectively.
3
<PAGE>
Revenues generated from customers located in Japan amounted to
$88.6 million, $81.4 million and $156.1 million during 1998, 1999 and 2000,
respectively. Revenues generated from customers located in the Netherlands
amounted to $67.9 million, $76.7 million and $89.7 million during 1998, 1999
and 2000, respectively.
End users of Cymer's lasers include the world's 20 largest
semiconductor manufacturers. The following semiconductor manufacturers have
purchased one or more DUV photolithography tools incorporating Cymer's lasers:
<TABLE>
<CAPTION>
UNITED STATES JAPAN TAIWAN/SOUTHEAST ASIA
- ------------- ----- ---------------------
<S> <C> <C>
Advanced Micro Devices ASET + 1st Silicon
Atmel Epson Chartered Semiconductor
Agilent Fujitsu ERSO
Conexant Systems Hitachi HNS
Cypress KMT Macronix
Dominion Semiconductor Matsushita Mosel
HP Mitsubishi Electric Nan-Ya
IBM NEC PSC
Integrated Device Technology Nippon Foundry ProMOS
Intel Oki Electric SSMC
LSI Logic Corp. Rohm Silicon Manufacturing Partners
Agere (Lucent/Cirent) Sanyo Silterra
Maxim Integrated Products Sharp Tech Semiconductor
Micron Technology Sony TSMC
Micrus Trecenti Technologies UMC Group
Motorola ToHoku Semicon USC
National Semiconductor Toshiba Vanguard International
SEMATECH + SELETE + Winbond Group
Texas Instruments
VLSI EUROPE
Wafertech ------
White Oak
Altis Semiconductor
KOREA C-NET
- ----- Ericsson
IMEC +
Anam-TI Infineon Technologies
ETRI + Philips
Hyundai ST Microelectronics
Samsung Siemens
</TABLE>
BACKLOG
Cymer schedules production of lasers based upon order backlog and
informal customer forecasts. Cymer includes in backlog only those orders to
which a purchase order number has been assigned by the customer and for which
delivery has been specified within 12 months. Because customers may cancel or
delay orders with little or no penalty, Cymer's backlog as of any particular
date may not be a reliable indicator of actual sales for any succeeding period.
At December 31, 2000, Cymer had a backlog of approximately $132.7 million
compared with a backlog of $102.7 million at December 31, 1999.
- -------------------
+ A semiconductor industry consortium.
4
<PAGE>
MANUFACTURING
Cymer's manufacturing activities consist of material management,
assembly, integration and testing. These activities are performed in a 124,000
square foot facility in San Diego, California that includes approximately 31,000
square feet of class 1000 clean room manufacturing and test space. In order to
focus its own resources, capitalize on the expertise of its key suppliers and
respond more efficiently to customer demand, Cymer has outsourced the
manufacturing of many of its subassemblies. Cymer's outsourcing strategy is
exemplified by the modular design of Cymer's 5000 and 6000 series lasers, for
which substantially all of the nonproprietary subassemblies have been
outsourced. Cymer believes that the highly outsourced content and manufacturable
design of the 5000 and 6000 series lasers allows for reduced manufacturing cycle
times and increased output per employee.
To improve current production efficiencies, costs, and manage overall
manufacturing capacity, Cymer intends to continue to provide additional training
to manufacturing personnel, improve its assembly and test processes in order to
reduce cycle time, invest in additional manufacturing tooling and further
develop its supplier management and engineering capabilities. Cymer is also
increasingly relying on outside suppliers for the manufacture of various
components and subassemblies used in its products and is dependent upon these
suppliers to meet Cymer's manufacturing schedules. The failure by one or more of
these suppliers to supply Cymer on a timely basis with sufficient quantities of
components or subassemblies that perform to Cymer's specifications could affect
Cymer's ability to deliver completed lasers to its customers on schedule.
In addition to the manufacturing capacity at its facilities in San
Diego, California, Cymer has qualified Seiko Instruments, Inc. ("Seiko") of
Japan as a contract manufacturer of its photolithography excimer lasers. In
order to ensure uniformity of product for all customers, Cymer maintains control
of all work flow design, manufacturing processes, engineering changes and
component sourcing decisions. Cymer manufactures and seals all core technology
modules in San Diego. The original contract manufacturing agreement with Seiko
expires in 2001, but will automatically renew every two years thereafter, unless
one year's notice to terminate is given by either party. No notice to terminate
has been received. Seiko began production of lasers for Cymer in the first
quarter of 1997.
Certain of the components and subassemblies included in Cymer's
products are obtained from a single supplier or a limited group of suppliers. In
particular, there are no alternative sources for certain of the components and
subassemblies, including certain optical components used in Cymer's lasers. In
addition, Cymer is increasingly outsourcing the manufacture of various
subassemblies. To date Cymer has been able to obtain adequate supplies of the
components and subassemblies used in the production of Cymer's laser systems in
a timely manner from existing sources. If in the future Cymer is unable to
obtain sufficient quantities of required materials, components or subassemblies,
or if such items do not meet Cymer's quality standards, delays or reductions in
product shipments could occur which could have a material adverse effect on
Cymer's business, financial condition and results of operations.
SALES AND MARKETING
Cymer's sales and marketing efforts have been predominately focused on
DUV photolithography tool manufacturers. Cymer markets and sells its products
through its own worldwide direct sales force. Cymer has developed product and
applications engineering teams to support the account managers and Cymer's
customers. Cymer believes that to facilitate the sales process it must work
closely with and understand the requirements of semiconductor manufacturers, the
end users of Cymer's products. Cymer visits major semiconductor manufacturers,
and their representatives attend Company-sponsored seminars on advanced excimer
photolithography. In Japan, Cymer sponsors an annual seminar with Seiko in
conjunction with SEMICON Japan. This seminar has attracted representatives of
semiconductor manufacturers from Japan, Korea, the United States and SEMATECH,
as well as photolithography tool manufacturers and other photolithography
process suppliers.
SERVICE AND SUPPORT
Cymer believes its success in the semiconductor photolithography market
is highly dependent upon after-sales support of both the customer and the end
user. Cymer supports its customers with field service, technical service
engineers and training programs, and in some cases provides ongoing on-site
technical support at the customer's manufacturing facility. Prior to shipment,
Cymer's support personnel
5
<PAGE>
typically assist the customer in site preparation and inspection and provide
customers with training at Cymer's facilities or at the customer's location.
Customers and end users are also provided with a comprehensive set of manuals,
including operations, maintenance, service, diagnostic and safety manuals.
Cymer's field engineers and technical support specialists are based
at its San Diego headquarters, and at its four field service offices located
throughout the United States. Support in Europe, Japan, Korea, Singapore and
Southeast Asia are provided by Cymer's subsidiaries located within those
regions. As part of its customer service, Cymer maintains an inventory of
spare parts at each of its service facilities. As Cymer's installed base
grows, replacement parts required to satisfy worldwide support requirements,
as well as Cymer's own logistics support organization, will be subject to the
fluctuating demands of the semiconductor industry. In order to meet these
demands, Cymer must continue to effectively manage its production of
component modules which are required for new systems as well as for support
and warranty requirements.
Cymer believes that the need to provide fast and responsive service to
the semiconductor manufacturers using its lasers is critical and that it will
not be able to depend solely on its customers to provide this specialized
service. Therefore, Cymer believes it is essential to maintain, through its own
personnel or through trained third party sources, a rapid response capability to
service its customers throughout the world. Accordingly, Cymer has an ongoing
effort to continuously develop its direct support infrastructure in Japan,
Korea, Taiwan and Southeast Asia, Singapore, Europe and the United States. This
task entails recruiting and training qualified field service personnel or
identifying qualified independent firms and maintaining effective and highly
trained organizations that can provide service to customers in various countries
in their assigned regions. There can be no assurance that Cymer will continue to
attract qualified personnel to maintain these operations successfully or that
the costs of such operations will not be excessive. A failure to effectively
continue this worldwide support infrastructure could have a material adverse
effect on Cymer's business, financial condition and results of operations.
Cymer generally warrants its new laser products against defects in
design, materials and workmanship for the earlier to occur of between 17 and 25
months from the date of shipment or 12 months after acceptance by the end user.
The 6000 series laser products are warranted for the earlier to occur of between
24 and 26 months from the date of shipment or 24 months after acceptance by the
end user.
RESEARCH AND DEVELOPMENT
The semiconductor industry is subject to rapid technological change and
new product introductions and enhancements. Cymer believes that continued and
timely development and introduction of new and enhanced laser products are
essential for Cymer to maintain its competitive position. Cymer intends to
continue to develop its technology and innovative products to meet customer
demands. Current projects include enhancements to Cymer's KrF and ArF lasers and
the development of the next generation of photolithography lasers. Other
research and development efforts are currently focused on reducing manufacturing
costs, lowering the cost of laser operation, enhancing laser performance,
developing new features for existing lasers, and development of non-laser light
sources.
Cymer has historically devoted a significant portion of its financial
resources to research and development programs and expects to continue to
allocate significant resources to these efforts. Research and development
expenses for 1998, 1999, and 2000 were approximately $30.2 million, $34.5
million, and $45.4 million, respectively.
In addition to funding its own research and development projects, Cymer
has pursued a strategy of securing research and development contracts from
customers, government agencies and SEMATECH in order to develop advanced
technology for current and future laser systems based on Cymer's core
technology. Revenues generated from research and development contracts amounted
to approximately $313,000, $399,000, and $1.2 million during 1998, 1999, and
2000, respectively.
Cymer plans to expand outside the lithography sector of the
semiconductor capital equipment industry by enhancing existing products,
offering new products and developing new semiconductor applications. The
acquisition of Active Control eXperts ("ACX") on February 13, 2001 provides
Cymer with opportunities to enhance and develop new products through ACX's
active structural control
6
<PAGE>
technology that can diagnose, design and implement a motion control solution for
unwanted nano-motions. This technology may be applied to many types of equipment
and enhance the platforms of tools. In addition, Cymer's agreement with Tuilaser
AG ("Tuilaser") provides Cymer with opportunities to enhance existing products
and explore other areas of semiconductor equipment applications.
INTELLECTUAL PROPERTY RIGHTS
Cymer believes that the success of its business depends more on such
factors as the technical expertise of its employees, as well as their innovative
skills and marketing and customer relations ability, than on patents,
copyrights, trade secrets and other intellectual property rights. Nevertheless,
the success of Cymer may depend in part on patents and as of December 31, 2000,
Cymer owned 95 United States patents covering certain aspects of technology
associated with excimer lasers which expire from January 2008 to September 2019
and had applied for 66 additional patents in the United States, 11 of which had
been allowed. As of December 31, 2000, Cymer also owned 80 foreign patents and
had filed 226 patent applications in various foreign countries. There can be no
assurance that Cymer's pending patent applications or any future applications
will be approved, that any issued patents will provide it with competitive
advantages or will not be challenged by third parties, or that the patents of
others will not have an adverse effect on Cymer's ability to do business. In
this regard, due to cost constraints, Cymer did not begin filing for patents in
Japan or other countries with respect to inventions covered by its United States
patents and patent applications until 1993, and Cymer has therefore lost the
right to seek patent protection in those countries for certain of its
inventions. Additionally, because foreign patents may afford less protection
under foreign law than is available under United States patent law, there can be
no assurance that any such patents issued to Cymer will adequately protect
Cymer's proprietary information. Furthermore, there can be no assurance that
others will not independently develop similar products, duplicate Cymer's
products or, if patents are issued to Cymer, design around the patents issued to
Cymer.
Others may have filed and in the future may file patent applications
that are similar or identical to those of Cymer. To determine the priority of
inventions, Cymer may have to participate in interference proceedings declared
by the United States Patent and Trademark Office that could result in
substantial cost to Cymer. No assurance can be given that any such patent
application will not have priority over patent applications filed by Cymer.
Cymer also relies upon trade secret protection, employee and
third-party nondisclosure agreements and other intellectual property protection
methods to protect its confidential and proprietary information. Despite these
efforts, there can be no assurance that others will not independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to Cymer's trade secrets or disclose such technology or that Cymer
can meaningfully protect its trade secrets.
Cymer has in the past funded a significant portion of its research and
development expenses from research and development revenues received from
photolithography tool manufacturers and from SEMATECH in connection with the
design and development of specific products. Although Cymer's arrangements with
photolithography tool manufacturers and SEMATECH seek to clarify the ownership
of the intellectual property arising from research and development services
performed by Cymer, there can be no assurance that disputes over the ownership
or rights to use or market such intellectual property will not arise between
Cymer and such parties. Any such dispute could result in restrictions on Cymer's
ability to market its products and could have a material adverse effect on
Cymer's business, financial condition and results of operations.
Third parties have in the past notified, and may in the future notify,
Cymer that it may be infringing their intellectual property rights. Conversely,
Cymer has in the past notified, and may in the future notify, third parties that
they may be infringing on Cymer's intellectual property rights.
Specifically, Cymer has engaged in discussions with one of its
competitors, Komatsu, Ltd ("Komatsu") with respect to certain of Komatsu's
Japanese patents, in the course of which Komatsu has also identified to Cymer a
number of additional Japanese patents that Komatsu asserts may be infringed by
Cymer and Cymer's Japanese manufacturing partner, Seiko. Cymer, in consultation
with Japanese patent counsel, has initiated oppositions to certain Komatsu
Japanese patents and patent applications in the Japanese Patent Office. To date,
one of these oppositions has been dismissed. Litigation might ensue with respect
to the Komatsu Japanese patents. Also, Komatsu might assert infringement claims
7
<PAGE>
under additional patents. Komatsu has notified Seiko that Komatsu intends to
enforce its rights under the Komatsu Japanese patents against Seiko if Seiko
engages in manufacturing activities for Cymer. In connection with its
manufacturing agreement with Seiko, Cymer has agreed to indemnify Seiko against
such claims under certain circumstances. Cymer and Seiko might not ultimately
prevail in any such litigation.
Cymer has also asserted certain of its U.S. patents against Komatsu
when informed that Komatsu lasers might be integrated into steppers intended for
shipment into the U.S. Cymer and Komatsu have been engaged in discussions with
regard to each party's claims. Cymer has also engaged in discussions with
Lambda-Physik regarding each party's patent claims. Those discussions might not
be successful and litigation could result. Attorneys representing Komatsu are
currently challenging one of Cymer's U.S. patents in the U.S. Patent Office.
During 2000, Komatsu's lithography laser business was transferred to Gigaphoton,
Inc., a joint venture of Komatsu and Ushio, Inc.
Any patent litigation, by or against Cymer, would, at a minimum, be
costly. Litigation could also divert the efforts and attention of Cymer's
management and technical personnel. Both could have a material adverse effect on
Cymer's business, financial condition and results of operations. Furthermore, in
the future other third parties might assert other infringement claims, and
customers and end users of Cymer's products might assert other claims for
indemnification resulting from infringement claims. Such assertions, if proven
to be true, might materially adversely affect Cymer's business, financial
condition and results of operations. If any such claims are asserted against
Cymer, Cymer may seek to obtain a license under the third party's intellectual
property rights. However, such a license might not be available on reasonable
terms or at all. Cymer could decide, in the alternative, to resort to litigation
to challenge such claims or to design around the patented technology. Such
actions could be costly and would divert the efforts and attention of Cymer's
management and technical personnel, which would materially adversely affect
Cymer's business, financial condition and results of operations.
Effective August 1, 1989 and lasting until the expiration of the
licensed patents, Cymer entered into an agreement for a nonexclusive worldwide
license to use or sell certain patented laser technology with Patlex Corp., a
patent holding company ("Patlex"). Under the terms of the agreement, Cymer is
required to pay royalties ranging from 0.25% to 5.0% of gross sales and leases
of its lasers, subject to an annual cap of $100,000 per year. During 1998, 1999
and 2000, royalty fees totaled $100,000 per year.
Cymer has granted Seiko the exclusive right in Japan and the
non-exclusive right outside of Japan to manufacture and sell Cymer's
industrial high power laser and subsequent enhancements thereto. Cymer has
also granted Seiko a right of first refusal to fund Cymer's development of,
and receive a license to, new industrial laser technologies not developed
with funding from other parties. In exchange for these rights, Cymer received
up-front license fees of $3.0 million in aggregate during 1992 and 1993.
Cymer was also entitled to royalties of 5% on related product sales through
September 1999, after which the royalty rate is subject to renegotiation.
Through 1999, Cymer earned no royalties under the agreement. The license
agreement also provides that product sales between Cymer and Seiko will be at
a 15% discount from the respective companies' list prices. The agreement
terminates in August 2012. There has been no Seiko production or sales
activity associated with this contract to date.
Cymer has registered the trademark CYMER in the United States and
certain other countries and is seeking additional registrations of other
trademarks including "Insist on Cymer" in the United States and in certain other
countries. Cymer uses these and a variety of other marks in its advertisements
and other business activities around the world.
COMPETITION
Cymer believes that the principal elements of competition in Cymer's
markets are the technical performance characteristics of the excimer laser
products and the operating efficiency of the system, which is based on
availability, performance efficiency and rate of quality. Cymer believes that it
competes favorably with respect to these factors.
Cymer currently has two competitors in the market for excimer laser
systems for photolithography applications, Lambda-Physik ("Lambda-Physik"), a
German-based subsidiary of
8
<PAGE>
Coherent, Inc., and Gigaphoton (a joint venture of Komatsu, Ltd. and Ushio),
located in Japan. Both of these companies are larger than Cymer, have access
to greater financial, technical and other resources and are located in closer
proximity to most of Cymer's customers. Cymer believes that Lambda-Physik and
Gigaphoton are aggressively seeking to gain larger positions in the market.
Cymer believes that its customers have each purchased products offered by
these competitors and that its customers have qualified these competitors'
lasers for use with at least some of their products. As competitors
successfully qualify their lasers for use with chipmakers, Cymer could lose
market share and its growth could slow or even decline. In the future, Cymer
will likely experience competition from post-optical technologies, such as
Extreme Ultra Violet ("EUV") and scalpel processes. To remain competitive,
Cymer believes that it will be required to manufacture and deliver products
to customers on a timely basis and without significant defects and that it
will also be required to maintain a high level of investment in research and
development and sales and marketing. There can be no assurance that Cymer
will have sufficient resources to continue to make the investments necessary
to maintain its competitive position. There can be no assurance that larger
competitors with substantially greater financial resources, including other
manufacturers of industrial lasers, will not attempt to enter the market for
excimer lasers. There can be no assurance that Cymer will remain competitive.
A failure to remain competitive would have a material adverse effect on Cymer's
business, financial condition and results of operations.
EMPLOYEES
On December 31, 2000, Cymer employed 898 persons worldwide. No
employees are currently covered by collective bargaining agreements or are
members of any labor organization as far as Cymer is aware. Cymer has not
experienced any work stoppages and believes that its employee relations are
good.
EXECUTIVE OFFICERS
Set forth below is certain information regarding the executive officers
of Cymer and their ages as of December 31, 2000.
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------- ----- ------------------------------------------------------------
<S> <C> <C>
Robert P. Akins.........................49 Chairman of the Board and Chief Executive Officer
Pascal Didier...........................42 President and Chief Operating Officer
William A. Angus, III...................54 Senior Vice President, Chief Financial Officer and Secretary
Wallace E. Breitman.....................61 Senior Vice President, Human Resources and Administration
Edward P. Holtaway......................45 Senior Vice President, Operations and Business Process
Brian Klene.............................43 Senior Vice President, Marketing and Business Development
Richard L. Sandstrom....................50 Senior Vice President, Chief Technology Officer
John Shin...............................45 Senior Vice President, Worldwide Customer Operations
Nancy J. Baker..........................38 Vice President, Finance and Treasurer
James Caltrider.........................47 Vice President, Manufacturing Order Fulfillment
Roger Green.............................54 Vice President, Strategic Initiatives
David Knowles...........................40 Vice President, Product Development
David Myers.............................44 Vice President, Technology Development
William Partlo..........................35 Vice President, Research and Development
Motohiko Tahara.........................58 President, Cymer Japan
</TABLE>
ROBERT P. AKINS, a co-founder of Cymer, has served as its Chief
Executive Officer and Chairman of the Board since its inception in January
1986, and also as President from January 1986 to May, 2000. He currently
serves on the board of directors of the Semiconductor Industry Suppliers
Association (SISA), and on the council of advisors to the Irwin and Joan
Jacobs School of Engineering at the University of California, San Diego. Mr.
Akins received a B.S. in Physics and a B.A. in Literature in 1974, and a
Ph.D. in Applied Physics in 1983, from the University of California, San
Diego.
9
<PAGE>
PASCAL DIDIER has served as President and Chief Operating Officer since
May 2000. He served as Senior Vice President, Worldwide Customer Operations from
November 1997 until May 2000, and served as Vice President of Sales and
Marketing from July 1997, when he joined Cymer, until November of that year. He
served as Vice President of Worldwide Sales and Field Operations with GaSonics
International, a semiconductor capital equipment manufacturer, from June 1995 to
June 1997, and served in the additional capacity of Vice President of
Asia/Pacific for that company from June 1995 to June 1996. Prior to that, Mr.
Didier served for two years as Vice President of International Operations for
Megatest Corporation, a semiconductor test equipment manufacturer. Mr. Didier
holds a bachelor's degree in business and administration from the College de
Paris VII and a bachelor's degree in electronics from the Institut Universitaire
de Lyon.
WILLIAM A. ANGUS, III has served as Senior Vice President and Chief
Financial Officer and Secretary since February 1996. From July 1990 to February
1996, Mr. Angus served as Vice President of Finance and Administration.
Previously he was the Executive Vice President and Chief Financial Officer of
Avant Garde Computing Inc., a manufacturer of data communications network
management systems. He received a bachelor's degree in economics from the
Wharton School of the University of Pennsylvania in 1968.
WALLACE E. ("WALLY") BREITMAN has served as Senior Vice President of
Human Resources and Administration since January 2000. He joined Cymer in March
1999 as Vice President, Human Resources. Mr. Breitman has more than 20 years
experience in the human resources field, and immediately prior to joining Cymer
served as Vice President, Human Resources for Walker, Inc., a software and
systems integration company located in San Francisco. Mr. Breitman has extensive
experience in designing and implementing compensation, incentive, stock, and
performance systems; training, development, and organizational development
programs, international and expatriate programs, and positive employee relations
and retention programs. He holds a bachelor's degree in literature and a
master's degree in American Civilization, both from New York University.
EDWARD P. ("TED") HOLTAWAY has served as Senior Vice President of
Operations and Business Process since May 2000. He joined Cymer in July 1998 as
Senior Vice President of Process Quality. For the previous 13 years, he
developed processes for San Diego-based Brooktree Corp., a fabless semiconductor
company acquired by Rockwell Semiconductor Systems in September of 1996. During
his tenure there, Mr. Holtaway's executive posts included Director of Rockwell's
San Diego operations from 1997 to 1998, Vice President and Managing Director of
Brooktree's Singapore operations from 1995 to 1996, and Vice President of
Corporate Quality from 1989 to 1995. Mr. Holtaway holds a bachelor's degree in
electrical engineering from the New Jersey Institute of Technology, a master's
degree in electrical engineering from the Polytechnic Institute of New York, and
a master's degree in business administration from San Diego State University.
BRIAN KLENE joined Cymer as Senior Vice President, Marketing and
Business Development, in June 2000. Prior to joining Cymer, Mr. Klene served for
two years as Vice President, Strategic Planning and Business Development at
Chartered Semiconductor Manufacturing Ltd. in Singapore. From 1995 to 1997, he
served as Executive Vice President, Sales and Marketing at Micron Electronics,
Inc., Nampa, Idaho. Before that, he served as Director of North American Sales
with Micron Technology, Inc., Boise, Idaho, from 1989 to 1994. He also served in
a variety of sales and marketing positions of increasing responsibility with IBM
Corp. in Los Angeles from 1979 to 1988. Mr. Klene holds a master's degree in
business administration from the University of Southern California, and a
bachelor's degree from The Citadel, Charleston, S.C.
RICHARD L. SANDSTROM, Ph.D., a co-founder of Cymer, has served under
the title of Senior Vice President and Chief Technology Officer since January
1999. Since Cymer's inception, he has served under various titles, such as Vice
President of Advanced Research and Vice President of Technology, and has been
instrumental in driving Cymer's technology forward. Dr. Sandstrom received a
bachelor's degree in physics and a doctorate in engineering physics from the
University of California, San Diego.
JOHN SHIN has served as Senior Vice President, Worldwide Customer
Operations since June 2000. He served as Vice President, Worldwide Customer
Operations from September 1999 to June 2000, as Vice President of Worldwide
Field Operations from April 1999 to September 1999, and as Vice President,
Asia/Pacific Operations from March of 1998 to April of 1999. He joined Cymer as
President,
10
<PAGE>
Cymer Korea in May 1997. Immediately prior to joining Cymer, Mr. Shin served as
President, Tencor Instruments Korea. From early 1993 to late 1996 he served as
Country Manager, Korea for Watkins-Johnson Company. Before that, he served as a
Sales Account Manager in Korea for Applied Materials, and earlier, served for
six years as a Business Development Manager with Samsung America in Santa Clara,
California. Mr. Shin holds a master's degree in computer science from Indiana
University, and a bachelor's degree in business from Hankuk University of
Foreign Studies, in Seoul, Korea.
NANCY J. BAKER was appointed Vice President, Finance and Treasurer of
Cymer in 1998. Ms. Baker, whose professional career spans more than fifteen
years, joined Cymer in 1992 as Corporate Controller for its worldwide
operations. In 1996, she was promoted to Director, Corporate Finance and
Treasurer. Prior to joining Cymer, she held a variety of financial management
positions with International Totalizator Systems, Inc., an international
manufacturer of lottery and racetrack wagering systems. Ms. Baker received a
Bachelor's degree in Accounting from the University of Texas at Austin and an
Executive Master's degree in Business Administration from Harvard Business
School.
JAMES CALTRIDER, Ph.D., has served as Vice President of
Manufacturing and Order Fulfillment since September of 1999, and served as
Vice President of Manufacturing Systems from October of 1998 to September of
1999. Prior to joining Cymer Dr. Caltrider provided consulting services to a
range of clients including Hewlett-Packard, Sprint, Robert Bosch and Andersen
Consulting, while holding a faculty position in the Graduate School of
Business at the University of San Diego and instructing in the Advanced
Manufacturing Systems Program in the UCSD Graduate Engineering School.
Dr.Caltrider also served as Director of Training and Development at Brooktree
Corporation from 1990 to 1992. He holds a doctorate in Operations Research
from the Colorado School of Mines, and a bachelor's degree in business
administration from Michigan State University.
ROGER L. GREEN has served as Vice President, Strategic Initiatives
since January, 2001. From September, 1997, until December, 2000, he served as
Cymer's Vice President of Knowledge Management and Chief Information Officer.
He joined Cymer in July, 1997, as Director of after Market Operations -
Europe. From August 1991 to June, 1997, Mr. Green served as Director of
Enterprise Systems Management - Europe, as well as Vice President of Network
Systems, with Boole & Babbage, Inc. , a leading supplier of IT enterprise
management solutions. From 1986 to 1990 he served as Vice President of
Customer Support for Avant-Garde Computing Inc., a manufacturer of data
communications network management systems. Mr. Green graduated from
Philadelphia University with a bachelor's degree in business administration
in 1968.
DAVID KNOWLES, Ph.D., has served as Vice President, Product Development
since March, 2000. Since joining Cymer in 1997, he has held various positions
including Manager of Optics Focus Factory and Program Manager for the ELS-5010,
ELS-5000A and ELS-6010 development programs. Dr. Knowles served as a
Physicist/Program Manager from 1994 to 1997 with Naval Research & Development
(NraD) in San Diego, where he was responsible for developing sensors using
optical and spectroscopic techniques. From 1991 to 1994, he was a Research
Fellow with the Centre for Lasers and Applications in Sydney, Australia, where
he started and directed the mid-infrared solid-state laser laboratory. Dr.
Knowles holds a doctorate in physics from the Massachusetts Institute of
Technology (MIT). He also holds a bachelor's degree in applied engineering &
physics from Cornell University in Ithaca, New York. Dr. Knowles has written 19
articles for various publications and conference proceedings, and has two
patents in the application stage.
DAVID MYERS has served as Vice President, Technology Development since
September 1999. Previously, he served as Systems Group Director from January
1997 to March 1999. He joined Cymer in 1997 as Product Development Director.
From 1988 to 1997, he served at Lawrence Livermore National Laboratory (LLNL),
in Livermore, California, first as Programmatic Group Leader for laser
diagnostic development, then as instrumentation systems group leader where he
managed a diverse group of engineers and technologists developing a variety of
remote sensing projects. From 1986 to 1988 he served as Engineering Development
Project Manager at Ionscan, a unit of General Signal, in Fremont, California.
Before that, he was a Design Engineer with the LLNL from 1978 to 1986. Mr. Myers
has also been a consultant on electronics system design and problem resolution
for a number of semiconductor equipment manufacturers, including Applied
Materials, ETEC, and Process Diagnostics. He holds a bachelor's degree in
electrical engineering from New Mexico State University at Las Cruces, and has
done graduate work in electrical engineering at Stanford University. Mr. Myers
has authored or co-authored more than 10 publications and holds six U.S.
patents.
WILLIAM PARTLO, Ph.D., has served as Vice President, Research and
Development, since December, 1999. From March 1999 to December 1999, he
served as Director of EUV Development, and was responsible for the
development of an EUV radiation source for next generation semiconductor
microlithography. From 1996 to March 1999, he served as a senior scientist,
and from 1994 to 1996 as a Program Manager. Dr. Partlo joined Cymer in 1993
as a research scientist. Before that, he served as a staff scientist at
GCA/TROPEL INC., in Rochester, New York. Dr. Partlo holds a doctorate and
master's degrees, both in engineering, from the University of California,
Berkeley, and a bachelor's degree in engineering from the University of
Wisconsin, Madison.
MOTOHIKO TAHARA, has served as President, Cymer Japan, Inc. since
September 2000. Prior to joining Cymer, Mr. Tahara served for more than nine
years with wholly owned subsidiaries or joint ventures of Applied Materials.
From 1999 until joining Cymer, he served as Vice President and Japan
Representative of AKT Inc., a wholly-owned subsidiary of Applied Materials,
and the successor company to Applied Komatsu Technology, Inc., a joint
venture between Applied Materials and Komatsu, where he served as Vice
President for two years. From 1991 to 1997, he served in positions of
increasing responsibility with Applied Materials Japan, Inc., where he rose
to the position of Vice President. Prior to that, he served for five years as
President of ULVAC-BTU Japan, a supplier of vertical furnaces and other
equipment to the semiconductor industry. During the first 19 years of his
career, he served in a variety of positions with Sumitomo Corporation,
including one year as a Director of Sales and Marketing in a joint venture
with GCA Corporation, and five years as a Director in the semiconductor
manufacturing equipment division at Sumisho Electronics Systems. Mr. Tahara
holds a bachelor's degree in mechanical engineering from Osaka University,
Japan.
Executive officers serve at the discretion of the Board of Directors.
There are no family relationships between any of the directors and executive
officers of Cymer.
11
<PAGE>
ITEM 2. PROPERTIES
Cymer's corporate headquarters, manufacturing, engineering and R&D
facilities are located in San Diego, California housed in multiple buildings
totaling approximately 330,000 square feet. Three of the four buildings
currently occupied are leased by Cymer under leases expiring between August 2002
and January 2010. In August 1999, Cymer began construction of a 135,000 square
foot office and laboratory facility on 5.98 acres of land that it purchased in
February 1999 adjacent to its current facilities. Upon completion of this
facility in the fourth quarter of 2000, Cymer consolidated its San Diego
operations into a three building main campus and one local off campus location.
As a result of this consolidation process, Cymer was able to vacate and sublease
its fifth leased building totaling 66,000 square feet. This facility was
subleased to Phogenix, an HP/Kodak joint venture. In addition, Cymer has
purchased a two parcel 5.97 acre undeveloped site adjacent to the existing
campus for future expansion capabilities. Cymer also leases the following
facilities for use as field service offices: a 400 square foot facility near
Boston, Massachusetts under a lease expiring August 2002; a 1,857 square foot
facility in Santa Clara, California under a lease expiring September 2002; a
1,627 square foot facility in Austin, Texas under a lease expiring October 2005,
and a 1,857 square foot facility in Portland, Oregon expiring in April 2006.
Cymer also leases the following for use as internationally located field service
and sales offices: 13,831 square feet of facilities in Ichikawa, Japan under a
renewable two-year lease expiring in June 2002; 807 square feet in Osaka Japan
under a lease expiring in December 2001; 4,184 square feet in Pundang, Korea
under a lease expiring August 2004; 4,821 square feet in Hsin Chu, Taiwan under
a lease expiring June 2004; 1,866 square feet in United Square, Singapore under
a lease expiring in May 2002; and 3,715 square feet in Maarssen, the Netherlands
under a lease expiring in May 2004. Cymer intends to add additional field
service offices as necessary to service and support its customers.
ITEM 3. LEGAL PROCEEDINGS
Cymer has been named as a defendant in several putative shareholder
class action lawsuits which were filed in September and October, 1998 in the
U.S. District Court for the Southern District of California. Certain executive
officers and directors of Cymer are also named as defendants. The plaintiffs
purport to represent a class of all persons who purchased Cymer's Common Stock
between April 24, 1997 and September 26, 1997 (the "Class Period"). The
complaints allege claims under the federal securities laws. The plaintiffs
allege that Cymer and the other defendants made various material
misrepresentations and omissions during the Class Period. The complaints do not
specify the amount of damages sought. The complaints have been consolidated into
a single action and a class representative has been appointed by the court. A
consolidated amended complaint was filed in early August 1999. On November 5,
1999, Cymer and the other defendants filed a motion to dismiss the consolidated
amended claim for failure to state a cause of action. On April 1, 2000, the
court granted defendant's motion to dismiss with leave to amend the complaint by
the plaintiffs. The plaintiffs filed their second amended complaint on June 5,
2000. Cymer moved to dismiss the amended complaint on August 4, 2000. On January
22, 2001, the Court heard oral arguments on Cymer's motion to dismiss, but has
not yet decided the motion. Cymer believes it has meritorious defenses to the
claims asserted and intends to defend the action vigorously. Accordingly, no
provision for any liability or loss that may result from adjudication or
settlement thereof has been made in the accompanying consolidated financial
statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the security holders of Cymer
during the fourth quarter of the fiscal year ended December 31, 2000.
12
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Cymer's Common Stock is publicly traded on the Nasdaq National Market
under the symbol "CYMI". The following table sets forth, for the periods
indicated, the high and low closing sales prices of Cymer's Common Stock as
reported by the Nasdaq National Market.
<TABLE>
<CAPTION>
<S> <C> <C>
Year ended December 31, 1999 High Low
- --------------------------------------------- ------------------ ------------------
First quarter $29 3/8 $16 -
Second quarter $25 - $16 3/8
Third quarter $38 1/8 $24 9/16
Fourth quarter $47 11/16 $30 9/16
Year ended December 31, 2000
- ---------------------------------------------
First quarter $65 1/4 $42 5/8
Second quarter $57 3/4 $27 11/16
Third quarter $50 7/8 $30 11/16
Fourth quarter $30 1/4 $18 1/4
</TABLE>
The closing sales price of Cymer's Common Stock on the Nasdaq National Market
was $25 on March 23, 2001 and there were 308 registered holders of record as
of that date.
Cymer has never declared or paid cash dividends on its Common Stock and
currently does not anticipate paying cash dividends in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with Cymer's consolidated financial statements and notes thereto and
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations," which are included elsewhere in this Annual Report on Form 10-K.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
1996 1997 1998 1999 2000
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Revenues:
Product sales $62,510 $201,191 $184,828 $220,051 $366,280
Other 2,485 2,456 313 399 1,180
----------- ----------- ----------- ----------- -----------
Total revenues 64,995 203,647 185,141 220,450 367,460
----------- ----------- ----------- ----------- -----------
Costs and expenses:
Cost of product sales 35,583 123,654 125,713 143,105 187,579
Research and development 11,742 24,971 30,152 34,518 45,433
Sales and marketing 5,516 11,992 14,528 16,742 20,098
General and administrative 4,270 8,586 9,487 13,101 22,618
----------- ----------- ----------- ----------- -----------
Total costs and expenses 57,111 169,203 179,880 207,466 275,728
----------- ----------- ----------- ----------- -----------
Operating income 7,884 34,444 5,261 12,984 91,732
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------
1996 1997 1998 1999 2000
------------ ------------ ------------ ------------ -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Other income (expense) - net (183) 112 (3,568) (3,748) (1,230)
------------ ------------ ------------ ------------ -----------
Income before income tax provision (benefit)
and minority interest 7,701 34,556 1,693 9,236 90,502
Income tax provision (benefit) 1,191 8,639 (1,250) - 26,246
Minority interest - 141 (420) (663) (484)
------------ ------------ ------------ ------------ -----------
Net income $6,510 $26,058 $2,523 $8,573 $63,772
------------ ------------ ------------ ------------ -----------
Basic earnings per share (1) $0.33 $0.92 $0.09 $0.31 $2.19
============ ============ ============ ============ ===========
Weighted average common shares
outstanding (1) 19,868 28,212 28,226 27,907 29,113
============ ============ ============ ============ ===========
Diluted earnings per share (1) $0.29 $0.86 $0.09 $0.29 $2.07
============ ============ ============ ============ ===========
Weighted average common and potential
shares outstanding (1) 22,420 30,267 29,566 29,640 30,758
============ ============ ============ ============ ===========
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
1996 1997 1998 1999 2000
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents $55,405 $51,903 $53,130 $75,765 $79,678
Working capital 84,743 202,539 198,645 213,121 278,546
Total assets 129,467 386,119 364,318 426,531 533,174
Total debt (2) 2,217 176,066 175,924 175,771 175,510
Treasury stock - - (24,871) (24,871) (24,871)
Stockholders' equity 98,820 125,779 106,531 126,893 212,968
</TABLE>
(1) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of the determination of shares used in computing earnings per share.
(2) Total debt includes indebtedness for convertible subordinated notes, and
capital lease obligations.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF CYMER, INC. SHOULD BE READ IN CONJUNCTION WITH CYMER'S
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS
ANNUAL REPORT ON FORM 10-K. STATEMENTS IN THIS REPORT THAT ARE NOT STRICTLY
HISTORICAL IN NATURE ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE A NUMBER OF
RISKS AND UNCERTAINTIES. ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY FROM
THOSE PROJECTED IN SUCH STATEMENTS DUE TO VARIOUS FACTORS, INCLUDING THOSE SET
FORTH UNDER "RISK FACTORS" AND ELSEWHERE CONTAINED IN THIS REPORT.
14
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain items in Cymer's consolidated
statements of income as a percentage of total revenues for the periods
indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------
1998 1999 2000
-------------- -------------- --------------
<S> <C> <C> <C>
Revenues:
Product sales 99.8 % 99.8 % 99.7 %
Other .2 .2 .3
-------------- -------------- --------------
Total revenues 100.0 100.0 100.0
Cost and expenses:
Cost of product sales 67.9 64.9 51.0
Research and development 16.3 15.7 12.4
Sales and marketing 7.9 7.6 5.5
General and administrative 5.1 5.9 6.2
-------------- -------------- --------------
Total costs and expenses 97.2 94.1 75.1
Operating income 2.8 5.9 24.9
Other (expense) - net (1.9) (1.7) (.3)
-------------- -------------- --------------
Income before income tax provision (benefit)
and minority interest 0.9 4.2 24.6
Income tax provision (benefit) (0.7) - 7.1
Minority interest (0.2) (0.3) (0.1)
-------------- -------------- --------------
Net income 1.4 % 3.9 % 17.4 %
============== ============== ==============
Gross margin on product sales 32.0 % 35.0 % 48.8 %
============== ============== ==============
</TABLE>
YEARS ENDED DECEMBER 31, 1999 AND 2000
REVENUES. Cymer's total revenues consist of product sales, which
include sales of laser systems, spare parts, service and training. Other
revenues primarily include revenue from funded development activities performed
for customers and for SEMATECH. Revenue from product sales is generally
recognized at the time of shipment, unless customer agreements contain
inspection, acceptance or other conditions, in which case revenue is recognized
at the time such conditions are satisfied. Funded development contracts are
accounted for on the percentage-of-completion method based on the relationship
of costs incurred to total estimated costs, after giving effect to estimates for
costs to complete the development project.
Product sales increased 66% from $220.1 million in 1999 to $366.3
million in 2000, due primarily to improved market conditions and increased
customer demand for lithography laser systems and spares. These changes in
conditions accounted for increases in unit sales of DUV photolithography laser
systems as well as increases in sales of spares, replacement parts, and services
due to the higher installed base at chipmakers and increased utilization rates.
A total of 302 laser systems were sold in 1999 compared to 494 laser systems
sold in 2000 with average selling prices ("ASP") of $493,000 versus $518,000,
respectively. These higher ASP's are a direct result of new model introductions
which command higher pricing and their adoption into the market place. Revenues
generated from replacement parts increased from $66.6 million in 1999 to $101.8
million in 2000; and revenues from service and service contracts increased from
$2.9 million in 1999 to $7.4 million in 2000. Funded development revenues
increased from $399,000 for 1999 to $1.2 million for 2000, primarily due to the
timing of the addition and completion of certain programs.
15
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Cymer's sales are generated primarily by shipments to customers in
Japan, the Netherlands, and the United States. Approximately 85% and 81% of
Cymer's sales in 1999 and 2000, respectively, were derived from customers
outside the United States. Cymer maintains a wholly-owned Japanese subsidiary
which sells to Cymer's Japanese customers. Revenues from Japanese customers,
generated primarily by this subsidiary, accounted for 37% and 42% of revenues in
1999 and 2000, respectively. The activities of Cymer's Japanese subsidiary are
limited to sales and service of products purchased by the subsidiary from the
parent corporation. All costs of development and production of Cymer's products,
including costs of shipment to Japan, are recorded on the books of the parent
company. Cymer anticipates that international sales will continue to account for
a significant portion of its net sales.
COST OF PRODUCT SALES. Cost of product sales includes direct material
and labor, warranty expenses, license fees, manufacturing and service overhead,
and foreign exchange gains and losses on foreign currency exchange contracts
associated with purchases of Cymer's products by the Japanese subsidiary for
resale under firm third-party sales commitments.
Cost of product sales rose 31% from $143.1 million in 1999 to $187.6
million in 2000 primarily in response to the increase in product sales. The
gross margin on these sales increased from 35% in 1999 to 49% in 2000 primarily
due to the increased volume of shipments absorbing fixed costs of production and
the ongoing improvements with regards to cycle times and overall manufacturing
and field support services processes. Charges related to obsolete inventory
remained consistent between 1999 and 2000.
Net gains or losses from foreign currency exchange contracts are
included in cost of product sales in the consolidated statements of income as
the related sales are recognized. Cymer recognized a net loss on such contracts
of $3.0 million for the year ended December 31, 1999 and a $3.2 million net gain
for the year ended December 31, 2000.
RESEARCH AND DEVELOPMENT. Research and development expenses include
costs of internally-funded and externally-funded projects as well as continuing
research support expenses which primarily include employee and material costs,
depreciation of equipment and other engineering related costs. Research and
development expenses increased 32% from $34.5 million in 1999 to $45.4 million
in 2000, due primarily to the continued product development efforts associated
with its ELS-6000 series laser system as well as ELS-6010 laser and ArF laser
development. In addition, research and development expenses were higher in 2000
as compared to 1999 due to increased staffing levels to support multiple new
product development efforts and allocated costs associated with the move from
the pre-existing research and development facility into a new Cymer-owned
facility, both located in San Diego, California. As a percentage of total
revenues, such expenses fell from 15.7% to 12.4% in the respective periods due
to the increase in Cymer's revenues as well as the increase in development
expenditures throughout 2000. Cymer expects that research and development
expenses will increase as Cymer continues to invest in the development of new
products and product enhancements.
SALES AND MARKETING. Sales and marketing expenses include the expenses
of the sales, marketing, and customer support staffs and other marketing
expenses. Sales and marketing expenses increased 20% from $16.7 million in 1999
to $20.1 million in 2000, due primarily to increased staffing expenses,
including recruiting costs associated with expanded operations in the areas of
product marketing, new product development, and sales administration. As a
percentage of total revenues, such expenses decreased from 7.6% to 5.5% as
revenues increased from the prior year.
GENERAL AND ADMINISTRATIVE. General and administrative expenses
consist primarily of management and administrative personnel costs, professional
services and administrative operating costs. General and administrative expenses
increased 73% from $13.1 million in 1999 to $22.6 million in 2000. This was due
to continued process quality development efforts including the implementation
and ongoing support of a new Enterprise Resource Planning ("ERP") which was
completed in 2000 and the required general and administrative support
activities. General and administrative expenses for 2000 also increased from
those in 1999 due to the write-off of computer systems made obsolete by the new
ERP system. Also included in general and administrative expenses for 2000 were
additional allowances for outstanding trade accounts receivable and notes
receivable totaling $1.4 million and
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<PAGE>
costs associated with the endowment of two professorship chairs for a total of
$750,000. As a percentage of total revenues, such expenses increased from 5.9%
to 6.2% in the respective periods.
OTHER INCOME (EXPENSE)- NET. Net other expenses decreased from $3.7
million for 1999 to $1.2 million for 2000. This decrease in net expenses was
primarily due to an increase in interest income in 2000 associated with the
investment of excess cash offset by foreign currency exchange losses in 2000 as
compared to gains in 1999. Foreign currency exchange gain totaled $643,000,
interest income totaled $7.3 million, and interest expense totaled $11.7 million
for 1999, compared to a foreign currency exchange loss of $1.4 million, interest
income of $10.8 million, and interest expense of $10.6 million for 2000.
Cymer's results of operations are subject to fluctuations in the value
of the Japanese yen against the United States dollar. Sales by Cymer to its
Japanese subsidiary are denominated in dollars, and sales by the subsidiary to
customers in Japan are denominated in yen. Cymer's Japanese subsidiary manages
its exposure to such fluctuations by entering into foreign currency exchange
contracts to hedge its purchase commitments to Cymer. The gains or losses from
these contracts are recorded as a component of cost of product sales, while the
remaining foreign currency exposure is recorded as other income (expense) in the
consolidated statements of income. Gains and losses resulting from foreign
currency translation are accumulated as a separate component of consolidated
stockholders' equity.
PROVISION FOR INCOME TAXES. The tax rate of zero and 29% reported in
1999 and 2000, respectively, reflect the tax benefits received from Cymer's
Foreign Sales Corporation and U.S. tax credits.
YEARS ENDED DECEMBER 31, 1998 AND 1999
REVENUES. Product sales increased 19% from $184.8 million in 1998 to
$220.1 million in 1999, due to a 61% increase in the sale of replacement
parts and service for lasers in Cymer's installed chipmaker base as the
semiconductor industry made a major recovery during 1999 and installed lasers
and utilization rates increased. Additionally, higher average selling prices
for new systems and the sale of upgrade packages to the installed base also
contributed to revenue growth. A total of 341 laser systems were sold in 1998
compared to 302 laser systems in 1999. The decrease was primarily
attributable to inventory management by Cymer's direct customers as well as
market share gains of competitors. Revenues generated from replacement parts
increased from $34.8 million in 1998 to $66.6 million in 1999; and revenues
from service and service contracts increased from $1.9 million in 1998 to
$2.9 million in 1999. Funded development revenues increased from $313,000 for
1998 to $399,000 for 1999, primarily due to the timing of the completion of
certain programs.
Cymer's sales are generated primarily by shipments to customers in
Japan, the Netherlands, and the United States. Approximately 88% and 85% of
Cymer's sales in 1998 and 1999, respectively, were derived from customers
outside the United States. Cymer maintains a wholly-owned Japanese subsidiary
which sells to Cymer's Japanese customers. Revenues from Japanese customers,
generated primarily by this subsidiary, accounted for 48% and 37% of revenues in
1998 and 1999, respectively. The activities of Cymer's Japanese subsidiary are
limited to sales and service of products purchased by the subsidiary from the
parent corporation. All costs of development and production of Cymer's products,
including costs of shipment to Japan, are recorded on the books of the parent
company. Cymer anticipates that international sales will continue to account for
a significant portion of its net sales.
COST OF PRODUCT SALES. Cost of product sales rose 14% from $125.7
million in 1998 to $143.1 million in 1999 primarily in response to the increase
in product sales. The gross margin on these sales increased from 32.0% in 1998
to 35% in 1999 primarily due to the increased volume of shipments absorbing
fixed costs of production. Charges related to obsolete inventory remained
consistent between 1998 and 1999.
Net gains or losses from foreign currency exchange contracts are
included in cost of product sales in the consolidated statements of income as
the related sales are recognized. Cymer recognized
17
<PAGE>
a net gain on such contracts of $4.5 million for the year ended December 31,
1998 and a $3.0 million net loss for the year ended December 31, 1999.
RESEARCH AND DEVELOPMENT. Research and development expenses increased
14% from $30.2 million in 1998 to $34.5 million in 1999, due primarily to
increased product improvement efforts associated with the release of Cymer's
6000 series lasers, and the continued development of new laser products. As a
percentage of total revenues, such expenses fell from 16.3% to 15.7% in the
respective periods due to the increase in Cymer's revenues as well as the
increase in development expenditures throughout 1999. Cymer expects that
research and development expenses will increase in absolute dollars but not as a
percentage of revenue in 2000 as Cymer continues to invest in the development of
new products and product enhancements.
SALES AND MARKETING. Sales and marketing expenses increased 15% from
$14.5 million in 1998 to $16.7 million in 1999, due primarily to increased
product management and sales support efforts and marketing infrastructure
activities developed over the period. As a percentage of total revenues, such
expenses decreased slightly from 7.9% to 7.6% as revenues increased from the
prior year.
GENERAL AND ADMINISTRATIVE. General and administrative expenses
increased 38% from $9.5 million in 1998 to $13.1 million in 1999. This was due
to ongoing process quality development efforts and costs, primarily outside
consultant compensation, to support an overall increase in Cymer's business
activities during the current year. As a percentage of total revenues, such
expenses increased from 5.1% to 5.9% in the respective periods.
OTHER INCOME (EXPENSE)- NET. Net other expenses of $3.6 million in
1998 remained consistent with net other expenses of $3.7 million in 1999 given
comparable investment and debt balance between the years.
PROVISION FOR INCOME TAXES. The tax benefit of $1.3 million reported
in 1998 was primarily attributed to tax credits and permanent differences
between taxable income and book income which resulted in a negative effective
tax rate for the year. For 1999 the effective tax rate was zero, primarily due
to the tax benefits received from Cymer's foreign sales corporation and U.S. tax
credits.
LIQUIDITY AND CAPITAL RESOURCES
Since its initial public offering and a second public offering, both
in 1996, Cymer funded its operations primarily through a convertible
subordinated note offering on August 6, 1997, which generated net proceeds of
$167.3 million, bank borrowings, cash flow from operations and the proceeds from
employee stock option exercises.
Cymer issued $172.5 million in aggregate principal amount in the
subordinated note offering. The notes are due on August 6, 2004, with interest
payable semi-annually on February 6 and August 6, beginning February 6, 1998, at
3 1/2% per annum from August 6, 1997 through August 5, 2000 and 7 1/4% per annum
from August 6, 2000 to maturity or earlier redemption. The notes are convertible
at the holder's option into shares of Cymer Common Stock on or after November 5,
1997, at a conversion rate of 21.2766 shares per $1,000 principal amount. Cymer
may redeem the notes, in whole or in part, at specified redemption prices. As of
December 31, 2000, $172.3 million under the Notes was outstanding. During the
first quarter of 2000, $165,000 of the Notes were converted into 3,510 shares of
common stock.
As of December 31, 2000, Cymer had approximately $79.7 million in
cash and cash equivalents, $117.0 million in short-term investments, $9.0
million in long-term investments, and $8.7 million in bank debt. As of December
31, 2000, Cymer had $278.5 million in working capital.
Net cash provided by operating activities was approximately $23.2
million, $46.8 million, and $55.5 million for 1998, 1999, and 2000,
respectively. Cash provided by operations in 1998 was primarily due to increases
in depreciation associated with the prior year's expansion efforts, offset by
decreases in accounts receivable. Cash provided by operations in 1999 resulted
from sustained depreciation, significant reductions in current liabilities, and
an increase in net income offset by increases in accounts receivable. In 2000,
cash provided by operating activities was primarily due to a significant
increase in
18
<PAGE>
net income. Increases in inventory, accounts receivable, and income taxes
payable resulted from the increased revenues and bookings in 2000 and were
offset by increases in accounts payable and accrued and other liabilities during
the year.
Net cash used for investing activities was approximately $5.7
million, $30.9 million and $54.9 million in 1998, 1999 and 2000, respectively.
Cash used for investing activities during 1998 and 1999 primarily reflects the
purchase of various types of manufacturing and test equipment, research and
development tools, and the addition of tenant improvements for the field support
organizations and manufacturing facility, all in support of business expansion
throughout the periods. For 1998 and 1999, the acquisition of property was
offset by the timing of purchases and sales of investments during the same
period. During 2000, cash used for investing activities continued to increase
significantly from the 1998 and 1999 levels, primarily due to additional
investments in property acquisitions to accommodate the increased business
activities. In addition to equipment purchases, property acquisitions in 2000
included the construction of an additional facility at the San Diego, California
location totaling $27.5 million, as well as the investment in a new ERP system
totaling $6.3 million and the purchase of an additional undeveloped parcel of
land adjacent to the San Diego, California facility for $5.0 million. In
addition, $1.1 million in cash was used during 2000 for the acquisition of the
minority interest in Cymer's Taiwan subsidiary.
Net cash used for financing activities was approximately $13.5
million in 1998, whereas cash provided by financing activities was $12.9 million
and $3.7 million for 1999 and 2000, respectively. In 1998, Cymer's financing
activities used net cash of approximately $13.5 million primarily due to the
$24.9 million repurchase of treasury stock offset by $10.1 million in bank loans
for the period. In 1999, financing activities generated $12.9 million of net
cash primarily from the exercise of employee stock options totaling $8.5
million, as well as a $4.9 million increase in net borrowings under a revolving
loan and security agreement. For 2000, the $3.7 million net cash provided by
financing activities was primarily due to $12.7 million from the exercise of
employee stock options offset by payments made during the year on the revolving
loan totaling $8.1 million.
Cymer had forward foreign exchange contracts at December 31, 2000 to
buy $76.9 million for 8.2 billion yen. The total unrecorded deferred gain and
premium on these contracts as of December 31, 2000 was approximately $2.3
million and $1.1 million, respectively.
On January 29, 1998, Cymer announced a program to repurchase up to
$50.0 million of Cymer's common stock. As of December 31, 1998, Cymer purchased
2 million shares at a total cost of $24.9 million. No stock was repurchased
during 1999 or 2000.
Cymer requires substantial working capital to fund its business,
particularly to finance inventories and accounts receivable and for capital
expenditures. Cymer's future capital requirements will depend on many factors,
including the rate of Cymer's manufacturing expansion, the timing and extent of
spending to support product development efforts and expansion of sales and
marketing and field service and support, the timing of introductions of new
products and enhancements to existing products, and the market acceptance of
Cymer's products. Cymer believes that it has sufficient working capital and
available banking arrangements to sustain operations and provide for the future
expansion of its business during 2001.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments and for hedging
activities. The new standard, as amended, will become effective for Cymer for
the first quarter of 2001. Interim reporting for this standard will be required.
Cymer is in the process of assessing the effect of this standard on Cymer's
current reporting and disclosures.
19
<PAGE>
RISK FACTORS
LIKELY FLUCTUATIONS IN OPERATING RESULTS
CERTAIN FACTORS CAUSING FLUCTUATIONS
Cymer's operating results have in the past fluctuated and are likely in
the future to fluctuate significantly. These fluctuations depend on a variety of
factors which may include:
- - the demand for semiconductors in general and, in particular, for leading
edge devices with smaller circuit geometries;
- - the rate at which semiconductor manufacturers take delivery of
photolithography tools from Cymer's customers and the rate at which those
customers take delivery of lightsources from Cymer;
- - cyclicality in the market for semiconductor manufacturing equipment;
- - the timing and size of orders from Cymer's small base of customers;
- - the ability of Cymer to manufacture, test and deliver laser systems in a
timely and cost effective manner;
- - the mix of laser models, replacement parts and service revenues in Cymer's
total revenues;
- - decrease in utilization rates of lasers, in addition to decrease in
installed chipmaker base, decreases sales for replacement parts and
services;
- - the ability of Cymer's competitors to obtain orders from Cymer's customers;
- - the entry of new competitors into the market for DUV photolithography
illumination sources;
- - the ability of Cymer to manage its costs as it supplies its products in
higher volumes and multiple models; and
- - Cymer's ability to effectively manage its exposure to foreign currency
exchange rate fluctuations, principally with respect to the Japanese yen
(in which sales by Cymer's Japanese subsidiary are denominated).
In addition, as customers become more efficient at integrating Cymer's lasers
into their photolithography tools, reductions in customer laser inventories may
affect Cymer's operating results.
TIMING OF REVENUE RECOGNITION
Cymer has historically derived a substantial portion of its quarterly
and annual revenues from the sale of a relatively small number of systems. As a
result, the precise timing of the recognition of revenue from an order for a
small number of systems can have a significant impact on Cymer's total revenues
and operating results for a particular period. If customers cancel or reschedule
orders for a small number of systems or if Cymer cannot fill orders in time to
recognize revenue during a particular period, this could adversely affect
Cymer's operating results for that period. For example, unanticipated
manufacturing, testing, shipping or product acceptance delays could cause such
cancellations, rescheduling or inability to fill orders promptly.
FIXED EXPENSES
Cymer's expense levels are based, in large part, on Cymer's
expectations as to future revenues. Therefore, Cymer's expenses are relatively
fixed in the short term. If revenue levels fall below expectations, this would
disproportionately and adversely affect net income. Cymer cannot forecast the
impact of these and other factors on its revenues and operating results in any
future period with any degree of certainty.
SEMICONDUCTOR MANUFACTURER DEMAND
Cymer believes that semiconductor manufacturers are currently
developing capability for production and pilot production of 0.18 um and below
devices. Cymer also believes that the efforts to develop such capability are
driving present demand for its laser systems for DUV photolithography tools.
Once semiconductor manufacturers have acquired such capability, their demand for
Cymer's DUV
20
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photolithography tools will depend on whether they want to expand their capacity
further to manufacture such devices. This will in turn depend on whether their
sales forecasts and manufacturing process yields justify such an investment.
Cymer currently expects that demand for its DUV laser systems will depend on
such demand and process development constraints of the semiconductor
manufacturers.
INDUSTRY CONDITIONS
Cymer has sized its operations in response to rapidly changing industry
conditions. Should conditions continue to deteriorate due to decreased capital
spending and lessening of semiconductor demand, current operating levels may
negatively impact profitable operations.
Due to the foregoing, as well as other unanticipated factors, Cymer's
operating results will likely fall below the expectations of public market
analysts or investors in some future quarter or quarters. Such failure to meet
operating result expectations would materially adversely affect the price of
Cymer's Common Stock.
DEPENDENCE ON SEMICONDUCTOR INDUSTRY
Cymer derives substantially all of its revenues from photolithography
tool manufacturers. Photolithography tool manufacturers depend in turn on the
demand for their products from semiconductor manufacturers. Semiconductor
manufacturers depend on the demand from manufacturers of end-products or systems
that use semiconductors. The semiconductor industry is highly cyclical and has
historically experienced periodic and significant downturns. These downturns
have often had a severe effect on the demand for semiconductor manufacturing
equipment, including photolithography tools. Cymer believes that downturns in
the semiconductor manufacturing industry will periodically occur, resulting in
periodic decreases in demand for semiconductor manufacturing equipment. In
addition, Cymer believes that in a future downturn Cymer's need to continue
investment in research and development, and to maintain extensive ongoing
customer service and support capability, will constrain its ability to reduce
expenses. Accordingly, downturns in the semiconductor industry would likely have
a material adverse effect on Cymer's business, financial condition and results
of operations.
DEPENDENCE ON SMALL NUMBER OF CUSTOMERS
A small number of manufacturers of DUV photolithography tools
constitute Cymer's primary customer base. Three large firms, ASM Lithography,
Canon and Nikon dominate the photolithography tool business. Collectively, they
accounted for approximately 88%, 74% and 77% of Cymer's total revenues in 1998,
1999, and 2000, respectively. Individually, sales to ASM Lithography, Canon and
Nikon accounted for approximately 33%, 17% and 24%, respectively, of total
revenues in 1999 and 30%, 19% and 28%, respectively, of total revenues in 2000.
Cymer expects that sales of its systems to these customers will continue to
account for a substantial majority of its revenues in the foreseeable future.
None of Cymer's customers are obligated to purchase a minimum number of Cymer's
products. The loss of any significant business from any one of these customers,
a significant reduction in orders from any one of these customers or production
problems for any one of these customers that cause a slow down in Cymer's
deliveries, would have a material adverse effect on Cymer's business, financial
condition and results of operations. Reductions caused by changes in a
customer's competitive position, a decision to purchase illumination sources
from other suppliers, or economic conditions in the semiconductor and
photolithography tool industries, could all cause such a loss of business or
reduction in orders.
NEED TO MANAGE A CHANGING BUSINESS
In recent years, in response to business cycles in the semiconductor
industry, Cymer has sharply expanded and contracted the scope of its operations
and the number of employees in most of its functional areas. As of December 31,
2000, Cymer occupied 330,000 square feet of facilities and had 898 employees
worldwide. In a cyclical environment of dramatic growth or contraction, Cymer
will need to:
21
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- - continue close management of these areas, and
- - improve its management, operational and financial systems, including
- accounting and other internal management systems,
- quality control,
- order fulfillment,
- field service and customer support capabilities, and
- changing sales and marketing channels.
Cymer must also effectively manage its inventory levels, including
assessing and managing excess and obsolete inventories associated with the
changing environment and new product introductions. Cymer will need to
attract, train, retain and manage key technical personnel in order to support
Cymer's growth and/or contraction. Cymer will also need to manage effectively
its international operations, including:
- operations of its subsidiaries in Japan, Korea, Taiwan, Singapore and the
Netherlands,
- field service and support presence in Asia and Europe, and
- the relationship with Seiko as a manufacturer of its photolithography
lasers.
Cymer must also effect timely deliveries of its products and
maintain the product quality and reliability required by its customers. Any
failure to effectively manage Cymer's growth or contraction would materially
adversely affect Cymer's business, financial condition and results of
operations.
RAPID TECHNOLOGICAL CHANGE; NEW PRODUCT INTRODUCTIONS
Semiconductor manufacturing equipment and processes are subject to
rapid technological change. Cymer believes that its future success will depend
in part upon its ability to:
- continue to enhance its excimer laser products and their process
capabilities, and
- develop and manufacture new products with improved capabilities.
In order to enhance and improve its products and develop new
products, among other things, Cymer must work closely with its customers,
particularly in the product development stage, to integrate its lasers with
its customers' photolithography tools. Future technologies, such as EUV and
scalpel processes, might render Cymer's excimer laser products obsolete.
Further, Cymer might not be able to develop and introduce new products or
enhancements to its existing products and processes in a timely or cost
effective manner that satisfy customer needs or achieve market acceptance.
The failure to do so could materially adversely affect Cymer's business,
financial condition and results of operations.
DEPENDENCE ON KEY SUPPLIERS
Cymer obtains certain of the components and subassemblies included in
its products from a single supplier or a limited group of suppliers. In
particular, there are no alternative sources for certain of such components and
subassemblies, including certain optical components used in Cymer's lasers. In
addition, Cymer is increasingly outsourcing the manufacture of various
subassemblies. To date Cymer has been able to obtain adequate supplies of the
components and subassemblies in a timely manner from existing sources. However,
due to the nature of Cymer's product development requirements, key suppliers
often need to rapidly advance their own technologies in order to support Cymer's
new product introduction schedule. These suppliers may or may not be able to
satisfy Cymer's schedule requirements in providing new modules and subassemblies
to Cymer. If Cymer cannot obtain sufficient quantities of such materials,
components or subassemblies, or if such items do not meet Cymer's quality
standards, delays or reductions in product shipments could have a material
adverse effect on Cymer's business, financial condition and results of
operations.
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COMPETITION
LAMBDA-PHYSIK AND GIGAPHOTON
Cymer currently has two significant competitors in the market for
excimer laser systems for photolithography applications:
- Lambda-Physik and
- Gigaphoton (Komatsu and Ushio).
On July 10, 2000, Ushio and Komatsu announced the combination of their excimer
laser business into a joint venture to be known as Gigaphoton Inc.
Both of these companies:
- are larger than Cymer,
- have access to greater financial, technical and other resources than does
Cymer, and
- are located in closer proximity to most of Cymer's customers than Cymer.
Cymer believes that Lambda-Physik and Gigaphoton are aggressively seeking to
gain larger positions in this market. Cymer believes that its customers have
each purchased products offered by these competitors and that its customers have
qualified competitors' lasers for use with their products. Cymer believes that
Gigaphoton in particular has been qualified for production use by chipmakers in
Japan and elsewhere. Cymer also believes that Lambda-Physik has been qualified
for production use by chipmakers in the U.S. and Europe. Cymer could lose market
share and its growth could slow or even decline as competitors gain market
acceptance.
OTHER TECHNOLOGIES
In the future, Cymer will likely experience competition from other
technologies, such as EUV and scalpel processes. To remain competitive, Cymer
believes that it will need to:
- manufacture and deliver products to customers on a timely basis and
without significant defects, and
- maintain a high level of investment in research and development and in
sales and marketing.
Cymer might not have sufficient resources to continue to make the investments
necessary to maintain its competitive position.
SMALL AND IMMATURE MARKET FOR EXCIMER LASERS
The market for excimer lasers is still small and immature. Larger
competitors with substantially greater financial resources, including other
manufacturers of industrial lasers, might attempt to enter the market.
Cymer might not remain competitive. A failure to remain competitive
would have a material adverse effect on Cymer's business, financial condition
and results of operations.
Any one of these risks could have an adverse effect on Cymer's
business, financial condition and results of operations.
RISK OF EXCESSIVE INVENTORY BUILDUPS BY PHOTOLITHOGRAPHY TOOL MANUFACTURERS
Photolithography tool manufacturers constitute substantially all of
Cymer's customers. Photolithography tool manufacturers sell their systems in
turn to semiconductor manufacturers. Market conditions in the industry and
production efficiency of the photolithography tool manufacturer can cause
Cymer's customers to expand or reduce their orders for new laser systems as they
try to manage their
23
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inventories to appropriate levels which better reflect their expected sales
forecasts and production requirements. Cymer is working with its customers to
better understand these issues. However, there can be no assurance that Cymer
will be successful in this regard, or that its customers will not build
excessive laser inventories. Excessive customer laser inventories could result
in a material decline in Cymer's revenues and operating results in future
periods as such inventories are brought into balance.
DEPENDENCE ON KEY PERSONNEL
Cymer is highly dependent on the services of a number of key employees
in various areas, including:
- engineering,
- research and development,
- sales and marketing, and
- manufacturing.
In particular, there are a limited number of experts in excimer laser
technology. There is intense competition for such personnel, as well as for the
highly-skilled hardware and software engineers that Cymer requires. Cymer has in
the past experienced, and continues to experience, difficulty in hiring
personnel, including experts in excimer laser technology. Cymer believes that,
to a large extent, its future success will depend upon:
- the continued services of its engineering, research and development,
sales and marketing and manufacturing and service personnel, and
- its ability to attract, train and retain highly skilled personnel in each
of these areas.
Cymer does not have employment agreements with most of its employees, and Cymer
might not be able to retain its key employees. The failure of Cymer to hire,
train and retain such personnel could have a material adverse effect on Cymer's
business, financial condition and results of operations.
DEPENDENCE ON SINGLE PRODUCT LINE
Cymer's only product line is excimer lasers ("KrF, ArF and F2 laser
systems"). The primary market for excimer lasers is for use in DUV
photolithography equipment for manufacturing deep-submicron semiconductor
devices. Demand for Cymer's products will depend in part on the rate at which
semiconductor manufacturers adopt excimer lasers as the illumination source for
their photolithography tools.
Impediments to such adoption include:
- instability of photoresists used in advanced DUV photolithography, and
- potential shortages of specialized materials used in DUV optics.
There can be no assurance that such impediments can or will be overcome. In any
event, such impediments may materially reduce the demand for Cymer's products.
Further, if Cymer's customers experience reduced demand for DUV photolithography
tools, or if Cymer's competitors are successful in obtaining significant orders
from such customers, Cymer's financial condition and results of operations would
be materially adversely affected.
DISRUPTION OF ELECTRIC SERVICE
California, the location of Cymer's headquarters, primary manufacturing
facility, and a number of Cymer's suppliers, is experiencing significant
problems in the operations of its electric utility infrastructure. This has
caused Cymer and its suppliers' electric utility suppliers to notify companies
that they could be subject to blackouts of electric power. Some of Cymer's
suppliers have experienced disruptions in services. While Cymer has some back up
power capability, any prolonged blackout or series of periodic blackouts could
disrupt Cymer's production schedule. Any material disruption of electric service
would have a material adverse impact upon Cymer's financial performance.
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MAINTENANCE OF FIELD SERVICE AND SUPPORT ORGANIZATION
Cymer believes that the need to provide fast and responsive service to
the semiconductor manufacturers using its lasers is critical. Cymer cannot
depend solely on its direct customers to provide this specialized service.
Therefore, Cymer believes it is essential to maintain through its own personnel
or through trained third party sources, a rapid response capability to service
its lasers throughout the world. Accordingly, Cymer has an ongoing effort to
continuously develop its direct support infrastructure in the United States,
Japan, Europe, Korea, Singapore, Taiwan and Southeast Asia. This task entails
recruiting and training qualified field service personnel or identifying
qualified independent firms and maintaining effective and highly trained
organizations that can provide service to customers in various countries in
their assigned regions. Cymer has historically experienced difficulties in
effectively training field service personnel. Additionally, field service
personnel often experience high turnover. Cymer might not be able to attract and
train qualified personnel to maintain these operations successfully. Further,
the costs of such operations might be excessive. A failure to implement this
plan effectively could have a material adverse effect on Cymer's business,
financial condition and results of operations.
UNCERTAINTY REGARDING PATENTS AND PROTECTION OF PROPRIETARY TECHNOLOGY
CYMER PATENTS
Cymer believes that the success of its business depends more on such
factors as the technical expertise of its employees, as well as their innovative
skills and marketing and customer relations ability, than on patents,
copyrights, trade secrets and other intellectual property rights. Nevertheless,
the success of Cymer may depend in part on patents. As of December 31, 2000,
Cymer owned 95 United States patents covering certain aspects of technology
associated with excimer lasers. Such patents will expire at various times during
the period from January 2008 to September 2019. As of December 31, 2000, Cymer
had also applied for 66 additional patents in the United States, 11 of which
have been allowed. As of December 31, 2000 Cymer owned 80 foreign patents and
had filed 226 patent applications pending in various foreign countries.
Cymer's pending patent applications and any future applications might
not be approved. Cymer's patents might not provide Cymer with competitive
advantages. Third parties might challenge Cymer's patents. In addition, third
parties' patents might have an adverse effect on Cymer's ability to do business.
In this regard, due to cost constraints, Cymer did not begin filing for patents
in Japan or other countries with respect to inventions covered by its United
States patents and patent applications until 1993. Therefore, Cymer lost the
right to seek foreign patent protection for certain of its inventions.
Additionally, because foreign patents may afford less protection under foreign
law than is available under United States patent law, any such patents issued to
Cymer might not adequately protect Cymer's technology in a given foreign
jurisdiction. Furthermore, third parties might independently develop similar
products, duplicate Cymer's products or, to the extent patents are issued to
Cymer, design around the patents issued to Cymer.
COMPETITIVE PATENTS
Others may have filed and in the future may file patent applications
that are similar or identical to those of Cymer. To determine the priority of
inventions, Cymer may have to participate in interference proceedings declared
by the United States Patent and Trademark Office. Such interference proceedings
could result in substantial cost to Cymer. Such third party patent applications
might have priority over patent applications filed by Cymer.
OTHER FORMS OF PROTECTION
Cymer also relies upon:
- trade secret protection,
- employee nondisclosure agreements,
- third-party nondisclosure agreements, and
- other intellectual property protection methods
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to protect its confidential and proprietary information. Despite these efforts,
third parties might:
- independently develop substantially equivalent proprietary information
and techniques,
- otherwise gain access to Cymer's trade secrets, or
- disclose such technology.
Cymer might not be able to meaningfully protect its trade secrets.
POSSIBLE CLAIMS TO OWNERSHIP OF CYMER'S INTELLECTUAL PROPERTY
Cymer has in the past funded a significant portion of its research and
development expenses from outside research and development revenues. Cymer has
received such revenues from photolithography tool manufacturers and from
SEMATECH, a semiconductor industry consortium, in connection with the design and
development of specific products. Cymer currently funds a small portion of its
development expenses through SEMATECH. Although Cymer's arrangements with
photolithography tool manufacturers and SEMATECH seek to clarify the ownership
of the intellectual property arising from research and development services
performed by Cymer, disputes over the ownership or rights to use or market such
intellectual property might arise between Cymer and such parties. Any such
dispute could result in restrictions on Cymer's ability to market its products
and could have a material adverse effect on Cymer's business, financial
condition and results of operations.
PATENT INFRINGEMENT
Third parties have in the past notified, and may in the future notify,
Cymer that it may be infringing intellectual property rights of others.
Conversely, Cymer has in the past notified, and may in the future notify, third
parties that they may be infringing Cymer's intellectual property rights.
Specifically, Cymer has engaged in discussions with one of its
competitors, Komatsu, with respect to certain of Komatsu's Japanese patents, in
the course of which Komatsu has also identified to Cymer a number of additional
Japanese and U.S. patents that Komatsu asserts may be infringed by Cymer or by
Cymer's Japanese manufacturing partner, Seiko. Komatsu has also notified one of
Cymer's integrator customers, Nikon, of its belief that Cymer's lasers infringe
several of Komatsu's Japanese and U.S. patents. Cymer, in consultation with
Japanese patent counsel, has initiated oppositions to certain Komatsu Japanese
patents and patent applications in the Japanese Patent Office. Some of these
oppositions have been dismissed by the Japanese Patent Office. Litigation might
ensue with respect to the Komatsu Japanese patents or Komatsu U.S. patents.
Also, Komatsu might assert infringement claims under other or additional
patents. Komatsu has notified Seiko that Komatsu intends to enforce its rights
under the Komatsu Japanese patents against Seiko if Seiko engages in
manufacturing activities for Cymer. In connection with its manufacturing
agreement with Seiko, Cymer has agreed to indemnify Seiko against such claims
under certain circumstances. Cymer and Seiko might not ultimately prevail in any
such litigation.
Cymer has notified its competitors and others of Cymer's United States
patent portfolio. Cymer has specifically asserted certain of its U.S. patents
against Komatsu when informed that Komatsu lasers might be integrated into
steppers intended for shipment into the U.S. Cymer and Komatsu have engaged in
discussions with regard to each party's claims. Those discussions might not be
successful and litigation could result. Attorneys representing Komatsu are
currently challenging one of Cymer's U.S. patents in the U.S. Patent Office.
During 2000, Komatsu's lithography laser business was transferred to Gigaphoton,
Inc., a joint venture of Komatsu and Ushio, Inc. Cymer has also been engaged in
patent discussions with another competitor, Lambda-Physik, concerning
allegations by each party against the other of possible patent infringement.
These discussions also might not be successful and litigation could result.
Any patent litigation initiated by Cymer, or initiated by Cymer's
competitors against Cymer, would, at a minimum, be costly. Litigation could also
divert the efforts and attention of Cymer's management and technical personnel.
Both could have a material adverse effect on Cymer's business, financial
condition and results of operations. Furthermore, in the future other third
parties might assert
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other infringement claims, and customers and end users of Cymer's products might
assert other claims for indemnification resulting from infringement claims. Such
assertions, if proven to be true, might materially adversely affect Cymer's
business, financial condition and results of operations. If any such claims are
asserted against Cymer, Cymer may seek to obtain a license under the third
party's intellectual property rights. However, such a license might not be
available on reasonable terms or at all. Cymer could decide, in the alternative,
to resort to litigation to challenge such claims or to design around the
patented technology. Any of these actions could be costly and would divert the
efforts and attention of Cymer's management and technical personnel, which would
materially adversely affect Cymer's business, financial condition and results of
operations.
TRADEMARK
Cymer has registered the trademark CYMER in the United States and
certain other countries and is seeking additional registrations of other
trademarks including "Insist on Cymer" in the United States and in certain other
countries. Cymer uses these and a variety of other marks in its advertisements
and other business activities around the world. Based on the use of these or
other marks, Cymer might be subjected to actions for trademark infringement,
which could be costly to defend. If a challenge to a mark were to be successful,
Cymer might be required to cease use of the mark and, potentially, to pay
damages.
RISKS ASSOCIATED WITH MANUFACTURING IN JAPAN
Cymer has qualified Seiko of Japan as a contract manufacturer of its
photolithography lasers. Komatsu, a member of the Gigaphoton joint venture and
competitor of Cymer, has advised Seiko that certain aspects of Cymer's lasers
might infringe certain patents that have been issued to Komatsu in Japan.
Komatsu has advised Seiko it intends to enforce its rights under such patents
against Seiko if Seiko engages in manufacturing activities for Cymer. In the
event that, notwithstanding its manufacturing agreement with Cymer, Seiko
determines not to continue manufacturing Cymer's products until resolution of
the matter with Komatsu, Cymer's ability to meet any heavy demand for its
products could be materially adversely affected. See -- "Uncertainty Regarding
Patents and Protection of Proprietary Technology."
RISKS OF INTERNATIONAL SALES AND OPERATIONS
SIGNIFICANT INTERNATIONAL TRADE
Cymer derived approximately 88%, 85% and 81% of its revenues in 1998,
1999 and 2000, respectively, from customers located outside the United States.
Because a significant majority of Cymer's principal customers are located in
other countries, particularly Asia, Cymer anticipates that international sales
will continue to account for a significant portion of its revenues. In order to
support its overseas customers, Cymer:
- maintains subsidiaries in Japan, Korea, Taiwan, Singapore and the
Netherlands,
- is further developing its field service and support operations worldwide,
and
- will continue to work with Seiko as a manufacturer of its products in
Japan.
Cymer might not be able to manage these operations effectively.
Cymer's investment in these activities might not enable it to compete
successfully in international markets or to meet the service and support
needs of its customers. Additionally, a significant portion of Cymer's sales
and operations could be subject to certain risks, including:
- tariffs and other barriers,
- difficulties in staffing and managing foreign subsidiary and branch
operations,
- currency exchange risks and exchange controls, or potentially adverse
tax consequences, and
- the possibility of difficulty in accounts receivable collection.
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Because many of Cymer's principal customers, as well as many of the end-users of
Cymer's laser systems, are located in Asia, the recent economic problems and
currency fluctuations affecting that region could intensify Cymer's
international risk. Further, while Cymer has experienced no difficulty to date
in complying with United States export controls, these rules could change in the
future and make it more difficult or impossible for Cymer to export its products
to various countries. These factors could have a material adverse effect on
Cymer's business, financial condition and results of operations.
CURRENCY FLUCTUATIONS
Sales by Cymer to its Japanese subsidiary are denominated in dollars,
while sales by the subsidiary to customers in Japan are denominated in yen. This
means that Cymer's results of operations show some fluctuation based on the
value of the Japanese yen against the U.S. dollar. Cymer's Japanese subsidiary
manages its exposure to such fluctuations by entering into foreign currency
exchange contracts to hedge its purchase commitments. Management will continue
to monitor Cymer's exposure to currency fluctuations, and, when appropriate, use
financial hedging techniques to minimize the effect of these fluctuations.
However, exchange rate fluctuations might have a material adverse effect on
Cymer's results of operations or financial condition. In the future, Cymer might
need to sell its products in other currencies, which would make the management
of currency fluctuations more difficult and expose Cymer to greater risks in
this regard.
FOREIGN REGULATIONS
Numerous foreign government standards and regulations apply to Cymer's
products. These standards and regulations are continually being amended.
Although Cymer endeavors to meet foreign technical and regulatory standards,
Cymer's products might not continue to comply with foreign government standards
and regulations, or changes thereto. It might not be cost effective for Cymer to
redesign its products to comply with such standards and regulations. The
inability of Cymer to design or redesign products to comply with foreign
standards could have a material adverse effect on Cymer's business, financial
condition and results of operations.
PRODUCTION USE OF EXCIMER LASERS
Cymer's products might not meet production specifications or cost of
operation requirements over time when subjected to prolonged and intense use in
volume production in semiconductor manufacturing processes. If any semiconductor
manufacturer cannot successfully achieve or sustain volume production using
Cymer's lasers, Cymer's reputation with semiconductor manufacturers or the
limited number of photolithography tool manufacturers could be damaged. This
would have a material adverse effect on Cymer's business, financial condition
and results of operations.
RISKS ASSOCIATED WITH EXPANDING PRODUCT OFFERINGS AND INTEGRATING ACQUIRED
BUSINESSES
The enhancement of Cymer's excimer laser products and their process
capabilities, as well as the development and manufacture of new products to
serve other semiconductor applications through strategic agreements and
acquisitions of businesses will be required for Cymer to continue to improve its
operational and financial growth. Cymer cannot be certain that it will be able
to manage its growth, the acceleration of the development enhancements for
existing technology and creating new technologies and products, or effectively
integrate new products and applications into Cymer's current operations. Any of
these risks could materially harm Cymer's business, financial condition and
results of operations.
In addition, the integration of acquired businesses will require
additional management, technical and administrative resources. The risks
involved with an acquisition may include, and are not limited to: diversion of
management's attention, failure to retain key personnel, amortization of
acquired intangible assets, client dissatisfaction or performance problems with
an acquired firm, costs associated with acquisitions and the integration of
acquired operations, and assumption of unknown liabilities, or other
unanticipated events or circumstances. Any of these risks could materially harm
Cymer's business, financial condition and results of operations. There can be no
assurance that any business acquired will achieve anticipated revenues or
operating results.
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ENVIRONMENTAL AND OTHER GOVERNMENT REGULATIONS
Federal, state and local regulations impose various controls on the
storage, handling, discharge and disposal of substances used in Cymer's
manufacturing process and on the facility leased by Cymer. Cymer believes that
its activities conform to present governmental regulations applicable to its
operations and its current facilities. These regulations include those related
to environmental, land use, public utility utilization and fire code matters.
Such governmental regulations might in the future impose the need for additional
capital equipment or other process requirements upon Cymer. They might also
restrict Cymer's ability to expand its operations. The adoption of such
measures, or the failure by Cymer to comply with applicable environmental and
land use regulations or to restrict the discharge of hazardous substances, could
subject Cymer to future liability or could cause its manufacturing operations to
be curtailed or suspended.
RISKS OF PRODUCT LIABILITY CLAIMS
Cymer faces a significant risk of exposure to product liability claims
in the event that the use of its products results in personal injury or death.
Cymer might experience material product liability losses in the future. Cymer
maintains insurance against product liability claims. However, such coverage
might not continue to be available on terms acceptable to Cymer. Such coverage
also might not be adequate for liabilities actually incurred. Further, in the
event that any of Cymer's products prove to be defective, Cymer may need to
recall or redesign such products. A successful claim brought against Cymer in
excess of available insurance coverage, or any claim or product recall that
results in significant adverse publicity against Cymer, could have a material
adverse effect on Cymer's business, financial condition and results of
operations.
POSSIBLE PRICE VOLATILITY OF COMMON STOCK
The following factors may significantly affect the market price of
Cymer's Common Stock:
- actual or anticipated fluctuations in Cymer's operating results,
- announcements of technological innovations,
- new products or new contracts by Cymer or its competitors,
- developments with respect to patents or proprietary rights,
- conditions and trends in the laser device and other technology
industries,
- changes in financial estimates by securities analysts,
- general market conditions, and
- other factors.
In addition, the stock market has experienced extreme price and volume
fluctuations that have particularly affected the market price for many high
technology companies. Such fluctuations have in some cases been unrelated to the
operating performance of these companies. Severe price fluctuations in a
company's stock have frequently been followed by securities litigation. Cymer is
currently in the process of defending such an action (see - "Legal Matters").
Such litigation can result in substantial costs and a diversion of management's
attention and resources and therefore could have a material adverse effect on
Cymer's business, financial condition and results of operations.
LEGAL MATTERS
Cymer has been named as a defendant in several putative shareholder
class action lawsuits which were filed in September and October, 1998 in the
U.S. District Court for the Southern District of California. Certain executive
officers and directors of Cymer are also named as defendants. The plaintiffs
purport to represent a class of all persons who purchased Cymer's Common Stock
between April 24, 1997 and September 26, 1997 (the "Class Period"). The
complaints allege claims under the federal securities laws. The plaintiffs
allege that Cymer and the other defendants made various material
misrepresentations and omissions during the Class Period. The complaints do not
specify the amount of damages sought. The complaints have been consolidated into
a single action and a class representative has been appointed by the court. A
consolidated amended complaint was filed in early August, 1999. On November 5,
1999, Cymer and the other defendants filed a motion to dismiss the
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consolidated amended claim for failure to state a cause of action. On April 1,
2000, the court granted defendant's motion to dismiss with leave to amend the
complaint by the plaintiffs. The plaintiffs filed their second amended complaint
on June 5, 2000. Cymer moved to dismiss the amended complaint on August 4, 2000.
On January 22, 2001, the Court heard oral argument on Cymer's motion to dismiss,
but has not yet decided the motion. Cymer believes it has meritorious defenses
to the claims asserted and intends to defend the action vigorously. Accordingly,
no provision for any liability or loss that may result from adjudication or
settlement thereof has been made in the accompanying consolidated financial
statements.
Even though Cymer believes the claim to be meritless and intends to
vigorously defend the action, there can be no assurances that Cymer will be
successful in ultimately defending and dismissing the action. Such litigation
may result in Cymer being required to pay damages, incur substantial costs and
divert management's attention and resources, and therefore could have a material
adverse effect on Cymer's business, financial condition and results of
operations.
ANTI-TAKEOVER EFFECT OF NEVADA LAW AND CHARTER AND BYLAW PROVISIONS;
AVAILABILITY OF PREFERRED STOCK FOR ISSUANCE
Nevada law as well as Cymer's charter and other documents contain
provisions that could discourage a proxy contest or make more difficult the
acquisition of a substantial block of Cymer's Common Stock, including Cymer's
Articles of Incorporation and Bylaws and Cymer's Preferred Shares Rights
Agreement ("poison pill") dated February 13, 1998. In addition, the Board of
Directors is authorized to issue, without shareholder approval, up to 5,000,000
shares of Preferred Stock. Such shares of Preferred Stock may have voting,
conversion and other rights and preferences that may be superior to those of the
Common Stock and that could adversely affect the voting power or other rights of
the holders of Common Stock. The Board of Directors could use the issuance of
Preferred Stock or of rights to purchase Preferred Stock to discourage an
unsolicited acquisition proposal.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FOREIGN CURRENCY RISK
Cymer conducts business in several international currencies through its
worldwide operations. Due to the large volume of business Cymer manages in
Japan, the Japanese operation poses the greatest foreign currency risk. Cymer
uses financial instruments, principally forward exchange contracts, in Japan to
manage its foreign currency exposures. Cymer does not enter into forward
exchange contracts for trading purposes.
Cymer enters into foreign currency exchange contracts in order to
reduce the impact of currency fluctuations related to purchases of Cymer's
inventories by Cymer Japan for resale under firm third-party sales commitments.
Net gains or losses are recorded on the date the inventories are received by
Cymer Japan (the transaction date) and are included in cost of product sales in
the consolidated statements of operations as the related sale is consummated.
Amounts due from/to the bank on contracts not settled as of the transaction date
are recorded as foreign exchange contracts receivable/payable in the
consolidated balance sheets.
At December 31, 2000, Cymer had outstanding forward foreign exchange
contracts to buy US$76.9 million for 8.2 billion yen under foreign currency
exchange facilities with contract rates ranging from 101.95 yen to 110.60 yen
per US dollar and which contracts expire on various expiration dates through
December 2001.
INVESTMENT AND DEBT RISK
Cymer maintains an investment portfolio consisting primarily of
government and corporate fixed income securities, certificates of deposit and
commercial paper. While it is Cymer's general intent to hold such securities
until maturity, management will occasionally sell certain securities for cash
flow purposes. Therefore, Cymer's investments are classified as
available-for-sale and are carried on the
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balance sheet at fair value. Due to the conservative nature of the investment
portfolio, a sudden change in interest rates would not have a material effect on
the value of the portfolio.
In August 1997, Cymer issued $172.5 million aggregate principal amount
of Step-Up Convertible Subordinated (Notes) due August 6, 2004, with interest
payable semi-annually on February 6 and August 6, commencing February 6, 1998.
Interest on the notes is stated at 3 1/2% per annum from August 6, 1997 through
August 5, 2000 and at 7 1/4% per annum from August 6, 2000 to maturity or
earlier redemption, representing a yield to maturity accrued at approximately
5.47%. The Notes are convertible at the option of the holder into shares of
Common Stock of Cymer at any time on or after November 5, 1997 and prior to
redemption or maturity, at a conversion rate of 21.2766 shares per $1,000
principal amount of Notes, subject to adjustment under certain conditions. Cymer
could not redeem the Notes prior to August 9, 2000. Thereafter, Cymer can redeem
the Notes from time to time, in whole or in part, at specified redemption
prices. The Notes are unsecured and subordinated to all existing and future
senior indebtedness of Cymer. The indenture governing the Notes does not
restrict the incurrence of senior indebtedness or other indebtedness by Cymer.
These Notes are recorded at face value on the consolidated balance sheets. The
fair value of such debt, based on quoted market prices at December 31, 2000 was
$168.9 million. As of December 31, 1999, $172.5 million in Notes was
outstanding, as compared to $172.3 million outstanding as of December 31, 2000.
As of December 31, 1999 and 2000, $172.5 million and $172.3 million,
respectively, under the Notes was outstanding. During the first quarter of 2000,
$165,000 of the Notes were converted into 3,510 shares of common stock.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is included in Part IV Items
14(a)(1) and (2) of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On March 31, 2000, Cymer dismissed Deloitte & Touche LLP as its
independent accountants. The decision to dismiss Deloitte & Touche LLP and
engage new auditors was recommended by the Audit Committee of Cymer's Board of
Directors and was approved by Cymer's Board. Cymer believes there were no
disagreements with Deloitte & Touche LLP within the meaning of Instruction 4 of
Item 304 of Regulation S-K on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure in connection
with the audits of the Cymer's financial statements for the years ended December
31, 1998 or 1999, which disagreement if not resolved to their satisfaction would
have caused Deloitte & Touche LLP to issue an adverse opinion or a disclaimer of
opinion, and neither report contained an adverse opinion or disclaimer of
opinion or was qualified or modified as to uncertainty, audit scope or
accounting principles.
During the two most recent fiscal years, there have no reportable
events (as defined in Item 304 of Regulation S-K) with Deloitte & Touche LLP. A
letter from Deloitte & Touche LLP addressed to the Securities and Exchange
Commission is included as Exhibit 16 to the Current Report on Form 8-K filed
April 5, 2000. This letter states that Deloitte & Touche LLP agrees with the
statements made by Cymer contained on such report on Form 8-K.
On April 12, 2000, Cymer engaged KPMG LLP as its independent
accountants to audit its consolidated financial statements for the year ending
December 31, 2000.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information regarding the identification and business experience of
Cymer's directors under the caption "Nominees" under the main caption "Proposal
1 - Election of Directors" in Cymer's definitive Proxy Statement for the annual
meeting of stockholders to be held, to be filed with the Securities and Exchange
Commission within 120 days after the end of Cymer's fiscal year ended December
31, 2000,
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is incorporated herein by this reference. For information regarding
the identification and business experience of Cymer's executive officers, see
"Executive Officers" at the end of Item 1 in Part I of this Annual Report on
Form 10-K. Information concerning filing requirements applicable to Cymer's
executive officers and directors under the caption "Section 16(a) Beneficial
Ownership Reporting Compliance" in Cymer's Proxy Statement is incorporated
herein by this reference.
ITEM 11. EXECUTIVE COMPENSATION
The information under the captions "Executive Compensation -
Compensation of Directors," and "Executive Compensation - Compensation of
Executive Officers" in Cymer's Proxy Statement is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the caption "Security Ownership of Certain
Beneficial Owners and Management" in Cymer's Proxy Statement is incorporated
herein by this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the caption "Certain Transactions" in Cymer's
Proxy Statement is incorporated herein by this reference.
With the exception of the information specifically incorporated by
reference from Cymer's Proxy Statement in Part III of this Annual Report on Form
10-K, Cymer's Proxy Statement shall not be deemed to be filed as part of this
Report. Without limiting the foregoing, the information under the captions
"Report of the Compensation Committee of the Board of Directors on Executive
Compensation" and "Performance Measurement Comparison" in Cymer's Proxy
Statement is not incorporated by reference in this Annual Report on Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of, or incorporated by
reference into, this Annual Report on Form 10-K:
(1) FINANCIAL STATEMENTS. The following Consolidated Financial
Statements of Cymer, Inc. and Independent Auditors' Report are included in a
separate section of this Report beginning on page F-1:
<TABLE>
<CAPTION>
Description Page Number
<S> <C>
Independent Auditors' Report - KPMG LLP........................................F-1
Independent Auditors' Report - Deloitte & Touche LLP...........................F-2
Consolidated Balance Sheets as of December 31, 1999 and 2000...................F-3
Consolidated Statements of Income for the Years Ended
December 31, 1998, 1999 and 2000......................................F-4
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1998, 1999 and 2000................................F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1999 and 2000......................................F-6
Notes to Consolidated Financial Statements.....................................F-8
</TABLE>
(2) FINANCIAL STATEMENT SCHEDULES. All financial statement
schedules have been omitted because the required information is not applicable
or not present in amounts sufficient to require submission of the schedule, or
because the information required is included in the consolidated financial
statements or the notes thereto.
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(3) EXHIBITS. The exhibits listed under Item 14(c) hereof are
filed with, or incorporated by reference into, this Annual Report on Form 10-K.
(b) REPORTS ON FORM 8-K. No reports on Form 8-K were filed by
Registrant during the fourth quarter of the fiscal year ended December 31, 2000.
(c) EXHIBITS. The following exhibits are filed as part of, or
incorporated by reference into, this Annual Report on Form 10-K:
3.1 Amended and Restated Articles of Incorporation of Cymer
(incorporated herein by reference to Exhibit 3.1 to Cymer's
Registration Statement on Form S-1 (as amended), Reg. No.
333-08383).
3.2 Certificate of Designations of Rights, Preferences and
Privileges of Series A Participating Preferred Stock of Cymer
(incorporated herein by reference to Exhibit 1 to Cymer's
Form 8-A, dated February 20, 1998).
3.3 Bylaws of Cymer, as amended and restated.
4.1 Preferred Shares Rights Agreement, dated as of February 13,
1998 between Cymer and ChaseMellon Shareholder Services,
L.L.C. (now Mellon Investor Services L.L.C.) (incorporated
herein by reference to Exhibit 1 to Cymer's Form 8-A, dated
February 20, 1998).
4.2 Indenture, dated as of August 6, 1997, by and among Cymer and
State Street Bank and Trust Company of California, N.A., as
trustee thereunder (incorporated herein by reference to
Exhibit 4.1 to Cymer's Form 8-K, dated August 1, 1997).
10.1 Form of Indemnification Agreement with Directors and Officers
(incorporated herein by reference to Exhibit 10.1 to Cymer's
Registration Statement on Form S-1 (as amended), Reg. No.
333-08383).
10.2 Standard Industrial Lease - Multi-Tenant, dated August 19,
1991, by and between Lepercq Corporate Income Fund L.P. and
Cymer (originally between Frankris Corporation and Cymer)
(incorporated herein by reference to Exhibit 10.15 to Cymer's
Registration Statement on Form S-1 (as amended), Reg. No.
333-08383).
10.3 Single-Tenant Industrial Lease, dated December 19, 1996, by
and between AEW/LBA Acquisition Co. II, LLC and Cymer
(incorporated herein by reference to Exhibit 10.20 to Cymer's
Annual Report on Form 10-K filed for the year ended December
31, 1996).
10.4 Patent License Agreement, dated October 13, 1989, by and
between Cymer and Patlex Corporation (incorporated herein by
reference to Exhibit 10.13 to Cymer's Registration Statement
on Form S-1 (as amended), Reg. No. 333-08383).
10.5 Contract Manufacturing Agreement -- Lithography Laser, dated
August 28, 1992, by and between Cymer and Seiko Instruments
Inc. (the "Seiko Agreement") (incorporated herein by
reference to Exhibit 10.16 to Cymer's Registration Statement
on Form S-1 (as amended), Reg. No. 333-08383).
Addendum No. 2 to the Seiko Agreement, dated February 21,
2000 (incorporated herein by reference to Exhibit 10.5 to
Cymer's Annual Report on Form 10-K for the year ended
December 31, 1999).
33
<PAGE>
10.6 Loan Agreement, dated as of December 8, 1997, by and among
Silicon Valley Bank and Bank of Hawaii, as co-lenders, and
Cymer and Cymer Japan, Inc., as borrowers (the "Loan
Agreement") (incorporated herein by reference to Exhibit
10.10 to Cymer's Annual Report on Form 10-K/A filed for the
year ended December 31, 1997).
Amendment to the Loan Agreement, dated as of February 4, 1999
(incorporated herein by reference to Exhibit 10.6 to Cymer's
Annual Report on Form 10-K for the year ended December 31,
1999).
Amendment to the Loan Agreement, dated as of September 22,
1999 (incorporated herein by reference to Exhibit 10.6 to
Cymer's Annual Report on Form 10-K for the year ended
December 31, 1999).
Amendment to the Loan Agreement, dated as of February 4, 2000
(incorporated herein by reference to Exhibit 10.6 to Cymer's
Annual Report on Form 10-K for the year ended December 31,
1999).
Amendment to Loan Agreement, dated as of February 3, 2001.
Corporate Guaranty, dated December 8, 1997, from Cymer to
Silicon Valley Bank and Bank of Hawaii, as co-lenders
(incorporated herein by reference to Exhibit 10.12 to Cymer's
Annual Report on Form 10-K/A filed for the year ended
December 31, 1997).
10.7 1996 Stock Option Plan, as amended and restated (incorporated
herein by reference to Exhibit 4.1 to Cymer's Registration
Statement on Form S-8, Reg. No. 333-48242).
10.8 1996 Employee Stock Purchase Plan (incorporated herein by
reference to Exhibit 10.4 to Cymer's Registration Statement
on Form S-1 (as amended), Reg. No. 333-08383).
10.9 1996 Director Option Plan (incorporated herein by reference
to Exhibit 10.5 to Cymer's Registration Statement on Form S-1
(as amended), Reg. No. 333-08383).
10.10 Employment Agreement, dated October 1, 2000, by and between
Robert P. Akins and Cymer.
10.11 Employment Agreement, dated November 26, 1997, by and between
William A. Angus, III and Cymer (incorporated herein by
reference to Exhibit 10.17 to Cymer's Annual Report on form
10-K/A filed for the year ended December 31, 1997).
10.12 Employment Agreement, dated October 1, 2000, by and between
Pascal Didier and Cymer.
10.13 Employment Agreement, dated October 21, 1998, by and between
Edward P. Holtaway and Cymer (incorporated herein by
reference to Exhibit 10.20 to Cymer's Annual Report on form
10-K filed for the year ended December 31, 1998).
10.14 Employment Agreement, dated March 1, 2000, by and between
Wallace Breitman and Cymer (incorporated herein by reference
to Exhibit 10.14 to Cymer's Annual Report on Form 10-K for
the year ended December 31, 1999).
34
<PAGE>
10.15 Description of Cymer Management Incentive Plan (incorporated
herein by reference to Exhibit 10.15 to Cymer's Annual Report
on Form 10-K for the year ended December 31, 1999).
10.16 Cymer Deferred Compensation Plan, as amended and restated
(incorporated herein by reference to Exhibit 10.1 to Cymer's
Quarterly Report on Form 10-Q for the quarter ended March 31,
2000).
10.17 Employment Agreement, dated May 8, 2000, by and between Brian
Klene and Cymer (incorporated herein by reference to Exhibit
10.1 to Cymer's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2000).
10.18 2000 Nonstatutory Stock Option Plan (incorporated herein by
reference to Exhibit 10.1 to Cymer's Quarterly Report on Form
10-Q for the quarter ended September 30, 2000).
10.19 Employment Agreement, dated June 1, 2000, by and between
David Myers and Cymer (incorporated herein by reference to
Exhibit 10.2 to Cymer's Quarterly Report on Form 10-Q for the
quarter ended September 30, 2000).
16.1 Letter from Deloitte & Touche LLP to the Securities and
Exchange Commission dated April 5, 2000 (incorporated herein
by reference to Exhibit 16 to Cymer's current report on Form
8-K, dated March 31, 2000).
21.1 Subsidiaries of Registrant.
23.1 Independent Auditors' Consent - KPMG LLP.
23.2 Independent Auditors' Consent - Deloitte & Touche LLP.
(d) FINANCIAL STATEMENT SCHEDULES. See item 14, paragraph (a) (2),
above.
35
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
CYMER, INC.
Dated: March 23, 2001 By: /s/ ROBERT P. AKINS
------------------------------------
Robert P. Akins, Chief Executive Officer,
and Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ ROBERT P. AKINS Chief Executive Officer,
- -------------------- and Chairman of the Board
Robert P. Akins (PRINCIPAL EXECUTIVE OFFICER) March 23, 2001
/s/ WILLIAM A. ANGUS, III Senior Vice President, Chief
- -------------------------- Financial Officer and Secretary
William A. Angus, III (PRINCIPAL FINANCIAL OFFICER) March 23, 2001
/s/ NANCY J. BAKER Vice President, Finance,
- ---------------------- Treasurer and Chief Accounting
Nancy J. Baker Officer
(PRINCIPAL ACCOUNTING OFFICER) March 23, 2001
/s/ RICHARD P. ABRAHAM Director March 23, 2001
- -----------------------
Richard P. Abraham
/s/ KENNETH M. DEEMER Director March 23, 2001
- ----------------------
Kenneth M. Deemer
/s/ MICHAEL R. GAULKE Director March 23, 2001
- ----------------------
Michael R. Gaulke
/s/ WILLIAM G. OLDHAM Director March 23, 2001
- ----------------------
William G. Oldham
/s/ PETER J. SIMONE Director March 23, 2001
- ---------------------
Peter J. Simone
/s/ JON D. TOMPKINS Director March 23, 2001
- ----------------------
Jon D. Tompkins
</TABLE>
36
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Cymer, Inc.:
We have audited the accompanying consolidated balance sheet of Cymer, Inc. and
subsidiaries (collectively, the "Company") as of December 31, 2000, and the
related consolidated statements of income, stockholders' equity, and cash flows
for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Cymer, Inc. and
subsidiaries as of December 31, 2000, and the results of their operations and
their cash flows for the year then ended, in conformity with accounting
principles generally accepted in the United States of America.
/s/ KPMG LLP
San Diego, California
January 30, 2001,
except as to Note 13
which is as of February 13, 2001
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Cymer, Inc.:
We have audited the accompanying consolidated balance sheet of Cymer, Inc. and
subsidiaries (collectively, the "Company") as of December 31, 1999 and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the two years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31,
1999, and the results of its operations and its cash flows for each of the two
years in the period ended December 31, 1999 in conformity with accounting
principles generally accepted in the United States of America.
/s/ DELOITTE & TOUCHE LLP
San Diego, California
January 28, 2000
F-2
<PAGE>
CYMER, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
ASSETS 1999 2000
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $75,765 $79,678
Short-term investments 97,564 117,017
Accounts receivable - net 68,961 85,569
Foreign exchange contracts receivable 21,706 34,276
Inventories 51,409 76,887
Deferred income taxes 16,360 23,503
Prepaid expenses and other assets 3,110 4,571
------------- -------------
Total current asset 334,875 421,501
PROPERTY AND EQUIPMENT - net 56,921 91,080
LONG-TERM INVESTMENTS 19,760 8,984
DEFERRED INCOME TAXES 8,562 6,060
OTHER ASSETS 6,413 5,549
------------- -------------
TOTAL ASSETS $426,531 $533,174
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $20,599 $23,471
Accrued and other liabilities 52,002 67,853
Foreign exchange contracts payable 24,276 31,612
Income taxes payable 6,482 11,274
Revolving loan 18,395 8,745
------------- -------------
Total current liabilities 121,754 142,955
CONVERTIBLE SUBORDINATED NOTES 172,500 172,335
OTHER LIABILITIES 3,271 3,175
MINORITY INTEREST 2,113 1,741
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock - authorized 5,000,000 shares;
$.001 par value, no shares issued or
outstanding - -
Common stock - authorized 50,000,000 shares;
$.001 par value, issued and outstanding
28,435,000 and 29,496,000 shares 28 29
at December 31, 1999 and 2000, respectively
Paid-in capital 125,623 145,996
Treasury stock, at cost (2,000,000 common shares) (24,871) (24,871)
Accumulated other comprehensive loss (3,620) (1,691)
Retained earnings 29,733 93,505
------------- -------------
Total stockholders' equity 126,893 212,968
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $426,531 $533,174
============= =============
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
CYMER, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1998 1999 2000
<S> <C> <C> <C>
REVENUES:
Product sales $184,828 $220,051 $366,280
Other 313 399 1,180
--------- --------- ---------
Total revenues 185,141 220,450 367,460
--------- --------- ---------
COSTS AND EXPENSES:
Cost of product sales 125,713 143,105 187,579
Research and development 30,152 34,518 45,433
Sales and marketing 14,528 16,742 20,098
General and administrative 9,487 13,101 22,618
--------- --------- ---------
Total costs and expenses 179,880 207,466 275,728
--------- --------- ---------
OPERATING INCOME 5,261 12,984 91,732
--------- --------- ---------
OTHER INCOME (EXPENSE):
Foreign currency exchange gain (loss) - net 692 643 (1,379)
Interest and other income 7,384 7,327 10,785
Interest and other expense (11,644) (11,718) (10,636)
--------- --------- ---------
Total other expense - net (3,568) (3,748) (1,230)
--------- --------- ---------
INCOME BEFORE INCOME TAX PROVISION (BENEFIT)
AND MINORITY INTEREST 1,693 9,236 90,502
INCOME TAX PROVISION (BENEFIT) (1,250) - 26,246
MINORITY INTEREST (420) (663) (484)
--------- --------- ---------
NET INCOME $2,523 $8,573 $63,772
--------- --------- ---------
EARNINGS PER SHARE:
Basic:
Earnings per share $0.09 $0.31 $2.19
--------- --------- ---------
Weighted average common shares outstanding 28,226 27,907 29,113
--------- --------- ---------
Diluted:
Earnings per share $0.09 $0.29 $2.07
--------- --------- ---------
Weighted average common and potential common
shares outstanding 29,566 29,640 30,758
--------- --------- ---------
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
CYMER, INC.
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(IN THOUSANDS) ACCUMULATED
COMMON STOCK OTHER TOTAL
-------------- PAID-IN TREASURY COMPREHENSIVE RETAINED STOCKHOLDERS' COMPREHENSIVE
SHARES AMOUNT CAPITAL STOCK LOSS EARNINGS EQUITY INCOME
------ ------ -------- -------- ------------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1998 28,724 $29 $109,367 ($2,254) $18,637 $125,779
Exercise of common stock options and
warrants 365 638 638
Issuance of employee stock purchase
plan shares 85 1,236 1,236
Stock repurchase of treasury stock (2,000) (2) (24,871) (24,873)
Income tax benefit from stock
options exercised 601 601
Net income 2,523 2,523 2,523
Other comprehensive income:
Translation adjustment, net of tax 441 441 441
Net unrealized gain on
available-for-sale
investments, net of tax 186 186 186
-------------
Total comprehensive income $3,150
------ ------ -------- -------- ------------- -------- ------------ =============
BALANCE, DECEMBER 31, 1998 27,174 $27 $111,842 ($24,871) ($1,627) $21,160 $106,531
Exercise of common stock options and
warrants 1,169 1 7,350 7,351
Issuance of employee stock purchase
plan shares 92 1,183 1,183
Income tax benefit from stock
options exercised 5,248 5,248
Net income 8,573 8,573 $8,573
Other comprehensive income:
Translation adjustment, net of tax (1,719) (1,719) (1,719)
Net unrealized gain on
available-for-sale investments,
net of tax (274) (274) (274)
-------------
Total comprehensive income $6,580
------ ------ -------- -------- ------------- -------- ------------ =============
BALANCE, DECEMBER 31, 1999 28,435 $28 $125,623 ($24,871) ($3,620) $29,733 $126,893
Exercise of common stock options and
warrants 992 1 11,046 11,047
Issuance of employee stock purchase
plan shares 65 1,634 1,634
Conversion of notes to equity 4 165 165
Income tax benefit from stock
options exercised 7,528 7,528
Net income 63,772 63,772 63,772
Other comprehensive income:
Translation adjustment, net of tax 1,784 1,784 1,784
Net unrealized loss on
available-for-sale investments,
net of tax 145 145 145
-------------
Total comprehensive income $65,701
------ ------ -------- -------- ------------- -------- ------------ =============
BALANCE, DECEMBER 31, 2000 29,496 $29 $145,996 ($24,871) ($1,691) $93,505 $212,968
====== ====== ======== ======== ============= ======== ============
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
CYMER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1998 1999 2000
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $2,523 $8,573 $63,772
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 16,001 18,463 19,197
Minority interest 420 663 484
Provision for deferred income taxes (1,683) (2,899) 493
Loss on disposal and impairment of
property and equipment 436 411 2,192
Change in assets and liabilities:
Accounts receivable - net 12,865 (14,446) (21,686)
Foreign exchange contracts receivable 12,022 2,601 (15,791)
Inventories (2,110) 636 (27,641)
Prepaid expenses and other assets (331) 616 (1,057)
Accounts payable (12,815) 11,890 3,059
Accrued and other liabilities 5,344 19,044 16,792
Foreign exchange contracts payable (5,664) (3,014) 10,532
Income taxes payable (3,789) 4,234 5,130
--------- --------- ---------
Net cash provided by operating
activities 23,219 46,772 55,476
--------- --------- ---------
INVESTING ACTIVITIES:
Acquisition of property and equipment (19,621) (22,195) (55,269)
Purchases of investments (74,604) (126,980) (173,044)
Proceeds from sold or matured investments 88,571 118,228 174,548
Acquisition of minority interest - - (1,104)
--------- --------- ---------
Net cash used for investing
activities (5,654) (30,947) (54,869)
--------- --------- ---------
FINANCING ACTIVITIES:
Net borrowings (payments) under revolving
loan and security agreements 10,083 4,938 (8,146)
Proceeds from issuance of common stock 1,874 8,534 12,681
Purchase of treasury stock (24,871)
Dividends paid to minority shareholder of
foreign subsidiary (183)
Payments on capital lease obligations (579) (586) (621)
--------- --------- ---------
Net cash provided by (used in)
financing activities (13,493) 12,886 3,731
----------- ---------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS (2,845) (6,076) (425)
----------- ---------- -----------
(continued)
</TABLE>
F-6
<PAGE>
CYMER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1998 1999 2000
<S> <C> <C> <C>
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,227 22,635 3,913
CASH AND CASH EQUIVALENTS AT BEGINNING
YEAR 51,903 53,130 75,765
----------- ---------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $53,130 $75,765 $79,678
=========== ========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid $6,617 $6,744 $6,942
=========== ========== ===========
Income taxes paid $4,205 $2,368 $17,987
=========== ========== ===========
SUPPLEMENTAL DISCLOSURE OF NON CASH
INVESTING AND FINANCING ACTIVITIES:
Capital lease obligations incurred
for property and equipment $102 - -
=========== ========== ===========
Conversion of subordinated notes to equity - - $165
=========== ========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
F-7
<PAGE>
CYMER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS - Cymer, Inc., and its wholly-owned and majority-owned
subsidiaries, (collectively, "Cymer" or the Company) is engaged primarily in
the development, manufacturing and marketing of excimer lasers for sale to
manufacturers of photolithography tools in the semiconductor equipment
industry. Cymer sells its product to customers primarily in Japan, the
Netherlands and the United States.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of Cymer, Inc., its wholly-owned subsidiaries, Cymer
Japan, Inc. "Cymer Japan", Cymer Singapore Pte Ltd. "Cymer Singapore",
Cymer B.V. in the Netherlands "Cymer B.V.", and Cymer Southeast Asia,
Inc., in Taiwan "Cymer SEA" and its majority-owned subsidiary, Cymer
Korea, Inc. "Cymer Korea". Cymer, Inc. owns 70% of Cymer Korea. During
the first quarter of 2000, Cymer, Inc. acquired the 25% minority interest
in Cymer SEA for $1,104,000. Cymer sells its excimer lasers in Japan
primarily through Cymer Japan. Cymer Korea, Cymer SEA, Cymer Singapore
and Cymer B.V. are field service offices for customers in those regions.
All significant intercompany balances have been eliminated in
consolidation.
ACCOUNTING ESTIMATES - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results may differ from those estimates.
CASH EQUIVALENTS - Cash equivalents consist of money market instruments,
commercial paper and other highly liquid investments purchased with an
original maturity of three months or less. As of December 31, 1999 and 2000,
cash equivalents amounted to $75.8 million and $79.7 million, respectively.
INVESTMENTS - Cymer maintains an investment portfolio consisting primarily
of government and corporate fixed income securities, certificates of deposit
and commercial paper. While it is Cymer's general intent to hold such
securities until maturity, management will occasionally sell certain
securities for cash flow purposes. Therefore, Cymer's investments are
classified as available-for-sale and are carried on the balance sheet at
fair value.
INVENTORIES - Inventories are carried at the lower of cost (first-in,
first-out) or market. Cost includes material, labor and manufacturing
overhead costs.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Depreciation is provided using the straight-line method over the estimated
useful lives of the assets (generally three to five years). The Cymer owned
building is depreciated over a useful life of twenty years. Leasehold
improvements are amortized, using the straight-line method, over the shorter
of the life of the improvement or the remaining lease term. Lasers built for
internal use are capitalized and depreciated using the straight-line method
over three years.
F-8
<PAGE>
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS FO BE DISPOSED OF -
Long-lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets
to be held and used is measured by a comparison of the carrying amount of
the assets to future net cash flows (undiscounted and without interest)
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying amount or
fair value less costs to sell. No such losses occurred in 1998 and 1999. The
total amount of impairment losses incurred in 2000 was approximately $2.0
million and was primarily related to the write-off of certain tenant
improvements in the Company's existing facilities as the Company moved to a
new facility in 2000, and the write-off of computer systems made obsolete by
the Company's new ERP system which was implemented in 2000. The loss of $2.0
million was reported in the general and administrative expenses in the
consolidated statements of income.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The following methods and assumptions
were used to estimate the fair value of each class of financial instruments
for which it is practicable to estimate that value:
Cash and Cash Equivalents, Accounts Receivable, Accounts Payable, and
Accrued and Other Liabilities - The carrying amount reported in the
consolidated balance sheets for cash and cash equivalents, accounts
receivable, accounts payable, and accrued and other liabilities
approximates fair value because of the short maturity of those
instruments.
Investments - Investments are carried at fair value which is based on
quoted market prices for such securities.
Foreign Exchange Contracts - The fair value of foreign exchange contracts
is determined using the quoted exchange rate (see "Foreign Exchange
Contracts" below in Note 1).
Convertible Subordinated Notes - Convertible Subordinated Notes are
recorded at face value of $172.3 million and $172.5 million at December
31, 1999 and 2000, respectively. The fair value of such debt, based on
quoted market prices at December 31, 1999 and 2000 was $205.1 million and
$168.9 million, respectively.
Revolving Loan - The carrying amount reported for the Company's revolving
loan approximates its fair value because the underlying instrument bears
interest at rates comparable to current rates offered to the Company for
instruments of similar terms and risk.
COMPREHENSIVE INCOME - Comprehensive income includes such items as foreign
currency translation adjustments and unrealized holding gains and losses on
available for sale securities that are currently being presented by Cymer as
a component of stockholders' equity.
REVENUE RECOGNITION - Revenue from product sales is generally recognized at
the time of shipment unless customer agreements contain inspection,
acceptance or other conditions, in which case revenue is recognized at the
time such conditions are satisfied. Product sales include sales of lasers,
replacement parts, and product service contracts. Other revenue primarily
represents revenue earned from funded development activities and license
fees. Such revenue is recognized on a basis consistent with the performance
requirement of the agreements. Payments received in advance of performance
are recorded as deferred revenue. Long-term contracts are accounted for on
the percentage-of-completion method based upon the relationship of costs
incurred to total estimated costs, after giving effect to estimates of costs
to complete.
F-9
<PAGE>
In the fourth quarter of 2000, the Company implemented Securities and
Exchange Commission's Staff Accounting Bulletin No. 101 "Revenue Recognition
in Financial Statements" ("SAB 101"). Effective as of January 1, 2000, SAB
101 summarizes certain of the SEC's staff's views in applying generally
accepted accounting principles to revenue recognition in financial
statements. Implementation of this bulletin did not have an impact on the
Company's results of operations.
Research and development revenues totaled $313,000, $399,000 and $1,180,000
for the years ended December 31, 1998, 1999 and 2000, respectively.
WARRANTY EXPENSE - Cymer generally warrants its products against defects for
the earlier of 17 to 25 months from the date of shipment or 12 months after
acceptance by the end-user. The 6000 Series laser products are warranted
for the earlier to occur between 24 and 26 months from the date of
shipment or 24 months after acceptance by the end user. Cymer accrues a
provision for warranty expense for all products sold which is included in
cost of product sales in the consolidated statements of income. The amount
of the provision is based on actual historical expenses incurred and
estimated probable future expenses related to current sales. Warranty costs
incurred are charged against the provision.
RESEARCH AND DEVELOPMENT COSTS - Research and development costs are expensed
in the period incurred.
INCOME TAXES - Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
STOCK-BASED COMPENSATION - Cymer has elected to account for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board ("APB") Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES, and related Interpretations. Accordingly, compensation cost for
stock options is measured as the excess, if any, of the quoted market price
of Cymer's stock at the date of the grant over the amount an employee must
pay to acquire the stock. Pro forma disclosures required under SFAS No. 123,
ACCOUNTING FOR STOCK-BASED COMPENSATION, which prescribes the recognition of
compensation expense based on the fair value of options on the grant date,
have been provided.
FOREIGN CURRENCY TRANSLATION - Gains and losses resulting from foreign
currency translation are accumulated as a separate component of consolidated
stockholders' equity as accumulated other comprehensive income (loss). Gains
and losses resulting from foreign currency transactions are included in the
consolidated statements of income.
FOREIGN EXCHANGE CONTRACTS - Cymer enters into foreign currency exchange
contracts in order to reduce the impact of currency fluctuations related to
purchases of Cymer's inventories by Cymer Japan for resale under firm
third-party sales commitments. Net gains or losses are recorded on the date
the inventories are received by Cymer Japan (the transaction date) and are
included in cost of product sales in the consolidated statements of income
as the related sale is consummated. Amounts due from/to the bank on
contracts not settled as of the transaction date are recorded as foreign
exchange contracts receivable/payable in the consolidated balance sheets.
Cymer recognized net gains from the above foreign currency exchange
contracts of $4,547,000 and $3,156,000 for the years ended December 31, 1998
and December 31, 2000, respectively, and a net loss of $2,991,000 for the
year ended December 31, 1999.
F-10
<PAGE>
Cymer had outstanding forward foreign exchange contracts at December 31,
2000 to buy $76.9 million for 8.2 billion yen under foreign currency
exchange facilities with banks in Japan and the United States (see Note 4).
The total unrecorded deferred gain and premium on these contracts as of
December 31, 2000 was approximately $2.3 million and $1.1 million,
respectively. Such contracts expire on various dates through December 2001.
CONCENTRATION OF CREDIT RISK - Cymer invests its excess cash in an effort to
preserve capital, provide liquidity, maintain diversification and generate
returns relative to Cymer's corporate investment policy and prevailing
market conditions. Cymer has not experienced any material losses on its cash
and investment accounts. Cymer has a small number of significant customers
and maintains a reserve for potential credit losses and such losses, to
date, have been minimal (see "Major Customers and Related Parties").
MAJOR CUSTOMERS AND RELATED PARTIES - Revenues from major customers are
detailed as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1998 1999 2000
CUSTOMER (IN THOUSANDS)
<S> <C> <C> <C>
A $57,900 $53,201 $103,551
B 36,916 38,200 67,992
C 67,729 72,828 111,288
D 10,833 11,794 9,456
</TABLE>
Receivables from these customers totaled $47,682,000 and $65,111,000 at
December 31, 1999 and 2000, respectively.
Revenues from Japanese customers, generated primarily by Cymer Japan,
accounted for 48%, 37% and 48% of revenues for the years ended December 31,
1998, 1999 and 2000, respectively. Revenues from a customer in the
Netherlands accounted for 37%, 33% and 30% of revenues for the years ended
December 31, 1998, 1999 and 2000, respectively.
Revenues from stockholders totaled $94,816,000, $91,401,000 for the years
ended December 31, 1998 and December 31, 1999, respectively. There were no
revenues from stockholders for the year ended December 31, 2000.
EARNINGS PER SHARE - Basic earnings per share ("EPS") excludes dilution and
is computed by dividing net income or loss attributable to common
stockholders by the weighted-average of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock (convertible preferred
stock, warrants to purchase common stock and common stock options using the
treasury stock method) were exercised or converted into common stock.
Potential common shares in the diluted EPS computation are excluded in net
loss periods as their effect would be anti-dilutive.
F-11
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1998 1999 2000
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net income $2,523 $8,573 $63,772
========== ========== ==========
Basic earnings per share $0.09 $0.31 $2.19
========== ========== ==========
Basic weighted average common shares
outstanding 28,226 27,907 29,113
Effect of dilutive securities:
Warrants 111 36 19
Options 1,229 1,697 1,626
---------- ---------- ----------
Diluted weighted average common and
potential common shares outstanding 29,566 29,640 30,758
========== ========== ==========
Diluted earnings per share $0.09 $0.29 $2.07
========== ========== ==========
</TABLE>
For the years ended December 31, 1998, 1999 and 2000, weighted average
options and warrants to purchase 2,364,000, 168,000 and 388,000 shares of
common stock, respectively, were outstanding but not included in the
computation of diluted earnings per share as their effect was anti-dilutive.
In addition, for the years ended December 31, 1998, 1999 and 2000, weighted
average common shares attributable to Convertible Subordinated Notes of
3,670,213, 3,670,213 and 3,666,704, and related interest expense of
$9,732,000, $9,732,000 and $9,721,000, respectively, were not included in
the calculation of diluted earnings per share as they were also
anti-dilutive.
RECLASSIFICATIONS - Certain amounts in the prior years' financial statements
have been reclassified to conform to current period presentation.
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
2. BALANCE SHEET DETAILS 1999 2000
(IN THOUSANDS)
<S> <C> <C>
ACCOUNTS RECEIVABLE:
Trade $67,399 $80,210
Notes and other 2,289 7,437
---------- ---------
69,688 87,647
Less allowance for doubtful accounts and
notes (727) (2,078)
---------- ---------
Total $68,961 $85,569
INVENTORIES:
Raw materials $16,199 $22,101
Work-in-progress 18,661 29,308
Finished goods 28,849 40,478
---------- ---------
63,709 91,887
Reserve for excess and obsolete (12,300) (15,000)
---------- ---------
Total $51,409 $76,887
=======================
</TABLE>
F-12
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1999 2000
(IN THOUSANDS)
<S> <C> <C>
PROPERTY - at cost:
Land 4,123 9,080
Building and capitalized interest - 27,528
Furniture and equipment $46,069 $63,688
Capitalized lasers 19,558 24,637
Leasehold improvements 24,121 23,418
Construction in process 7,657 3,373
---------- ---------
101,528 151,724
Less accumulated depreciation and
amortization (44,607) (60,644)
---------- ---------
Total $56,921 $91,080
ACCRUED AND OTHER LIABILITIES:
Warranty and installation reserves $24,600 $34,050
Payroll and payroll related 11,662 14,491
Interest 11,371 15,052
Other 4,369 4,260
---------- ---------
Total $52,002 $67,853
========== =========
</TABLE>
3. INVESTMENTS
Investments consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1999 2000
(IN THOUSANDS)
<S> <C> <C>
Short-term:
Municipal bonds $25,091 $14,605
Corporate bonds 23,204 32,429
Commercial paper 28,005 55,746
U.S. government agencies 19,464 14,237
Other 1,800 -
----------- -----------
Total $97,564 $117,017
=========== ===========
Long-term:
Corporate bonds $4,860 $8,984
Municipal bonds 14,900 -
----------- -----------
Total $19,760 $8,984
=========== ===========
</TABLE>
Investments are recorded at fair value. Short-term investments mature within
one year and long-term investments mature in one year to 18 months. See also
"Investments" in Note 1.
4. CREDIT FACILITIES
REVOLVING LOAN AGREEMENTS - During 1999 and 2000, respectively, Cymer
maintained a Loan Agreement (the "Agreement") which provided for an
unsecured optional currency revolving loan
F-13
<PAGE>
facility with two banks to provide for combined borrowings of up to a
maximum of $30 million in 1999 and $40 million in 2000. Under the Agreement,
interest accrues on outstanding borrowings at TIBOR plus 2.00% in 1999 and
in 2000. As of December 31, 1999 and 2000, there was $18.4 million and $8.7
million outstanding under this Agreement, at interest rates of 2.11% and
2.55%, respectively.
The Agreement requires Cymer to maintain compliance with certain financial
statement and other covenants, including tangible net worth, quick ratio and
profitability requirements. As of December 31, 2000, Cymer was in compliance
with all such covenants. Cymer did not renew this agreement, which expired
on March 16, 2001, on which date the balance owing was paid in full.
FOREIGN EXCHANGE FACILITIES - Cymer has foreign exchange facilities with a
bank in Japan and a bank in the United States. See also "Foreign Exchange
Contracts" in Note 1.
The foreign exchange facility provides up to $57.5 million in 1999 and up to
$100 million in 2000 to be utilized for spot and future foreign exchange
contracts for periods of up to one year. $56.0 million and $76.9 million was
being utilized under the foreign exchange facility as of December 31, 1999
and 2000, respectively. This facility is part of the Revolving Loan
Agreements discussed above and is subject to the same covenants. This
facility expired on March 16, 2001. Foreign exchange contracts outstanding
under this facility as of March 14, 2001 were $62,365,000 with expiration
dates through December, 2001.
5. CONVERTIBLE SUBORDINATED NOTES
In the third quarter of 1997, Cymer issued $172.5 million aggregate
principal amount of Step-Up Convertible Subordinated Notes (the "Notes") due
August 6, 2004 with interest payable semi-annually February 6 and August 6,
commencing February 6, 1998. Interest on the Notes is stated at 3 1/2% per
annum from August 6, 1997 through August 5, 2000 and at 7 1/4% per annum
from August 6, 2000 to maturity or earlier redemption, representing a yield
to maturity accrued at approximately 5.47%. The Notes are convertible at the
option of the holder into shares of Common Stock of Cymer at any time on or
after November 5, 1997 and prior to redemption or maturity, at a conversion
rate of 21.2766 shares per $1,000 principal amount of Notes, subject to
adjustment under certain conditions. Cymer could not redeem the Notes prior
to August 9, 2000. Thereafter, Cymer can redeem the Notes from time to time,
in whole or in part, at specified redemption prices. The Notes are unsecured
and subordinated to all existing and future senior indebtedness of Cymer.
The indenture governing the Notes does not restrict the incurrence of senior
indebtedness or other indebtedness by Cymer. As of December 31, 1999 and
2000, $172.5 million and $172.3 million, respectively, under the Notes was
outstanding. During the first quarter of 2000, $165,000 of the Notes were
converted into 3,510 shares of common stock.
6. STOCKHOLDERS' EQUITY
PREFERRED STOCK - Pursuant to Cymer's Articles of Incorporation, the Board
of Directors has the authority, without further action by the stockholders,
to issue up to 5,000,000 shares of Preferred Stock in one or more series and
to fix the designations, powers, preferences, privileges, and relative
participation, optional or special rights and the qualifications,
limitations or restrictions thereof, including dividend rights, conversion
rights, voting rights, terms of redemption and liquidation preferences, any
or all of which may be greater than the rights of the common stock.
F-14
<PAGE>
COMMON STOCK WARRANTS - At December 31, 2000, Cymer had warrants outstanding
to purchase 20,000 shares of its common stock at a weighted average purchase
price of $1.42 per share. The warrants expire in 2001.
STOCK OPTION AND PURCHASE PLANS - Cymer has four plans as follows:
<TABLE>
<CAPTION>
COMMON SHARES
DESIGNATED FOR
ISSUANCE
<S> <C>
(i) 1987 Stock Plan 3,000,000
(ii) 1996 Stock Option Plan 6,900,000
(iii) 1996 Employee Stock Purchase Plan 500,000
(iv) 2000 Nonstatutory Stock Option Plan 500,000
----------------
Total 10,900,000
================
</TABLE>
(i) 1987 STOCK OPTION PLAN (THE "1987 PLAN") - The 1987 Plan provides that
incentive and nonstatutory options to purchase shares of common stock may be
granted to employees and consultants at prices that are not less than 100%
(85% for nonstatutory options) of the fair market value of Cymer's common
stock on the date the options are granted. The 1987 Plan also provides for
various restrictions regarding option terms, prices, transferability and
other matters. Options issued under the 1987 Plan expire five to ten years
after the options are granted and generally become exercisable ratably over
a four-year period following the date of grant.
(ii) 1996 STOCK OPTION PLAN (THE "1996 STOCK PLAN") - The 1996 Stock Plan
provides for the grant of incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
and nonqualified stock options to employees, directors and consultants of
Cymer. Incentive stock options may be granted only to employees. The 1996
Stock Plan is administered by the Board of Directors or by a committee
appointed by the Board of Directors, which determines the terms of options
granted, including the exercise price and the number of shares subject to
the option. The exercise price of incentive stock options granted under the
1996 Stock Plan must be at least equal to the fair market value of Cymer's
common stock on the date of grant and the exercise price of nonqualified
stock options must be at least equal to 85% of the fair market value of
Cymer's common stock on the date of grant. Options issued under the 1996
Stock Plan expire five to ten years after the options are granted and
generally become exercisable ratably over a four-year period following the
date of grant. This plan was amended in 1998 by the shareholders to increase
the plan shares issuable from 3,000,000 to 4,250,000, again in 1999 to
increase the shares issuable to 5,500,000, and again in 2000 to increase the
shares issuable to 6,900,000.
(iii) 1996 EMPLOYEE STOCK PURCHASE PLAN (THE "ESPP") - The ESPP is intended
to qualify under Section 423 of the Code. Under the ESPP, an eligible
employee may purchase shares of common stock from Cymer through payroll
deductions of up to 10% of his or her base compensation (excluding bonuses,
overtime and sales commissions), at a price per share equal to 85% of the
lower of (i) the fair market value of Cymer's common stock as of the first
day of each offering period under the ESPP or (ii) the fair market value of
the common stock at the end of the offering period.
(iv) 2000 NONSTATUTORY STOCK OPTION PLAN ( THE "PLAN" ) - On August 16,
2000, Cymer adopted the 2000 Nonstatutory Stock Option Plan under which the
maximum aggregate number of shares which may be sold and issued is 500,000.
The shares may be authorized, but unissued, or reacquired common stock.
Options may only be granted to employees or consultants who are neither
directors nor officers. The Plan will be administered by the Board of
Directors or a committee appointed by the
F-15
<PAGE>
Board of Directors, which will determine the terms of the options, including
the exercise price and the number of options granted. The 2000 Nonstatutory
Stock Option Plan will be in effect for ten years from the adoption by the
Board of Directors unless terminated sooner under the terms of the Plan. The
exercise price of the options granted under the Plan will equal the quoted
market value of the common stock at the date of grant. Options issued under
the 2000 Nonstatutory Stock Option Plan generally become exercisable ratably
over a four year period following the date of grant.
In 1996, Cymer had adopted a 1996 DIRECTOR OPTION PLAN (THE "DIRECTOR
OPTION PLAN") whereby 200,000 shares were reserved for Board of Director
option grants. There were 80,000 options issued under the Director Option
Plan in 1997. The Director Option Plan was dissolved in October 1997 by the
Board of Directors.
Stock option transactions are summarized as follows (in thousands, except
per share data):
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF EXERCISE PRICE
SHARES PER SHARE
<S> <C> <C>
Outstanding, January 1, 1998 4,047 $ 14.39
Granted 1,731 $ 20.31
Exercised (359) $ 1.74
Terminated (1,351) $ 25.90
---------
Outstanding, December 31, 1998 4,068 $ 14.21
Granted 2,006 $ 27.95
Exercised (1,089) $ 6.74
Terminated (216) $ 18.95
---------
Outstanding, December 31, 1999 4,769 $ 21.47
Granted 2,244 $ 38.46
Exercised (974) $ 11.26
Terminated (302) $ 26.68
---------
Outstanding, December 31, 2000 5,737 $ 29.56
=========
Exercisable, December 31, 2000 2,119 $ 22.81
=========
</TABLE>
Cymer applies APB Opinion No. 25 and related Interpretations in accounting
for its employee stock option and stock purchase plans. Accordingly, no
compensation expense has been recognized for its stock-based compensation
plan, as the options are granted at the fair market value of Cymer's common
stock on the date of grant.
F-16
<PAGE>
The following table summarizes the impact had compensation cost been
determined based upon the fair value at the grant date for awards under the
plan consistent with the methodology prescribed under SFAS No. 123:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1998 1999 2000
------------- ------------ -------------
<S> <C> <C> <C>
Impact on net income ($15,228,000) ($18,246,000) ($27,251,000)
Impact on earnings per share:
Basic ($0.54) ($0.65) ($0.94)
Diluted ($0.52) ($0.62) ($0.89)
Estimated weighted average
fair market value of options
granted or shares purchased
using the Black-Scholes
pricing model:
Options $11.57 $21.71 $27.86
ESPP $9.00 $5.71 $15.40
Weighted average assumptions:
dividend yield None None None
volatility rate 85% 80% 87%
risk free interest rates 4.07% to 4.56% to 5.10% -
5.66% 6.27% 6.81%
assumed forfeiture rate 5 % 5% 5%
expected life - Options 5 years 7 years 7 years
ESPP .5 years .5 years .5 years
</TABLE>
The following table summarizes information as of December 31, 2000
concerning currently outstanding and exercisable options:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- -------------------------------------------------------- --------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE NUMBER AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE EXERCISABLE EXERCISE
PRICES OUTSTANDING LIFE PRICE PRICE
(YEARS)
<S> <C> <C> <C> <C> <C>
$2.00 - $20.19 1,009,957 6.22 $16.40 649,696 $15.32
$20.50 - $21.03 1,012,890 6.35 $20.88 593,207 $20.86
$21.56 - $32.38 1,036,552 7.49 $25.05 507,515 $23.35
$32.63 - $37.00 1,283,245 9.12 $36.66 117,770 $35.41
$37.06 - $44.75 977,204 9.11 $39.39 218,438 $38.78
$45.00 - $60.00 417,435 9.39 $48.76 32,793 $46.77
------------ ----------- ---------- ----------- ----------
5,737,283 7.84 $29.56 2,119,419 $22.81
</TABLE>
COMMON SHARES RESERVED - As of December 31, 2000, Cymer had reserved the
following number of shares of common stock for issuance (in thousands):
<TABLE>
<S> <C>
Issuance under stock option and purchase plans 923
Exercise of common stock purchase warrants 20
----------
Total 943
==========
</TABLE>
F-17
<PAGE>
TREASURY STOCK - On January 28, 1998, Cymer's Board of Directors authorized
Cymer to repurchase up to $50.0 million of Cymer's common stock from time to
time on the open market or in privately negotiated transactions. During
1998, Cymer repurchased 2,000,000 shares at a cost of $24.9 million. No
shares were repurchased during 1999 or 2000.
OPTION REPRICING - On January 28, 1998, Cymer's Board of Directors
authorized an incentive stock option repricing effective March 2, 1998 at a
new option price of $22.56 per share. The repricing took effect on 839,020
options with original prices ranging from $21.03 to $33.75 per share granted
from December 1996 through October 1997. The four year vesting period of the
repriced options also began on March 2, 1998 and the term of such options
was set at ten years. Cymer did not incur any compensation expense as a
result of this repricing for the year ended December 31, 1998.
STOCKHOLDER RIGHTS PLAN - On February 13, 1998, Cymer's Board of Directors
adopted a Stockholder Rights Plan. Under the terms of the Plan, rights were
distributed as a dividend at a rate of one preferred share purchase right on
each outstanding share of Cymer's common stock held by stockholders of
record as of the close of business on March 2, 1998. All additional shares
of common stock issued prior to February 13, 2008, the expiration date for
all rights, are to receive the dividend at the same rate. The exercise price
for each one-thousandth of a preferred share issuable pursuant to the
exercise of a right shall initially be $100.00, subject to adjustment under
the Plan. Such rights are exercisable only upon certain change of ownership
events as defined in the Plan. The rights are designed to assure that all
Cymer stockholders receive fair and equal treatment in the event of any
proposed takeover of Cymer and to guard against partial tender offers and
other abusive tactics to gain control of Cymer without paying all
stockholders the fair value of their shares, including a control premium.
7. INCOME TAXES
The components of the provision for income taxes are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1998 1999 2000
(IN THOUSANDS)
<S> <C> <C> <C>
Current income taxes:
Federal ($751) $4,961 $19,962
State 10 829 4,457
Foreign 1,213 2,404 7,808
----------- ----------- ----------
Total 472 8,194 32,227
----------- ----------- ----------
Deferred income taxes:
Federal (2,029) (5,979) (3,071)
State (552) (2,199) (2,910)
Foreign 859 (16) -
----------- ----------- ----------
Total (1,722) (8,194) (5,981)
----------- ----------- ----------
Income tax provision (benefit) ($1,250) $ - $26,246
=========== =========== ==========
</TABLE>
F-18
<PAGE>
The income tax provision (benefit) is different from that which would be
obtained by applying the statutory Federal income tax rate (35%) to income
before income tax expense (benefit). The items causing this difference for
the period are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1998 1999 2000
(IN THOUSANDS)
<S> <C> <C> <C>
Provision at statutory rate $592 $3,233 $31,739
Foreign provision in excess of
Federal statutory rate 2,504 932 (1,434)
State income taxes, net of Federal
benefit (152) (891) 1,006
Foreign sales corporation benefit,
net of Federal tax (3,270) (709) (4,469)
Federal tax credits (499) (2,389) (1,150)
Tax exempt interest, net of
disallowed expenses (563) (66) (52)
Miscellaneous/other items 138 (110) 606
-------- ------- --------
Provision (benefit) at effective tax
rate ($1,250) $ - $26,246
======== ======= ========
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of Cymer's net deferred tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1999 2000
(IN THOUSANDS)
<S> <C> <C>
Reserves and accruals not currently deductible $17,496 $23,780
Accrued Japanese enterprise tax 386 752
State taxes (1,526) (2,544)
Tax credit carryforwards 4,393 3,829
Difference between book and tax basis of
inventory and property and equipment 1,371 1,725
Tax effect of foreign currency translation
adjustments 2,205 901
Other 597 1,120
------------ ----------
Net deferred tax assets 24,922 29,563
Less: current portion (16,360) (23,503)
------------ ----------
Net non-current deferred tax assets $8,562 $6,060
============ ==========
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
LEASES - Cymer leases certain facilities under non-cancelable operating
leases. The lease terms are through January 1, 2010 and provide for certain
rent abatements and minimum annual increases and options to extend the terms.
Cymer also leases certain other facilities and equipment under capital and
short-term operating lease agreements. The capital leases expire on various
dates through 2003.
Under the terms of an operating lease for an office building entered into in
December 1996, Cymer had deposited approximately $2,224,000 in an escrow
account in lieu of a security deposit for the
F-19
<PAGE>
premises. During 1999, the requirement to hold the deposit in escrow
terminated and the funds were released to the general cash account.
Rent expense under operating leases is recognized on a straight-line basis
over the life of the related leases and totaled approximately $4,043,000
$4,752,000 and $4,788,000 for the years ended December 31, 1998, 1999 and
2000, respectively.
The net book value of assets under capital leases at December 31, 1999 and
2000 was approximately $1,108,000 and $606,000, net of accumulated
amortization of approximately $1,457,000 and $2,459,000, respectively.
Total future minimum lease commitments under operating and capital leases are
as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, OPERATING CAPITAL
<S> <C> <C>
2001 3,004 296
2002 2,892 29
2003 2,724 9
2004 2,797 -
2005 2,881 -
Thereafter 12,354 -
------------ ------------
Total $26,652 334
============
Less amount representing interest (11)
------------
Present value of minimum lease payments 323
Less current portion (289)
------------
Long term obligations under capital leases $34
============
</TABLE>
PATENT LICENSE AGREEMENT - Cymer has a patent license agreement for a
non-exclusive worldwide license to certain patented laser technology. Under
the terms of the agreement, Cymer is required to pay royalties ranging from
0.25% to 5.0% of gross sales and leases as defined depending on the total
amounts attained. Royalty fees totaled $100,000 in each of the years ended
December 31, 1998, 1999 and 2000.
EMPLOYEE SAVINGS PLAN - Cymer has a 401(k) plan that allows participating
employees to contribute a percentage of their salary, subject to annual
limits. The Plan is available to substantially all full-time United States
employees. Effective January 1, 1997 through December 31, 1999, Cymer
matched 100% of each eligible employee's contributions, up to $500 per year.
The Plan was amended effective January 1, 2000 to include a Cymer matching
contribution of up to 4% of each participating employee's contribution, not
to exceed $4,000 per year. Under the Plan, Cymer contributed $221,000,
$199,000, and $1,496,000 for the years ended December 31, 1998, 1999, and
2000, respectively.
RETIREMENT PLAN - During 1996, Cymer Japan adopted a retirement benefit plan
for all Cymer Japan employees and Japanese directors. The plan consists of a
multi-employer retirement plan covering all employees and life insurance
policies covering all employees and Japanese directors. The multi-employer
retirement plan was established under the Small and Medium-Size Enterprise
Retirement Benefits Cooperative Law. In December 1998, Cymer Japan adopted a
Retirement Allowance and Pension Plan accounted for using the book reserve
method. Expense under these plans totaled
F-20
<PAGE>
$379,000, $298,000, and $500,000 for the years ended December 31, 1998, 1999
and 2000, respectively.
CONTINGENCY - Cymer's Japanese manufacturing partner and at least one of
Cymer's Japanese customers have been notified that Cymer's laser systems in
Japan may infringe certain Japanese patents held by another Japanese
company. Cymer has agreed to indemnify its Japanese manufacturing partner
and its customers against patent infringement claims under certain
circumstances. Cymer believes, based upon the advice of counsel, that
Cymer's products do not infringe any valid claim of the asserted patents or
that it is entitled to prior user rights in Japan.
9. CLASS ACTION LAWSUITS
Cymer has been named as a defendant in several putative shareholder class
action lawsuits which were filed in September and October, 1998 in the U.S.
District Court for the Southern District of California. Certain executive
officers and directors of Cymer are also named as defendants. The plaintiffs
purport to represent a class of all persons who purchased Cymer's Common
Stock between April 24, 1997 and September 26, 1997 (the "Class Period").
The complaints allege claims under the federal securities laws. The
plaintiffs allege that Cymer and the other defendants made various material
misrepresentations and omissions during the Class Period. The complaints do
not specify the amount of damages sought. The complaints have been
consolidated into a single action and a class representative has been
appointed by the court. A consolidated amended complaint was filed in early
August, 1999. On November 5, 1999, Cymer and the other defendants filed a
motion to dismiss the consolidated amended claim for failure to state a
cause of action. On April 1, 2000, the court granted defendant's motion to
dismiss with leave to amend the complaint by the plaintiffs. The plaintiffs
filed their second amended complaint on June 5, 2000. Cymer moved to dismiss
the amended complaint on August 4, 2000. On January 22, 2001, the Court
heard oral argument on Cymer's motion to dismiss, but has not yet decided
the motion. Cymer believes it has meritorious defenses to the claims
asserted and intends to defend the action vigorously. Accordingly, no
provision for any liability or loss that may result from adjudication or
settlement thereof has been made in the accompanying consolidated financial
statements.
10. RELATED PARTY TRANSACTIONS
COLLABORATIVE ARRANGEMENT - Cymer has a collaborative arrangement with a
Japanese company that was also a stockholder of Cymer. The arrangement,
entered into in August 1992, includes a (i) stock purchase agreement, (ii)
research and development agreement, (iii) product license agreement, and
(iv) contract manufacturing agreement. The general provisions of these
agreements are as follows:
STOCK PURCHASE AGREEMENT - The stockholder purchased 470,590 shares of
Cymer's Series D Redeemable Convertible Preferred Stock at $4.25 per
share with net proceeds to Cymer of $1,909,000. Such stock was converted
to common stock in 1996 and was sold in 2000.
PRODUCT LICENSE AGREEMENT - Cymer granted to the stockholder the
exclusive right in Japan and the non-exclusive right outside Japan to
manufacture and sell one of Cymer's products and subsequent enhancements
thereto. Cymer also granted the stockholder the right of first refusal
to license and fund the development of new technologies not developed
with funding from other parties. In exchange for these rights, Cymer
received up-front license fees and is also entitled to royalties of 5%
on related product sales through September 1999, after which the royalty
rate is subject to renegotiation. The license agreement also provides
that product sales between Cymer and the stockholder will be at a 15%
discount from the respective companies' list price.
F-21
<PAGE>
The agreement terminates in August 2012. There was no activity under
this agreement in 1998, 1999 and 2000.
CONTRACT MANUFACTURING AGREEMENT - The stockholder has agreed to
manufacture for Cymer another of its products. Cymer will be required to
purchase a specified percentage of its total annual product, as defined,
from the stockholder. The agreement expires in August 2001, and will
automatically renew for two-year terms unless one year's notice is given
by either party. Cymer made $13.9 million, $10.9 million and $10.6
million in purchases under this agreement in 1998, 1999 and 2000,
respectively.
11. SEGMENT INFORMATION
Cymer designs, manufactures and sells excimer laser systems, replacement
parts, and support services for use in photolithography systems used in the
manufacture of semiconductors with critical features sizes. In accordance
with SFAS No. 131, Cymer currently considers its business to consist of one
reportable operating segment.
GEOGRAPHIC INFORMATION
Presented below is information regarding sales, income from operations, and
identifiable assets, classified by operations located in the United States,
Japan, Korea, Taiwan, Singapore and the Netherlands. Cymer sells its excimer
lasers in Japan through Cymer Japan. Intercompany sales to the subsidiaries
are primarily priced between 90% to 95% of the price of products sold to
outside customers. All significant intercompany balances are eliminated in
consolidation. The majority of consolidated costs and expenses are incurred
in the United States and are reflected in the operating loss from the United
States operations.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1998 1999 2000
<S> <C> <C> <C>
Sales from:
United States $93,144 $125,297 $173,979
Japan 88,571 81,445 156,064
Korea, Taiwan, Singapore,
and Netherlands 3,426 13,708 37,417
------------ ------------ -------------
Total $185,141 $220,450 $367,460
============ ============ =============
Operating income (loss) :
United States ($44,117) ($30,958) ($8,774)
Japan 47,359 36,068 81,606
Korea, Taiwan, Singapore,
and Netherlands 2,019 7,874 18,900
------------ ------------ -------------
Total $5,261 $12,984 $91,732
============ ============ =============
Identifiable assets:
United States $287,871 $333,902 $405,388
Japan 67,792 76,235 91,288
Korea, Taiwan, Singapore,
and Netherlands 8,655 16,394 36,498
------------ ------------ -------------
Total $364,318 $426,531 $533,174
============ ============ =============
</TABLE>
F-22
<PAGE>
12. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTERLY RESULTS OF OPERATIONS
(IN THOUSANDS , EXCEPT FOR PER SHARE DATA)
YEAR ENDED DECEMBER 31, 1999
-----------------------------------------
1ST 2ND 3RD 4TH
<S> <C> <C> <C> <C>
Revenues $40,092 $43,409 $58,934 $78,015
Gross profit $11,707 $14,983 $22,031 $28,224
Operating income (loss) ($1,802) $514 $4,714 $9,557
Net income (loss) ($2,298) ($1,489) $3,450 $8,910
Basic earnings (loss) per share ($0.08) ($0.05) $0.12 $0.31
Diluted earnings (loss) per share ($0.08) ($0.05) $0.12 $0.29
<CAPTION>
YEAR ENDED DECEMBER 31, 2000
-----------------------------------------
1ST 2ND 3RD 4TH
<S> <C> <C> <C> <C>
Revenues $80,617 $86,251 $98,427 $102,166
Gross profit $34,381 $42,157 $47,871 $54,293
Operating income $15,330 $22,506 $24,584 $29,312
Net income $10,174 $15,275 $18,089 $20,233
Basic earnings per share $0.35 $0.53 $0.62 $0.69
Diluted earnings per share $0.33 $0.50 $0.58 $0.68
</TABLE>
13. SUBSEQUENT EVENTS
On February 13, 2001 - Cymer acquired the Cambridge, Massachusetts based
company Active Control eXperts ("ACX") for an all-stock transaction totaling
1,025,000 common shares of Cymer stock. ACX is a leading developer,
manufacturer and marketer of hardware, software and firmware solutions for
vibrations and nano-motion control and currently has 38 employees. ACX
provides active control solutions to original equipment manufacturers of
precision manufacturing equipment where speed, accuracy and precision
provide competitive advantage. ACX technology can be physically embedded,
creating adaptive "smart structures" to intrinsically improve the stability
and precision of nano-motion control in next-generation semiconductor
capital equipment. Cymer's marketing strength, industry applications
capability and worldwide service and support infrastructure will help to
both fully develop the market potential of ACX's technology, and accelerate
its penetration into the semiconductor marketplace.
F-23
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.3
<SEQUENCE>2
<FILENAME>a2042704zex-3_3.txt
<DESCRIPTION>EXHIBIT 3.3
<TEXT>
<PAGE>
Exhibit 3.3
BYLAWS
OF
CYMER, INC.
AS
AMENDED AND RESTATED
THROUGH JANUARY 3, 2001
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 1 CORPORATE OFFICES...........................................................................1
1.1 Principal Office................................................................................1
1.2 Other Offices...................................................................................1
ARTICLE 2 STOCKHOLDERS' MEETINGS......................................................................1
ARTICLE 3 ANNUAL MEETINGS.............................................................................1
ARTICLE 4 SPECIAL MEETINGS............................................................................2
ARTICLE 5 NOTICE......................................................................................2
5.1 Notice Of Stockholders' Meetings................................................................2
5.2 Advance Notice Of Stockholder Nominees..........................................................2
5.3 Advance Notice Of Stockholder Business..........................................................3
ARTICLE 6 WAIVER; CONSENT; RATIFICATION...............................................................4
6.1 Waiver Of Notice................................................................................4
6.2 No Consent Of Stockholders In Lieu Of Meeting...................................................4
6.3 Ratification And Approval Of Actions At Special Meetings........................................4
ARTICLE 7 QUORUM OF STOCKHOLDERS......................................................................4
ARTICLE 8 PROXY AND VOTING............................................................................5
ARTICLE 9 BOARD OF DIRECTORS..........................................................................5
ARTICLE 10 POWERS OF DIRECTORS.........................................................................6
ARTICLE 11 MEETINGS AND CONSENTS.......................................................................6
11.1 Meetings........................................................................................6
11.2 Telephonic/Electronic Meetings..................................................................6
11.3 Consent To Action...............................................................................6
ARTICLE 12 QUORUM OF DIRECTORS.........................................................................7
ARTICLE 13 LIMITATIONS OF POWER........................................................................7
ARTICLE 14 COMMITTEES..................................................................................7
14.1 Committees Of Directors.........................................................................7
14.2 Committee Minutes...............................................................................8
14.3 Meetings And Action Of Committees...............................................................8
ARTICLE 15 OFFICERS....................................................................................8
ARTICLE 16 ELIGIBILITY OF OFFICERS.....................................................................8
</TABLE>
i
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 17 ADDITIONAL OFFICERS AND AGENTS..............................................................9
ARTICLE 18 CHIEF EXECUTIVE OFFICER; PRESIDENT AND CHIEF OPERATING OFFICER..............................9
ARTICLE 19 CHIEF FINANCIAL OFFICER.....................................................................9
ARTICLE 20 SECRETARY...................................................................................9
ARTICLE 21 TREASURER..................................................................................10
ARTICLE 22 RESIGNATIONS AND REMOVALS..................................................................10
ARTICLE 23 VACANCIES..................................................................................10
ARTICLE 24 CERTIFICATES OF STOCK......................................................................11
ARTICLE 25 TRANSFER OF STOCK..........................................................................11
ARTICLE 26 INDEMNITY..................................................................................11
26.1 Indemnification Of Officers And Directors In Advance...........................................11
26.2 Indemnification Of Employees And Agents........................................................12
26.3 Indemnity Not Exclusive........................................................................12
26.4 Indemnification For Successful Defense.........................................................12
26.5 Continuing Right To Indemnification............................................................13
26.6 Insurance And Other Financial Arrangements.....................................................13
ARTICLE 27 TRANSFER BOOKS AND RECORD DATES............................................................13
27.1 Record Date For Notice And Voting..............................................................13
27.2 Record Date For Purposes Other Than Notice And Voting..........................................14
ARTICLE 28 LOSS OF CERTIFICATES.......................................................................14
ARTICLE 29 CORPORATE AUTHORITY........................................................................14
29.1 Checks; Drafts; Evidences Of Indebtedness......................................................14
29.2 Corporate Contracts And Instruments; How Executed..............................................14
ARTICLE 30 AMENDMENTS.................................................................................15
</TABLE>
ii.
<PAGE>
BYLAWS
OF
CYMER, INC.,
A NEVADA CORPORATION
ARTICLE 1
CORPORATE OFFICES
1.1 PRINCIPAL OFFICE
The principal office of the corporation shall be located at 16275
Technology Drive, San Diego, California 92127, unless and until otherwise
decided by the Board of Directors, who may fix the location of the principal
office of the corporation at any place within or outside the State of Nevada. If
the principal office is located outside the State of Nevada and the corporation
has one or more business offices in the State of Nevada, then the board of
directors shall fix and designate a principal business office in the State of
Nevada.
1.2 OTHER OFFICES
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE 2
STOCKHOLDERS' MEETINGS
All meetings of stockholders shall be held either at the principal
office of the corporation or at any other place within or without the State of
Nevada or the United States as the Board of Directors or any person authorized
to call such meeting or meetings may designate.
ARTICLE 3
ANNUAL MEETINGS
The annual meeting of the stockholders of the corporation shall be held
on the first Friday of May in each year at 2:00 p.m., or at such other date and
time designated by the Board of Directors. In the event that such annual meeting
is omitted by oversight or otherwise on the date herein provided for, the
directors shall cause a meeting in lieu thereof to be held as soon thereafter as
conveniently may be, and any business transacted or elections held at such
meeting shall be as valid as if transacted or held at the annual meeting. Such
subsequent meeting shall be called in the same manner as provided for the annual
stockholders' meeting.
1.
<PAGE>
ARTICLE 4
SPECIAL MEETINGS
Except as otherwise provided by law, special meetings of the
stockholders of this corporation shall be held whenever called by the president
or by a majority of the Board of Directors or whenever one or more stockholders
who are entitled to vote and who hold at least ten percent (10%) of the capital
stock issued and outstanding shall make written application therefor to the
secretary stating the time, place, and purpose of the meeting called for.
ARTICLE 5
NOTICE
5.1 NOTICE OF STOCKHOLDERS' MEETINGS
Notice of all stockholders' meetings stating the time and the place,
and the objects for which such meetings are called, shall be given by the
president or secretary or by any one or more stockholders entitled to call a
special meeting of the stockholders or any such other person or persons as the
Board may designate, by mail not less than ten (10), nor more than sixty (60)
days prior to the date of the meeting, to each stockholder of record at his or
her address as it appears on the stock books of the corporation, unless he or
she shall have filed with the secretary of the corporation a written request
that notice intended for him or her be mailed to some other address, in which
case it shall be mailed to the address designated in such request. The person
giving such notice shall make an affidavit in relation thereto.
Any meeting of which all stockholders shall at any time waive or have
waived notice in writing shall be a legal meeting for the transaction of
business, notwithstanding that notice has not been given as hereinbefore
provided.
5.2 ADVANCE NOTICE OF STOCKHOLDER NOMINEES
Nominations of persons for election to the Board of Directors of the
corporation may be made at a meeting of stockholders by or at the discretion of
the Board of Directors or by any stockholder 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
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not less than forty-five (45)
days prior to the date on which the corporation first mailed proxy materials for
the prior years annual meeting; provided, however, that if the corporation's
annual meeting of stockholders occurs on a date more than thirty (30) days
earlier or later than the corporation's prior year's annual meeting, then the
corporation's board of directors shall determine a date a reasonable period
prior to the corporation's annual meeting of stockholders by which date the
stockholder's notice must be delivered and shall publicize such date in a filing
pursuant to the Securities Exchange Act of 1934, as amended, or via press
release. Such publication shall occur at least ten (10) days prior to the
deadline date for stockholder nominations set by the Board of
2.
<PAGE>
Directors. Such stockholder's notice shall set forth (a) as to each person, if
any, whom the stockholder 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 which are beneficially owned by
such person, (iv) any other information relating to such person that is 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 stockholder giving the notice: (i)
the name and address, as they appear on the corporation's books, of such
stockholder, and (ii) the class and number of shares of the corporation which
are beneficially owned by such stockholder, and (iii) a description of all
arrangements or understandings between such stockholder and each nominee and any
other person or persons (naming such person or persons) relating to the
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 stockholder's
notice of nomination which 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 chairman of the 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.
5.3 ADVANCE NOTICE OF STOCKHOLDER BUSINESS
At the annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be: (a) as specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors, (b) otherwise properly brought before the meeting by or
at the direction of the Board of Directors, or (c) otherwise properly brought
before the meeting by a stockholder. Business to be brought before an annual
meeting by a stockholder shall not be considered properly brought if the
stockholder has not given timely notice thereof in writing to the secretary of
the corporation. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the corporation not
less than forty-five (45) days prior to the date on which the corporation first
mailed proxy materials for the prior year's annual meeting; provided, however,
that if the corporation's annual meeting of stockholders occurs on a date more
than thirty (30) days earlier or later than the corporation's prior year's
annual meeting, then the corporation's board of directors shall determine a date
a reasonable period prior to the corporation's annual meeting of stockholders by
which date the stockholder's notice must be delivered and shall publicize such
date in a filing pursuant to the Securities Exchange Act of 1934, as amended, or
via press release. Such publication shall occur at least ten (10) days prior to
the deadline date for stockholder nominations set by the Board of Directors. A
stockholder's notice to the secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting: (i) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (ii) the name and address of
the stockholder proposing such business, (iii) the class and number of shares of
the corporation, which are beneficially owned by the stockholder, (iv) any
material interest of the stockholder in such business, and (v) any other
information that is required by law to be provided by the stockholder in his or
her capacity as a proponent of a
3.
<PAGE>
stockholder proposal. Notwithstanding anything in these Bylaws to the contrary,
no business shall be conducted at any annual meeting except in accordance with
the procedures set forth in this Section. The chairman of the annual meeting
shall, if the facts warrant, determine and declare at the meeting that business
was not properly brought before the meeting and 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.
ARTICLE 6
WAIVER; CONSENT; RATIFICATION
6.1 WAIVER OF NOTICE
Whenever any notice whatsoever is required to be given by these Bylaws,
or the Articles of Incorporation of this corporation, or any of the corporation
laws of the State of Nevada, a waiver thereof in writing, signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
6.2 NO CONSENT OF STOCKHOLDERS IN LIEU OF MEETING
No action which may be taken by the vote of stockholders at a meeting
may be taken without a meeting by the written consent of stockholders.
6.3 RATIFICATION AND APPROVAL OF ACTIONS AT SPECIAL MEETINGS
Whenever all persons entitled to vote at any meeting, whether of
directors or stockholders, consent, either by a writing on the record of the
meeting or filed with the secretary, or presence at such meeting and oral
consent entered on the minutes, or taking part in the deliberations at such
meeting without objection, the doings of such meeting shall be valid as if such
meeting was regularly called and noticed. At such meeting any business may be
transacted which is not excepted from the written consent or to the
consideration of which no objection for want of notice is made at the time.
If any meeting be irregular for want of notice or of consent, provided
a quorum was present at such meeting, the proceedings of the meeting may be
ratified and approved and rendered likewise valid and the irregularity or defect
therein waived by a writing signed by all parties having the right to vote at
such meeting. Such consent or approval of stockholders or creditors may be by
proxy or attorney, but all such proxies and powers of attorney must be in
writing.
ARTICLE 7
QUORUM OF STOCKHOLDERS
Except as hereinafter provided or otherwise provided by the Articles of
Incorporation or by law, at any meeting of the stockholders, the holders of a
majority of the stock issued, outstanding and entitled to vote thereat,
represented by stockholders in person or by proxy, shall
4.
<PAGE>
constitute a quorum. When a quorum is present at any meeting, a majority vote of
the shares present shall decide any question brought before such meeting, unless
the question is one upon which by express provision of law or of the Articles of
Incorporation or of these bylaws a larger or different vote is required, in
which case such express provision shall govern and control the decision of such
question.
ARTICLE 8
PROXY AND VOTING
Stockholders of record may vote at any meeting either in person or by
proxy or proxies appointed by a signed and executed instrument in writing, or by
telegram, cablegram, or other means of electronic transmission or copy thereof,
provided that the validity of such transmission can be determined by reference
to information set forth thereon. Such instrument or transmission shall be filed
with the secretary of the meeting before being voted. In the event that any such
instrument or transmission shall designate two or more persons to act as
proxies, a majority of such persons present at the meeting, or, if only one
shall be present, then that one, shall have and may exercise all of the powers
conferred by such instrument or transmission upon all of the persons so
designated unless such instrument or transmission shall otherwise provide.
No proxy shall be valid after the expiration of six (6) months from the
date of its execution unless coupled with an interest, or unless the person
executing it specifies therein the length of time for which it is to continue in
force, which in no case shall exceed seven (7) years from the date of its
execution. Subject to the above, any proxy duly executed is not revoked and
continues in full force and effect until an instrument revoking it or a duly
executed proxy bearing a later date is filed with the secretary of the
corporation.
ARTICLE 9
BOARD OF DIRECTORS
The Board of Directors shall be chosen by ballot at the annual meeting
of the stockholders or at any meeting held in place thereof as provided by law.
The authorized number of directors of this corporation shall be seven (7).
Subject to any limitation set forth in the provisions of the Articles of
Incorporation, the Board of Directors may, by resolution adopted, increase or
decrease the number of the directors of this corporation, provided that no such
reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
Each director shall serve until the next annual meeting of the
stockholders and until his or her successor is duly elected and qualified.
Directors need not be stockholders in the corporation. Directors shall be over
the age of eighteen (18).
5.
<PAGE>
ARTICLE 10
POWERS OF DIRECTORS
In the management and control of the property, business, and affairs of
the corporation, the Board of Directors is hereby vested with all the powers
possessed by the corporation itself, so far as this delegation of authority is
not inconsistent with the Nevada General Corporation Law, with the Articles of
Incorporation of the corporation, or with these Bylaws. The Board of Directors
may fix the compensation of directors for services in any capacity.
ARTICLE 11
MEETINGS AND CONSENTS
11.1 MEETINGS
Regular meetings of the Board of Directors shall be held at such places
and at such times as the Board by vote may determine, and if so determined no
notice thereof need be given. Special meetings of the Board of Directors may be
held at any time or place, whenever called by the president, a vice-president,
the treasurer, the secretary, an assistant secretary or two directors, notice
thereof being given to each director by the secretary or an assistant secretary
or an officer calling the meeting, or at any time without formal notice provided
all the directors are present or those not present shall waive or have waived
notice thereof. Notice of special meetings, stating the time and place thereof,
shall be given by mailing the same to each director at his or her residence or
business address at least four (4) days before the meeting, or by delivering the
same to him or her personally or telegraphing the same to him or her at his or
her residence or business address not later than forty-eight (48) hours before
the time at which the meeting is to be held, unless, in case of emergency, the
chairman of the Board of Directors or the president shall prescribe a shorter
notice to be given personally or by telegraphing each director at his or her
residence or business address.
11.2 TELEPHONIC/ELECTRONIC MEETINGS
Members of the Board of Directors or the governing body of the
corporation, or of any committee designated by such Board or body, may
participate in a meeting of such Board, body, or committee by means of a
conference telephone network, or a similar communications method by which all
persons participating in the meeting can hear each other. Participation in a
meeting pursuant to this subsection constitutes presence in person at such
meeting.
11.3 CONSENT TO ACTION
Any action required or permitted to be taken at any meeting of the
Board, body or committee may be taken without a meeting if, before or after such
action, a written consent thereto is signed by all members of the Board, body,
or committee. Such written consent shall be filed with the minutes of the
proceedings of the Board, body, or committee.
6.
<PAGE>
ARTICLE 12
QUORUM OF DIRECTORS
Unless the Articles of Incorporation or these Bylaws provide for a
different proportion, a majority of members of the Board of Directors of the
corporation, at a meeting duly assembled, shall constitute a quorum for the
transaction of business. When a quorum is present at any meeting, the act of
directors holding a majority of the voting power of the directors present shall
be the act of the Board of Directors.
ARTICLE 13
LIMITATIONS OF POWER
The enumeration of the powers and duties of the directors in these
Bylaws shall not be construed to exclude all or any powers and duties, except
insofar as the same are expressly prohibited or restricted by the provisions of
these Bylaws or the Articles of Incorporation. The directors may exercise all
other powers and perform all such duties as may be granted by the Nevada General
Corporation Law and as do not conflict with the provisions of these Bylaws or
the Articles of Incorporation.
ARTICLE 14
COMMITTEES
14.1 COMMITTEES OF DIRECTORS
The Board of Directors may, by resolution passed by a majority of the
whole Board, designate one or more committees, and each committee shall have as
a member at least one (1) director and such other natural persons as the Board
of Directors may select. The Board may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he, she or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors or
in these Bylaws of the corporation, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers that may require it; but no such committee shall have the
power or authority to (i) amend the Articles of Incorporation (except that a
committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the Board of Directors
as provided in Section 78.195 of the Nevada General Corporation Law, fix the
designations and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the corporation or fix the number of shares of any
7.
<PAGE>
series of stock or authorize the increase or decrease of the shares of any
series), (ii) adopt an agreement or plan of merger, consolidation or share
exchange under the Nevada General Corporation Law, (iii) recommend to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, (iv) recommend to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or (v) amend
the Bylaws of the corporation; and, unless the Board resolution establishing the
committee, the Bylaws or the Articles of Incorporation expressly so provide, no
such committee shall have the power or authority to declare a dividend, or to
authorize the issuance of stock.
14.2 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report
the same to the Board of Directors when required.
14.3 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of these Bylaws applicable to the full
Board of Directors, with such changes in the context of those Bylaws as are
necessary to substitute the committee and its members for the Board of Directors
and its members; provided, however, that (i) the time of regular meetings of
committees may be determined either by resolution of the Board of Directors or
by resolution of the committee, and (ii) special meetings of committees may also
be called by resolution of the Board of Directors and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The Board of Directors
may adopt rules not inconsistent with the provisions of these Bylaws for the
government of any committee.
ARTICLE 15
OFFICERS
The officers of this corporation shall include, without limitation, a
president, a secretary, and a treasurer. The Board of Directors, in its
discretion, may elect a chairman of the Board of Directors, who, when present,
shall preside at all meetings of the Board of Directors, and who shall have such
other powers as the Board shall prescribe.
The officers of the corporation shall be elected by the Board of
Directors after its election by the stockholders, and a meeting may be held
without notice for this purpose immediately after the annual meeting of the
stockholders and at the same place. Any person may hold two or more offices at
once.
ARTICLE 16
ELIGIBILITY OF OFFICERS
The chairman of the Board of Directors need not be a stockholder. The
president, secretary, treasurer, and such other officers as may be elected or
appointed need not be
8.
<PAGE>
stockholders or directors of the corporation. Any person may hold more than one
office, provided the duties thereof can be consistently performed by the same
person.
ARTICLE 17
ADDITIONAL OFFICERS AND AGENTS
The Board of Directors, at its discretion, may appoint one or more vice
presidents, assistant secretaries, assistant treasurers, and such other officers
or agents as it may deem advisable, and prescribe the duties thereof.
ARTICLE 18
CHIEF EXECUTIVE OFFICER; PRESIDENT AND CHIEF OPERATING OFFICER
The chief executive officer shall be the senior executive of the
corporation and, when present, shall preside at all meetings of the stockholders
and, unless a chairman of the Board of Directors has been elected and is
present, shall preside at meetings of the Board of Directors. The president and
chief operating officer, if there be one, shall report to the chief executive
officer and shall have such duties as may be assigned by the chief executive
officer or by the Board of Directors. The chief executive officer or the
president and chief operating officer and any other persons authorized by the
Board of Directors, shall sign all certificates of stock, bonds, deeds,
mortgages, extension agreements, modification of mortgage agreements, leases and
contracts of the corporation. The chief executive officer and the president and
chief operating officer shall perform all of the duties commonly incident to his
or her office and shall perform such other duties as the Board of Directors
shall designate.
ARTICLE 19
CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. He or she shall perform all of the duties
commonly incident to his or her office and such other duties as the Board of
Directors shall designate. The books of account shall at all reasonable times be
open to inspection by any director.
ARTICLE 20
SECRETARY
The secretary shall keep accurate minutes of all meetings of the
stockholders and the Board of Directors, and shall perform all the duties
commonly incident to his or her office, and shall perform such other duties and
have such other powers as the Board of Directors shall designate. The secretary
shall have power, together with the president, to sign certificates of stock of
the corporation. In his or her absence at the meeting an assistant secretary or
a secretary pro tempore shall perform his or her duties.
9.
<PAGE>
ARTICLE 21
TREASURER
The treasurer, subject to the order of the Board of Directors, shall
have the care and custody of the money, funds, valuable papers, and documents of
the corporation (other than his or her own bond, if any, which shall be in the
custody of the president), and shall have and exercise, under the supervision of
the Board of Directors, all the powers and duties commonly incident to his or
her office, and shall give bond in such form and with such sureties as shall be
required by the Board of Directors. He or she shall deposit all funds of the
corporation in such bank or banks, trust company or trust companies, or with
such firm or firms, doing a banking business, as the directors shall designate.
He or she may endorse for deposit or collection all checks and notes payable to
the corporation or to its order, may accept drafts on behalf of the corporation,
and together with the president may sign certificates of stock. He or she shall
keep accurate books of account of the corporation's transactions which shall be
the property of the corporation, and, together with all property in his or her
possession, shall be subject at all times to the inspection and control of the
Board of Directors.
All checks, drafts, notes, or other obligations for the payment of
money shall be signed by such officer or officers or agent or agents as the
Board of Directors shall by general or special resolution direct. The Board of
Directors may also in its discretion require, by general or special resolutions,
that checks, drafts, notes, and other obligations for the payment of money shall
be countersigned or registered as a condition to their validity by such officer
or officers or agent or agents as shall be directed in such resolution.
ARTICLE 22
RESIGNATIONS AND REMOVALS
Any director or officer of the corporation may resign at any time by
giving written notice to the corporation, to the Board of Directors, or to the
chairman of the Board, or to the president, or to the secretary of the
corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified therein, upon its acceptance by the
Board of Directors.
Any director may be removed from office by the vote of stockholders
representing not less than two-thirds (2/3) of the issued and outstanding
capital stock entitled to voting power.
ARTICLE 23
VACANCIES
Vacancies in the Board of Directors, including those caused by an
increase in the number of directors, may be filled by a majority of the
remaining directors, though less than a quorum. Vacancies in the Board of
Directors may be filled for the unexpired term by the stockholders at a meeting
called for that purpose, unless such vacancy shall have been filled by the
directors. Vacancies resulting from an increase in the number of directors may
be filled in the same manner.
10.
<PAGE>
ARTICLE 24
CERTIFICATES OF STOCK
Every stockholder shall be entitled to a certificate or certificates of
the capital stock of the corporation in such form as may be prescribed by the
Board of Directors, duly numbered and sealed with the corporate seal of the
corporation and setting forth the number and kind of shares. Such certificates
shall be signed by the president and by the treasurer or an assistant treasurer
or the secretary or an assistant secretary.
ARTICLE 25
TRANSFER OF STOCK
Unless further limited by the Articles of Incorporation, shares of
stock may be transferred by delivery of the certificate accompanied either by an
assignment in writing on the back of the certificate or by a written power of
attorney to sell, assign, and transfer the same on the books of the corporation,
signed by the person appearing by the certificate to be the owner of the shares
represented thereby, together with all necessary federal and state transfer tax
stamps affixed and shall be transferable on the books of the corporation upon
surrender thereof so assigned or endorsed. The person registered on the books of
the corporation as the owner of any shares of stock shall be entitled to all the
rights of ownership with respect to such shares. It shall be the duty of every
stockholder to notify the corporation of his or her post office address.
ARTICLE 26
INDEMNITY
26.1 INDEMNIFICATION OF OFFICERS AND DIRECTORS IN ADVANCE
The corporation shall, to the maximum extent and in the manner
permitted by Section 78.751 of the Nevada General Corporation Law, indemnify
each of its directors and officers against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, except an
action by or in the right of the corporation. For purposes of this Article, an
"officer" or "director" of the corporation includes any person (i) who is or was
a director or officer of the corporation, (ii) is or was serving at the request
of the corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise, or (iii) was a director or officer of
a corporation which was a predecessor corporation of the corporation or of
another enterprise at the request of such predecessor corporation.
The corporation shall, to the maximum extent permitted by Section
78.751 of the Nevada General Corporation Law, indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director or
officer of the corporation, or is or was serving at the request of the
corporation as a director or
11.
<PAGE>
officer of another corporation, partnership, joint venture, trust or other
enterprise, or was a director or officer of a corporation which was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation against expenses, including amounts paid
in settlement and attorneys' fees.
The corporation shall pay the expenses of officers and directors
incurred in defending a civil or criminal action, suit or proceeding as they are
incurred and in advance of the final disposition of the action, suit or
proceeding, upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he or she is not entitled to be indemnified by the
corporation.
26.2 INDEMNIFICATION OF EMPLOYEES AND AGENTS
The corporation shall have the power, to the maximum extent and in the
manner permitted by Section 78.751 of the Nevada General Corporation Law, to
indemnify each of its employees and agents against expenses, including
attorneys' fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred in connection with any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, except an action by or in the right of the corporation. For
purposes of this Article, an "employee" or "agent" of the corporation includes
any person (i) who is or was an employee or agent of the corporation, (ii) is or
was serving at the request of the corporation as an employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or (iii) was
an employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
The corporation shall have the power, to the maximum extent and in the
manner permitted by Section 78.751 of the Nevada General Corporation Law, to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was an employee or agent of the corporation, or is or was serving at the
request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or was an employee or
agent of a corporation which was a predecessor corporation of the corporation or
of another enterprise at the request of such predecessor corporation against
expenses, including amounts paid in settlement and attorneys' fees.
26.3 INDEMNITY NOT EXCLUSIVE
The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under the Articles of Incorporation, any Bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office.
26.4 INDEMNIFICATION FOR SUCCESSFUL DEFENSE
To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in
12.
<PAGE>
subsections 1 and 2 of Section 78.751 of the Nevada General Corporation Law, or
in defense of any claim, issue or matter therein, he or she must be indemnified
by the corporation against expenses, including attorneys' fees, actually and
reasonably incurred by him or her in connection with the defense.
26.5 CONTINUING RIGHT TO INDEMNIFICATION
The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to Section 78.751 of the Nevada General Corporation
Law continues for a person who has ceased to be a director, officer, employee or
agent and inures to the benefit of the heirs, executors and administrators of
such a person.
26.6 INSURANCE AND OTHER FINANCIAL ARRANGEMENTS
The corporation shall have the power, to the maximum extent and in the
manner permitted by Section 78.752 of the Nevada General Corporation Law, to
purchase and maintain insurance or make other financial arrangements on behalf
of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or was a director, officer, employee or
agent of a corporation which was a predecessor corporation of the corporation or
of another enterprise at the request of such predecessor corporation for any
liability asserted against him and liability and expenses incurred by him in his
capacity as a director, officer, employee or agent, or arising out of his status
as such, whether or not the corporation has the authority to indemnify him
against such liability and expenses.
ARTICLE 27
TRANSFER BOOKS AND RECORD DATES
27.1 RECORD DATE FOR NOTICE AND VOTING
The Board of Directors may prescribe a period not exceeding sixty (60)
days before any meeting of the stockholders during which no transfer of stock on
the books of the corporation may be made, or may fix a day not more than sixty
(60) days before the holding of any such meeting as the day as of which
stockholders entitled to notice of and to vote at such meetings must be
determined. Only stockholders of record on that day are entitled to notice or to
vote at such meeting.
If the Board of Directors does not so fix a record date:
(1) the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the business day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the business day next preceding
the day on which the meeting is held; and
(2) the record date for determining stockholders entitled to
give consent to corporate action in writing without a meeting, (i) when no prior
action by the board has been
13.
<PAGE>
taken, shall be the day on which the first written consent is given, or (ii)
when prior action by the board has been taken, shall be at the close of business
on the day on which the board adopts the resolution relating to that action, or
the sixtieth (60th) day before the date of such other action, whichever is
later.
27.2 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any other lawful
action (other than action by stockholders by written consent without a meeting),
the Board of Directors may fix, in advance, a record date, which shall not be
more than sixty (60) days before any such action. In that case, only
stockholders of record at the close of business on the date so fixed are
entitled to receive the 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 the record date so fixed, except as
otherwise provided in the Nevada General Corporation Law. If the Board of
Directors does not so fix a record date, then the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the board adopts the applicable resolution or the sixtieth (60th) day
before the date of that action, whichever is later.
ARTICLE 28
LOSS OF CERTIFICATES
In case of loss, mutilation, or destruction of a certificate of stock,
a duplicate certificate may be issued upon such terms as the Board of Directors
shall prescribe.
ARTICLE 29
CORPORATE AUTHORITY
29.1 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
29.2 CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED
The board of directors, except as otherwise provided in these Bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
14.
<PAGE>
ARTICLE 30
AMENDMENTS
The Bylaws of the corporation, regardless of whether made by the
stockholders or by the Board of Directors, may be amended, added to, or repealed
by the stockholders of the issued and outstanding capital stock of this
corporation, at any meeting of the stockholders, provided notice of the proposed
change is given in the notice of meeting, or notice thereof is waived in
writing.
Subject to the Bylaws, if any, adopted by the stockholders of the
issued and outstanding capital stock of this corporation, the Board of Directors
may amend, add to, or repeal the Bylaws of the corporation.
15.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.6
<SEQUENCE>3
<FILENAME>a2042704zex-10_6.txt
<DESCRIPTION>EXHIBIT 10.6
<TEXT>
<PAGE>
Exhibit 10.6
AMENDMENT TO LOAN AGREEMENT
THIS AMENDMENT TO LOAN AGREEMENT dated as of February 3, 2001 is
entered between SILICON VALLEY BANK and BANK OF HAWAII, on the one side,
CYMER, INC. and CYMER JAPAN, INC., on the other side.
The Parties agree to amend the Loan Agreement between them, dated
December 8, 1997, as amended from time to time (the "Loan Agreement"), as
follows, effective as of the date hereof, unless otherwise stated below.
(Capitalized terms used but not defined in this Amendment, shall have the
meanings set forth in the Loan Agreement.)
1. REVISED DEFINITIONS. Section 1.1 of the Loan Agreement is
hereby amended by replacing the definition "Revolving Maturity DAte" with the
following:
""Revolving Maturity Date" means March 16, 2001, as such date may
from time to time be extended by lenders in their sole discretion
pursuant to this agreement."
2. MODIFICATION FEE. Borrower shall pay to the Lenders a fee
of $6,250 in connection herewith, which shall be in addition to interest and
to all other amounts payable under the Loan Agreement; such fee shall be
refundable to the Borrower if the Borrower enters into definitive loan
documents with the Lenders pursuant to the loan proposal dated January 31,
2001.
3. REPRESENTATIONS TRUE. Borrower represents and warrants to
Bank that all representations and warranties set forth in the Loan Agreement
are true and correct.
4. GENERAL PROVISIONS. This Amendment, the Loan Agreement, any
prior written amendments to the Loan Agreement signed by Bank and the
Borrower, and the other written documents and agreements between Bank and the
Borrower set forth in full all of the representations and agreements of the
parties with respect to the subject matter hereof and supersede all prior
discussions, representations, agreements and understandings between the
parties with respect to the subject hereof. Except as herein expressly
amended, all of the terms and provisions of the Loan Agreement, and all other
documents and agreements between Bank and the Borrower shall continue in full
force and effect and the same are hereby ratified and confirmed. This
Agreement and Consent may be executed in any number of counterparts, which
when taken together shall constitute one and the same agreement.
CYMER, INC. SILICON VALLEY BANK
BY /s/ Nancy J. Baker By /s/ Raquel Cunningham
--------------------------- ---------------------------
President or Vice President Title Vice President
------------------------
CYMER JAPAN, INC. BANK OF HAWAII
BY /s/ William A. Angus, III By /s/ Joji Seta
--------------------------- ---------------------------
Director Title Senior Vice President
------------------------
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.10
<SEQUENCE>4
<FILENAME>a2042704zex-10_10.txt
<DESCRIPTION>EXHIBIT 10.10
<TEXT>
<PAGE>
Exhibit 10.10
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into effective
as of October, 1, 2000, by and between Robert P. Akins (the "Employee") and
Cymer, Inc., a Nevada corporation (the "Company").
R E C I T A L S
A. The Company may from time to time need to address the possibility of an
acquisition transaction or change of control event. The Board of Directors of
the Company (the "Board") recognizes that such events can be a distraction to
the Employee and can cause the Employee to consider alternative employment
opportunities. The Board has determined that it is in the best interests of the
Company and its stockholders to assure that the Company will have the continued
dedication and objectivity of the Employee, notwithstanding the possibility,
threat or occurrence of a Change of Control (as defined below) of the Company,
although no such Change is now contemplated.
B. The Board believes that it is in the best interests of the Company and
its stockholders to provide the Employee with an incentive to continue his
employment and to motivate the Employee to maximize the value of the Company
upon a Change of Control for the benefit of its stockholders.
C. The Board believes that it is imperative to provide the Employee with
certain benefits upon a Change of Control and, under certain circumstances, upon
termination of the Employee's employment in connection with a Change of Control,
which benefits are intended to provide the Employee with financial security and
provide sufficient incentive and encouragement to the Employee to remain with
the Company notwithstanding the possibility of a Change of Control.
D. To accomplish the foregoing objectives, the Board has directed the
Company, upon execution of this Agreement by the Employee, to agree to the terms
provided herein.
E. Certain capitalized terms used in this Agreement are defined in Section
7 below.
A G R E E M E N T
In consideration of the mutual covenants herein contained, and in consideration
of the continuing employment of the Employee by the Company, the parties agree
as follows:
1. DUTIES AND SCOPE OF EMPLOYMENT. The Company shall employ the Employee
in the position of Chairman of the Board and Chief Executive Officer, as such
position has been defined in terms of responsibilities and compensation as of
the effective date of this Agreement; provided, however, that the Board shall
have the right, at any time prior to the occurrence of a Change of Control, to
revise such responsibilities and compensation as the Board in its discretion may
deem necessary or appropriate. The Employee shall comply with and be bound by
the Company's operating policies, procedures and practices from time to time in
effect during his employment. During the term of the Employee's employment with
the Company, the Employee shall continue to devote his full time, skill and
attention to his duties and responsibilities, and shall perform them faithfully,
diligently and competently, and the Employee shall use his best efforts to
further the business of the Company and its affiliated entities.
2. BASE COMPENSATION. The Company shall pay the Employee as compensation
for his services a base salary at the annualized rate of $350,000.04. Such
salary shall be paid periodically in accordance with normal Company payroll
practices. The Board or the Compensation Committee of the Board shall review the
base salary of the
Page 1
<PAGE>
Employee according to normal Company practice, but no less frequently than
annually, and may in its discretion increase but not decrease the base salary
below the amount specified in this agreement.
3. ANNUAL INCENTIVE. Beginning with the Company's current fiscal year and
for each fiscal year thereafter during the term of this Agreement, the Employee
shall be eligible to receive an annual bonus under the Company's annual
incentive plan (the "Annual Incentive") based upon performance targets approved
by the Compensation Committee of the Board (the "Target Incentive"). The Annual
Incentive payable hereunder shall be payable in accordance with the Company's
normal practices and policies.
4. EMPLOYEE BENEFITS. The Employee shall be eligible to participate in the
employee benefit plans and executive compensation programs maintained by the
Company applicable to other key executives of the Company, including (without
limitation) retirement plans, savings or profit-sharing plans, stock option,
incentive or other bonus plans, life, disability, health, accident and other
insurance programs, paid vacations, and similar plans or programs, subject in
each case to the generally applicable terms and conditions of the applicable
plan or program in question and to the sole determination of the Board or any
committee administering such plan or program.
5. EMPLOYMENT RELATIONSHIP. The Company and the Employee acknowledge that
the Employee's employment is and shall continue to be at-will, as defined under
applicable law. If the Employee's employment terminates for any reason, the
Employee shall not be entitled to any payments, benefits, damages, awards or
compensation other than as provided by this Agreement, or as may otherwise be
available in accordance with the Company's established employee plans and
policies at the time of termination.
6. TERMINATION BENEFITS.
(a) Subject to Sections 8 and 9 below, in the event the Employee's
employment terminates as a result of an Involuntary Termination other
than for Cause upon or within eighteen (18) months after a Change of
Control, then the Employee shall be entitled to receive severance and
other benefits as follows:
(i) PAY CONTINUATION. The Employee shall be entitled to
monthly payments equal to the Employee's monthly Base
Compensation as in effect immediately prior to the Change of
Control plus one-twelfth (1/12) of the average of the annual
bonus amount paid to the Employee with respect to the three
previous calendar years. Such monthly amounts shall be paid
according to the normal payroll practice of the Company for 24
months following the date of termination (the "Termination
Period").
(ii) ANNUAL INCENTIVE. The Employee shall be entitled to
receive a percentage of the Employee's Target Incentive for
the calendar year in which such termination occurs. Such
percentage shall equal a fraction, the numerator of which
shall be the number of days in such calendar year up to and
including the date of such termination and the denominator of
which shall be the number of days in such calendar year. Such
amount shall be payable according to the normal practice of
the Company with respect to the payment of bonuses.
(iii) OPTIONS. The unvested portion of any stock option(s)
held by the Employee under the Company's stock option plans
shall vest and become exercisable in full upon the date of
such termination.
(iv) MEDICAL BENEFITS. The Company shall reimburse the
Employee for the cost of the Employee's group health, vision
and dental plan coverage in effect until the end of the
Termination Period. The Employee may use this payment, as well
as any other payment made under this Section 6, for such
continuation coverage or for any other purpose. To the extent
the Employee pays the cost of such coverage, and the cost of
such coverage is not deductible as a medical expense by the
Employee, the Company shall "gross-up" the amount of such
reimbursement for all taxes payable by the Employee on the
amount of such reimbursement and the amount of such gross-up.
Page 2
<PAGE>
(b) In the event the Employee voluntarily resigns his
employment with the Company within the 30-day period beginning
one year after a Change of Control, the Employee shall receive
the severance and other benefits set forth in Sections
6(a)(i)-(iv) above.
7. DEFINITION OF TERMS. The following terms referred to in this Agreement
shall have the following meanings:
(a) CAUSE. "Cause" shall mean (i) any act of personal dishonesty
taken by the Employee in connection with his responsibilities as an
employee and intended to result in substantial personal enrichment of
the Employee, (ii) conviction of a felony that is injurious to the
Company, (iii) a willful act by the Employee which constitutes gross
misconduct and which is injurious to the Company, and (iv) continued
violations by the Employee of the Employee's obligations under Section
1 of this Agreement that are demonstrably willful and deliberate on the
Employee's part after there has been delivered to the Employee a
written demand for performance from the Company which describes the
basis for the Company's belief that the Employee has not substantially
performed his duties.
(b) CHANGE OF CONTROL. "Change of Control" shall mean the
occurrence of any of the following events:
(i) The acquisition by any "person" (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act) (other than
the Company or a person that directly or indirectly controls,
is controlled by, or is under common control with, the
Company) of the "beneficial ownership" (as defined in Rule
13d-3 under said Act), directly or indirectly, of securities
of the Company representing fifty percent (50%) or more of the
total voting power represented by the Company's then
outstanding voting securities; or
(ii) A change in the composition of the Board of Directors
of the Company occurring within a two-year period, as a result
of which fewer than a majority of the directors are Incumbent
Directors. "Incumbent Directors" shall mean directors who
either (A) are directors of the Company as of the date hereof,
or (B) are elected, or nominated for election, to the Board of
Directors of the Company with the affirmative votes of at
least a majority of the Incumbent Directors at the time of
such election or nomination (but shall not include an
individual not otherwise an Incumbent Director whose election
or nomination is in connection with an actual or threatened
proxy contest relating to the election of directors to the
Company); or
(iii) A merger or consolidation of the Company with any
other corporation, other than a merger or consolidation which
would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
voting securities of the surviving entity) at least fifty
percent (50%) of the total voting power represented by the
voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or
the approval by the stockholders of the Company of a plan of
complete liquidation of the Company or of an agreement for the
sale or disposition by the Company of all or substantially all
the Company's assets.
(c) DISABILITY. "Disability" shall mean that the Employee has been
unable to substantially perform his duties under this Agreement as the
result of his incapacity due to physical or mental illness, and such
inability, at least 26 weeks after its commencement, is determined to
be total and permanent by a physician selected by the Company or its
insurers and acceptable to the Employee or the Employee's legal
representative (such agreement as to acceptability not to be
unreasonably withheld).
(d) EXCHANGE ACT. "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
(e) INVOLUNTARY TERMINATION. "Involuntary Termination" shall mean
(i) without the Employee's express written consent, the significant
reduction of the Employee's duties or responsibilities relative to the
Employee's duties or responsibilities in effect immediately prior to
such reduction; provided, however, that a reduction in duties or
responsibilities solely by virtue of the Company being acquired and
made part of a
Page 3
<PAGE>
larger entity (as, for example, when the Chief Financial Officer of
Company remains as such following a Change of Control and is not made
the Chief Financial Officer of the acquiring corporation) shall not
constitute an "Involuntary Termination"; (ii) without the Employee's
express written consent, a substantial reduction, without good business
reasons, of the facilities and perquisites (including office space and
location) available to the Employee immediately prior to such
reduction; (iii) without the Employee's express written consent, a
material reduction by the Company in the Base Compensation or Target
Incentive of the Employee as in effect immediately prior to such
reduction, or the ineligibility of the Employee to continue to
participate in any long-term incentive plan of the Company; (iv) a
material reduction by the Company in the kind or level of employee
benefits to which the Employee is entitled immediately prior to such
reduction with the result that the Employee's overall benefits package
is significantly reduced; (v) the relocation of the Employee to a
facility or a location more than 50 miles from the Employee's then
present location, without the Employee's express written consent; (vi)
any purported termination of the Employee by the Company which is not
effected for death or Disability or for Cause, or any purported
termination for which the grounds relied upon are not valid; or (vii)
the failure of the Company to obtain the assumption of this agreement
by any successors contemplated in Section 10 below.
8. LIMITATION ON PAYMENTS.
(a) In the event that the severance and other benefits provided
for in this Agreement or otherwise payable to the Employee (i)
constitute "parachute payments" within the meaning of Section 280G of
the Internal Revenue Code of 1986, as amended (the "Code") and (ii) but
for this Section 8 would be subject to the excise tax imposed by
Section 4999 of the Code, then the Employee's severance benefits under
Section 6 shall be payable either (i) in full, or (ii) as to such
lesser amount which would result in no portion of such severance
benefits being subject to excise tax under Section 4999 of the Code,
whichever of the foregoing amounts, taking into account the applicable
federal, state and local income taxes and the excise tax imposed by
Section 4999, results in the receipt by the Employee on an after-tax
basis, of the greatest amount of severance benefits under this
Agreement, notwithstanding that all or some portion of such severance
benefits may be taxable under Section 4999 of the Code.
(b) If a reduction in the payments and benefits that would
otherwise be paid or provided to the Employee under the terms of this
Agreement is necessary to comply with the provisions of Section 8(a),
the Employee shall be entitled to select which payments or benefits
will be reduced and the manner and method of any such reduction of such
payments or benefits (including but not limited to the number of
options that would vest under Section 6(b) subject to reasonable
limitations (including, for example, express provisions under the
Company's benefit plans) (so long as the requirements of Section 8(a)
are met). Within thirty (30) days after the amount of any required
reduction in payments and benefits is finally determined in accordance
with the provisions of Section 8(c), the Employee shall notify the
Company in writing regarding which payments or benefits are to be
reduced. If no notification is given by the Employee, the Company will
determine which amounts to reduce. If, as a result of any reduction
required by Section 8(a), amounts previously paid to the Employee
exceed the amount to which the Employee is entitled, the Employee will
promptly return the excess amount to the Company.
(c) Unless the Company and the Employee otherwise agree in
writing, any determination required under this Section 8 shall be made
in writing by the Company's independent public accountants (the
"Accountants"), whose determination shall be conclusive and binding
upon the Employee and the Company for all purposes. For purposes of
making the calculations required by this Section 8, the Accountants may
make reasonable assumptions and approximations concerning applicable
taxes and may rely on reasonable, good faith interpretations concerning
the application of Sections 280G and 4999 of the Code. The Company and
the Employee shall furnish to the Accountants such information and
documents as the Accountants may reasonably request in order to make a
determination under this Section. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section 8.
9. CERTAIN BUSINESS COMBINATIONS. In the event it is determined by the
Board, upon receipt of a written opinion of the Company's independent public
accountants, that the enforcement of any Section or subsection of this
Agreement, including, but not limited to, Section 6(b) hereof, which allows for
the acceleration of vesting of options
Page 4
<PAGE>
to purchase shares of the Company's common stock upon a termination in
connection with a Change of Control, would preclude accounting for any proposed
business combination of the Company involving a Change of Control as a pooling
of interests, and the Board otherwise desires to approve such a proposed
business transaction which requires as a condition to the closing of such
transaction that it be accounted for as a pooling of interests, then any such
Section of this Agreement shall be null and void, but only if the absence of
enforcement of such Section would preserve the pooling treatment. For purposes
of this Section 9, the Board's determination shall require the unanimous
approval of the disinterested Board members.
10. SUCCESSORS.
(a) COMPANY'S SUCCESSORS. Any successor to the Company (whether
direct or indirect and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) to all or substantially all of
the Company's business and assets shall assume the obligations under
this Agreement and agree expressly to perform the obligations under
this Agreement in the same manner and to the same extent as the Company
would be required to perform such obligations in the absence of a
succession. For all purposes under this Agreement, the term "Company"
shall include any successor to the Company's business and assets which
executes and delivers the assumption agreement described in this
Section 10(a) or which becomes bound by the terms of this Agreement by
operation of law.
(b) EMPLOYEE'S SUCCESSORS. The terms of this Agreement and all
rights of the Employee hereunder shall inure to the benefit of, and be
enforceable by, the Employee's personal or legal representatives,
executors, administrators, successors, heirs, devisees and legatees.
11. NOTICE. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail, return
receipt requested and postage prepaid. In the case of the Employee, mailed
notices shall be addressed to him at the home address which he most recently
communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notices shall
be directed to the attention of its Secretary.
12. MISCELLANEOUS PROVISIONS.
(a) WAIVER. No provision of this Agreement shall be modified,
waived or discharged unless the modification, waiver or discharge is
agreed to in writing and signed by the Employee and by an authorized
officer of the Company (other than the Employee). No waiver by either
party of any breach of, or of compliance with, any condition or
provision of this Agreement by the other party shall be considered a
waiver of any other condition or provision or of the same condition or
provision at another time.
(b) WHOLE AGREEMENT. No agreements, representations or
understandings (whether oral or written and whether express or implied)
which are not expressly set forth in this Agreement have been made or
entered into by either party with respect to the subject matter hereof.
(c) CHOICE OF LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the
State of California.
(d) SEVERABILITy. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity
or enforceability of any other provision hereof, which shall remain in
full force and effect.
(e) ARBITRATION. Any dispute or controversy arising out of,
relating to or in connection with this Agreement shall be settled
exclusively by binding arbitration in San Diego, California, in
accordance with the National Rules for the Resolution of Employment
Disputes of the American Arbitration Association then in effect.
Judgment may be entered on the arbitrator's award in any court having
jurisdiction. The
Page 5
<PAGE>
Company and the Employee shall each pay one-half of the costs and
expenses of such arbitration, and each shall separately pay its counsel
fees and expenses. Punitive damages shall not be awarded.
(f) NO ASSIGNMENT OF BENEFITS. The rights of any person to
payments or benefits under this Agreement shall not be made subject to
option or assignment, either by voluntary or involuntary assignment or
by operation of law, including (without limitation) bankruptcy,
garnishment, attachment or other creditor's process, and any action in
violation of this Section 12(g) shall be void.
(g) ASSIGNMENT BY COMPANY. The Company may assign its rights under
this Agreement to an affiliate, and an affiliate may assign its rights
under this Agreement to another affiliate of the Company or to the
Company; provided, however, that no assignment shall be made if the net
worth of the assignee is less than the net worth of the Company at the
time of assignment. In the case of any such assignment, the term
"Company" when used in a section of this Agreement shall mean the
corporation that actually employs the Employee.
(h) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together
will constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Company by its duly authorized officer, as of the day and year first
above written.
COMPANY: CYMER, INC.
By: Wallace E. Breitman
Title: Senior Vice President Human Resources and Administration
/s/ Wallace E. Breitman
-----------------------------------------------------------------
EMPLOYEE: /s/ Robert P. Akins
-----------------------------------------------------------------
Robert P. Akins
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.12
<SEQUENCE>5
<FILENAME>a2042704zex-10_12.txt
<DESCRIPTION>EXHIBIT 10.12
<TEXT>
<PAGE>
Exhibit 10.12
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into effective
as of October 1, 2000, by and between Pascal Didier (the "Employee") and Cymer,
Inc., a Nevada corporation (the "Company").
R E C I T A L S
A. The Company may from time to time need to address the possibility of an
acquisition transaction or change of control event. The Board of Directors of
the Company (the "Board") recognizes that such events can be a distraction to
the Employee and can cause the Employee to consider alternative employment
opportunities. The Board has determined that it is in the best interests of the
Company and its stockholders to assure that the Company will have the continued
dedication and objectivity of the Employee, notwithstanding the possibility,
threat or occurrence of a Change of Control (as defined below) of the Company,
although no such Change is now contemplated.
B. The Board believes that it is in the best interests of the Company and
its stockholders to provide the Employee with an incentive to continue his
employment and to motivate the Employee to maximize the value of the Company
upon a Change of Control for the benefit of its stockholders.
C. The Board believes that it is imperative to provide the Employee with
certain benefits upon a Change of Control and, under certain circumstances, upon
termination of the Employee's employment in connection with a Change of Control,
which benefits are intended to provide the Employee with financial security and
provide sufficient incentive and encouragement to the Employee to remain with
the Company notwithstanding the possibility of a Change of Control.
D. To accomplish the foregoing objectives, the Board has directed the
Company, upon execution of this Agreement by the Employee, to agree to the terms
provided herein.
E. Certain capitalized terms used in this Agreement are defined in Section
7 below.
A G R E E M E N T
In consideration of the mutual covenants herein contained, and in consideration
of the continuing employment of the Employee by the Company, the parties agree
as follows:
1. DUTIES AND SCOPE OF EMPLOYMENT. The Company shall employ the Employee
in the position of President and Chief Operating Officer, as such position has
been defined in terms of responsibilities and compensation as of the effective
date of this Agreement; provided, however, that the Board shall have the right,
at any time prior to the occurrence of a Change of Control, to revise such
responsibilities and compensation as the Board in its discretion may deem
necessary or appropriate. The Employee shall comply with and be bound by the
Company's operating policies, procedures and practices from time to time in
effect during his employment. During the term of the Employee's employment with
the Company, the Employee shall continue to devote his full time, skill and
attention to his duties and responsibilities, and shall perform them faithfully,
diligently and competently, and the Employee shall use his best efforts to
further the business of the Company and its affiliated entities.
2. BASE COMPENSATION. The Company shall pay the Employee as compensation
for his services a base salary at the annualized rate of $325,009.10. Such
salary shall be paid periodically in accordance with normal Company payroll
practices. The Board or the Compensation Committee of the Board shall review
the base salary of the Employee according to normal Company practice, but no
less frequently than annually, and may in its discretion increase but not
decrease the base salary. The Board or the Compensation Committee of the
Board shall review the
Page 1
<PAGE>
base salary of the Employee according to normal Company practice, but
no less frequently than annually, and may in its discretion increase but not
decrease the base salary below the amount specified in this agreement.
ANNUAL INCENTIVE. Beginning with the Company's current fiscal year and
for each fiscal year thereafter during the term of this Agreement, the Employee
shall be eligible to receive an annual bonus under the Company's annual
incentive plan (the "Annual Incentive") based upon performance targets approved
by the Compensation Committee of the Board (the "Target Incentive"). The Annual
Incentive payable hereunder shall be payable in accordance with the Company's
normal practices and policies.
4. EMPLOYEE BENEFITS. The Employee shall be eligible to participate in the
employee benefit plans and executive compensation programs maintained by the
Company applicable to other key executives of the Company, including (without
limitation) retirement plans, savings or profit-sharing plans, stock option,
incentive or other bonus plans, life, disability, health, accident and other
insurance programs, paid vacations, and similar plans or programs, subject in
each case to the generally applicable terms and conditions of the applicable
plan or program in question and to the sole determination of the Board or any
committee administering such plan or program.
5. EMPLOYMENT RELATIONSHIP. The Company and the Employee acknowledge that
the Employee's employment is and shall continue to be at-will, as defined under
applicable law. If the Employee's employment terminates for any reason, the
Employee shall not be entitled to any payments, benefits, damages, awards or
compensation other than as provided by this Agreement, or as may otherwise be
available in accordance with the Company's established employee plans and
policies at the time of termination.
6. TERMINATION BENEFITS. Subject to Sections 8 and 9 below, in the event
the Employee's employment terminates as a result of an Involuntary Termination
other than for Cause upon or within 18 months after a Change of Control, then
the Employee shall be entitled to receive severance and other benefits as
follows:
(a) PAY CONTINUATION. The Employee shall be entitled to monthly
payments equal to the Employee's monthly Base Compensation as in effect
immediately prior to the Change of Control plus one-twelfth (1/12) of
the average of the annual bonus amount paid to the Employee with
respect to the three previous calendar years. Such monthly amounts
shall be paid according to the normal payroll practice of the Company
for 24 months following the date of termination (the "Termination
Period").
(b) ANNUAL INCENTIVE. The Employee shall be entitled to receive a
percentage of the Employee's Target Incentive for the calendar year in
which such termination occurs. Such percentage shall equal a fraction,
the numerator of which shall be the number of days in such calendar
year up to and including the date of such termination and the
denominator of which shall be the number of days in such calendar year.
Such amount shall be payable according to the normal practice of the
Company with respect to the payment of bonuses.
(c) OPTIONS. The unvested portion of any stock option(s) held by
the Employee under the Company's stock option plans shall vest and
become exercisable in full upon the date of such termination.
(d) MEDICAL BENEFITS. The Company shall reimburse the Employee for
the cost of the Employee's group health, vision and dental plan
coverage in effect until the end of the Termination Period. The
Employee may use this payment, as well as any other payment made under
this Section 6, for such continuation coverage or for any other
purpose. To the extent the Employee pays the cost of such coverage, and
the cost of such coverage is not deductible as a medical expense by the
Employee, the Company shall "gross-up" the amount of such reimbursement
for all taxes payable by the Employee on the amount of such
reimbursement and the amount of such gross-up.
7. DEFINITION OF TERMS. The following terms referred to in this Agreement
shall have the following meanings:
(a) CAUSE. "Cause" shall mean (i) any act of personal dishonesty
taken by the Employee in connection with his responsibilities as an
employee and intended to result in substantial personal enrichment of
the Employee, (ii) conviction of a felony that is injurious to the
Company, (iii) a willful act by the
Page 2
<PAGE>
Employee which constitutes gross misconduct and which is injurious to
the Company, and (iv) continued violations by the Employee of the
Employee's obligations under Section 1 of this Agreement that are
demonstrably willful and deliberate on the Employee's part after there
has been delivered to the Employee a written demand for performance
from the Company which describes the basis for the Company's belief
that the Employee has not substantially performed his duties.
(b) CHANGE OF CONTROL. "Change of Control" shall mean the
occurrence of any of the following events:
(i) The acquisition by any "person" (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act) (other than
the Company or a person that directly or indirectly controls,
is controlled by, or is under common control with, the
Company) of the "beneficial ownership" (as defined in Rule
13d-3 under said Act), directly or indirectly, of securities
of the Company representing fifty percent (50%) or more of the
total voting power represented by the Company's then
outstanding voting securities; or
(ii) A change in the composition of the Board of Directors
of the Company occurring within a two-year period, as a result
of which fewer than a majority of the directors are Incumbent
Directors. "Incumbent Directors" shall mean directors who
either (A) are directors of the Company as of the date hereof,
or (B) are elected, or nominated for election, to the Board of
Directors of the Company with the affirmative votes of at
least a majority of the Incumbent Directors at the time of
such election or nomination (but shall not include an
individual not otherwise an Incumbent Director whose election
or nomination is in connection with an actual or threatened
proxy contest relating to the election of directors to the
Company); or
(iii) A merger or consolidation of the Company with any
other corporation, other than a merger or consolidation which
would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
voting securities of the surviving entity) at least fifty
percent (50%) of the total voting power represented by the
voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or
the approval by the stockholders of the Company of a plan of
complete liquidation of the Company or of an agreement for the
sale or disposition by the Company of all or substantially all
the Company's assets.
(c) DISABILITY. "Disability" shall mean that the Employee has been
unable to substantially perform his duties under this Agreement as the
result of his incapacity due to physical or mental illness, and such
inability, at least 26 weeks after its commencement, is determined to
be total and permanent by a physician selected by the Company or its
insurers and acceptable to the Employee or the Employee's legal
representative (such agreement as to acceptability not to be
unreasonably withheld).
(d) EXCHANGE ACT. "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
(e) INVOLUNTARY TERMINATION. "Involuntary Termination" shall mean
(i) without the Employee's express written consent, the significant
reduction of the Employee's duties or responsibilities relative to the
Employee's duties or responsibilities in effect immediately prior to
such reduction; provided, however, that a reduction in duties or
responsibilities solely by virtue of the Company being acquired and
made part of a larger entity (as, for example, when the Chief Financial
Officer of Company remains as such following a Change of Control and is
not made the Chief Financial Officer of the acquiring corporation)
shall not constitute an "Involuntary Termination"; (ii) without the
Employee's express written consent, a substantial reduction, without
good business reasons, of the facilities and perquisites (including
office space and location) available to the Employee immediately prior
to such reduction; (iii) without the Employee's express written
consent, a material reduction by the Company in the Base Compensation
or Target Incentive of the Employee as in effect immediately prior to
such reduction, or the ineligibility of the Employee to continue to
participate in any long-term incentive plan of the Company; (iv) a
material reduction by the Company in the kind or level of employee
benefits to which the Employee is entitled immediately prior to
Page 3
<PAGE>
such reduction with the result that the Employee's overall benefits
package is significantly reduced; (v) the relocation of the Employee to
a facility or a location more than 50 miles from the Employee's then
present location, without the Employee's express written consent; (vi)
any purported termination of the Employee by the Company which is not
effected for death or Disability or for Cause, or any purported
termination for which the grounds relied upon are not valid; or (vii)
the failure of the Company to obtain the assumption of this agreement
by any successors contemplated in Section 10 below.
8. LIMITATION ON PAYMENTS.
(a) In the event that the severance and other benefits provided
for in this Agreement or otherwise payable to the Employee (i)
constitute "parachute payments" within the meaning of Section 280G of
the Internal Revenue Code of 1986, as amended (the "Code") and (ii) but
for this Section 8 would be subject to the excise tax imposed by
Section 4999 of the Code, then the Employee's severance benefits under
Section 6 shall be payable either (i) in full, or (ii) as to such
lesser amount which would result in no portion of such severance
benefits being subject to excise tax under Section 4999 of the Code,
whichever of the foregoing amounts, taking into account the applicable
federal, state and local income taxes and the excise tax imposed by
Section 4999, results in the receipt by the Employee on an after-tax
basis, of the greatest amount of severance benefits under this
Agreement, notwithstanding that all or some portion of such severance
benefits may be taxable under Section 4999 of the Code.
(b) If a reduction in the payments and benefits that would
otherwise be paid or provided to the Employee under the terms of this
Agreement is necessary to comply with the provisions of Section 8(a),
the Employee shall be entitled to select which payments or benefits
will be reduced and the manner and method of any such reduction of such
payments or benefits (including but not limited to the number of
options that would vest under Section 6(b) subject to reasonable
limitations (including, for example, express provisions under the
Company's benefit plans) (so long as the requirements of Section 8(a)
are met). Within thirty (30) days after the amount of any required
reduction in payments and benefits is finally determined in accordance
with the provisions of Section 8(c), the Employee shall notify the
Company in writing regarding which payments or benefits are to be
reduced. If no notification is given by the Employee, the Company will
determine which amounts to reduce. If, as a result of any reduction
required by Section 8(a), amounts previously paid to the Employee
exceed the amount to which the Employee is entitled, the Employee will
promptly return the excess amount to the Company.
(c) Unless the Company and the Employee otherwise agree in
writing, any determination required under this Section 8 shall be made
in writing by the Company's independent public accountants (the
"Accountants"), whose determination shall be conclusive and binding
upon the Employee and the Company for all purposes. For purposes of
making the calculations required by this Section 8, the Accountants may
make reasonable assumptions and approximations concerning applicable
taxes and may rely on reasonable, good faith interpretations concerning
the application of Sections 280G and 4999 of the Code. The Company and
the Employee shall furnish to the Accountants such information and
documents as the Accountants may reasonably request in order to make a
determination under this Section. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section 8.
9. CERTAIN BUSINESS COMBINATIONS. In the event it is determined by the
Board, upon receipt of a written opinion of the Company's independent public
accountants, that the enforcement of any Section or subsection of this
Agreement, including, but not limited to, Section 6(b) hereof, which allows for
the acceleration of vesting of options to purchase shares of the Company's
common stock upon a termination in connection with a Change of Control, would
preclude accounting for any proposed business combination of the Company
involving a Change of Control as a pooling of interests, and the Board otherwise
desires to approve such a proposed business transaction which requires as a
condition to the closing of such transaction that it be accounted for as a
pooling of interests, then any such Section of this Agreement shall be null and
void, but only if the absence of enforcement of such Section would preserve the
pooling treatment. For purposes of this Section 9, the Board's determination
shall require the unanimous approval of the disinterested Board members.
10. SUCCESSORS.
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<PAGE>
(a) COMPANY'S SUCCESSORS. Any successor to the Company (whether
direct or indirect and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) to all or substantially all of
the Company's business and assets shall assume the obligations under
this Agreement and agree expressly to perform the obligations under
this Agreement in the same manner and to the same extent as the Company
would be required to perform such obligations in the absence of a
succession. For all purposes under this Agreement, the term "Company"
shall include any successor to the Company's business and assets which
executes and delivers the assumption agreement described in this
Section 10(a) or which becomes bound by the terms of this Agreement by
operation of law.
(b) EMPLOYEE'S SUCCESSORS. The terms of this Agreement and all
rights of the Employee hereunder shall inure to the benefit of, and be
enforceable by, the Employee's personal or legal representatives,
executors, administrators, successors, heirs, devisees and legatees.
11. NOTICE. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail, return
receipt requested and postage prepaid. In the case of the Employee, mailed
notices shall be addressed to him at the home address which he most recently
communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notices shall
be directed to the attention of its Secretary.
12. MISCELLANEOUS PROVISIONS.
(a) WAIVER. No provision of this Agreement shall be modified,
waived or discharged unless the modification, waiver or discharge is
agreed to in writing and signed by the Employee and by an authorized
officer of the Company (other than the Employee). No waiver by either
party of any breach of, or of compliance with, any condition or
provision of this Agreement by the other party shall be considered a
waiver of any other condition or provision or of the same condition or
provision at another time.
(b) WHOLE AGREEMENT. No agreements, representations or
understandings (whether oral or written and whether express or implied)
which are not expressly set forth in this Agreement have been made or
entered into by either party with respect to the subject matter hereof.
(c) CHOICE OF LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the
State of California.
(d) SEVERABILITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity
or enforceability of any other provision hereof, which shall remain in
full force and effect.
(e) ARBITRATION. Any dispute or controversy arising out of,
relating to or in connection with this Agreement shall be settled
exclusively by binding arbitration in San Diego, California, in
accordance with the National Rules for the Resolution of Employment
Disputes of the American Arbitration Association then in effect.
Judgment may be entered on the arbitrator's award in any court having
jurisdiction. The Company and the Employee shall each pay one-half of
the costs and expenses of such arbitration, and each shall separately
pay its counsel fees and expenses. Punitive damages shall not be
awarded.
(f) NO ASSIGNMENT OF BENEFITS. The rights of any person to
payments or benefits under this Agreement shall not be made subject to
option or assignment, either by voluntary or involuntary assignment or
by operation of law, including (without limitation) bankruptcy,
garnishment, attachment or other creditor's process, and any action in
violation of this Section 12(g) shall be void.
(g) ASSIGNMENT BY COMPANY. The Company may assign its rights under
this Agreement to an affiliate, and an affiliate may assign its rights
under this Agreement to another affiliate of the Company or to the
Company; provided, however, that no assignment shall be made if the net
worth of the assignee is less
Page 5
<PAGE>
than the net worth of the Company at the time of assignment. In the
case of any such assignment, the term "Company" when used in a section
of this Agreement shall mean the corporation that actually employs the
Employee.
(h) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together
will constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Company by its duly authorized officer, as of the day and year first
above written.
COMPANY: CYMER, INC.
By: Robert P. Akins
Title: Chairman of the Board and Chief Executive Officer
/s/ Robert P. Akins
-----------------------------------------------------------
EMPLOYEE: /s/ Pascal Didier
-----------------------------------------------------------
Pascal Didier
Page 6
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21.1
<SEQUENCE>6
<FILENAME>a2042704zex-21_1.txt
<DESCRIPTION>EXHIBIT 21.1
<TEXT>
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF REGISTRANT
<TABLE>
<CAPTION>
SUBSIDIARY JURISDICTION OF INCORPORATION
<S> <C>
Cymer (Barbados) Ltd. Barbados
Cymer B.V. Netherlands
Cymer International, Ltd. Barbados
Cymer Japan, Inc. Japan
Cymer Korea, Inc. Korea
Cymer Services, Inc. Nevada
Cymer Singapore Pte Ltd. Singapore
Cymer Southeast Asia, Ltd. Taiwan
Active Control eXperts, Inc. (ACX) as of February 13, 2001 Delaware
</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>7
<FILENAME>a2042704zex-23_1.txt
<DESCRIPTION>EXHIBIT 23.1
<TEXT>
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Cymer, Inc.
We consent to incorporation by reference in the registration statements (No.
333-16559, No. 333-67491 and No. 333-48242) on Form S-8 and in the registration
statement (No. 333-39101) on Form S-3 of Cymer, Inc. of our report dated
January 30, 2001, except as to Note 13 which is as of February 13, 2001,
relating to the consolidated balance sheet of Cymer, Inc. and subsidiaries as of
December 31, 2000, and the related consolidated statements of income,
stockholders' equity, and cash flows for the year then ended, which report
appears in the December 31, 2000 annual report on Form 10-K of Cymer, Inc.
/s/ KPMG LLP
San Diego, California
March 27, 2001
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.2
<SEQUENCE>8
<FILENAME>a2042704zex-23_2.txt
<DESCRIPTION>EXHIBIT 23.2
<TEXT>
<PAGE>
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
333-16559, 333-67491 and 333-48242 on Form S-8 and Registration Statement No.
333-39101 on Form S-3 of our report dated January 28, 2000, appearing in this
Annual Report on Form 10-K of Cymer, Inc., for the year ended December 31, 2000.
/s/ DELOITTE & TOUCHE LLP
San Diego, California
March 23, 2001
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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