UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(MARK ONE)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 1, 1994 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 0-6920
APPLIED MATERIALS, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-1655526
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3050 Bowers Avenue, Santa Clara, California 95054-3299
Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code (408) 727-5555
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)
subject to such filing requirements for the past 90 days. Yes X No .
Number of shares outstanding of the issuer's common stock as of
May 1, 1994: 83,402,000
PART I. FINANCIAL INFORMATION
APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
May 1, May 2, May 1, May 2,
(In thousands, except per share data) 1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net sales $ 411,332 $ 255,692 $ 751,781 $ 471,266
Costs and expenses:
Cost of products sold 221,941 145,176 406,411 269,143
Research, development
and engineering 43,654 33,829 82,892 64,014
Marketing and selling 39,370 25,212 73,403 48,596
General and administrative 20,489 15,110 40,221 28,566
Other, net (541) 1,175 114 2,078
Income from operations 86,419 35,190 148,740 58,869
Interest expense 3,472 3,347 7,120 6,945
Interest income 2,261 1,483 4,268 3,321
Income from consolidated companies
before taxes and cumulative effect
of accounting change 85,208 33,326 145,888 55,245
Provision for income taxes 29,823 10,998 51,061 18,231
Income from consolidated companies
before cumulative effect of
accounting change 55,385 22,328 94,827 37,014
Equity in net loss of joint venture 314 - 2,365 -
Income before cumulative effect of
accounting change 55,071 22,328 92,462 37,014
Cumulative effect of a change in
accounting for income taxes - - 7,000 -
Net income $ 55,071 $ 22,328 $ 99,462 $ 37,014
Earnings per share*
Before cumulative effect of
accounting change $ 0.65 $ 0.27 $ 1.10 $ 0.45
Net income $ 0.65 $ 0.27 $ 1.18 $ 0.45
Average common shares and
equivalents* 84,761 82,034 83,979 81,814
<FN>
* Retroactively restated for a two-for-one stock split in the form
of a 100% stock dividend effective October 5, 1993.
</FN>
</TABLE>
See accompanying notes to consolidated condensed financial statements.
APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
May 1, Oct. 31,
(In thousands) 1994 1993
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 96,606 $ 119,597
Short-term investments 232,517 146,583
Accounts receivable, net 337,291 256,020
Inventories 207,189 154,597
Deferred income taxes 66,674 62,413
Other current assets 47,748 36,706
Total current assets 988,025 775,916
Property, plant and equipment, net 357,495 327,704
Other assets 15,492 16,532
Total assets $ 1,361,012 $ 1,120,152
LIABILITIES
AND
STOCKHOLDERS'
EQUITY
Current liabilities:
Notes payable $ 35,671 $ 41,645
Current portion of long-term debt 14,941 7,017
Accounts payable and
accrued expenses 331,625 282,699
Income taxes payable 38,022 49,167
Total current liabilities 420,259 380,528
Long-term debt 110,730 121,076
Deferred income taxes and
other non-current obligations 24,796 19,786
Total liabilities 555,785 521,390
Stockholders' equity:
Common stock 834 804
Additional paid-in capital 362,720 256,429
Retained earnings 424,692 325,230
Cumulative translation adjustments 16,981 16,299
Total stockholders' equity 805,227 598,762
Total liabilities and
stockholders' equity $ 1,361,012 $ 1,120,152
<FN>
Amounts as of May 1, 1994 are unaudited. Amounts as of October 31, 1993 were
obtained from the October 31, 1993 audited financial statements.
</FN>
</TABLE>
See accompanying notes to consolidated condensed financial statements.
APPLIED MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
May 1, May 2,
(In thousands) 1994 1993
<S> <C> <C>
Cash flows from operating activities:
Net income $ 99,462 $ 37,014
Adjustments required to reconcile
net income to cash flows
provided by operations:
Depreciation and amortization 23,878 18,011
Cumulative effect of a change in
accounting for income taxes (7,000) -
Equity in net loss of joint venture 2,365 -
Changes in assets and liabilities:
Accounts receivable (79,577) (13,779)
Inventories (52,813) (16,978)
Other current assets (11,722) (3,596)
Other assets (1,541) (761)
Accounts payable and accrued expenses 48,450 1,934
Income taxes payable (8,054) (77)
Other long-term liabilities 4,827 1,023
(81,187) (14,223)
Cash provided by operations 18,275 22,791
Cash flows from investing activities:
Capital expenditures (59,592) (33,912)
Disposition of property, plant & equipment 7,365 1,742
Proceeds from short-term investments 69,917 56,076
Purchases of short-term investments (155,851) (109,469)
Cash used for investing (138,161) (85,563)
Cash flows from financing activities:
Short-term borrowing (repayments), net (6,487) 4,677
Long-term debt repayments (2,850) (2,848)
Sales (repurchases) of common stock, net 106,321 (256)
Cash provided by financing 96,984 1,573
Effect of exchange rate changes on cash (89) (215)
Decrease in cash and cash equivalents (22,991) (61,414)
Cash and cash equivalents
at beginning of period 119,597 159,453
Cash and cash equivalents
at end of period $ 96,606 $ 98,039
<FN>
Cash payments for interest expense were $6,759 and $6,720 for the six months ended
May 1, 1994 and May 2, 1993, respectively. Cash payments for income taxes were
$39,092 and $17,116 for the six months ended May 1, 1994 and May 2, 1993,
respectively.
</FN>
</TABLE>
See accompanying notes to consolidated condensed financial statements.
APPLIED MATERIALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)
SIX MONTHS ENDED MAY 1, 1994
(In thousands)
1) Basis of Presentation
In the opinion of management, the unaudited consolidated condensed interim
financial statements included herein have been prepared on the same basis as
the October 31, 1993 audited consolidated financial statements and include all
adjustments, consisting of only normal recurring adjustments,necessary to fairly
state the information set forth therein. Certain amounts in the consolidated
statement of cash flows for the six months ended May 2, 1993 have been
reclassified to conform with the current period's presentation.
2) Earnings Per Share
Earnings per share is computed on the basis of the weighted average number of
common shares and common equivalent shares from dilutive stock options.
3) Inventories
Inventories are stated at the lower of cost or market, with cost determined on
the basis of first-in, first-out (FIFO).
The components of inventories are as follows:
May 1, 1994 October 31, 1993
Customer service spares $ 53,345 $ 45,584
Systems raw materials 42,998 32,294
Work-in-process 68,768 57,526
Finished goods 42,078 19,193
$207,189 $154,597
4) Income Taxes
Effective November 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income
Taxes." The Company adopted SFAS 109 prospectively.
The adoption of SFAS 109 changes the Company's method of accounting for income
taxes from the deferred method, pursuant to APB 11, to an asset and liability
approach. Under APB 11, deferred taxes are recognized for income
and expense items that are reported in different years for financial
reporting purposes. Under the asset and liability approach of SFAS 109,
deferred assets and liabilities are recognized for the future consequences
attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their existing tax bases.
The cumulative effect of adopting SFAS 109 resulted in a one-time credit of
$7,000, or $0.08 per share, and is reported separately in the
Consolidated Condensed Statement of Operations for the six
month period ended May 1, 1994.
Deferred tax assets (liabilities) at November 1, 1993 relate to the following:
Deferred tax assets:
Financial accruals not currently tax deductible:
Inventory $ 13,454
Warranty and installation 21,022
Other 19,458
State income taxes 8,135
Other 4,344
Total deferred tax assets 66,413
Deferred tax liabilities:
Depreciation and other (7,193)
Net deferred tax assets $ 59,220
APPLIED MATERIALS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
During the second quarter of fiscal 1994 Applied Materials, Inc. reported
record net sales of $411.3 million. New orders of $456.5 million were received
during the quarter, driven by increased demand for the Company's Physical
Vapor Deposition (PVD) systems, Ion Implant systems and customer support and
spares and continued strong demand for Etch and Chemical Vapor Depositions
(CVD) systems. Backlog at May 1, 1994 was $498.8 million.
Results of Operations
The Company's worldwide net sales for the three and six month periods ended May
1, 1994 increased by 61 percent and 60 percent, respectively, from the
corresponding periods in fiscal 1993. This growth can be primarily
attributed to increased unit sales of the Company's single-wafer,
multi-chamber systems and increases in customer support revenues for all
of the regions served by the Company. Compared with the six months ended
May 2, 1993, PVD, metal Chemical Vapor Deposition (MCVD), Etch and Ion Implant
sales were all up significantly. Regionally, 66 percent of the Company's net
sales for the second quarter of fiscal 1994 were to customers located
outside North America compared to 57 percent in the first quarter of 1994 and
67 percent in the comparable 1993 period. Sales to customers located outside
North America represented 62 percent in the first half of 1994
compared to 61 percent in the first half of 1993. Fiscal 1994 year to date
sales to customers located in Asia/Pacific (excluding Japan) increased 82
percent from the prior year and accounted for 18 percent of the Company's
fiscal 1994 year to date sales, an increase from 15 percent in the
comparable fiscal period in 1993. This increase was driven primarily by
revenue from systems shipped in the first half of fiscal 1994 in response to a
$80 million Hyundai Electronics Co., Ltd. order. Sales to customers in Japan
during the three and six month periods ended May 1, 1994 showed significant
increases over the comparable periods in fiscal 1993 as DRAM manufacturers
began expansions of new eight-inch lines. Sales in Japan represented
27 percent of total 1994 year to date sales compared to 25 percent of
fiscal 1993 year to date sales. Fiscal 1994 year to date sales to customers in
Europe increased 36 percent over fiscal 1993 year to date sales due to
increasing demand for capacity to produce advanced telecommunication devices.
The bookings to net sales ratio in the second quarter of fiscal 1994 has
declined from the first quarter of fiscal 1994, which was unusually high
due to the $80 million order from Hyundai. The Company anticipates that
the bookings to net sales ratio will remain positive during the remainder
of fiscal 1994.
Gross margin as a percentage of sales for the three and six month periods ended
May 1, 1994 increased approximately three percentage points from the
corresponding periods in fiscal 1993. The continued improvement
in gross margin percentage primarily reflects economies of scale in
manufacturing and service and support operations as net sales have reached
record levels. Past margin trends are not necessarily indicative of future
margin performance.
Operating expenses for the three and six month periods ended May 1, 1994
decreased 4.5 and 4.2 percentage points as a percentage of sales,
respectively, compared to the corresponding periods in fiscal 1993. This
improvement is driven primarily by the Company's record sales levels.
The Company intends to invest significant funds for facilities expansion,
information systems technology and personnel to support higher volumes of
business and thus there can be no assurance that the Company will be
successful in maintaining or improving future operating expenses as a
percentage of sales.
The Company's effective tax rate for the first quarter and first half of fiscal
1994 was 35 percent, up from 33 percent in fiscal 1993. This increase
is due to recently enacted U.S. tax legislation as well as variations in the
Company's worldwide income mix and foreign taxes. Management anticipates the
35 percent effective tax rate will continue through the end of fiscal 1994.
Net income for the first half of fiscal 1994 of $99.5 million includes the
favorable impact of an accounting change of $7.0 million, or $0.08
per share, from the cumulative effect of the adoption of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes"(SFAS 109).
The Company adopted SFAS 109 prospectively and the cumulative accounting
change is reported separately in the Consolidated Condensed Statement of
Operations.
The market served by the Company is characterized by rapid technological change,
increasingly precise customer specifications and global service requirements.
The Company's future operating results may be affected inherent uncertainties
characteristic of the worldwide semiconductor equipment include, but are not
limited to, the development of new technologies, the anticipated transition to
a new generation of microprocessors, competitive pricing pressures,
global economic conditions, and the availability of needed components.
Accordingly, recent historical operating results should be only one factor
in evaluating the future financial performance of the Company.
Financial Condition, Liquidity and Capital Resources
The Company's financial condition at May 1, 1994 remained strong. Total current
assets exceeded total current liabilities by 2.4 times, compared to 2.0
at October 31, 1993. During the first two quarters of fiscal 1994, cash,
cash equivalents, and short-term investments increased $62.9 million, due
primarily to the Company's sale of 2.3 million shares of common stock in
the second quarter of fiscal 1994. Cash provided by operations since October
31, 1993 totaled $18.3 million, resulting primarily from net income and
increases in accounts payable and accrued expenses, partially offset by
increased inventory and accounts receivable levels. The increase in accounts
receivable was due to increased net sales over the prior period. Inventory
levels have increased in order to fulfill customer orders scheduled for
delivery in the third quarter of fiscal 1994. Other uses of cash include
investments in facilities and capital equipment of $59.6 million and
borrowing reductions of $9.3 million. Capital expenditures are expected to be
approximately $180 million for fiscal year 1994. This amount has increased
due to greater than anticipated growth requiring additional funds for
facilities expansion, investments in demonstration and test equipment,
information systems and other capital expenditures. The Company must continue
to manage its manufacturing capacity to ensure that customer demands will be
met.
At May 1, 1994, the Company's principal sources of liquidity consisted of
$329.1 million of cash and short-term investments and $130.4 million
in available U.S. and foreign credit facilities. In addition, the Company
filed a shelf registration with the Securities and Exchange
Commission during the second quarter of fiscal 1994 for the
sale of common stock and issuance of debt securities. The sale of 2.3 million
shares of common stock occurred in the second quarter of fiscal 1994
and no assurances can be given that the sale of debt securities will occur.
The Company's liquidity is affected by many factors, some based on the typical
on-going operations of the business and others related to the uncertainties
of the industry and global economies. Although the Company's cash
requirements will fluctuate based on the timing and extent of these factors,
management believes that cash generated from operations, together
with the liquidity provided by existing cash balances and current borrowing
arrangements, will be sufficient to support operations through fiscal year
1994.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
In the first of two lawsuits filed by the Company against Advanced
Semiconductor Materials, Inc., Epsilon Technology, Inc. (doing business as ASM
Epitaxy) and Advanced Semiconductor Materials International
N.V. (the defendants, together, hereafter referred to as "ASM"), described
in the Company's Annual Report on Form 10-K for its fiscal year
ended October 31, 1993, Judge William Ingram of the United States District
Court for the Northern District of California in San Jose
issued his decision from the trial which had concluded in August 1993.
Judge Ingram found that, of the five patents which the Company
had asserted against the ASM Epsilon One epitaxial reactor, three patents are
infringed, one is not infringed, and one is invalid. Of the patents
which the court found are infringed, two remain effective until 2002
and 2005, respectively, and one is expired. The Company is seeking an
injunction against further sales of the Epsilon One by ASM. ASM is expected
to appeal the Court's decision and seek a stay of any injunction which
may be issued. The damages to which the Company is entitled
as a result of ASM's infringement, as well as ASM's counterclaims,
will be decided at a later date in separate proceedings. The Company
believes that ASM's counterclaims are not meritorious in view of the Court's
decision that the Company's patents are infringed.
In the second of the two suits filed by the Company against ASM described
in the Company's 10-K for fiscal year 1993, the Company was successful in
obtaining an order of the Court dismissing, striking,
or eliminating from the suit, certain affirmative defenses and
counterclaims asserted by ASM. The dismissed defenses and counter claims
alleged that the Company obtained the patent which it is asserting against ASM
in this suit by "inequitable conduct." The Court ruled as a matter of law
that the Company did not engage in inequitable conduct.
Item 4. Submission of Matters to a Vote of Security-Holders.
The Annual Meeting of Stockholders was held March 3, 1994 in Santa Clara,
California. All nine incumbent directors were re-elected without
opposition to serve another one year term in office. In addition,
Michael Armacost was elected to the Board of Directors. The result
of this election was as follows:
Name of Director Votes For Votes Withheld
James C. Morgan 56,627,066 279,874
James W. Bagley 56,627,282 279,658
Dan Maydan 56,627,262 279,678
Michael Armacost 56,627,282 279,658
Herbert M. Dwight, Jr. 56,627,282 279,658
George B. Farnsworth 56,626,694 280,246
Philip V. Gerdine 56,627,282 279,658
Paul R. Low 56,624,682 282,258
Alfred J. Stein 56,627,182 279,758
Hiroo Toyoda 56,627,282 279,658
On a proposal to amend the Company's Certificate of Incorporation to increase
the number of authorized Common Shares to 200,000,000,
there were 53,917,924 votes cast in favor of this measure and 2,725,660
votes cast against it. There were 263,356 abstentions and no
broker non-votes.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits are numbered in accordance with the Exhibit Table of Item 601 of
Regulation S-K:
10.16 The 1985 Stock Option Plan for Non-Employee Directors, as amended
to December 8, 1993.
10. 17 Amendment No. 2 to the Applied Materials, Inc. Executive Deferred
Compensation Plan, dated May 9, 1994.
b) No reports on Form 8-K were filed by the Company during the quarter
ended May 1, 1994.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
APPLIED MATERIALS, INC.
June 2, 1994 By:/s/Gerald F. Taylor____
Gerald F. Taylor
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
By:/s/Michael K O'Farrell___
Michael K. O'Farrell
Corporate Controller
(Principal Accounting Officer)
INDEX TO EXHIBITS
Exhibits are numbered in accordance with the Exhibit Table of Item 601 of
Regulation S-K:
10.16 The 1985 Stock Option Plan for Non-Employee Directors, as
amended to December 8, 1993. 14
10.17 Amendment No. 2 to the Applied Materials, Inc. Executive Deferred
Compensation Plan, dated May 9, 1994. 30
APPLIED MATERIALS, INC.
1985 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
(as amended to December 8, 1993)
ARTICLE I
GENERAL
1. PURPOSE.
This 1985 Stock Option Plan for Non-Employee Directors
(the "Plan") is intended to attract and retain the services of
experienced and knowledgeable independent directors of Applied
Materials, Inc., a California corporation (the "Company"), for
the benefit of the Company and its shareholders and to provide
additional incentive for such directors to continue to work for
the best interests of the Company and its shareholders.
2. ADMINISTRATION.
The Plan shall be administered by the Board of
Directors of the Company (the "Board"). The Board shall have the
power to construe the Plan, to determine all questions arising
thereunder and to adopt and amend such rules and regulations for
the administration of the Plan as it may deem desirable.
The interpretation and construction by the Board of any
provisions of the Plan or of any option granted under it shall be
final. No member of the Board shall be liable for any action or
determination made in good faith with respect to the Plan or any
option granted under it.
3. ELIGIBILITY.
Only directors who are not employees of the Company or
any subsidiary are eligible participants in the Plan. Each such
person who shall have been elected or appointed a director of the
Company shall automatically be granted options to purchase
20,000 shares of the Company's Common Stock (the "Appointment
Grant") (subject to further adjustment as provided in Article III
hereof) on the date that any such person is for the first time
either appointed by the Board of Directors or elected by the
shareholders of the Company to the Board of Directors.
In addition, each such director of the Company shall
automatically be granted options to purchase 6,0001/ shares of the
Company's Common Stock (subject to further adjustment as provided
in Article III hereof) on the last business day of fiscal years
1986 through and including 1994, provided, that such automatic
option grants shall only be made if the recipient director (i) is
not otherwise an employee of the Company or any subsidiary on the
date of grant, (ii) has not been an employee of the Company or
any subsidiary for all or any part of the preceding fiscal year,
and (iii) has served on the Board of Directors for the entire
preceding fiscal year.
The dates on which options are granted hereunder are
referred to herein as the "Grant Date."
In the event that the number of shares of the Company's
Common Stock subject to future grants under the Plan is
insufficient to make all automatic grants required to be made on
the Grant Date, then all non-employee directors entitled to a
grant on such date shall share ratably in the number of options
on shares of the Company's Common Stock available for grant under
the Plan.
4. SHARES OF STOCK SUBJECT TO THE PLAN.
The shares that may be issued under the Plan shall be
authorized and unissued or reacquired shares of the Company's
common stock (the "Common Stock"). The aggregate number of
shares which may be issued under the Plan shall not exceed
800,000 shares of Common Stock, unless an adjustment is
required in accordance with Article III.
5. AMENDMENT OF THE PLAN.
The Board of Directors may, insofar as permitted by
law, from time to time, suspend or discontinue the Plan or revise
or amend it in any respect whatsoever, except that no such
amendment shall alter or impair or diminish any rights or
obligations under any option theretofore granted under the Plan
without the consent of the person to whom such option was
granted. In addition, without further shareholder approval, no
such amendment shall increase the number of shares subject to the
Plan (except as authorized by Article III), increase the number
of shares for which an option may be granted to any optionee
(except as authorized by Article III), change the designation in
Section 3 of Article I of the class of persons eligible to
receive options under the Plan, provide for the grant of options
having an option price per share less than fair market value (as
defined in Section 11 of this Article I) on the date of grant,
extend the term during which options may be exercised, extend the
final date upon which options under the Plan may be granted, or
otherwise amend the Plan in a way that would require shareholder
approval under Rule 16b-3.
The Company's shareholders shall approve amendments by
the affirmative votes of the holders of a majority of the
securities of the Company present, or represented, and entitled
to vote at a meeting (with the shares held by the interested
director or directors not being entitled to vote thereon), or any
adjournment thereof, duly held in accordance with the applicable
laws of the state or other jurisdiction in which the Company is
incorporated.
6. APPROVAL OF SHAREHOLDERS.
The Plan is effective September 5, 1985, subject to
approval by the affirmative votes of the holders of a majority of
the securities of the Company present, or represented, and
entitled to vote at the next annual meeting of shareholders (with
the shares held by the interested director or directors not being
entitled to vote thereon), or any adjournment thereof, duly held
in accordance with California law. No option granted hereunder
may become exercisable unless and until such approval is
obtained.
7. TERM OF PLAN.
Options may be granted under the Plan until October 30,
1994, the date of termination of the Plan. Notwithstanding the
foregoing, each option granted under the Plan shall remain in
effect until such option has been satisfied by the issuance of
shares or terminated in accordance with its terms and the terms
of the Plan.
8. RESTRICTIONS.
All options granted under the Plan shall be subject to
the requirement that, if at any time the Board shall determine,
in its discretion, that the listing, registration or
qualification of the shares subject to options granted under the
Plan upon any securities exchange or under any state or federal
law, or the consent or approval of any government regulatory
body, is necessary or desirable as a condition of, or in
connection with, the granting of such option or the issuance, if
any, or purchase of shares in connection therewith, such option
may not be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the
Board.
9. NONASSIGNABILITY.
No option shall be assignable or transferable by the
grantee except by will or by the laws of descent and
distribution. During the lifetime of the optionee, the option
shall be exercisable only by him, and no other person shall
acquire any rights therein.
10. WITHHOLDING TAXES.
Whenever shares of Common Stock are to be issued under
the Plan, the Company shall have the right to require the
optionee to remit to the Company an amount sufficient to satisfy
federal, state and local withholding tax requirements prior to
the delivery of any certificate or certificates for such shares.
11. DEFINITION OF "FAIR MARKET VALUE".
For the purposes of this Plan, the term "fair market
value," when used in reference to the date of grant of an option
or the date of surrender of Common Stock in payment for the
purchase of shares pursuant to the exercise of an option, as the
case may be, shall be the last reported sale price in the NASDAQ
National Market System on such date as published in The Wall
Street Journal or, if no report is available for such date, the
next preceding date for which a report is available.
ARTICLE II
STOCK OPTIONS
1. AWARD OF STOCK OPTIONS.
Awards of stock options shall be made under the Plan
under all the terms and conditions contained herein. Each option
granted under the Plan shall be evidenced by an option agreement
duly executed on behalf of the Company and by the director to
whom such option is granted, which option agreements may but need
not be identical and shall comply with and be subject to the
terms and conditions of the Plan. Any option agreement may
contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Board.
2. TERM OF OPTIONS AND EFFECT OF TERMINATION.
Notwithstanding any other provision of the Plan, no
option granted under the Plan shall be exercisable after the
expiration of five years from the date of its grant.
In the event that any outstanding option under the Plan
expires by reason of lapse of time or otherwise is terminated for
any reason, then the shares of Common Stock subject to any such
option which have not been issued pursuant to the exercise of the
option shall again become available in the pool of shares of
Common Stock for which options may be granted under the Plan.
3. TERMS AND CONDITIONS OF OPTIONS.
Options granted pursuant to the Plan shall be evidenced
by agreements in such form as the Board shall from time to time
determine, which agreements shall comply with the following terms
and conditions.
A. Number of Shares
Each option agreement shall state the number of
shares to which the option pertains.
B. Option Price
Each option agreement shall state the option price
per share (or the method by which such price shall be computed),
which shall be equal to 100% of the fair market value of a share
of the Common Stock on the date such option is granted.
C. Medium and Time of Payment
The option price shall be payable upon the
exercise of an option in the legal tender of the United States or
in shares of the Common Stock or in a combination of such legal
tender and such shares. Upon receipt of payment, the Company
shall deliver to the optionee (or person entitled to exercise the
option) a certificate or certificates for the shares of Common
Stock to which the option pertains.
D. Exercise of Options
Options granted to directors other than the
Appointment Grant shall become exercisable in installments to the
extent of one-fourth, excluding fractional shares, of the shares
covered by the option on the date one year after the Grant Date,
an additional one-fourth, excluding fractional shares, of the
shares covered by the option on the date two years after the
Grant Date, an additional one-fourth, excluding fractional
shares, of the shares covered by the option on the date three
years after the Grant Date, and the remaining shares covered by
the option on the date four years after the Grant Date.
Options granted pursuant to the Appointment Grant
shall become exercisable with respect to 6,000 shares on the
date one year after the Grant Date; an additional 5,5003/ shares
on the date two years after the Grant Date; an additional 5,0003/
shares on the date three years after the Grant Date; and the
final 3,5003/ shares on the date four years after the Grant Date.
To the extent that an option has become
exercisable and subject to the restrictions and limitations set
forth in this Plan and any option agreement, it may be exercised
in whole or such lesser amount as may be authorized by the option
agreement, provided, however, that no option shall be exercised
for fewer than ten shares. If exercised in part, the unexercised
portion of an option shall continue to be held by the optionee
and may thereafter be exercised as provided herein.
E. Termination of Directorship Except by Death
In the event that an optionee shall cease to be a
director of the Company for any reason other than his death, his
option shall be exercisable, to the extent it was exercisable at
the date he ceased to be a director, for a period of seven months
after such date, and shall then terminate. Such option may be
exercised at any time within such seven-month period and prior to
the date on which the option expires by its terms.
F. Death of Optionee and Transfer of Option
If an optionee dies while a director of the
Company, or within the seven-month period after termination of
such status during which he is permitted to exercise an option in
accordance with Subsection 3(E) of this Article II, such option
may be exercised at any time within one year after the
optionee's death, but only to the extent the option was
exercisable at the time of death. Such option may be exercised
at any time within such one year period and prior to the date on
which the option expires by its terms. During such period, such
option may be exercised by any person or persons designated by
the optionee on a Beneficiary Designation Form adopted by the
Board for such purpose, or, if there is no effective Beneficiary
Designation Form on file with the Board, by the executors or
administrators of the optionee's estate or by any person or
persons who shall have acquired the option directly from the
optionee by his will or the applicable law of descent and
distribution.
ARTICLE III
RECAPITALIZATIONS AND REORGANIZATIONS
The number of shares of Common Stock covered by the
Plan, the number of shares and price per share of each
outstanding option, and the number of shares subject to each
grant provided for in Article I, Section 3 hereof shall be
proportionately adjusted for any increase or decrease in the
number of issued and outstanding shares of Common Stock resulting
from a subdivision or consolidation of shares or the payment of a
stock dividend or any other increase or decrease in the number of
issued and outstanding shares of Common Stock effected without
receipt of consideration by the Company.
If the Company shall be the surviving corporation in
any merger or consolidation, each outstanding option shall
pertain to and apply to the securities to which a holder of the
same number of shares of Common Stock that are subject to that
option would have been entitled. A dissolution or liquidation of
the Company, or a merger or consolidation in which the Company is
not the surviving corporation, shall cause each outstanding
option to terminate, unless the agreement of merger or
consolidation shall otherwise provide; provided that, in the
event such dissolution, liquidation, merger or consolidation will
cause outstanding options to terminate, each optionee shall have
the right immediately prior to such dissolution, liquidation,
merger or consolidation to exercise his option in whole or in
part without regard to any limitations on the exercisability of
such option other than (i) the expiration date of the option,
(ii) the limitation set forth in Section 9 of Article I, and
(iii) the ten share limitation set forth in Section 3(D) of
Article II.
To the extent that the foregoing adjustments relate to
stock or securities of the Company, such adjustments shall be
made by the Board, whose determination in that respect shall be
final, binding and conclusive.
The grant of an option pursuant to the Plan shall not
affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its
capital or business structure or to merge or to consolidate or
to dissolve, liquidate or sell, or transfer all or any part of
its business or assets.
ARTICLE IV
MISCELLANEOUS PROVISIONS
1. RIGHTS AS A SHAREHOLDER.
An optionee or a transferee of an option shall have no
rights as a shareholder with respect to any shares covered by an
option until the date of the receipt of payment (including any
amounts required by the Company pursuant to Section 10 of
Article I) by the Company. No adjustment shall be made as to any
option for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other rights
for which the record date is prior to such date, except as
provided in Article III.
2. PURCHASE FOR INVESTMENT.
Unless the shares of Common Stock to be issued upon
exercise of an option granted under the Plan have been
effectively registered under the Securities Act of 1933 as now in
force or hereafter amended, the Company shall be under no
obligation to issue any shares of Common Stock covered by any
option unless the person who exercises such option, in whole or
in part, shall give a written representation and undertaking to
the Company which is satisfactory in form and scope to counsel to
the Company and upon which, in the opinion of such counsel, the
Company may reasonably rely, that he is acquiring the shares of
Common Stock issued to him pursuant to such exercise of the
option for his own account as an investment and not with a view
to, or for sale in connection with, the distribution of any such
shares of Common Stock, and that he will make no transfer of the
same except in compliance with any rules and regulations in force
at the time of such transfer under the Securities Act of 1933, or
any other applicable law, and that if shares of Common Stock are
issued without such registration, a legend to this effect may be
endorsed upon the securities so issued.
3. OTHER PROVISIONS.
The option agreements authorized under the Plan shall
contain such other provisions, including, without limitation,
restrictions upon the exercise of the option or restrictions
required by any applicable securities laws, as the Board shall
deem advisable.
4. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of
Common Stock pursuant to the exercise of options will be used for
general corporate purposes.
5. NO OBLIGATION TO EXERCISE OPTION.
The granting of an option shall impose no obligation
upon the optionee to exercise such option.
AMENDMENT NO. 2 TO THE
APPLIED MATERIALS, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
APPLIED MATERIALS, INC., having adopted the
Applied Materials, Inc. Executive Deferred Compensation Plan
effective as of July 1, 1993 (the "Plan"), hereby amends
Section 2.1.2 of the Plan, effective as of January 1, 1994, to
read in its entirety as follows:
2.1.2 Initial Elections by Other Employees. Each
individual who becomes an Eligible Employee after July 1,
1993 (whether by hire or promotion) may elect to become a
Participant in the Plan by electing, within thirty days of
the date of his or her hire or promotion (as the case may
be), to make Compensation Deferrals under the Plan. An
election under this Section 2.1.2 to make Compensation
Deferrals shall be effective only for the Plan Year with
respect to which the election is made.
IN WITNESS WHEREOF, Applied Materials, Inc., by its
duly authorized officer, has executed this Amendment No. 2 on the
date indicated below.
APPLIED MATERIALS, INC.
Dated: ____________________ By ___________________________
Title:
