<PAGE> 1
1994
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 OCTOBER 30, 1994
[ ] 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)
<TABLE>
<S> <C>
DELAWARE 94-1655526
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3050 BOWERS AVENUE, SANTA CLARA, CALIFORNIA 95054
Address of principal executive offices (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (408) 727-5555
</TABLE>
<TABLE>
<S> <C>
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of class Name of each exchange on which registered
-------------- -----------------------------------------
None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $.01 par value NASDAQ
</TABLE>
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 or any amendment to
this Form 10-K. [ ]
Aggregate market value of the voting stock held by non affiliates of the
registrant as of November 1, 1994: $4,138,522,014
Number of shares outstanding of the issuer's Common Stock, $.01 par value, as
of November 1, 1994: 84,119,287.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of Applied Materials 1994 Annual Report for the year ended October 30,
1994 are incorporated by reference into Parts I , II and IV of this Form 10-K.
Portions of the definitive Proxy Statement for the Company's Annual Meeting of
Stockholders to be held on March 14, 1995 are incorporated by reference into
Part III of this Form 10-K.
Index of Exhibits on pages 29 through 31.
1 of 217
<PAGE> 2
PART I
ITEM 1: BUSINESS
Organized in 1967, Applied Materials, Inc. ("Applied Materials" or
the "Company") develops, manufactures, markets and services semiconductor wafer
fabrication equipment and related spare parts. The Company's worldwide
customers include both companies which manufacture semiconductor devices for
use in their own products and companies which manufacture semiconductor devices
for sale to others. Applied Materials operates exclusively in the semiconductor
wafer fabrication equipment industry. The Company is also a fifty percent
stockholder in Applied Komatsu Technology, Inc., which produces thin film
transistor manufacturing systems for active-matrix liquid crystal displays.
PRODUCTS
Applied Materials' products are sophisticated systems requiring
state-of-the-art technology in wafer processing chemistry and physics,
particulate management, automation, process control and software. Many of
these technologies are complementary and can be applied across all of the
Company's products. The Company's products provide enabling technology,
productivity and yield enhancements to semiconductor manufacturers. The
Company's products are used to fabricate semiconductor devices on a substrate
of semiconductor material (usually silicon). Finished devices consist of thin
film layers which can form anywhere from one to millions of tiny electronic
components that combine to perform desired electrical functions. The
fabrication process must control film and feature quality to ensure proper
device performance while meeting yield and throughput goals. The Company
currently manufactures equipment that addresses three steps in wafer
fabrication: deposition, etch and ion implantation.
Single-wafer, multichamber architecture.
Recognizing the trend toward more stringent process requirements and
larger wafer sizes, Applied Materials developed a single-wafer, multichamber
system called the Precision 5000. The Company introduced the Precision 5000
with dielectric Chemical Vapor Deposition (CVD) processes in 1987, etch
processes in 1988 and CVD tungsten processes (WCVD) in 1989. The Precision
5000's single-wafer, multichamber architecture which features several
processing chambers, each of which is attached to a central handling system, is
designed for both serial and integrated processing. The Precision 5000's
integrated processing capability makes it possible to perform multiple process
steps without the wafer leaving a controlled environment, thus reducing the
risk of particulate contamination. The Company leveraged its expertise in
single-wafer, multichamber architecture to develop an evolutionary platform
called the Endura 5500 PVD (physical vapor deposition) in 1990 featuring a
staged, ultra-high vacuum architecture for the rapid sputtering of aluminum and
other metal films used to form the circuit interconnections on advanced
devices. In October 1991, the Company announced its second-generation
Precision 5000 system, the Precision 5000 Mark II, with numerous enhancements
to the platform, process chambers and remote support equipment. The Precision
5000 Mark II is used to manufacture advanced devices, such as 16 megabit DRAMs
(Dynamic Random Access Memories), on wafers up to 200mm (8-inch) in diameter.
In September 1992, the Company announced its latest generation single-wafer,
multichamber platform, the Centura, to target the high temperature thin films
market as well as future process applications with 0.5 micron and below
specifications. The Company has shipped more than 2,000 multichamber platforms
and more than 6,000 process chambers. For the fiscal year ended October 30,
1994, sales of the Company's single-wafer, multichamber systems accounted for
approximately 86% of systems revenue.
2
<PAGE> 3
Deposition.
A fundamental step in semiconductor fabrication, deposition is the
process of layering either electrically insulating (dielectric) or electrically
conductive material on the wafer. Applied Materials currently participates in
chemical vapor deposition (CVD), physical vapor deposition (PVD), and epitaxial
and polysilicon deposition.
CVD. Chemical vapor deposition deposits thin films
(insulators, conductors and semiconductors) from gaseous sources. In
1987, the Company introduced the Precision 5000 CVD which performs a
broad range of deposition processes utilizing up to four individual
chambers on a single system. In 1989, the Company entered the market
for metal CVD with a new system for blanket tungsten deposition, the
Precision 5000 WCVD. This system is based on the single-wafer,
multichamber Precision 5000 CVD system architecture and is designed to
reduce operating costs for tungsten deposition and to produce
high-quality tungsten films for interconnect applications in advanced
semiconductor devices. In 1990, the Company introduced integrated
tungsten plug fabrication capability by combining its blanket tungsten
CVD deposition and etchback capabilities onto the same system. In
1991, the Company introduced tungsten silicide capabilities and in
1993, titanium nitride (TiN) capabilities to further extend the
Precision 5000 platform offerings. The Company released its newest
generation of sub-atmospheric process technology on the Precision 5000
Mark II CVD platform in April 1994, addressing 0.35 micron
applications. In May 1994, the Company introduced a new
multi-platform chamber for blanket tungsten deposition on wafers up to
200mm (8 inch) in diameter.
PVD. Physical vapor deposition sputters metals on wafers
during semiconductor fabrication. Unlike CVD, the sources of the
deposited materials are solid sources of the films to be deposited.
Applied Materials entered the PVD market in April 1990 with the Endura
PVD system. The system utilizes a modular, single-wafer, multichamber
platform which accommodates ultra-high vacuum (UHV) processes like
PVD, and conventional high-vacuum processes like CVD and etch. In July
of 1993, the Company introduced the Endura High Productivity (HP) PVD
system, an enhanced version of the Endura PVD system. In November
1993, the Centura HP PVD was introduced in order to offer customers a
choice of platforms using the Company's PVD technology.
Epitaxial and polysilicon deposition. Epitaxial and
polysilicon deposition involve depositing a layer of high-quality,
silicon-based compounds on the surface of the silicon wafer. The
epitaxial layer forms the base of some types of integrated circuits.
In 1989, the Company introduced the Precision 7700 Epi system for
advanced silicon deposition. The 7700 system extends the capabilities
of radiantly-heated "barrel" technology and incorporates
fully-automated wafer handling as well as many features for
particulate control. In September 1992, the Company announced the
Centura Poly, a single-wafer, multichamber platform targeted at the
high-temperature thin film deposition of polysilicon on wafers up to
200mm (8 inch) in diameter. The Centura Epi system, which deposits
epitaxial silicon, was announced in March 1993. In December 1993, the
Company launched the Polycide Centura which combines chambers for
polysilicon and tungsten silicide deposition on the Centura platform.
3
<PAGE> 4
Etch.
Before etch processing begins, a wafer is patterned with photoresist
during photolithography. Etching then selectively removes material from areas
which are not covered by the photoresist pattern. Applied Materials entered
the etch market in 1981 with the introduction of the AME 8100 etch system,
which utilized a batch process technology for dry plasma etching. In 1985, the
Company introduced the Precision Etch 8300, which featured improved levels of
automation and particulate control. The Company continues to sell the
Precision Etch 8300 product and has shipped approximately 825 systems. Applied
Materials' first single-wafer, multichamber system for the dry etch market was
the Precision 5000 Etch, introduced in 1988. In 1990, the Company introduced a
metal etch system based on the Precision 5000 architecture which provides
single-wafer, aluminum etch capabilities. In July 1993, the Company introduced
its next generation etch system, the Omega Centura, designed for critical oxide
etch applications requiring sub-0.5 micron design rules. This announcement was
followed by the October 1993 introduction of the Precision 5000 Mark II Etch
MxP, a new model of the Precision 5000-series etch system with several
enhancements including process capability for 0.35 micron applications. In
July 1994, Applied Materials introduced the Metal Etch MxP Centura, which
combines sub-0.5 micron process technology with improved throughput.
Ion Implantation.
During ion implantation, silicon wafers are bombarded by a
high-velocity beam of electrically charged ions. These ions penetrate the
wafer at selected sites and change the electrical properties of the implanted
area. Applied Materials entered the high-current portion of the implant market
in 1985 with the Precision Implant 9000 and introduced the Precision Implant
9200 in 1988. In 1989, the Company added enhancements to the 9200 series
including a new option for automated selection of implant angles, and new
hardware/software options that enable customers to perform remote monitoring
and diagnostics. In 1991, the Company announced an enhanced version of its
high-current ion implanter and designated it the Precision Implant 9200XJ. In
November 1992, the Company introduced a new high-current ion implantation
system, the Precision Implant 9500, to address the production of high-density
semiconductor devices, such as 16 megabit and 64 megabit memory devices and
advanced microprocessors.
CUSTOMER SERVICE AND SUPPORT
The customer requirement for high yields of integrated circuits during
the manufacturing process requires that semiconductor wafer fabrication
equipment operates reliably, with maximum uptime and within very precise
tolerances. Applied Materials installs its equipment and provides warranty
service worldwide through offices located in the United States, Japan, Europe
and the Asia-Pacific region (Korea, Taiwan, China and Singapore). Applied
Materials maintains 54 service/sales offices worldwide, with 15 offices in
Japan, 9 offices in Europe, 8 offices in the Asia/Pacific region, and the
remainder in the United States. The Company offers a variety of service
contracts to customers for maintenance of installed equipment and provides a
comprehensive training program for all customers.
BACKLOG
At October 30, 1994, the Company's backlog totaled $715.2 million,
compared to $365.8 million at October 31, 1993. The Company expects to fill
the present backlog of orders during fiscal 1995.
4
<PAGE> 5
MANUFACTURING, RAW MATERIALS AND SUPPLIES
The Company's manufacturing activities consist primarily of assembling
various commercial and proprietary components into finished systems,
principally in the United States, with additional operations in England and
Japan. Production requires some raw materials and a wide variety of mechanical
and electrical components, which are manufactured to the Company's
specifications. Multiple commercial sources are available for most components.
The Company has consolidated the number of sources for several key purchased
items for purposes of improving its position with its suppliers, resulting in
higher levels of on-time delivery, lower inventory levels and better pricing to
the Company. There have been no significant delays in receiving components
from sole source suppliers; however, the unavailability of any of these sources
could disrupt scheduled deliveries to customers.
MARKETING AND SALES
Because of the highly technical nature of its products, the Company
markets its products worldwide through a direct sales force, with sales,
service and spare parts offices in the United States, Japan, Europe and the
Asia-Pacific region. For the fiscal year ended October 30, 1994, sales to
customers in the United States, Japan, Europe and Asia-Pacific accounted for
approximately 37%, 27%, 18% and 18%, respectively, of the Company's net sales.
For the fiscal year ended October 31, 1993, sales to customers in the United
States, Japan, Europe and Asia-Pacific accounted for approximately 38%, 25%,
20% and 17%, respectively, of the Company's net sales. The Company's business
is not considered to be seasonal in nature, but it is subject to the capital
equipment expenditure patterns of major semiconductor manufacturers which are
based on many factors including anticipated market demand for integrated
circuits, the development of new technologies and global economic conditions.
RESEARCH AND DEVELOPMENT
The market served by the Company is characterized by rapid
technological change. The Company's research and development efforts are global
in nature. Engineering organizations are located in the United States,
England, Israel and Japan, with process support and customer demonstration
laboratories in the United States, England and Japan. In 1991, the Company
announced the opening of an expanded technology center in Narita, Japan. In
1994, the Company announced plans to build and operate technology centers in
South Korea and Taiwan. The Company also operates a technology center in
Israel which is being used to develop controller configuration and software
tools for its semiconductor processing systems. Applied Materials' research
and development activities are primarily directed toward the development of new
wafer processing systems and new process applications for existing products.
Applied Materials works closely with its global customers to design its systems
to meet its customers' planned technical and production requirements.
COMPETITION
The global semiconductor equipment industry is highly competitive and
is characterized by rapid technological advancements and demanding worldwide
service requirements. Each of the Company's products competes in markets
defined by the particular wafer fabrication process it performs. There are
several companies that compete with Applied Materials in each of these markets.
Competition is based on many factors, primarily technological advancements,
productivity and cost-effectiveness, customer support, contamination control,
and overall product quality. Management believes that the Company's
competitive advantage in each of its served markets is based on the ability of
its products and services to address customer requirements as they relate to
these competitive factors.
5
<PAGE> 6
Applied Materials is a principal supplier in each of its served
markets. The Company faces strong competition throughout the world from other
semiconductor equipment manufacturers as well as semiconductor manufacturers
who design and produce fabrication equipment for their own internal uses and,
in some cases, for resale. Management believes that the Company is a strong
competitor with respect to its products, services and resources. However, new
products, pricing pressures, and other competitive actions from both new and
existing competitors could adversely affect the Company's market position.
JOINT VENTURE
In September 1991, the Company announced its plans to develop thin
film transistor (TFT) manufacturing systems for Active-Matrix Liquid Crystal
Displays (AMLCDs). The AMLCD market currently includes screens for laptop,
notebook and palmtop computers and instrument displays, and the Company
believes that this market in the future may include high-resolution
workstations and high definition television (HDTV). In September 1993, a joint
venture company was formed with Applied Materials, Inc. and Komatsu Ltd. of
Japan sharing a 50-50 ownership of the joint venture. The joint venture,
Applied Komatsu Technology, Inc. (AKT), is accounted for using the equity
method. The Company's management believes that systems developed by AKT have
the potential to lower the manufacturing costs of AMLCDs. The Company has
granted to AKT an exclusive license to use the Company's intellectual property
to develop, make, and sell products for the manufacture of flat panel displays,
in exchange for royalties in respect thereof. AKT anticipates accelerating its
investment in product technologies for both PVD and Etch in addition to
expanding the substrate size of its CVD product in fiscal 1995 and 1996.
PATENTS AND LICENSES
Management believes that the Company's competitive position is
primarily dependent upon skills in engineering, production, and marketing
rather than its patent position. However, protection of the Company's
technology assets by obtaining and enforcing patents is increasingly important.
Consequently, the Company has an active program to file applications in both
the United States and in other countries on inventions which the Company
considers significant. The Company has a number of patents in the United
States and other countries and additional applications are pending relating to
new developments in its equipment and processes. In addition to patents, the
Company also possesses other proprietary intellectual property, including
trademarks, know-how, trade secrets and copyrights.
The Company enters into patent and technology licensing agreements
with others when management determines that it is in the Company's interest to
do so. The Company pays reasonable royalties under existing patent license
agreements for the use, in several of its products, of certain patents which
are licensed to the Company for the life of the patents.
The Company has made its technology, including patents, available to
AKT through a license arrangement which permits AKT to use the Company's
technology to develop, manufacture and sell equipment for the flat panel
display industry.
In the normal course of business, the Company from time to time
receives and makes inquiries with regard to possible patent infringement. In
dealing with such inquiries, it may become necessary or useful in the future
for the Company to obtain and grant licenses or other rights. However, there
can be no assurance that such license rights will be available to the Company
on commercially reasonable terms. While there can be no assurance about the
outcome of such inquiries, the Company believes it is unlikely that their
resolution will have a material adverse effect on its financial position.
6
<PAGE> 7
ENVIRONMENTAL MATTERS
Although one of the Company's locations has been designated as a
Superfund site by the U.S. Environmental Protection Agency, neither compliance
with Federal, State and local provisions regulating discharge of materials into
the environment, nor remedial agreements or other actions relating to the
environment, has had or is expected to have a material effect on the Company's
capital expenditures, earnings or competitive position.
EMPLOYEES
At October 30, 1994, the Company employed 6,497 persons. None of
these employees was represented by a union. Management considers its relations
with its employees to be good.
The following portions of the Company's 1994 Annual Report are
incorporated herein by reference: "Management's Discussion and Analysis of
Financial Condition and Results of Operations," pages 27 through 30, and the
Consolidated Financial Statements and accompanying notes thereto, pages 31
through 45.
7
<PAGE> 8
ITEM 2: PROPERTIES
Certain information concerning the Company's principal properties at October
30, 1994 is set forth below:
<TABLE>
<CAPTION>
Square
Location Type Principal use Footage Ownership
-------- ---- ------------- ------- ---------
<S> <C> <C> <C>
Santa Clara, CA Office, plant & Headquarters, Marketing, 361,500 owned
warehouse Manufacturing, Research 881,600 leased
and Engineering
Austin, TX Office, plant & Manufacturing 154,000 owned
warehouse
Horsham, England Office, plant & Manufacturing, Research
warehouse and Engineering 74,200 leased
Narita, Japan Office, plant & Manufacturing, Research
warehouse and Engineering 218,400 owned*
Tel Aviv, Israel Office Research and Engineering 15,000 leased
</TABLE>
The Company also leases office space for 54 service and sales offices
throughout the world: 15 offices are located in Japan, 22 offices are in the
United States, 9 offices are in Europe, and 8 offices are located in the
Asia-Pacific region.
The Company owns 173 acres of land in Austin, Texas. This site can
accommodate approximately 1.5 million square feet of building space to help
satisfy the Company's current and future needs. In fiscal 1993, the Company
began volume production at a 154,000 square-foot manufacturing facility. The
Company expects a second facility to be completed in the first quarter of
fiscal 1995.
Management considers the above facilities suitable and adequate to
meet the Company's requirements.
* Subject to loans totaling $50 million secured by property and equipment
having an approximate net book value of $84 million at October 30, 1994.
8
<PAGE> 9
ITEM 3: LEGAL PROCEEDINGS
On February 6, 1991, the Company filed a lawsuit against Advanced
Semiconductor Materials America, Inc., Epsilon Technology, Inc. (doing
business as ASM Epitaxy) and Advanced Semiconductor Materials International
N.V. (the defendants, together, hereafter referred to as "ASM") in the United
States District Court for the Northern District of California. The Company
alleges that ASM has been and is currently infringing certain of the Company's
patents which relate to epitaxial reactors by making and selling, among other
products, the ASM Epsilon I epitaxial reactor. The Company seeks an injunction
against further infringement of these patents, damages for ASM's infringement,
trebling of damages for willful infringement, and reasonable attorneys' fees
and costs. In October, 1992, the Company filed an additional suit against the
same defendants, alleging infringement of an additional patent by the same ASM
Epsilon I epitaxial reactor.
The defendants (except ASM International N.V.) have made counterclaims
against the Company for declaratory judgment of invalidity, unenforceability
and noninfringement of the patents in suit. The defendants also claim that the
Company monopolizes and is attempting to monopolize the market for epitaxial
reactor systems. The defendants seek dismissal, payment by the Company of the
defendants' costs and attorneys' fees, injunctions against the Company, damages
according to proof and trebling of damages.
Trial of the first lawsuit against ASM concluded in August 1993 and in
April 1994, the court issued its decision. The court found that ASM infringed
three of the Company's patents, one of the patents asserted against ASM was
found not infringed and one was found invalid. Subsequently, the court issued
an injunction against ASM's sale and use of Epsilon I epitaxial reactors in the
United States, but granted a stay of the injunction pending an appeal of the
court's decision. The stay order requires ASM to pay a fee, as a security for
the Company's interests, for each Epsilon I sold by ASM in the United States
after the date of the injunction. Proceedings to resolve the issues of
damages, willful infringement, and ASM's counterclaims, which have been
bifurcated for separate trial, will be stayed pending the appeal of the trial
court's infringement and validity decision. Both ASM and the Company are
appealing that decision. The second of the Company's lawsuits against ASM is
currently set for trial in February, 1995.
On January 19, 1993, ASM served a lawsuit on the Company which alleges
that the Company infringes two patents of ASM. The lawsuit was originally
filed by ASM in the United States District Court for the District of Arizona in
Phoenix, Arizona, but has been transferred by the court to the Northern
District of California in San Jose, California. One of the patents relates to
the Company's CVD product lines and the second patent to the Company's
epitaxial product line. The lawsuit seeks to enjoin the Company from
infringing the patents and seeks monetary damages of an unspecified amount and
costs. After substantial discovery, ASM filed a voluntary stay of the
proceedings with respect to one of the patents in suit. Trial of its claims on
the other patent is currently set for May 1995. The Company believes it has
meritorious defenses against ASM's claims.
On September 6, 1994, General Signal Corporation filed a lawsuit
against the Company in the United States District Court, District of Delaware.
General Signal alleges that the Company infringes five of General Signal's
United States Patents by making, using, selling or offering for sale
multichamber wafer fabrication equipment, including for example, the Precision
5000 series machines. General Signal seeks an injunction, multiple damages and
costs, including reasonable attorneys' fees and interest, and other relief as
the court may deem just and proper.
9
<PAGE> 10
The suit is in the early stages of discovery and no date has been set
for trial. The Company believes that it has meritorious defenses against
General Signal's claims.
The Company is a defendant in other litigation arising in the normal
course of business. The Company believes that it is unlikely that the outcome
of these lawsuits will have an adverse material effect on the Company's
financial position or results of operations.
Also see "Environmental Matters" and "Patents and Licenses" under
"Item 1: BUSINESS" above.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS IN FOURTH QUARTER
OF FISCAL 1994
None.
10
<PAGE> 11
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table and notes thereto identify and set forth information
about the Company's seven executive officers:
<TABLE>
<CAPTION>
Name of Individual Capacities in which Served
------------------ --------------------------
<S> <C>
James C. Morgan (1) Chairman of the Board of Directors and Chief Executive Officer
James W. Bagley (2) Vice Chairman of the Board of Directors and Chief Operating Officer
Dan Maydan (3) President of the Company and Co-Chairman of Applied Komatsu Technology, Inc.
Gerald F. Taylor (4) Senior Vice President and Chief Financial Officer
Tetsuo Iwasaki (5) Chairman of Applied Materials Japan, Inc. and President of Applied Komatsu
Technology, Inc.
Sasson Somekh (6) Senior Vice President
David N.K. Wang (7) Senior Vice President
</TABLE>
(1) Mr. Morgan, age 56, has been Chief Executive Officer since 1977 and
Chairman of the Board of Directors since 1987. Mr. Morgan also served
as President of the Company from 1976 to 1987.
(2) Mr. Bagley, age 55, was appointed Vice Chairman of the Board of
Directors in December 1993. Mr. Bagley has been Chief Operating
Officer of the Company since 1987 and served as President of the
Company from 1987 to 1993. Prior to that, Mr. Bagley served as Senior
Vice President of the Company since 1981.
(3) Dr. Maydan, age 59, was appointed President of the Company in December
1993. Dr. Maydan served as Executive Vice President from 1990 to 1993.
Prior to that, Dr. Maydan had been Group Vice President since February
1989. Dr. Maydan joined Applied Materials in 1980 as a Director of
Technology.
(4) Mr. Taylor, age 54, has been Chief Financial Officer of the Company
since 1984 and Senior Vice President since 1991. Prior to that, Mr.
Taylor had been Vice President of Finance since 1984.
(5) Mr. Iwasaki, age 48, has been Chairman of Applied Materials Japan,
Inc. since 1991. Prior to that, Mr. Iwasaki had been President of
Applied Materials Japan, Inc. since 1981. Mr. Iwasaki became
President of Applied Komatsu Technology, Inc. (a 50-50 joint venture
corporation with Komatsu, Ltd.) in 1993.
(6) Dr. Somekh, age 48, was appointed Senior Vice President of the Company
in December 1993. Dr. Somekh served as Group Vice President from 1990
to 1993. Prior to that, Dr. Somekh had been a divisional Vice
President. Dr. Somekh joined Applied Materials in 1980 as a Project
Manager.
(7) Dr. Wang, age 48, was appointed Senior Vice President of the Company
in December 1993. Dr. Wang served as Group Vice President from 1990 to
1993. Prior to that, Dr. Wang had been a divisional Vice President.
Dr. Wang joined Applied Materials in 1980 as a Manager, Process
Engineering and Applications.
11
<PAGE> 12
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
"Stock Price History" on page 47 of the Applied Materials' 1994 Annual
Report is incorporated herein by reference.
The Company's common stock is traded over-the-counter. As of November 1,
1994 there were approximately 1,175 record holders of the common stock.
To date, the Company has paid no cash dividends to its stockholders. The
Company has no plans to pay cash dividends in the near future.
ITEM 6: SELECTED FINANCIAL DATA
"Selected Consolidated Financial Data" on page 26 of the Applied Materials
1994 Annual Report is incorporated herein by reference.
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
"Management's Discussion and Analysis" on pages 27 through 30 of
the Applied Materials 1994 Annual Report is incorporated herein by reference.
12
<PAGE> 13
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements, together with the report
thereon of Price Waterhouse LLP, independent accountants, dated November 23,
1994 and appearing in pages 31 through 47 of Applied Materials 1994 Annual
Report are incorporated by reference in this Form 10-K Annual Report. With the
exception of the aforementioned information and the information incorporated by
reference in items 1, 5, 6, and 7, Applied Materials 1994 Annual Report is not
deemed to be filed as part of this report.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
13
<PAGE> 14
PART III
Pursuant to Paragraph G(3) of the General Instructions to Form 10-K,
portions of the information required by Part III of Form 10-K are incorporated
by reference from the Company's Proxy Statement to be filed with the Commission
in connection with the 1995 Annual Meeting of Stockholders ("the Proxy
Statement").
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Information concerning directors of the Company appears in the
Company's Proxy Statement, under Item 1 "Election of Directors." This
portion of the Proxy Statement is incorporated herein by reference.
(b) For information with respect to Executive Officers, see Part I of this
Form 10-K.
ITEM 11: EXECUTIVE COMPENSATION
Information concerning executive compensation appears in the Company's
Proxy Statement, under the caption "Executive Compensation," and is
incorporated herein by reference.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning the security ownership of certain beneficial
owners and management appears in the Company's Proxy Statement, under Item 1
"Election of Directors," and is incorporated herein by reference.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions
appears in the Company's Proxy Statement, under Item 1 "Election of Directors,"
and is incorporated herein by reference.
14
<PAGE> 15
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Form 10-K:
(1) Consolidated Financial Statements. The following consolidated
financial statements of Applied Materials, Inc. and
subsidiaries, and the related notes and the report of
Price Waterhouse LLP, independent accountants, dated
November 23, 1994, included in the Applied Materials
1994 Annual Report, are incorporated herein by
reference:
<TABLE>
<CAPTION>
Annual Report
Page Number
-------------
<S> <C>
Consolidated Statements of Operations for the Fiscal
Years ended October 30, 1994, October 31, 1993
and October 25, 1992 31
Consolidated Balance Sheets at October 30, 1994
and October 31, 1993 32
Consolidated Statements of Cash Flows for
the Fiscal Years ended October 30, 1994,
October 31, 1993 and October 25, 1992 33
Notes to Consolidated Financial Statements 34 - 45
Report of Independent Accountants 47
</TABLE>
<TABLE>
<CAPTION>
Form 10-K
(2) Financial Statement Schedules Page Number
-----------
<S> <C>
Report of Independent Accountants on Financial Statement
Schedules 21
Schedule I Marketable Securities - Other Investments 22
Schedule II Amounts Receivable from Officers
and Employees 23
Schedule V Property, Plant and Equipment 24
Schedule VI Accumulated Depreciation of Property, Plant
and Equipment 25
Schedule VIII Valuation and Qualifying Accounts 26
Schedule IX Short-term Borrowings 27
Schedule X Supplementary Income Statement Information 28
</TABLE>
Schedules not listed above have been omitted because they are not required
or the information required to be set forth therein is included in the
Consolidated Financial Statements or Notes to Consolidated Financial
Statements.
15
<PAGE> 16
(3) Exhibits - See Exhibit Index on page 29 of this report. The
following exhibits listed in the exhibit index are filed with this
Report.
Executive Compensation Plans and Arrangements
<TABLE>
<S> <C>
10.1 Not used.
10.2 The 1976 Management Stock Option Plan, as amended to October 5, 1993, previously
filed with the Company's Form 10-K for fiscal year 1993, and incorporated herein by
reference.
10.3 Applied Materials, Inc., Supplemental Income Plan, as amended, including
Participation Agreements with James C. Morgan, Walter Benzing, and Robert Graham,
previously filed with the Company's Form 10-K for fiscal year 1981, and incorporated
herein by reference.
10.4 Amendment to Supplemental Income Plan, dated July 20, 1984, previously filed with the
Company's Form 10-K for fiscal year 1984, and incorporated herein by reference.
10.5 The Applied Materials Employee Financial Assistance Plan, previously filed with the
Company's definitive Proxy Statement in connection with the Annual Meeting of
Shareholders held on March 5, 1981, and incorporated herein by reference.
10.6 The 1985 Stock Option Plan for Non-Employee Directors, previously filed with the
Company's Form 10-K for fiscal year 1985, and incorporated herein by reference.
10.7 Amendment 1 to the 1985 Stock Option Plan for Non-Employee Directors dated June 14,
1989, previously filed with the Company's Form 10-K for fiscal year 1989, and
incorporated herein by reference.
10.8 Applied Materials, Inc. Supplemental Income Plan as amended to
December 15, 1988, including participation agreement with James C. Morgan, previously
filed with the Company's Form 10-K for fiscal year 1988, and incorporated herein by
reference.
10.9 Not used.
10.11 The Applied Materials, Inc. Executive Deferred Compensation Plan dated July 1, 1993
and as amended on September 2, 1993, previously filed with
the Company's Form 10-Q for the quarter ended August 1, 1993, and incorporated herein
by reference.
</TABLE>
16
<PAGE> 17
<TABLE>
<S> <C>
10.12 Amendment dated December 9, 1992 to Applied Materials, Inc. Supplemental Income Plan
dated June 4, 1981 (as amended to December 15, 1988), previously filed with the Company's
Form 10-K for fiscal year 1993, and incorporated herein by reference.
10.13 Amendment No. 2 to Applied Materials, Inc. 1985 Stock Option Plan for Non-Employee
Directors, dated September 10, 1992, previously filed with the Company's Form 10-K for
fiscal year 1993, and incorporated herein by reference.
10.14 Amendment No. 3 to Applied Materials Inc. 1985 Stock Option Plan for Non-Employee
Directors, dated October 5, 1993, previously filed with the Company's Form 10-K for
fiscal year 1993, and incorporated herein by reference.
10.16 Amendment No. 4 to Applied Materials Inc. 1985 Stock Option Plan for Non-Employee
Directors, dated December 8, 1993, previously filed with the Company's Form 10-Q for the
quarter ended May 1, 1994, and incorporated herein by reference.
10.17 Amendment No. 2 to the Applied Materials, Inc. Executive Deferred Compensation Plan,
dated May 9, 1994, previously filed with the Company's Form 10-Q for the quarter ended
May 1, 1994, and incorporated herein by reference.
10.18 Applied Komatsu Technology, Inc. 1994 Executive Incentive Stock Purchase Plan, together
with forms of Promissory Note, 1994 Executive Incentive Stock Purchase Agreement, and
Loan and Security Agreement, previously filed with the Company's Form 10-Q for the quarter
ended July 31, 1994, and incorporated herein by reference.
Other Exhibits
3.1 Certificate of Incorporation of Applied Materials, Inc., a Delaware corporation, as
amended to March 14, 1989, March 24, 1993, and March 22, 1994.
3.2 Bylaws of Applied Materials, Inc., as amended to December 7, 1994.
</TABLE>
17
<PAGE> 18
<TABLE>
<S> <C>
4.1 Rights Agreement, dated as of June 14, 1989, between Applied Materials, Inc. and Bank
of America NT&SA, as Rights Agent, including Form of Right Certificate and the Form
of Summary of Rights to Purchase Common Stock, previously filed with the Company's
report on Form 8-K dated June 14, 1989, and incorporated herein by reference.
4.2 Note Agreement dated as of March 1, 1991 between Applied Materials, Inc. and a group
of seven insurance companies, including the form of 9.62% Senior Notes due April 1,
1999, previously filed with the Company's Form 10-Q for the quarter ended April 28,
1991, and incorporated herein by reference.
4.3 Stock Transfer Agency Agreement, effective September 24, 1991 and signed March 9,
1992, between Applied Materials, Inc. and Harris Trust and Savings Bank, as Stock
Transfer Agent, Registrar and Rights Agent, previously filed with the Company's Form
10-K for fiscal year 1993, and incorporated herein by reference.
4.4 Form of Indenture (including form of debt security) dated as of August 24, 1994
between Applied Materials, Inc. and Harris Trust Company of California, as Trustee,
previously filed with the Company's Form 8-K on August 17, 1994, and incorporated
herein by reference.
10.10 License agreement dated January 1, 1992 between the Company and
Varian Associates, Inc., previously filed with the Company's Form 10-K for fiscal
year 1992, and incorporated herein by reference.
10.15 Joint Venture Agreement between Applied Materials, Inc. and Komatsu Ltd. dated
September 14, 1993 and exhibits thereto, previously filed with the Company's Form 10-
K for fiscal year 1993, and incorporated herein by reference. (Confidential
treatment has been requested for certain portions of the agreement.)
10.19 Underwriting agreement between the Company and several underwriters in connection
with the sale of 2,300,000 shares of the Company's common stock dated March 16, 1994.
10.20 Underwriting agreement between the Company and several underwriters, dated August 24,
1994 related to the sale by the Company of $100 million aggregate amount of 8% senior
notes.
10.21 $125,000,000 Credit agreement dated as of September 8, 1994 between Applied Materials
and a group of seven banks.
</TABLE>
18
<PAGE> 19
<TABLE>
<S> <C>
13. Applied Materials 1994 Annual Report for the fiscal year ended October 30, 1994 (to
the extent expressly incorporated by reference).
21. Subsidiaries of Applied Materials, Inc.
23. Consent of Independent Accountants.
24. Power of Attorney.
</TABLE>
(b) Report on Form 8-K was filed on August 17, 1994.
(c) Exhibits: The exhibits listed in Item (a)(3) above are submitted as a
separate section of this report.
(d) The individual financial statements of the registrant have been omitted
since the registrant is primarily an operating company and all subsidiaries
are included in the consolidated financial statements.
19
<PAGE> 20
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.
APPLIED MATERIALS, INC.
By /s/James C. Morgan
-------------------------
James C. Morgan
Chairman of the Board and
Chief Executive Officer
Dated: December 21, 1994
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 dates indicated.
<TABLE>
<CAPTION>
Title Date
----- ----
<S> <C> <C>
/s/James C. Morgan Chairman of the Board and December 21, 1994
- - ------------------------ Chief Executive Officer
James C. Morgan
/s/Gerald F. Taylor Senior Vice President and December 21, 1994
- - ------------------------ Chief Financial Officer (Principal
Gerald F. Taylor Financial Officer)
/s/Michael K. O'Farrell Corporate Controller (Principal December 21, 1994
- - ------------------------ Accounting Officer)
Michael K. O'Farrell
Directors:
James C. Morgan Director December 21, 1994
James W. Bagley* Director
Dan Maydan* Director
Michael Armacost* Director
Herbert M. Dwight, Jr.* Director
George B. Farnsworth* Director
Philip V. Gerdine* Director
Tsuyoshi Kawanishi* Director
Paul R. Low* Director
Alfred J. Stein* Director
Hiroo Toyoda* Director
*By /s/James C. Morgan December 21, 1994
----------------------
James C. Morgan
Attorney-in-fact
</TABLE>
A majority of the members of the Board of Directors.
20
<PAGE> 21
Report of Independent Accountants on
Financial Statement Schedules
To the Board of Directors of Applied Materials, Inc.
Our audits of the consolidated financial statements referred to in our report
dated November 23, 1994 appearing on page 47 of the 1994 Annual Report of
Applied Materials, Inc., (which report and consolidated financial statements
are incorporated by reference in this Annual Report on Form 10-K) also included
an audit of the Financial Statement Schedules listed in Item 14(a) of this Form
10-K. In our opinion, these Financial Statement Schedules present fairly, in
all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
/s/ Price Waterhouse LLP
- - ------------------------
Price Waterhouse LLP
San Jose, California
November 23, 1994
21
<PAGE> 22
SCHEDULE I
MARKETABLE SECURITIES-OTHER INVESTMENTS
(In thousands)
October 30, 1994
<TABLE>
<CAPTION>
Type of Issue(1) Amount(2)
----------------- ---------
<S> <C>
Municipal Bonds $ 55,015
Dutch Auction Municipal Bonds 40,407
United States Treasury Bills and Agencies 39,996
Commercial Paper 36,202
Certificates of Deposit 33,021
Medium Term Bank Notes 28,961
Asset Backed Securities 17,940
Corporate Bonds and Others 10,463
--------
$262,005
========
</TABLE>
(1) No individual issuer or group of issuers, as defined in Rule 12-02 of
Regulation S-X, exceeds 2% of total assets.
(2) Carried at cost which approximates fair market value.
22
<PAGE> 23
SCHEDULE II
AMOUNTS RECEIVABLE FROM OFFICERS AND EMPLOYEES
(In thousands)
<TABLE>
<CAPTION>
Balance at Balance
beginning at end
of year Additions Collections of year
---------- --------- ----------- -------
<S> <C> <C> <C> <C>
As of October 30, 1994
Ashok K. Sinha $200 $ - $ - $200(a)
Tetsuo Iwasaki - 156 - 156(b)
Dan Maydan - 186 - 186(b)
As of October 31, 1993:
Walter J. Wriggins $100 $ - $100 $ -
Ashok K. Sinha 200 - - 200(a)
As of October 25, 1992:
James W. Bagley $300 $ - $300 $ -
Peter R. Hanley 80 - 80 -
Walter J. Wriggins 100 - - 100
Ashok K. Sinha 200 - - 200(a)
</TABLE>
(a) Interest-free promissory note of $200 due fiscal 1995, secured by a
subordinated residential deed of trust.
(b) Bearing interest at 7.16% per annum. Interest only payable annually
and principal due January 31, 2004, secured by non-voting preferred
stock of Applied Komatsu Technology, Inc., a 50% investee of Applied
Materials, Inc.
23
<PAGE> 24
SCHEDULE V
PROPERTY, PLANT AND EQUIPMENT
(In thousands)
<TABLE>
<CAPTION>
Balance at Balance
beginning Sales & at end
of year Additions* retirements Adjustments** of year
---------- ---------- ----------- ------------- --------
<S> <C> <C> <C> <C> <C>
As of October 30, 1994
Land $ 22,884 $ 35,696 $ -- $ 370 $ 58,950
Building and leasehold 209,584 52,846 (2,001) 6,463 266,892
improvements
Manufacturing and 93,111 36,691 (17,773) 2,851 114,880
demonstration equipment
Furniture and fixtures 74,485 39,395 (4,806) 1,877 110,951
Construction in progress 49,584 21,361 (4) (24) 70,917
-------- -------- -------- ------- --------
Total $449,648 $185,989 $(24,584) $11,537 $622,590
======== ======== ======== ======= ========
As of October 31, 1993:
Land $ 14,585 $ 7,651 $ -- $ 648 $ 22,884
Building and leasehold 161,969 37,604 (187) 10,198 209,584
improvements
Manufacturing and 68,900 26,774 (6,310) 3,747 93,111
demonstration equipment
Furniture and fixtures 52,831 21,032 (1,068) 1,690 74,485
Construction in progress 45,836 6,292 (2,067) (477) 49,584
-------- -------- -------- ------- --------
Total $344,121 $ 99,353 $ (9,632) $15,806 $449,648
======== ======== ======== ======= ========
As of October 25, 1992:
Land $ 14,020 $ -- $ -- $ 565 $ 14,585
Building and leasehold 123,202 32,910 (3,483) 9,340 161,969
improvements
Manufacturing and 63,090 15,363 (12,637) 3,084 68,900
demonstration equipment
Furniture and fixtures 44,554 12,383 (5,998) 1,892 52,831
Construction in progress 40,928 5,943 (890) (145) 45,836
-------- -------- -------- ------- --------
Total $285,794 $ 66,599 $(23,008) $14,736 $344,121
======== ======== ======== ======= ========
</TABLE>
* Includes transfers between accounts.
**Includes foreign currency translation adjustments.
24
<PAGE> 25
SCHEDULE VI
ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
(In thousands)
<TABLE>
<CAPTION>
Balance at Balance
beginning Sales & at end
of year Additions retirements Adjustments** of year
--------- --------- ----------- ------------- --------
<S> <C> <C> <C> <C> <C>
As of October 30, 1994
Building and leasehold $ 41,153 $23,710 $ (1,407) $1,368 $ 64,824
improvements
Manufacturing and demonstration 44,618 17,587 (9,326) 1,450 54,329
equipment
Furniture and fixtures 36,173 17,185 (3,559) 1,184 50,983
-------- ------- -------- ------ --------
Total $121,944 $58,482 $(14,292) $4,002 $170,136
======== ======= ======== ====== ========
As of October 31, 1993:
Building and leasehold $ 27,530 $12,570 $ (268) $1,321 $ 41,153
improvements
Manufacturing and demonstration 33,208 14,341 (4,607) 1,676 44,618
equipment
Furniture and fixtures 24,862 10,866 (826) 1,271 36,173
-------- ------- -------- ------ --------
Total $ 85,600 $37,777 $ (5,701) $4,268 $121,944
======== ======= ======== ====== ========
As of October 25, 1992:
Building and leasehold $ 20,990 $ 8,901 $ (3,386) $1,025 $ 27,530
improvements
Manufacturing and 29,915 10,748 (8,618) 1,163 33,208
demonstration equipment
Furniture and fixtures 21,658 8,093 (5,348) 459 24,862
-------- ------- -------- ------ --------
Total $ 72,563 $27,742 $(17,352) $2,647 $ 85,600
======== ======= ======== ====== ========
</TABLE>
** Includes foreign currency translation adjustments.
25
<PAGE> 26
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
ALLOWANCE FOR DOUBTFUL ACCOUNTS
(In thousands)
<TABLE>
<CAPTION>
Balance at Additions- Balance
beginning Charged Deduction- at end
of year to income Recoveries of year
---------- --------- ---------- -------
<S> <C> <C> <C> <C>
As of:
October 30, 1994 $ 487 $875 $ (273) $1,089
October 31, 1993 $1,171 $663 $(1,347) $ 487
October 25, 1992 $1,158 $387 $ (374) $1,171
</TABLE>
26
<PAGE> 27
SCHEDULE IX
SHORT-TERM BORROWINGS
BANK BORROWINGS
(In thousands)
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Balance at end of year $43,081 $41,645 $27,449
Weighted average interest rate
at end of year 3.0% 4.1% 5.3%
Maximum amount outstanding
during the year $62,443 $50,243 $51,192
Average amount outstanding
during the year * $47,336 $40,875 $34,975
Weighted average interest rate
during the year ** 3.4% 5.3% 6.6%
</TABLE>
* An average amount outstanding for each week was calculated, and an
average of the averages was calculated for the year.
** Total annual interest expense related to short-term borrowings was
divided by the average amount of borrowings outstanding during the
year.
27
<PAGE> 28
SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
(In thousands)
<TABLE>
<CAPTION>
Charged to Costs and Expenses
-----------------------------
Item 1994 1993 1992
---- ---- ------- ------
<S> <C> <C> <C>
Maintenance and repairs * $11,676 $8,923
</TABLE>
* Maintenance and repairs expense was less than 1% of revenue for the year
ended October 30, 1994.
28
<PAGE> 29
INDEX TO EXHIBITS
These Exhibits are numbered in accordance with the Exhibit Table of Item 601 of
Regulation S-K:
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
3.1 Certificate of Incorporation of Applied Materials, Inc., a Delaware corporation, as
amended to March 14, 1989, March 24, 1993, and March 22, 1994. 32
3.2 Bylaws of Applied Materials, Inc., as amended to December 7, 1994. 34
4.1 Rights Agreement, dated as of June 14, 1989, between Applied Materials, Inc. and Bank
of America NT&SA, as Rights Agent, including Form of Right Certificate and the Form
of Summary of Rights to Purchase Common Stock, previously filed with the Company's
report on Form 8-K dated June 14, 1989, and incorporated herein by reference.
4.2 Note Agreement dated as of March 1, 1991 between Applied Materials, Inc. and a group
of seven insurance companies, including the form of 9.62% Senior Notes due April 1,
1999, previously filed with the Company's Form 10-Q for the quarter ended April 28,
1991, and incorporated herein by reference.
4.3 Stock Transfer Agency Agreement, effective September 24, 1991 and signed March 9,
1992, between Applied Materials, Inc. and Harris Trust and Savings Bank, as Stock
Transfer Agent, Registrar and Rights Agent, previously filed with the Company's Form
10-K for fiscal year 1993, and incorporated herein by reference.
4.4 Form of Indenture (including form of debt security) dated as of August 24, 1994
between Applied Materials, Inc. and Harris Trust Company of California, as Trustee,
previously filed with the Company's Form 8-K on August 17, 1994, and incorporated
herein by reference.
10.1 Not used.
10.2 The 1976 Management Stock Option Plan, as amended to
October 5, 1993, previously filed with the Company's Form 10-K for fiscal year 1993,
and incorporated herein by reference.
10.3 Applied Materials, Inc., Supplemental Income Plan, as amended, including
Participation Agreements with James C. Morgan, Walter Benzing, and Robert Graham,
previously filed with the Company's Form 10-K for fiscal year 1981, and incorporated
herein by reference.
</TABLE>
29
<PAGE> 30
<TABLE>
<CAPTION>
Page
----
<S> <C>
10.4 Amendment to Supplemental Income Plan, dated July 20, 1984, previously filed with the
Company's Form 10-K for fiscal year 1984, and incorporated herein by reference.
10.5 The Applied Materials Employee Financial Assistance Plan, previously filed with the
Company's definitive Proxy Statement in connection with the Annual Meeting of
Shareholders held on March 5, 1981, and incorporated herein by reference.
10.6 The 1985 Stock Option Plan for Non-Employee Directors, previously filed with the
Company's Form 10-K for fiscal year 1985, and incorporated herein by reference.
10.7 Amendment 1 to the 1985 Stock Option Plan for Non-Employee Directors dated June 14,
1989, previously filed with the Company's Form 10-K for fiscal year 1989, and
incorporated herein by reference.
10.8 Applied Materials, Inc. Supplemental Income Plan as amended to
December 15, 1988, including participation agreement with James C. Morgan, previously
filed with the Company's Form 10-K for fiscal year 1988, and incorporated herein by
reference.
10.9 Not used.
10.10 License agreement dated January 1, 1992 between the Company and
Varian Associates, Inc., previously filed with the Company's Form 10-K for fiscal
year 1992, and incorporated herein by reference.
10.11 The Applied Materials, Inc. Executive Deferred Compensation Plan dated July 1, 1993
and as amended on September 2, 1993, previously filed with the Company's Form 10-Q
for the quarter ended August 1, 1993, and incorporated herein by reference.
10.12 Amendment dated December 9, 1992 to Applied Materials, Inc. Supplemental Income Plan
dated June 4, 1981 (as amended to December 15, 1988), previously filed with the
Company's Form 10-K for fiscal year 1993, and incorporated herein by reference.
10.13 Amendment No. 2 to Applied Materials, Inc. 1985 Stock Option Plan for Non-Employee
Directors, dated September 10, 1992, previously filed with the Company's Form 10-K
for fiscal year 1993, and incorporated herein by reference.
</TABLE>
30
<PAGE> 31
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
10.14 Amendment No. 3 to Applied Materials Inc. 1985 Stock Option Plan for Non-Employee
Directors, dated October 5, 1993, previously filed with the Company's Form 10-K for
fiscal year 1993, and incorporated herein by reference.
10.15 Joint Venture Agreement between Applied Materials, Inc. and Komatsu Ltd. dated
September 14, 1993 and exhibits thereto, previously filed with the Company's Form 10-K
for fiscal year 1993, and incorporated herein by reference. (Confidential treatment
has been requested for certain portions of the agreement.)
10.16 Amendment No. 4 to Applied Materials Inc. 1985 Stock Option Plan for Non-Employee
Directors, dated December 8, 1993, previously filed with the Company's Form 10-Q for the
quarter ended May 1, 1994, and incorporated herein by reference.
10.17 Amendment No. 2 to the Applied Materials, Inc. Executive Deferred Compensation Plan,
dated May 9, 1994, previously filed with the Company's Form 10-Q for the quarter ended
May 1, 1994, and incorporated herein by reference.
10.18 Applied Komatsu Technology, Inc. 1994 Executive Incentive Stock Purchase Plan, together
with forms of Promissory Note, 1994 Executive Incentive Stock Purchase Agreement, Loan
and Security Agreement, previously filed with the Company's Form 10-Q for the quarter
ended July 31, 1994, and incorporated herein by reference.
10.19 Underwriting agreement between the Company and several underwriters in connection with 53
the sale of 2,300,000 shares of the Company's common stock dated March 16, 1994.
10.20 Underwriting agreement between the Company and several underwriters 69
dated August 24, 1994 related to the sale by the Company of $100 million aggregate amount
of 8% senior notes.
10.21 $125,000,000 Credit agreement dated as of September 8, 1994 between Applied Materials and 84
a group of seven banks.
13. Applied Materials 1994 Annual Report for the fiscal year ended October 30, 1994 (to the 193
extent expressly incorporated by reference).
21. Subsidiaries of Applied Materials, Inc. 215
23. Consent of Independent Accountants. 216
24. Power of Attorney. 217
</TABLE>
31
<PAGE> 1
EXHIBIT 3.1
PAGE 1
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, WILLIAM T. QUILLEN; SECRETARY OF STATE OF THE STATE OF DELAWARE,
DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "APPLIED MATERIALS, INC.", FILED IN THIS OFFICE ON THE
TWENTY-SECOND DAY OF MARCH, A.D. 1994, AT 1:30 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW
CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
[SEAL]
[SEAL] /s/ William T. Quillen
------------------------------------------
William T. Quillen, Secretary of State
2120849 8100 AUTHENTICATION: 7064755
944046516 DATE: 03-22-94
<PAGE> 2
APPLIED MATERIALS, INC.
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
The undersigned, James C. Morgan and Donald A. Slichter, hereby
certify that:
(1) They are the Chairman of the Board of Directors and Secretary,
respectively, of Applied Materials, Inc., a Delaware corporation.
(2) The Certificate of Incorporation of this corporation is amended
by deleting Section 1 of Article Fifth in its entirety and adding a new Section
1 of Article Fifth to such Certificate, to read as follows:
1. The corporation is authorized to issue two classes of shares to
be designated, respectively, "Preferred Stock" and "Common Stock." The number
of shares of Preferred Stock authorized to be issued is One Million (1,000,000)
and the number of shares of Common Stock authorized to be issued is Two Hundred
Million (200,000,000). The stock, whether Preferred Stock or Common Stock,
shall have a par value of $.01 per share.
The amendment to the Certificate of Incorporation was duly adopted by
the Board of Directors on December 8, 1993 and by the stockholders of the
corporation on March 3, 1994, in accordance with the provisions of Section 242
of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seal this 17th day of March 1994.
APPLIED MATERIALS, INC.
/s/ JAMES C. MORGAN
----------------------------------------
By: James C. Morgan
Attest /s/ DONALD A. SLICHTER
----------------------
Donald A. Slichter
<PAGE> 1
Exhibit 3.2
BYLAWS
OF
APPLIED MATERIALS, INC.
(a Delaware corporation)
(As amended to December 7, 1994)
<PAGE> 2
BYLAWS OF
APPLIED MATERIALS, INC.
Table of Contents
<TABLE>
Page
<CAPTION>
<S> <C>
ARTICLE I OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Registered Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 Special Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.4 Notice of Stockholders' Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5 Advance Notice of Stockholder Nominees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.6 Manner of Giving Notice; Affidavit of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.8 Adjourned Meeting; Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.10 Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.11 Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 Record Date for Stockholder Notice; Voting; Giving Consents . . . . . . . . . . . . . . . . . . . . . 4
2.13 Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1 Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Number of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.3 Election, Qualification and Term of Office of Directors . . . . . . . . . . . . . . . . . . . . . . . 5
3.4 Resignation and Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.5 Place of Meetings; Meetings by Telephone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.6 Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.7 Special Meetings; Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.8 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.9 Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.10 Board Action by Written Consent Without a Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.11 Fees and Compensation of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.12 Approval of Loans to Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.13 Removal of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.14 Chairman of the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.1 Committees of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.2 Committee Minutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 Meetings and Action of Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE V OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.1 Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.2 Election of Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.3 Appointed Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
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<TABLE>
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<S> <C>
5.4 Removal and Resignation of Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.5 Vacancies in Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.6 Chairman of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.7 President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.8 Senior Vice Presidents and Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.9 Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.10 Chief Financial Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.11 Representation of Shares of Other Corporations . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.12 Authority and Duties of Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VI RECORDS AND REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.1 Maintenance and Inspection of Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.2 Inspection by Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VII GENERAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.1 Execution of Corporate Contracts and Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.2 Stock Certificates; Partly Paid Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.3 Special Designation on Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.4 Lost Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.5 Construction; Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.6 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.7 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.8 Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VIII AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.1 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
ii
<PAGE> 4
BYLAWS
OF
APPLIED MATERIALS, INC.
ARTICLE I
OFFICES
1.1 Registered Office. The registered office of the corporation in
the State of Delaware shall be Corporation Trust Center, 1209 Orange Street, in
the City of Wilmington, County of New Castle. The name of the registered agent
of the corporation at such location is The Corporation Trust Company.
1.2 Other Offices. The corporation may also have offices at such
other places both within and without the State of Delaware as the board of
directors may from time to time determine or the business of the corporation
may require.
ARTICLE II
STOCKHOLDERS
2.1 Place of Meetings. Meetings of stockholders shall be held at
such place, either, within or without the State of Delaware, as may be
designated by the board of directors. In the absence of any such designation,
stockholders' meetings shall be held at the corporation's principal executive
offices.
2.2 Annual Meeting. The annual meeting of stockholders shall be
held each year on a date and at a time designated by the board of directors.
At the meeting, directors shall be elected and any other proper business may be
transacted.
2.3 Special Meeting. Special meetings of the stockholders may be
called at any time by the board of directors, or by the chairman of the board,
or by the president of the corporation.
If a special meeting is called by any person or persons other than
the board of directors, the request shall be in writing, specifying the time of
such meeting and the general nature of the business proposed to be transacted,
and shall be delivered personally or sent by registered mail or by telegraphic
or other facsimile transmission to the chairman of the board, the president,
any vice president, or the secretary of the
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corporation. No business may be transacted at such special meeting otherwise
than specified in such notice. The officer receiving the request shall cause
notice to be promptly given to the stockholders entitled to vote, in accordance
with the provisions of Sections 4 and 5 of this Article II, that a meeting will
be held at the time requested by the person or persons calling the meeting, not
less than 35 nor more than 60 days after the receipt of the request. If the
notice is not given within 20 days after the receipt of the request, the person
or persons requesting the meeting may give the notice. Nothing contained in
this paragraph of this Section 3 shall be construed as limiting, fixing, or
affecting the time when a meeting of stockholders called by action of the board
of directors may be held.
2.4 Notice of Stockholders' Meetings. All notices of meetings with
stockholders shall be in writing and shall be sent or otherwise given in
accordance with Section 2.5 of these bylaws not less than 10 nor more than 60
days before the date of the meeting to each stockholder entitled to vote at
such meeting. The notice shall specify the place, date, and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called.
2.5 Advance Notice of Stockholder Nominees. No nominations for
director of the corporation by any person other than the board of directors
shall be presented to any meeting of stockholders unless the person making the
nomination is a record stockholder and shall have delivered a written notice to
the secretary of the corporation no later than the close of business 60 days in
advance of the stockholder meeting or 10 days after the date on which notice of
the meeting is first given to the stockholders, whichever is later. Such
notice shall (i) set forth the name and address of the person advancing such
nomination and the nominee, together with such information concerning the
person making the nomination and the nominee as would be required by the
appropriate Rules and Regulations of the Securities and Exchange Commission to
be included in a proxy statement soliciting proxies for the election of such
nominee, and (ii) shall include the duly executed written consent of such
nominee to serve as director if elected.
No proposal by any person other than the board of directors shall be
submitted for the approval of the stockholders at any regular or special
meeting of the stockholders of the corporation unless the person advancing such
proposal shall have delivered a written notice to the secretary of the
corporation no later than the close of business 60 days in advance of the
stockholder meeting or 10 days after the date on which notice of the meeting is
first given to the stockholders, whichever is later. Such notice shall set
forth the name and address of the person advancing the proposal, any material
interest of such person in the proposal, and such other information concerning
the person making such proposal and the proposal itself as would be
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required by the appropriate Rules and Regulations of the Securities and
Exchange Commission to be included in a proxy statement soliciting proxies for
the proposal.
2.6 Manner of Giving Notice; Affidavit of Notice. Written notice
of any meeting of stockholders, if mailed, is given when deposited in the
United States mail, postage prepaid, directed to the stockholder at his address
as it appears on the records of the corporation. An affidavit of the secretary
or an assistant secretary or of the transfer agent of the corporation that the
notice has been given shall, in the absence of fraud, be prima facie evidence
of the facts stated therein.
2.7 Quorum. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. Except as otherwise required by law, the
certificate of incorporation or these bylaws, the affirmative vote of the
majority of such quorum shall be deemed the act of the stockholders. If,
however, such quorum is not present or represented at any meeting of the
stockholders, then either (i) the chairman of the meeting or (ii) the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
2.8 Adjourned Meeting; Notice. When a meeting is adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than 30 days, or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
2.9 Conduct of Business. The chairman of any meeting of
stockholders shall determine the order of business and the procedure at the
meeting, including such regulation of the manner of voting and the conduct of
business.
2.10 Voting. Except as may be otherwise provided in the
certificate of incorporation, each stockholder shall be entitled to one vote
for each share of capital stock held by such stockholder. Voting may be by
voice or by ballot as the presiding officer of the meeting of the stockholders
shall
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determine. On a vote by ballot, each ballot shall be signed by the stockholder
voting, or by such stockholder's proxy, and shall state the number of shares
voted.
2.11 Waiver of Notice. Whenever notice is required to be given
under any provision of the General Corporation Law of Delaware or of the
certificate of incorporation or these bylaws, a written waiver thereof, signed
by the person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the stockholders need be
specified in any written waiver of notice unless so required by the certificate
of incorporation or these bylaws.
2.12 Record Date for Stockholder Notice; Voting; Giving Consents.
In order that the corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the board of directors may fix, in advance, a record date, which shall not be
more than 60 nor less than 10 days before the date of such meeting, nor more
than 60 days prior to any other action.
If the board of directors does not so fix a record date:
(i) 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 day next preceding the day on which notice
is given, or, if notice is waived, at the close of business on the
day next preceding the day on which the meeting is held.
(ii) The record date for determining stockholders for any
other purpose shall be at the close of business on the day on which
the board of directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new record
date for the adjourned meeting.
2.13 Proxies. Each stockholder entitled to vote at a meeting of
stockholders may authorize another person or persons to act for him by a
written proxy, signed by the stockholder and
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filed with the secretary of the corporation, but no such proxy shall be voted
or acted upon after one year from its date, unless the proxy provides for a
longer period. A proxy shall be deemed signed if the stockholder's name is
placed on the proxy (whether by manual signature, typewriting, telegraphic
transmission or otherwise) by the stockholder or the stockholder's
attorney-in-fact. A duly executed proxy shall be irrevocable if it states that
it is irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the corporation generally.
ARTICLE III
DIRECTORS
3.1 Powers. Subject to the provisions of the General Corporation
Law of Delaware and any limitations in the certificate of incorporation or
these bylaws relating to action required to be approved by the stockholders,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
3.2 Number of Directors. The board of directors shall consist of
eleven persons until changed by a proper amendment of this Section 3.2.
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
3.3 Election, Qualification and Term of Office of Directors.
Except as provided in Section 3.4 of these bylaws, directors shall be elected
at each annual meeting of stockholders. Directors need not be stockholders.
Each director, including a director elected to fill a vacancy, shall hold
office until his successor is elected and qualified or until his earlier
resignation or removal.
Elections of directors need not be by written ballot.
3.4 Resignation and Vacancies. Any director may resign at any time
upon written notice to the attention of the secretary of the corporation. When
one or more directors so resigns and the resignation is effective at a future
date, a majority of the directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon
to take effect when such resignation or resignations shall become effective,
and each director so chosen shall hold
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office as provided in this section in the filling of other vacancies.
Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
certificate of incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause,
the corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a
stockholder, or other fiduciary entrusted with like responsibility for the
person or estate of a stockholder, may call a special meeting of stockholders
in accordance with the provisions of the certificate of incorporation or these
bylaws, or may apply to the Court of Chancery for a decree summarily ordering
an election as provided in Section 211 of the General Corporation Law of
Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten percent (10%) of the total number of the shares at the
time outstanding having the right to vote for such directors, summarily order
an election to be held to fill any such vacancies or newly created
directorships, or to replace the directors chosen by the directors then in
office as aforesaid, which election shall be governed by the provisions of
Section 211 of the General Corporation Law of Delaware as far as applicable.
The stockholders may elect a director at any time to fill any
vacancy not filled by the directors.
If a vacancy is the result of action taken by the shareholders under
Section 3.13 of these bylaws, then the vacancy shall be filled by the holders
of a majority of the shares then entitled to vote at an election of directors.
3.5 Place of Meetings; Meetings by Telephone. The board of
directors of the corporation may hold meetings, both regular and special,
either within or outside the State of Delaware.
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Members of the board of directors, or any committee designated by
the board of directors, may participate in a meeting of the board of directors,
or any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this bylaw shall
constitute presence in person at the meeting.
3.6 Regular Meetings. Regular meetings of the board of directors
may be held without notice at such time and at such place as shall from time to
time be determined by the board.
3.7 Special Meetings; Notice. Special meetings of the board of
directors for any purpose or purposes may be called at any time by the chairman
of the board, the president, any vice president, the secretary or any two
directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's
address as it is shown on the records of the corporation. If the notice is
mailed, it shall be deposited in the United States mail at least four days
before the time of the holding of the meeting. If the notice is delivered
personally or by telephone or by telegram, it shall be delivered personally or
by telephone or to the telegraph company at least 48 hours before the time of
the holding of the meeting. Any oral notice given personally or by telephone
may be communicated either to the director or to a person at the office of the
director who the person giving the notice has reason to believe will promptly
communicate it to the director. The notice need not specify the purpose or the
place of the meeting, if the meeting is to be held at the principal executive
office of the corporation.
3.8 Quorum. At all meetings of the board of directors, a majority
of the authorized number of directors shall constitute a quorum for the
transaction of business and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the board of
directors, except as may be otherwise specifically provided by statute or by
the certificate of incorporation. If a quorum is not present at any meeting of
the board of directors, then the directors present thereat may adjourn the
meeting from time to time, without notice other than the announcement at the
meeting, until a quorum is present.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
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3.9 Waiver of Notice. Whenever notice is required to be given
under any provision of the General Corporation Law of Delaware or of the
certificate of incorporation or these bylaws, a written waiver thereof, signed
by the person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the directors, or members of a
committee of directors, need be specified in any written waiver of notice
unless so required by the certificate of incorporation or these bylaws.
3.10 Board Action by Written Consent Without a Meeting. Any action
required or permitted to be taken at any meeting of the board of directors, or
of any committee thereof, may be taken without a meeting if all members of the
board or committee, as the case may be, consent thereto in writing and the
writing or writings are filed with the minutes of proceedings of the board or
committee.
3.11 Fees and Compensation of Directors. The board of directors
shall have the authority to fix the compensation of directors.
3.12 Approval of Loans to Officers. The corporation may lend money
to, or guarantee any obligations of, or otherwise assist any officer or other
employee of the corporation or any of its subsidiaries, including any officer
or employee who is a director of the corporation or any of its subsidiaries,
whenever, in the judgment of the directors, such loan, guaranty or assistance,
or an employee benefit or employee financial assistance plan adopted by the
board of directors or any committee thereof authorizing any such loan, guaranty
or assistance, may reasonably be expected to benefit the corporation. The
loan, guaranty or other assistance may be with or without interest and may be
unsecured, or secured in such a manner as the board of directors shall approve,
including, without limitation, a pledge of shares of stock of the corporation.
Nothing in this section contained shall be deemed to deny, limit or restrict
the powers of guaranty or warranty of the corporation at common law or under
any statute.
3.13 Removal of Directors. Any director or the entire board of
directors may be removed, with or without cause, by the holders of a majority
of the shares then entitled to vote at an election of directors.
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No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of such director's term
of office.
3.14 Chairman of the Board of Directors. The corporation may also
have, at the discretion of the board of directors, a chairman of the board of
directors who may be considered an officer of the corporation.
ARTICLE IV
COMMITTEES
4.1 Committees of Directors. The board of directors may, by
resolution passed by a majority of the whole board, designate one or more
committees, each committee to consist of one or more of the directors of the
corporation. 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 present at any meeting and not
disqualified from voting, whether or not he 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 the 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 which may require it; but no such committee shall have
the power or authority in reference to amending the certificate 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 151(a) of the General
Corporation Law of Delaware, 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 series of stock or authorize the increase or
decrease of the shares of any series), adopting an agreement of merger or
consolidation under Sections 251 or 252 of the General Corporation Law of
Delaware, recommending to the stockholders the sale, lease or exchange of all
or substantially all of the corporation's property and assets, recommending to
the stockholders a dissolution of the corporation or a revocation of a
dissolution, or amending the bylaws of the corporation; and, unless the
resolution, bylaws or certificate of incorporation expressly so provides, no
such committee shall have the power or
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authority to declare a dividend, to authorize the issuance of stock, or to
adopt a certificate of ownership and merger pursuant to Section 253 of the
General Corporation Law of Delaware.
4.2 Committee Minutes. Each committee shall keep regular minutes
of its meetings and report the same to the board of directors when required.
4.3 Meetings and Action of Committees. Meetings and actions of
committees shall be governed by, and held and taken in accordance with, the
provisions of Article III of these bylaws, Section 3.5 (place of meetings and
meetings by telephone), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), and
Section 3.10 (action without a meeting), 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 the time of
regular meetings of committees may be determined either by resolution of the
board of directors or by resolution of the committee, that 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 for the government of any committee not
inconsistent with the provisions of these bylaws.
ARTICLE V
OFFICERS
5.1 Officers. The officers of the corporation shall be a
president, a chief financial officer (who may be a vice president or treasurer
of the corporation) and a secretary. The corporation may also have, at the
discretion of the board of directors, a chairman of the board of directors, one
or more senior vice presidents and one or more other officers. One or more
officers may be appointed in accordance with the provisions of Section 5.3 of
these bylaws. Any number of offices may be held by the same person.
5.2 Election of Officers. The officers of the corporation, except
such officers as may be appointed in accordance with the provisions of Sections
5.3 or 5.5 of these bylaws, shall be elected by the board of directors.
5.3 Appointed Officers. The chief executive officer of the
corporation, or such other officer as the board of directors shall select, may
appoint, or the board of directors may appoint, such officers and agents of the
corporation as, in his or their judgment, are necessary to conduct the business
of the corporation. Each such officer shall hold office for such
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<PAGE> 14
period, have such authority, and perform such duties as are provided in these
bylaws or as the board of directors or the chief executive officer may from
time to time determine.
5.4 Removal and Resignation of Officers. Any officer may be
removed, either with or without cause, by an affirmative vote of the majority
of the board of directors at any regular or special meeting of the board or,
except in the case of an officer elected by the board of directors, by the
chief executive officer or such other officer upon whom such power of removal
may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless
otherwise specified in that notice, the acceptance of the resignation shall not
be necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 Vacancies in Offices. Any vacancy occurring in any office of
the corporation shall be filled by the board of directors, except for vacancies
in the offices of subordinate officers which may be filled pursuant to Section
5.3 hereof.
5.6 Chairman of the Board. The chairman of the board, if such an
officer be elected, shall, if present, preside at meetings of the board of
directors and the stockholders and exercise and perform such other powers and
duties as may be from time to time assigned by the board of directors or
prescribed by the bylaws.
5.7 President. Subject to such supervisory powers, if any, as may
be given by the board of directors to the chairman of the board, the president
shall be the chief executive officer of the corporation and shall, subject to
the control of the board of directors, have general supervision, direction, and
control of the business and the officers of the corporation. In the absence or
nonexistence of a chairman of the board, he shall preside at all meetings of
the stockholders and at all meetings of the board of directors. He shall have
the general powers and duties of management usually vested in the office of
president of a corporation and shall have such other powers and duties as may
be prescribed by the board of directors or these bylaws.
5.8 Senior Vice Presidents and Vice Presidents. In the absence or
disability of the president, the vice presidents, if any, in order of their
rank as fixed by the board of directors or, if not ranked, a vice president
designated by the board of directors, shall perform all the duties of the
president and when so acting shall have all the powers of, and be subject to
all the restrictions upon, the president. The vice presidents shall have
11
<PAGE> 15
such other powers and perform such other duties as from time to time may be
prescribed for them respectively by the board of directors, these bylaws, the
president or the chairman of the board.
5.9 Secretary. The secretary shall keep or cause to be kept, at
the principal executive office of the corporation or such other place as the
board of directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and stockholders. The minutes shall show
the time and place of each meeting, the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register, or a duplicate share register, showing the names
of all stockholders and their addresses, the number and classes of shares held
by each, the number and date of certificates evidencing such shares, and the
number and date of cancellation of every certificate surrendered for
cancellation.
The secretary shall give, or cause to be given, notice of all
meetings of the stockholders and of the board of directors required to be given
by law or by these bylaws. He shall keep the seal of the corporation, if one
be adopted, in safe custody and shall have such other powers and perform such
other duties as may be prescribed by the board of directors or by these bylaws.
5.10 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. The books
of account shall at all reasonable times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the corporation with such
depositories as may be designated by the board of directors. He shall disburse
the funds of the corporation as may be ordered by the board of directors, shall
render to the president and directors, whenever they request it, an account of
all his transactions as chief financial officer and of the financial condition
of the corporation, and shall have other powers and perform such other duties
as may be prescribed by the board of directors or the bylaws.
12
<PAGE> 16
5.11 Representation of Shares of Other Corporations. The chairman
of the board, the president, any vice president, the treasurer, the secretary
or assistant secretary of this corporation, or any other person authorized by
the board of directors or the president or a vice president, is authorized to
vote, represent, and exercise on behalf of this corporation all rights incident
to any and all shares of any other corporation or corporations standing in the
name of this corporation. The authority granted herein may be exercised either
by such person directly or by any other person authorized to do so by proxy or
power of attorney duly executed by such person having the authority.
5.12 Authority and Duties of Officers. In addition to the
foregoing authority and duties, all officers of the corporation shall
respectively have such authority and perform such duties in the management of
the business of the corporation as may be designated from time to time by the
board of directors.
ARTICLE VI
RECORDS AND REPORTS
6.1 Maintenance and Inspection of Records. The corporation shall,
either at its principal executive offices or at such place or places as
designated by the board of directors, keep a record of its stockholders listing
their names and addresses and the number and class of shares held by each
stockholder, a copy of these bylaws as amended to date, accounting books, and
other records.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean
a purpose reasonably related to such person's interest as a stockholder. In
every instance where an attorney or other agent is the person who seeks the
right to inspection, the demand under oath shall be accompanied by a power of
attorney or such other writing that authorizes the attorney or other agent to
so act on behalf of the stockholder. The demand under oath shall be directed
to the corporation at its registered office in Delaware or at its principal
place of business.
6.2 Inspection by Directors. Any director shall have the right to
examine the corporation's stock ledger, a list of its stockholders, and its
other books and records for a purpose reasonably related to his position as a
director. The Court of Chancery is hereby vested with the exclusive
jurisdiction to determine whether a director is entitled to the inspection
13
<PAGE> 17
sought. The Court may summarily order the corporation to permit the director
to inspect any and all books and records, the stock ledger, and the stock list
and to make copies or extracts therefrom. The Court may, in its discretion,
prescribe any limitations or conditions with reference to the inspection, or
award such other and further relief as the Court may deem just and proper.
ARTICLE VII
GENERAL MATTERS
7.1 Execution of Corporate Contracts and Instruments. 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.
7.2 Stock Certificates; Partly Paid Shares. The shares of a
corporation shall be represented by certificates, provided that the board of
directors of the corporation may provide by resolution or resolutions that some
or all of any or all classes or series of its stock shall be uncertificated
shares. Any such resolution shall not apply to shares represented by a
certificate until such certificate is surrendered to the corporation.
Notwithstanding the adoption of such a resolution by the board of directors,
every holder of stock represented by certificates and upon request every holder
of uncertificated shares shall be entitled to have a certificate signed by, or
in the name of the corporation by the chairman or vice-chairman of the board of
directors, or the president or vice president, and by the chief financial
officer, the treasurer, or an assistant treasurer, or the secretary or an
assistant secretary of such corporation representing the number of shares
registered in certificate form. Any or all of the signatures on the
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the corporation with
the same effect as if he were such officer, transfer agent or registrar at the
date of issue.
The corporation may issue the whole or any part of its shares as
partly paid and subject to call for the remainder of the consideration to be
paid therefor. Upon the face or back of each stock certificate issued to
represent any such partly paid
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<PAGE> 18
shares, or upon the books and records of the corporation in the case of
uncertificated partly paid shares, the total amount of the consideration to be
paid therefor and the amount paid thereon shall be stated. Upon the
declaration of any dividend on fully paid shares, the corporation shall declare
a dividend upon partly paid shares of the same class, but only upon the basis
of the percentage of the consideration actually paid thereon.
7.3 Special Designation on Certificates. If the corporation is
authorized to issue more than one class of stock or more than one series of any
class, then the powers, the designations, the preferences, and the relative,
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate that the corporation shall issue to represent such
class or series of stock; provided, however, that, except as otherwise provided
in Section 202 of the General Corporation Law of Delaware, in lieu of the
foregoing requirements there may be set forth on the face or back of the
certificate that the corporation shall issue to represent such class or series
of stock a statement that the corporation will furnish without charge to each
stockholder who so requests the powers, the designations, the preferences, and
the relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights.
7.4 Lost Certificates. The corporation may issue a new certificate
of stock or uncertificated shares in the place of any certificate theretofore
issued by it, alleged to have been lost, stolen or destroyed, and the
corporation may require the owner of the lost, stolen or destroyed certificate,
or his legal representative to give the corporation a bond sufficient to
indemnify it against any claim that may be made against it on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
such new certificate or uncertified shares.
7.5 Construction; Definitions. Unless the context requires
otherwise, the general provisions, rules of construction, and definitions in
the Delaware General Corporation Law shall govern the construction of these
bylaws. Without limiting the generality of this provision, the singular number
includes the plural, the plural number includes the singular, and the term
"person" includes both a corporation and a natural person.
7.6 Dividends. The directors of the corporation, subject to any
restrictions contained in the General Corporation Law of Delaware or the
certificate of incorporation, may declare and pay dividends upon the shares of
its capital stock. Dividends may be
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<PAGE> 19
paid in cash, in property, or in shares of the corporation's capital stock.
The directors of the corporation may set apart out of any of the
funds of the corporation available for dividends a reserve or reserves for any
proper purpose and may abolish any such reserve.
7.7 Fiscal Year. The fiscal year of the corporation shall be fixed
by resolution of the board of directors and may be changed by the board of
directors.
7.8 Seal. The board of directors may adopt a corporate seal, and
may use the same by causing it or a facsimile thereof, to be impressed or
affixed or in any other manner reproduced.
ARTICLE VIII
AMENDMENTS
8.1 Amendments. The bylaws of the corporation may be altered,
amended or repealed or new bylaws may be adopted by the stockholders or by the
board of directors.
16
<PAGE> 1
EXHIBIT 10-19
2,000,000 SHARES
APPLIED MATERIALS, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
March 16, 1994
LEHMAN BROTHERS INC.
MORGAN STANLEY & CO. INCORPORATED
ROBERTSON, STEPHENS & COMPANY
COWEN & COMPANY
NEEDHAM & COMPANY, INC.
As Managers for the several
Underwriters named in Schedule I hereto,
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Ladies and Gentlemen:
Applied Materials, Inc., a Delaware corporation (the "Company"), proposes
to issue and sell to the several Underwriters named in Schedule I hereto (the
"Underwriters"), for whom Lehman Brothers Inc., Morgan Stanley & Co.
Incorporated, Robertson, Stephens & Company, Cowen & Company and Needham &
Company, Inc. are acting as managers (the "Managers") an aggregate of 2,000,000
shares (the "Firm Securities") of Common Stock, $0.01 par value (the "Common
Stock"), of the Company. In addition, for the sole purpose of covering
over-allotments in connection with the sale of the Firm Securities, the Company
proposes to grant to the Underwriters an option to purchase up to an additional
300,000 shares (the "Additional Securities") of Common Stock. The Firm
Securities and any Additional Securities purchased pursuant to this Underwriting
Agreement are herein called the "Offered Securities." This is to confirm the
agreement concerning the purchase of the Offered Securities from the Company by
the Underwriters.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement, including a prospectus, relating to the
Offered Securities and has filed with, or transmitted for filing to, or shall
promptly hereafter file with or transmit for filing to, the Commission a
prospectus supplement (the "Prospectus Supplement") specifically relating to the
Offered Securities pursuant to Rule 424 or Rule 430A under the Securities Act of
1933, as amended (the "Securities Act"). The term "Registration Statement" means
the registration statement, including the exhibits thereto, as amended to the
date of this Agreement. The term "Basic Prospectus" means the prospectus
included in the Registration Statement. The term "Prospectus" means the Basic
Prospectus together with the Prospectus Supplement. The term "preliminary
prospectus" means a preliminary prospectus supplement specifically relating to
the Offered Securities, together with the Basic Prospectus. As used herein, the
terms "Registration Statement," "Basic Prospectus," "Prospectus" and
"preliminary prospectus" shall include in each case the documents, if any,
incorporated by reference therein. The terms "supplement," "amendment" and
"amend" as used herein shall include all documents deemed to be incorporated by
reference in the Prospectus that are filed subsequent to the date of the Basic
Prospectus by the Company with the Commission pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
1. Representations and Warranties. The Company represents and warrants to
and agrees with each of the Underwriters that:
(a) The Company meets the requirements for the use of Form S-3 under
the Securities Act. The Registration Statement has become effective; no
stop order suspending the effectiveness of the
<PAGE> 2
Registration Statement is in effect, and no proceedings for such purpose
are pending before or threatened by the Commission.
(b) (i) Each document, if any, filed or to be filed pursuant to the
Exchange Act and incorporated by reference in the Prospectus complied or
will comply when so filed in all material respects with the Exchange Act
and the applicable rules and regulations of the Commission thereunder, (ii)
each part of the Registration Statement, when such part became effective,
did not contain, and each such part, as amended or supplemented, if
applicable, when such part is filed, will not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, (iii)
the Registration Statement and the Prospectus comply, and, as amended or
supplemented, if applicable, will comply in all material respects with the
Securities Act and the applicable rules and regulations of the Commission
thereunder and (iv) the Prospectus as of its issue date does not contain
and, as amended or supplemented, if applicable, as of the date of any such
amendment and at the Closing Date, will not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties set
forth in this Section 1(b) do not apply to statements or omissions in the
Registration Statement or the Prospectus based upon information relating to
any Underwriter furnished to the Company in writing by such Underwriter
through the Managers expressly for use therein.
(c) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the State of Delaware, has
the corporate power and authority to own its property and to conduct its
business as described in the Prospectus and is duly qualified to transact
business and is in good standing in each jurisdiction in which the conduct
of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or
be in good standing would not have a material adverse effect on the Company
and its subsidiaries, taken as a whole.
(d) Each subsidiary of the Company has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to
own its property and to conduct its business as described in the Prospectus
and as currently being conducted and is duly qualified to transact business
and is in good standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or
be in good standing would not have a material adverse effect on the Company
and its subsidiaries, taken as a whole.
(e) This Agreement has been duly authorized, executed and delivered by
the Company.
(f) The Offered Securities have been duly authorized and, when issued
in accordance with the terms of this Agreement, and duly countersigned by
the Company's Transfer Agent and Registrar, will be validly issued, fully
paid and nonassessable and will not be subject to any preemptive rights or
similar rights to subscribe for or to purchase securities of the Company
pursuant to the Company's Certificate of Incorporation or bylaws or any
agreement to which the Company or any of its subsidiaries is a party or by
which it may be bound.
(g) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.
(h) The shares of Common Stock of the Company outstanding prior to the
issuance of the Offered Securities have been duly authorized and are
validly issued, fully paid and nonassessable.
(i) The execution and delivery by the Company of, and the performance
by the Company of its obligations under, this Agreement will not
contravene, or give rise to any additional rights or remedies under, any
provision of applicable law or the certificate of incorporation or bylaws
of the Company or any agreement or other instrument binding upon the
Company or any of its subsidiaries that is material to the Company and its
subsidiaries, taken as a whole, or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company or
any subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
(2)
<PAGE> 3
performance by the Company of its obligations under this Agreement, except
such as may be required by the securities or Blue Sky laws of the various
states in connection with the offer and sale of the Offered Securities.
(j) There has not occurred any material adverse change, or any
development which could be reasonably expected to result in a prospective
material adverse change, in the condition, financial or otherwise, or in
the business or operations of the Company and its subsidiaries, taken as a
whole, from that described in the Prospectus.
(k) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party or to
which any of the properties of the Company or any of its subsidiaries is
subject that are required to be described in the Registration Statement or
the Prospectus and are not so described in all material respects (other
than proceedings that would not have a material adverse effect on the
Company and its subsidiaries taken as a whole, or on the power or ability
of the Company to perform its obligations under this Agreement, or to
consummate the transactions contemplated by the Prospectus), or any
statutes, regulations, contracts or other documents that are required to be
described in the Registration Statement or the Prospectus or to be filed or
incorporated by reference as exhibits to the Registration Statement that
are not described, filed or incorporated as required.
(l) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended.
(m) To the best knowledge of the Company after due inquiry, the
Company and its subsidiaries (i) are in compliance with any and all
applicable foreign, federal, state and local laws and regulations relating
to the protection of human health and safety, the environment or hazardous
or toxic substances or wastes, pollutants or contaminants ("Environmental
Laws"), (ii) have received all permits, licenses or other approvals
required of them under applicable Environmental Laws which are necessary to
conduct their respective businesses and (iii) are in compliance with all
terms and conditions of any such permit, license or approval, except where
such noncompliance with Environmental Laws, failure to receive required
permits, licenses or other approvals or failure to comply with the terms
and conditions of such permits, licenses or approvals would not reasonably
be expected to, singly or in the aggregate, have a material adverse effect
on the Company and its subsidiaries, taken as a whole.
(n) The Company has a process of conducting periodic internal reviews
relating to compliance by the Company and its subsidiaries with
Environmental Laws. On the basis of such reviews, except as set forth in
the Prospectus, nothing has come to the attention of the Company which
would lead it to believe that costs associated with compliance with
Environmental Laws or liabilities arising due to noncompliance with
Environmental Laws (including, without limitation, any capital or operating
expenses required for cleanup, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties) would have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(o) Each of the Company and its subsidiaries owns or possesses
adequate and sufficient licenses or other rights to use all patents,
copyrights, trademarks, service marks, trade names, technology and know-how
necessary (in any material respect) to conduct its business in the manner
described in the Prospectus, except such as are not material to the
business of the Company and its subsidiaries taken as a whole and except as
disclosed in the Prospectus. Except as disclosed in the Prospectus, neither
the Company nor any of its subsidiaries has received any notice of
infringement or conflict with (and knows of no infringement or conflict
with) asserted rights of others with respect to any patents, copyrights,
trademarks, service marks, trade names or know-how which would reasonably
be expected to result in any material adverse effect upon the Company and
its subsidiaries taken as a whole.
(p) The Company has complied with all provisions of Section 517.075,
Florida Statutes (Chapter 92-198, Laws of Florida).
(3)
<PAGE> 4
2. Purchase and Delivery.
(a) Subject to the terms and conditions hereof and upon the basis of the
representations and warranties herein set forth, the Company agrees to sell to
the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase at a price of $48.25 per share, the aggregate number of
Firm Securities set forth opposite such Underwriter's name in Schedule I hereto.
The Underwriters agree to offer the Firm Securities to the public on the terms
as set forth in the Prospectus.
(b) The Company hereby grants to the Underwriters an option to purchase
from the Company, solely for the purpose of covering over-allotments in the sale
of Firm Securities, all or any portion of the Additional Securities for a period
of thirty (30) days from the date hereof at the purchase price per share set
forth above. Additional Securities shall be purchased from the Company,
severally and not jointly, for the accounts of the several Underwriters in
proportion to the number of Firm Securities set forth opposite such
Underwriter's name in Schedule I hereto, except that the respective purchase
obligations of each Underwriter shall be adjusted by the Managers so that no
Underwriter shall be obligated to purchase Additional Securities other than in
100-share quantities.
(c) Delivery of certificates for the Firm Securities, and certificates for
the Additional Securities, if the option to purchase the same is exercised on or
before the third Business Day (as defined in Section 10 hereof) prior to the
First Closing Date, shall be made at the offices of Lehman Brothers Inc., 388
Greenwich Street, New York, New York 10013 (Cashier's Window) (or such other
place as mutually may be agreed upon), at 10:00 A.M., New York City time, on the
fifth full Business Day following the date of this Agreement or on such later
date as shall be determined by you and the Company (the "Firm Closing Date").
Payment of the purchase price for the Firm Securities and, if the option to
purchase the Additional Securities is exercised on or before the third Business
Day prior to the Firm Closing Date, the Additional Securities, shall be made by
the Underwriters to the Company at the offices of Wilson, Sonsini, Goodrich &
Rosati, P.C., Two Palo Alto Square, Palo Alto, California 94306 (or such other
place as mutually agreed upon), at 10:00 A.M., New York City time, on the Firm
Closing Date.
(d) The option to purchase Additional Securities granted in Section 2(b)
hereof may be exercised during the term thereof by written notice to the Company
from the Manager. Such notice shall set forth the aggregate number of Additional
Securities as to which the option is being exercised and the time and date, not
earlier than either the Firm Closing Date or the second Business Day after the
date on which the option shall have been exercised nor later than the fifth
Business Day after the date of such exercise, as determined by the Managers,
when the Additional Securities are to be delivered (the "Option Closing Date").
Delivery and payment for such Additional Securities shall be made at the offices
set forth above for delivery and payment of the Firm Securities. (The Firm
Closing Date and the Option Closing Date are herein individually referred to as
the "Closing Date" and collectively referred to as the "Closing Dates.")
(e) Delivery of certificates for the Offered Securities shall be made by or
on behalf of the Company to you, for the respective accounts of the
Underwriters, against payment of the respective purchase prices therefor by
certified or official bank check payable in New York Clearing House funds to the
order of the Company. The certificates for the Offered Securities shall be
registered in such names and denominations as you shall have requested at least
two full Business Days prior to the applicable Closing Date, and shall be made
available for checking and packaging in New York, New York or such other
location as may be designated by you at least one full Business Day prior to
such Closing Date. Time shall be of the essence, and delivery of certificates
for the Offered Securities at the time and place specified in this Agreement is
a further condition to the obligations of each Underwriter.
3. Conditions to Closing. The several obligations of the Underwriters
hereunder are subject to the following conditions:
(a) Subsequent to the execution and delivery of the Underwriting
Agreement and prior to the Closing Date,
(i) there shall not have occurred any downgrading, nor shall any
notice have been given of any intended or potential downgrading, in the
rating accorded any of the Company's securities by any
(4)
<PAGE> 5
"nationally recognized statistical rating organization," as such term is
defined for purposes of Rule 436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any development
involving a prospective change, in the condition, financial or
otherwise, or in the business or operations, of the Company and its
subsidiaries, taken as a whole, from that set forth in the Prospectus
that, in the judgment of the Managers, is material and adverse and that
makes it, in the judgment of the Managers, impracticable to market the
Offered Securities on the terms and in the manner contemplated in the
Prospectus.
(b) The Managers shall have received on the Closing Date a
certificate, dated the Closing Date and signed by the chief executive
officer and chief financial officer of the Company, to the effect set forth
in clause (a)(i) above and to the effect that the representations and
warranties of the Company contained in this Agreement are true and correct
as of the Closing Date and that the Company has complied with all of the
agreements and satisfied all of the conditions on its part to be performed
or satisfied on or before the Closing Date.
The officers signing and delivering such certificate may rely upon the
best of their knowledge as to proceedings threatened.
(c) The Managers shall have received on the Closing Date an opinion of
Orrick, Herrington & Sutcliffe, counsel for the Company, dated the Closing
Date, substantially to the effect set forth in Exhibit A. The opinion of
Orrick, Herrington & Sutcliffe shall be rendered to the Managers at the
request of the Company and shall so state therein.
(d) The Managers shall have received on the Closing Date an opinion of
James J. DeLong, Director of Legal Affairs of the Company, dated the
Closing Date, substantially to the effect set forth in Exhibit B.
(e) The Managers shall have received on the Closing Date an opinion of
Wilson, Sonsini, Goodrich & Rosati, Professional Corporation, special
counsel for the Underwriters, dated the Closing Date, covering the matters
referred to in subparagraphs (ii), (iii), (viii) (but only as to the
statements in the Prospectus under "Underwriting"), (x) and (xii) of
Exhibit A hereto.
(f) The Managers shall have received on each of the date hereof and
the Closing Date a letter, dated the date hereof or the Closing Date, as
the case may be, in form and substance satisfactory to the Managers, from
Price Waterhouse, the Company's independent public accountants, containing
statements and information of the type ordinarily included in accountants'
"comfort letters" to underwriters with respect to the financial statements
and certain financial information contained in or incorporated by reference
into the Prospectus.
4. Covenants of the Company. In further consideration of the agreements of
the Underwriters herein contained, the Company covenants as follows:
(a) To furnish the Managers, without charge, a signed copy of the
Registration Statement (including exhibits thereto) and for delivery to
each other Underwriter a conformed copy of the Registration Statement
(without exhibits thereto) and, during the period mentioned in paragraph
(c) below, as many copies of the Prospectus, any documents incorporated by
reference therein and any supplements and amendments thereto or to the
Registration Statement as the Managers may reasonably request.
(b) Before amending or supplementing the Registration Statement or the
Prospectus with respect to the Offered Securities, to furnish to the
Managers a copy of each such proposed amendment or supplement and not to
file any such proposed amendment or supplement to which the Managers
reasonably objects.
(c) If, during such period after the first date of the public offering
of the Offered Securities as in the opinion of counsel for the Underwriters
the Prospectus is required by law to be delivered in connection with sales
by an Underwriter or dealer, any event shall occur or condition exist as a
result of which it is
(5)
<PAGE> 6
necessary to amend or supplement the Prospectus in order to make the
statements therein, in the light of the circumstances when the Prospectus
is delivered to a purchaser, not misleading, or if, in the opinion of
counsel for the Underwriters, it is necessary to amend or supplement the
Prospectus to comply with law, forthwith to prepare, file with the
Commission and furnish, at its own expense, to the Underwriters, and to the
dealers (whose names and addresses the Managers will furnish to the
Company) to which Offered Securities may have been sold by the Managers on
behalf of the Underwriters and to any other dealers upon request, either
amendments or supplements to the Prospectus so that the statements in the
Prospectus as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be
misleading or so that the Prospectus, as amended or supplemented, will
comply with law.
(d) To endeavor to qualify the Offered Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions as the Managers
shall reasonably request and to maintain such qualification for as long as
the Managers shall reasonably request.
(e) To make generally available to its security holders and to the
Managers as soon as practicable an earnings statement covering a twelve
month period beginning on the first day of the first full fiscal quarter
after the date of this Agreement, which earnings statement shall satisfy
the provisions of Section 11(a) of the Securities Act and the rules and
regulations of the Commission thereunder. If such fiscal quarter is the
last fiscal quarter of the Company's fiscal year, such earnings statement
shall be made available not later than 90 days after the close of the
period covered thereby and in all other cases shall be made available not
later than 45 days after the close of the period covered thereby.
(f) During the period beginning on the date of this Underwriting
Agreement and continuing for a period of 90 days after the first date of
the public offering of the Offered Securities, not to offer, sell, contract
to sell or otherwise dispose of any shares of its common stock or any
securities convertible into or exercisable or exchangeable for its common
stock, other than (i) the Offered Securities, (ii) options to purchase
common stock, stock purchase rights or shares of common stock issued upon
exercise of such options or rights, granted under the Company's existing
stock option and benefit plans, (iii) shares of common stock pursuant to
Rights (as defined in the Prospectus) and (iv) shares of common stock
issued upon exercise of warrants and options outstanding as of the date
hereof, without the prior written consent of the Managers.
(g) Whether or not any sale of Offered Securities is consummated, to
pay all expenses incident to the performance of its obligations under this
Agreement, including: (i) the preparation and filing of the Registration
Statement and the Prospectus and all amendments and supplements thereto,
(ii) the preparation, issuance and delivery of the Offered Securities,
(iii) the fees and disbursements of the Company's counsel and accountants,
(iv) the qualification of the Offered Securities under securities or Blue
Sky laws in accordance with the provisions of Section 4(d), including
filing fees and the fees and disbursements of counsel for the Underwriters
in connection therewith and in connection with the preparation of any Blue
Sky Memoranda, (v) the printing and delivery to the Underwriters in
quantities as hereinabove stated of copies of the Registration Statement
and all amendments thereto and of the Prospectus and any amendments or
supplements thereto, and (vi) the fees and expenses, if any, incurred with
respect to any filing with the National Association of Securities Dealers,
Inc.
5. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each Underwriter and
each person, if any, who controls such Underwriter within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act from and
against any and all losses, claims, damages and liabilities (including, without
limitation, any legal or other expenses reasonably incurred by any Underwriter
or any such controlling person in connection with investigating or defending any
such action or claim) caused by any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or any amendment
thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not
(6)
<PAGE> 7
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to any Underwriter furnished to the
Company in writing by such Underwriter through the Managers expressly for use
therein, provided, however, that the indemnity agreement contained in this
paragraph (a) with respect to any preliminary prospectus shall not inure to the
benefit of any Underwriter (or any person controlling such Underwriter) from
whom the person asserting any such loss, claim, damage or liability purchased
the Offered Securities, if a copy of the Prospectus (as then amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) was not sent or given by or on behalf of such Underwriter to such
person, if required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Offered Securities to such person, and the
Prospectus (as so amended or supplemented) would have corrected the defect
giving rise to such loss, claim, damage or liability.
(b) Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers who sign the Registration
Statement and each person, if any, who controls the Company within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from the Company to such Underwriter,
but only with reference to information relating to such Underwriter furnished to
the Company in writing by such Underwriter through the Managers expressly for
use in the Registration Statement, any preliminary prospectus, the Prospectus or
any amendments or supplements thereto. The information set forth on the cover
page of, and under the caption "Underwriting" or "Plan of Distribution" in the
Prospectus, insofar as it relates to the distribution by the Underwriters of the
Offered Securities, constitutes the only written information furnished by the
Underwriters to the Company for use in the Prospectus.
(c) In case any proceeding (including any governmental investigation) shall
be instituted involving any person in respect of which indemnity may be sought
pursuant to either paragraph (a) or (b) above, such person (the "indemnified
party") shall promptly notify the person against whom such indemnity may be
sought (the "indemnifying party") in writing and the indemnifying party, upon
request of the indemnified party, shall retain counsel reasonably satisfactory
to the indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such indemnified parties and that all such fees
and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by the Managers, in the case of parties indemnified
pursuant to paragraph (a) above, and by the Company, in the case of parties
indemnified pursuant to paragraph (b) above. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there shall be a final judgment
for the plaintiff, the indemnifying party agrees to indemnify the indemnified
party from and against any loss or liability by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into in good faith more than 45 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party,
(7)
<PAGE> 8
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
(d) To the extent the indemnification provided for in paragraph (a) or (b)
of this Section 5 is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities referred to therein, then
each indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on the
other hand from the offering of the Offered Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company on the one
hand and of the Underwriters on the other hand in connection with the statements
or omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other hand
in connection with the offering of the Offered Securities shall be deemed to be
in the same respective proportions as the net proceeds from the offering of such
Offered Securities (before deducting expenses) received by the Company and the
total underwriting discounts and commissions received by the Underwriters, in
each case as set forth in the table on the cover of the Prospectus Supplement,
bear to the aggregate public offering price of the Offered Securities. The
relative fault of the Company on the one hand and of the Underwriters on the
other hand shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or by the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Underwriters' respective obligations to contribute pursuant to this Section
5 are several in proportion to the respective number of shares of Offered
Securities they have purchased hereunder, and not joint.
(e) The Company and the Underwriters agree that it would not be just or
equitable if contribution pursuant to this Section 5 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in paragraph (d) above. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 5, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Offered
Securities underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages that such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 5 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
6. Termination. This Agreement shall be subject to termination, by notice
given by the Managers to the Company, if (a) after the execution and delivery of
the Underwriting Agreement and prior to the Closing Date (i) trading generally
shall have been suspended or materially limited on or by, as the case may be,
any of the New York Stock Exchange, the American Stock Exchange, the National
Association of Securities Dealers, Inc., or any other over-the-counter market,
(ii) trading of any securities of the Company shall have been suspended on any
exchange or in any over-the-counter market, (iii) a general moratorium on
commercial banking activities in New York shall have been declared by either
Federal or New York State authorities or (iv) there shall have occurred any
outbreak or escalation of hostilities or any change in financial markets or any
calamity or crisis that, in the judgment of the Managers, is material and
adverse and (b) in the case of any of the events specified in clauses (a)(i)
through (iv), such event, singly or together with other
(8)
<PAGE> 9
such event, makes it, in the judgement of the Managers, impracticable to market
the Offered Securities on the terms and in the manner contemplated in the
Prospectus.
7. Defaulting Underwriters. If, on the Closing Date, any one or more of
the Underwriters shall fail or refuse to purchase the Offered Securities that
it has or they have agreed to purchase hereunder on such date, and the
aggregate amount of Offered Securities which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase is not more than
one-tenth of the aggregate amount of the Offered Securities to be purchased on
such date, the other Underwriters shall be obligated severally in the
proportions that the amount of Offered Securities set forth opposite their
respective names in Schedule I to the Underwriting Agreement bears to the
aggregate amount of Offered Securities set forth opposite the names of all
such non-defaulting Underwriters, or in such other proportions as the
Managers may specify, to purchase the Offered Securities which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase on such
date; provided that in no event shall the amount of Offered Securities that any
Underwriter has agreed to purchase pursuant to this Agreement be increased
pursuant to this Section 7 by an amount in excess of one-ninth of such amount
of Offered Securities without the written consent of such Underwriter. If, on
the Closing Date, any Underwriter or Underwriters shall fail or refuse to
purchase Offered Securities and the aggregate amount of Offered Securities with
respect to which such default occurs is more than one-tenth of the aggregate
amount of Offered Securities to be purchased on such date, and arrangements
satisfactory to the Managers and the Company for the purchase of such Offered
Securities are not made within 36 hours after such default, this Agreement
shall terminate without liability on the part of any non-defaulting Underwriter
or the Company. In any such case either the Managers or the Company shall have
the right to postpone the Closing Date but in no event for longer than seven
days, in order that the required changes, if any, in the Registration Statement
and in the Prospectus or in any other documents or arrangements may be
effected. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of them,
because of any failure or refusal on the part of the Company to comply with the
terms or to fulfill any of the conditions of this Agreement, or if for any
reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering of the Offered Securities.
8. Representations and Indemnities to Survive. The respective indemnity
and contribution agreements and the representations, warranties and other
statements of the Company, its officers and the Underwriters set forth in this
Agreement will remain in full force and effect, regardless of any termination
of this Agreement, any investigation made by or on behalf of any Underwriter
or the Company or any of the officers, directors or controlling persons
referred to in Section 5 and delivery of and payment for the Offered Securities.
9. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the officers,
directors and controlling persons referred to in Section 5, and no other person
will have any right or obligation hereunder.
10. Definition of "Business Day." For purposes of this Agreement, "Business
Day" means any day on which the New York Stock Exchange, Inc. is open for
trading.
11. Counterparts. The Underwriting Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
12. Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
13. Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.
(9)
<PAGE> 10
Please confirm, by signing and returning to us two counterparts of this
Agreement, that you are acting on behalf of yourselves and the several
Underwriters and that the foregoing correctly sets forth the Agreement between
the Company and the several Underwriters.
Very truly yours,
APPLIED MATERIALS, INC.
By: /s/ JAMES C. MORGAN
---------------------------------
Authorized Signatory
Confirmed and accepted as of James C. Morgan
the date first above mentioned Chairman of the Board of Directors
and Chief Executive Officer
LEHMAN BROTHERS INC.
MORGAN STANLEY & CO. INCORPORATED
ROBERTSON, STEPHENS & COMPANY
COWEN & COMPANY
NEEDHAM & COMPANY, INC.
For themselves and as Managers for the several
Underwriters named in Schedule I hereto
By: Lehman Brothers Inc.
By: /s/ J. STUART FRANCIS
---------------------------------
Authorized Representative
J. Stuart Francis
Managing Director
(10)
<PAGE> 11
SCHEDULE I
UNDERWRITING AGREEMENT DATED MARCH 16, 1994
<TABLE>
<CAPTION>
NUMBER OF FIRM
UNDERWRITER SECURITIES TO BE PURCHASED
----------- --------------------------
<S> <C>
Lehman Brothers Inc...................................... 700,000
Morgan Stanley & Co. Incorporated........................ 700,000
Robertson, Stephens & Company............................ 200,000
Cowen & Company.......................................... 200,000
Needham & Company, Inc................................... 200,000
---------
Total.......................................... 2,000,000
=========
</TABLE>
(11)
<PAGE> 12
EXHIBIT A
Pursuant to Section 3(c) of the Underwriting Agreement, the Company's legal
counsel, Orrick, Herrington & Sutcliffe shall furnish their opinion to the
Underwriters, dated the Closing Date, to the effect that:
(i) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has the
full corporate power and corporate authority to own, lease and operate its
properties and conduct its business as described in the Prospectus.
(ii) The Underwriting Agreement has been duly authorized by all
necessary corporate action on the part of the Company and has been duly
executed and delivered by the Company.
(iii) The Offered Securities are duly authorized and will be, when
duly countersigned by the Company's Transfer Agent and Registrar and upon
issuance and delivery against payment therefor in accordance with the terms
of the Underwriting Agreement, validly issued, fully paid and
nonassessable.
(iv) There are no preemptive or, to our knowledge, other rights to
subscribe for or to purchase any securities of the Company pursuant to the
Company's Certificate of Incorporation, Bylaws, Credit Agreement, dated as
of August 1, 1991, among Applied Materials, Inc., the bank's signatory
thereto and The Chase Manhattan Bank, N.A., as agent (the "Bank
Agreement"), or any agreement set forth as an exhibit to any of the
documents incorporated by reference in the Prospectus.
(v) The execution, delivery and performance by the Company of the
Underwriting Agreement (1) do not conflict with or violate the Company's
Certificate of Incorporation or Bylaws, (2) to our knowledge, do not
conflict with or violate or constitute a breach of, or constitute a default
under, the Bank Agreement or any agreement set forth as an exhibit to any
of the documents incorporated by reference in the Prospectus, (3) to our
knowledge, do not result in the creation or imposition of any lien, charge,
claim or encumbrance upon any property or asset of the Company in any
manner that would have a material adverse effect on the condition
(financial or other), results of operations, business or business prospects
of the Company and its subsidiaries taken as a whole, and (4) do not
violate applicable law.
(vi) No permit, authorization, consent, approval of or qualification
with any U.S. federal or state governmental authority is required for the
execution, delivery or performance by the Company of the Underwriting
Agreement, except such as have been obtained under the Securities Act and
such as may be required under state or other blue sky laws (on which we
express no opinion) in connection with the purchase and distribution of the
Offered Securities.
(vii) To our knowledge, except as set forth in the Prospectus, there
is no action, suit or proceeding at law or in equity or by or before any
governmental instrumentality or other agency now pending or overtly
threatened in writing against or affecting the Company which would require
disclosure in the Registration Statement or the Prospectus.
(viii) The terms and provisions of the Offered Securities conform in
all material respects to the description thereof contained in the
Prospectus. The statements in the Prospectus under the captions
"Description of Debt Securities," "Description of Capital Stock,"
"Underwriting" and "Plan of Distribution," and in the Registration
Statement under Item 15, insofar as such statements constitute a summary of
the legal matters, documents or proceedings referred to therein, fairly
present the information called for with respect to such legal matters,
documents and proceedings and fairly summarize the matters referred to
therein.
(ix) The Registration Statement is effective under the Securities
Act and, to the best of our knowledge, no proceedings for a stop order have
been instituted or are pending or threatened under the Securities Act and
any required filings pursuant to Rule 424(b) have been made in accordance
therewith.
(x) The Registration Statement, the Prospectus and each amendment
thereof or supplement thereto (except the financial statements, schedules
and other financial and statistical information contained or incorporated
by reference therein as to which we express no opinion), as of their
respective
A-1
<PAGE> 13
effective or issue dates, complied as to form in all material respects with
the requirements of the Securities Act and the rules and regulations of the
Commission thereunder.
(xi) Each document filed pursuant to the Securities Exchange Act of
1934 and incorporated by reference in the Prospectus (it being understood
that we have not been requested to and do not give any opinion or make any
comment with respect to the financial statements, schedules and other
financial and statistical information contained or incorporated by
reference therein) complied when it was filed as to form in all material
respects with the requirements of the Securities Exchange Act of 1934 and
the rules and regulations of the Commission thereunder.
(xii) Nothing has come to such counsel's attention to cause it to
believe that (1) (except for financial statements, schedules and other
financial and statistical information contained therein as to which such
counsel need not express any belief and except for that part of the
Registration Statement that constitutes the Form T-1) the Registration
Statement, at the time it became effective contained any untrue statement
of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading,
and (2) (except for financial statements, schedules and other financial and
statistical information contained therein as to which such counsel need not
express any belief) the Prospectus as of its issue date and as of the date
such opinion is delivered contained or contains, respectively, any untrue
statement of a material fact or omitted or omits, respectively, to state a
material fact required to be stated therein or necessary in order to make
the statements therein not misleading.
(xiii) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended.
With respect to subparagraph (xii) above such counsel may state that their
belief is based upon their participation in the preparation of the Registration
Statement and Prospectus and any amendments or supplements thereto and documents
incorporated therein by reference and review and discussion of the contents
thereof, but are without independent check or verification, except as specified.
A-2
<PAGE> 14
EXHIBIT B
Pursuant to Section 3(d) of the Underwriting Agreement, the Company's
Director of Legal Affairs shall furnish an opinion to the Underwriters, dated
the Closing Date, to the effect that:
(i) Each of the Company's Significant Subsidiaries (as such term is
defined in Rule 405 under the Securities Act) (each, a "Subsidiary" and
collectively, the "Subsidiaries") has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with full power and authority to own,
lease and operate its properties and conduct its business as described in
the Prospectus and as presently being conducted, and the Company and each
Subsidiary is duly qualified to do business and is in good standing in each
jurisdiction in which the character of the business conducted by it or the
location of the properties owned or leased by it makes such qualification
necessary, except where the failure to be so qualified would not have a
material adverse effect on the condition (financial or other), results of
operations, business or business prospects of the Company and its
subsidiaries taken as a whole.
(ii) To such counsel's knowledge, there are no rights to subscribe
for or to purchase any securities of the Company pursuant to any
agreement to which the Company or any of the Subsidiaries is a party or
by which it or any of its properties is bound. To such counsel's
knowledge, no holders of shares of Common Stock of the Company have
registration rights with respect to such securities.
(iii) The execution and delivery by the Company of the Underwriting
Agreement, and the consummation by the Company of the transactions
contemplated thereby (i) do not conflict with or violate the charter
documents of any Subsidiary, (ii) to such counsel's knowledge, do not
result in the material breach or violation of any of the terms or
provisions of, or constitute a material default under, any agreement to
which the Company or any of the Subsidiaries is a party or by which it is
or any of its properties is bound, and (iii) do not violate any applicable
law or any judgment, order or decree of any court or any governmental
agency or body having jurisdiction over the Company or any of the
Subsidiaries, in each case in any manner that would have a material adverse
effect on the condition (financial or other), results of operations,
business or business prospects of the Company and its subsidiaries taken as
a whole or that would affect the power or ability of the Company in any
manner to perform its obligations under the Underwriting Agreement, or to
consummate the transactions contemplated by the Prospectus.
(iv) There is no action, suit or proceeding at law or in equity or by
or before any governmental instrumentality or other agency now pending or,
to such counsel's knowledge, threatened against or affecting the Company or
any Subsidiary or any of their respective properties, other than (i)
proceedings fairly summarized in all material respects in the Prospectus,
and (ii) proceedings which are not likely to have a material adverse effect
on the Company and its subsidiaries, taken as a whole, or on the power or
ability of the Company to perform its obligations under the Underwriting
Agreement or to consummate the transactions contemplated thereby.
(v) The statements in Item 3 - Legal Proceedings of the Company's
most recent Annual Report on Form 10-K and in Part II, Item 1 - Legal
Proceedings of the Company's Quarterly Report for the quarter ended January
30, 1994, insofar as such statements constitute a summary of the legal
matters, documents or proceedings referred to therein, fairly present the
information called for with respect to such legal matters, documents or
proceedings and fairly summarize in all material respects the matters
referred to therein.
(vi) To such counsel's knowledge, the Company and its subsidiaries
are in compliance with all applicable Environmental Laws, have received all
permits, licenses or other approvals required of them under all applicable
Environmental Laws to conduct their respective businesses and are in
compliance with all terms and conditions of such permits, licenses or
approvals, in each case (i) except as described in or contemplated by the
Prospectus and (ii) except where such noncompliance with such Environmental
Laws, failure to receive such required permits, licenses or approvals or
failure to comply with the
B-1
<PAGE> 15
terms and conditions of such permits, licenses or approvals would not
reasonably be expected to, singly or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
(vii) To such counsel's knowledge and except as described in or
contemplated by the Prospectus (i) each of the Company and its subsidiaries
owns or possesses adequate and sufficient licenses or other rights to use,
all patents, copyrights, trademarks, service marks, trade names, technology
and know-how necessary in any material respect to conduct its business as
described in the Prospectus and (ii) neither the Company nor any of its
subsidiaries has received any notice of infringement or conflict with (and
knows of no infringement or conflict with) asserted rights of others with
respect to any patents, copyrights trademarks, service marks, trade names
or know-how which would reasonably be expected to result in any material
adverse effect upon the Company and its subsidiaries, taken as a whole.
(viii) Such counsel does not know of any statutes, regulations,
contracts, indentures, mortgages, loan agreements, leases or other
documents of a character required to be described in the Registration
Statement or the Prospectus, or to be filed or incorporated by reference as
exhibits to the Registration Statement that are not described, filed or
incorporated by reference as required by the Securities Act and the rules
and regulations of the Commission thereunder.
B-2
<PAGE> 1
EXHIBIT 10.20
UNDERWRITING AGREEMENT
August 24, 1994
APPLIED MATERIALS, INC.
3050 Bowers Avenue
Santa Clara, California 95054
Ladies and Gentlemen:
We (the "Manager") are acting on behalf of the underwriter or
underwriters (including ourselves) named below (such underwriter or
underwriters being herein called the "Underwriters"), and we understand that
Applied Materials, Inc., a Delaware corporation (the "Company"), proposes to
issue and sell U.S. $100,000,000 aggregate initial offering price of 8% Senior
Notes Due 2004 (the "Debt Securities"). The Debt Securities are also referred
to herein as the "Offered Securities". The Debt Securities will be issued
pursuant to the provisions of an Indenture dated as of August 24, 1994 (the
"Indenture") between the Company and Harris Trust Company of California, as
Trustee (the "Trustee").
Subject to the terms and conditions set forth or incorporated by
reference herein, the Company hereby agrees to sell and the Underwriters agree
to purchase, severally and not jointly, the respective principal amounts of
Debt Securities set forth below opposite their names at a purchase price of
98.594% of the principal amount of Debt Securities, plus accrued interest, if
any, from September 1 to the date of payment and delivery:
<TABLE>
<CAPTION>
Principal Amount
Name of Debt Securities
--------------------------------------------------------------------- ------------------
<S> <C>
Morgan Stanley & Co. Incorporated . . . . . . . . . . . . . . . . . . $ 33,400,000
Lehman Brothers Inc. . . . . . . . . . . . . . . . . . . . . . . . . 33,300,000
J.P. Morgan Securities Inc. . . . . . . . . . . . . . . . . . . . . . 33,300,000
------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $100,000,000
============
</TABLE>
The Underwriters will pay for the Offered Securities upon delivery
thereof at the offices of Wilson, Sonsini, Goodrich & Rosati, 650 Page Mill
Road, Palo Alto, California at 10:00 am. New York time on September 1, 1994,
or at such other time, not later than 5:00 p.m. (New York time) on September 1,
1994, as shall be designated by the Manager. The time and date of such payment
and delivery are hereinafter referred to as the Closing Date. Payment for the
Offered Securities shall be made in immediately available or same day funds.
The Offered Securities shall have the terms set forth in the
Prospectus dated August 17, 1994, and the Prospectus Supplement dated August
24, 1994, including the following:
TERMS OF DEBT SECURITIES
<TABLE>
<CAPTION>
<S> <C>
Maturity Date: September 1, 2004
Interest Rate: 8% per annum
Redemption Provisions: None
Interest Payment Dates: March 1 and September 1, commencing March 1, 1995
(Interest accrues from September 1, 1994)
Form and Denomination: Global form, denominated in multiples of $1,000
</TABLE>
<PAGE> 2
All provisions contained in the document entitled Applied Materials,
Inc. Underwriting Agreement Standard Provisions (Debt Securities) dated August
24, 1994, a copy of which is attached hereto, are herein incorporated by
reference in their entirety and shall be deemed to be a part of this Agreement
to the same extent as if such provisions had been set forth in full herein,
except that (i) if any term defined in such document is otherwise defined
herein, the definition set forth herein shall control, (ii) all references in
such document to a type of security that is not an Offered Security shall not
be deemed to be a part of this Agreement, and (iii) all references in such
document to a type of agreement that has not been entered into in connection
with the transactions contemplated hereby shall not be deemed to be a part of
this Agreement.
Please confirm your agreement by having an authorized officer sign a
copy of this Agreement in the space set forth below.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
LEHMAN BROTHERS INC.
J.P. MORGAN SECURITIES INC.
Acting severally on behalf of themselves
and the several Underwriters named herein
By: MORGAN STANLEY & CO. INCORPORATED
By: /s/ RICHARD W. SWIFT
-----------------------------------
Name: Richard W. Swift
Title: Managing Director
Accepted, August 24, 1994
APPLIED MATERIALS, INC.
By: /s/ JAMES C. MORGAN
-------------------------------
Name: James C. Morgan
Title: Chairman
-2-
<PAGE> 3
APPLIED MATERIALS, INC.
UNDERWRITING AGREEMENT
STANDARD PROVISIONS
(Debt Securities)
August 24, 1994
From time to time, Applied Materials, Inc., a Delaware corporation (the
"Company"), may enter into one or more underwriting agreements that provide for
the sale of designated securities to the several underwriters named therein.
The standard provisions set forth herein may be incorporated by reference in
any such underwriting agreement (an "Underwriting Agreement"). The
Underwriting Agreement, including the provisions incorporated therein by
reference, is herein sometimes referred to as this Agreement. Unless otherwise
defined herein, terms defined in the Underwriting Agreement are used herein as
therein defined.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement, including a prospectus, relating to the
Offered Securities and has filed with, or transmitted for filing to, or shall
promptly hereafter file with or transmit for filing to, the Commission a
prospectus supplement (the "Prospectus Supplement") specifically relating to
the Offered Securities pursuant to Rule 424 or Rule 430A under the Securities
Act of 1933, as amended (the "Securities Act"). The term "Registration
Statement" means the registration statement, including the exhibits thereto, as
amended to the date of this Agreement. The term "Basic Prospectus" means the
prospectus included in the Registration Statement. The term "Prospectus" means
the Basic Prospectus together with the Prospectus Supplement. The term
"preliminary prospectus" means a preliminary prospectus supplement specifically
relating to the Offered Securities, together with the Basic Prospectus. As
used herein, the terms "Registration Statement," "Basic Prospectus,"
"Prospectus" and "preliminary prospectus" shall include in each case the
documents, if any, incorporated by reference therein. The terms "supplement,"
"amendment" and "amend" as used herein shall include all documents deemed to be
incorporated by reference in the Prospectus that are filed subsequent to the
date of the Basic Prospectus by the Company with the Commission pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
1. Representations and Warranties. The Company represents and
warrants to and agrees with each of the Underwriters that:
(a) The Company meets the requirements for the use of
Form S-3 under the Securities Act. The Registration Statement has become
effective; no stop order suspending the effectiveness of the Registration
Statement is in effect, and no proceedings for such purpose are pending before
or threatened by the Commission.
(b) (i) Each document, if any, filed or to be filed
pursuant to the Exchange Act and incorporated by reference in the Prospectus
complied or will comply when so filed in all material respects with the
Exchange Act and the applicable rules and regulations of the Commission
thereunder, (ii) each part of the Registration Statement, when such part became
effective, did not contain, and each such part, as amended or supplemented, if
applicable, when such part is filed, will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, (iii) the Registration
Statement and the Prospectus comply, and, as amended or supplemented, if
applicable, will comply in all material respects with the Securities Act and
the applicable rules and regulations of the Commission thereunder and (iv) the
Prospectus as of its issue date does not contain and, as amended or
supplemented, if applicable, as of the date of any such amendment and at the
Closing Date, will not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, except that
the representations and warranties set forth in this Section 1 (b) do not apply
(A) to statements or omissions in the
<PAGE> 4
Registration Statement or the Prospectus based upon information relating to any
Underwriter furnished to the Company in writing by such Underwriter through the
Manager expressly for use therein or (B) to that part of the Registration
Statement that constitutes the Statement of Eligibility (Form T-l) under the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), of the
Trustee.
(c) The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the State of
Delaware, has the corporate power and authority to own its property and to
conduct its business as described in the Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be
in good standing would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole.
(d) Each subsidiary of the Company has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described in the
Prospectus and as currently being conducted and is duly qualified to transact
business and is in good standing in each jurisdiction in which the conduct of
its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be
in good standing would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole.
(e) This Agreement has been duly authorized, executed and
delivered by the Company.
(f) The Indenture pursuant to which the Offered
Securities are to be issued has been duly qualified under the Trust Indenture
Act and has been duly authorized, executed and delivered by the Company and is
a valid and binding agreement of the Company, enforceable in accordance with
its terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally or the effect
of general principles of equity, including the possible unavailability of
specific performance or injunctive relief, whether considered in a proceeding
in equity or at law.
(g) The Offered Securities have been duly authorized and,
when executed and authenticated in accordance with the provisions of the
Indenture and delivered to and paid for by the Underwriters in accordance with
the terms of this Agreement, will be entitled to the benefits of the Indenture
and will be valid and binding obligations of the Company enforceable in
accordance with their terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws relating to or affecting
creditors' rights generally or the effect of general principles of equity,
including the possible unavailability of specific performance or injunctive
relief, whether considered in a proceeding in equity or at law.
(h) The authorized capital stock of the Company conforms
as to legal matters to the description thereof contained in the Prospectus.
(i) The shares of Common Stock of the Company outstanding
prior to the issuance of the Offered Securities have been duly authorized and
are validly issued, fully paid and nonassessable.
(j) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement, the
Indenture and the Offered Securities will not contravene, or give rise to any
additional rights or remedies under, any provision of applicable law or the
certificate of incorporation or bylaws of the Company or any agreement or other
instrument binding upon the Company or any of its subsidiaries that is material
to the Company and its subsidiaries, taken as a whole, or any judgment, order
or decree of any governmental body, agency or court having jurisdiction over
the Company or any subsidiary, and no consent, approval, authorization or order
of, or qualification with, any governmental body or agency is required for the
performance by the Company of its obligations under this Agreement, the
Indenture or the Offered Securities, except such as may be required by the
securities or Blue Sky laws of the various states in connection with the offer
and sale of the Offered Securities.
-2-
<PAGE> 5
(k) There has not occurred any material adverse change,
or any development which could be reasonably expected to result in a
prospective material adverse change, in the condition, financial or otherwise,
or in the business or operations of the Company and its subsidiaries, taken as
a whole, from that described in the Prospectus.
(l) There are no legal or governmental proceedings
pending or threatened to which the Company or any of its subsidiaries is a
party or to which any of the properties of the Company or any of its
subsidiaries is subject that are required to be described in the Registration
Statement or the Prospectus and are not so described in all material respects
(other than proceedings that would not have a material adverse effect on the
Company and its subsidiaries taken as a whole, or on the power or ability of
the Company to perform its obligations under this Agreement, the Indenture or
the Offered Securities or to consummate the transactions contemplated by the
Prospectus), or any statutes, regulations, contracts or other documents that
are required to be described in the Registration Statement or the Prospectus or
to be filed or incorporated by reference as exhibits to the Registration
Statement that are not described, filed or incorporated as required.
(m) The Company is not an "investment company" or an
entity "controlled" by an "investment company," as such terms are defined in
the Investment Company Act of 1940, as amended.
(n) To the best knowledge of the Company after due
inquiry, the Company and its subsidiaries (i) are in compliance with any and
all applicable foreign, federal, state and local laws and regulations relating
to the protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("Environmental Laws"),
(ii) have received all permits, licenses or other approvals required of them
under applicable Environmental Laws which are necessary to conduct their
respective businesses and (iii) are in compliance with all terms and conditions
of any such permit, license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such permits,
licenses or approvals would not reasonably be expected to, singly or in the
aggregate, have a material adverse effect on the Company and its subsidiaries,
taken as a whole.
(o) The Company has a process of conducting periodic
internal reviews relating to compliance by the Company and its subsidiaries
with Environmental Laws. On the basis of such reviews, except as set forth in
the Prospectus, nothing has come to the attention of the Company which would
lead it to believe that costs associated with compliance with Environmental
Laws or liabilities arising due to noncompliance with Environmental Laws
(including, without limitation, any capital or operating expenses required for
cleanup, closure of properties or compliance with Environmental Laws or any
permit, license or approval, any related constraints on operating activities
and any potential liabilities to third parties) would have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(p) Each of the Company and its subsidiaries owns or
possesses adequate and sufficient licenses or other rights to use all patents,
copyrights, trademarks, service marks, trade names, technology and know-how
necessary (in any material respect) to conduct its business in the manner
described in the Prospectus, except such as are not material to the business of
the Company and its subsidiaries taken as a whole and except as disclosed in
the Prospectus. Except as disclosed in the Prospectus, neither the Company nor
any of its subsidiaries has received any notice of infringement or conflict
with (and knows of no infringement or conflict with) asserted rights of others
with respect to any patents, copyrights, trademarks, service marks, trade names
or know-how which would reasonably be expected to result in any material
adverse effect upon the Company and its subsidiaries taken as a whole.
(q) The Company has complied with all provisions of
Section 517.075, Florida Statutes (Chapter 92-198, Laws of Florida).
2. Public Offering. The Company is advised by the Manager that
the Underwriters propose to make a public offering of their respective portions
of the Offered Securities as soon after this Agreement has been entered into as
in the Manager's judgment is advisable. The terms of the public offering of
the Offered Securities are set forth in the Prospectus.
-3-
<PAGE> 6
3. Purchase and Delivery. Payment for the Offered Securities
shall be made by certified or official bank check or checks payable to the
order of the Company in funds as are set forth in, and at the time and place
set forth in, the Underwriting Agreement, upon delivery to the Manager for the
respective accounts of the several Underwriters of the Offered Securities,
registered in such names and in such denominations as the Manager shall request
in writing not less than two full business days prior to the date of delivery,
with any transfer taxes payable in connection with the transfer of the Offered
Securities to the Underwriters duly paid.
4. Conditions to Closing. The several obligations of the
Underwriters hereunder are subject to the following conditions:
(a) Subsequent to the execution and delivery of the
Underwriting Agreement and prior to the Closing Date,
(i) there shall not have occurred any
downgrading, nor shall any notice have been given of any intended or potential
downgrading, in the rating accorded any of the Company's securities by any
"nationally recognized statistical rating organization," as such term is
defined for purposes of Rule 436(g) (2) under the Securities Act; and
(ii) there shall not have occurred any
change, or any development involving a prospective change, in the condition,
financial or otherwise, or in the business or operations, of the Company and
its subsidiaries, taken as a whole, from that set forth in the Prospectus that,
in the judgment of the Manager, is material and adverse and that makes it, in
the judgment of the Manager, impracticable to market the Offered Securities on
the terms and in the manner contemplated in the Prospectus.
(b) The Manager shall have received on the Closing Date a
certificate, dated the Closing Date and signed by the chief executive officer
and chief financial officer of the Company, to the effect set forth in clause
(a) (i) above and to the effect that the representations and warranties of the
Company contained in this Agreement are true and correct as of the Closing Date
and that the Company has complied with all of the agreements and satisfied all
of the conditions on its part to be performed or satisfied on or before the
Closing Date.
The officers signing and delivering such certificate may rely
upon the best of their knowledge as to proceedings threatened.
(c) The Manager shall have received on the Closing Date
an opinion of Orrick, Herrington & Sutcliffe, counsel for the Company, dated
the Closing Date, substantially to the effect set forth in Exhibit A. The
opinion of Orrick, Herrington & Sutcliffe shall be rendered to the Manager at
the request of the Company and shall so state therein.
(d) The Manager shall have received on the Closing Date
an opinion of James J. DeLong, Director of Legal Affairs of the Company, dated
the Closing Date, substantially to the effect set forth in Exhibit B.
(e) The Manager shall have received on the Closing Date
an opinion of Wilson, Sonsini, Goodrich & Rosati, Professional Corporation,
special counsel for the Underwriters, dated the Closing Date, covering the
matters referred to in subparagraphs (ii), (iii), (v), (ix) (but only as to the
statements in the Prospectus Supplement under "Description of the Senior Notes"
and "Underwriters" and in the Prospectus under "Description of Debt Securities"
and "Plan of Distribution"), (xii) and (xiii) of Exhibit A hereto.
(f) The Manager shall have received on each of the date
hereof and the Closing Date a letter, dated the date hereof or the Closing
Date, as the case may be, in form and substance satisfactory to the Manager,
from Price Waterhouse, the Company's independent public accountants, containing
statements and information of the type
-4-
<PAGE> 7
ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information contained
in or incorporated by reference into the Prospectus.
5. Covenants of the Company. In further consideration of the
agreements of the Underwriters herein contained, the Company covenants as
follows:
(a) To furnish the Manager, without charge, a signed copy
of the Registration Statement (including exhibits thereto) and for delivery to
each other Underwriter a conformed copy of the Registration Statement (without
exhibits thereto) and, during the period mentioned in paragraph (c) below, as
many copies of the Prospectus, any documents incorporated by reference therein
and any supplements and amendments thereto or to the Registration Statement as
the Manager may reasonably request.
(b) Before amending or supplementing the Registration
Statement or the Prospectus with respect to the Offered Securities, to furnish
to the Manager a copy of each such proposed amendment or supplement and not to
file any such proposed amendment or supplement to which the Manager reasonably
objects.
(c) If, during such period after the first date of the
public offering of the Offered Securities as in the opinion of counsel for the
Underwriters the Prospectus is required by law to be delivered in connection
with sales by an Underwriter or dealer, any event shall occur or condition
exist as a result of which it is necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not misleading,
or if, in the opinion of counsel for the Underwriters, it is necessary to amend
or supplement the Prospectus to comply with law, forthwith to prepare, file
with the Commission and furnish, at its own expense, to the Underwriters, and
to the dealers (whose names and addresses the Manager will furnish to the
Company) to which Offered Securities may have been sold by the Manager on
behalf of the Underwriters and to any other dealers upon request, either
amendments or supplements to the Prospectus so that the statements in the
Prospectus as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be misleading or
so that the Prospectus, as amended or supplemented, will comply with law.
(d) To endeavor to qualify the Offered Securities for
offer and sale under the securities or Blue Sky laws of such jurisdictions as
the Manager shall reasonably request and to maintain such qualification for as
long as the Manager shall reasonably request.
(e) To make generally available to its security holders
and to the Manager as soon as practicable an earnings statement covering a
twelve month period beginning on the first day of the first full fiscal quarter
after the date of this Agreement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and the rules and regulations
of the Commission thereunder. If such fiscal quarter is the last fiscal
quarter of the Company's fiscal year, such earnings statement shall be made
available not later than 90 days after the close of the period covered thereby
and in all other cases shall be made available not later than 45 days after the
close of the period covered thereby.
(f) During the period beginning on the date of this
Underwriting Agreement and continuing for a period through the Closing Date,
not to offer, sell, contract to sell or otherwise dispose of any debt
securities which are substantially similar to the Offered Securities other than
the Offered Securities without the prior written consent of the Manager.
(g) Whether or not any sale of Offered Securities is
consummated, to pay all expenses incident to the performance of its obligations
under this Agreement, including: (i) the preparation and filing of the
Registration Statement and the Prospectus and all amendments and supplements
thereto, (ii) the preparation, issuance and delivery of the Offered Securities,
(iii) the fees and disbursements of the Company's counsel and accountants and
of the Trustee and its counsel, (iv) the qualification of the Offered
Securities under securities or Blue Sky laws in accordance with the provisions
of Section 5(d), including filing fees and the fees and disbursements of
counsel for the Underwriters in connection therewith and in connection with the
preparation of any Blue Sky or Legal Investment Memoranda, (v) the
-5-
<PAGE> 8
printing and delivery to the Underwriters in quantities as hereinabove stated
of copies of the Registration Statement and all amendments thereto and of the
Prospectus and any amendments or supplements thereto, (vi) any fees charged by
rating agencies for the rating of the Offered Securities, and (vii) the fees
and expenses, if any, incurred with respect to any filing with the National
Association of Securities Dealers, Inc.
6. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless
each Underwriter and each person, if any, who controls such Underwriter within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred by any Underwriter or any such controlling person in
connection with investigating or defending any such action or claim) caused by
any untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement or any amendment thereof, any preliminary
prospectus or the Prospectus (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto), or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages or liabilities are caused by any
such untrue statement or omission or alleged untrue statement or omission based
upon information relating to any Underwriter furnished to the Company in
writing by such Underwriter through the Manager expressly for use therein, or
the Statement of Eligibility and Qualification (Form T-l) under the Trust
Indenture Act of the Trustees; provided, however, that the indemnity agreement
contained in this paragraph (a) with respect to any preliminary prospectus
shall not inure to the benefit of any Underwriter (or any person controlling
such Underwriter) from whom the person asserting any such loss, claim, damage
or liability purchased the Offered Securities, if a copy of the Prospectus (as
then amended or supplemented if the Company shall have furnished any amendments
or supplements thereto) was not sent or given by or on behalf of such
Underwriter to such person, if required by law so to have been delivered, at or
prior to the written confirmation of the sale of the Offered Securities to such
person, and the Prospectus (as so amended or supplemented) would have corrected
the defect giving rise to such loss, claim, damage or liability.
(b) Each Underwriter agrees, severally and not jointly,
to indemnify and hold harmless the Company, its directors, its officers who
sign the Registration Statement and each person, if any, who controls the
Company within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from the Company to such Underwriter, but only with reference to information
relating to such Underwriter furnished to the Company in writing by such
Underwriter through the Manager expressly for use in the Registration
Statement, any preliminary prospectus, the Prospectus or any amendments or
supplements thereto. The information set forth on the cover page of, and under
the caption "Underwriters" or "Plan of Distribution" in the Prospectus, insofar
as it relates to the distribution by the Underwriters of the Offered
Securities, constitutes the only written information furnished by the
Underwriters to the Company for use in the Prospectus.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to either paragraph (a) or (b) above, such
person (the "indemnified party") shall promptly notify the person against whom
such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding
and shall pay the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be
at the expense of such indemnified party unless (i) the indemnifying party and
the indemnified party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified
party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It
is understood that the indemnifying party shall not, in respect of the legal
expenses of any indemnified party in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all such
indemnified parties and that all such fees and
-6-
<PAGE> 9
expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by the Manager, in the case of parties indemnified
pursuant to paragraph (a) above, and by the Company, in the case of parties
indemnified pursuant to paragraph (b) above. The indemnifying party shall not
be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there shall be a final judgment
for the plaintiff, the indemnifying party agrees to indemnify the indemnified
party from and against any loss or liability by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by the
second and third sentences of this paragraph, the indemnifying party agrees
that it shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into in good faith more
than 45 days after receipt by such indemnifying party of the aforesaid request
and (ii) such indemnifying party shall not have reimbursed the indemnified
party in accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnity
could have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in
paragraph (a) or (b) of this Section 6 is unavailable to an indemnified party
or insufficient in respect of any losses, claims, damages or liabilities
referred to therein, then each indemnifying party under such paragraph, in lieu
of indemnifying such indemnified party thereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and the
Underwriters on the other hand from the offering of the Offered Securities or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
of the Company on the one hand and of the Underwriters on the other hand in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriters on the other hand in connection with the offering of the
Offered Securities shall be deemed to be in the same respective proportions as
the net proceeds from the offering of such Offered Securities (before deducting
expenses) received by the Company and the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the
table on the cover of the Prospectus Supplement, bear to the aggregate public
offering price of the Offered Securities. The relative fault of the Company on
the one hand and of the Underwriters on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or by the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The
Underwriters' respective obligations to contribute pursuant to this Section 6
are several in proportion to the respective principal amounts of Offered
Securities they have purchased hereunder, and not joint.
(e) The Company and the Underwriters agree that it would
not be just or equitable if contribution pursuant to this Section 6 were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation that does not
take account of the equitable considerations referred to in paragraph (d)
above. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages and liabilities referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 6, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Offered Securities underwritten by it and distributed
to the public were offered to the public exceeds the amount of any damages that
such Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent
-7-
<PAGE> 10
misrepresentation. The remedies provided for in this Section 6 are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
7. Termination. This Agreement shall be subject to termination,
by notice given by the Manager to the Company, if (a) after the execution and
delivery of the Underwriting Agreement and prior to the Closing Date (i)
trading generally shall have been suspended or materially limited on or by, as
the case may be, any of the New York Stock Exchange, the American Stock
Exchange, the National Association of Securities Dealers, Inc., or any other
over-the-counter market, (ii) trading of any securities of the Company shall
have been suspended on any exchange or in any over-the-counter market, (iii) a
general moratorium on commercial banking activities in New York shall have been
declared by either Federal or New York State authorities or (iv) there shall
have occurred any outbreak or escalation of hostilities or any change in
financial markets or any calamity or crisis that, in the judgment of the
Manager, is material and adverse and (b) in the case of any of the events
specified in clauses (a) (i) through (iv), such event, singly or together with
other such event, makes it, in the judgement of the Manager, impracticable to
market the Offered Securities on the terms and in the manner contemplated in
the Prospectus.
8. Defaulting Underwriters. If, on the Closing Date, any one or
more of the Underwriters shall fail or refuse to purchase the Offered
Securities that it has or they have agreed to purchase hereunder on such date,
and the aggregate amount of Offered Securities which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase is not
more than one- tenth of the aggregate amount of the Offered Securities to be
purchased on such date, the other Underwriters shall be obligated severally in
the proportions that the amount of Offered Securities set forth opposite their
respective names in the Underwriting Agreement bears to the aggregate amount of
Offered Securities set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as the Manager may specify, to
purchase the Offered Securities which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; provided
that in no event shall the amount of Offered Securities that any Underwriter
has agreed to purchase pursuant to this Agreement be increased pursuant to this
Section 8 by an amount in excess of one-ninth of such amount of Offered
Securities without the written consent of such Underwriter. If, on the Closing
Date, any Underwriter or Underwriters shall fail or refuse to purchase Offered
Securities and the aggregate amount of Offered Securities with respect to which
such default occurs is more than one-tenth of the aggregate amount of Offered
Securities to be purchased on such date, and arrangements satisfactory to the
Manager and the Company for the purchase of such Offered Securities are not
made within 36 hours after such default, this Agreement shall terminate without
liability on the part of any non-defaulting Underwriter or the Company. In any
such case either the Manager or the Company shall have the right to postpone
the Closing Date but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and in the Prospectus
or in any other documents or arrangements may be effected. Any action taken
under this paragraph shall not relieve any defaulting Underwriter from
liability in respect of any default of such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for
all out-of-pocket expenses (including the fees and disbursements of their
counsel) reasonably incurred by such Underwriters in connection with this
Agreement or the offering of the Offered Securities.
9. Representations and Indemnities to Survive. The respective
indemnity and contribution agreements and the representations, warranties and
other statements of the Company, its officers and the Underwriters set forth in
this Agreement will remain in full force and effect, regardless of any
termination of this Agreement, any investigation made by or on behalf of any
Underwriter or the Company or any of the officers, directors or controlling
persons referred to in Section 6 and delivery of and payment for the Offered
Securities.
-8-
<PAGE> 11
10. Successors. This Agreement will inure to the benefit of and
be binding upon the parties hereto and their respective successors and the
officers, directors and controlling persons referred to in Section 6, and no
other person will have any right or obligation hereunder.
11. Counterparts. The Underwriting Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
12. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
13. Headings. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
-9-
<PAGE> 12
EXHIBIT A
Pursuant to Section 4(c) of the Underwriting Agreement, the Company's
legal counsel, Orrick, Herrington & Sutcliffe shall furnish their opinion to
the Underwriters, dated the Closing Date, to the effect that:
(i) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has the full
corporate power and corporate authority to own, lease and operate its
properties and conduct its business as described in the Prospectus.
(ii) The Underwriting Agreement has been duly authorized by all
necessary corporate action on the part of the Company and has been duly
executed and delivered by the Company.
(iii) The Offered Securities have been duly authorized by all
necessary corporate action on the part of the Company and, when executed and
authenticated in accordance with the provisions of the Indenture and delivered
to and paid for in accordance with the terms of the Underwriting Agreement will
be (x) entitled to the benefits of the Indenture and (y) valid and binding
agreements of the Company enforceable against the Company in accordance with
their terms except as (a) the enforceability thereof may be limited by
bankruptcy, insolvency or other laws affecting creditors' rights generally and
(b) the enforceability thereof may be limited by general principles of equity
and the unavailability of specific performance or injunctive relief.
(iv) There are no preemptive or, to our knowledge, other rights to
subscribe for or to purchase any securities of the Company pursuant to the
Company's Certificate of Incorporation, Bylaws, Credit Agreement, dated as of
August 1, 1991, among Applied Materials, Inc., the bank's signatory thereto and
The Chase Manhattan Bank, N.A., as agent, as amended August 1, 1994 (the "Bank
Agreement"), or any agreement set forth as an exhibit to any of the documents
incorporated by reference in the Prospectus.
(v) The Indenture has been duly authorized by all necessary
corporate action on the part of the Company and has been executed and delivered
by the Company. The Indenture is a valid and binding agreement of the Company
enforceable against the Company in accordance with its terms except as (a) the
enforceability thereof may be limited by bankruptcy, insolvency or other laws
affecting creditors' rights generally and (b) the enforceability thereof may be
limited by general principles of equity and the unavailability of specific
performance or injunctive relief. The Indenture is qualified under the Trust
Indenture Act.
(vi) The execution, delivery and performance by the Company of the
Underwriting Agreement, The Indenture and the Offered Securities (1) do not
conflict with or violate the Company's Certificate of Incorporation or Bylaws,
(2) to our knowledge, do not conflict with or violate or constitute a breach
of, or constitute a default under, the Bank Agreement or any agreement set
forth as an exhibit to any of the documents incorporated by reference in the
Prospectus, (3) to our knowledge, do not result in the creation or imposition
of any lien, charge, claim or encumbrance upon any property or asset of the
Company in any manner that would have a material adverse effect on the
condition (financial or other), results of operations, business or business
prospects of the Company and its subsidiaries taken as a whole, and (4) do not
violate applicable law.
(vii) No permit, authorization, consent, approval of or
qualification with any U.S. federal or state governmental authority is
required for the execution, delivery or performance by the Company of the
Underwriting Agreement, the Indenture or the Offered Securities, except such as
have been obtained under the Securities Act and the Trust Indenture Act and
such as may be required under state or other blue sky laws (on which we express
no opinion) in connection with the purchase and distribution of the Offered
Securities.
(viii) To our knowledge, except as set forth in the Prospectus, there
is no action, suit or proceeding at law or in equity or by or before any
governmental instrumentality or other agency now pending or overtly threatened
in writing against or affecting the Company which would require disclosure in
the Registration Statement or the Prospectus.
A - 1
<PAGE> 13
(ix) The terms and provisions of the Offered Securities conform in
all material respects to the description thereof contained in the Prospectus.
The statements in the Prospectus under the caption "Description of Debt
Securities", "Description of Capital Stock", and "Plan of Distribution," and in
the Registration Statement under Item 15, and in the Prospectus Supplement
under the captions "Description of Senior Notes" and "Underwriters" insofar as
such statements constitute a summary of the legal matters, documents or
proceedings referred to therein, fairly present the information called for with
respect to such legal matters, documents and proceedings and fairly summarize
the matters referred to therein.
(x) The Registration Statement is effective under the Securities
Act and, to the best of our knowledge, no proceedings for a stop order have
been instituted or are pending or threatened under the Securities Act and any
required filings pursuant to Rule 424(b) have been made in accordance
therewith.
(xi) The Registration Statement, the Prospectus and each amendment
thereof or supplement thereto (except the financial statements, schedules and
other financial and statistical information contained or incorporated by
reference therein and the Form T- 1, as to which we express no opinion), as of
their respective effective or issue dates, complied as to form in all material
respects with the requirements of the Securities Act and the Trust Indenture
Act and the rules and regulations of the Commission thereunder.
(xii) Each document filed pursuant to the Securities Exchange Act of
1934 and incorporated by reference in the Prospectus (it being understood that
we have not been requested to and do not give any opinion or make any comment
with respect to the financial statements, schedules and other financial and
statistical information contained or incorporated by reference therein)
complied when it was filed as to form in all material respects with the
requirements of the Securities Exchange Act of 1934 and the rules and
regulations of the Commission thereunder.
(xiii) Nothing has come to such counsel's attention to cause it to
believe that (1) (except for financial statements, schedules and other
financial and statistical information contained therein as to which such
counsel need not express any belief and except for that part of the
Registration Statement that constitutes the Form T-l) the Registration
Statement, at the time it became effective contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and (2) (except for
financial statements, schedules and other financial and statistical information
contained therein as to which such counsel need not express any belief) the
Prospectus as of its issue date and as of the date such opinion is delivered
contained or contains, respectively, any untrue statement of a material fact or
omitted or omits, respectively, to state a material fact required to be stated
therein or necessary in order to make the statements therein not misleading.
(xiv) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended.
With respect to subparagraph (xiii) above such counsel may state that
their belief is based upon their participation in the preparation of the
Registration Statement and Prospectus and any amendments or supplements thereto
and documents incorporated therein by reference and review and discussion of
the contents thereof, but are without independent check or verification, except
as specified.
A - 2
<PAGE> 14
EXHIBIT B
Pursuant to Section 4(d) of the Underwriting Agreement, the Company's
Director of Legal Affairs shall furnish an opinion to the Underwriters, dated
the Closing Date, to the effect that:
(i) Each of the Company's Significant Subsidiaries (as such term
is defined in Rule 405 under the Securities Act) and each other subsidiary
listed on Exhibit 21 to the Company's Annual Report on Form 10-K for the year
ended October 31, 1993 (each, a "Subsidiary" and collectively, the
"Subsidiaries") has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, with full power and authority to own, lease and operate its
properties and conduct its business as described in the Prospectus and as
presently being conducted, and the Company and each Subsidiary is duly
qualified to do business and is in good standing in each jurisdiction in which
the character of the business conducted by it or the location of the properties
owned or leased by it makes such qualification necessary, except where the
failure to be so qualified would not have a material adverse effect on the
condition (financial or other), results of operations, business or business
prospects of the Company and its subsidiaries taken as a whole.
(ii) To such counsel's knowledge, there are no rights to subscribe
for or to purchase any securities of the Company pursuant to any agreement to
which the Company or any of the Subsidiaries is a party or by which it or any
of its properties is bound. To such counsel's knowledge, no holders of shares
of Common Stock of the Company have registration rights with respect to such
securities.
(iii) The execution and delivery by the Company of the Underwriting
Agreement, the Indenture or the Offered Securities and the consummation by the
Company of the transactions contemplated thereby (i) do not conflict with or
violate the charter documents of any Subsidiary, (ii) to such counsel's
knowledge, do not result in the material breach or violation of any of the
terms or provisions of, or constitute a material default under, any agreement
to which the Company or any of the Subsidiaries is a party or by which it is or
any of its properties is bound, and (iii) do not violate any applicable law or
any judgment, order or decree of any court or any governmental agency or body
having jurisdiction over the Company or any of the Subsidiaries, in each case
in any manner that would have a material adverse effect on the condition
(financial or other), results of operations, business or business prospects of
the Company and its subsidiaries taken as a whole or that would affect the
power or ability of the Company in any manner to perform its obligations under
the Underwriting Agreement, the Indenture or the Offered Securities or to
consummate the transactions contemplated by the Prospectus.
(iv) There is no action, suit or proceeding at law or in equity or
by or before any governmental instrumentality or other agency now pending or,
to such counsel's knowledge, threatened against or affecting the Company or any
Subsidiary or any of their respective properties, other than (i) proceedings
fairly summarized in all material respects in the Prospectus, and (ii)
proceedings which are not likely to have a material adverse effect on the
Company and its subsidiaries, taken as a whole, or on the power or ability of
the Company to perform its obligations under the Underwriting Agreement, the
Indenture or the Offered Securities or to consummate the transactions
contemplated thereby.
(v) The statements in Item 3 - Legal Proceedings of the Company's
most recent Annual Report on Form 10-K and in Part II, Item 1 - Legal
Proceedings of the Company's Quarterly Reports for the quarters ended January
30 and May 1, 1994, insofar as such statements constitute a summary of the
legal matters, documents or proceedings referred to therein, fairly present the
information called for with respect to such legal matters, documents or
proceedings and fairly summarize in all material respects the matters referred
to therein.
(vi) To such counsel's knowledge, the Company and its subsidiaries
are in compliance with all applicable Environmental Laws, have received all
permits, licenses or other approvals required of them under all applicable
Environmental Laws to conduct their respective businesses and are in compliance
with all terms and conditions of such permits, licenses or approvals, in each
case (i) except as described in or contemplated by the Prospectus and (ii)
except
B - 1
<PAGE> 15
where such noncompliance with such Environmental Laws, failure to receive such
required permits, licenses or approvals or failure to comply with the terms and
conditions of such permits, licenses or approvals would not reasonably be
expected to, singly or in the aggregate, have a material adverse effect on the
Company and its subsidiaries, taken as a whole.
(vii) To such counsel's knowledge and except as described in or
contemplated by the Prospectus, (i) each of the Company and its subsidiaries
owns or possesses adequate and sufficient licenses or other rights to use, all
patents, copyrights, trademarks, service marks, trade names, technology and
know-how necessary in any material respect to conduct its business as described
in the Prospectus and (ii) neither the Company nor any of its subsidiaries has
received any notice of infringement or conflict with (and knows of no
infringement or conflict with) asserted rights of others with respect to any
patents, copyrights, trademarks, service marks, trade names or know-how which
would reasonably be expected to result in any material adverse effect upon the
Company and its subsidiaries, taken as a whole.
(viii) Such counsel does not know of any statutes, regulations,
contracts, indentures, mortgages, loan agreements, leases or other documents of
a character required to be described in the Registration Statement or the
Prospectus, or to be filed or incorporated by reference as exhibits to the
Registration Statement that are not described, filed or incorporated by
reference as required by the Securities Act and the rules and regulations of
the Commission thereunder.
B - 2
<PAGE> 1
EXHIBIT 10.21
[CONFORMED COPY]
$125,000,000
CREDIT AGREEMENT
dated as of
September 8, 1994
among
Applied Materials, Inc.
The Banks Party Hereto
and
Morgan Guaranty Trust Company of New York,
as Agent
<PAGE> 2
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
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ARTICLE I
DEFINITIONS
<S> <C> <C>
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Types of Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.02. Notice of Committed Borrowing . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.03. Money Market Borrowings . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.04. Notice to Banks; Funding of Loans . . . . . . . . . . . . . . . . . . 24
SECTION 2.05. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.06. Maturity of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.07. Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.08. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.09. Optional Termination or Reduction
of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.10. Scheduled Termination of
Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.11. Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.12. General Provisions as to Payments . . . . . . . . . . . . . . . . . . 30
SECTION 2.13. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.14. Computation of Interest and Fees . . . . . . . . . . . . . . . . . . 32
ARTICLE III
CONDITIONS
SECTION 3.01. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.02. Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
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*The Table of Contents is not a part of this Agreement.
i
<PAGE> 3
<TABLE>
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
<S> <C> <C>
SECTION 4.01. Corporate Existence and Power . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.02. Corporate and Governmental
Authorization; No Contravention . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.03. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 4.04. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 4.05. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 4.06. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 4.07. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 4.08. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 4.09. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 4.10. Not an Investment Company . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 4.11. Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE V
COVENANTS
SECTION 5.01. Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 5.02. Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 5.03. Maintenance of Property; Insurance . . . . . . . . . . . . . . . . . . 43
SECTION 5.04. Conduct of Business and Maintenance
of Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 5.05. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 5.06. Restricted and Unrestricted
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 5.07. Consolidations, Mergers and Sales
of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 5.08. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 5.09. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . 45
SECTION 5.10. Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 5.11. Negative Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 5.12. Consolidated Tangible Net Worth . . . . . . . . . . . . . . . . . . . . 50
SECTION 5.13. Limitation on Long-Term Leases . . . . . . . . . . . . . . . . . . . . 51
SECTION 5.14. Quick Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
</TABLE>
ii
<PAGE> 4
<TABLE>
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ARTICLE VI
DEFAULTS
<S> <C> <C>
SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 6.02. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization . . . . . . . . . . . . . . . . . . . . . 55
SECTION 7.02. Agent and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 7.03. Action by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 7.04. Consultation with Experts . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 7.05. Liability of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 7.06. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.07. Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.08. Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.09. Agent's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate
Inadequate or Unfair . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 8.02. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 8.03. Increased Cost and Reduced Return . . . . . . . . . . . . . . . . . . . 59
SECTION 8.04. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 8.05. Limitations on Amounts Due Under
Section 8.03 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 8.06. Base Rate Loans Substituted for
Affected Fixed Rate Loans . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 8.07. Substitution of Bank . . . . . . . . . . . . . . . . . . . . . . . . . 63
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
ARTICLE IX
MISCELLANEOUS
<S> <C> <C>
SECTION 9.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 9.02. No Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 9.03. Expenses; Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 9.04. Sharing of Set-Offs . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 9.05. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 9.06. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 9.07. Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 9.08. Governing Law; Submission to
Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 9.09. Counterparts; Integration;
Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 9.10. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 9.11. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Pricing Schedule
Exhibit A - Note
Exhibit B - Money Market Quote Request
Exhibit C - Invitation for Money Market Quote
Exhibit D - Money Market Quote
Exhibit E - Opinion of General Counsel for the Company
Exhibit F - Opinion of Special Counsel for the Company
Exhibit G - Opinion of Special Counsel for the Agent
Exhibit H - Assignment and Assumption Agreement
Exhibit I - Restricted and Unrestricted Subsidiaries
Exhibit J - Existing Liens
Exhibit K - Special Unencumbered Property
</TABLE>
iv
<PAGE> 6
CREDIT AGREEMENT
AGREEMENT dated as of September 8, 1994 among APPLIED
MATERIALS, INC., the BANKS party hereto and MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used
herein, have the following meanings:
"Absolute Rate Auction" means a solicitation of Money Market
Quotes setting forth Money Market Absolute Rates pursuant to Section 2.03.
"Adjusted CD Rate" has the meaning set forth in
Section 2.07(b).
"Adjusted London Interbank Offered Rate" has the meaning set
forth in Section 2.07(c).
"Administrative Questionnaire" means, with respect to each
Bank, an administrative questionnaire in the form prepared by the Agent and
submitted to the Agent (with a copy to the Company) duly completed by such
Bank.
"Affiliate" means any Person (other than a Restricted
Subsidiary) (i) which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, the Company,
(ii) which beneficially owns or holds 10% or more of any class of the Voting
Stock of the Company or (iii) 10% or more of the Voting Stock (or in the case
of a Person which is not a corporation, 10% or more of the equity interest) of
which is beneficially owned or held by the Company or a Subsidiary. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of Voting Stock, by contract or otherwise.
<PAGE> 7
"Agent" means Morgan Guaranty Trust Company of New York in its
capacity as agent for the Banks hereunder, and its successors in such capacity.
"AMJ" means Applied Materials Japan, Inc., a corporation
organized under the laws of Japan.
"Applicable Lending Office" means, with respect to any Bank,
(i) in the case of its Domestic Loans, its Domestic Lending Office, (ii) in the
case of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the
case of its Money Market Loans, its Money Market Lending Office.
"Assessment Rate" has the meaning set forth in Section 2.07(b).
"Assignee" has the meaning set forth in Section 9.06(c).
"Bank" means each bank listed on the signature pages hereof,
each Assignee which becomes a Bank pursuant to Section 9.06(c), and their
respective successors.
"Base Rate" means, for any day, a rate per annum equal to the
higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus
the Federal Funds Rate for such day.
"Base Rate Loan" means a Committed Loan made or to be made by
a Bank as a Base Rate Loan in accordance with the applicable Notice of
Committed Borrowing or pursuant to Article VIII.
"Benefit Arrangement" means at any time an employee benefit
plan within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.
"Borrowing" has the meaning set forth in Section 1.02.
"Capitalized Lease" means any lease the obligation for Rentals
with respect to which is required to be capitalized on a consolidated balance
sheet of the lessee and its subsidiaries in accordance with GAAP.
"Capitalized Rentals" of any Person means at any date the
amount at which the aggregate Rentals due and to become due under all
Capitalized Leases under which such
2
<PAGE> 8
Person is a lessee would be reflected as a liability on a consolidated balance
sheet of such Person.
"CD Base Rate" has the meaning set forth in Section 2.07(b).
"CD Loan" means a Committed Loan made or to be made by a Bank
as a CD Loan in accordance with the applicable Notice of Committed Borrowing.
"CD Margin" has the meaning set forth in Section 2.07(b).
"CD Reference Banks" means Bank of America National Trust and
Savings Association, Banque Nationale de Paris and Morgan Guaranty Trust
Company of New York.
"Closing Date" means the date on or after the Effective Date
on which the Agent shall have received the documents specified in or pursuant
to Section 3.01.
"Commitment" means, with respect to each Bank, the amount set
forth opposite the name of such Bank on the signature pages hereof (or, in the
case of an Assignee, the portion of the transferor Bank's Commitment assigned
to such Assignee pursuant to Section 9.06(c)), in each case as such amount may
be reduced from time to time pursuant to Section 2.09 or changed as a result of
an assignment pursuant to Section 9.06(c).
"Committed Loan" means a loan made by a Bank pursuant to
Section 2.01.
"Company" means Applied Materials, Inc., a Delaware
corporation, and its successors.
"Company's 1993 Form 10-K" means the Company's annual report
on Form 10-K for 1993, as filed with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934.
"Company's Latest Form 10-Q" means the Company's quarterly
report on Form 10-Q for the quarter ended May 1, 1994, as filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934.
"Consolidated Current Liabilities" means at any date such
liabilities of the Company and its Relevant Subsidiaries on a consolidated
basis as shall be determined in accordance with GAAP to constitute current
liabilities.
3
<PAGE> 9
"Consolidated Debt" means all Debt of the Company and its
Relevant Subsidiaries, determined on a consolidated basis eliminating
intercompany items; provided that Debt of the Company to its Relevant
Subsidiaries with a maturity of more than 180 days shall be included in the
calculation of Consolidated Debt.
"Consolidated Net Income" for any period means the net income
of the Company and its Relevant Subsidiaries for such period, determined in
accordance with GAAP on a consolidated basis after eliminating earnings or
losses attributable to outstanding Minority Interests.
"Consolidated Net Tangible Assets" means at any date the total
amount of all Tangible Assets of the Company and its Relevant Subsidiaries
after deducting therefrom all liabilities which in accordance with GAAP would
be included on their consolidated balance sheet, except Consolidated Debt.
"Consolidated Quick Assets" means the Quick Assets of the
Company and its Relevant Subsidiaries, as determined on a consolidated basis in
accordance with GAAP.
"Consolidated Subsidiary" means at any date any Subsidiary or
other entity the accounts of which would, in accordance with GAAP, be
consolidated with those of the Company in its consolidated financial statements
if such statements were prepared as of such date.
"Consolidated Tangible Net Worth" means at any date total
stockholders' equity as indicated in the most recent quarterly or annual
consolidated financial statements of the Company and its Relevant Subsidiaries
less Intangible Assets.
"Consolidated Total Assets" means at any date the total assets
of the Company and its Relevant Subsidiaries on a consolidated basis determined
in accordance with GAAP.
"Debt" of any Person means at any date:
(i) all Indebtedness of such Person (a) for borrowed
money or (b) evidenced by notes, bonds, debentures or similar
evidences of indebtedness of such Person;
(ii) obligations secured by any Lien upon property or
assets owned by such Person, even though such Person has not assumed
or become liable for the payment of such obligation including, without
limitation,
4
<PAGE> 10
obligations secured by Liens arising from the sale or transfer of
notes or accounts receivable, other than Liens on notes or accounts
receivable sold or transferred in a transaction which is accounted for
as a true sale under GAAP;
(iii) obligations created or arising under any conditional
sale or other title retention agreement with respect to property
acquired by such Person, notwithstanding the fact that the rights and
remedies of the seller, lender or lessor under such agreement in the
event of default are limited to repossession or sale of property
including, without limitation, obligations secured by Liens arising
from the sale or transfer of notes or accounts receivable other than
precautionary Liens filed or recorded in connection with any such sale
or transfer of such notes or accounts receivable (a) which is
accounted for as a true sale under GAAP and (b) except for such
precautionary Liens filed or recorded in connection with any such
sales or transfers by AMJ, pursuant to which there is no recourse
(other than recourse for breach of customary representations and
warranties) to the seller of such notes or accounts receivable (as
evidenced by there being no accounting reserve taken or required to be
taken in respect of any possible liability relating to such sale or
transfer and, in the event such reserve is taken or required to be
taken, the amount of Debt shall be deemed to be the amount of such
reserve), but, in all events, excluding trade payables and accrued
expenses constituting current liabilities;
(iv) Capitalized Rentals;
(v) reimbursement obligations in respect of credit
enhancement instruments which are, in substance, financial guarantees
of the obligations of Persons other than the Company or its Relevant
Subsidiaries;
(vi) reimbursement obligations in respect of credit
enhancement instruments, which reimbursement obligations are then due
and payable;
(vii) obligations of such Person representing the deferred
and unpaid purchase price of any property or business or services,
excluding trade payables and accrued expenses constituting current
liabilities; and
(viii) Guarantees of obligations of others of the character
referred to hereinabove in this definition.
5
<PAGE> 11
The Company's obligations under the Lease Agreements shall be excluded from
this definition until December 31, 1995; provided that no such exclusion shall
be made if and to the extent that GAAP would require such obligations to be
classified as debt for borrowed money.
"Default" means any condition or event which constitutes an
Event of Default or which with the giving of notice or lapse of time or both
would, unless cured or waived, become an Event of Default.
"Derivatives Obligations" of any Person means all obligations
of such Person in respect of any rate swap transaction, basis swap, forward
rate transaction, commodity swap, commodity option, equity or equity index
swap, equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency
option or any other similar transaction (including any option with respect to
any of the foregoing transactions) or any combination of the foregoing
transactions.
"Domestic Business Day" means any day except a Saturday,
Sunday or other day on which commercial banks in New York City are authorized
by law to close.
"Domestic Lending Office" means, as to each Bank, its office
located at its address set forth in its Administrative Questionnaire (or
identified in its Administrative Questionnaire as its Domestic Lending Office)
or such other office as such Bank may hereafter designate as its Domestic
Lending Office by notice to the Company and the Agent; provided that any Bank
may so designate separate Domestic Lending Offices for its Base Rate Loans, on
the one hand, and its CD Loans, on the other hand, in which case all references
herein to the Domestic Lending Office of such Bank shall be deemed to refer to
either or both of such offices, as the context may require.
"Domestic Loans" means CD Loans or Base Rate Loans or both.
"Domestic Reserve Percentage" has the meaning set forth in
Section 2.07(b).
"Effective Date" means the date this Agreement becomes
effective in accordance with Section 9.09.
"Environmental Laws" means any and all federal, state, local
and foreign statutes, laws, judicial decisions,
6
<PAGE> 12
regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions,
permits, concessions, grants, franchises, licenses, agreements and other
governmental restrictions relating to the environment, the effect of the
environment on human health or to emissions, discharges or releases of
pollutants, contaminants, Hazardous Substances or wastes into the environment
including, without limitation, ambient air, surface water, ground water, or
land, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants,
contaminants, Hazardous Substances or wastes or the clean-up or other
remediation thereof.
"Equity Affiliate" means any Person in which the Company or
any of its Consolidated Subsidiaries holds an equity investment that is
accounted for under the equity method.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, or any successor statute.
"ERISA Affiliate" means any member of the ERISA Group.
"ERISA Group" means the Company, any Restricted Subsidiary and
all members of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control which, together with the
Company or any Restricted Subsidiary, are treated as a single employer under
Section 414 of the Internal Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on
which commercial banks are open for international business (including dealings
in dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its
office, branch or affiliate located at its address set forth in its
Administrative Questionnaire (or identified in its Administrative Questionnaire
as its Euro-Dollar Lending Office) or such other office, branch or affiliate of
such Bank as it may hereafter designate as its Euro-Dollar Lending Office by
notice to the Company and the Agent.
"Euro-Dollar Loan" means a Committed Loan made or to be made
by a Bank as a Euro-Dollar Loan in accordance with the applicable Notice of
Committed Borrowing.
7
<PAGE> 13
"Euro-Dollar Margin" has the meaning set forth in
Section 2.07(c).
"Euro-Dollar Reference Banks" means the principal London
offices of Bank of America National Trust and Savings Association, Banque
Nationale de Paris and Morgan Guaranty Trust Company of New York.
"Euro-Dollar Reserve Percentage" has the meaning set forth in
Section 2.07(c).
"Event of Default" has the meaning set forth in Section 6.01.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Domestic
Business Day next succeeding such day, provided that (i) if such day is not a
Domestic Business Day, the Federal Funds Rate for such day shall be such rate
on such transactions on the next preceding Domestic Business Day as so
published on the next succeeding Domestic Business Day, and (ii) if no such
rate is so published on such next succeeding Domestic Business Day, the Federal
Funds Rate for such day shall be the average rate quoted to Morgan Guaranty
Trust Company of New York on such day on such transactions as determined by the
Agent.
"Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or
Money Market Loans (excluding Money Market LIBOR Loans bearing interest at the
Base Rate pursuant to Section 8.01(a)) or any combination of the foregoing.
"GAAP" means at any time generally accepted accounting
principles as then in effect, applied on a basis consistent (except for changes
concurred in by the Company's independent public accountants) with the most
recent audited consolidated financial statements of the Company and its
Consolidated Subsidiaries delivered to the Banks; provided that, if the Company
notifies the Agent that the Company wishes to amend any covenant in Article V
or any definition of a term used in any such covenant to eliminate the effect
of any change in generally accepted accounting principles on the operation of
such covenant (or if the Agent notifies the Company that the Required Banks
wish to amend any such covenant or definition for such purpose), then, for
purposes of such covenant or definition only, "GAAP" shall mean GAAP as in
effect immediately before the relevant change in
8
<PAGE> 14
generally accepted accounting principles became effective, until either such
notice is withdrawn or such covenant or definition is amended in a manner
satisfactory to the Company and the Required Banks.
"Guarantees" by any Person means all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing, or in effect guaranteeing,
any Indebtedness, dividend or other obligation of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, all obligations incurred through an agreement, contingent
or otherwise, by such Person: (i) to purchase such Indebtedness or obligation
or any property or assets constituting security therefor, (ii) to advance or
supply funds (x) for the purchase or payment of such Indebtedness or
obligation, (y) to maintain working capital or other balance sheet condition or
otherwise to advance or make available funds for the purchase or payment of
such Indebtedness or obligation, (iii) to lease property or to purchase
Securities or other property or services primarily for the purpose of assuring
the owner of such Indebtedness or obligation of the ability of the primary
obligor to make payment of such Indebtedness or obligation, or (iv) otherwise
to assure the owner of such Indebtedness or obligation of the primary obligor
against loss in respect thereof. For purposes of all computations made under
this Agreement, a Guarantee in respect of any Indebtedness for borrowed money
shall be deemed to be Indebtedness equal to the principal amount of such
Indebtedness for borrowed money to the extent guaranteed, and a Guarantee in
respect of any other obligation or liability or any dividend shall be deemed to
be Indebtedness equal to the maximum aggregate amount of such obligation,
liability or dividend to the extent guaranteed. The Company's obligations
under the Lease Agreements shall be excluded from this definition until
December 31, 1995; provided that no such exclusion shall be made if and to the
extent that GAAP would require such obligations to be classified as a
guarantee.
"Hazardous Substances" means any toxic, radioactive, caustic
or otherwise hazardous substance, including petroleum, its derivatives,
by-products and other hydrocarbons, or any substance having any constituent
elements displaying any of the foregoing characteristics.
"Indebtedness" of any Person means and includes all
obligations of such Person which in accordance with GAAP shall be classified
upon a balance sheet of such Person as liabilities of such Person.
9
<PAGE> 15
"Indemnitee" has the meaning set forth in Section 9.03(b).
"Insurance Company Note Agreements" means the separate Note
Agreements, each dated as of March 1, 1991, between the Company and various
institutions, relating to the issuance and sale by the Company of its 9.62%
Senior Notes due April 1, 1999.
"Intangible Assets" means at any date the total amount of all
assets of the Company and its Relevant Subsidiaries that are properly
classified as "intangible assets" in accordance with GAAP and, in any event,
shall include, without limitation, goodwill, patents, trade names, trademarks,
copyrights, franchises, experimental expense, organization expense, unamortized
debt discount and expense, and deferred charges other than prepaid insurance
and prepaid taxes and current deferred taxes which are classified on the
balance sheet of the Company and its Relevant Subsidiaries as a current asset
in accordance with GAAP and in which classification the Company's independent
public accountants concur; provided that the foregoing Intangible Assets shall
be deemed to be in an amount equal to zero at all times during which such
Intangible Assets, in the aggregate, are less than 2% of stockholders' equity
of the Company.
"Interest Period" means: (1) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing and ending one,
two, three or six months thereafter, as the Company may elect in the applicable
Notice of Borrowing; provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar Business
Day falls in another calendar month, in which case such Interest
Period shall end on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
10
<PAGE> 16
(2) with respect to each CD Borrowing, the period commencing on the date of
such Borrowing and ending 30, 60, 90 or 180 days thereafter, as the Company may
elect in the applicable Notice of Borrowing; provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(3) with respect to each Base Rate Borrowing, the period commencing on the
date of such Borrowing and ending 30 days thereafter; provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(4) with respect to each Money Market LIBOR Borrowing, the period commencing
on the date of such Borrowing and ending such whole number of months thereafter
as the Company may elect in accordance with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar Business
Day falls in another calendar month, in which case such Interest
Period shall end on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
11
<PAGE> 17
(5) with respect to each Money Market Absolute Rate Borrowing, the period
commencing on the date of such Borrowing and ending such number of days
thereafter (but not less than 30 days) as the Company may elect in accordance
with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended, or any successor statute.
"Lease Agreements" means the Lease Agreement (Phase 1), Lease
Agreement (Phase 2), Purchase Agreement (Phase 1) and Purchase Agreement (Phase
2), each dated as of February 10, 1993 and each between the Company and BNP
Leasing Corporation.
"LIBOR Auction" means a solicitation of Money Market Quotes
setting forth Money Market Margins based on the London Interbank Offered Rate
pursuant to Section 2.03.
"Lien" means any interest in property securing an obligation
owed to, or a claim by, a Person other than the owner of the property, whether
such interest is based on the common law, statute or contract, and including
but not limited to the security interest lien arising from a mortgage,
encumbrance, pledge, conditional sale or trust receipt or a lease (other than
an operating lease), consignment, bailment or transfer for security purposes.
The term "Lien" shall include reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases and other
title exceptions and encumbrances (including, with respect to stock,
stockholder agreements, voting trust agreements, buy-back agreements and all
similar arrangements) affecting property. For the purposes of this Agreement,
the Company or a Restricted Subsidiary shall be deemed to be the owner of any
property which it has acquired or holds subject to a conditional sale
agreement, Capitalized Lease or other arrangement pursuant to which title to
the property has been retained by or vested in some other Person for security
purposes and such retention or vesting shall constitute a Lien. The Company's
obligations under the Lease Agreements shall be excluded from this definition
until December 31,
12
<PAGE> 18
1995; provided that no such exclusion shall be made if and to the extent that
GAAP would require such obligations to be classified as a lien.
"Loan" means a Domestic Loan or a Euro-Dollar Loan or a Money
Market Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or Money
Market Loans or any combination of the foregoing.
"London Interbank Offered Rate" has the meaning set forth in
Section 2.07(c).
"Long-Term Lease" means any lease of real or personal property
(other than a Capitalized Lease) having a remaining term, including any period
for which the lease may be renewed or extended at the option of the lessee, of
more than three years.
"Material Adverse Effect" means a material adverse effect on
the properties, business, prospects, profits or condition (financial or
otherwise) of the Company or of the Company and its Restricted Subsidiaries
taken as a whole.
"Material Debt" means Debt (other than the Notes) of the
Company and/or one or more of its Restricted Subsidiaries, arising in one or
more related or unrelated transactions, in an aggregate principal or face
amount exceeding $10,000,000.
"Material Financial Obligations" means a principal or face
amount of Debt and/or payment obligations (calculated after giving effect to
any applicable netting agreements) in respect of Derivatives Obligations of the
Company and/or one or more of its Restricted Subsidiaries, arising in one or
more related or unrelated transactions, exceeding in the aggregate $20,000,000.
"Material Plan" means at any time a Plan or Plans having
aggregate Unfunded Liabilities in excess of $10,000,000.
"Minority Interests" means any shares of stock of any class of
a Relevant Subsidiary (other than directors' qualifying shares as required by
law) that are not owned by the Company and/or one or more of its Relevant
Subsidiaries.
"Money Market Absolute Rate" has the meaning set forth in
Section 2.03(d).
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<PAGE> 19
"Money Market Absolute Rate Loan" means a loan made or to be
made by a Bank pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each Bank, its
Domestic Lending Office or such other office, branch or affiliate of such Bank
as it may hereafter designate as its Money Market Lending Office by notice to
the Company and the Agent; provided that any Bank may from time to time by
notice to the Company and the Agent designate separate Money Market Lending
Offices for its Money Market LIBOR Loans, on the one hand, and its Money Market
Absolute Rate Loans, on the other hand, in which case all references herein to
the Money Market Lending Office of such Bank shall be deemed to refer to either
or both of such offices, as the context may require.
"Money Market LIBOR Loan" means a loan made or to be made by a
Bank pursuant to a LIBOR Auction (including such a loan bearing interest at the
Base Rate pursuant to Section 8.01(a)).
"Money Market Loan" means a Money Market LIBOR Loan or a Money
Market Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in
Section 2.03(d).
"Money Market Quote" means an offer by a Bank to make a Money
Market Loan in accordance with Section 2.03.
"Multiemployer Plan" means at any time an employee pension
benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any
member of the ERISA Group is then making or accruing an obligation to make
contributions or has within the preceding five plan years made contributions,
including for these purposes any Person which ceased to be a member of the
ERISA Group during such five year period.
"Notes" means promissory notes of the Company, substantially
in the form of Exhibit A hereto, evidencing the obligation of the Company to
repay the Loans, and "Note" means any one of such promissory notes issued
hereunder.
"Notice of Borrowing" means a Notice of Committed Borrowing
(as defined in Section 2.02) or a Notice of Money Market Borrowing (as defined
in Section 2.03(f)).
"Parent" means, with respect to any Bank, any Person
controlling such Bank.
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"Participant" has the meaning set forth in Section 9.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan
(other than a Multiemployer Plan) which is covered by Title IV of ERISA or
subject to the minimum funding standards under Section 412 of the Internal
Revenue Code and either (i) is maintained, or contributed to, by any member of
the ERISA Group for employees of any member of the ERISA Group or (ii) has at
any time within the preceding five years been maintained, or contributed to, by
any Person which was at such time a member of the ERISA Group for employees of
any Person which was at such time a member of the ERISA Group.
"Pricing Schedule" means the Pricing Schedule attached hereto.
"Prime Rate" means the rate of interest publicly announced by
Morgan Guaranty Trust Company of New York in New York City from time to time as
its Prime Rate.
"Quick Assets" means the sum of (a) cash on hand or on deposit
in banks; (b) readily marketable securities maturing within one year and issued
by the United States of America or any agency thereof; (c) certificates of
deposit or banker's acceptances maturing within one year and issued by
commercial banks operating in the United States of America having capital and
surplus in excess of $500,000,000; (d) accounts receivable of the Company and
its Relevant Subsidiaries (determined on a consolidated basis) and (e) other
short-term investments made by the Company in accordance with its cash and
marketable securities investment policy.
"Reference Banks" means the CD Reference Banks or the
Euro-Dollar Reference Banks, as the context may require, and "Reference Bank"
means any one of such Reference Banks.
"Refunding Borrowing" means a Committed Borrowing which, after
application of the proceeds thereof, results in
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<PAGE> 21
no net increase in the outstanding principal amount of Committed Loans made by
any Bank.
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"Relevant Subsidiaries" means all Consolidated Subsidiaries,
provided that, if at any time the Company is required to deliver consolidated
financial statements of the Company and its Restricted Subsidiaries
("Restricted Group Financials") to the Banks pursuant to Section 5.01(h), the
term "Relevant Subsidiaries" shall mean the Restricted Subsidiaries at all
times from and including the date of such Restricted Group Financials, to but
excluding the first date thereafter as of which the Company is required to
deliver financial statements, but not Restricted Group Financials, pursuant to
Section 5.01.
"Rentals" means and includes at any date all fixed payments
(including as such all payments which the lessee is obligated to make to the
lessor on termination of the lease or surrender of the property) payable by the
Company or a Relevant Subsidiary, as lessee or sublessee under a lease of real
or personal property, but shall be exclusive of any amounts required to be paid
by the Company or a Relevant Subsidiary (whether or not designated as rents or
additional rents) on account of maintenance, repairs, insurance, taxes and
similar charges. Fixed rents under any so-called "percentage leases" shall be
computed solely on the basis of the minimum rents, if any, required to be paid
by the lessee regardless of sales volume or gross revenues.
"Reportable Event" means any "reportable event" as defined in
section 4043 of ERISA for which the 30-day notice requirement has not been
waived under applicable regulations.
"Required Banks" means at any time Banks having at least 60%
of the aggregate amount of the Commitments or, if the Commitments shall have
been terminated, holding Notes evidencing at least 60% of the aggregate unpaid
principal amount of the Loans.
"Restricted Subsidiary" means (i) any Subsidiary designated as
a Restricted Subsidiary in Exhibit I hereto, and (ii) any other Subsidiary
designated as a Restricted Subsidiary pursuant to and in accordance with the
provisions of Section 5.06.
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<PAGE> 22
"Security" has the meaning for such term set forth in Section
2(1) of the Securities Act of 1933, as amended.
"Subsidiary" means, as to any Person, any corporation or other
entity of which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by such Person;
unless otherwise specified, "Subsidiary" means a Subsidiary of the Company.
"Tangible Assets" means at any date Consolidated Total Assets
(less depreciation, depletion and other properly deductible valuation reserves)
after deducting (but without duplication) Intangible Assets.
"Termination Date" means September 7, 1998, or, if such day is
not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day.
"Unfunded Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (i) the value of all benefit liabilities
under such Plan, determined on a plan termination basis using the assumptions
prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the
fair market value of all Plan assets allocable to such liabilities under Title
IV of ERISA (excluding any accrued but unpaid contributions), all determined as
of the then most recent valuation date for such Plan, but only to the extent
that such excess represents a potential liability of a member of the ERISA
Group to the PBGC or any other Person under Title IV of ERISA.
"United States" means the United States of America, including
the States and the District of Columbia, but excluding its territories and
possessions.
"Unrestricted Subsidiary" means (i) any Subsidiary designated
as an Unrestricted Subsidiary in Exhibit I hereto and (ii) any other Subsidiary
designated as an Unrestricted Subsidiary pursuant to and in accordance with the
provisions of Section 5.06.
"Voting Stock" means Securities of any class or classes, the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
"Wholly-Owned Restricted Subsidiary" means any Restricted
Subsidiary all of the shares of capital stock or
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<PAGE> 23
other ownership interests of which (except directors' qualifying shares) are at
the time directly or indirectly owned by the Company.
SECTION 1.02. Types of Borrowings. The term "Borrowing"
denotes the aggregation of Loans of one or more Banks to be made to the Company
pursuant to Article II on a single date and for a single Interest Period.
Borrowings are classified for purposes of this Agreement either by reference to
the pricing of Loans comprising such Borrowing (e.g., a "Euro-Dollar Borrowing"
is a Borrowing comprised of Euro-Dollar Loans) or by reference to the
provisions of Article II under which participation therein is determined (i.e.,
a "Committed Borrowing" is a Borrowing under Section 2.01 in which all Banks
participate in proportion to their Commitments, while a "Money Market
Borrowing" is a Borrowing under Section 2.03 in which the Bank participants are
determined on the basis of their bids in accordance therewith).
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend. Each Bank severally
agrees, on the terms and conditions set forth in this Agreement, to make loans
to the Company pursuant to this Section 2.01 from time to time during the
period from and including the Closing Date to but excluding the Termination
Date; provided that the aggregate principal amount of Committed Loans by such
Bank at any one time outstanding shall not exceed the amount of its Commitment.
Each Borrowing under this Section 2.01 shall be in an aggregate principal
amount of $5,000,000 or any larger multiple of $1,000,000 (except that any such
Borrowing may be in the aggregate amount available in accordance with Section
3.02(c)) and shall be made from the several Banks ratably in proportion to
their respective Commitments. Within the foregoing limits, the Company may
borrow under this Section 2.01, repay, or to the extent permitted by Section
2.11, prepay Loans and reborrow at any time prior to the Termination Date under
this Section 2.01.
SECTION 2.02. Notice of Committed Borrowing. The Company
shall give the Agent notice (a "Notice of Committed Borrowing") not later than
(x) 12:00 Noon (New York City time) on the date of each Base Rate Borrowing,
(y) 1:00 P.M. (New York City time) on the second Domestic Business Day before
each CD Borrowing and (z) 1:00 P.M. (New York City
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<PAGE> 24
time) on the third Euro-Dollar Business Day before each Euro-Dollar Borrowing,
specifying:
(a) the date of such Borrowing, which shall be a Domestic
Business Day in the case of a Domestic Borrowing or a Euro-Dollar
Business Day in the case of a Euro-Dollar Borrowing,
(b) the aggregate amount of such Borrowing,
(c) whether the Loans comprising such Borrowing are to be CD
Loans, Base Rate Loans or Euro-Dollar Loans, and
(d) in the case of a Fixed Rate Borrowing, the duration of
the Interest Period applicable thereto, subject to the provisions of
the definition of Interest Period.
Such notice may be given by facsimile transmission (or by telephone promptly
confirmed by facsimile transmission).
SECTION 2.03. Money Market Borrowings.
(a) The Money Market Option. In addition to Committed
Borrowings pursuant to Section 2.01, the Company may, as set forth in this
Section, request the Banks to make offers to make Money Market Loans to the
Company from time to time during the period from and including the Closing Date
to but excluding the Termination Date; provided that the Company may not
request any such offer at a time when Level IV Pricing (as defined in the
Pricing Schedule) applies. The Banks may, but shall have no obligation to,
make such offers and the Company may, but shall have no obligation to, accept
any such offers in the manner set forth in this Section.
(b) Money Market Quote Request. When the Company wishes to
request offers to make Money Market Loans under this Section, it shall transmit
to the Agent by facsimile transmission (or by telephone promptly confirmed by
facsimile transmission) a Money Market Quote Request substantially in the form
of Exhibit B hereto so as to be received no later than (x) 1:00 P.M. (New York
City time) on the fifth Euro-Dollar Business Day prior to the date of Borrowing
proposed therein, in the case of a LIBOR Auction or (y) 11:30 A.M. (New York
City time) on the Domestic Business Day next preceding the date of Borrowing
proposed therein, in the case of an Absolute Rate Auction (or, in either case,
such other time or date as the Company and the Agent shall have mutually agreed
and shall have notified to
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<PAGE> 25
the Banks not later than the date of the Money Market Quote Request for the
first LIBOR Auction or Absolute Rate Auction for which such change is to be
effective) specifying:
(i) the proposed date of Borrowing, which shall be a
Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic
Business Day in the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be
$5,000,000 or a larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable thereto,
subject to the provisions of the definition of Interest Period, and
(iv) whether the Money Market Quotes requested are to set forth
a Money Market Margin or a Money Market Absolute Rate.
The Company may request offers to make Money Market Loans for more than one
Interest Period in a single Money Market Quote Request. No Money Market Quote
Request shall be given within five Euro-Dollar Business Days (or such other
number of days as the Company and the Agent may agree) of any other Money
Market Quote Request.
(c) Invitation for Money Market Quotes. Promptly upon
receipt of a Money Market Quote Request, the Agent shall send to the Banks by
telex or facsimile transmission an Invitation for Money Market Quotes
substantially in the form of Exhibit C hereto, which shall constitute an
invitation by the Company to each Bank to submit Money Market Quotes offering
to make the Money Market Loans to which such Money Market Quote Request relates
in accordance with this Section.
(d) Submission and Contents of Money Market Quotes. (i)
Each Bank may submit a Money Market Quote containing an offer or offers to make
Money Market Loans in response to any Invitation for Money Market Quotes. Each
Money Market Quote must comply with the requirements of this subsection (d) and
must be submitted to the Agent by telex or facsimile transmission at its
offices specified in or pursuant to Section 9.01 not later than (x) 2:00 P.M.
(New York City time) on the fourth Euro-Dollar Business Day prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (y) 10:15 A.M.
(New York City time) on the proposed date of Borrowing, in the case of an
Absolute Rate Auction (or, in either case, such other time or date as the
Company and the Agent shall have mutually agreed and shall
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<PAGE> 26
have notified to the Banks not later than the date of the Money Market Quote
Request for the first LIBOR Auction or Absolute Rate Auction for which such
change is to be effective); provided that Money Market Quotes submitted by the
Agent (or any affiliate of the Agent) in the capacity of a Bank may be
submitted, and may only be submitted, if the Agent or such affiliate notifies
the Company of the terms of the offer or offers contained therein not later
than (x) one hour prior to the deadline for the other Banks, in the case of a
LIBOR Auction or (y) 15 minutes prior to the deadline for the other Banks, in
the case of an Absolute Rate Auction. Subject to Articles III and VI, any
Money Market Quote so made shall be irrevocable except with the written consent
of the Agent given on the instructions of the Company.
(ii) Each Money Market Quote shall be in substantially the
form of Exhibit D hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan for which
each such offer is being made, which principal amount (w) may be
greater than or less than the Commitment of the quoting Bank, (x) must
be $5,000,000 or a larger multiple of $1,000,000, (y) may not exceed
the principal amount of Money Market Loans for which offers were
requested and (z) may be subject to an aggregate limitation as to the
principal amount of Money Market Loans for which offers being made by
such quoting Bank may be accepted,
(C) in the case of a LIBOR Auction, the margin above or below
the applicable London Interbank Offered Rate (the "Money Market
Margin") offered for each such Money Market Loan, expressed as a
percentage (specified to the nearest 1/10,000th of 1%) to be added to
or subtracted from such base rate,
(D) in the case of an Absolute Rate Auction, the rate of
interest per annum (specified to the nearest 1/10,000th of 1%) (the
"Money Market Absolute Rate") offered for each such Money Market Loan,
and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by the quoting
Bank with respect to each Interest Period specified in the related Invitation
for Money Market Quotes.
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(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit D hereto
or does not specify all of the information required by subsection
(d)(ii);
(B) contains qualifying, conditional or similar language;
(C) proposes terms other than or in addition to those set
forth in the applicable Invitation for Money Market Quotes; or
(D) arrives after the time set forth in subsection (d)(i).
(E) Notice to Company. The Agent shall promptly notify the
Company by facsimile transmission (or by telephone promptly confirmed by
facsimile transmission) of the terms (x) of any Money Market Quote submitted by
a Bank that is in accordance with subsection (d) and (y) of any Money Market
Quote that amends, modifies or is otherwise inconsistent with a previous Money
Market Quote submitted by such Bank with respect to the same Money Market Quote
Request; provided that, in the case of a LIBOR Auction, the Agent shall notify
the Company of the terms of such Money Market Quotes before 5:00 P.M. (New York
City time) on the fourth Euro-Dollar Business Day prior to the proposed date of
Borrowing. Any such subsequent Money Market Quote shall be disregarded by the
Agent unless such subsequent Money Market Quote is submitted solely to correct
a manifest error in such former Money Market Quote. The Agent's notice to the
Company shall specify (A) the aggregate principal amount of Money Market Loans
for which offers have been received for each Interest Period specified in the
related Money Market Quote Request, (B) the respective principal amounts and
Money Market Margins or Money Market Absolute Rates, as the case may be, so
offered and (C) if applicable, limitations on the aggregate principal amount of
Money Market Loans for which offers in any single Money Market Quote may be
accepted.
(F) Acceptance and Notice by Company. Not later than 11:30
A.M. (New York City time) on (x) the third EuroDollar Business Day prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (y) the proposed
date of Borrowing, in the case of an Absolute Rate Auction (or, in either case,
such other time or date as the Company and the Agent shall have mutually agreed
and shall
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<PAGE> 28
have notified to the Banks not later than the date of the Money Market Quote
Request for the first LIBOR Auction or Absolute Rate Auction for which such
change is to be effective), the Company shall notify the Agent by facsimile
transmission (or by telephone promptly confirmed by facsimile transmission) of
its acceptance or non-acceptance of the offers so notified to it pursuant to
subsection (e); provided that the Company may not accept any such offer at a
time when Level IV Pricing (as defined in the Pricing Schedule) applies. If
the Company fails to give such a timely notice to the Agent, it shall be deemed
not to have accepted such offers. In the case of acceptance, such notice (a
"Notice of Money Market Borrowing") shall specify the aggregate principal
amount of offers for each Interest Period that are accepted. The Company may
accept any Money Market Quote in whole or in part; provided that:
(i) the aggregate principal amount of each Money Market
Borrowing may not exceed the applicable amount set forth in the
related Money Market Quote Request,
(ii) the principal amount of each Money Market Borrowing
must be $5,000,000 or a larger multiple of $1,000,000,
(iii) acceptance of offers may only be made on the basis of
ascending Money Market Margins or Money Market Absolute Rates, as the
case may be, and
(iv) the Company may not accept any offer that is described in
subsection (d)(iii) or that otherwise fails to comply with the
requirements of this Agreement.
(g) Allocation by Agent. If offers are made by two or more
Banks with the same Money Market Margins or Money Market Absolute Rates, as the
case may be, for a greater aggregate principal amount than the amount in
respect of which such offers are accepted for the related Interest Period, the
principal amount of Money Market Loans in respect of which such offers are
accepted shall be allocated by the Agent among such Banks as nearly as possible
(in multiples of $1,000,000, as the Agent may deem appropriate) in proportion
to the aggregate principal amounts of such offers. Determinations by the Agent
of the amounts of Money Market Loans shall be conclusive in the absence of
manifest error.
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SECTION 2.04. Notice to Banks; Funding of Loans.
(a) Upon receipt of a Notice of Borrowing, the Agent shall
promptly notify each Bank of the contents thereof and of such Bank's share (if
any) of such Borrowing and such Notice of Borrowing shall not thereafter be
revocable by the Company.
(b) Not later than (x) 12:00 Noon (New York City time) on the
date of each Borrowing other than a Base Rate Borrowing and (y) 1:00 P.M. (New
York City time) on the date of each Base Rate Borrowing, each Bank
participating therein shall (except as provided in subsection (c) of this
Section) make available its share of such Borrowing, in Federal or other funds
immediately available in New York City, to the Agent at its address referred to
in Section 9.01. Unless the Agent determines that any applicable condition
specified in Article III has not been satisfied, the Agent will make the funds
so received from the Banks available to the Company at the Agent's aforesaid
address.
(c) If any Bank makes a new Loan hereunder on a day on which
the Company is to repay all or any part of an outstanding Loan from such Bank,
such Bank shall apply the proceeds of its new Loan to make such repayment and
only an amount equal to the difference (if any) between the amount being
borrowed and the amount being repaid shall be made available by such Bank to
the Agent as provided in subsection (b), or remitted by the Company to the
Agent as provided in Section 2.12, as the case may be.
(d) Unless the Agent shall have received notice from a Bank
prior to the date of any Borrowing that such Bank will not make available to
the Agent such Bank's share of such Borrowing, the Agent may assume that such
Bank has made such share available to the Agent on the date of such Borrowing
in accordance with subsections (b) and (c) of this Section 2.04 and the Agent
may, in reliance upon such assumption, make available to the Company on such
date a corresponding amount. If and to the extent that such Bank shall not
have so made such share available to the Agent, such Bank and the Company
severally agree to repay to the Agent forthwith on demand such corresponding
amount together with interest thereon, for each day from the date such amount
is made available to the Company until the date such amount is repaid to the
Agent, at (i) in the case of the Company, a rate per annum equal to the higher
of the Federal Funds Rate and the interest rate applicable thereto pursuant to
Section 2.07 and (ii) in the case of such Bank, the Federal Funds Rate. If
such Bank shall repay to the Agent such corresponding amount, such amount so
repaid shall
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constitute such Bank's Loan included in such Borrowing for purposes of this
Agreement.
SECTION 2.05. Notes. (a) The Loans of each Bank shall be
evidenced by a single Note payable to the order of such Bank for the account of
its Applicable Lending Office in an amount equal to the aggregate unpaid
principal amount of such Bank's Loans.
(b) Each Bank may, by notice to the Company and the Agent,
request that its Loans of a particular type be evidenced by a separate Note in
an amount equal to the aggregate unpaid principal amount of such Loans. Each
such Note shall be in substantially the form of Exhibit A hereto with
appropriate modifications to reflect the fact that it evidences solely Loans of
the relevant type. Each reference in this Agreement to the "Note" of such Bank
shall be deemed to refer to and include any or all of such Notes, as the
context may require.
(c) Upon receipt of each Bank's Note pursuant to Section
3.01(a), the Agent shall forward such Note to such Bank. Each Bank shall
record the date, amount, type and maturity of each Loan made by it and the date
and amount of each payment of principal made by the Company with respect
thereto, and may, if such Bank so elects in connection with any transfer or
enforcement of its Note, endorse on the schedule forming a part thereof
appropriate notations to evidence the foregoing information with respect to
each such Loan then outstanding; provided that the failure of any Bank to make
any such recordation or endorsement shall not affect the obligations of the
Company hereunder or under the Notes. Each Bank is hereby irrevocably
authorized by the Company so to endorse its Note and to attach to and make a
part of its Note a continuation of any such schedule as and when required.
SECTION 2.06. Maturity of Loans. Each Loan included in any
Borrowing shall mature, and the principal amount thereof shall be due and
payable, on the last day of the Interest Period applicable to such Borrowing.
SECTION 2.07. Interest Rates. (a) Each Base Rate Loan shall
bear interest on the outstanding principal amount thereof, for each day from
the date such Loan is made until it becomes due, at a rate per annum equal to
the Base Rate for such day. Such interest shall be payable for each Interest
Period on the last day thereof. Any overdue principal of or interest on any
Base Rate Loan shall bear interest, payable on demand, for each day until paid
at a
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rate per annum equal to the sum of 2% plus the rate otherwise applicable to
Base Rate Loans for such day.
(b) Each CD Loan shall bear interest on the outstanding
principal amount thereof, for each day during the Interest Period applicable
thereto, at a rate per annum equal to the sum of the CD Margin for such day
plus the Adjusted CD Rate applicable to such Interest Period; provided that if
any CD Loan shall, as a result of clause (2)(b) of the definition of Interest
Period, have an Interest Period of less than 30 days, such CD Loan shall bear
interest during such Interest Period at the rate applicable to Base Rate Loans
during such period. Such interest shall be payable for each Interest Period on
the last day thereof and, if such Interest Period is longer than 90 days, 90
days after the first day thereof. Any overdue principal of or interest on any
CD Loan shall bear interest, payable on demand, for each day until paid at a
rate per annum equal to the sum of 2% plus the higher of (i) the sum of the CD
Margin for such day plus the Adjusted CD Rate applicable to the Interest Period
for such Loan and (ii) the rate applicable to Base Rate Loans for such day.
"CD Margin" means a rate per annum determined in accordance
with the Pricing Schedule.
The "Adjusted CD Rate" applicable to any Interest Period means
a rate per annum determined pursuant to the following formula:
[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
----------
* The amount in brackets being rounded upward, if necessary, to the
next higher 1/100 of 1%
The "CD Base Rate" applicable to any Interest Period is the
rate of interest determined by the Agent to be the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum
bid at 10:00 A.M. (New York City time) (or as soon thereafter as practicable)
on the first day of such Interest Period by two
26
<PAGE> 32
or more New York certificate of deposit dealers of recognized standing for the
purchase at face value from each CD Reference Bank of its certificates of
deposit in an amount comparable to the principal amount of the CD Loan of such
CD Reference Bank to which such Interest Period applies and having a maturity
comparable to such Interest Period.
"Domestic Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement (including without
limitation any basic, supplemental or emergency reserves) for a member bank of
the Federal Reserve System in New York City with deposits exceeding five
billion dollars in respect of new non-personal time deposits in dollars in New
York City having a maturity comparable to the related Interest Period and in an
amount of $100,000 or more. The Adjusted CD Rate shall be adjusted
automatically on and as of the effective date of any change in the Domestic
Reserve Percentage.
"Assessment Rate" means for any day the annual assessment rate
in effect on such day which is payable by a member of the Bank Insurance Fund
classified as adequately capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within the meaning of 12
C.F.R. Section 327.3(e) (or any successor provision) to the Federal Deposit
Insurance Corporation (or any successor) for such Corporation's (or such
successor's) insuring time deposits at offices of such institution in the
United States. The Adjusted CD Rate shall be adjusted automatically on and as
of the effective date of any change in the Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on the
outstanding principal amount thereof, for each day during the Interest Period
applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar
Margin for such day plus the Adjusted London Interbank Offered Rate applicable
to such Interest Period. Such interest shall be payable for each Interest
Period on the last day thereof and, if such Interest Period is longer than
three months, three months after the first day thereof.
"Euro-Dollar Margin" means a rate per annum determined in
accordance with the Pricing Schedule.
The "Adjusted London Interbank Offered Rate" applicable to any
Interest Period means a rate per annum equal to the quotient obtained (rounded
upward, if
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<PAGE> 33
necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable
London Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve
Percentage.
The "London Interbank Offered Rate" applicable to any Interest
Period means the average (rounded upward, if necessary, to the next higher 1/16
of 1%) of the respective rates per annum at which deposits in dollars are
offered to each of the Euro-Dollar Reference Banks in the London interbank
market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days
before the first day of such Interest Period in an amount approximately equal
to the principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference
Bank to which such Interest Period is to apply and for a period of time
comparable to such Interest Period.
"Euro-Dollar Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement for a member bank of
the Federal Reserve System in New York City with deposits exceeding five
billion dollars in respect of "Eurocurrency liabilities" (or in respect of any
other category of liabilities which includes deposits by reference to which the
interest rate on Euro-Dollar Loans is determined or any category of extensions
of credit or other assets which includes loans by a non-United States office of
any Bank to United States residents). The Adjusted London Interbank Offered
Rate shall be adjusted automatically on and as of the effective date of any
change in the Euro-Dollar Reserve Percentage.
(d) Any overdue principal of or interest on any Euro-Dollar
Loan shall bear interest, payable on demand, for each day until paid at a rate
per annum equal to the higher of (i) the sum of 2% plus the Euro-Dollar Margin
for such day plus the Adjusted London Interbank Offered Rate applicable to the
Interest Period for such Loan and (ii) the sum of 2% plus the Euro-Dollar
Margin for such day plus the quotient obtained (rounded upward, if necessary,
to the next higher 1/100 of 1%) by dividing (x) the average (rounded upward, if
necessary, to the next higher 1/16 of 1%) of the respective rates per annum at
which one day (or, if such amount due remains unpaid more than three
Euro-Dollar Business Days, then for such other period of time not longer than
six months as the Agent may select) deposits in dollars in an amount
approximately equal to such overdue payment due to each of the Euro-Dollar
Reference Banks are offered to such Euro-Dollar Reference Bank in the London
interbank market for the applicable period determined as provided
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above by (y) 1.00 minus the Euro-Dollar Reserve Percentage (or, if the
circumstances described in clause (a) or (b) of Section 8.01 shall exist, at a
rate per annum equal to the sum of 2% plus the Base Rate for such day).
(e) Subject to Section 8.01(a), each Money Market LIBOR Loan
shall bear interest on the outstanding principal amount thereof, for the
Interest Period applicable thereto, at a rate per annum equal to the sum of the
London Interbank Offered Rate for such Interest Period (determined in
accordance with Section 2.07(c) as if the related Money Market LIBOR Borrowing
were a Committed Euro-Dollar Borrowing) plus (or minus) the Money Market Margin
quoted by the Bank making such Loan in accordance with Section 2.03. Each
Money Market Absolute Rate Loan shall bear interest on the outstanding
principal amount thereof, for the Interest Period applicable thereto, at a rate
per annum equal to the Money Market Absolute Rate quoted by the Bank making
such Loan in accordance with Section 2.03. Such interest shall be payable for
each Interest Period on the last day thereof and, if such Interest Period is
longer than three months, at intervals of three months after the first day
thereof. Any overdue principal of or interest on any Money Market Loan shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to the sum of 2% plus the Base Rate for such day.
(f) The Agent shall determine each interest rate applicable
to the Loans hereunder. The Agent shall give prompt notice to the Company and
the participating Banks of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
(g) Each Reference Bank agrees to use its best efforts to
furnish quotations to the Agent as contemplated by this Section. If any
Reference Bank does not furnish a timely quotation, the Agent shall determine
the relevant interest rate on the basis of the quotation or quotations
furnished by the remaining Reference Bank or Banks or, if none of such
quotations is available on a timely basis, the provisions of Section 8.01 shall
apply.
SECTION 2.08. Fees.
(a) Facility Fee. The Company shall pay to the Agent for the
account of the Banks ratably a facility fee at the Facility Fee Rate
(determined daily in accordance with the Pricing Schedule). Such facility fee
shall accrue (i) from and including the Closing Date to but excluding the
Termination Date (or earlier date of termination of the
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Commitments in their entirety), on the daily aggregate amount of the
Commitments (whether used or unused) and (ii) from and including the
Termination Date or such earlier date of termination to but excluding the date
the Loans shall be repaid in their entirety, on the daily aggregate outstanding
principal amount of the Loans.
(b) Payments. Fees accrued under this Section shall be
payable quarterly on the last day of each fiscal quarter of the Company and
upon the date of termination of the Commitments in their entirety (and, if
later, the date the Loans shall be repaid in their entirety).
SECTION 2.09. Optional Termination or Reduction of
Commitments. The Company may, upon at least three Domestic Business Days'
notice to the Agent, (i) terminate the Commitments at any time, if no Loans are
outstanding at such time or (ii) ratably reduce from time to time by an
aggregate amount of $10,000,000 or any larger multiple of $1,000,000, the
aggregate amount of the Commitments in excess of the aggregate outstanding
principal amount of the Loans.
SECTION 2.10. Scheduled Termination of Commitments. The
Commitments shall terminate on the Termination Date, and any Loans then
outstanding (together with accrued interest thereon) shall be due and payable
on such date.
SECTION 2.11. Optional Prepayments. (a) The Company may,
upon at least one Domestic Business Day's notice to the Agent, prepay any Base
Rate Borrowing in whole at any time, or from time to time in part in amounts
aggregating $5,000,000 or any larger multiple of $1,000,000, by paying the
principal amount to be prepaid together with accrued interest thereon to the
date of prepayment. Each such optional prepayment shall be applied to prepay
ratably the Loans of the several Banks included in such Borrowing.
(b) The Company may not prepay all or any portion of the
principal amount of any CD Loan, Euro-Dollar Loan or Money Market Loan prior to
the maturity thereof.
(c) Upon receipt of a notice of prepayment pursuant to this
Section, the Agent shall promptly notify each Bank of the contents thereof and
of such Bank's ratable share of such prepayment and such notice shall not
thereafter be revocable by the Company.
SECTION 2.12. General Provisions as to Payments. (a) The
Company shall make each payment of principal of,
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and interest on, the Loans and of fees hereunder, not later than 1:00 P.M. (New
York City time) on the date when due, in Federal or other funds immediately
available in New York City, to the Agent at its address referred to in Section
9.01. The Agent will promptly distribute to each Bank its ratable share of
each such payment received by the Agent for the account of the Banks. Whenever
any payment of principal of, or interest on, the Domestic Loans or of fees
shall be due on a day which is not a Domestic Business Day, the date for
payment thereof shall be extended to the next succeeding Domestic Business Day.
Whenever any payment of principal of, or interest on, the Euro-Dollar Loans
shall be due on a day which is not a Euro-Dollar Business Day, the date for
payment thereof shall be extended to the next succeeding Euro-Dollar Business
Day unless such Euro-Dollar Business Day falls in another calendar month, in
which case the date for payment thereof shall be the next preceding Euro-Dollar
Business Day. Whenever any payment of principal of, or interest on, the Money
Market Loans shall be due on a day which is not a Euro-Dollar Business Day, the
date for payment thereof shall be extended to the next succeeding Euro-Dollar
Business Day. If the date for any payment of principal is extended by
operation of law or otherwise, interest thereon shall be payable for such
extended time.
(b) Unless the Agent shall have received notice from the
Company prior to the date on which any payment is due to the Banks hereunder
that the Company will not make such payment in full, the Agent may assume that
the Company has made such payment in full to the Agent on such date and the
Agent may, in reliance upon such assumption, cause to be distributed to each
Bank on such due date an amount equal to the amount then due such Bank. If and
to the extent that the Company shall not have so made such payment, each Bank
shall repay to the Agent forthwith on demand such amount distributed to such
Bank together with interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such amount to the
Agent, at the Federal Funds Rate.
SECTION 2.13. Funding Losses. If the Company makes any
payment of principal with respect to any Fixed Rate Loan (pursuant to Article
VI or VIII or otherwise) on any day other than the last day of the Interest
Period applicable thereto, or the last day of an applicable period fixed
pursuant to Section 2.07(d), or if the Company fails to borrow any Fixed Rate
Loans after notice has been given to any Bank in accordance with Section
2.04(a), the Company shall reimburse each Bank within 60 days after demand for
any resulting loss or expense (with interest if appropriate) incurred by it or
by an existing or prospective Participant
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in the related Loan, including (without limitation) any loss incurred in
obtaining, liquidating or employing deposits from third parties, but excluding
loss of margin for the period after any such payment or failure to borrow or
prepay, provided that such Bank shall have delivered to the Company a
certificate as to the amount of such loss or expense, which certificate shall
show in reasonable detail the basis for calculating such amount and shall be
conclusive in the absence of manifest error.
SECTION 2.14. Computation of Interest and Fees. Interest
based on the Prime Rate hereunder shall be computed on the basis of a year of
365 days (or 366 days in a leap year) and paid for the actual number of days
elapsed (including the first day but excluding the last day). All other
interest and fees shall be computed on the basis of a year of 360 days and paid
for the actual number of days elapsed (including the first day but excluding
the last day).
ARTICLE III
CONDITIONS
SECTION 3.01. Closing. The closing hereunder shall occur
upon receipt by the Agent of the following documents, each dated the Closing
Date unless otherwise indicated:
(a) a duly executed Note for the account of each Bank dated
on or before the Closing Date and complying with the provisions of
Section 2.05;
(b) an opinion of James J. DeLong, Director, Legal Affairs
for the Company, substantially in the form of Exhibit E hereto and
covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request;
(c) an opinion of Orrick, Herrington & Sutcliffe, special
counsel for the Company, substantially in the form of Exhibit F hereto
and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request;
(d) an opinion of Davis Polk & Wardwell, special counsel for
the Agent, substantially in the form of Exhibit G hereto and covering
such additional matters
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relating to the transactions contemplated hereby as the Required Banks
may reasonably request;
(e) evidence satisfactory to the Agent that (i) the
commitment of the bank (or banks) under the Company's $50,000,000
Credit Agreement dated as of August 1, 1994 with Morgan Guaranty Trust
Company of New York has been terminated and (ii) any loans outstanding
thereunder (together with all interest accrued thereon) and all fees
accrued thereunder have been paid or the Company has made arrangements
satisfactory to the Agent for the payment thereof; and
(f) all documents the Agent may reasonably request relating
to the existence of the Company, the corporate authority for and the
validity of this Agreement and the Notes, and any other matters
relevant hereto, all in form and substance satisfactory to the Agent.
The Agent shall promptly notify the Company and the Banks of the Closing Date,
and such notice shall be conclusive and binding on all parties hereto.
SECTION 3.02. Borrowings. The obligation of any Bank to make
a Loan on the occasion of any Borrowing is subject to the satisfaction of the
following conditions:
(a) the fact that the Closing Date shall have occurred on
or prior to October 1, 1994;
(b) receipt by the Agent of a Notice of Borrowing as required
by Section 2.02 or 2.03, as the case may be;
(c) the fact that, immediately after such Borrowing, the
aggregate outstanding principal amount of the Loans will not exceed
the aggregate amount of the Commitments;
(d) the fact that, immediately before and after such
Borrowing, no Default shall have occurred and be continuing; and
(e) the fact that the representations and warranties of the
Company contained in this Agreement (except, in the case of a
Refunding Borrowing, the representations and warranties set forth in
Sections 4.04(c) and 4.05 as to any matter which has theretofore been
disclosed in writing by the Company to the Banks) shall be true on and
as of the date of such Borrowing.
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Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Company on the date of such Borrowing as to the facts specified in clauses
(c), (d) and (e) of this Section.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The Company and
each Restricted Subsidiary:
(a) is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation;
(b) has all requisite power and authority and all necessary
licenses and permits to own and operate its properties and to carry on
its business as now conducted and as presently proposed to be
conducted, except where failures to have such licenses and permits
would not, in the aggregate, have a Material Adverse Effect; and
(c) is duly licensed or qualified and is in good standing as
a foreign corporation in each jurisdiction wherein the nature of the
business transacted by it or the nature of the property owned or
leased by it makes such licensing or qualification necessary, except
where failures to be so licensed, qualified or in good standing would
not, in the aggregate, have a Material Adverse Effect.
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Company of this
Agreement and the Notes are within the Company's corporate powers, have been
duly authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official and do
not contravene, or constitute a default under, any provision of applicable law
or regulation or of the certificate of incorporation or by-laws of the Company
or of any agreement, judgment, injunction, order, decree or other instrument
binding upon the Company or any of its Subsidiaries or result in the
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creation or imposition of any Lien on any asset of the Company or any of its
Restricted Subsidiaries.
SECTION 4.03. Binding Effect. This Agreement constitutes a
valid and binding agreement of the Company and each Note, when executed and
delivered in accordance with this Agreement, will constitute a valid and
binding obligation of the Company, in each case enforceable in accordance with
its terms, except as limited by (i) bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (ii) general principles of equity.
SECTION 4.04. Financial Information.
(a) The consolidated balance sheet of the Company and its
Consolidated Subsidiaries as of October 31, 1993 and the related consolidated
statements of operations and cash flows for the fiscal year then ended,
reported on by Price Waterhouse and set forth in the Company's 1993 Form 10-K,
a copy of which has been delivered to each of the Banks, fairly present, in
conformity with generally accepted accounting principles, the consolidated
financial position of the Company and its Consolidated Subsidiaries as of such
date and their consolidated results of operations and cash flows for such
fiscal year.
(b) The unaudited consolidated balance sheet of the Company
and its Consolidated Subsidiaries as of May 1, 1994 and the related unaudited
consolidated statements of operations and cash flows for the six months then
ended, set forth in the Company's Latest Form 10-Q, a copy of which has been
delivered to each of the Banks, fairly present, in conformity with GAAP, the
consolidated financial position of the Company and its Consolidated
Subsidiaries as of such date and their consolidated results of operations and
cash flows for such six month period (subject to normal year-end adjustments).
(c) Since May 1, 1994 there has been no material adverse
change in the business, financial position, results of operations or prospects
of the Company and its Relevant Subsidiaries, considered as a whole.
SECTION 4.05. Litigation. Except as set forth under the
heading "Legal Proceedings" in the Company's 1993 Form 10-K and the Company's
Latest Form 10-Q, there is no action, suit or proceeding pending against, or to
the knowledge of the Company threatened against or affecting, the Company or
any of its Subsidiaries before any court or arbitrator or any governmental
body, agency or official in which there is a reasonable possibility of an
adverse
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determination which would have a Material Adverse Effect, or which in any
manner draws into question the validity of this Agreement or the Notes.
SECTION 4.06. Compliance with ERISA. Each member of the
ERISA Group has fulfilled its obligations under the minimum funding standards
of ERISA and the Internal Revenue Code with respect to each Plan and is in
compliance in all material respects with the presently applicable provisions of
ERISA and the Internal Revenue Code with respect to each Plan. No member of
the ERISA Group has (i) sought a waiver of the minimum funding standard under
Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to
make any contribution or payment to any Plan or Multiemployer Plan or in
respect of any Benefit Arrangement, or made any amendment to any Plan or
Benefit Arrangement, which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security under ERISA or the Internal
Revenue Code or (iii) incurred any liability under Title IV of ERISA other than
a liability to the PBGC for premiums under Section 4007 of ERISA.
SECTION 4.07. Environmental Matters. The Company has a
process of conducting periodic internal reviews relating to compliance by the
Company and its Restricted Subsidiaries with Environmental Laws and liabilities
thereunder. On the basis of such reviews, except as set forth in the Company's
1993 Form 10-K and the Company's Latest Form 10-Q, nothing has come to the
attention of the Company which would lead it to believe that costs associated
with compliance with Environmental Laws or liabilities thereunder (including,
without limitation, any capital or operating expenses required for cleanup,
closure of properties or compliance with Environmental Laws or any permit,
license or approval, any related constraints on operating activities and any
potential liabilities to third parties) would have a Material Adverse Effect.
SECTION 4.08. Taxes. All federal and state income tax
returns required to be filed by the Company or any Restricted Subsidiary in any
jurisdiction have, in fact, been filed and all other tax returns required to be
filed in any other jurisdiction have, in fact, been filed, except where the
failure to so file in such jurisdictions (other than in connection with federal
or state income tax returns) would not have a Material Adverse Effect, and all
taxes, assessments, fees and other governmental charges upon the Company or any
Restricted Subsidiary or upon any of their respective properties, income or
franchises, which are shown to be due and payable in such returns have been
paid. For all taxable years ending on or before October, 1983, the
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Federal income tax liability of the Company and its Restricted Subsidiaries has
been satisfied and either the period of limitations on assessment of additional
Federal income tax has expired or the Company and its Restricted Subsidiaries
have entered into an agreement with the Internal Revenue Service closing
conclusively the total tax liability for the taxable year. The provisions for
taxes on the books of the Company and each Restricted Subsidiary are adequate
for all open years, and for its current fiscal period.
SECTION 4.09. Subsidiaries. Exhibit I hereto sets forth as
of the date of this Agreement, with respect to each Person which is a
Subsidiary of the Company on the date hereof, (i) the name of such Subsidiary,
(ii) the jurisdiction of incorporation of such Subsidiary, (iii) the percentage
of Voting Stock of such Subsidiary owned by the Company and its other
Subsidiaries and (iv) whether such Subsidiary is designated as a Restricted
Subsidiary or an Unrestricted Subsidiary under the Insurance Company Note
Agreements.
SECTION 4.10. Not an Investment Company. The Company is not
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
SECTION 4.11. Full Disclosure. All written information
heretofore furnished by the Company to the Agent or any Bank for purposes of or
in connection with this Agreement or any transaction contemplated hereby does
not, and all such written information hereafter furnished by the Company to the
Agent or any Bank will not, contain any untrue statement of a material fact or
in the aggregate omit a material fact necessary to make the statements therein
not misleading on the date as of which such information is stated or certified.
There is no fact peculiar to the Company or its Subsidiaries which the Company
has not disclosed to the Banks in writing which materially adversely affects
or, so far as the Company can now reasonably foresee, will materially adversely
affect, the business of the Company and its Restricted Subsidiaries, taken as a
whole, as now conducted and presently proposed to be conducted or the ability
of the Company to meet its obligations under this Agreement and the Notes.
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ARTICLE V
COVENANTS
The Company agrees that, so long as any Bank has any
Commitment hereunder or any amount payable under any Note remains unpaid:
SECTION 5.01. Information. The Company will deliver to each
of the Banks:
(a) as soon as available and in any event within 45 days
after the end of each quarterly fiscal period (except the last) of
each fiscal year, copies of:
(1) a consolidated balance sheet of the Company
and its Subsidiaries as of the close of such quarterly fiscal
period, setting forth in comparative form the consolidated
figures as of the close of the fiscal year then most recently
ended,
(2) consolidated statements of operations of the
Company and its Subsidiaries for such quarterly fiscal period
and for the portion of the fiscal year ending with such
quarterly fiscal period, in each case setting forth in
comparative form the consolidated figures for the
corresponding period and portion of the preceding fiscal year,
and
(3) a consolidated statement of cash flows of the
Company and its Subsidiaries for the portion of the fiscal
year ending with such quarterly fiscal period, setting forth
in comparative form the consolidated figures for the
corresponding period of the preceding fiscal year,
it being agreed that (i) delivery of such financial statements shall be deemed
to be a representation by the Company that such financial statements fairly
present, in conformity with GAAP, the consolidated financial position of the
Company and its Consolidated Subsidiaries as of the close of such quarterly
fiscal period and their consolidated results of operations and cash flows for
the portion of the fiscal year ending with such quarterly fiscal period
(subject to normal year-end adjustments) and (ii) the Company may satisfy the
requirements of this Section 5.01(a) with the delivery of its Quarterly Report
on Form 10-Q filed with the Securities and Exchange Commission; provided that
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such Form 10-Q satisfies the foregoing requirements of this Section 5.01;
(b) as soon as available and in any event within 90 days
after the close of each fiscal year of the Company, copies of:
(1) consolidated and consolidating balance sheets
of the Company and its Subsidiaries as of the close of such
fiscal year, and
(2) consolidated and consolidating statements of
operations and retained earnings and cash flows of the Company
and its Subsidiaries for such fiscal year,
in each case setting forth in comparative form the consolidated
figures for the two preceding fiscal years, all in reasonable detail
and accompanied by a report thereon of a firm of independent public
accountants of recognized national standing selected by the Company to
the effect that the consolidated financial statements present fairly,
in all material respects, the consolidated financial position of the
Company and its Consolidated Subsidiaries as of the end of the fiscal
year being reported on and their consolidated results of operations
and cash flows for said year in conformity with GAAP and that the
examination of such accountants in connection with such financial
statements has been conducted in accordance with generally accepted
auditing standards (it being agreed that the Company may satisfy the
requirements of this Section 5.01(b) with the delivery of its Annual
Report on Form 10-K filed with the Securities and Exchange Commission
provided that such Form 10-K satisfies the requirements of this
Section 5.01);
(c) promptly upon receipt thereof, one copy of each
interim or special audit made by independent accountants of the books
of the Company or any Restricted Subsidiary and any management letter
received from such accountants, in all cases, material to the
financial condition or operations of the Company or of the Company and
its Restricted Subsidiaries taken as a whole;
(d) promptly upon their becoming available, one copy of
each financial statement, report, notice or proxy statement sent by
the Company to stockholders generally and of each regular or periodic
report, and any registration statement or prospectus (other than
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those on Form S-8) filed by the Company or any Subsidiary with any
securities exchange or the Securities and Exchange Commission or any
successor agency, and copies of any orders in any proceedings to which
the Company or any of its Subsidiaries is a party, issued by any
governmental agency, Federal or state, having jurisdiction over the
Company or any of its Subsidiaries, which orders are material to the
financial condition or operations of the Company or the Company and
its Restricted Subsidiaries taken as a whole;
(e) promptly upon the occurrence thereof, written notice
of (i) a Reportable Event with respect to any Plan; (ii) the
institution of any steps by the Company, any ERISA Affiliate, the PBGC
or any other person to terminate any Plan if such termination were to
result in a liability of the Company or any Restricted Subsidiary to
the PBGC in an amount which could materially and adversely affect the
condition, financial or otherwise, of the Company or of the Company
and its Restricted Subsidiaries taken as a whole; (iii) the
institution of any steps by the Company or any ERISA Affiliate to
withdraw from any Plan or any Multiemployer Plan if such withdrawal
would result in a liability of the Company or any Restricted
Subsidiary in an amount which could materially and adversely affect
the condition, financial or otherwise, of the Company or of the
Company and its Restricted Subsidiaries taken as a whole; (iv) a
non-exempt "prohibited transaction" within the meaning of Section 406
of ERISA in connection with any Plan if such "prohibited transaction"
would result in a liability of the Company or any Restricted
Subsidiary in an amount which could materially and adversely affect
the condition, financial or otherwise, of the Company or of the
Company and its Restricted Subsidiaries taken as a whole; (v) any
material increase in the contingent liability of the Company or any
Restricted Subsidiary with respect to any post- retirement welfare
liability; or (vi) the taking of any action by, or the threatening of
the taking of any action by, the Internal Revenue Service, the
Department of Labor or the PBGC with respect to any of the foregoing;
(f) within the periods provided in paragraphs (a) and (b)
above, a certificate of an authorized financial officer of the Company
stating that such officer has reviewed the provisions of this
Agreement and (i) setting forth the information and computations (in
sufficient detail) required in order to establish
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whether the Company was in compliance with the requirements of
Sections 5.10 through 5.14 at the end of the period covered by the
financial statements then being furnished and (ii) stating whether
there existed as of the date of such financial statements and whether,
to the best of such officer's knowledge, there exists on the date of
the certificate or existed at any time during the period covered by
such financial statements any Default and, if any such condition or
event exists on the date of the certificate, specifying the nature and
period of existence thereof and the action the Company is taking and
proposes to take with respect thereto;
(g) within the period provided in paragraph (b) above, a
certificate of the accountants who render an opinion with respect to
such financial statements, stating (i) that they have reviewed this
Agreement, and (ii) whether, in making their audit, such accountants
have become aware of any Default under Section 6.01 insofar as any
such terms or provisions pertain to or involve accounting matters or
determinations, and if any such condition or event then exists,
specifying the nature and period of existence thereof;
(h) if the Company's Unrestricted Subsidiaries, taken as
a whole, would have assets in excess of 5% of Consolidated Total
Assets at the date of any financial statements to be delivered
pursuant to paragraph (a) or (b) above or would have net income in
excess of 5% of Consolidated Net Income for any period covered by such
financial statements, the Company will provide, in addition to the
financial statements required by paragraph (a) or (b) above, the
financial statements required by such paragraph (a) or (b) (within the
applicable time period described in such paragraph (a) or (b)) on a
consolidated basis reflecting the financial statements of only the
Company and its Restricted Subsidiaries, certified by a financial
officer of the Company as to fairness of presentation and conformity
with GAAP (except for the exclusion of Unrestricted Subsidiaries)
substantially as set forth in the Company's representations in
Sections 4.04(a) and 4.04(b);
(i) within five days after any officer of the Company obtains
knowledge of any Default, if such Default is then continuing, a
certificate of the chief financial officer or the chief accounting
officer of the Company setting forth the details thereof and the
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action which the Company is taking and proposes to take with respect
thereto;
(j) promptly upon any change in the rating by Standard &
Poor's Ratings Group or Moody's Investors Service, Inc. of the
Company's senior unsecured long-term debt securities (without
third-party credit enhancement), a certificate of the chief financial
officer or the chief accounting officer of the Company reporting such
change and stating the date on which such change was publicly
announced by the relevant rating agency; and
(k) from time to time such additional information regarding
the financial position or business of the Company and its Subsidiaries
as the Agent, at the request of any Bank, may reasonably request.
Without limiting the foregoing, the Company will permit any Bank to visit and
inspect (at the expense of such Bank unless an Event of Default has occurred
and is continuing), under the Company's guidance and, so long as no Default
shall have occurred and be continuing, upon not less than three Business Days'
prior notice, any of the properties of the Company or any Restricted
Subsidiary, to examine (to the extent material to ascertaining compliance with
the terms and provisions hereof or to the extent reasonably related to the
financial condition or material operations of the Company or a Restricted
Subsidiary) all of their books of account, records, reports and other papers,
to make copies and extracts therefrom and (to the extent material to
ascertaining compliance with the terms and provisions hereof or to the extent
reasonably related to the financial condition or material operations of the
Company or a Restricted Subsidiary) to discuss their respective affairs,
finances and accounts with their respective officers, employees (who are
managers or officers), and independent public accountants (and by this
provision the Company authorizes said accountants to discuss with such Banks
the finances and affairs of the Company and its Restricted Subsidiaries;
provided that such Bank shall have given prior written notice to the Company of
its intention to discuss such finances and affairs with such accountants and
have given the Company the opportunity to participate in such discussions), all
at such reasonable times and as often as may be reasonably requested.
The Company will keep, and will cause each Restricted
Subsidiary to keep, proper books of record and account in which full, true and
correct entries shall be
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made of all dealings and transactions in relation to its business and
activities, in accordance with GAAP.
Notwithstanding anything to the contrary in the foregoing
provisions of this Section 5.01, neither the Agent nor any Bank shall have
access to, nor may they request copies of, any information constituting trade
secrets relating to technology unless the Agent or such Bank shall have
executed and delivered to the Company a confidentiality agreement satisfactory
to the Company.
SECTION 5.02. Payment of Obligations. The Company will pay
and discharge, and will cause each Restricted Subsidiary to pay and discharge,
at or before maturity, all their respective material obligations and
liabilities, including, without limitation, tax liabilities, except where the
same may be contested in good faith by appropriate proceedings, and will
maintain, and will cause each Restricted Subsidiary to maintain, in accordance
with generally accepted accounting principles, appropriate reserves for the
accrual of any of the same.
SECTION 5.03. Maintenance of Property; Insurance. (a) The
Company will keep, and will cause each Restricted Subsidiary to keep, all
property useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted; provided that nothing in this
Section 5.03(a) shall prevent the abandonment of any property if such
abandonment is not disadvantageous to the Banks in any material respect, does
not result in any Default hereunder and the Company determines, in the exercise
of its reasonable business judgment, that such abandonment is in the best
economic interest of the Company.
(b) The Company will maintain, and will cause each Restricted
Subsidiary to maintain, insurance coverage by financially sound and reputable
insurers and in such forms and amounts and against such risks as are customary
for corporations of established reputation engaged in the same or a similar
business and owning and operating similar properties in similar locations.
SECTION 5.04. Conduct of Business and Maintenance of
Existence. Neither the Company nor any Restricted Subsidiary will engage in
any business if, as a result, the primary business, taken on a consolidated
basis, which would then be engaged in by the Company and its Restricted
Subsidiaries would be substantially changed from the business of the
manufacture of capital equipment for the electronics industry. The Company
will preserve, renew and keep in full force and effect, and will cause each
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Restricted Subsidiary to preserve, renew and keep in full force and effect,
their respective corporate existence and their respective rights, privileges
and franchises material to the proper conduct of the business of the Company or
of the Company and its Restricted Subsidiaries taken as a whole; provided that
nothing in this Section 5.04 shall prohibit (i) the merger of a Restricted
Subsidiary into the Company or the merger or consolidation of a Restricted
Subsidiary with or into another Person if the corporation surviving such
consolidation or merger is a Restricted Subsidiary and if, in each case, after
giving effect thereto, no Default shall have occurred and be continuing or (ii)
the termination of the corporate existence of any Restricted Subsidiary if such
termination is not disadvantageous to the Banks in any material respect, does
not result in any Default hereunder and the Company determines, in the exercise
of its reasonable business judgment, that such termination is in the best
economic interest of the Company.
SECTION 5.05. Compliance with Laws. The Company will comply,
and cause each Restricted Subsidiary to comply, in all material respects with
all applicable laws, ordinances, rules, regulations, and requirements of
governmental authorities (including, without limitation, Environmental Laws and
ERISA and the rules and regulations thereunder) except (i) where the necessity
of compliance therewith is contested in good faith by appropriate proceedings
or (ii) where the violation of which, individually or in the aggregate, would
not reasonably be expected to (x) result in a Material Adverse Effect or (y) if
such violation is not remedied, result in any Lien not permitted under Section
5.11.
SECTION 5.06. Restricted and Unrestricted Subsidiaries. (a)
The Company may designate each Subsidiary organized or acquired by it after the
date hereof as either a Restricted Subsidiary or an Unrestricted Subsidiary by
resolution of the Board of Directors of the Company. Any such Subsidiary which
is not so designated within 30 days of its organization or acquisition as a
Subsidiary shall be deemed to be an Unrestricted Subsidiary.
(b) The Board of Directors may at any time designate any
Restricted Subsidiary as an Unrestricted Subsidiary if all of the following
conditions are met: (i) such Subsidiary does not own, directly or indirectly,
any capital stock or Indebtedness of the Company or any Restricted Subsidiary;
(ii) at any time of the proposed designation and after giving effect thereto,
there shall exist no Default and (iii) such Restricted Subsidiary has
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not previously been designated an Unrestricted Subsidiary pursuant to this
Section 5.06(b).
(c) The Board of Directors may at any time designate any
Unrestricted Subsidiary as a Restricted Subsidiary if, at the time of the
proposed designation and after giving effect thereto, there shall exist no
Default.
(d) Notwithstanding any provision of this Section 5.06 to
the contrary, so long as any of the notes issued and sold pursuant to the
Insurance Company Note Agreements remain outstanding, the Company agrees that
(i) any Subsidiary designated under the Insurance Company Note Agreements as a
Restricted Subsidiary will be so designated pursuant to this Section 5.06 and
(ii) any Subsidiary designated under the Insurance Company Note Agreements as
an Unrestricted Subsidiary will be so designated pursuant to this Section 5.06.
SECTION 5.07. Consolidations, Mergers and Sales of Assets.
The Company will not (i) consolidate or merge with or into any other Person or
(ii) sell, lease or otherwise transfer, directly or indirectly, all or
substantially all of its assets to any other Person; provided that the Company
may merge with another Person if immediately after giving effect to such merger
(i) no Default shall exist and (ii) the Company is the surviving entity.
SECTION 5.08. Use of Proceeds. The proceeds of the Loans
made under this Agreement will be used by the Company for general corporate
purposes. None of such proceeds will be used, directly or indirectly, for the
purpose, whether immediate, incidental or ultimate, of buying or carrying any
"margin stock" within the meaning of Regulation U.
SECTION 5.09. Transactions with Affiliates. The Company will
not, and will not permit any Restricted Subsidiary to, enter into or be a party
to any transaction or arrangement with any Affiliate (including, without
limitation, the purchase from, sale to or exchange of property with, or the
rendering of any service by or for, any Affiliate), except in the ordinary
course of and pursuant to the reasonable requirements of the Company's or such
Restricted Subsidiary's (as the case may be) business and upon fair and
reasonable terms no less favorable to the Company or such Restricted Subsidiary
than would be obtained in a comparable arm's-length transaction with a Person
other than an Affiliate.
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SECTION 5.10. Debt. (a) Consolidated Debt shall at all
times be less than 50% of Consolidated Net Tangible Assets; provided that, at
any time when the equity investments (valued at their then current book value)
of the Company and its Relevant Subsidiaries in Equity Affiliates would
otherwise exceed 5% of Consolidated Net Tangible Assets, Consolidated Net
Tangible Assets shall be adjusted for purposes of this subsection (a) by
deducting such equity investments (valued at their then current book value).
(b) The aggregate outstanding principal amount of Debt of
all Restricted Subsidiaries (excluding Debt of a Restricted Subsidiary to the
Company or to a Wholly-Owned Restricted Subsidiary) shall not exceed 30% of
Consolidated Net Tangible Assets at any time.
SECTION 5.11. Negative Pledge. The Company will not, and
will not permit any Restricted Subsidiary to, create or incur, or suffer to be
incurred or to exist, any Lien on its or their property or assets, whether now
owned or hereafter acquired, or upon any income or profits therefrom, or
acquire or agree to acquire, or permit any Restricted Subsidiary to acquire,
any property or assets upon conditional sales agreements or other title
retention devices, except:
(a) Liens for property taxes and assessments or
governmental charges or levies and Liens securing claims or demands of
mechanics and materialmen, provided that payment thereof is not at the
time required by Section 5.02 or 5.05;
(b) any Lien of or resulting from any judgment or award
in an amount not exceeding $50,000,000, the time for the appeal or
petition for rehearing of which shall not have expired, or in respect
of which the Company or a Restricted Subsidiary shall at any time in
good faith be prosecuting an appeal or proceeding for a review and in
respect of which a stay of execution pending such appeal or proceeding
for review shall have been secured;
(c) Liens incidental to the conduct of business conducted
by the Company and its Restricted Subsidiaries in the ordinary course
of business or the ownership of properties and assets owned by the
Company and its Restricted Subsidiaries (including Liens in connection
with worker's compensation, unemployment insurance and other like
laws, warehousemen's and attorneys' liens and statutory landlords'
liens) and Liens to secure the performance of bids, tenders or
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trade contracts, or to secure statutory obligations, surety or appeal
bonds or other Liens of like general nature incurred in the ordinary
course of business of the Company and its Restricted Subsidiaries and
not in connection with the borrowing of money, provided in each case,
the obligation secured is not overdue or, if overdue, is being
contested in good faith by appropriate actions or proceedings;
(d) survey exceptions or encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities and
other similar purposes, or zoning or other restrictions as to the use
of real properties, which are necessary or appropriate in the good
faith judgment of the Company for the conduct of the business of the
Company and its Restricted Subsidiaries or which customarily exist on
properties of corporations engaged in similar activities and similarly
situated and which, individually or in the aggregate, do not in any
event materially impair their use in the operation of the business of
the Company or of the Company and its Restricted Subsidiaries taken as
a whole;
(e) Liens securing Indebtedness of a Restricted
Subsidiary to the Company or to another Restricted Subsidiary;
(f) Liens existing as of July 31, 1994 and reflected in
Exhibit J hereto, including any renewals, extensions or replacements
of any such Lien, provided that:
(i) no additional property is encumbered in
connection with any such renewal, extension or replacement of
any such Lien; and
(ii) there is no increase in the aggregate
principal amount of Debt secured by any such Lien from that
which was outstanding or permitted to be outstanding with
respect to such Lien as of July 31, 1994 or the date of such
renewal, extension or replacement, whichever is greater;
(g) Liens incurred after July 31, 1994 given to secure
the payment of the purchase price and/or other direct costs incurred
in connection with the acquisition, construction, improvement or
rehabilitation of assets including Liens incurred by the Company or
any Restricted Subsidiary securing Debt incurred in connection with
industrial development bond and pollution control financings,
including Liens
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existing on such assets at the time of acquisition thereof or at the
time of acquisition by the Company or a Restricted Subsidiary of any
business entity (including a Restricted Subsidiary) then owning such
assets, whether or not such existing Liens were given to secure the
payment of the purchase price of the assets to which they attach,
provided that (i) except in the case of Liens existing on assets at
the time of acquisition of a Restricted Subsidiary then owning such
assets, the Lien shall be created within twelve (12) months of the
later of the acquisition of, or the completion of the construction or
improvement in respect of, such assets and shall attach solely to the
assets acquired, purchased, or financed, (ii) except in the case of
Liens existing on assets at the time of acquisition of a Restricted
Subsidiary then owning such assets or Liens in connection with
industrial development bond or pollution control financings, at the
time of the incurrence of such Lien, the aggregate amount remaining
unpaid on all Debt secured by Liens on such assets whether or not
assumed by the Company or a Restricted Subsidiary shall not exceed an
amount equal to 75% of the lesser of the total purchase price or fair
market value, at the time such Debt is incurred, of such assets (as
determined in good faith by the Board of Directors of the Company),
and (iii) all such Debt shall have been incurred within the applicable
limitations provided in Section 5.10;
(h) Liens arising from the sale or transfer of accounts
receivable and notes receivable of AMJ, provided that (i) AMJ shall
receive adequate consideration therefor and (ii) all Debt, if any,
secured by such Liens is incurred within the applicable limitations of
Section 5.10;
(i) Liens on notes or accounts receivable sold or
transferred in a transaction which is accounted for as a true sale
under GAAP;
(j) Liens not otherwise permitted by this Section 5.11
incurred in connection with the incurrence of additional Debt,
provided that (i) immediately after giving effect to the incurrence of
any such Lien, the sum of the aggregate principal amount of all
outstanding Debt secured by Liens incurred pursuant to this Section
5.11(j) shall not exceed 10% of Consolidated Net Tangible Assets, and
(ii) the incurrence of such Debt is permitted by Section 5.10; and
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(k) Liens incurred in connection with any renewals,
extensions or refundings of any Debt secured by Liens described in
Section 5.11(g), (h), (i) or (j) provided that there is no increase in
the aggregate principal amount of Debt secured thereby and no
additional property is encumbered.
In the event that any property of the Company or its Restricted Subsidiaries is
subjected to a lien in violation of this Section 5.11, but no other provision
of this Agreement including, without limitation, Section 5.10 (the Indebtedness
secured by such lien being referred to as "Prohibited Secured Indebtedness"),
such violation shall not constitute an Event of Default hereunder if the
Company, substantially simultaneously with the incurrence of such lien, makes
or causes to be made a provision whereby the Notes will be secured equally and
ratably with all Prohibited Secured Indebtedness and delivers to the Banks an
opinion to that effect, and, in any case, the Notes shall have the benefit, to
the full extent that, and with such priority as, the Banks may be entitled
thereto under applicable law, of an equitable lien to secure the Notes on such
property of the Company or its Restricted Subsidiaries that secures Prohibited
Secured Indebtedness. The opinion referred to in the preceding sentence shall
be addressed to each of the Banks, shall contain such qualifications and
limitations as are reasonably acceptable to the Banks and shall be delivered by
counsel of nationally recognized standing selected by the Company and
satisfactory to the Required Banks. Such counsel shall be deemed to be
satisfactory to the Required Banks unless, during the 15 day period after the
Banks have received written notice identifying such counsel, Banks having more
than 40% of the aggregate amount of the Commitments or, if the Commitments
shall have been terminated, holding Notes evidencing more than 40% of the
aggregate unpaid principal amount of the Loans, shall have objected to such
selection in writing to the Company.
Notwithstanding any of the foregoing provisions of this
Section 5.11 including, without limitation, the terms and provisions of the
preceding paragraph of this Section 5.11, the Company shall not, and shall not
permit any Restricted Subsidiary to, create or incur, or suffer to be incurred
or to exist, any Lien (other than Liens described in Section 5.11(a) through
(d), inclusive) upon Building 1 of Phase I in Austin, Texas (or upon the land
under such building), or upon the land, property or buildings (or any interest
therein) located in Santa Clara, California, all as more fully described as
Special Unencumbered Property in Exhibit K hereto.
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SECTION 5.12. Consolidated Tangible Net Worth. (a) The
Company will at all times keep and maintain Consolidated Tangible Net Worth
(adjusted as provided in subsections (b) and (c) of this Section, if
applicable) at an amount not less than the sum of:
(i) $725,000,000,
(ii) 50% of Consolidated Net Income (adjusted as provided in
subsections (b) and (c) of this Section, if applicable) for the period
from May 1, 1994 to and including the date of any calculation
hereunder and
(iii) 100% of the net proceeds of any sales or issuances of
capital stock of the Company during the period from May 1, 1994 to and
including the date of any calculation hereunder.
For purposes of this Section, Consolidated Net Income shall be computed on a
cumulative basis for said entire period; provided that for the purposes of any
determination of Consolidated Net Income under clause (ii) of this subsection
(a), if Consolidated Net Income for any particular fiscal year that has ended
or for that portion of a fiscal year that has not ended is a deficit figure,
then Consolidated Net Income shall, for that particular fiscal year or portion
of a fiscal year, be deemed to be zero.
(b) If the Company is required to deliver consolidated
financial statements of the Company and its Restricted Subsidiaries pursuant to
Section 5.01(h) as of any date (the "Break-Out Date"), then the following
adjustments shall be made for purposes of this Section as of the Break-Out Date
and at all times thereafter (unless and until the Company is no longer required
to deliver such financial statements pursuant to Section 5.01(h)):
(i) Consolidated Tangible Net Worth shall be adjusted by
deducting the equity investments (valued at their then current book
value) of the Company and its Restricted Subsidiaries in Unrestricted
Subsidiaries and
(ii) Consolidated Net Income shall be adjusted by excluding
the equity of the Company and its Restricted Subsidiaries in the
income (or loss) of Unrestricted Subsidiaries after May 1, 1994 and
including dividends received by the Company and its Restricted
Subsidiaries from Unrestricted Subsidiaries after May 1, 1994.
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(c) At any time when the aggregate book value of the equity
investments of the Company and its Relevant Subsidiaries in Equity Affiliates
exceeds 5% of Consolidated Net Tangible Assets, the following adjustments
shall be made for purposes of this Section:
(i) Consolidated Tangible Net Worth shall be adjusted by
deducting such equity investments (valued at their then current book
value) and
(ii) Consolidated Net Income shall be adjusted by excluding the
equity of the Company and its Relevant Subsidiaries in the income (or
loss) of Equity Affiliates after May 1, 1994 and including dividends
received by the Company and its Relevant Subsidiaries from Equity
Affiliates after May 1, 1994.
SECTION 5.13. Limitation on Long-Term Leases. The Company
will not, and will not permit any Restricted Subsidiary to, become obligated,
as lessee, under any Long-Term Lease if, at the time of entering into such
Long-Term Lease and after giving effect thereto, the aggregate Rentals payable
by the Company and all of its Relevant Subsidiaries on a consolidated basis in
any one fiscal year thereafter under all Long-Term Leases (net of minimum
rentals required and reasonably expected to be paid to the Company or any
Relevant Subsidiary (excluding intercompany items with Relevant Subsidiaries)
under sub-leases of property leased under such Long-Term Leases and which
rentals would be included on an income statement of the Company on an accrued
basis and are not in default) would exceed 7% of Consolidated Net Tangible
Assets. For purposes of this Section 5.13 only, Rentals shall not include any
amounts specifically required to be paid under Section 2 of the Purchase
Agreement (Phase 1) or Section 2 of the Purchase Agreement (Phase 2), each
dated as of February 10, 1993 and each between the Company and BNP Leasing
Corporation.
SECTION 5.14. Quick Ratio. On the last day of each fiscal
quarter of the Company, the ratio of Consolidated Quick Assets to Consolidated
Current Liabilities shall not be less than 1 to 1.
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ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the
following events ("Events of Default") shall have occurred and be continuing:
(a) the Company shall fail to pay any principal of any Loan
when due or shall fail to pay any interest, fee or other amount
payable hereunder within five days after it becomes due;
(b) the Company shall fail to observe or perform any covenant
or agreement contained in this Agreement (other than those covered by
clause (a) above) until the later of (i) 30 days after the occurrence
of such failure or (ii) two days after notice thereof has been given
to the Company by the Agent at the request of the Required Banks;
(c) any representation, warranty, certification or statement
made by the Company in this Agreement or in any certificate, financial
statement or other document delivered pursuant to this Agreement shall
prove to have been incorrect in any material respect when made (or
deemed made);
(d) the Company or any Restricted Subsidiary shall fail to
make any payment in respect of any Material Financial Obligations when
due or within any applicable grace period;
(e) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt or enables (or, with
the giving of notice or lapse of time or both, would enable) the
holder of such Debt or any Person acting on such holder's behalf to
accelerate the maturity thereof;
(f) the Company or any Subsidiary shall commence a voluntary
case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or
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other proceeding commenced against it, or shall make a general
assignment for the benefit of creditors, or shall fail generally to
pay its debts as they become due, or shall take any corporate action
to authorize any of the foregoing; provided that no event otherwise
constituting an Event of Default under this clause (f) shall be an
Event of Default if the total assets of all entities with respect to
which an event has occurred which would otherwise have constituted an
Event of Default under this clause (f) or clause (g) do not exceed
$10,000,000 in the aggregate;
(g) an involuntary case or other proceeding shall be
commenced against the Company or any Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall
remain undismissed and unstayed for a period of 60 days; or an order
for relief shall be entered against the Company or any Subsidiary
under the federal bankruptcy laws as now or hereafter in effect;
provided that no event otherwise constituting an Event of Default
under this clause (g) shall be an Event of Default if the total assets
of all entities with respect to which an event has occurred which
would otherwise have constituted an Event of Default under clause (f)
or this clause (g) do not exceed $10,000,000 in the aggregate;
(h) any ERISA Affiliate shall fail to pay when due an amount
or amounts aggregating in excess of $10,000,000 which it shall have
become liable to pay under Title IV of ERISA; or notice of intent to
terminate a Material Plan shall be filed under Title IV of ERISA by
any ERISA Affiliate, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of
ERISA to terminate, to impose liability (other than for premiums under
Section 4007 of ERISA) in respect of, or to cause a trustee to be
appointed to administer any Material Plan; or there shall occur a
complete or partial withdrawal from, or a default, within the meaning
of Section 4219(c)(5) of ERISA, with respect to, one or more
Multiemployer Plans which could cause one or more ERISA Affiliates to
incur a current payment obligation in excess of $10,000,000;
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(i) final judgments or orders for the payment of money in
excess of $10,000,000 in the aggregate (excluding amounts with respect
to which a financially sound and reputable insurer has admitted
liability) shall be rendered against the Company or any Subsidiary and
such judgments or orders shall continue unsatisfied and unstayed for a
period of 30 consecutive days; or
(j) either (i) any person or group of persons (within the
meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as
amended) shall have acquired beneficial ownership (within the meaning
of Rule 13d-3 promulgated by the Securities and Exchange Commission
under said Act) of 30% or more of the outstanding shares of Voting
Stock of the Company; or (ii) during any period of 12 consecutive
calendar months, commencing before or after the date of this
Agreement, individuals who were directors of the Company on the first
day of such period (the "Initial Directors") shall cease for any
reason to constitute a majority of the board of directors of the
Company unless the Persons replacing such individuals were nominated
or elected by a majority of the directors (x) who were Initial
Directors at the time of such nomination or election and/or (y) who
were nominated or elected by a majority of directors who were Initial
Directors at the time of such nomination or election;
then, and in every such event, the Agent shall (i) if requested by Banks having
more than 60% in aggregate amount of the Commitments, by notice to the Company
terminate the Commitments and they shall thereupon terminate, and (ii) if
requested by Banks holding Notes evidencing more than 60% in aggregate
principal amount of the Loans, by notice to the Company declare the Notes
(together with accrued interest thereon) to be, and the Notes shall thereupon
become, immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Company;
provided that in the case of any of the Events of Default specified in clause
(f) or (g) above with respect to the Company, without any notice to the Company
or any other act by the Agent or the Banks, the Commitments shall thereupon
terminate and the Notes (together with accrued interest thereon) shall become
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Company.
SECTION 6.02. Notice of Default. The Agent shall give notice
to the Company under clause (b) of Section 6.01
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promptly upon being requested to do so by the Required Banks and shall
thereupon notify all the Banks thereof.
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization. Each Bank
irrevocably appoints and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement and the Notes as
are delegated to the Agent by the terms hereof or thereof, together with all
such powers as are reasonably incidental thereto.
SECTION 7.02. Agent and Affiliates. Morgan Guaranty Trust
Company of New York shall have the same rights and powers under this Agreement
as any other Bank and may exercise or refrain from exercising the same as
though it were not the Agent, and Morgan Guaranty Trust Company of New York and
its affiliates may accept deposits from, lend money to, and generally engage in
any kind of business with the Company or any Subsidiary or affiliate of the
Company as if it were not the Agent hereunder.
SECTION 7.03. Action by Agent. The obligations of the Agent
hereunder are only those expressly set forth herein. Without limiting the
generality of the foregoing, the Agent shall not be required to take any action
with respect to any Default, except as expressly provided in Article VI.
SECTION 7.04. Consultation with Experts. The Agent may
consult with legal counsel (who may be counsel for the Company), independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken by it in good faith in accordance with
the advice of such counsel, accountants or experts.
SECTION 7.05. Liability of Agent. Neither the Agent nor any
of its affiliates nor any of their respective directors, officers, agents or
employees shall be liable for any action taken or not taken by it in connection
herewith (i) with the consent or at the request of the Required Banks or (ii)
in the absence of its own gross negligence or willful misconduct. Neither the
Agent nor any of its affiliates nor any of their respective directors,
officers, agents or employees shall be responsible for or have any duty to
ascertain, inquire into or verify (i) any statement,
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warranty or representation made in connection with this Agreement or any
borrowing hereunder; (ii) the performance or observance of any of the covenants
or agreements of the Company; (iii) the satisfaction of any condition specified
in Article III, except receipt of items required to be delivered to the Agent;
or (iv) the validity, effectiveness or genuineness of this Agreement, the Notes
or any other instrument or writing furnished in connection herewith. The Agent
shall not incur any liability by acting in reliance upon (i) any notice,
consent, certificate, statement, or other writing (which may be a bank wire,
telex, facsimile transmission or similar writing) believed by it to be genuine
or to be signed by the proper party or parties or (ii) any notice given by
telephone (pursuant to a specific provision herein authorizing notice to be
given by the Company to the Agent by telephone (promptly confirmed by facsimile
transmission)) believed by it to be given by the proper party.
SECTION 7.06. Indemnification. Each Bank shall, ratably in
accordance with its Commitment, indemnify the Agent, its affiliates and their
respective directors, officers, agents and employees (to the extent not
reimbursed by the Company) against any cost, expense (including counsel fees
and disbursements), claim, demand, action, loss or liability (except such as
result from such indemnitees' gross negligence or willful misconduct) that such
indemnitees may suffer or incur in connection with this Agreement or any action
taken or omitted by such indemnitees hereunder.
SECTION 7.07. Credit Decision. Each Bank acknowledges that
it has, independently and without reliance upon the Agent or any other Bank,
and based on such documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement. Each Bank
also acknowledges that it will, independently and without reliance upon the
Agent or any other Bank, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking any action under this Agreement.
SECTION 7.08. Successor Agent. The Agent may resign at any
time by giving notice thereof to the Banks and the Company. Upon any such
resignation, the Required Banks shall have the right to appoint a successor
Agent; provided that (i) such successor Agent shall have, in its capacity as a
Bank, a Commitment of not less than $12,500,000 (reduced to reflect any
reduction of the Commitments pursuant to Section 2.09) or, if the Commitments
have been terminated,
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shall hold a corresponding portion of the Committed Loans then outstanding (if
any) and (ii) unless a Default shall have occurred and be continuing, such
appointment shall not be effective without the consent of the Company, such
consent not to be unreasonably withheld. If no successor Agent shall have been
so appointed by the Required Banks, and shall have accepted such appointment,
within 30 days after the retiring Agent gives notice of resignation, then the
retiring Agent may, on behalf of the Banks, appoint a successor Agent, which
shall be a commercial bank organized or licensed under the laws of the United
States of America or of any State thereof and having a combined capital and
surplus of at least $50,000,000. Upon the acceptance of its appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Article shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent.
SECTION 7.09. Agent's Fee. The Company shall pay to the
Agent for its own account fees in the amounts and at the times previously
agreed upon between the Company and the Agent.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate
or Unfair. If on or prior to the first day of any Interest Period for any
Fixed Rate Borrowing:
(a) the Agent is advised by the Reference Banks that deposits
in dollars (in the applicable amounts) are not being offered to the
Reference Banks in the relevant market for such Interest Period, or
(b) in the case of a Committed Borrowing, Banks having 50% or
more of the aggregate amount of the Commitments advise the Agent that
the Adjusted CD Rate or the Adjusted London Interbank Offered Rate, as
the case may be, as determined by the Agent will not adequately and
fairly reflect the cost to such Banks of funding their CD Loans or
Euro-Dollar Loans, as the case may be, for such Interest Period,
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the Agent shall forthwith give notice thereof to the Company and the
Banks, whereupon until the Agent notifies the Company that the circumstances
giving rise to such suspension no longer exist, the obligations of the Banks
to make CD Loans or Euro-Dollar Loans, as the case may be, shall be suspended.
Unless the Company notifies the Agent at least two Domestic Business Days
before the date of any Fixed Rate Borrowing for which a Notice of Borrowing
has previously been given that it elects not to borrow on such date, (i) if
such Fixed Rate Borrowing is a Committed Borrowing, such Borrowing shall
instead be made as a Base Rate Borrowing and (ii) if such Fixed Rate Borrowing
is a Money Market LIBOR Borrowing, the Money Market LIBOR Loans comprising
such Borrowing shall bear interest for each day from and including the first
day to but excluding the last day of the Interest Period applicable thereto at
the Base Rate for such day.
SECTION 8.02. Illegality. If, on or after the date of this
Agreement, the adoption of any applicable law, rule or regulation, or any
change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency shall make it unlawful or
impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain
or fund its Euro-Dollar Loans and such Bank shall so notify the Agent, the
Agent shall forthwith give notice thereof to the other Banks and the Company,
whereupon until such Bank notifies the Company and the Agent that the
circumstances giving rise to such suspension no longer exist, the obligation of
such Bank to make Euro-Dollar Loans shall be suspended. Before giving any
notice to the Agent pursuant to this Section, such Bank shall designate a
different Euro-Dollar Lending Office if such designation will avoid the need
for giving such notice and will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank. If such Bank shall determine that it may not
lawfully continue to maintain and fund any of its outstanding Euro-Dollar Loans
to maturity and shall so specify in such notice, the Company shall immediately
prepay in full the then outstanding principal amount of each such Euro-Dollar
Loan, together with accrued interest thereon. Concurrently with prepaying each
such Euro-Dollar Loan, the Company shall borrow a Base Rate Loan in an equal
principal amount from such Bank (on which interest and principal shall be
payable contemporaneously with the related EuroDollar Loans of the
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<PAGE> 64
other Banks), and such Bank shall make such a Base Rate Loan.
SECTION 8.03. Increased Cost and Reduced Return. (a) If on
or after (x) the date hereof, in the case of any Committed Loan or any
obligation to make Committed Loans or (y) the date of the related Money Market
Quote, in the case of any Money Market Loan, the adoption of any applicable
law, rule or regulation, or any change in any applicable law, rule or
regulation, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Applicable Lending Office) with any request or directive (whether or not having
the force of law) of any such authority, central bank or comparable agency
shall impose, modify or deem applicable any reserve (including, without
limitation, any such requirement imposed by the Board of Governors of the
Federal Reserve System, but excluding (i) with respect to any CD Loan any such
requirement included in an applicable Domestic Reserve Percentage and (ii) with
respect to any Euro-Dollar Loan any such requirement included in an applicable
Euro-Dollar Reserve Percentage), special deposit, insurance assessment
(excluding, with respect to any CD Loan, any such requirement reflected in an
applicable Assessment Rate) or similar requirement against assets of, deposits
with or for the account of, or credit extended by, any Bank (or its Applicable
Lending Office) or shall impose on any Bank (or its Applicable Lending Office)
or on the United States market for certificates of deposit or the London
interbank market any other condition affecting its Fixed Rate Loans, its Note
or its obligation to make Fixed Rate Loans and the result of any of the
foregoing is to increase the cost to such Bank (or its Applicable Lending
Office) of making or maintaining any Fixed Rate Loan, or to reduce the amount
of any sum received or receivable by such Bank (or its Applicable Lending
Office) under this Agreement or under its Note with respect thereto, by an
amount deemed by such Bank to be material, then, within 60 days after demand by
such Bank (with a copy to the Agent), the Company shall pay to such Bank such
additional amount or amounts (with interest if appropriate) as will compensate
such Bank (subject to the limit in Section 8.05) for such increased cost or
reduction.
(b) If any Bank shall have determined that, after the date
hereof, the adoption of any applicable law, rule or regulation regarding
capital adequacy, or any change in any such law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with
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<PAGE> 65
the interpretation or administration thereof, or any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on capital of such Bank (or its Parent) as a
consequence of such Bank's obligations hereunder to a level below that which
such Bank (or its Parent) could have achieved but for such adoption, change,
request or directive (taking into consideration its policies with respect to
capital adequacy) by an amount deemed by such Bank to be material, then from
time to time, within 60 days after demand by such Bank (with a copy to the
Agent), the Company shall pay to such Bank such additional amount or amounts
(with interest if appropriate) as will compensate such Bank or its Parent
(subject to the limit in Section 8.05) for such reduction.
(c) Each Bank will promptly notify the Company and the Agent
of any event of which it has knowledge, occurring after the date hereof, which
will entitle such Bank to compensation pursuant to this Section and will
designate a different Applicable Lending Office if such designation will avoid
the need for, or reduce the amount of, such compensation and will not, in the
judgment of such Bank, be otherwise disadvantageous to such Bank. A
certificate of any Bank claiming compensation under this Section and setting
forth the additional amount or amounts to be paid to it hereunder shall show in
reasonable detail the basis for calculating such amount or amounts and shall be
conclusive in the absence of manifest error. In determining such amount, such
Bank may use any reasonable averaging and attribution methods.
SECTION 8.04. Taxes. (a) For purposes of this Section 8.04,
the following terms have the following meanings:
"Taxes" means any and all present or future taxes, duties,
levies, imposts, deductions, charges or withholdings with respect to any
payment by the Company pursuant to this Agreement or under any Note, and all
liabilities with respect thereto, excluding (i) in the case of each Bank and
the Agent, taxes imposed on its income, and franchise or similar taxes imposed
on it, by a jurisdiction under the laws of which such Bank or the Agent (as the
case may be) is organized or in which its principal executive office is located
or, in the case of each Bank, in which its Applicable Lending Office is located
and (ii) in the case of each Bank, any United States withholding tax imposed on
such payments.
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"Other Taxes" means any present or future stamp or documentary
taxes and any other excise or property taxes, or similar charges or levies,
which arise from any payment made pursuant to this Agreement or under any Note
or from the execution or delivery of, or otherwise with respect to, this
Agreement or any Note.
(b) Any and all payments by the Company to or for the
account of any Bank or the Agent hereunder or under any Note shall be made
without deduction for any Taxes or Other Taxes; provided that, if the Company
shall be required by law to deduct any Taxes or Other Taxes from any such
payments, (i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 8.04) such Bank or the Agent (as the case may
be) receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Company shall make such deductions, (iii) the
Company shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law and (iv) the Company shall
furnish to the Agent, at its address referred to in Section 9.01, the original
or a certified copy of a receipt evidencing payment thereof.
(c) The Company agrees to indemnify each Bank and the
Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on
amounts payable under this Section 8.04) paid by such Bank or the Agent (as the
case may be) and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto. This indemnification (with interest
if appropriate) shall be paid within 60 days after such Bank or the Agent (as
the case may be) makes demand therefor.
(d) Each Bank organized under the laws of a jurisdiction
outside the United States, on or prior to the date of its execution and
delivery of this Agreement in the case of each Bank listed on the signature
pages hereof and on or prior to the date on which it becomes a Bank in the case
of each other Bank, and from time to time thereafter if requested in writing by
the Company (but only so long as such Bank remains lawfully able to do so),
shall provide the Company with Internal Revenue Service form 1001 or 4224, as
appropriate, or any successor form prescribed by the Internal Revenue Service,
certifying that such Bank is entitled to benefits under an income tax treaty to
which the United States is a party which exempts the Bank from United States
withholding tax or reduces the rate of withholding tax on payments of interest
for the account of such Bank or
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certifying that the income receivable pursuant to this Agreement is effectively
connected with the conduct of a trade or business in the United States.
(e) If a Bank, which is otherwise exempt from or subject
to a reduced rate of United States withholding tax, becomes subject to such
withholding tax because of its failure to deliver a form required hereunder,
the Company shall take such steps as such Bank shall reasonably request to
assist such Bank to recover such withholding tax unless in the judgment of the
Company, such assistance would be otherwise disadvantageous to the Company.
(f) If the Company is required to pay additional amounts
to or for the account of any Bank pursuant to this Section 8.04, then such Bank
will change the jurisdiction of its Applicable Lending Office if, in the
judgment of such Bank, such change (i) will eliminate or reduce any such
additional payment which may thereafter accrue and (ii) is not otherwise
disadvantageous to such Bank.
SECTION 8.05. Limitations on Amounts Due Under Section 8.03.
If any Bank fails to give the Company any prompt notice required by Section
8.03(c), the Company shall not be required to indemnify and compensate such
Bank or the Agent under Section 8.03 for any amounts attributable to the event
or factual circumstance required to be disclosed in such notice and arising
during or with respect to any period ending more than 90 days before notice
thereof has been delivered to the Company; provided that this Section shall in
no way limit the right of any Bank or the Agent to demand or receive
compensation to the extent that such compensation relates to any law, rule,
regulation, interpretation, administration, request or directive (or any change
therein) which by its terms has retroactive application if such notice is given
within 90 days after the date of enactment or effectiveness of such retroactive
law, rule, regulation, interpretation, administration, request or directive (or
change therein).
SECTION 8.06. Base Rate Loans Substituted for Affected Fixed
Rate Loans. If (i) the obligation of any Bank to make Euro-Dollar Loans has
been suspended pursuant to Section 8.02 or (ii) any Bank has demanded
compensation under Section 8.03 or 8.04 with respect to its CD Loans or
Euro-Dollar Loans and the Company shall, by at least five Euro-Dollar Business
Days' prior notice to such Bank through the Agent, have elected that the
provisions of this Section shall apply to such Bank, then, unless and until
such Bank notifies the Company that the circumstances giving rise to such
suspension or demand for compensation no longer exist:
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(a) all Loans which would otherwise be made by such Bank as
CD Loans or Euro-Dollar Loans, as the case may be, shall be made
instead as Base Rate Loans (on which interest and principal shall be
payable contemporaneously with the related Fixed Rate Loans of the
other Banks), and
(b) after each of its CD Loans or Euro-Dollar Loans, as the
case may be, has been repaid, all payments of principal which would
otherwise be applied to repay such Fixed Rate Loans shall be applied
to repay its Base Rate Loans instead.
SECTION 8.07. Substitution of Bank. If (i) the obligation
of any Bank to make Euro-Dollar Loans has been suspended pursuant to Section
8.02 or (ii) any Bank has demanded compensation under Section 8.03 or Section
8.04, the Company shall have the right, with the assistance of the Agent, to
seek a mutually satisfactory substitute bank or banks (which may be one or more
of the Banks) to purchase the Note and assume the Commitment of such Bank.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. Except for notices given by telephone
pursuant to a specific provision herein authorizing notice by telephone
(promptly confirmed by facsimile transmission), all notices, requests and other
communications to any party hereunder shall be in writing (including bank wire,
telex, facsimile transmission or similar writing) and shall be given to such
party: (x) in the case of the Company or the Agent, at its address, facsimile
number or telex number set forth on the signature pages hereof, (y) in the case
of any Bank, at its address, facsimile number or telex number set forth in its
Administrative Questionnaire or (z) in the case of any party, such other
address, facsimile number or telex number as such party may hereafter specify
for the purpose by notice to the Agent and the Company. Each such notice,
request or other communication shall be effective (i) if given by telex, when
such telex is transmitted to the telex number specified in this Section and the
appropriate answerback is received, (ii) if given by facsimile transmission,
when transmitted to the facsimile number specified in this Section and
confirmation of receipt is received, (iii) if given by mail, 72 hours after
such communication is deposited in the mails
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with first class postage prepaid, addressed as aforesaid or (iv) if given by
any other means, when delivered at the address specified in this Section;
provided that notices to the Agent under Article II or Article VIII shall not
be effective until received.
SECTION 9.02. No Waivers. No failure or delay by the Agent
or any Bank in exercising any right, power or privilege hereunder or under any
Note shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.
SECTION 9.03. Expenses; Indemnification. (a) The Company
shall pay (i) all out-of-pocket expenses of the Agent, including reasonable
fees and disbursements of special counsel for the Agent, in connection with the
preparation of this Agreement, any waiver or consent hereunder or any amendment
hereof or any Default or alleged Default hereunder and (ii) if an Event of
Default occurs, all out-of-pocket expenses incurred by the Agent and each Bank,
including (without duplication) the reasonable fees and disbursements of
outside counsel and the allocated cost of inside counsel, in connection with
such Event of Default and collection, bankruptcy, insolvency and other
enforcement proceedings resulting therefrom.
(b) The Company agrees to indemnify the Agent and each Bank,
their respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including, without limitation, the reasonable fees and
disbursements of outside counsel and the allocated cost of inside counsel,
which may be incurred by such Indemnitee in connection with any investigative,
administrative or judicial proceeding (whether or not such Indemnitee shall be
designated a party thereto) brought or threatened relating to or arising out of
this Agreement or any actual or proposed use of proceeds of Loans hereunder;
provided that no Indemnitee shall have the right to be indemnified hereunder
for such Indemnitee's own gross negligence or willful misconduct.
SECTION 9.04. Sharing of Set-Offs. Each Bank agrees that if
it shall, by exercising any right of set-off or counterclaim or otherwise,
receive payment of a proportion of the aggregate amount of principal and
interest due with respect to any Note held by it which is greater
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than the proportion received by any other Bank in respect of the aggregate
amount of principal and interest due with respect to any Note held by such
other Bank, the Bank receiving such proportionately greater payment shall
purchase such participations in the Notes held by the other Banks, and such
other adjustments shall be made, as may be required so that all such payments
of principal and interest with respect to the Notes held by the Banks shall be
shared by the Banks pro rata; provided that nothing in this Section shall
impair the right of any Bank to exercise any right of set-off or counterclaim
it may have and to apply the amount subject to such exercise to the payment of
indebtedness of the Company other than its indebtedness hereunder.
SECTION 9.05. Amendments and Waivers. Any provision of this
Agreement or the Notes may be amended or waived if, but only if, such amendment
or waiver is in writing and is signed by the Company and the Required Banks
(and, if the rights or duties of the Agent are affected thereby, by the Agent);
provided that no such amendment or waiver shall, unless signed by all the
Banks, (i) increase or decrease the Commitment of any Bank (except for a
ratable decrease in the Commitments of all Banks) or subject any Bank to any
additional obligation, (ii) reduce the principal of or rate of interest on any
Loan or any fees hereunder, (iii) postpone the date fixed for any payment of
principal of or interest on any Loan or any fees hereunder or for the
termination of any Commitment or (iv) amend this Section 9.05 or change the
percentage of the Commitments or of the aggregate unpaid principal amount of
the Notes, or the number of Banks, which shall be required for the Banks or any
of them to take any action under this Section or any other provision of this
Agreement.
SECTION 9.06. Successors and Assigns. (a) The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that the Company may
not assign or otherwise transfer any of its rights under this Agreement without
the prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or
other institutions (each a "Participant") participating interests in its
Commitment or any or all of its Loans. In the event of any such grant by a
Bank of a participating interest to a Participant, whether or not upon notice
to the Company and the Agent, such Bank shall remain responsible for the
performance of its obligations hereunder, and the Company and the Agent shall
continue to deal solely and directly with such Bank in connection with such
Bank's rights and obligations under this Agreement. Any
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agreement pursuant to which any Bank may grant such a participating interest
shall provide that such Bank shall retain the sole right and responsibility to
enforce the obligations of the Company hereunder including, without limitation,
the right to approve any amendment, modification or waiver of any provision of
this Agreement; provided that such participation agreement may provide that
such Bank will not agree to any modification, amendment or waiver of this
Agreement described in clause (i), (ii) or (iii) of Section 9.05 without the
consent of the Participant. The Company agrees that each Participant shall, to
the extent provided in its participation agreement, be entitled to the benefits
of Article VIII with respect to its participating interest. An assignment or
other transfer which is not permitted by subsection (c) or (d) below shall be
given effect for purposes of this Agreement only to the extent of a
participating interest granted in accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or
other institutions (each an "Assignee") all, or a proportionate part
(equivalent to an initial Commitment of not less than $5,000,000) of all, of
its rights and obligations under this Agreement and the Notes, and such
Assignee shall assume such rights and obligations, pursuant to an Assignment
and Assumption Agreement in substantially the form of Exhibit H hereto executed
by such Assignee and such transferor Bank, with (and subject to) the subscribed
consent of the Company, which shall not be unreasonably withheld, and the
Agent; provided that if an Assignee is an affiliate of such transferor Bank or
was a Bank immediately prior to such assignment, no such consent shall be
required; and provided further that such assignment may, but need not, include
rights of the transferor Bank in respect of outstanding Money Market Loans.
Upon execution and delivery of such instrument and payment by such Assignee to
such transferor Bank of an amount equal to the purchase price agreed between
such transferor Bank and such Assignee, such Assignee shall be a Bank party to
this Agreement and shall have all the rights and obligations of a Bank with a
Commitment as set forth in such instrument of assumption, and the transferor
Bank shall be released from its obligations hereunder to a corresponding
extent, and no further consent or action by any party shall be required. Upon
the consummation of any assignment pursuant to this subsection (c), the
transferor Bank, the Agent and the Company shall make appropriate arrangements
so that, if required, a new Note is issued to the Assignee. In connection with
any such assignment, the transferor Bank shall pay to the Agent an
administrative fee for processing such assignment in the amount of $2,500. If
the Assignee is
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not incorporated under the laws of the United States of America or a state
thereof, it shall deliver to the Company and the Agent certification as to
exemption from deduction or withholding of any United States federal income
taxes in accordance with Section 8.04.
(d) Any Bank may at any time assign all or any portion of its
rights under this Agreement and its Note to a Federal Reserve Bank. No such
assignment shall release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any
Bank's rights shall be entitled to receive any greater payment under Section
8.03 or 8.04 than such Bank would have been entitled to receive with respect to
the rights transferred, unless such transfer is made with the Company's prior
written consent or by reason of the provisions of Section 8.02, 8.03 or 8.04
requiring such Bank to designate a different Applicable Lending Office under
certain circumstances or at a time when the circumstances giving rise to such
greater payment did not exist.
SECTION 9.07. Collateral. Each of the Banks represents to
the Agent and each of the other Banks that it in good faith is not relying upon
any "margin stock" (as defined in Regulation U) as collateral in the extension
or maintenance of the credit provided for in this Agreement.
SECTION 9.08. Governing Law; Submission to Jurisdiction.
This Agreement and each Note shall be governed by and construed in accordance
with the laws of the State of New York. The Company hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York State court sitting in New York City
for purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. The Company irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such proceeding brought in
such a court and any claim that any such proceeding brought in such a court has
been brought in an inconvenient forum.
SECTION 9.09. Counterparts; Integration; Effectiveness. This
Agreement may be signed in any number of counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and hereto were
upon the same instrument. This Agreement constitutes the entire agreement and
understanding among the parties hereto and supersedes any and all prior
agreements and understandings, oral or written, relating to the subject
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matter hereof. This Agreement shall become effective upon receipt by the Agent
of counterparts hereof signed by each of the parties hereto (or, in the case of
any party as to which an executed counterpart shall not have been received,
receipt by the Agent in form satisfactory to it of telegraphic, telex,
facsimile or other written confirmation from such party of execution of a
counterpart hereof by such party).
SECTION 9.10. Confidentiality. Each Bank and the Agent
agrees (on behalf of itself and each of its affiliates, directors, officers,
employees and representatives) to use reasonable precautions to keep
confidential, in accordance with safe and sound banking practices, any
non-public information supplied to it by the Company pursuant to this Agreement
which is identified by the Company as being confidential at the time the same
is delivered to the Banks or the Agent, provided that nothing herein shall
limit the disclosure of any such information (i) to the extent required by
statute, rule, regulation or, upon prompt prior written notice to the Company
(to the extent permitted by law), by judicial process, (ii) to counsel for any
of the Banks or the Agent, (iii) to bank examiners, auditors or accountants,
(iv) in connection with any litigation to which any one or more of the Banks is
a party, provided that the Company has been given prompt prior written notice
(to the extent permitted by law) of such proposed disclosure or (v) to any
Assignee or Participant (or prospective Assignee or Participant) so long as
such Assignee or Participant (or Prospective Assignee or Participant) agrees in
writing to be bound by the terms of this Section 9.10; and provided further
that in no event shall any Bank or the Agent be obligated or required to return
any materials furnished by the Company.
SECTION 9.11. WAIVER OF JURY TRIAL. EACH OF THE COMPANY, THE
AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
APPLIED MATERIALS, INC.
By /s/ JAMES C. MORGAN
-------------------------------------------------
James C. Morgan
Title: Chairman
By /s/ NANCY H. HANDEL
-------------------------------------------------
Nancy H. Handel
Title: Treasurer
3050 Bowers Avenue
Santa Clara, California 95054
Facsimile number:
Commitments
$25,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ DAVID T. ELLIS
-------------------------------------------------
David T. Ellis
Title: Vice President
$25,000,000 BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By /s/ ALLAN B. MINER
-------------------------------------------------
Allan B. Miner
Title: Vice President and Manager
$12,500,000 ABN AMRO BANK N.V. SAN FRANCISCO
INTERNATIONAL BRANCH
By /s/ LEBBEUS S. CASE, JR.
-------------------------------------------------
Lebbeus S. Case, Jr.
Title: Vice President
By /s/ ROBERT HARTINGER
-------------------------------------------------
Robert Hartinger
Title: Group Vice President
<PAGE> 75
$12,500,000 THE BANK OF CALIFORNIA
By /s/ J. WILLIAM BLOORE
-------------------------------------------------
J. William Bloore
Title: Assistant Vice President
$12,500,000 BANQUE NATIONALE DE PARIS
By /s/ JUDITH A. DOWLING
-------------------------------------------------
Judith A. Dowling
Title: Vice President
By /s/ WILLIAM J. LA HERRAN
-------------------------------------------------
William J. La Herran
Title: Assistant Vice President
$12,500,000 CREDIT SUISSE
By /s/ DAVID J. WORTHINGTON
-------------------------------------------------
David J. Worthington
Title: Member of Senior Management
By /s/ MARILOU PALENZUELA
-------------------------------------------------
Marilou Palenzuela
Title: Member of Senior Management
$12,500,000 DEUTSCHE BANK AG, LOS ANGELES
AND/OR CAYMAN ISLANDS BRANCHES
By /s/ CHRISTINE LANE
-------------------------------------------------
Christine Lane
Title: Assistant Vice President
By /s/ MICHAEL V. HOTZE
-------------------------------------------------
Michael V. Hotze
Title: Managing Director
<PAGE> 76
$12,500,000 UNION BANK
By /s/ John W. Hein
-----------------------------------------
Title: Senior Vice President and Manager
- - -----------------
Total Commitments
$125,000,000
============
<PAGE> 77
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By /s/ DAVID T. ELLIS
------------------------------
Title: Vice President
60 Wall Street
New York, New York 10260-0060
Attention: David T. Ellis
Telex number: 177615
Facsimile number: (212) 648-5014
<PAGE> 78
PRICING SCHEDULE
The "Euro-Dollar Margin", "CD Margin" and "Facility Fee Rate"
for any day are the respective rates per annum set forth below in the
applicable row in the column corresponding to the Pricing Level that applies on
such day:
<TABLE>
=====================================================================================================
<CAPTION>
Level I Level II Level III Level IV
------- -------- --------- --------
<S> <C> <C> <C> <C>
Euro-Dollar 0.3000% 0.3250% 0.4250% 0.6875%
Margin
CD Margin 0.4250% 0.4500% 0.5500% 0.8125%
Facility Fee 0.1500% 0.1750% 0.2000% 0.3125%
Rate
=====================================================================================================
</TABLE>
For purposes of this Pricing Schedule, the following terms
have the following meanings:
"Level I Pricing" applies on any day if, on such day, the
Company's long-term debt is rated BBB+ or higher by S&P or Baa1 or higher by
Moody's.
"Level II Pricing" applies on any day if, on such day, (i) the
Company's long-term debt is rated BBB or higher by S&P or Baa2 or higher by
Moody's and (ii) Level I Pricing does not apply.
"Level III Pricing" applies on any day if, on such day, (i)
the Company's long-term debt is rated BBB- or higher by S&P or Baa3 or higher
by Moody's and (ii) neither Level I Pricing nor Level II Pricing applies.
"Level IV Pricing" applies on any day if, on such day, no
other Pricing Level applies.
"Moody's" means Moody's Investors Service, Inc.
<PAGE> 79
"Pricing Level" means any one of the four pricing levels
represented by Level I Pricing, Level II Pricing, Level III Pricing and Level
IV Pricing.
"S&P" means Standard & Poor's Ratings Group.
The ratings to be utilized for purposes of this Pricing Schedule are those
assigned to the senior unsecured long-term debt securities of the Company
without third-party credit enhancement, and any rating assigned to any other
debt security of the Company shall be disregarded. The rating in effect on any
day is the rating in effect at the close of business on such day.
<PAGE> 80
EXHIBIT A
NOTE
New York, New York
, 19
For value received, Applied Materials, Inc., a Delaware
corporation (the "Company"), promises to pay to the order of
___________________________________________________ (the "Bank"), for the
account of its Applicable Lending Office, the unpaid principal amount of each
Loan made by the Bank to the Company pursuant to the Credit Agreement referred
to below on the last day of the Interest Period relating to such Loan. The
Company promises to pay interest on the unpaid principal amount of each such
Loan on the dates and at the rate or rates provided for in the Credit
Agreement. All such payments of principal and interest shall be made in lawful
money of the United States in Federal or other immediately available funds at
the office of Morgan Guaranty Trust Company of New York, 60 Wall Street, New
York, New York.
All Loans made by the Bank, the respective types and
maturities thereof and all repayments of the principal thereof shall be
recorded by the Bank and, if the Bank so elects in connection with any transfer
or enforcement hereof, appropriate notations to evidence the foregoing
information with respect to each such Loan then outstanding may be endorsed by
the Bank on the schedule attached hereto, or on a continuation of such schedule
attached to and made a part hereof; provided that the failure of the Bank to
make any such recordation or endorsement shall not affect the obligations of
the Company hereunder or under the Credit Agreement.
This note is one of the Notes referred to in the Credit
Agreement dated as of September 8, 1994 among the
<PAGE> 81
Company, the banks listed on the signature pages thereof and Morgan Guaranty
Trust Company of New York, as Agent (as the same may be amended from time to
time, the "Credit Agreement"). Terms defined in the Credit Agreement are used
herein with the same meanings. Reference is made to the Credit Agreement for
provisions for the prepayment hereof and the acceleration of the maturity
hereof.
APPLIED MATERIALS, INC.
By
-----------------------
Title:
2
<PAGE> 82
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
________________________________________________________________________
<TABLE>
<CAPTION>
Amount of
Amount of Type of Principal Maturity Notation
Date Loan Loan Repaid Date Made By
- - ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
</TABLE>
3
<PAGE> 83
EXHIBIT B
FORM OF MONEY MARKET QUOTE REQUEST
[Date]
To: Morgan Guaranty Trust Company of New York
(the "Agent")
From: Applied Materials, Inc. (the "Company")
Re: Credit Agreement (the "Credit Agreement") dated as of
September 8, 1994 among the Company, the Banks listed
on the signature pages thereof and the Agent
We hereby give notice pursuant to Section 2.03 of the Credit
Agreement that we request Money Market Quotes for the following proposed Money
Market Borrowing(s):
Date of Borrowing: __________________
<TABLE>
<CAPTION>
Principal Amount** Interest Period***
- - ---------------- ---------------
<S> <C>
$
</TABLE>
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
- - ----------------------------------
**Amount must be $5,000,000 or a larger multiple of $1,000,000.
***Not less than one month (LIBOR Auction) or not less than 30 days
(Absolute Rate Auction), subject to the provisions of the definition of
Interest Period.
<PAGE> 84
Terms used herein have the meanings assigned to them in the
Credit Agreement.
APPLIED MATERIALS, INC.
By
---------------------
Title:
2
<PAGE> 85
EXHIBIT C
FORM OF INVITATION FOR MONEY MARKET QUOTES
To: [Name of Bank]
Re: Invitation for Money Market Quotes to Applied Materials, Inc.
(the "Company")
Pursuant to Section 2.03 of the Credit Agreement dated as of
September 8, 1994 among the Company, the Banks parties thereto and the
undersigned, as Agent, we are pleased on behalf of the Company to invite you to
submit Money Market Quotes to the Company for the following proposed Money
Market Borrowing(s):
Date of Borrowing: __________________
<TABLE>
<CAPTION>
Principal Amount Interest Period
- - ---------------- ---------------
<S> <C>
$
</TABLE>
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
Please respond to this invitation by no later than [2:00 P.M.]
[10:15 A.M.] (New York City time) on [date].
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By
-------------------------
Authorized Officer
<PAGE> 86
EXHIBIT D
FORM OF MONEY MARKET QUOTE
To: Morgan Guaranty Trust Company of New York,
as Agent
Re: Money Market Quote to Applied Materials, Inc. (the "Company")
In response to your invitation on behalf of the Company dated
_____________, 19__, we hereby make the following Money Market Quote on the
following terms:
1. Quoting Bank: ________________________________
2. Person to contact at Quoting Bank:
_____________________________
3. Date of Borrowing: ____________________*
4. We hereby offer to make Money Market Loan(s) in the following
principal amounts, for the following Interest Periods and at the
following rates:
<TABLE>
<CAPTION>
Principal Interest Money Market
Amount** Period*** [Margin****] [Absolute Rate*****]
- - --------- --------- ---------------------------------
<S> <C> <C> <C>
$
$
</TABLE>
[Provided, that the aggregate principal amount of Money Market Loans
for which the above offers may be accepted shall not exceed
$____________.]**
__________
* As specified in the related Invitation.
** Principal amount bid for each Interest Period may not exceed principal
amount requested. Specify aggregate limitation if the sum of the individual
offers exceeds the amount the Bank is willing to lend. Bids must be made for
$5,000,000 or a larger multiple of $1,000,000.
(notes continued on following page)
<PAGE> 87
We understand and agree that the offer(s) set forth above,
subject to the satisfaction of the applicable conditions set forth in the
Credit Agreement dated as of September 8, 1994 among the Company, the Banks
listed on the signature pages thereof and yourselves, as Agent, irrevocably
obligates us to make the Money Market Loan(s) for which any offer(s) are
accepted, in whole or in part.
Very truly yours,
[NAME OF BANK]
Dated:_______________ By:
------------------------
Authorized Officer
- - ----------
*** Not less than one month or not less than 30 days, as specified in the
related Invitation. No more than five bids are permitted for each Interest
Period.
**** Margin over or under the London Interbank Offered Rate determined for the
applicable Interest Period. Specify percentage (to the nearest 1/10,000th of
1%) and specify whether "PLUS" or "MINUS".
2
<PAGE> 88
***** Specify rate of interest per annum (to the nearest 1/10,000th of 1%).
3
<PAGE> 89
EXHIBIT E
OPINION OF GENERAL
COUNSEL FOR THE COMPANY
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Ladies and Gentlemen:
I have acted as counsel to Applied Materials, Inc. (the
"Company") in connection with the execution and delivery of that certain Credit
Agreement (the "Credit Agreement") dated as of September 8, 1994 among the
Company, the Banks signatory thereto and Morgan Guaranty Trust Company of New
York, as Agent. Except as otherwise defined herein, all terms used herein and
defined in the Credit Agreement or any agreement delivered thereunder shall
have the meanings assigned to them therein.
In connection with this opinion, I have examined executed
copies of the Credit Agreement and the Notes and such other documents, records,
agreements and certificates as I have deemed appropriate. I have also reviewed
such matters of law as I have considered relevant for the purpose of this
opinion.
Based upon the foregoing, I am of the opinion that:
1. Each of the Company and its Restricted Subsidiaries is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation; has the corporate power and
authority to own its assets and to transact the business in which it is now
engaged or proposed to be engaged; and is duly licensed or qualified and is in
good standing as a foreign corporation in each jurisdiction wherein the nature
of the business transacted by it or the nature of the property owned or leased
by it makes such licensing or qualification necessary, except where the failure
to be so
<PAGE> 90
licensed, qualified, or in good standing would not, in the aggregate, have a
Material Adverse Effect.
2. The execution, delivery and performance by the Company of
this Agreement and the Notes are within the Company's corporate powers, have
been duly authorized by all necessary corporate action, require no action by or
in respect of, or filing with, any governmental body, agency or official and do
not contravene, or constitute a default under, any provision of applicable law
or regulation or of the certificate of incorporation or by-laws of the Company
or, to the best of my knowledge, of any agreement, judgment, injunction, order,
decree or other instrument binding upon the Company or any of its Subsidiaries
or, result in the creation or imposition of any Lien on any asset of the
Company or any of its Restricted Subsidiaries.
3. To the best of my knowledge, except as set forth under the
heading "Legal Proceedings" in the Company's 1993 Form 10-K and the Company's
forms 10-Q filed since the Company's 1993 Form 10-K and prior to the date
hereof, there are no pending or threatened actions, suits or proceedings
against or affecting the Company or any of its Subsidiaries before any court,
governmental agency or arbitrator in which there is a reasonable possibility of
an adverse determination which would have a Material Adverse Effect, or which
in any manner draws into question the validity of the Credit Agreement or the
Notes.
Certain Assumptions
With your permission I have assumed the following: (a) the
authenticity of original documents and the genuineness of all signatures; (b)
the conformity to the originals of all documents submitted to me as copies and
the truth, accuracy, and completeness of the information, representations and
warranties contained in the records, documents, instruments and certificates I
have reviewed; and (c) the absence of any evidence extrinsic to the provisions
of the written agreements between the parties that the parties intended a
meaning contrary to that expressed by those provisions.
Certain Limitations and Qualifications
I express no opinion as to laws other than laws of the State
of California, the federal law of the United States of America and the official
statutes of other jurisdictions to the extent necessary to render the opinions
as to corporate authority in paragraph 1 above. I am licensed to practice law
only in the State of California.
<PAGE> 91
The phrase "to the best of my knowledge" is intended to
indicate that, during the course of the performance of my duties as Director,
Legal Affairs, of the Company, no information that would give me current actual
knowledge of the inaccuracy of such statement has come to my attention.
Use of Opinion
This opinion is solely for your benefit (and the benefit of
any Assignee which becomes a Bank pursuant to Section 9.06(c) of the Credit
Agreement) in connection with the transaction covered by the first paragraph of
this letter and may not be relied upon, used, circulated, quoted or referred
to, nor may copies hereof be delivered to, any other person without my prior
written approval. I disclaim any obligation to update this opinion for events
occurring or coming to my attention after the date hereof.
Very truly yours,
James J. DeLong
Director, Legal Affairs
3
<PAGE> 92
EXHIBIT F
OPINION OF ORRICK, HERRINGTON & SUTCLIFFE,
SPECIAL COUNSEL FOR THE COMPANY
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Ladies and Gentlemen:
We have acted as counsel to Applied Materials, Inc., a
Delaware corporation (the "Company") in connection with that certain Credit
Agreement (the "Agreement") dated as of September 8, 1994 among the Company,
the banks signatory thereto (the "Banks") and Morgan Guaranty Trust Company of
New York, as Agent. The capitalized terms herein are used as defined in the
Agreement.
In this regard, we have examined executed originals or copies
of the following, copies of which have been delivered to you:
(a) The Agreement; and
(b) The Notes.
Based upon such examination and having regard for legal
considerations which we deem relevant, we are of the opinion that the Agreement
is and, when delivered under the Agreement, each Note will be, the legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its respective terms.
With your permission we have assumed the following: (a)
authenticity of original documents and the genuineness of all signatures; (b)
the conformity to the originals of all documents submitted to us as copies; (c)
the truth, accuracy, and completeness of the information, representations and
warranties contained in the records, documents, instruments and certificates we
have reviewed; (d) that the documents referred to herein were duly authorized,
executed and delivered on behalf of the
<PAGE> 93
respective parties thereto and, other than with respect to the Company, are
legal, valid, and binding obligations of such parties; (e) the compliance by
you with any applicable requirements to file returns and pay taxes under the
California Franchise Tax Law; (f) the Agent and the Banks are exempt from the
California usury law; (g) the compliance by you with any state or federal laws
or regulations applicable to you in connection with the transactions described
in the Agreement and the Notes; and (h) the absence of any evidence extrinsic
to the provisions of the written agreements between the parties that the
parties intended a meaning contrary to that expressed by those provisions.
We express no opinion as to (a) matters of law in
jurisdictions other than the State of California and the United States or (b)
the enforceability under California law of a choice of law provision in the
documents described herein. With your permission, we have assumed for the
purpose of rendering this opinion that the laws of the State of California
govern the transaction, notwithstanding that the Agreement and the Notes state
that they are to be governed by New York law.
Our opinion that any document is legal, valid, binding, or
enforceable in accordance with its terms is qualified as to:
(a) limitations imposed by bankruptcy, insolvency,
reorganization, arrangement, fraudulent conveyance, moratorium, or other laws
relating to or affecting the enforcement of creditors' rights generally;
(b) general principles of equity, including without
limitation concepts of mutuality, reasonableness, good faith and fair dealing,
and the possible unavailability of specific performance or injunctive relief,
regardless of whether such enforceability is considered in a proceeding in
equity or at law;
(c) the possibility that certain covenants and provisions
for the acceleration of the maturity of the Notes may not be enforceable if
enforcement would be unreasonable under the then existing circumstances, but in
our opinion acceleration would be available if an event of default occurred as
a result of a material breach of a material covenant;
(d) the unenforceability under certain circumstances of
provisions imposing penalties, forfeiture, late payment charges or an increase
in interest rate upon
2
<PAGE> 94
delinquency in payment or the occurrence of any event of default;
(e) rights to indemnification and contribution which may
be limited by applicable law and equitable principles; and
(f) the unenforceability under certain circumstances of
provisions expressly or by implication waiving broadly or vaguely stated rights
(including, without limitation, waivers of any objection to venue and forum non
conveniens and the right to a jury trial), the benefits of statutory
constitutional provisions, unknown future rights, and defenses to obligations
or rights granted by law, where such waivers are against public policy or
prohibited by law.
We note that you are receiving of even date herewith the
opinion of James J. DeLong, Director, Legal Affairs of the Company, as to
certain matters relating to the Company. We have made no independent
examination of such matters. We note for your information that Donald A.
Slichter, the Secretary of the Company, is a partner in our firm.
This opinion is solely for your benefit (and the benefit of
the Banks which become parties to the Agreement as Assignees under Section
9.06(c) of the Agreement) in connection with the transaction covered by the
first paragraph of this letter and may not be relied upon, used, circulated,
quoted or referred to by, nor may copies hereof be delivered to, any other
person without our prior written approval. We disclaim any obligation to
update this opinion letter for events occurring or coming to our attention
after the date hereof.
Very truly yours,
ORRICK, HERRINGTON & SUTCLIFFE
3
<PAGE> 95
EXHIBIT G
OPINION OF DAVIS POLK & WARDWELL,
SPECIAL COUNSEL FOR THE AGENT
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have participated in the preparation of the Credit
Agreement (the "Credit Agreement") dated as of September 8, 1994 among Applied
Materials, Inc., a Delaware corporation (the "Company"), the banks listed on
the signature pages thereof (the "Banks") and Morgan Guaranty Trust Company of
New York, as Agent (the "Agent"), and have acted as special counsel for the
Agent for the purpose of rendering this opinion pursuant to Section 3.01(d) of
the Credit Agreement. Terms defined in the Credit Agreement are used herein as
therein defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that:
1. The execution, delivery and performance by the Company of
the Credit Agreement and the Notes are within the Company's corporate powers
and have been duly authorized by all necessary corporate action.
2. The Credit Agreement constitutes a valid and binding
agreement of the Company and each Note constitutes a
<PAGE> 96
valid and binding obligation of the Company, in each case enforceable in
accordance with its terms, except as the same may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and by general
principles of equity.
We are members of the Bar of the State of New York and the
foregoing opinion is limited to the laws of the State of New York, the federal
laws of the United States of America and the General Corporation Law of the
State of Delaware. In giving the foregoing opinion, we express no opinion as
to the effect (if any) of any law of any jurisdiction (except the State of New
York) in which any Bank is located which limits the rate of interest that such
Bank may charge or collect.
This opinion is rendered solely to you in connection with the
above matter. This opinion may not be relied upon by you for any other purpose
or relied upon by any other person without our prior written consent.
Very truly yours,
2
<PAGE> 97
EXHIBIT H
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of _________, 19__ among [ASSIGNOR] (the
"Assignor"), [ASSIGNEE] (the "Assignee"), APPLIED MATERIALS, INC. (the
"Company") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the
"Agent").
W I T N E S S E T H
WHEREAS, this Assignment and Assumption Agreement (the
"Agreement") relates to the Credit Agreement dated as of September 8, 1994
among the Company, the Assignor and the other Banks party thereto, as Banks,
and the Agent (the "Credit Agreement");
WHEREAS, as provided under the Credit Agreement, the Assignor
has a Commitment to make Loans to the Company in an aggregate principal amount
at any time outstanding not to exceed $__________;
WHEREAS, Committed Loans made to the Company by the Assignor
under the Credit Agreement in the aggregate principal amount of $__________ are
outstanding at the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all
of the rights of the Assignor under the Credit Agreement in respect of a
portion of its Commitment thereunder in an amount equal to $__________ (the
"Assigned Amount"), together with a corresponding portion of its outstanding
Committed Loans, and the Assignee proposes to accept assignment of such rights
and assume the corresponding obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise
defined herein shall have the respective meanings set forth in the Credit
Agreement.
<PAGE> 98
SECTION 2. Assignment. The Assignor hereby assigns and sells
to the Assignee all of the rights of the Assignor under the Credit Agreement to
the extent of the Assigned Amount, and the Assignee hereby accepts such
assignment from the Assignor and assumes all of the obligations of the Assignor
under the Credit Agreement to the extent of the Assigned Amount, including the
purchase from the Assignor of the corresponding portion of the principal amount
of the Committed Loans made by the Assignor outstanding at the date hereof.
Upon the execution and delivery hereof by the Assignor, the Assignee[, the
Company and the Agent] and the payment of the amounts specified in Section 3
required to be paid on the date hereof (i) the Assignee shall, as of the date
hereof, succeed to the rights and be obligated to perform the obligations of a
Bank under the Credit Agreement with a Commitment in an amount equal to the
Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date
hereof, be reduced by a like amount and the Assignor released from its
obligations under the Credit Agreement to the extent such obligations have been
assumed by the Assignee. The assignment provided for herein shall be without
recourse to the Assignor.
SECTION 3. Payments. As consideration for the assignment and
sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor
on the date hereof in Federal funds the amount heretofore agreed between
them.**** It is understood that commitment and/or facility fees accrued to the
date hereof are for the account of the Assignor and such fees accruing from and
including the date hereof are for the account of the Assignee. Each of the
Assignor and the Assignee hereby agrees that if it receives any amount under
the Credit Agreement which is for the account of the other party hereto, it
shall receive the same for the account of such other party to the extent of
such other party's interest therein and shall promptly pay the same to such
other party.
[SECTION 4. Consent of the Company and the Agent. This
Agreement is conditioned upon the consent of the Company and the Agent pursuant
to Section 9.06(c) of the Credit Agreement. The execution of this Agreement by
the Company and the Agent is evidence of this consent. Pursuant
- - ----------------------------------
****Amount should combine principal together with accrued
interest and breakage compensation, if any, to be paid by the Assignee, net of
any portion of any upfront fee to be paid by the Assignor to the Assignee. It
may be preferable in an appropriate case to specify these amounts generically
or by formula rather than as a fixed sum.
2
<PAGE> 99
to Section 9.06(c) the Company agrees to execute and deliver a Note payable to
the order of the Assignee to evidence the assignment and assumption provided
for herein.]
SECTION 5. Non-Reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no responsibility
with respect to, the solvency, financial condition, or statements of the
Company, or the validity and enforceability of the obligations of the Company
in respect of the Credit Agreement or any Note. The Assignee acknowledges that
it has, independently and without reliance on the Assignor, and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and will continue to be
responsible for making its own independent appraisal of the business, affairs
and financial condition of the Company.
SECTION 6. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York.
SECTION 7. Counterparts. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered by their duly authorized officers as of the date
first above written.
[ASSIGNOR]
By
---------------------------
Title:
[ASSIGNEE]
By
---------------------------
Title:
3
<PAGE> 100
APPLIED MATERIALS, INC.
By
---------------------------
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By
---------------------------
Title:
4
<PAGE> 101
EXHIBIT I
RESTRICTED AND UNRESTRICTED SUBSIDIARIES
1. Restricted Subsidiaries:
<TABLE>
<CAPTION>
Percentage of Voting
Stock Owned Directly
Jurisdiction or Indirectly by
Name of Subsidiary of Incorporation the Company
------------------ ---------------- --------------------
<S> <C> <C>
Applied Materials Japan, Inc. Japan 100%
Applied Materials Asia-Pacific, Ltd. Delaware 100%
Applied Materials Korea, Ltd. Korea 100%
Applied Materials Taiwan, Ltd Taiwan 100%
Applied Materials Europe BV Netherlands 100%
Applied Materials, Ltd. England 100%
Applied Materials France SARL France 100%
Applied Materials GmbH Germany 100%
Applied Materials (Holdings) California 100%
Applied Implant Technology, Ltd. California 100%
Applied Materials International BV (FSC) Netherlands 100%
Applied Materials Israel, Ltd. Israel 100%
</TABLE>
2. Unrestricted Subsidiaries:
<TABLE>
<CAPTION>
Percentage of Voting
Stock Owned Directly or
Jurisdiction Indirectly by
Name of Subsidiary of Incorporation the Company
------------------ ---------------- -----------------------
<S> <C> <C>
Applied Komatsu Technology, Inc. Japan 50%
Applied Komatsu Technology California
America, Inc. 50%
[Applied Materials Europe BV]
Applied Materials Ireland, Ltd. Ireland 100%
Applied Materials Sweden AB Sweden 100%
Applied Acquisition Subsidiary California 100%
Applied Materials International, Inc. California 100%
G-Squared Semiconductor Corporation California 100%
DXGLZ Company, Limited Hong Kong 100%
</TABLE>
<PAGE> 102
EXHIBIT J
EXISTING LIENS AS OF JULY 31, 1994
<TABLE>
<CAPTION>
Description of Lien Aggregate Amount
------------------- of Debt
Secured by Lien
---------------
<S> <C>
T/C1 Land and "Kojozaidan" held by Bank of Tokyo, Japan $52,687,000
Development Bank, Mitsubishi Bank, Sanwa Bank and Nippon
Life Insurance Company. These are registered liens
placed upon the factory foundation at the Narita
Technology Center. The factory foundation is the
collection of land, buildings and machinery capital
equipment as one registered asset.
</TABLE>
<PAGE> 103
EXHIBIT K
<TABLE>
SPECIAL UNENCUMBERED PROPERTY
<CAPTION>
Property Approximate Property/Use Description Sq. Ft.
-------- ------------------------------------ -------
<S> <C> <C>
3050 Bowers Avenue Office, Engineering & R&D use. 84,300
Santa Clara, CA Bldg. #1
3100 Bowers Avenue Two story steel frame H-6 occupancy building used for 104,900
Santa Clara, CA Bldg. #2 product and technology development.
3300 Scott Boulevard Office, Manufacturing and Clean Room. 60,100
Santa Clara, CA Bldg. #3
3090 Bowers Ave. One story cafeteria with kitchen facility. 15,600
Santa Clara, CA Cafeteria
3070 Bowers Ave. Two level concrete reinforced 400 car capacity parking 136,000
Santa Clara, CA Garage platform.
3225 Oakmead Village Drive Three story steel frame B-2 occupancy administrative 96,600
Santa Clara, CA Bldg. #12 building currently under construction and situated at the
intersection of Oakmead Village Parkway and Central
Expressway.
Austin Campus Manufacturing, Office, Warehouse, 168,000
9700 Hiway 290 E Bldg. #2 "C" Cafeteria currently under construction.
Austin, TX
Austin Campus Manufacturing, Office and Warehouse. 156,000
9700 Hiway 290 E Bldg. #1 "C"
Austin, TX
Austin Campus Manufacturing, Office and Warehouse currently under 194,000
9700 Hiway 290 E Bldg. #3 "C" construction.
Austin, TX
</TABLE>
<PAGE> 1
EXHIBIT 13
SELECTED CONSOLIDATED
__________________________________
FINANCIAL DATA
<TABLE>
<CAPTION>
Fiscal year ended* 1994 1993 1992 1991 1990
- - ----------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net sales $1,659,807 $1,080,047 $751,383 $638,606 $567,130
Gross margin $ 768,295 $ 475,684 $308,204 $268,581 $265,129
(% of net sales) 46.3 44.0 41.0 42.1 46.7
Research, development
and engineering $ 189,126 $ 140,161 $109,196 $102,665 $ 97,066
(% of net sales) 11.4 13.0 14.5 16.1 17.1
Marketing, selling and
administrative $ 242,047 $ 171,654 $126,383 $113,228 $109,113
(% of net sales) 14.6 15.9 16.8 17.7 19.2
Income from consolidated
companies before taxes
and cumulative effect of
accounting change $ 334,497 $ 153,558 $ 58,925 $ 40,355 $ 54,084
(% of net sales) 20.2 14.2 7.8 6.3 9.5
Tax rate (%) 35.0 33.0 33.0 35.0 37.0
Net income $ 220,696 $ 99,695 $ 39,480 $ 26,231 $ 34,073
Earnings per share $ 2.60 $ 1.21 $ .54 $ .38 $ .50
Average common shares
and equivalents 85,021 82,294 72,680 68,900 68,144
--------------------------------------------------------------------------------------------------------------------
Order backlog $ 715,200 $ 365,800 $253,900 $213,400 $250,400
Working capital $ 734,104 $ 395,388 $333,590 $234,211 $171,656
Long-term debt $ 209,114 $ 121,076 $118,445 $123,967 $ 53,611
Stockholders' equity $ 966,264 $ 598,762 $474,111 $325,454 $300,308
Book value per share $ 11.49 $ 7.45 $ 6.06 $ 4.82 $ 4.51
Total assets $1,702,665 $1,120,152 $853,822 $660,756 $558,009
Capital expenditures $ 180,440 $ 95,351 $ 60,943 $ 62,670 $106,149
Regular full-time employees 6,497 4,739 3,909 3,543 3,281
======================================================================================================================
</TABLE>
* The fiscal year ends on the last Sunday in October of each year. The fiscal
year end for the periods presented are October 30, 1994, October 31, 1993,
October 25, 1992, October 27, 1991 and October 28, 1990.
26 A P P L I E D M A T E R I A L S
<PAGE> 2
MANAGEMENT'S DISCUSSION
__________________________________
AND ANALYSIS
Applied Materials, Inc. (the Company) achieved record revenues of $1.7 billion
for the fiscal year ended October 30, 1994. Record new orders for the fiscal
year were $2.0 billion and the Company ended the fiscal year with a backlog of
$715.2 million compared to $365.8 million at the end of fiscal 1993.
Fiscal 1994 and 1992 each consisted of 52 weeks while fiscal 1993
consisted of 53 weeks. Although the additional week affected overall sales and
spending during fiscal 1993, it did not materially impact the comparability of
the annual financial results from year to year.
RESULTS OF OPERATIONS
The Company's worldwide net sales increased by 54 percent and 121 percent for
fiscal 1994 compared to fiscal 1993 and fiscal 1992, respectively, reflecting a
continuing strong worldwide demand for the Company's single-wafer, multichamber
systems and worldwide service and support operations. The increased demand for
the Company's multichamber systems (the Precision 5000, Endura and Centura)
reflects the industry's trend toward systems capable of performing processes
needed for smaller device geometries, as well as complex multi-level metal
structures of most advanced semiconductor devices. High reliability and uptime
specifications from our global customers have helped establish firm worldwide
demand for the Company's installed base service and support organization which
increased revenues 39 percent from fiscal 1993 and 82 percent from fiscal 1992.
Applied Materials operates in all major geographic regions of the
worldwide semiconductor industry. In fiscal 1994, 63 percent of the Company's
net sales were to customers located outside North America compared to 62
percent in fiscal 1993 and 61 percent in fiscal 1992. North America continued
to represent the Company's largest region as manufacturers invested in
production capacity for advanced microprocessors, memory devices and
application-specific integrated circuits (ASIC). Sales in Japan improved from
the prior fiscal year as major dynamic random access memory (DRAM)
manufacturers invested in new eight-inch wafer fabrication lines. Fiscal 1994
sales in the Asia-Pacific region continued to increase from fiscal 1993 levels,
driven by investments in DRAM capacity in South Korea and logic and foundry
capacity in Taiwan and Singapore. European sales also showed improvement
reflective of investments by both European and U.S. multinational manufacturers
in semiconductor capacity to serve the computing, telecommunications and
consumer products markets. Although the Company has experienced high growth
rates for more than two years, the Company's expectation is that such rates
will moderate as demand for semiconductor production equipment reaches more
sustainable levels.
While markets outside of North America provide the Company with
significant growth opportunities, periodic downturns, fluctuations in interest
and foreign currency exchange rates, trade balance issues, and potential
political instability are all risks which could affect product demand.
Significant operations of the Company are conducted in Japanese yen, British
pounds sterling and other European currencies.
A P P L I E D M A T E R I A L S 27
<PAGE> 3
MANAGEMENT'S DISCUSSION
___________________________________
AND ANALYSIS
Forward exchange contracts and options are purchased to hedge certain existing
firm commitments and anticipated foreign currency denominated transactions over
the next year. Gains and losses on hedge contracts are reported as a component
of the related transaction. Because the impact of movements in currency
exchange rates on foreign exchange contracts offsets the related impact on the
underlying items being hedged, these financial instruments do not subject the
Company to speculative risk that would otherwise result from changes in
currency exchange rates. With the strengthening of the Japanese yen relative to
the U.S. dollar during fiscal 1994, the Company experienced a slightly
favorable impact to its results of operations after the effects of the foreign
currency hedging activities. To date exchange gains and losses resulting from
translation of foreign currencies into U.S. dollars have not had a significant
effect on the Company's results of operations.
Gross margin as a percentage of net sales increased to 46 percent in
fiscal year 1994 compared with 44 percent in fiscal 1993 and 41 percent in
fiscal 1992. The improvement from the prior years reflects economies of scale
in manufacturing and service and support operations as net sales reached record
levels. However, past margin trends are not necessarily indicative of future
margin performance.
Total operating expenses as a percentage of net sales were 26 percent
in fiscal 1994 compared to 29 percent and 32 percent in fiscal 1993 and 1992,
respectively. This decreasing trend is due mainly to revenue growth exceeding
spending growth. Due to the rapid growth in demand in fiscal 1994 and 1993, the
Company's operating infrastructure investments did not keep pace with the
increase in sales. Accordingly, the Company intends to increase investments in
strategic facilities expansion, information systems technology and personnel to
support higher volumes of business. Thus, the Company's expectation is that
operating expenses as a percentage of sales will increase modestly in fiscal
1995.
The highly competitive market served by the Company is characterized
by rapid technological change and increasingly stringent customer requirements.
The Company's future results depend, to a considerable extent, on its ability
to maintain a competitive advantage in both the products and services it
provides. For this reason, Applied Materials believes it is critical to
continue to make substantial investments in research and development to ensure
a continued flow of innovative, high-quality products. Investments in research,
development and engineering were $189.1 million or 11 percent of net sales in
fiscal 1994 compared with $140.2 million or 13 percent in fiscal 1993 and
$109.2 million or 15 percent in fiscal 1992. New products introduced during
fiscal 1994 include the Centura HP PVD, Polycide Centura and Metal Etch MxP
Centura. The Company also introduced a new electrostatic chuck, WCVD xZ(TM)
chamber and subatmospheric chemical vapor deposition technologies for existing
products. Research, development and engineering expenditures for fiscal 1995
will be directed towards new wafer processing systems, new process applications
for existing products and related wafer processing technology.
Marketing, selling and administrative expenses as a percentage of net
sales were 15 percent, 16 percent and 17 percent in fiscal 1994, 1993 and 1992,
respectively. During each of these fiscal years, the Company has increased
spending in marketing and selling programs to support the development of
international
28 A P P L I E D M A T E R I A L S
<PAGE> 4
markets and to increase customer understanding of new and existing products in
all geographic regions. Increases in administrative expenses over the prior
three fiscal years have been primarily to support the Company's growth. During
fiscal 1994, the Company implemented its global organization strategy which
created the worldwide business, product and manufacturing operations, supported
by global human resources, customer satisfaction and finance organizations. As
a percentage of net sales, these expenses have decreased as revenue growth has
exceeded the growth in marketing, selling and administrative expense.
Applied Materials' effective income tax rate was 35 percent in fiscal
1994 and 33 percent in fiscal 1993 and 1992. The two percentage point increase
in the effective tax rate over the last three years is primarily the result of
recently enacted U.S. tax legislation, as well as variations in the Company's
worldwide income mix and foreign taxes. The Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes", (SFAS
109) prospectively on November 1, 1993 and recorded a one-time $7.0 million
credit, or $0.09 per share, from the impact of the accounting change. Adoption
of SFAS 109 did not otherwise have a significant effect on the provision for
income taxes. In fiscal 1995, the Company's effective tax rate is anticipated
to remain at the current 35 percent level.
The Company's future operating results may be affected by inherent
uncertainties that exist in the worldwide semiconductor equipment industry.
Such uncertainties include, but are not limited to, the development of new
technologies, competitive pricing pressures, changes to global economic
conditions, and the availability of needed components. Accordingly, recent
historical operating results should only be one element in evaluating the
future financial performance of the Company.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Operating activities during fiscal 1994 generated $111.0 million in cash as
compared to $117.0 million in fiscal 1993 and $59.2 million in 1992. The
primary factor contributing to the decrease from fiscal 1993 to 1994 was
increased levels of accounts receivable and inventory offset by sharply higher
earnings and depreciation. The increase from fiscal 1992 to 1993 was the result
of higher earnings before depreciation. Accounts receivable increased $149.8
million from October 1993 primarily due to increased sales volumes and
increases in collection time in North America and Japan. Inventories increased
$91.1 million from October 1993 primarily to support production ramp-up to meet
higher demand for products and for increases in spare parts to support a larger
global installed base. Exchange rate fluctuations between the functional
currencies of the Company's subsidiaries and the U.S. dollar did not materially
affect the consolidated balance sheet.
The Company's investing activities used $295.9 million in cash as
compared to $184.6 million in fiscal 1993 and $109.2 million in 1992. In fiscal
1994, as in fiscal 1993 and 1992, investments consisted primarily of capital
expenditures for facilities expansion, demonstration and test equipment and
information systems. Major facility improvement and expansion projects are
currently taking place in Texas, California, Japan, Taiwan and Korea. These
projects reflect efforts taken by the Company to manage its manufacturing and
engineering lab capacity to ensure that customer demands will be met.
A P P L I E D M A T E R I A L S 29
<PAGE> 5
MANAGEMENT'S DISCUSSION
___________________________________
AND ANALYSIS
Capital expenditures are expected to approximate $195 million during 1995. This
amount includes funds for the continuation and completion of facilities
expansion, investments in demonstration and test equipment, information systems
and other capital expenditures. These expenditures are anticipated to be
financed by operating earnings and available cash on hand.
During fiscal 1994, the Company's financing activities raised $110.7
million from the sale of 2.3 million shares of common stock and $98.6 million
from the issuance of ten-year noncallable unsecured senior notes.
At October 30, 1994, the Company's principal sources of liquidity
consisted of $422.3 million of cash and short-term investments and $205 million
in available U.S. and foreign credit facilities. The Company's liquidity is
affected by many factors, some of which are based on the normal on-going
operations of the business and others which relate 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 satisfy commitments for capital expenditures and other cash requirements for
the next fiscal year.
One of the Company's locations has been designated as a superfund site
by the U.S. Environmental Protection Agency. The Company has an approved plan
for remedial action, and the cost of this approved plan is not significant.
In September 1993, the Company entered into a joint venture agreement
with Komatsu Ltd. to form Applied Komatsu Technology, Inc. (AKT), a joint
venture corporation whose global business is to develop, manufacture and market
systems used to produce flat panel displays (see note five to the consolidated
financial statements). In fiscal 1994, the Company recorded a $3.7 million
reduction in its investment in accounting for AKT's net loss. The Company's
management does not expect this transaction or the operations of the joint
venture to materially impact the Company's financial condition or net income
during fiscal 1995 as AKT remains in the startup phase of its business
operations. AKT anticipates accelerating its investment in product technologies
for both PVD and Etch in addition to expanding the substrate size of its CVD
product during fiscal 1995 and 1996.
30 A P P L I E D M A T E R I A L S
<PAGE> 6
CONSOLIDATED STATEMENTS OF
___________________________________
OPERATIONS
<TABLE>
<CAPTION>
Fiscal year ended 1994 1993 1992
--------------------------------------------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C>
Net sales $1,659,807 $1,080,047 $751,383
Cost of products sold 891,512 604,363 443,179
--------------------------------------------------------------------------------------------
Gross margin 768,295 475,684 308,204
Operating expenses:
Research, development and engineering 189,126 140,161 109,196
Marketing and selling 157,303 107,275 78,141
General and administrative 84,744 64,379 48,242
Other expense (income), net (2,115) 2,875 4,249
--------------------------------------------------------------------------------------------
Income from operations 339,237 160,994 68,376
Interest expense 15,962 14,206 15,207
Interest income 11,222 6,770 5,756
--------------------------------------------------------------------------------------------
Income from consolidated companies before taxes
and cumulative effect of accounting change 334,497 153,558 58,925
Provision for income taxes 117,074 50,674 19,445
--------------------------------------------------------------------------------------------
Income from consolidated companies before
cumulative effect of accounting change 217,423 102,884 39,480
Equity in net loss of joint venture 3,727 3,189 -
--------------------------------------------------------------------------------------------
Income before cumulative effect of accounting
change 213,696 99,695 39,480
Cumulative effect of a change in accounting for
income taxes 7,000 - -
--------------------------------------------------------------------------------------------
Net income $ 220,696 $ 99,695 $ 39,480
--------------------------------------------------------------------------------------------
Earnings per share:
Income before cumulative effect of accounting
change $ 2.51 $ 1.21 $ .54
--------------------------------------------------------------------------------------------
Net income $ 2.60 $ 1.21 $ .54
--------------------------------------------------------------------------------------------
Average common shares and equivalents 85,021 82,294 72,680
============================================================================================
</TABLE>
See accompanying notes to the consolidated financial statements.
A P P L I E D M A T E R I A L S 31
<PAGE> 7
CONSOLIDATED
__________________________
BALANCE SHEETS
<TABLE>
<CAPTION>
1994 1993
---------------------------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 160,320 $ 119,597
Short-term investments 262,005 146,583
Accounts receivable, less allowance for
doubtful accounts of $1,089 and $487 405,813 256,020
Inventories 245,710 154,597
Deferred income taxes 99,766 62,413
Other current assets 56,923 36,706
---------------------------------------------------------------------------
Total current assets 1,230,537 775,916
Property, plant and equipment, less
accumulated depreciation 452,454 327,704
Other assets 19,674 16,532
---------------------------------------------------------------------------
Total assets $1,702,665 $1,120,152
===========================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 43,081 $ 41,645
Current portion of long-term debt 15,432 7,017
Accounts payable and accrued expenses 378,238 282,699
Income taxes payable 59,682 49,167
---------------------------------------------------------------------------
Total current liabilities 496,433 380,528
Long-term debt 209,114 121,076
Deferred income taxes 11,581 7,193
Other non-current obligations 19,273 12,593
---------------------------------------------------------------------------
Total liabilities 736,401 521,390
---------------------------------------------------------------------------
Commitments and contingencies - -
Stockholders' equity:
Preferred stock; $.01 par value per share;
1,000 shares authorized; no shares issued - -
Common stock; $.01 par value per share;
200,000 shares authorized; 84,104 and
80,378 shares outstanding 841 804
Additional paid-in capital 390,655 256,429
Retained earnings 545,926 325,230
Cumulative translation adjustments 28,842 16,299
---------------------------------------------------------------------------
Total stockholders' equity 966,264 598,762
---------------------------------------------------------------------------
Total liabilities and stockholders' equity $1,702,665 $1,120,152
===========================================================================
</TABLE>
See accompanying notes to the consolidated financial statements.
32 A P P L I E D M A T E R I A L S
<PAGE> 8
CONSOLIDATED STATEMENTS OF
____________________________________
CASH FLOWS
<TABLE>
<CAPTION>
Fiscal year ended 1994 1993 1992
----------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 220,696 $ 99,695 $ 39,480
Adjustments required to reconcile net income
to cash provided by operations:
Depreciation and amortization 59,051 38,894 28,858
Equity in net loss of joint venture 3,727 3,189 -
Cumulative effect of a change in accounting for
income taxes (7,000) - -
Changes in assets and liabilities:
Accounts receivable (135,851) (53,188) (28,337)
Inventories (80,507) (42,731) (6,169)
Deferred income taxes (32,697) (22,961) (9,771)
Other current assets (18,216) (18,342) (6,179)
Other assets (3,733) (836) (178)
Accounts payable and accrued expenses 83,119 85,607 28,178
Income taxes payable 12,329 21,601 11,856
Other non-current obligations 10,106 6,030 1,413
----------------------------------------------------------------------------------------------------
Cash provided by operations 111,024 116,958 59,151
----------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (180,440) (95,351) (60,943)
Investment in joint venture - (5,860) -
Proceeds from short-term investments 151,305 155,668 34,362
Purchases of short-term investments (266,727) (239,034) (82,619)
----------------------------------------------------------------------------------------------------
Cash used for investing (295,862) (184,577) (109,200)
----------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Short-term borrowing, net (1,420) 9,907 (8,687)
Long-term debt borrowing 98,594 5,505 -
Long-term debt repayments (7,256) (9,158) (10,383)
Sales of common stock,
net of treasury stock activity 134,263 21,566 102,564
----------------------------------------------------------------------------------------------------
Cash provided by financing 224,181 27,820 83,494
----------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 1,380 (57) 834
----------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 40,723 (39,856) 34,279
Cash and cash equivalents at beginning of year 119,597 159,453 125,174
----------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 160,320 $ 119,597 $ 159,453
====================================================================================================
</TABLE>
Cash payments for interest were $14,120, $14,187 and $14,875 for 1994, 1993 and
1992, respectively.
Cash payments for income taxes were $79,498, $31,177 and $9,671 for 1994, 1993
and 1992, respectively.
See accompanying notes to the consolidated financial statements.
A P P L I E D M A T E R I A L S 33
<PAGE> 9
NOTES TO
_________________________________________
CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation. The consolidated
financial statements include the accounts of the Company and its subsidiaries
after elimination of all significant intercompany balances and transactions.
The Company's 50 percent joint venture investment in Applied Komatsu
Technology, Inc. (AKT) is accounted for under the equity method and is included
in other long-term assets. The Company's fiscal year ends on the last Sunday of
October. Fiscal 1994 consisted of 52 weeks and ended on October 30, 1994.
Fiscal 1993 consisted of 53 weeks and ended on October 31, 1993. Fiscal 1992
consisted of 52 weeks and ended on October 25, 1992.
Cash Equivalents and Short-Term Investments. All highly liquid investments
purchased with an original maturity of three months or less are considered to
be cash equivalents. Cash equivalents and short-term investments are stated at
cost which approximates market value.
During 1993, the Financial Accounting Standards Board adopted Statement of
Financial Accounting Standards No. 115 (SFAS 115), "Accounting for Certain
Investments in Debt and Equity Securities," effective for fiscal years
beginning after December 15, 1993. SFAS 115 requires investment securities to
be classified as trading, available for sale or held to maturity. The Company
will adopt SFAS 115 in the first quarter of fiscal 1995. The cumulative effect
of adopting SFAS 115 will not be material to the consolidated financial
statements.
Inventory Valuation Inventories are stated at the lower of cost or market,
with cost determined on the basis of first-in, first-out (FIFO).
Property, Plant and Equipment. Property, plant and equipment is stated at cost.
Depreciation is provided on a straight-line method over the estimated useful
lives of the assets. Leasehold improvements are amortized over the useful lives
of the improvements or the lease term, whichever is shorter. Gains and losses
on sales of property, plant and equipment are reflected in income. Maintenance
and repairs are charged to income as incurred. Improvements which extend the
useful life of property, plant and equipment are capitalized.
Revenue Recognition. Revenue related to systems is generally recognized upon
shipment, which usually precedes customer acceptance. A provision for the
estimated future cost of system installation and warranty is recorded at the
time revenue is recognized. Service revenue is recognized ratably over the
period of the related contract.
Foreign Currency Translation. The Company's subsidiaries located in Japan and
Europe operate using local functional currencies. Accordingly, all assets and
liabilities of these operations are translated at current exchange rates at the
end of the period and revenues and costs at average exchange rates in effect
during the period. The resulting cumulative translation adjustments are
recorded directly in stockholders' equity.
Foreign subsidiaries in the Asia-Pacific region use the U.S. dollar as the
functional currency. Accordingly, assets and liabilities are translated at
period-end exchange rates, except for inventories and property, plant and
equipment, which are translated at historical rates. Revenues and expenses are
translated at average exchange rates in effect during the period, except for
costs related to those balance sheet items which are translated at historical
rates. Foreign currency transaction gains and losses are included in income as
they occur.
Earnings Per Share. Earnings per common share and equivalents is computed on
the basis of the weighted average number of common shares and common equivalent
shares from dilutive stock options (see note nine).
34 A P P L I E D M A T E R I A L S
<PAGE> 10
2. FINANCIAL INSTRUMENTS
Off-Balance Sheet Risk. Forward exchange contracts and options are purchased to
hedge certain existing firm commitments and anticipated foreign currency
denominated transactions over the next year. Gains and losses on hedge
contracts are reported as a component of the related transaction. Because the
impact of movements in currency exchange rates on foreign exchange contracts
offsets the related impact on the underlying items being hedged, these
financial instruments do not subject the Company to speculative risk that would
otherwise result from changes in currency exchange rates.
Concentrations of Credit Risk. Financial instruments that potentially subject
the Company to significant concentrations of credit risk consist principally of
cash equivalents, short-term investments, trade accounts receivable, and
financial instruments used in hedging activities.
The Company invests in a variety of financial instruments such as
certificates of deposit, municipal bonds and treasury bills. The Company, by
policy, limits the amount of credit exposures to any one financial institution
or commercial issuer.
The Company's customers are semiconductor manufacturers throughout the
world. The Company performs ongoing credit evaluations of its customers'
financial condition and, generally requires no collateral from its customers.
The Company maintains an allowance for uncollectible accounts receivable based
upon expected collectibility of all accounts receivable.
The Company is exposed to credit loss in the event of nonperformance by
counterparties on the foreign exchange contracts used in hedging activities.
The Company does not anticipate nonperformance by any of these counterparties.
Fair Value of Financial Instruments. For certain of the Company's financial
instruments, including cash and cash equivalents, short-term investments,
accounts receivable, notes payable, accounts payable and accrued expenses, the
carrying amounts approximate fair value due to their short maturities.
Consequently, such instruments are not included in the following table, which
provides information regarding the estimated fair values of other financial
instruments, both on and off the balance sheet:
<TABLE>
<CAPTION>
1994 1993
- - -------------------------------------------------------------------------------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
- - -------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Long-term debt $224,546 $221,471 $128,093 $137,740
Forward exchange contracts:*
Sell foreign currency, primarily yen $214,637 $219,318 $ 53,397 $ 53,987
Buy foreign currency, primarily yen $136,454 $139,921 $ 35,617 $ 34,829
- - -------------------------------------------------------------------------------------------------------
</TABLE>
* Notional amount
The estimated fair value for long-term debt is primarily based on quoted market
prices for the same or similar issues. The fair value of forward exchange
contracts is based on quoted market prices of comparable instruments. The fair
value of foreign currency option contracts was not material at October 30, 1994
and October 31, 1993.
A P P L I E D M A T E R I A L S 35
<PAGE> 11
NOTES TO
________________________________________
CONSOLIDATED FINANCIAL STATEMENTS
3. INVENTORIES
<TABLE>
<CAPTION>
1994 1993
- - -------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Customer service spares $ 75,860 $ 45,584
Systems raw materials 56,309 32,294
Work-in-process 81,389 57,526
Finished goods 32,152 19,193
- - -------------------------------------------------------------------------------------
$245,710 $154,597
=====================================================================================
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
Useful Lives
In Years 1994 1993
- - ------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Land $ 58,950 $ 22,884
Buildings and leasehold improvements 5-65 266,892 209,584
Demonstration and manufacturing equipment 3-7 114,880 93,111
Furniture and fixtures 3-10 110,951 74,485
Construction in progress 70,917 49,584
- - ------------------------------------------------------------------------------------
622,590 449,648
Less accumulated depreciation 170,136 121,944
- - ------------------------------------------------------------------------------------
$452,454 $327,704
====================================================================================
</TABLE>
Construction in progress is primarily for buildings and leasehold improvements
in the U.S.
5. APPLIED KOMATSU TECHNOLOGY JOINT VENTURE
In September 1993, the Company entered into an agreement with Komatsu Ltd. to
form Applied Komatsu Technology, Inc. (AKT), a joint venture corporation to
develop, manufacture and market systems used to produce flat panel displays.
The Company's initial investment in AKT aggregated $6,916,000 which included
the net book value of contributed cash and certain tangible and intangible
assets, as well as the costs of formation. Komatsu Ltd. contributed $35,000,000
of cash to AKT. The difference between the Company's investment and its
interest in the book value of AKT's net assets will be amortized when AKT
achieves sustained profitability. The Company's investment in AKT has been
reduced to zero as a result of its share of AKT's net losses in fiscal 1994 and
1993. Under the joint venture agreement, the Company receives royalties on AKT
sales which did not materially affect the Company's results of operations in
fiscal 1994 or 1993.
6. NOTES PAYABLE
The Company has credit facilities for borrowings in various currencies up to
$247,900,000 on an unsecured basis; $125,000,000 represents a revolving credit
agreement in the U.S. with a group of eight banks. This agreement includes
facility fees, allows for borrowings at rates including the lead bank's
36 A P P L I E D M A T E R I A L S
<PAGE> 12
prime reference rate, requires compliance with certain financial covenants and
expires in September 1998. The remaining $122,900,000 of credit facilities are
primarily with Japanese and European banks at rates tied to their prime
reference rates. At October 30, 1994, $43,081,000, was outstanding, principally
under Japanese credit facilities at an average annual rate of 3 percent.
7. LONG-TERM DEBT
<TABLE>
<CAPTION>
Interest Maturity
Rate Date 1994 1993
- - -----------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Secured Japanese debt 4.6-6.9% 1995-2004 $ 49,546 $ 53,093
Unsecured senior notes 9.62% 1995-1999 75,000 75,000
Noncallable unsecured
senior notes 8.00% 2004 100,000
- - -----------------------------------------------------------------------------------
224,546 128,093
Less current portion 15,432 7,017
- - -----------------------------------------------------------------------------------
$ 209,114 $121,076
===================================================================================
</TABLE>
Japanese debt is due in equal periodic installments and is secured by property
and equipment having an approximate net book value of $83,506,000 at October
30, 1994.
The unsecured senior notes are fixed-rate and require annual principal
payments from April 1, 1995 through 1999. There is a prepayment penalty based
on current interest rates and the remaining time to maturity. The notes contain
covenants that include limitations on additional borrowings, liens placed on
assets, dividends and certain other major transactions, and require compliance
with certain financial tests and ratios.
The noncallable unsecured senior notes are fixed-rate and require
semi-annual interest payments on March 1 and September 1 with the principal
payable in 2004. The notes contain certain financial covenants that include
limitations on additional borrowings by U.S. subsidiaries, liens placed on
assets, and sale and leaseback transactions.
Aggregate principal payments required on long-term debt are:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------
(In thousands)
<S> <C>
1995 $ 15,432
1996 22,649
1997 22,397
1998 25,171
1999 28,597
Thereafter 110,300
===================================================================================
</TABLE>
A P P L I E D M A T E R I A L S 37
<PAGE> 13
NOTES TO
_________________________________________
CONSOLIDATED FINANCIAL STATEMENTS
8. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
<TABLE>
<CAPTION>
1994 1993
- - -----------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Accounts payable $119,039 $ 87,332
Compensation and employee benefits 70,474 48,383
Installation and warranty 77,057 55,240
Unearned income 24,324 24,220
Other 87,344 67,524
- - -----------------------------------------------------------------------------------
$378,238 $282,699
===================================================================================
</TABLE>
9. STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional Cumulative
Common Stock Paid-in Retained Translation
Shares Amount Capital Earnings Adjustments
- - ---------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Balance at October 27, 1991 67,484 $675 $132,428 $186,055 $ 6,296
Net issuance under stock plans* 2,962 30 13,431 - -
Stock offering 7,850 78 89,950 - -
Treasury stock acquired (100) (1) (924) - -
Translation adjustments - - - - 6,613
Net income - - - 39,480 -
- - ---------------------------------------------------------------------------------------------------
Balance at October 25, 1992 78,196 782 234,885 225,535 12,909
Net issuance under stock plans* 2,182 22 21,544 - -
Translation adjustments - - - - 3,390
Net income - - - 99,695 -
- - ---------------------------------------------------------------------------------------------------
Balance at October 31, 1993 80,378 804 256,429 325,230 16,299
Net issuance under stock plans* 1,426 14 23,576 - -
Stock offering 2,300 23 110,650 - -
Translation adjustments - - - - 12,543
Net income - - - 220,696 -
- - ---------------------------------------------------------------------------------------------------
Balance at October 30, 1994 84,104 $841 $390,655 $545,926 $ 28,842
===================================================================================================
</TABLE>
*Includes 100 and 416 shares of treasury stock issued under stock plans in 1994
and 1993, respectively. Includes tax benefits of $27,402, $18,708 and $7,779
for 1994, 1993 and 1992 respectively.
During fiscal 1994, the stockholders approved an increase in the authorized
number of shares of common stock to 200,000,000.
In March 1994, the Company sold 2,300,000 shares of common stock in a
public offering at a price of $50.25 per share prior to underwriters'
commission. Proceeds after underwriters' commission and other offering costs
were $110,673,000. In September 1992, the Company sold 7,850,000 shares of
common
38 A P P L I E D M A T E R I A L S
<PAGE> 14
stock in a public offering at a price of $12.00 per share prior to
underwriters' commission. Proceeds after underwriters' commission and other
offering costs were $90,028,000.
Common shares reserved for issuance upon exercise of outstanding stock
options and shares available for future grants aggregated approximately
9,424,000 shares at October 30, 1994.
10. EMPLOYEE BENEFIT PLANS
Stock Options. The Company grants options to key employees and non-employee
directors to purchase its common stock at fair market value at date of grant.
Generally, options vest over a four-year period. The stock option plan provides
for the payment of the stock option exercise price with cash or previously
owned shares of the Company's common stock at fair market value. In addition,
income taxes required to be withheld upon exercise of stock options may be paid
with shares of common stock at fair market value. There were 3,655,000,
5,723,000 and 3,740,000 shares available for grant at the end of fiscal 1994,
1993 and 1992, respectively. Stock option activity was as follows:
<TABLE>
<CAPTION>
1994 1993 1992
- - -------------------------------------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C>
Outstanding, beginning of year 5,463 7,692 9,276
Granted 2,291 526 2,126
Exercised (1,761) (2,647) (3,326)
Canceled (224) (108) (384)
- - -------------------------------------------------------------------------------------
Outstanding, end of year 5,769 5,463 7,692
- - -------------------------------------------------------------------------------------
Exercisable, end of year 1,872 1,608 1,844
=====================================================================================
Consideration received for options exercised
during year (ranging from $2.88 to $36.13
per share in 1994, $2.06 to $18.88 per share
in 1993 and $2.06 to $9.22 per share in 1992) $ 12,556 $13,123 $ 11,914
Aggregate purchase price of options outstanding
at end of year (ranging from $4.75 to $51.00 per
share in 1994, $2.06 to $36.13 per share in
1993 and $2.06 to $12.25 in 1992) $112,114 $46,451 $ 48,349
=====================================================================================
</TABLE>
Employee Bonus Plans. The Company has various employee bonus plans. A profit
sharing bonus plan distributes a percentage of pretax profits to substantially
all of the Company's employees up to a maximum percentage of compensation.
Another plan awards annual bonuses to the Company's executive staff based on
the achievement of profitability and other specific performance criteria. The
Company also has agreements with certain key technical employees that provide
for additional compensation related to the success of new product development
as well as achievement of specified profitability criteria. Charges to expense
under these plans were $31,166,000, $19,838,000 and $9,958,000 in fiscal 1994,
1993 and 1992, respectively.
A P P L I E D M A T E R I A L S 39
<PAGE> 15
NOTES TO
_________________________________________
CONSOLIDATED FINANCIAL STATEMENTS
Employee Savings and Retirement Plan. The Employee Savings and Retirement Plan
is qualified under Section 401(k) of the Internal Revenue Code. The Company
contributes a percentage of the amount of salary deferral contributions made by
each participating employee. Company contributions become 20 percent vested
after an employee's third year of service and vest an additional 20 percent for
each year of service thereafter, becoming fully vested after seven years of
service. All Company contributions are invested in the Company's common stock.
Expenses were $6,417,000, $4,935,000 and $2,022,000 for fiscal 1994, 1993 and
1992, respectively.
Defined Benefit Plans of Foreign Subsidiaries. Certain of the Company's foreign
subsidiaries have defined benefit pension plans covering substantially all of
their eligible employees. The benefits under these plans are based on years of
service and final average compensation levels. Funding is limited to statutory
requirements. The provisions under these plans aggregated $3,344,000,
$2,973,000 and $2,555,000, principally consisting of service cost, for fiscal
1994, 1993 and 1992, respectively. The aggregate accumulated benefit
obligation, projected benefit obligation and fair value of plan assets at
October 30, 1994 were $12,161,000, $18,592,000 and $6,108,000, respectively.
11. RESEARCH AND DEVELOPMENT ARRANGEMENTS
The Company has research and development arrangements with various customers
and other entities to partially fund the development of certain technologies
and possible future products. These contracts require the Company to perform
research and development on a milestone or best efforts basis and the Company
has no obligation to repay the funded amounts. Funding from these contracts,
recognized on the percentage of completion basis, aggregated $8,941,000,
$9,920,000 and $12,748,000 in 1994, 1993 and 1992, respectively, and are
recorded as a reduction of research, development and engineering expense. The
remaining balance of these contracts aggregates $5,729,000 at October 30, 1994
and expire at various dates through fiscal 1995.
12. 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 has adopted SFAS 109 prospectively, and amounts presented
for prior years have not been restated. The cumulative effect of adopting SFAS
109 resulted in a one-time credit of $7,000,000, or $0.09 per share, and is
reported separately in the consolidated statement of operations. Adoption of
SFAS 109 did not have any other significant effects on the fiscal 1994 tax
provision.
The adoption of SFAS 109 changes the Company's method of accounting for
income taxes from the deferral 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 tax
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.
40 A P P L I E D M A T E R I A L S
<PAGE> 16
Provisions are made for estimated United States and foreign income taxes,
less available tax credits and deductions, which may be incurred on the
remittance of the Company's share of foreign subsidiaries' undistributed
earnings.
The components of income from consolidated companies before taxes and
cumulative effect of accounting change were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
- - --------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
U.S. $276,483 $132,434 $48,557
Foreign 58,014 21,124 10,368
- - --------------------------------------------------------------------------------------------------
Income from consolidated companies before
taxes and cumulative effect of accounting change $334,497 $153,558 $58,925
==================================================================================================
</TABLE>
The components of the provision for income taxes were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
- - --------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Current:
U.S. $ 96,106 $ 47,050 $ 19,006
Foreign 32,343 14,170 7,221
State 17,083 11,259 3,691
- - --------------------------------------------------------------------------------------------------
145,532 72,479 29,918
- - --------------------------------------------------------------------------------------------------
Deferred:
U.S. (21,672) (18,015) (8,047)
Foreign (4,555) (3,790) (2,426)
State (2,231) - -
- - --------------------------------------------------------------------------------------------------
(28,458) (21,805) (10,473)
- - --------------------------------------------------------------------------------------------------
Provision for income taxes $117,074* $ 50,674 $ 19,445
==================================================================================================
</TABLE>
* Excludes cumulative effect of accounting change.
A P P L I E D M A T E R I A L S 41
<PAGE> 17
NOTES TO
_________________________________________
CONSOLIDATED FINANCIAL STATEMENTS
The provision for income taxes differs from the amount computed by applying the
statutory U.S. federal income tax rate as follows:
<TABLE>
<CAPTION>
1994 1993 1992
- - ------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Tax provision at U.S. statutory rate $117,074 $53,438 $20,035
Effect of foreign operations taxed
at various rates 7,480 2,643 1,270
State income taxes, net of federal benefit 9,654 7,341 2,436
Research tax credits (3,063) (1,690) (884)
FSC benefit (6,900) (4,566) (1,697)
Tax exempt interest (1,600) (1,379) (1,279)
Foreign tax credits (6,808) (5,193) (2,400)
Other 1,237 80 1,964
- - ------------------------------------------------------------------------------------
Provision for income taxes $117,074* $50,674 $19,445
====================================================================================
</TABLE>
*Excludes cumulative effect of accounting change.
The components of the net deferred income tax asset under SFAS 109 are as
follows:
<TABLE>
<CAPTION>
October 30, 1994 November 1, 1993
- - ---------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Deferred tax assets:
Inventory reserves and basis difference $20,366 $14,530
Warranty and installation reserves 23,470 22,288
Other 55,930 29,568
Deferred tax liabilities:
Depreciation (2,681) (1,622)
Other (8,900) (5,544)
- - ---------------------------------------------------------------------------------------------
Net deferred tax assets $88,185 $59,220
=============================================================================================
</TABLE>
42 A P P L I E D M A T E R I A L S
<PAGE> 18
For years prior to fiscal 1994, the components of the deferred tax provision
under APB 11 were as follows:
<TABLE>
<CAPTION>
1993 1992
- - -------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Net increase in financial accruals not currently
tax deductible:
Warranty and installation $ (6,617) $ (3,005)
Other financial accruals (11,377) (4,452)
Difference in tax versus book depreciation 1,207 (431)
Cost inventoriable for tax, not for books 138 (1,212)
Other (5,156) (1,373)
- - -------------------------------------------------------------------------------------
Total deferred tax provision $(21,805) $(10,473)
=====================================================================================
</TABLE>
13. INDUSTRY SEGMENT AND FOREIGN OPERATIONS
The Company currently operates exclusively in the semiconductor wafer
fabrication equipment industry. The Company's selling and service operations
are key revenue-producing activities. For geographical reporting, revenues are
attributed to the geographic location of the sales and service organizations,
and costs directly and indirectly incurred in generating revenues are similarly
assigned. Corporate assets consist primarily of cash and cash equivalents and
short-term investments. Corporate operating expenses consist primarily of
general and administrative expenses not allocable to geographic regions.
Sales to one customer were 16 percent of the Company's net sales in 1993. Sales
to two customers were 13 percent and 12 percent of the Company's net sales in
1992. No customers other than those noted above, were greater than 10 percent
of sales for fiscal years 1994, 1993 and 1992.
<TABLE>
<CAPTION>
United
States Europe Japan Asia-Pacific Corporate Consolidated
- - ------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
1994:
Net sales $611,670 $292,189 $454,939 $301,009 - $1,659,807
Income from
operations 139,562 77,956 75,324 95,475 (49,080) 339,237
Total assets 724,093 121,822 378,571 83,805 394,374 1,702,665
- - ------------------------------------------------------------------------------------------------------
1993:
Net sales $405,991 $218,825 $269,552 $185,679 - $1,080,047
Income from
operations 71,338 49,322 8,961 68,786 (37,413) 160,994
Total assets 454,085 104,110 255,827 48,696 257,434 1,120,152
- - ------------------------------------------------------------------------------------------------------
1992:
Net sales $296,717 $136,033 $227,303 $ 91,330 - $ 751,383
Income from
operations 40,429 20,778 11,558 26,230 (30,619) 68,376
Total assets 335,991 72,128 225,870 18,065 201,768 853,822
======================================================================================================
</TABLE>
A P P L I E D M A T E R I A L S 43
<PAGE> 19
NOTES TO
_________________________________________
CONSOLIDATED FINANCIAL STATEMENTS
Intercompany transfers of products from the United States to other regions were
$538,442,000, $370,668,000 and $282,236,000 in fiscal years 1994, 1993 and
1992, respectively, and from Europe were $67,934,000, $28,462,000 and
$22,524,000 in fiscal 1994, 1993 and 1992, respectively. Transfers and
commission arrangements between geographic areas are at prices sufficient to
recover a reasonable profit. At October 30, 1994, net accounts receivable from
customers located in the United States were $110,951,000 while net accounts
receivable from customers located in Japan, Europe and the Asia-Pacific region
were $198,445,000, $43,336,000 and $53,081,000, respectively.
14. COMMITMENTS AND CONTINGENCIES
The Company leases certain of its facilities and equipment under noncancelable
operating leases and has options to renew most leases, with rentals to be
negotiated. In February 1993, the Company entered into a four-year operating
lease for previously leased office and general operating facilities in Santa
Clara, California, providing for monthly payments which vary based on the
London interbank offering rate (LIBOR). This lease provides the Company with
the option at the end of the lease of either acquiring the property at its
original cost or arranging for the property to be acquired. The Company is
contingently liable under an 85 percent first-loss clause for up to $30,000,000
at October 30, 1994. Management believes that this contingent liability will
not have a material adverse effect on the Company's financial position or
results of operations. In addition, the Company must maintain compliance with
financial covenants similar to its credit facilities.
Total rent expense in fiscal 1994, 1993 and 1992 was $28,083,000,
$23,870,000 and $21,592,000, respectively. Aggregate minimum future rental
commitments are:
<TABLE>
<S> <C> <C>
- - ------------------------------------------------------------------------
(In thousands) 1995 $27,335
1996 18,501
1997 12,814
1998 8,723
1999 8,348
Thereafter 47,315
========================================================================
</TABLE>
Selected trade notes, received as payment for accounts receivable in Japan, are
discounted with financial institutions with recourse. At the end of fiscal year
1994, $100,896,000 of such receivables were outstanding.
The Company is the plaintiff in two patent infringement lawsuits against
another company and the defendant has filed a counterclaim in one of these
lawsuits and has other claims against the Company in two separate patent
infringement lawsuits. The Company is also a defendant in another patent
infringement lawsuit and in other litigation arising in the normal course of
business. Also in the normal course of business, the Company from time to time
receives and makes inquiries with regard to possible patent infringement.
Management believes that it is unlikely that the outcome of these lawsuits or
of the patent infringement inquiries will have a material adverse effect on the
Company's financial position or results of operations.
44 A P P L I E D M A T E R I A L S
<PAGE> 20
15. Unaudited Quarterly Consolidated Financial Data
<TABLE>
<CAPTION>
Quarter
------------------------------------------- Total
First Second Third Fourth Year
- - ------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
1994:
Net sales $340,449 $411,332 $440,228 $467,798 $1,659,807
Gross margin 155,979 189,391 205,572 217,353 768,295
Income before cumulative
effect of accounting
change 37,391 55,071 58,136 63,098 213,696
Net income 44,391 55,071 58,136 63,098 220,696
Earnings per share:
Income before
cumulative effect of
accounting change .45 .65 .68 .73 2.51
Net income .53 .65 .68 .73 2.60
==================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Quarter
-------------------------------------------- Total
First Second Third Fourth Year
- - ------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
1993:
Net sales $215,574 $255,692 $281,370 $327,411 $1,080,047
Gross margin 91,607 110,516 125,972 147,589 475,684
Net income 14,686 22,328 28,173 34,508 99,695
Earnings per share .18 .27 .34 .42 1.21
==================================================================================================================
</TABLE>
A P P L I E D M A T E R I A L S 45
<PAGE> 21
REPORT OF MANAGEMENT
Management is responsible for the preparation and integrity of the consolidated
financial statements appearing in the Annual Report. The financial statements
were prepared in conformity with generally accepted accounting principles
appropriate in the circumstances and, accordingly, include some amounts based
on management's best judgments and estimates. Financial information in the
Annual Report is consistent with that in the financial statements.
Management is responsible for maintaining a system of internal business
controls and procedures to provide reasonable assurance, at an appropriate
cost/benefit relationship, that assets are safeguarded and that transactions
are authorized, recorded and reported properly. The internal control system is
augmented by appropriate reviews by management, written policies and
guidelines, careful selection and training of qualified personnel and a written
Code of Business Ethics applicable to all employees of the Company and its
subsidiaries. Management believes that the Company's internal controls provide
reasonable assurance that assets are safeguarded against material loss from
unauthorized use or disposition and that the financial records are reliable for
preparing financial statements and other data and maintaining accountability
for assets.
The Audit Committee of the Board of Directors, composed solely of
Directors who are not officers of the Company, meets periodically with the
independent accountants, our internal auditors, and management to discuss
internal business controls, auditing and financial reporting matters. The
Committee reviews with the independent accountants the scope and results of the
audit effort. The Committee also meets with the independent accountants
without management present to ensure that the independent accountants have free
access to the Committee.
The independent accountants, Price Waterhouse LLP, are engaged to examine
the consolidated financial statements of the Company and conduct such tests and
related procedures as they deem necessary in accordance with generally accepted
auditing standards. The opinion of the independent accountants, based upon
their audit of the consolidated financial statements, is contained in this
Annual Report.
<TABLE>
<S> <C>
/s/ JAMES C. MORGAN /s/ JAMES W. BAGLEY
- - ------------------------------------ -----------------------------------------
James C. Morgan James W. Bagley
Chairman and Chief Executive Officer Vice Chairman and Chief Operating Officer
/s/ DAN MAYDAN /s/ GERALD F. TAYLOR
- - ------------------------------------ -----------------------------------------
Dan Maydan Gerald F. Taylor
President Senior Vice President, Finance and
Chief Financial Officer
November 23, 1994
</TABLE>
46 A P P L I E D M A T E R I A L S
<PAGE> 22
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of Applied Materials, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations and cash flows present fairly, in all
material respects, the financial position of Applied Materials, Inc. and its
subsidiaries at October 30, 1994 and October 31, 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
October 30, 1994, in conformity with generally accepted accounting principles.
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 of these statements in accordance with
generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
As discussed in Note 12 to the consolidated financial statements, the
Company changed its method of accounting for income taxes effective November 1,
1993.
/s/ PRICE WATERHOUSE LLP
- - ------------------------
San Jose, California
November 23, 1994
STOCKHOLDERS' INFORMATION
Legal Counsel
Orrick, Herrington & Sutcliffe
San Francisco, California
Independent Accountants
Price Waterhouse LLP
San Jose, California
Number of Registered Stockholders: 1175
Stock Listing
Applied Materials, Inc. is traded on the NASDAQ/
National Market System, NASDAQ Symbol: AMAT
Transfer Agent
Harris Trust Company of California
Los Angeles, California
Form 10-K
A copy of Applied Materials' 10-K Annual Report, filed with the Securities and
Exchange Commission, which contains additional information relating to the
Company, is available without charge. We welcome questions from potential and
existing stockholders.
Please contact:
Mike Musson
Director, Investor Relations
Applied Materials, Inc.
3050 Bowers Avenue
Santa Clara, California 95054-3299
(800) 882-0373
STOCK PRICE HISTORY
<TABLE>
<CAPTION>
Fiscal Year 1994 1993
- - -----------------------------------------------------------------
High Low High Low
- - -----------------------------------------------------------------
<S> <C> <C> <C> <C>
First Quarter 43 3/4 30 19 3/8 14 7/16
Second Quarter 51 3/4 37 5/8 22 5/8 17 1/2
Third Quarter 49 1/8 38 3/4 33 21 1/2
Fourth Quarter 52 1/2 43 39 1/4 28 5/8
=================================================================
</TABLE>
The preceding table sets forth the high and low closing sale
prices as reported on the NASDAQ National Market System during
the last two years.
A P P L I E D M A T E R I A L S 47
<PAGE> 23
APPENDIX TO 1994 ANNUAL REPORT
DESCRIPTION OF GRAPHS
In this Appendix, the following descriptions of certain graphs in the
Company's 1994 Annual Report that are omitted from the EDGAR version are more
specific with respect to the actual numbers, amounts and percentages than is
determinable from the graphs themselves. The Company submits such more
specific descriptions only for the purpose of complying with the requirements
for transmitting this Annual Report on Form 10-K electronically via EDGAR; such
more specific descriptions are not intended in any way to provide information
that is additional to the information otherwise provided in the Annual Report.
Page Number 26
Graph Title: REVENUE PER EMPLOYEE
(Dollars in thousands)
Bar graph with horizontal axis containing years 1994, 1993, 1992, 1991, and
1990 and vertical axis containing thousands of dollars. Revenue per employee
is $255, $228, $192, $180, and $173 thousand for 1994, 1993, 1992, 1991, and
1990, respectively.
Page Number 26
Graph Title: TOTAL ASSETS
(Dollars in millions)
Bar graph with horizontal axis containing years 1994, 1993, 1992, 1991, and
1990 and vertical axis containing dollars in millions. Assets are split by
Cash and Short-term Investments and Other Assets. Cash and Short-term
Investments are $422, $266, $223, $140, and $72 million for 1994, 1993, 1992,
1991, and 1990, respectively. Other Assets are $1,280, $854, $631, $521, and
$486 million for 1994, 1993, 1992, 1991, and 1990, respectively.
Page Number 26
Graph Title: R D & E Expenses
(Dollars in millions)
Bar graph with horizontal axis containing years 1994, 1993, 1992, 1991, and
1990 and vertical axis containing dollars in millions. Data contained in the
graph is located on page 26 of the 1994 Annual Report in the Selected
Consolidated Financial Data Table on the Research, development and engineering
line item.
<PAGE> 24
Page Number 27
Graph Title: SALES BY GEOGRAPHIC REGION
(Dollars in millions)
Bar graph with horizontal axis containing years 1994, 1993, 1992, 1991, and
1990 and vertical axis containing dollars in millions. Each bar is split by
the United States, Japan, Europe and Asia-Pacific. The following table lists
the amount of net sales by geographic region in millions of dollars:
<TABLE>
<CAPTION>
SALES BY GEOGRAPHIC REGION 1990 1991 1992 1993 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
U.S. $257.6 $216.5 $296.7 $ 406.0 $ 611.7
Japan 189.3 258.4 227.3 269.6 455.0
Europe 101.7 95.3 136.1 218.7 292.1
Asia-Pacific 18.5 68.4 91.3 185.7 301.0
------ ------ ------ -------- --------
Total $567.1 $638.6 $751.4 $1,080.0 $1,659.8
====== ====== ====== ======== ========
</TABLE>
Page Number 28
Graph Title: OPERATING PROFIT AS A PERCENTAGE OF NET SALES
(Percent)
Bar graph with horizontal axis containing years 1994, 1993, 1992, 1991, and 1990
and vertical axis containing percentages. Operating profit as a percentage of
net sales is 20%, 15%, 9%, 8%, and 10% for 1994, 1993, 1992, 1991, and 1990.
Page Number 29
Graph Title: CAPITAL EXPENDITURES
(Dollars in millions)
Bar graph with horizontal axis containing years 1994, 1993, 1992, 1991, and 1990
and vertical axis containing dollars in millions. Capital expenditures are
split by Land Buildings and Improvements and Other. Land, Buildings and
Improvements are $107, $49, $33, $45, and $69 million for 1994, 1993, 1992,
1991, and 1990, respectively. Other is $73, $46, $28, $18, and $38 million for
1994, 1993, 1992, 1991, and 1990, respectively.
Page Number 30
Graph Title: WORKING CAPITAL
(Dollars in millions)
Bar graph with horizontal axis containing years 1994, 1993, 1992, 1991, and 1990
and vertical axis containing dollars in millions. Data contained in the graph
is located on page 26 of the 1994 Annual Report in the Selected Consolidated
Financial Data Table on the Working capital line item.
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF APPLIED MATERIALS, INC.
<TABLE>
<CAPTION>
State or Country of
Incorporation
Subsidiaries of Applied Materials, Inc. or Organization
--------------------------------------- -------------------
<S> <C> <C>
Applied Materials Japan, Inc. Japan
Applied Materials Europe B.V. (1) Netherlands
Applied Materials International B.V. Netherlands
Applied Komatsu Technology, Inc. Japan
(50-50 joint venture with Komatsu Ltd.)
Applied Acquisition Subsidiary California
Applied Materials International, Inc. California
Applied Materials (Holdings) (2) California
Applied Materials Asia-Pacific, Ltd. (3) Delaware
Applied Materials Israel, Ltd. Israel
---------------------------------------
(1) Applied Materials Europe B.V. owns
the following subsidiaries:
Applied Materials GmbH Germany
Applied Materials France SARL France
Applied Materials, Ltd. England
Applied Materials Ireland, Ltd. Ireland
Applied Materials Sweden AB Sweden
(2) Applied Materials (Holdings) owns the following
subsidiary:
Applied Implant Technology, Ltd. California
(3) Applied Materials Asia-Pacific, Ltd. owns the
following subsidiaries:.
Applied Materials Korea, Ltd. Korea
Applied Materials Taiwan, Ltd. Taiwan
</TABLE>
215
<PAGE> 1
Exhibit 23
Consent of Independent Accountants
in Regard to Forms S-8
We hereby consent to the incorporation by reference in the Registration
Statements on Forms S-8 (Nos. 2-77988; 2-77987; 2-69114; 2-85545; 2-94205;
33-24530; 33-24531; 33-52072; 33-52076) of Applied Materials, Inc. of our
report dated November 23, 1994 appearing on page 47 of the Annual Report to
Stockholders which is incorporated in this Annual Report on Form 10-K. We also
consent to the incorporation by reference of our report on the Financial
Statement Schedules, which appears on page 21 of this Annual Report on Form
10-K.
/s/ Price Waterhouse LLP
- - ------------------------
Price Waterhouse LLP
San Jose, California
December 19, 1994
216
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
The undersigned directors and officers of Applied Materials, Inc., a
Delaware corporation (the "Company") hereby constitute and appoint James C.
Morgan and Geralf F. Taylor, and each of them with full power to act without
the other, the undersigned's true and lawful attorney-in-fact, with full power
of substitution and resubstitution, for the undersigned and in the
undersigned's name, place and stead in the undersigned's capacity as an officer
and/or director of the Company, to execute in the name and on behalf of the
undersigned an annual report of the Company on Form 10-K for the fiscal year
ended October 30, 1994 (the ""Report''), under the Securities and Exchange Act
of 1934, as amended, and to file such Report, with exhibits thereto and other
documents in connection therewith and any and all amendments thereto, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact, and
each of them, full power and authority to do and perform each and every act and
thing necessary or desirable to be done and to take any other action of any
type whatsoever in connection with the foregoing which, in the opinion of such
attorney-in-fact, may be of benefit to, in the best interest of, or legally
required of, the undersigned, it being understood that the documents executed
by such attorney-in-fact on behalf of the undersigned pursuant to this Power of
Attorney shall be in such form and shall contain such terms and conditions as
such attorney-in-fact may approve in such attorney-in-fact's discretion.
IN WITNESS WHEREOF, I have hereunto set my hand this 7th day of
December, 1994.
<TABLE>
<S> <C>
/s/ MICHAEL ARMACOST /s/ DR. HIROO TOYODA
- - -------------------------------- ---------------------------------
Michael Armacost Dr. Hiroo Toyoda
Director Director
/s/ HERBERT M. DWIGHT, JR. /s/ JAMES C. MORGAN
- - --------------------------------- ---------------------------------
Herbert M. Dwight, Jr. James C. Morgan
Director Chairman, Chief Executive Officer
and Director
(Principal Executive Officer)
/s/ GEORGE B. FARNSWORTH
- - ---------------------------------
George B.Farnsworth /s/ JAMES W. BAGLEY
Director ---------------------------------
James W. Bagley
Vice Chairman, Chief Operating
/s/ PHILIP V. GARDINA Officer and Director
- - ---------------------------------
Philip V. Gardina
Director /s/ DAN MAYDAN
---------------------------------
Dan Maydan
/s/ TSUYOSHI KAWANISHI President and Director
- - ---------------------------------
Tsuyoshi Kawanishi
Director /s/ GERALD F. TAYLOR
---------------------------------
Gerald F. Taylor
/s/ PAUL R. LOW Senior Vice President
- - --------------------------------- Chief Financial Officer
Paul R. Low (Principal Financial Officer)
Director
/s/ MICHAEL O'FARRELL
/s/ ALFRED J. STEIN ---------------------------------
- - --------------------------------- Michael O'Farrell
Alfred J. Stein Corporate Controller
Director (Chief Accounting Officer)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED OCTOBER 30, 1994.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-30-1994
<PERIOD-END> OCT-30-1994
<CASH> 160,320
<SECURITIES> 262,005
<RECEIVABLES> 406,902
<ALLOWANCES> 1,089
<INVENTORY> 245,710
<CURRENT-ASSETS> 1,230,537
<PP&E> 452,454
<DEPRECIATION> 170,136
<TOTAL-ASSETS> 1,702,665
<CURRENT-LIABILITIES> 496,433
<BONDS> 224,546
<COMMON> 841
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,702,665
<SALES> 1,659,807
<TOTAL-REVENUES> 1,659,807
<CGS> 891,512
<TOTAL-COSTS> 891,512
<OTHER-EXPENSES> 429,058
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,962
<INCOME-PRETAX> 334,497
<INCOME-TAX> 117,074
<INCOME-CONTINUING> 213,696
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 7,000
<NET-INCOME> 220,696
<EPS-PRIMARY> 2.60
<EPS-DILUTED> 2.60
</TABLE>
