<PAGE> 1
Registration Statement No. 33-60301
Filed Pursuant to Rule 424(b)(5)
PROSPECTUS SUPPLEMENT
(To Prospectus dated June 28, 1995)
$266,931,250
(LOGO - Applied Materials, Inc.)
MEDIUM-TERM NOTES, SERIES A
------------------------
Due More Than Nine Months To 30 Years From Date of Issue
------------------------
Applied Materials, Inc. (the "Company") may offer from time to time its
Medium-Term Notes, which are issuable in one or more series and may be offered
and sold in the United States. The Medium-Term Notes offered by this Prospectus
Supplement are offered in the United States at an aggregate initial public
offering price of up to U.S. $266,931,250. Such aggregate offering price is
subject to reduction as a result of the sale by the Company of other securities
covered by the accompanying Prospectus. The interest rate on each Note will be
established by the Company on the date of issue of such Note and will be either
a fixed rate, which may be zero in the case of certain Original Issue Discount
Notes, or a floating rate, as set forth herein and specified in the applicable
Pricing Supplement. A Fixed Rate Note may pay a level amount in respect of both
interest and principal amortized over the life of the Note (an "Amortizing
Note").
Unless otherwise specified in the applicable Pricing Supplement, interest on
each Note will be payable on the Interest Payment Dates set forth herein and in
the applicable Pricing Supplement and at Maturity. Each Note will mature on any
day more than nine months to 30 years from the date of issue, as set forth in
the applicable Pricing Supplement. See "Description of Notes." Unless otherwise
specified in the applicable Pricing Supplement, the Notes may not be redeemed by
the Company or the Holder prior to maturity and will be issued in fully
registered form in denominations of $100,000 or any amount in excess thereof
which is an integral multiple of $1,000. Each Note will be represented either by
a Global Security registered in the name of a nominee of The Depository Trust
Company, as Depositary (a "Global Note"), or by a certificate issued in
definitive form (a "Certificated Note"), as set forth in the applicable Pricing
Supplement. Beneficial interests in Global Securities representing Global Notes
will be shown on, and transfer thereof will be affected only through records
maintained by the Depositary (with respect to participants' interests) and its
participants. Global Notes will not be issuable as Certificated Notes except
under the circumstances described herein.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT, ANY SUPPLEMENT HERETO OR THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
Price to Agents' Proceeds to
Public(1) Commissions(2) Company(2)(3)
----------------- ------------------------- ---------------------------------
<S> <C> <C> <C>
Per Note................................... 100% .125% - .750% 99.875% - 99.250%
Total...................................... $266,931,250 $333,664 - $2,001,984 $266,597,586 - $264,929,266
</TABLE>
---------------
(1) Unless otherwise specified in the applicable Pricing Supplement, Notes
will be sold at 100% of their principal amount. If the Company issues
any Note at a discount from or at a premium over its principal amount,
the Price to Public of any Note issued at a discount or premium will be
set forth in the applicable Pricing Supplement.
(2) The commission payable to an Agent for each Note sold through such Agent
shall range from .125% to .750% of the principal amount of such Note.
The Company may also sell Notes to an Agent, as principal at negotiated
discounts, for resale to investors and other purchasers.
(3) Before deducting expenses payable by the Company estimated at $435,000.
------------------------
Offers to purchase the Notes are being solicited from time to time by Morgan
Stanley & Co. Incorporated,
Lehman Brothers, Lehman Brothers Inc. (including its affiliate Lehman Government
Securities Inc.) and J.P. Morgan Securities Inc. (individually, an "Agent" and
collectively, the "Agents"), on behalf of the Company. The Agents have agreed to
use reasonable efforts to solicit purchases of such Notes. The Company may also
sell Notes to an Agent acting as principal for resale to investors and other
purchasers, to be determined by such Agent. The Company may otherwise sell the
Notes. No termination date for the offering of the Notes has been established.
The Company or an Agent may reject any order in whole or in part. The Notes will
not be listed on any securities exchange, and there can be no assurance that the
Notes offered hereby will be sold or that there will be a secondary market for
the Notes or as to the liquidity of the secondary market if one develops. See
"Plan of Distribution."
------------------------
MORGAN STANLEY & CO.
Incorporated
LEHMAN BROTHERS
J.P. MORGAN SECURITIES INC.
August 24, 1995
<PAGE> 2
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IN
CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS SUPPLEMENT, ANY PRICING
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR BY THE AGENTS. THIS PROSPECTUS SUPPLEMENT, ANY PRICING
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY DEBT SECURITIES BY ANYONE IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
IN CONNECTION WITH THIS OFFERING, THE AGENTS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY OR OTHER DEBT SECURITIES OF THE COMPANY AT LEVELS ABOVE THOSE WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Debt Securities set forth
in the Prospectus, to which reference is hereby made. The particular terms of
the Notes sold pursuant to any pricing supplement (a "Pricing Supplement") will
be described therein. The terms and conditions set forth in "Description of
Notes" will apply to each Note unless otherwise specified in the applicable
Pricing Supplement and in such Note.
GENERAL
The Notes will be issued under the Indenture dated as of August 24, 1994
(the "Indenture") between the Company and Harris Trust Company of California, as
trustee (the "Trustee"). The Notes issued under the Indenture will constitute
one or more series under such Indenture. The Notes will rank pari passu with all
other unsecured and unsubordinated indebtedness of the Company. The Notes may be
issued from time to time in an aggregate principal amount of up to $266,931,250,
subject to reduction as a result of the sale by the Company of other securities
covered by the accompanying Prospectus.
The Notes will mature on any day more than nine months to 30 years from the
date of issue, as set forth in the applicable Pricing Supplement. Except as may
be provided in the applicable Pricing Supplement, the Notes will be issued only
in fully registered form. Unless otherwise provided in the applicable Pricing
Supplement, Notes will be denominated in Authorized Denominations (as defined
below). The defeasance and covenant defeasance provisions of the Indenture
described under the caption "Description of Debt Securities -- Defeasance and
Covenant Defeasance" in the Prospectus will apply to the Notes.
The Notes will be offered on a continuing basis, and each Note will be
issued initially as either a Global Note or a Certificated Note. Except as set
forth in "-- Book-Entry System," Global Notes will not be issuable as
Certificated Notes. The laws of some states may require that certain purchasers
of securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to own, transfer or pledge
beneficial interests in Global Securities. See "-- Book-Entry System" below.
The Notes may be presented for payment of principal and interest, transfer
of the Notes will be registrable and the Notes will be exchangeable at the
office of Harris Trust and Savings Bank, Attention: Indenture Trust, 311 West
Monroe Street, 12th Floor, Chicago, Illinois 60606; provided that Global Notes
will be exchangeable only in the manner and to the extent set forth in
"-- Book-Entry System."
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<PAGE> 3
The applicable Pricing Supplement will specify the price (the "Issue
Price") of each Note to be sold pursuant thereto (unless such Note is to be sold
at 100% of its principal amount), the interest rate or interest rate formula,
Stated Maturity and principal amount and any other terms on which each Note will
be issued.
As used herein, the following terms shall have the meanings set forth
below:
"Authorized Denominations" means, unless otherwise provided in the
applicable Pricing Supplement, U.S. $100,000 or any amount in excess
thereof which is an integral multiple of U.S. $1,000.
"Business Day" means any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which banking institutions are
authorized or required by law or regulation to close in The City of New
York and, with respect to LIBOR Notes (as defined below), is also a London
Banking Day.
An "Interest Payment Date" with respect to any Note shall be a date on
which, under the terms of such Note, regularly scheduled interest shall be
payable.
"London Banking Day" means any day on which dealings in deposits in
the Index Currency (as defined below) are transacted in the London
interbank market.
"Original Issue Discount Note" means any Note that provides for an
amount payable at Stated Maturity that exceeds its Issue Price by at least
0.25% of the amount payable at Stated Maturity, multiplied by the number of
full years from the date of original issue to the Stated Maturity.
The "Record Date" with respect to any Interest Payment Date shall be
the date 15 calendar days prior to such Interest Payment Date, whether or
not such date shall be a Business Day.
"Stated Maturity" of a Note is the date specified in the applicable
Pricing Supplement as the fixed date on which the principal of such Note is
due and payable, and "Maturity" of a Note is the date on which the
principal of the Note becomes due and payable, whether at Stated Maturity,
by acceleration, early redemption or repayment or otherwise.
INTEREST AND PRINCIPAL PAYMENTS
Interest will be payable to the person in whose name the Note is registered
at the close of business on the applicable Record Date; provided that the
interest payable at Maturity (whether or not the date of Maturity is an Interest
Payment Date) will be payable to the person to whom principal is payable. The
initial interest payment on a Note will be made on the first Interest Payment
Date falling after the date the Note is issued; provided, however, that payments
of interest (or, in the case of an Amortizing Note, principal and interest) on a
Note issued less than 15 calendar days before an Interest Payment Date will be
paid on the next succeeding Interest Payment Date to the Holder of record on the
Record Date with respect to such succeeding Interest Payment Date, unless
otherwise specified in the applicable Pricing Supplement.
Payments of interest, other than interest payable at Maturity, will be made
by check mailed to the address of the person entitled thereto as shown on the
Note register. Payment of principal, premium, if any, and interest at Maturity
will be made in immediately available funds against presentation and surrender
of the Note. Notwithstanding the foregoing, (a) the Depositary, as Holder of
Global Notes, shall be entitled to receive payments of interest by wire transfer
of immediately available funds and (b) a Holder of U.S. $10,000,000 or more in
aggregate principal amount of Certificated Notes of like tenor and terms shall
be entitled to receive payments of interest by wire transfer of immediately
available funds upon written request to the Trustee, provided such request is
received not later than 15 calendar days prior to the applicable Interest
Payment Date.
Certain Notes, including Original Issue Discount Notes, may be considered
to be issued with original issue discount, which must be included in income for
United States federal income tax purposes at a constant rate. See "Certain
United States Federal Income Tax Consequences -- Original Issue Discount" below.
Unless otherwise specified in the applicable Pricing Supplement, if the
principal of any Original Issue Discount Note is declared to be due and payable
immediately as described under "Description of Debt Securities -- Events of
Default" in the Prospectus, the amount of principal due and payable with respect
to
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<PAGE> 4
such Note shall be limited to the aggregate principal amount of such Note
multiplied by the sum of its Issue Price (expressed as a percentage of the
aggregate principal amount) plus the original issue discount amortized from the
date of issue to the date of declaration, which amortization shall be calculated
using the "interest method" (computed in accordance with generally accepted
accounting principles in effect on the date of declaration). Special
considerations applicable to any such Notes will be set forth in the applicable
Pricing Supplement.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from the date of issuance at the
annual rate stated on the face thereof until the principal thereof is paid or
made available for payment. Unless otherwise specified in the applicable Pricing
Supplement, such interest will be computed on the basis of a 360-day year of
twelve 30-day months. Unless otherwise specified in the applicable Pricing
Supplement, payments of interest on Fixed Rate Notes other than Amortizing Notes
will be made semiannually on each date set forth in the applicable Pricing
Supplement and at Maturity. Unless otherwise specified in the applicable Pricing
Supplement, payments of principal and interest on Amortizing Notes, which are
securities on which payments of principal and interest are made in equal
installments over the life of the security, will be made either quarterly or
semiannually on each date set forth in the applicable Pricing Supplement and at
Maturity. Payments with respect to Amortizing Notes will be applied first to
interest due and payable thereon and then to the reduction of the unpaid
principal amount thereof. A table setting forth repayment information in respect
of each Amortizing Note will be provided to the original purchaser and will be
available, upon request, to subsequent Holders.
If any Interest Payment Date or the Maturity of any Fixed Rate Note falls
on a day that is not a Business Day, the related payment of the interest and
principal (and premium, if any) shall be made on the next day that is a Business
Day, and no interest on such payment shall accrue as a result of such delayed
payment.
Interest payments for Fixed Rate Notes will include accrued interest from
and including the date of issue or from and including the last date in respect
of which interest has been paid, as the case may be, to, but excluding, the
Interest Payment Date or Maturity. The interest rates the Company will agree to
pay on newly issued Fixed Rate Notes are subject to change without notice by the
Company from time to time, but no such change will affect any Fixed Rate Notes
theretofore issued or that the Company has agreed to issue.
FLOATING RATE NOTES
Each Floating Rate Note will bear interest from the date of issuance until
the principal thereof is paid or made available for payment at a rate determined
by reference to an interest rate basis or formula (the "Base Rate"), which may
be adjusted by a Spread and/or Spread Multiplier (each as defined below). The
applicable Pricing Supplement will designate one or more of the following Base
Rates as applicable to each Floating Rate Note: (a) the CD Rate (a "CD Rate
Note"), (b) the Commercial Paper Rate (a "Commercial Paper Rate Note"), (c) the
Federal Funds Rate (a "Federal Funds Rate Note"), (d) LIBOR (a "LIBOR Note"),
(e) the Prime Rate (a "Prime Rate Note"), (f) the Treasury Rate (a "Treasury
Rate Note"), (g) the CMT Rate (a "CMT Rate Note") or (h) such other Base Rate or
interest rate formula as is set forth in such Pricing Supplement and in such
Floating Rate Note. The "Index Maturity" for any Floating Rate Note is the
period of maturity of the instrument or obligation from which the Base Rate is
calculated and will be specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate on each Floating Rate Note will be calculated by reference to the
specified Base Rate (i) plus or minus the Spread, if any, and/or (ii) multiplied
by the Spread Multiplier, if any. The "Spread" is the number of basis points
(one one-hundredth of a percentage point) specified in the applicable Pricing
Supplement to be added to or subtracted from the Base Rate for such Floating
Rate Note, and the "Spread Multiplier" is the percentage specified in the
applicable Pricing Supplement to be applied to the Base Rate for such Floating
Rate Note.
As specified in the applicable Pricing Supplement, a Floating Rate Note may
also have either or both of the following: (i) a maximum limitation, or ceiling,
on the rate of interest which may accrue during any interest period ("Maximum
Interest Rate"); and (ii) a minimum limitation, or floor, on the rate of
interest
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<PAGE> 5
which may accrue during any interest period ("Minimum Interest Rate"). In
addition to any Maximum Interest Rate that may be applicable to any Floating
Rate Note pursuant to the above provisions, the interest rate on a Floating Rate
Note will in no event be higher than the maximum rate permitted by applicable
law.
Unless otherwise specified in the applicable Pricing Supplement, the rate
of interest on each Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually or annually (such period being the "Interest Reset
Period" for such Note, and the first day of each Interest Reset Period being an
"Interest Reset Date"), as specified in the applicable Pricing Supplement.
Unless otherwise specified in the Pricing Supplement, the Interest Reset Date
will be, in the case of Floating Rate Notes which reset daily, each Business
Day; in the case of Floating Rate Notes (other than Treasury Rate Notes) which
reset weekly, the Wednesday of each week; in the case of Treasury Rate Notes
which reset weekly, the Tuesday of each week, except as provided below; in the
case of Floating Rate Notes which reset monthly, the third Wednesday of each
month; in the case of Floating Rate Notes which reset quarterly, the third
Wednesday of March, June, September and December; in the case of Floating Rate
Notes which reset semiannually, the third Wednesday of two months of each year,
as specified in the applicable Pricing Supplement; and in the case of Floating
Rate Notes which reset annually, the third Wednesday of one month of each year,
as specified in the applicable Pricing Supplement. If any Interest Reset Date
for any Floating Rate Note would otherwise be a day that is not a Business Day,
such Interest Reset Date shall be postponed to the next succeeding Business Day,
except that in the case of a LIBOR Note, if such Business Day is in the next
succeeding calendar month, such Interest Reset Date shall be the immediately
preceding Business Day. Treasury bills are normally sold at auction on Monday of
each week, unless that day is a legal holiday, in which case the auction is
normally held on the following Tuesday, but such auction may be held on the
preceding Friday. If an auction falls on a day that is an Interest Reset Date
for Treasury Rate Notes, the Interest Reset Date shall be the following day that
is a Business Day.
Except as provided below, unless otherwise specified in the applicable
Pricing Supplement, interest on Floating Rate Notes will be payable: (i) in the
case of Floating Rate Notes with a daily, weekly or monthly Interest Reset Date,
on the third Wednesday of each month or on the third Wednesday of March, June,
September and December, as specified in the applicable Pricing Supplement; (ii)
in the case of Floating Rate Notes with a quarterly Interest Reset Date, on the
third Wednesday of March, June, September and December; (iii) in the case of
Floating Rate Notes with a semiannual Interest Reset Date, on the third
Wednesday of the two months specified in the applicable Pricing Supplement; and
(iv) in the case of Floating Rate Notes with an annual Interest Reset Date, on
the third Wednesday of the month specified in the applicable Pricing Supplement.
If any Interest Payment Date for any Floating Rate Note would fall on a day that
is not a Business Day with respect to such Floating Rate Note, such Interest
Payment Date will be postponed to the following day that is a Business Day with
respect to such Floating Rate Note, except that, in the case of a LIBOR Note, if
such Business Day is in the next succeeding calendar month, such Interest
Payment Date shall be the immediately preceding day that is a Business Day with
respect to such LIBOR Note. If the Maturity of a Floating Rate Note would fall
on a day that is not a Business Day, the payment of principal, premium, if any,
and interest will be made on the next succeeding Business Day, and no interest
on such payment shall accrue as a result of such delayed payment.
Unless otherwise specified in the applicable Pricing Supplement, interest
payments for Floating Rate Notes shall be the amount of interest accrued from
and including the date of issue or from and including the last date to which
interest has been paid to, but excluding, the Interest Payment Date or maturity
date or date of redemption or repayment.
With respect to a Floating Rate Note, accrued interest shall be calculated
by multiplying the principal amount of such Floating Rate Note by an accrued
interest factor. Such accrued interest factor will be computed by adding the
interest factors calculated for each day in the period for which interest is
being paid. Unless otherwise specified in the applicable Pricing Supplement, the
interest factor for each such day is computed by dividing the interest rate
applicable to such day by 360, in the case of CD Rate Notes, Commercial Paper
Rate Notes, Federal Funds Rate Notes, LIBOR Notes and Prime Rate Notes or by the
actual number of days in the year, in the case of Treasury Rate Notes and CMT
Rate Notes. All percentages used in or resulting from any calculation of the
rate of interest on a Floating Rate Note will be rounded, if
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necessary, to the nearest one hundred-thousandth of a percentage point, with
five one-millionths of a percentage point rounded upward, and all dollar amounts
used in or resulting from such calculation on Floating Rate Notes will be
rounded to the nearest cent, with one-half cent rounded upward. The interest
rate in effect on any Interest Reset Date will be the applicable rate as reset
on such date. The interest rate applicable to any other day is the interest rate
from the immediately preceding Interest Reset Date; provided, however, that the
interest rate in effect from the date of issue to the first Interest Reset Date
with respect to a Floating Rate Note will be the initial interest rate set forth
in the applicable Pricing Supplement (the "Initial Interest Rate").
The calculation agent (the "Calculation Agent") with respect to any issue
of Floating Rate Notes will be set forth in the applicable Pricing Supplement.
Upon the request of the Holder of any Floating Rate Note, the Calculation Agent
will provide the interest rate then in effect and, if determined, the interest
rate that will become effective on the next Interest Reset Date with respect to
such Floating Rate Note.
The "Interest Determination Date" pertaining to an Interest Reset Date for
CD Rate Notes, Commercial Paper Rate Notes, Federal Funds Rate Notes, CMT Rate
Notes and Prime Rate Notes will be the second Business Day next preceding such
Interest Reset Date. The Interest Determination Date pertaining to an Interest
Reset Date for a LIBOR Note will be the second London Banking Day preceding such
Interest Reset Date. The Interest Determination Date pertaining to an Interest
Reset Date for a Treasury Rate Note will be the day of the week in which such
Interest Reset Date falls on which Treasury bills would normally be auctioned.
If, as the result of a legal holiday, an auction is held on the preceding
Friday, such Friday will be the Interest Determination Date pertaining to the
Interest Reset Date occurring in the next succeeding week.
Unless otherwise specified in the applicable Pricing Supplement, the
"Calculation Date," where applicable, pertaining to an Interest Determination
Date will be the earlier of (i) the tenth calendar day after such Interest
Determination Date, or, if such day is not a Business Day, the next succeeding
Business Day, or (ii) the Business Day preceding the applicable Interest Payment
Date or Maturity, as the case may be.
Interest rates will be determined by the Calculation Agent as follows:
CD Rate Notes
CD Rate Notes will bear interest at the interest rate (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the CD Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date, the rate on such date
for negotiable certificates of deposit having the Index Maturity designated in
the applicable Pricing Supplement as published by the Board of Governors of the
Federal Reserve System in "Statistical Release H.15(519), Selected Interest
Rates," or any successor publication of the Board of Governors of the Federal
Reserve System ("H.15(519)"), under the heading "CDs (Secondary Market)," or, if
not so published by 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the CD Rate will be the rate on
such Interest Determination Date for negotiable certificates of deposit of the
Index Maturity designated in the applicable Pricing Supplement as published by
the Federal Reserve Bank of New York in its daily statistical release "Composite
3:30 P.M. Quotations for U.S. Government Securities" (the "Composite
Quotations") under the heading "Certificates of Deposit." If such rate is not
yet published in either H.15(519) or the Composite Quotations by 3:00 P.M., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, the CD Rate on such Interest Determination Date will be
calculated by the Calculation Agent and will be the arithmetic mean of the
secondary market offered rates as of 10:00 A.M., New York City time, on such
Interest Determination Date for certificates of deposit in an amount that is
representative for a single transaction at that time with a remaining maturity
closest to the Index Maturity designated in the Pricing Supplement of three
leading nonbank dealers in negotiable U.S. dollar certificates of deposit in The
City of New York selected by the Calculation Agent (after consultation with the
Company) for negotiable certificates of deposit of major United States money
center banks; provided, however, that if the dealers selected as aforesaid by
the Calculation Agent are not quoting as set forth above, the CD Rate in effect
for the
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applicable period will be the same as the CD Rate for the immediately preceding
Interest Reset Period (or, if there was no such Interest Reset Period, the rate
of interest payable on the CD Rate Notes for which such CD Rate is being
determined shall be the Initial Interest Rate).
Commercial Paper Rate Notes
Commercial Paper Rate Notes will bear interest at the interest rate
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any, and subject to the Minimum Interest Rate and the
Maximum Interest Rate, if any) specified in the Commercial Paper Rate Notes and
in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Interest Determination Date,
the Money Market Yield (as defined below) of the rate on such date for
commercial paper having the Index Maturity specified in the applicable Pricing
Supplement, as such rate shall be published in H.15(519) under the heading
"Commercial Paper." In the event that such rate is not published by 9:00 A.M.,
New York City time, on the Calculation Date pertaining to such Interest
Determination Date, then the Commercial Paper Rate shall be the Money Market
Yield of the rate on such Interest Determination Date for commercial paper of
the specified Index Maturity as published in Composite Quotations under the
heading "Commercial Paper." If by 3:00 P.M., New York City time, on such
Calculation Date such rate is not yet available in either H.15(519) or Composite
Quotations, then the Commercial Paper Rate shall be the Money Market Yield of
the arithmetic mean of the offered rates as of 11:00 A.M., New York City time,
on such Interest Determination Date of three leading dealers of commercial paper
in The City of New York selected by the Calculation Agent (after consultation
with the Company) for commercial paper of the specified Index Maturity, placed
for an industrial issuer whose bond rating is "AA," or the equivalent, from a
nationally recognized rating agency; provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting offered rates as
mentioned in this sentence, the Commercial Paper Rate in effect for the
applicable period will be the same as the Commercial Paper Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the rate of interest payable on the Commercial Paper Rate Notes
for which such Commercial Paper Rate is being determined shall be the Initial
Interest Rate).
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
<TABLE>
<S> <C> <C>
D X 360
Money Market Yield = X 100
------------------
360 - (D X M)
</TABLE>
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the specified Index Maturity.
Federal Funds Rate Notes
Federal Funds Rate Notes will bear interest at the interest rate
(calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any, and subject to the Minimum Interest Rate and the
Maximum Interest Rate, if any) specified in the Federal Funds Rate Notes and in
the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Federal Funds Rate" means, with respect to any Interest Determination Date, the
rate on such date for Federal funds as published in H.15(519) under the heading
"Federal Funds (Effective)," or, if not so published by 9:00 A.M., New York City
time, on the Calculation Date pertaining to such Interest Determination Date,
the Federal Funds Rate will be the rate on such Interest Determination Date as
published in the Composite Quotations under the heading "Federal Funds/Effective
Rate." If such rate is not yet published in either H.15(519) or the Composite
Quotations by 3:00 P.M., New York City time, on the Calculation Date pertaining
to such Interest Determination Date, the Federal Funds Rate for such Interest
Determination Date will be calculated by the Calculation Agent and will be the
arithmetic mean of the rates for the last transaction in overnight Federal funds
as of 11:00 A.M., New York City time, on such Interest Determination Date
arranged by three leading brokers of Federal funds
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transactions in The City of New York selected by the Calculation Agent (after
consultation with the Company); provided, however, that if the brokers selected
as aforesaid by the Calculation Agent are not quoting as set forth above, the
Federal Funds Rate in effect for the applicable period will be the same as the
Federal Funds Rate for the immediately preceding Interest Reset Period (or, if
there was no such Interest Reset Period, the rate of interest payable on the
Federal Funds Rate Notes for which such Federal Funds Rate is being determined
shall be the Initial Interest Rate).
LIBOR Notes
LIBOR Notes will bear interest at the interest rate (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any, and subject
to the Minimum Interest Rate and the Maximum Interest Rate, if any) specified in
the LIBOR Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
for each Interest Determination Date will be determined by the Calculation Agent
as follows:
(i) As of the Interest Determination Date, LIBOR will be either: (a)
if "LIBOR Reuters" is specified in the applicable Pricing Supplement, the
arithmetic mean of the offered rates (unless the specified Designated LIBOR
Page (as defined below) by its terms provides only for a single rate, in
which case such single rate shall be used) for deposits in the London
interbank market in the Index Currency for the period of the Index Maturity
designated in the applicable Pricing Supplement, commencing on the second
London Banking Day immediately following such Interest Determination Date,
that appear on the Designated LIBOR Page at approximately 11:00 A.M.,
London time, on that Interest Determination Date, if at least two such
offered rates appear (unless, as aforesaid, only a single rate is required)
on such Designated LIBOR Page, or (b) if "LIBOR Telerate" is specified in
the applicable Pricing Supplement, the rate for deposits in the Index
Currency for the period of the Index Maturity designated in the applicable
Pricing Supplement, commencing on such Interest Determination Date, that
appears on the Designated LIBOR Page at approximately 11:00 A.M., London
time, on that Interest Determination Date. If fewer than two offered rates
appear (if "LIBOR Reuters" is specified in the applicable Pricing
Supplement and calculation of LIBOR is based on the arithmetic mean of the
offered rates) or if no rate appears (if "LIBOR Reuters" is specified in
the applicable Pricing Supplement and the Designated LIBOR Page by its
terms provides only for a single rate or if "LIBOR Telerate" is specified
in the applicable Pricing Supplement), LIBOR in respect of the related
Interest Determination Date will be determined as if the parties had
specified the rate described in clause (ii) below.
(ii) With respect to an Interest Determination Date on which fewer
than two offered rates appear (if "LIBOR Reuters" is specified in the
applicable Pricing Supplement and the calculation of LIBOR is based on the
arithmetic mean of the offered rates) or no rate appears (if "LIBOR
Reuters" is specified in the applicable Pricing Supplement and the
Designated LIBOR Page by its terms provides only for a single rate or if
"LIBOR Telerate" is specified in the applicable Pricing Supplement), the
Calculation Agent will request the principal London offices of each of four
major reference banks in the London interbank market, as selected by the
Calculation Agent (after consultation with the Company), to provide the
Calculation Agent with its offered quotations for deposits in the Index
Currency for the period of the Index Maturity designated in the applicable
Pricing Supplement, commencing on the second London Banking Day immediately
following such Interest Determination Date, to prime banks in the London
interbank market at approximately 11:00 A.M., London time, on such Interest
Determination Date and in a principal amount of not less than U.S.
$1,000,000 (or the equivalent in the Index Currency, if the Index Currency
is not the U.S. dollar) that is representative of a single transaction in
such Index Currency in such market at such time. If at least two such
quotations are provided, LIBOR determined on such Interest Determination
Date will be the arithmetic mean of such quotations. If fewer than two
quotations are provided, LIBOR determined on such Interest Determination
Date will be the arithmetic mean of the rates quoted at approximately 11:00
A.M. (or such other time specified in the applicable Pricing Supplement),
in the applicable principal financial center for the country of the Index
Currency on such Interest Determination Date, by three major banks in such
principal financial center
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selected by the Calculation Agent (after consultation with the Company) for
loans in the Index Currency to leading European banks, for the period of
the Index Maturity designated in the applicable Pricing Supplement
commencing on the second London Banking Day immediately following such
Interest Determination Date and in a principal amount of not less than U.S.
$1,000,000 (or the equivalent in the Index Currency, if the Index Currency
is not the U.S. dollar) that is representative of a single transaction in
such Index Currency in such market at such time; provided, however, that if
the banks so selected by the Calculation Agent are not quoting as mentioned
in this sentence, LIBOR in effect for the applicable period will be the
same as LIBOR for the immediately preceding Interest Reset Period (or, if
there was no such Interest Reset Period, the rate of interest payable on
the LIBOR Notes for which such LIBOR is being determined shall be the
Initial Interest Rate).
"Index Currency" means the currency (including composite currencies)
specified in the applicable Pricing Supplement as the currency for which LIBOR
shall be calculated. If no such currency is specified in the applicable Pricing
Supplement, the Index Currency shall be U.S. dollars.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is designated
in the applicable Pricing Supplement, the display on the Reuters Monitor Money
Rates Service for the purpose of displaying the London interbank rates of major
banks for the applicable Index Currency, or (b) if "LIBOR Telerate" is
designated in the applicable Pricing Supplement, the display on the Dow Jones
Telerate Service for the purpose of displaying the London interbank rates of
major banks for the applicable Index Currency. If neither LIBOR Reuters nor
LIBOR Telerate is specified in the applicable Pricing Supplement, LIBOR for the
applicable Index Currency will be determined as if LIBOR Telerate (and, if the
U.S. dollar is the Index Currency, Page 3750) had been specified.
Prime Rate Notes
Prime Rate Notes will bear interest at the interest rate (calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the Prime Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Determination Date, the rate set forth
in H.15(519) for such date opposite the caption "Bank Prime Loan." If such rate
is not yet published by 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the Prime Rate for such Interest
Determination Date will be the arithmetic mean of the rates of interest publicly
announced by each bank named on the Reuters Screen NYMF Page (as defined below)
as such bank's prime rate or base lending rate as in effect for such Interest
Determination Date as quoted on the Reuters Screen NYMF Page on such Interest
Determination Date, or, if fewer than four such rates appear on the Reuters
Screen NYMF Page for such Interest Determination Rate, the rate shall be the
arithmetic mean of the prime rates quoted on the basis of the actual number of
days in the year divided by 360 as of the close of business on such Interest
Determination Date by at least two of the three major money center banks in The
City of New York selected by the Calculation Agent from which quotations are
requested. If fewer than two quotations are provided, the Prime Rate shall be
calculated by the Calculation Agent and shall be determined as the arithmetic
mean on the basis of the prime rates in The City of New York by the appropriate
number of substitute banks or trust companies organized and doing business under
the laws of the United States, or any state thereof, in each case having total
equity capital of at least U.S. $500,000,000 and being subject to supervision or
examination by federal or state authority, selected by the Calculation Agent
(after consultation with the Company) to quote such rate or rates; provided,
however, that if the banks or trust companies selected as aforesaid by the
Calculation Agent are not quoting as set forth above, the Prime Rate in effect
for the applicable period will be the same as the Prime Rate for the immediately
preceding Interest Reset Period (or, if there was no such Interest Reset Period,
the rate of interest payable on the Prime Rate Notes for which such Prime Rate
is being determined shall be the Initial Interest Rate). "Reuters Screen NYMF
Page" means the display designated as Page "NYMF" on the Reuters Monitor Money
Rates Services (or such other page as may replace the NYMF Page on that service
for the purpose of displaying prime rates or base lending rates of major United
States banks).
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Treasury Rate Notes
Treasury Rate Notes will bear interest at the interest rate (calculated
with reference to the Treasury Rate and the Spread and/or Spread Multiplier, if
any, and subject to the Minimum Interest Rate and the Maximum Interest Rate, if
any) specified in the Treasury Rate Notes and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Treasury Rate" means, with respect to any Interest Determination Date, the rate
for the auction held on such date of direct obligations of the United States
("Treasury Bills") having the Index Maturity designated in the applicable
Pricing Supplement, as published in H.15(519) under the heading "Treasury
Bills -- auction average (investment)" or, if not so published by 9:00 A.M., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, the auction average rate on such Interest Determination Date
(expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) as otherwise announced by the United
States Department of the Treasury. In the event that the results of the auction
of Treasury Bills having the Index Maturity designated in the applicable Pricing
Supplement are not published or reported as provided above by 3:00 P.M., New
York City time, on such Calculation Date or if no such auction is held on such
Interest Determination Date, then the Treasury Rate shall be calculated by the
Calculation Agent and shall be a yield to maturity (expressed as a bond
equivalent, on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) calculated using the arithmetic mean of the secondary
market bid rates, as of approximately 3:30 P.M., New York City time, on such
Interest Determination Date, of three leading primary United States government
securities dealers selected by the Calculation Agent (after consultation with
the Company) for the issue of Treasury Bills with a remaining maturity closest
to the Index Maturity designated in the applicable Pricing Supplement; provided,
however, that if the dealers selected as aforesaid by the Calculation Agent are
not quoting bid rates as mentioned in this sentence, the Treasury Rate for such
Interest Reset Date will be the same as the Treasury Rate for the immediately
preceding Interest Reset Period (or, if there was no such Interest Reset Period,
the rate of interest payable on the Treasury Rate Notes for which the Treasury
Rate is being determined shall be the Initial Interest Rate).
CMT Rate Notes
CMT Rate Notes will bear interest at the interest rate (calculated with
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the CMT Rate Notes and in the applicable Pricing Supplement.
Unless otherwise indicated in an applicable Pricing Supplement, "CMT Rate"
means, with respect to any Interest Determination Date, the rate displayed on
the Designated CMT Telerate Page (as defined below) under the caption
"... Treasury Constant Maturities ... Federal Reserve Board Release
H.15 ... Mondays Approximately 3:45 p.m.," under the column for the Designated
CMT Maturity Index (as defined below) for (i) if the Designated CMT Telerate
Page is 7055, the rate on such Interest Determination Date and (ii) if the
Designated CMT Telerate Page is 7052, the week or the month, as applicable,
ended immediately preceding the week in which the related Interest Determination
Date occurs. If such rate is no longer displayed on the relevant page, or if not
displayed by 3:00 p.m., New York City time, on the related Calculation Date,
then the CMT Rate for such Interest Determination Date will be such Treasury
Constant Maturity rate for the Designated CMT Maturity Index as published in the
relevant H.15(519). If such rate is no longer published, or, if not published by
3:00 p.m., New York City time, on the related Calculation Date, then the CMT
Rate for such Interest Determination Date will be such Treasury Constant
Maturity rate for the Designated CMT Maturity Index (or other United States
Treasury rate for the Designated CMT Maturity Index) for the Interest
Determination Date with respect to such Interest Reset Date as may then be
published by either the Board of Governors of the Federal Reserve System or the
United States Department of the Treasury that the Calculation Agent determines
to be comparable to the rate formerly displayed on the Designated CMT Telerate
Page and published in the relevant H.15(519). If such information is not
provided by 3:00 p.m., New York City time, on the related Calculation Date, then
the CMT Rate for the Interest Determination Date will be calculated by the
Calculation Agent and will be a yield to maturity, based on the arithmetic mean
of the secondary market closing offer side prices as of approximately 3:30 p.m.,
New York City time, on the Interest
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Determination Date reported, according to their written records, by three
leading primary United States government securities dealers (each, a "Reference
Dealer") in The City of New York (which may include the Agents or their
affiliates) selected by the Calculation Agent (from five such Reference Dealers
selected by the Calculation Agent, after consultation with the Company, and
eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest)), for the most recently issued direct noncallable fixed rate obligations
of the Unites States ("Treasury notes") with an original maturity of
approximately the Designated CMT Maturity Index and remaining term to maturity
of not less than such Designated CMT Maturity Index minus one year. If the
Calculation Agent cannot obtain three such Treasury notes quotations, the CMT
Rate for such Interest Determination Date will be calculated by the Calculation
Agent and will be a yield to maturity based on the arithmetic mean of the
secondary market offer side prices as of approximately 3:30 p.m., New York City
time, on the Interest Determination Date of three Reference Dealers in The City
of New York (from five such Reference Dealers selected by the Calculation Agent
and eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest)), for Treasury notes with an original maturity of the number of years
that is the next highest to the Designated CMT Maturity Index and a remaining
term to maturity closest to the Designated CMT Maturity Index and in an amount
of at least $100,000,000. If three or four (and not five) of such Reference
Dealers are quoting as described above, then the CMT Rate will be based on the
arithmetic mean of the offer prices obtained and neither the highest nor the
lowest of such quotes will be eliminated; provided however, that if fewer than
three Reference Dealers selected by the Calculation Agent are quoting as
described herein, the CMT Rate for such Interest Reset Date will be the same as
the CMT Rate for the immediately preceding Interest Reset Period (or, if there
was no such Interest Reset Period, the rate of interest payable on the CMT Rate
Notes for which the CMT Rate is being determined shall be the Initial Interest
Rate). If two Treasury notes with an original maturity as described in the third
preceding sentence have remaining terms to maturity equally close to the
Designated CMT Maturity Index, the quotes for the Treasury note with the shorter
remaining term to maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page designated in an applicable Pricing Supplement (or any other
page as may replace such page on that service for the purpose of displaying
Treasury Constant Maturities as reported in H.15(519)), for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519). If no such
page is specified in the applicable Pricing Supplement, the Designated CMT
Telerate Page shall be 7052, for the most recent week.
"Designated CMT Maturity Index" shall be the original period to maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years)
specified in an applicable Pricing Supplement with respect to which the CMT Rate
will be calculated. If no such maturity is specified in the applicable Pricing
Supplement, the Designated CMT Maturity Index shall be two years.
INDEXED NOTES
The Notes may be issued, from time to time, as Notes where the principal
amount payable at Maturity and/or on which the amount of interest payable on an
Interest Payment Date will be determined by reference to currencies, currency
units, commodity prices, financial or non-financial indices or other factors
("Indexed Notes"), as indicated in the applicable Pricing Supplement. Holders of
Indexed Notes may receive a principal amount at Maturity that is greater than or
less than the face amount of such Notes depending upon the fluctuation of the
relative value, rate or price of the specified index. Specific information
pertaining to the method for determining the principal amount payable at
Maturity, a historical comparison of the relative value, rate or price of the
specified index and the face amount of the Indexed Note and certain additional
United States federal income tax consequences will be described in the
applicable Pricing Supplement.
BOOK-ENTRY SYSTEM
Upon issuance, all Fixed Rate Global Notes having the same Issue Date,
interest rate, if any, amortization schedule, if any, Stated Maturity and other
terms, if any, will be represented by one or more Global Securities, and all
Floating Rate Global Notes having the same Issue Date, Initial Interest Rate,
Base
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Rate, Interest Reset Dates, Interest Payment Dates, Index Maturity, Spread
and/or Spread Multiplier, if any, Minimum Interest Rate, if any, Maximum
Interest Rate, if any, Stated Maturity and other terms, if any, will be
represented by one or more Global Securities. Each Global Security representing
Global Notes will be deposited with, or on behalf of, The Depository Trust
Company, New York, New York (the "Depositary"), and registered in the name of a
nominee of the Depositary. Global Notes will not be exchangeable for
Certificated Notes, except under the circumstances described below. Certificated
Notes will not be exchangeable for Global Notes and will not otherwise be
issuable as Global Notes.
The Depositary has advised the Company and the Agents as follows: the
Depositary is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended. The Depositary holds securities that its participants
("Participants") deposit with the Depositary. The Depositary facilitates the
settlement among Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. "Direct Participants" include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. The Depositary is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the Depositary's system is also available to others such as banks, securities
brokers and dealers and trust companies that clear through or maintain a
custodial relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The Rules applicable to the Depositary and its
participants are on file with the Securities and Exchange Commission.
Purchase of interests in the Global Notes under the Depositary's system
must be made by or through Direct Participants, which will receive a credit for
such interests on the Depositary's records. The ownership interest of each
actual purchaser of interests in the Global Notes ("Beneficial Owner") is in
turn to be recorded on the Direct and Indirect Participants' records. Beneficial
Owners will not receive written confirmation from the Depositary of their
purchase, but Beneficial Owners are expected to receive written confirmations
providing details of the transactions, as well as periodic statements of their
holdings, from the Direct or Indirect Participant through which the Beneficial
Owner entered into the transaction. Transfers of ownership interests in the
Global Notes are to be accomplished by entries made on the books of Participants
acting on behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in the Global Notes, except
as described below.
To facilitate subsequent transfers, all Global Notes deposited by
Participants with the Depositary are registered in the name of the Depositary's
partnership nominee, Cede & Co. The deposit of Global Notes with the Depositary
and their registration in the name of Cede & Co. effect no change in beneficial
ownership. The Depositary has no knowledge of the actual Beneficial Owners of
the interests in the Global Notes; the Depositary's records reflect only the
identity of the Direct Participants to whose accounts interests in the Global
Notes are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by the Depositary to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all the
interests in the Global Notes are being redeemed, the Depositary's practice is
to determine by lot the amount of the interest of each Direct Participant in
such Global Note to be redeemed.
Neither the Depositary nor Cede & Co. will consent or vote with respect to
the Global Notes. Under its usual procedures, the Depositary mails an Omnibus
Proxy to the issuer as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants to
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whose accounts interests in the Global Notes are credited on the record date
(identified in a listing attached to the Omnibus Proxy).
Principal and interest payments on the Global Notes will be made to the
Depositary. The Depositary's practice is to credit Direct Participants' accounts
on the payment date in accordance with their respective holdings shown on the
Depositary's records unless the Depositary has reason to believe that it will
not receive payment on the payment date. Payments by Participants to Beneficial
Owners will be governed by standing instructions and customary practices, as is
the case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such Participant
and not of the Depositary, the Trustee, the Company, any paying agent or any
securities registrar, subject to any statutory or regulatory requirements as may
be in effect from time to time. Payment of principal and interest to the
Depositary is the responsibility of the Company or its paying agent,
disbursement of such payments to Direct and Indirect Participants shall be the
responsibility of the Depositary, and disbursement of such payments to the
Beneficial Owners shall be the responsibility of Direct and Indirect
Participants.
The Depositary may discontinue providing its services as depositary with
respect to the Notes at any time by giving reasonable notice to the Company or
its paying agent. Under such circumstances, in the event that a successor
depositary is not obtained, Certificated Notes are required to be printed and
delivered. The Company may decide to discontinue use of the system of book-entry
transfers through the Depositary (or a successor depositary). In that event,
Certificated Notes will be printed and delivered.
Unless and until it is exchanged in whole or in part for Certificated Notes
of such series in definitive form, a Global Note may not be transferred except
as a whole by the Depositary to a nominee of such Depositary or by a nominee of
such Depositary to such Depositary or another nominee of such Depositary or by
such Depositary or any such nominee to a successor of such Depositary or nominee
of such successor.
The Global Notes represented by one or more Global Securities are
exchangeable for Certificated Notes in definitive form of like tenor if (i) the
Depositary for such Global Notes notifies the Company and the Trustee in writing
that it is unwilling or unable to continue as Depositary for such Global Notes
or if at any time such Depositary ceases to be a clearing agency registered
under the Securities Exchange Act of 1934, as amended, and, in either case, a
successor depositary is not appointed by the Company within 90 days, (ii) the
Company in its sole discretion determines not to have all of the Notes
represented by one or more Global Note or Notes and notifies the Trustee
thereof, or (iii) an Event of Default or an event which, with the giving of
notice or lapse of time, or both, would constitute an Event of Default has
occurred and is continuing with respect to the Notes. Any Global Note that is
exchangeable pursuant to the preceding sentence is exchangeable for Certificated
Notes issuable in authorized denominations and registered in such names as the
Depositary holding such Global Note shall direct. Subject to the foregoing, a
Global Note is not exchangeable, except for a Global Note or Global Notes of the
same aggregate denomination to be registered in the name of such Depositary or
its nominee or in the name of a successor of such Depositary or a nominee of
such successor.
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
OPTIONAL REDEMPTIONS
The Pricing Supplement will indicate that the Notes cannot be redeemed
prior to Stated Maturity or will indicate the terms on which the Notes will be
redeemable at the option of the Company. Notice of redemption will be provided
by mailing a notice of such redemption to each Holder by first class mail,
postage prepaid, at least 30 days and not more than 60 days prior to the date
fixed for redemption to the respective address of each Holder as that address
appears upon the books maintained by the Trustee. Unless otherwise provided in
the applicable Pricing Supplement, the Notes, except for Amortizing Notes, will
not be subject to any sinking fund.
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REPAYMENT AT THE NOTEHOLDERS' OPTION; REPURCHASE
If applicable, the Pricing Supplement relating to each Note will indicate
that the Note will be repayable at the option of the Holder on a date or dates
specified prior to its Stated Maturity and, unless otherwise specified in such
Pricing Supplement, at a price equal to 100% of the principal amount thereof,
together with accrued interest to the date of repayment, unless such Note was
issued with original issue discount, in which case the Pricing Supplement will
specify the amount payable upon such repayment.
In order for such a Note to be repaid, the Trustee must receive not less
than 15 nor more than 30 days prior to the repayment date (i) the Note with the
form entitled "Option to Elect Repayment" on the reverse of the Note duly
completed or (ii) a telegram, telex, facsimile transmission or a letter from a
member of a national securities exchange, or the National Association of
Securities Dealers, Inc. (the "NASD") or a commercial bank or trust company in
the United States setting forth the name of the Holder of the Note, the
principal amount of the Note, the principal amount of the Note to be repaid, the
certificate number or a description of the tenor and terms of the Note, a
statement that the option to elect repayment is being exercised thereby and a
guarantee that the Note to be repaid, together with the duly completed form
entitled "Option to Elect Repayment" on the reverse of the Note, will be
received by the Trustee not later than the fifth Business Day after the date of
such telegram, telex, facsimile transmission or letter, provided, however, that
such telegram, telex, facsimile transmission or letter shall only be effective
if such Note and form duly completed are received by the Trustee by such fifth
Business Day. Unless otherwise specified in the applicable Pricing Supplement,
exercise of the repayment option by the Holder of a Note will be irrevocable.
The repayment option may be exercised by the Holder of a Note for less than the
entire principal amount of the Note but, in that event, the principal amount of
the Note remaining outstanding after repayment must be an Authorized
Denomination.
If a Note is represented by a Global Security, the Depositary's nominee
will be the Holder of such Note and therefore will be the only entity that can
exercise a right to repayment. In order to ensure that the Depositary's nominee
will timely exercise a right to repayment with respect to a particular Note, the
Beneficial Owner of such Note must instruct the broker or other Direct or
Indirect Participant through which it holds an interest in such Note to notify
the Depositary of its desire to exercise a right to repayment. Different firms
have different deadlines for accepting instructions from their customers and,
accordingly, each Beneficial Owner should consult the broker or other Direct or
Indirect Participant through which it holds an interest in a Note in order to
ascertain the deadline by which such an instruction must be given in order for
timely notice to be delivered to the Depositary.
The Company may purchase Notes at any price in the open market or
otherwise. Notes so purchased by the Company may, at the discretion of the
Company, be held or resold or surrendered to the Trustee for cancellation.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain United States federal income tax
consequences of the ownership of Notes as of the date hereof. This summary is
based on the Internal Revenue Code of 1986 (the "Code") as well as final,
temporary and proposed Treasury regulations and administrative and judicial
decisions. Legislative, judicial and administrative changes may occur, possibly
with retroactive effect, that could affect the accuracy of the statements set
forth herein. This summary does not purport to address all federal income tax
matters that may be relevant to particular purchasers of Notes. For example, it
generally is addressed only to original purchasers of the Notes, deals only with
Notes held as capital assets within the meaning of Section 1221 of the Code, and
does not address tax consequences of holding Notes that may be relevant to
investors in special tax situations, such as banks, insurance companies,
tax-exempt organizations, dealers in securities or currencies, Notes held as a
hedge or as part of a hedging, straddle or conversion transaction, or holders
whose "functional currency" (as defined in Code section 985) is not the United
States dollar. In the event the Company intends to issue Indexed Notes, the
applicable Pricing Supplement will describe relevant federal income tax
consequences. Persons considering the purchase of Notes should consult their own
tax advisors concerning the application of United States federal income tax
laws, as well as any state, local, foreign
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or other tax laws, to their particular situations. Additional United States
federal income tax consequences applicable to particular Notes may be set forth
in the applicable Pricing Supplement.
PAYMENT OF INTEREST
Except as set forth below, interest on a Note will be taxable to a holder
as ordinary interest income at the time it accrues or is received, in accordance
with the holder's method of accounting for tax purposes. Special rules governing
the treatment of Notes issued at an original issue discount are described under
"Original Issue Discount" below.
ORIGINAL ISSUE DISCOUNT
The following is a summary of the principal federal income tax consequences
of the ownership of Notes issued at an original issue discount. It is based in
part upon the rules governing original issue discount that are set forth in Code
sections 1271 through 1275 and in Treasury regulations thereunder (the "OID
Regulations"). On December 15, 1994, the Internal Revenue Service ("IRS") issued
proposed Treasury regulations relating to contingent payment debt instruments,
which also contained proposed amendments to the OID Regulations with regard to
variable rate debt instruments (the "Proposed Regulations"). In general, the
Proposed Regulations are proposed to be effective for debt instruments issued on
or after the date that is 60 days after final regulations are published. The
following summary does not discuss the application of the Proposed Regulations
to, or address the federal income tax consequences of, an investment in
contingent payment debt instruments. In the event the Company issues contingent
payment debt instruments, such as Indexed Notes, the applicable Pricing
Supplement will describe the material federal income tax consequences thereof.
A Note which has an "issue price" of less than its "stated redemption price
at maturity" generally will be issued at an original issue discount for federal
income tax purposes. The issue price of a Note generally is the first price at
which a substantial amount of the issue of Notes is sold to the public
(excluding bond houses, brokers, or similar persons acting in the capacity of
underwriters or wholesalers). The "stated redemption price at maturity" is the
total amount of all payments provided by the Note other than "qualified stated
interest" payments; qualified stated interest generally is stated interest that
is unconditionally payable at least annually either at a single fixed rate, or,
to the extent described below, at a "qualifying variable rate." Qualified stated
interest will be taxable to a holder when accrued or received in accordance with
such holder's method of tax accounting. A Note generally will be considered to
have de minimis original issue discount if the excess of its stated redemption
price at maturity over its issue price is less than the product of 0.25 percent
of the stated redemption price at maturity and the number of complete years to
maturity (or the "weighted average maturity" in the case of a Note that provides
for payment of an amount other than qualified stated interest before maturity).
Holders of Notes having de minimis original issue discount generally must
include a proportionate amount of the de minimis original issue discount in
income as each payment of stated principal is made as a payment received in
retirement of the Note.
Holders of Notes issued at an original issue discount that is not de
minimis original issue discount and that mature more than one year from the date
of issuance will be required to include such original issue discount in gross
income for federal income tax purposes as it accrues, in advance of receipt of
the cash attributable to such income. Original issue discount accrues based on a
compounded, constant yield to maturity; accordingly, holders of Notes issued at
an original issue discount generally will be required to include in income
increasingly greater amounts of original issue discount in successive accrual
periods. The annual amount of original issue discount includible in income by
the initial holder of a Note issued at an original issue discount will equal the
sum of the daily portions of the original issue discount with respect to the
Note for each day on which such holder held the Note during the taxable year.
Generally, the daily portions of the original issue discount are determined by
allocating to each day in an accrual period the ratable portion of the original
issue discount allocable to such accrual period. The term "accrual period" means
any interval of time with respect to which the accrual of original issue
discount is measured, and which may vary in length over the term of the Note
provided that each accrual period is no longer than one year and each scheduled
payment of principal or interest occurs at the beginning or end of an accrual
period. The amount of original issue discount
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allocable to an accrual period will be the excess of (a) the product of the
"adjusted issue price" of the Note at the commencement of such accrual period
and its "yield to maturity" over (b) the amount of any qualified stated interest
payments allocable to the accrual period. The "adjusted issue price" of the Note
at the beginning of the first accrual period is its issue price, and, on any day
thereafter, it is the sum of the issue price and the amount of the original
issue discount previously includible in the gross income of any holder (without
regard to any acquisition premium), reduced by the amount of any payment other
than a payment of qualified stated interest previously made with respect to the
Note. The OID Regulations provide a special rule for determining the original
issue discount allocable to an accrual period if an interval between payments of
qualified stated interest contains more than one accrual period. The "yield to
maturity" of the Note is computed on the basis of a constant interest rate,
compounding at the end of each accrual period, taking into account the length of
the particular accrual period. If all accrual periods are of equal length except
for an initial or an initial and final shorter accrual period(s), the amount of
original issue discount allocable to the initial period may be computed using
any reasonable method; the original issue discount allocable to the final
accrual period is in any event the difference between the amount payable at
maturity (other than a payment of qualified stated interest) and the adjusted
issue price at the beginning of the final accrual period.
For purposes of calculating the yield and maturity of a Note subject to an
issuer or holder right to accelerate principal repayment (respectively, a "call
option" or "put option"), such call option or put option is presumed exercised
if the yield on the Note would be less or more, respectively, than it would be
if the option were not exercised. The effect of this rule generally may be to
accelerate or defer the inclusion of original issue discount in the income of a
holder whose Note is subject to a put option or a call option, as compared to a
Note that does not have such an option. If any such option presumed to be
exercised is not in fact exercised, the Note is treated as reissued on the date
of presumed exercise for an amount equal to its adjusted issue price on that
date for purposes of redetermining such Note's yield and maturity and any
related subsequent accruals of original issue discount. Purchasers of Notes with
such features should carefully review the applicable Pricing Supplement and
should consult their own tax advisors with respect to the consequences of a Note
having such an option.
Special considerations relate to the calculation of interest income and
original issue discount with respect to Floating Rate Notes. Such notes
generally will bear interest at a "qualified floating rate" and thus will be
treated as "variable rate debt instruments" under the OID Regulations. Such
Notes will be treated as described in the following paragraph. Floating Rate
Notes that are not treated as variable rate debt instruments or that have an
issue price that exceeds the total noncontingent principal payments by more than
a specified minimum amount will be treated as contingent payment debt
instruments. The Pricing Supplement applicable to any such debt instrument will
describe the material federal income tax consequences of the ownership of such
instrument.
If a Note qualifies as a variable rate debt instrument, the OID Regulations
specify rules for determining the amount of qualified stated interest and the
amount and accrual of any original issue discount. If the Note bears interest
that is unconditionally payable at least annually at a single qualified floating
rate or objective rate, all stated interest is treated as qualified stated
interest. The accrual of any original issue discount is determined by assuming
the Note bears interest at a fixed interest rate equal to the issue date value
of the qualified floating rate or qualified inverse floating rate, or equal to
the reasonably expected yield for the Note in the case of any other objective
rate. The Proposed Regulations clarify that the qualified stated interest
allocable to an accrual period is increased (or decreased) if the interest
actually paid during an accrual period exceeds (or is less than) the interest
assumed to be paid during the accrual period; such clarification is proposed to
be effective for debt instruments issued on or after April 4, 1994. If the Note
bears interest at a rate that is not a single qualified floating rate or
objective rate, the amount of interest and accruals of original issue discount
generally are determined by (i) determining a fixed rate substitute for each
variable rate as described above, (ii) determining the amount of qualified
stated interest and original issue discount by assuming the Note bears interest
at such substitute fixed rates, and (iii) making appropriate adjustments to the
qualified stated interest and original issue discount so determined for actual
interest paid under the Note. However, if such qualifying variable rate includes
a fixed rate, the Note first is treated for purposes of applying clause (i) of
the preceding sentence as if it provided for an assumed qualified floating rate
(or qualified inverse
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floating rate if the actual variable rate is such) in lieu of the fixed rate;
the assumed variable rate would be a rate that would cause the Note to have
approximately the same fair market value.
In general, an individual or other cash method holder of a Note that
matures one year or less from the date of its issuance (a "Short-term Note") is
not required to accrue original issue discount for federal income tax purposes
unless it elects to do so. Holders who report income for federal income tax
purposes on the accrual method and certain other holders, including banks,
regulated investment companies and dealers in securities, are required to
include original issue discount on such Notes on a straight-line basis, unless
an election is made to accrue the original issue discount according to a
constant yield method based on daily compounding. In the case of a holder who is
not required and does not elect to include original issue discount in income
currently, any gain realized on the sale, exchange or retirement of such a Note
will be ordinary income to the extent of the original issue discount accrued on
a straight-line basis (or, if elected, according to a constant yield method
based on daily compounding) through the date of sale, exchange or retirement. In
addition, such non-electing holders who are not subject to the current inclusion
requirement described in this paragraph will be required to defer deductions for
any interest paid on indebtedness incurred or continued to purchase or carry
such Notes in an amount not exceeding the deferred interest income, until such
deferred interest income is realized. As described elsewhere herein, certain of
the Notes may be subject to special put, call, and renewal options. These
options may affect the determination of whether a Note has a maturity of not
more than one year and thus is a Short-term Note. Purchasers of Notes with such
options should carefully review the applicable Pricing Supplement and should
consult their own tax advisors with respect to such features.
RENEWABLE AND EXTENDIBLE NOTES
A holder of a Note with a Stated Maturity that may be extended at the
option of the holder (a "Renewable Note"), or at the option of the Company (an
"Extendible Note"), will determine yield and maturity of the Note depending upon
whether the option to extend is treated as exercised. The option to extend shall
be treated as exercised if the resulting yield would be greater than (in the
case of a Renewable Note), or equal to or less than (in the case of an
Extendible Note), it would be if the option to extend were not exercised.
Correspondingly, the option to extend shall be treated as not exercised if the
resulting yield would be equal to or less than (in the case of a Renewable
Note), or greater than (in the case of an Extendible Note), it would be if the
option to extend were exercised. A Renewable or an Extendible Note will not be
considered to have original issue discount if the difference between the Note's
stated redemption price at maturity determined under the foregoing rules and its
issue price is less than 0.25% of the stated redemption price at maturity as so
determined multiplied by the number of complete years to the Note's Stated
Maturity (or, the weighted average maturity, if applicable).
In addition, there is a possibility that if the Stated Maturity of a
Renewable or an Extendible Note is extended the holder may be treated for
federal income tax purposes as having exchanged such Note (the "Old Note") for a
new Note with revised terms (the "New Note"). If the holder is treated as having
exchanged the Old Note for the New Note, such exchange may be treated as either
a taxable exchange or a tax-free recapitalization, possibly on the day of the
agreement to exercise the option even though the extension may not be
immediately effective, with differing consequences under the original issue
discount rules. On the other hand, if the holder is not treated as exchanging
the Old Note for the New Note, no gain or loss will be recognized as a result
thereof. Holders of Notes should consult their own tax advisors regarding the
tax consequences of holding and disposing of the Renewable or Extendible Notes,
including the decision whether to elect to extend the Stated Maturity.
MARKET DISCOUNT AND PREMIUM
If a holder purchases a Note (other than a Short-term Note) for an amount
that is less than the Note's stated redemption price at maturity, or, in the
case of a Note issued at an original issue discount, less than its adjusted
issue price (as defined above) as of the date of purchase, the amount of the
difference generally will be treated as "market discount" for federal income tax
purposes. A Note acquired at its original issue will not have market discount
unless the Note is purchased at less than its issue price. Market discount
generally will
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be de minimis and hence disregarded, however, if it is less than the product of
0.25 percent of the stated redemption price at maturity of the Note and the
number of remaining complete years to maturity (or weighted average maturity in
the case of Notes paying any amount other than qualified stated interest prior
to maturity). Under the market discount rules, a holder is required to treat any
principal payment on, or any gain on the sale, exchange, retirement or other
disposition of, a Note as ordinary income to the extent of any accrued market
discount which has not previously been included in income. If such Note is
disposed of in a nontaxable transaction (other than certain specified
nonrecognition transactions), accrued market discount will be includible as
ordinary income to the holder as if such holder had sold the Note at its then
fair market value. In addition, the holder may be required to defer, until the
maturity of the Note or its earlier disposition in a taxable transaction, the
deduction of all or a portion of the interest expense on any indebtedness
incurred or continued to purchase or carry such Note.
Market discount is considered to accrue ratably during the period from the
date of acquisition to the maturity of a Note, unless the holder elects to
accrue on a constant yield basis. A holder of a Note may elect to include market
discount in income currently as it accrues (on either a ratable or constant
yield basis), in which case the rule described above regarding deferral of
interest deductions will not apply. This election to include market discount
currently applies to all market discount obligations acquired during or after
the first taxable year to which the election applies, and may not be revoked
without the consent of the IRS.
A holder who purchases a Note issued at an original issue discount for an
amount exceeding its adjusted issue price (as defined above) and less than or
equal to the sum of all amounts payable on the Note after the purchase date
other than payments of qualified stated interest will be considered to have
purchased such Note with "acquisition premium." The amount of original issue
discount which such holder must include in gross income with respect to such
Note will be reduced in the proportion that such excess bears to the original
issue discount remaining to be accrued as of the Note's acquisition.
A holder who acquires a Note for an amount that is greater than the sum of
all amounts payable on the Note after the purchase date other than payments of
qualified stated interest will be considered to have purchased such Note at a
premium, and will not be required to include any original issue discount in
income. A holder generally may elect to amortize such premium using a constant
yield method over the remaining term of the Note and offset such amortizable
premium against interest income on the Note. Any such election shall apply to
all debt instruments (other than debt instruments the interest on which is
excludable from gross income) held at the beginning of the first taxable year to
which the election applies or thereafter acquired, and is irrevocable without
consent of the IRS. Special rules may apply if a Note is subject to call prior
to maturity at a price in excess of its stated redemption price at maturity.
CONSTANT YIELD ELECTION
A holder of a Note may elect to include in income all interest, discount
and premium with respect to such Note based on a constant yield method, as
described above. The election is made for the taxable year in which the holder
acquires the Note, and it may not be revoked without the consent of the IRS. If
such election is made with respect to a Note having market discount, such holder
will be deemed to have elected to include market discount in gross income
currently on a constant yield basis with respect to all debt instruments having
market discount acquired during the year of election or thereafter. If made with
respect to a Note having amortizable bond premium, such holder will be deemed to
have made an election to amortize premium generally with respect to all debt
instruments having amortizable bond premium held by the taxpayer during the year
of election or thereafter.
SALE AND RETIREMENT OF THE NOTES
Upon the sale, exchange or retirement of a Note, a holder will recognize
taxable gain or loss equal to the difference between the amount realized from
the sale, exchange or retirement (less any accrued qualified stated interest
which will be taxable as such) and the holder's adjusted tax basis in the Note.
Such gain or loss generally will be capital gain or loss, except to the extent
of any accrued market discount (see "Market Discount and Premium" above), and
such capital gain or loss will generally be long term capital gain or loss if
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the Note has been held for more than one year. A holder's adjusted tax basis in
a Note will equal the cost of the Note, increased by any original issue discount
or market discount previously includible in taxable income by the holder with
respect to such Note, and reduced by any amortizable bond premium applied to
reduce interest on a Note, any principal payments received by the holder, and in
the case of Notes issued at an original issue discount, any other payments not
constituting qualified stated interest (as defined above).
The Code provides preferential treatment under certain circumstances for
net long-term capital gains realized by individual investors. The ability of
United States holders to offset capital losses against ordinary income is
limited. Special rules regarding the treatment of gain realized with respect to
Short-term Notes issued at an original issue discount are described under
"Original Issue Discount" above.
BACKUP WITHHOLDING AND INFORMATION REPORTING
A 31 percent "backup" withholding tax and certain information reporting
requirements may apply to payments of principal, premium and interest (including
any original issue discount) made to, and the proceeds of disposition of a Note
by, certain holders. Backup withholding will apply only if (i) the holder fails
to furnish its Taxpayer Identification Number ("TIN") to the payor, (ii) the IRS
notifies the payor that the holder has furnished an incorrect TIN, (iii) the IRS
notifies the payor that the holder has failed to report properly payments of
interest and dividends or (iv) under certain circumstances, the holder fails to
certify, under penalty of perjury, that it has both furnished a correct TIN and
not been notified by the IRS that it is subject to backup withholding for
failure to report interest and dividend payments. Backup withholding will not
apply with respect to payments made to certain exempt recipients, such as
corporations and financial institutions. Holders should consult their tax
advisors regarding their qualification for exemption from backup withholding and
the procedure for obtaining such an exemption.
The amount of any backup withholding from a payment to a holder will be
allowed as a credit against such holder's federal income tax liability and may
entitle such holder to a refund, provided that the required information is
furnished to the IRS.
NON-UNITED STATES HOLDERS
A "non-United States Holder" is any person other than (i) a citizen or
resident of the United States, (ii) a corporation or partnership organized in or
under the laws of the United States, any state thereof or the District of
Columbia, or (iii) an estate or trust the income of which is includible in gross
income for United States federal income tax purposes regardless of its source. A
non-United States Holder generally will not be subject to United States federal
withholding tax with respect to payments of interest on Notes, provided that (1)
such holder does not actually or constructively own 10 percent or more of the
total combined voting power of all classes of stock of the Company entitled to
vote, (2) such holder is not for United States federal income tax purposes a
controlled foreign corporation related to the Company through stock ownership,
(3) the beneficial owner of the Note certifies under penalties of perjury as to
its status as a non-United States Holder and complies with applicable
identification procedures, and (4) such payment is not a payment of "contingent
interest" described in Code section 871(h)(4). The applicable Pricing Supplement
will indicate if a Note is described in section 871(h)(4). In certain
circumstances, the above-described certification can be provided by a bank or
other financial institution. If the requirements listed above are not met, a
non-United States Holder may be subject to withholding at a rate of 30 percent,
or the lower treaty rate, whichever is applicable, or possibly to backup
withholding at a rate of 31 percent. Regardless of whether a non-United States
Holder is subject to withholding, information reporting is required.
In addition, a non-United States Holder of a Note generally will not be
subject to United States federal income tax on any gain realized upon the sale,
retirement or other disposition of a Note, unless such holder is an individual
who is present in the United States for 183 days or more during the taxable year
of such sale, retirement or other disposition and certain other conditions are
met. If a non-United States Holder of a Note is engaged in a trade or business
in the United States and income or gain from the Note is effectively connected
with the conduct of such trade or business, the non-United States Holder will be
exempt from withholding tax if appropriate certification has been provided, but
will generally be subject to regular United
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States income tax on such income and gain in the same manner as if it were a
United States holder. In addition, if such non-United States Holder is a foreign
corporation, it may be subject to a branch profits tax equal to 30 percent of
its effectively connected earnings and profits for the taxable year, subject to
adjustments.
Backup withholding will not apply to payments of principal, premium, if
any, and interest made to a non-United States Holder by the Company on a Note
with respect to which the holder has provided the required certification under
penalties of perjury of its non-United States Holder status or has otherwise
established an exemption, provided in each case that the Company or its paying
agent, as the case may be, does not have actual knowledge that the payee is a
United States person. Payments on the sale, exchange or other disposition of a
Note by a non-United States Holder to or through a foreign office of a broker
will not be subject to backup withholding. However, if such broker is a United
States person, a controlled foreign corporation for United States tax purposes
or a foreign person 50 percent or more of whose gross income is derived from its
conduct of a United States trade or business for a specified three-year period,
information reporting will be required unless the broker has in its records
documentary evidence that the beneficial owner is not a United States person and
certain other conditions are met or the beneficial owner otherwise establishes
an exemption. Payments to or through the United States office of a broker will
be subject to backup withholding and information reporting unless the holder
certifies under penalties of perjury to its non-United States Holder status or
otherwise establishes an exemption.
Non-United States Holders should consult their tax advisors regarding the
application of United States federal income tax laws, including information
reporting and backup withholding, to their particular situations.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis by the Company through
the Agents, who have agreed to use reasonable efforts to solicit offers to
purchase Notes. The Company will have the sole right to accept offers to
purchase Notes and may reject any offer to purchase Notes in whole or in part.
An Agent will have the right to reject any offer to purchase Notes solicited by
it in whole or in part. Payment of the purchase price of the Notes will be
required to be made in immediately available funds. The Company will pay an
Agent, in connection with sales of Notes resulting from a solicitation made or
an offer to purchase received by such Agent, a commission ranging from .125% to
.750% of the principal amount of Notes to be sold.
The Company may also sell Notes to an Agent as principal for its own
account at discounts to be agreed upon at the time of sale. Such Notes may be
resold to investors and other purchasers at prevailing market prices, or prices
related thereto at the time of such resale, as determined by the Agent or, if so
agreed, at a fixed public offering price. In addition, the Agents may offer the
Notes they have purchased as principal to other dealers. The Agents may sell
Notes to any dealer at a discount and, unless otherwise specified in the
applicable Pricing Supplement, such discount allowed to any dealer will not be
in excess of the discount to be received by such Agent from the Company. After
the initial public offering of Notes to be resold to investors and other
purchasers, the public offering price (in the case of Notes to be resold at a
fixed public offering price) concession and discount may be changed.
The Company may accept (but not solicit) offers to purchase Notes through
additional agents and may appoint additional agents for the purpose of
soliciting offers to purchase Notes, in either case on terms substantially
identical to the terms contained in the Distribution Agreement. Such other
agents may also purchase Notes as principal for resale as described above. Such
other agents, if any, will be named in the applicable Pricing Supplement.
An Agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933 (the "Securities Act"). The Company and the Agents have
agreed to indemnify each other against certain liabilities, including
liabilities under the Securities Act, or to contribute to payments made in
respect thereof. The Company has also agreed to reimburse the Agents for certain
expenses.
The Company does not intend to apply for the listing of the Notes on a
national securities exchange. The Company has been advised by the Agents that
the Agents intend to make a market in the Notes, as permitted
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by applicable laws and regulations. The Agents are not obligated to do so,
however, and the Agents may discontinue making a market at any time without
notice. No assurance can be given as to the liquidity of any trading market for
the Notes.
The Agents and/or certain of their affiliates may engage in transactions
with and perform services for the Company and certain of its affiliates in the
ordinary course of business.
VALIDITY OF NOTES
The validity of the Notes will be passed upon for the Company by Orrick,
Herrington & Sutcliffe, San Francisco, California, counsel for the Company, and
for the Agents by Wilson, Sonsini, Goodrich & Rosati, Professional Corporation,
Palo Alto, California.
The opinions of counsel will be conditioned upon, and subject to certain
assumptions regarding, future actions required to be taken by the Company in
connection with the issuance and sale of any particular Note, the specific terms
of Notes and other matters which may affect the validity of the Notes but which
cannot be ascertained on the date of such opinions.
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<PAGE> 23
PROSPECTUS
(LOGO - Applied Materials, Inc.)
DEBT SECURITIES AND COMMON STOCK
------------------------
Applied Materials, Inc. ("Applied Materials" or the "Company") from time to
time may offer its debt securities consisting of senior debentures, notes, bonds
and/or other evidences of indebtedness in one or more series ("Debt Securities")
and shares of Common Stock, $.01 par value, of the Company ("Common Stock") with
an aggregate initial public offering price of up to $600,000,000 or the
equivalent thereof in one or more foreign currencies or composite currencies,
including European Currency Units ("ECU"). The Debt Securities and the Common
Stock (collectively, the "Securities") may be offered, separately or together,
in separate series in amounts, at prices, and on terms to be set forth in a
supplement to this Prospectus (a "Prospectus Supplement").
The Securities may be sold for U.S. Dollars, one or more foreign currencies
or amounts determined by reference to an index and the principal of and any
interest on the Debt Securities may likewise be payable in U.S. Dollars, one or
more foreign currencies or amounts determined by reference to an index.
The Debt Securities will rank equally with all other unsubordinated and
unsecured indebtedness of the Company. See "Description of Debt Securities."
The specific terms of the Securities in respect of which this Prospectus is
being delivered, such as where applicable, (i) in the case of Debt Securities,
the specific designation, aggregate principal amount, currency, denomination,
maturity, premium, rate (or manner of calculation thereof) and time of payment
of interest, terms for redemption at the option of the Company or the holder or
for sinking fund payments, and the initial public offering price and (ii) in the
case of Common Stock, the number of shares and the initial public offering price
or method of determining the initial public offering price, will be set forth in
an accompanying Prospectus Supplement. See "Description of Debt Securities" and
"Description of Capital Stock."
The Securities may be sold through underwriting syndicates led by one or
more managing underwriters or through one or more underwriters acting alone. The
Securities may also be sold directly by the Company or through agents designated
from time to time. If any underwriters or agents are involved in the sale of the
Securities, their names, the principal amount of Securities to be purchased by
them and any applicable fee, commission or discount arrangements with them will
be set forth in the Prospectus Supplement. See "Plan of Distribution."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
THE DATE OF THIS PROSPECTUS IS JUNE 28, 1995.
<PAGE> 24
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington D.C. 20549, and
at Regional Offices of the Commission located at Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and at Seven World
Trade Center, 13th Floor, New York, New York 10048. Copies of such material can
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington D.C. 20549, at prescribed rates. Such reports, proxy
statements and other information may also be inspected at the offices of the
National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington D.C. 20006.
This Prospectus does not contain all the information set forth in the
Registration Statement on Form S-3 (the "Registration Statement") of which this
Prospectus is a part, including exhibits relating thereto, which has been filed
with the Commission in Washington, D.C. Statements made in this Prospectus as to
the contents of any referenced contract, agreement or other document are not
necessarily complete, and each such statement shall be deemed qualified in its
entirety by reference thereto. Copies of the Registration Statement and the
exhibits and schedules thereto may be obtained, upon payment of the fee
prescribed by the Commission, or may be examined without charge, at the office
of the Commission.
INFORMATION INCORPORATED BY REFERENCE
The following documents have been filed with the Commission and are
incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
October 30, 1994 (which incorporates by reference portions of the Company's
definitive Proxy Statement dated January 31, 1995 for the Company's Annual
Meeting of Stockholders held on March 14, 1995 and portions of its 1994
Annual Report to Stockholders for the year ended October 30, 1994);
(b) The Company's Quarterly Reports on Form 10-Q for the quarters
ended January 29, 1995 and April 30, 1995; and
(c) The description of the Company's Common Stock and Common Stock
Purchase Rights contained in its Registration Statement on Form 8-A, filed
on April 5, 1994.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Securities offered hereby shall be deemed to
be incorporated by reference in this Prospectus.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of the Registration Statement or this Prospectus to the extent that
a statement contained herein, in a Prospectus Supplement or in any other
document subsequently filed with the Commission which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superceded shall not be deemed, except as so modified
or superseded, to constitute a part of the Registration Statement or this
Prospectus.
The Company will furnish without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the written or oral
request of such person, a copy of any or all of the documents incorporated by
reference, other than exhibits to such documents. Requests should be directed to
Director, Investor Relations, Applied Materials, Inc., 3050 Bowers Avenue, Santa
Clara, California 95054-3299; telephone number (408) 727-5555.
2
<PAGE> 25
THE COMPANY
Applied Materials, Inc. ("Applied Materials" or the "Company") develops,
manufactures, markets and services semiconductor wafer fabrication equipment and
related spare parts for the worldwide semiconductor industry. The Company's
customers include both companies which manufacture semiconductor devices for use
in their own products and companies which manufacture semiconductor devices for
sale to others. The Company 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
fabrication systems for flat panel displays.
Applied Materials' products are sophisticated systems requiring
state-of-the-art technology in wafer processing chemistry and physics,
particulate management, process control, software and automation. 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
(primarily silicon). A finished device consists 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 major steps in wafer fabrication: deposition, etch and ion implantation.
The Company was incorporated in California in 1967 and reincorporated in
Delaware in 1987. Its principal executive offices are located at 3050 Bowers
Avenue, Santa Clara, California 95054-3299 (telephone number (408) 727-5555).
References to the Company or to Applied Materials shall mean Applied Materials,
Inc. and its consolidated subsidiaries, unless the context requires otherwise.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
Securities will be used for general corporate purposes, including increases in
working capital and expansion of facilities. The Company believes that success
in its industry requires substantial financial strength and flexibility. In
addition, the Company from time to time considers acquisitions of complementary
businesses, assets or technologies, and although there are no current agreements
or understandings with respect to any such acquisition, the Company desires to
be able to respond to opportunities as they arise. The Company is not
negotiating, discussing or planning any potential acquisition at this time.
Pending such uses, the Company will invest the net proceeds in investment-grade,
interest-bearing securities.
RATIO OF EARNINGS TO FIXED CHARGES
Set forth below is the ratio of earnings to fixed charges for each of the
years in the five-year period ended October 30, 1994, and for the six months
ended April 30, 1995 and May 1, 1994. For the purpose of calculating the ratio
of earnings to fixed charges, (i) earnings consists of income before taxes and
cumulative effect of accounting change plus fixed charges and (ii) fixed charges
consists of interest expense incurred, amortization of debt issuance expense and
the portion of rental expense under operating leases deemed by the Company to be
representative of the interest factor.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------- FISCAL YEAR ENDED
APRIL 30, MAY 1, --------------------------------------
1995 1994 1994 1993 1992 1991 1990
--------- ------- ------ ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed
Charges.......................... 13.39x 12.58x 13.37x 7.61x 3.63x 3.02x 5.89x
====== ====== ====== ===== ===== ===== =====
</TABLE>
3
<PAGE> 26
DESCRIPTION OF DEBT SECURITIES
The following statements with respect to the Debt Securities are summaries
of, and subject to, the detailed provisions of an indenture (the "Indenture")
entered into by the Company and Harris Trust Company of California, as trustee
(the "Trustee"), a copy of which is filed as an exhibit to the Registration
Statement. The following summaries of certain provisions of the Indenture do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all of the provisions of the Indenture, including the
definitions therein of certain terms. Wherever particular Sections or defined
terms of the Indenture are referred to herein or in a Prospectus Supplement,
such Sections or defined terms are incorporated herein or therein by reference.
Section and Article references used herein are references to the Indenture.
The Debt Securities may be issued from time to time in one or more series.
The particular terms of each series of Debt Securities offered by any Prospectus
Supplement or Prospectus Supplements will be described in such Prospectus
Supplement or Prospectus Supplements relating to such series.
GENERAL
The Indenture does not limit the aggregate amount of Debt Securities which
may be issued thereunder and Debt Securities may be issued thereunder from time
to time in separate series up to the aggregate amount from time to time
authorized by the Company for each series. The Debt Securities will be senior
unsecured obligations of the Company.
The applicable Prospectus Supplement or Prospectus Supplements will
describe the following terms of the series of Debt Securities in respect of
which this Prospectus is being delivered: (1) the title of the Debt Securities;
(2) any limit on the aggregate principal amount of the Debt Securities; (3) the
Person to whom any interest on a Debt Security shall be payable, if other than
the person in whose name that Debt Security is registered on the Regular Record
Date; (4) the date or dates on which the principal of the Debt Securities will
be payable; (5) the rate or rates at which the Debt Securities will bear
interest, if any, or the method by which such rate or rates are determined, the
date or dates from which such interest will accrue, the Interest Payment Dates
on which any such interest on the Debt Securities will be payable and the
Regular Record Date for any interest payable on any Interest Payment Date, and
the basis upon which interest will be calculated if other than that of a 360-day
year of twelve 30-day months; (6) the place or places where the principal of and
any premium and interest on the Debt Securities will be payable; (7) the period
or periods within which, the price or prices at which, and the terms and
conditions upon which the Debt Securities may be redeemed, in whole or in part,
at the option of the Company; (8) the obligation of the Company, if any, to
redeem or repurchase the Debt Securities pursuant to any sinking fund or
analogous provisions or at the option of the Holders and the period or periods
within which, the price or prices at which and the terms and conditions upon
which such Debt Securities shall be redeemed or purchased, in whole or in part,
pursuant to such obligation, and any provisions for the remarketing of such Debt
Securities; (9) the denominations in which any Debt Securities will be issuable,
if other than denominations of $1,000 and any integral multiple thereof; (10)
the currency, currencies or currency units in which payment of principal of and
any premium and interest on any Debt Securities shall be payable if other than
United States dollars; (11) any index, formula or other method used to determine
the amount of payments of principal of and any premium and interest on the Debt
Securities; (12) if the principal of or any premium or interest on any Debt
Securities is to be payable, at the election of the Company or the Holders, in
one or more currencies or currency units other than that or those in which such
Debt Securities are stated to be payable, the currency, currencies or currency
units in which payment of the principal of and any premium and interest on such
Debt Securities shall be payable, and the periods within which and the terms and
conditions upon which such election is to be made; (13) if other than the
principal amount thereof, the portion of the principal amount of the Debt
Securities which will be payable upon declaration of the acceleration of the
Maturity thereof; (14) the applicability of any provisions described under
"Defeasance and Covenant Defeasance"; (15) whether any of the Debt Securities
are to be issuable in permanent global form and, if so, the Depositary or
Depositaries for such Global Security and the terms and conditions, if any, upon
which interests in such Debt Securities in global form may be exchanged, in
whole or in part, for the individual Debt Securities represented thereby; (16)
the Security Registrar, if other than the
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<PAGE> 27
Trustee, and the entity who will be the Paying Agent; (17) any Events of
Default, with respect to the Debt Securities of such series, if not otherwise
set forth under "Events of Default"; (18) if other than the date of original
issuance by the Company of such series of Debt Securities, such other date as is
applicable to the Debt Securities of such series for purposes of the covenant
described under "Covenants of the Company -- Restrictions on Funded Debt of
Restricted Subsidiaries" below; and (19) any other terms of the Debt Securities
not inconsistent with the provisions of the Indenture. (Section 301)
Debt Securities may be issued as Original Issue Discount Securities to be
sold at a substantial discount from their principal amount. (Section 301) United
States Federal income tax consequences and other special considerations
applicable to any such Original Issue Discount Securities will be described in
the Prospectus Supplement relating thereto.
If any of the Debt Securities are sold for any foreign currency or currency
unit or if principal of, premium, if any, or interest, if any, on any of the
Debt Securities is payable in any foreign currency or currency unit, the
restrictions, elections, tax consequences, specific terms and other information
with respect to such Debt Securities and such foreign currency or currency unit
will be specified in the Prospectus Supplement relating thereto.
EXCHANGE, REGISTRATION, TRANSFER AND PAYMENT
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal, premium, if any, and interest, if any, on the Debt Securities will
be payable, and the exchange of and the transfer of Debt Securities will be
registrable, at the office or agency of the Company maintained for such purpose
and at any other office or agency maintained for such purpose. (Sections 305 and
1002) Unless otherwise indicated in the applicable Prospectus Supplement, the
Debt Securities will be issued in denominations of $1,000 or integral multiples
thereof. (Section 302) No service charge will be made for any registration of
transfer or exchange of Debt Securities, but the Company may require payment of
a sum sufficient to cover any tax or other governmental charge imposed in
connection therewith. (Section 305)
All moneys paid by the Company to a Paying Agent for the payment of
principal, premium, if any, or interest, if any, on any Debt Security which
remain unclaimed for two years after such principal, premium, or interest has
become due and payable may be repaid to the Company, and thereafter the Holder
of such Debt Security may look only to the Company for payment thereof. (Section
1003)
In the event of any redemption, the Company shall not be required to (i)
issue, register the transfer of or exchange Debt Securities of any series during
a period beginning at the opening of business 15 days before the day of the
mailing of a notice of redemption of Debt Securities of that series to be
redeemed and ending at the close of business on the day of such mailing or (ii)
register the transfer of or exchange any Debt Security, or portion thereof,
called for redemption, except the unredeemed portion of any Debt Security being
redeemed in part. (Section 305)
GLOBAL SECURITIES
If any Debt Securities of a series are issuable as Global Securities, the
applicable Prospectus Supplement will describe the circumstances, if any, under
which beneficial owners of interests in any such Global Security may exchange
such interests for Debt Securities of such series and of like tenor and
principal amount of any authorized form and denomination. Principal of and any
premium and interest on a Global Security will be payable in the manner
described in the Prospectus Supplement relating thereto.
COVENANTS OF THE COMPANY
Except as set forth below or as otherwise provided in the applicable
Prospectus Supplement with respect to any series of Debt Securities, the Company
is not restricted by the Indenture from incurring, assuming or becoming liable
for any type of debt or other obligations, from paying dividends or making
distributions on its capital stock or purchasing or redeeming its capital stock.
The Indenture does not require the maintenance of any financial ratios or
specified levels of net worth or liquidity. In addition, the Indenture does not
contain any
5
<PAGE> 28
provision that would require the Company to repurchase or redeem or otherwise
modify the terms of any of its Debt Securities upon a change in control or other
events involving the Company which may adversely affect the creditworthiness of
the Debt Securities.
Unless otherwise indicated in the applicable Prospectus Supplement, certain
covenants contained in the Indenture which are summarized below will be
applicable (unless waived or amended) to the series of Debt Securities to which
such Prospectus Supplement relates so long as any of the Debt Securities of such
series are outstanding.
Limitations on Liens. The Company covenants that it will not issue, incur,
create, assume or guarantee, and will not permit any Restricted Subsidiary to
issue, incur, create, assume or guarantee, any debt for borrowed money secured
by a mortgage, security interest, pledge, lien, charge or other encumbrance
("mortgages") upon any Principal Property or Domestic Receivables or Inventory
of the Company or any Restricted Subsidiary or upon any shares of stock or
indebtedness of any Restricted Subsidiary (whether such Principal Property, or
Domestic Receivables or Inventory, shares or indebtedness are now existing or
owed or hereafter created or acquired) without in any such case effectively
providing concurrently with the issuance, incurrence, creation, assumption or
guaranty of any such secured debt that the Debt Securities (together with, if
the Company shall so determine, any other indebtedness of or guarantee by the
Company or such Restricted Subsidiary ranking equally with the Debt Securities)
shall be secured equally and ratably with (or, at the option of the Company,
prior to) such secured debt. The foregoing restriction, however, will not apply
to: (a) mortgages on property, shares of stock or indebtedness or other assets
of any corporation existing at the time such corporation becomes a Restricted
Subsidiary, provided that such mortgages or liens are not incurred in
anticipation of such corporation becoming a Restricted Subsidiary; (b)(i)
mortgages on property, shares of stock, indebtedness or other assets existing at
the time of acquisition thereof by the Company or a Restricted Subsidiary (which
may include property previously leased by the Company and leasehold interests
thereon, provided that the lease terminates prior to the acquisition) or
mortgages thereon to secure the payment of all or any part of the purchase price
thereof, or (ii) mortgages on property, shares of stock, indebtedness or other
assets to secure any indebtedness for borrowed money incurred prior to, at the
time of, or within 270 days after, the latest of the acquisition thereof, or, in
the case of property, the completion of construction, the completion of
improvements or the commencement of substantial commercial operation of such
property for the purpose of financing all or any part of the purchase price
thereof, such construction or the making of such improvements; (c) mortgages to
secure indebtedness owing to the Company or to a Restricted Subsidiary; (d)
mortgages existing at the date of the initial issuance of the Securities of such
series; (e) mortgages on property or other assets of a corporation existing at
the time such corporation is merged into or consolidated with the Company or a
Restricted Subsidiary or at the time of a sale, lease or other disposition of
the properties of a corporation as an entirety or substantially as an entirety
to the Company or a Restricted Subsidiary, provided that such mortgage was not
incurred in anticipation of such merger or consolidation or sale, lease or other
disposition; (f) mortgages in favor of the United States of America or any
State, territory or possession thereof (or the District of Columbia), or any
department, agency, instrumentality or political subdivision of the United
States of America or any State, territory or possession thereof (or the District
of Columbia), to secure partial, progress, advance or other payments pursuant to
any contract or statute or to secure any indebtedness incurred for the purpose
of financing all or any part of the purchase price or the cost of constructing
or improving the property subject to such mortgages; or (g) extensions, renewals
or replacements of any mortgage referred to in the foregoing clauses (a) through
(f); provided, however, that any mortgages permitted by any of the foregoing
clauses (a) through (f) shall not extend to or cover any property of the Company
or such Restricted Subsidiary, as the case may be, other than the property
specified in such clauses and improvements thereto. (Section 1008)
Notwithstanding the restrictions outlined in the preceding paragraph, the
Company or any Restricted Subsidiary may issue, incur, create, assume or
guarantee debt secured by a mortgage which would otherwise be subject to such
restrictions, without equally and ratably securing the Debt Securities, provided
that after giving effect thereto, the aggregate amount of all debt so secured by
mortgages (not including mortgages permitted under clauses (a) through (g)
above) does not exceed 5% of the Consolidated Net Tangible Assets of the
Company. (Section 1008)
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<PAGE> 29
Limitations on Sale and Lease-Back Transactions. The Company covenants that
it will not, nor will it permit any Restricted Subsidiary to, enter into any
Sale and Lease-Back Transaction with respect to any Principal Property, other
than any such transaction involving a lease for a term of not more than three
years or any such transaction between the Company and a Restricted Subsidiary or
between Restricted Subsidiaries, unless: (a) the Company or such Restricted
Subsidiary would be entitled to incur indebtedness secured by a mortgage on the
Principal Property involved in such transaction at least equal in amount to the
Attributable Debt with respect to such sale and lease-back transaction, without
equally and ratably securing the Debt Securities, pursuant to the limitation in
the Indenture on liens; or (b) the Company shall apply an amount equal to the
greater of the net proceeds of such sale or the Attributable Debt with respect
to such sale and lease-back transaction within 180 days of such sale to either
(or a combination of) (i) the retirement (other than any mandatory retirement,
mandatory prepayment or sinking fund payment or by payment at maturity) of debt
for borrowed money of the Company or a Restricted Subsidiary that matures more
than twelve months after the creation of such indebtedness or (ii) the purchase,
construction or development of other comparable property. (Section 1009)
Restrictions on Funded Debt of Restricted Subsidiaries. The Company
covenants that it will not permit any Restricted Subsidiary to create, incur,
issue, assume or guarantee any Funded Debt. The foregoing restriction, however,
will not apply if: (a) the Company or such Restricted Subsidiary could create
Debt secured by mortgages in accordance with the "Limitations on Liens" covenant
described above or enter into a sale and lease-back transaction in accordance
with the "Limitations on Sale and Lease-Back Transactions" covenant described
above in an amount equal to such Funded Debt, without equally and ratably
securing the Debt Securities; or (b) such Funded Debt existed on the date of the
original issuance by the Company of the Debt Securities issued pursuant to the
Indenture, or such other date as may be specified in the Prospectus Supplement;
or (c) such Funded Debt is owed to the Company or any Subsidiary; or (d) such
Funded Debt existed at the time the corporation that issued such Funded Debt
became a Restricted Subsidiary, or was merged with or into or consolidated with
such Restricted Subsidiary; or at the time of a sale, lease or other disposition
of the properties of such corporation as an entirety to such Restricted
Subsidiary, or arising thereafter (i) otherwise than in connection with the
borrowing of money arranged thereafter and (ii) pursuant to contractual
commitments entered into prior to and not in contemplation of such corporation
becoming a Restricted Subsidiary and not in contemplation of such merger or
consolidation or any such sale, lease or other disposition; or (e) such Funded
Debt is issued, assumed or guaranteed in connection with, or with a view to,
compliance by such Restricted Subsidiary with the requirements of any program
adopted by any federal, state or local governmental authority and applicable to
such Restricted Subsidiary and providing financial or tax benefits to such
Restricted Subsidiary which are not available directly to the Company; or (f)
such Funded Debt is issued, assumed or guaranteed to pay all or any part of the
purchase price or the construction cost of land, land improvements, buildings,
fixtures and equipment acquired by a Restricted Subsidiary, provided such Funded
Debt is incurred within 270 days after acquisition, completion of construction
or commencement of full operation of such property, whichever is later; or (g)
such Funded Debt is incurred for the purpose of extending, renewing,
substituting, replacing or refunding Funded Debt permitted by the foregoing.
(Section 1010)
Notwithstanding the foregoing, any Restricted Subsidiary may create, incur,
issue, assume or guarantee Funded Debt which would otherwise be subject to the
foregoing restrictions in an aggregate principal amount which, together with the
aggregate outstanding principal amount of all other Funded Debt of the Company's
Restricted Subsidiaries which would otherwise be subject to the foregoing
restrictions (not including Funded Debt permitted to be incurred pursuant to
clauses (a) through (g) above), does not at the time such Funded Debt is
incurred exceed an amount equal to 5% of the Consolidated Net Tangible Assets.
(Section 1010)
Certain Definitions Applicable to Covenants. The term "Attributable Debt"
when used in connection with a Sale and Lease-Back Transaction involving a
Principal Property shall mean, at the time of determination, the lesser of: (a)
the fair value of such property (as determined in good faith by the Board of
Directors of the Company); or (b) the present value of the total net amount of
rent required to be paid under such lease during the remaining term thereof
(including any renewal term or period for which such lease has been extended),
discounted at the rate of interest set forth or implicit in the terms of such
lease or, if not
7
<PAGE> 30
practicable to determine such rate, the weighted average interest rate per annum
borne by the Debt Securities of each series outstanding pursuant to the
Indenture compounded semi-annually, in either case as determined in good faith
by the principal accounting or financial officer of the Company. For purposes of
the foregoing definition, rent shall not include amounts required to be paid by
the lessee, whether or not designated as rent or additional rent, on account of
or contingent upon maintenance and repairs, insurance, taxes, assessments, water
rates and similar charges. In the case of any lease which is terminable by the
lessee upon the payment of a penalty, such net amount shall be the lesser of the
net amount determined assuming termination upon the first date such lease may be
terminated (in which case the net amount shall also include the amount of the
penalty, but no rent shall be considered as required to be paid under such lease
subsequent to the first date upon which it may be so terminated) or the net
amount determined assuming no such termination.
The term "Consolidated Net Tangible Assets" shall mean, as of any
particular time, the aggregate amount of assets (less applicable reserves and
other properly deductible items) after deducting therefrom: (a) all current
liabilities, except for (1) notes and loans payable, (2) current maturities of
long-term debt and (3) current maturities of obligations under capital leases;
and (b) certain intangible assets, to the extent included in said aggregate
amount of assets, all as set forth on the most recent consolidated balance sheet
of the Company and its consolidated subsidiaries and computed in accordance with
generally accepted accounting principles.
The term "Domestic Receivables or Inventory" shall mean accounts receivable
arising from the sale of inventory or inventory owned by the Company or any
Subsidiary whose principal place of business and place of incorporation is
located in the United States of America. For purposes hereof, inventory and
receivables shall be deemed to be "owned" if they are deemed to be assets of the
Company or such Subsidiary for purposes of generally accepted accounting
principles.
The term "Funded Debt" shall mean indebtedness created, assumed or
guaranteed by a Person for money borrowed which matures by its terms, or is
renewable by the Borrower to a date, more than one year after the date of
original creation, assumption or guarantee.
The term "Principal Property" shall mean the land, land improvements,
buildings and fixtures (to the extent they constitute real property interests)
(including any leasehold interest therein) constituting the principal corporate
office, any manufacturing plant or any manufacturing facility (whether now owned
or hereafter acquired) and the equipment located thereon which: (a) is owned by
the Company or any Subsidiary; (b) is located within any of the present 50
States of the United States of America (or the District of Columbia); (c) has
not been determined in good faith by the Board of Directors of the Company not
to be materially important to the total business conducted by the Company and
its Subsidiaries taken as a whole; and (d) has a book value on the date as of
which the determination is being made in excess of 0.75% of Consolidated Net
Tangible Assets of the Company as most recently determined on or prior to such
date (including for purposes of such calculation the land, land improvements,
buildings and such fixtures compromising such office, plant or facilities, as
the case may be).
The term "Restricted Subsidiary" shall mean any Subsidiary which owns any
Principal Property or Domestic Receivables or Inventory; provided, however, that
the term "Restricted Subsidiary" shall not include any Subsidiary which is
principally engaged in financing the Company's operations outside the United
States of America; and provided, further, that the term "Restricted Subsidiary"
shall not include any Subsidiary less than 80% of the voting stock of which is
owned, directly or indirectly, by the Company or by one or more other
Subsidiaries, or by the Company and one or more other Subsidiaries if the common
stock of such Subsidiary is traded on any national securities exchange or quoted
on the Nasdaq National Market or in the over-the-counter market.
The term "Sale and Lease-Back Transaction" shall mean any arrangement with
any Person providing for the leasing by the Company or any Restricted Subsidiary
of any Principal Property which property has been or is to be sold or
transferred by the Company or such Restricted Subsidiary to such Person.
The term "Subsidiary" shall mean any corporation of which at least 66 2/3%
of the outstanding stock having the voting power to elect a majority of the
board of directors of such corporation is at the time owned,
8
<PAGE> 31
directly or indirectly, by the Company or by one or more other Subsidiaries, or
by the Company and one or more other Subsidiaries. For the purposes of this
definition, "voting stock" means stock which ordinarily has voting power for the
election of directors, whether at all times or only so long as no senior class
of stock has such voting power by reason of any contingency.
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that, if such provision is made applicable to the
Debt Securities of any series pursuant to the provisions of the Indenture, the
Company may elect (i) to defease and be discharged from any and all obligations
in respect of such Debt Securities except for the rights of holders to receive
payments in
respect of the principal of and any premium and interest on such Debt Securities
and for certain obligations to register the transfer or exchange of such Debt
Securities, to replace temporary, destroyed, stolen, lost or mutilated Debt
Securities, to maintain paying agencies and to hold monies for payment in trust
("defeasance") or (ii) (A) to omit to comply with certain restrictive covenants
in Sections 1005 through 1010 (including the covenants referred to above under
"Covenants of the Company") and (B) to deem the occurrence of any event referred
to in clauses (d) (with respect to Sections 1005 through 1010 inclusive) and (g)
under "Events of Default" below not to be or result in an Event of Default if,
in each case with respect to the Outstanding Debt Securities of such series as
provided in Section 1303 on or after the date the conditions set forth in
Section 1304 are satisfied ("covenant defeasance"), in either case upon the
deposit with the Trustee (or other qualifying trustee), in trust, of money
and/or U.S. Government Obligations, which through the payment of interest and
principal in respect thereof in accordance with their terms will provide money
in an amount sufficient to pay the principal of and any premium and interest on
the Debt Securities of such series on the respective Stated Maturities and any
mandatory sinking fund payments or analogous payments on the days payable, in
accordance with the terms of the Indenture and the Debt Securities of such
series. Such a trust may only be established if, among other things, the Company
has delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of the Outstanding Debt Securities of such series will not recognize
income, gain or loss for Federal income tax purposes as a result of such
deposit, defeasance or covenant defeasance and will be subject to Federal income
tax on the same amount, and in the same manner and at the same times as would
have been the case if such deposit, defeasance or covenant defeasance had not
occurred. Such opinion, in the case of defeasance under clause (i) above, must
refer to and be based upon a ruling of the Internal Revenue Service or a change
in applicable Federal income tax laws occurring after the date of the Indenture.
The Prospectus Supplement relating to a series may further describe the
provisions, if any, permitting such defeasance or covenant defeasance with
respect to the Debt Securities of a particular series. (Article Thirteen)
EVENTS OF DEFAULT
Any one of the following events will constitute an Event of Default under
the Indenture with respect to Debt Securities of any series (unless such event
is specifically inapplicable to a particular series as described in the
Prospectus Supplement relating thereto): (a) failure to pay any interest on any
Debt Security of that series when due, continued for 30 days; (b) failure to pay
principal of or any premium on any Debt Security of that series when due; (c)
failure to deposit any sinking fund payment, when due, in respect of any Debt
Security of that series; (d) failure to perform any other covenant of the
Company in the Indenture (other than a covenant included in the Indenture solely
for the benefit of a series of Debt Securities other than that series),
continued for 90 days after written notice as provided in the Indenture; (e)
certain events in bankruptcy, insolvency or reorganization involving the
Company; (f)(i) failure of the Company to make any payment at maturity,
including any applicable grace period, in respect of indebtedness, which term as
used in the Indenture means obligations (other than non-recourse obligations or
the Debt Securities of such series) of the Company for borrowed money or
evidenced by bonds, debentures, notes or similar instruments ("Indebtedness") in
an amount in excess of $10,000,000 and continuance of such failure or (ii) a
default with respect to any Indebtedness, which default results in the
acceleration of Indebtedness in an amount in excess of $10,000,000 without such
Indebtedness having been discharged or such acceleration having been cured,
waived, rescinded or annulled, in the case of (i) or (ii) above, for a period of
30 days after written notice thereof to the Company by the Trustee or to the
Company and the Trustee by the holders of not less than 15%
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in principal amount of Debt Securities of such series; provided, however, that
if any such failure, default or acceleration referred to in (i) or (ii) above
shall cease or be cured, waived, rescinded or annulled, then the Event of
Default by reason thereof shall be deemed likewise to have been thereupon cured;
and (g) any other Event of Default provided with respect to Debt Securities of
that series. (Section 501)
Subject to the provisions of the Indenture relating to the duties of the
Trustee during default to act with the required standard of care, the Trustee is
under no obligation to exercise any of its rights or powers under the Indenture
at the request or direction of any of the Holders, unless such Holders shall
have offered to the Trustee reasonable indemnity. (Sections 601 and 603) Subject
to such provisions for the indemnification of the Trustee, the Holders of a
majority in principal amount of the Outstanding Debt Securities of any series
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or power
conferred on the Trustee, with respect to the Debt Securities of that series.
(Section 512)
The Indenture provides that the Company will deliver to the Trustee, within
120 days after the end of each fiscal year, a brief certificate from the
principal executive, financial or accounting officer of the Company as to his or
her knowledge of the Company's compliance (without regard to any period of grace
or requirement of notice) with all conditions and covenants of the Indenture.
(Section 1004)
If an Event of Default with respect to Debt Securities of any series at the
time Outstanding occurs and is continuing, either the Trustee or the Holders of
at least 25% in principal amount of the Outstanding Debt Securities of that
series by notice as provided in the Indenture may declare the principal amount
(or, if the Debt Securities of that series are Original Issue Discount
Securities, such portion of the principal amount as may be specified in the
terms of that series) of all the Debt Securities of that series to be due and
payable immediately. At any time after a declaration of acceleration with
respect to Debt Securities of any series has been made, but before a judgment or
decree for payment of money has been obtained by the Trustee, the Holders of a
majority in principal amount of the Outstanding Debt Securities of that series
may, under certain circumstances, rescind and annul such acceleration. (Section
502)
No Holder of any Debt Security of any series has any right to institute any
proceeding with respect to the Indenture or for any remedy thereunder, unless
such Holder shall have previously given to the Trustee written notice of a
continuing Event of Default and unless the Holders of at least 25% in principal
amount of the Outstanding Debt Securities of that series shall have made written
request, and offered reasonable indemnity, to the Trustee to institute such
proceeding as trustee, and the Trustee shall not have received from the Holders
of a majority in principal amount of the Outstanding Debt Securities of that
series a direction inconsistent with such request and shall have failed to
institute such proceeding within 60 days. (Section 507) However, such
limitations generally do not apply to a suit instituted by a Holder of a Debt
Security for the enforcement of payment of the principal or interest on such
Debt Security on or after the respective due dates expressed in such Debt
Security. (Section 508)
MEETINGS, MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of not less than a majority in
principal amount of the Outstanding Debt Securities of each series affected by
such modification or amendment; provided, however that no such modification or
amendment may, without the consent of the Holder of each Outstanding Debt
Security affected thereby, (a) change the Stated Maturity of the principal of,
or any installment of principal of or interest on, any Debt Security, (b) reduce
the principal amount of, rate of interest on or any premium payable upon the
redemption of any Debt Security, (c) reduce the amount of principal of an
Original Issue Discount Security payable upon acceleration of the Maturity
thereof, (d) change the Place of Payment where, or the coin or currency in
which, any Debt Security or any premium or interest thereon is payable, (e)
impair the right to institute suit for the enforcement of any payment on or with
respect to any Debt Security after the Stated Maturity, Redemption Date or
Repayment Date, (f) reduce the percentage in principal amount of Outstanding
Debt Securities of any series, the consent of whose Holders is required for
modification or amendment of the Indenture or for waiver of compliance with
certain provisions of the Indenture or for waiver of certain defaults,
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or (g) modify any of the provisions set forth in this paragraph except to
increase any such percentage or to provide that certain other provisions of the
Indenture may not be modified or waived without the consent of the Holder of
each Outstanding Debt Security affected thereby. (Section 902)
The Holders of at least a majority in principal amount of the Outstanding
Debt Securities of each series may, on behalf of the Holders of all the Debt
Securities of that series, waive, insofar as that series is concerned,
compliance by the Company with certain restrictive provisions of the Indenture.
(Section 1011) The Holders of not less than a majority in principal amount of
the Outstanding Debt Securities of each series may, on behalf of all Holders of
Debt Securities of that series and any coupons appertaining thereto, waive any
past default under the Indenture with respect to Debt Securities of that series,
except a default (a) in the payment of principal of or any premium or interest
on any Debt Security of such series or (b) in respect of a covenant or provision
of the Indenture which cannot be modified or amended without the consent of the
Holder of each Outstanding Debt Security of such series affected. (Section 513)
The Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Debt Securities have given any
request, demand, authorization, direction, notice, consent or waiver thereunder
or whether a quorum is present at a meeting of Holders of Debt Securities (i)
the principal amount of an Original Issue Discount Security that shall be deemed
to be Outstanding shall be the amount of the principal thereof that would be due
and payable as of the date of such determination upon acceleration of the
Maturity thereof, (ii) the principal amount of a Debt Security denominated in
other than U.S. dollars shall be the U.S. dollar equivalent, determined on the
date of original issuance of such Debt Security, of the principal amount of such
Debt Security (or, in the case of an Original Issue Discount Security, the U.S.
dollar equivalent on the date of original issuance of such Debt Security of the
amount determined as provided in (i) above of such Debt Security) and (iii) Debt
Securities owned by the Company or any Affiliate of the Company shall be
disregarded and deemed not to be Outstanding. (Section 101)
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company, without the consent of the Holders of any of the Outstanding
Debt Securities under the Indenture, may consolidate with or merge into, or
transfer or lease its assets substantially as an entirety to, any Person which
is a corporation, partnership or trust organized and validly existing under the
laws of any domestic jurisdiction, provided that any successor Person expressly
assumes the Company's obligations on the Debt Securities and under the Indenture
and that, after giving effect to the transaction, no Event of Default, and no
event which, after notice or lapse of time, would become an Event of Default,
shall have occurred and be continuing, and that certain other conditions are
met. (Section 801)
NOTICES
Except as otherwise provided in the Indenture, notices to Holders of Debt
Securities will be given by mail to the addresses of such Holders as they appear
in the Debt Security Register. (Section 106)
TITLE
Prior to due presentment of a Debt Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Debt Security is registered as the owner of such
Debt Security for the purpose of receiving payment of principal of and any
premium and any interest (other than Defaulted Interest or as otherwise provided
in the applicable Prospectus Supplement) on such Debt Security and for all other
purposes whatsoever, whether or not such Debt Security be overdue, and neither
the Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary. (Section 308)
REPLACEMENT OF DEBT SECURITIES
Any mutilated Debt Security will be replaced by the Company at the expense
of the Holder upon surrender of such Debt Security to the Trustee. Debt
Securities that become destroyed, stolen or lost will be replaced by the Company
at the expense of the Holder upon delivery to the Trustee of the Debt Security
or
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evidence of the destruction, loss or theft thereof satisfactory to the Company
and the Trustee. In the case of a destroyed, lost or stolen Debt Security, an
indemnity satisfactory to the Trustee and the Company may be required at the
expense of the Holder of such Debt Security before a replacement Debt Security
will be issued. (Section 306)
GOVERNING LAW
The Indenture and the Debt Securities will be governed by, and construed in
accordance with, the laws of the State of New York. (Section 112)
REGARDING THE TRUSTEE
The Indenture contains certain limitations on the right of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases or to realize for its own account on certain property received in
respect of any such claim as security or otherwise. (Section 613) The Trustee is
permitted to engage in certain other transactions; however, if it acquires any
conflicting interest and there is a default under the Debt Securities of any
series for which the Trustee serves as trustee, the Trustee must eliminate such
conflict or resign. (Section 608)
The Trustee currently provides certain banking and financial services to
the Company in the ordinary course of business and may provide other such
services in the future.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company consists of 1,000,000 shares of
Preferred Stock, none of which has been issued, and 200,000,000 shares of Common
Stock, approximately 84,744,000 of which were issued and outstanding as of April
30, 1995.
PREFERRED STOCK
Under the Company's Certificate of Incorporation, the Board of Directors is
authorized to issue shares of Preferred Stock from time to time in one or more
series and to determine the designation and number of shares of each series and
the relative rights, preferences and limitations with respect to dividends,
redemptions (including sinking fund provisions), liquidation, dissolution or
winding up, voting rights and conversion, all in accordance with the laws of the
State of Delaware. When shares of Preferred Stock are issued, certain rights of
the holders thereof may materially affect the rights of the holders of the
Common Stock, including voting rights and preferences in respect of dividends
and liquidation.
COMMON STOCK
All issued and outstanding shares of Common Stock of the Company, including
the shares offered hereby, are fully paid and nonassessable. Holders of Common
Stock have no preemptive, subscription or conversion rights and are not liable
for further calls or assessments. There are no redemption or sinking fund
provisions in effect with respect to the Common Stock. Subject to the rights of
any then outstanding Preferred Stock, holders of Common Stock are entitled to
receive such dividends as may be declared by the Board of Directors out of funds
legally available therefor and to share ratably in the assets available for
distribution upon liquidation. Except as described below, each share of Common
Stock is entitled to one vote at all meetings of stockholders. The holders of
Common Stock are not entitled to cumulative voting rights in the election of
directors.
The Company has paid no cash dividends on its Common Stock since its
incorporation and anticipates that for the foreseeable future it will continue
to retain any earnings for use in its business. The Common Stock of the Company
is traded on The Nasdaq National Market under the symbol AMAT. The transfer
agent and registrar for the Common Stock is Harris Trust Company of California.
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The Certificate of Incorporation and the By-Laws of the Company contain
provisions that could have certain anti-takeover effects. The Board of Directors
has no current plans to formulate or effect additional measures that could have
anti-takeover effects.
Fair Price Provisions. The Certificate of Incorporation contains a fair
price provision pursuant to which, unless certain minimum price criteria and
procedural requirements are satisfied, Business Combinations (as defined in the
Certificate of Incorporation) with any person who is the beneficial owner of 15%
or more of the Voting Stock (as defined) or with certain other persons must be
approved by either the holders of two-thirds of the Company's outstanding voting
stock or a majority of the Continuing Directors (as defined) of the Company.
These provisions may have the effect of discouraging or deterring a third party
from making an offer to the Company's stockholders to acquire a substantial
amount or all of the Company's Common Stock.
No Stockholder Action by Written Consent; Special Meetings. The Certificate
of Incorporation prohibits stockholder action by written consent in lieu of a
meeting. The provision of the Certificate of Incorporation prohibiting
stockholder action by written consent may have the effect of delaying
consideration of a stockholder proposal until the next annual meeting unless a
special meeting is called by the Board of Directors, the Chairman of the Board
of Directors, or the President of the Company. This provision would also prevent
the holders of a majority of the outstanding shares of Common Stock from using
the written consent procedure to take stockholder action and from taking action
by consent without giving all the stockholders of the Company entitled to vote
on a proposed action the opportunity to participate in determining such proposed
action.
Advance Notice Requirements for Stockholders' Proposals and Director
Nominations. The By-Laws establish an advance notice procedure with regard to
the nomination, other than by or at the direction of the Board of Directors or a
committee thereof, of candidates for election as directors (the "Nomination
Procedure") and with regard to certain matters to be brought before a meeting of
stockholders of the Company (the "Business Procedure").
The Nomination Procedure provides that the notice of proposed stockholder
nominations for the election of directors must be timely given in writing to the
Secretary of the Company prior to the meeting at which directors are to be
elected. The Business Procedure provides that only such business may be
conducted at a stockholders' meeting as has been brought before the meeting by,
or at the direction of, the Board of Directors or by a stockholder who has given
timely prior written notice to the Secretary of the Company of such
stockholder's intention to bring such business before the meeting. In the case
of both the Nomination Procedure and the Business Procedure, to be timely,
notice must be received not less than 60 days prior to the date of the
stockholders' meeting or 10 days after the date on which notice of the meeting
is first given.
Although the By-Laws do not give the Board of Directors any power to
approve or disapprove stockholder nominations for the election of directors or
any other business desired by stockholders to be conducted at a stockholders'
meeting, the By-Laws may have the effect of precluding a nomination for the
election of directors or precluding the conducting of business at a particular
meeting if the proper procedures are not followed, and may discourage or deter a
third party from conducting a solicitation of proxies to elect its own slate of
directors or otherwise attempting to obtain control of the Company, even if the
conduct of such solicitation or such attempt might otherwise be desired by the
Company's stockholders.
Amendment of Certain Provisions of the Certificate of Incorporation. The
Certificate of Incorporation requires the affirmative vote of the holders of at
least two-thirds of the total voting power of all the outstanding shares of
stock entitled to vote generally in the election of directors for any amendment
of the fair price provision of the Certificate of Incorporation described above.
This provision will make it more difficult for stockholders to make changes in
the Certificate of Incorporation. In addition, the requirement for approval by
at least a two-thirds stockholder vote will enable the holders of a minority of
the voting stock of the Company to prevent the holders of a majority or more of
the stock from amending such provisions of the Certificate of Incorporation.
Preferred Stock. The Certificate of Incorporation authorizes the Board of
Directors to fix, with respect to any series of Preferred Stock, the powers,
preferences and rights of the shares of such series. Although the
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Company has no intention at the present time of doing so, it could issue
Preferred Stock that could, depending on its terms, either impede or facilitate
the completion of a merger, tender offer or other takeover attempt. Although the
Board of Directors is required to make any determination to issue such stock
based on its judgment as to the best interest of the stockholders of the
Company, the Board of Directors could act in a manner that would discourage an
acquisition attempt or other transaction that some, or a majority, of the
stockholders might believe to be in their best interests or in which
stockholders might receive a premium for their stock over the then market price
of such stock.
RIGHTS PLAN
In June 1989, the Board of Directors of Applied Materials declared a
dividend distribution of one right (a "Right" or, collectively, the "Rights")
for each outstanding share of Common Stock of the Company to stockholders of
record at the close of business on June 26, 1989 (the "Record Date"). Each Right
entitles the registered holder to purchase from the Company a unit consisting of
one-fourth of a share (a "Unit") of Common Stock, at a price of $11.25 per Unit
(the "Exercise Price"), subject to adjustment (giving effect to two subsequent
two-for-one stock splits). The description and terms of the Rights are set forth
in a Rights Agreement dated as of June 14, 1989 (the "Rights Agreement").
Initially, the Rights are evidenced by the Common Stock certificates
representing shares outstanding and no separate Rights certificates will be
distributed. The Rights will be exercisable, and transferable apart from the
shares of Common Stock, on the earlier to occur of (i) 10 business days
following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the right
to acquire, beneficial ownership of 20% or more of the outstanding shares of
Common Stock (the "Stock Acquisition Date"), or (ii) 10 business days following
the commencement of (or a public announcement of an intention to commence) a
tender offer or exchange offer if, upon consummation thereof, the person who
commenced the offer would be an Acquiring Person (the earlier of such dates
being called the "Distribution Date"). The foregoing time periods are subject to
extension as set forth in the Rights Agreement. After the occurrence of the
event set forth in clause (ii) above, the Rights would become exercisable for a
Unit of Common Stock at the Exercise Price. After the occurrence of the event
set forth in clause (i) above, the Rights would become exercisable as set forth
below.
In the event that a person becomes the beneficial owner of 20% or more of
the then outstanding shares of Common Stock (other than as a result of a tender
or exchange offer for all shares of the Common Stock at a price and on terms
determined by a majority of the directors who are not representatives, nominees,
affiliates or associates of an Acquiring Person, after receiving advice from one
or more nationally recognized investment banking firms selected by such
directors, to be fair and adequate to the stockholders, and otherwise in the
best interests of the Company and its stockholders (a "Permitted Offer")), the
Rights Agreement provides that proper provision shall be made so that each
holder of a Right will thereafter have the right to receive, for a 90-day period
(the "Exercise Period"), upon exercise, Common Stock (or, under certain
circumstances, cash, a reduction in the Exercise Price, other securities of the
Company or any combination thereof) having a market value equal to two times the
exercise price paid (i.e., at a 50% discount). Following the occurrence of this
event, any Rights that are, or (under certain circumstances specified in the
Rights Agreement) were, beneficially owned by any Acquiring Person shall
immediately become null and void. However, Rights generally are not exercisable
following the occurrence of such an event until such time as the Rights are no
longer redeemable by the Company as set forth below. Further, Rights generally
are exercisable only after the effectiveness of a registration statement for the
Common Stock issuable upon exercise of the Rights under the Securities Act of
1933.
In the event that, at any time following the Distribution Date, (i) the
Company engages in a merger or other business combination transaction in which
the Company is not the surviving corporation (other than following a Permitted
Offer), (ii) the Company engages in a merger or other business combination
transaction with another person in which the Company is the surviving
corporation, but in which its Common Stock is changed or exchanged (other than
following a Permitted Offer), or (iii) 50% or more of the Company's assets or
earning power (on a consolidated basis) is sold or transferred, the Rights
Agreement provides that proper provision shall be made so that each holder of a
Right (except Rights which previously have been voided as
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set forth above) shall thereafter have the right to receive, upon the exercise
thereof at the then current exercise price of the Right, common stock of the
acquiring company having a market value equal to two times the exercise price
paid (i.e., at a 50% discount). The events described in clauses (i), (ii) and
(iii) of this paragraph are defined as "Triggering Events."
The Exercise Price payable, and the number of shares of Common Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Common
Stock, (ii) upon the grant to holders of the Common Stock of certain rights or
warrants to subscribe for preferred stock that is substantially the same as
Common Stock or convertible securities at less than the current market price of
the Common Stock, or (iii) upon the distribution to holders of the Common Stock
of evidences of indebtedness, cash (excluding regular quarterly cash dividends),
assets (other than dividends payable in Common Stock) or of subscription rights
or warrants (other than those referred to above).
At any time after the date of the Rights Agreement until 10 business days
(or such later date as the Board of Directors of the Company may determine)
following the Stock Acquisition Date, the Company may redeem the Rights in
whole, but not in part, at a price of $.0025 per Right, as adjusted for stock
splits, stock dividends or similar transactions (the "Redemption Price"),
payable in cash, Common Stock or other consideration deemed appropriate by the
Board of Directors. Thereafter, the Company's right of redemption may be
reinstated if the Exercise Period has expired, no Triggering Event has occurred
and an Acquiring Person reduces his beneficial ownership to 5% or less of the
outstanding shares of Common Stock in a transaction or series of transactions
not involving the Company and there are no other Acquiring Persons. Immediately
upon the action of the Board of Directors of the Company ordering redemption of
the Rights, the Rights will terminate and the only right of the holders of
Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to the stockholders or the Company, the stockholders may, depending
upon the circumstances, recognize taxable income in the event that the Rights
become exercisable for Common Stock (or other consideration) of the Company or
for common stock of the acquiring company as set forth above.
The foregoing description of the Company's Common Stock and the Rights do
not purport to be a complete description of the terms of the Company's Common
Stock and the Rights and is qualified in its entirety by reference to the terms
of such Common Stock and Rights, which are incorporated herein by reference and
are set forth in full in the Company's Certificate of Incorporation and the
Rights Agreement, respectively.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law. This statute generally prohibits, under certain
circumstances, a Delaware corporation whose stock is publicly traded, from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless (i) the corporation has elected in its
certificate of incorporation or bylaws not to be governed by this Delaware law
(the Company has not made such an election), (ii) prior to the time the
stockholder became an interested stockholder, the board of directors approved
either the business combination or the transaction which resulted in the person
becoming an interested stockholder, (iii) the stockholder owned at least 85% of
the outstanding voting stock of the corporation (excluding shares held by
directors who were also officers or held in certain employee stock plans) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder or (iv) the business combination was approved by the
board of directors and by two-thirds of the outstanding voting stock of the
corporation (excluding shares held by the interested stockholder). An
"interested stockholder" is a person who, together with affiliates and
associates, owns (or any time within the prior three years did own) 15% or more
of the corporation's outstanding voting stock. The term "business combination"
is defined generally to include mergers, consolidations, stock sales, asset
based transactions, and other transactions resulting in a financial benefit to
the interested stockholder.
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PLAN OF DISTRIBUTION
The Company may sell the Securities separately or together, (i) to one or
more underwriters or dealers for public offering and sale by them and (ii) to
investors directly or through agents. The distribution of the Securities may be
effected from time to time in one or more transactions at a fixed price or
prices (which may be changed from time to time), at market prices prevailing at
the time of sale, at prices related to such prevailing market prices or at
negotiated prices. Each Prospectus Supplement will describe the method of
distribution of the Securities offered thereby.
In connection with the sale of the Securities, underwriters, dealers or
agents may receive compensation from the Company or from purchasers of the
Securities for whom they may act as agents, in the form of discounts,
concessions or commissions. The underwriters, dealers or agents which
participate in the distribution of the Securities may be deemed to be
underwriters under the Securities Act of 1933 and any discounts or commissions
received by them and any profit on the resale of the Securities received by them
may be deemed to be underwriting discounts and commissions thereunder. Any such
underwriter, dealer or agent will be identified and any such compensation
received from the Company will be described in the Prospectus Supplement. Any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
Under agreements that may be entered into with the Company, underwriters,
dealers and agents may be entitled to indemnification by the Company against
certain civil liabilities, including liabilities under the Securities Act of
1933, or to contribution with respect to payments which the underwriters,
dealers or agents may be required to make in respect thereof.
The Company may grant underwriters who participate in the distribution of
Securities an option to purchase additional Securities to cover over-allotments,
if any.
All Debt Securities will be new issues of securities with no established
trading market. Any underwriters to whom Debt Securities are sold by the Company
for public offering and sale may make a market in such securities, but such
underwriters will not be obligated to do so and may discontinue any market
making at any time without notice. No assurance can be given as to the liquidity
of the trading market for any such securities.
Certain of the underwriters or agents and their associates may be customers
of, engage in transactions with or perform services for the Company in the
ordinary course of business.
LEGAL OPINIONS
The validity of the Securities is being passed upon for the Company by
Orrick, Herrington & Sutcliffe, San Francisco, California.
EXPERTS
The audited consolidated financial statements incorporated in this
Prospectus, and the financial statement schedules incorporated in the
Registration Statement, by reference to the Annual Report on Form 10-K of
Applied Materials, Inc. for the year ended October 30, 1994 have been so
incorporated in reliance on the reports of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
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(LOGO - Applied Materials, Inc.)
