<PAGE> 1
PROSPECTUS SUPPLEMENT Filed Pursuant to Rule 424(b)(4)
Registration Statement No. 33-60301
(To Prospectus dated June 28, 1995)
3,500,000 Shares
(LOGO) APPLIED MATERIALS
COMMON STOCK
------------------------
ALL OF THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY APPLIED
MATERIALS, INC. (THE "COMPANY"). THE COMPANY'S COMMON
STOCK IS TRADED IN THE OVER-THE-COUNTER MARKET UNDER THE NASDAQ
NATIONAL MARKET SYMBOL "AMAT." THE LAST SALE
PRICE FOR THE COMMON STOCK ON JUNE 28, 1995, AS
REPORTED ON THE NASDAQ NATIONAL MARKET,
WAS $82 3/4 PER SHARE. SEE "PRICE
RANGE OF COMMON STOCK."
------------------------
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
OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
PRICE $82 3/4 A SHARE
------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
Per Share........................ $82.75 $2.86 $79.89
Total(3)......................... $289,625,000 $10,010,000 $279,615,000
</TABLE>
- ------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriters."
(2) Before deducting expenses payable by the Company estimated at $315,000.
(3) The Company has granted to the Underwriters an option, exercisable within 30
days of the date hereof, to purchase up to an aggregate of 525,000
additional Shares at the price to public less underwriting discounts and
commissions for the purpose of covering over-allotments, if any. If the
Underwriters exercise such option in full, the total price to public,
underwriting discounts and commissions and proceeds to Company will be
$333,068,750, $11,511,500 and $321,557,250, respectively. See
"Underwriters."
------------------------
The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to approval of certain legal matters
by Wilson Sonsini Goodrich & Rosati, counsel for the Underwriters. It is
expected that delivery of the Shares will be made on or about July 5, 1995 at
the offices of Morgan Stanley & Co. Incorporated, New York, N.Y. against payment
therefor in New York funds.
------------------------
MORGAN STANLEY & CO.
Incorporated
LEHMAN BROTHERS
COWEN & COMPANY
NEEDHAM & COMPANY, INC.
ROBERTSON, STEPHENS & COMPANY
June 28, 1995
<PAGE> 2
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR PROSPECTUS, AND ANY INFORMATION OR
REPRESENTATION NOT CONTAINED OR INCORPORATED HEREIN MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS
SUPPLEMENT OR PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR
SUCH PERSON TO MAKE SUCH AN OFFERING OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT OR PROSPECTUS AT ANY TIME NOR ANY SALE MADE HEREUNDER
SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
The Company.......................................................................... S-3
Recent Publicity..................................................................... S-6
Use of Proceeds...................................................................... S-7
Price Range of Common Stock.......................................................... S-7
Dividend Policy...................................................................... S-7
Capitalization....................................................................... S-8
Selected Consolidated Financial Data................................................. S-9
Underwriters......................................................................... S-11
Legal Opinions....................................................................... S-12
PROSPECTUS
Available Information................................................................ 2
Information Incorporated by Reference................................................ 2
The Company.......................................................................... 3
Use of Proceeds...................................................................... 3
Ratio of Earnings to Fixed Charges................................................... 3
Description of Debt Securities....................................................... 4
Description of Capital Stock......................................................... 12
Plan of Distribution................................................................. 16
Legal Opinions....................................................................... 16
Experts.............................................................................. 16
</TABLE>
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON
STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER THE
SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITERS."
S-2
<PAGE> 3
THE COMPANY
Organized in 1967, Applied Materials, Inc. ("Applied Materials" or the
"Company") develops, manufactures, markets and services semiconductor wafer
fabrication equipment and related spare parts. The Company's worldwide customers
include both companies which manufacture semiconductor devices for use in their
own products and companies which manufacture semiconductor devices for sale to
others. 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 manufacturing
systems for active-matrix liquid crystal displays.
PRODUCTS
Applied Materials' products are sophisticated systems requiring
state-of-the-art technology in wafer processing chemistry and physics,
particulate management, 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.
Single-wafer, multi-chamber architecture. The trend toward more stringent
process requirements and larger wafer sizes prompted Applied Materials to
develop the single-wafer, multi-chamber system called the Precision 5000. The
Company introduced the Precision 5000 with chemical vapor deposition (CVD)
dielectric processes in 1987, etch processes in 1988 and CVD tungsten processes
(WCVD) in 1989. The Precision 5000's single-wafer, multi-chamber architecture
which features several processing chambers, each of which is attached to a
central handling system, is designed for both serial and integrated processing.
The Precision 5000's integrated processing capability makes it possible to
perform multiple process steps on the wafer without leaving a controlled
environment, thus reducing the risk of particulate contamination. The Company
leveraged its expertise in single-wafer, multi-chamber architecture to develop
an evolutionary platform called the Endura 5500 PVD (physical vapor deposition)
in 1990 featuring a staged, ultra-high vacuum architecture. In October 1991, the
Company announced its second generation Precision 5000 system, the Precision
5000 Mark II, with numerous enhancements to the platform, process chambers and
remote support equipment. The Precision 5000 Mark II addresses customers'
demands in the manufacturing of advanced devices, such as 16 megabit DRAMs
(dynamic random access memories) and the use of 200mm (8-inch) wafers. In
September 1992, the Company announced its latest generation single-wafer, multi-
chamber platform, the Centura, to target the high temperature thin films market
as well as future process applications with 0.5-micron and below specifications.
The Company has shipped more than 2,500 platforms and more than 7,600 process
chambers. For the six months ended April 30, 1995, sales of the Company's
single-wafer, multi-chamber systems accounted for approximately 91% of systems
revenue.
Deposition. A fundamental step in fabricating a semiconductor device,
deposition is a process in which a layer of either electrically insulating
(dielectric) or electrically conductive material is deposited on the wafer.
Deposition can be divided into several different categories of which Applied
Materials currently participates in three: chemical vapor deposition (CVD),
physical vapor deposition (PVD), and epitaxial and polysilicon deposition.
CVD. Chemical vapor deposition is a process used in semiconductor
fabrication in which thin films (insulators, conductors and semiconductors)
are deposited from vapor (gaseous) phase sources. The Company produces
several different types of CVD systems. In 1987, the Company introduced the
Precision 5000 CVD which, with its automated multi-chamber architecture,
provides the flexibility to perform a broad range of deposition processes
utilizing up to four individual chambers on a single system. In 1989, the
Company entered the market for metal chemical vapor deposition with the
introduction of a
S-3
<PAGE> 4
new system for blanket tungsten deposition, the Precision 5000 WCVD. This
system is based on the single-wafer, multi-chamber Precision 5000 CVD
system architecture and is designed to reduce operating costs for tungsten
deposition and to produce high-quality tungsten films for interconnect
applications in advanced semiconductor devices. In 1990, the Company
introduced integrated tungsten plug fabrication capability by combining its
blanket tungsten CVD deposition and etchback capabilities onto the same
system. In 1991, the Company introduced tungsten silicide capabilities and
in 1993, titanium nitride (TiN) capabilities to further extend the
Precision 5000 platform offerings. The Company released its newest
generation of sub-atmospheric process technology on the Precision 5000 Mark
II CVD platform in April 1994, addressing applications to 0.35-microns. In
May 1994, the Company introduced a new multi-platform chamber for blanket
tungsten deposition on wafers up to 200mm (8-inch) in diameter. In 1995,
the Company introduced a new CVD process for tungsten silicide using
dichlorosilane as the silicon source gas as well as announced a significant
enhancement to its Precision 5000 CVD system that improves system
throughput and reduces ownership costs. In addition, the Company announced
in April 1995 its entry into the Pre-Metal CVD market, using the Company's
Sub-Atmospheric CVD technology to deposit Borophosphosilicate glass films.
PVD. Physical vapor deposition sputters metals on wafers to form the
circuit interconnects. Unlike CVD, the sources of the deposited materials
are solid sources called targets. Applied Materials first entered the PVD
market in April 1990 with the Endura 5500 PVD system. The system offers a
modular, single-wafer, multi-chamber platform which will accommodate both
ultra-high vacuum processes like PVD, and conventional high vacuum
processes like CVD and etch. In July 1993, the Company introduced the
Endura HP (High Productivity) PVD system, an enhanced version of its Endura
PVD system. In November 1993, the Centura HP PVD system was introduced in
order to offer customers a choice of platforms using the Company's PVD
technology. In November 1994, the Endura VHP (Very High Productivity) PVD
system was launched, further enhancing the wafer transfer system to raise
throughput.
Epitaxial and polysilicon deposition. Epitaxial and polysilicon
deposition involve depositing a layer of high-quality, silicon based
compounds on the surface of an existing silicon wafer to change its
electrical properties and form the base on which the integrated circuit is
built. In 1989, the Company introduced the Precision 7700 Epi system for
advanced silicon deposition. The 7700 system extends the capabilities of
radiantly-heated barrel technology and incorporates fully automated wafer
handling as well as many features for particulate control. In September
1992, the Company announced the Centura Poly, a single-wafer, multi-chamber
platform targeted at the high temperature thin film deposition of
polysilicon on wafers up to 200mm (8-inch) in diameter. The Centura Epi
system, which features deposition of epitaxial silicon, was announced in
March 1993. In December 1993, the Company launched the Centura Polycide
which combines chambers for polysilicon and tungsten silicide deposition on
the Centura platform.
Etch. Prior to etch processing, a wafer is patterned with photoresist
during photolithography. Etching then selectively removes material from areas
which are not covered by the photoresist pattern. Applied Materials entered the
etch market in 1981 with the introduction of the AME 8100 etch system, which
utilized a batch process technology for dry plasma etching. In 1985, the Company
introduced the Precision Etch 8300, which featured improved levels of automation
and particulate control. The Company continues to sell the Precision Etch 8300
product and has shipped approximately 865 systems. Applied Materials' first
single-wafer, multi-chamber system for the dry etch market was the Precision
5000 Etch, introduced in 1988. In 1990, the Company introduced a metal etch
system based on the Precision 5000 architecture which provides single-wafer
aluminum etch capabilities. In July 1993, the Company introduced its next
generation etch platform, the Centura HDP Dielectric Etcher designed for
applications requiring sub-0.5-micron design rules. This announcement was soon
followed by the October 1993 introduction of the Precision 5000 Mark II Etch
MxP, a new model of the Precision 5000-series etch system with several
enhancements including process capability for 0.35-micron applications. In July
1994, Applied Materials introduced the Metal Etch MxP Centura, which combines
sub-0.5-micron process technology with improved throughput. The Company launched
a new
S-4
<PAGE> 5
dielectric etch system in April 1995, combining its latest Centura platform with
an enhanced etch chamber, called the MxP "Plus".
Ion Implantation. During ion implantation, silicon wafers are bombarded by
a high velocity beam of electrically charged ions. These ions are embedded
within the wafer at selected sites and change the electrical properties of the
implanted area. Applied Materials entered the high-current portion of the
implant market in 1985 with the Precision Implant 9000 and introduced the
Precision Implant 9200 in 1988. In 1989, the Company added enhancements to the
9200 series including a new option for automated selection of implant angles,
and new hardware/software options that enable customers to perform remote
monitoring and diagnostics. In 1991, the Company announced an enhanced version
of its high-current ion implanter and designated it the Precision Implant
9200XJ. In November 1992, the Company introduced a new high-current ion
implantation system, the Precision Implant 9500, to address the production of
high density semiconductor devices, such as 16 and 64 MB memory devices and
advanced microprocessors. In November 1994, the 9500 xR model was introduced,
further extending the range of the 9500 system into the traditional
medium-current area with enhanced low-dose, low-energy implant performance.
CUSTOMER SERVICE AND SUPPORT
The demand for improved production yields of integrated circuits requires
that semiconductor wafer processing equipment operate reliably, with maximum
uptime and within very precise tolerances. Applied Materials installs equipment
and provides warranty service worldwide through offices located in the United
States, Japan, Europe and the Asia-Pacific region (Korea, Taiwan, China and
Singapore). Applied Materials maintains 60 service/sales offices worldwide, with
15 of those in Japan, 9 offices in Europe, 10 offices in the Asia-Pacific region
and the remainder in the United States. The Company offers a variety of service
contracts to customers for maintenance of installed equipment and provides a
comprehensive training program for all customers.
MARKETING AND SALES
Because of the highly technical nature of its products, the Company markets
its products worldwide through a direct sales force, with sales, service and
spare parts offices in the United States, Japan, Europe and the Asia-Pacific
region. For the fiscal year ended October 30, 1994, sales to customers in the
United States, Japan, Europe and Asia-Pacific accounted for approximately 37%,
27%, 18% and 18%, respectively, of the Company's net sales. For the six months
ended April 30, 1995, sales to customers in the United States, Japan, Europe and
Asia-Pacific accounted for approximately 37%, 22%, 12% and 29%, respectively, of
the Company's net sales. The Company's business is not considered to be seasonal
in nature, but it is dependent upon the capital equipment expenditure patterns
of major semiconductor manufacturers. These expenditure patterns are based on
many factors including anticipated market demand for integrated circuits, the
development of new technologies, and global economic conditions.
RESEARCH AND DEVELOPMENT
The market served by the Company is characterized by rapid technological
change. The Company's research and development efforts are global in nature.
Engineering organizations are located in the United States, England, Israel and
Japan, with process support and customer demonstration laboratories in the
United States and Japan. In 1991, the Company announced the opening of a new
technology center in Narita, Japan. The Company is currently building, and
intends to operate, applications laboratories in South Korea and Taiwan. The
Company also operates a technology center in Israel which is being used to
develop controller configuration and software tools for its semiconductor
processing systems. Applied Materials' research and development activities are
primarily directed toward the development of new wafer processing systems and
new process applications for existing products. Applied Materials works closely
with its global customers to design its systems to meet its customers' planned
technical and production requirements.
The Company has recently introduced a rapid thermal processing (RTP)
system. This technology employs radiant energy directed on a wafer at high
temperatures for a short duration to achieve implant annealing, silicide
formation and thin oxide growth.
S-5
<PAGE> 6
JOINT VENTURE
In September 1991, the Company announced its plans to develop thin film
transistor (TFT) manufacturing systems for Active-Matrix Liquid Crystal Displays
(AMLCDs). The AMLCD market currently includes screens for laptop, notebook and
palmtop computers and instrument displays, and the Company believes in the
future may include high-resolution workstations and High Definition Television
(HDTV). In September 1993, a joint venture company was formed with Applied
Materials, Inc. and Komatsu Ltd. of Japan sharing a 50-50 ownership of the joint
venture. The joint venture, Applied Komatsu Technology, Inc. (AKT), is accounted
for using the equity method. The Company's management believes that systems
developed by AKT have the potential to lower the manufacturing costs of AMLCDs.
The Company has granted to AKT an exclusive license to use the Company's
intellectual property to develop, make, and sell products for the manufacture of
flat panel displays, in exchange for royalties in respect thereof. AKT
anticipates accelerating its investment in product technologies for both PVD and
Etch in addition to expanding the substrate size of its CVD product in fiscal
1995 and 1996.
------------------------
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.
Applied Materials, Precision 5000 and Endura are registered trademarks of
Applied Materials, Inc. Centura, Endura 5500 PVD, Precision 5000 Mark II,
Precision 5000 CVD, Precision 5000 WCVD, Endura HP PVD, VHP, Precision 7700 Epi,
Centura Poly, Centura Polycide, Centura Epi, AME 8100, Precision Etch 8300,
Centura HDP Dielectic Etch, Precision 5000 Mark II Etch MxP, Precision 5000 Mark
II CVD, Metal Etch MxP Centura, Precision Implant 9000, Precision Implant 9200,
Precision Implant 9200XJ, Precision Implant 9500 and Precision Implant 9500 xR
are trademarks of Applied Materials, Inc. Applied Komatsu Technology is a
trademark of Applied Komatsu Technology, Inc.
RECENT PUBLICITY
On June 20, 1995, James C. Morgan, Chairman and Chief Executive Officer of
the Company, conducted a telephone interview with a reporter from Reuters
Information Services, Inc. In this interview Mr. Morgan indicated that the
Company has been growing at the rate of over 50% a year, and that he expected
that Applied Materials would do more business (measured in revenue) in fiscal
1995 (ending on the last Sunday of October), than it did in the previous two
fiscal years combined ($2,739,854,000). Mr. Morgan also indicated that recent
independent forecasts for semiconductor demand are that the demand for
semiconductors in the year 2000 will approach $300 billion from about $140
billion this year. He indicated that the outlook for semiconductor equipment
demand is very strong. Mr. Morgan added that a significant change is taking
place in the dynamics of the semiconductor market. He said that major new
economies around the world are emerging and that some of these are putting much
of their investments into developing technology industries
and telecommunications. He said the fastest growing markets for the Company's
equipment are in Taiwan, Singapore, Korea and neighboring countries, although
its largest markets remain in the United States and Japan. Demand for wafer
fabrication equipment in the United States and Japan, he added, is accelerating
from a steady stream of chip makers building new fabrication plants.
The Reuters release incorrectly reported that Mr. Morgan said that "the
50%-plus growth which has occurred at the Company would continue for some time."
Mr. Morgan, however, states that he did not make such a statement, but merely
said that the Company had been growing at over 50% a year in the past, and that,
based on independent forecasts of semiconductor industry growth, long-term
growth prospects for the Company could be substantial.
Neither the Company, nor any of the Underwriters, have confirmed, endorsed
or adopted any projections or forecasts with respect to the Company's future
results for utilization by, or distribution to, prospective purchasers of the
securities offered hereby. To the extent any comments made in the foregoing
interview not included herein are inconsistent with, or conflict with, the
information contained in this Prospectus, or relate to information not contained
in this Prospectus, they are disclaimed by the Company and the Underwriters.
S-6
<PAGE> 7
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the Common
Stock offered hereby are estimated to be $279,300,000 ($321,242,000 if the
Underwriters' over-allotment option is exercised in full), at a public offering
price of $82 3/4 per share and after deducting estimated underwriting discounts
and commissions and expenses of the offering. The net proceeds 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 acquisitions, 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.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded on The Nasdaq National Market under
the symbol AMAT. The following table sets forth the range of high and low
closing sales prices of the Company's Common Stock for the indicated periods, as
reported on The Nasdaq National Market. All prices have been restated to reflect
a two-for-one stock split in the form of a 100% stock dividend effective October
5, 1993.
<TABLE>
<CAPTION>
FISCAL YEAR HIGH LOW
------------------------------------------------------------------ ---- ------
<S> <C> <C>
1993:
First Quarter................................................... $19 3/8 $14 7/16
Second Quarter.................................................. 22 5/8 17 1/2
Third Quarter................................................... 33 21 1/2
Fourth Quarter.................................................. 39 1/4 28 5/8
1994:
First Quarter................................................... 43 3/4 30
Second Quarter.................................................. 51 3/4 37 5/8
Third Quarter................................................... 49 1/8 38 3/4
Fourth Quarter.................................................. 52 1/2 43
1995:
First Quarter................................................... 52 1/2 39
Second Quarter.................................................. 61 5/8 38 1/2
Third Quarter (through June 28, 1995)........................... 86 11/16 60 1/8
</TABLE>
On June 28, 1995, the last reported sale price for the Common Stock on The
Nasdaq National Market was $82 3/4 per share.
DIVIDEND POLICY
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. Certain of the Company's debt
agreements limit the Company's ability to pay dividends on its Common Stock.
S-7
<PAGE> 8
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of April 30, 1995, and as adjusted to give effect to the sale by the
Company of the shares of Common Stock offered hereby, at a public offering price
of $82 3/4 per share, the application of the estimated net proceeds therefrom
and no exercise of the Underwriters' over-allotment option:
<TABLE>
<CAPTION>
AS OF APRIL 30, 1995
-----------------------------
ACTUAL AS ADJUSTED(1)
---------- --------------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Notes payable........................................ $ 45,190 $ 45,190
Current portion of long-term debt.................... 24,577 24,577
----------- -----------
Total short-term debt............................. $ 69,767 $ 69,767
=========== ===========
Long-term debt:
Secured Japanese debt................................ $ 87,243 $ 87,243
Unsecured senior notes............................... 52,500 52,500
Noncallable unsecured senior notes................... 100,000 100,000
----------- -----------
Total long-term debt.............................. 239,743 239,743
----------- -----------
Stockholders' equity:
Preferred Stock; $0.01 par value; 1,000 shares
authorized;
no shares issued.................................. -- --
Common Stock; $0.01 par value; 200,000 shares
authorized(2); 84,744 shares issued and
outstanding; 88,244 shares outstanding as
adjusted.......................................... 847 882
Additional paid-in capital........................... 395,109 674,374
Retained earnings.................................... 705,369 705,369
Cumulative translation adjustments................... 49,094 49,094
----------- -----------
Total stockholders' equity........................ 1,150,419 1,429,719
----------- -----------
Total capitalization.............................. $1,390,162 $1,669,462
=========== ===========
</TABLE>
- ------------
(1) The Company currently intends to commence a program for the sale to the
public from time to time of up to $300,000,000 of unsecured senior debt
securities, which may include medium-term notes, with maturities ranging
from nine months to 30 years. For a description of certain terms of the debt
securities, see "Description of Debt Securities" in the accompanying
Prospectus. The as adjusted number does not reflect the sale of the debt
securities. No assurances can be given that the sale of the debt securities
will occur.
(2) Of the authorized shares, as of April 30, 1995, an aggregate of
approximately 6,232,000 shares of Common Stock were reserved for issuance
upon exercise of outstanding options and an aggregate of approximately
6,189,000 shares of Common Stock were available for future grants under the
Company's stock option plans. As of June 7, 1995, options to purchase
1,217,000 shares of Common Stock are currently exercisable at a weighted
average exercise price of $10.82 per share. Between June 8, 1995 and July
15, 1995, options to purchase an additional 1,296,000 shares of Common Stock
become exercisable at a weighted average exercise price of $11.92 per share.
See "Underwriters."
S-8
<PAGE> 9
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below for, and as of the
end of, each of the years in the five-year period ended October 30, 1994 have
been derived from the consolidated financial statements of the Company, which
have been audited by Price Waterhouse LLP, independent accountants. The selected
consolidated financial data presented below as of and for the six month periods
ended April 30, 1995 and May 1, 1994, and for each of the six fiscal quarters
ended April 30, 1995 have been derived from unaudited interim consolidated
financial information of the Company. In the opinion of management, the
unaudited interim consolidated financial information have been prepared on the
same basis as the audited consolidated financial statements and include all
adjustments, consisting of only normal recurring adjustments, necessary to
fairly state the information set forth therein. The results of operations for
the six months ended April 30, 1995 are not necessarily indicative of the
results to be expected for the fiscal year ending October 29, 1995. This data
should be read in conjunction with the more detailed information and
consolidated financial statements and notes thereto incorporated by reference in
the accompanying Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------- FISCAL YEAR ENDED(1)
APRIL 30, MAY 1, --------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(2):
Net sales................................. $1,181,547 $ 751,781 $1,659,807 $1,080,047 $751,383 $638,606 $567,130
Costs and expenses:
Cost of products sold................... 638,525 406,411 891,512 604,363 443,179 370,025 302,001
Research, development and engineering... 133,389 82,892 189,126 140,161 109,196 102,665 97,066
Marketing and selling................... 96,046 73,403 157,303 107,275 78,141 70,416 68,238
General and administrative.............. 64,987 40,221 84,744 64,379 48,242 42,812 40,875
Other, net.............................. 1,653 114 (2,115) 2,875 4,249 3,316 3,116
---------- -------- ---------- ---------- -------- -------- --------
Income from operations.................... 246,947 148,740 339,237 160,994 68,376 49,372 55,834
Interest expense........................ 11,634 7,120 15,962 14,206 15,207 13,969 6,717
Interest income......................... 9,983 4,268 11,222 6,770 5,756 4,952 4,967
---------- -------- ---------- ---------- -------- -------- --------
Income from consolidated companies before
taxes and cumulative effect of
accounting change....................... 245,296 145,888 334,497 153,558 58,925 40,355 54,084
Provision for income taxes................ 85,853 51,061 117,074 50,674 19,445 14,124 20,011
---------- -------- ---------- ---------- -------- -------- --------
Income from consolidated companies before
cumulative effect of accounting
change.................................. 159,443 94,827 217,423 102,884 39,480 26,231 34,073
Equity in net loss of joint venture....... -- 2,365 3,727 3,189 -- -- --
---------- -------- ---------- ---------- -------- -------- --------
Income before cumulative effect of
accounting change....................... 159,443 92,462 213,696 99,695 39,480 26,231 34,073
Cumulative effect of a change in
accounting for income taxes............. -- 7,000 7,000 -- -- -- --
---------- -------- ---------- ---------- -------- -------- --------
Net income................................ $ 159,443 $ 99,462 $ 220,696 $ 99,695 $ 39,480 $ 26,231 $ 34,073
========== ======== ========== ========== ======== ======== ========
EARNINGS PER SHARE:
Income before cumulative effect of
accounting change..................... $ 1.84 $ 1.10 $ 2.51 $ 1.21 $ 0.54 $ 0.38 $ 0.50
========== ======== ========== ========== ======== ======== ========
Net income.............................. $ 1.84 $ 1.18 $ 2.60 $ 1.21 $ 0.54 $ 0.38 $ 0.50
========== ======== ========== ========== ======== ======== ========
Average common shares and equivalents .... 86,505 83,979 85,021 82,294 72,680 68,900 68,144
========== ======== ========== ========== ======== ======== ========
BALANCE SHEET DATA (AT PERIOD END):
Cash and short-term investments........... $ 404,360 $ 329,123 $ 422,325 $ 266,180 $222,670 $140,134 $ 72,016
Accounts receivable, net.................. 587,292 337,291 405,813 256,020 191,510 152,787 147,267
Inventories............................... 342,732 207,189 245,710 154,597 110,667 101,471 102,272
Total current assets...................... 1,507,066 988,025 1,230,537 775,916 581,797 434,199 366,894
Property, plant and equipment, net........ 522,933 357,495 452,454 327,704 258,521 213,231 181,494
Total assets.............................. 2,052,156 1,361,012 1,702,665 1,120,152 853,822 660,756 558,009
Short-term debt........................... 69,767 50,612 58,513 48,662 33,947 36,704 27,413
Total current liabilities................. 623,004 420,259 496,433 380,528 248,207 199,988 195,238
Long-term debt............................ 239,743 110,730 209,114 121,076 118,445 123,967 53,611
Stockholders' equity...................... 1,150,419 805,227 966,264 598,762 474,111 325,454 300,308
</TABLE>
- ------------
(1) The Company's fiscal year ends on the last Sunday of October.
(2) Share information and per share data have been restated to reflect a
two-for-one stock split in the form of a 100% stock dividend effective
April 6, 1992, and an additional two-for-one stock split in the form of
a 100% stock dividend effective October 5, 1993.
S-9
<PAGE> 10
SELECTED CONSOLIDATED FINANCIAL DATA -- (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------
APR. 30, JAN. 29, OCT. 30, JULY 31, MAY 1, JAN. 30,
1995 1995 1994 1994 1994 1994
-------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.......................... $675,439 $506,108 $467,798 $440,228 $411,332 $340,449
Costs and expenses:
Cost of products sold............ 370,429 268,096 250,445 234,656 221,941 184,470
Research, development and
engineering................... 73,393 59,996 53,740 52,494 43,654 39,238
Marketing and selling............ 51,901 44,145 44,049 39,851 39,370 34,033
General and administrative....... 34,963 30,024 24,244 20,279 20,489 19,732
Other, net....................... (141) 1,794 (2,930) 701 (541) 655
-------- -------- -------- -------- -------- --------
Income from operations............. 144,894 102,053 98,250 92,247 86,419 62,321
Interest expense................. 5,881 5,582 5,183 3,659 3,472 3,648
Interest income.................. 5,040 4,772 4,008 2,946 2,261 2,007
-------- -------- -------- -------- -------- --------
Income from consolidated companies
before taxes and cumulative
effect of accounting change...... 144,053 101,243 97,075 91,534 85,208 60,680
Provision for income taxes......... 50,418 35,435 33,977 32,036 29,823 21,238
-------- -------- -------- -------- -------- --------
Income from consolidated companies
before cumulative effect of
accounting change................ 93,635 65,808 63,098 59,498 55,385 39,442
Equity in net loss of joint
venture.......................... -- -- -- 1,362 314 2,051
-------- -------- -------- -------- -------- --------
Income before cumulative effect of
accounting change................ 93,635 65,808 63,098 58,136 55,071 37,391
Cumulative effect of a change in
accounting for income taxes...... -- -- -- -- -- 7,000
-------- -------- -------- -------- -------- --------
Net income......................... $ 93,635 $ 65,808 $ 63,098 $ 58,136 $ 55,071 $ 44,391
======== ======== ======== ======== ======== ========
Earnings per share:
Income before cumulative effect
of accounting change.......... $ 1.08 $ 0.76 $ 0.73 $ 0.68 $ 0.65 $ 0.45
======== ======== ======== ======== ======== ========
Net income....................... $ 1.08 $ 0.76 $ 0.73 $ 0.68 $ 0.65 $ 0.53
======== ======== ======== ======== ======== ========
Average common shares and
equivalents...................... 86,703 86,308 86,330 86,033 84,761 83,245
======== ======== ======== ======== ======== ========
</TABLE>
S-10
<PAGE> 11
UNDERWRITERS
Under the terms and subject to conditions contained in an Underwriting
Agreement dated the date hereof, each of the Underwriters named below have
severally agreed to purchase, and the Company has agreed to sell to them, the
number of shares of the Company's Common Stock set forth opposite their
respective names below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Morgan Stanley & Co. Incorporated......................................... 1,225,000
Lehman Brothers Inc. ..................................................... 1,225,000
Cowen & Company........................................................... 350,000
Needham & Company, Inc. .................................................. 350,000
Robertson, Stephens & Company, L.P. ...................................... 350,000
---------
Total........................................................... 3,500,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The Underwriters are obligated to take
and pay for all of the shares of Common Stock offered hereby (other than those
covered by the over-allotment option described below) if any such shares are
taken.
The Underwriters initially propose to offer part of the shares directly to
the public at the public offering price set forth on the cover page hereof and
part to certain dealers at a price which represents a concession not in excess
of $1.715 a share under the public offering price. Any Underwriter may allow,
and such dealers may reallow, a concession not in excess of $.10 a share to
certain other dealers. After the public offering, the public offering price, the
concession to selected dealers and the reallowance to other dealers may be
changed by the Underwriters.
The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus Supplement, to purchase up to an
additional 525,000 shares of Common Stock at the public offering price set forth
on the cover page hereof, less underwriting discounts and commissions. The
Underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, made in connection with this offering. To the extent
such option is exercised, each Underwriter will become obligated, subject to
certain conditions, to purchase approximately the same percentage of such
additional shares as the number set forth next to such Underwriter's name in the
preceding table bears to the total number of Shares offered hereby.
The Company and the Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act of
1933, as amended.
The Company has agreed that without the written consent of the
Underwriters, it will not offer, sell, contract to sell or otherwise dispose of
any shares of Common Stock or any securities convertible or exchangeable
therefor, for a period of 90 days from the date of this Prospectus Supplement,
subject to limited exceptions. Purchases and sales of the Company's Common Stock
by executive officers and directors between the date hereof and the date of the
Company's press release regarding third quarter earnings (expected on or about
August 15, 1995) are not permitted under the Company's policy regarding trading
in its securities by executive officers and directors.
From time to time, certain of the Underwriters or their affiliates have
provided, and may continue to provide, investment banking services to the
Company.
In connection with this offering, certain Underwriters and selling group
members (if any) or their respective affiliates who are qualified registered
market makers on The Nasdaq National Market, may engage in passive market making
transactions in the Common Stock on The Nasdaq National Market in accordance
with Rule 10b-6A under the Securities Exchange Act of 1934, as amended, during
the two business day period before commencement of offers or sales of the Common
Stock. The passive market making transactions must
S-11
<PAGE> 12
comply with applicable volume and price limits and be identified as such. In
general, a passive market maker may display its bid at a price not in excess of
the highest independent bid for the security; if all independent bids are
lowered below the passive market maker's bid, however, such bid must then be
lowered when certain purchase limits are exceeded.
LEGAL OPINIONS
The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by Orrick, Herrington & Sutcliffe, San Francisco,
California. Certain matters will be passed upon for the Underwriters by Wilson
Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto, California.
S-12
<PAGE> 13
PROSPECTUS
(LOGO) APPLIED MATERIALS
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> 14
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> 15
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> 16
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
4
<PAGE> 17
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> 18
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)
6
<PAGE> 19
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> 20
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> 21
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%
9
<PAGE> 22
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,
10
<PAGE> 23
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
11
<PAGE> 24
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
directions.
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.
12
<PAGE> 25
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
13
<PAGE> 26
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
14
<PAGE> 27
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.
15
<PAGE> 28
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.
16
<PAGE> 29
[LOGO] APPLIED MATERIALS
