<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
APPLIED MATERIALS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
- --------------------------------------------------------------------------------
APPLIED MATERIALS
James C. Morgan
CHAIRMAN
CHIEF EXECUTIVE OFFICER
February 22, 1999
LOGO
Dear Applied Materials Stockholder:
We cordially invite you to attend Applied Materials' 1999 Annual Meeting of
Stockholders which will be held at the Westin Hotel, Santa Clara Ballroom, 5101
Great America Parkway, Santa Clara, California on Wednesday, March 31, 1999 at
3:00 p.m. At the meeting, the stockholders will elect nine directors, vote on an
amendment of the Employee Stock Purchase Plan, and vote on a stockholder
proposal to amend the Company's Bylaws. Your participation at the Annual
Meeting, in person or by proxy, is particularly important this year because of
the Board's opposition to this stockholder proposal.
Your Board is unanimously opposed to the stockholder proposal, and we
strongly urge you to vote against it because we believe it is not in the best
interests of either stockholders or the Company. If approved, the proposal would
significantly limit the Board's ability to negotiate effectively with a
potential acquiror and impair its ability to preserve and maximize value for all
stockholders.
Studies by J. P. Morgan and Georgeson & Company lead your Board to believe
that stockholder rights plans, like ours, actually increase premiums paid by
acquirors and do not reduce the likelihood of a tender offer being made. Your
Board also believes that a stockholder rights plan which provides for periodic
review by independent directors is preferable to the proposal's ongoing
requirement that stockholders approve any extension of the current rights plan
or new rights plan.
In addition, the Board believes the proposed bylaw, if approved, would be
legally invalid because it would unlawfully limit the Board's ability to perform
its obligation to manage the business and affairs of the Company, as required by
law. Our position is fully set forth in the enclosed proxy statement and we urge
you to read it carefully.
Please review the proxy materials carefully, and vote FOR the director
nominees, vote FOR the amendment of the Employee Stock Purchase Plan, and vote
AGAINST the stockholder proposal. If you have any questions, or need any
assistance in voting your shares, please call the company assisting us in the
solicitation of proxies, Innisfree M&A Incorporated, toll-free at
1-888-750-5834.
Sincerely,
LOGO
James C. Morgan
<TABLE>
<S> <C>
3050 Bowers Avenue Mailing Address:
Santa Clara, California 95054 Applied Materials, Inc.
Phone: (408) 727-5555 P.O. Box 58039
FAX: (408) 496-6421 Santa Clara, California 95052
Telex: 34-6332
</TABLE>
<PAGE> 3
APPLIED MATERIALS, INC.
3050 BOWERS AVENUE
SANTA CLARA, CALIFORNIA 95054
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
WEDNESDAY, MARCH 31, 1999
AT 3:00 P.M.
To the Stockholders:
The Annual Meeting of Stockholders of Applied Materials, Inc. will be held
at the Westin Hotel, Santa Clara Ballroom, 5101 Great America Parkway, Santa
Clara, California on Wednesday, March 31, 1999 at 3:00 p.m. for the following
reasons:
1. To elect nine directors to serve for a one-year term and until their
successors have been elected and qualified.
2. To approve an amendment of the Employee Stock Purchase Plan to increase
the number of shares issuable thereunder by 8,000,000 shares.
3. To vote on a stockholder proposal to amend the Bylaws of Applied
Materials, Inc., so as to require stockholder approval to adopt a new
stockholder rights plan or to renew its existing rights plan.
4. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
Only stockholders of record at the close of business on Monday, February 1,
1999 are entitled to notice of, and to vote at, the meeting and any adjournment
or postponement thereof. In accordance with Delaware law, a list of the
Company's stockholders entitled to vote at the meeting will be available for
examination by any stockholder for any purpose germane to the meeting during
normal business hours at the Company's offices at 2881 Scott Boulevard, Santa
Clara, California, for ten days prior to the meeting.
By Order of the Board of Directors
Donald A. Slichter
Secretary
Santa Clara, California
February 22, 1999
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. WHETHER
OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE
ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE PREPAID ENVELOPE.
<PAGE> 4
APPLIED MATERIALS, INC.
3050 BOWERS AVENUE
SANTA CLARA, CALIFORNIA 95054
PROXY STATEMENT
The accompanying proxy is solicited on behalf of the Board of Directors
(the "Board") of Applied Materials, Inc., a Delaware corporation (the
"Company"), for use at the Annual Meeting of Stockholders of the Company to be
held at 3:00 p.m. on March 31, 1999, and at any adjournment or postponement
thereof (the "Annual Meeting" or "Meeting"), for the reasons set forth in the
accompanying Notice of Annual Meeting of Stockholders. Only stockholders of
record at the close of business on February 1, 1999 are entitled to notice of,
and to vote at, the Annual Meeting. On that date, the Company had outstanding
373,206,480 shares of Common Stock. Holders of Common Stock are entitled to one
vote for each share held.
If the enclosed form of proxy is properly signed and returned, the shares
represented thereby will be voted at the Annual Meeting in accordance with the
instructions specified thereon. If the proxy does not specify how the shares
represented thereby are to be voted, the proxy will be voted FOR the election of
the nine directors proposed by the Board unless the authority to vote for the
election of directors (or for any one or more nominees) is withheld and, if no
contrary instructions are given, the proxy will be voted FOR the approval of the
amendment of the Company's Employee Stock Purchase Plan (the "Plan") and AGAINST
the stockholder proposal to amend the Bylaws of the Company. Any stockholder
signing a proxy in the form accompanying this Proxy Statement has the power to
revoke it prior to or at the Meeting. A proxy may be revoked by a writing
delivered to the Secretary of the Company stating that the proxy is revoked, by
a subsequent proxy signed by the person who signed the earlier proxy or by
attendance at the Meeting and voting in person. Votes will be tabulated by the
inspector of elections of the Meeting.
A majority of the shares entitled to vote, represented in person or by
proxy, constitutes a quorum. If a quorum is present, (i) a plurality vote of the
shares present, in person or by proxy, at the Meeting and entitled to vote is
required for the election of directors and (ii) the affirmative vote of the
majority of the shares present, in person or by proxy, at the Meeting and
entitled to vote is required for the approval of the amendment of the Plan and
the stockholder proposal to amend the Bylaws of the Company. Abstentions are
considered shares present and entitled to vote, and therefore have the same
legal effect as a vote against a matter presented at the Meeting. Any shares
held in street name for which the broker or nominee receives no instructions
from the beneficial owner, and as to which such broker or nominee does not have
discretionary voting authority under applicable New York Stock Exchange rules,
will be considered as shares not entitled to vote and will therefore not be
considered in the tabulation of the votes. Accordingly, a broker non-vote will
have no effect with respect to any item of this Proxy Statement.
The expense of soliciting proxies will be paid by the Company. Following
the original mailing of the proxies and soliciting materials, employees of the
Company may solicit proxies by mail, telephone, facsimile transmission and
personal interviews. The Company will request brokers, custodians, nominees and
other record holders to forward copies of the proxies and soliciting materials
to persons for whom they hold shares of the Company's Common Stock and to
request authority for the exercise of proxies; in such cases, the Company will
reimburse such holders for their reasonable expenses. Proxies will also be
solicited on behalf of the Company by the firm of Innisfree M&A Incorporated,
whose fee of $18,000 will be borne by the Company.
This Proxy Statement was first mailed to stockholders on or about February
22, 1999.
<PAGE> 5
ITEM 1 -- ELECTION OF DIRECTORS
NOMINEES
At the Annual Meeting of Stockholders, a Board of nine directors will be
elected, each to hold office until a successor is elected and qualified, or
until the death, resignation or removal of the director. Shares represented by
the accompanying proxy will be voted for the election of the nine nominees
(recommended by the Board of Directors) named in the following table, unless the
proxy is marked in such a manner as to withhold authority so to vote. All
nominees were elected directors by a vote of the stockholders at the last Annual
Meeting of Stockholders on March 17, 1998. The Company has no reason to believe
that the nominees for election will not be available to serve their prescribed
terms. However, if any nominee is for any reason unable to serve or will not
serve, the proxy may be voted for such substitute nominee as the persons
appointed in the proxy may in their discretion determine.
The following table sets forth certain information concerning the nominees,
based on data furnished by them.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
--------------- --- -------------------- --------
<S> <C> <C> <C>
James C. Morgan.................... 60 Chairman of the Board and Chief Executive Officer 1977
of the Company
Dan Maydan......................... 63 President of the Company and Former Chairman of 1992
Applied Komatsu Technology, Inc.
Michael H. Armacost*............... 61 President of The Brookings Institution 1993
Deborah A. Coleman*................ 46 Chair and Chief Executive Officer of Merix 1997
Corporation
Herbert M. Dwight, Jr.**........... 68 Retired Chairman and Chief Executive Officer of 1981
Optical Coating Laboratory, Inc.
Philip V. Gerdine*................. 59 Retired Executive Director (Overseas Acquisitions) 1976
of Siemens AG
Tsuyoshi Kawanishi*................ 69 Senior Adviser to Toshiba Corporation 1994
Paul R. Low**...................... 65 Chief Executive Officer of P.R.L. Associates 1992
Alfred J. Stein**.................. 66 Chairman and Chief Executive Officer of VLSI 1981
Technology, Inc.
</TABLE>
- ---------------
* Member of Audit Committee
** Member of Stock Option and Compensation Committee
There is no family relationship between any of the foregoing nominees or
between any of such nominees and any of the Company's executive officers. The
Company's executive officers serve at the discretion of the Board of Directors.
James C. Morgan has been Chairman of the Board of the Company since 1987
and Chief Executive Officer of the Company since February 1977. Mr. Morgan is a
director of Cisco Systems, Inc.
Dan Maydan has been President of the Company since December 1993. He served
as a Chairman of Applied Komatsu Technology, Inc. (formerly Applied Display
Technology, Inc.) from December 1991 through October 23, 1998. From 1990 to
December 1993, he was Executive Vice President of the Company. Dr. Maydan is a
director of Electronics for Imaging, Inc. and Drexler Technology Corporation.
Michael H. Armacost has been President of The Brookings Institution, a
nonpartisan public policy research organization, since October 1995. In May 1998
he joined IBM's Asia-Pacific Board, which is an advisory council to IBM's
Asia-Pacific operations. From September 1993 through September 1995, he was a
Distinguished Senior Fellow and Visiting Professor at the Asia-Pacific Research
Center, Stanford University. From 1989 to 1993, he was the U.S. Ambassador to
Japan. Mr. Armacost is a director of TRW, Inc., AFLAC Incorporated and Cargill,
Incorporated.
2
<PAGE> 6
Deborah A. Coleman has been Chair and Chief Executive Officer of Merix
Corporation, a manufacturer of interconnect solutions for use in electronic
equipment, since April 1994. From November 1992 through March 1994, she was the
Vice President of Materials Operations at Tektronix, Inc. Ms. Coleman is a
director of Synopsys, Inc.
Herbert M. Dwight, Jr. served as Chairman and Chief Executive Officer of
Optical Coating Laboratory, Inc., a manufacturer of optical thin films and
components, from 1991 until his retirement in 1998. Mr. Dwight is a director of
Applied Magnetics Corporation, Optical Coating Laboratory, Inc. and Advanced
Fiber Communications, Inc.
Philip V. Gerdine served as Executive Director (Overseas Acquisitions) of
Siemens AG, Munich, Germany, a manufacturer of electrical and electronic
products, from 1990 until his retirement in 1998. Dr. Gerdine is a director of
Solectron Corporation.
Tsuyoshi Kawanishi has been Senior Adviser to Toshiba Corporation, a
manufacturer of electrical and electronic products, since June 1994, and
Chairman of the Management Board of the Institute of Microelectronics since June
1996. From June 1990 to June 1994, he was Senior Executive Vice President and a
member of the Board of Directors of Toshiba Corporation. Mr. Kawanishi is a
director of Chartered Semiconductor Manufacturing Ltd., Asyst Technologies, Inc.
and Advanpack Solutions Pte., Ltd.
Paul R. Low has been Chief Executive Officer of P.R.L. Associates, a
consulting firm, since July 1992. Dr. Low is a director of Solectron
Corporation, Veeco Instruments Inc., VLSI Technology, Inc., and Xionics Document
Technologies, Inc.
Alfred J. Stein has been Chairman and Chief Executive Officer of VLSI
Technology, Inc., a manufacturer of semiconductor devices, since March 1982. Mr.
Stein is a director of Tandy Corporation.
BOARD AND COMMITTEE MEETINGS
The Board of Directors met eight times during fiscal 1998. Standing
committees of the Board include an Audit Committee, which met three times during
fiscal 1998, and a Stock Option and Compensation Committee, which met four times
during fiscal 1998. There is no nominating committee. Potential nominees are
interviewed by outside directors, who submit their recommendations to the Board.
The Audit Committee is comprised of Messrs. Gerdine (Chairman), Armacost
and Kawanishi, and Ms. Coleman. Messrs. Low and Stein are alternate members. All
members and alternate members are non-employee directors. Pursuant to the Audit
Committee Charter, the Committee addresses on a regular basis matters that
include, among other things, (1) making recommendations to the Board of
Directors regarding the appointment of independent auditors, (2) reviewing with
Company financial management the plans for, and results of, the independent
audit engagement, (3) reviewing the adequacy of the Company's system of internal
accounting controls, (4) monitoring the Company's internal audit program to
assure that areas of potential risk are adequately covered, and (5) reviewing
legal and regulatory matters that may have a material effect on the Company's
financial statements.
The Stock Option and Compensation Committee is comprised of Messrs. Dwight
(Chairman), Low and Stein. Alternate members include Mr. Armacost and Ms.
Coleman. All members and alternate members are non-employee directors. The
Committee's primary functions are to determine remuneration policies applicable
to the Company's executive officers and to determine the bases of the
compensation of the Chief Executive Officer, including the factors and criteria
on which such compensation is to be based. The Committee also administers the
Company's 1995 Equity Incentive Plan (the "1995 Plan") and Senior Executive
Bonus Plan.
No incumbent director during fiscal 1998 attended fewer than seventy-five
percent (75%) of the aggregate of (1) the total number of meetings of the Board
of Directors (held during the period for which the individual has been a
director) and (2) the total number of meetings held by all committees of the
Board on which the director served, with the exception of Mr. Kawanishi who
attended all of the Company's regularly scheduled Board meetings, but did not
attend three special meetings of the Board.
3
<PAGE> 7
COMPENSATION OF DIRECTORS
Directors who are officers of the Company do not receive any additional
compensation for their services as a director. During fiscal 1998, directors who
were not officers of the Company received a quarterly retainer of $3,000 for the
first fiscal quarter of 1998. In the second fiscal quarter of 1998, and for each
fiscal quarter thereafter, directors who were not officers of the Company were
paid a quarterly retainer fee of $3,750, in accordance with a $750 increase in
the quarterly retainer approved at the December 10, 1997 meeting of the Stock
Option and Compensation Committee. The Company also paid such directors a fee of
$2,000 for each Board meeting attended and a fee of $500 for each committee
meeting attended if the committee met on a day other than the day the Board met.
Mr. Kawanishi received an additional $1,200 for each Board meeting. Directors
are reimbursed for out-of-pocket costs incurred in connection with attending
meetings, and directors who are not residents of California are reimbursed for
the costs of preparing California tax returns. Mr. Kawanishi is also reimbursed
for the costs of preparing a U.S. federal tax return.
Directors who are not officers of the Company participate in one equity
incentive plan, the 1995 Plan, which was approved by the Company's stockholders
at the 1995 Annual Meeting of Stockholders. Under the 1995 Plan, options to
purchase 20,000 shares of the Company's Common Stock are automatically granted
to each non-employee director on the date such director is for the first time
elected or appointed to the Board of Directors. Thereafter, each such director
is automatically granted options to purchase 6,000 shares on the last business
day of each fiscal year, provided that such automatic option grants are made
only if the director was on the Board of Directors for the entire fiscal year
then ending (including the last business day of the fiscal year) and was not an
employee of the Company or any affiliate for any part of the fiscal year then
ending. The exercise price for all non-employee director options granted under
the 1995 Plan is 100% of the fair market value of the shares on the grant date.
All such options become exercisable over a four-year period, assuming continued
service on the Board of Directors. The options expire no later than five years
after the date of grant (up to six years in the event of the director's death).
4
<PAGE> 8
MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table contains certain information regarding beneficial
ownership of the Company's Common Stock as of November 1, 1998 by (i) each of
the Company's current directors, (ii) the Chief Executive Officer and each of
the Company's four other most highly compensated executive officers (the five
officers shall be referred to as the "Named Executive Officers"), and (iii) all
directors and executive officers as a group. No person was known by the Company
to own 5% or more of the Company's Common Stock as of November 1, 1998.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
---------------------
DIRECTORS AND NAMED EXECUTIVE OFFICERS NUMBER(1) PERCENT
-------------------------------------- --------- -------
<S> <C> <C>
NON-EMPLOYEE DIRECTORS:
Michael H. Armacost................................... 100,500(2) *
Deborah A. Coleman.................................... 12,000(3) *
Herbert M. Dwight, Jr. ............................... 91,500(4) *
Philip V. Gerdine..................................... 114,100(5) *
Tsuyoshi Kawanishi.................................... 41,500(6) *
Paul R. Low........................................... 40,500(7) *
Alfred J. Stein....................................... 70,500(8) *
NAMED EXECUTIVE OFFICERS:
James C. Morgan....................................... 1,801,693(9) *
Dan Maydan............................................ 854,465(10) *
Joseph R. Bronson..................................... 83,656(11) *
Sasson Somekh......................................... 997,894(12) *
David N.K. Wang....................................... 812,685(13) *
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP
(12 PERSONS).......................................... 5,020,993(14) 1.36 %
</TABLE>
- ---------------
* Less than 1%
(1) Represents shares held directly and with sole voting and investment power
or with voting and investment power shared with a spouse.
(2) Includes options to purchase 92,100 shares of Common Stock exercisable by
Mr. Armacost within 60 days of November 1, 1998.
(3) Includes options to purchase 12,000 shares of Common Stock exercisable by
Ms. Coleman within 60 days of November 1, 1998.
(4) Includes options to purchase 40,500 shares of Common Stock exercisable by
Mr. Dwight within 60 days of November 1, 1998.
(5) Includes options to purchase 40,500 shares of Common Stock exercisable by
Dr. Gerdine within 60 days of November 1, 1998.
(6) Includes options to purchase 41,500 shares of Common Stock exercisable by
Mr. Kawanishi within 60 days of November 1, 1998.
(7) Includes options to purchase 40,500 shares of Common Stock exercisable by
Dr. Low within 60 days of November 1, 1998.
(8) Includes options to purchase 28,500 shares of Common Stock exercisable by
Mr. Stein within 60 days of November 1, 1998.
(9) Includes options to purchase 576,000 shares of Common Stock exercisable by
Mr. Morgan within 60 days of November 1, 1998.
5
<PAGE> 9
(10) Includes options to purchase 200,000 shares of Common Stock exercisable by
Dr. Maydan within 60 days of November 1, 1998.
(11) Includes options to purchase 57,000 shares of Common Stock exercisable by
Mr. Bronson within 60 days of November 1, 1998.
(12) Includes options to purchase 336,000 shares of Common Stock exercisable by
Dr. Somekh within 60 days of November 1, 1998.
(13) Includes options to purchase 336,000 shares of Common Stock exercisable by
Dr. Wang within 60 days of November 1, 1998.
(14) Includes options to purchase 1,800,600 shares of Common Stock exercisable
by directors and Named Executive Officers within 60 days of November 1,
1998.
EXECUTIVE COMPENSATION
The following table contains information concerning compensation earned by
the Named Executive Officers for services rendered to the Company and its
subsidiaries in all capacities during the last three fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------- ---------------------------------
AWARD PAYOUTS
OTHER ----------------------- -------
ANNUAL RESTRICTED SECURITIES ALL
COMPEN- STOCK UNDERLYING LTIP OTHER
NAME AND FISCAL SALARY BONUS SATION AWARDS OPTIONS PAYOUTS COMPENSATION(1)
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
------------------ ------ ------- ------- ------- ---------- ---------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James C. Morgan................... 1998 747,914 264,190 0 0 80,000 0 7,200
Chairman of the Board and 1997 671,539 602,640 0 0 160,000 0 6,750
Chief Executive Officer 1996 645,136 919,215 0 0 140,000 0 6,750
Dan Maydan........................ 1998 571,323 201,812 0 0 70,000 0 107,656(2)
President of the Company 1997 508,094 460,350 0 0 140,000 0 6,750
and Former Chairman of Applied 1996 476,586 683,144 0 0 110,000 0 4,457
Komatsu Technology, Inc.
Joseph R. Bronson................. 1998 363,077 135,900 0 0 40,000 0 4,077
Senior Vice President, 1997 271,154 486,000 0 0 44,000 0 3,779
Office of the President, 1996 239,531 282,670 0 0 88,000 0 102,784(3)
Chief Financial Officer and
Chief Administrative Officer
Sasson Somekh..................... 1998 394,732 139,433 0 0 40,000 0 4,051
Senior Vice President, 1997 348,077 318,060 0 0 80,000 0 3,742
Office of the President 1996 322,596 459,608 0 0 70,000 0 3,562
David N.K. Wang................... 1998 394,732 139,433 0 0 40,000 0 4,051
Senior Vice President, 1997 348,077 318,060 0 0 80,000 0 3,742
Office of the President 1996 322,596 459,608 0 0 70,000 0 3,562
</TABLE>
- ---------------
(1) Unless otherwise indicated, the amounts in this column consist of matching
contributions made by the Company under the Employee Savings and Retirement
Plan, a "401(k)" plan providing for broad-based employee participation.
(2) This amount consists of the Company's matching contribution of $7,200 under
the Employee Savings and Retirement Plan, a payment of $99,856 in relation
to a bonus payment to Dr. Maydan further described under the section of the
Proxy Statement entitled "Loans to Management" and a payment of $600 to Dr.
Maydan as part of the Company's Patent Incentive Award Program.
(3) This amount consists of the Company's matching contribution of $3,562 under
the Employee Savings and Retirement Plan; and $99,222 paid to Mr. Bronson in
connection with housing costs related to his role as Group Vice President,
Worldwide Manufacturing Operations, a position which required frequent and
extended trips to the Company's facility in Austin, Texas.
6
<PAGE> 10
The following table contains information concerning the grant of stock
options to the Named Executive Officers during fiscal 1998 under the Company's
1995 Plan:
STOCK OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE
---------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION -------------------------
NAME GRANTED(#) FISCAL YEAR PRICE($/SH) DATE 5% 10%
---- ---------- ------------ ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
James C. Morgan........... 80,000 0.30% 29.75 01/15/05 968,899 2,257,947
Dan Maydan................ 70,000 0.26% 29.75 01/15/05 847,787 1,975,703
Joseph R. Bronson......... 40,000 0.15% 29.75 01/15/05 484,450 1,128,973
Sasson Somekh............. 40,000 0.15% 29.75 01/15/05 484,450 1,128,973
David N.K. Wang........... 40,000 0.15% 29.75 01/15/05 484,450 1,128,973
</TABLE>
- ---------------
(1) The stock options in this table were granted in January 1998 and have an
exercise price equal to the fair market value of the Company's Common Stock
on the date of grant. For each grant, 100% of the options become exercisable
on July 15, 2001, assuming continued employment with the Company.
The Company has not granted stock appreciation rights.
The following table contains information concerning (i) the exercise of
stock options by the Named Executive Officers during fiscal 1998 and (ii)
unexercised stock options held by the Named Executive Officers as of the end of
fiscal 1998:
AGGREGATED STOCK OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES FISCAL YEAR END(#) AT FISCAL YEAR END($)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James C. Morgan.......... 0 0 576,000 380,000 13,968,000 5,156,250
Dan Maydan............... 0 0 200,000 320,000 4,687,500 4,318,750
Joseph R. Bronson........ 15,000 324,375 57,000 128,000 1,335,938 1,779,000
Sasson Somekh............ 0 0 336,000 190,000 8,239,000 2,578,125
David N.K. Wang.......... 202,300 6,132,807 336,000 190,000 8,239,000 2,578,125
</TABLE>
7
<PAGE> 11
REPORT OF THE STOCK OPTION AND COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Notwithstanding any statement to the contrary in any of the Company's
previous or future filings with the Securities and Exchange Commission, this
Report shall not be incorporated by reference into any such filings.
Compensation Philosophy. In developing the Company's executive compensation
policies, the Stock Option and Compensation Committee (the "Committee") has two
principal objectives: (1) attracting, rewarding and retaining officers who
possess outstanding talent, and (2) motivating the officers to achieve
short-term and long-term corporate objectives that enhance stockholder value.
Accordingly, the Committee adopted the following overriding policies:
- The Company will pay compensation that is competitive with the practices
of other leading high technology companies;
- A significant portion of the officers' compensation will depend upon the
achievement of challenging performance goals for the Company and its
various business units and officers; and
- The Company will align the interests of its officers with those of the
Company's stockholders -- therefore, stock options will constitute a
significant portion of compensation.
Total Annual Compensation. Each officer's target total annual compensation
(that is, salary plus bonus) is determined after reviewing independent survey
data on the compensation paid to officers at a group of approximately 20
companies in the high technology industry. These companies strenuously compete
with the Company for executive talent and/or have revenues comparable to the
Company's revenues. The Company's goal is to set total target annual
compensation at a level that is near the median level for the officers at the
surveyed companies.
Bonuses. The target bonus for each officer depends on his or her potential
impact on the Company's operating and financial results. Target bonuses for
business unit executives generally range from 65 - 75% of annual salary. Target
bonuses for staff executives generally equal 50 - 65% of annual salary.
The actual bonus (that is, the percentage of the target bonus) that any
officer (other than the Named Executive Officers) actually receives depends on
the achievement of business unit objectives and financial performance goals for
the Company. Typical business unit objectives include both financial and
operating goals, including, for example, increasing profitability, customer
satisfaction and market share, and growing controllable profit and gross margin.
For each year, the performance goals are set in light of general business
conditions and the Company's strategies for the year. For fiscal 1998, the
Committee directed Company management to determine the performance targets for
the officers other than Named Executive Officers, using a philosophy approved by
the Committee. The Committee developed and approved the specific performance
targets for the Named Executive Officers, as described in the following
paragraph.
Fiscal 1998 bonuses for Mr. Morgan, Dr. Maydan, Mr. Bronson, Dr. Somekh and
Dr. Wang (that is, the Named Executive Officers) were paid pursuant to the
Company's Senior Executive Bonus Plan (the "Bonus Plan"). Bonuses are paid under
the Bonus Plan only if performance goals that the Committee sets at the
beginning of the fiscal year are achieved. Under the Bonus Plan, the performance
goals require the achievement of specific targets for one or more of the
following: (1) annual revenue, (2) controllable profits, (3) customer
satisfaction management by objective ("MBO") goals, (4) earnings per share, (5)
individual MBOs, (6) net income, (7) new orders, (8) pro forma net income, (9)
asset management, or (10) return on sales. For fiscal 1998, the Committee chose
two equally weighted performance goals: (a) growth in the Company's annual
revenue, and (b) achievement of certain levels of return on sales (that is, the
Company's net income as a percentage of the Company's annual sales).
8
<PAGE> 12
Stock Options. The Committee strongly believes that stock options motivate
the officers to maximize stockholder value and to remain in the Company's employ
despite a very competitive labor market. All Company stock options have a per
share exercise price equal to the fair market value of the Company's stock on
the grant date. The number of options granted to each officer and each option's
vesting schedule are determined based on the executive's position at the
Company, his or her individual performance, the number of options the executive
already holds and other factors, including an estimate of the potential value of
the options. In fiscal 1998, the Committee made these determinations for the
Named Executive Officers and other senior officers, and for any other individual
granted options covering more than 25,000 shares. For all other grants, the
Chief Executive Officer (that is, Mr. Morgan) made these determinations, in
consultation with the Company's Human Resources organization.
Compensation of Chief Executive Officer. During fiscal 1998, Mr. Morgan
received a salary of $747,914 and his target bonus under the Bonus Plan was 75%
of his annual salary. In setting Mr. Morgan's target bonus, the Committee
considered its belief that Mr. Morgan, as Chief Executive Officer, significantly
and directly influences the Company's overall performance. Mr. Morgan's actual
bonus was determined according to a formula, based on the extent to which the
Company exceeded or fell short of the specified performance goals (which, as
described under "Bonuses" above, required the Company to achieve certain levels
of annual revenue and return on sales). Actual performance for fiscal 1998 fell
short of the performance goals. Accordingly, Mr. Morgan's bonus was $264,190,
which equaled approximately 35% of his fiscal 1998 salary.
Tax Deductibility of Executive Compensation. Under section 162(m) of the
Internal Revenue Code the Company generally receives a federal income tax
deduction for compensation paid to any of its Named Executive Officers only if
the compensation is less than $1 million during any fiscal year or is
"performance-based" under section 162(m). Both the Company's 1995 Equity
Incentive Plan and the Bonus Plan permit the Committee to pay compensation that
is "performance-based" and thus fully tax-deductible by the Company. The
Committee currently intends to continue seeking a tax deduction for all of the
Company's executive compensation, to the extent consistent with the best
interests of the Company.
Herbert M. Dwight, Jr.
Paul R. Low
Alfred J. Stein
9
<PAGE> 13
COMPANY STOCK PERFORMANCE
The following graph shows a five-year comparison of cumulative total return
for the Company's stock, the Standard & Poor's 500 Composite Index and the
Hambrecht & Quist Semiconductor Index, which is a published industry index. The
Hambrecht & Quist Semiconductor Index contains 37 companies in the semiconductor
and semiconductor equipment industries. Notwithstanding any statement to the
contrary in any of the Company's previous or future filings with the Securities
and Exchange Commission, this graph shall not be incorporated by reference into
any such filings.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG APPLIED MATERIALS, INC., THE HAMBRECHT & QUIST
SEMICONDUCTOR INDEX AND THE S&P 500 INDEX
<TABLE>
<CAPTION>
APPLIED MATERIALS, INC. H&Q SEMICONDUCTOR S&P 500
----------------------- ----------------- -------
<S> <C> <C> <C>
'10/31/93' 100.00 100.00 100.00
'10/30/94' 165.00 127.00 104.00
'10/29/95' 311.00 221.00 130.00
'10/27/96' 170.00 182.00 160.00
'10/26/97' 423.00 288.00 219.00
'10/25/98' 431.00 237.00 252.00
</TABLE>
--------------------
* $100 Invested on 10/31/93 in Stock or Index -- Including Reinvestment of
Dividends.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1998, non-employee directors Herbert M. Dwight, Jr., Paul R.
Low and Alfred J. Stein served as members of the Stock Option and Compensation
Committee. None of the Stock Option and Compensation Committee members or Named
Executive Officers have any relationship that must be disclosed under this
caption.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and executive officers, and holders of more
than 10% of the Company's Common Stock, to file with the Securities and Exchange
Commission (the "SEC") initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Such
officers, directors and 10% stockholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they file.
10
<PAGE> 14
Based on its review of such forms that it received, or written
representations from reporting persons that no Forms 5 were required for such
persons, the Company believes that, during fiscal 1998, all Section 16(a) filing
requirements were satisfied on a timely basis.
LOANS TO MANAGEMENT
Dan Maydan was a Chairman of Applied Komatsu Technology, Inc. ("AKT"), a
joint venture corporation 50% owned by the Company and 50% owned by Komatsu
Ltd., a Japanese corporation. Pursuant to the AKT Executive Incentive Stock
Purchase Plan ("EIP"), in fiscal 1994, the Company and Komatsu Ltd. each lent
Dr. Maydan $185,500 to purchase shares of non-voting convertible preferred stock
of AKT. The terms of the loan between Dr. Maydan and the Company call for
interest at the rate of 7.16% to be paid on an annual basis, with a balloon
principal payment to be paid January 31, 2004. Unpaid interest is added to the
principal balance upon which interest is calculated. The loan is secured by the
shares purchased. At the March 16, 1998 meeting of the Stock Option and
Compensation Committee, the Committee approved a bonus payment to Dr. Maydan in
an amount of $99,856 to offset interest accrued on the loans through October 31,
1997. This bonus payment was similar to payments made by AKT to its employees
participating in the AKT Executive Incentive Stock Purchase Plan. As a result of
the bonus payment to Dr. Maydan, the outstanding principal amount of the loan
from the Company on October 25, 1998 was $200,767 while the largest principal
amount of the loan outstanding during fiscal 1998 was $244,273.
11
<PAGE> 15
ITEM 2 -- ADOPTION OF AMENDMENT OF EMPLOYEE STOCK PURCHASE PLAN
The Company's Employee Stock Purchase Plan (the "Plan") provides eligible
employees of the Company and its participating subsidiaries with the opportunity
to purchase shares of Common Stock of the Company through convenient payroll
deductions.
At the 1992 Annual Meeting the stockholders voted for the adoption of an
amended and restated Plan that increased the maximum number of shares issuable
thereunder to a total of 4,800,000 shares.
The Board has determined that, in order to give the Company the ability to
continue to attract and retain the talented employees necessary for the
Company's continued growth and success, the number of shares issuable under the
Plan should be increased. Therefore, the Board proposes to increase the number
of shares under the Plan by 8,000,000 shares.
PURPOSE
The purpose of the Plan is to encourage ownership of Common Stock of the
Company by all eligible employees and to provide incentives for them to exert
maximum efforts for the success of the Company and its affiliates. The Plan is
intended to qualify as an employee stock purchase plan under Section 423 of the
Internal Revenue Code of 1986, as amended.
ELIGIBILITY TO PARTICIPATE
Most employees of the Company and its participating subsidiaries are
eligible to elect to participate in the Plan. However, an employee is not
eligible if he or she has the right to acquire five percent or more of the
voting stock of the Company or of any subsidiary of the Company. Also, an
employee is not eligible if he or she normally is scheduled to work less than or
equal to twenty hours per week or five months per calendar year. Currently only
U.S. employees are eligible to participate in the Plan. A separate similar stock
purchase plan is available to eligible employees outside the U.S. As of November
30, 1998, there were 9,016 employees participating in the Plan.
ADMINISTRATION, AMENDMENT AND TERMINATION
The Board has delegated the authority to administer the Plan to the Stock
Option and Compensation Committee (the "Committee") of the Board of Directors of
the Company. The members of the Committee serve at the pleasure of the Board.
Subject to the terms of the Plan, the Committee has all discretion and
authority necessary or appropriate to control and manage the operation and
administration of the Plan, including the power to designate the subsidiaries of
the Company which will be permitted to participate in the Plan. The Committee
also may establish a waiting period (not to exceed two years) before new
employees may become eligible for the Plan. The Committee may make whatever
rules, interpretations, and computations, and take any other actions to
administer the Plan that it considers appropriate to promote the Company's best
interests and to ensure that the Plan remains qualified under Section 423 of the
Internal Revenue Code. The Committee may delegate one or more ministerial duties
in the administration of the Plan.
The Company's Board of Directors, in its sole discretion, may amend or
terminate the Plan at any time for any reason. The Plan, unless sooner
terminated, will terminate on March 10, 2002.
NUMBER OF SHARES OF COMMON STOCK AVAILABLE UNDER THE PLAN
A maximum of 9,660,106 shares of Common Stock will be available for
issuance pursuant to the Plan if this Amendment is adopted. Shares sold under
the Plan may be newly issued shares or treasury shares. In the event of any
stock split or other change in the capital structure of the Company, appropriate
adjustments will be made in the number, kind and purchase price of the shares
available for purchase under the Plan.
12
<PAGE> 16
ENROLLMENT AND CONTRIBUTIONS
Eligible employees voluntarily elect whether or not to enroll in the Plan.
Employees join for an enrollment period of six months. Employees who have joined
the Plan are automatically re-enrolled for additional rolling six-month periods;
provided, however, that an employee may cancel his or her enrollment at any time
(subject to Plan rules).
Employees contribute to the Plan through payroll deductions. Participating
employees generally may contribute up to 10% of their eligible compensation
through after-tax payroll deductions. From time to time, the Committee may
establish a lower maximum permitted contribution percentage, change the
definition of eligible compensation, or change the length of the enrollment
periods (but in no event may any enrollment period exceed 27 months). After an
enrollment period has begun, an employee may increase or decrease his or her
contribution percentage (subject to Plan rules).
PURCHASE OF SHARES
On the last business day of each six-month enrollment period, each
participating employee's payroll deductions are used to purchase shares of
Common Stock for the employee. The price of the shares purchased will be 85% of
the lower of (1) the stock's market value on the first day of the six-month
enrollment period, or (2) the stock's market value on the last day of the
enrollment period. Market value under the Plan means the closing price of the
Common Stock on the Nasdaq/National Market for the day in question. However,
during any single year, no employee may purchase more than $25,000 of Common
Stock under the Plan (based on market value on the applicable enrollment
date(s)).
TERMINATION OF PARTICIPATION
Participation in the Plan terminates when a participating employee's
employment with the Company ceases for any reason, the employee withdraws from
the Plan, or the Plan is terminated or amended such that the employee no longer
is eligible to participate.
NUMBER OF SHARES PURCHASED BY CERTAIN INDIVIDUALS AND GROUPS
Given that the number of shares that may be purchased under the Plan is
determined, in part, on the stock's market value on the first and last day of
the enrollment period and given that participation in the Plan is voluntary on
the part of employees, the actual number of shares that may be purchased by any
individual is not determinable. The following table sets forth (a) the aggregate
number of shares of the Company's Common Stock which were purchased under the
Plan during fiscal 1998, and (b) the average per share purchase price paid for
such shares.
<TABLE>
<CAPTION>
NUMBER OF AVERAGE PER SHARE
NAME OF INDIVIDUAL OR GROUP SHARES PURCHASED PURCHASE PRICE
--------------------------- ---------------- -----------------
<S> <C> <C>
James C. Morgan............................................. 468 $27.20
Dan Maydan.................................................. 468 $27.20
Joseph R. Bronson........................................... 470 $27.20
Sasson Somekh............................................... 468 $27.20
David N.K. Wang............................................. 468 $27.20
All executive officers, as a group.......................... 2,342 $27.20
All directors who are not executive officers, as a N/A N/A
group(1)..................................................
All employees who are not executive officers, as a group.... 1,436,944 $27.55
</TABLE>
- ---------------
(1) Directors who are not employees of the Company are not eligible to
participate in the Plan.
13
<PAGE> 17
TAX ASPECTS
Based on management's understanding of current federal income tax laws, the
tax consequences of the purchase of shares of Common Stock under the Plan are as
follows:
An employee will not have taxable income when the shares of Common Stock
are purchased for him or her, but the employee generally will have taxable
income when the employee sells or otherwise disposes of stock purchased through
the Plan.
For shares which are not disposed of until more than 24 months after the
enrollment date under which the shares were purchased (the "24-month holding
period"), gain up to the amount of the discount (if any) from the market price
of the stock on the enrollment date (or re-enrollment date) is taxed as ordinary
income. Any additional gain above that amount is taxed at long-term capital gain
rates. If, after the 24-month holding period, the employee sells the stock for
less than the purchase price, the difference is a long-term capital loss. Shares
sold within the 24-month holding period are taxed at ordinary income rates to
the extent of the discount received from the stock's market price on the
purchase date. Any additional gain (or loss) is taxed to the stockholder as
long-term or short-term capital gain (or loss). The purchase date begins the
holding period for determining whether the gain (or loss) is short-term or
long-term.
The Company will receive a deduction for federal income tax purposes for
the ordinary income an employee must recognize when he or she disposes of stock
purchased under the Plan within the 24-month holding period. The Company will
not receive such a deduction for shares disposed of after the 24-month holding
period.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
AMENDMENT OF THE EMPLOYEE STOCK PURCHASE PLAN.
14
<PAGE> 18
ITEM 3 -- STOCKHOLDER PROPOSAL
The State of Wisconsin Investment Board ("SWIB"), P.O. Box 7842, Madison,
WI 53707-7842, beneficial owner of 983,200 shares of Common Stock as of October
8, 1998, has advised the Company that it intends to introduce the following
resolution at the Company's 1999 Annual Meeting for the reasons given:
"WHEREAS, Applied Materials Inc. (the Company) through its Board of
Directors, has adopted a shareholder rights plan, dated June 14, 1989; and
WHEREAS, such shareholder rights plan is expiring on June 13, 1999; and
WHEREAS, the Board of Directors has the authority to adopt a new
shareholder rights plan or amend or rescind the existing plan;
NOW THEREFORE, BE IT RESOLVED:
Pursuant to the authority of shareholders to change bylaws, the following
bylaw shall be added to the Bylaws of Applied Materials, Inc.: Treatment of
Shareholder Rights Plans. The Board of Directors shall not change the expiration
date of the shareholder rights plan or adopt any new shareholder rights plan,
without the approval of such actions by the holders of a majority of the issued
and outstanding shares. If this bylaw is amended or rescinded by the Board of
Directors, then notwithstanding anything in these bylaws to the contrary,
holders of 10% of the outstanding shares may by notice to the Company secretary,
call a special meeting of stockholders to be held on a date designated by such
10% holders, to vote on a proposal to repeal such action taken by the Board.
Such notice shall be deemed to meet the requirements of Section 2.5 of these
bylaws. Further, any amendment to the current shareholder rights plan extending
the expiration date and any new shareholder rights plan adopted by the Board of
Directors after October 8, 1998, are hereby repealed and rescinded as of the
date this bylaw is adopted.
SUPPORTING STATEMENT
If the shareholder rights plan ("poison pill") is not designed properly,
the poison pill may be used to block offers that are in the best interests of
the shareholders. Therefore, adoption or renewal of the poison pill should be
conditioned on shareholder approval. Further, shareholders should have the
opportunity to vote periodically on the continuation of the poison pill.
We believe that the current Applied Materials, Inc. shareholder rights plan
dated June 14, 1989 is not designed properly. Companies extending their poison
pills should adopt a new type of poison pill that allows shareholders the
opportunity to hold a referendum on any offer to acquire control of the company.
If shareholders vote that the offer is in their best interests, the Board of
Directors would be required to stop using the pill to block the offer.
Meanwhile, there would be ample time for the Board to develop superior
alternatives for shareholders.
This bylaw would have the effect of requiring the Company's Board of
Directors to seek stockholder approval before renewing the existing poison pill
or adopting a new poison pill. If the Board of Directors unilaterally extends
the expiration date of the existing poison pill, or adopts a new plan before
this bylaw is adopted, the bylaw would repeal such action by the Board."
STATEMENT BY THE BOARD IN OPPOSITION TO THE PROPOSAL
INTRODUCTION
Your Board of Directors ("Board") opposes SWIB's proposal for several
reasons. First, the proposed bylaw would significantly limit the Board's ability
to negotiate effectively with a potential hostile acquiror and to preserve and
maximize value for all stockholders. This proposal, for example, would restrict
the Company's flexibility in responding to acquisition offers -- friendly and
hostile alike -- by preventing the Board from quickly and unilaterally extending
the current Stockholder Rights Plan ("Rights Plan"), which is scheduled to
expire in June 1999, or adopting a new rights plan. In the supporting statement
accompanying its proposal, SWIB states that any new stockholder rights plan
should provide for "a [stockholders'] referendum on any offer to acquire control
of the company." In the Board's view, a new or extended rights plan which allows
15
<PAGE> 19
stockholders the opportunity to hold a referendum on any offer to acquire the
Company, as favored by SWIB, would further curtail the Board's ability to
respond to a takeover bid.
Second, as to any extension of the current Rights Plan, or any new
stockholder rights plan, your Board intends to require periodic review of such
plan by independent directors. Your Board believes that this approach is
preferable to the proposed ongoing requirement that stockholders approve any
extension of the current Rights Plan or adoption of any new stockholder rights
plan.
Lastly, your Board believes, based upon the opinion of counsel discussed
below, that the SWIB bylaw, if adopted, would be legally invalid. Counsel's
opinion advises that SWIB's proposed bylaw amendment impermissibly would
interfere with the Board of Directors' full authority to manage the business and
affairs of the Company. Such counsel further advises that, although stockholders
have a right to amend a Delaware corporation's bylaws in certain instances, the
extensive body of Delaware court decisions regarding rights plans and directors'
fiduciary duties is inconsistent with the concept of stockholder-dictated action
controlling the use of a rights plan, such as a bylaw adopted by stockholders.
The opinion notes, however, that no Delaware court has ruled upon the validity
of a bylaw of the kind proposed by SWIB.
Your Board's commitment has always been, and always will be, to serve the
best interests of all of our stockholders. Your Board embraces its legal
responsibility to manage the business and affairs of the Company, including
protecting stockholder interests and maximizing stockholder value in the event
that a takeover bid is made for the Company. To this end, your Board believes
that a stockholder rights plan, which the Board may adopt and amend without
stockholder approval, provides the Board with the ability and flexibility to
respond to a takeover bid in beneficial ways not available to individual
stockholders. Thus, your Board believes that a requirement that stockholders
approve any new rights plan or extension of the expiration date of the current
Rights Plan severely undermines the Board's ability to discharge its legal
responsibilities and advance stockholder interests.
The Board is well aware of the concerns that some stockholders have
expressed about the possible abuse of stockholder rights plans by other
companies. The Rights Plan is not intended to prevent a takeover on terms that
are fair and equitable to all stockholders nor is it intended as a deterrent to
proxy contests initiated by stockholders. Further, your Board has decided that
any extension of the Rights Plan or any new rights plan will include, as
discussed below, increased oversight by the Company's independent directors.
The true test of the benefits of the Rights Plan is how your Board uses it.
Therefore, the real issue posed by SWIB's proposal is whether the stockholders
can rely upon the Board to perform its fiduciary obligations and utilize this
tool properly if and when the need arises. In this regard, your Board believes
that stockholders should feel confident about the directors whom they have
elected.
Consistent with the Company's long-standing philosophy that a majority of
the Board consist of independent directors -- i.e., those who are neither
employees nor officers of the Company -- seven of the Company's current nine
directors are independent. All the directors have a broad range of experience in
global businesses, finance and academia and have demonstrated their ability to
enhance stockholder value. All the directors are keenly aware of their fiduciary
duties under Delaware law, which requires that they act in the best interests of
the Company and all of the stockholders.
Your Board will, as fiduciaries, properly consider the interests of all
stockholders if the Company should receive a takeover proposal. Further, your
Board will employ the Rights Plan and any future stockholder rights plan only in
a manner which is in the best interests of all stockholders.
THE RIGHTS PLAN IS A WIDELY ACCEPTED DEFENSE BENEFITING ALL STOCKHOLDERS
Your Board adopted the Rights Plan in 1989. The Rights Plan is similar to
those adopted by approximately 2,200 other domestic corporations. Virtually all
of these plans were adopted without stockholder approval.
The overriding objective of the Board in adopting the Rights Plan was, and
continues to be, the preservation and maximization of the Company's long-term
value for all stockholders. The Rights Plan allows
16
<PAGE> 20
the Board adequate time and flexibility to negotiate on behalf of the
stockholders. It also enhances the Board's ability to negotiate the highest
possible bid from a potential acquiror. In addition, the Rights Plan allows the
Board to develop alternatives to a takeover bid which may better maximize
stockholder value and to preserve the long-term value of the Company for all
stockholders. Finally, the Rights Plan protects stockholders from certain
abusive takeover practices. In this regard, it is important to remember that
hostile acquirors are interested in buying a company as cheaply as they can and,
in attempting to do so, may use coercive tactics, partial or two-tiered bids and
stock accumulation programs which do not treat all stockholders fairly and
equally.
Critics of stockholder rights plans argue, among other things, that they
prevent mergers and takeovers which may be beneficial to stockholders, reduce
value that stockholders receive as a result of a merger or takeover, and lead to
management entrenchment. Empirical studies demonstrate, however, that rights
plans increase the value received by stockholders as a result of mergers. Also,
no rights plan has been triggered resulting in an actual loss in value to
stockholders.
Furthermore, seven of the current nine members of your Board of Directors
are not employees or consultants to the Company and are independent. Your Board
is proud that a 1998 survey by the editors of Fortune demonstrated that from
1987 to 1997 the Company was ranked first of all the Fortune 500 companies based
on growth in earnings per share and ranked tenth based on highest total return
to investors. In addition, the Board has for years employed governance practices
which it believes are examples of good corporate governance.
THE RIGHTS PLAN AFFORDS YOUR BOARD NEGOTIATING LEVERAGE TO MAXIMIZE VALUE
The Board believes that a stockholder rights plan is essential if the Board
is to fulfill its fiduciary duty to act in the best interests of all
stockholders. The Board believes that its ability to negotiate effectively with
a potential acquiror on behalf of all stockholders is significantly greater than
that of the stockholders individually. The Board further believes that it is in
the best position to evaluate the adequacy of any potential offer, to develop
and implement superior alternatives to a takeover bid and to protect
stockholders against potential abuses during a takeover bid. Without a
stockholder rights plan, the Company could find itself negotiating with a
potential acquiror from a weakened posture, unable to obtain a transaction which
maximizes value for stockholders and unable to protect the stockholders from
unfair bids.
PROPOSED BYLAW IMPAIRS YOUR BOARD'S ABILITY TO RESPOND TO A TAKEOVER BID
The Board believes that SWIB's proposed bylaw amendment could impair the
Board's ability to respond to a takeover proposal and negotiate on the
stockholders' behalf. Confronted with a hostile or unfair takeover, the Board,
in all likelihood, would have to move rapidly to safeguard stockholder
interests. Should the Board decide that extending the current Rights Plan or
implementing a new rights plan is the appropriate response, the proposed bylaw
would require stockholder approval for either of these actions. Rapid
decision-making and the procedures for a special meeting of stockholders are
mutually inconsistent objectives. The extensive time necessary to obtain
stockholder approval, including preparation of proxy materials, review by the
Securities and Exchange Commission, printing, mailing and allowing an adequate
time for solicitation, in many circumstances could result in detrimental delay
and possibly loss of an opportunity for the Board to negotiate effectively on
behalf of all the stockholders.
Further, SWIB's proposed bylaw would allow holders of ten percent of the
outstanding shares to call a special meeting of stockholders to vote on a
proposal to repeal a decision by your Board to amend or rescind this bylaw. In
the Board's view, such a time consuming and disruptive procedure also would
undermine the Board's ability to respond to a takeover bid in a way which
maximizes value for all stockholders. Specifically, the Board believes that this
procedure provides a hostile bidder with a platform to pursue a transaction that
the Board previously determined not to be in the best interests of the
stockholders.
17
<PAGE> 21
THE RIGHTS PLAN DOES NOT BLOCK FAIR AND EQUITABLE OFFERS
The Rights Plan is not intended to prevent a takeover on terms that are
fair and equitable to all stockholders or deter a proxy contest for control of
the Company. In recent years, a number of companies with rights plans have
received unsolicited offers and have allowed stockholders to receive tender
offers (by rendering their plans inoperative) after their directors were
satisfied that the transaction, as negotiated, was fair to and in the best
interests of all stockholders. Thus, in the Board's view, other companies'
experience indicates that rights plans neither prevent unsolicited offers from
occurring nor prevent companies from being acquired at prices that are fair to
all stockholders.
RIGHTS PLANS INCREASE PREMIUMS PAID AND DO NOT DECREASE THE LIKELIHOOD OF
TAKEOVER BIDS
Studies show that companies with rights plans receive higher takeover
premiums than those without such plans. These studies also conclude that rights
plans do not decrease the likelihood that takeover bids will be made or
completed for companies which implemented such plans.
A study by J.P. Morgan Securities Inc. of 438 acquisition transactions with
an indicated value in excess of $500 million each from 1988 to 1997 concludes
that the median acquisition premium (the price paid over the stock price five
days before the offer) was 12.2% higher when the acquired company had a
stockholder rights plan in place. The acquisition premium on 199 of such
acquisitions in which the acquired company had such a plan was 41.9%, compared
to 29.7% for 239 transactions involving acquired companies without stockholder
rights plans. According to J.P. Morgan, the difference in premiums was
significant whether or not the transactions were hostile or friendly, whether or
not the financing was all stock, all cash or a combination of stock and cash,
and whether or not the indicated acquisition value was greater or less than $1
billion.
A study by Georgeson & Company, Inc., a leading investor communications
firm, after extensive analysis of takeover transactions, found that stockholders
of companies with rights plans received $13 billion in additional takeover
premiums during the five-year period from 1992-1996, and that stockholders of
companies without rights plans gave up $14.5 billion in potential value. The
Georgeson study also found that companies with rights plans were at least as
likely as companies without rights plans to become takeover targets and that
hostile bids for companies with rights plans were less likely to be withdrawn or
defeated.
These empirical studies demonstrate that stockholder rights plans actually
increase value to stockholders rather than decrease value as asserted by critics
of rights plans.
NEW PLAN WOULD INCREASE THE ROLE OF INDEPENDENT DIRECTORS TO THE BENEFIT OF
STOCKHOLDERS
The current Rights Plan will expire on June 13, 1999. Your Board is
committed to implementing and maintaining a new stockholder rights plan ("New
Plan") which is consistent with the Board's goal of preserving and maximizing
the Company's value for all stockholders. Your Board also intends to include in
any New Plan favorable provisions other companies have included in their rights
plans. To that end, for example, any New Plan adopted by the Board (or any
extension of the existing Rights Plan) would be a "Three-year Independent
Director Evaluation" plan, pursuant to which:
1. The Board would maintain its majority of independent directors.
2. A Corporate Governance Committee ("Committee") would have the authority
to review the New Plan when and as the Committee deems it appropriate,
and at least every three years, with authority to recommend to the Board
modification of the New Plan or redemption of rights as the Committee
determines.
3. The Committee would be comprised solely of independent directors.
4. The Committee would set its own agenda, and have the ability to retain
its choice of legal counsel, investment bankers and other advisors.
5. The Committee would be authorized to review: (i) stockholder opinions
about the plan; (ii) the research and development and other assets of
the Company; (iii) market valuations of the Company's
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<PAGE> 22
stock; (iv) relative valuations of peer companies; (v) developments in
rights plans since adoption of the New Plan or the Committee's last
review of the New Plan; (vi) the merger and acquisition market and
related financing markets; (vii) developments in academic studies of
rights plans and contests for corporate control; and (viii) other
factors the Committee deems relevant.
6. At each review, the Committee would determine whether the New Plan
continues to be in the best interests of the Company and all
stockholders. If not, the Committee would make its recommendations to
the full Board.
Your Board believes that the foregoing strikes a proper balance between
giving the Board the ability to negotiate effectively with a hostile bidder and
ensuring an independent and impartial evaluation of any New Plan adopted by the
Board and the merits of any bid. The Board further believes that periodic review
by independent directors is preferable to a requirement that stockholders
approve any new stockholder rights plan and any extension of the current Rights
Plan.
A REFERENDUM PROVISION IS DETRIMENTAL TO STOCKHOLDER INTERESTS
In its supporting statement, SWIB argues that companies should include in
their new stockholder rights plans a referendum provision whereby stockholders
may vote on whether a rights plan should be removed in order to allow
stockholders to accept a takeover bid. Your Board believes that including such a
provision in a New Plan would discourage hostile bidders from negotiating with
your Board and undermine the Board's ability to discharge its fiduciary duty to
maximize value for all stockholders. Also, your Board believes, contrary to
SWIB's assertion, that the operation of a referendum provision may interfere
with the time the Board needs to develop superior alternatives to a takeover
bid.
YOUR BOARD BELIEVES THAT THE PROPOSED BYLAW WOULD BE LEGALLY INVALID IF ADOPTED
In addition to its belief that SWIB's proposal is ill-advised and against
the best interests of the Company's stockholders, the Board believes that the
proposed bylaw amendment would be legally invalid if adopted. SWIB's proposal
would, through a bylaw amendment, attempt to limit the ability of the Board to
manage the business and affairs of the Company. The Company has received an
opinion of its special Delaware counsel, Richards, Layton & Finger, to the
effect that the bylaw set forth in the SWIB proposal would not be valid under
Delaware law. The legal opinion states that, although no Delaware case directly
addresses a bylaw such as that embodied in SWIB's proposal, Delaware case law
under Section 141(a) of the Delaware General Corporation Law (the "General
Corporation Law") has recognized that among the powers conferred upon a board of
directors under Section 141(a) is the power to adopt and maintain defensive
measures, specifically including a stockholder rights plan, prior to or in
response to a takeover proposal.
The legal opinion received by the Company is based on Section 141(a), which
provides that "[t]he business and affairs of every corporation organized under
this chapter shall be managed by or under the direction of a board of directors,
except as may be otherwise provided in this chapter or in its certificate of
incorporation," and on Section 157 of the General Corporation Law, which confers
on a corporation's board of directors the authority to issue rights and to
establish the terms of such rights. The opinion of the Company's special
Delaware counsel notes that both of the foregoing sections provide that the
authority of a corporation's board of directors may be limited by the
corporation's certificate of incorporation, but that neither section provides
that such authority may be limited by a bylaw. The opinion also states that
SWIB's proposed bylaw amendment "impermissibly would interfere with the Board of
Directors' full authority under Section 141(a) to manage the business and
affairs of the Company." Such counsel further believes that, although
stockholders have a right to amend a Delaware corporation's bylaws in certain
instances pursuant to Section 109(b) of the General Corporation Law, the
extensive body of Delaware case law regarding stockholder rights plans is
inconsistent with the concept of stockholder-dictated action controlling the use
of a stockholder rights plan, such as a bylaw adopted by stockholders pursuant
to Section 109(b).
This legal opinion advises that in a recent decision in Oklahoma,
International Brotherhood of Teamsters General Fund v. Fleming Cos., No. 90,185,
1999 WL 35227 (Okla. January 26, 1999), the Oklahoma Supreme Court ruled that a
bylaw similar to SWIB's proposed bylaw would be valid under Oklahoma law if
19
<PAGE> 23
adopted by the stockholders of an Oklahoma corporation. This Oklahoma decision,
however, is not binding on a Delaware court. Further, the opinion received by
the Company concludes that the reasoning and decision of the Oklahoma court
would not be persuasive to a Delaware court for a number of reasons.
OTHER DEFENSIVE PROVISIONS ARE NOT A SUBSTITUTE FOR A RIGHTS PLAN
Stockholders should be aware that, in addition to the Company's Rights
Plan, certain provisions of the Company's certificate of incorporation, bylaws
and the General Corporation Law could make it more difficult for a third party
to acquire the Company on an unsolicited basis. In this regard, the certificate
of incorporation includes the following provisions: (a) a 66 2/3% vote is
required to approve a "business combination" with a "related person," unless the
business combination is approved by the Board or the offer to acquire the
Company's shares meets certain "fair price" tests, and (b) stockholders may take
no action by written consent. Also, the Company's bylaws provide (a) that
special meetings of stockholders may be called only by the Board or the Chairman
of the Board or the President of the Company, and (b) for advance notice of any
stockholder proposal to nominate directors or present business at stockholders'
meetings. Lastly, Section 203 of the General Corporation Law establishes certain
restrictions on "business combinations" with "interested stockholders."
Although these provisions offer some protection to the Company, in the
Board's opinion they do not offer the same flexibility or effectiveness as the
Rights Plan in negotiating with a hostile bidder or maximizing stockholder
value.
FOR THE ABOVE REASONS, THE BOARD OF DIRECTORS RECOMMENDS THAT
STOCKHOLDERS VOTE AGAINST THE ADOPTION OF THE STOCKHOLDER PROPOSAL.
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<PAGE> 24
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The firm of independent accountants of the Company recommended by the Audit
Committee and selected by the Board of Directors for the current fiscal year is
PricewaterhouseCoopers LLP. The Board of Directors expects that representatives
of PricewaterhouseCoopers LLP will be present at the Annual Meeting, will be
given an opportunity to make a statement at such meeting if they desire to do so
and will be available to respond to appropriate questions.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not
intend to bring any other business before the Annual Meeting and, as far as is
known to the Board of Directors, no matters are to be brought before the Annual
Meeting except as specified in the Notice of Annual Meeting. However, as to any
other business that may properly come before the Annual Meeting, it is intended
that proxies, in the form enclosed, will be voted in respect thereof in
accordance with the judgment of the persons voting such proxies.
STOCKHOLDER PROPOSALS -- 2000 ANNUAL MEETING
Stockholders are entitled to present proposals for action at a forthcoming
stockholders' meeting if they comply with the requirements of the proxy rules.
Any proposals intended to be presented at the 2000 Annual Meeting of
Stockholders of the Company must be received at the Company's offices on or
before October 25, 1999 in order to be considered for inclusion in the Company's
proxy statement and form of proxy relating to such meeting.
The attached proxy card grants the proxy holders discretionary authority to
vote on any matter raised at the Annual Meeting. If a stockholder intends to
submit a proposal at the 2000 Annual Meeting of Stockholders of the Company,
which proposal is not intended to be included in the Company's proxy statement
and form of proxy relating to such meeting, the stockholder should give the
Company appropriate notice no later than January 8, 2000. If the Company fails
to receive notice of the proposal by such date, the Company will not be required
to provide any information about the nature of the proposal in its proxy
statement and the proposal will not be submitted to the stockholders for
approval at the 2000 Annual Meeting of Stockholders of the Company as the
Company will not have received proper notice as required by the Company's
Bylaws.
Donald A. Slichter
Secretary
February 22, 1999
Santa Clara, California
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. WHETHER
OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE
ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE PREPAID ENVELOPE.
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THIS PROXY STATEMENT WAS PRINTED ON RECYCLED PAPER.
(LOGO)
<PAGE> 26
APPENDIX A
APPLIED MATERIALS, INC.
EMPLOYEES' STOCK PURCHASE PLAN
(AS AMENDED AND RESTATED DECEMBER 10, 1998)
1. ESTABLISHMENTS; PURPOSE
Effective as of December 10, 1998, the Corporation hereby amends, restates
and continues in its entirety, the Applied Materials, Inc. Employees' Stock
Purchase Plan on the following terms and conditions. The Plan is intended to
encourage ownership of Common Stock of the Corporation by all Eligible Employees
and to provide incentives for them to exert maximum efforts for the success of
the Corporation and its Affiliates. By extending to Eligible Employees the
opportunity to acquire proprietary interests in the Corporation and to
participate in its success, the Plan may be expected to benefit the Corporation
and its shareholders by making it possible for the Corporation to attract and
retain qualified employees. The Plan is intended to qualify as an employee stock
purchase plan under section 423 of the Code.
2. DEFINITIONS
The following words and phrases shall have the following meanings unless a
different meaning is plainly required by the context:
2.1 "Affiliate" means any (i) parent to the Corporation as determined
under Section 424(e) of the Code and (ii) any subsidiary to the Corporation as
determined under Section 424(f) of the Code which parent or subsidiary has been
designated by the Board as a corporation employees of which may participate in
the Plan.
2.2 "Board" means the Board of Directors of the Corporation, as from time
to time constituted.
2.3 "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
2.4 "Common Stock" means the common stock of the Corporation.
2.5 "Corporation" means Applied Materials, Inc., a Delaware Corporation.
2.6 "Eligible Employee" means any employee eligible to participate in the
Plan in accordance with Section 5.
2.7 "Grant Date" means that date specified by the Board under Section 7
for the granting of Options in an Offering under the Plan.
2.8 "Offering" means an offer to purchase stock under Section 6.
2.9 "Option" means an option to acquire Common Stock under the terms of
this Plan.
<PAGE> 27
2.10 "Participating Employee" means, with respect to each Offering under
the Plan, any Eligible Employee who has elected to participate in accordance
with Section 7.
2.11 "Plan" means this Employees' Stock Purchase Plan, as amended from time
to time.
2.12 "Plan Administrator" means the employee or employees of the
Corporation selected by the Board or the Committee (if authorized by the Board
under Section 4.3) to perform certain ministerial duties in the administration
of the Plan.
3. STOCK SUBJECT TO THE PLAN
No more than 12,800,000 shares of Common Stock may be issued upon the
exercise of Options granted under the Plan, subject to adjustments as provided
in Section 9, which may be unissued shares, reacquired shares, or shares brought
on the market. If any Option which shall have been granted shall expire or
terminate for any reason without having been exercised in full, the unpurchased
shares shall again become available for purposes of the Plan (unless the Plan
shall have been terminated).
4. ADMINISTRATION
4.1 The Plan shall be administered by the Board, except to the extent that
the Board shall delegate responsibility for the administration of the Plan as
stated in Section 4.3.
4.2 The Board shall have the plenary power, subject to and within the
limits of the express provisions of the Plan:
(a) To construe and interpret the Plan and Options granted under it,
and to establish, amend and revoke rules and regulations for its administration.
The Board, in the exercise of this power, shall generally determine all
questions of policy and expediency that may arise, and may correct any defect,
supply any omission or reconcile any inconsistency in the Plan or in any
instrument associated with the Plan, in such manner and to such extent as the
Board shall deem necessary to make the Plan fully effective.
(b) To establish the terms of each Offering of Common Stock under the
Plan.
(c) Adopt such procedures and subplans as are necessary or
appropriate to permit participation in the Plan by Eligible Employees who are
foreign nationals or employed outside of the United States.
4.3 The Board, by resolution, may delegate responsibility for the
administration of the Plan or any part thereof, to a committee (the "Committee")
composed of not less than the minimum number of disinterested members of the
Board as is necessary to maintain the qualification of the Plan under Rule 16b-3
or any similar or successor rule promulgated under the Exchange Act of 1934, as
amended ("Rule 16b-3"). The Board may from time to time
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<PAGE> 28
remove members from, or add members to, the Committee. Vacancies on the
Committee, howsoever caused, shall be filled by the Board. To the extent that
responsibility for the administration of the Plan is delegated to the Committee,
the Committee shall have the powers theretofore possessed by the Board and to
the extent that the Committee has been so authorized to act, all references in
this Plan to the Board shall include the Committee, subject, however, to such
resolutions, not inconsistent with the provisions of the Plan, as, from time to
time, may be adopted by the Board. The Board at any time, by resolution, may
revoke such delegation and re-vest in the Board all or any part of the
responsibility for the administration of the Plan.
4.4 The Board or the Committee (if authorized by the Board under Section
4.3) may delegate to the Plan Administrator the responsibility to perform
certain ministerial duties in the administration of the Plan as are specified in
this Plan. To the extent that the Board or Committee has not delegated such
duties to the Plan Administrator, all references in this Plan to Plan
Administrator shall include the Board or Committee as appropriate.
5. ELIGIBILITY
Subject to the provisions of Section 7.14, an individual shall be eligible
to participate in any Offering under the Plan if he or she (a) has been
continuously employed by the Corporation and/or an Affiliate for such minimum
period (not to exceed two years) prior to such Grant Date as the Board shall fix
and (b) is customarily employed by the Corporation and/or an Affiliate at least
20 hours per week and five months per calendar year. A member of the Board who
is not also an employee of the Corporation and/or an Affiliate shall not be
eligible to participate in the Plan.
6. OFFERINGS
During the term of the Plan, the Corporation will make one or more
offerings ("Offering") in which Options to purchase Common Stock will be granted
to Eligible Employees under the Plan. The terms and conditions of Options to be
granted in any such Offering will be determined by the Board under Section 7. In
connection with any Offering, if the number of shares for which Eligible
Employees elect to participate shall be greater than the shares remaining
available, the available shares shall, at the end of the Offering Period, be
allocated among the Participating Employees pro rata on the basis of the number
of shares for which each has elected to participate.
7. TERMS AND CONDITIONS OF OPTIONS
7.1 Subject to the limitations herein contained, the Board shall determine
the terms of Options in each Offering all of which shall be granted on the same
date (the "Grant Date").
7.2 The Option price per share for each Offering shall be determined by
the Board, but shall in no instance be less than the lower of 85% of the fair
market value of a share of the Common Stock on the Grant Date, or 85% of the
fair market value of a share of the Common Stock on the date the Option is
exercised (the "Exercise Date"). The fair market value of a share of the Common
Stock on the Grant Date or the Exercise Date shall be the last trade price of
the Common Stock as reported in the NASDAQ over-the-counter market for National
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<PAGE> 29
Market Issues by The Wall Street Journal on such Grant Date or Exercise Date, as
determined by the Board, or if no report is available for such date, on the next
subsequent date for which such a report is available.
7.3 The expiration date of the Options granted under each Offering shall
be determined by the Board on or prior to the Grant Date for such Offering, but
in no event shall such expiration be more than 27 months from the Grant Date for
such Offering.
7.4 All Eligible Employees to whom Options are granted shall have the same
rights and privileges within the meaning of Section 423 of the Code, and
applicable rules and regulations thereunder.
7.5 Each Eligible Employee who desires to participate in an Offering shall
elect to do so in such manner as may be prescribed from time to time by the
Board.
7.6 A Participating Employee shall exercise his or her Option by
delivering notice of exercise to the Plan Administrator or a person designated
by the Plan Administrator at such time and in such manner as the Board shall
prescribe.
7.7 Upon exercise of an Option, full payment for the shares subject to the
Option shall be made in such form or manner as the Board shall fix.
7.8 The Board may (but is not required to) establish on such terms and
conditions as it shall determine (subject, however, to the requirements of
Section 423 of the Code) a payroll deduction system for the purchase of shares
covered by the Options hereunder. If there are payroll deductions under any
Offering, the Corporation or an Affiliate shall maintain a payroll deduction
account for each Participating Employee. The Board may (but is not required to)
provide for interest at such rate as the Board shall determine to be credited to
the payroll deduction accounts.
7.9 Subject to such requirements or limitations of Section 423 of the Code
as shall apply, the Board shall establish rules, terms and conditions for each
Offering governing the exercise of outstanding Options in the event of a
Participating Employee's termination of employment or change in employment
status.
7.10 The Corporation will seek to obtain from each regulatory committee or
agency having jurisdiction such authority as may be required to issue and sell
shares of Common Stock to satisfy Options granted under the Plan. Inability of
the Corporation to obtain from any such regulatory commission or agency
authority which counsel for the Corporation deems necessary for the lawful
issuance and sale of its Common Stock to satisfy Options granted under the Plan,
shall relieve the Corporation from any liability for failure to issue and sell
Common Stock to satisfy such Options pending the time when such authority is
obtained or is obtainable.
7.11 Neither an Eligible Employee to whom an Option is granted under the
Plan nor his or her transferee shall have any rights as a stockholder with
respect to any shares covered by his or her Option until the date of the
issuance of a stock certificate to him or her for such shares.
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<PAGE> 30
7.12 Options granted under the Plan shall not be transferable, except by
will or by the laws of descent and distribution, and may be exercised during the
lifetime of a Participating Employee only by him or her.
7.13 Each Option granted under the Plan shall be evidenced by such
instrument or documentation, if any, as the Board shall establish, which shall
be dated the Grant Date and shall comply with and be subject to the terms and
conditions of the Plan.
7.14 No Eligible Employee shall be granted an Option under the Plan if such
Eligible Employee, immediately after the Option is granted, would own stock
possessing 5% or more of the total combined voting power or value of all classes
of stock of the Corporation, determined in accordance with Section 423(b)(3) of
the Code. No Eligible Employee shall be granted an Option under the Plan which
permits his or her right to purchase Common Stock under all employee stock
purchase plans of the Corporation (qualifying under Section 423 of the Code) to
accrue at a rate which exceeds $25,000 (or such other maximum as may be
prescribed from time to time by the Code) of fair market value of the Common
Stock (determined at the time the Option is granted) for each calendar year in
which the Option is outstanding at any time, in accordance with the provisions
of Section 423(b)(8) of the Code.
7.15 Nothing in the Plan or in any Option granted under the Plan shall
confer on any Participating Employee any right to continue in the employ of the
Corporation or any of its Affiliates or to interfere in any way with the right
of the Corporation or any of its Affiliates to terminate his or her employment
at any time.
8. FUNDS
All amounts held by the Corporation or an Affiliate in payroll deduction
accounts under the Plan may be used for any corporate purpose of the Corporation
or Affiliate.
9. ADJUSTMENT IN NUMBER OF SHARES AND IN OPTION PRICE
In the event there is any change in the Common Stock through declarations
of stock dividends or stock split-ups, recapitalizations resulting in stock
split-ups, or combinations or exchanges of shares, or otherwise, appropriate
adjustments in the number of shares available for Option, as well as the shares
subject to any Option and the Option price thereof, shall be made, provided that
no fractional shares shall be subject to an Option and each Option shall be
adjusted down to the nearest full share.
10. AMENDMENT OF THE PLAN
The Board at any time, and from time to time, may amend the Plan, provided
however, that except as provided in Section 9, approval by the Shareholders of
the Company shall be required (i) to increase the aggregate number of shares
which may be issued under the Plan and (ii) to the extent necessary to preserve
the qualification of the Plan under Rule 16b-3.
11. TERMINATION OR SUSPENSION OF THE PLAN
The Board may at any time suspend or terminate the Plan. The Plan, unless
sooner terminated, shall terminate on March 10, 2002. No Offering shall be made
under the Plan while it is suspended or after it is terminated.
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<PAGE> 31
PROXY PROXY
APPLIED MATERIALS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS ON MARCH 31, 1999.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints James C. Morgan and Donald A. Slichter, or
either of them, each with full power of substitution, as proxies of the
undersigned, to attend the Annual Meeting of Stockholders of Applied Materials,
Inc., to be held on Wednesday, March 31, 1999, at 3:00 p.m. and any adjournment
or postponement thereof, and to vote the number of shares the undersigned would
be entitled to vote if personally present on the items set forth on the reverse
side and upon such other business as may properly come before such meeting and
any adjournment or postponement thereof:
(Continued and to be signed on reverse side)
STOCKHOLDERS ARE URGED TO MARK, DATE, SIGN AND RETURN THIS PROXY IN THE
ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE> 32
APPLIED MATERIALS, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
<TABLE>
<S> <C> <C> <C>
FOR ALL
1. ELECTION OF DIRECTORS FOR WITHHELD EXCEPT
M. Armacost D. Coleman, H. Dwight, P. Gerdina,
T. Kawanishi, P. Low, D. Maydan, J. Morgan, A. Stein [ ] [ ] [ ]
INSTRUCTIONS: To withhold authority to vote for any
individual Nominee, write that Nominee's name in the
space provided below.
FOR AGAINST ABSTAIN
- --------------------------------------------------------- [ ] [ ] [ ]
2. An amendment of the Employee Stock Purchase Plan to
increase the number of shares issuable thereunder by
8,000,000 shares.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ITEM 3.
<TABLE>
<S> <C> <C> <C>
FOR AGAINST ABSTAIN
3. A stockholder proposal to amend the Bylaws of Applied [ ] [ ] [ ]
Materials, Inc., so as to require stockholder approval to
adopt a new stockholder rights plan or to renew its
existing rights plan.
</TABLE>
THIS PROXY WILL BE VOTED AS SPECIFIED, OR IF NO
CHOICE IS SPECIFIED, WILL BE VOTED FOR THE NINE
NOMINEES FOR ELECTION AND FOR ITEM 2 AND AGAINST
ITEM 3. (Please sign exactly as your name appears.
When shares are held by joint tenants, both should
sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by
president or other authorized officer, if a partnership,
please sign in partnership name by authorized person.)
- ----------------------------------------------
- ----------------------------------------------
Signature(s) Date
