<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED SEPTEMBER 30, 1996
Commission File No. 0-12933
LAM RESEARCH CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 94-2634797
-------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
4650 CUSHING PARKWAY, FREMONT, CALIFORNIA 94538
- --------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (510) 659-0200
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
--- -----
As of September 30, 1996 there were 30,482,280 shares of Registrant's Common
Stock outstanding.
<PAGE>
INDEX
Page
No.
----
PART I. FINANCIAL INFORMATION ................................ 3
Item 1. Financial Statements (unaudited)....................... 3
Condensed Consolidated Balance Sheets............. 3
Condensed Consolidated Statements of Income....... 4
Condensed Consolidated Statements of Cash Flows... 5
Notes to Condensed Consolidated Financial
Statements................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 8
Results of Operations............................. 8
Liquidity and Capital Resources................... 10
Risk Factors...................................... 11
PART II. OTHER INFORMATION..................................... 14
Item 1. Legal Proceedings..................................... 14
Item 6. Exhibits and Reports on Form 8-K...................... 14
2
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ITEM 1. FINANCIAL STATEMENTS
--------------------
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except per share data)
<TABLE>
<CAPTION>
September 30, June 30,
1996 1996
(Unaudited) (Note)
------------- --------
<S> <C> <C>
Assets
Cash and cash equivalents $ 22,930 $ 62,879
Short-term investments 107,465 67,605
Accounts receivable, net 230,338 256,767
Inventories 282,910 322,366
Prepaid expenses and other assets 19,120 17,193
Deferred income taxes 50,035 50,035
-------- --------
Total Current Assets 712,798 776,845
Equipment and leasehold improvements, net 208,352 170,839
Other assets 22,434 21,681
-------- --------
Total Assets $943,584 $969,365
======== ========
Liabilities and Stockholders' Equity
Trade accounts payable $ 58,032 $112,883
Accrued expenses and other
current liabilities 147,352 155,874
Line of credit borrowings 35,000 25,000
Current portion of long-term debt and
capital lease obligations 13,952 12,896
-------- --------
Total Current Liabilities 254,336 306,653
Long-term debt and capital lease
obligations, less current portion 67,408 52,926
-------- --------
Total Liabilities 321,744 359,579
Preferred stock: 5,000 shares authorized;
none outstanding
Common Stock at par value of $.001 per share
Authorized -- 90,000 shares; issued and
outstanding 30,482 shares at September 30,
1996 and 30,266 shares at June 30, 1996 30 30
Additional paid-in capital 299,604 298,160
Retained earnings 322,206 311,596
-------- --------
Total Stockholders' Equity 621,840 609,786
-------- --------
$943,584 $969,365
======== ========
</TABLE>
- --------------------------
Note -- The Condensed Consolidated Balance Sheet at June 30, 1996 has
been derived from the audited financial statements at that
date.
See Notes to condensed consolidated financial statements.
3
<PAGE>
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
--------------------
September 30,
-------------
1996 1995
-------- ---------
<S> <C> <C>
Net sales $276,200 $257,747
Royalty income 6,559 5,497
-------- --------
Total revenue 282,759 263,244
Costs and expenses:
Cost of goods sold 167,653 134,707
Research and development 41,525 35,983
Selling, general and
administrative 48,882 47,584
Restructuring charge 9,021 -
-------- --------
Operating income 15,678 44,970
Other expense, net 515 172
-------- --------
Income before income taxes 15,163 44,798
Income taxes 4,553 14,331
-------- --------
Net income $ 10,610 $ 30,467
======== ========
Net income per share
Primary $ 0.35 $ 1.07
======== ========
Fully diluted $ 0.35 $ 1.00
======== ========
Number of shares used in
per share calculations
Primary 30,600 28,400
======== ========
Fully diluted 30,600 31,125
======== ========
</TABLE>
See Notes to condensed consolidated financial statements.
4
<PAGE>
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------
September 30, September 30,
1996 1995
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 10,610 $ 30,467
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 12,023 7,153
Change in certain working capital
accounts 585 (12,566)
-------- --------
Net cash provided by operating
activities 23,218 25,054
Cash flows from investing activities:
Capital expenditures (30,202) (18,206)
Purchase of short-term investments (161,297) (95,759)
Sale of short-term investments 121,437 54,123
Proceeds from sales of securities - 12,038
Other (753) (2,470)
-------- --------
Net cash used in investing activities (70,815) (50,274)
======== ========
Cash flows from financing activities:
Proceeds from borrowings under
line of credit 35,000 -
Repayments of borrowings under
line of credit (25,000) -
Sale of stock, net of issuance
costs 1,444 618
Principal payments on long-term debt
and capital lease obligations (3,796) (6,541)
-------- --------
Net cash provided by (used in)
financing activities 7,648 (5,923)
-------- --------
Net decrease in cash and
cash equivalents (39,949) (31,143)
Cash and cash equivalents at beginning
of period 62,879 43,675
-------- --------
Cash and cash equivalents at end of
period $ 22,930 $ 12,532
======== ========
</TABLE>
5
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LAM RESEARCH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996
(Unaudited)
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normal recurring adjustments) considered necessary for a fair
presentation have been included. The accompanying unaudited condensed
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements of Lam Research Corporation (the "Company")
for the year ended June 30, 1996, which are included in the Annual Report on
Form 10-K, File number 0-12933.
The results of operations for the three months ended September 30, 1996 are
not necessarily indicative of the results that may be expected for the entire
fiscal year ending June 30, 1997.
NOTE B -- INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
September 30, June 30,
1996 1996
---------------- -----------
(in thousands)
<S> <C> <C>
Raw materials $160,936 $167,513
Work-in-process 98,029 122,828
Finished goods 23,945 32,025
-------- --------
$282,910 $322,366
======== ========
</TABLE>
NOTE C -- EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements consist of the following:
<TABLE>
<CAPTION>
September 30, June 30,
1996 1996
---------------- -----------
(in thousands)
<S> <C> <C>
Equipment $152,746 $120,770
Furniture & fixtures 49,568 45,740
Leasehold improvements 101,628 88,131
-------- --------
303,942 254,641
Accumulated depreciation and
amortization (95,590) (83,802)
$208,352 $170,839
======== ========
</TABLE>
6
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NOTE D -- OTHER EXPENSE, NET
The significant components of other expense, net are as follows
(in thousands):
Three Months Ended
------------------
September 30,
1996 1995
------- -------
Interest Expense $ 1,536 $ 1,968
Interest Income (1,119) (1,375)
Other 98 (421)
------- -------
$ 515 $ 172
======= =======
NOTE E -- LINE OF CREDIT
During fiscal 1996, the Company entered into a syndicated bank line of
credit totaling $210.0 million, which expires in December 1998. At September 30,
1996, the Company had outstanding borrowings of $35.0 million against the line
of credit.
NOTE F -- NET INCOME PER SHARE
For the three month periods ended September 30, 1996 and 1995, primary net
income per share is calculated using the weighted average number of shares of
common stock and common stock equivalents outstanding during the period. The
common stock equivalents include shares issuable upon the assumed exercise of
stock options reflected under the treasury stock method. In addition, fully
diluted net income per share for the three month period ended September 30, 1995
reflects the assumed conversion of the Company's convertible subordinated
debentures at the beginning of that period, and also adds the interest expense
incurred on the debentures, net of income tax effect, to the net income amount
for use in the fully diluted calculation. The convertible subordinated
debentures were called by the Company during the fourth quarter of fiscal 1996,
and therefore the impact of the assumed conversion is not included in the fully
diluted net income per share for the three month period ended September 30,
1996.
NOTE G -- RESTRUCTURING
During the first quarter of fiscal 1997, the Company restructured its
operations by consolidating its previous business unit structure into a more
centralized functional organization. As a result of the restructuring, and in
response to industry conditions, the Company reduced its work force by
approximately 11%. The Company recorded a restructuring charge of $9.0 million
for costs related primarily to severance compensation and consolidation of
facilities.
NOTE H -- LITIGATION
See Part II, item 1 for discussion of litigation.
7
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial
--------------------------------------------------
Condition and Results of Operations
-----------------------------------
The information in this discussion contains forward looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, and is subject to the Safe Harbor provisions created by that statute.
Such statements are subject to certain risks and uncertainties, including those
discussed below, that could cause actual results to differ materially from those
projected. Readers are cautioned not to place undue reliance on these forward-
looking statements, which speak only as of the date hereof. Forward-looking
statements are indicated by an asterisk (*). The Company undertakes no
obligation to publicly release the results of any revisions to these
forward-looking statements which may be made to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
The components of the Company's statements of income, expressed as a percentage
of total revenue, are as follows:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1996 1995
----- -----
<S> <C> <C>
Net Sales 97.7% 97.9%
Royalty income 2.3 2.1
----- -----
100.0 100.0
Cost of goods sold 59.3 51.2
Research and development 14.7 13.6
Selling, general
& administrative 17.3 18.1
Restructuring charge 3.2 -
----- -----
Operating income 5.5 17.1
Other expense, net 0.1 0.1
----- -----
Income before taxes 5.4 17.0
Income taxes 1.6 5.4
----- -----
Net income 3.8% 11.6%
===== ====
</TABLE>
Results of Operations
- ---------------------
Net sales for the three month period ended September 30, 1996, were 7%
higher compared to the year-ago period but were 25% lower than the preceding
quarter. Alliance(tm) cluster systems continued to increase as a percentage of
total revenue. The increased Alliance sales were offset by a reduction in
Advanced Capability Rainbow(tm) system revenue due in part to a softening demand
(related to current semiconductor industry-wide market conditions) for these
single-chamber etch products. Transformer Coupled Plasma(tm) (TCP(tm)) etch
system revenue remained flat as a percentage of total machine revenue when
compared to the year-ago period but decreased slightly when compared to the
preceding quarter. This decrease in stand alone TCP systems was due in part to
increasing customer preference for Alliance cluster systems which
8
<PAGE>
utilize from one to four TCP etch chambers each. Total export sales were 68% of
total revenue during the first quarter of fiscal 1997 compared to 61% and 67% of
total revenue, respectively, for the year-ago period and the preceding quarter.
Asia Pacific region net sales increased 39% when comparing first quarter fiscal
1997 against first quarter fiscal 1996, but decreased 28% when compared to the
fourth quarter of fiscal 1996. Total spares and service revenue for the first
quarter of fiscal 1997 increased 11% and decreased 7%, respectively, compared to
the year-ago period and preceding quarter. The worldwide semiconductor market is
presently experiencing a slowdown in product demand and volatility in product
pricing. This slowdown and volatility have caused a reduction in demand for
semiconductor processing equipment. Accordingly, during the first quarter of
fiscal 1997, the Company's revenue was adversely affected by the worldwide
slowdown in the semiconductor market. The Company anticipates that its sales
will continue to be adversely affected by this slowdown and therefore the
revenue levels achieved for the remaining quarters of fiscal 1997 may be lower
than the revenue levels achieved in the first quarter of fiscal 1997.*
Royalty income increased 19% from the year-ago period and remained flat
compared to the preceding quarter. The Company expects that royalty income will
decrease in subsequent quarters as the current royalty agreement with Tokyo
Electron Limited which was due to expire in December 1996, has been renewed at a
significantly lower royalty rate.*
The Company's gross margin percentage declined to 40.7% in the first
quarter of fiscal 1997 compared with 48.8% and 46.5%, respectively, for the
year-ago period and the preceding quarter. Approximately half of the decline
in the Company's gross margin can be attributed to a change in product mix; and
the remaining half to a combination of excess manufacturing capacity costs,
increased warranty and installation costs and charges related to an inventory
reduction program. During the first quarter of fiscal 1997, the Company's
product mix continued to shift to a higher percentage of the less mature, lower
margin Alliance cluster products. During fiscal 1996 the Company sold a higher
percentage of the higher margin Rainbow products. As a result of reduced
manufacturing volumes and increased facilities-related costs the Company
experienced substantial excess manufacturing capacity during the first quarter
of fiscal 1997 that contributed to the decline in gross margin. Warranty and
installation costs continued to increase as a percentage of the reduced sales
levels. Also contributing to the decline in gross margin were costs incurred in
relation to a first quarter fiscal 1997 inventory reduction program involving
the return of certain inventory to suppliers. During the first quarter of fiscal
1997, the Company also incurred lower gross margins on its spares and service
revenue due to increasing service contract costs and increasing spare parts
costs. The Company anticipates that the slowdown in the worldwide semiconductor
industry will continue to negatively impact its gross margins for the remainder
of fiscal 1997.*
Research and development (R&D) expenses for the quarter ended September 30,
1996 were 15.4% higher than the year-ago period but 18.8% lower than the
preceding quarter. During the first quarter of fiscal 1997, the Company
implemented a restructuring of its operations which eliminated the prior
business unit structure. As a result, the Company centralized its R&D activities
and eliminated certain duplicate functions. The Company believes that in order
to remain competitive it must continue to substantially invest in R&D. The
Company continues to
9
<PAGE>
invest in advanced etch applications, chemical vapor deposition (CVD)
technologies, flat panel display technology and continued enhancements of the
Alliance and TCP products.
Selling, general and administrative (SG&A) expenses increased 2.7% during
the first quarter of fiscal 1997 compared to the year-ago period but decreased
23.9% compared to the preceding quarter. During fiscal 1996, the Company added
new employees in all areas to accommodate the increase in sales volume. However,
as a result of the slowdown in the industry, the Company implemented a
restructuring of its operations during the first quarter of fiscal 1997, and
implemented programs to reduce expenses and capital spending.
As part of the restructuring, the Company recorded a charge of $9.0 million
related primarily to severance compensation and consolidation of facilities. The
Company expects that operating expenses may continue to decline on a dollar
basis in fiscal 1997 compared to fiscal 1996 but may be slightly higher as a
percentage of revenue.*
The effective tax rate for the fiscal 1997 period is 30% compared to 32%
for the prior year period due primarily to the reinstatement of the federal
research and development tax credit for fiscal 1997.
Liquidity and Capital Resources
- -------------------------------
Net cash provided by operating activities was $23.2 million for the three
months ended September 30, 1996, derived primarily from net income before
depreciation and amortization expenses totaling $22.6 million. The decline in
system shipments contributed to decreases in receivables, inventory and accounts
payable. Also contributing to the decrease in inventory was the impact of a
Company-wide inventory reduction program. During the first quarter of fiscal
1997, an additional $35.0 million was provided from the sale of yen-denominated
Japanese receivables to a bank (under an amended agreement whereby the Company
increased the amount of yen-denominated Japanese receivables it may sell to the
bank from 6 billion yen to 9 billion). At September 30, 1996, $70.8 million of
the total receivables sold under this agreement remained uncollected by the bank
and subject to recourse provisions. Capital expenditures for the three month
period ended September 30, 1996 were $30.2 million, primarily for capitalization
of Alliance demonstration machines, and the completion of facility leasehold
improvements and furnishings. Also contributing to the cash used in investing
activities were net purchases of short-term investments of $39.9 million. Net
cash provided from financing was $7.6 million.
As of September 30, 1996, the Company had $130.4 million in cash, cash
equivalents and short-term investments compared with $130.5 million at June 30,
1996. The Company has a total of $210.0 million available under a syndicated
bank line of credit which is due to expire in December 1998. Borrowings under
the line of credit bear interest at the bank's prime rate or 0.7% to 0.9% over
London Interbank Offered Rate. Borrowings under the line of credit are subject
to the Company's compliance with financial covenants. At September 30, 1996, the
Company had borrowings against the syndicated bank line of credit of $35.0
million.
The Company's cash, cash equivalents, short-term investments and available
lines of credit at the end of the first quarter of fiscal 1997 are considered
adequate to support current levels of operations for at least the next twelve
months.*
10
<PAGE>
Risk Factors
- ------------
CURRENT VOLATILITY IN THE SEMICONDUCTOR INDUSTRY
The Company's business depends upon the capital expenditures of
semiconductor manufacturers, which in turn depend on the current and anticipated
market demand for integrated circuits and products utilizing integrated
circuits. The semiconductor industry has been cyclical in nature and
historically experienced periodic downturns. The semiconductor industry has
recently followed such cyclicality and is presently experiencing such a downturn
in product demand and pricing. This slowdown has had an adverse effect on the
semiconductor industry's demand for semiconductor processing equipment which has
had an adverse effect on the Company's operating results in the first quarter of
fiscal 1997. The Company anticipates that the current slowdown in demand for
semiconductor equipment will continue to adversely impact the Company's
operating results through fiscal 1997.* No assurance can be given that the
Company's revenue and operating results will not continue to be adversely
affected for longer or by future downturns. In addition, the need for continued
investments in R&D, substantial capital equipment requirements and extensive
ongoing worldwide customer service and support capability may limit the
Company's ability to reduce expenses. Accordingly, there is no assurance that
the Company will be able to remain profitable in the future.
HIGHLY COMPETITIVE INDUSTRY
The semiconductor processing equipment industry is highly competitive. The
Company faces substantial competition throughout the world. The Company
believes that to remain competitive, it will require significant financial
resources in order to offer a broad range of products, to maintain customer
service and support centers worldwide, and to invest in product and process
research and development. In addition, the Company intends to continue to
invest substantial resources into its effort to increase sales of its systems to
Japanese semiconductor manufacturers, who represent a substantial portion of the
worldwide semiconductor market and whose market is difficult for non-Japanese
equipment companies to penetrate.* The Company believes that the semiconductor
equipment industry is becoming increasingly dominated by large manufacturers who
have the resources to support customers on a worldwide basis, and certain of the
Company's competitors have substantially greater financial resources and more
extensive engineering, manufacturing, marketing and customer service and support
capabilities than the Company. In addition, there are smaller emerging
semiconductor equipment companies which provide innovative technology. The
Company expects its competitors to continue to improve the design and
performance of their current products and processes and to introduce new
products and processes with improved price and performance characteristics.*
If the Company's competitors enter into strategic relationships with leading
semiconductor manufacturers covering etch or deposition products similar to
those sold by the Company, its ability to sell its products to those
manufacturers could be adversely affected. Although no such alliances have yet
been formed which have negatively impacted the Company's business. No assurance
can be given that the Company will continue to compete successfully in the
United States or worldwide.
11
<PAGE>
DEPENDENCE ON NEW PRODUCTS AND PROCESSES; RAPID TECHNOLOGICAL CHANGE
Semiconductor manufacturing equipment and processes are subject to rapid
technological change. The Company believes that its future success will depend
in part upon its ability to continue to enhance its existing products and their
process capabilities and to develop and manufacture new products with improved
process capabilities. As a result, the Company expects to continue to make
significant investments in R&D.* The Company also must manage product
transitions successfully, as introductions of new products could adversely
affect sales of existing products. There can be no assurance that future
technologies, processes or product developments will not render the Company's
current product offerings obsolete or that the Company will be able to develop
and introduce new products or enhancements to its existing products and
processes in a timely manner which satisfy customer needs or achieve market
acceptance. The failure to do so could adversely affect the Company's business.
Furthermore, if the Company is not successful in the development of advanced
processes or equipment for manufacturers with whom it has formed strategic
alliances, its ability to sell its products to those manufacturers will be
adversely affected. In addition, in connection with the development of the
Company's new products, the Company invests in high levels of preproduction
inventory, and the failure to complete development and commercialization of
these new products in a timely manner could result in inventory obsolescence,
which could have an adverse effect on the Company's financial results.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company's revenue and operating results may fluctuate from quarter to
quarter. The Company derives its revenue primarily from the sale of a relatively
small number of high-priced systems which can range in price from $300,000 to
over $2 million. Some of these systems are ordered and shipped during the same
quarter. The Company's results of operations for a particular quarter could be
adversely affected if anticipated orders for even a small number of systems were
not received in time to enable shipment during the quarter, if anticipated
shipments were delayed or cancelled by one or more customers or if shipments
were delayed due to manufacturing difficulties. In particular, during the first
quarter of fiscal 1997 the Company has experienced certain cases of rescheduling
or cancellation of orders, which has had an adverse effect on the Company's
operating results. The Company's revenue and operating results may also
fluctuate due to the mix of products sold, the channel of distribution or the
level of royalty income from the Company's Japanese licensees. The Company
generally realizes a higher margin on sales of its mature etch products and on
revenue from service and spare parts than on sales of new Alliance and chemical
vapor deposition products. Newer products usually have lower margins in the
initial phase of production. Increases or decreases in royalty income will also
have a disproportionate impact on operating income and will continue to
fluctuate on a quarterly basis. Specifically, the Company's royalty agreement
with Tokyo Electron Limited, which was due to expire in December 1996, has been
renewed at a significantly lower royalty rate. The impact of these and other
factors on the Company's revenues and operating results in any future periods is
difficult for the Company to forecast.
12
<PAGE>
DEPENDENCE ON KEY SUPPLIERS
Certain of the components and subassemblies included in the Company's
products are obtained from a single supplier or a limited group of suppliers.
The Company believes that alternative sources could be obtained and qualified to
supply these products. Nevertheless, a prolonged inability to obtain certain
components could have an adverse effect on the Company's operating results and
could result in damage to customer relationships.
ENVIRONMENTAL REGULATIONS
The Company is subject to a variety of governmental regulations related to
the discharge or disposal of toxic, volatile, or otherwise hazardous chemicals
used in the manufacturing process. The Company believes that it is in
compliance with these regulations and that it has obtained all necessary
environmental permits to conduct its business, which permits generally relate to
the disposal of hazardous wastes. Nevertheless, the failure to comply with
present or future regulations could result in fines being imposed on the
Company, suspension of production or cessation of operations. Such regulations
could require the Company to acquire significant equipment or to incur
substantial other expenses to comply with environmental regulations. Any
failure by the Company to control the use of, or adequately restrict the
discharge or disposal of hazardous substances could subject the Company to
future liabilities.
INTERNATIONAL SALES
The Company anticipates that export sales will continue to account for a
significant portion of its net sales. Additionally, the Company continues to
expand its international operations, including expansion of its facilities in
Asia. As a result, a significant portion of the Company's sales and operations
will be subject to certain risks, including tariffs and other barriers,
difficulties in staffing and managing foreign subsidiary and branch operations,
difficulties in managing distributors, potentially adverse tax consequences and
the possibility of difficulty in accounts receivable collection. There can be
no assurance that any of these factors will not have a material adverse effect
on the Company's business, financial condition and results of operations.
INTELLECTUAL PROPERTY MATTERS
From time to time, the Company is notified that it may be in violation of
certain patents. In such cases, the Company's policy is to defend against the
claims or negotiate licenses where considered appropriate. However, no
assurance can be given that it will be able to obtain necessary licenses on
commercially reasonable terms or at all. Any failure to obtain such licenses on
commercially reasonable terms, or at all, or litigation resulting from such
claims could have a material adverse effect on the Company's business and
financial condition.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
- ------- -----------------
In October 1993, Varian Associates, Inc. ("Varian") brought suit against
the Company in the United States District Court, Northern District of
California, seeking monetary damages and injunctive relief based on the
Company's alleged infringement of certain patents held by Varian. The lawsuit is
in the late stages of discovery and was reassigned a new judge. The Company has
asserted defenses of invalidity and unenforceability of the patents that are the
subject of the lawsuit, as well as noninfringement of such patents by the
Company's products. While litigation is subject to inherent uncertainties and no
assurance can be given that the Company will prevail in such litigation or will
obtain a license under such patents on commercially reasonable terms or at all
if such patents are held valid and infringed by the Company's products, the
Company believes that the Varian lawsuit will not have a material adverse effect
on the Company's consolidated financial statements.
In addition, the Company is from time to time notified by various parties
that it may be in violation of certain patents. In such cases, it is the
Company's intention to seek negotiated licenses where it is considered
appropriate. The outcome of these matters will not, in management's opinion,
have a material impact on the Company's consolidated financial position,
operating results or cash flows.
ITEM 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits
Exhibit 10.33 Employment contract for Roger D. Emerick, effective
July 1, 1996
Exhibit 11.1 Statement Re: Computation of Earnings Per
Share
Exhibit 27 Financial Data Schedule
(b) No reports on Form 8-K were filed by the Registrant during
the quarter ended September 30, 1996.
14
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 13, 1996
LAM RESEARCH CORPORATION
By: /s/ Henk J. Evenhuis
-----------------------------------
Henk J. Evenhuis, Executive Vice
President, Finance & Chief
Financial Officer
15
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is made and entered into
effective as of July 1, 1996 (the "Effective Date"), by and between Roger D.
Emerick (the "Executive") and Lam Research Corporation (the "Company").
R E C I T A L S
---------------
A. The Executive is currently employed by the Company as its
Chief Executive Officer. In addition, the Executive serves as Chairman of the
Company's Board of Directors.
B. The Company and the Executive desire to enter into this
Agreement with respect to the Executive's continued provision of services to the
Company.
C. Certain capitalized terms used in the Agreement are defined
in Section 8 below.
In consideration of the mutual covenants herein contained, and in
consideration of the continuing employment of Executive by the Company, the
parties agree as follows:
1. Duties and Scope of Employment.
------------------------------
(a) Position. During the Employment Period (as defined in Section
--------
2(a) below), the Executive shall continue to serve as the Chief Executive
Officer of the Company. In addition, during the Employment Period and the
Consulting Period (as defined in Section 6(a) below), the Company shall use its
best efforts to elect the Executive as a director of the Company and as the
Chairman of the Board of the Directors. The duties and responsibilities of the
Executive shall include the duties and responsibilities for the Executive's
corporate offices and positions as set forth in the Company's Bylaws from time
to time in effect and such other duties and responsibilities as the Board of
Directors of the Company (the "Board") may from time to time reasonably assign
to the Executive, in all cases to be consistent with the Executive's corporate
offices and positions. The parties agree and understand that during the
Employment Period, the Executive and the Company will begin a search to identify
and hire a successor to the Executive as the Chief Executive Officer of the
Company.
(b) Obligations. During the Employment Period, the Executive shall
-----------
devote his full business efforts and time to the Company. The foregoing,
however, shall not preclude the Executive from engaging in such activities and
services as do not interfere or conflict with his responsibilities to the
Company.
2. Employment Period.
-----------------
(a) Basic Rule. The Employment Period (the "Employment Period")
----------
shall begin upon the Effective Date and shall continue thereafter until June 30,
1998, unless sooner terminated in accordance with paragraphs (b)-(d) below.
After the initial Employment Period, or any extension term, the Employment
Period shall be automatically extended (but not beyond June 30, 2002) unless
terminated by either party with at least 180 days' advance written notice prior
to the end of then-current term.
<PAGE>
(b) Early Termination.
-----------------
(i) By the Company. The Company may terminate the
--------------
Executive's employment for Cause (as defined in Section 8(a) below), by giving
the Executive 30 days' advance notice in writing. The Company may terminate the
Executive's employment with the Company other than for Cause by giving the
Executive 180 days' advance notice in writing. Any waiver of notice shall be
valid only if it is made in writing and expressly refers to the applicable
notice requirement of this Section 2(b).
(ii) By the Executive. The Executive may terminate his
----------------
employment with the Company at any time by giving the Company 180 days' advance
written notice. Any waiver of notice shall be valid only if it is made in
writing and expressly refers to the applicable notice requirement of this
Section 2(b).
(iii) Hiring of a Successor. The Executive's employment
---------------------
with the Company shall terminate in the event the Company hires a successor to
the Executive as Chief Executive Officer of the Company, although the Company
does not intend to hire a successor before July 1, 1997. In such event, the
Executive's employment shall terminate as of the date such successor commences
employment as Chief Executive Officer of the Company or as of such other
mutually agreeable date. The Executive's termination of employment in such
event shall not be considered an Involuntary Termination for purposes of Section
5 but shall instead convert the Executive's status to consultant as contemplated
by Section 6.
(c) Death. The Executive's employment shall terminate in the event
-----
of his death. The Company shall pay to the Executive' estate any earned but
unpaid salary, vacation pay and pro-rated bonus(es) accrued to the date of his
death.
(d) Disability. The Company may terminate the Executive's
----------
employment for Disability (as defined in Section 8(c) below) by giving the
Executive 90 days' advance notice in writing. In the event the Executive resumes
the performance of substantially all of his duties hereunder before the
termination of his employment under this Section 2(d) becomes effective, the
notice of termination shall automatically be deemed to have been revoked.
3. Compensation and Benefits.
-------------------------
(a) Base Compensation. During the Employment Period, the Company
-----------------
shall pay the Executive as compensation for services a base salary at the
annualized rate of $621,872. Such salary shall be reviewed at least annually
and may be increased from time to time. Such salary shall be paid periodically
in accordance with normal Company payroll. The annual compensation specified in
this Section 3(a), as adjusted from time to time, is referred to in this
Agreement as "Base Compensation."
(b) Bonus. In addition to Base Compensation, during the Employment
-----
Period the Executive shall participate in an executive incentive bonus program
under which the Executive shall be entitled to earn annual incentive bonus
compensation in addition to the Executive's Base Compensation based upon the
satisfaction of certain performance goals. These performance objectives will be
mutually determined and reviewed annually by the Board in consultation with the
Executive. To the extent the
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<PAGE>
Executive terminates his employment voluntarily or as a result of his death or
Disability, the Executive shall be entitled to his pro rata shares of the target
bonus for the year in which such termination occurs. To the extent the
Executive's employment terminates as a result of Involuntary Termination other
than for Cause, the Executive shall be entitled to the target bonus. Any bonus
to which the Executive becomes entitled shall be paid to the Executive in a lump
sum within thirty (30) days of the last day of the applicable bonus period,
provided that any bonus payable as a result of the Executive's termination of
employment shall be paid within ten (10) days of such termination. Beginning
with the Company's current fiscal year and for each fiscal year thereafter
during the Employment Period, the Executive shall be eligible to participate in
any bonus plan or arrangement maintained by the Company of general applicability
to other key executives of the Company.
(c) Benefits. During the Employment Period and, to the extent
--------
permitted under the applicable benefit plan or program, during the Consulting
Period, the Executive shall be eligible to participate in the benefit plans and
compensation programs maintained by the Company of general applicability to
other key executives of the Company, including (without limitation) retirement
plans, savings or profit-sharing plans, deferred compensation plans,
supplemental retirement or excess-benefit plans, stock option, restricted stock
programs, incentive or other bonus plans, life, disability, health, accident and
other insurance programs, paid vacations, and similar plans or programs, subject
in each case to the generally applicable terms and conditions of the plan or
program in question and to the determination of the Board or any committee
administering such plan or program. The Executive will continue to participate
in and receive benefits under the Deferred Compensation Agreement between the
Company and the Executive in accordance with the terms of such Agreement.
(d) Section 162(m). In the event that the Company reasonably
--------------
determines that any compensation payable to the Executive under this Agreement
would not be fully deductible as a result of Section 162(m) of the Internal
Revenue Code (or any successor provision), then the Company may, in its sole
discretion, elect to defer payment of such compensation pursuant to the terms of
the deferred compensation agreement with the Executive.
(d)
4. Benefits Upon a Change in Control. In the event of a Change
---------------------------------
in Control (as defined in Section 8(b) below) that occurs during the Employment
Period or the Consulting Period, the unvested portion of any stock option or
restricted stock held by the Executive shall automatically be accelerated in
full so as to become completely vested.
5. Severance Benefits.
------------------
(a) Severance Benefits. If the Executive's employment with the
------------------
Company terminates prior to the end of the Employment Period and the Executive
is not retained as a consultant pursuant to Section 6 below, then the Executive
shall be entitled to receive severance benefits as follows:
(i) Involuntary Termination. If the Executive's employment
-----------------------
terminates as a result of Involuntary Termination other than for Cause, then the
Company shall pay the Executive within ten (10) business days after the
Termination Date a lump sum amount equal to the sum of (i) the Executive's Base
Compensation at the time of such termination calculated from the Termination
Date through June 30,
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<PAGE>
1998 (in the event the termination occurs before that date), plus (ii) an amount
equal to the Consulting Fee (as defined in Section 6(a) below) for the period
beginning on the Termination Date and ending June 30, 2002, subject to a maximum
of forty-eight (48) months. In addition, the Executive shall be entitled to a
payment of the target bonus amount (within the meaning of Section 3(b)) for the
then current bonus period(s). Such payment shall be paid in a lump sum within
ten (10) business days after the Termination Date. The Executive shall also
receive such other benefits as may be payable to the Executive under the
Company's then-existing benefit plans in accordance with the terms of such
plans. In addition, the Company shall continue to satisfy its obligations to the
Executive under the terms of the Deferred Compensation Agreement between the
Company and the Executive in accordance with the terms of such Agreement.
(ii) Voluntary Resignation; Disability; Death; Termination
-----------------------------------------------------
for Cause. If the Executive's employment terminates by reason of the Executive's
- ---------
(i) voluntary resignation (and is not an Involuntary Termination), (ii)
Disability, (iii) death, or (iv) if the Executive is terminated for Cause, then
the Executive shall not be entitled to receive severance or other benefits
except for those (if any) as may then be established (and applicable) under the
Company's then-existing severance and benefits plans and policies at the time of
such termination.
(b) Benefits; Miscellaneous. In the event the Executive is
-----------------------
entitled to severance benefits pursuant to subsection 5(a)(i), then in addition
to such severance benefits, the Company shall continue to provide the Executive,
until June 30, 2002, welfare benefits or such comparable alternative welfare
benefits as the Company may, in its discretion, determine to be sufficient to
satisfy its obligations to the Executive under this Agreement (including,
without limitation, medical, prescription, dental, disability, individual life,
group life, accidental death and travel accident plans and programs) which are
at least as favorable as the most favorable plans of the Company applicable to
other peer executives and their families as of the Termination Date.
Notwithstanding the foregoing, if the Executive is covered under any medical,
life, or disability insurance plan(s) provided by a subsequent employer, then
the amount of coverage required to be provided by the Company hereunder shall be
reduced by the amount of coverage provided by the subsequent employer's medical,
life or disability insurance plan(s). The Executive's rights under this Section
5(b) shall be in addition to, and not in lieu of, any post-termination
continuation coverage or conversion rights the Executive may have pursuant to
applicable law, including without limitation, continuation coverage required by
Section 4980B of the Internal Revenue Code.
In addition, (i) the Company shall pay the Executive any unpaid base
salary due for periods prior to the Termination Date; (ii) the Company shall pay
the Executive all of the Executive's accrued and unused vacation through the
Termination Date; and (iii) following submission of proper expense reports by
the Executive, the Company shall reimburse the Executive for all expenses
reasonably and necessarily incurred by the Executive in connection with the
business of the Company prior to termination. These payments shall be made
promptly upon termination and within the period of time mandated by law.
(c) Option and Restricted Stock Accelerated Vesting. In the event
-----------------------------------------------
the Executive is entitled to severance benefits pursuant to subsection 5(a)(i),
the unvested portion of any Company stock option or restricted stock held by the
Executive shall automatically be accelerated in full so as to become completely
vested.
-4-
<PAGE>
6. Consulting.
----------
(a) Consulting Period. Beginning with the earlier of (i) the
-----------------
expiration of the Employment Period (pursuant to paragraph 2(a) above), or (ii)
the date as of which a successor to the Executive as Chief Executive Officer of
the Company commences employment as Chief Executive Officer of the Company, and
ending on June 30, 2002, unless sooner terminated in accordance with Sections
(b) or (c) below (the "Consulting Period"), the Executive shall serve as a
consultant to the Company. During the Consulting Period, the Executive shall
perform such advisory and consulting services as may be reasonably requested of
the Executive by the Board of Directors of the Company. Such services shall be
subject to the request and direction of the Company involving (on average) two
days per week. As consideration for the Executive's services during the
Consulting Period, the Company shall pay the Executive a monthly consulting fee
(the "Consulting Fee") of $33,333. In addition, the Company shall reimburse the
Executive for all reasonable expenses actually incurred or paid by the Executive
in performance of his consulting services on behalf of the Company, upon
presentation of expense statements or other supporting information in accordance
with the Company's expense reimbursement policy.
(b) Disability/Death. The Consulting Period shall terminate in the
----------------
event of the Executive's death or Disability, without further obligation by the
Company.
(c) Other Termination. The Company may, prior to the end of the
-----------------
Consulting Period, terminate the Executive's consultancy. In such event, the
Company shall pay the Executive within ten (10) business days after the
Termination Date a lump sum amount equal to the Consulting Fee for the remainder
of the original Consulting Period, provided that the Executive, as of such
Termination Date, is not in violation of his obligations under Section 11 below.
(d) Options; Restricted Stock. During the Consulting Period, the
-------------------------
Executive shall continue to vest in any Company stock option or restricted stock
held by the Executive. In the event the Consulting Period terminates pursuant
to Section 6(c) above, the unvested portion of any stock option or restricted
stock held by the Executive shall automatically be accelerated in full so as to
become completely vested.
7. Limitation on Payments. Notwithstanding anything to the contrary
----------------------
contained herein, in the event it shall be determined that any payment by the
Company to or for the benefit of the Executive, whether paid or payable but
determined without regard to any additional payments required under this Section
7 (a "Payment"), would be subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code of 1986, as amended (the "Code"), or any comparable
federal, state, or local excise tax (such excise tax, together with any interest
and penalties, are hereinafter collectively referred to as the "Excise Tax"),
then the Executive shall be entitled to receive an additional payment (a "Gross-
Up Payment") in such an amount that after the payment of all taxes (including,
without limitation, any interest and penalties on such taxes and the Excise Tax)
on the payment and on the Gross-Up Payment, the Executive shall retain an amount
equal to the Payment minus all applicable taxes on the Payment. The intent of
the parties is that the Company shall be solely responsible for, and shall pay,
any Excise Tax on the Payment and Gross-Up Payment and any income and employment
taxes (including, without limitation, penalties and interest) imposed on any
Gross-Up Payment, as well as any loss of tax deduction caused by the Gross-Up
Payment.
-5-
<PAGE>
All determinations required to be made under this Section, including without
limitation, whether and when a Gross-Up Payment is required and the amount of
such Gross-Up Payment and the assumptions to be utilized in arriving at such
determinations, shall be made by a nationally recognized accounting firm that is
the Company's outside auditor at the time of such determinations, which firm
must be reasonably acceptable to the Executive (the "Accounting Firm"). All fees
and expenses of the Accounting Firm shall be borne solely by the Company.
8. Definition of Terms. The following terms referred to in this
-------------------
Agreement shall have the following meanings:
(a) Cause. "Cause" shall mean (i) a willful act of personal
-----
dishonesty knowingly taken by the Executive in connection with his
responsibilities as an employee and intended to result in his substantial
personal enrichment, (ii) a willful and knowing act by the Executive which
constitutes gross misconduct, or any refusal by the Executive to comply with a
reasonable directive of the Board, (iii) a willful breach by the Executive of a
material provision of this Agreement, or (iv) a material and willful violation
of a federal or state law or regulation applicable to the business of the
Company. No act, or failure to act, by the Executive shall be considered
"willful" unless committed without good faith and without a reasonable belief
that the act or omission was in the Company's best interest. Termination for
Cause shall not be deemed to have occurred unless, by the affirmative vote of
all of the members of the Board (excluding the Executive, if applicable), at a
meeting called and held for that purpose (after reasonable notice to the
Executive and his counsel after allowing the Executive and his counsel to be
heard before the Board, a resolution is adopted finding that in the good faith
opinion of such Board members the Executive was guilty of conduct set forth in
(i), (ii), (iii), or (iv) and specifying the particulars thereof.
(b) Change in Control. "Change in Control" shall mean the
-----------------
occurrence of any of the following events:
(i) Any "person" or "group" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of the Company representing twenty percent
(20%) or more of the total voting power represented by the Company's then
outstanding voting securities; or
(ii) A change in the composition of the Board occurring
within a two-year period, as a result of which fewer than a majority of the
directors are Incumbent Directors. "Incumbent Directors" shall mean directors
who either (A) are directors of the Company as of the date hereof, or (B) are
elected, or nominated for election, to the Board with the affirmative votes of
at least a majority of the Incumbent Directors at the time of such election or
nomination (but shall not include an individual whose election or nomination is
in connection with an actual or threatened proxy contest relating to the
election of directors to the Company); or
(iii) The stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
-6-
<PAGE>
remaining outstanding or by being converted into voting securities of the
surviving entity) more than fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the stockholders
of the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
the Company's assets (other than to a subsidiary or subsidiaries).
(c) Disability. "Disability" shall mean that the Executive has
----------
been or will be unable to substantially perform his duties under this Agreement
for a period of six or more months due to illness, accident or other physical or
mental incapacity.
(d) Involuntary Termination. "Involuntary Termination" shall
-----------------------
mean:
(i) the continued assignment to the Executive of any duties
or the continued significant change in the Executive's duties, either of which
is substantially inconsistent with the Executive's duties immediately prior to
such assignment or change for a period of 30 days after notice thereof from the
Executive to the Board setting forth in reasonable detail the respects in which
Executive believes such assignments or duties are significantly inconsistent
with the Executive's prior duties;
(ii) a reduction in the Executive's Base Compensation, other
than any such reduction which is part of, and generally consistent with, a
general reduction of officer salaries;
(iii) a material reduction by the Company in the kind or
level of employee benefits (other than salary and bonus) to which the Executive
is entitled immediately prior to such reduction with the result that the
Executive's overall benefits package (other than salary and bonus) is
substantially reduced (other than any such reduction applicable to officers of
the Company generally);
(iv) the relocation of the Executive's principal place for
the rendering of the services to be provided by him hereunder to a location more
than fifty (50) miles from the present location of the principal executive
office of the Company;
(v) any purported termination of the Executive's employment
by the Company other than for Cause;
(vi) the failure of the Company to obtain the assumption of
this Agreement by any successors contemplated in Section 9 below; or
(vii) any material breach by the Company of any material
provision of this Agreement which continues uncured for 30 days following notice
thereof; provided that none of the foregoing shall constitute Involuntary
Termination to the extent the Executive has agreed thereto.
(e) Termination Date. "Termination Date" shall mean (i) if the
----------------
Executive's employment or consultancy is terminated by the Company for
Disability, thirty (30) days after notice of termination is given to the
Executive (provided that the Executive shall not have returned to the
performance of the Executive's duties on a full-time basis during such thirty
(30) day period), (ii) if the Executive's employment
-7-
<PAGE>
or consultancy is terminated by the Company for any other reason, the date on
which a notice of termination is given, or (iii) if the Agreement is terminated
by the Executive, the date on which the Executive delivers the notice of
termination to the Company.
9. Successors.
----------
(a) Company's Successors. Any successor to the Company (whether
--------------------
direct or indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's business
and/or assets shall assume the obligations under this Agreement and agree
expressly to perform the obligations under this Agreement in the same manner and
to the same extent as the Company would be required to perform such obligations
in the absence of a succession. For all purposes under this Agreement, the term
"Company" shall include any successor to the Company's business and/or assets
which exe cutes and delivers the assumption agreement described in this
subsection (a) or which becomes bound by the terms of this Agreement by
operation of law.
(b) Executive's Successors. The terms of this Agreement and all
----------------------
rights of the Executive hereunder shall inure to the benefit of, and be
enforceable by, the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
10. Notice.
------
(a) General. Notices and all other communications contemplated by
-------
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified mail,
return receipt requested and postage prepaid. In the case of the Executive,
mailed notices shall be addressed to him at the home address which he most
recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be addressed to its corporate headquarters, and all notices
shall be directed to the attention of its Secretary.
(b) Notice of Termination. Any termination by the Company for
---------------------
Cause or by the Executive as a result of a voluntary resignation or an
Involuntary Termination shall be communicated by a notice of termination to the
other party hereto given in accordance with Section 10 of this Agreement. Such
notice shall indicate the specific termination provision in this Agreement
relied upon, shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination under the provision so indicated, and
shall specify the termination date (which shall be not more than 30 days after
the giving of such notice). The failure by the Executive to include in the
notice any fact or circumstance which contributes to a showing of Involuntary
Termination shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing his rights
hereunder.
11. Non-Compete; Non-Solicit.
------------------------
(a) The parties hereto recognize that the Executive's services are
special and unique and that his level of compensation and the provisions herein
for compensation upon Involuntary Termination are partly in consideration of and
conditioned upon the Executive's not competing with the Company, and
-8-
<PAGE>
that the covenant on his part not to compete or solicit as set forth in this
Section 11 during and after his employment is essential to protect the business
and goodwill of the Company.
(b) The Executive agrees that during the Employment Period and the
Consulting Period, and for the period ending twenty-four (24) months following
the date the Executive ceases to render services to the Company as an employee
or consultant (the "Covenant Period"), the Executive will not either directly or
indirectly, whether as a director, officer, consultant, employee or advisor or
in any other capacity (i) render any planning, marketing or other services
respecting the creation, design, manufacture or sale of semiconductor
manufacturing equipment and/or software to any business, agency, partnership or
entity ("Restricted Business") other than the Company, or (ii) make or hold any
investment in any Restricted Business in the United States other than the
Company, whether such investment be by way of loan, purchase of stock or
otherwise, provided that there shall be excluded from the foregoing (i) the
--------
ownership of not more than 2% of the listed or traded stock of any publicly-held
corporation and (ii) the Executive's current (as of the Effective Date)
directorships or trade directorships. For purposes of this Section 11, the term
"Company" shall mean and include the Company, any subsidiary or affiliate of the
Company, any successor to the business of the Company (by merger, consolidation,
sale of assets or stock or otherwise) and any other corporation or entity of
which the Executive may serve as a director, officer or employee at the request
of the Company or any successor of the Company.
(c) During the Covenant Period, the Executive will not, directly
or indirectly, induce or attempt to influence any employee of the Company to
leave its employ and the Executive will not, directly or indirectly, involve
himself in decisions to hire any employee who has left the Company's employ
within the three-month period preceding the Executive's cessation of employment
or the three-month period following his cessation of employment. This provision
shall not apply to individuals who were employed by Executive's present employer
during the three-month period ending on the date of this Agreement and, in
addition, shall not be construed to affect any responsibility the Executive has
with respect to the bona fide hiring and firing of Company personnel.
(d) The Executive agrees that the Company would suffer an
irreparable injury if he were to breach the covenants contained in subparagraphs
(b) or (c) and that the Company would by reason of such breach or threatened
breach be entitled to injunctive relief in a court of appropriate jurisdiction
and the Executive hereby stipulates to the entering of such injunctive relief
prohibiting him from engaging in such breach.
(e) If any of the restrictions contained in this Paragraph 11
shall be deemed to be unenforceable by reason of the extent, duration or
geographical scope or other provisions thereof, then the parties hereto
contemplate that the court shall reduce such extent, duration, geographical
scope or other provision hereof and enforce this Paragraph 11 in its reduced
form for all purposes in the manner contemplated hereby.
12. Arbitration. At the option of either party, any and all
-----------
disputes or controversies whether of law or fact and of any nature whatsoever
arising from or respecting this Agreement shall be decided by arbitration by the
American Arbitration Association in accordance with the rules and regulations of
that Association.
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<PAGE>
The arbitrator shall be selected as follows: In the event the Company
and the Executive agree on one arbitrator, the arbitration shall be conducted by
such arbitrator. In the event the Company and the Executive do not so agree,
the Company and the Executive shall each select one independent, qualified
arbitrator and the two arbitrators so selected shall select the third
arbitrator. The Company reserves the right to object to any individual
arbitrator who shall be employed by or affiliated with a competing organization.
Arbitration shall take place in San Jose, California, or any other
location mutually agreeable to the parties. At the request of either party,
arbitration proceedings will be conducted in the utmost secrecy; in such case
all documents, testimony and records shall be received, heard and maintained by
the arbitrators in secrecy under seal, available for the inspection only of the
Company or the Executive and their respective attorneys and their respective
experts who shall agree in advance and in writing to receive all such
information confidentially and to maintain such information in secrecy unless
and until such information shall become generally known. The arbitrator, who
shall act by majority vote, shall be able to decree any and all relief of an
equitable nature, including but not limited to such relief as a temporary
restraining order, a temporary and/or a permanent injunction, and shall also be
able to award damages, with or without an accounting and costs, provided that
punitive damages shall not be awarded. The decree or judgment of an award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof.
Reasonable notice of the time and place of arbitration shall be given
to all persons, other than the parties, as shall be required by law, in which
case such persons or those authorized representatives shall have the right to
attend and/or participate in all the arbitration hearings in such manner as the
law shall require.
13. Miscellaneous Provisions.
------------------------
(a) No Duty to Mitigate. The Executive shall not be required to
-------------------
mitigate the amount of any payment contemplated by this Agreement, nor shall any
such payment be reduced by any earnings that the Executive may receive from any
other source.
(b) Waiver. No provision of this Agreement shall be modified,
------
waived or discharged unless the modification, waiver or discharge is agreed to
in writing and signed by the Executive and by an authorized officer of the
Company (other than the Executive). No waiver by either party of any breach of,
or of compliance with, any condition or provision of this Agreement by the other
party shall be considered a waiver of any other condition or provision or of the
same condition or provision at another time.
(c) Whole Agreement. This Agreement and the documents expressly
---------------
referred to herein represent the entire agreement of the parties with respect to
the matters set forth herein. No agreements, representations or understandings
(whether oral or written and whether express or implied) which are not expressly
referred to herein have been made or entered into by either party with respect
to the subject matter hereof.
(d) Choice of Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of
California.
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<PAGE>
(e) Severability. The invalidity or unenforceability of any
------------
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.
(f) No Assignment of Benefits. The rights of any person to
-------------------------
payments or benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment or other
creditor's process, and any action in violation of this subsection (f) shall be
void.
(g) Employment Taxes. All payments made pursuant to this Agreement
----------------
will be subject to withholding of applicable income and employment taxes.
(h) Assignment by Company. The Company may assign its rights under
---------------------
this Agreement to an affiliate, and an affiliate may assign its rights under
this Agreement to another affiliate of the Company or to the Company; provided,
however, that no assignment shall be made if the net worth of the assignee is
less than the net worth of the Company at the time of assignment. In the case of
any such assignment, the term "Company" when used in a section of this Agreement
shall mean the corporation that actually employs the Executive.
(i) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this
Agreement, in the case of the Company by its duly authorized officer, as of the
day and year first above written.
COMPANY LAM RESEARCH CORPORATION
By:
----------------------------------------
Title:
-------------------------------------
EXECUTIVE -------------------------------------------
Roger D. Emerick
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<PAGE>
EXHIBIT 11.1
------------
LAM RESEARCH CORPORATION
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
(In thousands except per share data)
----------------------------------------------
September 30, September 30,
1996 1995
------- -------- ------- --------
Fully Fully
Primary Diluted Primary Diluted
------- -------- ------- --------
<S> <C> <C> <C> <C>
Net income $10,610 $10,610 $30,467 $30,467
Add interest expense on convertible
subordinated debentures, net of
income tax effect 803
------- -------- ------- --------
$10,610 $10,610 $30,467 $31,270
======= ======= ======= =======
Average shares outstanding 30,274 30,274 27,293 27,293
Net effect of dilutive
stock options 326 326 1,107 1,192
Assumed conversion of convertible
subordinated debentures 2,640
------- -------- ------- --------
30,600 30,600 28,400 31,125
======= ======== ======= ========
Net income per share $ 0.35 $ 0.35 $ 1.07 $ 1.00
======= ======== ======= ========
</TABLE>
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS, THE CONSOLIDATED BALANCE SHEET AND THE
ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIALS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 22,930
<SECURITIES> 107,465
<RECEIVABLES> 231,968
<ALLOWANCES> 1,620
<INVENTORY> 282,910
<CURRENT-ASSETS> 712,798
<PP&E> 303,942
<DEPRECIATION> 95,590
<TOTAL-ASSETS> 943,584
<CURRENT-LIABILITIES> 254,336
<BONDS> 0
0
0
<COMMON> 30
<OTHER-SE> 621,810
<TOTAL-LIABILITY-AND-EQUITY> 943,584
<SALES> 276,200
<TOTAL-REVENUES> 282,759
<CGS> 167,653
<TOTAL-COSTS> 267,081
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,536
<INCOME-PRETAX> 15,163
<INCOME-TAX> 4,553
<INCOME-CONTINUING> 10,610
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,610
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.35
</TABLE>
