<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 31, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
LAM RESEARCH CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 94-2634797
(STATE OR OTHER JURISDICTION OF INCORPORATION (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
OR ORGANIZATION)
</TABLE>
4650 CUSHING PARKWAY
FREMONT, CALIFORNIA 94538
(510) 659-0200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
RICHARD H. LOVGREN
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
LAM RESEARCH CORPORATION
4650 CUSHING PARKWAY
FREMONT, CALIFORNIA 94538
(510) 659-0200
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER,
INCLUDING AREA CODE OF AGENT FOR SERVICE)
COPIES TO:
TWILA FOSTER, ESQ.
JACKSON TUFTS COLE & BLACK, LLP
650 CALIFORNIA STREET; 32ND FLOOR
SAN JOSE, CA 95113
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans please check the following
box [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement of the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
==========================================================================================================
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE FEE(4)
- ----------------------------------------------------------------------------------------------------------
5% Convertible Subordinated Notes
Due 2002........................ $310,000,000 100% $310,000,000 $93,939.39
- ----------------------------------------------------------------------------------------------------------
Common Stock, Par Value $.001 per
share(3)........................ 3,531,958(3) N/A N/A
==========================================================================================================
</TABLE>
(1) Or, if Notes were issued with a principal amount denominated in a foreign
currency or composite currency such greater amount as shall result in an
aggregate offering price equivalent to $310,000,000.
(2) Exclusive of accrued interest, if any. Estimated solely for purposes of
calculating the registration fee.
(3) Up to 3,531,958 shares of Common Stock as may from time to time be issuable
upon conversion or exchange of the Notes, at a conversion price of $87.77
per share (equal to a conversion rate of approximately 11.39 shares per
$1,000.00 principal amount of the Notes). Represents shares originally
issuable upon conversion of the Notes being registered under this
Registration Statement plus an additional indeterminate number of shares as
may become issuable upon conversion of the Notes being registered hereunder
by means of adjustment in the conversion price thereof.
(4) Pursuant to Rule 457(i), there is no filing fee with respect to the shares
of Common Stock being registered hereunder because no additional
consideration will be received in connection with the exercise of the
conversion privilege.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED OCTOBER 31, 1997
PROSPECTUS
LAM RESEARCH CORPORATION
5% CONVERTIBLE SUBORDINATED NOTES DUE 2002
3,531,958 SHARES OF COMMON STOCK, PAR VALUE $.001
This prospectus relates to the resale of (i) $310 Million aggregate
principal amount of 5% Convertible Subordinated Notes (the "Notes," each a
"Note" ) of Lam Research Corporation, a Delaware corporation (the "Company" or
"Lam"), and (ii) 3,531,958 shares of Lam Common Stock, par value $.001 per share
(the "Common Stock"), which are initially issuable upon conversion thereof, plus
an indeterminable number of shares of Common Stock as may become issuable upon
conversion of the Notes as a result of adjustment to the conversion price
thereunder (collectively, the "Shares"). The Notes and the Shares that are being
registered hereby are to be offered for the account of the holders thereof (the
"Selling Securityholders"). The Registration Statement of which this prospectus
is a part has been filed with the Securities and Exchange Commission pursuant to
a Registration Rights Agreement dated as of August 15, 1997 (the "Registration
Rights Agreement") entered into in connection with the initial private
placement.
The Notes are convertible into Common Stock at any time prior to the close
of business on the maturity date, as defined herein, unless previously redeemed
or repurchased, at a conversion price of $87.77 per share (equivalent to a
conversion rate of approximately 11.39 shares per $1,000 principal amount of
Notes), subject to adjustment. See "Description of Notes -- Payment and
Conversion." The Notes were initially sold by the Company to the initial
purchasers (the "Initial Purchasers," see "Plan of Distribution") on August 26,
1997 (the "Private Placement"). The Initial Purchasers have engaged in initial
resales of the Notes only to persons reasonably believed by the Initial
Purchasers to be Qualified Institutional Buyers ("QIBs"), as defined in Rule
144A of the Securities Act of 1933, as amended (the "Securities Act"), and in
accordance with the provisions of Regulation S, Rules 901-904 inclusive, of the
Securities Act.
Interest on the Notes is payable on September 1 and March 1 of each year,
commencing on March 1, 1998. Principal and interest payments will be made
without any deduction for U.S. withholding taxes, except to the extent described
under "Certain Federal Income Tax Consequences." For a description of certain
income tax consequences to holders of the Notes, see "Certain Federal Income Tax
Consequences."
The Notes are redeemable by the Company in the event of certain developments
involving withholding taxes of the United States. See "Description of
Notes -- Redemption -- Redemption for Taxation Reasons." Otherwise, the Notes
are not redeemable prior to September 6, 2000. On or after September 6, 2000,
the Notes will be redeemable at the option of the Company, in whole, or from
time to time, in part, at the redemption prices set forth in this Prospectus
plus accrued interest, if the closing price of the Common Stock shall have
exceeded 130% of the conversion price then in effect for 20 trading days within
a period of 30 consecutive trading days ending within five trading days prior to
the notice of redemption. See "Description of Notes -- Redemption -- Optional
Redemption." In the event of a Fundamental Change (as later defined herein),
each holder of Notes may require the Company to repurchase its Notes, in whole
or in part, for cash, at the repurchase prices set forth herein plus accrued
interest. See "Description of Notes -- Repurchase at Option of Holders Upon a
Fundamental Change."
The Notes are general, unsecured obligations of the Company and are
subordinated in right of payment to all existing and future Senior Indebtedness
(as defined) of the Company. The Notes also are structurally subordinated to all
liabilities of subsidiaries of the Company. The Notes were issued under an
indenture dated as of August 15, 1997 (the "Indenture"), between the Company and
LaSalle National Bank, as trustee (the "Trustee") which is summarized herein.
See "Description of Notes." The Notes do not provide for a sinking fund. The
Indenture does not restrict the Company from incurring additional Senior
Indebtedness or the Company or its subsidiaries from incurring other
indebtedness and liabilities.
The Common Stock is listed on the Nasdaq National Market under the symbol
"LRCX." The last reported bid price of the Common Stock on the Nasdaq National
Market on October 29, 1997 was $38.00 per share.
There is no existing public market for the Notes and there can be no
assurance as to the liquidity of any markets that may develop for the Notes, the
ability of the holders to sell their Notes or what price holders of the Notes
will be able to sell their Notes. The Initial Purchasers have informed the
Company that they are making and currently intend to continue making a market in
the Notes. The Initial Purchasers, however, are not obligated to do so and any
such market making may be discontinued at any time without notice, in the sole
discretion of the Initial Purchasers. Prior to the resale of the Notes pursuant
to this Prospectus, each of the Notes was eligible for trading in the Private
Offerings, Resales and Trading through Automated Linkages Market (the "PORTAL
Market"). Notes sold pursuant to this Prospectus will no longer be eligible for
trading in the PORTAL Market. The Company has applied to list the Notes on the
Luxembourg Stock Exchange.
The Notes and the Shares are being registered to permit public secondary
trading of the Notes and, upon conversion, the underlying Common Stock, by the
holders thereof from time to time after the date of this Prospectus. The Company
has agreed, among other things, to bear all expenses (other than underwriting
discounts, selling commissions and fees and the expenses of advisors to the
holders of the Notes or the underlying Common Stock), including the fees of
special counsel to the holders of the Notes, Wilson Sonsini Goodrich & Rosati
LLP, in connection with the registration and sale of the Notes and the Shares
covered by this Prospectus.
The Company will not receive any of the proceeds from the sales of the Notes
or the Shares by the Selling Securityholders. The Notes and the Shares may be
offered in negotiated transactions or otherwise, at market prices prevailing at
the time of sale or at negotiated prices. In addition, the Shares may be offered
from time to time through ordinary brokerage transactions on the Nasdaq National
Market. See "Plan of Distribution." The Selling Securityholders may be deemed to
be "underwriters" as defined in the Securities Act. If any broker-dealers are
used by the Selling Securityholders, any commissions paid to broker-dealers and,
if broker-dealers purchase any Notes or Shares as principals, any profits
received by such broker-dealers on the resale of the Notes or Shares may be
deemed to be underwriting discounts or commissions under the Securities Act. In
addition, any profits realized by the Selling Securityholders may be deemed to
be underwriting commissions.
THE NOTES AND THE COMMON STOCK ISSUABLE UPON CONVERSION THEREOF OFFERED HEREBY
INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" AT PAGE 6 OF THIS PROSPECTUS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
No underwriting commissions or discounts will be paid by the Company in
connection with this offering. Estimated expenses payable by the Company in
connection with the offering pursuant to this Prospectus are approximately
$400,000. See "Plan of Distribution."
The Company has agreed to indemnify the Selling Securityholders and certain
other persons against certain liabilities, including liabilities under the
Securities Act.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY STATE OR
OTHER JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH STATE OR JURISDICTION.
THE COMPANY ENDEAVORS TO PROTECT ITS INTELLECTUAL PROPERTY RIGHTS AND HAS
RIGHTS TO CERTAIN TRADEMARKS THAT APPEAR IN THIS PROSPECTUS.
THE DATE OF THIS PROSPECTUS IS OCTOBER , 1997
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information concerning the Company can be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, Room 1024; the
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511; and 7 World Trade Center, New York, New York 10048, 14th
Floor. Copies of such material can be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates.
This Prospectus constitutes a part of a registration statement on Form S-3
(together with all amendments and exhibits, the "Registration Statement") filed
by the Company with the Commission under the Securities Act. This Prospectus
does not contain all of the information included in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. Statements contained herein concerning the provisions of any
document do not purport to be complete and, in each instance, reference is made
to the copy of such document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission. Each such statement is subject to and
qualified in its entirety by such reference. Reference is made to such
Registration Statement and to the exhibits relating thereto for further
information with respect to the Company and the securities offered hereby.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission by the Company
and are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year June
30, 1997 including all material incorporated by reference therein;
2. The Company's Current Report on Form 8-K reporting events on August
5, 1997 as filed on August 15, 1997 and amended on October 3, 1997;
3. The Company's Current Report on Form 8-K reporting events on August
18, 1997 and August 19, 1997 as filed on August 28, 1997;
4. The Company's Current Report on Form 8-K reporting events on August
19, 1997 as filed on September 8, 1997;
5. The description of the Company's Rights Agreement and the Lam
Preferred Stock Purchase Rights contained in the Company's Registration
Statement on Form 8-A as filed on January 28, 1997 and amended on January
30, 1997; and
6. The Company's Registration Statement on Form 8-A registering the
Common Stock under Section 12(g) of the Exchange Act.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the initial filing date of this
Prospectus and to the termination of the resale of the Notes and the Common
Stock issuable upon the conversion of the Notes shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the request of such person, a copy of any or all
of the foregoing documents incorporated herein by reference, other
2
<PAGE> 4
than exhibits to such documents (unless such exhibits are specifically
incorporated by reference into such documents). Requests for such documents
should be directed to the Director of Investor Relations of the Company at 4650
Cushing Parkway, Fremont, California 94538, Attn: David L. Ringler.
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE DISCUSSION IN
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT, INCLUDING, BUT NOT LIMITED TO, STATEMENTS AS
TO BENEFITS OF THE MERGER OF ONTRAK SYSTEMS, INC. ("ONTRAK") WITH AND INTO THE
COMPANY, CONSUMMATED ON AUGUST 5, 1997 (THE "MERGER") AND FUTURE OPERATING
RESULTS AND BUSINESS PLANS OF THE COMPANY, THAT INVOLVE RISKS, UNCERTAINTIES AND
OTHER FACTORS WHICH MAY CAUSE THE COMPANY'S ACTUAL RESULTS, PERFORMANCE OR
FINANCIAL CONDITION TO DIFFER MATERIALLY FROM THOSE DISCUSSED HEREIN. FACTORS
THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED
TO, A DOWNTURN IN THE SEMICONDUCTOR INDUSTRY, COMPETITION, ADDITIONAL OR
CONTINUED DIFFICULTIES ARISING OUT OF THE COMPANY'S PRODUCT SHIFT. OTHER
IMPORTANT FACTORS THAT COULD CAUSE THE ACTUAL RESULTS, PERFORMANCE OR FINANCIAL
CONDITION OF THE COMPANY TO DIFFER MATERIALLY FROM THE COMPANY'S EXPECTATIONS AS
DISCLOSED IN THIS PROSPECTUS AND THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN
("CAUTIONARY STATEMENTS"), INCLUDING, WITHOUT LIMITATION, THOSE STATEMENTS MADE
IN CONJUNCTION WITH ANY SUCH FORWARD-LOOKING STATEMENTS, THOSE INCLUDED UNDER
"RISK FACTORS" AND OTHERWISE HEREIN AND THEREIN. ANY SUCH WRITTEN OR ORAL
FORWARD-LOOKING STATEMENTS ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE
CAUTIONARY STATEMENTS.
3
<PAGE> 5
SUMMARY SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT RATIO AND PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30,
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1997 1996 1995 1994 1993
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<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue.................... $1,073,197 $1,332,713 $836,581 $505,192 $270,489
Operating income (loss)(1)....... (60,776) 218,855 119,945 62,603 28,625
Net income (loss)(1)............. (30,676) 145,878 90,279 39,269 19,231
Net income (loss) per share
Primary........................ $ (0.83) $ 4.11 $ 2.79 $ 1.33 $ 0.67
========== ========== ======== ======== ========
Fully diluted.................. $ (0.83) $ 3.95 $ 2.65 $ 1.31 $ 0.67
========== ========== ======== ======== ========
OTHER DATA:
Ratio of earnings to fixed
charges(2) n/a 10.6x 11.2x 9.0x 7.9x
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
----------------------------
AS ADJUSTED(3)
--------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital(1)................................................. $ 462,171 $ 764,971
Total assets(1).................................................... 1,035,049 1,345,049
Long-term obligations, less current portion........................ 46,592 356,592
Total stockholders' equity......................................... $ 647,482 $ 647,482
</TABLE>
- ---------------
(1) During fiscal 1997, Lam recorded one-time charges and other significant
adjustments totaling approximately $78 million on a pre-tax basis for
restructuring costs; inventory, product warranty and other adjustments; and
bad debt reserves.
(2) For purposes of calculating the ratio of earnings to fixed charges, (i)
earnings consist of consolidated income (loss) before income taxes plus
fixed charges and (ii) fixed charges consist of interest expense incurred,
including capital leases, amortization of interest costs and the portion of
rental expense under operating leases deemed by the Company to be
representative of the interest factor. Earnings were not sufficient to cover
fixed charges for fiscal 1997 by approximately $36 million.
(3) The as adjusted balance sheet data gives effect to the sale by the Company
of the Notes offered hereby and the application of the estimated proceeds
therefrom, net of debt issuance costs of approximately $9.0 million, on June
30, 1997.
4
<PAGE> 6
THE COMPANY
The Company designs, manufactures, markets and services semiconductor
processing equipment used in the fabrication of integrated circuits. Lam is
recognized by its customers worldwide as a leading supplier of semiconductor
production equipment. The Company's products are used to deposit special films
on silicon wafers ("deposition") and to selectively etch away portions of
various films ("etch") to create an integrated circuit. Deposition and etch
processes, which are repeated numerous times during the fabrication cycle, are
required to manufacture every semiconductor device produced today. The Company's
etch technology is also used to process device features in flat panel displays
("FPDs"). With the acquisition of OnTrak, consummated in August 1997, Lam has
added both chemical mechanical planarization ("CMP") cleaning and polishing
product lines. CMP enables the fabrication of devices featuring design rules of
0.5 micron and below with multiple metal layers and is currently the fastest
growing segment of the semiconductor capital equipment industry.
The postal address for the Company's principal executive offices is 4650
Cushing Parkway, Fremont, CA 94538. The telephone number for the Company's
principal executive offices is (510) 659-0200.
5
<PAGE> 7
RISK FACTORS
THE NOTES AND COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN ADDITION TO THE
OTHER INFORMATION IN THIS PROSPECTUS BEFORE PURCHASING THE NOTES OR COMMON STOCK
OFFERED HEREBY. EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE
DISCUSSION IN THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT, INCLUDING, BUT NOT LIMITED TO,
STATEMENTS AS TO BENEFITS OF THE MERGER AND THE FUTURE OPERATING RESULTS AND
BUSINESS PLANS OF THE COMPANY, THAT INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED HEREIN.
FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT
LIMITED TO, A DOWNTURN IN THE SEMICONDUCTOR INDUSTRY, COMPETITION, ADDITIONAL OR
CONTINUED DIFFICULTIES ARISING OUT OF THE COMPANY'S PRODUCT SHIFT AND OTHER
RISKS DISCUSSED BELOW, AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS PROSPECTUS
AND IN ANY DOCUMENTS INCORPORATED HEREIN BY REFERENCE. IN ADDITION TO THE OTHER
INFORMATION IN THIS PROSPECTUS AND IN ANY DOCUMENTS INCORPORATED HEREIN BY
REFERENCE, THE FOLLOWING SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN
INVESTMENT IN THE NOTES OR COMMON STOCK OFFERED BY THIS PROSPECTUS.
FLUCTUATIONS IN QUARTERLY REVENUES
The Company's quarterly revenues have fluctuated in the past and may
fluctuate in the future. The Company's revenues are dependent on many factors,
including but not limited to the economic conditions in the semiconductor
industry, customer capacity requirements, the size and timing of the receipt of
orders from customers, customer cancellations or delays of shipments, the
Company's ability to develop, introduce and market new and enhanced products on
a timely basis, the introduction of new products by its competitors, changes in
average selling prices and product mix, and exchange rate fluctuations, among
others. The Company's expense levels will be based, in part, on expectations of
future revenues. If revenue levels in a particular quarter do not meet
expectations, operating results could be adversely affected. The Company derives
its revenue primarily from the sale of a relatively small number of high-priced
systems. The Company's systems can range in price from approximately $150,000 to
over $3 million per unit. The sale of fewer systems than anticipated in any
quarter may have a substantial negative impact on the operating results for the
quarter. The Company's results of operations for a particular quarter could be
adversely affected if anticipated orders are not received in time to enable
shipment during such quarter, if anticipated shipments are delayed or canceled
by one or more customers, or if shipments are delayed due to procurement
shortages or manufacturing difficulties. The slowdown in the semiconductor
industry and in the construction of new wafer fabrication facilities has
resulted in the Company experiencing a reduction in new orders as well as
rescheduled and canceled orders. There can be no assurance that this slowdown
will not continue. The Company generally realizes a higher margin on sales of
its mature products, such as Rainbow etch systems and CMP cleaning systems, and
on revenue from service and spare parts than on sales of Alliance, Chemical
Vapor Deposition ("CVD"), FPD, and newly released Transformer Coupled Plasma
("TCP") products. Newer products usually have lower margins in the initial phase
of production. The impact of these and other factors on the Company's revenues
and operating results in any future period is difficult for the Company to
forecast. There can be no assurance that these and other factors will not
materially adversely affect the Company's future business and financial results.
VOLATILITY IN THE SEMICONDUCTOR EQUIPMENT INDUSTRY
The business of the Company depends on the capital equipment 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
6
<PAGE> 8
has experienced periodic downturns. The semiconductor industry has been
experiencing a slowdown of product demand and volatility in product pricing.
This slowdown and volatility have caused the semiconductor industry to reduce or
delay purchases of semiconductor manufacturing equipment and construction of new
fabrication facilities. These conditions have adversely affected and may
continue to adversely affect the Company's aggregate bookings, revenues and
operating results, and no assurance can be given that the Company's bookings,
revenue and operating results will not be adversely affected by future downturns
in the semiconductor industry. Even during periods of reduced revenues, in order
to remain competitive, the Company will be required to continue to invest in
research and development ("R&D") and to maintain extensive ongoing worldwide
customer service and support capability, which could adversely affect its
financial results.
RISKS RELATED TO THE MERGER WITH ONTRAK
Integration of Operations
The realization of the benefits sought from the Merger depends on the
ability of the combined company to effectively utilize the joint product
development capabilities, sales and marketing capabilities, administrative
organizations and facilities of the two companies. There can be no assurance
that these benefits will be achieved or that the activities of the Company will
be integrated in a coordinated, timely and efficient manner. The combination of
the two organizations also will require the dedication of management resources,
which will detract such persons' attention from the day-to-day business of the
Company. There can be no assurance that the integration will be completed
without disrupting the Company's business. The inability of the Company to
effectively utilize resources and to achieve integration in a timely and
coordinated fashion could result in a material adverse effect on the Company's
financial condition, operating results and cash flows. There can be no assurance
that the Company will retain and successfully integrate its key management,
technical, sales and customer support personnel, or that it will obtain any of
the anticipated benefits of the Merger.
Substantial Expenses Resulting from the Merger
Costs associated with the Merger of approximately $17.7 million negatively
impacted results of operations in the fiscal quarter ended September 30, 1997.
Such expenses included investment advisory fees, legal and accounting fees,
financial printing costs and other Merger-related costs. Although the Company
does not believe that actual Merger costs will exceed the aforementioned
estimated amount, there can be no assurance that the Company's estimate is
correct or that unanticipated contingencies will not occur that will
substantially increase the costs of combining the operations of the two
companies.
Potential Dilutive Effect to Stockholders
Although the Company believes that beneficial synergies will result from
the Merger, there can be no assurance that combining the two companies'
businesses, even in an efficient, effective and timely manner, will result in
combined results of operations and financial condition superior to what would
have been achieved by each company independently, or as to the period of time
required to achieve such result. The issuance of the Company's Common Stock in
connection with the Merger may have the effect of reducing the Company's net
income per share from levels otherwise expected for the Company and could reduce
the market price of the Company's Common Stock unless revenue growth or cost
savings and other business synergies sufficient to offset the effect of such
issuance can be achieved.
DEPENDENCE ON NEW PRODUCTS AND PROCESSES; RAPID TECHNOLOGICAL CHANGE
Rapid technological changes in semiconductor manufacturing processes
subject the semiconductor manufacturing equipment industry to increased pressure
to maintain technological parity with deep submicron process technology. The
Company believes that the future success of the Company will depend in part upon
its ability to develop, manufacture and successfully introduce new products and
product lines with improved capabilities and to continue to enhance existing
products. Due to the risks inherent in transitioning to new products, the
Company will be required to accurately forecast demand for new products while
managing the
7
<PAGE> 9
transition from older products. If new products have reliability or quality
problems, reduced orders, higher manufacturing costs, delays in acceptance of
and payment for new products and additional service and warranty expenses may
result. In the past, the Company has experienced some delays as well as
reliability and quality problems in connection with product introductions,
resulting in some of these consequences. There can be no assurance that the
Company will successfully develop and manufacture new products, or that new
products introduced by the Company will be accepted in the marketplace. If the
Company does not successfully introduce new products, the Company's results of
operations will be materially adversely affected.
In addition, the Company expects to continue to make significant
investments in R&D. The Company also must manage product transitions
successfully, as introduction 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 existing products which satisfy customer needs in a timely
manner 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
marketing and selling of advanced processes or equipment to customers with whom
the Company has formed strategic alliances, the results of operations of the
Company could be adversely affected. In addition, in connection with the
development of the Company's new products, the Company will invest 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.
PRODUCT CONCENTRATION; LACK OF PRODUCT REVENUE DIVERSIFICATION
A substantial percentage of the Company's revenues to date have been
derived from a limited number of products, and such products are expected to
continue to account for a substantial percentage of the Company's revenues in
the near term. Collective sales of the Company's two primary products, Alliance
multi-chamber etch cluster tools and TCP single-chamber etch systems, accounted
for approximately 66% of the Company's total combined machine revenue for the
fiscal year ended June 30, 1997. Continued market acceptance of the Company's
primary products is therefore critical to the future success of the Company. Any
decline in demand for or failure to achieve continued market acceptance of such
products or any new version of these products, if any, as a result of
competition, technological change, failure of the Company to timely release new
versions of these products, or otherwise, could have a material adverse effect
on the business, operating results, financial condition and cash flows of the
Company. During the quarter ended March 31, 1997, the Company experienced a
faster than anticipated transition from its single-chamber etch products to its
next generation, multi-chamber etch cluster tools, which resulted in the need
for higher-than-anticipated reserve provisions for excess and obsolete
manufacturing and spare parts inventories and additional provisions for
installation and warranty costs. These factors, among others, resulted in the
Company reporting a loss for the fiscal year ended June 30, 1997.
DEPENDENCE UPON KEY SUPPLIERS AND KEY DISTRIBUTORS
Certain of the components and subassemblies included in the products of the
Company are obtained from a single supplier or a limited group of suppliers. The
Company's key suppliers include Bullen Ultrasonics, Inc., which supplies
electrodes, Edwards High Vacuum Inc., Lam's supplier of chillers, and Advanced
Energy Industries, Lam's RF generator supplier. Lam purchases in excess of
$500,000 of supplies on a monthly basis from these suppliers. Each of these
suppliers has a one year blanket purchase contract with Lam under which Lam may
issue purchase orders. These contracts may be renewed annually. Each of these
suppliers has sold products to Lam during at least the last four years, and Lam
has no reason to expect that they will not continue to renew these contracts in
the future. Lam 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.
8
<PAGE> 10
HIGHLY COMPETITIVE INDUSTRY
The semiconductor processing industry is highly competitive. The Company
has experienced and expects to continue to face substantial competition
throughout the world. A substantial investment is required by semiconductor
manufacturers to install and integrate capital equipment into a semiconductor
production line. The Company believes that as a result, once a semiconductor
manufacturer has selected a particular supplier's capital equipment, the
manufacturer generally relies upon that equipment for the specific production
line application and frequently will attempt to consolidate its other capital
equipment requirements with the same supplier. Accordingly, the Company would
expect to experience difficulty in selling to a given customer if that customer
had initially selected or selects a competitor's capital equipment. The Company
believes that to remain competitive, the Company 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 R&D.
The Company intends to continue to invest substantial resources 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 its 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 that provide innovative
technology that may have performance advantages over systems offered by the
Company.
The Company faces significant competitive factors in the etch equipment
market which include etch quality, repeatability, process capability and
flexibility and overall cost of ownership, including reliability, software
automation, throughput, customer support and system price. Although the Company
believes that it competes favorably with respect to each of these factors, the
Company's ability to compete successfully in this market will depend upon its
ability to introduce product enhancements and new products on a timely basis.
There can be no assurance that the Company will continue to compete successfully
in the future. In the etch equipment market, the Company's primary competitors
are Applied Materials, Inc., Tokyo Electronics Limited and Hitachi Ltd.
The Company faces significant competitive factors in the CVD equipment
market, including film quality, flow uniformity, contamination control,
temperature control and overall cost of ownership, including throughput, system
reliability, cost of consumables, system price and customer support. In the CVD
equipment market, the principal suppliers of equipment are Applied Materials,
Inc., Canon Sales Co. Inc., Novellus Systems, Inc. and Watkins-Johnson Company.
The CMP polishing system under development by the Company is expected to
face significant competition from multiple current and future competitors.
Companies currently offering polishing systems include Applied Materials, Inc.,
Cybeq Systems, Ebara Corporation, Integrated Process Equipment Corp. ("IPEC"),
SpeedFam Corp., Strasbaugh and Sumitomo Metals Limited. IPEC currently has the
largest installed base of CMP polishers and also offers an integrated CMP
polishing and cleaning system. Lam believes that other companies are developing
polishing systems and are planning to introduce new products to this market
before or during the same time frame as the Company's planned introduction of
its CMP polishing system.
In CMP slurry removal and cleaning applications, as developed by OnTrak,
the Company's principal competitor is Dainippon Screen Manufacturing Co. Ltd.
("Dainippon Screen"). The Company expects that it will face increased
competition from IPEC, which currently offers a slurry removal cleaning system,
and SpeedFam, as well as others as the CMP market continues to develop. In
general cleaning applications, the Company competes against Dainippon Screen and
others.
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
9
<PAGE> 11
characteristics. If the Company's competitors enter into strategic relationships
with leading semiconductor manufacturers covering etch, CMP or CVD products
similar to those sold or being developed by the Company, the Company's ability
to sell its products to those manufacturers could be adversely affected. No
assurance can be given that the Company will continue to compete successfully in
the United States or worldwide.
Present or future competitors may be able to develop products comparable or
superior to those offered by the Company or adapt more quickly to new
technologies or evolving customer requirements. In particular, while the Company
currently is developing additional product enhancements that it believes address
customer requirements, there can be no assurance that the development or
introduction of these additional product enhancements will be successfully
completed on a timely basis or that these product enhancements will achieve
market acceptance. Accordingly, there can be no assurance that the Company will
be able to continue to compete effectively in its markets, that competition will
not intensify or that future competition will not have a material adverse effect
on the business, operating results, financial condition and cash flows of the
Company.
INTERNATIONAL OPERATIONS AND EXPANSION
International sales accounted for 57%, 63%, and 53%, respectively, of the
Company's net revenues in the fiscal years 1997, 1996 and 1995. The Company
anticipates that international sales will continue to account for a significant
portion of net sales. Additionally, the Company intends to continue expansion of
international operations, including expansion of facilities in the Asia Pacific
region. 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 difficulties in accounts receivable collection.
In addition to the uncertainty as to the Company's ability to expand its
international presence, there are certain risks inherent in doing business on an
international level, such as unexpected changes in regulatory requirements,
political instability, fluctuations in currency exchange rates, and seasonal
reductions in business activity during summer months in Europe and certain other
parts of the world, any of which could have an adverse impact on the success of
international operations. Sales of products by the Company currently are
denominated principally in United States dollars. Accordingly, any increase in
the value of the United States dollar as compared to currencies in the Company's
principal overseas markets would increase the foreign currency-denominated cost
of the Company's products, which may negatively affect the Company's sales in
those markets. The Japanese yen has decreased in value relative to the United
States dollar in recent months. In addition to the potential impact on the
pricing of the Company's products, this decline will likely lower the rate of
dollar revenue growth. Currently, the Company enters into foreign currency
forward contracts to minimize the impact of exchange rate fluctuations on the
value of the yen-denominated assets and liabilities, and the Company will enter
into such hedging transactions in the future. In addition, effective patent,
copyright, trademark and trade secret protection may be limited or unavailable
under the laws of certain foreign jurisdictions. It is also possible that the
Company's Korean manufacturing facility may experience difficulties in
management, procurement, production and staffing. There can be no assurance that
one or more of such factors will not have a material adverse effect on the
Company's international operations and, consequently, on the business, operating
results, financial condition and cash flows of the Company.
INTELLECTUAL PROPERTY MATTERS
From time to time, the Company has received notices from third parties
alleging infringement of such parties' patent rights by the Company's products.
In such cases, it is the policy of the Company to defend against the claims or
negotiate licenses on commercially reasonable terms where considered
appropriate. However, no assurance can be given that the Company will be able to
negotiate necessary licenses on commercially reasonable terms, or at all, or
that any litigation resulting from such claims would not have a material adverse
effect on the Company's business and financial results.
10
<PAGE> 12
In October 1993, Varian Associates, Inc. ("Varian") brought suit against
the Company in the United States District Court for the 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 has been reassigned to a new judge. The
trial date has been set for March 1998. 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 Lam 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
operating results or the Company's financial position.
The Company's success depends in part on its proprietary technology. While
the Company attempts to protect its proprietary technology through patents,
copyrights and trade secret protection, it believes that the success of the
Company will depend on more technological expertise, continuing the development
of new systems, market penetration and growth of its installed base and the
ability to provide comprehensive support and service to customers. There can be
no assurance that the Company will be able to protect its technology or that
competitors will not be able to develop similar technology independently. The
Company currently has a number of United States and foreign patents and patent
applications. There can be no assurance that any patents issued to the Company
will not be challenged, invalidated or circumvented or that the rights granted
thereunder will provide competitive advantages to the Company.
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 general
compliance with these regulations and that it has obtained (or otherwise
addressed) 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.
DEPENDENCE ON KEY PERSONNEL AND DIFFICULTY OF IDENTIFYING AND HIRING CERTAIN
PERSONNEL
The performance of the Company is substantially dependent on the
performance of its executive officers and key employees. The loss of the
services of any of the executive officers or other key employees of the Company
could have a material adverse effect on the business, operating results,
financial condition and cash flows of the Company.
The future success of the Company also depends on its continuing ability to
identify, hire, train and retain other highly qualified technical and managerial
personnel. Competition for such personnel is intense, and the Company has
experienced difficulty in identifying and hiring qualified engineering
personnel. There can be no assurance that the Company will be able to attract,
assimilate or retain highly qualified technical and managerial personnel in the
future. The inability to attract and retain the necessary technical and
managerial personnel could have a material adverse effect on the Company's
business, operating results, financial condition and cash flows.
MANAGEMENT TRANSITION
In recent years, the Company has experienced expansion of its operations
that has placed significant demands on its respective administrative,
operational and financial resources, the demands of which are expected to
intensify as a result of the Merger. James W. Bagley, the Chairman and Chief
Executive Officer of OnTrak, became the Chief Executive Officer of Lam on August
6, 1997. In addition, Lam hired a new Chief Financial Officer, Mercedes Johnson,
in April 1997 and a new Chief Operating Officer, Stephen G.
11
<PAGE> 13
Newberry, in August 1997. There can be no assurance that such management
transitions can be accomplished in an efficient manner without business
disruption.
MANAGEMENT OF POTENTIAL GROWTH; INTEGRATION OF POTENTIAL ACQUISITIONS
To manage future growth, if any, management of the Company will face
significant challenges in improving financial and management controls,
management processes, business and management information systems and procedures
on a timely basis and expanding, training and managing its work force. There can
be no assurance that the Company will be able to perform such actions
successfully. In the future, the Company may make additional acquisitions of
complementary companies, products or technologies. Managing an acquired business
entails numerous operational and financial risks, including difficulties in
assimilating acquired operations and new personnel, diversion of management's
attention to other business concerns, amortization of acquired intangible assets
and potential loss of key employees or customers of acquired operations. The
Company's success will depend, to a significant extent, on the ability of its
executive officers and other members of senior management to respond to these
challenges effectively. There can be no assurance that the Company will be able
to effectively achieve and manage any such growth, or that its management,
personnel or systems will be adequate to support the Company's operations. Any
such inabilities or inadequacies would have a material adverse effect on the
Company's business, operating results, financial condition and cash flows.
An important element of the Company's management strategy is to review
acquisition prospects that would complement the Company's existing products,
augment its market coverage and distribution ability or enhance its
technological capabilities. While the Company has no current agreements or
negotiations underway with respect to any new acquisitions, the Company may
acquire additional businesses, products or technologies in the future. Future
acquisitions by the Company could result in potentially dilutive issuances of
equity securities, the incurrence of debt and contingent liabilities and
amortization expense related to goodwill and other intangible assets, and other
changes which could materially adversely affect the Company's business,
financial condition and results of operations and/or the price of Lam Common
Stock.
POTENTIAL VOLATILITY OF NOTES AND COMMON STOCK PRICE
The market price for Lam Common Stock has been volatile. The market price
of Lam Common Stock, and, in turn the market price of the Notes, could be
subject to significant fluctuations in response to variations in quarterly
operating results, shortfalls in revenues or earnings from levels expected by
securities analysts and other factors such as announcements of technological
innovations or new products by the Company or by the Company's competitors,
government regulations, developments in patent or other proprietary rights. In
addition, the stock market has in recent years experienced significant price
fluctuations. These fluctuations often have been unrelated to the operating
performance of the specific companies whose stocks are traded. Broad market
fluctuations, as well as economic conditions generally in the semiconductor
industry, may adversely affect the market price of Lam Common Stock, and, in
turn, the market price of the Notes.
POTENTIAL ANTI-TAKEOVER EFFECTS OF RIGHTS PLAN AND BYLAWS
On January 23, 1997, the Company adopted a Rights Plan (the "Rights Plan")
in which rights were distributed as a dividend at the rate of one right for each
share of Common Stock, par value $0.001 per share, of the Company held by
stockholders of record as of the close of business on January 31, 1997 and
thereafter. In connection with the adoption of the Rights Plan, the Board of
Directors also adopted a number of amendments to the Company's Bylaws, including
amendments requiring advance notice of stockholder nominations of directors and
stockholder proposals.
The Rights Plan may have certain anti-takeover effects. The Rights Plan
will cause substantial dilution to a person or group that attempts to acquire
the Company in certain circumstances. Accordingly, the existence of the Rights
Plan and the issuance of the related rights may deter certain acquirers from
making takeover proposals or tender offers. The Rights Plan, however, is not
intended to prevent a takeover but rather is
12
<PAGE> 14
designed to enhance the ability of the Board of Directors to negotiate with a
potential acquirer on behalf of all of the stockholders.
In addition, the Certificate of Incorporation authorizes 5,000,000 shares
of undesignated preferred stock. The Board of Directors of the Company, without
further stockholder approval, may issue this preferred stock with such terms as
the Board of Directors may determine, which could have the effect of delaying or
preventing a change in control of the Company. The issuance of preferred stock
could also adversely affect the voting power of the holders of Common Stock,
causing the loss of voting control. The Company's Bylaws and indemnity
agreements with officers and directors provide that the Company will indemnify
officers and directors against losses that they may incur in legal proceedings
resulting from their service to the Company. Moreover, Section 203 of the
Delaware General Corporation Law restricts certain business combinations with
"interested stockholders" as defined by that statute.
SIGNIFICANT LEVERAGE; DEBT SERVICE; REQUIRED RESTRUCTURING OF SENIOR
INDEBTEDNESS
In connection with the issuance of the Notes, the Company incurred $310
million of indebtedness which results in a ratio of long-term debt to total
capitalization at June 30, 1997 of approximately 34%, restated to give effect to
the issuance of the Notes. As a result of this additional indebtedness, the
Company's principal and interest obligations will increase substantially. The
degree to which the Company is leveraged could materially and adversely affect
the Company's ability to obtain financing for working capital, acquisitions or
other purposes and could make it more vulnerable to industry downturns and
competitive pressures. The Company's ability to meet its debt service
obligations will be dependent upon the Company's future performance, which will
be subject to financial, business and other factors affecting the operations of
the Company, many of which are beyond its control.
The Company will require substantial amounts of cash to fund scheduled
payments of principal and interest on its outstanding indebtedness, including
the Notes, future capital expenditures and any increased working capital
requirements. If the Company is unable to meet its cash requirements out of cash
flow from operations and its available borrowings, there can be no assurance
that it will be able to obtain alternative financing or that it will be
permitted to do so under the terms of its existing financing arrangements. In
the absence of such financing, the Company's ability to respond to changing
business and economic conditions, to make future acquisitions, to absorb adverse
operating results or to fund capital expenditures or increased working capital
requirements may be adversely affected. If the Company does not generate
sufficient increases in cash flow from operations to repay the Notes at
maturity, it could attempt to refinance the Notes; however, no assurance can be
given that such a refinancing would be available on terms acceptable to the
Company, if at all. Any failure by the Company to satisfy its obligations with
respect to the Notes at maturity (with respect to payments of principal) or
prior thereto (with respect to payments of interest or required repurchases)
would constitute a default under the Indenture and could cause a default under
agreements governing other indebtedness, if any, of the Company.
As a consequence of the issuance of the Notes offered hereby, the Company
in August 1997 obtained consents and waivers for certain financial and other
covenants contained in agreements related to certain existing financing
arrangements. These financing arrangements include the Company's revolving
credit facility, synthetic real estate leases, a receivable purchase arrangement
and a yen denominated term loan of the Company's Japanese subsidiary, which is
guaranteed by the Company. The Company obtained subsequent waivers for certain
financial covenants on or before September 30, 1997, and amendments to its
revolving credit facility and synthetic real estate leases on October 7, 1997.
ABSENCE OF PUBLIC MARKET
There is no existing public market for the Notes and there can be no
assurance as to the liquidity of any markets that may develop for the Notes, the
ability of the holders to sell the Notes or the price at which holders of the
Notes may be able to sell their Notes. Future trading prices of the Notes will
depend on many factors, including, among other things, prevailing interest
rates, the Company's operating results, the price of the Common Stock and the
market for similar securities. The Initial Purchasers have informed the Company
13
<PAGE> 15
that the Initial Purchasers are making and currently intend to continue making a
market in the Notes; however, the Initial Purchasers are not obligated to do so,
and any such market making activity may be terminated at any time without notice
to the holders of the Notes, in the sole discretion of the Initial Purchasers.
Prior to the resale thereof pursuant to this Prospectus, each of the Notes was
eligible for trading in the PORTAL Market. Notes sold pursuant to this
Prospectus will no longer be eligible for trading in the PORTAL Market. The
Company has applied for listing of the Notes on the Luxembourg Stock Exchange.
SUBORDINATION AND ABSENCE OF FINANCIAL COVENANTS
The Notes are unsecured and subordinated in right of payment to all
existing and future Senior Indebtedness of the Company. The Notes are also
structurally subordinated to the existing and future liabilities, including
trade payables, of the Company's subsidiaries, and the Company conducts a
significant portion of its operations through its subsidiaries. As of June 30,
1997, on a restated basis giving effect to the Merger, there was approximately
$226 million of indebtedness of the Company outstanding that would have
constituted Senior Indebtedness and approximately $51 million of indebtedness
and other liabilities of subsidiaries of the Company outstanding (excluding
intercompany liabilities and indebtedness included as Senior Indebtedness as a
result of guarantees by the Company) to which the Notes would have been
structurally subordinated. The Indenture does not prohibit or limit the
incurrence of Senior Indebtedness or the incurrence of other indebtedness and
liabilities by the Company or its subsidiaries, and the incurrence of any such
additional indebtedness or liabilities could adversely affect the Company's
ability to pay its obligations on the Notes. The Company anticipates that from
time to time it will incur additional indebtedness, including Senior
Indebtedness, and that it and its subsidiaries will from time to time incur
other additional indebtedness and liabilities. See "Description of
Notes -- Subordination."
The Indenture does not contain any financial covenants or restrictions on
the payment of dividends, the incurrence of indebtedness, including Senior
Indebtedness, by the Company or the issuance or repurchase of securities by the
Company. The Indenture contains no covenants or other provisions to afford
protection to holders of the Notes in the event of a highly leveraged
transaction or a change in control of the Company except to the extent described
under "Description of Notes -- Repurchase at Option of Holders Upon a
Fundamental Change." The term "Fundamental Change" is limited to certain
specified transactions and may not include other events that might adversely
affect the financial condition of the Company, nor would the requirement that
the Company offer to repurchase the Notes upon a Fundamental Change necessarily
afford holders of the Notes protection in the event of a highly leveraged
transaction, reorganization, merger or similar transaction involving the
Company.
LIMITATIONS ON REPURCHASE OF NOTES
Upon a Fundamental Change (as defined below, see "Description of the
Notes -- Repurchase at Option of Holders Upon a Fundamental Change"), each
holder of Notes will have certain rights, at the holder's option, to require the
Company to repurchase all or a portion of such holder's Notes. If a Fundamental
Change were to occur, there can be no assurance that the Company would have or
be able to obtain sufficient funds to pay the repurchase price for all Notes
tendered by the holders thereof. Certain of the agreements evidencing the
Company's existing indebtedness contain, and future credit agreements relating
to other indebtedness (including other Senior Indebtedness) to which the Company
may become a party may also contain, restrictions and provisions which prohibit
the Company from repurchasing or redeeming any Notes and certain agreements
evidencing the Company's existing indebtedness provide and future agreements
relating to other indebtedness may provide that certain transactions
constituting a Fundamental Change would constitute an event of default
thereunder. In the event a Fundamental Change occurs at a time when the Company
is prohibited from repurchasing or redeeming Notes, the Company could seek the
consent of its lenders to the repurchase of Notes or could attempt to refinance
the borrowings that contain such prohibition. If the Company does not obtain
such a consent or repay such borrowings, the Company would remain prohibited
from repurchasing or redeeming Notes. In such case, the Company's failure to
repurchase tendered Notes may constitute an Event of Default (as defined below,
"Description of the Notes -- Events of Default") under the Indenture, which may,
in turn, constitute a further default under the terms of certain of
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<PAGE> 16
the Senior Indebtedness. In such circumstances, the subordination provisions in
the Indenture would likely restrict payments to the Holders of the Notes. See
"Description of Notes -- Repurchase at Option of Holders upon a Fundamental
Change."
DISCRETIONARY USE OF PROCEEDS OF OFFERING OF NOTES
The principal purpose of the sale of the Notes by the Company was to
increase the Company's capital base and financial flexibility. The Company plans
to use the net proceeds principally for general corporate purposes, including
working capital. As a consequence, the Company's management has the ability to
allocate the net proceeds of the completed Notes offering at its discretion.
There can be no assurance that the proceeds will be utilized to yield a
significant return. See "Significant Leverage; Debt Service; Required
Restructuring of Senior Indebtedness."
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Notes or
Common Stock offered by the Selling Securityholders hereby. However, if and when
shares of Common Stock are issued upon conversion of the Notes, certain of the
Company's indebtedness will be canceled. See "Selling Securityholders."
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at June 30, 1997 giving effect to the Merger, which has been accounted
for as a pooling of interests, and as adjusted to give effect to the sale by the
Company of the Notes on August 26, 1997 and the application of the estimated net
proceeds therefrom (as if such sale and application of proceeds occurred on such
date). The following table should be read in conjunction with the Supplemental
Consolidated Financial Statements, related Notes thereto and Management's
Discussion and Analysis of Financial Condition and Results of Operations
included elsewhere in this Registration Statement. See "Risk
Factors -- Discretionary Use of Proceeds of Offering" and "-- Significant
Leverage; Debt Service: Required Restructuring of Senior Indebtedness."
<TABLE>
<CAPTION>
JUNE 30, 1997
(IN THOUSANDS)
-----------------------
AS
ADJUSTED
(3)
----------
<S> <C> <C>
Line of credit borrowings (1).................................... $ 35,000 $ 35,000
Long-term debt and capital lease obligations including current
portion....................................................... 67,719 67,719
5% Convertible Subordinated Notes due 2002....................... -- 310,000
Stockholders' Equity:
Preferred stock, $0.001 par value, 5,000 shares authorized; no
shares issued or outstanding................................. -- --
Common stock, $0.001 par value, 90,000 shares authorized;
37,334 issued and outstanding (2)............................ 37 37
Additional paid-in capital.................................... 361,101 361,101
Retained earnings............................................. 286,344 286,344
-------- ----------
Total stockholders' equity.................................... 647,482 647,482
-------- ----------
Total capitalization.......................................... $750,201 $1,060,201
======== ==========
</TABLE>
- ---------------
(1) Does not give effect to the repayment of the line of credit borrowings of
$35 million during July 1997.
(2) Does not include 4,935 shares of Common Stock issuable upon exercise of
employee and director stock options outstanding at June 30, 1997.
(3) The as adjusted capitalization table gives effect to the sale by the Company
of the Notes and the application of the estimated net proceeds therefrom on
June 30, 1997.
15
<PAGE> 17
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The Selected Consolidated Financial Information has been derived from the
Supplemental Consolidated Financial Statements of the Company and gives effect
to the Merger which has been accounted for as a pooling of interests. Lam's and
OnTrak's historical results of operations and financial position for the fiscal
years ended June 30, 1997, 1996, 1995, 1994 and 1993 have been combined to
reflect the companies' results of operations and financial position for the
respective periods presented. The Selected Consolidated Financial Information is
presented for illustrative purposes only and is not necessarily indicative of
the operating results or financial position that would have occurred had the
Merger been effective during the periods presented, nor necessarily indicative
of the future operating results or financial position of the combined company.
This information should be read in connection with the Company's Supplemental
Consolidated Financial Statements and Notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30,
----------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- -------- -------- --------
(IN THOUSANDS, EXCEPT RATIO AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................................... $1,060,535 $1,309,899 $824,233 $496,389 $265,905
Royalty income............................................... 12,662 22,814 12,348 8,803 4,584
---------- ---------- -------- -------- --------
Total revenue........................................ 1,073,197 1,332,713 836,581 505,192 270,489
Costs and expenses (1)
Cost of goods sold......................................... 723,404 689,515 429,707 270,807 142,420
Research and development................................... 192,254 186,899 134,668 78,319 45,092
Selling, general and administrative........................ 209,294 237,444 151,011 93,463 54,352
Restructuring charge....................................... 9,021 -- -- -- --
Charge for past royalties.................................. -- -- 1,250 -- --
---------- ---------- -------- -------- --------
1,133,973 1,113,858 716,636 442,589 241,864
Operating income (loss) (1).................................. (60,776) 218,855 119,945 62,603 28,625
Other (income) expense, net.................................. 83 2,456 (9,025) 3,097 1,194
---------- ---------- -------- -------- --------
Income (loss) before income taxes (1)........................ (60,859) 216,399 128,970 59,506 27,431
Income tax expense (benefit)................................. (30,183) 70,521 38,691 20,237 8,200
---------- ---------- -------- -------- --------
Net income (loss) (1)........................................ $ (30,676) $ 145,878 $ 90,279 $ 39,269 $ 19,231
========== ========== ======== ======== ========
Net income (loss) per share
Primary.................................................... $ (0.83) $ 4.11 $ 2.79 $ 1.33 $ 0.67
========== ========== ======== ======== ========
Fully diluted.............................................. $ (0.83) $ 3.95 $ 2.65 $ 1.31 $ 0.67
========== ========== ======== ======== ========
Number of shares used in per share calculations
Primary.................................................... 36,919 35,479 32,391 29,566 28,636
========== ========== ======== ======== ========
Fully diluted.............................................. 36,919 37,719 35,391 32,266 29,236
========== ========== ======== ======== ========
OTHER DATA:
Ratio of earnings to fixed charges (2)....................... n/a 10.6x 11.2x 9.0x 7.9x
---------- ---------- -------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30,
---------------------------------------------
1997 1996 1995 1994 1993
----- ----- ----- ----- -----
AS A PERCENTAGE OF TOTAL REVENUE
<S> <C> <C> <C> <C> <C>
Net sales....................................................................... 98.8% 98.3% 98.5% 98.3% 98.3%
Royalty income.................................................................. 1.2 1.7 1.5 1.7 1.7
------ ------ ------ ------ ------
Total revenue................................................................. 100.0 100.0 100.0 100.0 100.0
Costs and expenses
Cost of goods sold............................................................ 67.4 51.7 51.4 53.6 52.6
Research and development...................................................... 17.9 14.1 16.1 15.5 16.7
Selling, general and administrative........................................... 19.5 17.8 18.1 18.5 20.1
Restructuring charge.......................................................... 0.9 -- -- -- --
Charge for past royalties..................................................... -- -- 0.1 -- --
------ ------ ------ ------ ------
105.7 83.6 85.7 87.6 89.4
Operating income (loss)......................................................... (5.7) 16.4 14.3 12.4 10.6
Other (income) expense, net..................................................... -- 0.2 (1.1) 0.6 0.5
------ ------ ------ ------ ------
Income (loss) before income taxes............................................... (5.7) 16.2 15.4 11.8 10.1
Income tax expense (benefit).................................................... (2.8) 5.3 4.6 4.0 3.0
------ ------ ------ ------ ------
Net income (loss)............................................................... (2.9)% 10.9% 10.8% 7.8% 7.1%
====== ====== ====== ====== ======
</TABLE>
16
<PAGE> 18
<TABLE>
<CAPTION>
AS OF JUNE 30,
----------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (1).......................................... $ 462,171 $ 516,162 $343,410 $173,913 $155,357
Total assets (1)............................................. 1,035,049 1,031,497 698,416 386,772 271,139
Long-term obligations, less current portion.................. 46,592 54,099 97,399 79,648 79,678
Mandatorily redeemable preferred stock....................... -- -- 6,522 -- --
Total stockholders' equity................................... 647,482 661,876 396,098 178,715 130,676
</TABLE>
- ---------------
(1) During fiscal 1997, Lam recorded one-time charges and other significant
adjustments totaling approximately $78 million on a pre-tax basis for
restructuring costs; inventory, product warranty and other adjustments; and
bad debt reserves.
(2) For purposes of calculating the ratio of earnings to fixed charges, (i)
earnings consist of consolidated income (loss) before income taxes plus
fixed charges and (ii) fixed charges consist of interest expense incurred,
including capital leases, amortization of interest costs and the portion of
rental expense under operating leases deemed by the Company to be
representative of the interest factor. Earnings were not sufficient to cover
fixed charges for fiscal 1997 by approximately $36 million.
17
<PAGE> 19
RECENT DEVELOPMENTS
Revenue for the Company for the quarter ended September 30, 1997 was $289.9
million compared to revenue of $299.2 million for the prior year period. The
Company reported a net loss of $12.2 million ($0.32 per share) for the quarter
compared to net income of $11.7 million ($0.31 per share, fully diluted) for the
prior year's first quarter. The quarter ended September 30, 1997 results include
a $17.7 million pre-tax charge ($0.41 per share, after tax) related to costs
associated with the Merger, which was completed during the quarter.
DESCRIPTION OF NOTES
The Notes offered by the holders hereby were issued under an Indenture,
dated as of August 15, 1997, between the Company and the LaSalle National Bank
(the "Trustee"). The Notes offered pursuant to this Prospectus are limited to
U.S. $310,000,000 aggregate principal amount (or its equivalent based on the
applicable exchange rate at the time of sale). The statements herein relating to
the Notes and the Indenture are summaries and are subject to the detailed
provisions of the Indenture. A copy of the Indenture is filed as an exhibit to
the Registration Statement of which this Prospectus is a part; also copies of
the Indenture are available from the Trustee, the Company, or the Company's
agent in Luxembourg upon request by holders of the Notes. The following
summaries of certain provisions of the Notes and the Indenture do not purport to
be complete and are subject to, and are qualified in their entirety by reference
to, all of the provisions of the Notes and the Indenture, including the
definitions therein of certain terms which are not otherwise defined in this
Prospectus. Wherever particular provisions or defined terms of the Indenture (or
the form of Note which is a part thereof) or the Registration Rights Agreement
are referred to, such provisions or defined terms are incorporated herein by
reference. References in this section to the "Company" are solely to Lam
Research Corporation, a Delaware corporation, and not its subsidiaries.
GENERAL
The Notes are unsecured subordinated obligations of the Company,
$310,000,000 in aggregate principal amount, will mature on September 1, 2002 and
are payable at a price of 100% of the principal amount thereof. The Notes bear
interest at the rate of 5% per annum commencing as of August 26, 1997, payable
semiannually on March 1 and September 1 of each year, commencing on March 1,
1998.
The Notes are convertible into Common Stock initially at the conversion
price of $87.77 per share (equivalent to a conversion rate of approximately
11.39 shares per $1,000 principal amount of Notes), subject to adjustment upon
the occurrence of certain events described under "-- Conversion," at any time
prior to the close of business on the maturity date, unless previously redeemed
or repurchased.
The Notes are redeemable (a) at the option of the Company in the event of
certain developments involving withholding taxes of the U.S. as described below
under "-- Redemption -- Redemption for Taxation Reasons" at a redemption price
of 100% of the principal amount of the Notes to be redeemed, plus accrued
interest to, but excluding the Redemption Date (as defined) and (b) at the
option of the Company under the circumstances and at the redemption prices set
forth below under "Redemption -- Optional Redemption," plus accrued interest to,
but excluding, the Redemption Date.
The Indenture does not contain any financial covenants or restrictions on
the payment of dividends by the Company, the incurrence of indebtedness,
including Senior Indebtedness (as defined), by the Company or the issuance or
repurchase of securities by the Company. The Indenture contains no covenants or
other provisions to afford protection to holders of the Notes in the event of a
highly leveraged transaction or a change in control of the Company except to the
extent described below under "-- Repurchase at Option of Holders Upon a
Fundamental Change."
The Notes redemption price at the maturity date is 100% of the original
principal amount.
18
<PAGE> 20
BOOK ENTRY, DELIVERY AND FORM
The Notes were issued in fully registered form, without coupons, in
denominations of $1,000 principal amount and integral multiples thereof.
Global Note, Book-Entry Form. The Notes currently held by QIBs, are
evidenced by a global Note (the "144A Global Note"), which is deposited with, or
on behalf of, The Depository Trust Company, New York, New York ("DTC"), and
registered in the name of Cede & Co. ("Cede") as DTC's nominee.
The Notes held by persons who acquired such Notes in compliance with
Regulation S under the Securities Act (a "Non-U.S. Person") are evidenced by a
global Note (the "Regulation S Global Note"), which is deposited with, or on
behalf of, DTC and registered in the name of Cede as DTC's nominee, for the
accounts of Morgan Guaranty Trust Company of New York, Brussels office, as
operator of the Euroclear System ("Euroclear") and Cedel, S.A. ("Cedel").
Beneficial interests in the Regulation S Global Note may only be held through
Euroclear or Cedel, and, prior to the effective date of this Prospectus and the
sale of the Notes under the terms of this Prospectus, any resale or transfer of
such interests to U.S. persons is restricted. Except as set forth below, the
144A Global Note and the Regulation S Global Note may be transferred, in whole
or in part, only to another nominee of DTC or to a successor of DTC or its
nominee.
Upon the initial sale of the Notes offered hereby pursuant to this
Prospectus, each Selling Securityholder will be required to deliver a notice
("Notice") of such sale to the Trustee and the Company. The Notice will, among
other things, identify the sale as a transfer pursuant to the Registration
Statement of which this Prospectus forms a part, certify that the prospectus
delivery requirements, if any, of the Securities Act have been satisfied, and
certify that the Selling Securityholder and the aggregate principal amount of
Notes owned by such holder are identified in the Prospectus in accordance with
the applicable rules and regulations under the Securities Act. Copies may be
requested from the Company.
Upon the initial transfer pursuant to the Registration Statement of which
this Prospectus forms a part, the Notes will be represented by one or more
global notes (the "Global Notes," each a "Global Note") in definitive, fully
registered form, without coupons. Each such Global Note will be deposited upon
issuance with, or on behalf of, DTC and registered in the name of DTC or its
nominee (the "Global Note Registered Owner") or will remain in the custody of
the Trustee pursuant to an agreement between DTC and the Trustee. Except as set
forth below, the Global Note may be transferred, in whole or in part, only to
another nominee of DTC or to a successor of DTC or its nominee.
DTC has advised the Company as follows. DTC is a limited purpose trust
company organized under the New York Banking Law, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participant organizations (collectively, the "Participants")
and to facilitate the clearance and settlement of transactions in those
securities between Participants through electronic book-entry changes in
accounts of its Participants. The Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Access to DTC's system is also available to other entities such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
(collectively, the "Indirect Participants"). Persons who are not Participants
may beneficially own securities held by or on behalf of DTC only through the
Participants or the Indirect Participants. The ownership interest and transfer
of ownership interest of each actual purchaser of each security held by or on
behalf of DTC are recorded on the records of the Participants and Indirect
Participants.
Pursuant to procedures established by DTC, (i) upon deposit of the Global
Note, DTC will credit the accounts of Participants with portions of the
principal amount of the Global Note and (ii) ownership of such interests in the
Global Note will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants (with respect
to other owners of beneficial interests in the Global Note). The laws of some
states require that certain persons take physical delivery in definitive form of
securities that they own. Consequently, the ability to transfer Notes will be
limited to that extent.
19
<PAGE> 21
Except as described below, owners of interests in the Global Note will not
have Notes registered in their names, will not receive physical delivery of the
Notes in definitive form and will not be considered the registered owners
thereof under the Indenture for any purpose.
The limited circumstances under the Indenture pursuant to which owners of
beneficial interests in the Global Note are entitled to have certificates
registered in their name would occur if at any time (i) the Company or an
affiliate of the Company is such owner of a beneficial interest in the
securities represented by such Global Note, or (ii) the depository (initially
DTC) for the Global Note notifies the Company that it is unwilling or unable to
continue as depository for the Global Note, and a successor depository is not
appointed by the Company within ninety (90) days after the Company receives such
notice. In this event, the Company will execute, and the Trustee, upon receipt
of an Officers' Certificate (as defined in the Indenture) for the authentication
and delivery of such securities, will authenticate and deliver, the securities
in certificated form, in aggregate principal amount equal to the principal
amount of the Global Note, in exchange for the Global Note. Securities in
certificated form shall be registered in such names and in such authorized
denominations as the depository, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Trustee. Upon execution
and authentication, the Trustee shall deliver such securities in certificated
form to the Persons in whose names such securities in certificated form are so
registered.
Payment of interest on and the redemption price of the Global Note are made
to Cede, the nominee for DTC, as the registered owner of the Global Note, by
wire transfer of immediately available funds on each interest payment date.
Neither the Company, the Trustee nor any Paying Agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Note or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Company has been informed by DTC that, with respect to any payment of
interest on, or the redemption price of, the Global Note, DTC's practice is to
credit Participants' accounts on the payment date therefor with payments in
amounts proportionate to their respective beneficial interests in the Notes
represented by the Global Note, as shown on the records of DTC (adjusted as
necessary so that such payments are made with respect to whole Notes only),
unless DTC has reason to believe that it will not receive payment on such
payment date. Payments by Participants to owners of beneficial interests in
Notes represented by the Global Note held through such Participants are the
responsibility of such Participants, as is now the case with securities held for
the accounts of customers registered in "street name."
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a person
having a beneficial interest in the principal amount represented by the Global
Note to pledge such interest to persons or entities that do not participate in
the DTC system, or otherwise take actions in respect of such interest, may be
affected by the lack of a physical certificate evidencing such interest.
Neither the Company nor the Trustee (or any Note Registrar, Paying Agent or
Conversion Agent under the Indenture) will have any responsibility for the
performance by DTC or its Participants or Indirect Participants of their
respective obligations under the rules and procedures governing their
operations. DTC has advised the Company that it will take any action permitted
to be taken by a holder of Notes (including, without limitation, the
presentation of Notes for exchange as described below) only at the direction of
one or more Participants to whose account with DTC interests in the Global Note
are credited and only in respect of the principal amount of the Notes
represented by the Global Note as to which such Participant or Participants has
or have given such direction.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-entry
changes to accounts of its Participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and may
20
<PAGE> 22
include certain other organizations such as the Initial Purchasers. Certain of
such Participants (or their representatives), together with other entities, own
DTC. Indirect access to the DTC system is available to others such as banks,
brokers, dealers and trust companies that clear through, or maintain a custodial
relationship with, a Participant, either directly or indirectly.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among Participants, it is under no
obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. If DTC is at any time unwilling or
unable to continue as depository and a successor depository is not appointed by
the Company within 90 days, the Company will cause the Notes to be issued in
definitive form in exchange for the Global Note.
CONVERSION
The holder of any Note will have the right at the holder's option to
convert any Note (in denominations of $1,000 or any multiple thereof) into
shares of Common Stock at any time, at a conversion price of $87.77 per share
(equivalent to a conversion rate of approximately 11.39 shares per $1,000
principal amount of Notes). The conversion price is subject to adjustment from
time to time as described below. The right to convert a Note will end at the
close of business on the maturity date, September 1, 2002, except that the right
to convert a Note called for redemption or delivered for repurchase will
terminate upon the earlier to occur of (i) the close of business on the Business
Day prior to the Redemption Date or the Repurchase Date (as defined), as the
case may be, or (ii) the close of business on the maturity date. The rights and
privileges of the holders of Common Stock are described in "Description of
Capital Stock."
Beneficial owners of interests in a Global Note may exercise their right of
conversion by delivering to any Conversion Agent the appropriate instruction
form for conversion. Pursuant to the Indenture, the date on which all of the
foregoing requirements have been satisfied is the date of surrender for
conversion. Such notice of conversion can be obtained from the Trustee at the
Corporate Trust Office or the office of any Conversion Agent. As promptly as
practicable on or after the conversion date, the Company will issue and deliver
to the Trustee a certificate or certificates for the number of full shares of
Common Stock issuable upon conversion, together with payment in lieu of any
fraction of a share in an amount determined as set forth below. Such
certificates are sent by the Trustee to the appropriate Conversion Agent for
delivery to the holder. Such Common Stock issuable upon conversion of the Notes
shall be fully paid and nonassessable. Any Note surrendered for conversion
during the period from the close of business on any Regular Record Date, as
defined herein, to the opening of business on the next succeeding Interest
Payment Date (except Notes called for redemption on a Redemption Date or to be
repurchased on a Repurchase Date during such period) must be accompanied by
payment of an amount equal to the interest payable on such Interest Payment Date
on the principal amount of the Notes being surrendered for conversion. In the
case of any Note which has been converted after any Regular Record Date, but on
or before the next Interest Payment Date, the Stated Maturity of which is on
such Interest Payment Date, interest shall be payable on such Interest Payment
Date notwithstanding such conversion. Such interest shall be paid to the holder
of such Note on such Regular Record Date. As a result, a holder that surrenders
Notes for conversion on a date that is not an Interest Payment Date will not
receive any interest for the period from the Interest Payment Date next
preceding the date of conversion to the date of conversion or for any later
period, even if the Notes are surrendered after a notice of redemption (except
for the payment of interest on Notes called for redemption on a Redemption Date
or to be repurchased on a Repurchase Date between a Regular Record Date and the
Interest Payment Date to which it relates). No other payment or adjustment for
interest, or for any dividends in respect of Common Stock, are made upon
conversion. Holders of Common Stock issued upon conversion will not be entitled
to receive any dividends payable to holders of Common Stock as of any record
time before the close of business on the conversion date. No fractional shares
are issued upon conversion but, in lieu thereof, an appropriate amount is paid
in cash by the Company based on the market price of Common Stock on the day of
conversion.
A holder delivering a Note for conversion will not be required to pay any
taxes or duties in respect of the issue or delivery of Common Stock on
conversion but is required to pay any tax or duty which may be payable in
respect of any transfer involved in the issue or delivery of the Common Stock in
a name other than that of
21
<PAGE> 23
the holder of the Note. Certificates representing Common Stock will not be
issued or delivered unless all taxes and duties, if any, payable by the holder
have been paid.
The initial conversion price of $87.77 per share of Common Stock
(equivalent to a conversion rate of approximately 11.39 shares per $1,000
principal amount of the Notes) is subject to adjustment (under formulae set
forth in the Indenture) in certain events, including: (i) the issuance of Common
Stock as a dividend or distribution on Common Stock; (ii) certain subdivisions
and combinations of the Common Stock; (iii) the issuance to all holders of
Common Stock of certain rights or warrants to purchase Common Stock (provided
that the conversion price will be readjusted to the extent that such rights or
warrants are not exercised prior to the expiration thereof); (iv) the
distribution to all holders of Common Stock of shares of capital stock of the
Company (other than Common Stock) or evidences of indebtedness of the Company or
assets (including securities, but excluding those rights, warrants, dividends
and distributions referred to above or paid in cash); (v) distributions
consisting of cash, excluding any quarterly cash dividend on the Common Stock to
the extent that the aggregate cash dividend per share of Common Stock in any
quarterly period does not exceed the greater of (x) the amount per share of
Common Stock of the next preceding quarterly cash dividend on the Common Stock
to the extent that such preceding quarterly dividend did not require an
adjustment of the conversion price pursuant to this clause (v), and (y) 3.75% of
the average of the daily Closing Prices (as defined in Section 12.4 (8) of the
Indenture) of the Common Stock for the ten consecutive Trading Days (as defined
in Section 12.4 (8) of the Indenture) immediately prior to the date of
declaration of such dividend, and excluding any dividend or distribution in
connection with the liquidation, dissolution or winding up of the Company; (vi)
payment in respect of a tender or exchange offer by the Company for the Common
Stock to the extent that the cash and value of any other consideration included
in such payment per share of Common Stock exceeds the Current Market Price (as
defined in Section 12.4 (8) of the Indenture) per share of Common Stock on the
Trading Day next succeeding the last date on which tenders or exchanges may be
made pursuant to such tender or exchange offer; and (vii) payment in respect of
a tender offer or exchange offer by a person other than the Company in which, as
of the closing date of the offer, the Board of Directors is not recommending
rejection of the offer. If an adjustment is required to be made as set forth in
clause (v) above as a result of a distribution that is a quarterly dividend,
such adjustment would be based upon the amount by which such distribution
exceeds the amount of quarterly cash dividends permitted to be excluded pursuant
to such clause (v). In the event of a distribution to substantially all holders
of Common Stock of rights to subscribe for additional shares of the Company's
capital stock as provided in clause (iii) above, the Company may, instead of
making any adjustment in the conversion price, make proper provision so that
each holder of a Note who converts such Note after the record date for such
distribution and prior to the expiration or redemption of such rights shall be
entitled to receive upon such conversion, in addition to shares of Common Stock,
an appropriate number of such rights. If an adjustment is required to be made as
set forth in clause (v) above as a result of a distribution that is not a
quarterly dividend, such adjustment would be based upon the full amount of the
distribution. The adjustment referred to in clause (vii) above will only be made
if the tender offer or exchange offer is for an amount which increases that
person's ownership of Common Stock to more than 25% of the total shares of
Common Stock outstanding and if the cash and value of any other consideration
included in such payment per share of Common Stock exceeds the Current Market
Price per share of Common Stock on the business day next succeeding the last
date on which tenders or exchanges may be made pursuant to such tender or
exchange offer. The adjustment referred to in clause (vii) above will not be
made, however, if, as of the closing of the offer, the offering documents with
respect to such offer disclose a plan or an intention to cause the Company to
engage in a consolidation or merger of the Company or a sale of all or
substantially all of the Company's assets. After and so long as the Notes are
listed on the Luxembourg Stock Exchange and the rules of the Luxembourg Stock
Exchange so require, notice of any adjustment of the conversion price are given
to holders of the Notes by publication in a daily newspaper of general
circulation in Luxembourg (which is expected to be the Luxemburger Wort) or, if
publication in Luxembourg is not practical, in Western Europe.
Under the provisions of Lam's Rights Plan (see "Description of Capital
Stock -- Rights Plan"), upon conversion of the Notes into Common Stock to the
extent that the Rights Plan is still in effect upon such conversion, the holders
will receive, in addition to the Common Stock, the Rights described therein
(whether
22
<PAGE> 24
or not the rights have separated from the Common Stock at the time of
conversion), subject to certain limited exceptions.
In the case of (i) any reclassification of the Common Stock, or (ii) a
consolidation, merger or combination involving the Company or a sale or
conveyance to another person of the property and assets of the Company as an
entirety or substantially as an entirety, in each case as a result of which
holders of Common Stock shall be entitled to receive stock, other securities,
other property or assets (including cash) with respect to or in exchange for
such Common Stock, the holders of the Notes then outstanding will generally be
entitled thereafter to convert such Notes for the kind and amount of shares of
stock, other securities or other property or assets (including cash) which they
would have owned or been entitled to receive upon such reclassification,
consolidation, merger, combination, sale or conveyance had such Notes been
converted into Common Stock immediately prior to such reclassification,
consolidation, merger, combination, sale or conveyance assuming that a holder of
Notes would not have exercised any rights of election as to the stock, other
securities or other property or assets (including cash) receivable in connection
therewith.
The Company from time to time may to the extent permitted by law reduce the
conversion price by any amount for any period of at least 20 days, in which case
the Company shall give at least 15 days notice of such reduction, if the Board
of Directors of the Company has made a determination that such reduction would
be in the best interests of the Company which determination shall be conclusive.
The Company may, at its option, make such reductions in the conversion price, in
addition to those set forth above, as the Board of Directors of the Company
deems advisable to avoid or diminish any income tax to holders of Common Stock
resulting from any dividend or distribution of stock (or rights to acquire
stock) or from any event treated as such for income tax purposes.
No adjustment in the conversion price is required unless such adjustment
would require a change of at least 1% in the conversion price then in effect;
provided that any adjustment that would otherwise be required to be made shall
be carried forward and taken into account in any subsequent adjustment. Except
as stated above, the conversion price will not be adjusted for the issuance of
Common Stock or any securities convertible into or exchangeable for Common Stock
or carrying the right to purchase any of the foregoing.
SUBORDINATION
The indebtedness evidenced by the Notes is subordinated in right of payment
to the extent provided in the Indenture to the prior payment in full of all
Senior Indebtedness (as defined below). Upon any distribution of assets of the
Company upon any dissolution, winding up, liquidation or reorganization
(including any of the foregoing as a result of bankruptcy or moratorium of
payment), the payment on account of the principal of, redemption of, liquidated
damages, if any, or premium, if any, and interest on the Notes (including on
account of a Fundamental Change) is to be subordinated to the extent provided in
the Indenture in right of payment to the prior payment in full in cash of all
Senior Indebtedness. In the event of any acceleration of the Notes because of an
Event of Default, the holders of any Senior Indebtedness then outstanding would
be entitled to payment in full in cash of all obligations in respect of such
Senior Indebtedness before the holders of the Notes are entitled to receive any
payment or other distribution in respect thereof. The Indenture will require
that the Company promptly notify the Trustee if payment of the Notes is
accelerated because of an Event of Default.
The Company also may not make any payment upon, redemption of, or payment
of liquidated damages, if any, on or purchase or otherwise acquire the Notes if
(i) a default in the payment of the principal of, premium, if any, interest,
rent or other obligations in respect of Senior Indebtedness occurs and is
continuing beyond any applicable period of grace or (ii) any other default
occurs and is continuing with respect to Designated Senior Indebtedness (as
defined below) that permits the holders of the Designated Senior Indebtedness as
to which such default relates to accelerate its maturity and the Trustee
receives a notice of such default (a "Payment Blockage Notice") from the Company
or other person permitted to give such notice under the Indenture. Payments on
the Notes may and shall be resumed (a) in case of a payment default, upon the
date on which such default is cured or waived or ceases to exist and (b) in case
of a nonpayment default, the earlier of the date on which such nonpayment
default is cured or waived or ceases to exist or 179 days after
23
<PAGE> 25
the date on which the applicable Payment Blockage Notice is received. No new
period of payment blockage may be commenced pursuant to a Payment Blockage
Notice unless and until 365 days have elapsed since the effectiveness of the
immediately prior Payment Blockage Notice. No nonpayment default that existed or
was continuing on the date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice.
By reason of the subordination provisions described above, in the event of
the Company's bankruptcy, dissolution or reorganization, holders of Senior
Indebtedness may receive more, ratably, and holders of the Notes may receive
less, ratably, than the other creditors of the Company. Such subordination will
not prevent the occurrence of any Event of Default under the Indenture.
In the event that, notwithstanding the foregoing, the Trustee or any
holders of the Notes receives any payment or distribution of assets of the
Company of any kind in contravention of any of the subordination provisions of
the Indenture, whether in cash, property or securities, including, without
limitation, by way of set-off or otherwise, in respect of the Notes before all
Senior Indebtedness is paid in full, then such payment or distribution will be
held by the recipient in trust for the benefit of holders of Senior Indebtedness
of the Company or their representative or representatives to the extent
necessary to make payment in full of all Senior Indebtedness of the Company
remaining unpaid, after giving effect to any concurrent payment or distribution,
or provision therefor, to or for the holders of Senior Indebtedness of the
Company.
The Notes are unsecured and subordinated in right of payment to all
existing and future Senior Indebtedness of the Company. The Notes are also
structurally subordinated to the existing and future liabilities, including
trade payables, of the Company's subsidiaries, and the Company conducts a
significant portion of its operations through subsidiaries. As of June 30, 1997,
there was approximately $226 million of indebtedness of the Company outstanding
that would have constituted Senior Indebtedness and there was approximately $51
million of indebtedness and other liabilities of subsidiaries of the Company
outstanding (excluding intercompany liabilities and indebtedness included as
Senior Indebtedness as a result of guarantees by the Company) to which the Notes
would have been structurally subordinated. The Indenture does not prohibit or
limit the incurrence of Senior Indebtedness or the incurrence of other
indebtedness and other liabilities by the Company or its subsidiaries, and the
incurrence of any such additional indebtedness or liabilities could adversely
affect the Company's ability to pay its obligations on the Notes. The Company
anticipates that from time to time it will incur additional indebtedness,
including Senior Indebtedness, and that it and its subsidiaries will from time
to time incur other additional indebtedness and liabilities. See "Risk
Factors -- Subordination and Absence of Financial Covenants."
The Company is obligated to pay reasonable compensation to the Trustee and
to indemnify the Trustee against any losses, liabilities or expenses incurred by
it in connection with its duties relating to the Notes. The Trustee's claims for
such payments are senior to those of holders of the Notes in respect of all
funds collected or held by the Trustee.
The term "Senior Indebtedness" means the principal of, premium, if any,
interest (including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding) and rent payable on or
in connection with, and all fees, costs, expenses and other amounts accrued or
due on or in connection with, Indebtedness (as defined below) of the Company,
whether outstanding on the date of the Indenture or thereafter created,
incurred, assumed, guaranteed or in effect guaranteed by the Company (including
all deferrals, renewals, extensions or refundings of, or amendments,
modifications or supplements to, the foregoing), unless in the case of any
particular Indebtedness the instrument creating or evidencing the same or the
assumption or guarantee thereof expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes or expressly provides that such
Indebtedness is pari passu or "junior" to the Notes. Notwithstanding the
foregoing, Senior Indebtedness shall include Indebtedness of the Company to any
subsidiary of the Company.
The term "Indebtedness" means, with respect to any Person, and without
duplication, (a) all indebtedness, obligations and other liabilities (contingent
or otherwise) of the Company for borrowed money (including obligations of the
Company in respect of overdrafts, foreign exchange contracts, currency exchange
agreements, interest rate protection agreements, and any loans or advances from
banks, whether or not
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<PAGE> 26
evidenced by notes or similar instruments) or evidenced by bonds, debentures,
notes or similar instruments (whether or not the recourse of the lender is to
the whole of the assets of such Person or to only a portion thereof) other than
any account payable or other accrued current liability or obligation incurred in
the ordinary course of business in connection with the obtaining of materials or
services, (b) all reimbursement obligations and other liabilities (contingent or
otherwise) of the Company with respect to letters of credit, bank guarantees or
bankers' acceptances, (c) all obligations and liabilities (contingent or
otherwise) in respect of leases of the Company required, in conformity with
generally accepted accounting principles, to be accounted for as capitalized
lease obligations on the balance sheet of the Company and all obligations and
other liabilities (contingent or otherwise) under any lease or related document
(including a purchase agreement) in connection with the lease of real property
or improvements thereon which provides that the Company is contractually
obligated to purchase or cause a third party to purchase the leased property and
thereby guarantee a minimum residual value of the leased property to the lessor
and the obligations of the Company under such lease or related document to
purchase or to cause a third party to purchase such leased property, (d) all
obligations of the Company (contingent or otherwise) with respect to an interest
rate or other swap, cap or collar agreement or other similar instrument or
agreement or foreign currency hedge, exchange, purchase or similar instrument or
agreement, (e) all direct or indirect guaranties or similar agreements by the
Company in respect of, and obligations or liabilities (contingent or otherwise)
of the Company to purchase or otherwise acquire or otherwise assure a creditor
against loss in respect of, indebtedness, obligations or liabilities of another
person of the kind described in clauses (a) through (d), (f) any indebtedness or
other obligations described in clauses (a) through (d) secured by any mortgage,
pledge, lien or other encumbrance existing on property which is owned or held by
the Company, regardless of whether the indebtedness or other obligation secured
thereby shall have been assumed by the Company, and (g) any and all deferrals,
renewals, extensions and refundings of, or amendments, modifications or
supplements to, any indebtedness, obligation or liability of the kind described
in clauses (a) through (f).
The term "Designated Senior Indebtedness" means any particular Senior
Indebtedness in which the instrument creating or evidencing the same or the
assumption or guarantee thereof (or related agreements or documents to which the
Company is a party) expressly provides that such Senior Indebtedness shall be
"Designated Senior Indebtedness" for purposes of the Indenture (provided that
such instrument, agreement or other document may place limitations and
conditions on the right of such Senior Indebtedness to exercise the rights of
Designated Senior Indebtedness).
REDEMPTION
Optional Redemption
At any time on or after September 6, 2000, the Notes are redeemable at the
Company's option on at least 20 and not more than 60 days notice, in whole, or
from time to time, in part, at the following prices (expressed as percentages of
the principal amount), together with accrued interest to, but excluding, the
Redemption Date, if the closing price of the Common Stock shall have exceeded
130% of the conversion price then in effect for 20 trading days within a period
of 30 consecutive trading days ending within five trading days prior to the
notice of redemption.
If redeemed during the 12-month period beginning September 1 (beginning
September 6, 2000 and ending August 31, 2001, in the case of the first such
period):
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ---- ----------------
<S> <C>
2000 102%
2001 101
</TABLE>
and 100% at September 1, 2002; provided that any semi-annual payment of interest
becoming due on the Redemption Date shall be payable to the holders of record on
the Regular Record Date of the Notes being redeemed.
If fewer than all the Notes are to be redeemed, the Trustee will select the
Notes to be redeemed by lot. If any Note is to be redeemed in part only, a new
Note or new Notes in principal amount equal to the
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<PAGE> 27
unredeemed principal portion thereof will be issued at the office of the agency
of the Trustee in the City of New York or the Corporate Trust Office of the
Trustee in Chicago, Illinois or the Note Registrar in Luxembourg. If a portion
of a holder's Notes is selected for partial redemption and such holder converts
a portion of such Notes, such converted portion shall be deemed to be taken from
the portion selected for redemption.
There is no sinking fund provided for the Notes.
Redemption for Taxation Reasons
If, as a result of any change in, or amendment to, the laws or regulations
prevailing in the United States or any political subdivision or taxing authority
thereof or therein, which change or amendment becomes effective on or after the
date of this Prospectus or as a result of any application or official
interpretation of such laws or regulations not generally known before that date
(a "Tax Law Change") the Company is or would be required on the next succeeding
Interest Payment Date to pay Additional Amounts (as defined in Section 2.2 of
the Indenture), and such requirement or obligation cannot be avoided by the
Company taking reasonable measures available to it, the Company may redeem the
affected Notes in whole, but not in part, at any time, on giving not less than
20 days notice, at a redemption price equal to 100% of the principal amount
thereof plus accrued interest to, but excluding, the Redemption Date and any
Additional Amounts then payable, provided that no such notice of redemption
shall be given earlier than 90 days prior to the earliest date on which the
Company would be obligated to withhold or pay additional amounts were a payment
in respect of the Notes then made.
Prior to the publication of any notice of redemption with respect to a Tax
Law Change, the Company shall deliver to the Trustee (a) a certificate stating
that the Company is entitled to effect such redemption and setting forth a
statement of facts showing that the conditions precedent to the right of the
Company so to redeem have occurred and (b) an opinion of counsel selected by the
Company and reasonably acceptable to the Trustee, to the effect that the Company
has or will become obligated to pay such Additional Amounts as a result of a Tax
Law Change. The Company's right to redeem the affected Notes shall continue as
long as the Company is obligated to pay Additional Amounts, notwithstanding that
the Company shall have theretofore made payments of Additional Amounts.
PAYMENT AND CONVERSION
The principal of the Notes are payable in United States dollars, against
surrender thereof at the office of the agency of the Trustee in The City of New
York or the Corporate Trust Office of the Trustee in Chicago, Illinois, or,
subject to any applicable laws and regulations, at the office of any Paying
Agent, by dollar check drawn on, or by transfer to a United States dollar
denominated account (such transfer to be made only to holders of an aggregate
principal amount of Notes in excess of $2,000,000) maintained by the holder
with, a bank in The City of New York. Payment of any installment of interest on
Notes shall be made to the Person in whose name such Notes or any predecessor
Note is registered at the close of business on February 15 or August 15 (whether
or not a Business Day) immediately preceding the relevant Interest Payment Date
(a "Regular Record Date"). Payments of such interest are made by a dollar check
drawn on a bank in The City of New York mailed to the holder at such holder's
registered address or, upon application by the holder thereof to the Trustee not
later than the applicable Regular Record Date, by transfer to a United States
dollar denominated account (such transfer to be made only to holders of an
aggregate principal amount of the Notes in excess of $2,000,000) maintained by
the holder with a bank in The City of New York. No transfer to a United States
dollar denominated account shall be made unless the Trustee has received written
wire instructions not less than 15 days prior to the relevant payment date.
Any payment on the Notes due on any day which is not a Business Day need
not be made on such day, but may be made on the next succeeding Business Day
with the same force and effect as if made on such due date, and no interest
shall accrue on such payment for the period from and after such date. "Business
Day," when used with respect to any place of payment, place of conversion or any
other place, as the case may be, means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking
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<PAGE> 28
institutions in such place of payment, place of conversion or other place, as
the case may be, are authorized or obligated by law or executive order to close;
provided, however, that a day on which banking institutions in New York, New
York or Luxembourg are authorized or obligated by law or executive order to
close shall not be a Business Day for certain purposes.
The Notes may be surrendered for conversion, subject to any applicable laws
and regulations, at the office of any Conversion Agent outside the U.S. In
addition, the Notes may be surrendered for conversion at the office of the
agency of the Trustee in The City of New York or the Corporate Trust Office of
the Trustee in Chicago, Illinois. Notes surrendered for conversion must be
accompanied by appropriate notices and any payments in respect of interest or
taxes, as applicable, as described above under "-- Conversion."
The Company has initially appointed as Paying Agent and Conversion Agent
the Trustee at its Corporate Trust Office in Chicago, Illinois or at the office
of the agency of the Trustee in The City of New York and Banque de Luxembourg in
Luxembourg as the Paying Agent and Conversion Agent in Luxembourg. The Company
may at any time terminate the appointment of any Paying Agent or Conversion
Agent and appoint additional or other Paying Agents and Conversion Agents,
provided that until the Notes have been delivered to the Trustee for
cancellation, or moneys sufficient to pay the principal of, premium, if any, and
interest on the Notes have been made available for payment and either paid or
returned to the Company as provided in the Indenture, it will maintain offices
or agencies in The City of New York, and after and so long as the Notes are
listed on the Luxembourg Stock Exchange, in Luxembourg for payments with respect
to the Notes and for the surrender of the Notes for conversion. Notice of any
such termination or appointment and of any change in the office through which
any Paying Agent or Conversion Agent will act are given in accordance with
"Notices" below.
Interest payable on the Notes on any Redemption Date or Repurchase Date
that is an Interest Payment Date are paid to the holders of record as of the
immediately preceding Regular Record Date.
All moneys deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of principal of, premium, if any, or
interest on any Notes which remain unclaimed at the end of the earlier of the
date on which such money escheats to the state or two years after such payment
has become due and payable are repaid to the Company, and the holder of such
Note will thereafter look only to the Company for payment thereof.
PAYMENT OF ADDITIONAL AMOUNTS
The Company will pay to a Non-U.S. Holder (as defined in "Certain Federal
Income Tax Considerations" below) of any Note such additional amounts
("Additional Amounts") as may be necessary in order that every net payment of
the principal of, premium, if any, and interest on such Note, after deduction or
withholding for or on account of any present or future tax, assessment or
governmental charge imposed upon or as a result of such payment by the United
States or any political subdivision or taxing authority thereof or therein, will
not be less than the amount provided for in such Note to be then due and
payable; provided however, that the foregoing obligation to pay Additional
Amounts will not apply to:
(a) any tax, assessment or other governmental charge which would not
have been so imposed but for (i) the existence of any present or former
connection between such Non-U.S. Holder (or between a fiduciary, settlor,
beneficiary, member, shareholder of or possessor of a power over such
Non-U.S. Holder, if such Non-U.S. Holder is a trust, an estate, a
partnership or a corporation) and the United States or any political
subdivision or taxing authority thereof or therein, including, without
limitation, such Non-U.S. Holder (or such fiduciary, settlor, beneficiary,
member, shareholder or possessor) being or having been a citizen,
domiciliary or resident of the United States or treated as a resident
thereof, or being or having been engaged in trade or business or present
therein, or having or having had a permanent establishment therein; or (ii)
such Non-U.S. Holder's present or former status as a personal holding
company, a foreign personal holding company with respect to the United
States, a controlled foreign corporation, a passive foreign investment
company, or a foreign private foundation or foreign tax exempt entity for
United States tax purposes, or a corporation which accumulates earnings to
avoid United States federal income tax;
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<PAGE> 29
(b) any tax, assessment or other governmental charge which would not
have been so imposed but for the presentation by the Non-U.S. Holder of
such Notes for payment on a date more than 15 days after the date on which
such payment became due and payable or the date on which payment thereof is
duly provided for, whichever occurs later;
(c) any estate, inheritance, gift, sales, transfer, personal property
or similar tax, assessment or governmental charge;
(d) any tax, assessment or other governmental charge which would not
have been imposed but for the failure to comply with any certification,
identification or other reporting requirement concerning the nationality,
residence, identity or connection with the United States of such Non-U.S.
Holder (or beneficial owner of such Note), if compliance is required or
imposed by a statute, treaty, regulation or administrative practice of the
United States as a precondition to exemption from all or part of such tax,
assessment or other governmental charge;
(e) any tax, assessment or other governmental charge which is payable
otherwise than by deduction or withholding from payments of principal of,
premium, if any, or interest on such Note;
(f) any tax, assessment or other governmental charge imposed on
interest received by a Non-U.S. Holder actually or constructively holding
10% or more of the total combined voting power of all classes of stock of
the Company entitled to vote;
(g) any tax, assessment or other governmental charge imposed on a
Non-U.S. Holder that is a partnership or a fiduciary or other than the sole
beneficial owner of such payment, but only to the extent that any
beneficial owner or member of the partnership or beneficiary or settlor
with respect to the fiduciary would not have been entitled to the payment
of Additional Amounts had the beneficial owner, member, beneficiary or
settlor directly been the holder of the Note; or
(h) any combination of items (a), (b), (c), (d), (e), (f) and (g).
Notwithstanding the foregoing, the Company shall not be obligated to pay
Additional Amounts in respect of payments becoming due on the Notes more than 15
days after the Redemption Date with respect to any redemption of the Notes
described in the first paragraph under "Redemption -- Redemption for Taxation
Reasons" to the extent that the Company's obligation to pay such Additional
Amounts arises from the Tax Law Change that resulted in such redemption.
REPURCHASE AT OPTION OF HOLDERS UPON A FUNDAMENTAL CHANGE
If a Fundamental Change (as defined below) occurs, each holder of Notes
shall have the right, at the holder's option, to require the Company to
repurchase all of such holder's Notes, or any portion of a Note that is $1,000
or an integral multiple of $1,000 in excess thereof, on the date (the
"Repurchase Date") that is 45 days after the date of the Company Notice (as
defined below), at a price (the "Repurchase Price") (expressed as a percentage
of the principal amount) equal to (i) 105% if the Repurchase Date is during the
12-month period beginning September 1, 1997, (ii) 104% if the Repurchase Date is
during the 12-month period beginning September 1, 1998, (iii) 103% if the
Repurchase Date is during the 12-month period beginning September 1, 1999 and
(iv) thereafter at the redemption price set forth under " -- Redemption --
Optional Redemption" which would be applicable to a redemption at the option of
the Company on the Repurchase Date; provided that, if the Applicable Price (as
defined below) is less than the Reference Market Price (as defined below), the
Company shall repurchase such Notes at a price equal to the foregoing redemption
price multiplied by the fraction obtained by dividing the Applicable Price by
the Reference Market Price. In each case, the Company shall also pay accrued
interest on the redeemed Notes to, but excluding, the Repurchase Date. Any Notes
repurchased by the Company shall be canceled.
Within 30 days after the occurrence of a Fundamental Change, the Company is
obligated to give to all holders of the Notes notice, as provided in the
Indenture (the "Company Notice"), of the occurrence of such Fundamental Change
and of the repurchase right arising as a result thereof. The Company must also
deliver a copy of the Company Notice to the Trustee. To exercise the repurchase
right, a holder of Notes must deliver
28
<PAGE> 30
on or before the 30th day after the date of the Company Notice irrevocable
written notice to the Trustee or any Paying Agent of the holder's exercise of
such right, together with the Notes with respect to which the right is being
exercised. Beneficial owners of an interest in a Global Note may exercise the
repurchase right by delivering the appropriate instruction form for repurchases
at the election of holders pursuant to the DTC book-entry repurchase program.
The term "Fundamental Change" means the occurrence of any transaction or
event in connection with which all or substantially all of the Common Stock
shall be exchanged for, converted into, acquired for or constitute solely the
right to receive, consideration (whether by means of an exchange offer,
liquidation, tender offer, consolidation, merger, combination, reclassification,
recapitalization or otherwise) which is not all or substantially all common
stock or shares which are (or, upon consummation of or immediately following
such transaction or event, are) listed on a United States national securities
exchange or approved for quotation on the Nasdaq National Market or any similar
United States system of automated dissemination of quotations of securities
prices. The term "Applicable Price" means (i) in the event of a Fundamental
Change in which the holders of Common Stock receive only cash, the amount of
cash received by the holder of one share of Common Stock and (ii) in the event
of any other Fundamental Change, the average of the last reported sale price for
the Common Stock during the ten Trading Days prior to the record date for the
determination of the holders of Common Stock entitled to receive cash,
securities, property or other assets in connection with such Fundamental Change
or, if no such record date exists, the date upon which the holders of the Common
Stock shall have the right to receive such cash, securities, property or other
assets in connection with the Fundamental Change. The term "Reference Market
Price" shall initially mean $37.75 (which is equal to 66 2/3% of the last bid
price of the Common Stock on August 18, 1997) and in the event of any adjustment
to the conversion price described above pursuant to the provisions of the
Indenture, the Reference Market Price shall also be adjusted so that the ratio
of the Reference Market Price to the conversion price after giving effect to any
such adjustment shall always be the same as the ratio of $37.75 to the
conversion price specified on the cover page of this Prospectus (without regard
to any adjustment thereto).
Rule 13e-4 under the Exchange Act requires the dissemination of certain
information to security holders in the event of an issuer tender offer and may
apply in the event that the repurchase option becomes available to holders of
the Notes. The Company will comply with this rule and any other securities laws
to the extent applicable at that time.
Upon a Fundamental Change, each holder of Notes will have certain rights,
at the holder's option, to require the Company to repurchase all or a portion of
such holder's Notes. If a Fundamental Change were to occur, there can be no
assurance that the Company would have or be able to obtain sufficient funds to
pay the repurchase price for all Notes tendered by the holders thereof. Certain
of the Company's agreements evidencing existing Indebtedness contain and future
credit agreements or other agreements relating to other indebtedness (including
other Senior Indebtedness) to which the Company may become a party may also
contain restrictions and provisions which prohibit the Company from repurchasing
or redeeming any Notes and certain agreements evidencing existing Indebtedness
provide and future agreements relating to Indebtedness may also provide that
certain transactions constituting a Fundamental Change would constitute an event
of default thereunder. In the event a Fundamental Change occurs at a time when
the Company is prohibited from repurchasing or redeeming the Notes, the Company
could seek the consent of its lenders to the repurchase of the Notes or could
attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain such a consent or repay such borrowings, the Company
would remain prohibited from repurchasing or redeeming the Notes. In such case,
the Company's failure to repurchase tendered Notes would constitute an Event of
Default under the Indenture, which could, in turn, constitute a further default
under the other Indebtedness that the Company may enter into from time to time.
In such circumstances, the subordination provisions in the Indenture would
likely restrict payments to the holders of Notes.
The repurchase option upon a Fundamental Change feature of the Notes may in
certain circumstances make more difficult or discourage a takeover of the
Company and, thus, the removal of incumbent management. The Fundamental Change
repurchase feature, however, is not the result of management's knowledge of any
specific effort to accumulate the Company's stock or to obtain control of the
Company by means of a merger, tender offer, solicitation or otherwise, or part
of a plan by management to adopt a series of
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<PAGE> 31
anti-takeover provisions. Instead, the Fundamental Change repurchase feature is
a result of negotiations between the Company and the Initial Purchasers.
Management has no present intention to engage in a transaction involving a
Fundamental Change, although it is possible that the Company could decide to do
so in the future. Subject to the limitations on mergers, consolidations and sale
of assets described herein, the Company could, in the future, enter into certain
transactions, including acquisitions, refinancings or other recapitalizations,
that would not constitute a Fundamental Change under the Indenture, but that
could increase the amount of indebtedness (including Senior Indebtedness)
outstanding at such time or otherwise affect the Company's capital structure or
credit ratings. The payment of the repurchase price in the event of a
Fundamental Change is subordinated to the prior payment of Senior Indebtedness
as described under "-- Subordination" above.
The term "Fundamental Change" is limited to certain specified transactions
and may not include other events that might adversely affect the financial
condition of the Company nor would the requirement that the Company offer to
repurchase the Notes upon a Fundamental Change necessarily afford holders of the
Notes protection in the event of a highly leveraged transaction, reorganization,
merger or similar transaction involving the Company.
MERGERS AND SALES OF ASSETS BY THE COMPANY
The Company may not consolidate with or merge into any other person (in a
transaction in which the Company is not the surviving entity) or transfer or
lease its properties and assets substantially as an entirety to any Person
unless (i) the person formed by such merger or into which the Company is merged
or the person to which the properties and assets of the Company are so
transferred or leased shall expressly assume the payment of the principal of,
premium, if any, and interest on the Notes, (ii) no default and no Event of
Default shall have occurred and be continuing as a result of such consolidation,
merger, transfer or lease, and (iii) the performance of the other covenants of
the Company under the Indenture and certain other conditions are met.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture: (a) failure to pay
principal of or premium, if any, on any Note when due; (b) failure to pay any
interest on, or Additional Amounts with respect to, any Note when due,
continuing for 30 days; (c) failure to perform any other covenant of the Company
in the Indenture, continuing for 60 days after written notice as provided in the
Indenture; and (d) certain events of bankruptcy, insolvency or reorganization.
Subject to the provisions of the Indenture relating to the duties of the Trustee
in case an Event of Default shall occur and be continuing, the Trustee is under
no obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the holders, unless such holders shall have
offered to the Trustee reasonable indemnity. Subject to such provisions
providing for the indemnification of the Trustee, the holders of a majority in
aggregate principal amount of the outstanding Notes will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee.
If an Event of Default (other than as specified in clause (d) above) shall
occur and be continuing, either the Trustee or the holders of at least 25% in
aggregate principal amount of the outstanding Notes may accelerate the maturity
of all Notes; provided, however, that after such acceleration, but before a
judgment or decree based on acceleration, the holders of a majority in aggregate
principal amount of outstanding Notes may, under certain circumstances, rescind
and annul such acceleration if all Events of Default, other than the non-payment
of accelerated principal, have been cured or waived as provided in the
Indenture. If an Event of Default as specified in clause (d) above occurs and is
continuing, then the principal of, and accrued interest on, all the Notes shall
ipso facto become immediately due and payable without any declaration or other
act on the part of the holders of the Notes or the Trustee. For information as
to waiver of defaults, see "-- Meetings, Modification and Waiver."
No holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder unless such holder shall
have previously given to the Trustee written notice of a
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<PAGE> 32
continuing Event of Default and the holders of at least 25% in aggregate
principal amount of the outstanding Notes shall have made written request, and
offered reasonable indemnity, to the Trustee to institute such proceeding as
Trustee, and the Trustee shall not have received from the holders of a majority
in aggregate principal amount of the outstanding Notes a direction inconsistent
with such request and shall have failed to institute such proceeding within 60
days. However, such limitations do not apply to a suit instituted by a holder of
a Note for the enforcement of payment of the principal of, premium, if any, or
interest on such Note on or after the respective due dates expressed in such
Note or of the right to convert such Note in accordance with the Indenture.
The Company is required to furnish to the Trustee annually a statement as
to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance.
MEETINGS, MODIFICATION AND WAIVER
The Indenture contains provisions for convening meetings of the holders of
Notes to consider matters affecting their interests.
Modifications and amendments of the Indenture may be made, and certain past
defaults by the Company may be waived, either (i) with the written consent of
the holders of not less than a majority in aggregate principal amount of the
outstanding Notes or (ii) by the adoption of a resolution, at a meeting of
holders of the Notes at which a quorum is present, by the holders of at least
the lesser of a majority in aggregate principal amount of the outstanding Notes
and 66 2/3% of the aggregate principal amount of the Notes represented and
entitled to vote at such meeting. However, no such modification or amendment
may, without the consent of the holder of each outstanding Note, (a) change the
Stated Maturity of the principal of, or any installment of interest on, any
Note, (b) reduce the principal amount of, or the premium, if any, or interest
on, any Note, (c) reduce the amount payable upon a redemption or repurchase, (d)
modify the provisions with respect to the repurchase right of the holders in a
manner adverse to the holders, (e) change the obligation of the Company to pay
Additional Amounts described above in a manner adverse to the holders, (f)
change the place or currency of payment of principal of, or premium, if any, or
interest on, any Note, (g) impair the right to institute suit for the
enforcement of any payment on or with respect to any Note, (h) modify the
obligation of the Company to maintain an office or agency in The City of New
York and in a Western European city, (i) adversely affect the right to convert
the Notes, (j) modify the subordination provisions in a manner adverse to the
holders of the Notes, (k) reduce the above-stated percentage of outstanding
Notes necessary to modify or amend the Indenture, (l) reduce the percentage of
aggregate principal amount of Outstanding Notes necessary for waiver of
compliance with certain provisions of the Indenture or for waiver of certain
defaults, (m) reduce the percentage in aggregate principal amount of Outstanding
Notes required for the adoption of a resolution or the quorum required at any
meeting of holders of Notes at which a resolution is adopted, or (n) modify the
obligation of the Company to deliver information required under Rule 144A to
permit resales of Notes and Common Stock issuable upon conversion thereof in the
event the Company ceases to be subject to certain reporting requirements under
the United States securities laws. The quorum at any meeting called to adopt a
resolution shall be persons holding or representing a majority in aggregate
principal amount of the Outstanding Notes and, at any reconvened meeting
adjourned for lack of a quorum, 25% of such aggregate principal amount.
The Indenture may also be modified or amended without the consent of the
holders: (i) to evidence the succession of another person to the Company as
otherwise permitted by the Indenture; (ii) to add to the covenants of the
Company for the benefit of the holders of the Notes or to surrender any power
conferred upon the Company; (iii) to add any Events of Default; (iv) to permit
or facilitate the issuance of securities in uncertificated form; (v) to secure
the Notes; (vi) to provide for successor or additional trustees; or (vii) to
cure any ambiguity, to correct or supplement any provision which may be
inconsistent with any other provision or to make any other provisions with
respect to matters or questions arising under the Indenture, provided such
action shall not adversely affect the interest of holders of Notes in any
material respect.
The holders of a majority in aggregate principal amount of the outstanding
Notes may waive compliance by the Company with certain restrictive provisions of
the Indenture by written consent. The holders of a
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majority in aggregate principal amount of the Outstanding Notes also may waive
any past default under the Indenture, except a default in the payment of
principal, premium, if any, or interest, by written consent.
REGISTRATION RIGHTS
The Company is filing the Registration Statement pursuant to and in
accordance with the Registration Rights Agreement, which requires that the
Company, at the Company's expense for the benefit of the holders of the Notes
and the Common Stock issuable upon conversion thereof (together, the
"Registrable Securities"), (i) file with the Commission within 90 days after the
date of original issuance of the Notes, a registration statement (the "Shelf
Registration Statement") covering resales of the Registrable Securities, (ii)
use its reasonable efforts to cause the Shelf Registration Statement to be
declared effective under the Securities Act within 180 days after the date of
original issuance of the Notes and (iii) use its reasonable efforts to keep
effective the Shelf Registration Statement until the second anniversary of the
last date of original issuance of Notes or such earlier date as all Registrable
Securities shall have been disposed of or on which all Registrable Securities
held by Persons that are not affiliates of the Company may be resold without
registration pursuant to Rule 144(k) under the Securities Act (the
"Effectiveness Period"). Pursuant to the terms of the Registration Rights
Agreement, the Company will be permitted to suspend the use of this Prospectus
in connection with the sales of the Registrable Securities during certain
periods of time under certain circumstances relating to pending corporate
developments, public filings with the Commission and other events. Pursuant to
the terms of the Registration Rights Agreement, the Company will provide to each
holder of Registrable Securities copies of this Prospectus, notify each holder
when the Shelf Registration Statement has become effective and take certain
other actions as are required to permit public resales of the Registrable
Securities. A holder of Registrable Securities that sells such Registrable
Securities pursuant to the Shelf Registration Statement will be required to be
named as a selling security holder in this Prospectus and to deliver a
Prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the Registration Rights Agreement, including certain
indemnification obligations.
The Notes sold pursuant to the Shelf Registration Statement will be
represented by a new Global Note, and will not be subject to any restrictions on
transfer. The Notes sold pursuant to the Shelf Registration Statement will not
be listed on any United States exchange or automated quotation system, but will
trade in the over-the-counter market in the United States.
This summary of certain provisions of the Registration Rights Agreement
does not purport to be complete and is subject to, and qualified in its entirety
by reference to, all the provisions of the Registration Rights Agreement, a copy
of the form of which will be made available to prospective investors in the
Notes upon request to the Company.
TRANSFER AND EXCHANGE
At the option of the holder upon request confirmed in writing, Notes are
exchangeable at any time into an equal aggregate principal amount of Notes of
different authorized denominations. See "-- Book Entry, Delivery and Form."
The Notes may be presented for registration of transfer (with the form of
transfer endorsed thereon duly executed) or exchange, at the office of the Note
Registrar, without service charge but, in the case of a transfer, upon payment
of any taxes and other governmental charges as described in the Indenture. Any
registration of transfer or exchange is effected upon the Note Registrar being
satisfied with the documents of title and identity of the Person making the
request, and subject to such reasonable regulations as the Company may from time
to time agree upon with the Note Registrar, all as described in the Indenture.
Notes may be transferred in whole or in part in authorized denominations at the
office of the agency of the Trustee in The City of New York or the Corporate
Trust Office of the Trustee in Chicago, Illinois or the Note Registrar in
Luxembourg.
The Company has initially appointed the Trustee as Note Registrar and has
appointed Banque de Luxembourg as Note Registrar in Luxembourg. The Company
reserves the right to vary or terminate the
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appointment of the Note Registrar or to appoint additional or other Note
Registrars or to approve any change in the office through which any Note
Registrar acts, provided that there will at all times be a Note Registrar, after
and so long as, the Notes are listed on the Luxembourg Stock Exchange and the
rules of the Luxembourg Stock Exchange shall require, in Luxembourg.
In the event of a redemption of less than all of the Notes for any of the
reasons set forth above under "-- Redemption," the Company will not be required
(a) to register the transfer or exchange of Notes for a period of 15 days
immediately preceding the date notice is given identifying the serial numbers of
the Notes called for such redemption or (b) to register the transfer of or
exchange any Note, or portion thereof, called for redemption.
TITLE
The Company, the Trustee, any Paying Agent, any Conversion Agent and any
Note Registrar may treat the registered owner (as reflected in the Note
Register) of any Note as the absolute owner thereof (whether or not such Note
shall be overdue) for the purpose of making payment and for all other purposes.
NOTICES
Notice to holders of Notes will be given by mail to the addresses of such
holders as they appear on the Note Register. Such notices will be deemed to have
been given on the date of such mailing or on the date of the first such
publication, as the case may be.
In addition, after and so long as the Notes are listed on the Luxembourg
Stock Exchange and the rules of the Luxembourg Stock Exchange shall require,
notices to holders of the Notes will be given by publication in a daily
newspaper of general circulation in Luxembourg or, if publication in Luxembourg
is not practical, in Western Europe. Such publication is expected to be made in
the Luxemburger Wort. Such notices are deemed to have been given on the date of
such publication or, if published in such newspapers on different dates, on the
date of the first such publication.
Notice of a redemption of the Notes will be given at least once not less
than 20 nor more than 60 days prior to the Redemption Date (which notice shall
be published in accordance with the procedures described in the preceding
paragraphs) and shall be irrevocable and will specify the Redemption Date.
REPLACEMENT OF NOTES
Notes that become mutilated, destroyed, stolen or lost will be replaced by
the Company at the expense of the holder upon delivery to the Trustee or to a
Note Registrar outside the United States of the mutilated Notes or evidence of
the loss, theft or destruction thereof satisfactory to the Company and the
Trustee. In the case of a lost, stolen or destroyed Note, indemnity satisfactory
to the Trustee and the Company may be required at the expense of the holder of
such Note before a replacement Note will be issued.
PAYMENT OF STAMP AND OTHER TAXES
The Company will pay all stamp and other duties, if any, which may be
imposed by the United States or any political subdivision thereof or taxing
authority thereof or therein with respect to the issuance of the Notes or the
issuance of Common Stock upon any conversion of the Notes. Except as described
under "-- Payment of Additional Amounts," the Company will not be required to
make any payment with respect to any other tax, assessment or governmental
charge imposed by any government or any political subdivision thereof or taxing
authority thereof or therein.
GOVERNING LAW
The Indenture, the Notes and the Registration Rights Agreement are governed
by and construed in accordance with the laws of the State of New York, United
States of America.
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INFORMATION CONCERNING THE TRUSTEE
LaSalle National Bank is the Trustee under the Indenture. An affiliate of
the Trustee, ABN AMRO Bank N.V., is a lender to the Company, ABN AMRO Rothschild
was an Initial Purchaser, and the Company may maintain deposit accounts and
conduct other banking transactions with the Trustee and its affiliates in the
normal course of business.
In case an Event of Default shall occur (and shall not be cured or waived
in a timely manner), the Trustee is required to use the degree of care of a
prudent person in the conduct of his or her own affairs in the exercise of its
powers. Subject to such provisions, the Trustee is under no obligation to
exercise any of its rights or powers under the Indenture at the request of any
of the holders of Notes, unless they shall have offered to the Trustee
reasonable security or indemnity.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain U.S. federal income tax
considerations relevant to holders of the Notes and Common Stock into which the
Notes may be converted. This discussion is based upon the Internal Revenue Code
of 1986, as amended (the "Code"), Treasury Regulations, Internal Revenue Service
("IRS") rulings and judicial decisions now in effect, all of which are subject
to change (possibly with retroactive effect) or different interpretations. There
can be no assurance that the IRS will not challenge one or more of the tax
consequences described herein, and the Company has not obtained, nor does it
intend to obtain, a ruling from the IRS with respect to the U.S. federal income
tax consequences of acquiring or holding Notes or Common Stock. This discussion
does not purport to deal with all aspects of U.S. federal income taxation that
may be relevant to a particular holder in light of the holder's circumstances
(for example, persons subject to the alternative minimum tax provisions of the
Code). Also, it is not intended to be wholly applicable to all categories of
investors, some of which (such as dealers in securities, banks, insurance
companies, tax-exempt organizations, and persons holding Notes or Common Stock
as part of a hedging or conversion transaction or straddle or persons deemed to
sell Notes or Common Stock under the constructive sale provisions of the Code)
may be subject to special rules. The discussion also does not discuss any aspect
of state, local or foreign law. In addition, this discussion assumes that the
holders will hold the Notes, or the shares of Common Stock received upon
conversion of the Notes, as "capital assets" within the meaning of Section 1221
of the Code, and assumes the Notes are not contingent payment debt instruments.
ALL PROSPECTIVE PURCHASERS OF THE NOTES ARE ADVISED TO CONSULT THEIR OWN
TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF
THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES AND THE COMMON STOCK.
U.S. HOLDERS
As used herein, the term "U.S. Holder" means the beneficial holder of a
Note or Common Stock that for United States federal income tax purposes is (i) a
citizen or resident (as defined in Section 7701(b) of the Code) of the United
States, (ii) a corporation, partnership or other entity formed under the laws of
the United States or any political subdivision thereof, (iii) an estate the
income of which is subject to U.S. federal income taxation regardless of its
source, (iv) in general, a trust subject to the primary supervision of a court
within the United States and the control of a United States fiduciary as
described in Section 7701(a)(30) of the Code and (v) any other person whose
income or gain with respect to a Note or Common Stock is effectively connected
with the conduct of a United States trade or business. A "Non-U.S. Holder" is
any holder other than a U.S. Holder.
Interest on Notes
Stated interest on the Notes will generally be includable in a U.S.
Holder's gross income and taxable as ordinary income for U.S. federal income tax
purposes at the time it is paid or accrued in accordance with the U.S. Holder's
regular method of accounting.
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Conversion of Notes Into Common Stock
In general, no gain or loss will be recognized for U.S. federal income tax
purposes on a conversion of Notes into Common Stock. However, cash paid in lieu
of a fractional share of Common Stock will result in taxable gain (or loss),
which will be capital gain (or loss), to the extent that the amount of such cash
exceeds (or is exceeded by) the portion of the adjusted basis of the Note
allocable to such fractional share. The adjusted basis of shares of Common Stock
received on conversion will equal the adjusted basis of the Note converted,
reduced by the portion of adjusted basis allocated to any fractional share of
Common Stock exchanged for cash. The holding period of the Common Stock received
on conversion will generally include the period during which the converted Notes
were held.
The conversion price of the Notes is subject to adjustment under certain
circumstances. Section 305 of the Code and the Treasury Regulations issued
thereunder may treat the holders of the Notes as having received a constructive
distribution if and to the extent that certain adjustments in the conversion
price that may occur in limited circumstances (particularly an adjustment to
reflect a taxable dividend to holders of Common Stock) increase the
proportionate interest of a holder of Notes in the fully diluted Common Stock,
whether or not such holder ever exercises its conversion privilege. Moreover, if
there is not a full adjustment to the conversion ratio of the Notes to reflect a
stock dividend or other event increasing the proportionate interest of the
holders of outstanding Common Stock in the assets or earnings and profits of the
Company, then such increase in the proportionate interest of the holders of the
Common Stock generally will be treated as a constructive distribution to such
holders. Any deemed constructive distribution will be taxable as ordinary income
(subject to a possible dividends received deduction in the case of corporate
holders) to the extent of the Company's current and/or accumulated earnings and
profits. See "Dividends on Shares of Common Stock" below.
Sale, Exchange or Retirement of the Notes
Each U.S. Holder generally will recognize gain or loss upon the sale,
exchange, redemption, retirement or other disposition of Notes measured by the
difference (if any) between (i) the amount of cash and the fair market value of
any property received (except to the extent that such cash or other property is
attributable to the payment of accrued interest not previously included in
income, which amount will be taxable as ordinary income) and (ii) such holder's
adjusted tax basis in the Notes. Any such gain or loss recognized on the sale,
exchange, redemption, retirement or other disposition of a Note should be
capital gain or loss and will generally be long-term capital gain or loss if the
Note has been held or deemed held for more than one year at the time of the sale
or exchange. On August 5, 1997, legislation was enacted which, among other
things, reduces to 20% the maximum rate of tax on long-term capital gains on
most capital assets held by an individual for more than 18 months. Gain on most
capital assets held by an individual more than one year and up to 18 months is
subject to tax at a maximum rate of 28%. A holder's initial basis in a Note will
be the amount paid therefor.
Market Discount
If a Note is acquired by a subsequent purchaser at a "market discount,"
some or all of the gain realized by such purchaser upon a disposition or payment
upon the Note's maturity may be treated as ordinary income. Subject to a de
minimis exception, "market discount" with respect to a Note will be equal to the
excess of (i) the stated redemption price at maturity of the Note over (ii) the
holder's tax basis in the Note immediately after acquisition. The amount of
market discount treated as having accrued will be determined either on a ratable
basis, or, if the holder so elects, on a constant interest method. Upon any
subsequent disposition of the Note (other than in connection with certain
nonrecognition transactions, e.g., the conversion to Common Stock), the lesser
of (i) gain on the disposition or (ii) the market discount that accrued while
the Note was held by the subsequent holder will be treated as ordinary income at
the time of the disposition. A holder may elect to include market discount in
income currently in lieu of including accrued market discount in income at the
time of disposition. A holder of a Note acquired at a market discount may be
required to defer the deduction of a portion of the interest expense on any
indebtedness incurred or maintained to purchase or carry the Note until the Note
is disposed of in a taxable transaction, unless the holder elects to
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include accrued market discount in income currently. If a holder acquires a Note
at a market discount and receives Common Stock upon conversion of the Note, the
amount of accrued market discount with respect to the converted Note through the
date of conversion will be treated as ordinary income upon the disposition of
the Common Stock.
Amortizable Bond Premium
If a subsequent purchaser of a Note purchases it at a cost that is in
excess of the amount payable at maturity, the excess cost may be treated as
"amortizable bond premium" that is allocated among the interest payments on the
Note using a constant interest rate method over the Note's remaining term. The
amount allocated to each interest payment would be applied against and offset a
portion of the income from such interest payment, with a corresponding reduction
in the holder's basis. The interest offset would be available only if an
election under Section 171 of the Code is made or is in effect and if the
acquired Note is held as a capital asset. The election would apply to all debt
instruments held or subsequently acquired by the electing holder on or after the
first day of the first taxable year to which the election applies and may not be
revoked without the consent of the IRS. The amount of the premium attributable
to the conversion feature of the Note must be eliminated in determining the
amount of any amortizable bond premium.
Dividends on Shares of Common Stock
Distributions, if any, paid on Common Stock after a conversion, to the
extent made from current or accumulated earnings and profits of the Company, as
determined for U.S. federal income tax purposes, will constitute dividends and
be included in a U.S. Holder's income as ordinary income (subject to a possible
dividends received deduction in the case of corporate holders) as they are paid.
To the extent that a holder receives a distribution on Common Stock that would
otherwise constitute a dividend but exceeds current and accumulated earnings and
profits of the Company, such distribution will be treated first as a non-taxable
return of capital reducing the holder's adjusted tax basis in Common Stock. Any
distribution in excess of the holder's adjusted tax basis in Common Stock will
be treated as capital gain.
Sale or Exchange of Common Stock
Gain or loss realized on the sale or exchange of Common Stock will equal
the difference between the amount realized on such sale or exchange and the U.S.
Holder's adjusted tax basis in such Common Stock. Such gain or loss will
generally be long-term capital gain or loss if the holder has held or is deemed
to have held the Common Stock for more than one year. On August 5, 1997,
legislation was enacted which reduces to 20% the maximum rate of tax on
long-term capital gains on most capital assets held by an individual for more
than 18 months. Gain on most capital assets held by an individual more than one
year and up to 18 months is subject to tax at a maximum rate of 28%.
Information Reporting and Backup Withholding
A holder of Notes or Common Stock may be subject to "backup withholding" at
a rate of 31% with respect to certain "reportable payments," including interest
payments, dividend payments and, under certain circumstances, principal payments
on the Notes. These backup withholding rules apply if the holder, among other
things, (i) fails to furnish a social security number or other taxpayer
identification number ("TIN") certified under penalties of perjury within a
reasonable time after the request therefor, (ii) furnishes an incorrect TIN,
(iii) fails to report properly interest or dividends, or (iv) under certain
circumstances, fails to provide a certified statement, signed under penalties of
perjury, that the TIN furnished is the correct number and that such holder is
not subject to backup withholding. A holder who does not provide the Company
with its correct TIN also may be subject to penalties imposed by the IRS. Any
amount withheld from a payment to a holder under the backup withholding rules is
creditable against the holder's federal income tax liability, provided that the
required information is furnished to the IRS. Backup withholding will not apply,
however, with respect to payments made to certain holders, including
corporations, tax-exempt organizations and certain foreign persons, provided
their exemptions from backup withholding are properly established.
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The Company will report to the U.S. Holders of Notes and Common Stock and
to the IRS the amount of any "reportable payments" for each calendar year and
the amount of tax withheld, if any, with respect to such payments.
NON-U.S. HOLDERS
The following discussion is limited to the U.S. federal income tax
consequences relevant to a Non-U.S. Holder.
For purposes of the following discussion, interest, dividends and gain on
the sale, exchange or other disposition of a Note or Common Stock will be
considered to be "U.S. trade or business income" if such income or gain is (i)
effectively connected with the conduct of a U.S. trade or business or (ii) in
the case of a treaty resident, attributable to a permanent establishment (or, in
the case of an individual, a fixed base) in the United States.
Stated Interest
Generally any interest paid to a Non-U.S. Holder of a Note that is not U.S.
trade or business income will not be subject to U.S. tax if the interest
qualifies as "portfolio interest." Generally interest on the Notes will qualify
as portfolio interest if (i) the Non-U.S. Holder does not actually or
constructively own 10% or more of the total voting power of all voting stock of
the Company and is not a "controlled foreign corporation" with respect to which
the Company is a "related person" within the meaning of the Code, (ii) the
beneficial owner, under penalties of perjury, certifies that the beneficial
owner is not a U.S. person and such certificate provides the beneficial owner's
name and address, (iii) the Non-U.S. Holder is not a bank receiving interest on
an extension of credit made pursuant to a loan agreement made in the ordinary
course of its trade or business, and (iv) the Notes are in registered form.
The gross amount of payments to a Non-U.S. Holder of interest that do not
qualify for the portfolio interest exemption and that are not U.S. trade or
business income will be subject to U.S. federal income tax at the rate of 30%,
unless a U.S. income tax treaty applies to reduce or eliminate withholding.
Non-U.S. Holders should consult applicable income tax treaties, which may
provide different rules. U.S. trade or business income will be taxed at regular
U.S. rates rather than the 30% gross rate. In the case of a Non-U.S. Holder that
is a corporation, such U.S. trade or business income may also be subject to the
branch profits tax (which is generally imposed on a foreign corporation on the
actual or deemed repatriation from the United States of earnings and profits
attributable to U.S. trade or business income) at a 30% rate. The branch profits
tax may not apply (or may apply at a reduced rate) if a recipient is a qualified
resident of certain countries with which the United States has an income tax
treaty. To claim the benefit of a tax treaty or to claim exemption from
withholding because the income is U.S. trade or business income, the Non-U.S.
Holder must provide a properly executed Form 1001 or 4224 (or such successor
forms as the IRS designates), as applicable, prior to the payment of interest.
These forms must be periodically updated. Under U.S. Treasury regulations
recently finalized but not effective until January 1, 1999, the Forms 1001 and
4224 will be replaced by Form W-8. Also, under the recently finalized U.S.
Treasury regulations, a Non-U.S. Holder who is claiming the benefits of a treaty
generally will be required to obtain a U.S. taxpayer identification number and
to provide certain documentary evidence issued by foreign governmental
authorities to prove residence in the foreign country. Certain special
procedures are provided in the recently finalized regulations for payments
through qualified intermediaries as well.
Dividends
In general, dividends paid to a Non-U.S. Holder of Common Stock will be
subject to withholding of U.S. federal income tax at a 30% rate unless such is
reduced by an applicable income tax treaty. Dividends that are connected with
such holder's conduct of a trade or business in the United States (U.S. trade or
business income) are generally subject to U.S. federal income tax at regular
rates, but are not generally subject to the 30% withholding tax if the Non-U.S.
Holder files the appropriate form with the payor, as discussed above. Any U.S.
trade or business income received by a Non-U.S. Holder that is a corporation may
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also, under certain circumstances, be subject to an additional "branch profits
tax" at a 30% rate or such lower rate as may be applicable under an income tax
treaty. Non-U.S. Holders should consult any applicable income tax treaties,
which may provide for a lower withholding or other rules different from those
described above. Currently, dividends paid to an address in a foreign country
generally are presumed (absent actual knowledge to the contrary) to be paid to a
resident of such country for purposes of the withholding discussed above and for
purposes of determining the applicability of a tax treaty rate. Under the
recently finalized U.S. Treasury regulations, however, effective January 1,
1999, a Non-U.S. Holder of Common Stock claiming the benefits of a treaty
generally will be required to obtain a U.S. taxpayer identification number and
to provide certain documentary evidence as described above.
A Non-U.S. Holder of Common Stock that is eligible for a reduced rate of
U.S. withholding tax pursuant to an income treaty may obtain a refund of any
amounts currently withheld by filing an appropriate claim for a refund with the
IRS.
Conversion
A Non-U.S. Holder generally will not be subject to U.S. federal income tax
on the conversion of Notes into Common Stock, except with respect to cash (if
any) received in lieu of a fractional share or interest not previously included
in income. Cash received in lieu of a fractional share may give rise to gain
that would be subject to the rules described below for the sale of Notes. Cash
or Common Stock treated as issued for accrued interest would be treated as
interest under the rules described above.
Sale, Exchange or Redemption of Notes or Common Stock
Except as described below and subject to the discussion concerning backup
withholding, any gain realized by a Non-U.S. Holder on the sale, exchange or
redemption of a Note or Common Stock generally will not be subject to U.S.
federal income tax, unless (i) such gain is U.S. trade or business income, (ii)
subject to certain exceptions, the Non-U.S. Holder is an individual who holds
the Note or Common Stock as a capital asset and is present in the United States
for 183 days or more in the taxable year of the disposition, (iii) the Non-U.S.
Holder is subject to tax pursuant to the provisions of U.S. tax law applicable
to certain U.S. expatriates (including certain former citizens or residents of
the United States), or (iv) in the case of the disposition of Common Stock, the
Company is a U.S. real property holding corporation. The Company does not
believe that it is currently a "United States real property holding
corporation," or that it will become one in the future.
Information Reporting and Backup Withholding
The Company must report annually to the IRS and to each Non-U.S. Holder any
interest or dividend that is subject to withholding, or that is exempt from U.S.
withholding tax pursuant to a tax treaty, or interest that is exempt from U.S.
tax under the portfolio interest exception. Copies of these information returns
may also be made available under the provisions of a specific treaty or
agreement to the tax authorities of the country in which the Non-U.S. Holder
resides.
Backup withholding and additional information reporting will not apply to
payments of principal, interest and premium (if any) on the Notes by the Company
to a Non-U.S. Holder if the holder certifies as to its Non-U.S. Holder status
under penalties of perjury or otherwise establishes an exemption (provided that
neither the Company nor its Paying Agent has actual knowledge that the holder is
a U.S. person or that the conditions of any other exemption are not, in fact,
satisfied).
The payment of the proceeds from the disposition of Notes or Common Stock
to or through the U.S. office of any broker, U.S. or foreign, will be subject to
information reporting and possible backup withholding unless the owner certifies
as to its Non-U.S. Holder status under penalties of perjury or otherwise
establishes an exemption, provided that the broker does not have actual
knowledge that the holder is a U.S. person or that the conditions of any other
exemption are not, in fact, satisfied. The payment of the proceeds from the
disposition of a Note or Common Stock to or through a non-U.S. office of a
non-U.S. broker that is not a U.S. related person will not be subject to
information reporting or backup withholding. For this purpose, a
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"U.S. related person" is (i) a "controlled foreign corporation" for U.S. federal
income tax purposes or (ii) a foreign person 50% or more of whose gross income
from all sources for the three-year period ending with the close of its taxable
year preceding the payment (or for such part of the period that the broker has
been in existence) is derived from activities that are effectively connected
with the conduct of a U.S. trade or business.
In the case of the payment of proceeds from the disposition of Notes or
Common Stock to or through a non-U.S. office of a broker that is either a U.S.
person or a U.S. related person, information reporting is required on the
payment unless the broker has documentary evidence in the files that the owner
is a Non-U.S. Holder and the broker has no knowledge to the contrary. Backup
withholding will not apply to payments made through foreign offices of a broker
that is not a U.S. person or a U.S. related person (absent actual knowledge that
the payee is a U.S. person).
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a refund or a credit against such Non-U.S.
Holder's U.S. federal income tax liability, provided that the requisite
procedures are followed.
THE PRECEDING DISCUSSION OF CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY,
EACH INVESTOR SHOULD CONSULT HIS OR HER OWN TAX ADVISER AS TO PARTICULAR TAX
CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF THE NOTES AND THE COMMON
STOCK OF THE COMPANY, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL
OR FOREIGN TAX LAWS, AND OF ANY PROPOSED CHANGES IN APPLICABLE LAWS.
39
<PAGE> 41
DESCRIPTION OF CAPITAL STOCK
Set forth below is a summary of certain information concerning the
Company's capital stock, and a brief description of certain provisions contained
in the Certificate of Incorporation, Bylaws and the Rights Plan (as defined).
The summaries and descriptions below do not purport to be complete statements of
these provisions and are qualified in their entirety by reference to such
documents.
The authorized capital stock of the Company consists of 90,000,000 shares
of Common Stock, $.001 par value, and 5,000,000 shares of Preferred Stock, $.001
par value.
LAM COMMON STOCK
As of September 30, 1997, there were approximately 37,756,139 shares of
Common Stock issued and outstanding. The Common Stock is listed on the Nasdaq
National Market under the symbol "LRCX." As of June 30, 1997, the outstanding
Lam Common Stock was held of record by approximately 1,012 stockholders. In the
Merger with OnTrak, which was consummated on August 5, 1997, the Company issued
approximately 6,500,000 shares of Lam Common Stock and options and rights to
acquire approximately 2,260,000 shares of Lam Common Stock. In addition, as of
September 30, 1997, stock options to purchase an aggregate of approximately
4,053,305 shares of Common Stock were outstanding.
The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. The stockholders are entitled to
cumulate votes in connection with the election of directors. Subject to the
preferences that may be applicable to outstanding Preferred Stock, if any, the
holders of Common Stock are entitled to receive ratably such dividends, if any,
as may be declared from time to time by the Lam Board of Directors (the "Lam
Board") out of funds legally available therefor. In the event of a liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to share ratably in all assets remaining after payment of liabilities,
subject to the preferences that may be applicable to outstanding Preferred
Stock, if any. The Common Stock has no preemptive or conversion rights or other
subscription rights. There are no redemption or sinking fund provisions
applicable to Common Stock. All outstanding shares of Common Stock are fully
paid and nonassessable.
PREFERRED STOCK
The Company has 5,000,000 shares of Preferred Stock authorized, of which no
shares are outstanding. Under the Lam Rights Plan described below, the Board of
the Company has reserved 100,000 shares of the Preferred Stock for issuance in
one or more series and the Board has the authority to fix the rights,
preferences, privileges and restrictions granted to or imposed upon any unissued
and undesignated shares of Preferred Stock and to fix the number of shares
constituting any series and the designations of such series, without any further
vote or action by the stockholders. Although it presently has no intention to do
so, the Lam Board, without stockholder approval, can issue Preferred Stock with
voting and conversion rights which could adversely affect the voting power or
other rights of the holders of Common Stock. The issuance of Preferred Stock may
also have the effect of delaying, deferring or preventing a change in control of
Lam. See "-- Rights Plan."
RIGHTS PLAN
The Lam Board adopted a Rights Plan (the "Rights Plan") on January 23, 1997
that is designed to deter hostile takeover attempts, including the accumulation
of shares in the open market or through private transactions, and to prevent an
acquirer from gaining control of Lam without offering a fair price to all of
Lam's stockholders. Under the Rights Plan, rights were distributed as a dividend
at the rate of one right (a "Lam Right") for each share of Common Stock, held by
stockholders of record as of the close of business on January 31, 1997 and
thereafter. Each holder of shares of Common Stock is entitled to a Lam Right in
respect of each share held by such stockholder. The Lam Rights will expire on
January 31, 2007. Under the Rights Plan, each Lam Right initially entitles
stockholders to buy one unit of a share of Preferred Stock for $250. The Lam
Rights will be exercisable only if a person or group (other than stockholders
currently owning 15% of the Common Stock) acquires beneficial ownership of 15%
(17% in the case of the asset management firm FMR
40
<PAGE> 42
Corp. or its affiliates, collectively "FMR") or more of Common Stock or
commences a tender or exchange offer upon consummation of which such person or
group would beneficially own 15% or more of Common Stock (17% in the case of
FMR).
If any person becomes the beneficial owner of 15% (17% in the case of FMR)
or more of Common Stock, other than pursuant to a tender or exchange offer for
all outstanding shares of Lam approved by a majority of the independent
directors not affiliated with such person, then each Lam Right not owned by such
person or related parties will entitle its holder to purchase, at the Lam
Right's then current exercise price, shares of Common Stock (or, in certain
circumstances as determined by the Lam Board, cash, other property or other
securities) having a value of twice the Lam Right's then current exercise price.
In addition, if after any person has become a 15% (17% in the case of FMR)
stockholder, Lam is involved in a merger or other business combination
transaction with another person in which Lam does not survive or in which Common
Stock is changed or exchanged, or if Lam sells 50% or more of its assets or
earning power to another person, each Lam Right will entitle its holder to
purchase, at the Lam Right's then current exercise price, shares of common stock
of such other person having a value of twice the Lam Right's then current
exercise price.
Lam is generally entitled to redeem the Lam Rights at $0.001 per Lam Right
at any time until ten business days (subject to extension) following a public
announcement that a 15% (17% in the case of FMR) position has been acquired.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is
ChaseMellon Shareholder Services L.L.C., Securities Transfer Services, P.O. Box
3312, South Hackensack, New Jersey 07606. Its phone number is (800) 356-2017.
SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
The following section contains the Supplemental Consolidated Financial
Statements of Lam. As described further in the notes to the Supplemental
Consolidated Financial Statements, these financial statements have been prepared
to give retroactive effect to the Merger which has been accounted for as a
pooling of interests. The historical financial statements of Lam and OnTrak for
the years ended June 30, 1997, 1996 and 1995 have been combined to reflect the
companies' results of operations and financial position for the respective
periods presented. The Supplemental Consolidated Financial Statements are not
necessarily indicative of the operating results or financial position that would
have occurred had the Merger been effective during the periods presented.
41
<PAGE> 43
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors
Lam Research Corporation
Fremont, California
We have audited the supplemental consolidated balance sheets of Lam
Research Corporation (formed as a result of the consolidation of Lam Research
Corporation and OnTrak Systems, Inc.) as of June 30, 1997 and 1996 and the
related supplemental consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended June 30,
1997. Our audits also included the financial statement schedule listed in the
Index at Item 16 of this Registration Statement. The supplemental consolidated
financial statements and schedule give retroactive effect to the merger of Lam
Research Corporation and OnTrak Systems, Inc. on August 5, 1997, which has been
accounted for using the pooling of interests method as described in the notes to
the supplemental consolidated financial statements. These supplemental financial
statements and schedule are the responsibility of the management of Lam Research
Corporation. Our responsibility is to express an opinion on these supplemental
financial statements and schedule based on our audits. We did not audit the
financial statements of OnTrak Systems, Inc., which statements reflect total
assets constituting 6.7% for 1997 and 6.0% for 1996 of the related supplemental
consolidated financial statement totals, and which reflect net income
constituting approximately 4.3% of the related supplemental consolidated
financial statement totals for the three-year period ended June 30, 1997. Those
statements were audited by other auditors whose report has been furnished to us,
and our opinion, insofar as it related to data included for OnTrak Systems,
Inc., is based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
supplemental financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Lam Research
Corporation at June 30, 1997 and 1996, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
June 30, 1997, after giving retroactive effect to the merger of OnTrak Systems,
Inc., as described in the notes to the supplemental consolidated financial
statements, in conformity with generally accepted accounting principles. Also,
in our opinion, the related financial statement schedule, when considered in
relation to the basic supplemental financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Ernst & Young, LLP
San Jose, California
August 26, 1997
42
<PAGE> 44
REPORT OF INDEPENDENT ACCOUNTANTS
FOR ONTRAK SYSTEMS, INC.
To the Board of Directors and Stockholders
of OnTrak Systems, Inc.
In our opinion, the consolidated balance sheet and the related consolidated
statements of operations, of stockholders' equity and of cash flows present
fairly, in all material respects, the financial position of OnTrak Systems, Inc.
and its subsidiaries (not presented separately herein) at June 30, 1997 and
1996, and the results of their operations and their cash flows for each of the
three years in the period ended June 30, 1997, in conformity with generally
accepted accounting principles. These consolidated financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
San Jose, California
July 24, 1997, except for Note 2,
which is as of August 5, 1997
43
<PAGE> 45
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
JUNE 30
-------------------------
1997 1996
---------- ----------
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Cash and cash equivalents........................................... $ 140,872 $ 87,096
Short-term investments.............................................. 54,821 79,977
Accounts receivable, less allowance for doubtful accounts of $2,377
in 1997 and $2,063 in 1996........................................ 232,073 265,685
Inventories......................................................... 261,738 329,258
Prepaid expenses and other assets................................... 37,707 18,772
Deferred income taxes............................................... 75,935 50,896
---------- ----------
Total current assets...................................... 803,146 831,684
Equipment and leasehold improvements, net........................... 196,992 178,132
Other assets........................................................ 34,911 21,681
---------- ----------
$1,035,049 $1,031,497
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Trade accounts payable.............................................. $ 117,163 $ 116,007
Accrued expenses and other liabilities.............................. 167,685 161,336
Line of credit borrowings........................................... 35,000 25,000
Current portion of long-term debt and capital lease obligations..... 21,127 13,179
---------- ----------
Total current liabilities................................. 340,975 315,522
Long-term debt and capital lease obligations, less current
portion........................................................... 46,592 54,099
Commitments and contingencies
Preferred stock: 5,000 shares authorized, none outstanding.......... -- --
Common stock at par value of $.001 per share
Authorized -- 90,000 shares, issued and outstanding -- 37,334
shares at June 30, 1997 and 36,506 shares at June 30, 1996..... 37 36
Additional paid-in capital.......................................... 361,101 344,820
Retained earnings................................................... 286,344 317,020
---------- ----------
Total stockholders' equity.......................................... 647,482 661,876
---------- ----------
$1,035,049 $1,031,497
========== ==========
</TABLE>
See notes to supplemental consolidated financial statements.
44
<PAGE> 46
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------
1997 1996 1995
---------- ---------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net sales............................................... $1,060,535 $1,309,899 $824,233
Royalty income.......................................... 12,662 22,814 12,348
---------- ---------- --------
Total revenue................................. 1,073,197 1,332,713 836,581
Costs and expenses:
Cost of goods sold.................................... 723,404 689,515 429,707
Research and development.............................. 192,254 186,899 134,668
Selling, general and administrative................... 209,294 237,444 151,011
Restructuring charge.................................. 9,021 -- --
Charge for past royalties............................. -- -- 1,250
---------- ---------- --------
1,133,973 1,113,858 716,636
---------- ---------- --------
Operating income (loss)................................. (60,776) 218,855 119,945
---------- ---------- --------
Other (income) expense:
Interest income....................................... (5,775) (7,048) (5,245)
Interest expense...................................... 5,222 8,051 6,866
Other, net............................................ 636 1,453 (10,646)
---------- ---------- --------
83 2,456 (9,025)
---------- ---------- --------
Income (loss) before income taxes....................... (60,859) 216,399 128,970
Income tax expense (benefit)............................ (30,183) 70,521 38,691
---------- ---------- --------
Net income (loss)....................................... $ (30,676) $ 145,878 $ 90,279
---------- ---------- --------
Net income (loss) per share
Primary............................................... $ (0.83) $ 4.11 $ 2.79
---------- ---------- --------
Fully diluted......................................... $ (0.83) $ 3.95 $ 2.65
---------- ---------- --------
Number of shares used in per share calculations
Primary............................................... 36,919 35,479 32,391
---------- ---------- --------
Fully diluted......................................... 36,919 37,719 35,391
========== ========== ========
</TABLE>
See notes to supplemental consolidated financial statements.
45
<PAGE> 47
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------
1997 1996 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................................ $(30,676) $145,878 $ 90,279
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization............................. 55,694 35,320 24,018
Deferred income taxes..................................... (25,032) (22,547) (12,617)
Changes in certain working capital accounts:
Accounts receivable, net of allowance................... 33,547 (64,723) (79,105)
Inventories............................................. 59,707 (153,309) (58,968)
Prepaid expenses and other assets....................... (19,767) (3,548) (19,870)
Trade accounts payable.................................. 1,156 30,889 18,416
Accrued expenses and other liabilities.................. 6,349 59,881 54,965
--------- --------- ---------
Total adjustments.................................... 111,654 (118,037) (73,161)
--------- --------- ---------
Net cash provided by operating activities............ 80,978 27,841 17,118
Cash flows from investing activities:
Net capital expenditures..................................... (47,332) (72,647) (65,105)
Purchases of available-for-sale securities................... (602,474) (423,255) (348,204)
Sales of available-for-sale securities....................... 627,630 425,636 289,968
Proceeds from the sale of securities......................... -- 12,038 --
Other........................................................ (11,002) (6,726) (3,026)
--------- --------- ---------
Net cash used in investing activities................ (33,178) (64,954) (126,367)
Cash flows from financing activities:
Proceeds from borrowings under line of credit................ 95,000 40,000 --
Repayment of borrowings under line of credit................. (85,000) (15,000) --
Proceeds from issuance of long-term debt..................... 2,956 23,043 9,468
Principal payments on long-term debt and capital lease
obligations............................................... (21,848) (15,451) (6,611)
Proceeds from redemption of mandatorily redeemable preferred
stock..................................................... -- (3,450) 6,522
Net proceeds from Initial Public Offering of OnTrak Systems,
Inc....................................................... -- 41,404 --
Proceeds from issuance of common stock, net of repurchases... 14,868 8,221 119,976
--------- --------- ---------
Net cash provided by financing activities............ 5,976 78,767 129,355
--------- --------- ---------
Net increase in cash and cash equivalents...................... 53,776 41,654 20,106
Cash and cash equivalents at beginning of year................. 87,096 45,442 25,336
--------- --------- ---------
Cash and cash equivalents at end of year....................... $140,872 $ 87,096 $ 45,442
--------- --------- ---------
Cash payments for interest..................................... $ 5,310 $ 8,738 $ 6,748
--------- --------- ---------
Cash payments for income taxes................................. $ 32,377 $ 77,385 $ 32,064
========= ========= =========
</TABLE>
See notes to supplemental consolidated financial statements.
46
<PAGE> 48
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON COMMON ADDITIONAL
STOCK STOCK PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
------ ------ -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1994............. 26,126 $ 26 $ 95,648 $ 83,041 $178,715
Sale of Common Stock, net of
repurchases........................ 3,357 3 122,151 (2,178) 119,976
Income tax benefit from stock option
transactions....................... -- -- 7,128 -- 7,128
Net income........................... -- -- -- 90,279 90,279
------ --- -------- -------- --------
Balance at June 30, 1995............. 29,483 29 224,927 171,142 396,098
Sale of Common Stock, net of
repurchases........................ 664 1 8,220 -- 8,221
Income tax benefit from stock option
transactions....................... -- -- 2,940 -- 2,940
Conversion of Preferred Stock........ 1,486 1 3,071 -- 3,072
Conversion of subordinated
debentures......................... 2,640 3 64,260 -- 64,263
Net Proceeds from Initial Public
Offering of OnTrak Systems, Inc.... 2,233 2 41,402 -- 41,404
Net income........................... -- -- -- 145,878 145,878
------ --- -------- -------- --------
Balance at June 30, 1996............. 36,506 36 344,820 317,020 661,876
Sale of Common Stock, net of
repurchases........................ 828 1 14,549 -- 14,550
Income tax benefit from stock option
transactions....................... -- -- 1,732 -- 1,732
Net loss............................. -- -- (30,676) (30,676)
------ --- -------- -------- --------
Balance at June 30, 1997............. 37,334 $ 37 $361,101 $286,344 $647,482
====== === ======== ======== ========
</TABLE>
See notes to supplemental consolidated financial statements.
47
<PAGE> 49
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
NOTE A: MERGER WITH ONTRAK
On August 5, 1997, the stockholders of each of Lam Research Corporation
(the "Company" or "Lam") and OnTrak Systems, Inc. ("OnTrak") approved the merger
between the companies (the "Merger") and the issuance of Lam Common Stock under
the Agreement and Plan of Merger with OnTrak. The Company issued approximately
eight million shares of Lam Common Stock, par value $0.001 per share, for all
the outstanding common stock and options and rights to purchase OnTrak Common
Stock, par value $0.0001 per share, on the basis of 0.83 of a share of Lam
Common Stock for one share of OnTrak Common Stock. The transaction has been
accounted for as a pooling of interests and is structured to qualify as a
tax-free reorganization. The anticipated financial impact of the conforming
accounting methods is not expected to be material to the financial position of
the Company. Lam estimates that costs associated with the Merger were
approximately $17.7 million. Such expenses include investment advisory fees,
legal and accounting fees, financial printing costs and other Merger related
costs. Such costs associated with the Merger will negatively impact results of
operations of the Company in the fiscal quarter ended September 30, 1997.
The supplemental consolidated financial statements have been prepared to
give retroactive effect to the Merger. Generally accepted accounting principles
prohibit giving effect to a consummated business combination accounted for by
the pooling of interests method in financial statements that do not include the
date of consummation. The accompanying supplemental consolidated financial
statements do not extend through the date of consummation; however, they will
become the historical consolidated financial statements of the Company after
financial statements covering the date of consummation of the business
combination are issued.
The following table shows revenues and net income of the separate companies
through the periods preceding the Merger:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------
1997 1996 1995
---------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Total revenue:
Lam................................ $1,002,404 $1,276,884 $810,557
OnTrak............................. 70,793 55,829 26,024
---------- ---------- --------
Combined........................... $1,073,197 $1,332,713 $836,581
========== ========== ========
Net income (loss):
Lam................................ $ (33,634) $ 141,091 $ 89,211
OnTrak............................. 2,958 4,787 1,068
---------- ---------- --------
Combined........................... $ (30,676) $ 145,878 $ 90,279
========== ========== ========
</TABLE>
NOTE B: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation: The supplemental consolidated financial
statements include the accounts of the Company and its wholly owned
subsidiaries. All intercompany accounts and transactions have been eliminated in
consolidation.
Cash equivalents: All highly liquid investments purchased with an original
maturity of three months or less are considered to be cash equivalents.
Inventories: Inventories are stated at the lower of cost (first-in,
first-out method) or market. The Company evaluates the need to record
adjustments for impairment of inventory on a quarterly basis. The Company's
policy is to evaluate all inventory including manufacturing raw materials,
work-in-process, finished goods, and spare parts. Inventory in excess of the
Company's estimated usage requirements is written down to its estimated net
realizable value. Inherent in the estimates of net realizable value are
management estimates
48
<PAGE> 50
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997
related to the Company's future manufacturing schedules, customer demand,
possible alternative uses and ultimate realization of potentially excess
inventory.
Equipment and leasehold improvements: Equipment and leasehold improvements
are stated at cost. Equipment is depreciated by the straight-line method over
the estimated useful lives of the assets, generally three to seven years.
Leasehold improvements are amortized by the straight-line method over the
shorter of the life of the related asset or the term of the underlying lease.
Amortization of equipment under capital leases is included with depreciation.
Revenue recognition: Sales of the Company's products are generally recorded
upon shipment. Estimated costs to be incurred by the Company related to product
installation and warranty fulfillment are accrued at the date of shipment.
Foreign currency: The Company has foreign sales, service and manufacturing
operations. With respect to all foreign subsidiaries excluding Japan, the
functional currency is the U.S. dollar and transaction and translation gains and
losses are included in net income and have not been material in any year
presented. The functional currency of the Company's Japanese subsidiary is the
Japanese yen. Translation gains and losses related to the Japanese subsidiary
are included as a component of stockholders' equity, but have not been material
through June 30, 1997.
Income (loss) per share: For fiscal 1997, net loss per share is calculated
using the weighted average number of shares of common stock outstanding during
the period. For fiscal 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. The convertible subordinated debentures are not deemed to
be common stock equivalents and, accordingly, are excluded from the calculation
of primary net income per share. Fully diluted net income per share for fiscal
1996 and 1995 reflects the assumed conversion of the Company's convertible
subordinated debentures at the beginning of that period, and also adjusts net
income to reflect the exclusion of net interest expense and net amortization
expense of the debt issuance cost related to the debentures. The convertible
subordinated debentures were called by the Company during the quarter ended June
30, 1996. Primary income per share, for fiscal 1996, calculated to reflect the
conversion of the convertible subordinated debentures as if they were converted
on July 1, 1995 is $3.95.
In March 1997, the Financial Accounting Standards Board ("FASB") released
Statement of Financial Accounting Standards No. 128 "Earnings Per Share" ("FAS
128"), which is required to be adopted on December 31, 1997. At that time, the
Company will be required to change the method currently used to compute earnings
per share and to restate all prior periods. Under the new requirements for
calculating primary net income per share (basic earnings per share), the
dilutive effect of stock options will be excluded. The Company's basic and
diluted earnings (loss) per share as calculated according to FAS 128 would be as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ----- -----
<S> <C> <C> <C>
Basic.............................................. $(0.83) $4.32 $3.07
Diluted............................................ $(0.83) $3.95 $2.65
</TABLE>
Employee stock plans: The Company accounts for its stock option plans and
its employee stock purchase plan in accordance with the provisions of the
Accounting Principles Board's Opinion No. 25 "Accounting For Stock Issued to
Employees" ("APB 25"). In October 1995, the FASB released Statement of Financial
Accounting Standard No. 123, "Accounting For Stock-Based Compensation"("FAS
123") which provides an alternative to APB 25. As allowed under FAS 123, the
Company continues to account for its employee stock plans in accordance with the
provisions of APB 25. (See note K.)
49
<PAGE> 51
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997
Use of estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that could affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from those estimates.
Transfer of financial assets: During fiscal 1997, the Company adopted
Statement of Financial Accounting Standard No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities" ("FAS
125"), which requires the Company to recognize the financial and servicing
assets it controls and the liabilities it has incurred and to exclude financial
assets when control has been surrendered in accordance with criteria provided.
FAS 125 is required to be applied to sales of receivables by the Company
occurring after January 1, 1997. The effect of adopting FAS 125 for the six
months ended June 30, 1997 was not material.
Capital structure: In February 1997, the FASB released Statement of
Financial Accounting Standards No. 129, "Disclosure of Information about Capital
Structure" ("FAS 129"). FAS 129 consolidates the existing guidance regarding
disclosure relating to a company's capital structure and is effective for fiscal
years beginning after December 15, 1997. Adoption of FAS 129 is not expected to
have a material impact on the Company's financial statements.
Comprehensive Income: In June 1997, the FASB released Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("FAS
130"). FAS 130 establishes standards for the reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements and is effective for fiscal years beginning after December
15, 1997. The Company believes that adoption of FAS 130 will not have a material
impact on the Company's financial statements.
Segment information: In June 1997, the FASB released Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" ("FAS 131"). FAS 131 will change the way companies report
selected segment information in interim financial reports to stockholders. FAS
131 is effective for fiscal years beginning after December 15, 1997. Based on
the current circumstances, the Company believes that the application of the new
rules will not have a material impact on the Company's consolidated financial
statements.
NOTE C: COMPANY AND INDUSTRY INFORMATION
Lam is a leading supplier of technically complex thin film processing
equipment used in the primary stages of semiconductor manufacturing. The
Company's product offerings include single wafer plasma etch systems with a wide
range of applications and chemical mechanical planarization ("CMP"), chemical
vapor deposition ("CVD") and flat panel display ("FPD") systems. The Company
sells its products primarily to large companies involved in the production of
semiconductors in the United States, Europe, Japan and Asia Pacific. Credit
evaluations are performed on all customers, and the Company usually does not
require collateral on sales.
The semiconductor industry has historically been cyclical and has
experienced periodic downturns, which have had a material adverse effect on the
semiconductor industry's demand for semiconductor processing equipment,
including equipment manufactured and marketed by the Company. 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 a severe near term effect on the Company's operating results and could
result in damage to customer relationships.
The Company entered into agreements totaling 9 billion yen and 6 billion
yen, respectively, in fiscal 1997 and 1996 to sell specific Japanese
yen-denominated receivables subject to recourse provisions. At June 30, 1997 and
1996, $59,986,000 and $82,104,000 of these receivables respectively, had been
sold to a bank, of
50
<PAGE> 52
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997
which $39,924,000 and $49,467,000 at June 30, 1997 and 1996, respectively,
remained uncollected by the bank and subject to recourse provisions.
During fiscal 1997 and 1996, no individual customer accounted for greater
than 10% of total sales. One customer accounted for 11% of total sales for
fiscal 1995.
The Company operates in four geographic regions, the United States, Europe,
Japan and Asia Pacific. The following is a summary of local operations by
geographic region at June 30:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenue:
United States......................... $ 903,222 $1,101,400 $741,039
Europe................................ 42,942 40,365 26,925
Japan................................. 69,427 138,713 45,856
Asia Pacific.......................... 57,606 52,235 22,761
---------- ---------- --------
Total................................... $1,073,197 $1,332,713 $836,581
========== ========== ========
Operating income/(loss):
United States......................... $ (58,078) $ 132,620 $ 91,698
Europe................................ (8,730) 9,696 4,657
Japan................................. 2,342 56,903 18,174
Asia Pacific.......................... 3,690 19,636 5,416
---------- ---------- --------
Total................................... $ (60,776) $ 218,855 $119,945
========== ========== ========
Identifiable assets:
United States......................... $ 872,657 $ 891,974 $606,058
Europe................................ 31,538 28,688 20,974
Japan................................. 71,847 65,344 43,791
Asia Pacific.......................... 59,007 45,491 27,593
---------- ---------- --------
Total................................... $1,035,049 $1,031,497 $698,416
========== ========== ========
</TABLE>
Sales between geographic areas are accounted for at prices that provides a
profit and are in accordance with the rules and regulations of the respective
governing authorities. Total export revenue consisting of sales from the
Company's U.S. operating subsidiary to non-affiliated customers by geographic
region for the three years ended June 30 are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Asia Pacific............................... $293,488 $336,769 $175,815
Europe..................................... 131,342 182,688 109,229
Japan...................................... 23,019 28,255 30,418
-------- -------- --------
$447,849 $547,712 $315,462
======== ======== ========
</TABLE>
NOTE D: FINANCIAL INSTRUMENTS
In November 1995, the FASB staff issued a Special Report, "A Guide to
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities". In accordance with provisions in that Special Report,
the Company elected, in December 1995, to reclassify all of its held-to-maturity
securities to available-for-sale. At the time of transfer, the amortized cost of
those securities was $24,099,000, which approximated their fair value.
51
<PAGE> 53
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997
Investments at June 30, are comprised of the following:
<TABLE>
<CAPTION>
1997 1996
----------------------- -----------------------
ESTIMATED ESTIMATED
COST FAIR VALUE COST FAIR VALUE
-------- ---------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Municipal Bonds and Notes................... $ 89,546 $ 89,546 $ 12,372 $ 12,372
U.S. Treasury Bonds and Notes............... 5,539 5,539 21,380 21,380
Institutional Money Market Funds............ 28,329 28,329 5,642 5,642
-------- -------- -------- --------
Amounts included in cash and cash
equivalents............................... 123,414 123,414 39,394 39,394
Municipal Bonds and Notes................... 16,301 16,301 -- --
Floating Rate Municipal Bonds............... 19,549 19,549 44,600 44,600
U.S. Treasury Bonds and Notes............... 18,971 18,971 23,005 23,005
-------- -------- -------- --------
Amounts included in short-term
investments............................... 54,821 54,821 67,605 67,605
-------- -------- -------- --------
Total Available-for-Sale.................... $178,235 $ 178,235 $106,999 $ 106,999
======== ======== ======== ========
</TABLE>
The difference between cost and fair value of available-for-sale securities
was not significant at June 30, 1997 and 1996.
The amortized cost and estimated fair value of investments in debt
securities at June 30 by contractual maturities are as follows:
<TABLE>
<CAPTION>
1997 1996
----------------------- -----------------------
ESTIMATED ESTIMATED
COST FAIR VALUE COST FAIR VALUE
-------- ---------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Due in less than one year................... $155,864 $ 155,864 $ 83,994 $ 83,994
Due after one year through five years....... 22,371 22,371 23,005 23,005
-------- -------- -------- --------
Total investments in debt securities........ $178,235 $ 178,235 $106,999 $ 106,999
======== ======== ======== ========
</TABLE>
The carrying and fair values of the Company's financial instruments at June
30, are as follows:
<TABLE>
<CAPTION>
1997 1996
----------------------- -----------------------
CARRYING ESTIMATED CARRYING ESTIMATED
VALUE FAIR VALUE VALUE FAIR VALUE
-------- ---------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash and cash equivalents................... $140,872 $ 140,872 $ 87,096 $ 87,096
Foreign currency forward contracts.......... $ -- $ 31,604 $ -- $ 43,632
Other long-term debt........................ $ 67,719 $ 67,745 $ 67,278 $ 67,047
</TABLE>
The fair value of the Company's short-term investments is based on quoted
market prices at June 30, 1997 and 1996. The fair value of the Company's foreign
currency contracts is estimated based upon the yen exchange rate at June 30,
1997 and 1996. The fair value of the Company's other long-term debt is estimated
based on the current rates offered to the Company for similar debt instruments
of the same remaining maturities.
NOTE E: DERIVATIVE FINANCIAL INSTRUMENTS
The Company enters into foreign-currency forward contracts to minimize the
impact of exchange rate fluctuations on the value of yen-denominated assets and
liabilities. A substantial portion of the forward contracts entered into have a
maturity of 90 days or less. The realized and unrealized gains and losses on
these contracts are deferred and offset against realized and unrealized gains
and losses from the settlement of the related yen receivables. The realized
losses on yen-forward contracts during fiscal 1997 were offset by the gains on
underlying receivables.
52
<PAGE> 54
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997
At June 30, 1997 and 1996, the notional amount of outstanding foreign
currency forward contracts were $30,651,000 and $44,580,000, respectively. Of
the total outstanding contracts at June 30, 1997 and 1996, $13,828,000 and
$38,794,000, respectively, were to hedge yen intercompany receivables and
$17,776,000 and $4,838,000, respectively, were to hedge firm commitments from
customers in Japan. The unrealized loss on these contracts at June 30, 1997 was
$953,000. The unrealized gain on these contracts at June 30, 1996 was $948,000.
NOTE F: INVENTORIES
Inventories consist of the following at June 30:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Raw materials.......................................... $136,698 $170,851
Work-in-process........................................ 93,057 126,309
Finished goods......................................... 31,983 32,098
-------- --------
$261,738 $329,258
======== ========
</TABLE>
NOTE G: PREPAID EXPENSES AND OTHER ASSETS
<TABLE>
<CAPTION>
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Prepaid expenses......................................... $13,092 $10,408
Net realizable value of collateral....................... 5,320 --
Taxes receivable......................................... 5,400 --
Other.................................................... 13,895 8,364
------- -------
$37,707 $18,772
======= =======
</TABLE>
During fiscal 1997, the Company recorded bad debt expense of $6,550,000
relating to the former at-risk receivables from SubMicron Technology PLC
("SubMicron"). The estimated net realizable value of the collateral which the
Company holds related to these receivables has been included in prepaid expenses
and other assets.
NOTE H: EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements consist of the following at June 30:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Equipment.............................................. $158,475 $127,039
Furniture and fixtures................................. 58,642 47,077
Leasehold improvements................................. 100,222 89,891
-------- --------
317,339 264,007
Less allowance for depreciation and amortization....... (120,347) (85,875)
-------- --------
$196,992 $178,132
======== ========
</TABLE>
53
<PAGE> 55
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997
NOTE I: ACCRUED EXPENSES AND OTHER LIABILITIES
The significant components of accrued expenses and other liabilities
consist of the following at June 30:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Warranty and installation reserves..................... $ 75,321 $ 64,002
Accrued compensation................................... 30,987 29,612
Income and other taxes payable......................... 21,381 45,471
Other.................................................. 39,996 22,251
-------- --------
$167,685 $161,336
======== ========
</TABLE>
NOTE J: LINE OF CREDIT, LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long-term debt and capital lease obligations at June 30 consist of the
following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Capitalized lease obligations with varying interest
rates from 4.6% to 9.6%.............................. $ 35,666 $ 30,043
Japanese yen-denominated bank loans with fixed interest
rates from 3.0% to 4.9%, principal payable in
quarterly and semi-annual installments from July 1997
to April 2003........................................ 28,562 32,724
Other.................................................. 3,491 4,511
-------- --------
67,719 67,278
Less current portion................................... (21,127) (13,179)
-------- --------
$ 46,592 $ 54,099
======== ========
</TABLE>
During the second quarter of fiscal 1996, the Company entered into a
syndicated bank line of credit totaling $210,000,000, under which borrowings
bear interest at the bank's prime rate or 0.7% to 0.9% over LIBOR. This
syndicated bank line of credit expires in December 1998. During the third
quarter of fiscal 1997, the Company received amendments or waivers for certain
of its financial covenants which would have otherwise been breached by the net
loss reported by the Company. At June 30, 1997, and 1996, respectively, the
Company had outstanding borrowings of $35,000,000 and $25,000,000 against the
syndicated bank line of credit. The Company also has a $10,000,000 line of
credit agreement with a bank which expires in November 1997; borrowings under
the bank line credit bear interest at the bank's prime rate. No borrowings were
outstanding under the bank line of credit at June 30, 1997 and June 30, 1996.
The syndicated bank line of credit and the bank line of credit agreements
include terms requiring satisfaction of certain financial ratios, interest
coverage, maximum leverage, senior indebtedness, tangible net worth, minimum
profitability and also restrict the Company from paying dividends. At June 30,
1997, the Company was in compliance with all of its covenants as amended.
54
<PAGE> 56
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997
At June 30, 1997, future maturities of long-term debt and minimum payments
for capital lease obligations are as follows:
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30, LONG TERM CAPITAL LEASE
(IN THOUSANDS) DEBT OBLIGATIONS TOTAL
------------------------------------------- --------- ------------- -------
<S> <C> <C> <C>
1998.................................. $ 8,458 $14,776 $23,234
1999.................................. 8,338 12,921 21,259
2000.................................. 7,922 9,351 17,273
2001.................................. 5,959 2,304 8,263
2002.................................. 803 472 1,275
Thereafter............................ 573 -- 573
Less amounts representing interest......... -- (4,158) (4,158)
------- ------- -------
$32,053 $35,666 $67,719
======= ======= =======
</TABLE>
Long-term debt and capital lease obligations are collateralized by
equipment included in equipment and leasehold improvements with a cost and
accumulated depreciation and amortization of $56,671,000 and $(22,698,000),
respectively, at June 30, 1997 and $45,484,000 and $(15,309,000), respectively,
at June 30, 1996.
NOTE K: INCENTIVE STOCK OPTION PLANS AND STOCK PURCHASE PLAN
The Company has adopted incentive stock option plans that provide for the
granting to qualified employees of incentive stock options to purchase shares of
Common Stock. In addition, the plans permit the granting of nonstatutory stock
options to paid consultants and employees and provide for the automatic grant of
nonstatutory stock options to outside directors. The option price is determined
by the Board of Directors, but in no event will it be less than the fair market
value on the date of grant (no less than 85% of the fair market value at the
date of grant in case of nonstatutory options). Options granted under the plans
vest over a period determined by the Board of Directors. Under the automatic
grant program, each outside director receives an option exercisable for 6,000
shares of Common Stock during January of each year with the exercise price equal
to the fair market value on date of grant.
Prior to the Merger, OnTrak had incentive and nonstatutory stock option
plans (the "Employee Plans"). Incentive stock option and nonstatutory stock
option grants under the Employee Plans must be at prices of at least 100% of the
fair market value of the stock on the date of grant. The options generally vest
25% per year.
OnTrak also had a director stock option plan (the "Director Plan") and
reserved 103,750 shares of Common Stock for issuance thereunder. The Director
Plan provided for the grant of nonstatutory stock options to nonemployee
directors of OnTrak pursuant to an automatic, nondiscretionary grant mechanism.
During fiscal year 1996, OnTrak issued an option to purchase 664,000 shares
of Common Stock to its Chief Executive Officer at an exercise price of $20.78
per share. In November 1996, following the approval of the 1996 Equity Incentive
Plan by the OnTrak stockholders, this option was canceled and reissued with
identical terms.
55
<PAGE> 57
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997
A summary of incentive stock option plan transactions follows:
<TABLE>
<CAPTION>
WTD.
AUTHORIZED OUTSTANDING OPTION PRICE AVERAGE
---------- ---------- ------------- -------
<S> <C> <C> <C> <C>
June 30, 1994.............................. 558,376 2,510,720 $0.18-35.88 $ 12.00
Additional amount authorized............... 2,114,990 -- --
Granted.................................... (1,516,140) 1,516,140 2.41-63.88 22.03
Exercised.................................. -- (801,345) 0.28-35.88 6.04
Canceled................................... 49,654 (49,654) 1.70-50.63 25.90
Expired.................................... (5,481) -- --
---------- ---------- ------------ ------
June 30, 1995.............................. 1,201,399 3,175,861 $0.18-63.88 $ 18.10
Additional amount authorized............... 1,000,000 -- --
Granted.................................... (2,396,838) 2,396,838 16.87-68.00 39.71
Exercised.................................. -- (457,842) 0.18-45.13 7.39
Canceled................................... 1,323,292 (1,323,292) 2.04-68.00 46.81
Expired.................................... (8,174) -- --
---------- ---------- ------------ ------
June 30, 1996.............................. 1,119,679 3,791,565 $0.28-62.88 $ 23.71
Additional amount authorized............... 1,660,000 -- --
Granted.................................... (1,860,555) 1,860,555 16.57-40.31 23.57
Exercised.................................. -- (351,387) 0.28-35.75 16.53
Canceled................................... 365,662 (365,662) 2.26-44.88 26.72
Expired.................................... (1,319) -- --
---------- ---------- ------------ ------
June 30, 1997.............................. 1,283,467 4,935,071 $0.28-62.88 $ 23.82
========== ========== ============ ======
</TABLE>
At June 30, 1997, 6,218,538 shares of Common Stock were reserved for future
issuance under the stock option plans and options to purchase 2,348,749 shares
were exercisable at a range of $0.28-$62.88
Outstanding and excercisable options presented by price range at June 30,
1997 are as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- --------------------------------------------------------- ------------------------------------------------------
NUMBER OF OPTIONS WTD. AVERAGE WTD. AVERAGE NUMBER OF OPTIONS WTD.
RANGE OF OUTSTANDING AT REMAINING LIFE EXERCISE OUTSTANDING AT AVERAGE
EXERCISE PRICES JUNE 30, 1997 (YEARS) PRICE JUNE 30, 1997 EXERCISE PRICE
- ---------------- ----------------- -------------- ------------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
$ 0.28-3.01 241,530 4.50 $ 1.25 186,750 $ 0.81
5.25-16.42 631,689 4.12 8.22 493,079 7.92
16.57-19.73 189,692 4.95 18.01 90,092 17.98
19.88-26.36 1,415,970 6.76 21.44 498,731 21.43
26.63-32.60 1,323,027 7.66 28.97 665,725 29.41
33.63-33.63 761,556 8.54 33.63 267,815 33.63
33.81-62.88 371,607 8.43 38.58 146,557 39.26
------------ ---- ---- - ---- ------ -------
$0.28-$62.88 4,935,071 6.88 $ 23.82 2,348,749 $21.58
============ ========= ==== ====== =======
</TABLE>
During fiscal 1996, the Company adopted a Performance-Based Restricted
Stock Plan designed to reward executives based upon the achievement of certain
predetermined goals. The grant is based on the fair market value of the
Company's Common Stock at the end of the quarter, provided the predetermined
goals are met. The Company authorized 150,000 shares to be reserved for issuance
under the Performance-Based Stock Plan. At June 30, 1997, 120,879 shares remain
available under this plan.
Common Stock is sold to employees under the 1984 Employee Stock Purchase
Plan ("ESPP"). During fiscal 1996, the Company authorized an additional 150,000
shares to be reserved for issuance under the ESPP. Another 166,000 shares were
reserved upon consummation of the Merger. The purchase price per share is the
56
<PAGE> 58
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997
lower of 85% of the fair market value of the Common Stock on the first or last
day of a six-month offering period. A total of 1,397,627 shares of the Company's
Common Stock were issued under the ESPP through June 30, 1997 at prices ranging
from $2.65 to $43.03 per share. At June 30, 1997, 455,627 shares remain
available for sale under the ESPP.
As permitted under FAS 123 the Company has elected to follow APB 25, and
related Interpretations, in accounting for stock-based awards to employees.
Under APB 25, the Company generally recognized no compensation expense with
respect to such awards.
Pro forma information regarding net income (loss) and net income (loss) per
share is required by FAS 123 for awards granted after June 30, 1995 as if the
Company had accounted for its stock-based awards to employees under the fair
value method of FAS 123. The fair value of the Company's stock-based awards to
employees was estimated using a Black-Scholes option pricing model. The
Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, the Black-Scholes model requires the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's stock-based awards to employees have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its stock-based awards to employees. The fair value
of the Company's stock-based awards to employees was estimated assuming no
expected dividends and the following weighted-average assumptions:
<TABLE>
<CAPTION>
OPTIONS ESPP
---------------- ----------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Expected life............................. 3.3% 3.5% 0.5% 0.5%
Expected stock price volatility........... 59.8% 54.3% 57.9% 57.8%
Risk-free interest rate................... 6.1% 5.5% 5.3% 5.4%
</TABLE>
The weighted average fair value of options granted during 1997 and 1996 was
$10.55 and $13.45 per share, respectively. The weighted average fair value of
shares granted under the ESPP during fiscal 1997 and 1996 were $7.62 and $9.71
per share, respectively.
For pro forma purposes, the estimated fair value of the Company's
stock-based awards to employees is amortized over the options' vesting period
(for options) and the six-month purchase period (for stock purchases under the
ESPP). The Company's pro forma information follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Net income (loss) -- as reported..................... $(30,676) $145,878
Net income (loss) -- pro forma....................... (41,194) 134,737
Primary net income (loss) per share -- as reported... (0.83) 4.11
Primary net income (loss) per share -- pro forma..... (1.12) 3.80
Fully diluted net income (loss) per share -- as
reported........................................... (0.83) 3.95
Fully diluted net income (loss) per share -- pro
forma.............................................. (1.12) 3.57
</TABLE>
FAS 123 is applicable only to awards granted subsequent to June 30, 1995.
As a result, its pro forma effect will not be fully reflected until fiscal 1999.
NOTE L: PROFIT SHARING PLAN AND BENEFIT PLAN
Distributions to employees by the Company are made quarterly based upon a
percentage of base salary provided that a threshold level of the Company's
financial and performance is met. Upon achievement of the threshold, profit
sharing is awarded based upon performance against certain corporate financial
and operating
57
<PAGE> 59
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997
goals. Prior to fiscal 1995, distributions to the domestic employees under the
profit sharing plan were made semi-annually based on 5% of pretax income
provided certain minimum net income goals were met. Prior to the Merger, OnTrak
maintained a profit sharing plan, whereby an aggregate amount of 5% of OnTrak's
operating profits as defined was paid semi-annually. Subsequent to the Merger,
the Company will have one profit sharing plan. Profit sharing plan expense for
fiscal 1997, 1996 and 1995 was $176,000, $14,783,000, and $9,693,000,
respectively.
The Company maintains a 401(k) retirement savings plan for its full-time
domestic employees. Each participant in the plan may elect to contribute 2% to
15% of his or her annual salary to the plan, subject to statutory limitations.
Prior to October 1, 1995, each participant could elect to contribute 2% to 20%
of his or her annual salary to the plan, subject to statutory limitations. The
Company matches employee contributions to the plan at the rate of 50% of the
first 6% of salary contributed. Prior to the Merger, OnTrak also maintained an
employee savings and retirement plan qualified under Section 401(k) of the
Internal Revenue Code. The OnTrak plan allowed participants to contribute up to
14% of the total compensation that would otherwise be paid to them by OnTrak,
not to exceed the maximum allowed by the applicable Internal Revenue Service
guidelines. OnTrak matched 100% of the salary deferral contributions made by
each participating employee, up to a maximum of 6% of total employee
compensation. OnTrak's contributions were 25%, 50% and 100% vested after an
employee's second year, third year and fourth year of service, respectively.
Total Company match expense for fiscal 1997, 1996 and 1995 was $5,205,000,
$4,213,000, and $2,606,000, respectively.
NOTE M: LICENSING/ROYALTY AGREEMENTS
The Company receives royalty income from Tokyo Electron Limited ("TEL")
under a licensing agreement signed in fiscal 1987 and extended in fiscal 1992
and 1996. For the years ended June 30, 1997, 1996 and 1995, the Company earned
approximately $11,700,000, $20,700,000, and $10,500,000, respectively, of
royalty income from TEL. The current royalty agreement, which was due to expire
December 31, 1996, was renegotiated at a reduced royalty rate (5% to 1%) which
went into effect January 1, 1997.
The Company also receives royalty income from Sumitomo Metal Industries,
Ltd. ("Sumitomo"). Royalty income earned from Sumitomo for fiscal 1997, 1996 and
1995 amounted to approximately $1,000,000, $2,100,000, and $1,700,000,
respectively.
During fiscal 1995, the Company earned approximately $100,000 of royalty
income from other sources.
NOTE N: COMMITMENTS
The Company leases its administrative, research and development ("R&D"),
and manufacturing facilities, regional sales/service offices and certain
equipment under noncancelable operating leases, which expire at various dates
through 2020. Certain of the Company's labs and other equipment are also
supplied under operating leases. All of the Company's facility leases for
buildings located at its Fremont, California headquarters and certain operating
leases provide the Company an option to extend the leases for additional
periods. Certain of the Company's other facility leases provide for periodic
rent increases based on the general rate of inflation.
58
<PAGE> 60
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997
Future minimum lease payments for the years ended June 30 and in the
aggregate under operating leases consist of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
1998....................................... $ 50,256
1999....................................... 43,218
2000....................................... 34,692
2001....................................... 24,694
2002....................................... 18,986
Thereafter................................. 111,614
--------
$283,460
========
</TABLE>
During fiscal 1996, the Company entered into a ten year operating lease
agreement for two buildings, an R&D building and an additional engineering
building, which requires the Company to set aside $47,900,000 as lease
collateral five years after lease inception.
Total rental expense for all leases amounted to approximately $46,728,000,
$36,079,000, and $9,847,000, for the years ended June 30, 1997, 1996 and 1995,
respectively.
The Company has subleased some of its buildings and will receive income of
approximately $1,914,000, $2,442,000, $2,448,000, $2,293,000, $1,978,000, and
$471,000 for the fiscal years 1998, 1999, 2000, 2001, 2002 and thereafter,
respectively, which will offset minimum lease payments.
For the fiscal year ended June 30, 1997, the Company received income
totaling $405,000 on its subleased facilities.
NOTE O: INCOME TAXES
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal:
Current.................................. $(20,064) $ 65,107 $ 36,559
Deferred................................. (15,521) (19,280) (10,313)
-------- -------- --------
(35,585) 45,827 26,246
State:
Current.................................. 2,474 7,192 6,211
Deferred................................. (9,511) (1,717) (2,304)
-------- -------- --------
(7,037) 5,475 3,907
Foreign:
Current 12,439 20,769 8,538
Deferred................................. -- (1,550) --
-------- -------- --------
12,439 19,219 8,538
-------- -------- --------
$(30,183) $ 70,521 $ 38,691
======== ======== ========
</TABLE>
Actual current tax liabilities are lower than reflected above for fiscal
years 1997, 1996 and 1995 by $1,732,000, $2,940,000, and $7,128,000,
respectively, for the stock option deduction benefits recorded as a credit to
stockholders' equity.
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<PAGE> 61
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997
Under FAS No. 109, deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's net deferred tax assets as of June 30,
are as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Accounting reserves and accruals deductible in different
periods................................................ $43,871 $26,172
Inventory valuation differences.......................... 24,635 21,696
Net undistributed profits of foreign subsidiaries........ 3,805 6,753
Tax credit carryforward.................................. 15,189 --
Other.................................................... 466 673
------- -------
Total deferred tax assets................................ 87,966 55,294
Deferred tax liabilities:
Temporary differences for capital assets................. (8,534) (75)
Other.................................................... (1,236) (2,055)
------- -------
Total deferred tax liabilities........................... (9,770) (2,130)
------- -------
Net deferred tax assets........................ $78,196 $53,164
======= =======
</TABLE>
A reconciliation of income tax expense provided at the federal statutory
rate (35% in 1997, 1996 and 1995) to income tax expense follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Income tax expense (benefit) computed at
federal statutory rate..................... $(21,345) $75,665 $45,124
Tax credits.................................. (5,316) (203) (2,953)
State income taxes, net of federal tax
benefits (provision)....................... (4,422) 3,777 2,626
Other........................................ 900 (8,718) (6,106)
------- ------ ------
$(30,183) $70,521 $38,691
======= ====== ======
</TABLE>
Income before income taxes from foreign operations for fiscal years 1997,
1996 and 1995 was $31,621,000, $42,216,000, and $17,830,000, respectively. In
addition, the Company received royalty and other income from foreign sources of
$12,662,000, $22,814,000 and $12,227,000, in fiscal years 1997, 1996 and 1995,
respectively, which was subject to foreign tax withholding.
NOTE P: 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 and market 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. At June 30, 1997, $1.7 million remains in accrued liabilities
relating primarily to executive severance and remaining lease payments on unused
facilities. As of June 30, 1997, the Company has made $6.3 million of cash
payments relating to the restructuring.
NOTE Q: RIGHTS PLAN
On January 23, 1997, the Company adopted a Shareholder Rights Plan (the
"Rights Plan"). Pursuant to the Rights Plan, rights were distributed as a
dividend at the rate of one right for each share of Lam Common
60
<PAGE> 62
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997
Stock, par value $0.001 per share ("Right"), of the Company held by stockholders
of record as of the close of business on January 31, 1997. The Rights will
expire on January 31, 2007, unless redeemed or exchanged. Under the Rights Plan,
each Right initially will entitle the registered holder to buy one unit of a
share of preferred stock for $250.00. The Rights will become exercisable only if
a person or group (other than stockholders currently owning 15 percent of the
Lam's Common Stock) acquires beneficial ownership of 15 percent or more of the
Lam's Common Stock or commences a tender or exchange offer upon consummation of
which such person or group would beneficially own 15 percent or more of the
Lam's Common Stock.
NOTE R: RELATED PARTY TRANSACTIONS
During fiscal 1997, the Company invested $4.0 million for a 32% interest in
a limited partnership (the "Partnership"). The Partnership was organized for the
purpose of investing in emerging technology companies to seek income and gains
for the Partnership. Three of the Company's directors are principals in the
limited liability company that is the general partner of the Partnership. The
Company is accounting for its investment in the Partnership under the equity
method. Accordingly, the Company will adjust the recorded value of its
investment for its share (32%) of the Partnership's net income or loss. The
Company's portion of the Partnership's net income was not material for the year
ended June 30, 1997.
The Company received financial advisory services under an agreement with a
consulting firm, a principal of which became a director in April 1995. The
agreement, which was terminated in February 1996, provided for a consulting fee
of $10,000 per month. A total of $80,000 and $125,000 was paid to the consulting
firm under this agreement during the years ended June 30, 1996 and 1995,
respectively. In November 1994, the Company paid $288,000 to the consulting firm
as a finder's fee and issued warrants to purchase 81,340 shares of Common Stock
at an exercise price of $4.267 per share in consideration of services related to
a preferred stock financing. These warrants were exercised using a net exercise
provision in March 1997, resulting in the issuance of 70,933 shares of Common
Stock with no net proceeds.
NOTE S: LITIGATION
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 has recently been reassigned to a new judge.
The trial date has been set for March 1998. 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 flow statements.
NOTE T: SUBSEQUENT EVENT -- APPROVAL OF LAM RESEARCH CORPORATION 1997 INCENTIVE
STOCK PLAN
On August 5, 1997 the stockholders of the Company approved the Lam Research
Corporation 1997 Stock Incentive Plan, which will provide for the grant of stock
options, restricted stock, deferred stock and performance share awards to
participating officers, directors, employees, consultants and advisors of the
Company and its subsidiaries. Initially, 3,000,000 shares were reserved for
issuance. The number of shares to
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<PAGE> 63
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997
be issued will automatically be increased each calendar quarter subject to
certain provisions and restrictions, but in no event exceed 5,000,000 shares.
NOTE U: SUBSEQUENT EVENT -- CONVERTIBLE SUBORDINATED NOTES
During August 1997, Lam completed the offering of $310.0 million of the
Notes. The Notes bear interest at five percent, mature on September 1, 2002 and
are convertible into shares of Lam's Common Stock at $87.77 per share. Expenses
associated with the offering of approximately $9.0 million will be deferred and
will be included in other assets. Such expenses will be amortized over the term
of the Notes.
62
<PAGE> 64
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
With the exception of historical facts, the statements contained in this
discussion are forward-looking statements within the meaning of Section 21E of
the Exchange Act, and are subject to the safe harbor provisions created by that
statute. Such forward-looking statements include, but are not limited to,
statements that relate to the Company's future revenue, royalty income, gross
margins, levels of R&D and operating expenses, management's plans and objectives
for future operations of the Company, the effects of the Company's merger with
OnTrak, and the sufficiency of financial resources to support future operations
and capital expenditures. Such statements are based on current expectations that
involve risks and uncertainties, including those discussed below and under the
heading "Risk Factors," that could cause actual results to differ materially
from those expressed. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. 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. This discussion should be read in conjunction with the
Supplemental Consolidated Financial Statements and Notes presented thereto on
pages 44 to 62 of this Prospectus for a full understanding of the Company's
financial position and results of operations.
RESULTS OF OPERATIONS
Merger
On August 5, 1997, each of stockholders of Lam and OnTrak approved the
issuance of Lam Common Stock to OnTrak stockholders under the Merger Agreement
between Lam and OnTrak. Each share of OnTrak Common Stock was exchanged for 0.83
of a share of Lam Common Stock and each option and right to acquire one share of
OnTrak Common Stock was exchanged for options and rights to purchase 0.83 of a
share of Lam Common Stock. The transaction was accounted for as a pooling of
interests and is structured to qualify as a tax-free reorganization. All
financial data of the Company included herein reflects the combination of the
historical financial information of both Lam and OnTrak.
The following table sets forth, for the fiscal years indicated, certain
income and expense items as a percentage of total revenue:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Net sales........................................... 98.8% 98.3% 98.5%
Royalty income...................................... 1.2 1.7 1.5
----- ----- -----
Total revenue..................................... 100.0 100.0 100.0
Cost of goods sold.................................. 67.4 51.7 51.4
Research and development............................ 17.9 14.1 16.1
Selling, general and administrative............... 19.5 17.8 18.1
Restructuring charge................................ 0.9 -- --
Charge for past royalties........................... -- -- 0.1
----- ----- -----
Operating income (loss)........................ (5.7) 16.4 14.3
Other expense (income), net......................... -- 0.2 (1.1)
----- ----- -----
Income (loss) before income taxes.............. (5.7) 16.2 15.4
----- ----- -----
Income tax expense (benefit)........................ (2.8) 5.3 4.6
----- ----- -----
Net income (loss).............................. (2.9)% 10.9% 10.8%
===== ===== =====
</TABLE>
Fiscal 1997 vs. 1996
The Company's revenue for fiscal year 1997 totaled $1,073.2 million, a 19%
decrease from the prior fiscal year total revenue of $1,332.7 million. Overall,
revenue was lower in fiscal 1997 due to the reduced demand for the Company's
equipment based upon its customers' reduced production capacity requirements in
response to
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<PAGE> 65
a slowdown in the semiconductor market. Also, during fiscal 1997, the Company's
product mix began to shift with a higher percentage of revenues contributed by
the multi-chamber Alliance and CVD products and a lower percentage of revenues
derived from the more mature single-chamber Rainbow and TCP etch systems. Sales
of the Company's cleaning products increased 25% in fiscal 1997 compared with
fiscal 1996. Regionally, revenue reflected a higher percentage attributable to
domestic sales, with revenue from foreign regions decreasing to 57% of revenue
in fiscal 1997 from 63% in fiscal 1996. The Japan region experienced the largest
decline in revenue, a 50% decrease from the prior year representing
approximately 30% of the total decline in revenue. Total spares and service
revenue dollars remained virtually flat in fiscal 1997 compared to fiscal 1996.
Service revenue represented less than 4% of total revenue in fiscal 1997 and
1996.
During fiscal 1997, Lam's revenue declined sequentially for three quarters,
then increased for the fourth quarter. The Company anticipates that quarterly
revenues for the first half of fiscal 1998 are likely to be relatively flat with
revenue for the fourth quarter of fiscal 1997. The Company believes that as the
industry returns to historical growth rates revenues may increase during the
second half of fiscal 1998.
Royalty income for fiscal 1997 decreased 44% to $12.7 million from $22.8
million in fiscal 1996. The reduction in royalty income was due primarily to the
lower royalty rate effective January 1, 1997 under the extended royalty
agreement with TEL. The agreement, originally set to expire on December 31,
1996, was renegotiated to a reduced royalty rate of 1% from 5%. The Company
expects that royalty income for fiscal 1998 will be significantly lower than
fiscal 1997 as 1998 will be the first full fiscal year with royalty income from
TEL computed at the reduced rate.
The Company's gross margin percentage for fiscal 1997 was 32.6% compared to
48.3% for fiscal 1996. As noted above, during fiscal 1997, the Company's product
mix shifted from the higher-margin Rainbow products to the newer lower-margin
Alliance cluster etch and CVD products. Furthermore, as a result of this faster
than expected customer transition to the multi-chamber from the single-chamber
tools, and continuing revisions to the design and features of such multi-chamber
products, during the third quarter of fiscal 1997, the Company established
additional reserves for excess and obsolete manufacturing and spare parts
inventories and inventory-related commitments of approximately $42.0 million.
The Company also re-evaluated its warranty and installation reserves and
determined that additional provisions of approximately $15.0 million were
required, primarily because the Alliance cluster and CVD tools are more costly
to install and fulfill warranty obligations. Additionally, the slowdown in the
semiconductor industry brought about reduced manufacturing volumes which in turn
caused the Company to experience an increase in fixed manufacturing costs as a
percentage of revenue. Also contributing to the decline in gross margin percent
was an overall decline in the spare parts and service margin caused by a shift
whereby a lower percentage of revenue was derived from higher-margin spares and
a higher percentage of revenue from lower-margin service.
While the Company expects that gross margin percentages in the first half
of fiscal 1998 will continue to be affected by the slowdown in the semiconductor
industry and the Company's related excess manufacturing capacity, the Company
anticipates that the gross margin percentages may start to increase in the
second half of fiscal 1998.
R&D expenses increased to $192.3 million in fiscal 1997 from $186.9 million
in fiscal 1996. As a percentage of revenue, R&D expenses increased to 17.9% of
revenue in fiscal 1997 compared with 14.1% in fiscal 1996. Contributing to the
increase in R&D expenses during fiscal 1997 was the Company's continued
investment in development of the CMP polishing system. During the first quarter
of fiscal 1997, the Company implemented a restructuring of its operations which
eliminated the previously existing business unit structure. As a result of the
restructuring, R&D activities were centralized and certain duplicate R&D
functions were eliminated. Partially offsetting the overall decrease in R&D
spending during fiscal 1997 was an approximate $3.0 million write-off of
R&D-related fixed assets during the third quarter of fiscal 1997. The Company
believes that in order to remain competitive in the semiconductor equipment
industry it must continue to significantly invest in R&D. Over the next five to
ten years, the Company intends to invest a significant percentage of R&D
resources to create production ready systems that allow the Company's customers
to process 300 mm wafers efficiently and effectively. The Company continues to
invest in advanced etch
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<PAGE> 66
applications, and FPD technology, to develop its CVD technology, to develop its
CMP polishing system and to make enhancements to its Alliance and TCP products.
Sales, general and administrative ("S,G&A") expenses decreased $28.2
million in fiscal 1997 from $237.4 million in fiscal 1996. During fiscal 1996,
the Company added employees in all administrative areas to accommodate the
increase in sales volume. During fiscal 1997, in response to the slowdown in the
semiconductor market and the decrease in sales volume, the Company implemented a
restructuring of its operations which resulted in a reduction in workforce and
initiated programs which reduced expenses and capital spending. Partially
offsetting the overall reduction in S,G&A expenses were $6.6 million of bad debt
expense for at-risk receivables relating to SubMicron and an adjustment of
approximately $3.0 million for the write-off of certain obsolete customer
evaluation systems.
During fiscal 1997, Lam 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 market
conditions Lam reduced its workforce by approximately 11% and recorded a charge
of $9.0 million related primarily to severance compensation for and
consolidation of facilities. At June 30, 1997, $1.7 million remains in accrued
liabilities relating primarily to executive severance and lease payments on
remaining unused facilities. As of June 30, 1997, Lam has made $6.3 million of
cash payments relating to the restructuring. The Company anticipates that
operating expenses for the first half of fiscal 1998 will remain relatively flat
when compared with the second half of fiscal 1997.
Interest expense for the Company decreased by 35% in fiscal 1997 over
fiscal 1996, due primarily to the retirement of the subordinated convertible
debentures in the fourth quarter of fiscal 1996. The Company expects that
interest expense will increase in future periods due to the additional interest
expense which the Company will incur on the Notes, which the Company offered in
August 1997 (see note U of the Notes to the Supplemental Consolidated Financial
Statements). The Company also expects that interest income will increase as a
result of the additional cash acquired from the sale of the Notes.
The Company recorded a tax benefit of 49.6% of its pre-tax loss related
primarily due to the benefit from its carryback operating loss and R&D tax
credits for fiscal 1997.
Lam experienced its first net loss in fiscal 1997 since fiscal 1990. In
summary, items that contributed to the net loss included lower revenues due to
the slowdown in the semiconductor industry, and lower gross margins due to the
transition from the higher-margin, mature Rainbow and TCP products to the
lower-margin Alliance products. Additionally, adjustments relating to excess and
obsolete manufacturing and spares parts inventory, increased reserves for
installation and warranty, a charge for the restructuring of operations during
the first quarter of fiscal 1997, and bad debt expenses during the year
contributed to the net loss.
Fiscal 1996 vs. 1995
The Company's revenue for fiscal year 1996 increased to $1,332.7 million, a
59% increase from the $836.6 million of revenue in fiscal 1995. Lam's TCP
products experienced increased sales in all regions and accounted for
approximately one half of the overall increase in revenue. Also contributing to
the overall increase in revenue for fiscal 1996 were sales of Lam's Rainbow and
Alliance products, which when combined accounted for approximately one-third of
the increase in revenue. Alliance revenue was particularly strong in the latter
half of fiscal 1996, as customers took delivery of the Alliance product in
larger quantities. Most of the remainder of the increase in revenue resulted
from increased spares and service revenue, which occurred as a result of Lam's
increased installed machine base. The Company experienced increased revenue in
all geographic regions, with foreign sales increasing to 63% of overall revenue
from 53% in fiscal 1995. The Asia Pacific region, excluding Japan, accounted for
slightly more than one half of the increase in revenue obtained from foreign
sources. Also, the United States, Japan and European regions continued to show
increases in revenue, accounting for, in approximately equal amounts, the
remainder of the increase.
Royalty income was $22.8 million in fiscal 1996, an 85% increase over
fiscal 1995, due to the increased sales of systems incorporating Lam technology
by TEL and Sumitomo.
65
<PAGE> 67
Gross margins were 48.3% for fiscal 1996 compared with 48.6% for fiscal
1995. The slight decrease in gross margins can be attributed to the product mix
as Lam sold a relatively higher percentage of the lower margin TCP and Alliance
machines and a relatively lower percentage of the higher margin Rainbow
machines.
R&D dollar spending increased 38.8% in fiscal 1996 over fiscal 1995 and as
a percentage of revenues decreased by 2.0% to 14.1% in fiscal 1996. R&D spending
increased as Lam continued to invest in the development of advanced etch
applications, CVD technologies, including the DSM 9800 and DSM 9900, development
of the CMP polishing system, continued enhancements to the TCP and Alliance
products, and continued development of Lam's FPD technology. Although the R&D
expenditures increased as the Company had added engineering and scientific
headcount, R&D expenditures increased at a rate slightly slower than revenue
increased. During the quarter ended June 30, 1996, Lam began occupancy in an
additional engineering facility at Lam's Fremont campus, which Lam is utilizing
under an operating lease.
S,G&A expenses increased by 57.2% in fiscal 1996 over fiscal 1995 and
decreased slightly as a percentage of sales. During fiscal 1996, the Company
added employees in all customer support, sales and administration areas to
accommodate the increased sales volume. During fiscal 1996, the Company
significantly expanded its foreign facilities: Lam opened a manufacturing
facility in Korea, expanded its facilities in Japan and relocated and began the
expansion of its Taiwan facility.
In June 1995, OnTrak entered into a worldwide, non-exclusive license
agreement under which OnTrak agreed to pay $1.5 million upon closing of its
initial public offering in July 1995. The portion of the payment which related
to the use of the technology prior to March 31, 1995 was reflected as a
non-recurring, $1.3 million charge to operations in fiscal 1995. For sales after
March 31, 1995, royalty expense relating to the license has been included in
cost of sales.
Interest expense for the Company increased by 17% in fiscal 1996 over
fiscal 1995, due to additional yen bank borrowings by Lam's Japanese subsidiary,
additional interest expense related to an interest rate swap and the increased
interest expense associated with the additional capital leases for equipment and
leasehold improvements. Other income decreased due to a $10.4 million one-time
gain recorded in the fourth quarter of fiscal 1995 from the sale of all of the
stock held by Lam in Brooks Automation, Inc., a vendor to Lam.
The combined effective tax rate was 32.6% for fiscal 1996, an increase over
the prior year's 30%, due primarily to the expiration of federal R&D tax
credits.
Liquidity and Capital Resources
Despite a net loss of $30.7 million for fiscal 1997, operating activities
provided approximately $81.0 million in cash flows. Non-cash depreciation and
amortization accounted for $55.7 million of the net operating cash flow;
partially offsetting the cash flow from depreciation and amortization was $25.0
million related to additional deferred tax assets recorded as a result of
non-deductible reserves recorded in third quarter of fiscal 1997. Working
capital accounts provided $81.0 million from decreases in inventory and accounts
receivable, increases in accrued liabilities, partially offset by increases in
prepaid expenses and other assets. During fiscal 1997, inventories decreased due
to the impact of Lam's company-wide inventory reduction program, and additional
reserves recorded in the third quarter, which was offset by increases in
inventory needed to increase worldwide spares capabilities. The Company's asset
management efforts and the decrease in revenues contributed to the overall
decrease in the accounts receivable balance. Prepaid expenses and other assets
increased $19.8 million due to the reclassification of some other receivables
and increases in prepaid corporate and consumption taxes at Lam's foreign
subsidiaries. During fiscal 1997, an additional $60.0 million of cash was
provided from the sale of yen-denominated Japanese receivables to a bank (under
an amended agreement whereby Lam increased the amount of yen-denominated
Japanese receivables it may sell to the bank from 6 billion yen to 9 billion
yen). At June 30, 1997, $39.9 million of the total receivables sold under this
agreement remained uncollected by the bank and subject to recourse provisions.
The Company enters into foreign-currency forward contracts to minimize the
impact of exchange rate fluctuations on the value of yen-denominated assets and
liabilities. The realized gains and losses on these contracts are deferred and
offset
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<PAGE> 68
against realized and unrealized gains and losses from the settlement of the
related yen receivables. The realized losses on yen-forward contracts at June
30, 1997 were offset by gains on the underlying receivables.
Net cash used for investing activities during fiscal 1997 was $33.2
million. Net capital expenditures were $47.3 million, primarily for the
completion of leasehold improvements. Offsetting cash used for investing were
net sales of short-term investments of $25.1 million. Cash totaling $11.0
million was also used to purchase certain technology rights and other
investments classified as other assets on the Company's balance sheet.
Net cash flows provided by financing activities were $6.0 million.
Contributing to the cash from financing activities was $14.9 million relating to
common stock issuances, primarily for the employee stock purchase and option
plans and net cash borrowings of $10.0 million against the syndicated line of
credit. Offsetting the cash contributions were payments of lease obligations of
$18.9 million.
As of June 30, 1997, the Company had $195.7 million in cash, cash
equivalents and short-term investments compared with $167.1 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 syndicated bank line of credit bear interest at the bank's prime rate or
0.7% to 0.9% over London Interbank Offered Rate (LIBOR) and are subject to the
Company's compliance with financial and other covenants. The Company also has a
line of credit of $10.0 million with a bank which expires in November 1997;
borrowings under this bank line of credit bear interest at the bank's prime
rate. The Company amended or received waivers for certain of its financial
covenants in anticipation of the net loss reported for the three and nine month
periods ended March 31, 1997. The Company was in compliance with the all the
covenants at June 30,1997. At June 30, 1997, the Company had borrowings against
the syndicated bank line of credit of $35.0 million. Borrowings under the line
of credit are unsecured. During August 1997, the Company completed an offering
of $310.0 million of the Notes. Expenses associated with the offering of
approximately $9.0 million will be deferred and will be included in other
assets. Such expenses will be amortized to interest expense over the term of the
Notes.
In connection with the issuance of the Notes, the Company received consents
and waivers with respect to certain financial and other covenants contained in
agreements related to certain existing financial arrangements. In addition, as a
consequence of the Merger with OnTrak as well as issuance of the Notes, the
Company, prior to the end of the fiscal quarter ending September 30, 1997, would
have been out of compliance with certain other financial covenants unless
appropriate waivers were completed prior to that time. The Company received
appropriate waivers prior to the fiscal quarter end and on October 7, 1997
amended its syndicated revolving credit agreement and synthetic real estate
leases.
The Company's commitments consist primarily of debt obligations and
operating and capital lease commitments for its facilities and equipment. Based
upon current forecasts, the Company's cash, cash equivalents, short-term
investments and available lines of credit at June 30, 1997 as well as the
proceeds from the Notes are expected to be sufficient to support anticipated
levels of operations and capital expenditures through at least June 30, 1998.
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<PAGE> 69
SELLING SECURITYHOLDERS
The Notes were originally issued by the Company and sold by the Initial
Purchasers in a transaction exempt from the registration requirements of the
Securities Act to persons reasonably believed by such Initial Purchasers to be
QIBs or in transactions complying with the provisions of Regulation S under the
Securities Act. The Selling Securityholders (which term includes their
transferees, pledgees, donees or successors) may from time to time offer and
sell pursuant to this Prospectus any or all of the Notes and Common Stock.
Set forth below are the names of each Selling Securityholder, the nature of
any position, office, or other material relationship that the Selling
Securityholder has had within the past three years with the Company or any of
its predecessors or affiliates, the principal amount of Notes that may be
offered and sold by such Selling Securityholder pursuant to this Prospectus and
(if one percent or more) the percentage of such Notes owned as of October 23,
1997, the number of Shares that may be offered and sold by such Selling
Securityholder pursuant to this Prospectus and (if one percent or more) the
percentage of Common Stock represented by the Common Stock owned by each Selling
Securityholder after conversion of the Notes.
Any or all of the Notes or Common Stock listed below may be offered for
sale pursuant to this Prospectus by the Selling Securityholders from time to
time. Accordingly, no estimate can be given as to the amount of the Notes or
Shares that will be held by the Selling Securityholders upon consummation of any
such sales. In addition, the Selling Securityholders identified below may have
sold, transferred or otherwise disposed of all or a portion of their Notes since
the date on which the information regarding their Notes was provided, in
transactions exempt from the registration requirements of the Securities Act.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF SHARES THAT MAY PERCENTAGE OF
NOTES THAT PERCENTAGE BE SOLD PURSUANT COMMON STOCK
MAY BE OF NOTES TO THIS AFTER CONVERSION
NAME SOLD($) OUTSTANDING PROSPECTUS(1) OF THE NOTES(2)
- ------------------------------------------- ----------- ----------- ------------------ ----------------
<S> <C> <C> <C> <C>
BancAmerica Robertson Stephens............. 2,085,000 * 23,755 *
The Bank of New York....................... 6,000,000 1.94% 68,360 *
Bankers Trust Company...................... 18,915,000 6.10% 215,506 *
Bear, Stearns Securities Corp.............. 15,750,000 5.08% 179,446 *
Boston Safe Deposit and Trust Company...... 15,275,000 4.93% 174,034 *
Brown Brothers Harriman & Co............... 15,860,000 5.12% 180,699 *
Bank of Tokyo-Mitsubishi Trust Company..... 3,535,000 1.14% 40,275 *
BT/Corp. Clearance BTI..................... 5,000,000 1.61% 56,967 *
Chase Manhattan Bank....................... 1,925,000 * 21,932 *
Chase Manhattan Bank/Chemical.............. 23,430,000 7.56% 266,947 *
Citibank, N.A.............................. 1,535,000 * 17,488 *
Deutsche Bank A.G., New York Branch........ 85,450,000 27.56% 973,567 2.59%
Donaldson, Lufkin and Jenrette Securities
Corporation.............................. 8,000,000 2.58% 91,147 *
Everen Clearing Corp....................... 265,000 * 3,019 *
Goldman, Sachs & Co........................ 5,750,000 1.85% 65,512 *
Jefferies & Company, Inc................... 1,000,000 * 11,393 *
Lehman Brothers, Inc....................... 250,000 * 2,848 *
Lehman Brothers
International[Europe]-Equity Division.... 50,000 * 569 *
Lehman Brothers International(Europe)-Prime
Broker (LBI)............................. 903,000 * 10,288 *
Merrill Lynch Professional Clearing
Corp..................................... 275,000 * 3,133 *
Merrill Lynch, Pierce Fenner & Smith
Safekeeping.............................. 3,465,000 1.12% 39,478 *
J.P. Morgan Securities, Inc................ 1,050,000 * 11,963 *
Morgan Stanley & Co. Inc................... 1,800,000 * 20,508 *
</TABLE>
68
<PAGE> 70
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF SHARES THAT MAY PERCENTAGE OF
NOTES THAT PERCENTAGE BE SOLD PURSUANT COMMON STOCK
MAY BE OF NOTES TO THIS AFTER CONVERSION
NAME SOLD($) OUTSTANDING PROSPECTUS(1) OF THE NOTES(2)
- ------------------------------------------- ----------- ----------- ------------------ ----------------
<S> <C> <C> <C> <C>
NationsBanc Montgomery Securities, Inc./San
Francisco................................ 2,000,000 * 22,786 *
NatWest Securities Corporation............. 28,672,000 9.25% 326,671 *
NationsBank of Texas, N.A.................. 135,000 * 1,538 *
Northern Trust Company..................... 600,000 * 6,836 *
Nesbitt Burns Inc.......................... 200,000 * 2,278 *
Oppenheimer & Co., Inc..................... 1,000,000 * 11,393 *
Prudential Securities Incorporated
Custodial Account........................ 715,000 * 8,146 *
Republic New York Securities Corporation... 475,000 * 5,411 *
Smith Barney Inc........................... 17,900,000 5.77% 203,942 *
Societe Generale Securities Corp........... 3,400,000 1.10% 38,737 *
SSB -- Custodian........................... 13,350,000 4.31% 152,102 *
Suntrust Bank, Atlanta..................... 6,000,000 1.94% 68,360 *
Texas Commerce Bank, National
Association.............................. 60,000 * 683 *
UBS Securities Inc......................... 17,150,000 5.53% 195,397 *
Wachovia Bank of North Carolina, N.A....... 775,000 * 8,829 *
Total...................................... 310,000,000 100% 3,531,943
</TABLE>
- ---------------
* Less than one percent.
(1) Assumes conversion of the full amount of Notes held by such Selling
Securityholder at the initial conversion price of $87.77 per share; such
conversion price is subject to adjustment as described under "Description of
Notes -- Conversion Rights." Accordingly, the number of Shares issuable upon
conversion of the Notes may increase or decrease from time to time.
Fractional shares will not be issued upon conversion of the Notes; cash will
be paid in lieu of fractional shares, if any. The difference in the total
from that set forth on the Prospectus cover page is due to rounding of
fractional shares.
(2) The percentage of Common Stock after conversion of the Notes represents the
percentage of the Common Stock each Selling Securityholder will have after
treating as outstanding the number of Shares of Common Stock shown as being
issuable upon the assumed conversion by the named Selling Securityholder of
the full amount of such holder's Notes but not assuming the conversion of
the Notes of any other Selling Securityholder. These percentages are based
on 37,635,223 shares of Common Stock that were issued and outstanding as of
October 23, 1997 before taking into account any of the assumed conversions.
69
<PAGE> 71
PLAN OF DISTRIBUTION
The Company is registering the Notes and the Common Stock issuable upon
conversion (collectively, the "Registered Securities") for resale by the holders
thereof pursuant to contractual registration rights contained in the
Registration Rights Agreement as discussed above.
The Registered Securities offered hereunder may be sold from time to time
by the holders thereof, or by pledgees, donees, transferees or other successors
in interest. Such sales may be made on the Nasdaq National Market System (only
in the case of the Common Stock), on the over-the-counter market or otherwise at
prices and on terms then prevailing or related to the then current market price,
or in negotiated transactions. The Registered Securities may be sold to or
through one or more broker-dealers, acting as agent or principal in underwriting
offerings, block trades, agency placements, exchange distributions, brokerage
transactions or otherwise, or in any combination of transactions.
In connection with any transaction involving the Registered Securities,
broker-dealers or others may receive from holders thereof, and may in turn pay
to other broker-dealers or others, compensation in the form of commissions,
discounts or concessions in amounts to be negotiated at the time. Broker-dealers
and any other persons participating in a distribution of the Registered
Securities may be deemed to be "underwriters' within the meaning of the Act in
connection with such distribution, and any such commissions, discounts or
concessions may be deemed to be underwriting discounts or commissions under the
Securities Act.
Any or all of the sales or other transactions involving the Registered
Securities described above, whether effected by the Selling Securityholders, any
broker dealer or others, may be made pursuant to this Prospectus. In addition,
any shares of Common Stock that qualify for sale pursuant to Rule 144 under the
Securities Act may be sold under Rule 144 rather than pursuant to this
Prospectus.
In order to comply with the securities laws of certain states, if
applicable, the Registered Securities may be sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, the Registered
Securities may not be sold unless they have been registered or qualified for
sale or an exemption from registration or qualification requirements is
available and is complied with under applicable state securities laws.
The Company and the holders or the Registered Securities have agreed, and
hereafter may further agree, to indemnify certain persons, including
broker-dealers or others, against certain liabilities in connection with any
offering of the Common Stock, including liabilities arising under the Securities
Act.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Common Stock
offered hereby will be passed upon for the Company by Jackson Tufts Cole &
Black, LLP, 60 South Market Street, San Jose, CA 95113. Certain legal matters
with respect to the legality and enforceability of the Notes will be passed upon
by Winthrop, Stimson, Putnam & Roberts, 1 Battery Park Plaza, New York, NY
10004-1490.
70
<PAGE> 72
EXPERTS
The consolidated financial statements and schedule of Lam Research
Corporation appearing in the Company's Annual Report (Form 10-K) for the year
ended June 30, 1997 have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and incorporated
herein by reference. Such consolidated financial statements and schedule are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements of OnTrak Systems, Inc., not
separately presented in this Prospectus, have been audited by Price Waterhouse
LLP, independent accountants, whose report thereon appears herein. Such
financial statements, to the extent they have been included in the financial
statements of Lam Research Corporation, have been so included in reliance on
their report given on the authority of said firm as experts in auditing and
accounting.
The supplemental consolidated financial statements of Lam Research
Corporation at June 30, 1997 and 1996 and for each of the three years in the
period ended June 30, 1997, appearing in this Prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon and appearing elsewhere herein, which is based in
part on the report of Price Waterhouse LLP, independent accountants. The
supplemental consolidated financial statements referred to above are included in
reliance upon such reports given upon the authority of such firms as experts in
accounting and auditing.
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED TO DO SO OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Available Information................................................................... 2
Incorporation of Certain Documents by Reference......................................... 2
The Company............................................................................. 5
Risk Factors............................................................................ 6
Use of Proceeds......................................................................... 15
Capitalization.......................................................................... 15
Selected Consolidated Financial Information............................................. 16
Recent Developments..................................................................... 18
Description of Notes.................................................................... 18
Certain Federal Income Tax Considerations............................................... 34
Description of Capital Stock............................................................ 40
Supplemental Consolidated Financial Statements.......................................... 41
Management's Discussion and Analysis of Financial Condition and Results of Operations... 63
Selling Securityholders................................................................. 68
Plan of Distribution.................................................................... 70
Legal Matters........................................................................... 70
Experts................................................................................. 71
</TABLE>
71
<PAGE> 73
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the Notes and Common Stock being registered. All the amounts shown are
estimates except for the registration fee.
<TABLE>
<S> <C>
Registration fee................................................ $ 93,939.39
Blue sky qualification fees and expenses........................ 10,000.00
Legal fees and expenses......................................... 60,000.00
Printing and engraving expenses................................. 100,000.00
Miscellaneous................................................... 5,000.00
Accounting fees and expenses.................................... 130,000.00
----------
Total................................................. $398,939.39
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL") permits a
Delaware corporation to indemnify officers, directors, employees and agents for
actions taken in good faith and in a manner they reasonably believed to be in,
or not opposed to, the best interests of the corporation, and with respect to
any criminal action, which they had no reasonable cause to believe was unlawful.
The DGCL provides that a corporation may pay expenses (including attorneys'
fees) incurred by an officer or director in defending any civil, criminal,
administrative or investigative action (upon receipt of a written undertaking to
reimburse the corporation if indemnification is not appropriate), and must
reimburse a successful defendant for expenses, including attorney's fees,
actually and reasonably incurred, and permits a corporation to purchase and
maintain liability insurance for its directors and officers. The DGCL provides
that indemnification may be made for any claim, issue or matter as to which a
person has been adjudged by a court of competent jurisdiction, after exhaustion
of all appeals therefrom, to be liable to the corporation, unless and only to
the extent a court determines that the person is entitled to indemnity for such
expenses as the court deems proper.
The Lam Certificate of Incorporation (the "Lam Certificate") and the
Company Bylaws provide, among other things, that, to the fullest extent
authorized by the DGCL, the Company shall indemnify each person who is or has
served as a director or officer of the Company or any predecessor of the
Company, or any other enterprise at the request of the Company or of any
predecessor of the Company, against expenses (including attorneys' fees),
judgments, fines, settlements, and other amounts actually and reasonably
incurred in connection with any proceeding, arising by reason of the fact that
such person is or was an agent of the Company. The Company may also indemnify
each of its employees and other agents against expenses (including attorneys'
fees), judgments, fines, settlements, and other amounts actually and reasonably
incurred in connection with any proceeding arising by reason of the fact that
such person is or was an agent of the Company.
The DGCL permits a Delaware corporation to include a provision in its
certificate of incorporation eliminating or limiting the personal liability of
any director to the corporation or its stockholders for monetary damages for a
breach of the director's fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL, which concerns unlawful payments of dividends, stock purchases or
redemptions or (iv) for any transaction from which the director derived an
improper personal benefit. The Lam Certificate contains provisions limiting the
liability of its directors, to the fullest extent currently permitted by the
DGCL for monetary damages for breach of their fiduciary duty as directors.
II-1
<PAGE> 74
While these provisions provide directors with protection from awards for
monetary damages for breaches of their duty of care, they do not eliminate such
duty. Accordingly, these provisions will have no effect on the availability of
equitable remedies such as an injunction or rescission based on a director's
breach of his or her duty of care.
The Company has purchased insurance which purports to insure the Company
against certain costs of indemnification which may be incurred by it pursuant to
the Lam Certificate and the Company Bylaws and to insure the officers and
directors of the Company, and its subsidiary companies, against certain
liabilities incurred by them in the discharge of their functions as such
officers and directors except for liabilities resulting from their own
malfeasance.
ITEM 16. EXHIBITS AND SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- ----------------------------------------------------------------------
<C> <S>
4.1 Indenture by and between the Company and LaSalle National Bank dated
as of August 15, 1997.
4.2 Registration Rights Agreement dated as of August 15, 1997 by and
between the Company and Deutsche Morgan Grenfeld Inc., ABN AMRO
Rothschild, and Lombard Odier International Underwriters Limited.
4.3 Form of Notes (included in Exhibit 4.1)
5.1 Opinion of Jackson Tufts Cole & Black LLP
5.2 Opinion of Winthrop Stimson Putnam & Roberts
11.1 Computation of Supplemental Earnings per Share
12.1 Ratios of Earnings to Fixed Charges
23.1 Consent of Ernst & Young LLP, independent auditors
23.2 Consent of Price Waterhouse LLP, independent accountants
23.3 Consent of Jackson Tufts Cole & Black, LLP (contained in Exhibit 5.1
hereto)
23.4 Consent of Winthrop, Stimson Putnam & Roberts (contained in Exhibit
5.2 hereto)
24.1 Power of Attorney (See page II-4)
25.1 Form T-1 Statement of Eligibility and Qualification of Trustee
27 Financial Data Schedule
</TABLE>
SCHEDULES
Schedule II Valuation and Qualifying Accounts
ITEM 17. UNDERTAKINGS.
(a) Rule 415 offering.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made
of the securities registered hereby, a post-effective amendment to this
Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement;
II-2
<PAGE> 75
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this Registration Statement
or any material change to such information in this Registration
Statement;
provided, however, that the undertakings set forth in paragraphs (i) and
(ii) above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed by the registrant pursuant to section 13 or section 15(d) of
the Securities Exchange Act of 1934 (the "Exchange Act") that are
incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Filings incorporating subsequent Exchange Act documents by reference.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in this Registration Statement shall be deemed to be a
new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Acceleration of Effectiveness.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE> 76
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Lam Research
Corporation certifies that it has reasonable grounds to believe that it meets
all of the applicable requirements for filing on Form S-3 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Fremont, State of California, on this
31st day of October, 1997.
LAM RESEARCH CORPORATION
By: /s/ RICHARD H. LOVGREN
------------------------------------
Richard H. Lovgren
Vice President, General Counsel and
Secretary
POWER OF ATTORNEY
KNOW ALL THESE PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Roger D. Emerick and Richard H. Lovgren
as his or her true and lawful attorneys-in-fact and agents, each with full power
of substitution for him or her and in his or her name, place and stead in any
and all capacities, to sign any and all amendments to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that each said attorney-in-fact and
agent or his substitute or substitutes may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the 31st day of October, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------- -------------------------------------
<C> <S> <C>
/s/ ROGER D. EMERICK Chairman of the Board
- -------------------------------------
Roger D. Emerick
/s/ JAMES W. BAGLEY Chief Executive Officer, Director
- -------------------------------------
James W. Bagley
/s/ HSIU-SHENG (WAY) TU President
- -------------------------------------
Hsiu-Sheng (Way) Tu
/s/ MERCEDES JOHNSON Vice President, Finance and Chief
- ------------------------------------- Finance Officer (Principal Financial
Mercedes Johnson and Accounting Officer)
/s/ DAVID G. ARSCOTT Director
- -------------------------------------
David G. Arscott
/s/ RICHARD J. ELKUS, JR. Director
- -------------------------------------
Richard J. Elkus, Jr.
/s/ JACK R. HARRIS Director
- -------------------------------------
Jack R. Harris
/s/ GRANT M. INMAN Director
- -------------------------------------
Grant M. Inman
/s/ OSAMU (SAM) KANO Director
- -------------------------------------
Osamu (Sam) Kano
</TABLE>
II-4
<PAGE> 77
LAM RESEARCH CORPORATION
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
--------------------------------------------------------------------------
CHARGED TO
BALANCE AT CHARGED TO OTHER
BEGINNING COSTS AND ACCOUNTS DEDUCTIONS BALANCE AT END
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE OF PERIOD
- --------------------------------- ---------- ---------- ---------- ---------- --------------
COL. A COL. B COL. C COL. D COL. E
<S> <C> <C> <C> <C> <C>
Year Ended June 30, 1997
Deducted from asset accounts:
Other allowance(1)............. $ 0 $6,550,000(2) $1,530,000(3) $ 0 $8,080,000
Allowance for doubtful
accounts.................... $2,063,000 $ 738,000 $ 0 $424,000(4) $2,377,000
Year Ended June 30, 1996
Deducted from asset accounts:
Allowance for doubtful
accounts.................... $1,245,000 $ 844,000 $ 0 $ 26,000(4) $2,063,000
Year Ended June 30, 1995
Deducted from asset accounts:
Allowance for doubtful
accounts.................... $1,212,000 $ 217,000 $ 0 $184,000(4) $1,245,000
</TABLE>
- ---------------
(1) Included in the Balance Sheet under the caption "Other assets." Represents
allowance relating to the write-off of certain at-risk receivables.
(2) Represents write-off of bad debt relating to certain at-risk receivables.
(3) Represents related installation and warranty.
(4) Represents specific customer accounts written-off.
Note: Amounts presented above applicable to prior periods have been restated to
reflect the Company's merger with OnTrak Systems, Inc. as a pooling of
interests.
S-1
<PAGE> 78
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------------------
<C> <S> <C>
4.1 Indenture by and between the Company and LaSalle National Bank dated as
of August 15, 1997
4.2 Registration Rights Agreement dated as of August 15, 1997 by and between
the Company and Deutsche Morgan Grenfeld Inc., ABN AMRO Rothschild, and
Lombard Odier International Underwriters Limited
4.3 Form of Notes (included in Exhibit 4.1)
5.1 Opinion of Jackson Tufts Cole & Black LLP
5.2 Opinion of Winthrop Stimson Putnam & Roberts
11.1 Computation of Supplemental Earnings per Share
12.1 Ratios of Earnings to Fixed Charges
23.1 Consent of Ernst & Young LLP, independent auditors
23.2 Consent of Price Waterhouse LLP, independent accountants
23.3 Consent of Jackson Tufts Cole & Black, LLP (contained in Exhibit 5.1
hereto)
23.4 Consent of Winthrop, Stimson Putnam & Roberts (contained in Exhibit 5.2
hereto)
24.1 Power of Attorney (See page II-4)
25.1 Form T-1 Statement of Eligibility and Qualification of Trustee
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 4.1
FINAL
- --------------------------------------------------------------------------------
LAM RESEARCH CORPORATION,
COMPANY
LASALLE NATIONAL BANK,
TRUSTEE
----------------------
INDENTURE
DATED AS OF AUGUST 15, 1997
----------------------
5% CONVERTIBLE SUBORDINATED NOTES DUE 2002
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
RECITALS.....................................................................................6
ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION..........................7
SECTION 1.1. Definitions..................................................................7
Act......................................................................................7
Additional Amounts.......................................................................7
Affiliate................................................................................7
Applicable Price.........................................................................8
Authenticating Agent.....................................................................8
Authorized Newspaper.....................................................................8
Board of Directors.......................................................................8
Board Resolution.........................................................................8
Business Day.............................................................................8
Cedel....................................................................................8
Closing Price............................................................................8
Code.....................................................................................8
Commission...............................................................................9
Common Stock.............................................................................9
Company..................................................................................9
Company Order..............................................................................9
Company Notice...........................................................................9
Constituent Person.......................................................................9
Conversion Agent.........................................................................9
Conversion Price.........................................................................9
Corporate Trust Office...................................................................9
corporation.............................................................................10
Custodian...............................................................................10
Defaulted Interest......................................................................10
Depositary..............................................................................10
Designated Senior Indebtedness..........................................................10
Dollar..................................................................................10
DTC.....................................................................................10
Euroclear...............................................................................10
Event of Default........................................................................10
Exchange Act............................................................................10
Fundamental Change......................................................................10
Global Security.........................................................................11
Holder..................................................................................11
Indebtedness............................................................................11
Indenture...............................................................................12
Initial Purchasers......................................................................12
Interest Payment Date...................................................................12
Liquidated Damages......................................................................12
Maturity................................................................................12
Non-electing Share......................................................................12
Non-U.S. Holder.........................................................................12
Note Register...........................................................................12
Note Registrar..........................................................................12
Officer.................................................................................12
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Officers' Certificate...................................................................12
Opinion of Counsel......................................................................13
Outstanding.............................................................................13
Paying Agent............................................................................13
Payment Blockage Notice.................................................................14
Person..................................................................................14
Place of Conversion.....................................................................14
Place of Payment........................................................................14
Predecessor Security....................................................................14
Purchase Agreement......................................................................14
Purchased Shares........................................................................14
Record Date.............................................................................14
Redemption Date.........................................................................14
Redemption Price........................................................................14
Reference Market Price..................................................................14
Registration Rights Agreement...........................................................14
Regular Record Date.....................................................................15
Regulation S............................................................................15
Regulation S Global Security............................................................15
Representative..........................................................................15
Repurchase Date.........................................................................15
Repurchase Price........................................................................15
Responsible Officer.....................................................................15
Rule 144A...............................................................................15
Rule 144A Global Security...............................................................15
Rule 144A Information...................................................................15
Securities..............................................................................15
Securities Act..........................................................................15
Senior Indebtedness.....................................................................16
Special Record Date.....................................................................16
Stated Maturity.........................................................................16
Subsidiary..............................................................................16
Successor Security......................................................................16
Tax Affected Security...................................................................16
Taxing Jurisdiction.....................................................................16
Tax Law Change..........................................................................16
Trading Day.............................................................................17
Trust Indenture Act.....................................................................17
Trustee.................................................................................17
United States...........................................................................17
U.S. Holder.............................................................................17
Western Europe..........................................................................17
SECTION 1.2. Compliance Certificates and Opinions........................................17
SECTION 1.3. Form of Documents Delivered to the Trustee..................................18
SECTION 1.4. Acts of Holders of Securities...............................................19
SECTION 1.5. Notices, Etc., to Trustee and Company.......................................21
SECTION 1.6. Notice to Holders of Securities; Waiver.....................................22
SECTION 1.7. Effect of Headings and Table of Contents....................................22
SECTION 1.8. Successors and Assigns......................................................22
SECTION 1.9. Separability Clause.........................................................22
SECTION 1.10. Benefits of Indenture.......................................................23
SECTION 1.11. Governing Law...............................................................23
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SECTION 1.12. Legal Holidays..............................................................23
SECTION 1.13. Conflict with Trust Indenture Act...........................................23
SECTION 1.14. Jurisdiction................................................................24
SECTION 1.15. Indenture and Securities Solely Corporate Obligations.......................24
SECTION 1.16. Luxembourg Obligations......................................................25
ARTICLE TWO SECURITY FORMS..................................................................25
SECTION 2.1. Forms Generally.............................................................25
SECTION 2.2. Form of Security............................................................26
SECTION 2.3. Assignment Form and Certificate of Transfer.................................40
SECTION 2.4. Form of Election of Holder to Require Repurchase............................42
SECTION 2.5. Form of Conversion Notice...................................................43
SECTION 2.6. Form of Certificate of Authentication.......................................44
ARTICLE THREE THE SECURITIES................................................................45
SECTION 3.1. Title and Terms.............................................................45
SECTION 3.2. Denominations...............................................................46
SECTION 3.3. Execution, Authentication, Delivery and Dating..............................46
SECTION 3.4. Registration, Registration of Transfer and Exchange;
Restrictions on Transfer .................................................49
SECTION 3.5. Temporary Securities........................................................56
SECTION 3.6. Mutilated, Destroyed, Lost or Stolen Securities.............................57
SECTION 3.7. Payment of Interest; Interest Rights Preserved..............................58
SECTION 3.8. Persons Deemed Owners.......................................................59
SECTION 3.9. Cancellation................................................................60
SECTION 3.10. Computation of Interest.....................................................60
SECTION 3.11. CUSIP Numbers...............................................................60
ARTICLE FOUR SATISFACTION AND DISCHARGE.....................................................60
SECTION 4.1. Satisfaction and Discharge of Indenture.....................................60
SECTION 4.2. Application of Trust Money..................................................62
ARTICLE FIVE REMEDIES.......................................................................62
SECTION 5.1. Events of Default...........................................................62
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment..........................63
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee.............64
SECTION 5.4. Trustee May File Proofs of Claim............................................65
SECTION 5.5. Trustee May Enforce Claims Without Possession of Securities.................66
SECTION 5.6. Application of Money Collected..............................................66
SECTION 5.7. Limitation on Suits.........................................................67
SECTION 5.8. Unconditional Right of Holders to Receive Principal, Premium and
Interest and to Convert...................................................67
SECTION 5.9. Restoration of Rights and Remedies..........................................68
SECTION 5.10. Rights and Remedies Cumulative..............................................68
SECTION 5.11. Delay or Omission Not Waiver................................................68
SECTION 5.12. Control by Holders of Securities............................................68
SECTION 5.13. Waiver of Past Defaults.....................................................69
SECTION 5.14. Undertaking for Costs.......................................................69
SECTION 5.15. Waiver of Stay, Extension and Usury Laws....................................69
ARTICLE SIX THE TRUSTEE.....................................................................70
SECTION 6.1. Certain Duties and Responsibilities.........................................70
SECTION 6.2. Notice of Defaults..........................................................71
SECTION 6.3. Certain Rights of Trustee...................................................71
SECTION 6.4. Not Responsible for Recitals or Issuance of Securities......................72
SECTION 6.5. May Hold Securities, Act as Trustee Under Other Indentures..................73
SECTION 6.6. Money Held in Trust.........................................................73
SECTION 6.7. Compensation and Reimbursement..............................................73
SECTION 6.8. Corporate Trustee Required; Eligibility.....................................74
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SECTION 6.9. Resignation and Removal; Appointment of Successor..........................75
SECTION 6.10. Acceptance of Appointment by Successor.....................................76
SECTION 6.11. Merger, Conversion, Consolidation or Succession to Business................76
SECTION 6.12. Authenticating Agents......................................................77
SECTION 6.13. Disqualification; Conflicting Interests....................................78
SECTION 6.14. Preferential Collection of Claims Against Company..........................78
ARTICLE SEVEN CONSOLIDATION, MERGER, TRANSFER OR LEASE......................................78
SECTION 7.1. Company May Consolidate, Etc., Only on Certain Terms.......................78
SECTION 7.2. Successor Substituted......................................................79
ARTICLE EIGHT SUPPLEMENTAL INDENTURES.......................................................79
SECTION 8.1. Supplemental Indentures Without Consent of Holders of Securities...........79
SECTION 8.2. Supplemental Indentures with Consent of Holders of Securities..............80
SECTION 8.3. Execution of Supplemental Indentures.......................................82
SECTION 8.4. Effect of Supplemental Indentures..........................................82
SECTION 8.5. Reference in Securities to Supplemental Indentures.........................82
SECTION 8.6. Notice of Supplemental Indentures..........................................82
ARTICLE NINE MEETINGS OF HOLDERS OF SECURITIES..............................................83
SECTION 9.1. Purposes for Which Meetings May Be Called..................................83
SECTION 9.2. Call, Notice and Place of Meetings.........................................83
SECTION 9.3. Persons Entitled to Vote at Meetings.......................................83
SECTION 9.4. Quorum; Action.............................................................84
SECTION 9.5. Determination of Voting Rights; Conduct and Adjournment of Meetings........85
SECTION 9.6. Counting Votes and Recording Action of Meetings............................85
ARTICLE TEN COVENANTS.......................................................................86
SECTION 10.1. Payment of Principal, Premium and Interest.................................86
SECTION 10.2. Maintenance of Offices or Agencies.........................................86
SECTION 10.3. Money for Security Payments To Be Held in Trust............................87
SECTION 10.4. Additional Amounts.........................................................88
SECTION 10.5. Corporate Existence........................................................89
SECTION 10.6. Statement by Officers as to Default........................................89
SECTION 10.7. Delivery of Certain Information............................................90
ARTICLE ELEVEN REDEMPTION OF SECURITIES.....................................................90
SECTION 11.1. Right of Redemption........................................................90
SECTION 11.2. Applicability of Article...................................................90
SECTION 11.3. Election to Redeem; Notice to Trustee......................................90
SECTION 11.4. Selection by Trustee of Securities to Be Redeemed..........................91
SECTION 11.5. Notice of Redemption.......................................................91
SECTION 11.6. Deposit of Redemption Price................................................92
SECTION 11.7. Securities Payable on Redemption Date......................................93
SECTION 11.8. Securities Redeemed in Part................................................93
SECTION 11.9. Conversion Arrangement on Call for Redemption..............................93
ARTICLE TWELVE CONVERSION OF SECURITIES.....................................................94
SECTION 12.1. Conversion Privilege and Conversion Price..................................94
SECTION 12.2. Exercise of Conversion Privilege...........................................95
SECTION 12.3. Fractions of Shares........................................................97
SECTION 12.4. Adjustment of Conversion Price.............................................97
SECTION 12.5. Notice of Adjustments of Conversion Price.................................106
SECTION 12.6. Notice of Certain Corporate Action........................................106
SECTION 12.7. Company to Provide Common Stock...........................................108
SECTION 12.8. Taxes on Conversions......................................................109
SECTION 12.9. Company Covenant as to Common Stock.......................................109
SECTION 12.10. Cancellation of Converted Securities......................................109
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SECTION 12.11. Provision in Case of Consolidation, Merger, or Sale of
Assets of the Company..................................................109
SECTION 12.12. Responsibility of Trustee for Conversion Provisions.......................110
ARTICLE THIRTEEN SUBORDINATION OF SECURITIES...............................................111
SECTION 13.1. Agreement of Subordination................................................111
SECTION 13.2. Payments to Holders.......................................................111
SECTION 13.3. Subrogation of Securities.................................................114
SECTION 13.4. Authorization to Effect Subordination.....................................115
SECTION 13.5. Notice to Trustee.........................................................116
SECTION 13.6. Trustee's Relation to Senior Indebtedness of the Company..................117
SECTION 13.7. No Impairment of Subordination............................................117
SECTION 13.8. Article Applicable to Paying Agents.......................................117
SECTION 13.9. Senior Indebtedness of the Company Entitled to Rely.......................117
SECTION 13.10. Certain Conversions Deemed Payment........................................118
ARTICLE FOURTEEN REPURCHASE OF SECURITIES AT THE OPTION OF THE HOLDER UPON
A FUNDAMENTAL CHANGE.......................................................................118
SECTION 14.1. Right to Require Repurchase...............................................118
SECTION 14.2. Notices; Method of Exercising Repurchase Right, Etc.......................119
SECTION 14.3. Merger, Consolidation, etc................................................121
ARTICLE FIFTEEN HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY...........................122
SECTION 15.1. Company to Furnish Trustee Names and Addresses of Holders.................122
SECTION 15.2. Trustee to Furnish Company Names and Addresses of Holders.................122
SECTION 15.3. Preservation of Information...............................................123
SECTION 15.4. Reports by Trustee........................................................123
SECTION 15.5. Reports by Company........................................................123
SECTION 15.6. Reports with Respect to Registration of Securities........................124
</TABLE>
EXHIBIT A
INDENTURE, dated as of August 15, 1997, between Lam Research
Corporation, a Delaware corporation (herein called the "Company"), and LaSalle
National Bank, as Trustee hereunder (herein called the "Trustee").
RECITALS
The Company has duly authorized the creation of an issue of its 5%
Convertible Subordinated Notes due 2002 (herein called the "Securities") in an
aggregate principal amount not to exceed $355,000,000, and to provide therefor
the Company has duly authorized the execution and delivery of this Indenture.
All things necessary to make the Securities, when the Securities are
executed by the Company and authenticated and delivered hereunder, the valid
obligations of the Company, and to make this Indenture a valid agreement of the
Company, in accordance with their and its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
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For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, the Company and the Trustee mutually covenant
and agree, for the equal and proportionate benefit of all Holders of the
Securities as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.1. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned
to them in this Article and include the plural as well as the singular;
(2) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles in the United States, and, except as otherwise
herein expressly provided, the term "generally accepted accounting
principles" with respect to any computation required or permitted
hereunder shall mean such accounting principles as are generally
accepted at the date of such computation, other than for the purpose of
the definition of Indebtedness and Senior Indebtedness set forth herein;
and
(3) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
"Act", when used with respect to any Holder of a Security, has the
meaning specified in Section 1.4.
"Additional Amounts" has the meaning specified in Section 2.2.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control", when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
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"Applicable Price" means (i) in the event of a Fundamental Change in
which the holders of Company's Common Stock receive only cash, the amount of
cash received by the holder of one share of Common Stock and (ii) in the event
of any other Fundamental Change, the arithmetic average of the Closing Price for
the Company's Common Stock during the ten Trading Days prior to the record date
for the determination of the holders of Common Stock entitled to receive cash,
securities, property or other assets in connection with such Fundamental Change,
or, if there is no such record date, the date upon which the holders of the
Common Stock shall have the right to receive such cash, securities, property or
other assets in connection with the Fundamental Change.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 6.12 to act on behalf of the Trustee to authenticate
Securities.
"Authorized Newspaper" means a newspaper, in an official language of the
country of publication or in the English language, customarily published on each
Business Day, whether or not published on Saturdays, Sundays or holidays, and of
general circulation in the place in connection with which the term is used or in
the financial community of such place. Where successive publications are
required to be made in Authorized Newspapers, the successive publications may be
made in the same or in different newspapers in the same city meeting the
foregoing requirements and in each case on any Business Day.
"Board of Directors" or "Board" means either the board of directors of
the Company or any committee of that board empowered to act for it with respect
to this Indenture.
"Board Resolution" means a resolution duly adopted by the Board, a copy
of which, certified by the Secretary or an Assistant Secretary of the Company to
have been duly adopted by the Board and to be in full force and effect on the
date of such certification, shall have been delivered to the Trustee.
"Business Day", when used with respect to any Place of Payment, Place of
Conversion or any other place, as the case may be, means each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a day on which banking institutions
in such Place of Payment, Place of Conversion or other place, as the case may
be, are authorized or obligated by law or executive order to close; provided,
however, that a day on which banking institutions in either New York, New York
or Luxembourg are authorized or obligated by law or executive order to close
shall not be a Business Day for purposes of Section 10.1, 10.3, 11.6 or 13.5.
"Cedel" means Cedel Bank, societe anonyme.
"Closing Price" has the meaning specified in Section 12.4(8)(a).
"Code" means the United States Internal Revenue Code of 1986, as
amended.
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"Commission" means the United States Securities and Exchange Commission,
as from time to time constituted, created under the Exchange Act, or, if at any
time after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Stock" includes any stock or shares of any class of the Company
which has no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Company and which is not subject to redemption by the Company; provided,
however, subject to the provisions of Section 12.11, shares issuable on
conversion of Securities shall include only shares of the class designated as
Common Stock of the Company at the date of this Indenture or shares of any class
or classes resulting from any reclassification or reclassifications thereof and
which have no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Company and which are not subject to redemption by the Company; provided,
further, however, that if at any time there shall be more than one such
resulting class, the shares of each such class then so issuable shall be
substantially in the proportion which the total number of shares of such class
resulting from all such reclassifications bears to the total number of shares of
all such classes resulting from all such reclassifications.
"Company" means the Person named as the "Company" in the first paragraph
of this Indenture until a successor Person shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor Person.
"Company Order" or "Company Request" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its Chief Executive Officer, its President or a Senior
Vice President or a Vice President, and by its principal financial officer,
Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and
delivered to the Trustee.
"Company Notice" has the meaning specified in Section 14.2.
"Constituent Person" has the meaning specified in Section 12.11.
"Conversion Agent" means any Person authorized by the Company to convert
Securities in accordance with Article Twelve. The Company has initially
appointed (i) the Trustee as its Conversion Agent, which shall maintain an
office or agency in the Borough of Manhattan, The City of New York, New York and
(ii) Banque de Luxembourg, as its Conversion Agent in Luxembourg.
"Conversion Price" has the meaning specified in Section 12.1.
"Corporate Trust Office" means the office of the Trustee at which at any
particular time its corporate trust business shall be principally administered
(which at the date of this Indenture
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is located at 135 South LaSalle Street, Chicago, Illinois 60603), except that
with respect to presentation of securities for payment or for registration of
transfer or exchange, such term shall mean the office or agency of the Trustee
at which at any particular time, its corporate agency business shall be
conducted.
"corporation" means a corporation, company, including, without
limitation, a limited liability company, association, joint-stock company or
business trust.
"Custodian" shall mean LaSalle National Bank, as custodian with respect
to a Global Security, or any successor entity thereto.
"Defaulted Interest" has the meaning specified in Section 3.7.
"Depositary" means, with respect to any Securities issued in whole or in
part in the form of one or more Global Securities, the clearing agency that is
registered under the Exchange Act and designated to act as Depositary for such
Securities, as contemplated by Section 3.4, or any successor clearing agency
registered under the Exchange Act as contemplated by Section 3.4.
"Designated Senior Indebtedness" means the Company's obligations under
any particular Senior Indebtedness of the Company in which the instrument
creating or evidencing the same or the assumption or guarantee thereof (or
related agreements or documents to which the Company is a party) expressly
provides that such Senior Indebtedness shall be "Designated Senior Indebtedness"
for purposes of the Indenture (provided that such instrument, agreement or other
document may place limitations and conditions on the right of such Senior
Indebtedness to exercise the rights of the Designated Senior Indebtedness).
"Dollar" or "U.S.$" means a dollar or other equivalent unit in such coin
or currency of the United States as at the time shall be legal tender for the
payment of public and private debts.
"DTC" means The Depository Trust Company, a New York corporation.
"Euroclear" means Euroclear System.
"Event of Default" has the meaning specified in Section 5.1.
"Exchange Act" means the United States Securities Exchange Act of 1934,
as amended from time to time.
"Fundamental Change" means the occurrence of any transaction or event in
connection with which all or substantially all of the Common Stock shall be
exchanged for, converted into, acquired for or constitute solely the right to
receive, consideration (whether by means of an exchange offer, liquidation,
tender offer, consolidation, merger, combination, reclassification,
recapitalization or otherwise) which is not all or substantially all common
stock or shares which
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<PAGE> 11
are (or, upon consummation of or immediately following such transaction or
event, will be) listed on a United States national securities exchange or
approved for quotation on the Nasdaq National Market or any similar United
States system of automated dissemination of quotations of securities prices.
"Global Security" means any Security issued in the form set forth in
Section 2.2 and registered in the Note Register in the name of a Depositary or a
nominee thereof.
"Holder", when used with respect to any Security, means the Person in
whose name the Security is registered in the Note Register.
"Indebtedness" means, with respect to any Person, and without
duplication, (a) all indebtedness, obligations and other liabilities (contingent
or otherwise) of the Person for borrowed money (including obligations of the
Person in respect of overdrafts, foreign exchange contracts, currency exchange
agreements, interest rate protection agreements, and any loans or advances from
banks, whether or not evidenced by notes or similar instruments) or evidenced by
bonds, debentures, notes or similar instruments (whether or not the recourse of
the lender is to the whole of the assets of the Person or to only a portion
thereof) (other than any account payable or other accrued current liability or
obligation incurred in the ordinary course of business in connection with the
obtaining of materials or services), (b) all reimbursement obligations and other
liabilities (contingent or otherwise) of the Person with respect to letters of
credit, bank guarantees or bankers' acceptances, (c) all obligations and
liabilities (contingent or otherwise) in respect of leases of the Person
required, in conformity with generally accepted accounting principles, to be
accounted for as capitalized lease obligations on the balance sheet of the
Person and all obligations and other liabilities (contingent or otherwise) under
any lease or related document (including a purchase agreement) in connection
with the lease of real property which provides that the Person is contractually
obligated to purchase or cause a third party to purchase the leased property or
pay an agreed upon residual value of the leased property to the lessor and the
obligations of the Person under such lease or related document to purchase or to
cause a third party to purchase such leased property, (d) all obligations of the
Person (contingent or otherwise) with respect to an interest rate or other swap,
cap or collar agreement or other similar instrument or agreement or foreign
currency hedge, exchange, purchase or similar instrument or agreement, (e) all
direct or indirect guaranties or similar agreements by the Person in respect of,
and obligations or liabilities (contingent or otherwise) of the Person to
purchase or otherwise acquire or otherwise assure a creditor against loss in
respect of, indebtedness, obligations or liabilities of another Person of the
kind described in clauses (a) through (d), (f) any indebtedness or other
obligations described in clauses (a) through (d) secured by any mortgage,
pledge, lien or other encumbrance existing on property which is owned or held by
the Person, regardless of whether the indebtedness or other obligation secured
thereby shall have been assumed by the Person and (g) any and all deferrals,
renewals, extensions, refinancings and refundings of, or amendments,
modifications or supplements to, any indebtedness, obligation or liability of
the kind described in clauses (a) through (f).
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<PAGE> 12
"Indenture" means this Indenture as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this Indenture and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this Indenture and any such supplemental indenture,
respectively.
"Initial Purchasers" means Deutsche Morgan Grenfell Inc., ABN AMRO
Rothschild and Lombard Odier International Underwriters Limited.
"Institutional Accredited Investor" means an institutional "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Liquidated Damages" has the meaning specified in the Registration
Rights Agreement.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption, exercise of the repurchase right set forth in
Article Fourteen or otherwise.
"Non-electing Share" has the meaning specified in Section 12.11.
"Non-U.S. Holder" means any Holder other than a U.S. Holder.
"Note Register" shall have the meaning specified in Section 3.4.
"Note Registrar" has the meaning specified in Section 2.2. The Company
has initially appointed (i) the Trustee as its Note Registrar in New York and
(ii) after and so long as the Securities are listed on the Luxembourg Stock
Exchange and the Luxembourg Stock Exchange shall require, Banque de Luxembourg,
as its Note Registrar in Luxembourg for the purpose of registering Securities
and transfers and exchange of Securities as provided for herein.
"Officer" means the Chairman of the Board, a Vice Chairman of the Board,
the Chief Executive Officer, the President or a Senior Vice President or a Vice
President, the principal financial officer, the Treasurer, or Assistant
Treasurer, the Secretary or an Assistant Secretary of the Company.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, a Vice Chairman of the Board, the Chief Executive Officer, the
President or a Vice President and by the principal financial officer, Treasurer,
an Assistant Treasurer, the Secretary or an Assistant Secretary of the Company
and delivered to the Trustee.
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"Opinion of Counsel" means a written opinion of independent counsel of
recognized standing who may be counsel for the Company and who shall be
reasonably acceptable to the Trustee.
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Securities for the payment or redemption of which money in the
necessary amount has been theretofore deposited with the Trustee or any Paying
Agent (other than the Company) or set aside and segregated in trust by the
Company (if the Company shall act as its own Paying Agent) for the Holders of
such Securities, provided that if such Securities are to be redeemed, notice of
such redemption has been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made;
(iii) Securities which have been paid pursuant to Section 3.6 or in
exchange for or in lieu of which other Securities have been authenticated and
delivered pursuant to this Indenture, other than any such Securities in respect
of which there shall have been presented to the Trustee proof satisfactory to it
that such Securities are held by a bona fide purchaser in whose hands such
Securities are valid obligations of the Company; and
(iv) Securities converted into Common Stock pursuant to Article
Twelve;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities are present at a meeting of Holders
of Securities for quorum purposes or have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in making such calculation or in relying upon any such determination as to the
presence of a quorum or upon any such request, demand, authorization, direction,
notice, consent or waiver, only Securities which a Responsible Officer of the
Trustee actually knows to be so owned shall be so disregarded. Securities so
owned which have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Trustee the pledgee's right
so to act with respect to such Securities and that the pledgee is not the
Company or any other obligor upon the Securities or any Affiliate of the Company
or such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or interest on any Securities on behalf of the Company and, except
as otherwise specifically set forth herein, such term shall include the Company
if it shall act as its own Paying Agent. The Company has initially appointed (i)
the Trustee as its Paying Agent, which shall maintain an
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<PAGE> 14
office or agency in The City of New York, New York, and (ii) Banque de
Luxembourg, as its Paying Agent in Luxembourg.
"Payment Blockage Notice" has the meaning specified in Section 13.2.
"Person" means any individual, corporation, partnership, joint venture,
association, trust, estate, unincorporated organization or government or any
agency or political subdivision thereof.
"Place of Conversion" has the meaning specified in Section 3.1.
"Place of Payment" has the meaning specified in Section 3.1.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 3.6 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Purchase Agreement" means the Purchase Agreement, dated August 19,
1997, between the Company and the Initial Purchasers, as such agreement may be
amended from time to time.
"Purchased Shares" has the meaning specified in Section 12.4(6).
"QIB" shall mean a "qualified institutional buyer" as defined in Rule
144A.
"Record Date" means any Regular Record Date or Special Record Date.
"Redemption Date", when used with respect to any Security to be redeemed
in whole or in part, means the date fixed for such redemption by or pursuant to
this Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Reference Market Price" means $37.75 and in the event of any adjustment
to the Conversion Price pursuant to Section 12.4, the Reference Market Price
shall also be adjusted so that the ratio of the Reference Market Price to the
Conversion Price after giving effect to any such adjustment shall always be the
same as the ratio of $37.75 to the initial Conversion Price specified in Section
12.1 (without regard to any adjustment thereto).
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of August 15, 1997, between the Company and the Initial Purchasers, as
such agreement may be amended from time to time.
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<PAGE> 15
"Regular Record Date" for interest payable in respect of any Security on
any Interest Payment Date means the February 15 or August 15 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act (or any
successor provision), as it may be amended from time to time.
"Regulation S Global Security" has the meaning specified in Section 3.4.
"Representative" means the (a) indenture trustee or other trustee, agent
or representative for any Senior Indebtedness or (b) with respect to any Senior
Indebtedness that does not have any such trustee, agent or other representative,
(i) in the case of such Senior Indebtedness issued pursuant to an agreement
providing for voting arrangements as among the holders or owners of such Senior
Indebtedness, any holder or owner of such Senior Indebtedness acting with the
consent of the required persons necessary to bind such holders or owners of such
Senior Indebtedness and (ii) in the case of all other such Senior Indebtedness,
the holder or owner of such Senior Indebtedness.
"Repurchase Date" has the meaning specified in Section 14.1.
"Repurchase Price" has the meaning specified in Section 14.1.
"Responsible Officer", when used with respect to the Trustee, means any
officer of the Trustee including without limitation any vice president,
assistant vice president, assistant treasurer, assistant secretary, corporate
trust officer, assistant corporate trust officer or other employee of the
Trustee customarily performing functions similar to those performed by any of
the above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge and familiarity with the particular subject.
"Rule 144A" means Rule 144A under the Securities Act (or any successor
provision), as it may be amended from time to time.
"Rule 144A Global Security" has the meaning specified in Section 3.4.
"Rule 144A Information" has the meaning specified in Section 10.7.
"Securities" has the meaning ascribed to it in the first paragraph under
the caption "Recitals".
"Securities Act" means the United States Securities Act of 1933, as
amended from time to time.
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"Senior Indebtedness" means the principal of, premium, if any, interest
(including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in such proceeding) and rent payable on or in
connection with, and all fees, costs, expenses and other amounts accrued or due
on or in connection with, Indebtedness of the Company, whether outstanding on
the date of this Indenture or thereafter created, incurred, assumed, guaranteed
or in effect guaranteed by the Company (including all deferrals, renewals,
extensions or refundings of, or amendments, modifications or supplements to, the
foregoing), unless in the case of any particular Indebtedness the instrument
creating or evidencing the same or the assumption or guarantee thereof expressly
provides that such Indebtedness shall not be senior in right of payment to the
Securities or expressly provides that such Indebtedness is "pari passu" or
"junior" to the Securities. Notwithstanding the foregoing, Senior Indebtedness
shall not include any Indebtedness of the Company to any Subsidiary of the
Company a majority of the voting stock of which is owned, directly or
indirectly, by the Company.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.7.
"Stated Maturity", when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal of such Security or such installment of
interest is due and payable.
"Subsidiary" means, with respect to any Person, a corporation more than
50% of the outstanding voting stock of which is owned, directly or indirectly,
by such Person or by one or more other Subsidiaries, or by such Person and one
or more other Subsidiaries. For the purposes of this definition, "voting stock"
means stock or other similar interests in the corporation which ordinarily has
or have voting power for the election of directors, or persons performing
similar functions, whether at all times or only so long as no senior class of
stock or other interests has or have such voting power by reason of any
contingency.
"Successor Security" of any particular Security means every Security
issued after, and evidencing all or a portion of the same debt as that evidenced
by, such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 3.6 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security.
"Tax Affected Security" means any Security that, if as a result of any
Tax Law Change, the Company has or will become obligated to pay Additional
Amounts in respect of such Security.
"Taxing Jurisdiction" has the meaning specified in Section 2.2.
"Tax Law Change" means any change in, or amendment to, the laws,
regulations, treaties or rulings prevailing in the United States or any
political subdivision or taxing authority thereof
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or therein, which change or amendment becomes effective on or after the date
hereof or any application or judicial, legislative or administrative
interpretation of such laws, regulations, treaties or rulings.
"Trading Day" has the meaning specified in Section 12.4(8)(e).
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force
at the date as of which this Indenture was executed; provided, however, that in
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
"Trustee" means the Person named as the "Trustee" in the first paragraph
of this Indenture until a successor Trustee shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Trustee" shall mean
such successor Trustee.
"United States" means the United States of America (including the States
and the District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction (its "possessions" including Puerto Rico, the U.S.
Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana
Islands).
"U.S. Holder" means the beneficial holder of a Security or Common Stock
that for United States federal income tax purposes is (i) a citizen or resident
(as defined in Section 7701(b) of the Code) of the United States, (ii) a
corporation, partnership or other entity formed under the laws of the United
States or any political subdivision thereof, (iii) an estate the income of which
is subject to U.S. federal income taxation regardless of its source, (iv) in
general, a trust subject to the primary supervision of a court within the United
States and the control of a United States fiduciary as described in Section
7701(a)(30) of the Code or (v) any other person whose income or gain with
respect to a Security or Common Stock is effectively connected with the conduct
of a United States trade or business.
"Western Europe" means Austria, Belgium, Denmark, Finland, France,
Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal,
Spain, Sweden, Switzerland and the United Kingdom.
The definitions of certain other terms are specified in Article Twelve
and elsewhere in this Indenture.
SECTION 1.2. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee or any
Paying Agent to take any action under any provision of this Indenture, the
Company shall furnish to the Trustee or the Paying Agent, as the case may be, an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been
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<PAGE> 18
complied with and if required hereunder, an Opinion of Counsel stating that in
the opinion of such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture relating to such particular application or request, no
additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (excluding certificates provided for
in Section 10.6) shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he or
she has made such examination or investigation as is necessary to enable
him or her, as the case may be, to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 1.3. Form of Documents Delivered to the Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an Officer may be based, insofar as it
relates to legal matters, upon a certificate or opinion of, or representations
by, counsel, unless such Officer knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
the matters upon which such certificate or opinion is based are erroneous. Any
such certificate or opinion of counsel may be based, insofar as it relates to
factual matters, upon a certificate or opinion of, or representations by, an
Officer or Officers stating that the information with respect to such factual
matters is in the possession of the Company unless such counsel knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.
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Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.4. Acts of Holders of Securities.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided or permitted by this Indenture to be given or
taken by Holders of Securities may be embodied in and evidenced by (1) one or
more instruments of substantially similar tenor signed by such Holders in person
or by agents or proxies duly appointed in writing by such Holders, (2) the
record of Holders of Securities voting in favor thereof, either in person or by
proxies duly appointed in writing, at any meeting of Holders of Securities duly
called and held in accordance with the provisions of Article Nine or (3) a
combination of such instruments and any such record. Such action shall become
effective when such instrument or instruments or record or both are delivered to
the Trustee and, where it is hereby expressly required, to the Company. The
Trustee shall promptly deliver to the Company copies of all such instruments and
records delivered to the Trustee with a courtesy copy to Company's counsel at
the address listed in Section 1.5 and if pertaining to any conversion notice,
with a courtesy copy to Company's common stock transfer agent at the address
listed in Section 1.5. Such instrument or instruments and record (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the
"Act" of the Holders of Securities signing such instrument or instruments and so
voting at such meeting. Proof of execution of any such instrument or of a
writing appointing any such agent or proxy, or of the holding by any Person of a
Security, shall be sufficient for any purpose of this Indenture and (subject to
Section 6.1) conclusive in favor of the Trustee and the Company if made in the
manner provided in this Section. The record of any meeting of Holders of
Securities shall be proved in the manner provided in Section 9.6.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority.
(c) The principal amount and serial number of any Security held by any
Person, and the date of his holding the same, shall be proved by the Note
Register.
(d) The fact and date of execution of any such instrument or writing and
the authority of the Person executing the same may also be proved in any other
manner which the Trustee or the Paying Agent deems sufficient; and the Trustee
or any Paying Agent may in any instance require further proof with respect to
any of the matters referred to in this Section 1.4.
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(e) The Company may set any day as the record date for the purpose of
determining the Holders entitled to give or take any request, demand,
authorization, direction, notice, consent, waiver or other action, or to vote on
any action, authorized or permitted by this Indenture to be given or taken by
Holders. Promptly and in any case not later than ten days after setting a record
date, the Company shall notify the Trustee, each Paying Agent and the Holders of
such record date. If not set by the Company prior to the first solicitation of a
Holder made by any Person in respect of any such action, or, in the case of any
such vote, prior to such vote, the record date for any such action or vote shall
be the 30th day (or, if later, the date of the most recent list of Holders
required to be provided pursuant to Section 15.1) prior to such first
solicitation or vote, as the case may be. With regard to any record date, the
Holders on such date (or their duly appointed agents or proxies), and only such
Persons, shall be entitled to give or take, or vote on, the relevant action,
whether or not such Holders remain Holders after such record date.
Notwithstanding the foregoing, the Company shall not set a record date for, and
the provisions of this paragraph shall not apply with respect to, any notice,
declaration or direction referred to in the next paragraph.
Upon receipt by the Trustee from any Holder of (i) any notice of default
or breach referred to in Section 5.1(3), if such default or breach has occurred
and is continuing and the Trustee shall not have given such a notice to the
Company, (ii) any declaration of acceleration referred to in Section 5.2, if an
Event of Default has occurred and is continuing and the Trustee shall not have
given such a declaration to the Company, or (iii) any direction referred to in
Section 5.12, if the Trustee shall not have taken the action specified in such
direction, then a record date shall automatically and without any action by the
Company or the Trustee be set for determining the Holders entitled to join in
such notice, declaration or direction, which record date shall be the close of
business on the tenth day (or, if such day is not a Business Day, the first
Business Day thereafter) following the day on which the Trustee receives such
notice, declaration or direction. Promptly after such receipt by the Trustee,
and as soon as practicable thereafter, the Trustee shall notify the Company and
the Holders of any such record date so fixed. The Holders on such record date
(or their duly appointed agents or proxies), and only such Persons, shall be
entitled to join in such notice, declaration or direction, whether or not such
Holders remain Holders after such record date; provided that, unless such
notice, declaration or direction shall have become effective by virtue of
Holders of the requisite principal amount of Securities on such record date (or
their duly appointed agents or proxies) having joined therein on or prior to the
90th day after such record date, such notice, declaration or direction shall
automatically and without any action by any Person be canceled and of no further
effect. Nothing in this paragraph shall be construed to prevent a Holder (or a
duly appointed agent or proxy thereof) from giving, before or after the
expiration of such 90-day period, a notice, declaration or direction contrary to
or different from, or, after the expiration of such period, identical to, the
notice, declaration or direction to which such record date relates, in which
event a new record date in respect thereof shall be set pursuant to this
paragraph. In addition, nothing in this paragraph shall be construed to render
ineffective any notice, declaration or direction of the type referred to in this
paragraph given at any time to the Trustee and the Company by
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Holders (or their duly appointed agents or proxies) of the requisite principal
amount of Securities on the date such notice, declaration or direction is so
given.
(f) Any request, demand, authorization, direction, notice, consent,
election, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Successor Security
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof in respect of anything done, omitted or suffered to be done by the
Trustee or the Company in reliance thereon, whether or not notation of such
action is made upon such Security.
(g) The provisions of this Section 1.4 are subject to the provisions of
Section 9.5.
SECTION 1.5. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent,
election, waiver or Act of Holders of Securities or other document provided or
permitted by this Indenture to be made upon, given or furnished to, or filed
with,
(1) the Trustee in Chicago, Illinois or the agency of the Trustee
in New York, New York or the Paying Agent in Luxembourg by any Holder of
Securities or by the Company shall be sufficient for every purpose
hereunder if made, given, furnished or filed in writing to or with the
Trustee and received at its Corporate Trust Office, 135 South LaSalle
Street, Chicago, Illinois 60603, Attention: Corporate Trust Department -
Lam Research Corporation (facsimile number (312) 904-2236), or to or
with the agency of the Trustee in New York, New York at IBJ Schroder
Bank & Trust Company, One State Street, New York, New York 10004,
Attention: Reorganization Department (facsimile number: (212) 858-2611).
In addition, a courtesy copy shall be sent to Trustee's counsel (which
shall not constitute notice to the Trustee): Chapman & Cutler, 111 West
Monroe Street, Chicago, Illinois, Attention: James E. Spiotto, Esq.
(facsimile number (312) 516-1900), or
(2) the Company by the Trustee or any Paying Agent or by any
Holder of Securities shall be sufficient for every purpose hereunder
(unless otherwise herein expressly provided) if in writing, mailed,
first-class postage prepaid, or telecopied and confirmed by mail,
first-class postage prepaid, or delivered by hand or overnight courier,
addressed to the Company at Lam Research Corporation, 4650 Cushing
Parkway, Fremont, California (facsimile number: (510) 572-2876),
Attention: Treasurer, with a copy to General Counsel, or at any other
address previously furnished in writing to the Trustee by the Company.
In addition, a courtesy copy shall be sent to Company's counsel (which
shall not constitute notice to the Company): Jackson Tufts Cole & Black,
LLP, 60 South Market Street, 10th Floor, San Jose, California 95113
(facsimile number (408) 998-4889), Attention: Richard Scudellari, Esq.
and if relating to a conversion notice as described in Section 2.2, with
a copy to Company's common stock transfer agent,
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ChaseMellon Shareholder Services L.L.C. (facsimile number (415)
989-5241), Attention: Paul Collins - Lam Research Corporation.
Any request, demand, authorization, direction, notice, consent, election
or waiver required or permitted under this Indenture shall be in the English
language, except that any published notice may be in an official language of the
country of publication.
SECTION 1.6. Notice to Holders of Securities; Waiver.
Except as otherwise expressly provided herein, where this Indenture
provides for notice to Holders of Securities of any event, such notice shall be
sufficiently given to Holders of Securities if in writing and mailed,
first-class postage prepaid, to each Holder of a Security affected by such
event, at the address of such Holder as it appears in the Note Register, not
earlier than the earliest date and not later than the latest date prescribed for
the giving of such notice. Such notice shall be conclusively deemed to have been
given and received by Holders when such notice is mailed, whether or not such
Holder receives such notice.
In any case where notice to Holders of Securities is given by mail,
neither the failure to mail such notice, nor any defect in any notice so mailed,
to any particular Holder of a Security shall affect the sufficiency of such
notice with respect to other Holders of Securities given as provided above. In
case by reason of the suspension of or irregularities in regular mail service or
by reason of any other cause it shall be impracticable to give such notice by
mail, then such notification to Holders of Securities as shall be made with the
approval of the Trustee, which approval shall not be unreasonably withheld,
shall constitute a sufficient notification to such Holders for every purpose
hereunder.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders of Securities shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
SECTION 1.7. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 1.8. Successors and Assigns.
All covenants, stipulations, promises and agreements in this Indenture
by the Company shall bind its successors and assigns, whether so expressed or
not.
SECTION 1.9. Separability Clause.
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In case any provision in this Indenture or the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 1.10. Benefits of Indenture.
Except as provided in the next sentence, nothing in this Indenture or in
the Securities, express or implied, shall give to any Person, other than the
parties hereto and their successors and assigns hereunder and the Holders of
Securities, any benefit or legal or equitable right, remedy or claim under this
Indenture. The provisions of Article Thirteen are intended to be for the benefit
of, and shall be enforceable directly by, the holders of Senior Indebtedness of
the Company.
SECTION 1.11. Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, THE UNITED STATES OF AMERICA,
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 1.12. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, Repurchase
Date or Stated Maturity of any Security or the last day on which a Holder of a
Security has a right to convert his Security shall not be a Business Day at any
Place of Payment or Place of Conversion, as the case may be, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest or principal and premium, if any, or delivery for conversion
of such Security need not be made at such Place of Payment or Place of
Conversion, as the case may be, on or by such day, but may be made on or by the
next succeeding Business Day at such Place of Payment or Place of Conversion, as
the case may be, with the same force and effect as if made on the Interest
Payment Date, Redemption Date or Repurchase Date, or at the Stated Maturity or
by such last day for conversion; provided, however, that in the case that
payment is made on such succeeding Business Day, no interest shall accrue on the
amount so payable for the period from and after such Interest Payment Date,
Redemption Date, Repurchase Date, Stated Maturity or last day for conversion, as
the case may be.
SECTION 1.13. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a provision
of the Trust Indenture Act that is required under the Trust Indenture Act to be
a part of and to govern this Indenture, the latter provision shall control. If
any provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall be
deemed to apply to this Indenture as so modified or to be excluded, as the case
may be. Until such time as this Indenture shall be qualified under the Trust
Indenture Act, this
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Indenture, the Company and the Trustee shall be deemed for all purposes hereof
to be subject to and governed by the Trust Indenture Act to the same extent as
would be the case if this Indenture were so qualified on the date hereof.
SECTION 1.14. Jurisdiction.
(a) The Company hereby irrevocably and unconditionally submits to the
non-exclusive jurisdiction of any New York State or United States Federal court
sitting in New York City over any suit, action or proceeding arising out of or
relating to this Indenture or any Security. The Company irrevocably and
unconditionally waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding brought in such a court and any claim that any such suit,
action or proceeding brought in such a court has been brought in an inconvenient
forum. To the extent that the Company has or hereafter may acquire any immunity
from jurisdiction of any court or from any legal process with respect to itself
or its property, the Company irrevocably waives such immunity in respect of its
obligations under the Indenture or any Security. The Company agrees that final
judgment in any such suit, action or proceeding brought in such a court shall be
conclusive and binding upon the Company, and, to the extent permitted by
applicable law, may be enforced in any court to the jurisdiction of which the
Company is subject by a suit upon such judgment or in any manner provided by
law; provided that service of process is effected upon the Company in the manner
specified in the following subsection or as otherwise permitted by law.
(b) As long as any of the Securities remain outstanding, the Company
will at all times have an authorized agent in New York City, upon whom process
may be served in any legal action or proceeding arising out of or relating to
this Indenture or any Security. Service of process upon such agent and written
notice of such service mailed or delivered to the Company shall to the fullest
extent permitted by law be deemed in every respect effective service of process
upon the Company in any such legal action or proceeding. The Company hereby
irrevocably appoints the CT Corporation System, 1633 Broadway, New York, New
York 10019 as its agent for such purpose, and covenants and agrees that service
of process in any suit, action or proceeding may be made upon it at such office
of such agent. Notwithstanding the foregoing, the Company may, with prior
written notice to the Trustee, terminate the appointment of such agent and
appoint another agent for the above purposes so that the Company shall at all
times have an agent for the above purposes in New York City.
SECTION 1.15. Indenture and Securities Solely Corporate Obligations.
No recourse for the payment of the principal of or premium, if any, or
interest on any Security and no recourse under or upon any obligation, covenant
or agreement of the Company in this Indenture or in any supplemental indenture
or in any Security, or because of the creation of any indebtedness represented
thereby, shall be had against any incorporator, stockholder, employee, agent,
officer, or director or subsidiary, as such, past, present or future, of the
Company or of any successor corporation, whether by virtue of any constitution,
statute or rule
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of law, or by the enforcement of any assessment or penalty or otherwise; it
being expressly understood that all such liability is hereby waived and released
as a condition of, and as a consideration for, the execution of this Indenture
and the issue of the Securities.
SECTION 1.16. Luxembourg Obligations.
The obligations of the Company under this Indenture (i) to maintain a
Conversion Agent, Paying Agent or Note Registrar in Luxembourg, (ii) to maintain
an office for payment and conversion of the Securities in Luxembourg pursuant to
Section 10.2, (iii) to publish notice of the occurrence of certain events under
this Indenture in Luxembourg and (iv) to take any other action under this
Indenture that is specifically required to be taken in Luxembourg (the
"Luxembourg Obligations") shall cease to exist, and the provisions in this
Indenture regarding such Luxembourg Obligations shall no longer have any force
or effect, if at any time Securities are either no longer listed on the
Luxembourg Stock Exchange or such obligation is no longer required by the
Luxembourg Stock Exchange, provided that such obligations shall be reinstated
and again be in full force and effect if Securities subsequently become listed
on the Luxembourg Stock Exchange.
ARTICLE TWO
SECURITY FORMS
SECTION 2.1. Forms Generally.
The Securities shall be in substantially the forms set forth in this
Article, with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture, and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the Securities Act
and the Exchange Act, applicable state securities law or the rules of any
securities exchange, the Code, and the treasury regulations under the Code, or
as may, consistently herewith, be determined by the Officers executing such
Securities, as evidenced by their execution thereof.
The Assignment Form and Certificate of Transfer shall be in
substantially the form set forth in Section 2.3.
The Election of Holder to Require Repurchase Form shall be substantially
in the form set forth in Section 2.4. The Conversion Notice shall be in
substantially the form set forth in Section 2.5. The Trustee's certificate of
authentication shall be in substantially the form set forth in Section 2.6.
The Securities may be printed, lithographed, typewritten, mimeographed
or otherwise produced, as determined by the Officers executing such Security, as
evidenced by their execution thereof.
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SECTION 2.2. Form of Security.
[For Global Security only:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (THE
"DEPOSITARY," WHICH TERM INCLUDES ANY SUCCESSOR DEPOSITARY FOR THE CERTIFICATES)
TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DEPOSITARY AND ANY
PAYMENT HEREON IS MADE TO CEDE & CO. (OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER, PLEDGE, OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS,
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR
FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE SECURITY
EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT, PRIOR
TO EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY
EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR
PROVISION), RESELL OR OTHERWISE TRANSFER THE SECURITY EVIDENCED HEREBY OR THE
COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH SECURITY EXCEPT (A) TO LAM
RESEARCH CORPORATION OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO
A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO LASALLE NATIONAL BANK, AS
TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THE SECURITY EVIDENCED HEREBY (THE
-26-
<PAGE> 27
FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE OR A SUCCESSOR TRUSTEE,
AS APPLICABLE), (D) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER
THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY
RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER); (3)
PRIOR TO SUCH TRANSFER (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 2(F) ABOVE), IT
WILL FURNISH TO LASALLE NATIONAL BANK, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS
APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS IT MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND (4) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THE SECURITY EVIDENCED HEREBY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THE SECURITY EVIDENCED HEREBY PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD
APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE
SECURITIES ACT (OR ANY SUCCESSOR PROVISION), THE HOLDER MUST CHECK THE
APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH
TRANSFER AND SUBMIT THIS CERTIFICATE TO LASALLE NATIONAL BANK, AS TRUSTEE (OR A
SUCCESSOR TRUSTEE, AS APPLICABLE). IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR OR A PURCHASER WHO IS NOT A U.S. PERSON, THE
HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO LASALLE NATIONAL BANK, AS
TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND
WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE SECURITY EVIDENCED
HEREBY PURSUANT TO CLAUSE 2(F) ABOVE OR UPON ANY TRANSFER OF THE SECURITIES
EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR
PROVISION). AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES"
AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT.
-27-
<PAGE> 28
LAM RESEARCH CORPORATION
5% CONVERTIBLE SUBORDINATED NOTE DUE 2002
No. ________________ U.S.$_____
CUSIP NO. __________
Lam Research Corporation, a Delaware corporation (herein called the
"Company", which term includes any successor Person under the Indenture referred
to on the reverse hereof), for value received, hereby promises to pay to
_______________, or registered assigns (the "Holder"), the principal sum of
_____________ United States Dollars (U.S.$_____) [(which amount may from time to
time be increased or decreased to such other principal amounts (which, taken
together with the principal amounts of all other Outstanding Securities, shall
not exceed $355,000,000 in the aggregate at any time) by adjustments made on the
records of the Trustee, as Custodian of the Depositary, in accordance with the
rules and procedures of the Depositary (1) on September 1, 2002 and to pay
interest thereon, from August 26, 1997, or from the most recent Interest Payment
Date (as defined below) to which interest has been paid or duly provided for,
semi-annually in arrears on March 1 and September 1 in each year (each, an
"Interest Payment Date"), commencing March 1, 1998, at the rate of 5% per annum
(together with any Additional Amounts and Liquidated Damages that the Company
may be required to pay) until the principal hereof is due, and at a rate of 5%
per annum on any overdue principal and premium, if any, and, to the extent
permitted by law, on any overdue interest.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the February 15 or August 15 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Except as
otherwise provided in the Indenture, any such interest not so punctually paid or
duly provided for ("Defaulted Interest") will forthwith cease to be payable to
the Holder on such Regular Record Date and may either be paid to the Person in
whose name this Security (or one or more Predecessor Securities) is registered
at the close of business on a Special Record Date for the payment of such
Defaulted Interest to be fixed by the Company, notice whereof shall be given to
Holders of Securities not less than 10 days prior to such Special Record Date,
or be paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities may be listed,
and upon such notice as may be required by such exchange, all as more fully
provided in the Indenture. Payments of principal shall be made upon the
surrender of this Security, at the Corporate Trust Office of the Trustee in
Chicago,
- ------------
(1) This language shall appear on each Global Security.
-28-
<PAGE> 29
Illinois or the office of the agency of the Trustee in the Borough of Manhattan,
The City of New York or, subject to the right of the Company to terminate such
appointment, the Paying Agent in Luxembourg, or at such other office or agency
of the Company as may be designated by it for such purpose in the Borough of
Manhattan, The City of New York or Luxembourg in such coin or currency of the
United States of America as at the time of payment shall be legal tender for the
payment of public and private debts, or at such other offices or agencies as the
Company may designate, by United States Dollar check drawn on a bank in the
United States, or transfer to a United States Dollar account (such a transfer to
be made only to a Holder of an aggregate principal amount of Securities in
excess of U.S. $2,000,000, and only if such Holder shall have furnished wire
instructions in writing to the Trustee no later than 15 days prior to the
relevant payment date) maintained by the Holder with a bank in the United
States. Payment of interest on this Security may be made by United States Dollar
check mailed to the address of the Person entitled thereto as such address shall
appear in the Note Register, or, upon written application by the Holder to the
Security Registrar setting forth wire instructions not later than the relevant
Record Date, by transfer to a United States Dollar account (such a transfer to
be made only to a Holder of an aggregate principal amount of Securities in
excess of U.S.$2,000,000 and only if such Holder shall have furnished wire
instructions in writing to the Trustee no later than 15 days prior to the
relevant payment date) maintained by the Holder with a bank in the United
States.
The Company will pay to the Holder of this Security who is a Non-U.S.
Holder such additional amounts ("Additional Amounts") as may be necessary in
order that every net payment of the principal of, premium, if any, and interest
on this Security (including payment on redemption or repurchase), after
deduction or withholding for or on account of any present or future tax,
assessment or governmental charge imposed upon or as a result of such payment by
the United States of America or any political subdivision or taxing authority
thereof or therein (each, a "Taxing Jurisdiction"), will not be less than the
amount provided for in this Security to be then due and payable; provided,
however, that the Company shall not be obligated to pay any Additional Amounts
in respect of payments becoming due on the Securities more than 15 days after
the Redemption Date with respect to any redemption of the Tax Affected
Securities pursuant to the fourth paragraph of the reverse of this Security to
the extent that the Company$s obligation to pay such Additional Amounts arises
from the Tax Law Change that resulted in such redemption; and provided, further,
that the foregoing obligation to pay Additional Amounts will not apply to:
(a) any tax, assessment or other governmental charge which would
not have been so imposed but for (i) the existence of any present or
former connection between such Non-U.S. Holder (or between a fiduciary,
settlor, beneficiary, member, shareholder of or possessor of a power
over such Non-U.S. Holder, if such Non-U.S. Holder is an estate, a
trust, a partnership or a corporation) and the Taxing Jurisdiction,
including, without limitation, such Non-U.S. Holder (or such fiduciary,
settlor, beneficiary, member, shareholder or possessor) being or having
been a citizen, domiciliary or resident of the United States of America
or treated as a resident thereof, or being or having been engaged in
trade or business or present
-29-
<PAGE> 30
therein, or having or having had a permanent establishment therein or
(ii) such Non-U.S. Holder's present or former status as a personal
holding company, a foreign personal holding company with respect to the
United States, a controlled foreign corporation, a passive foreign
investment company, or a foreign private foundation or foreign tax
exempt entity for United States federal tax purposes, or a corporation
which accumulates earnings to avoid United States federal income tax;
(b) any tax, assessment or other governmental charge which would
not have been so imposed but for the presentation by the Non-U.S. Holder
of this Security for payment on a date more than 15 days after the date
on which such payment became due and payable or the date on which
payment thereof is duly provided for, whichever occurs later;
(c) any estate, inheritance, gift, sales, transfer, personal
property or similar tax, assessment or governmental charge;
(d) any tax, assessment or other governmental charge which would
not have been imposed but for the failure to comply with any
certification, identification or other reporting requirement concerning
the nationality, residence, identity or connection with the United
States of such Non-U.S. Holder (or beneficial owner of such Security),
if compliance is required or imposed by a statute, treaty, regulation or
administrative practice of the United States as a precondition to
exemption from all or part of such tax, assessment or other governmental
charge;
(e) any tax, assessment or other governmental charge which is
payable otherwise than by deduction or withholding from payments of
principal of, premium, if any, or interest on such Security;
(f) any tax, assessment or other governmental charge imposed on
interest received by a Non-U.S. Holder actually or constructively
holding 10% or more of the total combined voting power of all classes of
stock of the Company entitled to vote;
(g) any tax, assessment or other governmental charge imposed on a
Non-U.S. Holder that is a partnership or a fiduciary or other than the
sole beneficial owner of such payment, but only to the extent that any
beneficial owner or member of the partnership or beneficiary or settlor
with respect to the fiduciary would not have been entitled to the
payment of Additional Amounts had the beneficial owner, member,
beneficiary or settlor directly been the Holder of this Security; or
(h) any combination of items (a), (b), (c), (d), (e), (f) and
(g).
Except as specifically provided herein and in the Indenture, the Company
shall not be required to make any payment with respect to any tax, assessment or
other governmental charge
-30-
<PAGE> 31
imposed by any government or any political subdivision or taxing authority
thereof or therein. Whenever in this Security there is a reference, in any
context, to the payment of the principal of, premium, if any, or interest on, or
in respect of, any Security such mention shall be deemed to include mention of
the payment of Additional Amounts payable as described in the preceding
paragraph to the extent that, in such context, Additional Amounts are, were or
would be payable in respect of such Security and express mention of the payment
of Additional Amounts (if applicable) in any provisions of this Security shall
not be construed as excluding Additional Amounts in those provisions of this
Security where such express mention is not made.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place. Capitalized terms used
herein, including on the reverse hereof, and not defined herein or on the
reverse hereof shall have the respective meanings given to such terms in the
Indenture.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof or an Authenticating Agent by the
manual signature of one of their respective authorized signatories, this
Security shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers under its corporate
seal.
Dated:
--------------------------
Lam Research Corporation
[seal] By:
---------------------------------
Name:
-----------------------
Title:
-----------------------
- ---------------------------------
Attest
By:
---------------------------
-31-
<PAGE> 32
[FORM OF REVERSE]
This Security is one of a duly authorized issue of securities of the
Company designated as its "5% Convertible Subordinated Notes due 2002" (herein
called the "Securities"), limited in aggregate principal amount to U.S.
$355,000,000, issued and to be issued under and pursuant to an Indenture, dated
as of August 15, 1997 (herein called the "Indenture"), between the Company and
LaSalle National Bank, Trustee (herein called the "Trustee", which term includes
any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee, the holders of Senior Indebtedness of the Company and
the Holders of the Securities and of the terms upon which the Securities are,
and are to be, authenticated and delivered. The Securities are issuable in the
denomination of U.S.$1,000 and integral multiples thereof. As provided in the
Indenture and subject to the limitations therein set forth, the Securities are
exchangeable (a) at the Corporate Trust Office of the Trustee or the office of
the agency of the Trustee, or at such other office or agency of the Company as
may be designated by it for such purpose in The City of New York or (b) after
and so long as the Securities are listed on the Luxembourg Stock Exchange and
the rules of the Luxembourg Stock Exchange shall so require (and to the right of
the Company to terminate the appointment of any Note Registrar (as defined
below)), the office of Banque de Luxembourg, International Department, 14
Boulevard Royal, L-2449 Luxembourg, or at such other offices or agencies outside
the United States as the Company may designate (each a "Note Registrar").
No sinking fund is provided for the Securities. The Securities will not
be redeemable at the option of the Company prior to September 6, 2000. At any
time on or after September 6, 2000, and prior to maturity, the Securities are
subject to redemption at the option of the Company at any time, in whole or in
part, at the following Redemption Prices (expressed as percentages of the
principal amount) upon not less than 20 nor more than 60 days' notice to the
Holders prior to the Redemption Date, if the Closing Price of the Common Stock
shall have exceeded 130% of the Conversion Price then in effect for 20 Trading
Days within a period of 30 consecutive Trading Days ending within five Trading
Days prior to the date notice of redemption is given.
If redeemed during the 12-month period beginning September 1 (beginning
September 6, 2000 and ending August 31, 2001, in the case of the first such
period);
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2000 102%
2001 101
</TABLE>
and 100% at September 1, 2002, together, in each case, with accrued interest to,
but excluding, the Redemption Date; provided that Securities that are Tax
Affected Securities are also
-32-
<PAGE> 33
redeemable, in whole but not in part, under the circumstances described in the
next succeeding paragraph, at a Redemption Price equal to 100% of the principal
amount thereof plus interest accrued to, but excluding, the Redemption Date;
provided, however, that interest installments on Securities whose Stated
Maturity is on or prior to such Redemption Date will be payable to the Holders
of such Securities, or one or more Predecessor Securities, of record at the
close of business on the relevant Record Dates referred to on the face hereof,
all as provided in the Indenture.
If the Company determines that, principally as a result of a Tax Law
Change, the Company is or would become obligated to pay Additional Amounts to
the Holder of any Security, as described in the third paragraph of the face of
this Security, and such obligation cannot be avoided by the Company taking
reasonable measures available to it, then the Company may, at its option, redeem
the Tax Affected Securities in whole, but not in part, at any time, on giving
not less than 20 days' notice to the Holders prior to the Redemption Date, at a
Redemption Price equal to 100% of the principal amount plus interest accrued to,
but excluding, the Redemption Date, and any Additional Amounts then payable;
provided, that no such notice of redemption shall be given earlier than 90 days
prior to the earliest date on which the Company would be obligated to pay any
such Additional Amounts were a payment in respect of the Tax Affected Securities
then made. Prior to the giving of any notice of redemption pursuant to this
paragraph, the Company shall deliver to the Trustee (a) an Officers' Certificate
stating that the Company is entitled to effect such redemption and setting forth
a statement of facts showing that the conditions precedent to the right of the
Company so to redeem have occurred and (b) an Opinion of Counsel of recognized
standing selected by the Company to the effect that the circumstances referred
to above in this paragraph exist. The Trustee shall accept such opinion as
sufficient evidence of the satisfaction of the conditions precedent described
above, in which event it shall be conclusive and binding on the Holders. The
Company's right to redeem the Tax Affected Securities shall continue as long as
the Company is obligated to pay such Additional Amounts, notwithstanding that
the Company shall have made payments of Additional Amounts specified in such
third paragraph.
In the event of a redemption of less than all of the Securities, the
Company will not be required (a) to register the transfer or exchange of
Securities for a period of 15 days immediately preceding the date notice is
given identifying the serial numbers of the Securities called for such
redemption or (b) to register the transfer or exchange of any Security, or
portion thereof, called for redemption.
In any case where the due date for the payment of the principal or
premium, if any, or interest, including Additional Amounts and Liquidated
Damages on, any Security or the last day on which a Holder of a Security has a
right to convert his Security shall be, at any Place of Payment or Place of
Conversion, as the case may be, a day on which banking institutions at such
Place of Payment or Place of Conversion are authorized or obligated by law or
executive order to close, then payment of principal, premium, if any, or
interest, including Additional Amounts and Liquidated Damages, or delivery for
conversion of such Security need not be made on or by such
-33-
<PAGE> 34
date at such place but may be made on or by the next succeeding day at such
place which is not a day on which banking institutions are authorized or
obligated by law or executive order to close, with the same force and effect as
if made on the date for such payment or the date fixed for redemption or
repurchase, or by such last day for conversion, and no interest shall accrue on
the amount so payable for the period after such date.
Subject to and upon compliance with the provisions of the Indenture, the
Holder of this Security is entitled, at his option, at any time prior to the
close of business on September 1, 2002, or in case this Security or a portion
hereof is called for redemption or the Holder hereof has exercised his right to
require the Company to repurchase this Security, or such portion hereof, then in
respect of this Security until and including, but (unless the Company defaults
in making the payment due upon redemption or repurchase, as the case may be) not
after, the close of business on the Business Day next preceding the Redemption
Date or the Repurchase Date, as the case may be, to convert this Security (or
any portion of the principal amount hereof that is an integral multiple of
U.S.$1,000, provided that the unconverted portion of such principal amount is
U.S.$1,000 or any integral multiple thereof) into fully paid and nonassessable
Common Stock of the Company at an initial Conversion Price of U.S. $87.77 for
each share of Common Stock (or at the then current adjusted Conversion Price if
an adjustment has been made as provided in the Indenture).
In order to convert such Security, a Holder must surrender this
Security, duly endorsed or assigned to the Company or in blank and, in case such
surrender shall be made during the period from the close of business of any
Regular Record Date next preceding any Interest Payment Date to the opening of
business on such Interest Payment Date ("Interest Period") (except Securities
called for redemption on a Redemption Date or to be repurchased on a Repurchase
Date during, in each case, such Interest Period), also accompanied by payment in
New York Clearing House or other funds acceptable to the Company of an amount
equal to the interest payable on such Interest Payment Date on the principal
amount of this Security then being converted, and also the conversion notice
hereon duly executed, to the Company at the Corporate Trust Office of the
Trustee in Chicago, Illinois or the office of the agency of the Trustee in the
Borough of Manhattan, The City of New York or the Conversion Agent in
Luxembourg, or at such other office or agency of the Company, subject to any
laws or regulations applicable thereto and subject to the right of the Company
to terminate the appointment of any Conversion Agent (as defined below) as may
be designated by it for such purpose in the Borough of Manhattan, The City of
New York or Luxembourg, or at such other offices or agencies as the Company may
designate (each a "Conversion Agent"), provided further, that if this Security
or portion hereof has been called for redemption on a Redemption Date or is
repurchasable on a Repurchase Date occurring, in either case, during the
Interest Period and is surrendered for conversion during such Interest Period,
then the Holder of this Security who converts this Security or a portion hereof
during such Interest Period will be entitled to receive the interest accruing
hereon from the Interest Payment Date next preceding the date of such conversion
to such succeeding Interest Payment Date and shall not be required to pay such
interest upon surrender of this Security for conversion. Subject to the
aforesaid requirement for payment and, in the case of a conversion
-34-
<PAGE> 35
after the Regular Record Date next preceding any Interest Payment Date and on or
before such Interest Payment Date, to the right of the Holder of this Security
(or any Predecessor Security) of record at such Regular Record Date to receive
an installment of interest, no cash payment or adjustment is to be made on
conversion, if the date of conversion is not an Interest Payment Date, for
interest accrued hereon from the Interest Payment Date next preceding the date
of conversion, or for dividends on the Common Stock issued on conversion hereof.
The Company shall thereafter deliver to the Holder the fixed number of shares of
Common Stock (together with any cash adjustment, as provided in the Indenture)
into which this Security is convertible and such delivery will be deemed to
satisfy the Company's obligation to pay the principal amount of this Security.
No fractions of shares or scrip representing fractions of shares will be issued
on conversion, but instead of any fractional interest (calculated to the nearest
1/100th of a share) the Company shall pay a cash adjustment as provided in the
Indenture. The Conversion Price is subject to adjustment as provided in the
Indenture. In addition, the Indenture provides that in case of certain
consolidations or mergers to which the Company is a party (other than a
consolidation or merger which does not result in any reclassification,
conversion, exchange or cancellation of the Common Stock) or the transfer of all
or substantially all of the property and assets of the Company, the Indenture
shall be amended, without the consent of any Holders of Securities, so that this
Security, if then Outstanding, will be convertible thereafter, during the period
this Security shall be convertible as specified above, only into the kind and
amount of securities, cash and other property receivable upon such
consolidation, merger or transfer by a holder of the number of shares of Common
Stock of the Company into which this Security could have been converted
immediately prior to such consolidation, merger or transfer (assuming such
holder of Common Stock is not a Constituent Person and failed to exercise any
rights of election and received per share the kind and amount received per share
by a plurality of Non-electing Shares). No adjustment in the Conversion Price
will be made until such adjustment would require an increase or decrease of at
least one percent of such price, provided that any adjustment that would
otherwise be made will be carried forward and taken into account in the
computation of any subsequent adjustment.
Subject to certain limitations in the Indenture, at any time when the
Company is not subject to Section 13 or 15(d) of the United States Securities
Exchange Act of 1934, as amended, upon the request of a Holder of a Restricted
Security or the holder of Common Stock issued upon conversion thereof, the
Company will promptly furnish or cause to be furnished Rule 144A Information to
such Holder of Restricted Securities or such holder of Common Stock issued upon
conversion of Restricted Securities, or to a prospective purchaser of any such
security designated by any such Holder or holder, as the case may be, to the
extent required to permit compliance by such Holder or holder with Rule 144A
under the Securities Act in connection with the resale of any such security.
The Holder of this Security and the Common Stock issuable upon
conversion thereof is entitled to the benefits of a Registration Rights
Agreement (subject to the provisions thereof), dated as of August 15, 1997,
between the Company and the Initial Purchasers.
-35-
<PAGE> 36
If a Fundamental Change (as defined in the Indenture) occurs at any time
on or prior to September 1, 2002, each Holder shall have the right, at such
Holder's option, to require the Company to repurchase all of such Holder's
Securities (or any portion of such Securities that is $1,000 or an integral
multiple of $1,000 in excess thereof) on the 45th day after notice thereof. Such
payment shall be made at the following Repurchase Prices (expressed as
percentages of the principal amount thereof) in the event of a Fundamental
Change occurring during the 12-month period beginning September 1:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1997 105%
1998 104
1999 103
2000 102
2001 101
</TABLE>
and 100% at September 1, 2002; provided in each case that if the Applicable
Price (as defined in the Indenture) is less than the Reference Market Price (as
defined in the Indenture), the Company shall repurchase such Securities at a
price equal to the foregoing Repurchase Price multiplied by the fraction
obtained by dividing the Applicable Price by the Reference Market Price. In each
case, the Company shall also pay accrued interest, if any, on such Securities
to, but excluding the Repurchase Date; provided that if such Repurchase Date is
March 1 or September 1, then the interest payable on such date shall be paid to
the Holder of record of the Securities on the Regular Record Date. Whenever in
this Security there is a reference, in any context, to the principal of any
Security as of any time, such reference shall be deemed to include reference to
the Repurchase Price payable in respect of such Security to the extent that such
Repurchase Price is, was or would be so payable at such time, and express
mention of the Repurchase Price in any provision of this Security shall not be
construed as excluding the Repurchase Price in those provisions of this Security
when such express mention is not made.
[The following paragraph shall appear in each Security that is not a
Global Security:
In the event of redemption, repurchase or conversion of this Security in
part only, a new Security or Securities for the unredeemed, unrepurchased or
unconverted portion hereof will be issued in the name of the Holder hereof.]
[The following paragraph shall appear in the Global Security:
In the event of a deposit or withdrawal of an interest in this Security,
including an exchange, transfer, redemption, repurchase or conversion of this
Security in part only, the Trustee, as Custodian of the Depositary, shall make
an adjustment on its records to reflect such deposit or withdrawal in accordance
with the rules and procedures of the Depositary.]
The indebtedness evidenced by this Security and the obligations of the
Company under the Indenture are to the extent and in the manner provided in the
Indenture, subordinate
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<PAGE> 37
and subject in right of payment to the prior payment in full of all Senior
Indebtedness (as defined in the Indenture) of the Company, and this Security is
issued subject to such provisions of the Indenture with respect thereto. Each
Holder of this Security, by accepting the same, (a) agrees to and shall be bound
by such provisions, (b) authorizes and directs the Trustee on his behalf to take
such action as may be necessary or appropriate to effectuate the subordination
so provided and (c) appoints the Trustee his attorney-in-fact for any and all
such purposes.
If an Event of Default (as defined in the Indenture) shall occur and be
continuing, the principal of all the Securities, together with accrued interest
to the date of declaration, may be declared due and payable in the manner and
with the effect provided in the Indenture. Upon payment (i) of the amount of
principal so declared due and payable, together with accrued interest and
premium, if any, Additional Amounts, if any, and Liquidated Damages, if any, to
the date of declaration, and (ii) of interest on any overdue principal and
overdue interest, to the extent permitted by law, all of the Company's
obligations in respect of the payment of the principal of and interest on the
Securities shall terminate.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with either (a) the written consent of
the Holders of not less than a majority in aggregate principal amount of the
Securities at the time Outstanding (as defined in the Indenture), or (b) by the
adoption of a resolution, at a meeting of Holders of the Outstanding Securities
at which a quorum is present, by the Holders of at least the lesser of (i) a
majority in aggregate principal amount of the Securities at the time Outstanding
and (ii) 66-2/3% in aggregate principal amount of the Outstanding Securities
represented and entitled to vote at such meeting. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate
principal amount of the Securities at the time Outstanding, on behalf of the
Holders of all the Securities, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any Successor Security to this Security, whether or not
notation of such consent or waiver is made upon this Security or such other
Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless (a) such Holder shall have previously
given the Trustee written notice of a continuing Event of Default, (b) the
Holders of not less than 25% in aggregate principal amount of the Securities
Outstanding shall have made written request to the Trustee to institute
proceedings in respect of such Event of Default as Trustee and offered the
Trustee reasonable indemnity and the Trustee shall not have received from the
Holders of a majority in aggregate principal amount of the Securities
Outstanding a direction inconsistent with such request, and (c) shall have
failed to institute any such proceeding, for 60 days after receipt of such
notice, request and offer of indemnity. The
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<PAGE> 38
foregoing shall not apply to any suit instituted by the Holder of this Security
for the enforcement of any payment of principal hereof, premium, if any, or
interest hereon (including any Additional Amounts and Liquidated Damages) on or
after the respective due dates expressed herein or for the enforcement of the
right to convert this Security as provided in the Indenture.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of, premium, if any, and
interest on (including Additional Amounts and Liquidated Damages, as described
herein) this Security at the times, places and rate, and in the coin or
currency, herein prescribed or to convert this Security as provided in the
Indenture.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of Securities is registrable on the Note Register (as
defined in the Indenture) upon surrender of a Security for registration of
transfer (a) at the Corporate Trust Office of the Trustee or at the office of
the agency of the Trustee in the Borough of Manhattan or at such other office or
agency of the Company as may be designated by it for such purpose in the Borough
of Manhattan, The City of New York, (b) after and so long as the Securities are
listed on the Luxembourg Stock Exchange and the rules of the Luxembourg Stock
Exchange shall so require, the office of Banque de Luxembourg in Luxembourg or
(c) subject to any laws or regulations applicable thereto and to the right of
the Company to terminate the appointment of any Note Registrar, at the offices
of the Note Registrars described herein or at such other offices or agencies as
the Company may designate, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Note
Registrar duly executed by, the Holder thereof or his attorney duly authorized
in writing, and thereupon one or more new Securities, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees by the Note Registrar. No service charge
shall be made for any such registration of transfer or exchange, but the Company
may require payment of a sum sufficient to recover any tax or other governmental
charge payable in connection therewith.
No recourse for the payment of the principal (and premium, if any) or
interest on this Security and no recourse under or upon any obligation, covenant
or agreement of the Company in the Indenture or any indenture supplemental
thereto or in any Security, or because of the creation of any indebtedness
represented thereby, shall be had against any incorporator, stockholder,
employee, agent, officer or director or subsidiary, as such, past, present or
future, of the Company or of any successor corporation, either directly or
through the Company or any successor corporation, whether by virtue of any
constitution, statute or rule of law or by the enforcement of any assessment or
penalty or otherwise, all such liability being, by the acceptance hereof and as
part of consideration for the issue hereof, expressly waived and released.
Prior to due presentation of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered, as the owner thereof for
all purposes, whether or not such Security be
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<PAGE> 39
overdue, and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA,
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
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<PAGE> 40
SECTION 2.3. Assignment Form and Certificate of Transfer.
ASSIGNMENT FORM AND
CERTIFICATE OF TRANSFER
To assign this Security fill in the form below:
(I) or (we) assign and transfer this Security to
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ______________ agent to transfer this Security on the
books of the Company. The agent may substitute another to act for him.
In connection with any transfer of any of the Securities within the
period prior to the expiration of the holding period applicable to the sales
thereof under Rule 144(k) (other than any transfer pursuant to a registration
statement that has been declared effective under the Securities Act of 1933, as
amended (the "Securities Act") (or any successor provision)), the undersigned
confirms that such Securities are being transferred:
CHECK ONE BOX BELOW
- to the Company or a subsidiary thereof; or
- pursuant to and in compliance with Rule 144A under the
Securities Act; or
- pursuant to and in compliance with Regulation S under the
Securities Act; or
- to an Institutional Accredited Investor pursuant to and in
compliance with the Securities Act; or
- pursuant to Rule 144 of the Securities Act;
and unless the box below is checked, the undersigned confirms that such
Securities are not being transferred to an "affiliate" of the Company as defined
in Rule 144 under the Securities Act (an "Affiliate").
- The transferee is an Affiliate of the Company.
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<PAGE> 41
Dated:
------------------------------
--------------------------------------------
--------------------------------------------
Signature(s)
Signature(s) must be guaranteed by a
commercial bank or trust company or a member
firm of a major stock exchange if shares of
Common Stock are to be issued, or Securities
to be delivered, other than to or in the
name of the registered Holder.
--------------------------------------------
Signature Guarantee
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<PAGE> 42
SECTION 2.4. Form of Election of Holder to Require Repurchase.
ELECTION OF HOLDER TO REQUIRE REPURCHASE
1. Pursuant to Section 14.1 of the Indenture, the undersigned hereby
elects to have this Security repurchased by the Company.
2. The undersigned hereby directs the Company to pay it or
_______________ the Repurchase Price plus interest accrued to, but excluding,
the Repurchase Date, as provided in the Indenture.
Dated:
------------------------------
--------------------------------------------
Signature(s) must be guaranteed by a
commercial bank or trust company or a member
firm of a major stock exchange if shares of
Common Stock are to be issued, or Securities
to be delivered, other than to or in the
name of the registered Holder.
--------------------------------------------
Signature Guaranteed
Principal amount to be repurchased:
-----------------
Remaining principal amount following such repurchase:
-------------------------
NOTICE: The signature to the foregoing Election must correspond to the name as
written upon the face of this Security in every particular, without alteration
or any change whatsoever.
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<PAGE> 43
SECTION 2.5. Form of Conversion Notice.
CONVERSION NOTICE
The undersigned Holder of this Security hereby irrevocably exercises the
option to convert this Security, or any portion of the principal amount hereof
(which is an integral multiple of U.S.$1,000) below designated, into shares of
Common Stock of the Company in accordance with the terms of the Indenture
referred to in this Security, and directs that such shares, together with a
check in payment for any fractional shares and any Securities representing any
unconverted principal amount hereof, be delivered to and be registered in the
name of the undersigned unless a different name has been indicated below. If
shares of Common Stock or Securities are to be registered in the name of a
Person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto. Any amount required to be paid by the undersigned
on account of interest accompanies this Security.
Dated:
------------------------------ --------------------------------------
Signatures
If shares or Securities are to be Signature(s) must be guaranteed by a
registered in the name of a Person commercial bank or trust company or a
other than the Holder, please print member firm of a major stock exchange
such Person's name and address: if shares of Common Stock are to be
issued, or Securities to be delivered,
other than to or in the name of the
registered Holder.
- ------------------------------------ --------------------------------------
Name
--------------------------------------
Signature Guarenteed
- ------------------------------------
Social Security of toher Taxpayer Principal amount to be converted.
Identification Number, if any
U.S.$
---------------------------------
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<PAGE> 44
SECTION 2.6. Form of Certificate of Authentication.
The Trustee's certificate of authentication shall be in substantially
the following form:
This is one of the Securities referred to in the within-mentioned
Indenture.
Dated:
---------------
LASALLE NATIONAL BANK,
as Trustee
By:
------------------------------------
Authorized Signatory
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<PAGE> 45
ARTICLE THREE
THE SECURITIES
SECTION 3.1. Title and Terms.
The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture is limited to U.S. $355,000,000, except for
Securities authenticated and delivered in exchange for, or in lieu of, other
Securities pursuant to Section 3.4, 3.5, 3.6, 8.5, 11.8, 12.2 or 14.2(e).
The Securities shall be known and designated as the "5% Convertible
Subordinated Notes due 2002" of the Company. Their Stated Maturity shall be
September 1, 2002 and they shall bear interest on their principal amount from
August 26, 1997, payable semi-annually in arrears on March 1 and September 1 in
each year, commencing March 1, 1998, at the rate of 5% (together with any
Additional Amounts and Liquidated Damages the Company may be required to pay)
until the principal thereof is due, and at the rate of 5% per annum on any
overdue principal and, to the extent permitted by law, on any overdue interest;
provided, however, that payments shall only be made on Business Days as provided
in Section 1.12.
The Securities are entitled to the benefits of registration rights as
provided by the Registration Rights Agreement.
The principal of, premium, if any, and interest on the Securities shall
be payable as provided in the form of Security set forth in Section 2.2 and the
Repurchase Price shall be payable at such places as are identified in the
Company Notice given pursuant to Section 14.2 (any city in which any Paying
Agent is located being herein called a "Place of Payment").
The Securities shall be redeemable at the option of the Company, in
whole or in part, and at the option of the Company or otherwise in the event of
certain developments, including, developments with respect to U.S. withholding
taxes or certification requirements, as provided in Article Eleven and in the
form of Security set forth in Section 2.2.
The Securities shall be convertible as provided in Article Twelve (any
city in which any Conversion Agent is located being herein called a "Place of
Conversion").
The Securities shall be subordinated in right of payment to Senior
Indebtedness of the Company as provided in Article Thirteen.
The Securities shall be subject to repurchase by the Company at the
option of the Holders as provided in Article Fourteen.
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<PAGE> 46
SECTION 3.2. Denominations.
The Securities shall be issuable without coupons in denominations of
U.S.$1,000 and integral multiples thereof.
SECTION 3.3. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its Chief Executive
Officer, its President or one of its Senior Vice Presidents or one of its Vice
Presidents, under an impression of its corporate seal or a facsimile of its
corporate seal reproduced thereon attested by its Secretary or one of its
Assistant Secretaries. Any such signature may be manual or facsimile.
Securities bearing the manual or facsimile signature of an individual or
individuals who were at any time the proper officer or officers of the Company
shall bind the Company, notwithstanding that such individuals or any of them
have ceased to hold such offices prior to the authentication and delivery of
such Securities or did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee or to its order for authentication (or to the Paying Agent),
together with a Company Order for the authentication and delivery of such
Securities, and the Trustee or an Authenticating Agent in accordance with such
Company Order shall authenticate and make available for delivery such Securities
as in this Indenture provided and not otherwise. In connection with any Company
Order for authentication, an Officers' Certificate and Opinion of Counsel
pursuant to Section 1.2 shall be required.
Each Security shall be dated the date of its authentication.
In authenticating the Securities and in accepting the additional
responsibilities under the Indenture in relation to such Securities, the Trustee
shall be entitled to receive and shall be fully protected in relying upon, an
Opinion of Counsel stating that:
(a) the form or forms of such Securities have been established in
conformity with the provisions of this Indenture;
(b) the terms of such Securities have been established in
conformity with the provisions of this Indenture;
(c) such Securities, when completed by appropriate insertions and
executed and delivered by the Company to the Trustee for authentication in
accordance with this Indenture, authenticated and delivered by the Trustee in
accordance with this Indenture and
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<PAGE> 47
issued by the Company in the manner and subject to any conditions specified in
such Opinion of Counsel, will constitute the legal, valid and binding
obligations of the Company, enforceable in accordance with their terms, subject
to applicable bankruptcy, insolvency, reorganization and other similar laws of
general applicability relating to or affecting the enforcement of creditors$
rights, to general equitable principles and to such other qualifications as such
counsel shall conclude do not materially affect the rights of Holders of such
Securities;
(d) all laws and requirements in respect of the execution and
delivery by the Company of such Securities and of the supplemental indenture, if
any, have been complied with and that authentication and delivery of such
Securities and the execution and delivery of the supplemental indenture, if any,
by the Trustee will not violate the terms of the Indenture;
(e) the Company has the corporate power to issue such Securities,
and has duly taken all necessary corporate action with respect to such issuance;
and
(f) the issuance of such Securities will not contravene the
articles of incorporation or by-laws of the Company or result in any violation
of any of the terms or provisions of any law or regulation or of any indenture,
mortgage or other agreement by which the Company is bound known to such Counsel,
which violation would have a material adverse effect on the Company.
The Trustee shall not be required to authenticate and deliver any such
Securities if the issue of such Securities pursuant to this Indenture will
affect the Trustee's own rights, duties or immunities under the Securities and
this Indenture or otherwise in a manner which is not reasonably acceptable to
the Trustee.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee or an Authenticating Agent by manual signature of an
authorized signatory, and such certificate upon any Security shall be conclusive
evidence, and the only evidence, that such Security has been duly authenticated
and delivered hereunder is entitled to the benefits of this Indenture.
Any Global Security shall represent such of the outstanding Securities
as shall be specified therein and shall provide that it shall represent the
aggregate amount of outstanding Securities from time to time endorsed thereon
and that the aggregate amount of outstanding Securities represented thereby may
from time to time be increased or reduced to reflect transfers or exchanges
permitted hereby. Any endorsement of a Global Security to reflect the amount of
any increase or decrease in the amount of outstanding Securities represented
thereby shall be made by the Trustee or the Custodian, at the direction of the
Trustee, in such manner and upon instructions given by the holder of such
Securities in accordance with this Indenture. Payment of principal of and
interest and premium, if any, on any Global Security shall be made to the Holder
of such Global Security.
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<PAGE> 48
SECTION 3.4. Registration, Registration of Transfer and Exchange; Restrictions
on Transfer.
(a) The Company shall cause to be kept at the Corporate Trust
Office of the Trustee a register (the register maintained in such office and in
any other office or agency of the Company designated pursuant to Section 10.2
(including the office of the agency of LaSalle National Bank, in the Borough of
Manhattan, The City of New York and the office of Banque de Luxembourg, in
Luxembourg) being herein sometimes collectively referred to as the "Note
Register") in which, subject to such reasonable regulations as it may prescribe,
the Company shall provide for the registration of Securities and of transfers of
Securities.
Upon surrender for registration of transfer of any Security at an office
or agency of the Company designated pursuant to Section 10.2 for such purpose,
the Company shall execute, and the Trustee shall authenticate and deliver, in
the name of the designated transferee or transferees, one or more new Securities
of any authorized denominations and of a like aggregate principal amount and
tenor and bearing such restrictive legends as may be required by this Indenture.
At the option of the Holder, and subject to the further provisions of
this Section 3.4, Securities may be exchanged for other Securities of any
authorized denomination and of a like aggregate principal amount, upon surrender
of the Securities to be exchanged at any such office or agency maintained by the
Company pursuant to Section 10.2. Whenever any Securities are so surrendered for
exchange, and subject to the further provisions of this Section 3.4, the Company
shall execute, and the Trustee shall authenticate and deliver, the Securities
which the Holder making the exchange is entitled to receive. Every Security
presented or surrendered for registration of transfer or for exchange shall (if
so required by the Company or the Note Registrar) be duly endorsed, or be
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Note Registrar duly executed, by the Holder thereof or his
attorney duly authorized in writing.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and, subject to the other provisions of this Section 3.4, entitled to the
same benefits, under and subject to the same restrictions imposed by this
Indenture, as the Securities surrendered upon such registration of transfer or
exchange.
Except as provided in Section 3.6, no service charge shall be made for
any registration of transfer or exchange of Securities, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Securities, other than exchanges pursuant to Section 8.5, 11.8, 12.2
or 14.2(e) (other than, in the case of Securities, where the Common Stock is to
be issued or delivered in a name other than that of the Holder of the Security)
not involving any transfer and other than any stamp and other duties, if any,
which may be imposed in connection with any such transfer or exchange by the
United States or any political subdivision thereof or therein, which shall be
paid by the Company.
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<PAGE> 49
In the event of a redemption of the Securities in part, neither the
Company nor the Note Registrar will be required (a) to register the transfer of
or exchange of Securities for a period of 15 days immediately preceding the date
notice is given identifying the serial numbers of the Securities called for such
redemption or (b) to register the transfer of or exchange any Security, or
portion thereof, called for redemption.
(b) So long as the Securities are eligible for book-entry
settlement with the Depositary, or unless otherwise required by law, all
Securities that are so eligible may be represented by one or more Global
Securities registered in the name of the Depositary or the nominee of the
Depositary, except as otherwise specified below. The transfer and exchange of
beneficial interests in any such Global Security shall be effected through the
Depositary in accordance with this Indenture and the procedures of the
Depositary therefor.
Securities that upon initial issuance are beneficially owned by QIBs
will be represented by a Global Security (the "Rule 144A Global Security"), and
Securities that upon initial issuance are beneficially owned by Non-U.S. Persons
will be represented by another Global Security (the "Regulation S Global
Security"). Transfers of interests in the Securities between the Rule 144A
Global Security and the Regulation S Global Security will be made in accordance
with the standing instructions and procedures of the Depositary and its
participants. The Trustee shall make appropriate endorsements to reflect
increases or decreases in the principal amounts of such Global Securities as set
forth on the face of the Security ("Principal Amount") to reflect any such
transfers.
Except as provided below, beneficial owners of a Global Security shall
not be entitled to have certificates registered in their names, will not receive
or be entitled to receive physical delivery of certificates in definitive form
and will not be considered Holders of such Global Securities.
(c) So long as the Securities are eligible for book-entry
settlement, or unless otherwise required by law, upon any transfer of a
definitive Security to a QIB in accordance with Rule 144A or to a Non-U.S.
Person in accordance with Regulation S, and upon receipt of the definitive
Security or Securities being so transferred, together with a certification,
substantially in the form on the reverse of the Security, from the transferor
that the transfer is being made in compliance with Rule 144A or Regulation S, as
the case may be (or other evidence satisfactory to the Trustee), the Trustee
shall make an endorsement on the Rule 144A Global Security or the Regulation S
Global Security, as the case may be, to reflect an increase in the aggregate
Principal Amount of the Securities represented by such Global Security, the
Trustee shall cancel such definitive Security or Securities in accordance with
the standing instructions and procedures of the Depositary, the aggregate
Principal Amount of Securities represented by such Global Security to be
increased accordingly; provided that no definitive Security, or portion thereof,
in respect of which the Company or an Affiliate of the Company held any
beneficial interest shall be included in such Global Security until such
definitive Security is freely tradable in accordance
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<PAGE> 50
with Rule 144(k); provided further that the Trustee shall issue Securities in
definitive form upon any transfer of a beneficial interest in the Global
Security to the Company or any Affiliate of the Company.
Upon any sale or transfer of a Security to an Institutional Accredited
Investor (other than pursuant to a registration statement that has been declared
effective under the Securities Act), such Institutional Accredited Investor
shall, prior to such sale or transfer, furnish to the Company and/or the Trustee
a signed letter containing representations and agreements relating to
restrictions on transfer substantially in the form set forth in Exhibit A to
this Indenture.
Any Global Security may be endorsed with or have incorporated in the
text thereof such legends or recitals or changes not inconsistent with the
provisions of this Indenture as may be required by the Custodian, the Depositary
or by the National Association of Securities Dealers, Inc. in order for the
Securities to be tradeable on The Portal Market or as may be required for the
Securities to be tradeable on any other market developed for trading of
securities pursuant to Rule 144A or Regulation S or required to comply with any
applicable law or any regulation thereunder or with the rules and regulations of
Euroclear, Cedel or any securities exchange or automated quotation system upon
which the Securities may be listed or traded or to conform with any usage with
respect thereto, or to indicate any special limitations or restrictions to which
any particular Securities are subject.
(d) Every Security that bears or is required under this Section
3.4(d) to bear the legend set forth in this Section 3.4(d) (together with any
Common Stock issued upon conversion of the Securities and required to bear the
legend set forth in Section 3.4(e), collectively, the "Restricted Securities")
shall be subject to the restrictions on transfer set forth in this Section 3.4
(d) (including those set forth in the legend set forth below) unless such
restrictions on transfer shall be waived by written consent of the Company, and
the holder of each such Restricted Security by such Holder's acceptance thereof,
agrees to be bound by all such restrictions on transfer. As used in Sections
3.4(d) and 3.4(e), the term "transfer" encompasses any sale, pledge, transfer or
other disposition whatsoever of any Restricted Security.
Until the expiration of the holding period applicable to sales thereof
under Rule 144(k) under the Securities Act (or any successor provision), any
certificate evidencing such Security (and all securities issued in exchange
therefor or substitution thereof, other than Common Stock, if any, issued upon
conversion thereof, which shall bear the legend set forth in Section 3.4(e), if
applicable) shall bear a legend in substantially the following form, unless such
Security has been sold pursuant to a registration statement that has been
declared effective under the Securities Act (and which continues to be effective
at the time of such transfer), or unless otherwise agreed by the Company in
writing, with written notice thereof to the Trustee:
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND, ACCORDINGLY, MAY
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<PAGE> 51
NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A)
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR"
(AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT)
("INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND
IS ACQUIRING THE SECURITY EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION;
(2) AGREES THAT IT WILL NOT, PRIOR TO EXPIRATION OF THE HOLDING PERIOD
APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(k)
UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), RESELL OR
OTHERWISE TRANSFER THE SECURITY EVIDENCED HEREBY OR THE COMMON STOCK
ISSUABLE UPON CONVERSION OF SUCH SECURITY EXCEPT (A) TO LAM RESEARCH
CORPORATION OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO LASALLE
NATIONAL BANK, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING
TO THE RESTRICTIONS ON TRANSFER OF THE SECURITY EVIDENCED HEREBY (THE
FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE OR A SUCCESSOR
TRUSTEE, AS APPLICABLE), (D) OUTSIDE THE UNITED STATES IN COMPLIANCE
WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE) OR (F) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE
EFFECTIVE AT THE TIME OF SUCH TRANSFER); (3) PRIOR TO SUCH TRANSFER
(OTHER THAN A TRANSFER PURSUANT TO CLAUSE 2(F) ABOVE), IT WILL FURNISH
TO LASALLE NATIONAL BANK, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS
APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS
IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (4) AGREES THAT IT
WILL DELIVER TO EACH PERSON TO WHOM THE SECURITY EVIDENCED HEREBY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THE SECURITY EVIDENCED HEREBY PRIOR TO
THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY
EVIDENCED
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HEREBY UNDER RULE 144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR
PROVISION), THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE
REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO LASALLE NATIONAL BANK, AS TRUSTEE (OR A SUCCESSOR
TRUSTEE, AS APPLICABLE). IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL
ACCREDITED INVESTOR OR A PURCHASER WHO IS NOT A U.S. PERSON, THE HOLDER
MUST, PRIOR TO SUCH TRANSFER, FURNISH TO LASALLE NATIONAL BANK, AS
TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS,
LEGAL OPINIONS OR OTHER INFORMATION AS IT MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE
TRANSFER OF THE SECURITY EVIDENCED HEREBY PURSUANT TO CLAUSE 1(F) ABOVE
OR UPON ANY TRANSFER OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(k)
UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), AS USED HEREIN,
THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE
THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
Any Security (or Successor Security issued in exchange or substitution
therefor) as to which such restrictions on transfer shall have expired in
accordance with their terms or as to the conditions for removal of the foregoing
legend set forth therein have been satisfied may, upon surrender of such
Security for exchange to the Note Registrar in accordance with the provisions of
this Section 3.4, be exchanged for a new Security or Securities of like tenor
and aggregate principal amount, which shall not bear the restrictive legend
required by this Section 3.4(d).
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in the second paragraph of Section 3.4(b) and in this
Section 3.4(d)), a Global Security may not be transferred as a whole or in part
except by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary.
The Depositary shall be a clearing agency registered under the Exchange
Act. The Company initially appoints DTC to act as Depositary with respect to the
Global Securities. Initially, the Rule 144A Global Security and the Regulation S
Global Security shall be issued to the Depositary, registered in the name of
Cede & Co., as the nominee of the Depositary, and deposited with the Custodian
for Cede & Co.
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If at any time the Depositary for a Global Security notifies the Company
that it is unwilling or unable to continue as Depositary for such Global
Security, the Company may appoint a successor Depositary with respect to such
Global Security. If a successor Depositary is not appointed by the Company
within ninety (90) days after the Company receives such notice, the Company will
execute, and the Trustee, upon receipt of an Officers' Certificate for the
authentication and delivery of Securities, will authenticate and deliver,
Securities in certificated form, in aggregate principal amount equal to the
Principal Amount of such Global Security, in exchange for such Global Security.
If a Security in certificated form is issued in exchange for any portion
of a Global Security after the close of business at the office or agency where
such exchange occurs on any Record Date and before the opening of business at
such office or agency on the next succeeding Interest Payment Date, interest
will not be payable on such Interest Payment Date in respect of such Security,
but will be payable on such Interest Payment Date, subject to the provisions of
Section 3.7, only to the Person to whom interest in respect of such portion of
such Global Security is payable in accordance with the provisions of this
Indenture.
Securities in certificated form issued in exchange for all or a part of
a Global Security pursuant to this Section 3.4 shall be registered in such names
and in such authorized denominations as the Depositary, pursuant to instructions
from its direct or indirect participants or otherwise, shall instruct the
Trustee. Upon execution and authentication, the Trustee shall deliver such
Securities in certificated form to the Persons in whose names such Securities in
certificated form are so registered.
At such time as all interests in a Global Security have been redeemed,
repurchased, converted, canceled, exchanged for Securities in certificated form,
or transferred to a transferee who receives Securities in certificated form
thereof, such Global Security shall, upon receipt thereof, be canceled by the
Trustee in accordance with standing procedures and instructions existing between
the Depositary and the Custodian. At any time prior to such cancellation, if any
interest in a Global Security is exchanged for Securities in certificated form,
redeemed, converted, repurchased or canceled, exchanged for Securities in
certificated form or transferred to a transferee who receives Securities in
certificated form therefor or any Security in certificated form is exchanged or
transferred for part of a Global Security, the principal amount of such Security
shall, in accordance with the standing procedures and instructions existing
between the Depositary and the Custodian, be appropriately reduced or increased,
as the case may be, and an endorsement shall be made on such Global Security, by
the Trustee or the Custodian, at the direction of the Trustee, to reflect such
reduction or increase.
(e) Until the expiration of the holding period applicable to
sales thereof under Rule 144(k) under the Securities Act (or any successor
provision), any stock certificate representing Common Stock issued upon
conversion of such Security shall bear a legend in substantially the following
form, unless such Common Stock has been sold pursuant to a
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registration statement that has been declared effective under the Securities Act
(and which continues to be effective at the time of such transfer) or such
Common Stock has been issued upon conversion of Securities that have been
transferred pursuant to a registration statement that has been declared
effective under the Securities Act, or unless otherwise agreed by the Company in
writing with written notice thereof to the Common Stock transfer agent:
THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. THE HOLDER HEREOF AGREES
THAT UNTIL THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF
THE SECURITY EVIDENCED HEREBY UNDER RULE 144(k) UNDER THE SECURITIES ACT
(OR ANY SUCCESSOR PROVISION), (1) IT WILL NOT RESELL OR OTHERWISE
TRANSFER THE COMMON STOCK EVIDENCED HEREBY EXCEPT (A) TO LAM RESEARCH
CORPORATION OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN COMPLIANCE WITH RULE 144A, (C) INSIDE THE UNITED
STATES TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) THAT PRIOR TO SUCH
TRANSFER FURNISHES TO CHASE MELLON SHAREHOLDER SERVICES L.L.C., AS
TRANSFER AGENT (OR A SUCCESSOR TRANSFER AGENT, AS APPLICABLE), A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THE COMMON STOCK EVIDENCED HEREBY (THE FORM
OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRANSFER AGENT OR A SUCCESSOR
TRANSFER AGENT, AS APPLICABLE), (D) OUTSIDE THE UNITED STATES IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES
ACT (IF AVAILABLE), OR (F) PURSUANT TO A REGISTRATION STATEMENT WHICH
HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH
CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER); (2) PRIOR TO
SUCH TRANSFER (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 1(F) ABOVE), IT
WILL FURNISH TO CHASEMELLON SHAREHOLDER SERVICES L.L.C. AS TRANSFER
AGENT (OR A SUCCESSOR TRANSFER AGENT, AS APPLICABLE), SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS IT MAY REASONABLY
REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES
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ACT AND (3) IT WILL DELIVER TO EACH PERSON TO WHOM THE COMMON STOCK
EVIDENCED HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO
CLAUSE 1(F) ABOVE) A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE
COMMON STOCK EVIDENCED HEREBY PURSUANT TO CLAUSE 1(F) ABOVE OR UPON ANY
TRANSFER OF THE COMMON STOCK EVIDENCED HEREBY AFTER THE EXPIRATION OF
THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY
UNDER RULE 144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION).
AS USED HEREIN, THE TERMS "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
Any such Common Stock as to which such restrictions on transfer shall
have expired in accordance with their terms or as to which the conditions for
removal of the foregoing legend set forth therein have been satisfied may, upon
surrender of the certificates representing such shares of Common Stock for
exchange in accordance with the procedures of the transfer agent for the Common
Stock, be exchanged for a new certificate or certificates for a like number of
shares of Common Stock, which shall not bear the restrictive legend required by
this Section 3.4(e).
(f) Any Security or Common Stock issued upon the conversion or
exchange of a Security that, prior to the expiration of the holding period
applicable to sales thereof under Rule 144(k) under the Securities Act (or any
successor provision), is purchased or owned by the Company or any Affiliate
thereof may not be resold by the Company or such Affiliate unless registered
under the Securities Act or resold pursuant to an exemption from the
registration requirements of the Securities Act in a transaction which results
in such Securities or Common Stock, as the case may be, no longer being
"restricted securities" (as defined under Rule 144).
SECTION 3.5. Temporary Securities
Pending the preparation of Securities in certificated form, the Company
may execute and the Trustee or an Authenticating Agent shall, upon the written
request of the Company, authenticate and deliver temporary Securities (printed
or lithographed). Temporary Securities shall be issuable in any authorized
denomination, and substantially in the form of the Securities in certificated
form, but with such omissions, insertions and variations as may be appropriate
for temporary Securities, all as may be determined by the Company. Every such
temporary Security shall be executed by the Company and authenticated by the
Trustee or such Authenticating Agent upon the same conditions and in
substantially the same manner, and with the same effect, as the Securities in
certificated form. Without unreasonable delay the Company will execute and
deliver to the Trustee or such Authenticating Agent Securities in certificated
form (other than in the case of Global Securities) and thereupon any or all
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temporary Securities (other than any such Global Security) may be surrendered in
exchange therefor, at each office or agency maintained by the Company and the
Trustee or such Authenticating Agent shall authenticate and make available for
delivery in exchange for such temporary Securities an equal aggregate principal
amount of Securities in certificated form. Such exchange shall be made by the
Company at its own expense and without any charge therefor. Until so exchanged,
the temporary Securities shall in all respects be entitled to the same benefits
and subject to the same limitations under this Indenture as Securities in
certificated form authenticated and delivered hereunder.
SECTION 3.6. Mutilated, Destroyed, Lost or Stolen Securities
If any mutilated Security is surrendered to the Trustee or to a Note
Registrar outside the United States, the Company shall execute, the Trustee or
an Authenticating Agent shall authenticate and the Trustee or Note Registrar
shall deliver in exchange therefor a new Security of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
If there be delivered to the Company and either to the Trustee or to a
Note Registrar outside the United States:
(1) evidence to their satisfaction of the destruction,
loss or theft of any Security, and
(2) such security or indemnity as may be satisfactory to
the Company and the Trustee and such Note Registrar to save each of them and any
agent of either of them harmless, then, in the absence of actual notice to the
Company, the Trustee or the Note Registrar that such Security has been acquired
by a bona fide purchaser, the Company shall execute, and upon its request, the
Trustee or an Authenticating Agent shall authenticate and the Trustee or Note
Registrar shall deliver in lieu of any such destroyed, lost or stolen Security
or in exchange for the Security, a new Security of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion, but
subject to any conversion rights, may, instead of issuing a new Security, pay
such Security.
Upon the issuance of any new Security under this Section 3.6, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto (other than any
stamp and other duties, if any, which may be imposed in connection therewith by
the United States of America or any political subdivision thereof or therein,
which shall be paid by the Company) and any other expenses (including the fees
and expenses of the Trustee, any Paying Agent and any Note Registrar) connected
therewith.
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Every new Security issued pursuant to this Section 3.6 in lieu of any
mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Security shall be at any time enforceable by anyone,
and such new Security shall be entitled to all the benefits of this Indenture
equally and proportionately with any and all other Securities duly issued
hereunder.
The provisions of this Section 3.6 are exclusive and shall preclude (to
the extent lawful) all other rights and remedies of any Holder with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.7. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company
shall notify the Trustee in writing of the amount of Defaulted Interest
proposed to be paid on each Security, and the date of the proposed
payment, and at the same time the Company shall deposit with the Trustee
an amount of money equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this
Clause provided. Thereupon, the Trustee shall fix the Special Record
Date for the payment of such Defaulted Interest, which shall be not more
than 15 days and not less than 10 days prior to the date of the proposed
payment and not less than 10 days after the receipt by the Trustee of
the notice of the proposed payment. The Trustee shall promptly notify
the Company of such Special Record Date and, in the name and at the
expense of the Company, shall cause notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor to be
mailed, first-class postage prepaid, to each Holder of Securities at
such Holder's address as it appears in the Note Register, not less than
10 days prior to such Special Record Date. Notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor
having
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been so mailed, such Defaulted Interest shall be paid to the Persons in
whose names the Securities (or their respective Predecessor Securities)
are registered at the close of business on such Special Record Date and
shall no longer be payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by
the Company to the Trustee of the proposed payment pursuant to this
Clause, such manner of payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
In the case of any Security which is converted after any Regular Record
Date and on or prior to the next succeeding Interest Payment Date (other than
any Security whose Maturity is prior to such Interest Payment Date), interest
whose Stated Maturity is on such Interest Payment Date shall be payable on such
Interest Payment Date notwithstanding such conversion, and such interest
(whether or not punctually paid or duly provided for) shall be paid to the
Person in whose name such Security (or one or more Predecessor Securities) is
registered at the close of business on such Regular Record Date. Except as
otherwise expressly provided in the immediately preceding sentence, in the case
of any Security which is converted, interest whose Stated Maturity is after the
date of conversion of such Security shall not be payable.
SECTION 3.8. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer, the
Company or the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name such Security is registered as the owner of such Security
for the purpose of receiving payment of principal of, premium, if any, and
(subject to Section 3.7) interest on such Security and for all other purposes
whatsoever, whether or not such Security be overdue, and neither the Company,
the Trustee nor any agent of the Company or the Trustee shall be affected by
notice to the contrary.
None of the Company, the Trustee, any Paying Agent or the Note Registrar
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests of a Security
in global form or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests.
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Notwithstanding the foregoing, with respect to any Global Security,
nothing herein shall prevent the Company, the Trustee, or any agent of the
Company or the Trustee, from giving effect to any written certification, proxy
or other authorization furnished by any Depositary, as a Holder, with respect to
such Global Security or impair, as between such Depositary and owners of
beneficial interests in such Global Security, the operation of customary
practices governing the exercise of the rights of such Depositary (or its
nominee) as Holder of such Global Security.
SECTION 3.9. Cancellation.
All Securities surrendered for payment, redemption, repurchase,
registration of transfer or exchange or conversion shall, if surrendered to any
Person other than the Trustee, be delivered to the Trustee. All Securities so
delivered to the Trustee shall be canceled promptly by the Trustee. No
Securities shall be authenticated in lieu of or in exchange for any Securities
canceled as provided in this Section 3.9. The Trustee shall destroy all canceled
Securities in accordance with applicable law and its customary practices in
effect from time to time.
SECTION 3.10. Computation of Interest.
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months.
SECTION 3.11. CUSIP Numbers.
The Company in issuing Securities may use "CUSIP" numbers (if then
generally in use) in addition to serial numbers; if so, the Trustee shall use
such "CUSIP" numbers in addition to serial numbers in notices of redemption and
repurchase as a convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness of such CUSIP numbers
either as printed on the Securities or as contained in any notice of a
redemption or repurchase and that reliance may be placed only on the serial or
other identification numbers printed on the Securities, and any such redemption
or repurchase shall not be affected by any defect in or omission of such CUSIP
numbers.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 4.1. Satisfaction and Discharge of Indenture.
This Indenture shall, upon Company Request, cease to be of further
effect (except as to any surviving rights of conversion, or registration of
transfer or exchange, or replacement of Securities herein expressly provided for
and any right to receive Additional Amounts and Liquidated Damages, if any, as
provided in the form of Security set forth in Section 2.2 and the
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Company's obligations to the Trustee pursuant to Section 6.7), and the Trustee,
at the expense of the Company, shall execute proper instruments in form and
substance satisfactory to the Trustee acknowledging satisfaction and discharge
of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered (other
than (i) Securities which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section 3.6 and (ii) Securities for whose
payment money has theretofore been deposited with the Trustee or the Paying
Agent in trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as provided in Section
10.3) have been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee
or the Paying Agent or its agent for cancellation (other than Securities
referred to in clauses (i) and (ii) of clause (1)(A) above)
(i) have become due and payable, or
(ii) will have become due and payable at their Stated
Maturity within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice
of redemption by the Trustee in the name, and at the expense, of
the Company,
and the Company, in the case of clause (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust funds
(immediately available to the Holders in the case of clause (i)) in
trust for the purpose an amount sufficient to pay and discharge the
entire indebtedness on such Securities not theretofore delivered to the
Trustee for cancellation, for principal, premium, if any, and interest
(including any applicable Additional Amounts and Liquidated Damages) to
the date of such deposit (in the case of Securities which have become
due and payable) or to the Stated Maturity or Redemption Date, as the
case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture have
been complied with.
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Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.7, the obligations of
the Company to any Authenticating Agent under Section 6.12, the obligation of
the Company to pay Additional Amounts and, if money shall have been deposited
with the Trustee pursuant to clause (1)(B) of this Section 4.1, the obligations
of the Trustee under Section 4.2 and the last paragraph of Section 10.3 shall
survive. Funds held in trust pursuant to this Section are not subject to the
provisions of Article Thirteen.
SECTION 4.2. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 10.3, all
money deposited with the Trustee pursuant to Section 4.1 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine to the Persons entitled thereto, of the principal, premium, if any,
and interest for whose payment such money has been deposited with the Trustee;
but such money need not be segregated from other funds except to the extent
required by law.
All moneys deposited with the Trustee pursuant to Section 4.1 (and held
by it or any Paying Agent) for the payment of Securities subsequently converted
shall be returned to the Company upon a Company Request.
ARTICLE FIVE
REMEDIES
SECTION 5.1. Events of Default.
"Event of Default", wherever used herein, means any one of the following
events (whatever the reason for such Event of Default and whether it shall be
occasioned by the provisions of Article Thirteen or be voluntary or involuntary
or be effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body):
(1) default in the payment of the principal of or premium, if
any, on any Security at its Maturity, whether or not such payment is
prohibited by the subordination provisions of Article Thirteen; or
(2) default in the payment of any interest (including any
Additional Amounts or Liquidated Damages, if any) upon any Security when
it becomes due and payable, and continuance of such default for a period
of 30 days, whether or not such payment is prohibited by the
subordination provisions of Article Thirteen; or
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(3) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or
warranty a default in the performance or breach of which is specifically
dealt with elsewhere in this Section), and continuance of such default
or breach for a period of 60 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25% in aggregate
principal amount of the Outstanding Securities a written notice
specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder; or
(4) the entry by a court having jurisdiction in the premises of
(A) a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable bankruptcy,
moratorium of payments, insolvency, reorganization or other similar law
or, (B) a decree or order adjudging the Company a bankrupt or insolvent,
or approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company
under any applicable federal or state law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or of substantially all of its property, or
ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order unstayed and in effect for a
period of 60 consecutive days; or
(5) the commencement by the Company of a voluntary case or
proceeding under any applicable bankruptcy, moratorium of payments,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent or to be granted
moratorium of payment, or the consent by it to the entry of a decree or
order for relief in respect of the Company in an involuntary case or
proceeding under any applicable bankruptcy, moratorium of payment,
insolvency, reorganization or other similar law or to the commencement
of any bankruptcy, moratorium of payment or insolvency proceedings
against it, or the filing by it of a petition or consent seeking
reorganization or similar relief under any applicable law, or the
consent by it to the filing of such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Company or of
substantially all of its property, or the making by it of an assignment
for the benefit of creditors, or the admission by it in writing of its
inability to pay its debts generally as they become due, or the taking
of corporate action by the Company in furtherance of any such action.
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
Section 5.1(4) or (5)) occurs and is continuing, then in every such case the
Trustee or the Holders of not less than 25% in aggregate principal amount of the
Outstanding Securities may declare the principal of all the Securities to be due
and payable immediately, by a notice in writing to the Company (and to the
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Trustee if given by the Holders), and upon any such declaration such principal
and all accrued interest thereon shall become immediately due and payable. If an
Event of Default specified in Section 5.1(4) or (5) occurs, the principal of,
and accrued interest on, all the Securities shall ipso facto become immediately
due and payable without any declaration or other Act of the Holders or any act
on the part of the Trustee.
At any time after such declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article Five provided, the Holders of a
majority in aggregate principal amount of the Outstanding Securities, by written
notice to the Company and the Trustee, may rescind and annul such declaration
and its consequences if
(1) The Company has paid or deposited with the Trustee a sum sufficient
to pay
(A) all overdue interest (including any Additional Amounts
and Liquidated Damages) on all Securities,
(B) the principal of and premium, if any, on any
Securities which have become due otherwise than by such
declaration of acceleration and any interest thereon at the rate
borne by the Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at a rate of 5% per annum, and
(D) all sums paid or advanced by the Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel; and
(2) all Events of Default, other than the nonpayment of the principal
of, and any interest on, Securities which have become due solely by such
declaration of acceleration, have been cured or waived as provided in Section
5.13.
No rescission or annulment referred to above shall affect any subsequent
default or impair any right consequent thereon.
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if
(1) default is made in the payment of any interest (including any
Additional Amounts and Liquidated Damages) on any Security when
it becomes due and payable and such default continues for a
period of 30 days, or
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(2) default is made in the payment of the principal of or
premium, if any, on any Security at the Maturity thereof,
The Company will, upon demand of the Trustee, pay to the Trustee, for the
benefit of the Holders of such Securities, the whole amount then due and payable
on such Securities for principal and interest (including any Additional Amounts
and Liquidated Damages) and interest on any overdue principal and premium, if
any, and on any overdue interest (including any Additional Amounts and
Liquidated Damages), to the extent permitted by law, at a rate of 5% per annum,
and in addition thereto, such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities, wherever
situated.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders of Securities by such appropriate judicial proceedings as the Trustee
shall deem most effectual to protect and enforce any such rights, whether for
the specific enforcement of any covenant or agreement in this Indenture or in
aid of the exercise of any power granted herein, or to enforce any other proper
remedy.
SECTION 5.4. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, moratorium of payments, reorganization, arrangement, adjustment,
composition or other judicial proceeding relative to the Company or any other
obligor upon the Securities or the property of the Company or of such other
obligor or the creditors of either, the Trustee (irrespective of whether the
principal of, and any interest on, the Securities shall then be due and payable
as therein expressed or by declaration or otherwise and irrespective of whether
the Trustee shall have made any demand on the Company for the payment of overdue
principal or interest) shall be entitled and empowered, by intervention in such
proceeding or otherwise,
(1) to file and prove a claim for the whole amount of principal,
premium, if any, and interest owing and unpaid in respect of the
Securities and take such other actions, including participating as a
member, voting or otherwise, of any official committee of creditors
appointed in such matter, and to file such other papers or documents, in
each of the foregoing cases, as may be necessary or advisable in order
to have the claims of the Trustee (including any claim for the
reasonable compensation,
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expenses, disbursements and advances of the Trustee, its agents and
counsel) and of the Holders of Securities allowed in such judicial
proceeding, and
(2) to collect and receive any moneys or other property payable
or deliverable on any such claim and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder of Securities to make such payments to the Trustee and, in the event
that the Trustee shall consent to the making of such payments directly to the
Holders of Securities to pay to the Trustee any amount due to it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel and any other amounts due the Trustee under Section 6.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder of a Security
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder of a Security in any such proceeding;
provided, however, that the Trustee may, on behalf of such Holders, vote for the
election of a trustee in bankruptcy or similar official.
SECTION 5.5. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which judgment
has been recovered.
SECTION 5.6. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article Five shall
be applied in the following order, at the date or dates fixed by the Trustee
and, in case of the distribution of such money on account of principal, premium,
if any, or interest, upon presentation of the Securities and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 6.7;
SECOND: To the payment of the amounts then due and unpaid for
principal, premium, if any, or interest (including any Additional
Amounts and Liquidated Damages) on the Securities in respect of which or
for the benefit of which such money has been
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collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Securities for
principal, premium, if any, and interest (including any Additional
Amounts and Liquidated Damages), respectively; and
THIRD: Any remaining amounts shall be repaid to the Company.
SECTION 5.7. Limitation on Suits.
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless:
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in aggregate principal
amount of the Outstanding Securities shall have made written request to
the Trustee to institute proceedings in respect of such Event of Default
in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority in aggregate principal amount of the Outstanding Securities;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all such
Holders.
SECTION 5.8. Unconditional Right of Holders to Receive Principal, Premium and
Interest and to Convert.
Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right, which is absolute and unconditional, to receive
payment of the principal of, premium, if any, and interest on such Security on
the respective Stated Maturities expressed in such Security (or, in the case of
redemption or repurchase, on the Redemption Date or Repurchase Date, as the case
may be), and to convert such Security in accordance with Article
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Twelve, and to institute suit for the enforcement of any such payment and right
to convert, and such rights shall not be impaired without the consent of such
Holder.
SECTION 5.9. Restoration of Rights and Remedies.
If the Trustee or any Holder of a Security has instituted any proceeding
to enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders of
Securities shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee and
such Holders shall continue as though no such proceeding had been instituted.
SECTION 5.10. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Securities in the last paragraph of
Section 3.6, no right or remedy herein conferred upon or reserved to the Trustee
or to the Holders of Securities is intended to be exclusive of any other right
or remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 5.11. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or any
acquiescence therein. Every right and remedy given by this Article Five or by
law to the Trustee or to the Holders of Securities may be exercised from time to
time, and as often as may be deemed expedient, by the Trustee or (subject to the
limitations contained in this Indenture) by the Holders of Securities.
SECTION 5.12. Control by Holders of Securities.
Subject to Section 6.3(6), the Holders of a majority in aggregate
principal amount of the Outstanding Securities shall have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee or exercising any trust or power conferred on the Trustee,
provided that
(1) such direction shall not be in conflict with any rule of law
or with this Indenture;
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(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction;
(3) the Trustee need not take any action which might result in
personal liability or be unjustly prejudicial to the Holders of
Securities not consenting; and
(4) such direction shall be presented by such Holders to the
Trustee in a timely manner.
SECTION 5.13. Waiver of Past Defaults.
The Holders, either (a) through the written consent of not less than a
majority in aggregate principal amount of the Outstanding Securities, or (b) by
the adoption of a resolution, at a meeting of Holders of the Outstanding
Securities at which a quorum is present, by the Holders of the lesser of (x) not
less than a majority in aggregate principal amount of Outstanding Securities and
(y) at least 66-2/3% in aggregate principal amount of the Outstanding Securities
represented at such meeting, may on behalf of the Holders of all the Securities
waive any past default hereunder and its consequences, except a default (1) in
the payment of the principal of, premium, if any, or interest on any Security,
or (2) in respect of a covenant or provision hereof which under Article Eight
cannot be modified or amended without the consent of the Holder of each
Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 5.14. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security by
his or her acceptance thereof shall be deemed to have agreed, that any court may
in its discretion require, in any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against the Trustee for any action
taken, suffered or omitted by it as Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit, and that such court
may in its discretion assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in such suit, having due regard to the merits
and good faith of the claims or defenses made by such party litigant.
SECTION 5.15. Waiver of Stay, Extension and Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension law or usury law or other
law that would prohibit or forgive the Company from paying all or any portion of
its obligations on the Securities as provided herein, wherever
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enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
SECTION 6.1. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this
Indenture; but in the case of any such certificates or opinions which by
any provision hereof are specifically required to be furnished to the
Trustee, the Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this
Indenture, but not to verify the contents thereof.
(b) In case an Event of Default has occurred and is continuing of which
a Responsible Officer of the Trustee has actual knowledge, the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and use
the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that
(1) this paragraph (c) shall not be construed to limit the effect
of paragraph (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it shall be proved
that the Trustee was negligent in ascertaining the pertinent facts; and
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(3) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders of a majority in aggregate principal amount of
the Outstanding Securities or such lesser percentage as provided in this
Indenture relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any
trust or power conferred upon the Trustee, under this Indenture.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
(e) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability has
not been provided to it.
SECTION 6.2. Notice of Defaults.
Within 90 days after the occurrence of any default hereunder as to which
the Trustee has received written notice, the Trustee shall give to all Holders
of Securities, in the manner provided in Section 1.6, notice of such default,
unless such default shall have been cured or waived; provided, however, that,
except in the case of a default in the payment of the principal of, premium, if
any, or interest on any Security, the Trustee shall be protected in withholding
such notice if and so long as the board of directors, the executive committee or
a trust committee of directors or Responsible Officers of the Trustee in good
faith determine that the withholding of such notice is in the interest of the
Holders; and provided, further, that in the case of any default of the character
specified in Section 5.1(4), no such notice to Holders of Securities shall be
given until at least 30 days after the occurrence thereof. For the purpose of
this Section, the term "default" means any event which is, or after notice or
lapse of time or both would become, an Event of Default.
SECTION 6.3. Certain Rights of Trustee.
Subject to the provisions of Section 6.1:
(1) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officers' Certificate, other
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, coupon, other evidence
of indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
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(2) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order,
and any resolution of the Board shall be sufficiently evidenced by a
Board Resolution;
(3) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate;
(4) the Trustee may consult with counsel of its selection and the
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(5) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders of Securities pursuant to this
Indenture, unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such
request or direction;
(6) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, coupon, other evidence of indebtedness or other
paper or document, but the Trustee in its sole discretion may make such
further inquiry or investigation into such facts or matters as it may
see fit, and, if the Trustee shall determine to make such further
inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or attorney;
(7) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents
or attorneys and the Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney appointed with due
care by it hereunder;
(8) the permissive right of the Trustee to take or refrain from
taking any actions enumerated in this Indenture shall not be construed
as a duty and the Trustee shall not be answerable in such actions other
than for its own negligence, bad faith or willful misconduct in
exercising any such right; and
(9) the Trustee shall not be liable for any action taken,
suffered or omitted to be taken by it in good faith and reasonably
believed by it to be authorized or within the discretion or rights or
powers conferred upon it by the Indenture.
SECTION 6.4. Not Responsible for Recitals or Issuance of Securities.
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The recitals contained herein and in the Securities (except the
Trustee's certificates of authentication) shall be taken as the statements of
the Company, and the Trustee or any Authenticating Agent assumes no
responsibility for their correctness. The Trustee makes no representations as to
the validity or sufficiency of this Indenture, of the Securities or of the
Common Stock issuable upon the conversion of the Securities. The Trustee or any
Authenticating Agent shall not be accountable for the use or application by the
Company of Securities or the proceeds thereof.
SECTION 6.5. May Hold Securities, Act as Trustee Under Other Indentures.
The Trustee, any Authenticating Agent, any Paying Agent, any Conversion
Agent or any other agent of the Company or the Trustee, in its individual or any
other capacity, may become the owner or pledgee of Securities and may otherwise
deal with the Company with the same rights it would have if it were not the
Trustee, Authenticating Agent, Paying Agent, Conversion Agent or such other
agent.
The Trustee may become and act as trustee under other indentures under
which other securities, or certificates of interest or participation in other
securities, of the Company are outstanding in the same manner as if it were not
Trustee hereunder.
SECTION 6.6. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed in writing with the Company.
SECTION 6.7. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time such compensation as
the Company and the Trustee shall from time to time agree in writing for
all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable expenses, disbursements
and advances incurred or made by the Trustee in accordance with any
provision of this Indenture (including the reasonable compensation and
the expenses and disbursements of its agents and counsel), except for
any such expense, disbursement or advance as may be attributable to its
negligence, bad faith or willful misconduct. The Trustee agrees to repay
such expenses, disbursements and advances attributable to its
negligence, bad faith or willful misconduct
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upon the entry of a final nonappealable determination that the Trustee
engaged in negligence, bad faith or willful misconduct; and
(3) to indemnify the Trustee (and its directors, officers,
employees and agents) for, and to hold it harmless against, any loss,
liability or expense incurred without negligence, bad faith or willful
misconduct on its part, arising out of or in connection with the
acceptance or administration of this trust, including the costs,
expenses and reasonable attorneys' fees of defending itself against any
claim or liability in connection with the exercise or performance of any
of its powers or duties hereunder.
When the Trustee incurs expenses or renders services in connection with
an Event of Default specified in Section 5.1(4) or Section 5.1(5), the expenses
(including the reasonable charges of its counsel) and the compensation for the
services are intended to constitute expenses of the administration under any
applicable Federal or state bankruptcy, insolvency or other similar law.
Any Paying Agent or Authenticating Agent appointed hereunder shall be
entitled to the benefits of Section 6.7(3) as if the indemnity set forth
therefor were specifically afforded to such Paying Agent or Authenticating
Agent.
The provisions of this Section shall survive the termination of this
Indenture or the earlier resignation or removal of the Trustee, any Paying Agent
or any Authenticating Agent, as the case may be.
The obligations of the Company under this Section to compensate the
Trustee, to pay or reimburse the Trustee for expenses, disbursements and
advances and to indemnify and hold harmless the Trustee shall constitute
additional indebtedness hereunder and shall survive the satisfaction and
discharge of this Indenture. As security for the performance of such obligations
of the Company, the Trustee shall have a claim prior to the Securities upon all
property and funds held or collected by the Trustee as such, except funds held
in trust for the payment of principal of (and premium, if any) or interest on
particular Securities.
SECTION 6.8. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a Person
that is eligible pursuant to the Trust Indenture Act to act as such, having (or
if the Trustee is a member of a bank holding company, its bank holding company
has) a combined capital and surplus of at least U.S.$50,000,000, subject to
supervision or examination by Federal or state authority, in good standing. If
such corporation publishes reports of condition at least annually, pursuant to
law or to the requirements of said supervising or examining authority, then for
the purposes of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section, it
shall
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resign immediately in the manner and with the effect hereinafter specified in
this Article and a successor shall be appointed pursuant to Section 6.9.
SECTION 6.9. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 6.10.
(b) The Trustee may resign at any time by giving written notice thereof
to the Company. If the instrument of acceptance by a successor Trustee required
by Section 6.10 shall not have been delivered to the Trustee within 30 days
after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in aggregate principal amount of the Outstanding Securities, delivered
to the Trustee and the Company. If the instrument of acceptance by a successor
Trustee required by Section 6.10 shall not have been delivered to the Trustee
within 30 days after the giving of such notice of removal, the removed Trustee
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
(d) If at any time:
(1) the Trustee shall cease to be eligible under Section 6.8 and
shall fail to resign after written request therefor by the Company or by
any Holder of a Security who has been a bona fide Holder of a Security
for at least six months, or
(2) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 5.14, any Holder of a Security who has been
a bona fide Holder of a Security for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee and
shall comply with the applicable requirements of this Section and Section 6.10.
If, within one year after such resignation, removal or incapability,
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or the occurrence of such vacancy, a successor Trustee shall be appointed by Act
of the Holders of a majority in aggregate principal amount of the Outstanding
Securities delivered to the Company and the retiring Trustee, the successor
Trustee so appointed shall, forthwith upon its acceptance of such appointment in
accordance with the applicable requirements of Section 6.10, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders of Securities and accepted appointment in the manner required by this
Section and Section 6.10, any Holder of a Security who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor Trustee to all Holders of
Securities in the manner provided in Section 1.6. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
SECTION 6.10. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on the request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder. Upon request of any such successor Trustee, the
Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be eligible under this Article.
SECTION 6.11. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
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authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.
SECTION 6.12. Authenticating Agents.
The Trustee may appoint an additional Authenticating Agent or Agents
with respect to the Securities which shall be authorized to act on behalf of the
Trustee to authenticate Securities issued upon exchange or substitution pursuant
to this Indenture.
Securities authenticated by an Authenticating Agent shall be entitled to
the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder, and every reference in
this Indenture to the authentication and delivery of Securities by the Trustee
or the Trustee's certificate of authentication shall be deemed to include
authentication and delivery on behalf of the Trustee by an Authenticating Agent
and a certificate of authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a corporation organized and doing business
under the laws of the United States of America, any State thereof, the District
of Columbia authorized under such laws to act as Authenticating Agent and
subject to supervision or examination by government or other fiscal authority.
If at any time an Authenticating Agent shall cease to be eligible in accordance
with the provisions of this Section 6.12, such Authenticating Agent shall resign
immediately in the manner and with the effect specified in this Section 6.12.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section 6.12, without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 6.12, the Trustee may appoint a successor
Authenticating Agent which shall be subject to acceptance by the Company. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section 6.12.
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The Company agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section 6.12 and the Trustee
shall be entitled to be reimbursed for such payments, subject to the provisions
of Section 6.7.
If an Authenticating Agent is appointed with respect to the Securities
pursuant to this Section 6.12, the Securities may have endorsed thereon, in
addition to or in lieu of the Trustee's certification of authentication, an
alternative certificate of authentication in the following form:
This is one of the Securities referred to in the within-mentioned
Indenture.
Dated: LASALLE NATIONAL BANK,
as Trustee
By [Authenticating Agent],
as Authenticating Agent
By:
-----------------------------------------
Authorized Signatory
SECTION 6.13. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
SECTION 6.14. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company (or
any other obligor upon the Securities), the Trustee shall be subject to the
provisions of Section 311 of the Trust Indenture Act regarding the collection of
claims against the Company (or any such other obligor).
ARTICLE SEVEN
CONSOLIDATION, MERGER, TRANSFER OR LEASE
SECTION 7.1. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate or merge into any other corporation or
convey or transfer its properties and assets substantially as an entirety to any
Person, and shall not transfer
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and assign all its obligations of, and position as, the Company hereunder,
except for a consolidation or merger in which the Company is the surviving
party, unless:
(a) the Person formed by such consolidation or into which the
Company is merged or which acquires by conveyance or transfer the
properties and assets of the Company substantially as an entirety, or to
which obligations of, and position as, the Company hereunder are
transferred and assigned (the "Successor") (i) shall be a corporation,
limited liability company, partnership or trust organized and existing
under the laws of, and resident for tax purposes in, the United States
of America or any political subdivision thereof, and (ii) shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, due and
punctual payment of the principal of and interest (including Additional
Amounts, if any, and Liquidated Damages, if any) on all of the
Securities and the performance of every covenant of this Indenture and
in the Securities on the part of the Company to be performed or
observed;
(b) immediately after giving effect to any such consolidation,
merger, conveyance or transfer, or such transfer and assignment, no
default and no Event of Default shall have occurred and be continuing;
and
(c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance or transfer, or such transfer and
assignment, and such supplemental indenture comply with this Article and
that all conditions precedent herein provided for relating to such
transaction have been compiled with.
SECTION 7.2. Successor Substituted.
Upon any consolidation, merger or any conveyance or transfer of the
properties and assets of the Company substantially as an entirety, or upon
transfer and assignment of all obligations of, and position as, the Company
hereunder, in accordance with Section 7.1, the Successor shall succeed to and be
substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such Successor had been named as the
Company herein, and thereafter, the predecessor Person shall be relieved of all
obligations and covenants under the Indenture and the Securities.
ARTICLE EIGHT
SUPPLEMENTAL INDENTURES
SECTION 8.1. Supplemental Indentures Without Consent of Holders of Securities.
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Without the consent of any Holders of Securities, the Company, when
authorized by a Board Resolution, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto in form
satisfactory to the Trustee for any of the following purposes:
(1) to evidence the succession of another Person to the Company
and the assumption by any such successor of the covenants and
obligations of the Company herein and in the Securities as permitted by
this Indenture; or
(2) to add to the covenants of the Company for the benefit of the
Holders of Securities, or to surrender any right or power herein
conferred upon the Company; or
(3) to add any additional Events of Default;
(4) to secure the Securities; or
(5) to make provision with respect to the conversion rights of
Holders of Securities pursuant to Section 12.11 or the repurchase rights
of Holders of Securities pursuant to Section 14.3; or
(6) to comply with the requirements of the Trust Indenture Act or
the rules and regulations of the Commission thereunder in order to
effect or maintain the qualification of this Indenture under the Trust
Indenture Act, as contemplated by this Indenture or otherwise; or
(7) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein or
which is otherwise defective, or to make any other provisions with
respect to matters or questions arising under this Indenture as the
Company and the Trustee may deem necessary or desirable, provided, such
action pursuant to this clause (7) shall not adversely affect the
interests of the Holders of Securities in any material respect.
Upon Company Request, accompanied by a Board Resolution authorizing the
execution of any such supplemental indenture, and subject to and upon receipt by
the Trustee of the documents described in Section 8.3 hereof, the Trustee shall
join with the Company in the execution of any supplemental indenture authorized
or permitted by the terms of this Indenture and to make any further appropriate
agreements and stipulations which may be therein contained.
SECTION 8.2. Supplemental Indentures with Consent of Holders of Securities.
With either (a) the written consent of the Holders of not less than a
majority in aggregate principal amount of the Outstanding Securities, by the Act
of said Holders delivered to the Company and the Trustee, or (b) by the adoption
of a resolution, at a meeting of Holders of the Outstanding Securities at which
a quorum is present, by the Holders of the lesser of (x) not less
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than a majority in aggregate principal amount of the Outstanding Securities and
(y) 66-2/3% in aggregate principal amount of the Outstanding Securities
represented at such meeting, the Company, when authorized by a Board Resolution,
and the Trustee may enter into an indenture or indentures supplemental hereto
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or of modifying in any
manner the rights of the Holders of Securities under this Indenture; provided,
however, that no such supplemental indenture shall, without the consent or
affirmative vote of the Holder of each Outstanding Security,
(1) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the principal amount
or the rate of interest payable thereon or any premium payable upon
redemption or mandatory repurchase thereof, or change the obligation of
the Company to pay Additional Amounts pursuant to Section 10.4 in a
manner adverse to the Holders, or change the Place of Payment or coin or
currency in which any Security or the interest or any premium thereon or
any other amount in respect thereof is payable, or impair the right to
institute suit for the enforcement of any payment in respect of any
Security on or after the Stated Maturity thereof (or, in the case of
redemption or any repurchase, on or after the Redemption Date or
Repurchase Date, as the case may be) or, except as permitted by Section
12.11, adversely affect the right to convert any Security as provided in
Article Twelve, or modify the provisions of this Indenture with respect
to the subordination of the Securities in a manner adverse to the
Holders of Securities, or
(2) reduce the requirements of Section 9.4 for quorum or voting,
or reduce the percentage in aggregate principal amount of the
Outstanding Securities the consent of whose Holders is required for any
such supplemental indenture or the consent of whose Holders is required
for any waiver (of compliance with certain provisions of this Indenture
or certain defaults hereunder and their consequences) provided for in
this Indenture, or
(3) modify any of the provisions of this Section or Section 5.13,
except to increase any percentage contained herein or therein or to
provide that certain other provisions of this Indenture cannot be
modified or waived without the consent of the Holder of each Outstanding
Security affected thereby; or
(4) modify the provisions of Article Fourteen in a manner adverse
to the Holders; or
(5) modify any of the provisions of Section 10.7 in a manner
adverse to the Holders.
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It shall not be necessary for any Act of Holders of Securities under
this Section to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the substance
thereof.
SECTION 8.3. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Sections 6.1 and 6.3) shall be fully protected in relying upon,
an Opinion of Counsel stating that the execution of such supplemental indenture
is authorized or permitted by this Indenture, and that such supplemental
indenture has been duly authorized, executed and delivered by the Company and
constitutes a valid and legally binding obligation of the Company enforceable
against the Company in accordance with its terms. The Trustee may, but shall not
be obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION 8.4. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 8.5. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Company and the
Trustee, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
SECTION 8.6. Notice of Supplemental Indentures.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of Section 8.2, the Company
shall give notice to all Holders of Securities of such fact, setting forth in
general terms the substance of such supplemental indenture, in the manner
provided in Section 1.6. Any failure of the Company to give such notice, or any
defect therein, shall not in any way impair or affect the validity of any such
supplemental indenture.
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After and so long as the Securities are listed on the Luxembourg Stock
Exchange and the rules of the Luxembourg Stock Exchange shall require, notice of
any supplemental indenture pursuant to this Article Eight will be given by
publication in a Authorized Newspaper in Luxembourg, or, if not practicable in
Luxembourg, elsewhere in a Western European city. Any failure of the Company to
give such notice, or any defect therein, shall not in any way impair or affect
the validity of any such supplemental indenture.
ARTICLE NINE
MEETINGS OF HOLDERS OF SECURITIES
SECTION 9.1. Purposes for Which Meetings May Be Called.
A meeting of Holders of Securities may be called at any time and from
time to time pursuant to this Article to make, give or take any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be made, given or taken by Holders of Securities.
SECTION 9.2. Call, Notice and Place of Meetings.
(a) The Trustee may at any time call a meeting of Holders of Securities
for any purpose specified in Section 9.1, to be held at such time and at such
place in Chicago, Illinois, in the Borough of Manhattan, The City of New York
or, after and so long as the Securities are listed on the Luxembourg Stock
Exchange and the Luxembourg Stock Exchange shall require, in Luxembourg, as the
Trustee shall determine. Notice of every meeting of Holders of Securities,
setting forth the time and the place of such meeting and in general terms the
action proposed to be taken at such meeting, shall be given, in the manner
provided in Section 1.6, not less than 21 nor more than 180 days prior to the
date fixed for the meeting.
(b) In case at any time the Company, pursuant to a Board Resolution, or
the Holders of at least 25% in aggregate principal amount of the Outstanding
Securities shall have requested the Trustee to call a meeting of the Holders of
Securities for any purpose specified in Section 9.1, by written request setting
forth in reasonable detail the action proposed to be taken at the meeting, and
the Trustee shall not have made the first publication of the notice of such
meeting within 21 days after receipt of such request or shall not thereafter
proceed to cause the meeting to be held as provided herein, then the Company or
the Holders of Securities in the amount specified, as the case may be, may
determine the time and the place in the Borough of Manhattan, The City of New
York or, after and so long as the Securities are listed on the Luxembourg Stock
Exchange and the Luxembourg Stock Exchange shall require, in Luxembourg, for
such meeting and may call such meeting for such purposes by giving notice
thereof as provided in paragraph (a) of this Section.
SECTION 9.3. Persons Entitled to Vote at Meetings.
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To be entitled to vote at any meeting of Holders of Securities, a Person
shall be (a) a Holder of one or more Outstanding Securities on the applicable
record date, or (b) a Person appointed by an instrument in writing as proxy for
a Holder or Holders of one or more Outstanding Securities by such Holder or
Holders. The only Persons who shall be entitled to be present or to speak at any
meeting of Holders shall be the Persons entitled to vote at such meeting and
their counsel, any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel.
SECTION 9.4. Quorum; Action.
The Persons entitled to vote a majority in aggregate principal amount of
the Outstanding Securities shall constitute a quorum. In the absence of a quorum
within 30 minutes of the time appointed for any such meeting, the meeting shall,
if convened at the request of Holders of Securities, be dissolved. In any other
case, the meeting may be adjourned for a period of not less than 10 days as
determined by the chairman of the meeting prior to the adjournment of such
meeting. In the absence of a quorum at any such reconvened meeting, such
reconvened meeting may be further adjourned for a period not less than 10 days
as determined by the chairman of the meeting prior to the adjournment of such
reconvened meeting (subject to repeated applications of this sentence). Notice
of the reconvening of any adjourned meeting shall be given as provided in
Section 9.2(a), except that such notice need be given only once not less than
five days prior to the date on which the meeting is scheduled to be reconvened.
Notice of the reconvening of an adjourned meeting shall state expressly the
percentage of the principal amount of the Outstanding Securities which shall
constitute a quorum.
Subject to the foregoing, at the reconvening of any meeting adjourned
for a lack of a quorum, the Persons entitled to vote 25% in aggregate principal
amount of the Outstanding Securities at the time shall constitute a quorum for
the taking of any action set forth in the notice of the original meeting.
At a meeting or an adjourned meeting duly reconvened and at which a
quorum is present as aforesaid, any resolution and all matters (except as
limited by the proviso to Section 8.2) shall be effectively passed and decided
if passed or decided by the lesser of (i) not less than a majority in aggregate
principal amount of the Outstanding Securities and (ii) Persons entitled to vote
not less than 66-2/3% in aggregate principal amount of Outstanding Securities
represented and entitled to vote at such meeting.
Any resolution passed or decisions taken at any meeting of Holders of
Securities duly held in accordance with this Section shall be binding on all the
Holders of Securities, whether or not present or represented at the meeting. The
Trustee shall, in the name and at the expense of the Company, notify all the
Holders of Securities of any such resolutions or decisions pursuant to Section
1.6.
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SECTION 9.5. Determination of Voting Rights; Conduct and Adjournment
of Meetings.
(a) Notwithstanding any other provisions of this Indenture, the Trustee
may make such reasonable regulations as it may deem advisable for any meeting of
Holders of Securities in regard to proof of the holding of Securities and of the
appointment of proxies and in regard to the appointment and duties of inspectors
of votes, the submission and examination of proxies, certificates and other
evidence of the right to vote, and such other matters concerning the conduct of
the meeting as it shall deem appropriate. Except as otherwise permitted or
required by any such regulations, the holding of Securities shall be proved in
the manner specified in Section 1.4 and the appointment of any proxy shall be
proved in the manner specified in Section 1.4.
(b) The Trustee shall, by an instrument in writing, appoint a temporary
chairman (which may be the Trustee) of the meeting, unless the meeting shall
have been called by the Company or by Holders of Securities as provided in
Section 9.2(b), in which case the Company or the Holders of Securities calling
the meeting, as the case may be, shall in like manner appoint a temporary
chairman. A permanent chairman and a permanent secretary of the meeting shall be
elected by vote of the Persons entitled to vote a majority in aggregate
principal amount of the Outstanding Securities represented at the meeting.
(c) At any meeting, each Holder of a Security or proxy shall be entitled
to one vote for each U.S.$1,000 principal amount of Securities held or
represented by him; provided, however, that no vote shall be cast or counted at
any meeting in respect of any Security challenged as not Outstanding and ruled
by the chairman of the meeting to be not Outstanding. The chairman of the
meeting shall have no right to vote, except as a Holder of a Security or proxy.
(d) Any meeting of Holders of Securities duly called pursuant to Section
9.2 at which a quorum is present may be adjourned from time to time by Persons
entitled to vote a majority in aggregate principal amount of the Outstanding
Securities represented at the meeting, and the meeting may be held as so
adjourned without further notice.
SECTION 9.6. Counting Votes and Recording Action of Meetings.
The vote upon any resolution submitted to any meeting of Holders of
Securities shall be by written ballots on which shall be subscribed the
signatures of the Holders of Securities or of their representatives by proxy and
the principal amounts at Stated Maturity and serial numbers of the Outstanding
Securities held or represented by them. The permanent chairman of the meeting
shall appoint two inspectors of votes who shall count all votes cast at the
meeting for or against any resolution and who shall make and file with the
secretary of the meeting their verified written reports in duplicate of all
votes cast at the meeting. A record, at least in duplicate, of the proceedings
of each meeting of Holders of Securities shall be prepared by the secretary of
the meeting and there shall be attached to said record the original reports of
the inspectors of votes on any vote by ballot taken thereat and affidavits by
one or more Persons having knowledge of
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the facts setting forth a copy of the notice of the meeting and showing that
said notice was given as provided in Section 9.2 and, if applicable, Section
9.4. Each copy shall be signed and verified by the affidavits of the permanent
chairman and secretary of the meeting and one such copy shall be delivered to
the Company and another to the Trustee to be preserved by the Trustee, the
latter to have attached thereto the ballots voted at the meeting. Any record so
signed and verified shall be conclusive evidence of the matters therein stated.
ARTICLE TEN
COVENANTS
SECTION 10.1. Payment of Principal, Premium and Interest.
The Company covenants and agrees that it will duly and punctually pay
the principal of and premium, if any, and interest (including Additional
Amounts, if any, or Liquidated Damages, if any) on the Securities in accordance
with the terms of the Securities and this Indenture. The Company will deposit or
cause to be deposited with the Trustee on or prior to the due date for any
installment of interest thereon or on the Stated Maturity of any Security all
payments so due, which payments shall be in immediately available funds on the
date of such due date or Stated Maturity, as the case may be.
SECTION 10.2. Maintenance of Offices or Agencies.
The Company hereby appoints (a) the Corporate Trust Office of the
Trustee in Chicago, Illinois and an agency of the Trustee in the Borough of
Manhattan, The City of New York, where Securities may be presented or
surrendered for payment, where Securities may be surrendered for registration of
transfer or exchange, where Securities may be surrendered for conversion, and
where notices and demands to or upon the Company in respect of the Securities
and this Indenture may be served, and (b) after and so long as the Securities
are listed on Luxembourg Stock Exchange and the Luxembourg Stock Exchange shall
require, the office of Banque de Luxembourg, 14 Boulevard Royal, L-2449
Luxembourg, as its agent outside of the United States where, subject to any
applicable laws or regulations, Securities may be surrendered for payment, where
Securities may be surrendered for registration of transfer or exchange and where
Securities may be surrendered for conversion.
The Company may at any time and from time to time vary or terminate the
appointment of any such agent or appoint any additional agents for any or all of
such purposes; provided, however, that until all of the Securities have been
delivered to the Trustee for cancellation, or moneys sufficient to pay the
principal of, premium, if any, and interest on the Securities have been made
available for payment and either paid or returned to the Company pursuant to the
provisions of Section 10.3, the Company will maintain (1) in the Borough of
Manhattan, The City of New York, an office or agency where Securities may be
presented or surrendered for
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payment and conversion, where Securities may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Company in
respect of the Securities and this Indenture may be served, and (2) after and so
long as the Securities are listed on the Luxembourg Stock Exchange and the
Luxembourg Stock Exchange shall require, subject to any laws or regulations
applicable thereto, in Luxembourg an office or agency where Securities may be
presented and surrendered for payment, where Securities may be presented for
registration of transfer or exchange or conversion. The Company will give prompt
written notice to the Trustee, and notice to the Holders in accordance with
Section 1.6, of the appointment or termination of any such agents and of the
location and any change in the location of any such office or agency.
If at any time the Company shall fail to maintain any such required
office or agency, or shall fail to furnish the Trustee with the address thereof,
presentations and surrenders may be made and notices and demands may be served
on the agency of the Trustee in the Borough of Manhattan, the City of New York,
or other Paying Agent or Conversion Agent outside the United States, and the
Company hereby appoints the Paying Agent in Luxembourg as its agent to receive
such respective presentations, surrenders, notices and demands outside the
United States.
SECTION 10.3. Money for Security Payments To Be Held in Trust.
If the Company shall act as its own Paying Agent, it will, on or before
each due date of the principal of, premium, if any, or interest on any of the
Securities, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal, premium, if any, or interest so
becoming due until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and the Company will promptly notify the Trustee of its
action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it will, on
or prior to each due date of the principal of, premium, if any, or interest on
any Securities, deposit with such Paying Agent a sum sufficient to pay the
principal, premium, if any, or interest so becoming due, such sum to be held for
the benefit of the Persons entitled to such principal, premium, if any, or
interest, and (unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee of its action or any failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of,
premium, if any, or interest on Securities for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons
or otherwise disposed of as herein provided;
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(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities) in the making of any payment of
principal, premium, if any, or interest; and
(3) at any time during the continuance of any such default, upon
the written request of the Trustee, forthwith pay to the Trustee all
sums so held by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such sums.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Security and remaining unclaimed for the earlier of ten days
prior to the time such money would escheat to the state or two years after such
principal, premium, if any, or interest has become due and payable shall be paid
to the Company or (if then held by the Company) shall be discharged from such
trust; and the Holder of such Security shall thereafter, as an unsecured general
creditor, look only to the Company for payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such trust money, and all liability
of the Company as trustee thereof, shall thereupon cease.
SECTION 10.4. Additional Amounts.
The Company will pay to the Holder of any Security Additional Amounts as
provided in the form of Security, as set forth in Section 2.2. Whenever in this
Indenture there is mentioned, in any context, the payment of the principal of,
premium, if any, or interest on, or in respect of, any Security, such mention
shall be deemed to include mention of the payment of Additional Amounts provided
for in this Section to the extent that, in such context, Additional Amounts are,
were or would be payable in respect thereof pursuant to the provisions of this
Section and express mention of the payment of Additional Amounts (if applicable)
in any provisions hereof shall not be construed as excluding Additional Amounts
in those provisions hereof where such express mention is not made.
At least 10 days prior to March 1, 1998, or an earlier Redemption Date
or Repurchase Date (and at least 10 days prior to each date of payment of
principal, premium, if any, or interest after March 1, 1998, or such earlier
Redemption Date or Repurchase Date), the Company shall furnish the Trustee, the
agency of the Trustee in the Borough of Manhattan, the Paying Agent in the
Borough of Manhattan, The City of New York and the Paying Agent in Luxembourg,
if other than the Trustee, with an Officers' Certificate instructing the Trustee
and such Paying Agents
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whether or not such payment of principal of, premium, if any, or interest on the
Securities shall be made to the Holders of Securities subject to withholding or
deduction. If any withholding or deduction shall be required, such Officers'
Certificate shall specify the amount required to be withheld or deducted with
respect to such payments to such Holders of Securities and the Company will pay
to the Trustee or the applicable Paying Agent the Additional Amounts, if any,
required to be paid as set forth in the first sentence of this Section 10.4. The
Company covenants to indemnify the Trustee and any Paying Agent for, and to hold
them harmless against, any loss, liability or expense reasonably incurred
without negligence, bad faith or willful misconduct arising out of or in
connection with actions taken or omitted by any of them in reliance on any
Officers' Certificate furnished pursuant to this Section. In the absence of any
such Officers' Certificates with respect to withholding, the Trustee can
conclusively rely on the fact that there is no such withholding.
SECTION 10.5. Corporate Existence.
Subject to Article Seven, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence.
SECTION 10.6. Statement by Officers as to Default.
The Company will deliver to the Trustee within 120 days after the end of
each fiscal year of the Company an Officers' Certificate stating that in the
course of performance by the signers of their duties as such officers of the
Company they would normally obtain knowledge of whether any default exists in
the performance and observance of any of the terms, provisions and conditions of
this Indenture and whether the Company has kept, observed, performed and
fulfilled its obligations under this Indenture. Such Officers' Certificate shall
further state, as to each such officer signing such Certificate, to the best of
the knowledge of such officer, as of the date of such Officers' Certificate, (a)
whether any such default exists, (b) whether the Company (as applicable) during
the preceding fiscal year kept, observed, performed and fulfilled each and every
covenant and obligation of the Company under this Indenture and (c) whether
there was any default in the performance and observance of any of the terms,
provisions or conditions of this Indenture during such preceding fiscal year. If
the officer or officers signing the Officers' Certificate know of such a
default, whether then existing or occurring during such preceding fiscal year,
the Officers' Certificate shall describe such default and its status with
particularity. The Company shall also promptly notify the Trustee if the
Company's fiscal year is changed so that the end thereof is on any date other
than the then current fiscal year end date.
The Company will deliver to the Trustee, forthwith upon becoming aware
of any default in the performance or observance of any covenant, agreement or
condition contained in this Indenture, or any Event of Default, an Officers'
Certificate specifying with particularity such default or Event of Default and
further stating what action the Company has taken, is taking or proposes to take
with respect thereto.
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Any notice required to be given under this Section 10.6 shall be
delivered to the Trustee at its Corporate Trust Office.
SECTION 10.7. Delivery of Certain Information.
At any time when the Company is not subject to Section 13 or 15(d) of
the Exchange Act, upon the request of a holder of a Restricted Security, the
Company will promptly furnish or cause to be furnished Rule 144A Information (as
defined below) to such holder of Restricted Securities, or to a prospective
purchaser of any such security designated by any such holder, as the case may
be, to the extent required to permit compliance by such holder with Rule 144A
under the Securities Act (or any successor provision thereto) in connection with
the resale of any such security; provided, however, that the Company shall not
be required to furnish such information in connection with any request made on
or after the date which is two years from the later of (i) the date such a
security (or any such predecessor security) was last acquired from the Company
or (ii) the date such a security (or any such predecessor security) was last
acquired from an "affiliate" of the Company within the meaning of Rule 144 under
the Securities Act (or any successor provision thereto). "Rule 144A Information"
shall be such information as is specified pursuant to Rule 144A(d)(4) under the
Securities Act (or any successor provision thereto).
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 11.1. Right of Redemption.
The Securities may be redeemed in accordance with the provisions of the
form of Security set forth in Section 2.2.
SECTION 11.2. Applicability of Article.
Redemption of Securities at the election of the Company or otherwise, as
permitted or required by any provision of the Securities or this Indenture,
shall be made in accordance with such provision and this Article Eleven.
SECTION 11.3. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be evidenced
by a Board Resolution. In case of any redemption at the election of the Company
of any of the Securities, the Company shall, at least 45 days prior to the
Redemption Date fixed by the Company (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee in writing of such Redemption
Date. If the Securities are to be redeemed pursuant to an election of the
Company
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which is subject to a condition specified in the form of Security set forth in
Section 2.2, the Company shall furnish the Trustee with an Officers' Certificate
stating that the Company is entitled to effect such redemption and setting forth
a statement of facts showing that the conditions precedent to the right of the
Company so to redeem have occurred.
SECTION 11.4. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities are to be redeemed (other than pursuant
to the fourth paragraph on the reverse of the form of Security in Section 2.2),
the particular Securities to be redeemed shall be selected by the Trustee within
seven Business Days after it receives the notice described in 11.3, from the
Outstanding Securities not previously called for redemption, by such method as
the Trustee may deem fair and appropriate.
If any Security selected for partial redemption is converted in part
before termination of the conversion right with respect to the portion of the
Security so selected, the converted portion of such Security shall be deemed (so
far as may be) to be the portion selected for redemption. Securities which have
been converted during a selection of Securities to be redeemed may be treated by
the Trustee as Outstanding for the purpose of such selection.
The Trustee shall promptly notify the Company and each Note Registrar in
writing of the securities selected for redemption and, in the case of any
Securities selected for partial redemption, the principal amount thereof to be
redeemed.
For all purposes of this Indenture, unless the context otherwise requires, all
provisions relating to the redemption of Securities shall relate, in the case of
any Securities redeemed or to be redeemed only in part, to the portion of the
principal amount of such Securities which has been or is to be redeemed.
SECTION 11.5. Notice of Redemption.
Notice of redemption shall be given in the manner provided in Section
1.6 to the Holders of Securities to be redeemed not less than 20 nor more than
60 days prior to the Redemption Date, and such notice shall be irrevocable.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all Outstanding Securities are to be redeemed,
the aggregate principal amount of Securities to be redeemed and the
aggregate principal amount of Securities which will be outstanding after
such partial redemption,
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(4) that on the Redemption Date the Redemption Price, and accrued
interest, if any, will become due and payable upon each such Security to
be redeemed, and that interest thereon shall cease to accrue on and
after said date,
(5) the Conversion Price then in effect, the date on which the
right to convert the Securities to be redeemed will terminate and the
places where such Securities, may be surrendered for conversion,
(6) the place or places where such Securities are to be
surrendered for payment of the Redemption Price and accrued interest, if
any, and
(7) in the case of a notice of redemption pursuant to the fourth
paragraph on the reverse of the form of Security in Section 2.2, a form
of written certification of each beneficial owner of a Security as to
such beneficial owner's entitlement to Additional Amounts.
In case of a partial redemption, the notice shall specify the serial and
CUSIP numbers (if any) and the portions thereof called for redemption and that
transfers and exchanges may occur on or prior to the Redemption Date.
Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's written request, by
the Trustee in the name of and at the expense of the Company. Notice of
redemption of Securities to be redeemed at the election of the Company received
by the Trustee shall be given by the Trustee to each Paying Agent in the name of
and at the expense of the Company.
After and so long as the Securities are listed on the Luxembourg Stock
Exchange and the rules of the Luxembourg Stock Exchange shall require, notice of
redemption will be given by publication in a Authorized Newspaper in Luxembourg,
or, if not practicable in Luxembourg, elsewhere in a Western European city.
SECTION 11.6. Deposit of Redemption Price.
By 10:00 a.m. (New York time) on any Redemption Date of the Securities,
the Company shall deposit with the Trustee or with the Paying Agent so directed
by the Trustee (or, if the Company is acting as its own Paying Agent, segregate
and hold in trust as provided in Section 10.3) an amount of money (which shall
be in immediately available funds on such Redemption Date) sufficient to pay the
Redemption Price of, and accrued interest on, all the Securities which are to be
redeemed on that date other than any Securities called for redemption on that
date which have been converted prior to the date of such deposit.
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If any Security called for redemption is converted, any money deposited
with the Trustee or with a Paying Agent or so segregated and held in trust for
the redemption of such Security shall (subject to any right of the Holder of
such Security, if a Security, or any Predecessor Security to receive interest as
provided in the last paragraph of Section 3.7) be paid to the Company on Company
Request as soon as administratively practicable after the Trustee receives such
Company Request or, if then held by the Company, shall be discharged from such
trust.
SECTION 11.7. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified and from and after such date (unless the
Company shall default in the payment of the Redemption Price, including accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
Security for redemption in accordance with said notice, such Security shall be
paid by the Company at the Redemption Price together with accrued and unpaid
interest to the Redemption Date; provided, however, that installments of
interest on Securities whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such on the relevant Record Date according
to their terms and the provisions of Section 3.7.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal amount of, premium, if any, and,
to the extent permitted by applicable law, accrued interest on such Security
shall, until paid, bear interest from the Redemption Date at a rate of 5% per
annum and such Security shall remain convertible into Common Stock until the
principal of such Security (or portion thereof, as the case may be) shall have
been paid or duly provided for.
SECTION 11.8. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered
at an office or agency of the Company designated for that purpose pursuant to
Section 10.2 (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or his attorney duly authorized
in writing), and the Company shall execute, and the Trustee shall authenticate
and make available for delivery to the Holder of such Security without service
charge, a new Security or Securities, of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in exchange
for the unredeemed portion of the principal of the Security so surrendered.
SECTION 11.9. Conversion Arrangement on Call for Redemption.
In connection with any redemption of Securities, the Company may arrange
for the purchase and conversion of any Securities by an agreement with one or
more investment bankers
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or other purchasers (the "Purchasers") to purchase such securities by paying to
the Trustee in trust for the Holders, on or before the Redemption Date, an
amount not less than the applicable Redemption Price, together with interest
accrued to the Redemption Date, of such Securities. Notwithstanding anything to
the contrary contained in this Article Eleven, the obligation of the Company to
pay the Redemption Price, together with interest accrued to, but excluding, the
Redemption Date, shall be deemed to be satisfied and discharged to the extent
such amount is so paid by such Purchasers. If such an agreement is entered into
(a copy of which shall be filed with the Trustee prior to the close of business
on the Business Day immediately prior to the Redemption Date), any Securities
called for redemption that are not duly surrendered for conversion by the
Holders thereof may, at the option of the Company, be deemed, to the fullest
extent permitted by law, and consistent with any agreement or agreements with
such Purchasers, to be acquired by such Purchasers from such Holders and
(notwithstanding anything to the contrary contained in Article Twelve)
surrendered by such Purchasers for conversion, all as of immediately prior to
the close of business on the Redemption Date (and the right to convert any such
Securities shall be extended though such time), subject to payment of the above
amount as aforesaid. At the direction of the Company, the Trustee shall hold and
dispose of any such amount paid to it to the Holders in the same manner as it
would monies deposited with it by the Company for the redemption of Securities.
Without the Trustee's prior written consent, no arrangement between the Company
and such Purchasers for the purchase and conversion of any Securities shall
increase or otherwise affect any of the powers, duties, responsibilities or
obligations of the Trustee as set forth in this Indenture, and the Company
agrees to indemnify the Trustee from, and hold it harmless against, any loss,
liability or expense arising out of or in connection with any such arrangement
for the purchase and conversion of any Securities between the Company and such
Purchasers, including the costs and expenses, including reasonable legal fees,
incurred by the Trustee in the defense of any claim or liability arising out of
or in connection with the exercise or performance of any of its powers, duties,
responsibilities or obligations under this Indenture.
ARTICLE TWELVE
CONVERSION OF SECURITIES
SECTION 12.1. Conversion Privilege and Conversion Price.
Subject to and upon compliance with the provisions of this Article
Twelve, at the option of the Holder thereof, the Holder of any Security is
entitled at his option, at any time prior to the close of business on September
1, 2002, to convert such Security into fully paid and nonassessable shares
(calculated as to each conversion to the nearest 1/100th of a share) of Common
Stock of the Company at the Conversion Price, determined as hereinafter
provided, in effect at the time of conversion. Such conversion right shall be
subject, in the case of the conversion of any Global Security, to any applicable
book-entry procedures of the Depositary therefor and the following sentence. In
case a Security or portion thereof is called for redemption
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or is delivered for repurchase, such conversion right in respect of the Security
or portion so called shall expire at the close of business on the Business Day
prior to the Redemption Date or the Repurchase Date (as defined in Article
Fourteen), as the case may be, unless the Company defaults in making the payment
due upon redemption or repurchase, as the case may be.
The price at which shares of Common Stock shall be delivered upon
conversion (herein called the "Conversion Price") shall be initially U.S.$87.77
per share of Common Stock. The Conversion Price shall be adjusted in certain
instances as provided in this Article Twelve.
SECTION 12.2. Exercise of Conversion Privilege.
Beneficial owners of interests in a Global Security may exercise their
right of conversion by delivering to the Depositary the appropriate instruction
form for conversion pursuant to the Depositary's conversion program and, in the
case of conversions through Euroclear or Cedel, in accordance with Euroclear's
or Cedel's normal operating procedures. To convert a definitive Security into
shares of Common Stock, a Holder must (i) complete and manually sign the
conversion notice in the form set forth in Section 2.4 on the back of the
definitive Security (or complete and manually sign a facsimile thereof) and
deliver such notice to the Trustee at the Corporate Trust Office of the Trustee
or the office of the agency of LaSalle National Bank, in New York, New York,
(ii) surrender the definitive Security to the Trustee at the Corporate Trust
Office of the Trustee or the office of the agency of LaSalle National Bank, in
New York, New York or the Conversion Agent in Luxembourg, (iii) if required,
furnish appropriate endorsements and transfer documents, (iv) if required, pay
all transfer or similar taxes, and (v) if required, pay funds equal to interest
payable on the next Interest Payment Date. The date on which all of the
foregoing requirements have been satisfied is the date of surrender for
conversion. The Trustee shall promptly deliver to the Company and the Company's
Common Stock transfer agent notification of such notice of conversion at the
address described in Section 1.5. Such notice of conversion can be obtained from
the Trustee at the Corporate Trust Office or the office of any Conversion Agent.
Each Security surrendered for conversion will be converted into Common Stock in
registered form. Each Security surrendered for conversion (in whole or in part)
during the period from the close of business on any Regular Record Date to the
opening of business on the next succeeding Interest Payment Date (except
Securities called for redemption on a Redemption Date or to be repurchased on a
Repurchase Date during, in each case, such period) shall be accompanied by
payment in New York Clearing House funds or other funds acceptable to the
Company of an amount equal to the interest payable on such Interest Payment Date
on the principal amount of such Security (or part thereof, as the case may be)
being surrendered for conversion. The interest so payable on such Interest
Payment Date with respect to any Security (or portion thereof, if applicable)
which has been called for redemption on a Redemption Date, or is repurchasable
on a Repurchase Date, occurring, in either case, during the period from the
close of business on any Record Date next preceding any Interest Payment Date to
the opening of business on such Interest Payment Date, which Security (or
portion thereof, if applicable) is surrendered for conversion during such
period, shall be paid to the Holder of such Security being converted in an
amount equal to the interest that would have been payable on such Security if
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such Security had been converted as of the close of business on such Interest
Payment Date. The interest so payable on such Interest Payment Date in respect
of any Security (or portion thereof, as the case may be) which has not been
called for redemption on a Redemption Date, or is not eligible for repurchase on
a Repurchase Date, occurring, in either case, during the period from the close
of business on any Record Date next preceding any Interest Payment Date, which
Security (or portion thereof, as the case may be) is surrendered for conversion
during such period, shall be paid to the Holder of such Security as of such
Regular Record Date. Except as provided in this paragraph and subject to the
last paragraph of Section 3.7, no cash payment or adjustment shall be made upon
any conversion on account of, if the date of conversion is not an Interest
Payment Date, any interest accrued from the Interest Payment Date next preceding
the conversion date, in respect of any Security (or part thereof, as the case
may be) surrendered for conversion, or on account of any dividends on the shares
of Common Stock issued upon conversion. The Company's delivery to the Holder of
the number of shares of Common Stock (and cash in lieu of fractions thereof, as
provided in this Indenture) into which a Security is convertible will be deemed
to satisfy the Company's obligation to pay the principal amount of the Security.
Securities shall be deemed to have been converted immediately prior to
the close of business on the day of surrender of such Securities for conversion,
in accordance with the foregoing provisions, and at such time the rights of the
Holders of such Securities as Holders shall cease, and the Person or Persons
entitled to receive the shares of Common Stock issuable upon conversion shall be
treated for all purposes as the record holder or holders of such Common Stock at
such time. As promptly as practicable on or after the conversion date, the
Company shall issue and deliver to the Trustee, for delivery to the Holder, a
certificate or certificates for the number of full shares of Common Stock
issuable upon conversion, together with payment in lieu of any fraction of a
share, as provided in Section 12.3.
All shares of Common Stock delivered upon such conversion of Securities
that are Restricted Securities shall, if required, bear restrictive legends set
forth in Section 3.4(c) and shall be subject to the restrictions on transfer
provided in such legends. Neither the Trustee nor any agent maintained for the
purpose of such conversion shall have any responsibility for the inclusion or
content of any such restrictive legends on such shares of Common Stock;
provided, however, that the Trustee or Conversion Agent shall have provided, to
the Company or to the Note Registrar for such shares of Common Stock, prior to
or concurrently with a request to the Company to deliver such shares of Common
Stock, written notice that the Securities delivered for conversion are
Restricted Securities.
In the case of any Security which is converted in part only, upon such
conversion the Company shall execute and the Trustee shall authenticate and
deliver to the Holder thereof, at the expense of the Company, a new Security or
Securities of authorized denominations in an aggregate principal amount equal to
the unconverted portion of the principal amount of such Security. A Security may
be converted in part, but only if the principal amount of such Security to be
converted is any integral multiple of U.S.$1,000 and the principal amount of
such security
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to remain Outstanding after such conversion is equal to U.S.$1,000 or any
integral multiple thereof.
In the event that the original issuance of the Securities would
otherwise constitute the sale or issuance by the Company of Common Stock (or
securities convertible into or exercisable for Common Stock) equal to 20% or
more of the Common Stock or 20% or more of the voting power outstanding before
the original issuance of the Securities for less than the greater of book or
market value of the Common Stock for purposes of paragraph (i) of Rule 4460 of
the Rules of the Association of the National Association of Securities Dealers,
Inc. ("NASD"), and, therefore, under such Rule shareholder approval would have
been required for the issuance of the Securities but for the application of this
paragraph, and the Company shall have delivered an Opinion of Counsel to such
effect to the Trustee (which shall be based, at least in part, on a formal
finding by the NASD to such effect), then, to the extent issuance of shares of
Common Stock upon conversion of the Securities would otherwise render the total
shares issued upon conversion to be in excess of 19.9% of the number of shares
of Common Stock outstanding on the date of original issuance of Securities, upon
any such conversion of Securities, in lieu of shares of Common Stock in excess
of such 19.9%, the Company shall pay an amount in cash equal to the fair market
value of the shares of Common Stock otherwise issuable upon such conversion. For
purposes of the preceding sentence, fair market value shall be deemed to be the
Current Market Price as of the applicable conversion date (such conversion date
to be determined in accordance with Section 12.2).
SECTION 12.3. Fractions of Shares.
No fractional shares of Common Stock shall be issued upon conversion of
any Securities. If more than one Security shall be surrendered for conversion at
one time by the same Holder, the number of full shares which shall be issuable
upon conversion thereof shall be computed on the basis of the aggregate
principal amount of the Securities (or specified portions thereof) so
surrendered. Instead of any fractional share of Common Stock which would
otherwise be issuable upon conversion of any Securities (or specified portions
thereof), the Company shall calculate and pay a cash adjustment in respect of
such fraction (calculated to the nearest 1/100th of a share) in an amount equal
to the same fraction of the Current Market Price per share of Common Stock
(calculated in accordance with Section 12.4(8) below) at the close of business
on the day of conversion.
SECTION 12.4. Adjustment of Conversion Price.
The Conversion Price shall be subject to adjustments from time to time
as follows:
(1) In case the Company shall hereafter pay a dividend or make a
distribution to all holders of the outstanding Common Stock in shares of Common
Stock, the Conversion Price in effect at the opening of business on the date
following the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution shall be reduced by
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multiplying such Conversion Price by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding at the close of business on the
date fixed for such determination and the denominator of which shall be the sum
of such number of shares and the total number of shares constituting such
dividend or other distribution, such reduction to become effective immediately
after the opening of business on the day following the date fixed for such
determination. If any dividend or distribution of the type described in this
Section 12.4(1) is declared but not so paid or made, the Conversion Price shall
again be adjusted to the Conversion Price which would then be in effect if such
dividend or distribution had not been declared.
(2) In case the Company shall issue rights or warrants to all holders of
its outstanding Common Stock entitling them (for a period expiring within 45
days after the date fixed for determination of stockholders entitled to receive
such rights or warrants) to subscribe for or purchase Common Stock at a price
per share less than the Current Market Price (as defined in Section 12.4(8)(b))
on the date fixed for determination of stockholders entitled to receive such
rights or warrants, the Conversion Price shall be adjusted so that the same
shall equal the price determined by multiplying the Conversion Price in effect
immediately prior to the date fixed for determination of shareholders entitled
to receive such rights or warrants by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding at the close of business on
the date fixed for determination of stockholders entitled to receive such rights
and warrants plus the number of shares which the aggregate offering price of the
total number of shares so offered would purchase at such Current Market Price,
and the denominator of which shall be the number of shares of Common Stock
outstanding on the date fixed for determination of stockholders entitled to
receive such rights and warrants plus the total number of additional shares of
Common Stock offered for subscription or purchase. Such adjustment shall be
successively made whenever any such rights and warrants are issued, and shall
become effective immediately after the opening of business on the day following
the date fixed for determination of stockholders entitled to receive such rights
or warrants. To the extent that shares of Common Stock are not delivered after
the expiration of such rights or warrants, the Conversion Price shall be
readjusted to the Conversion Price which would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made on the
basis of delivery of only the number of shares of Common Stock actually
delivered. In the event that such rights or warrants are not so issued, the
Conversion Price shall again be adjusted to be the Conversion Price which would
then be in effect if such date fixed for the determination of stockholders
entitled to receive such rights or warrants had not been fixed. In determining
whether any rights or warrants entitle the holders to subscribe for or purchase
Common Stock at less than such Current Market Price, and in determining the
aggregate offering price of such Common Stock, there shall be taken into account
any consideration received by the Company for such rights or warrants, the value
of such consideration, if other than cash, to be determined by the Board of
Directors.
(3) In case outstanding Common Stock shall be subdivided into a greater
number of shares of Common Stock, the Conversion Price in effect at the opening
of business on the day following the day upon which such subdivision becomes
effective shall be proportionately reduced, and conversely, in case outstanding
shares of Common Stock shall be combined into a
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smaller number of shares of Common Stock, the Conversion Price in effect at
the opening of business on the day following the day upon which such combination
becomes effective shall be proportionately increased.
(4) In case the Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock shares of any class of capital stock of the
Company (other than any dividends or distributions to which Section 12.4(1)
applies) or evidences of its indebtedness or assets (including securities, but
excluding any rights or warrants referred to in Section 12.4(2), and excluding
any dividend or distribution (x) paid exclusively in cash or (y) referred to in
Section 12.4(1) (any of the foregoing hereinafter in this Section 12.4(4) called
the "Distribution Securities")), then, in each such case, the Conversion Price
shall be reduced so that the same shall be equal to the price determined by
multiplying the Conversion Price in effect on the Distribution Record Date with
respect to such distribution by a fraction the numerator of which shall be the
Current Market Price per share of Common Stock on such Distribution Record Date
less the fair market value (as determined by the Board of Directors whose
determination shall be conclusive, and described in a resolution of the Board of
Directors) on the Distribution Record Date of the portion of the Distribution
Securities so distributed applicable to one share of Common Stock and the
denominator of which shall be the Current Market Price per share of Common
Stock, such reduction to become effective immediately prior to the opening of
business on the day following such Distribution Record Date; provided, however,
that in the event the then fair market value (as so determined) of the portion
of the Distribution Securities so distributed applicable to one share of Common
Stock is equal to or greater than the Current Market Price per share of the
Common Stock on the Distribution Record Date, in lieu of the foregoing
adjustment, adequate provision shall be made so that each Holder shall have the
right to receive upon conversion the amount of Distribution Securities such
Holder would have received had such Holder converted each Security on the
Distribution Record Date. In the event that such dividend or distribution is not
so paid or made, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such dividend or distribution
had not been declared. If the Company's Board of Directors determines the fair
market value of any distribution for purposes of this Section 12.4(4) by
reference to the actual or when issued trading market for any securities, it
must in doing so consider the prices in such market over the same period used in
computing the Current Market Price of the Common Stock.
Rights or warrants distributed by the Company to all holders of Common
Stock entitling the holders thereof to subscribe for or purchase shares of the
Company's capital stock (either initially or under certain circumstances), which
rights or warrants, until the occurrence of a specified event or events
("Trigger Event"): (i) are deemed to be transferred with such shares of Common
Stock; (ii) are not exercisable; and (iii) are also issued in respect of future
issuances of shares of Common Stock, shall be deemed not to have been
distributed for purposes of this Section 12.4 (and no adjustment to the
Conversion Price under this Section 12.4 will be required) until the occurrence
of the earliest Trigger Event, whereupon such rights and warrants shall be
deemed to have been distributed and an appropriate adjustment (if any is
required) to the Conversion Price shall be made under this Section 12.4(4). If
any such right or warrant,
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including any such existing rights or warrants distributed prior to the date of
this Indenture, are subject to events, upon the occurrence of which such rights
or warrants become exercisable to purchase different securities, evidences of
indebtedness or other assets or different amounts of any of the foregoing, or
both, then the date of the occurrence of any and each such event shall be deemed
to be the date of distribution and record date with respect to new rights or
warrants with such rights (and a termination or expiration of the existing
rights or warrants without exercise by any of the holders thereof). In addition,
in the event of any distribution (or deemed distribution) of rights or warrants,
or any Trigger Event or other event (of the type described in the preceding
sentence) with respect thereto that was counted for purposes of calculating a
distribution amount for which an adjustment to the Conversion Price under this
Section 12.4 was made, (1) in the case of any such rights or warrants which
shall all have been redeemed or repurchased without exercise by any holders
thereof, the Conversion Price shall be readjusted upon such final redemption or
repurchase to give effect to such distribution or Trigger Event, as the case may
be, as though it were a cash distribution, equal to the per share redemption or
repurchase price received by a holder or holders of shares of Common Stock with
respect to such rights or warrants (assuming such holder had retained such
rights or warrants), made to all holders of shares of Common Stock as of the
date of such redemption or repurchase, and (2) in the case of such rights or
warrants which shall have expired or been terminated without exercise by any
holders thereof, the Conversion Price shall be readjusted as if such rights and
warrants had not been issued.
Notwithstanding the foregoing, in the event that the Company shall
distribute rights or warrants to subscribe for additional shares of the Common
Stock (other than rights or warrants described in Section 12.4(2)), pro rata to
holders of Common Stock, and in the case of the rights issued pursuant to the
Company's rights agreement in existence as of the date hereof, the Company may,
in lieu of making any adjustment pursuant to this Section 12.4(4), make proper
provision (in the case of the Company's rights agreement in existence as of the
date hereof, to the extent it does not make proper provision) so that each
holder of a Security who converts such Security (or any portion thereof) after
the Distribution Record Date for such distribution shall be entitled to receive
upon such conversion, in addition to the shares of Common Stock issuable upon
such conversion (the "Conversion Shares"), a number of rights or warrants to be
determined as follows: (i) if such conversion occurs on or prior to the date for
the distribution to the holders of such rights or warrants of separate
certificates evidencing such rights or warrants (the "Distribution Date"), the
same number of rights or warrants to which a holder of a number of shares of
Common Stock equal to the number of Conversion Shares is entitled at the time of
such conversion in accordance with the terms and provisions of and applicable to
such rights or warrants; and (ii) if such conversion occurs after the
Distribution Date, the same number of rights or warrants to which a holder of
the number of shares of Common Stock into which the principal amount of the
Security so converted was convertible immediately prior to the Distribution Date
would have been entitled on the Distribution Date in accordance with the terms
and provisions of, and applicable to such rights or warrants.
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For purposes of this Section 12.4(4) and Sections 12.4(1) and (2), any
dividend or distribution to which this Section 12.4(4) is applicable that also
includes shares of Common Stock, or rights or warrants to subscribe for or
purchase shares of Common Stock (or both), shall be deemed instead to be (1) a
dividend or distribution of the evidences of indebtedness, assets or shares of
capital stock other than such shares of Common Stock or rights or warrants (and
any Conversion Price reduction required by this Section 12.4(4) with respect to
such dividend or distribution shall then be made) immediately followed by (2) a
dividend or distribution of such shares of Common Stock or such rights or
warrants (and any further Conversion Price reduction required by Sections
12.4(1) and (2) with respect to such dividend or distribution shall then be
made), except (A) the Distribution Record Date of such dividend or distribution
shall be substituted as "the date fixed for the determination of shareholders
entitled to receive such dividend or other distribution" and "the date fixed for
such determination" within the meaning of Sections 12.4(1) and (2) and (B) any
shares of Common Stock included in such dividend or distribution shall not be
deemed "outstanding at the close of business on the date fixed for such
determination" within the meaning of Section 12.4(1).
(5) In case the Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock cash (excluding (x) any quarterly cash dividend
on the Common Stock to the extent the aggregate cash dividend per share of
Common Stock in any quarterly period does not exceed the greater of (A) the
amount per share of Common Stock of the next preceding quarterly cash dividend
on the Common Stock to the extent that such preceding quarterly dividend did not
require any adjustment of the Conversion Price pursuant to this Section 12.4(5)
(as adjusted to reflect subdivisions or combinations of the Common Stock), and
(B) 3.75% of the arithmetic average of the Closing Prices (determined as set
forth in Section 12.4(8)) during the ten Trading Days immediately prior to the
date of declaration of such dividend, (y) any dividend or distribution in
connection with the liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary and (z) any cash that is distributed as part of
a distribution requiring a Conversion Price adjustment pursuant to Section
12.4(4)), then, in such case, the Conversion Price shall be reduced so that the
same shall equal the price determined by multiplying the Conversion Price in
effect immediately prior to the close of business on such Distribution Record
Date by a fraction of which the numerator shall be the Current Market Price of
the Common Stock on the Distribution Record Date less the amount of cash so
distributed (and not excluded as provided above) applicable to one share of
Common Stock and the denominator shall be such Current Market Price of the
Common Stock, such reduction to be effective immediately prior to the opening of
business on the day following the Distribution Record Date; provided, however,
that in the event the portion of the cash so distributed applicable to one share
of Common Stock is equal to or greater than the Current Market Price of the
Common Stock on the Distribution Record Date, in lieu of the foregoing
adjustment, adequate provision shall be made so that each Holder shall have the
right to receive upon conversion the amount of cash such Holder would have
received had such Holder converted each Security on the Distribution Record
Date. In the event that such dividend or distribution is not so paid or made,
the Conversion Price shall again be adjusted to be the Conversion Price which
would then be in effect if such dividend or distribution had not been declared.
If any adjustment
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is required to be made as set forth in this Section 12.4(5) as a result of a
distribution that is a quarterly dividend, such adjustment shall be based upon
the amount by which such distribution exceeds the amount of the quarterly cash
dividend permitted to be excluded pursuant hereto. If an adjustment is required
to be made as set forth in this Section 12.4(5) above as a result of a
distribution that is not a quarterly dividend, such adjustment shall be based
upon the full amount of the distribution.
(6) In case a tender or exchange offer made by the Company or any
subsidiary of the Company for all or any portion of the Common Stock shall
expire and such tender or exchange offer (as amended upon the expiration
thereof) shall require the payment to stockholders of consideration per share of
Common Stock having a fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a Board
Resolution) that as of the last time (the "Expiration Time") tenders or
exchanges may be made pursuant to such tender or exchange offer (as it may be
amended) that exceeds the Current Market Price of the Common Stock on the
Trading Day next succeeding the Expiration Time, the Conversion Price shall be
reduced so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the Expiration Time by a
fraction of which the numerator shall be the number of Common Stock outstanding
(including any tendered or exchanged shares) on the Expiration Time multiplied
by the Current Market Price of the Common Stock on the Trading Day next
succeeding the Expiration Time and the denominator shall be the sum of (x) the
fair market value (determined as aforesaid) of the aggregate consideration
payable to stockholders based on the acceptance (up to any maximum specified in
the terms of the tender or exchange offer) of all shares validly tendered or
exchanged and not withdrawn as of the Expiration Time (the shares deemed so
accepted, up to any such maximum, being referred to as the "Purchased Shares")
and (y) the product of the number of Common Stock outstanding (less any
Purchased Shares) on the Expiration Time and the Current Market Price of the
Common Stock on the Trading Day next succeeding the Expiration Time, such
reduction to become effective immediately prior to the opening of business on
the day following the Expiration Time. In the event that the Company is
obligated to purchase shares pursuant to any such tender or exchange offer, but
the Company is permanently prevented by applicable law from effecting any such
purchases or all such purchases are rescinded, the Conversion Price shall again
be adjusted to be the Conversion Price which would then be in effect if such
tender or exchange offer had not been made.
(7) In case of a tender or exchange offer made by a Person other than
the Company or any Subsidiary of the Company for an amount which increases the
offeror$s ownership of Common Stock to more than 25% of the Common Stock
outstanding and shall involve the payment by such Person of consideration per
share of Common Stock having a fair market value (as determined by the Board of
Directors, whose determination shall be conclusive, and described in a
resolution of the Board) at the last time (the "Tender Expiration Time") tenders
or exchanges may be made pursuant to such tender or exchange offer (as it shall
have been amended) that exceeds the Current Market Price per share of the Common
Stock on the Trading Day next succeeding the Tender Expiration Time, and in
which, as of the Tender Expiration
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Time the Board of Directors is not recommending rejection of the offer, the
Conversion Price shall be reduced so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior to
the Tender Expiration Time by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding (including any tendered or
exchanged shares) on the Tender Expiration Time multiplied by the Current Market
Price of the Common Stock on the Trading Day next succeeding the Tender
Expiration Time and the denominator shall be the sum of (x) the fair market
value (determined as aforesaid) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in the terms
of the tender or exchange offer) of all shares validly tendered or exchanged and
not withdrawn as of the Tender Expiration Time (the shares deemed so accepted,
up to any such maximum, being referred to as the "Accepted Purchased Shares")
and (y) the product of the number of shares of Common Stock outstanding (less
any Accepted Purchased Shares) on the Tender Expiration Time and the Current
Market Price of the Common Stock on the Trading Day next succeeding the Tender
Expiration Time, such reduction to become effective immediately prior to the
opening of business on the day following the Tender Expiration Time. In the
event that such Person is obligated to purchase shares pursuant to any such
tender or exchange offer, but such Person is permanently prevented by applicable
law from effecting any such purchases or all such purchases are rescinded, the
Conversion Price shall again be adjusted to be the Conversion Price which would
then be in effect if such tender or exchange offer had not been made.
Notwithstanding the foregoing, the adjustment described in this Section 12.4(7)
shall not be made if, as of the Tender Expiration Time, the offering documents
with respect to such offer disclose a plan or intention to cause the Company to
engage in any transaction described in Article Seven.
(8) For purposes of this Section 12.4, the following terms shall have
the meaning indicated:
(a) "Closing Price" with respect to any securities on any day
shall mean the closing sale price regular way on such day or, in case no
such sale takes place on such day, the average of the reported closing
bid and asked prices, regular way, in each case on the New York Stock
Exchange, or, if such security is not listed or admitted to trading on
such Exchange, on the principal security exchange or quotation system in
the United States on which such security is quoted or listed or admitted
to trading, or, the average of the closing bid and asked prices of such
security on the over-the-counter market on the day in question as
reported by the Nasdaq National Market or a similar generally accepted
reporting service, or if not so available, in such manner as furnished
by any New York Stock Exchange member firm selected from time to time by
the Board of Directors for that purpose, or a price determined in good
faith by the Board of Directors or, to the extent permitted by
applicable law, a duly authorized committee thereof, whose determination
shall be conclusive.
(b) "Current Market Price" shall mean the average of the daily
Closing Prices per share of Common Stock for the ten consecutive Trading
Days immediately prior to
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the date in question; provided, however, that (1) if the "ex" date (as
hereinafter defined) for any event (other than the issuance or
distribution or Fundamental Change requiring such computation) that
requires an adjustment to the Conversion Price pursuant to Section
12.4(1), (2), (3), (4), (5), (6) or (7) occurs during such ten
consecutive Trading Days, the Closing Price for each Trading Day prior
to the "ex" date for such other event shall be adjusted by multiplying
such Closing Price by the same fraction by which the Conversion Price is
so required to be adjusted as a result of such other event, (2) if the
"ex" date for any event (other than the issuance, distribution or
Fundamental Change requiring such computation) that requires an
adjustment to the Conversion Price pursuant to Section 12.4(1), (2),
(3), (4), (5), (6) or (7) occurs on or after the "ex" date for the
issuance or distribution requiring such computation and prior to the day
in question, the Closing Price for each Trading Day on and after the
"ex" date for such other event shall be adjusted by multiplying such
Closing Price by the reciprocal of the fraction by which the Conversion
Price is so required to be adjusted as a result of such other event, and
(3) if the "ex" date for the issuance, distribution or Fundamental
Change requiring such computation is prior to the day in question, after
taking into account any adjustment required pursuant to clause (1) or
(2) of this proviso, the Closing Price for each Trading Day on or after
such "ex" date shall be adjusted by adding thereto the amount of any
cash and the fair market value (as determined by the Board of Directors
in a manner consistent with any determination of such value for purposes
of Section 12.4(4), (6) or (7) whose determination shall be conclusive
and described in a resolution of the Board of Directors) of the
evidences of indebtedness, shares of capital stock or assets being
distributed applicable to one share of Common Stock as of the close of
business on the day before such "ex" date. For purposes of any
computation under Section 12.4(6) or (7), the Current Market Price of
the Common Stock on any date shall be deemed to be the average of the
daily Closing Prices per share of Common Stock for such day and the next
two succeeding Trading Days; provided, however, that if the "ex" date
for any event (other than the tender or exchange offer requiring such
computation) that requires an adjustment to the Conversion Price
pursuant to Section 12.4(1), (2), (3), (4), (5), (6) or (7) occurs on or
after the Expiration Time or Tender Expiration Time, as the case may be,
for the tender or exchange offer requiring such computation and prior to
the day in question, the Closing Price for each Trading Day on and after
the "ex" date for such other event shall be adjusted by multiplying such
Closing Price by the reciprocal of the fraction by which the Conversion
Price is so required to be adjusted as a result of such other event. For
purposes of this paragraph, the term "ex" date, (1) when used with
respect to any issuance or distribution, means the first date on which
the Common Stock trades regular way on the relevant exchange or in the
relevant market from which the Closing Price was obtained without the
right to receive such issuance or distribution, (2) when used with
respect to any subdivision or combination of shares of Common Stock,
means the first date on which the Common Stock trades regular way on
such exchange or in such market after the time at which such subdivision
or combination becomes effective, and (3) when used with respect to any
tender or exchange offer means the first date on which the
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Common Stock trades regular way on such exchange or in such market after
the Expiration Time or Tender Expiration Time, as the case may be, of
such offer.
(c) "fair market value" shall mean the amount which a willing
buyer would pay a willing seller in an arm's length transaction.
(d) "Distribution Record Date" shall mean, with respect to any
dividend, distribution or other transaction or event in which the
holders of Common Stock have the right to receive any cash, securities
or other property or in which the Common Stock (or other applicable
security) is exchanged for or converted into any combination of cash,
securities or other property, the date fixed for determination of
stockholders entitled to receive such cash, securities or other property
(whether such date is fixed by the Board of Directors or by statute,
contract or otherwise).
(e) "Trading Day" shall mean (x) if the applicable security is
listed or admitted for trading on the New York Stock Exchange or another
national security exchange, a day on which the New York Stock Exchange
or another national security exchange is open for business or (y) if the
applicable security is quoted on the Nasdaq National Market, a day on
which trades may be made on thereon or (z) if the applicable security is
not so listed, admitted for trading or quoted, any day other than a
Saturday or Sunday or a day on which banking institutions in the State
of New York are authorized or obligated by law or executive order to
close.
(9) No adjustment in the Conversion Price shall be required unless such
adjustment (plus any adjustments not previously made by reason of this paragraph
(9)) would require an increase or decrease of at least one percent in such
price; provided, however, that any adjustments which by reason of this paragraph
(9) are not required to be made shall be carried forward and taken into account
in any subsequent adjustment. All calculations under this Article shall be made
to the nearest cent or to the nearest one-hundredth of a share, as the case may
be.
(10) The Company may, at its option, make such reductions in the
Conversion Price as the Board deems advisable, in addition to those required by
paragraphs (1), (2), (3), (4), (5), (6) or (7) of this Section 12.4 in order to
avoid or diminish any income tax to any holders of Common Stock or rights to
purchase Common Stock resulting from any dividend or distribution on Common
Stock (or rights to acquire such shares) or from any event treated as such for
income tax purposes, resulting from any dividend or distribution of shares or
issuance of rights or warrants to purchase or subscribe for shares or from any
event treated as such for income tax purposes.
To the extent permitted by applicable law, the Company from time to time
may reduce the Conversion Price by any amount for any period of time if the
period is (i) at least twenty (20) days, (ii) the reduction is irrevocable
during the period and (iii) the Board shall have made a determination that such
reduction would be in the best interests of the Company, which determination
shall be conclusive. Whenever the Conversion Price is reduced pursuant to the
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preceding sentence, the Company shall give notice of the reduction to the
Holders of Securities in the manner provided in Section 1.6 at least fifteen
(15) days prior to the date the reduced Conversion Price takes effect, and such
notice shall state the reduced Conversion Price and the period during which it
will be in effect.
(11) No adjustment of the Conversion Price will result in zero or a
negative number.
SECTION 12.5. Notice of Adjustments of Conversion Price.
Whenever the Conversion Price is adjusted as herein provided:
(1) the Company shall compute the adjusted Conversion Price in
accordance with Section 12.4 and shall prepare a certificate signed by
the President, Treasurer, Chief Financial Officer or Vice President of
Finance of the Company setting forth the adjusted Conversion Price and
showing in reasonable detail the facts upon which such adjustment is
based, and such certificate shall promptly be filed with the Trustee and
with each Conversion Agent; and
(2) a notice stating that the Conversion Price has been adjusted
and setting forth the adjusted Conversion Price shall promptly be
prepared and as soon as practicable thereafter, such notice shall be
provided by the Company to all Holders in accordance with Section 1.6.
Neither the Trustee nor any Conversion Agent shall be under any duty or
responsibility with respect to any such certificate or the information and
calculations contained therein, except to exhibit the same to any Holder of
Securities desiring inspection thereof at its office during normal business
hours.
After and so long as the Securities are listed on the Luxembourg Stock
Exchange and the rules of the Luxembourg Stock Exchange shall require, notice of
any adjustment of the Conversion Price pursuant to this Article Twelve will be
given by publication in an Authorized Newspaper in Luxembourg, or, if not
practicable in Luxembourg, elsewhere in a Western European city. Any failure of
the Company to give such notice, or any defect therein, shall not in any way
impair or affect the validity of any such Conversion Price adjustment.
SECTION 12.6. Notice of Certain Corporate Action.
In case:
(a) the Company shall declare a dividend (or any other
distribution) on all or substantially all of its Common Stock payable
(i) otherwise than exclusively in cash or (ii) exclusively in cash in an
amount that would require any adjustment pursuant to Section 12.4; or
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(b) the Company shall authorize the granting to the holders of
its Common Stock of rights, options or warrants to subscribe for or
purchase any shares of capital stock of any class or of any other rights
that would require any adjustment pursuant to Section 12.4; or
(c) of any reclassification of the Common Stock of the Company
(other than a subdivision or combination of its outstanding Common
Stock), or of any consolidation or merger to which the Company is a
party and for which approval of any stockholders of the Company is
required, or of the sale or transfer of all or substantially all of the
assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(e) the Company or any Subsidiary of the Company shall commence a
tender offer for all or a portion of the Company's outstanding Common
Stock (or shall amend any such tender offer);
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Securities pursuant to Section 10.2, and shall
cause to be provided to all Holders in accordance with Section 1.6, at least 20
days (or 10 days in any case specified in clause (a) or (b) above) prior to the
applicable record, expiration or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, rights, options or warrants, or, if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distribution, rights, options or warrants are to be
determined, (y) the date on which the right to make tenders under such tender
offer expires or (z) the date on which such reclassification, consolidation,
merger, share exchange, conveyance, transfer, sale, dissolution, liquidation or
winding up is expected to become effective, and the date as of which it is
expected that holders of shares of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, share exchange,
conveyance, transfer, sale, lease, dissolution, liquidation or winding up. If at
the time the Trustee shall not be the Conversion Agent, a copy of such notice
and any notice referred to in the following paragraph shall also forthwith be
filed by the Company with the Trustee.
The preceding paragraph to the contrary notwithstanding, the Company
shall cause to be filed at each office or agency maintained for the purpose of
conversion of Securities pursuant to Section 10.2, and shall cause to be
provided to all Holders in accordance with Section 1.6, notice of any tender
offer by the Company or any subsidiary of the Company for all or any portion of
the Common Stock at or about the time that such notice of tender offer is
provided to the public generally (such notice to be sent to all Holders within
five days after receipt of such notice by the Trustee or Conversion Agent from
the Company).
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SECTION 12.7. Company to Provide Common Stock.
The Company shall ensure that the Company has, free from preemptive
rights, out of its authorized but unissued Common Stock, the full number of
shares of Common Stock for the purpose of effecting the conversion of
Securities.
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SECTION 12.8. Taxes on Conversions.
The Company will pay any and all taxes and duties that may be payable in
respect of the issue or delivery of Common Stock on conversion of Securities
pursuant hereto. The Company shall not, however, be required to pay any tax or
duty which may be payable in respect of any transfer involved in the issue and
delivery of Common Stock in a name other than that of the Holder of the Security
or Securities to be converted, and no such issue or delivery shall be made
unless and until the Person requesting such issue has paid to the Company the
amount of any such tax or duty, or has established to the satisfaction of the
Company that such tax or duty has been paid.
SECTION 12.9. Company Covenant as to Common Stock.
The Company covenants that all Common Stock which may be delivered upon
conversion of Securities, upon such delivery, will have been duly authorized and
validly issued and will be fully paid and nonassessable and, except as provided
in Section 12.8, the Company will pay all taxes, liens and charges with respect
to the issue thereof.
SECTION 12.10. Cancellation of Converted Securities.
All Securities delivered for conversion shall be delivered to the
Trustee or the Paying Agent in Luxembourg or its agent to be canceled by or at
the direction of the Trustee, which shall dispose of the same as provided in
Section 3.9.
SECTION 12.11. Provision in Case of Consolidation, Merger, or Sale of Assets
of the Company.
In case of any consolidation of the Company with, or merger of the
Company into, any other Person, or any merger of another Person into the Company
(other than a merger which does not result in any reclassification, conversion,
exchange or cancellation of outstanding Common Stock of the Company) or any sale
or transfer of all or substantially all of the assets of the Company, the
Company and the Person formed by such consolidation or resulting from such
merger or which acquires such assets shall execute and deliver to the Trustee a
supplemental indenture providing that the Holder of each Security then
Outstanding shall have the right thereafter, during the period such Security
shall be convertible as specified in Section 12.1, to convert such Security only
into the kind and amount of securities, cash
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and other property receivable upon such consolidation, merger, sale or transfer
by a holder of the number of shares of Common Stock of the Company into which
such Security might have been converted immediately prior to such consolidation,
merger, sale or transfer, assuming such holder of Common Stock of the Company
(i) is not a Person with which the Company consolidated or into which the
Company merged or which merged into the Company or to which such sale or
transfer was made, as the case may be (a "Constituent Person"), or an Affiliate
of a Constituent Person, and (ii) failed to exercise his rights of election, if
any, as to the kind or amount of securities, cash and other property receivable
upon such consolidation, merger, sale or transfer (provided that if the kind or
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer is not the same for each share of Common
Stock of the Company held immediately prior to such consolidation, merger, sale
or transfer by others than a Constituent Person or an Affiliate thereof and in
respect of which such rights of election shall not have been exercised
("Non-electing Share"), then for the purposes of this Section 12.11 the kind and
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer by the holders of each Non-electing
Share shall be deemed to be the kind and amount so receivable per share by a
plurality of the Non-electing Shares). Such supplemental indenture shall provide
for adjustments which, for events subsequent to the effective date of such
supplemental indenture, shall be as nearly equivalent as may be practicable to
the adjustments provided for in this Article. The above provisions of this
Section 12.11 shall similarly apply to successive consolidations, mergers, sales
or transfers. Notice of the execution of such a supplemental indenture shall be
given by the Company to the Holder of each Security as provided in Section 1.6
promptly upon such execution.
Neither the Trustee, any Paying Agent nor any Conversion Agent shall be
under any responsibility to determine the correctness of any provisions
contained in any such supplemental indenture relating either to the kind or
amount of shares of stock or other securities or property or cash receivable by
Holders of Securities upon the conversion of their Securities after any such
consolidation, merger, conveyance, transfer, sale or lease or to any such
adjustment, but may accept as conclusive evidence of the correctness of any such
provisions, and shall be protected in relying upon, an Opinion of Counsel with
respect thereto, which the Company shall cause to be furnished to the Trustee
upon request.
SECTION 12.12. Responsibility of Trustee for Conversion Provisions.
The Trustee and any Conversion Agent shall not at any time be under any
duty or responsibility to any Holder of Securities to determine whether any
facts exist which may require any adjustment of the Conversion Price, or with
respect to the nature or extent of any such adjustment when made, or with
respect to the method employed, or herein or in any supplemental indenture
provided to be employed, in making the same, or whether a supplemental indenture
need be entered into. Neither the Trustee nor any Conversion Agent shall be
accountable with respect to the validity or value (or the kind or amount) of any
Common Stock, or of any other securities or property or cash, which may at any
time be issued or delivered upon the conversion of any Security; and it or they
do not make any representation with respect thereto. Neither the Trustee,
subject to the provisions of Section 6.1, nor any Conversion Agent shall be
responsible for any failure of the Company to make or calculate any cash payment
or to issue, transfer or deliver any Common Stock or share certificates or other
securities or property or cash upon the surrender of any Security for the
purpose of conversion; and the Trustee and any Conversion Agent shall not be
responsible for any failure of the Company to comply with any of the covenants
of the Company contained in this Article.
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ARTICLE THIRTEEN
SUBORDINATION OF SECURITIES
SECTION 13.1. Agreement of Subordination.
The Company covenants and agrees, and each Holder of Securities issued
hereunder by his acceptance thereof likewise covenants and agrees, that all
Securities shall be issued subject to the provisions of this Article Thirteen;
and each Person holding any Security, whether upon original issue or upon
transfer, assignment or exchange thereof, accepts and agrees to be bound by such
provisions.
The payment of the principal of, premium, if any, and interest on all
Securities (including, but not limited to, the Redemption Price with respect to
the Securities called for redemption in accordance with Article Eleven, or the
Repurchase Price with respect to Securities submitted for repurchase in
accordance with Article Fourteen, as the case may be, as provided in this
Indenture and Additional Amounts, if any, and Liquidated Damages, if any) issued
hereunder shall, to the extent and in the manner hereinafter set forth, be
subordinated and subject in right of payment to the prior payment in full in
cash of all Senior Indebtedness of the Company, whether outstanding at the date
of this Indenture or thereafter incurred.
No provision of this Article Thirteen shall prevent the occurrence of
any default or Event of Default hereunder.
SECTION 13.2. Payments to Holders.
No payment shall be made with respect to the principal of, or premium,
if any, or interest on the Securities by the Company (including, but not limited
to, the Redemption Price with respect to the Securities to be called for
redemption in accordance with Article Eleven or the Repurchase Price with
respect to Securities submitted for repurchase in accordance with Article
Fourteen, as the case may be, as provided in this Indenture and Additional
Amounts, if any, Liquidated Damages, if any), except payments and distributions
made by the Trustee as permitted by the first or second paragraph of Section
13.5, if:
(i) a default in the payment of principal, premium, interest,
rent or other obligations due on any Senior Indebtedness of the Company
has occurred and is continuing (or, in the case of Senior Indebtedness
of the Company for which there is a period of grace, in the event of
such a default that continues beyond the period of grace, if any,
specified in the instrument or lease evidencing such Senior Indebtedness
of the Company), unless and until such default shall have been cured or
waived or shall have ceased to exist; or
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(ii) a default (other than a payment default but including any
default in the payment of principal, premium, interest, rent or other
obligations on Designated Senior Indebtedness that would be a payment
default but for the period of grace specified in such instrument or
lease) on Designated Senior Indebtedness occurs and is continuing that
then permits holders of such Designated Senior Indebtedness to
accelerate its maturity and the Trustee receives a notice of the default
(a "Payment Blockage Notice") from a Representative of Designated Senior
Indebtedness or a holder of Designated Senior Indebtedness or the
Company.
If the Trustee receives any Payment Blockage Notice pursuant to clause
(ii) above, no subsequent Payment Blockage Notice shall be effective for
purposes of this Section unless and until at least 365 days shall have elapsed
since the initial effectiveness of the immediately prior Payment Blockage
Notice. No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee (unless such default was
waived, cured or otherwise ceased to exist and thereafter subsequently
reoccurred) shall be, or be made, the basis for a subsequent Payment Blockage
Notice.
The Company may and shall resume payments on and distributions in
respect of the Securities upon the earlier of:
(1) in the case of a payment default, the date upon which
the default is cured or waived or ceases to exist, or
(2) in the case of a default referred to in clause (ii)
above, the earlier of the date on which such default is cured or waived or
ceases to exist or 179 days after the date on which the applicable Payment
Blockage Notice is received if the maturity of such Designated Senior
Indebtedness has not been accelerated.
unless this Article Thirteen otherwise prohibits the payment or distribution at
the time of such payment or distribution (including without limitation, in the
case of default referred to in clause (ii) above, as a result of a payment
default with respect to the applicable Senior Indebtedness as a consequence of
the acceleration of the maturity thereof or otherwise).
Upon any payment by the Company, or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any dissolution or winding-up or liquidation or reorganization of
the Company, whether voluntary or involuntary or in bankruptcy, moratorium of
payments, insolvency, receivership or other proceedings, all amounts due or to
become due upon all Senior Indebtedness of the Company shall first be paid in
full in cash or other payment satisfactory to the holders of such Senior
Indebtedness of the Company, or payment thereof in accordance with its terms
provided for in cash or other payment satisfactory to the holders of such Senior
Indebtedness of the Company before any payment is made on account of the
principal of, premium, if any, or interest (including Additional Amounts, if
any, or Liquidated Damages, if any) on the Securities by the Company (except
payments by
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the Company made pursuant to Article Four from monies deposited with the Trustee
pursuant thereto prior to commencement of proceedings for such dissolution,
winding-up, liquidation or reorganization); and upon any such dissolution or
winding-up or liquidation or reorganization of the Company or bankruptcy,
insolvency, receivership or other proceeding, any payment by the Company, or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, to which the Holders or the Trustee would be entitled,
except for the provision of this Article Thirteen, shall (except as aforesaid)
be paid by the Company or by any receiver, trustee in bankruptcy, moratorium of
payments, liquidating trustee, agent or other Person making such payment or
distribution, or by the Holders or by the Trustee under this Indenture if
received by them or it, directly to the holders of Senior Indebtedness of the
Company (pro rata to such holders on the basis of the respective amounts of
Senior Indebtedness of the Company held by such holders, or as otherwise
required by law or a court order) or their Representative or Representatives, or
to the trustee or trustees under any indenture pursuant to which any instruments
evidencing any Senior Indebtedness of the Company may have been issued, as their
respective interests may appear, to the extent necessary to pay all Senior
Indebtedness of the Company in full, in cash or other payment satisfactory to
the holders of such Senior Indebtedness of the Company, after giving effect to
any concurrent payment or distribution to or for the holders of Senior
Indebtedness of the Company, before any payment or distribution is made to the
Holders or to the Trustee.
For purposes of this Article Thirteen, the words, "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article Thirteen with
respect to the Securities to the payment of all Senior Indebtedness of the
Company which may at the time be outstanding; provided that (i) the Senior
Indebtedness of the Company is assumed by the new corporation, if any, resulting
from any reorganization or readjustment, and (ii) the rights of the holders of
Senior Indebtedness of the Company (other than leases which are not assumed by
the Company or the new corporation, as the case may be) are not, without the
consent of such holders, altered by such reorganization or readjustment. The
merger of the Company into another corporation or the liquidation or dissolution
of the Company following the conveyance or transfer of its property as an
entirety, or substantially as an entirety, to another corporation upon the terms
and conditions provided for in Article Seven shall not be deemed a dissolution,
winding-up, liquidation or reorganization for the purposes of this Section 13.2
if such other corporation shall, as a part of such merger, conveyance or
transfer, comply with the conditions stated in Article Seven.
In the event of the acceleration of the Securities because of an Event
of Default, no payment or distribution shall be made to the Trustee or any
Holder of Securities in respect of the principal of, premium, if any, or
interest on the Securities by the Company (including, but not limited to, the
Redemption Price with respect to the Securities called for redemption in
accordance with Article Eleven or the Repurchase Price with respect to
Securities submitted for repurchase in accordance with Article Fourteen, as the
case may be, as provided in this Indenture
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and Additional Amounts, if any, and Liquidated Damages, if any), except payments
and distributions made by the Trustee as permitted by the first or second
paragraph of Section 13.5, until all Senior Indebtedness of the Company has been
paid in full in cash or other payment satisfactory to the holders of Senior
Indebtedness of the Company or such acceleration is rescinded in accordance with
the terms of this Indenture. If payment of the Securities is accelerated because
of an Event of Default, the Company shall promptly notify holders of Senior
Indebtedness of the Company of the acceleration.
In the event that, notwithstanding the foregoing provisions, any payment
or distribution of assets of the Company of any kind or character, whether in
cash, property or securities (including, without limitation, by way of setoff or
otherwise), prohibited by the foregoing, shall be received by the Trustee or the
Holders of the Securities before all Senior Indebtedness of the Company is paid
in full in cash or other payment satisfactory to the holders of such Senior
Indebtedness of the Company, or provision is made for such payment thereof in
accordance with its terms in cash or other payment satisfactory to the holders
of such Senior Indebtedness of the Company, such payment or distribution shall
be held in trust for the benefit of and shall be paid over or delivered to the
holders of Senior Indebtedness of the Company or their Representative or
Representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any Senior Indebtedness of the Company may have
been issued, as their respective interests may appear, as calculated by the
Company, for application to the payment of all Senior Indebtedness of the
Company remaining unpaid to the extent necessary to pay all Senior Indebtedness
of the Company in full in cash or other payment satisfactory to the holders of
such Senior Indebtedness of the Company, after giving effect to any concurrent
payment or distribution, or provision therefor, to or for the holders of such
Senior Indebtedness of the Company.
Nothing in this Article Thirteen shall apply to claims of, or payments
to, the Trustee under or pursuant to Section 6.7. This Section 13.2 shall be
subject to the further provisions of Section 13.5.
SECTION 13.3. Subrogation of Securities.
Subject to the payment in full in cash of all Senior Indebtedness of the
Company, the Holders of the Securities shall be subrogated to the extent of the
payments or distributions made to the holders of such Senior Indebtedness of the
Company pursuant to the provisions of this Article Thirteen (equally and ratably
with the holders of all indebtedness of the Company which by its express terms
is subordinated to other indebtedness of the Company to substantially the same
extent as the Securities are subordinated and is entitled to like rights of
subrogation) to the rights of the holders of Senior Indebtedness of the Company
to receive payments or distributions of cash, property or securities of the
Company applicable to the Senior Indebtedness of the Company until the
principal, premium, if any, and interest on the Securities shall be paid in
full; and, for the purposes of such subrogation, no payments or distributions to
the holders of the Senior Indebtedness of the Company of any cash, property or
securities to which the Holders of
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the Securities or the Trustee would be entitled except for the provisions of
this Article Thirteen, and no payment over pursuant to the provisions of this
Article Thirteen, to or for the benefit of the holders of Senior Indebtedness of
the Company by Holders of the Securities or the Trustee, shall, as between the
Company, its creditors other than holders of Senior Indebtedness of the Company,
and the Holders of the Securities, be deemed to be a payment by the Company to
or on account of the Senior Indebtedness of the Company. It is understood that
the provisions of this Article Thirteen are and are intended solely for the
purposes of defining the relative rights of the Holders of the Securities, on
the one hand, and the holders of the Senior Indebtedness of the Company, on the
other hand.
Nothing contained in this Article Thirteen or elsewhere in this
Indenture or in the Securities is intended to or shall impair, as among the
Company, its creditors other than the holders of Senior Indebtedness of the
Company, and the Holders of the Securities, the obligation of the Company, which
is absolute and unconditional, to pay to the Holders of the Securities the
principal of (and premium, if any) and interest on the Securities as and when
the same shall become due and payable in accordance with their terms, or is
intended to or shall affect the relative rights of the Holders of the Securities
and creditors of the Company other than the holders of the Senior Indebtedness
of the Company, nor shall anything herein or therein prevent the Trustee or the
Holder of any Security from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article Thirteen of the holders of Senior Indebtedness of the Company
in respect of cash, property or securities of the Company received upon the
exercise of any such remedy.
Upon any payment or distribution of assets of the Company referred to in
this Article Thirteen, the Trustee, subject to the provisions of Section 6.1,
and the Holders of the Securities shall be entitled to rely upon any order or
decree made by any court of competent jurisdiction in which such bankruptcy,
dissolution, winding-up, liquidation or reorganization proceedings are pending,
or a certificate of the receiver, trustee in bankruptcy, liquidating trustee,
agent or other Person making such payment or distribution, delivered to the
Trustee or to the Holders of the Securities, for the purpose of ascertaining the
Persons entitled to participate in such distribution, the holders of the Senior
Indebtedness of the Company and other Indebtedness of the Company, the amount
thereof or payable thereon and all other facts pertinent thereto or to this
Article Thirteen.
SECTION 13.4. Authorization to Effect Subordination.
Each Holder of a Security by the Holder's acceptance thereof authorizes
and directs the Trustee on the Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article Thirteen and appoints the Trustee to act as the Holder's
attorney-in-fact for any and all such purposes. If the Trustee does not file a
proper proof of claim or proof of debt in the form required in any proceeding
referred to in Section 5.4 hereof at least 30 days before the expiration of the
time to file such claim, the holders
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of any Senior Indebtedness of the Company or their Representatives are hereby
authorized to file an appropriate claim for and on behalf of the Holders of the
Securities.
SECTION 13.5. Notice to Trustee.
The Company shall give prompt written notice in the form of an Officers'
Certificate to a Responsible Officer of the Trustee and to any Paying Agent of
any fact known to the Company which would prohibit the making of any payment of
monies deposited by the Company to or by the Trustee or any Paying Agent in
respect of the Securities pursuant to the provisions of this Article Thirteen.
Notwithstanding the provisions of this Article Thirteen or any other provision
of this Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts which would prohibit the making of any payment of monies
deposited by the Company to or by the Trustee in respect of the Securities
pursuant to the provisions of this Article Thirteen, unless and until a
Responsible Officer of the Trustee shall have received written notice thereof at
the Corporate Trust Office from the Company (in the form of an Officers'
Certificate) or a Representative of Senior Indebtedness or of a holder or
holders of Senior Indebtedness of the Company or from any trustee thereof; and
before the receipt of any such written notice, the Trustee shall be entitled in
all respects to assume that no such facts exist; provided that if on a date not
fewer than two Business Days prior to the date upon which by the terms hereof
any such monies may become payable for any purpose (including, without
limitation, the payment of the principal of, or premium, if any, or interest on
any Security) the Trustee shall not have received, with respect to such monies,
the notice provided for in this Section 13.5, then, anything herein contained to
the contrary notwithstanding, the Trustee shall have full power and authority to
receive such monies deposited by the Company and to apply the same to the
purpose for which they were received, and shall not be affected by any notice to
the contrary which may be received by it on or after such prior date.
Notwithstanding anything in this Article Thirteen to the contrary,
nothing shall prevent any payment by the Trustee to the Holders of monies
deposited with it pursuant to Section 4.1, and any such payment shall not be
subject to the provisions of Section 13.1 or 13.2.
The Trustee shall be entitled to rely on the delivery to it of a written
notice by a Representative or a Person representing himself to be a holder of
Senior Indebtedness of the Company (or a trustee on behalf of such holder) to
establish that such notice has been given by a Representative or a holder of
Senior Indebtedness of the Company or a trustee on behalf of any such holder or
holders. In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness of the Company to participate in any payment or distribution
pursuant to this Article Thirteen, the Trustee may request such Person to
furnish evidence to the reasonable satisfaction of the Trustee as to the amount
of Senior Indebtedness of the Company held by such Person, the extent to which
such Person is entitled to participate in such payment or distribution and any
other facts pertinent to the rights of such Person under this Article Thirteen,
and if such evidence is not
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furnished the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
SECTION 13.6. Trustee's Relation to Senior Indebtedness of the Company.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article Thirteen in respect of any Senior Indebtedness
of the Company at any time held by it, to the same extent as any other holder of
Senior Indebtedness of the Company, and nothing in this Indenture shall deprive
the Trustee of any of its rights as such holder.
With respect to the holders of Senior Indebtedness of the Company, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article Thirteen, and no
implied covenants or obligations with respect to the holders of Senior
Indebtedness of the Company shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness of the Company and the Trustee shall not be
liable to any holder of Senior Indebtedness of the Company if it shall pay over
or deliver to Holders of Securities, the Company or any other Person money or
assets to which any holder of Senior Indebtedness of the Company shall be
entitled by virtue of this Article Thirteen or otherwise.
SECTION 13.7. No Impairment of Subordination.
No right of any present or future holder of any Senior Indebtedness of
the Company to enforce subordination as herein provided shall at any time in any
way be prejudiced or impaired by any act or failure to act on the part of the
Company or by any act or failure to act, in good faith, by any such holder, or
by any noncompliance by the Company with the terms, provisions and covenants of
this Indenture, regardless of any knowledge thereof which any such holder may
have or otherwise be charged with.
SECTION 13.8. Article Applicable to Paying Agents.
If at any time any Paying Agent other than the Trustee shall have been
appointed by the Company and be then acting hereunder, the term "Trustee" as
used in this Article shall (unless the context otherwise requires) be construed
as extending to and including such Paying Agent within its meaning as fully for
all intents and purposes as if such Paying Agent were named in this Article in
addition to or in place of the Trustee; provided, however, that the first
paragraph of Section 13.5 shall not apply to the Company or any Affiliate of the
Company if it or such Affiliate acts as Paying Agent.
SECTION 13.9. Senior Indebtedness of the Company Entitled to Rely.
The holders of Senior Indebtedness of the Company (including, without
limitation, Designated Senior Indebtedness) shall have the right to rely upon
this Article Thirteen, and no
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amendment or modification of the provisions contained herein shall diminish the
rights of such holders unless such holders shall have agreed in writing thereto.
SECTION 13.10. Certain Conversions Deemed Payment.
For the purposes of this Article Thirteen only, (1) the issuance and
delivery of junior securities upon conversion of Securities in accordance with
Article Twelve shall not be deemed to constitute a payment or distribution on
account of the principal of (or premium, if any) or interest on Securities or on
account of the purchase or other acquisition of Securities, and (2) the payment,
issuance or delivery of cash (except in satisfaction of fractional shares
pursuant to Section 12.2), property or securities (other than junior securities)
upon conversion of a Security shall be deemed to constitute payment on account
of the principal of such Security. For the purposes of this Section 13.10, the
term ?junior securities? means (a) shares of any stock of any class of the
Company (including, without limitation, the Common Stock of the Company), or (b)
securities of the Company which are subordinated in right of payment to all
Senior Indebtedness of the Company which may be outstanding at the time of
issuance or delivery of such securities to substantially the same extent as, or
to a greater extent than, the Securities are so subordinated as provided in this
Article. Nothing contained in this Article Thirteen or elsewhere in this
Indenture or in the Securities is intended to or shall impair, as among the
Company, its creditors other than holders of Senior Indebtedness of the Company
and the Holders, the right, which is absolute and unconditional, of the Holder
of any Security to convert such Security in accordance with Article Twelve.
ARTICLE FOURTEEN
REPURCHASE OF SECURITIES AT THE OPTION
OF THE HOLDER UPON A FUNDAMENTAL CHANGE
SECTION 14.1. Right to Require Repurchase.
In the event that a Fundamental Change (as hereinafter defined) shall
occur, then each Holder shall have the right, at the Holder's option, to require
the Company to repurchase, and upon the exercise of such right the Company shall
repurchase, all of such Holder's Securities, or any portion of the principal
amount thereof that is equal to U.S.$1,000 or any integral multiple thereof
(provided that no single Security may be repurchased in part unless the portion
of the principal amount of such Security to be Outstanding after such repurchase
is equal to U.S.$1,000 or integral multiples of U.S.$1,000 in excess thereof),
on the date (the "Repurchase Date") that is 45 days after the date of the
Company Notice (as defined in Section 14.2) at the following prices (expressed
as percentages of the principal amount thereof) (the "Repurchase Price") in the
event of a Fundamental Change occurring during the 12-month period beginning
September 1 (plus interest accrued to, but excluding, the Repurchase Date):
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<TABLE>
<CAPTION>
Year Repurchase Price
---- ----------------
<S> <C>
1997 105%
1998 104
1999 103
2000 102
2001 101
</TABLE>
and 100% at September 1, 2002; provided that if the Applicable Price with
respect to the Fundamental Change is less than the Reference Market Price, the
Company shall repurchase such Securities at a price equal to the foregoing
Repurchase Price multiplied by the fraction obtained by dividing the Applicable
Price by the Reference Market Price; and provided, further, that installments of
interest on Securities whose Stated Maturity is on or prior to the Repurchase
Date shall be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such on the Regular Record Date according
to their terms and the provisions of Section 3.7. Such right to require the
repurchase of the Securities shall not continue after a discharge of the Company
from its obligations with respect to the Securities in accordance with Article
Four, unless a Fundamental Change shall have occurred prior to such discharge.
Whenever in this Indenture (including Sections 2.2, 3.1, 5.1(1) and 5.8) there
is a reference, in any context, to the principal of any Security as of any time,
such reference shall be deemed to include reference to the Repurchase Price
payable in respect of such Security to the extent that such Repurchase Price is,
was or would be so payable at such time, and express mention of the Repurchase
Price in any provision of this Indenture shall not be construed as excluding the
Repurchase Price in those provisions of this Indenture when such express mention
is not made.
SECTION 14.2. Notices; Method of Exercising Repurchase Right, Etc.
(a) Unless the Company shall have theretofore called for
redemption all of the Outstanding Securities, on or before the 30th day after
the occurrence of a Fundamental Change, the Company or, at the request and
expense of the Company, the Trustee, shall give to all Holders of Securities, in
the manner provided in Section 1.6, notice (the "Company Notice") of the
occurrence of the Fundamental Change and of the repurchase right set forth
herein arising as a result thereof. The Company shall also deliver a copy of
such notice of a repurchase right to the Trustee.
Each notice of a repurchase right shall state:
(1) the Repurchase Date,
(2) the date by which the repurchase right must be
exercised,
(3) the Repurchase Price,
(4) a description of the procedure which a Holder must
follow to exercise a repurchase right, and the place or places where such
Securities maturing after the
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Repurchase Date, are to be surrendered for payment of the Repurchase Price and
accrued interest, if any,
(5) that on the Repurchase Date the Repurchase Price, and
accrued interest, if any, will become due and payable upon each such Security
designated by the Holder to be repurchased, and that interest thereon shall
cease to accrue on and after said date, and
(6) the Conversion Price then in effect, the date on which
the right to convert the principal amount of the Securities to be repurchased
will terminate and the place or places where such Securities may be surrendered
for conversion.
So long as the Securities are listed on the Luxembourg Stock Exchange
and the Luxembourg Stock Exchange shall so require, on or before the 30th day
after the occurrence of a Fundamental Change, the Company or, at the request of
the Company, the Paying Agent in Luxembourg, will provide notice of such
Fundamental Change by publishing such notice in an Authorized Newspaper in
Luxembourg, or, if not practicable in Luxembourg, elsewhere in a Western
European city. No failure of the Company to give the foregoing notices or defect
therein shall limit any Holder's right to exercise a repurchase right or affect
the validity of the proceedings for the repurchase of Securities.
If any of the foregoing provisions or other provisions of this Article
are inconsistent with applicable law, such law shall govern.
(b) To exercise a repurchase right, a Holder shall deliver to the
Trustee or any Paying Agent on or before the 30th day after the date of the
Company Notice (i) written notice of the Holder's exercise of such right, which
notice shall set forth the name of the Holder, the principal amount of the
Securities to be repurchased (and, if any Security is to be repurchased in part,
the serial number thereof, the portion of the principal amount thereof to be
repurchased and the name of the Person in which the portion thereof to remain
Outstanding after such repurchase is to be registered) and a statement that an
election to exercise the repurchase right is being made thereby, and (ii) the
Securities with respect to which the repurchase right is being exercised. Such
written notice shall be irrevocable, except that the right of the Holder to
convert the Securities with respect to which the repurchase right is being
exercised shall continue until the close of business on the Business Day prior
to the Repurchase Date.
(c) In the event a repurchase right shall be exercised in
accordance with the terms hereof, the Company shall pay or cause to be paid to
the Trustee or the Paying Agent the Repurchase Price in cash, as provided above,
for payment to the Holder on the Repurchase Date together with accrued and
unpaid interest to the Repurchase Date payable with respect to the Securities as
to which their purchase right has been exercised; provided, however, that
installments of interest that mature on or prior to the Repurchase Date shall be
payable in cash, in the case of Securities, to the Holders of such Securities,
or one or more Predecessor Securities, registered as such at the close of
business on the relevant Regular Record Date.
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(d) If any Security (or portion thereof) surrendered for
repurchase shall not be so paid on the Repurchase Date, the principal amount of
such Security (or portion thereof, as the case may be) shall, until paid, bear
interest to the extent permitted by applicable law from the Repurchase Date at
the rate of 5% per annum, and each Security shall remain convertible into Common
Stock until the principal of such Security (or portion thereof, as the case may
be) shall have been paid or duly provided for.
(e) Any Security which is to be repurchased only in part shall be
surrendered to the Trustee (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and make available for delivery to the Holder of such
Security without service charge, a new Security or Securities, containing
identical terms and conditions, each in an authorized denomination in aggregate
principal amount equal to and in exchange for the unrepurchased portion of the
principal of the Security so surrendered.
(f) All securities delivered for repurchase shall be delivered to
the Trustee, the Paying Agent or any other agents (as shall be set forth in the
Company Notice) to be canceled by or at the direction of the Trustee, which
shall dispose of the same as provided in Section 3.9.
SECTION 14.3. Merger, Consolidation, etc.
In the case of any merger, consolidation, sale or transfer of all or
substantially all of the assets of the Company to which Section 12.11 applies,
in which the Common Stock of the Company is changed or exchanged as a result
into the right to receive shares of stock and other securities or property or
assets (including cash) which includes Common Stock of the Company or common
stock of another Person that are, or upon issuance will be, traded on a United
States national securities exchange or approved for trading on an established
automated over-the-counter trading market in the United States and such shares
constitute at the time such change or exchange becomes effective in excess of
50% of the aggregate fair market value of such shares of stock and other
securities, property and assets (including cash) (as determined by the Company,
which determination shall be conclusive and binding), then the Company and the
Person resulting from such merger or consolidation or which acquires the
properties or assets (including cash) of the Company, as the case may be, shall
execute and deliver to the Trustee a supplemental indenture (which shall comply
with the Trust Indenture Act as in force at the date of execution of such
supplemental indenture) modifying the provisions of this Indenture relating to
the right of Holders to cause the Company to repurchase the Securities following
a Fundamental Change, including without limitation the applicable provisions of
this Article Fourteen and the definitions of the Common Stock and Fundamental
Change, as appropriate, and such other related definitions set forth herein as
determined in good faith by the Company and the Company (which determination
shall be conclusive and binding), to make such provisions apply in the event of
a subsequent Fundamental Change to the common stock and the issuer
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thereof if different from the Company and the Common Stock of the Company (in
lieu of the Company and Common Stock of the Company).
ARTICLE FIFTEEN
HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 15.1. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee:
(a) semi-annually, not more than 15 days after the Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the names
and addresses of the Holders of Securities as of such Regular Record Date, and
(b) at such other times as the Trustee may reasonably request in
writing, within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
provided, however, that no such list need be furnished so long as the Trustee is
acting as Note Registrar.
SECTION 15.2. Trustee to Furnish Company Names and Addresses of Holders.
The Trustee will furnish or cause to be furnished to the Company, or to
Company$s counsel:
(a) within 10 days from the date of this Indenture, an updated
Note Register,
(b) semi-annually, not more than 15 days after the Regular Record
Date, an updated Note Register, in such form as the Company may reasonably
require, of the names and addresses of the Holders of Securities as of such
Regular Record Date,
(c) During the preparation, pendency and effectiveness of the
Shelf Registration Statement (described in the Registration Rights Agreement)
beginning thirty days after the date of this Indenture and until such time as
the Company is no longer required to maintain the effectiveness of such Shelf
Registration Statement, the Trustee shall provide the Company on the first and
fifteenth date of every month (unless such date is a weekend or holiday, and
then on the preceding Business Day) during such period with an updated copy of
the Note Register detailing the holders of the Securities for the preceding
week, and
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(d) at such other times as the Trustee may reasonably request in
writing, within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
provided, however, that no such list need be furnished so long as the Trustee is
not acting as Note Registrar.
SECTION 15.3. Preservation of Information.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in the most
recent list furnished to the Trustee as provided in Section 15.1, if any, and
the names and addresses of Holders received by the Trustee in its capacity as
Note Registrar. The Trustee may destroy any list furnished to it pursuant to
Section 15.1 upon receipt of a new list so furnished.
(b) If and when this Indenture has become qualified under the
Trust Indenture Act, the rights of Holders to communicate with other Holders
with respect to their rights under this Indenture or under the Securities, and
the corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by reason of
any disclosure of information as to names and addresses of Holders made
hereunder.
SECTION 15.4. Reports by Trustee.
(a) If and when this Indenture becomes qualified under the Trust
Indenture Act, the Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.
(b) If and when this Indenture becomes qualified under the Trust
Indenture Act, a copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Securities are listed, with the Commission and with the Company. The
Company will notify the Trustee when the Securities are listed on any stock
exchange.
SECTION 15.5. Reports by Company.
If and when this Indenture becomes qualified under the Trust Indenture
Act, the Company shall file with the Trustee and the Commission, and transmit to
Holders, such information, documents and other reports, and such summaries
thereof, as may be required pursuant to the Trust Indenture Act at the times and
in the manner provided pursuant to such Act;
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provided that any such information, documents or reports required to be filed
with the Commission pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 shall be filed with the Trustee within 15 days after the same is so
required to be filed with the Commission.
SECTION 15.6. Reports with Respect to Registration of Securities.
The Company shall provide to the Trustee a form of Selling
Securityholder Questionnaire, within forty-five (45) days of the date of this
Indenture. Within ten (10) Business Days following the receipt of such Selling
Securityholder Questionnaire, the Trustee shall deliver to each Holder of
Securities at such time a copy of the Selling Securityholder Questionnaire in
the form provided to the Trustee by the Company. Thereafter, and until such time
as the Company is no longer required to maintain the effectiveness of the Shelf
Registration Statement (as defined in the Registration Rights Agreement), the
Trustee shall deliver, upon request of any Holder of Securities, a Selling
Securityholder Questionnaire in the form provided to the Trustee by the Company.
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This Indenture may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed all as of the day and year first above written.
LAM RESEARCH CORPORATION
By
-----------------------------------------
Name:
Title:
LASALLE NATIONAL BANK
Trustee
By
-----------------------------------------
Name:
Title:
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EXHIBIT A
Lam Research Corporation
4650 Cushing Parkway
Fremont, California 94538
LaSalle National Bank
Corporate Trust Department
135 South LaSalle Street
Chicago, Illinois 60603
Gentlemen:
We are delivering this letter in connection with an offering of 5%
Convertible Subordinated Notes due 2002 (the "Notes) which are convertible into
shares of Common Stock, $.001 par value (the "Common Stock"), of Lam Research
Corporation (the "Company").
We hereby confirm that:
1. we are an "accredited investor" within the meaning of Rule
501(a)(1), (2) or (3) under the Securities Act of 1933 (the "Securities
Act") or an entity in which all of the equity owners are accredited
investors within the meaning of Rule 501(a)(1), (2) or (3) under the
Securities Act:
2. (A) any purchase of Notes by us will be for our own account
or for the account of one or more other institutional accredited
investors or as fiduciary for the account of one or more trusts, each of
which is an "accredited investor" within the meaning of Rule 501(a)(7)
under the Securities Act (such trusts, together with accredited
investors within the meaning of Rule 501(a)(1), (2) or (3) under the
Securities Act, an "Institutional Accredited Investor") and for each of
which we exercise sole investment discretion or (B) we are a "bank,"
within the meaning of Section 3(a)(2) of the Securities Act, or a
"savings and loan association" or other institution described in Section
3(l)(5)(a) of the Securities Act that is acquiring Notes as fiduciary
for the account of one or more institutions for which we exercise sole
investment discretion;
3. in the event that we purchase any Notes, we will acquire
Notes having a minimum principal amount of not less than $250,000 for
our own account or for any separate account for which we are acting;
4. we have such knowledge and experience in financial and
business matters that we are capable of evaluating the merits and risks
of purchasing the Notes; and
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5. we are not acquiring Notes with a view to distribution
thereof or with any present intention of offering or selling Notes or
the Common Stock issuable upon conversion thereof, except as permitted
below; provided that the disposition of our property and property of any
accounts for which we are acting as fiduciary shall remain at all times
within our control.
We understand that the Notes are being offered in a transaction not
involving any public offering within the United States within the meaning of the
Securities Act and that the Notes and the shares of Common Stock issuable upon
conversion thereof have not been registered under the Securities Act, and we
agree, on our own behalf and on behalf of each account for which we acquire any
Notes, that if in the future we decide to resell or otherwise transfer such
Notes or the Common Stock issuable upon conversion thereof, such Notes or Common
Stock may be resold or otherwise transferred only (i) to the Company or any
subsidiary thereof, or (ii) inside the United States to a person who is a
"qualified institutional buyer" (as defined in Rule 144A under the Securities
Act) in a transaction meeting the requirements of Rule 144A, or (iii) inside the
United States to an Institutional Accredited Investor that, prior to such
transfer, furnishes to the Trustee or transfer agent for such securities a
signed letter containing certain representations and agreements relating to the
restrictions on transfer of such securities (the form of which letter can be
obtained from such Trustee or transfer agent), or (iv) outside the United States
in a transaction meeting the requirements of Rule 904 under the Securities Act,
or (v) pursuant to the exemption from registration provided by Rule 144 under
the Securities Art (if applicable), or (vi) pursuant to a registration statement
which has been declared effective under the Securities Act (and which continues
to be effective at the time of such transfer), and in each case, in accordance
with any applicable securities laws of any State of the United States or any
other applicable jurisdiction and in accordance with the legends set forth on
the Notes or the Common Stock issuable upon conversion thereof, as the case may
be. We further agree to provide any person purchasing any of the Notes or the
Common Stock issuable upon conversion thereof other than pursuant to clause (vi)
above from us a notice advising such purchaser that resales of such securities
are restricted as stated herein. We understand that the Trustee for the Notes
and/or the transfer agent for the Common Stock will not be required to accept
for registration of transfer any Notes or any shares of Common Stock issued upon
conversion of the Notes except upon presentation of evidence satisfactory to the
Company that the foregoing restrictions on transfer have been complied with. We
further understand that any Notes and any certificates representing Common Stock
will be in the form of definitive physical certificates and that such
certificates will bear a legend reflecting the substance of this paragraph other
than certificates representing Common Stock transferred pursuant to clause (vi)
above.
We acknowledge that the Company, others and you will rely upon our
confirmations, acknowledgments and agreements set forth herein, and we agree to
notify you promptly in writing if any of our representations or warranties
herein ceases to be accurate and complete.
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THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK
--------------------------------------------
(Name of Purchaser)
By:
-----------------------------------------
Name:
Title:
Address:
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Note: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
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Exhibit 4.2
FINAL
LAM RESEARCH CORPORATION
REGISTRATION RIGHTS AGREEMENT
Dated as of
August 15, 1997
Deutsche Morgan Grenfell Inc.
ABN AMRO Rothschild
Lombard Odier International Underwriters
Limited
c/o Deutsche Morgan Grenfell Inc.
51 West 52nd Street
New York, NY 10019
Ladies and Gentlemen:
Lam Research Corporation, a Delaware corporation (the "Company"), proposes
to issue and sell to Deutsche Morgan Grenfell Inc., ABN AMRO Rothschild and
Lombard Odier International Underwriters Limited (the "Initial Purchasers") upon
the terms set forth in a purchase agreement dated August 19, 1997 (the "Purchase
Agreement") between the Initial Purchasers and the Company, its 5% Convertible
Subordinated Notes due 2002. As an inducement to the Initial Purchasers to enter
into the Purchase Agreement and in satisfaction of a condition to the
obligations of the Initial Purchasers thereunder, the Company agrees with the
Initial Purchasers, (i) for the benefit of the Initial Purchasers and (ii) for
the benefit of the Holders (as defined below) from time to time of the
Registrable Securities (as defined below), including the Initial Purchasers, as
follows:
1. DEFINITIONS. Capitalized terms used herein without definition shall
have their respective meanings set forth in or pursuant to the Purchase
Agreement or the Offering Memorandum, dated August 19, 1997, in respect of the
Securities. As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"Affiliate" of any specified Person means any other Person which, directly
or indirectly, is in control of, is controlled by, or is under common control
with such specified Person. For purposes of this definition, control of a Person
means the power, direct or indirect, to direct or cause the direction of the
management and policies of such Person whether by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
<PAGE> 2
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"Agreement" shall mean this Registration Rights Agreement as the same may
be amended, supplemented or modified from time to time in accordance with the
terms hereof.
"Commission" means the United States Securities and Exchange Commission.
"Common Stock" means the common stock, $0.001 par value, of the Company
and any other shares of common stock as may constitute "Common Stock" for
purposes of the Indenture.
"DTC" means The Depository Trust Company.
"Effectiveness Period" has the meaning set forth in Section 2(b) hereof.
"Exchange Act" means the United States Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Holder" shall mean any person that is the record owner of Registrable
Securities (and includes any person that has a beneficial interest in any
Registrable Security in book-entry form).
"Indenture" shall mean the Indenture, dated as of 15 August 1997, between
the Company and the Trustee thereunder, pursuant to which the Securities are
being issued, as amended, modified or supplemented from time to time in
accordance with the terms thereof.
"Issue Date" means August 26, 1997
"Liquidated Damages" has the meaning set forth in Section 2(c).
"Managing Underwriters" means the investment banker or investment bankers
and manager or managers that shall administer an underwritten offering, if any,
as set forth in Section 6 hereof.
"Person" shall mean an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
"Prospectus" means the prospectus included in any Shelf Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities.
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"Registration Default" has the meaning set forth in Section 2(c) hereof.
"Restricted Securities" shall mean all Securities required pursuant to the
Indenture to bear any Restricted Securities Legend (as defined in the
Indenture).
"Registrable Security" shall mean any Restricted Security and any share of
Common Stock issuable upon conversion thereof except any such Restricted
Security or share of Common Stock which (i) has been effectively registered
under the Securities Act and sold in a manner contemplated by the Registration
Statement, (ii) has been transferred in compliance with Rule 144 under the
Securities Act (or any successor provision thereto), or is transferable pursuant
to paragraph (k) of such Rule 144 (or any successor provision thereto), or (iii)
has otherwise been transferred and a new security or share of Common Stock not
subject to transfer restrictions under the Securities Act has been delivered by
or on behalf of the Company in accordance with the Indenture.
"Rule 144" shall mean Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
successor rule or regulation.
"Rule 144A" shall mean Rule 144A promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
successor rule or regulation.
"Rule 415" shall mean Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
successor rule or regulation.
"Rule 430A" shall mean Rule 430A promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
successor rule or regulation.
"Securities" shall mean the $310,000,000 aggregate principal amount of 5%
Convertible Subordinated Notes due 2002 of the Company being issued pursuant to
the Indenture (together with up to $45,000,000 aggregate principal amount of
such convertible subordinated notes if, and to the extent, the Initial
Purchasers' over-allotment option is exercised).
"Securities Act" means the United States Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Shelf Registration" means a registration effected pursuant to Section 2
hereof.
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FINAL
"Shelf Registration Statement" means a shelf registration statement of the
Company pursuant to the provisions of Section 2 hereof filed with the Commission
which covers some or all of the Registrable Securities, as applicable, on an
appropriate form under Rule 415 under the Securities Act, or any similar rule
that may be adopted by the Commission, amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Special Counsel" means any special counsel to the Holders, determined as
provided in Section 4 hereof.
"Trust Indenture Act" has the meaning set forth in Section 1.1 of the
Indenture.
"Trustee" means the Trustee under the Indenture.
"underwriter" means any underwriter of Registrable Securities in
connection with an offering thereof under a Shelf Registration Statement.
2. SHELF REGISTRATION.
(a) The Company shall, within 90 calendar days following the Issue
Date of the Securities, file with the Commission a Shelf Registration Statement
relating to the offer and sale of the Registrable Securities by the Holders from
time to time in accordance with the methods of distribution elected by such
Holders and set forth in such Shelf Registration Statement and, thereafter,
shall use its reasonable efforts to cause such Shelf Registration Statement to
be declared effective under the Securities Act as soon as practicable, and in
any event within 180 calendar days after the Issue Date.
(b) The Company shall use its reasonable efforts:
(i) To keep the Shelf Registration Statement continuously
effective in order to permit the Prospectus forming part thereof to
be usable by Holders for a period of two years from the later of a)
the Issue Date or b) the last date of original issuance of the
Securities or such shorter period that will terminate upon the
earliest of the following: (A) when all the Securities covered by
the Shelf Registration Statement have been sold pursuant to the
Shelf Registration Statement, (B) when all shares of Common Stock
issued upon conversion of any such Securities that had not been sold
pursuant to the Shelf Registration Statement have been sold pursuant
to the Shelf Registration Statement and (C) when there shall cease
to be outstanding Registrable Securities (in any such case, such
period being called the "Effectiveness Period"); and
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(ii) After the effectiveness of the Shelf Registration
Statement, promptly upon the request of any Holder, to take any
action reasonably necessary to register the sale of any Registrable
Securities of such Holder and to identify such Holder as a selling
securityholder.
The Company shall be deemed not to have used its reasonable efforts to keep the
Shelf Registration Statement effective during the requisite period if the
Company voluntarily takes any action that would result in Holders of Registrable
Securities covered thereby not being able to offer and sell any such Registrable
Securities during that period, unless (i) such action is required by applicable
law, (ii) the continued effectiveness of the Shelf Registration Statement would
require the Company to disclose a material financing, acquisition or other
corporate transaction, and the Board of Directors shall have determined in good
faith that such disclosure is not in the best interests of the Company and the
holders of its outstanding Common Stock, or (iii) the Board of Directors shall
have determined in good faith that there is a valid business purpose or reason
for such suspension, and (x), in the case of clause (i) above, the Company
thereafter promptly complies with the requirements of paragraph 3(i) below and
(y) the Company complies with its obligations, if any, to pay Liquidated
Damages.
(c) (1) If (i) on or prior to 90 days following the Issue Date a
Shelf Registration Statement has not been filed with the Commission or (ii) on
or prior to the 180th day following the Issue Date, such Shelf Registration
Statement is not declared effective (each, a "Registration Default"), additional
interest ("Liquidated Damages") will accrue on the Restricted Securities from
and including the date following such Registration Default until such time as
such Shelf Registration Statement is filed or such Shelf Registration Statement
is declared effective, as the case may be. Liquidated Damages will be paid
semi-annually in arrears, with the first semi-annual payment due on the first
Interest Payment Date under the Indenture following the date on which such
Liquidated Damages begin to accrue, and will accrue at a rate per annum equal to
an additional one-quarter of one percent (0.25%) of the principal amount, to and
including the 90th day following such Registration Default and one-half of one
percent (0.50%) thereof from and after the 91st day following such Registration
Default. In the event that Shelf Registration Statement ceases to be effective
for more than 90 days or the Company suspends the use of the prospectus which is
a part thereof for more than 90 days, whether or not consecutive, during any
12-month period, then the interest rate borne by Restricted Securities will
increase by an additional one-half of one percent (0.50%) per annum from the
91st day of the applicable 12-month period such Shelf Registration Statement
ceases to be effective or the Company suspends the use of the prospectus which
is a part thereof, as the case may be, until the earlier of such time as (i) the
Shelf Registration Statement again becomes effective, (ii) the use of the
related prospectus ceases to be suspended or (iii) the Effectiveness Period
expires. Following the cure of all Registration Defaults relating to any
Restricted Securities, the accrual of Liquidated Damages
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FINAL
with respect to such Restricted Securities will cease (without in any way
limiting the effect of any subsequent Registration Default). In no event shall
the Company be required to pay Liquidated Damages in excess of the applicable
maximum amount of one-half of one percent (0.50%) set forth above, regardless of
whether one or multiple Registration Defaults exist.
(2) Liquidated Damages on the Restricted Securities shall be
paid by the Company to the holders of record of such Restricted Securities on
each Interest Payment Date (as defined in the Indenture) in the same manner as
for interest on such Restricted Securities as provided in the form of Securities
set forth in Section 2.2 of the Indenture.
(3) All of the Company's obligations set forth in this Section
2(c) which are unsatisfied to any extent with respect to any Restricted Security
at the time such security ceases to be a Restricted Security shall survive until
such time as all such obligations with respect to such security have been
satisfied in full (notwithstanding the earlier termination of this Agreement).
(4) Any payments due and payable pursuant to this Section 2(c)
shall be subordinated to Senior Indebtedness (as defined in the Indenture) to
the extent and in the manner set forth in the Indenture.
(5) The rights of the recordholders of Restricted Securities
to Liquidated Damages as set forth in this Section 2(c) is not intended to be
exclusive of any other right or remedy, and shall be in addition to every other
right and remedy given hereunder or under the Indenture or now or hereafter
existing at law or in equity or otherwise.
3. REGISTRATION PROCEDURES. In connection with any Shelf Registration
Statement, the following provisions shall apply:
(a) The Company shall furnish to the Special Counsel and Holders (if
requested), prior to the filing thereof with the Commission, a copy of any
Shelf Registration Statement, and each amendment thereof and each
amendment or supplement, if any, to the Prospectus included therein and
shall use its reasonable efforts to reflect in each such document, when so
filed with the Commission, such comments as the Special Counsel and
Holders reasonably may propose.
(b) The Company shall take such action as may be necessary so that
(i) any Shelf Registration Statement and any amendment thereto and any
Prospectus forming part thereof and any amendment or supplement thereto
(and each report or other document incorporated therein by reference in
each case) complies in all material respects with the Securities Act and
the Exchange Act, (ii) any Shelf Registration Statement and any amendment
thereto does not, when it becomes effective, contain
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FINAL
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading and (iii) any Prospectus forming part of any Shelf
Registration Statement, and any amendment or supplement to such
Prospectus, does not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements,
in the light of the circumstances under which they were made, not
misleading.
(c) (1) The Company shall advise the Initial Purchasers and, in the
case of clause (i), the Holders and, if requested by any Initial Purchaser
or any such Holder, confirm such advice in writing:
(i) when a Shelf Registration Statement and any
amendment thereto has been filed with the Commission and when
the Shelf Registration Statement or any post effective
amendment thereto has become effective; and
(ii) of any request by the Commission for amendments or
supplements to the Shelf Registration Statement or the
Prospectus included therein or for additional information.
(2) The Company shall advise the Holders and, if requested by
any such Holder, confirm such advice in writing of:
(i) the issuance by the Commission of any stop order
suspending effectiveness of the Shelf Registration Statement
or the initiation of any proceedings for that purpose;
(ii) the receipt by the Company of any notification with
respect to the suspension of the qualification of the
securities included therein for sale in any jurisdiction or
the initiation of any proceeding for such purpose; and
(iii) the happening of any event that requires the
making of any changes in the Shelf Registration Statement or
the Prospectus so that, as of such date, the Shelf
Registration Statement and the Prospectus do not contain an
untrue statement of a material fact and do not omit to state a
material fact required to be stated therein or necessary to
make the statements therein (in the case of the Prospectus, in
light of the circumstances under which they were made) not
misleading (which advice shall be accompanied by an
instruction to
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FINAL
suspend the use of the Prospectus until the requisite changes
have been made).
(d) The Company shall use its reasonable efforts to prevent the
issuance, and if issued to obtain the withdrawal, of any order suspending
the effectiveness of any Shelf Registration Statement at the earliest
possible time.
(e) The Company shall furnish to the Special Counsel and each Holder
(if requested) with respect to a Shelf Registration Statement, without
charge, at least one copy of such Shelf Registration Statement and any
post-effective amendment thereto, including financial statements and
schedules, and, if the Holder so requests in writing, all reports, other
documents and exhibits (including those incorporated by reference).
(f) The Company shall, during the Effectiveness Period, deliver to
each Holder with respect to a Shelf Registration Statement, without
charge, as many copies of the Prospectus (including each preliminary
Prospectus) included in such Shelf Registration Statement and any
amendment or supplement thereto as such Holder may reasonably request, and
the Company consents (except during the continuance of any event described
in Section 3(c)(2)(iii)) to the use of the Prospectus or any amendment or
supplement thereto by each of the Holders in connection with the offering
and sale of the Registrable Securities covered by the Prospectus or any
amendment or supplement thereto during the Effectiveness Period.
(g) Prior to any offering of Registrable Securities pursuant to any
Shelf Registration Statement, the Company shall register or qualify or
cooperate with the Special Counsel and Holders in connection with the
registration or qualification of such Registrable Securities for offer and
sale under the securities or blue sky laws of such jurisdictions as any
such Holders reasonably request in writing and do any and all other acts
or things necessary or advisable to enable the offer and sale in such
jurisdictions of the Registrable Securities covered by such Shelf
Registration Statement; provided, however, that in no event shall the
Company be obligated to (i) qualify as a foreign corporation or as a
dealer in securities in any jurisdiction where it would not otherwise be
required to so qualify but for this Section 3(g), (ii) file any general
consent to service of process in any jurisdiction where it is not as of
the date hereof then so subject or (iii) subject itself to taxation in any
jurisdiction if it is not so subject.
(h) Unless any Registrable Securities shall be in book-entry only
form, the Company shall cooperate with the Holders to facilitate the
timely preparation and delivery of certificates representing Registrable
Securities to be sold pursuant to any Shelf Registration Statement free of
any restrictive legends and in such permitted
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denominations and registered in such names as Holders may request in
connection with the sale of Registrable Securities pursuant to such Shelf
Registration Statement.
(i) Upon the occurrence of any event contemplated by paragraph
3(c)(2)(iii) above, the Company shall promptly prepare a post-effective
amendment to any Shelf Registration Statement or an amendment or
supplement to the related Prospectus or file any other required document
so that, as thereafter delivered to purchasers of the Registrable
Securities included therein, the Prospectus will not include an untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading. If the Company notifies the Holders
of the occurrence of any event contemplated by paragraph 3(c)(2)(iii)
above, the Holders shall suspend the use of the Prospectus until the
requisite changes to the Prospectus have been made.
(j) Not later than the effective date of any Shelf Registration
Statement hereunder, the Company shall provide a CUSIP number for the
Securities registered under such Shelf Registration Statement.
(k) The Company shall use its reasonable efforts to comply with all
applicable rules and regulations of the Commission and shall make
generally available to their securityholders or otherwise provide in
accordance with Section 11(a) of the Securities Act as soon as practicable
after the effective date of the applicable Shelf Registration Statement an
earnings statement satisfying the provisions of Section 11(a) of the
Securities Act.
(l) The Company shall cause the Indenture and the Securities to be
qualified under the Trust Indenture Act in a timely manner; and in
connection with such qualification, the Company shall cooperate with the
Trustee under the Indenture and the Holders (as defined in the Indenture)
to effect such changes to the Indenture as may be required for such
Indenture to be so qualified in accordance with the terms of the Trust
Indenture Act; and the Company shall execute and use all reasonable
efforts to cause the Trustee to execute, all documents that may be
required to effect such changes and all other forms and documents required
to be filed with the Commission to enable such Indenture to be so
qualified in a timely manner.
(m) The Company may require each Holder with respect to a Shelf
Registration Statement to furnish to the Company such information
regarding the Holder and the distribution of Registrable Securities held
by such Holder as may be required by applicable law or regulation for
inclusion in such Shelf Registration Statement (including, without
limitation, the information required by Item 507 of
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Regulation S-K of the Securities Act), and the Company may exclude from
such registration the Registrable Securities of any Holder that fails to
furnish such information within a reasonable time after receiving such
request unless, and until such time as, such information is furnished by
such Holder.
(n) The Company shall enter into such customary agreements
(including underwriting agreements in customary form) to take all other
appropriate actions in order to expedite or facilitate the registration or
the disposition of the Registrable Securities, and in connection
therewith, if an underwriting agreement is entered into pursuant to an
underwritten offering in accordance with the provisions of Section 6,
cause the same to contain indemnification provisions and procedures
substantially identical to those set forth in Section 5 (or such other
provisions and procedures acceptable to the Managing Underwriters, if any)
with respect to all parties to be indemnified pursuant to Section 5.
(o) The Company shall make reasonably available for inspection by
one representative of the Holders designated in writing by the Holders of
a majority of the Registrable Securities to be registered thereunder, any
underwriter participating in any disposition pursuant to such Shelf
Registration Statement, and any attorney, accountant or other agent
retained by such representative or any such underwriter all relevant
financial and other records, pertinent corporate documents and properties
of the Company and its subsidiaries;
(p) The Company shall cause the Company's officers, directors and
employees to make reasonably available for inspection all relevant
information reasonably requested by such representative or any such
underwriter, attorney, accountant or agent in connection with any such
Shelf Registration Statement, in each case, as is customary for similar
due diligence examinations; provided, however, that any information that
is designated in writing by the Company, in good faith, as confidential at
the time of delivery of such information shall be kept confidential by
such representative, any Holders or any such underwriter, attorney,
accountant or agent, unless such disclosure is made in connection with a
court proceeding or required by law, or such information becomes available
to the public generally or through a third party without an accompanying
obligation of confidentiality;
(q) The Company will use its reasonable efforts to cause the Common
Stock issuable upon conversion of the Securities to be admitted for
quotation on the Nasdaq National Market or other stock exchange or trading
system on which the Common Stock primarily trades on or prior to the
effective date of any Shelf Registration Statement hereunder.
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(r) In the event that any broker-dealer registered under the
Exchange Act shall underwrite any Registrable Securities or participate as
a member of an underwriting syndicate or selling group or "assist in the
distribution" (within the meaning of the Rules of Fair Practice and the
By-Laws of the National Association of Securities Dealers, Inc. ("NASD"))
thereof, whether as a Holder of such Registrable Securities or as an
underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, assist such broker-dealer in complying with the
requirements of such Rules and By-Laws, including, without limitation, by
(A) such Rules or By-Laws, including Schedule E thereto, shall so require,
engaging a "qualified independent underwriter" (as defined in Schedule E)
to participate in the preparation of the Shelf Registration Statement
relating to such Registrable Securities and to exercise usual standards of
due diligence in respect thereto, (B) indemnifying any such qualified
independent underwriter to the extent of the indemnification of
underwriters provided in Section 5 hereof and (C) providing such
information to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the Rules of Fair
Practice of the NASD.
(s) The Company shall use its reasonable efforts to take all other
steps necessary to effect the registration, offering and sale of the
Registrable Securities covered by the Shelf Registration Statement
contemplated hereby.
(t) Notwithstanding any provision of this Section 3 to the contrary,
the Company shall not be required to amend or supplement the Shelf
Registration Statement pursuant to the requirements of Sections 3(b),
3(c), 3(i) or 3(s) hereof if (i) such amendment or supplement would
require the Company to disclose a material financing, acquisition or
corporate transaction and the Board of Directors shall have determined
that such disclosure is not in the best interests of the Company and the
holders of its outstanding Common Stock or (ii) the Board of Directors
shall have determined in good faith that there is a valid business purpose
or reason for suspending the use of the Prospectus included in such Shelf
Registration Statement in accordance with Section 3(i) hereof instead of
making such amendment or supplement, provided that in each such case the
Company complies with its obligations, if any, to pay Liquidated Damages.
4. REGISTRATION EXPENSES. Except as otherwise provided in Section 6, the
Company shall bear all fees and expenses incurred in connection with the
performance of its obligations under Sections 2 and 3 hereof and shall bear or
reimburse the Holders for the reasonable fees and disbursements of a Special
Counsel designated by the Company. For purposes of this Agreement, the Company
initially appoints Wilson Sonsini Goodrich & Rosati, Professional Corporation,
as Special Counsel; provided that the Holders of a majority of the Registrable
Securities covered by the Shelf Registration Statement have the right pursuant
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to this Agreement to substitute another firm of counsel as Special Counsel under
this Agreement.
5. INDEMNIFICATION AND CONTRIBUTION. (a) In connection with any Shelf
Registration Statement, the Company shall indemnify and hold harmless each
Holder, the Initial Purchasers, each underwriter who participates in an offering
of Registrable Securities, each person, if any, who controls any of such parties
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act and each of their respective directors, officers, employees,
trustees and agents, as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, including any amounts paid in settlement of any investigation,
litigation, proceeding or claim, joint or several, as incurred, arising
out of any untrue statement or alleged untrue statement of a material fact
contained in any Shelf Registration Statement (or any amendment thereto)
covering Registrable Securities, including all documents incorporated
therein by reference, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the
statements therein not misleading or arising out of any untrue statement
or alleged untrue statement of a material fact contained in any Prospectus
(or any amendment or supplement thereto) or the omission or alleged
omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; provided, that the Company shall not be liable
under this clause (i) for any settlement of any action effected without
its written consent, which consent shall not be unreasonably withheld; and
(ii) against any and all expenses whatsoever, as incurred (including
reasonable fees and disbursements of counsel chosen by the Holders, such
Holder or any underwriter (except to the extent otherwise expressly
provided in Section 5(c) hereof)), reasonably incurred in investigating,
preparing or defending against any litigation, or any investigation or
proceeding by any court or governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue statement
or omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under subparagraph (i) of this
Section 5(a);
provided that this indemnity shall not apply to any loss, liability, claim,
damage or expense to the extent arising out of an untrue statement or omission
or alleged untrue statement or omission made in reliance upon and in conformity
with written information furnished to the Company by such Holder or any
underwriter in writing expressly for use in the Shelf Registration Statement (or
any amendment thereto) or any Prospectus (or any amendment or supplement
thereto). Any amounts advanced by the Company to an indemnified party pursuant
to this Section 5 as a result of such losses shall be returned to the Company if
it
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shall be finally determined by such a court in a judgment not subject to appeal
or final review that such indemnified party was not entitled to indemnification
by the Company.
(b) Each Holder shall agree, severally and not jointly, to indemnify and
hold harmless the Company, each underwriter who participates in an offering of
Registrable Securities and the other Holders and each of their respective
directors, officers (including each officer of the Company who signed the Shelf
Registration Statement), employees, trustees and agents and each Person, if any,
who controls the Company, any underwriter or any other Holder within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and
against any and all loss, liability, claim, damage and expense whatsoever
described in the indemnity contained in Section 5(a)(i) and (ii) hereof, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Shelf Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by such Holder expressly for use in the Shelf Registration Statement (or
any amendment thereto) or any Prospectus (or any amendment or supplement
thereto); provided, however, that, no such Holder shall be liable for any claims
hereunder in excess of the amount of net proceeds received by such Holder from
the sale of Registrable Securities pursuant to the Shelf Registration Statement.
(c) Each indemnified party shall give prompt notice to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, enclosing a copy of all papers served on such indemnified
party, but failure to so notify an indemnifying party shall not relieve it of
any liability which it may have to the indemnified party otherwise than on
account of this indemnity agreement. An indemnifying party may participate at
its own expense in the defense of any such action. If an indemnifying party so
elects within a reasonable time after receipt of such notice, such indemnifying
party, jointly with any other indemnifying party, may assume the defense of such
action with counsel chosen by it and approved by the indemnified party or
parties defendant in such action, provided that if any such indemnified party
reasonably determines that there may be legal defenses available to such
indemnified party which are different from or in addition to those available to
such indemnifying party or that representation of such indemnifying party and
any indemnified party by the same counsel would present a conflict of interest,
then such indemnifying party or parties shall not be entitled to assume such
defense. If an indemnifying party is not entitled to assume the defense of such
action as a result of the proviso to the preceding sentence, counsel for such
indemnifying party shall be entitled to conduct the defense of such indemnifying
party and counsel for each indemnified party or parties shall be entitled to
conduct the defense of such indemnified party or parties. If an indemnifying
party assumes the defense of an action in accordance with and as permitted by
the provisions of this paragraph, such indemnifying party shall not be liable
for any fees and expenses of counsel for the indemnified parties incurred
thereafter in connection with such action. In no event shall
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<PAGE> 14
FINAL
the indemnifying party or parties be liable for the fees and expenses of more
than one counsel (in addition to any local counsel) separate from its own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnity provision agreement provided for in this
Section 5 is for any reason held to be unavailable to the indemnified parties
although applicable in accordance with its terms, the Company, and the Holders
shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by said indemnity agreement incurred by the
Company and the Holders, as incurred; provided that no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person that was not
guilty of such fraudulent misrepresentation. As between the Company, on the one
hand, and the Holders, on the other hand, such parties shall contribute to such
aggregate losses, liabilities, claims, damages and expenses of the nature
contemplated by such indemnity agreement in such proportion as shall be
appropriate to reflect the relative fault of the Company, on the one hand, and
the Holders, on the other hand, with respect to the statements or omissions
which resulted in such loss, liability, claim, damage or expense, or action in
respect thereof, as well as any other relevant equitable considerations. The
relative fault of the Company, on the one hand, and of the Holders, on the other
hand, shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company, on the one hand, or by or on behalf of the Holders, on the other hand,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the Initial Purchasers agree, and the Holders shall agree, that it would not be
just and equitable if contribution pursuant to this Section 5 were to be
determined by pro rata allocation or by any other method of allocation that does
not take into account the relevant equitable considerations. For purposes of
this Section 5(d), each director, officer, employee, trustee, agent and Person,
if any, who controls a Holder within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act shall have the same rights to contribution
as such Holder, and each director, officer, employee, trustee and agent of the
Company, and each Person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act shall have
the same rights to contribution as the Company. No party shall be liable for
contribution with respect to any action, suit, proceeding or claim settled
without its written consent.
(e) The Company may require, as a condition to including any Registrable
Securities in any Registration Statement filed and to entering into any
underwriting agreement with respect thereto, that the Company shall have
received an undertaking reasonably satisfactory to it from the holder of such
Registrable Securities and from each
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<PAGE> 15
FINAL
underwriter named in any such underwriting agreement, severally and not jointly,
to comply with the provisions of paragraphs (a) through (d) of this Section 5.
6. UNDERWRITTEN OFFERING. The Holders who desire to do so may sell
Registrable Securities in an underwritten offering. In any such underwritten
offering, the investment banker or bankers and manager or managers that will
administer the offering will be selected by, and the underwriting arrangements
with respect thereto will be approved by the Holders of a majority of the
Registrable Securities to be included in such offering; provided, however, that
(i) such investment bankers and managers and underwriting arrangements must be
reasonably satisfactory to the Company and (ii) the Company shall not be
obligated to arrange for more than one underwritten offering during the
Effectiveness Period. No Holder may participate in any underwritten offering
contemplated hereby unless such Holder (a) agrees to sell such Holder's
Registrable Securities in accordance with any approved underwriting
arrangements, (b) completes and executes all reasonable questionnaires, powers
of attorney, indemnities, underwriting agreements, lock-up letters and other
documents required under the terms of such approved underwriting arrangements
and (c) at least 20% of the outstanding Registrable Securities are included in
such underwritten offering. The Holders participating in any underwritten
offering shall be responsible for any expenses customarily borne by selling
securityholders, including underwriting discounts and commissions and fees and
expenses of counsel to the selling securityholders and shall reimburse the
Company for the fees and disbursements of their counsel, their independent
public accountants and any printing expenses incurred in connection with such
underwritten offerings. Notwithstanding the foregoing or the provisions of
Section 6(a) hereof, upon receipt of a request from the Managing Underwriter or
a representative of Holders of a majority of the Registrable Securities
outstanding to prepare and file an amendment or supplement to the Shelf
Registration Statement and Prospectus in connection with an underwritten
offering, the Company may delay the filing of any such amendment or supplement
for up to 90 days if the Company in good faith has a valid business reason for
such delay.
The Company shall in connection with an underwritten offering in
accordance with the provisions of this Section:
(a) The Company shall, if requested, promptly include or incorporate
in a Prospectus supplement or post-effective amendment to a Shelf
Registration Statement, such information as the Managing Underwriters
administering an underwritten offering of Registrable Securities
registered thereunder reasonably request to be included therein and to
which the Company does not reasonably object and shall make all required
filings of such Prospectus supplement or post-effective amendment as soon
as practicable after they are notified of the matters to be included or
incorporated in such Prospectus supplement or post-effective amendment;
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<PAGE> 16
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(b) make such representations and warranties to the Holders and the
underwriters in form, substance and scope as are customarily made by the
Company to underwriters in primary underwritten offerings and covering
matters, including, but not limited to, those set forth in the Purchase
Agreement;
(c) obtain opinions of counsel to the Company and updates thereof
(which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the Managing Underwriters) addressed to each
Holder and the underwriters covering such matters as are customarily
covered in opinions requested in underwritten offerings and such other
matters as may be reasonably requested by such Holders and underwriters
(it being agreed that the matters to be covered by such opinion or written
statement by such counsel delivered in connection with such opinions shall
include in customary form, without limitation, as of the date of the
opinion and as of the effective date of the Shelf Registration Statement
or most recent post-effective amendment thereto, as the case may be, the
absence from such Shelf Registration Statement and the prospectus included
therein, as then amended or supplemented, including the documents
incorporated by reference therein, of an untrue statement of a material
fact or the omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading);
(d) obtain "cold comfort" letters and updates thereof from the
independent public accountants of the Company (and, if necessary, any
other independent public accountants of any subsidiary of the Company or
of any business acquired by the Company for which financial statements and
financial data are, or are required to be, included in the Shelf
Registration Statement), addressed to each Holder and the underwriters in
customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with primary underwritten offerings;
and
(e) deliver such documents and certificates as may be reasonably
requested by any such Holders and the Managing Underwriters, including
those to evidence compliance with Section 3(i) and with any customary
conditions contained in the underwriting agreement or other agreement
entered into by the Company.
7. MISCELLANEOUS.
(a) Other Registration Rights. The Company may grant registration
rights that would permit any Person that is a third party the right to
piggy-back on any Shelf Registration Statement, provided that if the Managing
Underwriter, if any, of such offering delivers an opinion to the Holders that
the total amount of securities which they and the holders of such piggy-back
rights intend to include in any Shelf Registration Statement is so large as to
materially adversely affect the success of such offering (including the price at
which
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such securities can be sold), then only the amount, the number or kind of
securities to be offered for the account of holders of such piggy-back rights
will be reduced to the extent necessary to reduce the total amount of securities
to be included in such offering to the amount, number or kind recommended by the
Managing Underwriter prior to any reduction in the amount of Registrable
Securities to be included.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Company has obtained the written
consent of Deutsche Morgan Grenfell Inc.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telex, telecopier, or air courier guaranteeing overnight delivery:
(1) if to a Holder, at the most current address given by such
Holder to the Company in accordance with the provisions of this
Section 7(c);
(2) if to the Initial Purchasers, initially at the address set
forth in the Purchase Agreement;
(3) if to the Company, initially at its address set forth in
the Purchase Agreement; and
(4) if to the Special Counsel, the address given by such
Special Counsel to the Company in accordance with the provisions of
this Section 7(c).
All such notices and communications shall be deemed to have been duly given when
received.
The Initial Purchasers, the Company and the Special Counsel by notice to
the others may designate additional or different addresses for subsequent
notices or communications.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
and the Holders, including, without the need for an express assignment or any
consent by the Company thereto, subsequent Holders of Registrable Securities.
The Company hereby agrees to extend the benefits of this Agreement to any Holder
of Registrable Securities and any such Holder may specifically enforce the
provisions of this Agreement as if an original party hereto.
(e) Counterparts. This agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so
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executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(f) Headings. The headings in this agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. This agreement shall be governed by and construed
in accordance with the laws of the State of New York, United States of America,
without giving effect to any provisions relating to conflicts of laws.
(h) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.
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Please confirm that the foregoing correctly sets forth the agreement
between the Company and you.
Very truly yours,
LAM RESEARCH CORPORATION
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
The foregoing Registration Rights Agreement is hereby confirmed and
accepted as of the date first above written.
DEUTSCHE MORGAN GRENFELL INC.
Acting severally on behalf of itself and the
several Initial Purchasers named herein.
By: DEUTSCHE MORGAN GRENFELL INC.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
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<PAGE> 1
EXHIBIT 5.1
[JACKSON TUFTS COLE & BLACK, LLP LETTERHEAD]
October 31, 1997
Lam Research Corporation
4650 Cushing Parkway
Fremont, CA 94538
Re: Registration Statement on Form S-3 of Lam Research Corporation
Ladies and Gentlemen:
We are acting as counsel for Lam Research Corporation, a Delaware
corporation (the "Company") in connection with the registration under the
Securities Act of 1933, as amended (the "Act"), of the offer and sale of up to
$310,000,000 of the Company's 5% Convertible Subordinated Notes due 2002 (the
"Notes") and 3,531,958 shares of the company's Common Stock, par value $.001 per
share, issuable on conversion thereof (the "Shares"), to be sold from time to
time by the selling securityholders listed in a Registration Statement on Form
S-3, which is expected to be filed with the Securities and Exchange Commission
(the "Commission") on or about the date hereof (as amended, the "Registration
Statement").
In reaching the conclusions expressed in this opinion we have examined and
relied on such documents, corporate records and other instruments, including the
Indenture (the "Indenture") dated as of August 15, 1997 between the Company and
LaSalle National Bank and certificates of officers of the Company, and made such
further investigation and inquiry as we have deemed necessary to reach the
opinions expressed herein. In making the foregoing examination, we have assumed
the genuineness of all signatures on original documents of all copies submitted
to us.
Based solely upon the foregoing, subject to the comments and exceptions
hereinafter stated, it is our opinion that:
1. The Notes have been duly authorized for issuance by the Company.
2. The Indenture has been duly authorized, executed and delivered by
the Company.
3. The Shares, when issued and delivered in accordance with the terms
of the Notes and the Indenture upon conversion of the Notes, will be
legally issued, fully paid and non-assessable.
We express no opinion as to the laws of any jurisdiction other than the
General Corporation Law of the State of Delaware and the federal laws of the
United States of America, in each case as in effect of the date hereof.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to our firm therein under the
caption "Legal Matters." In giving this consent, we do not admit that we come
within the category of persons whose consent is required under Section 7 of the
Act or the rules and regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ JACKSON TUFTS COLE & BLACK, LLP
<PAGE> 1
EXHIBIT 5.2
[Winthrop, Stimson, Putnam & Roberts Letterhead]
October 29, 1997
Lam Research Corporation
4650 Cushing Parkway
Fremont, CA 94538
Re: Registration Statement on Form S-3 of Lam Research Corporation
Ladies and Gentlemen:
We are acting as special New York counsel for Lam Research Corporation,
a Delaware corporation (the "Company"), in connection with the registration
under the Securities Act of 1933 (the "Act"), of up to $310,000,000 of the
Company's 5% Convertible Subordinated Notes due 2002 (the "Notes") and 3,531,958
shares of the company's Common Stock, par value $.001 per share, issuable on
conversion thereof (the "Shares"), to be sold from time to time by the selling
securityholders listed in a Registration Statement on Form S-3, which is
expected to be filed with the Securities and Exchange Commission (the
"Commission") on or about the date hereof (as amended, the "Registration
Statement").
In reaching the conclusions expressed in this opinion we have examined
and relied on such documents, corporate records and other instruments, including
the Indenture (the "Indenture") dated as of August 15, 1997 between the Company
and LaSalle National Bank (the "Trustee")and made such further investigation and
inquiry as we have deemed necessary to reach the opinions expressed herein. We
have not examined the Notes, except specimens thereof. In making the foregoing
examination, we have assumed the genuineness of all signatures on original
documents of all copies submitted to us.
Based solely upon the foregoing, subject to the qualifications and
exceptions hereinafter stated, it is our opinion that, assuming (i) that the
Company has sufficient legal capacity under the laws of its jurisdiction of
incorporation to enter into and carry out its obligations under the Indenture
and the Notes; (ii) assuming the due authorization and execution and delivery by
the Company in accordance with such authorization and as contemplated by the
form of such agreement of the Indenture; (iii) assuming the due authorization
and execution and delivery by the Company in accordance with such authorization
of the Notes and (iv) assuming due authorization, execution and delivery by the
Trustee of the Indenture, (x) the Indenture is a valid and binding obligation of
the Company, enforceable against the Company in accordance with the terms
thereof, except as (i) limited or otherwise affected by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and other similar
<PAGE> 2
Lam Research Corporation
October 24, 1997
Page 2
laws of general application relating to or affecting creditor's rights and (ii)
limited by general principles of equity (regardless of whether considered in a
proceeding at law or in equity) including, without limitation, the availability
or unavailability of equitable remedies and an implied covenant of good faith
and fair dealing and (y) the Notes, assuming they have been executed by the
Company and authorized by the Trustee in accordance with the provisions of the
Indenture and delivered to and paid for by the initial purchasers thereof,
constitute valid and legally binding obligations of the Company, enforceable
against the Company in accordance with the terms thereof except as (i) limited
or otherwise affected by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and other similar laws of general application
relating to or affecting creditors' rights and (ii) limited by general
principles of equity (regardless of whether considered in a proceeding at law or
in equity), including, without limitation, the availability or unavailability of
equitable remedies and an implied covenant of good faith and fair dealing, and
will be entitled to the benefits of the Indenture.
We express no opinion as to the laws of any jurisdiction other than the
laws of the State of New York as in effect of the date hereof. Notwithstanding
anything to the contrary contained herein, we express no opinion as to rights
to indemnity and contribution.
We hereby consent to the filing of this opinion as Exhibit 5.2 to the
Registration Statement and to the reference to our firm therein under the
caption "Legal Matters." In giving this consent, we do not admit that we come
within the category of persons whose consent is required under Section 7 of the
Act or the rules and regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ Winthrop, Stimson, Putnam & Roberts
<PAGE> 1
EXHIBIT 11.1
LAM RESEARCH CORPORATION
COMPUTATION OF SUPPLEMENTAL EARNINGS PER SHARE
FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRIMARY FULLY DILUTED
-------- -------------
<S> <C> <C>
YEAR-ENDED JUNE 30, 1997
Net loss............................................................. $(30,676) $ (30,676)
-------- --------
$(30,676) $ (30,676)
======== ========
Weighted average shares outstanding.................................. 36,919 36,919
-------- --------
Common and common equivalent shares used in computing per share
amounts............................................................ 36,919 36,919
======== ========
Net loss per share................................................... $ (0.83) $ (0.83)
======== ========
YEAR-ENDED JUNE 30, 1996
Net Income........................................................... $145,878 $ 145,878
Add interest expense on convertible subordinated debentures, net of
tax................................................................ -- 3,264
-------- --------
$145,878 $ 149,142
======== ========
Weighted average shares outstanding.................................. 33,753 33,753
Net effect of dilutive stock option.................................. 1,726 1,744
Assumed conversion of subordinated debentures........................ -- 2,222
-------- --------
Common and common equivalent shares used in computing per share
amounts............................................................ 35,479 37,719
======== ========
Net income per share................................................. $ 4.11 $ 3.95
======== ========
YEAR-ENDED JUNE 30,1995
Net Income........................................................... $ 90,279 $ 90,279
Add interest expense on convertible subordinated debentures, net of
tax................................................................ -- 3,455
-------- --------
$ 90,279 $ 93,734
======== ========
Weighted average shares outstanding.................................. 29,377 29,377
Net effect of dilutive stock options................................. 3,014 3,374
Assumed conversion of subordinated debentures........................ -- 2,640
-------- --------
Common and common equivalent shares used in computing per share
amounts............................................................ 32,391 35,391
-------- --------
$ 2.79 $ 2.65
======== ========
</TABLE>
- ---------------
Note: Amounts presented above applicable to prior periods have been restated to
reflect the Company's merger with OnTrak Systems, Inc. as a pooling of
interests.
<PAGE> 1
EXHIBIT 12.1
LAM RESEARCH CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Income (loss) before income taxes..... $(60,859) $216,399 $128,970 $59,506 $27,431
Fixed charges......................... 24,650 22,576 12,583 7,451 3,992
Earnings (loss)....................... (36,209) 238,975 141,553 66,957 31,423
Divided by fixed charges.............. 24,650 22,576 12,583 7,451 3,992
Ratio of earnings to fixed charges.... n/a 10.6x 11.2x 9.0x 7.9x
</TABLE>
- ---------------
Note: Above noted amounts have been restated to reflect the combined results of
Lam Research Corporation and OnTrak Systems, Inc.
Note: For purposes of calculating the ratio of earnings to fixed charges, (i)
earnings consist of consolidated net income (loss) before income taxes of
the combined company (ii) fixed charges consist of interest expense
incurred, by the combined company, including capital leases, amortization
of interest costs and the portion of rental expense under operating leases
deemed by the Company to be representative of the interest factor.
Earnings were not sufficient to cover fixed charges for fiscal 1997 by
approximately $36 million.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Lam Research
Corporation for the registration of $310,000,000 of 5% convertible subordinated
notes due 2002 and up to 3,531,958 shares of Common Stock, and to the
incorporation by reference therein of our report dated August 26, 1997, with
respect to the consolidated financial statements of Lam Research Corporation
incorporated by reference in its Annual Report on Form 10-K for the year ended
June 30, 1997, and our report dated August 26, 1997, with respect to the
supplemental consolidated financial statements and schedule of Lam Research
Corporation included herein.
/s/ ERNST & YOUNG LLP
San Jose, California
October 28, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of Lam Research
Corporation of our report dated July 24, 1997, except for Note 2, which is dated
as of August 5, 1997, relating to the consolidated financial statements of
OnTrak Systems, Inc., which appears on page 7 of Lam Research Corporation's
Current Report on Form 8-K/A dated August 5, 1997 as amended on October 3, 1997.
We also consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-3 of Lam Research Corporation of our report
dated July 24, 1997, except for Note 2, which is dated as of August 5, 1997,
relating to the consolidated financial statements of OnTrak Systems, Inc. which
appears in such Prospectus. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
San Jose, California
October 27, 1997
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
-----------------------
LASALLE NATIONAL BANK
(Exact name of trustee as specified in its charter)
36-1521370
(I.R.S. Employer
Identification No.)
135 South LaSalle Street, Chicago, Illinois 60603
(Address of principal executive offices) (Zip Code)
-----------------------
M. ROBERT K. QUINN
Senior Vice President and General Counsel
Telephone: (312) 904-2010
135 South LaSalle Street
Chicago, Illinois 60603
(Name, address and telephone number of agent for service)
-----------------------
LAM RESEARCH CORPORATION
(Exact name of obligor as specified in its charter)
Delaware 94-2634797
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
4650 Cushing Parkway
Fremont, California
(510) 659-0200 94538-6470
(Address of Principal Executive Offices) (Zip Code)
-----------------------
5% Convertible Subordinated Notes due 2002
(Title of the indenture securities)
<PAGE> 2
ITEM 1. GENERAL INFORMATION
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
1. Comptroller of the Currency, Washington D.C.
2. Federal Deposit Insurance Corporation, Washington, D.C.
3. The Board of Governors of the Federal Reserve Systems,
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS.
If the obligor or any underwriter for the obligor is an affiliate of the
trustee, describe each such affiliation.
Neither the obligor nor any underwriter for the obligor is an
affiliate of the trustee.
ITEM 3. VOTING SECURITIES OF THE TRUSTEE.
Furnish the following information as to each class of voting securities of the
trustee:
Not applicable
ITEM 4. TRUSTEESHIPS UNDER OTHER INDENTURES.
If the trustee is a trustee under another indenture under which any other
securities, or certificates of interest or participation in any other
securities, of the obligor are outstanding, furnish the following information:
(a) Title of the securities outstanding under each other indenture.
Not applicable
(b) A brief statement of the facts relied upon as a basis for the claim
that no conflicting interest within the meaning of Section 310(b)(1) of
the Act arises as a result of the trusteeship under such other
indenture, including a statement as to how the indenture securities will
rank as compared with the securities issued under such other indenture.
Not applicable
ITEM 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE
OBLIGOR OR UNDERWRITERS.
If the trustee or any of the directors or executive officers of the trustee is a
director, officer, partner, employee, appointee, or representative of the
obligor or of any underwriter for the obligor, identify each such person having
any such connection and state the nature of each such connection.
Not applicable
<PAGE> 3
ITEM 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS
OFFICIALS.
Furnish the following information as to the voting securities of the trustee
owned beneficially by the obligor and each director, partner and executive
officer of the obligor.
Not applicable
ITEM 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR
OFFICIALS.
Furnish the following information as to the voting securities of the trustee
owned beneficially by each underwriter for the obligor and each director,
partner, and executive officer of each such underwriter.
Not applicable
ITEM 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
Furnish the following information as to securities of the obligor owned
beneficially or held as collateral security for obligations in default by the
trustee:
Not applicable
ITEM 9. SECURITIES OF THE UNDERWRITER OWNED OR HELD BY THE TRUSTEE.
If the trustee owns beneficially or holds as collateral security for obligations
in default any securities of an underwriter for the obligor, furnish the
following information as to each class of securities of such underwriter any of
which are so owned or held by the trustee.
Not applicable
ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN
AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.
If the trustee owns beneficially or holds as collateral security for obligations
in default voting securities of a person who, to the knowledge of the trustee
(1) owns 10 percent or more of the voting securities of the obligor or (2) is an
affiliate, other than a subsidiary, of the obligor, furnish the following
information as to the voting securities of such person.
Not applicable
ITEM 11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON
OWNING 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR.
If the trustee owns beneficially or holds as collateral security for obligations
in default any securities of a person who, to the knowledge of the trustee, owns
50 percent or more of the voting securities of the obligor, furnish the
following information as to each class of securities of such person any of which
are so owned or held by the trustee.
Not applicable
<PAGE> 4
ITEM 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
If the obligor is indebted to the trustee, furnish the following information.
Not applicable
ITEM 13. DEFAULTS BY THE OBLIGOR.
a) State whether there is or has been a default with respect to the securities
under this indenture. Explain the nature of any such default.
Not applicable
b) If the trustee is a trustee under another indenture under which any other
securities, or certificates of interest or participation in any other
securities, of the obligor are outstanding, or is trustee for more than one
outstanding series of securities under the indenture, state whether there has
been a default under any such indenture or series, identify the indenture or
series affected, and explain the nature of any such default.
Not applicable
ITEM 14. AFFILIATIONS WITH THE UNDERWRITERS.
If any underwriter is an affiliate of the trustee, describe each such
affiliation.
Not applicable
ITEM 15. FOREIGN TRUSTEE.
Identify the order or rule pursuant to which the foreign trustee is authorized
to act as sole trustee under indentures qualified or to be qualified.
Not applicable
ITEM 16. LIST OF EXHIBITS.
List below all exhibits filed as part of this statement of eligibility and
qualification.
1. A copy of the Articles of Association of LaSalle National Bank
now in effect.
2. A copy of the certificate of authority to commence business.
3. A copy of the authorization to exercise corporate trust powers.
4. A copy of the existing By-Laws of LaSalle National Bank.
5. Not applicable.
6. The consent of the trustee required by Section 321(b) of the
Trust Indenture Act of 1939.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority.
8. Not applicable.
9. Not applicable.
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939,the trustee,
LaSalle National Bank, a corporation organized and existing under the laws of
the United States of America, has duly caused this statement of eligibility and
qualification to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Chicago, State of Illinois, on 10/25/97 2:57 AM.
LASALLE NATIONAL BANK
By: /s/ SARAH H. WEBB
-----------------------------
Sarah H. Webb
First Vice President
<PAGE> 6
EXHIBIT 1
ARTICLES OF ASSOCIATION
<PAGE> 7
ARTICLES
OF
ASSOCIATION
LA SALLE NATIONAL BANK (LOGO)
LA SALLE NATIONAL BANK
CHICAGO, ILLINOIS
<PAGE> 8
(LOGO)
LaSalle National Bank
ARTICLES OF ASSOCIATION
FIRST. The title of this association, which shall carry on the
business of banking under the laws of the United States shall be "LaSalle
National Bank."
SECOND. The place where the main banking house or office of this
association shall be located, its operations of discount and deposit carried on,
and its general business conducted, shall be Chicago, County of Cook, State of
Illinois.
THIRD. The Board of Directors of this association shall consist of
such number of its shareholders, not less than five nor more than twenty-five,
as from time to time shall be determined by a majority of the votes to which all
of its shareholders are at the time entitled. A majority of the Board of
Directors shall be necessary to constitute a quorum for the transaction of
business. The Board of Directors, by vote of a majority of the full board, may,
between annual meetings of shareholders increase the membership of the Board
where the number of directors last elected by shareholders was 15 or less, by
not more than two members, and where the number of directors last elected by
shareholders was 16 or more, by not more than four members and by a like vote
appoint qualified persons to fill the vacancies created thereby; provided that
the number of Directors shall at no time exceed twenty-five.
FOURTH. The regular annual meeting of the shareholders of this
association shall be held at its main banking house, or other convenient place
duly authorized by the board of directors on such day of each year as is
specified therefor in the bylaws.
FIFTH. The amount of capital stock which this association is
authorized to issue shall be Twenty Million Dollars ($20,000,000.00) divided
into 2,000,000 shares of common capital stock of the par value of $10.00 each;
but said capital stock may be increased or decreased from time to time, in
accordance with the provisions of the laws of the United States.
If the capital stock is increased by the sale of additional shares
thereof, other than to key officers and employees of the association upon the
exercise of options granted pursuant to the terms of a stock option plan then in
effect, as to which sales all pre-emptive rights are waived, each shareholder
shall be entitled to subscribe for such additional shares in proportion to the
number of shares of said capital stock owned by him at the time the increase is
authorized by the shareholders, unless another time subsequent to the date of
the shareholders' meeting is specified in a resolution adopted by the
shareholders at the time the increase is authorized. The board of directors
shall have the power to prescribe a reasonable period of time within which the
pre-emptive rights to subscribe to the new shares of capital stock may be
exercised.
The association, at any time and from time to time, may authorize
and issue debt obligations, whether or not subordinated, without the approval of
the shareholders.
SIXTH. The board of directors shall appoint one of its members
president of this association, who shall be chairman of the board, but the board
of directors may appoint a director in lieu of the president to be chairman of
the board, who shall perform such duties as may be designated by the board of
directors. The board of directors shall have the power to appoint one or more
vice presidents, a cashier and such other officers as may be required to
transact the business of this association; to fix the salaries to be paid to all
officers of this association; and to dismiss such officers, or any of them.
The board of directors shall have the power to define the duties of
officers and employees of this association, to require bonds from them, and to
fix the penalty thereof; to regulate the manner in which directors shall be
elected or appointed, and to appoint judges of the election; to make all bylaws
that it may be lawful for
<PAGE> 9
them to make for the general regulation of the business of this association and
the management of its affairs; and generally to do and perform all acts that it
may be lawful for a board of directors to do and perform.
SEVENTH. This association shall have succession from the date of its
organization certificate until such time as it be dissolved by act of its
shareholders in accordance with the provisions of the banking laws of the United
States, or until its franchise becomes forfeited by reason of violation of law,
or until terminated by either a general or a special act of Congress, or until
its affairs be placed in the hands of a receiver and finally wound up by him.
EIGHTH. The board of directors of this association, or any three or
more shareholders owning, in the aggregate, not less than ten per centum of the
stock of this association, may call a special meeting of shareholders at any
time: Provided, however, that, unless otherwise provided by law, not less than
ten days prior to the date fixed for any such meeting, a notice of the time,
place, and purpose of the meeting shall be given by first-class mail, postage
prepaid, to all shareholders of record of this association at their respective
addresses as shown upon the books of the association. These articles of
association may be amended at any regular or special meeting of the shareholders
by the affirmative vote of the shareholders owning at least a majority of the
stock of this association, subject to the provisions of the banking laws of the
United States. The notice of any shareholders' meeting, at which an amendment to
the articles of association of this association is to be considered, shall be
given as herein-above set forth.
NINTH. Any person, his heirs, executors, or administrators, may be
indemnified or reimbursed by the association for reasonable expenses actually
incurred in connection with any action, suit, or proceeding, civil or criminal,
to which he or they shall be made a party by reason of his being or having been
a director, officer, or employee of the association or of any firm, corporation,
or organization which he served in any such capacity at the request of the
association: Provided, however, that no person shall be so indemnified or
reimbursed in relation to any matter in such action, suit, or proceeding as to
which he shall finally be adjudged to have been guilty of or liable for
negligence or wilful misconduct in the performance of his duties to the
association: And, provided further, that no person shall be so indemnified or
reimbursed in relation to any matter in such action, suit, or proceeding which
has been made the subject of a compromise settlement except with the approval of
a court of competent jurisdiction, or the holders of record of a majority of the
outstanding shares of the association, or the board of directors, acting by vote
of directors not parties to the same or substantially the same action, suit, or
proceeding, constituting a majority of the whole number of the directors. The
foregoing right of indemnification or reimbursement shall not be exclusive of
other rights to which such person, his heirs, executors, or administrators, may
be entitled as a matter of law.
********
May 17, 1982
Form No. 181, Rev 5/17/82 GW
<PAGE> 10
EXHIBIT 2
CERTIFICATE OF AUTHORITY
TO COMMENCE BUSINESS
<PAGE> 11
STATE OF ILLINOIS
AUDITOR'S OFFICE
NO. 333 (LOGO)
NATIONAL BANK TRUST CERTIFICATE
Springfield, FEBRUARY 15th 1928
I, OSCAR NELSON, Auditor of Public Accounts of the State of
Illinois, do hereby certify that the NATIONAL BUILDERS BANK OF CHICAGO located
at CHICAGO, County of COOK and State of Illinois, a corporation organized under
and by authority of the statutes of the United States governing National Banks
and authority granted by the Federal Reserve Act for the purpose of accepting
and executing trusts, has this day deposited in this office, securities in the
sum of TWO HUNDRED THOUSAND Dollars, $200,000.00 of the character designated by
Section 6 of the Act of the Legislature of the State of Illinois entitled "An
Act to provide for and regulate the administration of trusts by trust
companies,"
The said deposit is made for the benefit of the creditors of said
NATIONAL BUILDERS BANK OF CHICAGO under and by virtue of the provisions of the
Act above referred to and the said securities are now held by me in this office
in my official capacity as such Auditor of Public Accounts, for the uses and
purposes aforesaid.
I further certify that by virtue of the Acts aforesaid, the NATIONAL
BUILDERS BANK OF CHICAGO is hereby authorized to accept and execute trusts and
receive deposits of trust funds under the provisions and limitations of "An Act
to provide for and regulate the administration of trusts in Illinois.
IN TESTIMONY WHEREOF, I hereunto subscribe my name
and affix the seal of my office, the day and year
first above written.
(SEAL)
/s/ OSCAR NELSON
---------------------------
AUDITOR OF PUBLIC ACCOUNTS.
STATE OF ILLINOIS.
<PAGE> 12
NO. 13146.
TREASURY DEPARTMENT (LOGO)
OFFICE OF COMPTROLLER OF THE CURRENCY
Washington, D.C., NOVEMBER 29, 1927.
WHEREAS, by satisfactory evidence presented to the undersigned, it
has been made to appear that "NATIONAL BUILDERS BANK OF CHICAGO" in the CITY of
CHICAGO in the County of COOK and State of ILLINOIS has complied with all the
provisions of the Statutes of the United States, required to be complied with
before an association shall be authorized to commence the business of Banking;
NOW THEREFORE I, J.W. MCINTOSH, Comptroller of the Currency, do
hereby certify that "NATIONAL BUILDERS BANK OF CHICAGO" in the CITY of CHICAGO
in the County of COOK and State of ILLINOIS is authorized to commence the
business of Banking as provided in Section Fifty one hundred and sixty nine of
the Revised Statutes of the United States.
IN TESTIMONY WHEREOF witness my hand and Seal of
(SEAL) office this TWENTY-NINTH day of
NOVEMBER, 1927.
(SEAL)
/s/ J.W. MCINTOSH
---------------------------
Comptroller of the Currency
<PAGE> 13
CERTIFICATE OF CHANGE OF CORPORATE TITLE
(LOGO)
NO. 13146.
TREASURY DEPARTMENT
OFFICE OF THE COMPTROLLER OF THE CURRENCY
WASHINGTON, D.C., MAY 1, 1940.
WHEREAS, by satisfactory evidence presented to me, it appears that
under authority of sections 2, 3, and 4, of the Act of Congress approved May 1,
1886, entitled "An Act to enable national banking associations to increase their
capital stock and to change their names or location," shareholders owning
two-thirds of the stock of the national banking association heretofore known
as-- "NATIONAL BUILDERS BANK OF CHICAGO," located in CHICAGO, County of COOK,
State of ILLINOIS, have voted to change the name of said association to--
"LASALLE NATIONAL BANK," and have complied with all the provisions of the said
Act relative to national banking associations changing their name.
NOW, THEREFORE, IT IS HEREBY CERTIFIED, that the name of the said
association has been changed to-- "LASALLE NATIONAL BANK," and that such change
of name is hereby approved under authority conferred by said Act.
(SEAL) IN TESTIMONY WHEREOF, witness my hand and seal of
office this FIRST day of MAY, 1940.
/s/
----------------------------------
ACTING Comptroller of the Currency.
<PAGE> 14
EXHIBIT 3
AUTHORIZATION TO EXERCISE
CORPORATE TRUST POWERS
<PAGE> 15
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM [LETTERHEAD]
WASHINGTON
May 9, 1940
LaSalle National Bank,
Chicago, Illinois.
Gentlemen:
The Board of Governors of the Federal Reserve System has been
officially advised by the Comptroller of the Currency that on May 1, 1940,
National Builders Bank of Chicago, Chicago, Illinois, changed its title to
LaSalle National Bank, and accordingly there is enclosed herewith a certificate
showing that LaSalle National Bank has authority to exercise the fiduciary
powers enumerated therein.
Kindly acknowledge receipt of this certificate.
Very truly yours,
/s/ S. R. CARPENTER
------------------------------
S. R. Carpenter,
Assistant Secretary.
Enclosure
<PAGE> 16
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
I, S. R. Carpenter, Assistant Secretary of the Board of Governors of
the Federal Reserve System (formerly known as the Federal Reserve Board), do
hereby certify that it appears from the records of the Board of Governors of the
Federal Reserve System that:
(1) Pursuant to the authority vested in the Federal Reserve Board by
an Act of Congress approved December 23, 1913, known as the Federal Reserve Act,
as amended, the Federal Reserve Board on December 8, 1927, granted to National
Builders Bank of Chicago, Chicago, Illinois, the right to act, when not in
contravention of State or local law, as trustee, executor, administrator,
registrar of stocks and bonds, guardian of estates, assignee, receiver,
committee of estates of lunatics, or in any other fiduciary capacity in which
State banks, trust companies or other corporations which come into competition
with national banks are permitted to act under the laws of the State of
Illinois;
(2) Under the provisions of an Act of Congress approved May 1, 1886,
National Builders Bank of Chicago, Chicago, Illinois, on May 1, 1940, changed
its title to LaSalle National Bank; and
(3) By virtue of the foregoing, LaSalle National Bank, Chicago,
Illinois, has authority to act, when not in contravention of State or local law,
as trustee, executor, administrator, registrar of stocks and bonds, guardian of
estates, assignee, receiver, committee of estates of lunatics, or in any other
fiduciary capacity in which State banks, trust companies or other corporations
which come into competition with national banks are permitted to act under the
laws of the State of Illinois, subject to regulations prescribed by the Board of
Governors of the Federal Reserve System.
IN WITNESS WHEREOF, I have hereunto subscribed my name and caused
the seal of the Board of Governors of the Federal Reserve System to be affixed
at the City of Washington in the District of Columbia.
/s/ S. R. CARPENTER
--------------------------
Assistant Secretary.
Dated May 9, 1940
<PAGE> 17
EXHIBIT 4
BY-LAWS OF LA SALLE NATIONAL BANK
<PAGE> 18
BYLAWS
OF
LA SALLE NATIONAL BANK
CHICAGO, ILLINOIS
LA SALLE NATIONAL BANK (LOGO)
Organized Under the National Banking Laws
of the United States
<PAGE> 19
BYLAWS
of the
LA SALLE NATIONAL BANK
(a National Banking Association which association
is herein referred to as the "bank")
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1.1. ANNUAL MEETING. The regular annual meeting of the
shareholders for the election of directors and the transaction of whatever other
business may properly come before the meeting, shall be held at the main office
of the Bank, 135 South LaSalle Street, Chicago, Illinois, or such other place as
the Board of Directors may designate, at 9:00 A.M., on the third Wednesday of
March of each year. Notice of such meeting shall be mailed, postage prepaid, at
least ten days prior to the date thereof, addressed to each shareholder at his
address appearing on the books of the Bank. If for any cause, an election of
directors is not made on the said day, the Board of Directors shall order the
election to be held on some subsequent day as soon thereafter as practicable,
according to the provisions of law; and notice thereof shall be given in the
manner herein provided for the annual meeting.
SECTION 1.2. SPECIAL MEETINGS. Except as otherwise specifically
provided by statute, special meetings of the shareholders may be called for any
purpose at anytime by the board of directors or by any three or more
shareholders owning, in the aggregate, not less than ten percent of the stock of
the bank. Every such special meeting, unless otherwise provided by law, shall be
called by mailing, postage pre-paid, not less than ten days prior to the date
fixed for such meeting, to each shareholder at his address appearing on the
books of the bank, a notice stating the purpose of the meeting.
SECTION 1.3. NOMINATIONS FOR DIRECTOR. Nominations for election to
the board of directors may be made by the board of directors or by any
shareholder of any outstanding class of capital stock of the bank entitled to
vote for the election of directors. Nominations, other than those made by or on
behalf of the existing management of the bank, shall be made in writing and
shall be delivered or mailed to the president of the bank and to the Comptroller
of the Currency, Washington, D.C., not less than 14 days nor more than 50 days
prior to any meeting of shareholders called for the election of directors,
provided, however, that if less than 21 days' notice of the meeting is given to
the shareholders, such nomination shall be mailed or delivered to the president
of the bank and to the Comptroller of the Currency not later than the close of
business on the seventh day following the day on which the notice of meeting was
mailed. Such notification shall contain the following information to the extent
known to the notifying shareholder: (a) the name and address of each proposed
nominee; (b) the principal occupation of each proposed nominee; (c) the total
number of shares of capital stock of each proposed nominee; (d) the name and
address of the notifying shareholder; and (e) the number of shares of capital
stock of the bank owned by the notifying shareholder. Nominations not made in
accordance herewith, may, in his discretion, be disregarded by the chairman of
the meeting, and upon his instructions, the vote tellers may disregard all votes
cast for each such nominee.
SECTION 1.4. JUDGES OF ELECTION. Every election of directors shall
be managed by three judges, who shall be appointed by the board of directors
prior lo the time of said election. The judges of election shall hold and
conduct the election at which they are appointed to serve; and after the
election, they shall file with the cashier a certificate under their hands,
certifying the result thereof and the names of the directors elected. The judges
of election. at the request of the chairman of the meeting, shall act as tellers
of any other vote by ballot taken at such meeting, and shall certify the result
thereof.
<PAGE> 20
SECTION 1.5. PROXIES. Shareholders may vote at any meeting of the
shareholders by proxies duly authorized in writing, but no officer or employee
of this bank shall act as proxy. Proxies shall be valid only for one meeting, to
be specified therein, and any adjournments of such meeting. Proxies shall be
dated and shall be filed with the records of the meeting.
SECTION 1.6. QUORUM. A majority of the outstanding capital stock,
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders, unless otherwise provided by law; but less than a quorum may
adjourn any meeting, from time to time, and the meeting may be held, as
adjourned, without further notice. A majority of the votes cast shall decide
every question or matter submitted to the shareholders at any meeting, unless
otherwise provided by law or by the articles of association.
ARTICLE II
DIRECTORS
SECTION 2.1. BOARD OF DIRECTORS. The board of directors (hereinafter
referred to as the "board"), shall have power to manage and administer the
business affairs of the bank. Except as expressly limited by law, all corporate
powers of the bank shall be vested in and may be exercised by said board.
SECTION 2.2. NUMBER. The board shall consist of not less than five
or more than twenty-five shareholders, the exact number within such minimum and
maximum limits to be fixed and determined from time to time by resolution of a
majority of the full board or by resolution of the shareholders at any meeting
thereof; provided, however, that a majority of the full board may not increase
the number of directors by more than two if the number of directors last elected
by shareholders was fifteen or less and by not more than four where the number
of directors last elected by shareholders was sixteen or more, provided that in
no event shall the number of directors exceed twenty-five.
SECTION 2.3. ORGANIZATION MEETING. The cashier, upon receiving the
certificate of the judges, of the result of any election, shall notify the
directors-elect of their election and of the time at which they are required to
meet at the main office of the bank for the purpose of organizing the new board
and electing and appointing officers of the bank for the succeeding year. Such
meeting shall be appointed to be held on the day of election or as soon
thereafter as practicable, and, in any event, within thirty days thereof. If, at
the time fixed for such meeting, there shall not be a quorum present the
directors present may adjourn the meeting, from time to time, until a quorum is
obtained.
SECTlON 2.4 REGULAR MEETINGS. The regular meetings of the board
shall be held, without notice, on the third Wednesday of each month at the main
office. When any regular meeting of the board falls upon a holiday, the meeting
shall be held on the next banking business day unless the board shall designate
some other day.
SECTION 2.5 SPECIAL MEETINGS. Special meetings of the board may be
called by the chairman of the board, the president, or at the request of three
or more directors. Each member of the board shall be given notice stating the
time and place, by telegram, letter or in person, of each such special meeting.
SECTION 2.6. QUORUM. A majority of the directors shall constitute a
quorum at any meeting, except when otherwise provided by law; but a less number
may adjourn any meeting from time to time, and the meeting may be held, as
adjourned, without further notice.
SECTION 2.7. VACANCIES. When any vacancy occurs among the directors,
the remaining members of the board, in accordance with the laws of the United
States, may appoint a director to fill such vacancy at any regular meeting of
the board, or at a special meeting called for that purpose.
<PAGE> 21
SECTION 2.8. RETIREMENT POLICY. A retirement policy adopted by the
board of directors shall be applicable to directors who are not active officers
of the bank.
ARTICLE III
COMMITTEES OF THE BOARD
SECTION 3.1. EXECUTIVE COMMITTEE. There shall be an executive
committee of the board. The members of the executive committee shall be chosen
by the board from time to time, shall hold office during its pleasure, and shall
consist of the chairman of the board, the chairman of the executive committee
selected by the board, who may but need not be the same person designated to be
president, and the president, ex officio, and not less than seven additional
members of the board who shall not be active officers of the bank. It shall be
the duty of this committee to exercise such powers and perform such duties in
respect to the making of loans and discounts as shall from time to time be
specified by resolution of the board. During such periods as the board shall not
be in session, the executive committee shall have and may exercise all the
powers of the board except such as are by law or by these bylaws required to be
exercised only by the board. The executive committee may make rules for holding
and conducting its meetings and keep in the minute book of the bank a report of
all action taken which shall be submitted for approval at each regular meeting
of the board and the action of the board shall be recorded in the minutes of
that meeting. A quorum of the executive committee shall consist of not less than
five of its members, at least three of whom shall not be active officers of the
bank. The chairman of the board, or in his absence in the order named if
present, the chairman of the executive committee or the president, may designate
any director who is not an active officer of the bank, or a designated member,
to serve as a member of the executive committee at any specified meeting.
Vacancies in the executive committee at any time existing may be filled by
appointment by the board. The board may at anytime revise or change the
membership and chairmanship of the executive committee and make new or
additional appointments thereto. The chairman of the executive committee shall
be ex officio a member of all committees except the examining committee and the
trust audit committee, and shall have such other duties as may from time to time
be assigned him by the board.
SECTION 3.2. OFFICERS' COMPENSATION COMMITTEE. There shall be an
officers' compensation committee of the board. The members of the officers'
compensation committee shall consist of the members ex officio provided for in
other sections of these bylaws and not less than three additional non-officer
members of the board who shall be appointed by the board each year at its first
meeting after the directors have been elected and qualified. It shall be the
duty of this committee to study the compensation of all officers of the bank and
from time to time report their recommendations to the board; and such other
duties, if any, as may from time to time be assigned to it by the board. A
majority of the committee, including at least two non-officer members, shall be
necessary for the committee to keep records of its action.
SECTION 3.3. EXAMINING COMMITTEE. There shall be an examining
committee of the board. The members of the examining committee shall consist of
the members ex officio provided for in other sections of these bylaws, but
exclusive of any active officer of the bank and not less than three additional
non-officer members of the board who shall be appointed by the board each year
at its first meeting after the directors have been elected and qualified. It
shall be the duty of this committee to make an examination at least twice each
year into the affairs of the bank or to cause the examinations to be made by
accountants (who may be the bank's own accountants) responsible only to the
board in such examinations, and to report the result of such examinations in
writing to the board at the next regular meeting thereafter, or it may, at its
sole discretion, submit the reports of the national bank examiner or of the
Chicago Clearing House Association examination, with or without additional
comments by the committee itself, for, and in lieu of its personal examinations.
Such reports shall state whether the bank is in sound condition, whether
adequate internal audit controls and procedures are being maintained and shall
recommend to the board such changes in the manner of doing business or
conducting the affairs of the bank as shall be deemed advisable.
<PAGE> 22
SECTION 3.4. OTHER COMMITTEES. The board may appoint, from time to
time, from its own members, other committees of one or more persons, for such
purposes and with such powers as the board may determine.
ARTICLE IV
OFFICERS AND EMPLOYEES
SECTION 4.1. CHAIRMAN OF THE BOARD. The board shall appoint one of
its members to be chairman of the board. The chairman of the board shall
supervise the carrying out of the policies adopted or approved by the board. He
shall have general executive powers, as well as the specific powers conferred by
these bylaws. He shall be ex officio a member of all committees, except the
examining committee and the trust audit committee. He shall have general
supervision and direction of the business, affairs and personnel of the bank. He
shall also have and may exercise such further powers and duties as from time to
time may be conferred upon, or assigned to him by the board.
SECTION 4. 2. VICE CHAIRMAN OF THE BOARD. The board may appoint one
of its members to be vice chairman of the board. He shall perform such duties as
may from time to time be assigned to him by the board.
SECTION 4.3. PRESIDENT. The board shall appoint one of its members
to be president of the bank. He shall be the chief executive officer and the
chief administrative officer of the bank and in the absence of the chairman of
the board, he shall preside at any meeting of the board at which he is present.
The president shall have general executive powers, and shall have and may
exercise any and all other powers and duties pertaining by law, regulation, or
practice to the office of president, or imposed by these bylaws. He shall be ex
officio a member of all committees, except the examining committee and trust
audit committee. He shall have general supervision of the business, affairs and
personnel of the bank and in the absence of the chairman of the board, shall
exercise the powers and perform the duties of the chairman of the board. He
shall also have and may exercise such further powers and duties as from time to
time may be conferred upon or assigned to him by the board.
SECTION 4.4. SENIOR OFFICERS. The board may appoint one or more
executive vice presidents and one or more senior vice presidents. Each such
senior officer shall have such powers and duties as may be assigned to him by
the board, the chairman of the board, or the president.
SECTION 4.5. VICE PRESIDENT. The board may appoint one or more vice
presidents. Each vice president shall have such powers and duties as may be
assigned to him by the board, the chairman of the board, or the president.
SECTION 4.6. CASHIER. The board shall appoint a cashier who shall
have such powers and duties as may be assigned to him by the board, the chairman
of the board, or the president. The cashier shall be custodian of the corporate
seal, records, documents and papers of the bank. He shall provide for keeping of
proper records of all transactions of the bank.
SECTION 4.7. SECRETARY. The board shall appoint a secretary who
shall be secretary of the bank. He shall also perform such duties as may be
assigned to him from time to time by the board. The board may appoint a
secretary of the board who shall keep accurate minutes of all meetings. He shall
attend to the giving of all notices; he shall also perform such other duties as
may be assigned to him from time to time by the board.
SECTION 4.8. OTHER OFFICERS. The board may appoint one or more
assistant vice presidents, one or more trust officers, one or more assistant
secretaries, one or more assistant cashiers, and such other officers and
attorneys-in-fact as from time to time may appear to the board to be required or
desirable to transact the
<PAGE> 23
business of the bank. Such officers, respectively, shall exercise such powers
and perform such duties as pertain to their several offices or as may be
conferred upon or assigned to them by the board the chairman of the board or the
president.
SECTION 4.9. CLERKS AND AGENTS. The chairman of the board, the
president, or any other active officer of the bank authorized by the chairman of
the board, or the president, may appoint and dismiss all or any paying tellers
receiving tellers note tellers, vault custodians, bookkeepers and other clerks,
agents and employees as they may deem advisable for the prompt and orderly
transaction of the business of the bank, define their duties, fix the salaries
to be paid them and the conditions of their employment.
SECTION 4.10. RESPONSIBILITY FOR MONEYS, ETC. Each of the active
officers and clerks of this bank shall be responsible for all moneys, funds
valuables and property of every kind and description that may from time to time
be entrusted to his care or placed in his hands by the board or others, or that
otherwise may come into his possession as an active officer or clerk of this
bank.
SECTION 4.11. SURETY BONDS. All the active officers and clerks of
this bank may be covered by one of the blanket form bonds customarily written by
the surety companies, drawn for such an amount, and executed by such surety
company, as the board may from time to time require, and duly approve; or at the
discretion of the board, all such active officers and clerks shall, each for
himself, give such bond, with such security, and in such denominations as the
board may from time to time require and direct. All bonds approved by the board
shall assure the faithful and honest discharge of the respective duties of such
active officer or clerk and shall provide that such active officer or clerk
shall faithfully apply and account for all moneys, funds, valuables and property
of every kind and description that may from time to time come into his hands or
be entrusted to his care, and pay over and deliver the same to the order of the
board or to such other person or persons as may be authorized to demand and
receive the same.
SECTION 4.12. TERM OF OFFICE - OFFICER DIRECTOR. The chairman of the
board, the vice chairman of the board and the president, together with any other
active officers who may be duly elected members of the board, shall hold their
respective offices for the current year for which the board (of which they shall
be members) was elected and until their successors are appointed, unless they
shall resign, be disqualified, or be removed; and any vacancy occurring in the
office of the chairman of the board, the vice chairman of the board, the
president, or in the board, shall, if required by these bylaws, be filled by the
remaining members.
SECTION 4.13. TERM OF OFFICE - OFFICER. The executive vice
presidents, the senior vice presidents, the vice presidents, the assistant vice
presidents, the cashier, the secretary, the trust officers and all other
officers and attorneys-in-fact who are not duly elected members of the board,
shall be appointed to hold their offices, respectively, during the pleasure of
the board.
ARTICLE V
TRUST DEPARTMENT
SECTION 5.1. TRUST DEPARTMENT. There shall be a department of the
bank known as the trust department which shall perform the fiduciary
responsibilities of the bank.
SECTION 5.2. TRUST OFFICER. There shall be a senior vice president
and trust officer, or vice president and trust officer of this bank, who shall
be designated as the managing officer of the trust department and whose duties
shall be to manage, supervise and direct all the activities of the trust
department. He shall do, or cause to be done, all things necessary or proper in
carrying on the business of the trust department in accordance with provisions
of law and regulations. He shall act pursuant to opinion of counsel where such
opinion is deemed necessary. Opinions of counsel shall be retained on file in
connection with all important matters pertaining to fiduciary activities. The
trust officer shall be responsible for all assets and documents held by the bank
in connection with fiduciary matters.
<PAGE> 24
The board may appoint such other officers of the trust department as it may deem
necessary, with such duties as may be assigned to them by the board, the
chairman of the board, or the president.
SECTION 5.3. TRUST INVESTMENT COMMITTEE. There shall be appointed by
the board a trust investment committee of this bank composed of not less than
four members, including members ex officio provided for in other sections of
these bylaws, who shall be capable and experienced officers or directors of the
bank. All investments of funds held in a fiduciary capacity shall be made,
retained or disposed of only with the approval of the trust investment
committee; and the committee shall keep minutes of all its meetings, showing the
disposition of all matters considered and passed upon by it. The committee
shall, promptly after the acceptance of an account for which the bank has
investment responsibilities, review the assets thereof, to determine the
advisability of retaining or disposing of such assets. The committee shall
conduct a similar review at least once during each calendar year thereafter and
within fifteen months of the last such review. A report of all such reviews,
together with the action taken as a result thereof, shall be noted in the
minutes of the committee. Three members of the trust investment committee shall
constitute a quorum, and any action approved by a majority of those present
shall constitute the action of the committee.
SECTION 5.4. TRUST AUDIT COMMITTEE. The board shall appoint a
committee of not less than three directors, including members ex officio
provided for in other sections of these bylaws, exclusive of any active officers
of the bank, which shall at least once during each calendar year and within
fifteen months of the last such audit make suitable audits of the trust
department, or cause suitable audits to be made, by auditors responsible only to
the board, and at such time shall ascertain whether the department has been
administered in accordance with law, Regulation 9, and sound fiduciary
principles. Notwithstanding the provisions of this Section, the board at any
time may assign to the Examining Committee, in addition to the duties of the
Examining Committee set forth in Section 3.3 of these bylaws, all of the duties
of the Trust Audit Committee and during such time as the Examining Committee is
performing the duties of both committees, the Trust Audit Committee shall cease
to function as a committee of this board. The board at any time may reassign the
duties provided for in this Section to the Trust Audit Committee.
SECTION 5.5. TRUST DEPARTMENT FILES. There shall be maintained in
the trust department, files containing all fiduciary records necessary to assure
that its fiduciary responsibilities have been properly undertaken and
discharged.
SECTION 5.6. TRUST INVESTMENTS. Funds held in a fiduciary capacity
shall be invested in accordance with the instrument establishing the fiduciary
relationship and local law. Where such instrument does not specify the character
and class of investments to be made and does not vest in the bank a discretion
in the matter, fund shield pursuant to such instrument shall be invested in
investments in which corporate fiduciaries may invest under local law.
ARTICLE VI
STOCK AND STOCK CERTIFICATES
SECTION 6.1. TRANSFERS. Shares of capital stock shall be
transferable on the books of the bank and a transfer book shall be kept in which
all transfers of stock shall be recorded. Every person becoming a shareholder be
such transfer shall in proportion to his shares, succeed to all rights and
liabilities of the prior holder of such shares.
SECTION 6.2. STOCK CERTIFICATES. Certificates of capital stock shall
bear the signature of any one of, the chairman of the board, or the president
(which may be engraved, printed or impressed) and shall be signed manually or by
facsimile process by the secretary, assistant secretary, cashier, assistant
cashier, or any other officer appointed by the board for that purpose, to be
known as an authorized officer and the seal of the bank shall be engraven
thereon. Each certificate shall recite on its face that the stock represented
thereby is transferable, properly endorsed, only on the books of the bank.
<PAGE> 25
ARTICLE VII
CORPORATE SEAL
SECTION 7.1. CORPORATE SEAL. The chairman of the board, the
president, the cashier, the secretary or any assistant cashier or assistant
secretary, or other officer thereunto designated by the board, shall have
authority to affix the corporate seal to any document requiring such seal, and
to attest the same. Such seal shall be substantially in the form set forth
herein.
ARTICLE VIII
INDEMNIFYING OFFICERS AND DIRECTORS
SECTION 8.1. INDEMNIFYING OFFICERS AND DIRECTORS. Any person, his
heirs, executors or administrators, may be indemnified or reimbursed by the bank
for reasonable expenses actually incurred in connection with any action, suit or
proceeding, civil or criminal, to which he or they shall be made a party by
reason of his being or having been a director, officer or employee of the bank
or of any firm, corporation or organization which he served in any such capacity
at the request of the bank; provided, however, that no person shall be so
indemnified or reimbursed in relation to any matter in such action, suit or
proceeding as to which he shall finally be adjudged to have been guilty of or
liable for negligence or willful misconduct in the performance of his duties to
the bank; and, provided further, that no person shall be so indemnified or
reimbursed in relation to any matter in such action, suit or proceeding which
has been made the subject of a compromise settlement except with the approval of
a court of competent jurisdiction, or the holders of record of a majority of the
outstanding shares of the bank, or the board, acting by vote of directors not
parties to the same or substantially the same action suit or proceeding,
constituting a majority of the whole number of the directors. The foregoing
right of indemnification or reimbursement shall not be exclusive of other rights
to which such person, his heirs, executors or administrators, may be entitled as
a matter of law.
ARTICLE IX
MISCELLANEOUS PROVISIONS
SECTION 9.1. FISCAL YEAR. The fiscal year of the bank shall be the
calendar year.
SECTION 9.2. EXECUTION OF INSTRUMENTS. All agreements, indentures
mortgages, deeds, conveyances transfers certificates declarations, receipts,
discharges, releases, satisfactions, settlements, petitions, schedules,
accounts, affidavits, bonds, undertakings, proxies and other instruments or
documents may be signed, executed, acknowledged, verified, delivered or accepted
for the bank by the chairman of the board, or the vice chairman of the board, or
the president, or any executive vice president, or any senior vice president, or
any vice president, or the secretary or the cashier, or, if in connection with
the exercise of fiduciary powers of the bank by any of said officers or by any
officer in the trust department. Any such instruments may also be signed,
executed, acknowledged, verified, delivered or accepted for the bank in such
other manner and by such other officers as the board may from time to time
direct. The provisions of this Section 9.2 are supplementary to any other
provisions of these bylaws.
SECTION 9.3. RECORDS. The articles of association, the bylaws, and the
proceedings of all meetings of the shareholders and of the board shall be
recorded in appropriate minute books provided for the purpose; where these
bylaws so provide, the proceedings of standing committees of the board shall be
recorded in appropriate minute books provided for the purpose.
<PAGE> 26
ARTICLE X
EMERGENCIES
SECTION 10.1. CONTINUATION OF BUSINESS. In the event of a state of
emergency of sufficient severity to interfere with the conduct and management of
the affairs of this bank, the officers and employees will continue to conduct
the affairs of the bank under such guidance from the directors as may be
available except as to matters which by statute require specific approval of the
board of directors and subject to conformance with any governmental directives
during the emergency.
SECTION 10.2. DESIGNATION OF PLACE OF BUSINESS. The offices of the
bank at which its business shall be conducted shall be the main office thereof
located at 135 South LaSalle Street, Chicago, Illinois, and any other legally
authorized location which may be leased or acquired by this bank to carry on its
business. During an emergency resulting in any authorized place of business of
this bank being unable to function, the business ordinarily conducted at such
location shall be relocated elsewhere in suitable quarters, in addition to or in
lieu of the locations heretofore mentioned, as may be designated by the board of
directors or by the executive committee or by such persons as are then, in
accordance with resolutions adopted from time to time by the board of directors
dealing with the exercise of authority in the time of such emergency, conducting
the affairs of this bank. Any temporarily relocated place of business of this
bank shall be returned to its legally authorized location as soon as practicable
and such temporary place of business shall then be discontinued.
ARTICLE XI
BYLAWS
SECTION 11.1 INSPECTION. A copy of the bylaws with all amendments
thereto, shall at all times be kept in a convenient place at the main office of
the bank and shall be open for inspection to all shareholders, during banking
hours.
SECTION 11.2 AMENDMENTS. The bylaws may be amended, altered or
repealed, at any regular meeting of the board, by a vote of a majority of the
whole number of the directors.
***
I........................................... hereby certify that I
am the................................ Cashier/Secretary of LaSalle National
Bank, Chicago, Illinois and that the foregoing is a true and correct copy of the
bylaws of this bank as amended and that the same are in full force and effect
............. day of...................19........
...............................
Cashier/Secretary.
December 15, 1982
(SEAL)
<PAGE> 27
EXHIBIT 5
NOT APPLICABLE
<PAGE> 28
EXHIBIT 6
LaSalle National Bank hereby consents in accordance with the provisions of
Section 321(b) of the Trust Indenture Act of 1939, that reports of examinations
by Federal, State, Territorial and District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon its request therefor.
LA SALLE NATIONAL BANK
By: /s/ SARAH H. WEBB
---------------------------
Sarah H. Webb
First Vice President
<PAGE> 29
EXHIBIT 7
Latest Report of Condition of
Trustee published pursuant to
law or the requirement of its
surviving or examining authority.
<PAGE> 30
EXHIBIT 8
NOT APPLICABLE
<PAGE> 31
EXHIBIT 9
NOT APPLICABLE
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY SUPPLEMENTAL FINANCIAL INFORMATION EXTRACTED
FROM THE SUPPLEMENTAL CONSOLIDATED STATEMENT OF OPERATIONS, THE SUPPLEMENTAL
CONSOLIDATED BALANCE SHEET AND THE ACCOMPANYING NOTES TO THE SUPPLEMENTAL
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH SUPPLEMENTAL FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 140,872
<SECURITIES> 54,821
<RECEIVABLES> 234,450
<ALLOWANCES> 2,377
<INVENTORY> 261,738
<CURRENT-ASSETS> 803,146
<PP&E> 317,339
<DEPRECIATION> 120,347
<TOTAL-ASSETS> 1,035,049
<CURRENT-LIABILITIES> 340,975
<BONDS> 0
0
0
<COMMON> 37
<OTHER-SE> 647,445
<TOTAL-LIABILITY-AND-EQUITY> 1,035,049
<SALES> 1,060,535
<TOTAL-REVENUES> 1,073,197
<CGS> 723,404
<TOTAL-COSTS> 1,133,973
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,222
<INCOME-PRETAX> (60,859)
<INCOME-TAX> (30,183)
<INCOME-CONTINUING> (30,676)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (30,676)
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