<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR QUARTER ENDED SEPTEMBER 30, 1998
Commission File No. 0-12933
LAM RESEARCH CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 94-2634797
- ------------------------------ ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
4650 CUSHING PARKWAY, FREMONT, CALIFORNIA 94538
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (510) 659-0200
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO____
As of September 30, 1998 there were 38,747,958 shares of Registrant's Common
Stock outstanding.
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INDEX
<TABLE>
<CAPTION>
Page
No.
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION ............................................... 3
Item 1. Financial Statements (unaudited)..................................... 3
Condensed Consolidated Balance Sheets............ 3
Condensed Consolidated Statements of Operations.. 4
Condensed Consolidated Statements of Cash Flows.. 5
Notes to Condensed Consolidated Financial
Statements............................ 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 9
Results of Operations............................ 9
Liquidity and Capital Resources.................. 13
Risk Factors..................................... 13
Item 3. Quantitative and Qualitative Disclosure about Market Risk............ 19
PART II. OTHER INFORMATION.................................................... 19
Item 1. Legal Proceedings.................................................... 19
Item 6. Exhibits and Reports on Form 8-K..................................... 20
</TABLE>
2
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ITEM 1. FINANCIAL STATEMENTS
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
<TABLE>
<CAPTION>
September 30,
1998 June 30,
(unaudited) 1998
----------- -----------
<S> <C> <C>
Assets
Cash and cash equivalents $ 129,841 $ 13,509
Short-term investments 209,999 383,647
Accounts receivable, net 152,575 176,029
Inventories 214,233 220,610
Prepaid expenses and other assets 41,283 25,809
Deferred income taxes 77,485 77,485
----------- -----------
Total Current Assets 825,416 897,089
Equipment and leasehold improvements, net 137,530 144,252
Restricted cash 51,357 51,357
Other assets 55,735 58,074
----------- -----------
Total Assets $ 1,070,038 $ 1,150,772
=========== ===========
Liabilities and Stockholders' Equity
Trade accounts payable $ 54,330 $ 67,703
Accrued expenses and other
current liabilities 172,116 208,442
Current portion of long-term debt and
capital lease obligations 16,863 17,364
----------- -----------
Total Current Liabilities 243,309 293,509
Long-term debt and capital lease
obligations, less current portion 331,645 334,174
----------- -----------
Total Liabilities 574,954 627,683
Preferred stock: 5,000 shares authorized;
none outstanding
Common Stock at par value of $0.001 per share
Authorized -- 90,000 shares; issued and
outstanding 38,748 shares at September 30,
1998 and 38,267 shares at June 30, 1998 39 38
Additional paid-in capital 380,782 381,011
Accumulated other comprehensive income (loss) (710) 295
Retained earnings 114,973 141,745
----------- -----------
Total Stockholders' Equity 495,084 523,089
----------- -----------
$ 1,070,038 $ 1,150,772
=========== ===========
</TABLE>
- --------------------
See Notes to condensed consolidated financial statements.
3
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LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
------------------------
September 30,
------------------------
1998 1997
--------- ---------
<S> <C> <C>
Net sales $ 142,137 $ 289,392
Royalty income 62 534
--------- ---------
Total revenue 142,199 289,926
Costs and expenses:
Cost of goods sold 92,043 176,940
Research and development 35,114 54,177
Selling, general and administrative 41,836 53,204
Merger costs -- 17,685
--------- ---------
Operating loss (26,794) (12,080)
Other (income) expense, net (22) 798
--------- ---------
Loss before income taxes (26,772) (12,878)
Income tax benefit -- 706
--------- ---------
Net loss $ (26,772) $ (12,172)
========= =========
Net loss per share
Basic $ (0.70) $ (0.32)
========= =========
Diluted $ (0.70) $ (0.32)
========= =========
Number of shares used in
per share calculations
Basic 38,400 37,600
========= =========
Diluted 38,400 37,600
========= =========
</TABLE>
See Notes to condensed consolidated financial statements.
4
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LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------
September 30, September 30,
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (26,772) $ (12,172)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization 15,013 15,148
Deferred taxes (724) --
Change in certain working capital
accounts (36,915) 16,070
----------- -----------
Net cash provided by (used in) operating
activities (49,398) 19,046
Cash flows from investing activities:
Capital expenditures, net (6,268) (13,091)
Purchase of short-term investments (874,693) (4,559,637)
Sale/maturities of short-term investments 1,048,341 4,157,485
Other 2,613 (1,232)
----------- -----------
Net cash provided by (used in)
investing activities 169,993 (416,475)
----------- -----------
Cash flows from financing activities:
Repayments of borrowings under
line of credit -- (35,000)
Common stock repurchase (3,937)
Sale of stock, net of issuance
costs 3,709 9,275
Net proceeds from issuance of
long-term debt -- 301,000
Principal payments on long-term debt
and capital lease obligations (3,030) (4,074)
Foreign currency translation adjustment (1,005) (42)
----------- -----------
Net cash provided by (used in) financing
activities (4,263) 271,159
----------- -----------
Net increase (decrease) in cash and
cash equivalents 116,332 (126,270)
Cash and cash equivalents at beginning
of period 13,509 140,872
----------- -----------
Cash and cash equivalents at end of
period $ 129,841 $ 14,602
=========== ===========
</TABLE>
See Notes to condensed consolidated financial statements.
5
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LAM RESEARCH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998
(Unaudited)
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) considered necessary for a
fair presentation have been included. The accompanying unaudited condensed
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements of Lam Research Corporation (the "Company" or
"Lam") for the fiscal year ended June 30, 1998, which are included in the Annual
Report on Form 10-K, File number 0-12933.
NOTE B -- INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
Sept. 30, June 30,
(in thousands) 1998 1998
-------- --------
<S> <C> <C>
Raw materials $156,460 $147,794
Work-in-process 41,789 52,374
Finished goods 15,984 20,442
-------- --------
$214,233 $220,610
======== ========
</TABLE>
NOTE C -- EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements consist of the following:
<TABLE>
<CAPTION>
Sept. 30, June 30,
(in thousands) 1998 1998
--------- ---------
<S> <C> <C>
Equipment $ 136,763 $ 139,358
Furniture & fixtures 62,184 60,353
Leasehold improvements 99,445 95,075
--------- ---------
298,392 294,786
Accumulated depreciation and
amortization (160,862) (150,534)
--------- ---------
$ 137,530 $ 144,252
========= =========
</TABLE>
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NOTE D -- OTHER (INCOME) EXPENSE, NET
The significant components of other (income) expense, net are as
follows:
<TABLE>
<CAPTION>
Three Months Ended
(in thousands) September 30,
-----------------------------
1998 1997
------- -------
<S> <C> <C>
Interest expense $ 4,871 $ 2,715
Interest income (5,932) (3,199)
Other 1,039 1,282
------- -------
$ (22) $ 798
======= =======
</TABLE>
NOTE E -- NET LOSS PER SHARE
All net loss amounts for all periods have been presented and, where
necessary, restated to conform to the FAS 128 requirements. Basic net loss per
share, is calculated using the weighted average number of shares of common stock
outstanding during the period. Diluted net loss per share is calculated using
the weighted average number of shares of common stock outstanding during the
period. The assumed conversion of the convertible subordinated notes to
potential common shares were excluded from the diluted earnings per share
because their effect was antidilutive. Options were outstanding during the three
month periods ended September 30, 1998 and September 30, 1997, respectively, but
were excluded from the computation of diluted net loss per common share because
the effect in periods with a net loss would be antidilutive. The Company's basic
and diluted net loss per share, as calculated according to FAS 128, are as
follows:
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
(in thousands, except per share data) 1998 1997
-------- --------
<S> <C> <C>
Numerator:
Numerator for basic net loss per share $(26,772) $(12,172)
-------- --------
Numerator for diluted net loss per share $(26,772) $(12,172)
-------- --------
Denominator:
Basic net loss per share - average shares outstanding 38,400 37,600
-------- --------
Diluted net loss per share -
average shares outstanding and assumed
conversions 38,400 37,600
-------- --------
Basic net loss per share $ (0.70) $ (0.32)
======== ========
Diluted net loss per share $ (0.70) $ (0.32)
======== ========
</TABLE>
NOTE F -- COMPREHENSIVE LOSS
As of July 1, 1998, the Company has adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income," ("FAS 130"). FAS
130 establishes new rules for the reporting and display of comprehensive income
and its components; however the adoption of this statement had no impact on the
Company's net loss or stockholders' equity. FAS 130 requires that unrealized
gains or losses on available-for-sale securities and foreign currency
translation adjustments are to
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be included in other comprehensive loss. Prior to adoption, unrealized gains and
losses and foreign currency translation adjustments were reported as a component
of stockholder's equity.
The components of comprehensive loss, net of tax, are as follows:
<TABLE>
<CAPTION>
Three Months Ended
(in thousands) September 30,
- -------------- ----------------------
1998 1997
-------- --------
<S> <C> <C>
Net loss $(26,772) $(12,172)
Foreign currency translation adjustment (1,005) (42)
-------- --------
Comprehensive loss $(27,777) $(12,214)
======== ========
</TABLE>
Accumulated other comprehensive income (loss) presented on the
accompanying consolidated condensed balance sheets consists of the accumulated
foreign currency translation adjustment.
NOTE G -- RESTRUCTURING
During the quarters ended March 31, 1998 and June 30, 1998, the
Company announced plans to restructure its operations to focus more on its core
etch and Chemical Mechanical Planarization ("CMP") product groups, and to exit
its Flat Panel Display ("FPD") and Chemical Vapor Deposition ("CVD") operations.
As a result of the restructurings, the Company reduced its global workforce by
approximately 28% and downsized and consolidated its manufacturing operations
and facilities. The Company recorded a total restructuring charge of $148.9
million for severance compensation and benefits, the write-off of facilities,
fixed assets and excess and obsolete inventory and other exit costs. At
September 30, 1998, $30.2 million of the charge remains accrued on the balance
sheet. During the quarter ended September 30, 1998 the Company made
approximately $17 million of cash payments, relating primarily to severance,
benefits and rent on unoccupied facilities. At September 30, 1998, the Company
has approximately $28 million of future cash payments relating to the
restructurings. There will be further charges against the restructuring reserves
established in fiscal 1998 during fiscal 1999, as the Company completes this
restructuring program.
Restructuring activity:
<TABLE>
<CAPTION>
Facilities
Severance and Excess and Other
and Fixed Obsolete Exit
(in thousands) Benefits Assets Inventory Costs Total
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Restructuring provision $ 40,317 $ 64,339 $ 31,933 $ 12,269 $148,858
Spending and charges 9,766 48,859 31,933 9,857 100,415
-------- -------- -------- -------- --------
Balance at June 30, 1998 $ 30,551 $ 15,480 $ -- $ 2,412 $ 48,443
Spending and charges 17,312 911 -- -- 18,223
-------- -------- -------- -------- --------
Balance at September 30, 1998 $ 13,239 $ 14,569 $ -- $ 2,412 $ 30,220
======== ======== ======== ======== ========
</TABLE>
NOTE H -- DEBT
During the quarter ended September 30, 1998, the Company renegotiated
a replacement facility for a yen 1.7 billion yen-
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denominated loan. Principal payments on the new facility are due annually on
September 30 through September 30, 2001. The new facility was renegotiated at
terms which were more favorable than the previous yen-denominated loan.
NOTE I -- LITIGATION
See Part II, item 1 for discussion of litigation.
ITEM 2. 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 27A
of the Securities Act of 1933 and 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, product development, demand, acceptance
and market share, competitiveness, royalty income, gross margins, levels of
research and development and operating expenses, management's plans and
objectives for current and future operations of the Company, the effects of the
Company's on-going reorganization and consolidation of operations and
facilities, the ability of the Company to complete contemplated reorganizations
or consolidations on time or within anticipated costs, and the sufficiency of
financial resources to support future operations and capital expenditures. Such
statements are based on current expectations and are subject to risks,
uncertainties, and changes in condition, significance, value and effect,
including those discussed below under the heading Risk Factors, and other
documents the Company files from time to time with the Securities and Exchange
Commission, specifically the Company's last filed Annual Report on the Form
10-K. Such risks, uncertainties and changes in condition, significance, value
and effect could cause actual results to differ materially from those expressed
herein and in ways not readily foreseeable. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the
date hereof and of information currently and reasonably known. The Company
undertakes no obligation to release the results of any revisions to these
forward-looking statements which may be made to reflect events or circumstances
which occur after the date hereof or to reflect the occurrence or effect of
anticipated or unanticipated events. This discussion should be read in
conjunction with the Condensed Consolidated Financial Statements and Notes
presented thereto on pages 3 to 9 of this Form 10-Q for a full understanding of
the Company's financial position and results of operations for the quarter ended
September 30, 1998.
Results of Operations
Net sales for the first quarter of fiscal 1999 decreased 51% compared
to the first quarter of fiscal 1998. The Company experienced decreased revenues
for all of its product lines. Total foreign sales represented 42% of total
revenue during the first quarter of fiscal 1999 compared to 51% of total revenue
for the year-ago period. Revenue from the Asia Pacific and Japan regions
decreased to 15% and 6%, respectively, of total revenue during the first quarter
of fiscal 1999 from 31% and 9%, respectively of total revenue during the first
quarter of fiscal 1998. Revenue from the North America and Europe regions
increased to 58% and 21%, respectively, of total revenue during the first
quarter
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of fiscal 1999 from 49% and 11%, respectively, of total revenue during the first
quarter of fiscal 1998. The semiconductor industry is currently experiencing a
severe worldwide slowdown in equipment demand which was and continues to be
brought on by depressed DRAM pricing, production overcapacity as well as
uncertainty in the worldwide financial markets. The Company anticipates that net
sales will decrease, compared to the quarter ended September 30, 1998, for the
remainder of calendar 1998.
In response to the continued decline in net sales, and as part of a
restructuring plan, the Company commenced a reduction of its work force in
November 1998. In addition, Management anticipates that as part of the
restructuring plan it will consolidate facilities. The Company has not yet
finalized its restructuring plan and therefore, it cannot quantify the
associated costs at this time. The Company will record a restructuring charge
during the fiscal quarter ending December 1998.
Royalty income decreased 88% from the year-ago period. The Company
expects that royalty income will remain relatively flat for the remainder of the
fiscal year. The reduction in royalty income is a result of the slowdown in
equipment sales in the Japan region.
Gross margin percentage declined to 35.3% in the first quarter of
fiscal 1999 compared with 39.0% for the year-ago period. The lower overall gross
margin percentage is primarily a result of excess manufacturing capacity which
is a result of the Company's lower volume of sales.
Research and development ("R&D") expenses for the quarter ended
September 30, 1998 were 35.2% lower than the year-ago period. As a percentage of
total revenue R&D expenses increased to 24.7% of total revenue for the quarter
ended September 30, 1998 compared to 18.7% of total revenue for the quarter
ended September 30, 1997. The decrease in R&D expenses is a result of the
Company's efforts to exit from its FPD and CVD operations and to focus more on
its core etch and CMP product groups.
Selling, general and administrative ("SG&A") expenses decreased 21.4%
during the first quarter of fiscal 1999 compared to the year-ago period. The
decrease in SG&A expenses is a result of the Company's restructurings in fiscal
1998. The Company continues to monitor closely its expenditures and capital
spending relative to revenue levels.
During the first quarter of fiscal 1998, the Company recorded costs
of $17.7 million related to the merger with OnTrak Systems, Inc. ("OnTrak").
Such expenses relate to investment advisory fees, legal and accounting fees,
financial printing costs and other merger-related costs.
Other income increased $0.8 million during the first quarter of
fiscal 1999 compared to the first quarter of fiscal 1998. During the first
quarter of fiscal 1998, the Company issued $310.0 million of convertible
subordinated notes ("the Notes") bearing interest at 5% which are due to mature
on September 1, 2002. During the first quarter of fiscal 1999, the Company's
rate of return on its investments exceeded the interest rate it pays on the
Notes.
10
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Due to the Company's significant tax loss and credit carryovers, Lam
did not record any tax benefit during the first quarter of fiscal 1999.
During the quarters ended March 31, 1998 and June 30, 1998, the
Company announced plans to restructure its operations to focus more on its core
etch and CMP product groups, and to exit its FPD and Chemical Vapor Deposition
("CVD") operations. As a result of the restructurings, Lam reduced its global
workforce by approximately 28% and downsized and consolidated its manufacturing
operations and facilities. The Company recorded a total restructuring charge of
$148.9 million for severance compensation and benefits, the write-off of
facilities, fixed assets and excess and obsolete inventory and other exit costs.
At September 30, 1998, $30.2 million of the charge remains accrued on the
balance sheet. During the quarter ended September 30, 1998, the Company made
approximately $17 million of cash payments, relating primarily to severance,
benefits and rent on unoccupied facilities. At September 30, 1998 the Company
has approximately $28 million of future cash payments relating to the
restructurings. There will be further charges against the restructuring reserves
established in fiscal 1998 during fiscal 1999, as the Company completes its
restructuring program.
The Company has established a team to address issues raised by the
introduction of the Single European Currency ("Euro") for initial implementation
as of January 1, 1999, and through the transition period to January 1, 2002. Lam
expects to be able to meet related legal requirements by January 1, 1999, and
through the transition period. Lam does not expect the cost of any system
modifications to be material and does not currently expect that introduction and
use of the Euro will materially affect its foreign exchange and hedging
activities or will result in any material increase in transaction costs. The
Company will continue to evaluate the impact over time of the introduction of
the Euro; however, based on currently available information management does not
believe that the introduction of the Euro will have a material adverse impact on
the Company's financial condition or the overall trends in results of its
operations.
The Company relies heavily on its existing application software and
operating systems. The Year 2000 compliance issue (in which systems do not
properly recognize date sensitive information when the year changes to 2000)
creates risks for the Company: if internal data management, accounting and/or
manufacturing or operational software and systems do not adequately or
accurately process or manage day or date information beyond the year 1999, there
could be an adverse impact on the Company's operations. To address the issue,
the Company has assembled a task force to review and assess internal software,
data management, accounting and manufacturing and operational systems to ensure
that they do not malfunction as a result of the Year 2000 date transition. The
review and corrective measures are proceeding in parallel. These review and
corrective measures are intended to encompass all significant categories of
systems used by the Company, including data management, accounting,
manufacturing, sales, human resources and operational software and systems. The
Company is also working with its significant suppliers of products and systems
to assure that the products and systems supplied to the Company, and the
products the Company supplies to its customers, are Year 2000 compliant. With
respect to compliance of the products the Company supplies to its customers, the
Company intends to adhere to Year 2000
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test case scenarios established by SEMATECH, an industry group comprised of US
semiconductor manufacturers. The Company's compliance efforts are substantially
complete, and the Company currently expects that its review, corrective measures
and contingency planning (where necessary) will be complete by the end of fiscal
1999, with the goal of resolving all material internal programs and systems
prior to the Year 2000 date transition.
In connection with its review and corrective measures, both to ensure
that its internal products and systems, and the operating systems accompanying
the products sold to its customers, are Year 2000 compliant, the Company expects
both to replace some software and systems and to upgrade others where
appropriate. As a contingency with respect to products the Company currently
offers to its customers, the Company may replace all non-compliant operating
systems with systems demonstrated to be Year 2000 compliant. With respect to
products and systems supplied to the Company for use internally, the Company may
upgrade all non-compliant products and systems and, where necessary or where no
reasonable upgrade is available, replace such non-compliant products and systems
with products and systems demonstrated to be Year 2000 compliant.
The Company is in the process of identifying for its customers the
corrective measures necessary to ensure that its installed products are Year
2000 compliant, including compliance of third-party products (such as software)
incorporated into the Company's installed products. In this regard, the Company
is incurring, and will continue to incur throughout fiscal 1999, various costs
to provide customer support regarding Year 2000 issues, and certain of such
costs are expected to be borne not by the Company but, instead, to be passed on
to the customers. The full cost of these activities, including corrective
measures, is not fully known. However, the Company believes that the potential
future financial impact of assuring such Year 2000 compliance is not expected to
be material. The Company's failure to ensure, at all or in a timely or
reasonable manner, that its products are Year 2000 compliant may cause
disruption in the customer's ability to derive expected productivity from those
products or to integrate the products fully and functionally into certain
automated manufacturing environments. With respect to products and systems the
Company purchases for use internally, failure to ensure Year 2000 compliance may
cause disruption in the Company's automated accounting, financial planning, data
management and manufacturing operations which could have a material effect on
the Company's short-term ability to manage its day-to-day operations in an
efficient, cost-effective and reliable manner.
The Company believes that its Year 2000 compliance project will be
completed on a timely basis, and in advance of the Year 2000 date transition and
will not have a material adverse effect on the Company's financial condition or
overall trends in the results of operations. However, there can be no assurance
that unexpected delays or problems, including the failure to ensure Year 2000
compliance by systems or products supplied to the Company by a third party, will
not have an adverse effect on the Company, its financial performance, or the
competitiveness or customer acceptance of its products. Further, the Company's
current understanding of expected costs is subject to change as the project
progresses, and does not include potential costs related to actual customer
claims, or the cost of internal software and hardware replaced in the normal
course of business (whose installation
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otherwise in the normal course of business may be accelerated to provide
solutions to Year 2000 compliance issues).
Liquidity and Capital Resources
As of September 30, 1998, the Company had $391.2 million in cash,
cash equivalents, short-term investments and restricted cash, compared with
$448.5 million at June 30, 1998. The Company has a total of $100.0 million
available under a syndicated bank line of credit which is due to expire in April
2001. Borrowings under the line of credit bear interest at the bank's prime rate
or 0.55% to 0.95% over London Interbank Offered Rate.
Net cash used in operating activities was $49.4 million for the three
months ended September 30, 1998. The Company used $36.9 million of working
capital. Cash payouts relating to the fiscal 1998 restructurings were
approximately $17 million. Decreases in accounts payable, accrued liabilities
and increases in prepaid expenses were offset by decreases in accounts
receivables and inventory resulting in a use of cash of $19.9 million. Cash
provided by investing activities was $170.0 million, which was primarily from
the net sales of short-term investments. Capital expenditures, net of
retirements, for the three month period ended September 30, 1998 were $6.3
million. The Company used $4.3 million in financing activities primarily from
the principal payments of long-term debt and capital lease obligations of $3.0
million. During the quarter ended September 30, 1998, the Company used $3.9
million for the repurchase of common stock which was offset by the sale of
common stock.
The Company's cash, cash equivalents, short-term investments and
available lines of credit at the end of the first quarter of fiscal 1999 are
considered adequate to support current levels of operations for at least the
next twelve months.
Risk Factors
Fluctuations in Quarterly Revenues and Operating Results
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 generally, and equipment industry specifically, 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, enhanced and competitive products, at all and on a
timely basis, the introduction of new products by its competitors, challenges to
the Company's products and technology, 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 $2.5 million per unit. The sale of
fewer systems than anticipated in any
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quarter may have a substantial negative impact on the Company's 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. Further, as a result of the
continuing consolidation of manufacturing operations and capacity at the
Company's Fremont, California facility, natural, physical or other events
affecting the facility, including labor disruptions, could adversely impact the
Company's operations and revenue.
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
has historically experienced periodic downturns. During the past nine months the
semiconductor industry has been experiencing a severe slowdown of product demand
and extreme volatility in product pricing. This slowdown and volatility has
caused the semiconductor industry to reduce or delay significantly purchases of
semiconductor manufacturing equipment and construction of new fabrication
facilities. This slowdown and volatility is expected to continue throughout
fiscal 1999. As previously announced, these conditions have adversely affected
and will continue to affect materially the Company's aggregate bookings,
revenues and operating results. Even during periods of reduced revenues, in
order to remain competitive the Company will continue to invest in R&D and to
maintain extensive ongoing worldwide customer service and support capabilities,
which could adversely affect its financial results.
Dependence on New Products and Processes; Rapid Technological Change
Rapid technological changes in semiconductor manufacturing processes
subject the semiconductor equipment industry to increased pressure to maintain
technological parity with deep submicron process technology. The Company
believes that its future success will depend in part upon its ability to
develop, manufacture and introduce successfully 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 forecast accurately demand for new products while managing the
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.
There can be no assurance that the Company will successfully develop and
manufacture new products, or that new products introduced by it will be accepted
in the marketplace. If Lam does not successfully introduce new products, the
Company's results from operations will be materially adversely affected.
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<PAGE> 15
The Company expects to continue to make significant investments in
R&D and to explore joint development relationships with other members of the
industry. The Company must manage product transitions or joint development
relationships 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 it has formed strategic alliances, selling of
its existing products to those customers 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 its financial results.
Introduction of New Product
Lam currently anticipates shipping its Teres CMP system in fiscal
1999, which is expected to face significant competition from multiple current
and future competitors. Among the companies currently offering polishing systems
are Applied Materials, Inc., Cybeq Systems, Ebara Corporation, IPEC, SpeedFam
Corp., Strasbaugh and Sumitomo. 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 anticipated introduction
of its Teres CMP polishing system.
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. Continued market acceptance of its 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 release new versions of these products on
time, or otherwise, could have a material adverse effect on the business,
operating results, financial condition and cash flows of the Company.
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. The Company purchases
in excess of $500,000 of supplies on a monthly basis from these
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<PAGE> 16
suppliers. Each of these suppliers has a one year blanket purchase contract
under which Lam may issue purchase orders. These contracts may be renewed
periodically. Each of these suppliers has sold products to Lam during at least
the last four years, and there is no reason to expect that these contracts will
not continue to be renewed in the future or otherwise replaced with competent
alternative source suppliers. Management 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.
Highly Competitive Industry
The semiconductor equipment manufacturing industry is highly
competitive. The Company 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, Lam 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, significant financial resources are
required 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 semiconductor equipment industry is becoming increasingly
dominated by large manufacturers who have the resources to support customers on
a worldwide basis, and certain of Lam's competitors have substantially greater
financial resources and more extensive engineering, manufacturing, marketing and
customer service and support. In addition, there are smaller, emerging
semiconductor equipment companies that provide innovative technology that may
have performance advantages over systems offered by the Company.
Competitors are expected to continue to improve the design and
performance of their current products and processes and to introduce new
products and processes with improved price and performance characteristics. If
competitors enter into strategic relationships with leading semiconductor
manufacturers covering products similar to those sold or being developed by the
Company, its ability to sell products to those manufacturers could be adversely
affected. No assurance can be given that Lam 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 Lam
currently is developing additional product enhancements that it believes
addresses customer requirements, there can be no assurance that the development
or introduction of these additional product enhancements will be successfully
completed, at all or on a timely basis, or that these product enhancements will
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<PAGE> 17
achieve market acceptance or be competitive. 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 Sales
International sales accounted for 42% and 51%, respectively, of net
revenues for the first quarter of fiscal 1999 and 1998, and 55%, 57% and 63%,
respectively, of net revenues for fiscal years 1998, 1997 and 1996.
Historically, sales to the Asia regions have accounted for a substantial portion
of international sales. Recent banking and currency problems in the Asia regions
have had and will continue to have a significant adverse impact on the Company's
revenue and operations, including specifically revenues and operations for
fiscal 1999.
Sales of products currently are denominated in United States dollars.
In Korea, devaluation of the Won and difficulties by customers in obtaining
credit have curtailed semiconductor equipment investment and have led to
cancellation or delay of orders by the Company's customers, and are likely to
continue to do so in fiscal 1999.
In Japan, the Company's sales are denominated in Japanese Yen. A
weakening of the value of the Japanese Yen as compared to the U.S. dollar could
negatively impact operating margins. Currently, the Company enters into foreign
currency forward contracts to minimize the impact of exchange rate fluctuations
on yen-denominated assets and liabilities and will continue to enter into such
hedging transactions in the future.
In Europe, sales following January 1, 1999 will be subject to certain
provisions governing the transition of commercial transactions to the Euro. Lam
expects to be able to meet related legal requirements by January 1, 1999, and
through the transition period. The Company does not currently expect that
introduction and use of the Euro will materially affect its foreign exchange and
hedging activities or will result in any material increase in transaction costs.
Lam will continue to evaluate the impact over time of the introduction of the
Euro. Based on currently available information management does not believe that
the introduction of the Euro will have a material adverse impact on Lam's
financial condition or the overall trends in results of operations.
The impact of these and other factors on the Company's revenues and
operating results in any future period is difficult to forecast. There can be no
assurance that these and other factors relating to international sales and
operations by the Company will not materially adversely affect future business
and financial results, or in ways not readily foreseeable.
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<PAGE> 18
Potential Volatility of Common Stock Price
The market price for Lam Common Stock has been volatile and it could
continue to be subject to significant fluctuations in response to market or
industry conditions generally, or specific variations in quarterly operating
results, shortfalls in revenues or earnings from levels expected by securities
analysts and other factors such as announcements of restructurings,
technological innovations, reductions in force, departure of key employees,
consolidations of operations or introduction of new products by the Company or
by the Company's competitors, government regulations, developments in patent or
other proprietary rights, disruptions with key customers or the occurrence of
political, economic or environmental events globally or in key sales regions. 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. Recent
fluctuations affecting Lam Common Stock have been tied in part to the Asian and
Russian financial crisis and the price of and market for semiconductors. Broad
market fluctuations, as well as economic conditions generally in the
semiconductor industry, may adversely affect the market price of Lam Common
Stock.
Intellectual Property Matters
From time to time, Lam has received notices from third parties
alleging infringement of such parties' patent or other intellectual property
rights by the Company's products. In such cases, it is the policy of the Company
to defend the claims or negotiate licenses on commercially reasonable terms,
where considered appropriate. However, no assurance can be given that Lam will
be able in the future 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.
In October 1993, Varian brought suit against Lam 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 Company has asserted defenses of invalidity and
unenforceability of the patents that are the subject of the lawsuit, as well as
non-infringement of such patents by the Company's products. No trial date is
currently scheduled. 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 Lam attempts to protect its proprietary technology through patents,
copyrights and trade secret protection, it believes that its success 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 or more competitive technology independently. Lam
currently holds a number of United States and foreign patents and patent
applications pending. There can be no
18
<PAGE> 19
assurance that any patents issued to the Company will not be challenged,
invalidated or circumvented, that pending applications will be issued or that
the rights granted or anticipated thereunder will provide competitive
advantages.
Year 2000 Compliance
See discussion in Management Discussion and Analysis of Financial
Condition and Results of Operation on page 11 to 13.
Restructurings and Consolidation of Operations
The Company substantially restructured and consolidated its
operations during the quarters ended March 31, 1998 and June 30, 1998.
Implementation of these restructurings and consolidations involves several
risks, including that of simplifying and modifying its product line offerings
(which will increase its dependence on fewer products and potentially reduce
overall sales).
Although the Company believes that the actions it is taking and
contemplates taking in connection with the restructurings and consolidations,
including the reduction in workforce, the consolidation of manufacturing
operations and the exiting from FPD and CVD operations, should help more closely
align Lam with its business outlook, there can be no assurance that such actions
will enable the Company to achieve its objectives of reducing costs, or can be
accomplished at specific or optimum values or on time or as intended. In
addition, there can be no assurance that the size of the restructuring charge
will not exceed current estimates. The Company's future consolidated operating
results and financial condition could be adversely affected should it encounter
difficulty in effectively managing the restructurings and consolidations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
For financial market risks related to changes in interest rates and
foreign currency exchange rates, refer to Part II, Item 7A, Quantitative and
Qualitative Disclosures About Market Risk, in the Company's Annual Report on
Form 10-K for the year ended June 30, 1998.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
In October 1993, 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 Company has asserted
defenses of invalidity and unenforceability of the patents that are the subject
of the lawsuit, as well as non-infringement of such patents by the Company's
products. No trial date is currently scheduled. 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
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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.
In addition, the Company is from time to time notified by various
parties that its products 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.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<S> <C> <C>
Exhibit 10.58 Loan Agreement between Lam Research Co., LTD and ABN
AMRO Bank N.V., dated September 30, 1998.
Exhibit 10.59 Guaranty to Loan Agreement between Lam Research Co.,
LTD and ABN AMRO Bank N.V., dated September 30, 1998.
Exhibit 10.60 Second Addendum to Employment Agreement between Lam
Research Corporation and Roger D. Emerick, effective
September 1, 1998.
Exhibit 27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
The Company filed a Form 8-K on July 10, 1998 making an Item 5
disclosure to disclose the Company's announcement of a restructuring.
The Company filed a Form 8-K on August 14, 1998 making an Item 5
disclosure to disclose its year end press release.
The Company filed a Form 8-K on September 16, 1998 making an Item 5
disclosure to disclose that the Company had announced a stock
repurchase.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 12, 1998
LAM RESEARCH CORPORATION
By:/s/ Mercedes Johnson
---------------------------------
Mercedes Johnson, Vice President,
Finance & Chief Financial Officer
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<PAGE> 22
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
Exhibit 10.58 Loan Agreement between Lam Research Co., LTD and ABN
AMRO Bank N.V., dated September 30, 1998.
Exhibit 10.59 Guaranty to Loan Agreement between Lam Research Co.,
LTD and ABN AMRO Bank N.V., dated September 30, 1998.
Exhibit 10.60 Second Addendum to Employment Agreement between Lam
Research Corporation and Roger D. Emerick, effective
September 1, 1998.
Exhibit 27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.58
DATED September 30, 1998
LOAN AGREEMENT
between
LAM RESEARCH CO., LTD.
as Borrower
THE BANKS AND FINANCIAL INSTITUTIONS NAMED HEREIN
as Lenders
ABN AMRO BANK N.V., TOKYO BRANCH
as Agent
<PAGE> 2
CONTENTS
<TABLE>
<CAPTION>
Clause Heading Page
<S> <C> <C>
1. PURPOSE AND DEFINITIONS...................................................................................1
1.1 Purpose.........................................................................................1
1.2 Definitions.....................................................................................1
1.3 Headings........................................................................................5
1.4 Construction of certain terms...................................................................5
2. THE FACILITY..............................................................................................6
2.1 Amount..........................................................................................6
2.2 Obligations several.............................................................................7
2.3 Interests several...............................................................................7
3. CONDITIONS................................................................................................7
3.1 Documents and evidence..........................................................................7
3.2 Further conditions precedent....................................................................7
3.3 Representations.................................................................................8
3.4 Waiver of conditions precedent..................................................................9
4. DRAWDOWN..................................................................................................9
5. INTEREST RATES AND INTEREST PERIODS.......................................................................9
5.1 Usual interest rate.............................................................................9
5.2 Default interest...............................................................................10
5.3 Margin.........................................................................................11
5.4 Selection of Interest Periods..................................................................13
5.5 Determination of Interest Periods..............................................................13
5.6 Notification of Interest Periods and interest rate.............................................14
5.7 Market disruption; non-availability............................................................14
5.8 Fixed rate option..............................................................................15
6. REPAYMENT, PREPAYMENT AND CANCELLATION...................................................................16
6.1 Repayment......................................................................................16
6.2 Voluntary prepayment...........................................................................17
6.3 Additional voluntary prepayment................................................................17
6.4 Timing, amounts and application of prepayments.................................................17
6.5 Notice and effect of prepayment................................................................17
</TABLE>
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<TABLE>
<S> <C> <C>
7. FEES AND EXPENSES........................................................................................18
7.1 Fees...........................................................................................18
7.2 Expenses.......................................................................................18
7.3 Consumption, etc. tax..........................................................................19
7.4 Stamp and other duties.........................................................................19
8. PAYMENTS AND TAXES; ACCOUNTS AND CALCULATIONS............................................................19
8.1 No set-off or counterclaim; distribution to the Lenders........................................19
8.2 Payments by the Lenders........................................................................20
8.3 Agent may assume receipt.......................................................................20
8.4 Time of payment................................................................................20
8.5 Non-Banking Days...............................................................................21
8.6 Calculations...................................................................................21
8.7 Certificates conclusive........................................................................21
8.8 Grossing-up for Taxes..........................................................................22
8.9 Lender accounts................................................................................22
8.10 Partial payments...............................................................................23
8.11 Variation of application.......................................................................23
9. REPRESENTATIONS AND WARRANTIES...........................................................................24
9.1 Representations and Warranties.................................................................24
9.2 Repetition.....................................................................................26
10. UNDERTAKINGS.............................................................................................27
10.1 Undertakings...................................................................................27
10.2 Pledges........................................................................................28
11. EVENTS OF DEFAULT........................................................................................29
11.1 Events of Default..............................................................................29
11.2 Acceleration...................................................................................32
11.3 Demand basis...................................................................................33
12. INDEMNITIES..............................................................................................33
12.1 Broken funding and other indemnities...........................................................33
12.2 Currency indemnity.............................................................................34
13. UNLAWFULNESS AND INCREASED COSTS.........................................................................35
13.1 Unlawfulness...................................................................................35
13.2 Increased costs................................................................................35
13.3 Capital requirements...........................................................................36
</TABLE>
ii
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<TABLE>
<S> <C> <C>
13.4 Mitigation.....................................................................................37
14. SET-OFF AND PRO RATA PAYMENTS............................................................................37
14.1 Set-off........................................................................................37
14.2 Pro rata payments..............................................................................38
15. ASSIGNMENT, SUBSTITUTION AND LENDING OFFICES.............................................................39
15.1 Benefit and burden.............................................................................39
15.2 No assignment by Borrower......................................................................39
15.3 Participation..................................................................................39
15.4 Transfer.......................................................................................40
15.5 Reliance on Substitution Certificate...........................................................41
15.6 Authorization of Agent.........................................................................41
15.7 Construction of certain references.............................................................41
15.8 Lending offices................................................................................41
15.9 Disclosure of information......................................................................42
16. ARRANGER, AGENT AND REFERENCE LENDERS....................................................................42
16.1 Appointment of Agent...........................................................................42
16.2 Amendments; Waivers............................................................................42
16.3 Rights of Agent as Lender; No partnership......................................................43
16.4 No liability of Arranger and Agent.............................................................43
16.5 Agent's duty to notify and take action.........................................................44
16.6 Identity of Lenders............................................................................44
16.7 Non-reliance on Arranger or Agent..............................................................45
16.8 No Responsibility on Arranger or Agent for Borrower's performance..............................45
16.9 Other dealings.................................................................................46
16.10 Reimbursement and indemnity by Lenders.........................................................46
16.11 Retirement of Agent............................................................................46
16.12 Variation of Exhibits..........................................................................47
17. NOTICES AND OTHER MATTERS................................................................................47
17.1 Notices........................................................................................47
17.2 Notices through the Agent......................................................................48
17.3 No implied waivers, remedies cumulative........................................................48
17.4 English language...............................................................................48
17.5 Confidentiality................................................................................49
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
18. GOVERNING LAW AND JURISDICTION...........................................................................50
18.1 Governing law..................................................................................50
18.2 Jurisdiction...................................................................................50
</TABLE>
iv
<PAGE> 6
Schedules
1 The Parties and the Commitments
2 Documents and evidence required as conditions precedent
3 Additional documents and evidence required after Drawdown Date
Exhibits
1 Form of Guaranty
2 Form of Substitution Certificate
3 Form of Margin Certificate
v
<PAGE> 7
THIS LOAN AGREEMENT is made the 30th of September, 1998 BETWEEN:
LAM RESEARCH CO., LTD., as Borrower;
THE BANKS AND FINANCIAL INSTITUTIONS details of which are set out in
Schedule 1, as Lenders; and
ABN AMRO BANK N.V., acting through its TOKYO BRANCH, as Agent.
IT IS AGREED as follows:
1. PURPOSE AND DEFINITIONS
1.1 Purpose
This Agreement sets out the terms and conditions on and subject to
which the Lenders agree, according to their several obligations, to
make available to the Borrower a loan of up to (Y)1,700,000,000 (one
billion seven hundred million Yen) to be used for the purpose of
refinancing the Borrower's current term debt.
1.2 Definitions
In this Agreement, unless the context otherwise requires:
"Advance" means the borrowing of all of the Commitments by the Borrower
or (as the context may require) the principal amount of such borrowing
for the time being outstanding;
"Agent" means ABN AMRO Bank N.V., acting through its Tokyo Branch or
such other person as may be appointed agent for the Lenders pursuant to
Clause 16.11;
"Arranger" means ABN AMRO North America, Inc.;
"Banking Day" means a day (other than Saturday or Sunday) on which
banks are open for business in Tokyo;
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<PAGE> 8
"Borrower" means Lam Research Co., Ltd., a Japanese corporation, whose
current address is 1-1-10, Oyama, Sagamihara-shi, Kanagawa Prefecture,
Japan;
"Borrower's Account" means the account of the Borrower maintained at
ABN AMRO Bank N.V., Tokyo Branch, bearing the number 13-23-016, or such
other account as the Borrower from time to time shall designate in a
written notice to the Agent for the deposit of funds borrowed under
this Agreement.
"Capital Adequacy Requirement" has the meaning given to it in Clause
13.3;
"Change of Law" has the meaning given to it in Clause 13.1;
"Commitment" means, in relation to a Lender, the amount set opposite
its name in Schedule 1 or, as the case may be, in any relevant
Substitution Certificate, as reduced by any relevant term of this
Agreement;
"Contribution" means, in relation to a Lender, the principal amount of
the Advance owing to such Lender at any relevant time;
"Default" means any Event of Default or any event or circumstance which
would, on the giving of a notice by the Agent and/or the expiry of the
relevant period and/or the fulfillment of any other condition (in each
case as specified in Clause 11.1), constitute an Event of Default;
"Drawdown" means the payment of the Advance to the Borrower by the
Agent;
"Drawdown Date" mean September 30, 1998 or such other date as may be
agreed upon between the Borrower and the Agent;
"Event of Default" means any of the events or circumstances described
in Clause 11.1;
"Governmental Authority" means any domestic or foreign national, state
or local government, any political subdivision thereof, any department,
agency, authority or bureau of any of the foregoing, or any other
entity exercising
2
<PAGE> 9
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, including, without
limitation, any central bank or any comparable authority;
"Governmental Rule" means any law, rule, regulation, ordinance, order,
code interpretation, judgment, decree, directive, guidelines, policy or
similar form of decision of any Governmental Authority;
"Guaranty" means a guaranty in the form of Exhibit 1, to be given by
the Guarantor;
"Guarantor" means Lam Research Corporation, a Delaware corporation,
whose current address is at 4650 Cushing Parkway, Fremont, CA 94538,
U.S.A.;
"Interest Payment Date" means a date specified for the payment of
interest pursuant to Clause 5.1;
"Interest Period" means the period determined in accordance with Clause
5.4 and Clause 5.5.
"Lenders" means the banks and financial institutions listed in Schedule
1 and includes their successors in title and Substitutes;
"Lien" means any mortgage, charge, pledge, lien, encumbrance or other
security interest with respect to any present or future assets or
revenues of the party referred to in the context in which the term is
used;
"Loan" means the Advance;
"Majority Lenders" means Lenders the aggregate of whose Contributions
at any relevant time equals or exceeds 66 2/3 percent of the Advances
or, if no Advance has been made, the aggregate of whose Commitments
equals or exceeds 66 2/3 percent of the total of the Commitments of all
the Lenders;
"Margin" means a percentage per annum calculated in accordance with
Clause 5.3;
3
<PAGE> 10
"Margin Certificate" means a certificate in the form of Exhibit 3;
"Margin Determination Date" means the fifteenth day following the date
by which the Guarantor shall be required to deliver the quarterly
financial statements and information under clauses (i) and (iii) of
Subparagraph 4(a) of the Guaranty;
"Margin Period" means the period commencing on and including December
27, 1999 and ending on but excluding the Margin Determination Date
falling immediately following December 27, 1999, and thereafter each
successive period commencing on and including the last preceding Margin
Determination Date and ending on but excluding the next succeeding
Margin Determination Date;
"Maturity Date" means the third anniversary of the Drawdown Date;
"month" in respect of any Interest Period means a period beginning in
one calendar month and ending in the next calendar month on the day
numerically corresponding to the day of the calendar month on which it
started, provided that (i) if the period started on the last Banking
Day in a calendar month or if there is no such numerically
corresponding day, it shall end on the last Banking Day in the next
calendar month and (ii) if the numerically corresponding day is not a
Banking Day, the period shall end on the next following Banking Day in
the same calendar month but if there is no such Banking Day it shall
end on the preceding Banking Day, and "months" and "monthly" shall be
construed accordingly;
"Principal Payment Date " has the meaning given to it in Clause 6.1;
"Reserve Requirement" shall mean, with respect to any day in an
Interest Period for a Loan, the aggregate of the reserve requirement
rates (expressed as a decimal) in effect on such day. As used herein,
the term "reserve requirement" shall include, without limitation, any
basic, supplemental or emergency reserve requirements imposed on a
Lender by any Governmental Authority;
"Senior Indebtedness Ratio" has the meaning set out in the Guaranty;
"Substitute" has the meaning given to it in Clause 15.5;
4
<PAGE> 11
"Substitution Certificate" means a certificate substantially in the
form of Exhibit 2;
"TIBOR" in relation to any period means (i) the average rate at which
deposits in Yen are offered to all banks for that period (or a period
most comparable to that period) calculated in accordance with Reuter
Screen TIBM page or, if that page is no longer published, its successor
or equivalent in respect of a deposit for that period (or a period most
comparable to that period) at or about 11:00 a.m. (Tokyo time) on the
date falling two Banking Days prior to the first day of that period, or
(ii) if no such rate is quoted, the rate which a major Japanese city
bank selected by the Agent in its discretion was offering deposits to
prime banks in the Tokyo Interbank market for that period (or a period
most comparable to that period) at or about 11:00 a.m. (Tokyo time) on
the date falling two Banking Days prior to the first day of that
period;
"U.S. Dollars" or the sign "US$" means the lawful currency for the time
being of the United States of America;
"written" or "in writing" means any method of representing or
reproducing words or characters in permanent visible form; and
"Yen" or the sign "(Y)" means the lawful currency for the time being of
Japan and, in respect of all payments to be made under this Agreement,
means immediately available, freely transferable, cleared funds.
1.3 Headings
Clause headings and the table of contents are inserted for convenience
of reference only and shall be ignored in the interpretation of this
Agreement.
1.4 Construction of certain terms
In this Agreement, unless the context otherwise requires: (a)
references to clauses, schedules and exhibits are to be construed as
references to the clauses of, and schedules and exhibits to, this
Agreement and references to this
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Agreement include its schedules which form an integral part of this
Agreement; (b) references to a "regulation" include any present or
future regulation, rule, directive, requirement, request or guideline
(whether or not having the force of law) of any agency, authority,
central bank or government department or any self-regulatory or other
national or supra-national authority; (c) words importing the plural
shall include the singular and vice versa and words importing a gender
shall include every gender; (d) references to any enactment shall be
deemed to include references to such enactment as re-enacted, amended
or extended; (e) references to "law" include, without limitation, any
legislation or decree or any decision of any court or tribunal in any
applicable jurisdiction; (f) references to "consent" include, without
limitation, any license, approval, waiver, filing, registration or
authorization; (g) references to a "party" are to a party to this
Agreement and "parties" shall be construed accordingly; (h) references
to statutes or regulations are to be construed as including all
statutory and regulatory provisions consolidating, amending or
replacing the statute or regulation referred to; (i) references to
agreements and other contractual instruments shall be deemed to include
all subsequent amendments and other modifications thereto, but only to
the extent such amendments and other modifications are not prohibited
by the terms of this Agreement or the Guaranty; (j) the words "hereof,"
"herein," "hereto," "hereunder" and the like mean and refer to this
Agreement as a whole and not merely to the specific Article, Section,
subsection, paragraph or clause in which the respective word appears;
and (k) the words "including," "includes" and "include" shall be deemed
to be followed by the words "without limitation".
2. THE FACILITY
2.1 Amount
The Lenders, relying on each of the representations and warranties in
Clause 9, agree to make available to the Borrower on and subject to the
terms of this Agreement a loan of up to (Y)1,700,000,000 (one billion
seven hundred million Yen). The obligation of each Lender under this
Agreement shall be to contribute that proportion of the Advance which
its Commitment bears to the total of the Commitments of all the
Lenders.
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2.2 Obligations several
The obligations of each Lender under this Agreement are several; the
failure of any Lender to perform its obligations shall not relieve any
other party of any of its respective obligations or liabilities under
this Agreement nor shall any party be responsible for the obligations
of any other party under this Agreement.
2.3 Interests several
The interests of the Agent, the Arranger and the Lenders are several
and the amount due to the Agent (for its own account), to the Arranger
and to each Lender is a separate and independent debt. The Agent, the
Arranger and (acting through the Agent in accordance with the terms of
this Agreement) each Lender shall have the right to protect and enforce
its rights arising out of this Agreement and may do so without joining
any other party to any proceedings taken for that purpose.
3. CONDITIONS
3.1 Documents and evidence
The obligation of each Lender to make its Commitment available is
conditional on the Agent, or its duly authorized representative, having
received the documents and evidence specified in Schedule 2 in form and
substance satisfactory to the Agent by the respective dates specified
in that schedule. The Agent shall notify the Lenders promptly after
receipt by it of the documents and evidence referred to in this Clause
3 in form and substance satisfactory to it.
3.2 Further conditions precedent
The obligation of each Lender to contribute to the Advance is subject
to the further conditions that:
(a) as of the Drawdown Date;
(i) the representations and warranties set out in Clause 9
(and so that the representation and warranty in Clause
9.1(f) shall for this
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purpose refer to the then latest audited financial
statements delivered to the Agent under Clause 10.1)
and in Paragraph 3 of the Guaranty are true and
correct on and as of each such time as if each was
made with respect to the facts and circumstances then
existing; and
(ii) no Default shall have occurred and be continuing or
would result from the making of the Advance;
(iii) all the covenants of the Borrower set forth in this
Agreement and all the covenants of the Guarantor set
forth in the Guaranty then required to have been met
and performed have been fully met and performed as of
the Drawdown Date; and
(iv) all of the conditions of drawdown required to be met
by the Borrower and which have not been waived by the
Agent acting on the instructions of the Majority
Lenders have been met as of the Drawdown Date and all
documents delivered by or on behalf of the Borrower as
conditions precedent continue in full force and
effect.
(b) the Agent shall have received payment of all fees then due in
accordance with the fee letter between the Borrower and the
Arranger dated on or around the date hereof.
Nothing in this Clause 3.2 constitutes a waiver of any right of the
Lenders arising from any Event of Default which shall have occurred and
be outstanding at the time of the drawing of the Advance.
3.3 Representations
The making of the Drawdown hereunder shall be deemed to be a
representation and warranty by the Borrower of the facts stated in
Clause 3.2(a).
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3.4 Waiver of conditions precedent
The conditions specified in this Clause 3 are solely for the benefit of
the Lenders and may be waived on their behalf in whole or in part and
with or without conditions by the Agent acting on the instructions of
the Majority Lenders.
4. DRAWDOWN
(a) Subject to the fulfillment of the conditions precedent set
forth in Clause 3, the Borrower shall borrow the Commitments
in a single drawing on the Drawdown Date. The drawdown shall
be in the total amount of the unterminated Commitments. The
Lenders shall not have any obligation to lend hereunder after
such date.
(b) Upon and subject to the terms and conditions hereof, and
subject to the due satisfaction or waiver by the Agent acting
on the instructions of the Majority Lenders of the conditions
to the obligations of the Lenders hereunder set forth in
Clause 3, each Lender shall, not later than 10:00 a.m. (Tokyo
time) on the Drawdown Date, make available to the Agent at its
Tokyo Branch Yen in immediately available funds in an amount
equal to its Commitment. The Agent shall promptly transfer on
the Drawdown Date all such amounts so made available to the
Borrower's Account upon which the Loan shall have been drawn
down in accordance with this Agreement.
(c) Without prejudice to the Borrower's obligations under Clause
10.1(b), none of the Lenders, the Arranger or the Agent shall
have any responsibility for the application by the Borrower of
the proceeds of the Advance.
5. INTEREST RATES AND INTEREST PERIODS
5.1 Usual interest rate
(a) The Borrower shall pay interest on the Loan in respect of each
Interest Period on the last day of each Interest Period
(provided that if the Borrower selects a duration of six
months for any Interest Period, interest shall be payable on
the date which is three months after the first day of such
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Interest Period in respect of the three-month period then
ending as well as on the last day of such Interest Period in
respect of the remaining three-month period) (each an
"Interest Payment Date") at the rate per annum determined by
the Agent to be the aggregate of (i) the applicable Margin and
(ii) TIBOR during such Interest Period.
(b) Notwithstanding the provisions of Clause 5.1(a), the Borrower
shall pay on October 30, 1998 interest on the Loan in respect
of the period commencing on and including the Drawdown Date
and ending on but excluding October 30, 1998 at the rate per
annum determined by the Agent to be the aggregate of (i) the
applicable Margin and (ii) the rate, expressed as a decimal,
equal to the cost to each Lender (as certified by it, which
certification shall be binding upon the parties hereto in the
absence of manifest error, and expressed as a rate per annum)
of funding its Contribution in Tokyo and in Yen during such
period in the Tokyo interbank market.
5.2 Default interest
During the existence of a Default the Borrower shall pay interest (both
before and after judgment) on (a) the outstanding Loan and (b) on any
amount (other than principal of the outstanding Loan) not paid when due
at a rate determined by the Agent pursuant to this Clause 5.2.
(a) The period beginning on the occurrence of the Default (the
"Default Date") and ending on the date any such Default is
cured or waived in accordance with the terms hereof shall be
divided into successive periods of not more than three months
(each a "default period") as selected by the Agent (after
consultation with the Lenders) each of which (other than the
first, which shall commence on the Default Date) shall
commence on the last day of the preceding default period.
(b) The rate of interest applicable to each default period shall
be the rate per annum determined by adding (i) two percent and
(ii) the applicable Margin then in effect to TIBOR as in
effect for such default period.
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(c) Default interest under this Clause 5.2 shall be due and
payable on the last day of each default period or, if earlier,
on the date on which the sum in respect of which that default
interest is accruing is actually paid.
(d) If the Agent is unable to determine a rate in accordance with
the foregoing provisions of this Clause 5.2, each Lender shall
promptly notify the Agent of the cost of funds to such Lender
and interest on any sum not paid on its due date for payment
shall be calculated for each Lender at a rate determined by
the Agent to be two percent per annum above the aggregate of
the Margin and the cost of funds to such Lender, as determined
by such Lender in its sole discretion.
5.3 Margin
(a) The Margin shall be, in respect of the period from and
including the Drawdown Date to and including December 26,
1999, 0.90 percent per annum.
(b) On or after December 27, 1999, the Margin shall be, in respect
of any Margin Period:
(i) if the Guarantor does not have net profits of greater
than US$1, as determined in accordance with generally
accepted accounting principles and practices in the
United States of America as consistently applied,
during both the fiscal quarter ending on September 26,
1999 and the fiscal quarter ending on December 26,
1999, 0.90 percent per annum;
(ii) if the Guarantor has net profits of greater than US$1,
as determined in accordance with generally accepted
accounting principles and practices in the United
States of America as consistently applied, during both
the fiscal quarter ending on September 26, 1999 and
the fiscal quarter ending on December 26, 1999 and the
Senior Indebtedness Ratio of the Guarantor as set
forth in the quarterly financial statements and
information of the Guarantor for the fiscal
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quarter ending immediately preceding the first day of
the relevant Margin Period is less than 0.10, 0.75
percent per annum;
(iii) if the Guarantor has net profits of greater than
US$1, as determined in accordance with generally
accepted accounting principles and practices in the
United States of America as consistently applied,
during both the fiscal quarter ending on September
26, 1999 and the fiscal quarter ending on December
26, 1999 and the Senior Indebtedness Ratio of the
Guarantor as set forth in the quarterly financial
statements and information of the Guarantor for the
fiscal quarter ending immediately preceding the first
day of the relevant Margin Period is greater than or
equal to 0.10 but less than 0.15, 0.85 percent per
annum; or
(iv) if the Guarantor has net profits of greater than US$1,
as determined in accordance with generally accepted
accounting principles and practices in the United
States of America as consistently applied, during both
the fiscal quarter ending on September 26, 1999 and
the fiscal quarter ending on December 26, 1999 and the
Senior Indebtedness Ratio of the Guarantor as set
forth in the quarterly financial statements and
information of the Guarantor for the fiscal quarter
ending immediately preceding the first day of the
relevant Margin Period is greater than or equal to
0.15, 0.95 percent per annum.
(c) Notwithstanding the provisions of Clause 5.3(b), if the
Guarantor fails to deliver to the Agent the financial
statements and information required under clause (i) and (ii)
of Subparagraphs 4(a) of the Guaranty within the time periods
set forth therein, the Margin shall be, in respect of any
period from and including the fifteenth day following the date
of such failure to and including the fifteenth day following
receipt by the Agent of such financial statements and
information (at which time subclause (b) above shall apply),
0.95 percent per annum.
Except where item (i) of subclause (b) above shall be applicable, the
Borrower shall notify the Agent of the Senior Indebtedness Ratio of the
Guarantor
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applicable to each Margin Period and shall submit Margin Certificates
(duly completed and signed by a duly authorized officer of the
Guarantor), and supporting evidence in respect thereof on or before the
first day of such Margin Period.
5.4 Selection of Interest Periods
Before the beginning of the initial Interest Period (which shall
commence on the date that is one month after the Drawdown Date) with
respect to the Loan, the Borrower may by notice received by the Agent
not later than 10 a.m. (Tokyo time) on the fifth Banking Day prior to
the first day of the initial Interest Period and subject to Clause 5.5
specify whether that Interest Period shall have a duration of one, two,
three or six months. The Borrower may, subject to Clause 5.5, select
subsequent Interest Periods with respect to the Loan. Before the
beginning of each subsequent Interest Period, the Borrower may by
notice received by the Agent not later than 10 a.m. (Tokyo time) on the
fifth Banking Day prior to the first day of such subsequent Interest
Period and subject to Clause 5.5 specify whether that Interest Period
shall have a duration of one, two, three or six months.
5.5 Determination of Interest Periods
Each Interest Period shall be of the duration specified by the Borrower
pursuant to Clause 5.4 except that:
(a) the initial Interest Period in respect of the Loan will
commence on the Drawdown Date and each subsequent Interest
Period in respect of the Loan will commence on the last day of
the previous Interest Period for the Loan;
(b) any Interest Period that would otherwise overrun the Maturity
Date shall end on the Maturity Date;
(c) the Borrower may choose an Interest Period of less than one
month in order that the Interest Period may end on a Principal
Payment Date;
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(d) the Borrower may not choose an Interest Period if as a result
thereof the Borrower would be unable to make the payment due
on the next Principal Payment Date on a day which is an
Interest Payment Date; and
(e) if the Borrower fails to specify the duration of an Interest
Period in accordance with the provisions of Clause 5.4 and
this Clause 5.5, that Interest Period shall have a duration of
one month or such other period as shall comply with this
Clause 5.5.
5.6 Notification of Interest Periods and interest rate
The Agent shall notify the Borrower and the Lenders promptly of the
duration of each Interest Period or other period for the calculation of
interest (or, as the case may be, default interest) and of each rate of
interest determined by it under this Clause 5.
5.7 Market disruption; non-availability
(a) If and whenever, at any time prior to the making or
continuation of the Advance:
(i) the Agent shall have determined (which determination
shall, in the absence of manifest error, be
conclusive), that adequate and fair means do not
exist for ascertaining TIBOR in respect of any
Interest Period in accordance with this Agreement; or
(ii) the Agent shall have received notification from
Lenders with Contributions aggregating not less than
one-third of the total of the Loan (or, if no Advance
has been made, Commitments aggregating not less than
one third of the Commitments of all the Lenders) that
deposits in Yen are not available to those Lenders in
the relevant interbank market in the ordinary course
of business in sufficient amounts to fund (or
maintain) their Contributions to the Loan or that
their funding costs in respect of the Loan are not
accurately reflected by TIBOR having regard to the
likely interest rate in respect of such Interest
Period,
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the Agent shall immediately give notice (a "Determination
Notice") of that fact to the Borrower and to each of the
Lenders. A Determination Notice shall give particulars of the
relevant circumstances giving rise to its issue.
(b) After the Interest Period in which any Determination Notice
falls, the Loan shall bear interest at the rate per annum
determined by the Agent to be the aggregate of (i) the
applicable Margin and (ii) the rate, expressed as a decimal,
equal to the cost to each Lender (as certified by it, which
certification shall be binding upon the parties hereto in the
absence of manifest error, and expressed as a rate per annum)
of funding its Contribution in Tokyo and in Yen during such
period in the Tokyo interbank market on each day during the
relevant period. The Borrower shall pay such interest on the
Loan on a monthly basis. The provisions of Clause 5.5 shall
apply mutatis mutandis as if the Borrower has chosen a
duration of one month for any Interest Period. If the Agent
deems that the relevant circumstances stated in such
Determination Notice have ceased to exist, the parties hereto
agree to return to the TIBOR based pricing as soon as
reasonably practicable.
5.8 Fixed rate option
On the effective date of the initial assignment by the initial Lender
hereunder of all or any of its rights hereunder to a Substitute
pursuant to Clause 15.4 (the "Conversion Date"), the parties hereto
shall convert the interest rate payable by the Borrower hereunder to a
fixed rate. Not later than five Banking Days prior to the Conversion
Date (which shall be the last day of an Interest Period), the Agent
will provide the Borrower with a quotation of the fixed interest rate
at which the initial Lender and such Substitute are prepared to
continue to maintain the Loan for the remaining term up to the Maturity
Date. If such quotation is acceptable to the Borrower, the Borrower
will notify the Agent of its intention to convert the Loan from a
floating rate loan to a fixed rate loan on or before 10:00 a.m. (Tokyo
time) on the fourth Banking Day prior to the Conversion Date, in which
case the Loan shall, commencing on the Conversion Date, bear interest
at the fixed rate quoted as aforesaid. Interest shall be calculated on
the basis of the actual number of days elapsed and a year of 365 days
and shall be payable on each
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Fixed Rate Payment Date for the Fixed Rate Period then ending. "Fixed
Rate Payment Date" means the date which (save as mentioned below) falls
three months after the last preceding Fixed Rate Payment Date or, in
the case of the first Fixed Rate Payment Date, after the Conversion
Date, provided that (x) on the first and the second Principal Payment
Dates, any interest accrued up to each such date on the amount of the
principal of the Loan due on such date shall be payable and (y) the
last Fixed Rate Payment Date shall be the Maturity Date. If any Fixed
Rate Payment Date falls on a day which is not a Banking Day, any
payment due on such date shall be made on the immediately succeeding
Banking Day (unless such succeeding Banking Day falls in the next
calendar month, in which case (i) such Fixed Rate Payment Date shall be
the immediately preceding Banking Day, and (ii) each subsequent Fixed
Rate Payment Date shall be the last Banking Day of the third month
after the month in which the preceding Fixed Rate Payment Date shall
have fallen). "Fixed Rate Period" means the period commencing on and
including the Conversion Date and ending on and including the first
Fixed Rate Payment Date, and thereafter each successive period
commencing on and including the date immediately following the last
preceding Fixed Rate Payment Date and ending on and including the next
succeeding Fixed Rate Payment Date. During the existence of a Default
the Borrower shall pay interest (both before and after judgment) on (a)
the outstanding Loan and (b) on any amount (other than principal of the
outstanding Loan) not paid when due at a rate per annum equal to the
applicable fixed rate plus two percent. If the fixed rate quotation
provided by the Agent is not acceptable to the Borrower, the Borrower
shall repay the Loan in full on the proposed Conversion Date.
6. REPAYMENT, PREPAYMENT AND CANCELLATION
6.1 Repayment
The Loan shall be repaid in three installments payable on September 30,
1999, September 30, 2000 and the Maturity Date (each such date, a
"Principal Payment Date") as follows:
September 30, 1999 (Y)425,000,000
September 30, 2000 (Y)425,000,000
Maturity Date (Y)850,000,000
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6.2 Voluntary prepayment
The Borrower may voluntarily prepay the Loan subject to the provisions
of this Clause 6 and of Clause 12.1. Any voluntary prepayment of the
Loan when it then bears interest at one of the rates specified in
Clause 5.1 may be in whole or in part, with any partial prepayment to
be in a minimum of (Y)100,000,000 (one hundred million Yen) or a larger
sum which is an integral multiple of (Y)100,000,000 (one hundred
million Yen). Any voluntary prepayment of the Loan when it then bears
interest at a fixed rate pursuant to Clause 5.8 may be in whole only.
6.3 Additional voluntary prepayment
The Borrower may also prepay (in whole but not in part only), without
premium or penalty, but without prejudice to its obligations under
Clause 8.8, Clause 12.1 or Clause 13.2, the Contribution of any Lender
to which the Borrower has become obliged to pay additional amounts
under Clause 8.8 or Clause 13.2. On notice of such a prepayment being
given, the Commitment of the relevant Lender shall be reduced to zero.
6.4 Timing, amounts and application of prepayments
Prepayments made on a date other than an Interest Payment Date will be
subject to, inter alia, the provisions of Clause 12.1(c) and (d).
Prepayments under this Agreement shall be made together with: (a)
accrued interest to the date of prepayment; (b) any additional amount
payable under Clause 8.8 or Clause 13.2; and (c) all other sums payable
by the Borrower to the relevant Lender under this Agreement and any
amounts payable under Clause 12.1.
6.5 Notice and effect of prepayment
No prepayment may be effected under this Clause 6 unless the Borrower
shall have given the Agent at least 10 days' notice of its intention to
make such prepayment. Every notice of prepayment shall be effective
only on actual receipt by the Agent, shall be irrevocable and shall
oblige the Borrower to make such prepayment on the date specified in
the notice. On a prepayment being made,
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the Commitments shall be automatically reduced by an amount equal to
the amount so prepaid and sums prepaid may not be re-borrowed. Any such
prepayment shall be applied to the then outstanding repayment
installments of the principal of the Loan as set out in Clause 6.1 in
the inverse order of their maturity.
7. FEES AND EXPENSES
7.1 Fees
The Borrower shall pay to the Agent whether or not any part of the
Commitments is ever advanced an arrangement fee, in the amount and at
the time agreed between the Borrower and the Arranger in a letter dated
on or around the date hereof.
7.2 Expenses
The Borrower shall pay to the Agent:
(a) as soon as reasonably practicable in accordance with the
Borrower's customary procedures for reviewing and processing
such items, and in any event within 30 days following receipt
of the Agent's invoice therefor, all reasonable expenses
(including legal and out-of-pocket expenses) incurred by the
Agent and the Arranger in connection with the negotiation,
preparation, syndication, execution and delivery of this
Agreement whether or not any part of the Commitments is ever
advanced;
(b) as soon as reasonably practicable in accordance with the
Borrower's customary procedures for reviewing and processing
such items, and in any event within 30 days following receipt
of the Agent's invoice therefor, all reasonable expenses
(including legal and out-of-pocket expenses) incurred by the
Agent and the Arranger in connection with any amendment or
extension of or the granting of any waiver or consent under
this Agreement; and
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(c) on demand, all reasonable expenses (including legal and
out-of-pocket expenses) incurred by the Agent, the Arranger,
the Lenders or any of them in contemplation of, or otherwise
in connection with, the enforcement of, or preservation of any
rights under, this Agreement, or otherwise in respect of the
moneys owing under this Agreement, together with interest at
the rate referred to in Clause 5.2 from the date on which such
expenses were incurred to the date of payment (as well after
as before judgment).
7.3 Consumption, etc. tax
All fees and expenses payable pursuant to this Clause 7 shall be paid
together with an amount equal to any consumption, sales, value added or
similar tax payable by the Agent, the Arranger or any Lender in respect
of those fees and expenses.
7.4 Stamp and other duties
The Borrower shall pay all stamp, documentary, registration or other
like duties or taxes (including any duties or taxes payable by the
Lenders) imposed on or in connection with this Agreement and shall
indemnify the Agent, the Arranger and the Lenders against any liability
arising by reason of any delay or omission by the Borrower to pay such
duties or taxes.
8. PAYMENTS AND TAXES; ACCOUNTS AND CALCULATIONS
8.1 No set-off or counterclaim; distribution to the Lenders
The Borrower acknowledges that, in performing their obligations under
this Agreement, the Lenders will be incurring liabilities to third
parties in relation to the funding of amounts advanced to the Borrower,
those liabilities matching the liabilities of the Borrower to the
Lenders, and that it is reasonable for the Lenders to be entitled to
receive payments from the Borrower gross on their due date in order
that the Lenders are put in a position to perform their matching
obligations to the relevant third parties. Accordingly all payments to
be made by the Borrower under this Agreement shall be made in full,
without any set-off or counterclaim whatsoever and, subject to Clause
8.8, free and clear of any deductions or withholdings, in Yen (except
for costs, charges or expenses which
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shall be payable in the currency in which they are incurred) on their
due date to the account of the Agent specified in Schedule 1 or such
other bank and/or account as the Agent may from time to time specify
for this purpose. Except where this Agreement specifically provides for
a payment to be made for the account of a particular Lender, the Agent
or the Arranger, payments to be made by the Borrower under this
Agreement shall be for the account of all the Lenders and the Agent
shall forthwith distribute those payments in like funds as are received
by the Agent to the Lenders ratably in accordance with their
Commitments or Contributions, as the case may be.
8.2 Payments by the Lenders
Sums to be advanced by the Lenders to the Borrower under this Agreement
shall be remitted in Yen on the Drawdown Date to the account of the
Agent at such bank as the Agent may have notified to the Lenders and
shall be paid by the Agent on that date in like funds as are received
by the Agent to the Borrower's Account.
8.3 Agent may assume receipt
Where any sum is to be paid under this Agreement to the Agent for the
account of the Borrower or any Lender, the Agent may assume that the
payment will be made when due and may (but shall not be obliged to)
make that sum available to the person so entitled. If that payment is
then not made to the Agent, then the person to whom that sum was made
available shall on request refund that sum to the Agent together with
interest on it sufficient to compensate the Agent for the cost of
making the sum available up to the date of repayment and the person by
whom the sum was payable shall indemnify the Agent for all loss or
expense which the Agent may sustain or incur as a consequence of that
sum not having been paid on its due date.
8.4 Time of payment
Any sum payable by the Borrower to the Agent, the Arranger or to any
Lender under this Agreement shall be paid so as to be received in
immediately available funds in the payee's designated account by 11:00
a.m. (Tokyo time) for that
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account. Any payment received by the Agent from the Borrower for the
account of the Arranger or any Lender or Lenders which is received on
its due date but after the time specified above and too late to be made
available on that due date to the Arranger or the relevant Lender or
Lenders, as appropriate, shall be deemed to be received on the next
Banking Day (though the Agent shall give credit to the Borrower for any
interest earned by the Agent on that sum prior to its distribution). In
holding any such sum, the Agent shall not be acting as agent of or
trustee for the Borrower and may invest, deposit or otherwise deal with
that sum as it may, in its absolute discretion, see fit without any
duty or obligation to the Borrower in respect of that sum other than as
specifically provided for in this Agreement.
8.5 Non-Banking Days
When any payment under this Agreement would otherwise be due on a day
which is not a Banking Day, the due date for payment shall be extended
to the next following Banking Day unless that Banking Day falls in the
next calendar month in which case payment shall be made on the
immediately preceding Banking Day.
8.6 Calculations
Except with respect to interest on the Loan and unless provided
otherwise, all interest and other payments of an annual nature under
this Agreement shall accrue from day to day and be calculated on the
basis of actual days elapsed and a 365 day year. Interest on the Loan
shall accrue from day to day and be calculated on the basis of actual
days elapsed and a 360 day year.
8.7 Certificates conclusive
Any certificate or determination of the Agent or any Lender as to any
rate of interest or any amount payable under this Agreement shall, in
the absence of manifest error and so long as it acts in good faith, be
conclusive and binding on the Borrower and (in the case of a
certificate or determination by the Agent) on the Lenders; provided
that, in the case of expenses required to be paid by the Borrower
pursuant to Clause 7.2, the Agent, the Arranger, or any Lender, as the
case may be, shall provide such invoices, receipts or other documents
evidencing
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or supporting such determination as is reasonably available to it, and
such evidence or support shall be prima facie evidence of the amount
payable by the Borrower pursuant to Clause 7.2.
8.8 Grossing-up for Taxes
If at any time the Borrower is required to make any deduction or
withholding in respect of taxes, duties, assessments or governmental
charges of whatsoever nature ("Taxes") from any payment due under this
Agreement for the account of any Lender, the Arranger or the Agent (or
if the Agent is required to make any such deduction or withholding from
a payment to the Arranger or a Lender), the sum due from the Borrower
in respect of such payment shall be increased to the extent necessary
to ensure that, after the making of such deduction or withholding, each
Lender, the Arranger and the Agent receives on the due date for such
payment (and retains, free from any liability in respect of such
deduction or withholding) a net sum equal to the sum which it would
have received had no such deduction or withholding been required to be
made and the Borrower shall indemnify each Lender, the Arranger and the
Agent against any losses or costs incurred by any of them by reason of
any failure of the Borrower to make any such deduction or withholding
or by reason of any increased payment not being made on the due date
for such payment. The Borrower shall promptly deliver to the Agent any
receipts, certificates or other proof evidencing the amounts (if any)
paid or payable in respect of any deduction or withholding as
aforesaid.
8.9 Lender accounts
Each Lender shall maintain, in accordance with its usual practices, an
account or accounts evidencing the amounts from time to time lent by,
owing to and paid to it under this Agreement. The Agent shall maintain
a control account showing the Loan and other sums owing by the Borrower
under this Agreement and all payments in respect thereof made by the
Borrower from time to time. The control account shall, in the absence
of manifest error, be conclusive as to the amount from time to time
owing by the Borrower under this Agreement.
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8.10 Partial payments
If, on any date on which a payment is due to be made by the Borrower
under this Agreement, the amount received by the Agent from the
Borrower falls short of the total amount of the payment due to be made
by the Borrower on that date then, without prejudice to any rights or
remedies available to the Agent, the Arranger or the Lenders under this
Agreement, the Agent shall apply the amount actually received from the
Borrower in or towards discharge of the obligations of the Borrower
under this Agreement in the following order, notwithstanding any
appropriation made, or purported to be made, by the Borrower:
(a) firstly, in or towards payment of any unpaid fees, costs and
expenses of the Agent under this Agreement;
(b) secondly, in or towards payment to the Arranger of any portion
of the arrangement fee payable under Clause 7.1 which remains
unpaid;
(c) thirdly, in or towards payment of any default interest which
is due but remains unpaid;
(d) fourthly, in or towards payment to the Lenders, on a pro rata
basis, of any accrued interest (other than default interest)
which is due but remains unpaid;
(e) fifthly, in or towards payment to the Lenders, on a pro rata
basis, of any principal which is due but remains unpaid; and
(f) sixthly, in or towards payment of any other sum which is due
but remains unpaid (and, if more than one such sum so remains
unpaid, on a pro rata basis).
8.11 Variation of application
The order of application set out in Clause 8.10(c) - 8.10(f) may be
varied by the Agent only if all the Lenders so direct.
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9. REPRESENTATIONS AND WARRANTIES
9.1 Representations and Warranties
The Borrower represents and warrants to each of the Lenders, the
Arranger and the Agent that:
(a) Due incorporation
the Borrower is duly incorporated and validly existing under
the laws of Japan as a limited liability stock company and has
power to carry on its business as it is now being conducted
and to own its property and other assets;
(b) Corporate power to borrow
the Borrower has power to execute, deliver and perform its
obligations under this Agreement and to borrow the
Commitments; all necessary corporate, shareholder and other
action has been taken to authorize the execution, delivery and
performance of the same and no limitation on the powers of the
Borrower to borrow will be exceeded as a result of borrowings
under this Agreement;
(c) Binding obligations
this Agreement constitutes valid and legally binding
obligations of the Borrower enforceable against the Borrower
in accordance with its terms;
(d) No conflict with other obligations
the execution and delivery of, the performance of its
obligations under, and compliance with the provisions of, this
Agreement by the Borrower will not (i) contravene any existing
material law or license to which the Borrower is subject; (ii)
conflict with, or result in any breach of any of the terms of,
or constitute a default under, any material agreement or other
instrument to which the Borrower is a party or is subject or
by which it or any of its
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property is bound; (iii) contravene or conflict with any
provision of the Borrower's Articles of Incorporation or (iv)
result in the creation or imposition of or oblige the Borrower
to create any Lien on any of the Borrower's undertaking,
assets, rights or revenues;
(e) Consents obtained
No authorization, consent, approval, license, exemption of, or
notarization, filing, recordation, registration or enrollment
in or with, any Governmental Authority, or approval or consent
of any other person, is required for the due execution,
delivery, validity, enforceability or admissibility in
evidence of this Agreement or the performance by the Borrower
of its obligations under this Agreement;
(f) Financial statements correct and complete
the unaudited financial statements of the Borrower in respect
of the financial year ended on June 30, 1998, as delivered to
Agent, have been prepared in accordance with generally
accepted accounting principles and practices in the United
States of America, which have been consistently applied and
present fairly and accurately the financial position of the
Borrower as at such date and the results of the operations of
the Borrower for the year ended on such date and, as at such
date, the Borrower did not have any significant liabilities
(contingent or otherwise) or any unrealized or unanticipated
losses which are not disclosed by, or reserved against or
provided for in, those financial statements;
(g) Ranking of Loan
the payment obligations of the Borrower hereunder will be
ranked by the Borrower at least pari passu in priority of
payment with all other unsecured and unsubordinated
indebtedness of the Borrower;
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(h) Choice of law
the choice by the Borrower of the laws of Japan to govern this
Agreement is valid and binding;
(i) No immunity
neither the Borrower nor any of its assets is entitled to
immunity on the grounds of sovereignty or otherwise from any
legal action or proceeding (which shall include, without
limitation, suit, attachment prior to judgment, execution or
other enforcement); and
(j) No withholding Taxes
provided that each Lender is incorporated in or has its
lending office in Japan, no Taxes (other than consumption and
stamp duties) are imposed by withholding or otherwise on any
payment to be made by the Borrower under this Agreement or are
imposed on or by virtue of the execution or delivery by the
Borrower of this Agreement or any document or instrument to be
executed or delivered under this Agreement.
9.2 Repetition
The representations and warranties in Clause 9.1 (and so that the
representation and warranty in Clause 9.1(f) shall for this purpose
refer to the then latest financial statements delivered to the Agent
under Clause 10.1) shall be deemed to be repeated by the Borrower on
and as of the Drawdown Date, the first day of each Interest Period and
the Conversion Date as if made with reference to the facts and
circumstances existing on each such day.
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10. UNDERTAKINGS
10.1 Undertakings
The Borrower undertakes with each of the Lenders and the Agent that,
from the date of this Agreement and so long as any moneys are owing
under this Agreement, it will, or will cause to happen on its behalf:
(a) Notice of Default
promptly inform the Agent of any occurrence of which it
becomes aware which is reasonably likely to materially and
adversely affect its ability to perform its obligations under
this Agreement and of any Default immediately on becoming
aware of it and will from time to time, if so requested by the
Agent, confirm to the Agent that, except as otherwise stated
in that confirmation, no Default has occurred and is
continuing;
(b) Use of proceeds
use the Advances exclusively for the purposes specified in
Clause 1.1;
(c) Pari passu
ensure that its obligations under this Agreement shall,
without prejudice to the provisions of Clause 10.2, at all
times rank at least pari passu with all its other present and
future unsecured and unsubordinated indebtedness;
(d) Financial statements
prepare unaudited financial statements in accordance with
generally accepted accounting principles and practices in the
United States of America consistently applied in respect of
each financial year and prepare summary financial statements
(in a form reasonably acceptable to the Agent) in respect of
each quarter in accordance with generally accepted accounting
principles and practices in the United States of America
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consistently applied and deliver sufficient copies of the same
to the Agent for distribution to all the Lenders as soon as
practicable but not later than 100 days (in the case of the
annual financial statements) or 50 days (in the case of
quarterly financial statements) after the end of the financial
period to which they relate;
(e) Delivery of reports, etc.
deliver to the Agent, for distribution to the Lenders,
sufficient copies for all the Lenders of every report,
circular, notice or like document issued by the Borrower to
its creditors generally, at the time of issue thereof, and
provide the Agent with such other information relating to the
Borrower and the Guarantor as any Lender (through the Agent)
may reasonably request from time to time;
(f) Pension schemes
ensure that the levels of contribution to the pension schemes
for the time being operated by the Borrower are and continue
to be sufficient to cover the liabilities of such schemes in
full to the extent contributions to cover such liabilities are
permitted or will not result in taxation on participants
thereof in the year in which contribution is made; and
(g) Additional evidence
not later than October 15, 1998, deliver to the Agent, or its
duly authorized representative, all of the documents and
evidence specified in Schedule 3 in form and substance
satisfactory to the Agent.
10.2 Pledges
The Borrower undertakes with each of the Lenders and the Agent that,
from the date of this Agreement and so long as any moneys are owing
under this Agreement, without the prior written consent of the Agent
acting on the instructions of the Majority Lenders, it will not create,
incur, assume or suffer to exist any Lien upon or with respect to any
of its properties, revenues or assets,
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whether now owned or hereafter acquired, except for Permitted Liens (as
defined in the Guaranty).
11. EVENTS OF DEFAULT
11.1 Events of Default
Each of the events and circumstances set out below is an Event of
Default (whether or not caused by any reason outside the control of the
Borrower or the Guarantor):
(a) Non-payment: the Borrower fails to pay in Yen in the manner
provided in this Agreement (i) on the Maturity Date, any
amount payable by it hereunder on that date; (ii) on the due
date, any principal payable by it hereunder; or (iii) within
five Banking Days after the due date, any other amount payable
by it hereunder; or
(b) Mis-representations: any representation or warranty made or
deemed to be made by the Borrower under this Agreement or by
the Guarantor under the Guaranty or in any certificate,
document or financial or other statement furnished at any time
under or in connection with this Agreement or the Guaranty
proves to have been incorrect or misleading in any material
respect when made or deemed to be made and such incorrectness
or misleadingness shall not be cured within 30 days after
written notice thereof is given by the Agent to the Borrower;
or
(c) Breach of other obligations: the Borrower commits any material
breach of or omits to observe in any material respect any of
the obligations or undertakings expressed to be assumed by it
under this Agreement (other than failure to pay any sum when
due) and, in respect of any such breach or omission which in
the opinion of the Majority Lenders is capable of remedy, such
breach or omission shall continue for 30 or more days after
the occurrence of such default; or the Guarantor commits any
breach of or omits to observe any of the obligations or
undertakings expressed to be assumed by it under the Guaranty
and, in respect of any such breach or omission which in the
opinion of the Majority Lenders is capable of
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remedy, such breach or omission shall continue for 30 or more
days after the occurrence of such default; or
(d) Cross default: the Borrower or the Guarantor (i) defaults in
any payment of principal of or interest on any indebtedness
(other than the Loan), in an aggregate amount of US$10,000,000
(or its equivalent in any other currency) or more beyond the
period of grace, if any, provided in the instrument or
agreement under which such indebtedness was created; or (ii)
defaults in the observance or performance of any other
agreement or condition relating to any such indebtedness or
contained in any instrument or agreement evidencing, securing
or relating thereto, the effect of which is to cause, or to
permit the holder or holders of such indebtedness (or trustee
or agent on behalf of such holder or holders) to cause, with
the giving of notice if required, such indebtedness to become
due prior to its stated maturity and any such default shall
continue for more than the applicable period of grace, if any,
provided in the instrument or agreement under which such
indebtedness was created; or
(e) Insolvency:
(i) the Borrower or the Guarantor commences any case,
proceeding or other action under any existing or
future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or
other relief of debtors, seeking to have an order for
relief entered on its behalf as debtor, or seeking to
adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, winding-up, liquidation,
dissolution, composition, readjustment of debt or
other relief with respect to it or its debts, or
seeking appointment of a receiver, trustee,
custodian, liquidator, conservator, sequestrator or
other similar official for it or for all or any
substantial part of its assets; or
(ii) the Borrower or the Guarantor makes a general
assignment for the benefit of its creditors; or
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(iii) there is commenced against the Borrower or the
Guarantor any case proceeding or other action of a
nature referred to in clause (i) or (ii) which (A)
results in the entry of an order for relief or any
such adjudication or appointment with respect to the
Borrower or the Guarantor or all or any substantial
part of its assets, or (B) remains undismissed,
unstayed, undischarged or unbonded for a period of 60
days; or
(iv) there is commenced against the Borrower or the
Guarantor any case, proceeding or other action seeking
issuance of a warrant of attachment, execution,
distraint or similar process against all or any
substantial part of its assets which results in the
entry of an order for any such relief which shall not
have been vacated, discharged, or stayed or bonded
pending appeal within 60 days after the entry thereof;
or
(v) the Borrower or the Guarantor takes any action in
furtherance of, or indicating its consent to, approval
of, or acquiescence in, any of the acts set forth in
items (i), (ii), (iii) or (iv) above; or
(vi) the Borrower or the Guarantor is unable to, or admits
in writing its inability to, pay its debts as they
become due; or
(vii) any clearing house for the settlement of promissory
notes in observance of its rules takes procedures for
suspension of the Borrower's transactions with banks
and similar institutions; or
(f) Judgments: a final judgment for the payment of money in excess
of US$10,000,000 (or its equivalent in any other currency) in
the aggregate is rendered by a court against the Borrower or
the Guarantor and the Borrower or the Guarantor, as the case
may be, shall not discharge the same or provide for its
discharge in accordance with its terms, or procure a stay of
execution thereof within 120 days after the date of entry
thereof and within said period of 120 days, or such longer
period during which execution of such judgment shall have been
stayed, appeal therefrom and cause the execution thereof to be
stayed during such appeal; or
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(g) Guaranty effective: the Guaranty ceases to be (or the
Guarantor claims that the Guaranty has ceased to be) in full
force and effect; or
(h) Change in control: (i) the Guarantor ceases to own 100% of the
total issued shares in the Borrower or (ii) any Change of
Control (as defined in the Guaranty) occurs; or
(i) Material adverse effect: (i) any event or circumstance (other
than those referred to elsewhere in Clause 11.1) occurs that
would have a material adverse effect on the ability of the
Borrower to perform its obligations hereunder or (ii) any
Material Adverse Effect (as defined in the Guaranty) occurs.
11.2 Acceleration
The Agent may, or if so instructed by the Majority Lenders, shall,
without prejudice to any other rights of the Lenders, at any time after
the happening of an Event of Default so long as the same is continuing
by notice to the Borrower declare that:
(a) the obligation of each Lender to make its Commitment available
shall be terminated and the Commitments shall then immediately
be reduced to zero; and/or
(b) the outstanding Loan and all interest accrued and all other
sums payable under this Agreement have become immediately due
and payable or have become due and payable on demand,
whereupon the same shall, immediately or in accordance with
the terms of that notice, become so due and payable;
provided that, upon the occurrence of any Event of Default described in
Clause 11.1(e), the result which would otherwise occur only upon
declaration by the Agent shall occur automatically, without the
necessity of any action by the Agent or the Lenders.
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On or at any time after the making of any such declaration, the Agent
shall be entitled, to the exclusion of the Borrower (and without
prejudice to Clause 5.2), to select the duration of Interest Periods.
11.3 Demand basis
If, pursuant to Clause 11.2(b), the Agent declares the outstanding Loan
to be due and payable on demand then, at any time thereafter, the Agent
may, or, if so instructed by the Majority Lenders, shall, by written
notice to the Borrower (a) call for repayment of the Loan on such date
as may be specified in that notice and the Loan shall become due and
payable on the date so specified together with all interest accrued and
all other sums payable under this Agreement or (b) withdraw that
declaration with effect from the date specified in the notice.
12. INDEMNITIES
12.1 Broken funding and other indemnities
The Borrower shall on demand indemnify each Lender, the Arranger and
the Agent, without prejudice to any of their other respective rights
under this Agreement, against any loss or expense which such Lender,
the Arranger or the Agent shall certify (which certification shall be
provided in writing within six months after such Lender, the Arranger
or the Agent determines that such indemnification is due) as having
been sustained or incurred by it as a consequence of:
(a) any default in payment by the Borrower of any sum under this
Agreement when due;
(b) the occurrence of any other Event of Default or any
acceleration pursuant to Clause 11.2;
(c) any prepayment of the Advance or part thereof when it then
bears interest at one of the rates specified in Clause 5.1
being made under Clause 6.2, Clause 6.3 or Clause 13.1
otherwise than on an Interest Payment Date;
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(d) any prepayment of the Advance when it then bears interest at a
fixed rate pursuant to Clause 5.8 being made under Clause 6.2,
Clause 6.3 or Clause 13.1 at any time (whether on an Interest
Payment Date or otherwise); or
(e) the Advance not being made for any reason (excluding any
default by the Agent, the Arranger or any Lender) on the
Drawdown Date,
including, in any such case, any loss or expense sustained or incurred
by such Lender in maintaining or funding its Contribution or any part
thereof or in liquidating or re-employing deposits from third parties
acquired or contracted for to fund its Contribution or any part thereof
or any other amount owing to such Lender.
12.2 Currency indemnity
If any sum due from the Borrower under this Agreement or any order or
judgment given or made in relation hereto has to be converted from the
currency (the "first currency") in which the same is payable under this
Agreement or under such order or judgment into another currency (the
"second currency") for the purpose of (a) making or filing a claim or
proof against the Borrower, (b) obtaining an order or judgment in any
court or other tribunal or (c) enforcing any order or judgment given or
made in relation to this Agreement, the Borrower shall indemnify and
hold harmless the Agent, the Arranger and each Lender from and against
any loss suffered as a result of any difference between (i) the rate of
exchange used for such purpose to convert the sum in question from the
first currency into the second currency and (ii) the rate or rates of
exchange at which the Agent, the Arranger or such Lender may in the
ordinary course of business purchase the first currency with the second
currency upon receipt of a sum paid to it in satisfaction, in whole or
in part, of any such order, judgment, claim or proof. Any amount due
from the Borrower under this Clause 12.2 shall be due as a separate
debt and shall not be affected by judgment being obtained for any other
sums due under or in respect of this Agreement and the term "rate of
exchange" includes any premium and costs of exchange payable in
connection with the purchase of the first currency with the second
currency.
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13. UNLAWFULNESS AND INCREASED COSTS
13.1 Illegality
If, after the date of this Agreement, the adoption of any Governmental
Rule, any change in any Governmental Rule or the application or
requirements thereof (whether such change occurs in accordance with the
terms of such Governmental Rule as enacted, as a result of amendment or
otherwise), any change in the interpretation or administration of any
Governmental Rule by any Governmental Authority, or compliance by any
Lender with any request or directive (whether or not having the force
of law) of any Governmental Authority (a "Change of Law") shall make it
unlawful or impossible for any Lender to make or maintain its
Contribution, such Lender shall immediately notify Agent and Borrower
of such Change of Law and the Borrower shall, not later than the date
specified by such Lender, repay such Lender's Contribution.
13.2 Increased costs
If, after the date of this Agreement, any Change of Law:
(a) Shall subject any Lender to any tax, duty or
other charge with respect to its Contribution or shall change
the basis of taxation of payments by the Borrower to any
Lender on its Contribution or in respect to such Contribution
under this Agreement (except for changes in the rate of
taxation on the overall net income of any Lender imposed by
its jurisdiction of incorporation or the jurisdiction in which
its principal executive office is located); or
(ii) Shall impose, modify or hold applicable any
reserve (excluding any Reserve Requirement or other reserve to
the extent included in the calculation of TIBOR for the Loan),
special deposit or similar requirement against assets held by,
deposits or other liabilities in or for the account of,
advances or loans by, or any other acquisition of funds by any
Lender for its Contribution; or
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(iii) Shall impose on any Lender any other condition
related to its Contribution, the Loan or such Lender's
Commitment;
And the effect of any of the foregoing is to increase the cost to such
Lender of making, renewing, or maintaining its Contribution, the Loan
or its Commitment or to reduce any amount receivable by such Lender
hereunder; then the Borrower shall from time to time, within five (5)
days after demand by such Lender, pay to such Lender additional amounts
sufficient to reimburse such Lender for such increased costs or to
compensate such Lender for such reduced amounts. A certificate as to
the amount of such increased costs or reduced amounts, submitted by
such Lender to the Borrower shall, in the absence of manifest error, be
conclusive and binding on the Borrower for all purposes. The
obligations of the Borrower under this Clause 13.2 shall survive the
payment and performance of the Borrower's obligations under this
Agreement and the termination of this Agreement; provided, however,
that any Lender must submit a demand for payment pursuant to this
provision within six (6) months after such Lender has first
conclusively determined that such reimbursement or compensation is due
such Lender under this and similar agreements.
13.3 Capital requirements
If, after the date of this Agreement, any Lender determines that (i)
any Change of Law affects the amount of capital required or expected to
be maintained by such Lender or any party controlling such Lender (a
"Capital Adequacy Requirement") and (ii) the amount of capital
maintained by such Lender or such party which is attributable to or
based upon such Lender's Contribution, the Loan or such Lender's
Commitments or this Agreement must be increased as a result of such
Capital Adequacy Requirement (taking into account such Lender's or such
party's policies with respect to capital adequacy), the Borrower shall
pay to such Lender or such party, within five (5) days after demand of
such Lender, such amounts as such Lender or such party shall determine
are necessary to compensate such Lender or such party for the increased
costs to such Lender or such party of such increased capital. A
certificate of any Lender setting forth in reasonable detail the
computation of any such increased costs, delivered by such Lender to
the Borrower shall, in the absence of manifest error, be conclusive and
binding on the Borrower for all purposes. The
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obligations of the Borrower under this Clause 13.3 shall survive the
payment and performance of the Borrower's obligations under this
Agreement and the termination of this Agreement; provided, however,
that any Lender must submit a demand for payment pursuant to this
provision within six (6) months after such Lender has first
conclusively determined that such reimbursement or compensation is due
such Lender under this and similar agreements.
13.4 Mitigation
Any Lender which becomes aware of (i) any Change of Law which will make
it unlawful or impossible for such Lender to make or maintain its
Contribution or (ii) any Change of Law or other event or condition
which will obligate Borrower to pay any amount pursuant to Clause 13.2
or Clause 13.3 shall notify the Borrower and the Agent thereof as
promptly as practical. If any Lender that has given notice of any such
Change of Law or other event or condition thereafter becomes aware that
such Change of Law or other event or condition has ceased to exist,
such Lender shall notify the Borrower and the Agent thereof as promptly
as practical. Each Lender affected by any Change of Law which makes it
unlawful or impossible for such Lender to make or maintain its
Contribution or to which the Borrower is obligated to pay any amount
pursuant to Clause 13.2 or Clause 13.3 shall use reasonable commercial
efforts (including changing the jurisdiction of its lending office) to
avoid the effect of such Change of Law or to avoid or materially reduce
any amounts which Borrower is obligated to pay pursuant to Clause 13.2
or Clause 13.3 if, in the reasonable opinion of such Lender, such
efforts would not be disadvantageous to such Lender or contrary to such
Lender's normal banking practices.
14. SET-OFF AND PRO RATA PAYMENTS
14.1 Set-off
The Borrower authorizes each Lender to apply any credit balance to
which the Borrower is then entitled on any account of the Borrower with
the Lender at any of its branches in or towards satisfaction of any sum
then due and payable from the Borrower to the Lender under this
Agreement. For this purpose each Lender
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is authorized to purchase with the moneys standing to the credit of any
such account such other currencies as may be necessary to effect that
application. None of the Lenders shall be obliged to exercise any right
given to it by this Clause 14.1. Each Lender shall notify the Agent and
the Borrower immediately on the exercise or purported exercise of any
right of set-off, giving full details in relation thereto and the Agent
shall inform the other Lenders.
14.2 Pro rata payments
(a) If at any time any Lender (the "Recovering Lender") receives
or recovers any amount owing to it by the Borrower under this
Agreement by direct payment, set-off or in any manner other
than by payment through the Agent pursuant to Clause 8.1 or
Clause 8.10, the Recovering Lender shall, within two Banking
Days of such receipt or recovery (a "Direct Receipt") notify
the Agent of the amount of the Direct Receipt. If the Direct
Receipt exceeds the amount which the Recovering Lender would
have received if the Direct Receipt had been received by the
Agent and distributed pursuant to Clause 8.1 or Clause 8.10
(as the case may be) then:
(i) within two Banking Days of demand by the Agent, the
Recovering Lender shall pay to the Agent an amount
equal (or equivalent) to the excess;
(ii) the Agent shall treat the excess amount so paid by the
Recovering Lender as if it were a payment made by the
Borrower and shall distribute the same to the Lenders
(other than the Recovering Lender) in accordance with
Clause 8.1 or Clause 8.10, as appropriate; and
(iii) as between the Borrower and the Recovering Lender the
excess amount so re-distributed shall be treated as
not having been paid but the obligations of the
Borrower to the other Lenders shall, to the extent of
the amount so re-distributed to them, be treated as
discharged.
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(b) If any part of the Direct Receipt subsequently has to be
wholly or partly refunded by the Recovering Lender each Lender
to which any part of such Direct Receipt was so re-distributed
shall on request from the Recovering Lender repay to the
Recovering Lender its pro rata share of the amount which has
to be refunded by the Recovering Lender.
(c) Each Lender shall on request supply to the Agent such
information as the Agent may from time to time request for the
purpose of this Clause 14.2.
(d) Any amount received or recovered by a Lender under a transfer,
assignment, sub-participation (or the like) shall be ignored
for the purpose of this Clause 14.2.
15. ASSIGNMENT, SUBSTITUTION AND LENDING OFFICES
15.1 Benefit and burden
This Agreement shall be binding upon, and enure for the benefit of, the
Lenders, the Agent and the Borrower and their respective successors and
Substitutes. This Agreement shall also enure for the benefit of the
Arranger.
15.2 No assignment by Borrower
The Borrower may not assign, transfer or otherwise dispose of any of
its rights or obligations under this Agreement without the prior
written consent of the Agent and each Lender.
15.3 Participation
Any Lender may, in its absolute discretion and without any requirement
to obtain the consent of or to give notice or any information to any
other party, grant one or more participating interests in its
proportion of the Loan to any third party (a "Participant"). The
granting of such a participating interest shall not affect the relevant
Lender's rights and obligations under this Agreement nor shall the
Participant acquire any rights or assume any obligations under this
Agreement other than with the agreement of the Borrower and the Agent.
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<PAGE> 46
15.4 Transfer
Otherwise than in accordance with this Clause 15.4, each Lender may not
assign all or any of its rights hereunder. Each Lender (a "Transferring
Lender") may, in its absolute discretion and without any requirement to
obtain the consent of any other party (other than the consent of the
Agent and (if no Default shall have occurred or be continuing) the
Borrower, which consent shall not be unreasonably withheld or delayed),
transfer all or any part of its rights, benefits and/or obligations
under this Agreement to another person (a "Substitute"), provided that
the amount to be transferred shall not be less than (Y)500,000,000. Any
such transfer shall be effected on five Banking Days' prior notice by
delivery to the Agent of a duly completed Substitution Certificate duly
executed by the Transferring Lender and the Substitute (which the Agent
shall promptly execute for itself, the Borrower and the other Lenders
(the "other parties")). Subject to the execution of that Substitution
Certificate by all parties to it, on the effective date specified in a
Substitution Certificate, to the extent that they are expressed in that
Substitution Certificate to be the subject of the transfer effected
pursuant to this Clause 15.4:
(a) the other parties and the Transferring Lender shall be
released from their respective obligations towards one another
under this Agreement (the "discharged obligations") and their
respective rights against one another under this Agreement
(the "discharged rights") shall be cancelled;
(b) the relevant Substitute and the other parties shall assume
obligations towards each other which differ from the
discharged obligations only insofar as they are owed to or
assumed by that Substitute instead of to or by the
Transferring Lender; and
(c) the relevant Substitute and the other parties shall acquire
rights against each other which differ from the discharged
rights only insofar as they are exercisable by or against such
Substitute instead of by or against the Transferring Lender.
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<PAGE> 47
The Agent shall promptly notify the other parties of the receipt by it
of any Substitution Certificate and shall promptly deliver a copy of
that Substitution Certificate to the Borrower.
15.5 Reliance on Substitution Certificate
The Agent and the Borrower may rely on any Substitution Certificate
delivered to the Agent in accordance with the foregoing provisions of
this Clause 15 which is complete and regular on its face as regards its
contents and purportedly signed on behalf of the Transferring Lender
and the Substitute and neither the Agent nor the Borrower shall have
any liability or responsibility to any party as a consequence of
placing reliance on and acting in accordance with any such Substitution
Certificate if it proves to be the case that the same was not authentic
or duly authorized.
15.6 Authorization of Agent
The Borrower and each Lender irrevocably authorizes the Agent to
counter-sign each Substitution Certificate on its behalf without any
further consent of, or consultation with, the Borrower or such Lender.
15.7 Construction of certain references
If any Lender transfers any of its rights, benefits and obligations as
provided in Clause 15.4 all relevant references in this Agreement to
such Lender shall thereafter be construed as a reference to that Lender
and/or its Substitute (as the case may be) to the extent of their
respective interests.
15.8 Lending offices
Each Lender shall lend through its office at the address specified in
Schedule 1 or, as the case may be, in any relevant Substitution
Certificate or through any other office of that Lender selected from
time to time by that Lender through which such Lender wishes to lend
for the purposes of this Agreement. If the office through which a
Lender is lending is changed pursuant to this Clause 15.8, the Lender
shall notify the Agent promptly of that change. Before a Lender changes
its lending office pursuant to this Clause 15.8, such Lender shall
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<PAGE> 48
consider whether such change will increase the amounts payable by the
Borrower to such Lender under this Agreement.
15.9 Disclosure of information
Any Lender may disclose to a prospective transferee or Substitute or to
any other Person who may propose entering into contractual relations
with that Lender in relation to this Agreement such information about
the Borrower as the Lender shall consider appropriate, subject to
Clause 17.5.
16. ARRANGER, AGENT AND REFERENCE LENDERS
16.1 Appointment of Agent
Each Lender irrevocably appoints the Agent as its agent for the
purposes of this Agreement and the Guaranty and authorizes the Agent
(whether or not by or through employees or agents) to take such action
on such Lender's behalf and to exercise such rights, remedies, powers
and discretions as are specifically delegated to the Agent by this
Agreement, together with such powers and discretions as are reasonably
incidental thereto. Neither the Agent nor the Arranger shall, however,
have any duties, obligations or liabilities to the Lenders beyond those
expressly stated in this Agreement.
16.2 Amendments; Waivers
(a) Subject to Clause 16.2(b), the Agent may, with the consent of
the Majority Lenders (or if and to the extent expressly
authorized by the other provisions of this Agreement), (i)
agree to amendments or modifications to this Agreement with
the Borrower and/or (ii) vary or waive breaches of, or
defaults under, or otherwise excuse performance of, any
provision of this Agreement by the Borrower. Any such action
so authorized and effected by the Agent shall be documented in
such manner as the Agent shall (with the approval of the
Majority Lenders) determine, shall be promptly notified to the
Lenders by the Agent and shall be binding on all the Lenders.
(b) Except with the prior written consent of all the Lenders, the
Agent shall not have authority on behalf of the Lenders to
agree with the Borrower to
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<PAGE> 49
any amendment or modification to this Agreement or to grant
waivers in respect of breaches or defaults or to vary or
excuse performance of or under this Agreement by the Borrower,
if the effect of such amendment, modification, waiver,
variation or excuse would be to (i) reduce any applicable
Margin, (ii) postpone the due date or reduce the amount of any
payment of principal, interest or other amount payable by the
Borrower under this Agreement, (iii) change the currency in
which any amount is payable by the Borrower under this
Agreement, (iv) increase any Lender's Commitment, (v) change
the definition of "Majority Lenders" in Clause 1.2, (vi)
change any provision of this Agreement which expressly or
impliedly requires the approval or consent of all the Lenders
such that the relevant approval or consent may be given
otherwise than with the sanction of all the Lenders, (vii)
change the order of distribution under Clause 8.10, (viii)
change Clause 14.2 or (ix) change this Clause 16.2.
16.3 Rights of Agent as Lender; No partnership
With respect to its own Commitment and Contribution (if any) the Agent
shall have the same rights and powers under this Agreement and the
Guaranty as any other Lender and may exercise the same as though it
were not performing the duties and functions delegated to it under this
Agreement and the term "Lenders" shall, unless the context clearly
otherwise indicates, include the Agent in its individual capacity as a
Lender. This Agreement shall not and shall not be construed so as to
constitute a partnership between the parties or any of them.
16.4 No liability of Arranger and Agent
Neither the Arranger nor the Agent shall:
(a) be obliged to request any certificate under Clause 10.1 or to
make any enquiry as to the use of the proceeds of the Loan
unless (in the case of the Agent) so required in writing by
any Lender, in which case the Agent shall promptly make the
appropriate request of the Borrower, or be obliged to make any
enquiry as to any default by the Borrower in the performance
or observance of any of the provisions of this Agreement or as
to the existence of a Default unless (in the case of the
Agent) the Agent has actual
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<PAGE> 50
knowledge thereof or has been notified in writing thereof by a
Lender, in which case the Agent shall promptly notify the
Lenders of the relevant event or circumstance; or
(b) be liable to any Lender for any action taken or omitted under
or in connection with this Agreement unless caused by its
gross negligence or willful misconduct.
For the purposes of this Clause 16 the Agent shall not be treated as
having actual knowledge of any matter of which the corporate finance or
any other division outside the agency or loan administration department
of the person for the time being acting as the Agent may become aware
in the context of corporate finance, advisory or lending activities
from time to time undertaken by the Agent for the Borrower or any of
its subsidiaries or associated companies or any other person which may
be a trade competitor of the Borrower or may otherwise have commercial
interests similar to those of the Borrower.
16.5 Agent's duty to notify and take action
The Agent shall:
(a) promptly notify each Lender of the contents of each notice,
certificate or other document received by the Agent from the
Borrower under or pursuant to Clauses 10.1(a) or 10.1(e); and
(b) (subject to its being indemnified to its satisfaction) take
such action or, as the case may be, refrain from taking such
action with respect to any Default of which the Agent has
actual knowledge as the Majority Lenders may reasonably
direct.
16.6 Identity of Lenders
The Agent may deem and treat (a) each Lender as the person entitled to
the benefit of the Contribution of such Lender for all purposes of this
Agreement unless and until a Substitution Certificate shall have been
filed with the Agent, and (b) the office set opposite the name of each
Lender in Schedule 1 or, as the
44
<PAGE> 51
case may be, in any relevant Substitution Certificate as such Lender's
lending office unless and until a written notice of change of lending
office shall have been received by the Agent; and the Agent may act
upon any such notice unless and until the same is superseded by a
further such notice.
16.7 Non-reliance on Arranger or Agent
Each Lender acknowledges that it has not relied on any statement,
opinion, forecast or other representation made by the Arranger or the
Agent to induce it to enter into this Agreement and that it has made
and will continue to make, without reliance on the Agent or the
Arranger and based on such documents as it considers appropriate, its
own appraisal of the creditworthiness of the Borrower and its own
independent investigation of the financial condition and affairs of the
Borrower in connection with the making and continuation of the Loan
under this Agreement. Neither the Arranger nor the Agent shall have any
duty or responsibility, either initially or on a continuing basis, to
provide any Lender with any credit or other information with respect to
the Borrower whether coming into its possession before the making of
any Advance or at any time or times thereafter, other than (in the case
of the Agent) as provided in Clause 16.5(a).
16.8 No Responsibility on Arranger or Agent for Borrower's performance
Neither the Arranger nor the Agent shall have any responsibility to any
Lender on account of the failure of the Borrower or the Guarantor to
perform its obligations under this Agreement or the Guaranty or for the
financial condition of the Borrower or the Guarantor or for the
completeness or accuracy of any statements, representations or
warranties in this Agreement or the Guaranty or any document delivered
under this Agreement or for the execution, effectiveness, adequacy,
genuineness, validity, enforceability or admissibility in evidence of
this Agreement or of any certificate, report or other document executed
or delivered under this Agreement or its negotiation or for acting (or,
as the case may be, refraining from acting) in accordance with the
instructions of the Majority Lenders. The Arranger and the Agent shall
be entitled to rely on any communication, instrument or document
believed by it to be genuine and correct and to have been signed or
sent by the proper person and shall be entitled to rely
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<PAGE> 52
as to legal or other professional matters on opinions and statements of
any legal or other professional advisers selected or approved by it.
16.9 Other dealings
The Arranger and the Agent may, without any liability to account to the
Lenders, accept deposits from, lend money to, and generally engage in
any kind of banking or trust business with, the Borrower or any of its
subsidiaries or associated companies or any of the Lenders as if it
were not the Arranger or the Agent as the case may be.
16.10 Reimbursement and indemnity by Lenders
Each Lender shall reimburse the Arranger and the Agent (ratably in
accordance with such Lender's Commitment or Contribution), to the
extent that the Arranger or the Agent is not reimbursed by the Borrower
or the Guarantor, for the charges and expenses incurred by the Arranger
and the Agent in connection with the contemplation of, or otherwise in
connection with, the enforcement of, or the preservation of any rights
under, or in carrying out its duties under, this Agreement including
(in each case) the fees and expenses of legal or other professional
advisers. Each Lender shall indemnify the Agent (ratably in accordance
with its Commitment or Contribution) against all liabilities, damages,
costs and claims whatsoever incurred by the Agent in connection with
this Agreement or the performance of its duties under this Agreement or
any action taken or omitted by the Agent under this Agreement, unless
such liabilities, damages, costs or claims arise from the Agent's own
gross negligence or willful misconduct.
16.11 Retirement of Agent
(a) The Agent may retire from its appointment as Agent under this
Agreement having given to the Borrower and each of the Lenders
not less than 30 days' notice of its intention to do so,
provided that no such retirement shall take effect unless
there has been appointed by the Agent as a successor agent:
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<PAGE> 53
(i) a Lender nominated by the Majority Lenders or,
failing such a nomination,
(ii) any reputable and experienced bank or financial
institution with offices in Tokyo and nominated by the
Agent,
which shall have consented to such appointment.
(b) On any such successor being appointed, the retiring Agent
shall be discharged from any further obligation under this
Agreement and its successor and each of the other parties to
this Agreement shall have the same rights and obligations
among themselves as they would have had if such successor had
been a party to this Agreement in place of the retiring Agent.
16.12 Variation of Exhibits
The Agent may require such changes to any of the Exhibits as are
reasonable, in the opinion of the Agent after consultation with the
Lenders, to protect the interests of the Lenders under this Agreement.
17. NOTICES AND OTHER MATTERS
17.1 Notices
Every notice, request, demand or other communication under this
Agreement shall:
(a) be in writing delivered personally or by prepaid letter
(airmail if the addressee is abroad), telex or telefax;
(b) be deemed to have been received, subject as otherwise provided
in this Agreement, in the case of a letter when delivered
personally or two business days after it has been put into the
post (seven business days if delivered through international
airmail), in the case of a telex, at the time of dispatch with
confirmed answerback of the addressee appearing at the
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<PAGE> 54
beginning and end of the transmission and, in the case of a
telefax, when a complete and legible copy is received by the
addressee (provided that if the date of receipt of a letter is
not a business day in the country of the addressee or if the
time of receipt of any telex or telefax is after the close of
business in the country of the addressee it shall be deemed to
have been received at the opening of business on the next such
business day); and
(c) be sent to the addressee at the relevant address telex number
or telefax number stated in Schedule 1 or to such other
address, telex number or telefax number as has been notified
by the addressee to the other parties.
17.2 Notices through the Agent
Every communication under this Agreement to be given by the Borrower to
any other party shall be given to the Agent for onward transmission as
appropriate and to be given to the Borrower shall (except as otherwise
provided in this Agreement) be given by the Agent.
17.3 No implied waivers, remedies cumulative
No failure or delay on the part of the Agent, the Arranger, the Lenders
or any of them to exercise any power, right or remedy under this
Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise by the Agent, the Arranger, the Lenders or any of them
of any power, right or remedy preclude any other or further exercise
thereof or the exercise of any other power, right or remedy. The
remedies provided in this Agreement are cumulative and are not
exclusive of any remedies provided by law.
17.4 English language
This Agreement is made in and shall be construed in the English
language; all certificates, instruments and other documents to be
delivered under or supplied in connection with this Agreement shall be
in the English language or (if prepared in any other language) shall be
accompanied by an English translation.
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17.5 Confidentiality
Agent and each Lender agree to take and to cause its affiliates to take
normal and reasonable precautions and exercise due care to maintain the
confidentiality of all information identified as "confidential" or
"secret" by the Borrower or the Guarantor and provided to it by the
Borrower, the Guarantor or any subsidiary, or by Agent on the
Borrower's, the Guarantor's or such subsidiary's behalf, under this
Agreement, and neither it nor any of its affiliates shall use any such
information other than in connection with or in enforcement of this
Agreement or in connection with other business now or hereafter
existing or contemplated with the Borrower, the Guarantor or any
subsidiary, except to the extent such information (i) was or becomes
generally available to the public other than as a result of disclosure
by the Agent or such Lender, or (ii) was or becomes available on a
non-confidential basis from a source other than the Borrower, provided
that such source is not bound by a confidentiality agreement with the
Borrower known to the Agent or such Lender; provided, however, that the
Agent or any Lender may disclose such information (A) at the request or
pursuant to any requirement of any Governmental Authority to which the
Agent or such Lender is subject or in connection with an examination of
the Agent or such Lender by any such authority; (B) pursuant to
subpoena or other court process; (C) when required to do so in
accordance with the provisions of any applicable Governmental Rule or
Governmental Authority; (D) to the extent reasonably required in
connection with any litigation or proceeding to which the Agent, any
Lender or their respective affiliates may be party; (E) to the extent
reasonably required in connection with the exercise of any remedy
hereunder; (F) to the Agent or such Lender's independent auditors and
other professional advisors; (G) to any Participant or Substitute,
actual or potential, provided that such party agrees in writing to keep
such information confidential to the same extent required of the
Lenders hereunder; (H) as to the Agent, any Lender or and of their
respective affiliates, as expressly permitted under the terms of any
other document or agreement regarding confidentiality to which the
Borrower, the Guarantor or any subsidiary is party or is deemed party
with the Agent, such Lender or such affiliate; and (I) to its
affiliates.
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18. GOVERNING LAW AND JURISDICTION
18.1 Governing law
This Agreement shall be governed by, and construed in accordance with,
the laws of Japan.
18.2 Jurisdiction
(a) Each party irrevocably agrees that the Tokyo District Court
shall have jurisdiction to hear and determine any suit, action
or proceedings, and to settle any disputes, which may arise
out of or in connection with this Agreement and, for those
purposes, irrevocably submits to the jurisdiction of that
court.
(b) Each party irrevocably waives any objection which it might now
or hereafter have to the court referred to in Clause 18.2(a)
being nominated as the forum to hear and determine any suit,
action or proceedings, and to settle any disputes, which may
arise out of or in connection with this Agreement and agrees
not to claim that court is not a convenient or appropriate
forum.
(c) The submission to the jurisdiction of the court referred to in
Clause 18.2(a) shall not (and shall not be construed so as to)
limit any right of any party to take proceedings against any
other party in any other court of competent jurisdiction nor
shall the taking of proceedings in any one or more
jurisdictions preclude the taking of proceedings in any other
jurisdiction if and to the extent permitted by applicable law.
(d) Each party consents generally in respect of any legal action
or proceedings arising out of or in connection with this
Agreement to the giving of any relief or the issue of any
process in connection with such action or proceedings
including the making, enforcement or execution against any
property whatsoever (irrespective of its use or intended use)
of any order or judgment which may be made or given in such
action or proceeding.
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IN WITNESS WHEREOF the parties have caused this Agreement to be duly
executed on the date first above written.
Borrower: LAM RESEARCH CO., LTD.
By____________________________________
Name:
Title:
Agent and Lender: ABN AMRO BANK N.V., Tokyo Branch
By____________________________________
Name:
Title:
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<PAGE> 58
Schedule 1
The Parties and the Commitments
A. The Borrower
(1) Name: Lam Research Co., Ltd.
(2) Incorporated in: Japan
(3) Principal Office: 1-1-10, Oyama, Sagamihara-shi, Kanagawa Prefecture
229, Japan
(4) Fax: 81-427-70-0347
(5) Notices to: (a) Lam Research Co., Ltd.
same as stated in (3) above
(b) with a copy to
Lam Research Corporation
4650 Cushing Parkway
Fremont, CA 94538-6470 U.S.A.
Fax: 1-510-659-2876
(6) Notices for the attention of:
(a) Mr. Hiroyuki Ishihara
Controller, Finance & Accounting Department
(b) Brian J. Sereda
Director of Finance
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<PAGE> 59
B. The Lenders and their Commitments
<TABLE>
<CAPTION>
- -------------------------------------- --------------------------------------- ---------------------------------
Name Address, telex and Commitment
Telefax number (Y)
- -------------------------------------- --------------------------------------- ---------------------------------
<S> <C> <C>
(1) ABN AMRO Bank N.V. Lending Office: (Y)1,700,000,000
Tokyo Branch
13F, Shiroyama JT Mori
Building
4-3-1, Toranomon
Minato-ku, Tokyo 105
Japan
Attn: Structured Finance
Tel: 81-3-5405-6503
Fax: 81-3-5405-6903/6902
Notices to:
Same as above.
- -------------------------------------- --------------------------------------- ---------------------------------
</TABLE>
S-1-2
<PAGE> 60
C. The Agent
(1) Name: ABN AMRO BANK N.V., Tokyo Branch
(2) Incorporated in:
(3) Principal Office: 13F, Shiroyama JT Mori Building
4-3-1, Toranomon, Minato-ku
Tokyo 105, Japan
(4) Telex:
(5) Fax: 81-3-5405-6903/6902
(6) Notices to: Same as above
(7) Notices for the attention of: Structured Finance
(8) Payment Account
Bank: The Sakura Bank, Limited
Branch: Tokyo Main Office (Tokyo eigyo-bu)
Address: 1-1-2, Yurakucho, Chiyoda-ku, Tokyo 100-0006, Japan
A/c No: 1008000
S-1-3
<PAGE> 61
Schedule 2
Documents and evidence required as conditions precedent
A. Borrower
(a) A copy, certified as then true and complete and up-to-date as of the
Drawdown Date by a duly authorized officer of the Borrower, of the
Articles of Incorporation of the Borrower.
(b) A copy, certified as a true copy by a duly authorized officer of the
Borrower, of resolutions of the Board of Directors of the Borrower
effective as of the Drawdown Date evidencing approval of this Agreement
and authorizing its appropriate officers or attorney (as applicable) to
execute and deliver this Agreement and to give all notices and take all
other action required by the Borrower under this Agreement.
(c) Specimen signatures, authenticated by a duly authorized officer of the
Borrower, of the persons authorized in the resolutions of the Board of
Directors referred to in paragraph (b) above together with the executed
Power of Attorney empowering that person to execute and deliver this
Agreement and to give all notices and take all other action required by
the Borrower under this Agreement (if applicable).
B. The Guarantor
(a) The Guaranty, executed by the Guarantor.
(b) Copies of the resolutions of the board of directors of the Guarantor
and other necessary corporate action authorizing the Guarantor to enter
into the Guaranty and the transactions contemplated thereby, certified
as of the Drawdown Date or a recent date prior thereto by the Secretary
or Assistant Secretary of the Guarantor.
(c) A certificate of the Secretary or Assistant Secretary of the Guarantor
certifying as of the Drawdown Date or a recent date prior thereto the
names and true signatures of the officers of the Guarantor authorized
to execute, deliver and
S-2-1
<PAGE> 62
perform, as applicable, the Guaranty, and all other documents to be
delivered by it thereunder.
(d) The certificate or articles of incorporation and the bylaws of the
Guarantor as in effect on the Drawdown Date or a recent date prior
thereto, certified by the Secretary or Assistant Secretary of the
Guarantor as of such date, together with a good standing certificate
from the Secretary of State of its jurisdiction of incorporation, dated
the Drawdown Date or a recent date prior thereto.
(e) An opinion dated the Drawdown Date or a recent date prior thereto of
California counsel to the Guarantor and addressed to the Agent and the
Lenders, in a form satisfactory to and previously approved by the
Agent.
(f) A certificate signed by a duly authorized officer of the Guarantor,
dated the Drawdown Date or a recent date prior thereto, stating that:
i. The representations and warranties contained in Paragraph 3 of
the Guaranty are true and correct on and as of such date, as
though made on and as of such date;
ii. no Default or Event of Default has occurred and is continuing
as of the date hereof or will occur on the date hereof as a
result of the execution of the Guaranty;
iii. no event or circumstance has occurred since June 30, 1998
which has had or is reasonably likely to have a Material
Adverse Effect (as defined in the Guaranty); and
iv. each of the documents previously delivered pursuant to this
Schedule 2, Part B remains true, complete and accurate.
(g) Evidence that as of the Drawdown Date all approvals or consent of any
other person (including, if any, any necessary shareholder consents),
required in connection with the execution, delivery and performance of
the Guaranty and any other document to be executed and delivered by the
Guarantor shall have been obtained.
S-2-2
<PAGE> 63
C. General
Such other documents, confirmations, information or opinions as the
Agent may have previously reasonably requested in writing.
S-2-3
<PAGE> 64
Schedule 3
Additional documents and evidence required after the Drawdown Date
(a) An opinion of legal advisers to the Borrower on Japanese law, dated the
Drawdown Date, in a form satisfactory to and previously approved by the
Agent.
(b) An opinion of Nishimura & Partners, special legal advisers in Japan to
the Agent and the Lenders, dated the Drawdown Date, in a form
satisfactory to and previously approved by the Agent.
(c) A certified copy of the commercial registry and a certificate of seal
impression (each as of the date as close as possible to the Drawdown
Date) of a representative director of the Borrower executing this
Agreement or the Power of Attorney referred to in item (c) of Part A.
of Schedule 2 hereto (as the case may be).
S-3-1
<PAGE> 65
Exhibit 1
Form of Guaranty
See Attachment
E-1-1
<PAGE> 66
Exhibit 2
Form of Substitution Certificate
To: [Name and address of Agent]
Date: ___________________
Attention:
Substitution Certificate
This Substitution Certificate relates to a Loan Agreement (the
"Agreement") dated September 30, 1998 between Lam Research Co., Ltd. as Borrower
(1), the banks and financial institutions whose respective names and addresses
are set out in schedule 1 thereto as Lenders (2) and ABN AMRO Bank N.V., Tokyo
Branch as Agent (3) and the Guaranty as defined in the Agreement. Terms defined
in the Agreement shall have the same meaning in this Substitution Certificate.
1 [Existing Lender] (the "Existing Lender") (a) confirms the accuracy of
the summary of its participation in the Loan set out in the schedule
hereto; and (b) requests [Substitute Lender] (the "Substitute") to
accept by way of transfer the portion of that participation specified
in the schedule hereto by counter-signing and delivering this
Substitution Certificate to the Agent at its address for the service of
notices specified in the Agreement.
2 The Substitute hereby requests the Agent (on behalf of itself, the
Borrower and the Lenders) to accept this Substitution Certificate as
being delivered to the Agent pursuant to and for the purposes of Clause
15.4 of the Agreement and Subparagraph 8(e) of the Guaranty, so as to
take effect in accordance with the respective terms thereof on [date of
transfer] (the "Effective Date") or on such later date as may be
determined in accordance with the terms thereof.
E-2-1
<PAGE> 67
3 The Agent (for itself, the Borrower and the other Lenders and the
Guarantor) confirms the transfer effected by this Substitution
Certificate pursuant to and for the purposes of Clause 15.4 of the
Agreement and Subparagraph 8(e) of the Guaranty so as to take effect in
accordance with the terms thereof.
4 The Substitute confirms:
(a) that it has received a copy of the Agreement and the Guaranty
and all other documentation and information required by it in
connection with the transactions contemplated by this
Substitution Certificate;
(b) that it has made and will continue to make its own assessment
of the validity, enforceability and sufficiency of the
Agreement the Guaranty and this Substitution Certificate and
has not relied and will not rely on the Existing Lender, the
Arranger or the Agent or any statements made by any of them in
that respect;
(c) that it has made and will continue to make its own credit
assessment of the Borrower and has not relied and will not
rely on the Existing Lender, the Arranger or the Agent or any
statements made by either of them in that respect; and
(d) accordingly, none of the Existing Lender, the Arranger nor the
Agent shall have any liability or responsibility to the
Substitute in respect of any of the foregoing matters.
5 Execution of this Substitution Certificate by the Substitute
constitutes its representation to the Existing Lender and all other
parties to the Agreement that it has power to become party to the
Agreement as a Lender on the terms herein and therein set out and has
taken all necessary steps to authorize execution and delivery of this
Substitution Certificate.
6 The Existing Lender makes no representation or warranty and assumes no
responsibility with respect to the legality, validity, effectiveness,
adequacy or enforceability of the Agreement the Guaranty or any
document relating thereto and assumes no responsibility for the
financial condition of the Borrower or any
E-2-3
<PAGE> 68
other party to the Agreement or the Guaranty or for the performance and
observance by the Borrower or any other such party of any of its
obligations under the Agreement or any document relating thereto and
any and all such conditions and warranties, whether express or implied
by law or otherwise, are hereby excluded.
7 The Substitute hereby undertakes to the Existing Lender, the Borrower
and Agent that it will perform in accordance with their terms all those
obligations which by the respective terms of the Agreement will be
assumed by it after acceptance of this Substitution Certificate by the
Agent.
8 This Substitution Certificate and the rights and obligations of the
parties hereunder shall be governed by and construed in accordance with
the laws of Japan.
Note: This Substitution Certificate is not a security, bond, note, debenture,
investment or similar instrument.
Executed by the authorized signatories of the parties on the date appearing
below.
E-2-3
<PAGE> 69
The Schedule
- ----------------------------- ---------------------------
Amount of Contribution Portion transferred
(Y) (Y)
- ----------------------------- ---------------------------
- ----------------------------- ---------------------------
Administrative Details of Substitute
Lending office:
Account for payments:
Telephone:
Telefax:
Telex:
Attention:
[Existing Lender] [Substitute]
By: By:
Title: Title:
Date: Date:
The Agent
(for itself and on behalf of the Borrower and the Lenders and the Guarantor./)
By:
Title:
Date:
E-2-4
<PAGE> 70
Exhibit 3
Form of Margin Certificate
To: [Name and address of Agent]
Attention: [Date]
Loan Agreement dated September 30, 1998
We refer to the above Agreement (terms used in this letter having the
meanings given to them in that Agreement) and notify you that the Senior
Indebtedness Ratio of the Guarantor as set forth in the quarterly financial
statements and information of the Guarantor for the fiscal quarter ending on
[ ] is [ ].
for and on behalf of
Lam Research Corporation
By_________________________________
Name:
Title:
E-3-1
<PAGE> 1
Exhibit 10.59
GUARANTY
THIS GUARANTY, dated as of September 30, 1998, is executed by LAM
RESEARCH CORPORATION, a Delaware corporation ("Guarantor"), in favor of ABN AMRO
BANK N.V., acting as agent (in such capacity, and each successor thereto in such
capacity, "Agent") for the financial institutions which are from time to time
parties to the Loan Agreement referred to in Recital A below (collectively,
"Lenders").
RECITALS
A. Pursuant to a Loan Agreement dated as of September 30, 1998 (as
amended from time to time, the "Borrower Loan Agreement"), among Lam Research
Co., Ltd., a Japanese limited liability stock company ("Borrower"), the Lenders
and Agent, the Lenders have agreed to extend a certain credit facility to
Borrower upon the terms and subject to the conditions set forth therein.
Borrower is a wholly-owned Subsidiary of Guarantor.
B. The Lenders' obligations to extend the credit facility to Borrower
under the Borrower Loan Agreement are subject, among other conditions, to
receipt by Agent of this Guaranty, duly executed by Guarantor.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Guarantor hereby agrees with Agent, for the ratable benefit of the
Lenders and Agent, as follows:
1. DEFINITIONS AND INTERPRETATION.
(a) Definitions. When used in this Guaranty, the following terms
shall have the following respective meanings:
"Affiliate" shall mean, with respect to any Person, (a) each
Person that, directly or indirectly, owns or controls, whether
beneficially or as a trustee, guardian or other fiduciary, ten percent
(10%) or more of any class of Equity Securities of such Person, (b) each
Person that controls, is controlled by or is under common control with
such Person or any Affiliate of such Person or (c) each of such Person's
officers, directors, joint venturers and partners; provided, however,
that in no case shall Agent or any Lender be deemed to be an Affiliate
of Guarantor or any of its Subsidiaries for purposes of this Guaranty.
For the purpose of this definition, "control" of a Person shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of its
<PAGE> 2
management or policies, whether through the ownership of voting
securities, by contract or otherwise.
"Agent" shall have the meaning given to that term in the
introductory paragraph hereof.
"Base Rate" shall mean, on any day, the greater of (a) the Prime
Rate in effect on such date and (b) the Federal Funds Rate for such day
plus one-half percent (0.50%). ("Federal Funds Rate" shall mean, for any
day, the rate per annum set forth in the weekly statistical release
designated as H.15(519), or any successor publication, published by the
Federal Reserve Board (including any such successor publication, "H.15
(519)") for such day opposite the caption "Federal Funds (Effective)".
"Prime Rate" shall mean the per annum rate publicly announced by ABN
AMRO Bank N.V. from time to time at its Chicago, Illinois office. The
Prime Rate is determined by ABN AMRO Bank N.V. from time to time as a
means of pricing credit extensions to some customers and is neither
directly tied to any external rate of interest or index nor necessarily
the lowest rate of interest charged by ABN AMRO Bank N.V. at any given
time for any particular class of customers or credit extensions. Any
change in the Base Rate resulting from a change in the Prime Rate shall
become effective on the Business Day on which each change in the Prime
Rate occurs.)
"Borrower" shall have the meaning given to that term in Recital
A hereof.
"Borrower Loan Agreement" shall have the meaning given to that
term in Recital A hereof.
"Borrower Loan Documents" shall mean and include the Borrower
Loan Agreement, this Guaranty and all other documents, instruments and
agreements delivered by Borrower, Guarantor or any Subsidiary of
Guarantor in connection with the Borrower Loan Agreement.
"Business Day" shall mean any day on which commercial banks are
not authorized or required to close in San Francisco, California, New
York, New York or Tokyo.
"Capital Asset" shall mean, with respect to any Person, any
tangible fixed or capital asset owned or leased (in the case of a
Capital Lease) by such Person, or any expense incurred by such Person
that is required by GAAP to be reported as a non-current asset on such
Person's balance sheet.
"Capital Expenditures" shall mean, with respect to any Person
and any period, all amounts expended and indebtedness incurred or
assumed by such Person during such period for the acquisition of Capital
Assets (including all amounts expended and indebtedness incurred or
assumed in connection with Capital Leases).
2
<PAGE> 3
"Capital Leases" shall mean any and all lease obligations that,
in accordance with GAAP, are required to be capitalized on the books of
a lessee.
3
<PAGE> 4
"Change of Control" shall mean (a) the acquisition of beneficial
ownership by any "person" or "group" (as defined in Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended) of a direct
or indirect interest in more than thirty-three percent (33%) of the
voting power of the then outstanding capital stock of the Guarantor; or
(b) a merger or consolidation of the Guarantor with any other Person or
the merger of any other Person into the Guarantor or any other
transaction, as a result of which the stockholders of the Guarantor
immediately prior to such transaction own, in the aggregate, less than a
majority of the voting power of the outstanding capital stock of the
surviving or resulting entity; or (c) the first day on which a majority
of the members of the Board of Directors of the Guarantor are not
Continuing Directors. A "Continuing Director" shall mean any director of
the Board of Directors of the Guarantor who is either (i) a member of
such Board of Directors on the date of this Agreement or (ii) nominated
or elected to such Board of Directors with the approval of a majority of
the Continuing Directors who were members of such Board of Directors at
the time of such nomination or elections.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
"Compliance Certificate" shall have the meaning given to that
term in Subparagraph 4(a) hereof.
"Contingent Obligation" shall mean, with respect to any Person,
without duplication, (a) any Guaranty Obligation of that Person; and (b)
any direct or indirect obligation or liability, contingent or otherwise,
of that Person (i) in respect of any letters of credit, acceptances,
bank guaranties, surety bonds or similar instrument issued for the
account of that Person or as to which that Person is otherwise liable
for reimbursement of drawings, (ii) as a partner or joint venturer in
any partnership or joint venture, or (iii) incurred pursuant to any
interest rate swap, currency swap, forward, cap, floor or other similar
contract that is not entered into in connection with a bona fide hedging
operation that provides offsetting benefits to such Person. The amount
of any Contingent Obligation shall (subject, in the case of Guaranty
Obligations, to the last sentence of the definition of "Guaranty
Obligation") be deemed equal to the maximum reasonably anticipated
liability in respect thereof.
"Contractual Obligation" of any Person shall mean, any
indenture, note, lease, loan agreement, security, deed of trust,
mortgage, security agreement, guaranty, instrument, contract, agreement
or other form of contractual obligation or undertaking to which such
Person is a party or by which such Person or any of its property is
bound.
"Debt Service Coverage Ratio" shall mean, with respect to any
Person for any fiscal quarter, the ratio, determined on a consolidated
basis in accordance with
4
<PAGE> 5
GAAP where applicable, of;
(a) The EBITDAR of such Person and its Subsidiaries for
such quarter;
to
(b) The sum of (i) all Interest Expenses of such Person
and its Subsidiaries for such quarter, (ii) all rental expenses
for such Person and its Subsidiaries for such quarter, and (iii)
one-fourth of all principal payments on Indebtedness for
borrowed money of such Person and its Subsidiaries scheduled for
payment during the four quarters immediately succeeding the
quarter for which EBITDAR is calculated pursuant to clause (a).
"Default" shall have the meaning given to that term in the
Borrower Loan Agreement.
"Disallowed Post-Commencement Interest and Expenses" shall mean
interest computed at the rate provided in the Borrower Loan Agreement
and claims for reimbursement, costs, expenses or indemnities under the
terms of any of the Borrower Loan Documents accruing or claimed at any
time after the commencement of any Insolvency Proceeding, if the claim
for such interest, reimbursement, costs, expenses or indemnities is not
allowable, allowed or enforceable against Borrower in such Insolvency
Proceeding.
"Dollar Equivalent" shall mean , as to any amount denominated in
Yen as of any date of determination, the equivalent amount in Dollars as
determined by Agent on the basis of the Telegraphic Transfer Mid Rate
quoted by Bank of Tokyo Mitsubishi at or about 10:00 a.m. (Tokyo time)
on such date.
"Dollars" and "$" shall mean the lawful currency of the United
States of America and, in relation to any payment under this Guaranty,
same day or immediately available funds.
"EBITDAR" shall mean, with respect to any Person for any period,
the sum of the following, determined on a consolidated basis in
accordance with GAAP where applicable:
(a) The net income or net loss of such Person and its
Subsidiaries (including interest income) for such period before
provision for income taxes;
plus
(b) The sum of (i) all Interest Expenses of such Person
and its Subsidiaries accruing during such period and (ii) all
depreciation, amortization and rental expenses of such Person
and its Subsidiaries
5
<PAGE> 6
accruing during such period (in each case, to the extent
deducted in calculating net income or loss in clause (a) above).
6
<PAGE> 7
"Employee Benefit Plan" shall mean any employee benefit plan
within the meaning of section 3(3) of ERISA maintained or contributed to
by Guarantor or any ERISA Affiliate, other than a Multiemployer Plan.
"Environmental Laws" shall mean all Requirements of Law relating
to the protection of human health and the environment, including,
without limitation, all Requirements of Law, pertaining to reporting,
licensing, permitting, transportation, storage, disposal, investigation,
and remediation of emissions, discharges, releases, or threatened
releases of Hazardous Materials, chemical substances, pollutants,
contaminants, or hazardous or toxic substances, materials or wastes,
whether solid, liquid, or gaseous in nature, into the air, surface
water, groundwater, or land, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling
of chemical substances, pollutants, contaminants, or hazardous or toxic
substances, materials, or wastes, whether solid, liquid, or gaseous in
nature.
"Equity Securities" of any Person shall mean (a) all common
stock, preferred stock, participations, shares, partnership interests or
other equity interests in and of such Person (regardless of how
designated and whether or not voting or non-voting) and (b) all
warrants, options and other rights to acquire any of the foregoing,
other than convertible debt securities which have not been converted
into common stock, preferred stock, participations, shares, partnership
interests or other equity interests in any such Person.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as the same may from time to time be amended or supplemented,
including any rules or regulations issued in connection therewith.
"ERISA Affiliate" shall mean any Person which is treated as a
single employer with Guarantor under Section 414 of the Code.
"Event of Default" shall have the meaning given to that term in
the Borrower Loan Agreement.
"Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System.
"Financial Statements" shall mean, with respect to any
accounting period for any Person, statements of income, shareholders'
equity and cash flows of such Person for such period, and a balance
sheet of such Person as of the end of such period, setting forth in each
case in comparative form figures for the corresponding period in the
preceding fiscal year if such period is less than a full fiscal year or,
if such period is a full fiscal year, corresponding figures from the
preceding annual audit, all prepared in reasonable detail and in
accordance with GAAP.
7
<PAGE> 8
"Funded Debt" of any Person shall mean, without duplication, all
Indebtedness of such Person, as described in Subparagraphs (a)-(d) of
the definition of Indebtedness.
"GAAP" shall mean generally accepted accounting principles and
practices as in effect in the United States of America from time to
time, consistently applied.
"Governmental Authority" shall mean any domestic or foreign
national, state or local government, any political subdivision thereof,
any department, agency, authority or bureau of any of the foregoing, or
any other entity exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to government, including,
without limitation, the Federal Deposit Insurance Corporation, the
Federal Reserve Board, the Comptroller of the Currency, any central bank
or any comparable authority.
"Governmental Charges" shall mean, with respect to any Person,
all levies, assessments, fees, claims or other charges imposed by any
Governmental Authority upon such Person or any of its property or
otherwise payable by such Person.
"Governmental Rule" shall mean any law, rule, regulation,
ordinance, order, code interpretation, judgment, decree, directive,
guidelines, policy or similar form of decision of any Governmental
Authority.
"Guaranteed Obligations" shall mean all loans, advances, debts,
liabilities and obligations, howsoever arising, owed by Borrower to
Agent or any Lender of every kind and description (whether or not
evidenced by any note or instrument and whether or not for the payment
of money), direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising pursuant to the terms of the
Borrower Loan Agreement or any of the other Borrower Loan Documents,
including, without limitation, all principal, interest, rent, fees,
taxes, charges, expenses, attorneys' fees and accountants' fees
chargeable to Borrower or payable by Borrower thereunder.
"Guarantor" shall have the meaning given to that term in the
introductory paragraph hereof.
"Guarantor Credit Agreement" shall mean the Credit Agreement
dated as of April 13, 1998 among Guarantor, the financial institutions
from time to time parties thereto as lenders, and ABN AMRO Bank N.V., as
agent for such financial institutions.
"Guarantor Credit Documents" shall have the meaning given to the
term "Credit Documents" under the Guarantor Credit Agreement.
8
<PAGE> 9
"Guaranty Obligation" shall mean, with respect to any Person,
any direct or indirect liability of that Person with respect to any
Indebtedness, lease, dividend, or other obligation (the "primary
obligations") of another Person (the "primary obligor"), including any
obligation of that Person, whether or not contingent, (a) to purchase,
repurchase or otherwise acquire such primary obligations or any property
constituting direct or indirect security therefor, or (b) to advance or
provide funds (i) for the payment or discharge of any such primary
obligation, or (ii) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency or
any balance sheet item, level of income or financial condition of the
primary obligor, or (c) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such
primary obligation, or (d) otherwise to assure or hold harmless the
holder of any such primary obligation against loss in respect thereof.
The amount of any Guaranty Obligation shall be deemed equal to the
stated or determinable amount of the primary obligation in respect of
which such Guaranty Obligation is made or, if not stated or if
indeterminable, the maximum reasonably anticipated liability in respect
thereof.
"Hazardous Materials" shall mean all materials, substances and
wastes which are classified or regulated as "hazardous," "toxic" or
similar descriptions under any Environmental Law or which are hazardous,
toxic, harmful or dangerous to human health.
"Indebtedness" of any Person shall mean, without duplication:
(a) All obligations of such Person evidenced by notes,
bonds, debentures or other similar instruments and all other
obligations of such Person for borrowed money;
(b) All obligations of such Person for the deferred
purchase price of property or services (including obligations
under credit facilities which secure or finance such purchase
price and obligations under synthetic leases), other than trade
payables incurred by such Person in the ordinary course of its
business on ordinary terms;
(c) All obligations of such Person under conditional
sale or other title retention agreements with respect to
property acquired by such Person (to the extent of the value of
such property if the rights and remedies of the seller or lender
under such agreement in the event of default are limited solely
to repossession or sale of such property);
(d) All obligations of such Person as lessee under or
with respect to Capital Leases;
9
<PAGE> 10
(e) All obligations of such Person with respect to
accounts receivable and related rights and property sold,
assigned or transferred by such Person with recourse to such
Person;
(f) All Contingent Obligations of such Person; and
(g) All Indebtedness of other Persons of the types
described in clauses (a) - (f) above to the extent secured by
(or for which any holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien in
any property (including accounts and contract rights) of such
Person, even though such Person has not assumed or become liable
for the payment of such Indebtedness.
"Insolvency Proceeding" shall mean any case or proceeding under
the United States Bankruptcy Code or any other similar law, rule or
regulation of the United States or any jurisdiction or any other action
or proceeding for the reorganization, liquidation, appointment of a
receiver, rearrangement of debts, marshalling of assets or similar
action relating to Borrower or Guarantor, their respective creditors or
any substantial part of their respective assets, whether or not any such
case, proceeding or action is voluntary or involuntary.
"Interest Expenses" shall mean, with respect to any Person for
any period, the sum, determined on a consolidated basis in accordance
with GAAP, of all interest accruing on the Indebtedness of such Person
during such period (including interest attributable to Capital Leases).
"Investment" of any Person shall mean any loan or advance of
funds by such Person to any other Person (other than advances to
employees of such Person in the ordinary course of business), any
purchase or other acquisition of any Equity Securities or Indebtedness
of any other Person, any capital contribution by such Person to or any
other investment by such Person in any other Person (including any
Guaranty Obligations of such Person and any indebtedness of such Person
of the type described in clause (g) of the definition of "Indebtedness"
on behalf of any other Person); provided, however, that Investments
shall not include (a) accounts receivable or other indebtedness owed by
customers of such Person which are current assets and arose from sales
of inventory in the ordinary course of such Person's business, (b)
prepaid expenses of such Person incurred and prepaid in the ordinary
course of business, and (c) Capital Expenditures of such Person incurred
in the ordinary course of business.
"Lenders" shall have the meaning given to that term in the
introductory paragraph hereof.
"Lien" shall mean, with respect to any property, any security
interest, mortgage, deed of trust, pledge, lien, charge or other
encumbrance in, of, or on such property or the income therefrom,
including, without limitation, the interest
10
<PAGE> 11
of a vendor or lessor under a conditional sale agreement, Capital Lease
or other title retention agreement, or any agreement to provide any of
the foregoing, and the filing of any financing statement or similar
instrument under the Uniform Commercial Code or comparable law of any
jurisdiction.
"Majority Lenders" shall have the meaning given to that term in
the Borrower Loan Agreement.
"Margin Stock" shall have the meaning given to that term in
Regulation U issued by the Federal Reserve Board, as amended from time
to time, and any successor regulation thereto.
"Material Adverse Effect" shall mean a material adverse effect
on (a) the business, assets, operations or financial condition of
Guarantor and its Subsidiaries; (b) the ability of Guarantor to pay or
perform the Guaranteed Obligations in accordance with the terms of this
Guaranty and the other Borrower Loan Documents; or (c) the rights and
remedies of Agent or any Lender under this Guaranty, the other Borrower
Loan Documents or any related document, instrument or agreement.
"Material Subsidiary" shall mean, with respect to any Subsidiary
of the Guarantor, any Subsidiary whose (a) total assets exceed ten
percent (10%) of the consolidated total assets of Guarantor and its
Subsidiaries at any time or (b) gross revenues exceed five percent (5%)
of the consolidated gross revenues of Guarantor and its Subsidiaries at
any time.
"Multiemployer Plan" shall mean any multiemployer plan within
the meaning of section 3(37) of ERISA maintained or contributed to by
Guarantor or any ERISA Affiliate.
"Net Proceeds" shall mean, with respect to any sale or issuance
of any Equity Security by any Person, the aggregate consideration
received by such Person from such sale or issuance less the sum of the
actual amount of the reasonable fees and commissions payable to Persons
other than such Person or any Affiliate of such Person, the reasonable
legal expenses and the other reasonable costs and expenses directly
related to such sale or issuance that are to be paid by such Person.
"Overnight Rate" shall mean, for any amount payable in Yen on
any day, the per annum interest rate at which overnight deposits in Yen
in an amount approximately equal to such amount would be offered for
such day by ABN AMRO Bank N.V.'s Tokyo Office to major banks in the
Tokyo interbank market.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or
any successor thereto.
11
<PAGE> 12
"Permitted Indebtedness" shall have the meaning given to that
term in Subparagraph 5(a) hereof.
"Permitted Liens" shall have the meaning given to that term in
Subparagraph 5(b) hereof.
"Person" shall mean and include an individual, a partnership, a
corporation (including a business trust), a joint stock company, an
unincorporated association, a limited liability company, a joint
venture, a trust or other entity or a Governmental Authority.
"Quick Ratio" shall mean, with respect to any Person at any
time, the ratio, determined on a consolidated basis in accordance with
GAAP, of:
(a) The remainder at such time of (i) the sum of all
cash, cash equivalents (less than ninety (90) days in term),
short-term marketable securities (less than one (1) year in
term) and accounts receivable of such Person and its
Subsidiaries (less all reserves therefor) minus (ii) the sum of
(A) the aggregate amount of such cash, cash equivalents,
short-term marketable securities and accounts receivable which
are subject to any Lien or are otherwise encumbered or
restricted (to the extent such amounts do not secure a
corresponding current liability amount included in the
calculation of subpart (b) below), and (B) with respect to any
accounts receivable sold, assigned or transferred, to the extent
included under subpart (a)(i) above, the aggregate amount of any
accounts receivable representing the discounted portion of such
accounts receivable so sold, assigned or transferred;
to
(b) The sum at such time of (i) the current liabilities
of such Person and its Subsidiaries, (ii) the aggregate
principal amounts outstanding under any revolving credit
facility (including, without limitation, in the case of
Guarantor, the aggregate principal amount of all Loans then
outstanding), and (iii) in the event such Person or any of its
Subsidiaries exercises a purchase option under a synthetic lease
or a purchase payment otherwise becomes due under a synthetic
lease, the portion of any synthetic lease payment that would be
utilized to purchase the underlying property within one year of
the date of such exercise or acceleration.
"Reportable Event" shall have the meaning given to that term in
ERISA and applicable regulations thereunder.
"Requirement of Law" applicable to any Person shall mean (a) the
Articles or Certificate of Incorporation and By-laws, Partnership
Agreement or other organizational or governing documents of such Person,
(b) any Governmental
12
<PAGE> 13
Rule applicable to such Person, (c) any license, permit, approval or
other authorization granted by any Governmental Authority to or for the
benefit of such Person or (d) any judgment, decision or determination of
any Governmental Authority or arbitrator, in each case applicable to or
binding upon such Person or any of its property or to which such Person
or any of its property is subject.
"Senior Funded Debt" of any Person shall mean any Funded Debt
which is not Subordinated Debt.
"Senior Indebtedness" of any Person shall mean, without
duplication:
(a) all Senior Funded Debt of such Person;
(b) all Contingent Obligations of such Person;
(c) all obligations of such Person with respect to any
synthetic leases (excluding the portion of such obligations
which are irrevocably secured by cash or cash equivalents); and
(d) all obligations of such Person with respect to any
sale, transfer or assignment of accounts receivable and related
rights and property by such Person with recourse to such Person.
"Senior Indebtedness Ratio" shall mean, with respect to any
Person at any time, the ratio, determined on a consolidated basis in
accordance with GAAP, of:
(a) The total Senior Indebtedness of such Person and its
Subsidiaries at such time;
to
(b) The sum at such time of (i) the total Senior
Indebtedness and Subordinated Debt of such Person and its
Subsidiaries at such time plus (ii) the total Tangible Net Worth
of such Person and its Subsidiaries at such time.
"Subordinated Debt" shall mean, collectively, (i) Guarantor's
$310,000,000 Five Percent (5%) Convertible Subordinated Notes due 2002,
and (ii) and any other subordinated debt permitted by clause (xi) of
Subparagraph 5(a) hereof.
"Subordinated Obligations" shall have the meaning given to that
term in Paragraph 7 hereof.
"Subsidiary" of any Person shall mean (a) any corporation of
which more than 50% of the issued and outstanding Equity Securities
having ordinary voting power to elect a majority of the Board of
Directors of such corporation (irrespective of whether at the time
capital stock of any other class or classes of
13
<PAGE> 14
such corporation shall or might have voting power upon the occurrence of
any contingency) is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other Subsidiaries, (b)
any partnership, joint venture, or other association of which more than
50% of the equity interest having the power to vote, direct or control
the management of such partnership, joint venture or other association
is at the time owned and controlled by such Person, by such Person and
one or more of the other Subsidiaries or by one or more of such Person's
other Subsidiaries or (c) any other Person included in the Financial
Statements of such Person on a consolidated basis.
"Tangible Net Worth" shall mean, with respect to any Person at
any time, the remainder at such time, determined on a consolidated basis
in accordance with GAAP, of (a) the total assets of such Person and its
Subsidiaries minus (b) the sum (without limitation and without
duplication of deductions) of (i) the total liabilities of such Person
and its Subsidiaries, (ii) all reserves established by such Person and
its Subsidiaries for anticipated losses and expenses (to the extent not
deducted in calculating total assets in clause (a) above), and (iii) all
intangible assets of such Person and its Subsidiaries (to the extent
included in calculating total assets in clause (a) above), including,
without limitation, goodwill (including any amounts, however designated
on the balance sheet, representing the cost of acquisition of businesses
and investments in excess of underlying tangible assets), trademarks,
trademark rights, trade name rights, copyrights, patents, patent rights,
licenses, unamortized debt discount, marketing expenses, organizational
expenses, non-compete agreements and deferred research and development.
"Yen" and "(Y)" shall mean the lawful currency of Japan and, in
relation to any payment under this Guaranty, same day or immediately
available funds.
(b) Other Interpretive Provisions. Unless otherwise indicated in this
Guaranty, all accounting terms used in this Guaranty shall be construed, and all
accounting and financial computations hereunder shall be computed, in accordance
with GAAP. Headings in this Guaranty are for convenience of reference only and
are not part of the substance hereof. All terms defined in this Guaranty in the
singular form shall have comparable meanings when used in the plural form and
vice versa. References in this Guaranty to any document, instrument or agreement
(i) shall include all exhibits, schedules and other attachments thereto, (ii)
shall include all documents, instruments or agreements issued or executed in
replacement thereof and (iii) shall mean such document, instrument or agreement,
or replacement or predecessor thereto, as amended, modified and supplemented
from time to time and in effect at any given time. References in this Guaranty
to any statute or other law (A) shall include any successor statute or law, (B)
shall include all rules and regulations promulgated under such statute or law
(or any successor statute or law), and (C) shall mean such statute or law (or
successor statute or law) and such rules and regulations, as amended, modified,
codified or reenacted from time to time and in effect at any given time.
References in this Guaranty to any Person in
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a particular capacity (1) shall include any permitted successors to and assigns
of such Person in that capacity and (2) shall exclude such Person individually
or in any other capacity. The words "hereof," "herein" and "hereunder" and words
of similar import when used in this Guaranty shall refer to this Guaranty as a
whole and not to any particular provision of this Guaranty. The words "include"
and "including" and words of similar import when used in this Guaranty shall not
be construed to be limiting or exclusive.
2. GUARANTY.
(a) Payment Guaranty. Guarantor unconditionally guarantees and
promises to pay and perform as and when due, whether at stated maturity,
upon acceleration or otherwise, any and all of the Guaranteed
Obligations. If any Insolvency Proceeding relating to Borrower is
commenced, Guarantor further unconditionally guarantees and promises to
pay and perform, upon the demand of Agent, any and all of the Guaranteed
Obligations (including any and all Disallowed Post-Commencement Interest
and Expenses) in accordance with the terms of the Borrower Loan
Documents, whether or not such obligations are then due and payable by
Borrower and whether or not such obligations are modified, reduced or
discharged in such Insolvency Proceeding. This Guaranty is a guaranty of
payment and not of collection.
(b) Continuing Guaranty. This Guaranty is an irrevocable
continuing guaranty of the Guaranteed Obligations which shall continue
in effect until all obligations of the Lenders to extend credit to
Borrower have terminated and all of the Guaranteed Obligations have been
fully, finally and indefeasibly paid. If any payment on any Guaranteed
Obligation is set aside, avoided or rescinded or otherwise recovered
from Agent or any Lender, such recovered payment shall constitute a
Guaranteed Obligation hereunder and, if this Guaranty was previously
released or terminated, it automatically shall be fully reinstated, as
if such payment was never made.
(c) Independent Obligation. The liability of Guarantor hereunder
is independent of the Guaranteed Obligations, and a separate action or
actions may be brought and prosecuted against Guarantor irrespective of
whether action is brought against Borrower or any other guarantor of the
Guaranteed Obligations or whether Borrower or any other guarantor of the
Guaranteed Obligations is joined in any such action or actions.
(d) Fraudulent Transfer Limitation. If, in any action to enforce
this Guaranty, any court of competent jurisdiction determines that
enforcement against Guarantor for the full amount of the Guaranteed
Obligations is not lawful under or would be subject to avoidance under
Section 548 of the United States Bankruptcy Code or any applicable
provision of any comparable law of any state or other jurisdiction, the
liability of Guarantor under this Guaranty shall be limited to the
maximum amount lawful and not subject to such avoidance.
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(e) Termination. Notwithstanding any termination of this
Guaranty in accordance with Paragraph 6 hereof, this Guaranty shall
continue to be in full force and effect and applicable to any Guaranteed
Obligations arising thereafter which arise because prior payments of
Guaranteed Obligations are rescinded or otherwise required to be
surrendered by Agent or any Lender after receipt.
3. REPRESENTATIONS AND WARRANTIES. Guarantor hereby represents and
warrants to Agent and the Lenders as follows:
(a) Due Incorporation, Qualification, Etc. Each of Guarantor and
Guarantor's Subsidiaries (i) is a corporation duly organized, validly
existing and in good standing under the laws of its state of
incorporation; (ii) has the power and authority to own, lease and
operate its properties and carry on its business as now conducted; and
(iii) is duly qualified, licensed to do business and in good standing as
a foreign corporation in each jurisdiction where the failure to be so
qualified or licensed is reasonably likely to have a Material Adverse
Effect.
(b) Authority. The execution, delivery and performance by
Guarantor of each Borrower Loan Document executed, or to be executed, by
Guarantor and the consummation of the transactions contemplated thereby
(i) are within the power of Guarantor and (ii) have been duly authorized
by all necessary actions on the part of Guarantor.
(c) Enforceability. Each Borrower Loan Document executed, or to
be executed, by Guarantor has been, or will be, duly executed and
delivered by Guarantor and constitutes, or will constitute, a legal,
valid and binding obligation of Guarantor, enforceable against Guarantor
in accordance with its terms, except as limited by bankruptcy,
insolvency or other laws of general application relating to or affecting
the enforcement of creditors' rights generally and general principles of
equity.
(d) Non-Contravention. The execution and delivery by Guarantor
of the Borrower Loan Documents executed by Guarantor and the performance
and consummation of the transactions contemplated thereby do not (i)
violate any Requirement of Law applicable to Guarantor; (ii) violate any
provision of, or result in the breach or the acceleration of, or entitle
any other Person to accelerate (whether after the giving of notice or
lapse of time or both), any Contractual Obligation of Guarantor; or
(iii) result in the creation or imposition of any Lien (or the
obligation to create or impose any Lien) upon any property, asset or
revenue of Guarantor.
(e) Approvals. No consent, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Authority
or other Person (including, without limitation, the shareholders of any
Person) is required in connection with the execution and delivery of the
Borrower Loan Documents executed by Guarantor and the performance and
consummation of the transactions contemplated thereby, except such as
have been made or obtained and are in full force and effect.
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<PAGE> 17
(f) No Violation or Default. Neither Guarantor nor any of its
Subsidiaries is in violation of or in default with respect to (i) any
Requirement of Law applicable to such Person; (ii) any Contractual
Obligation of such Person (nor is there any waiver in effect which, if
not in effect, would result in such a violation or default), where, in
each case, such violation or default is reasonably likely to have a
Material Adverse Effect. Without limiting the generality of the
foregoing, neither Guarantor nor any of its Subsidiaries (A) has
violated any Environmental Laws, (B) has any liability under any
Environmental Laws or (C) has received notice or other communication of
an investigation or is under investigation by any Governmental Authority
having authority to enforce Environmental Laws, where such violation,
liability or investigation is reasonably likely to have a Material
Adverse Effect. No Event of Default or Default has occurred and is
continuing.
(g) Litigation. No actions (including, without limitation,
derivative actions), suits, proceedings or investigations are pending
or, to the knowledge of Guarantor, threatened against Guarantor or any
of its Subsidiaries at law or in equity in any court or before any other
Governmental Authority which (i) is reasonably likely (alone or in the
aggregate) to have a Material Adverse Effect or (ii) seeks to enjoin,
either directly or indirectly, the execution, delivery or performance by
Guarantor of the Borrower Loan Documents executed by Guarantor or the
transactions contemplated thereby.
(h) Title; Possession Under Leases. Guarantor and its
Subsidiaries (i) own and have good and marketable title (without regard
to minor defects of title) to the real property owned by Guarantor and
its Subsidiaries, as reflected in the most recent Financial Statements
delivered to Agent (except those assets and properties disposed of since
the date of such Financial Statements in compliance with this Guaranty),
(ii) have valid leasehold interests in all real property leased by
Guarantor and its Subsidiaries, (iii) own and have good title (without
regard to minor defects of title) to all their other respective
properties and assets which are material to the business of Guarantor
and its Subsidiaries, as reflected in the most recent Financial
Statements delivered to Agent (except those assets and properties
disposed of since the date of such Financial Statements in compliance
with this Guaranty) and (iv) own and have good title (without regard to
minor defects of title) to all respective properties and assets acquired
by Guarantor and its Subsidiaries since such date which are material to
the business of Guarantor and its Subsidiaries (except those assets and
properties disposed of in compliance with this Guaranty). Such assets
and properties are subject to no Lien, except for Permitted Liens. Each
of Guarantor and its Subsidiaries enjoys peaceful and undisturbed
possession under all leases, except for any failure to enjoy such
possession which (alone or in the aggregate with any other such
failures) is not reasonably likely to have a Material Adverse Effect.
(i) Financial Statements. The Financial Statements of Guarantor
and its Subsidiaries which have been delivered to Agent, (i) are in
accordance with the books and records of Guarantor and its Subsidiaries,
which have been maintained in accordance with good business practice;
(ii) have been prepared in conformity with GAAP; and (iii) fairly
present the financial conditions and results of operations of Guarantor
and its Subsidiaries
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as of the date thereof and for the period covered thereby. Neither
Guarantor nor any of its Subsidiaries has any contingent obligations,
liability for taxes or other outstanding obligations which are material
in the aggregate, except as disclosed in the audited Financial
Statements of Guarantor and its Subsidiaries for the fiscal year ending
June 30, 1997, and the unaudited Financial Statements of Guarantor and
its Subsidiaries for the fiscal quarter ending March 31, 1998, furnished
by Guarantor to Agent prior to the date hereof, or in the Financial
Statements delivered to Agent and Lenders pursuant to clause (i) or (ii)
of Subparagraph 4(a) hereof.
(j) Equity Securities. As of the date of this Guaranty, the
authorized Equity Securities of Guarantor consist of ninety million
(90,000,000) shares of common stock. All outstanding Equity Securities
of Guarantor are duly authorized, validly issued, fully paid and
non-assessable. All Equity Securities of Guarantor have been offered and
sold in compliance with all federal and state securities laws and all
other Requirements of Law.
(k) No Agreements to Sell Assets, Etc. Neither Guarantor nor any
of its Subsidiaries has any legal obligation, absolute or contingent, to
any Person to sell the assets of Guarantor or any of its Subsidiaries
(other than sales in the ordinary course of business), or to effect any
merger, consolidation or other reorganization of Guarantor or any of its
Subsidiaries or to enter into any agreement with respect thereto, except
to the extent otherwise permitted pursuant to Subparagraph 5(c) and 5(d)
hereof.
(l) Employee Benefit Plans.
(i) Based on the latest valuation of each Employee
Benefit Plan that either Guarantor or any ERISA Affiliate
maintains or contributes to, or has any obligation under (which
occurred within twelve months of the date of this
representation), the aggregate benefit liabilities of such plan
within the meaning of Section 4001 of ERISA did not exceed the
aggregate value of the assets of such plan. Neither Guarantor
nor any ERISA Affiliate has any liability with respect to any
post-retirement benefit under any Employee Benefit Plan which is
a welfare plan (as defined in section 3(1) of ERISA), other than
liability for health plan continuation coverage described in
Part 6 of Title I(B) of ERISA, which liability for health plan
contribution coverage is not reasonably likely to have a
Material Adverse Effect.
(ii) Each Employee Benefit Plan complies, in both form
and operation, in all material respects, with its terms, ERISA
and the Code, and no condition exists or event has occurred with
respect to any such plan which would result in the incurrence by
either Guarantor or any ERISA Affiliate of any material
liability, fine or penalty. Each Employee Benefit Plan, related
trust agreement, arrangement and commitment of Guarantor or any
ERISA Affiliate is legally valid and binding and in full force
and effect. No Employee Benefit Plan is being audited or
investigated by any government agency or is subject to any
pending or
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threatened claim or suit. Neither Guarantor nor any ERISA
Affiliate nor any fiduciary of any Employee Benefit Plan has
engaged in a prohibited transaction under section 406 of ERISA
or section 4975 of the Code.
(iii) Neither Guarantor nor any ERISA Affiliate
contributes to or has any material contingent obligations to any
Multiemployer Plan. Neither Guarantor nor any ERISA Affiliate
has incurred any material liability (including secondary
liability) to any Multiemployer Plan as a result of a complete
or partial withdrawal from such Multiemployer Plan under Section
4201 of ERISA or as a result of a sale of assets described in
Section 4204 of ERISA. Neither Guarantor nor any ERISA Affiliate
has been notified that any Multiemployer Plan is in
reorganization or insolvent under and within the meaning of
Section 4241 or Section 4245 of ERISA or that any Multiemployer
Plan intends to terminate or has been terminated under Section
4041A of ERISA.
(m) Other Regulations. Guarantor is not subject to regulation
under the Investment Company Act of 1940, the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Interstate Commerce Act,
any state public utilities code or to any other Governmental Rule
limiting its ability to incur indebtedness.
(n) Patent and Other Rights. Guarantor and its Subsidiaries own
or license under validly existing agreements, and have the full right to
license without the consent of any other Person (or can demonstrate to
the satisfaction of the Majority Lenders the ability to obtain or
maintain), all patents, licenses, trademarks, trade names, trade
secrets, service marks, copyrights and all rights with respect thereto,
which are material to the conduct of their businesses as now conducted.
(o) Governmental Charges and Other Indebtedness. Guarantor and
its Subsidiaries have filed or caused to be filed all tax returns which
are required to be filed by them. Guarantor and its Subsidiaries have
paid, or made provision for the payment of, all taxes and other
Governmental Charges which have or may have become due pursuant to said
returns or otherwise and all other indebtedness, except such
Governmental Charges or indebtedness, if any, which are being contested
in good faith and as to which adequate reserves (determined in
accordance with GAAP) have been provided or which are not reasonably
likely to have a Material Adverse Effect if unpaid.
(p) Margin Stock. Guarantor owns no Margin Stock which, in the
aggregate, would constitute a substantial part of the assets of
Guarantor, and no proceeds of any loan under the Borrower Loan Agreement
will be used to purchase or carry, directly or indirectly, any Margin
Stock or to extend credit, directly or indirectly, to any Person for the
purpose of purchasing or carrying any Margin Stock.
(q) Subsidiaries, etc. Set forth in Schedule 3(q) (as
supplemented by Guarantor from time to time in a written notice to Agent
and the Lenders) is a complete list of all of Guarantor's Subsidiaries,
the jurisdiction of incorporation of each, and the percentage of shares
of such Subsidiary owned directly or indirectly by Guarantor (which
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in the event there is more than one class of Equity Securities and/or
Guarantor, directly or indirectly, owns less than 100% of any Equity
Securities of such Subsidiary, such information shall list the classes
of Equity Securities and/or the number and percentage of Equity
Securities owned directly or indirectly by Guarantor). Except for such
Subsidiaries, Guarantor has no Subsidiaries, is not a partner in any
partnership or a joint venturer in any joint venture.
(r) Catastrophic Events. Neither Guarantor nor any of its
Subsidiaries and none of their properties is or has been affected by any
fire, explosion, accident, strike, lockout or other labor dispute,
drought, storm, hail, earthquake, embargo, act of God or other casualty
that is reasonably likely to have a Material Adverse Effect. There are
no disputes presently subject to grievance procedure, arbitration or
litigation under any of the collective bargaining agreements, employment
contracts or employee welfare or incentive plans to which Guarantor or
any of its Subsidiaries is a party, and there are no strikes, lockouts,
work stoppages or slowdowns, or, to the best knowledge of Guarantor,
jurisdictional disputes or organizing activities occurring or threatened
which alone or in the aggregate are reasonably likely to have a Material
Adverse Effect.
(s) Burdensome Contractual Obligations, Etc. Neither Guarantor
nor any of its Subsidiaries and none of their properties is subject to
any Contractual Obligation or Requirement of Law which is reasonably
likely to have a Material Adverse Effect.
(t) No Material Adverse Effect. No event has occurred and no
condition exists which is reasonably likely to have a Material Adverse
Effect.
(u) Accuracy of Information Furnished. None of the Borrower Loan
Documents and none of the other certificates, statements or information
furnished to Agent or any Lender by or on behalf of Borrower, Guarantor
or any of its Subsidiaries in connection with the Borrower Loan
Documents or the transactions contemplated thereby contains or will
contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
4. AFFIRMATIVE COVENANTS. Until all obligations of Agent or any Lender
to extend credit to Guarantor have terminated and all of the Guaranteed
Obligations have been fully, finally and indefeasibly paid, Guarantor shall
comply, and shall cause compliance, with the following affirmative covenants,
unless Majority Lenders shall otherwise consent in writing:
(a) Financial Statements, Reports, etc. Guarantor shall furnish
to Agent for each Lender the following, each in such form and such
detail as Agent shall reasonably request (copies of which Agent shall
promptly deliver to each Lender):
(i) As soon as available and in no event later than
fifty (50) days after the last day of each fiscal quarter of
Guarantor, a copy of the Financial Statements of Guarantor and
its Subsidiaries (prepared on a consolidated basis) for such
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quarter and for the fiscal year to date, certified by the chief
executive officer, president, chief financial officer or
treasurer of Guarantor to present fairly the financial
condition, results of operations and other information reflected
therein and to have been prepared in accordance with GAAP
(subject to normal year-end audit adjustments);
(ii) As soon as available and in no event later than one
hundred (100) days after the close of each fiscal year of
Guarantor, (A) copies of the audited Financial Statements of
Guarantor and its Subsidiaries (prepared on a consolidated
basis) for such year, prepared by independent certified public
accountants of recognized national standing acceptable to Agent,
and (B) copies of the unqualified opinions (or qualified
opinions reasonably acceptable to Agent) and management letters
delivered by such accountants in connection with all such
Financial Statements;
(iii) Contemporaneously with the quarterly and year-end
Financial Statements required by the foregoing clauses (i) and
(ii), a compliance certificate (the "Compliance Certificate") of
the chief executive officer, president, chief financial officer
or treasurer of Guarantor which (A) states that no Event of
Default and no Default has occurred and is continuing, or, if
any such Event of Default or Default has occurred and is
continuing, a statement as to the nature thereof and what action
Guarantor proposes to take with respect thereto, and (B) sets
forth, for the quarter or year covered by such Financial
Statements or as of the last day of such quarter or year (as the
case may be), the calculation of the financial ratios and tests
provided in Subparagraph 5(l) hereof;
(iv) [RESERVED];
(v) As soon as possible and in no event later than five
(5) Business Days after any officer of Guarantor knows of the
occurrence or existence of (A) any Reportable Event under any
Employee Benefit Plan or Multiemployer Plan; (B) any actual
litigation or threatened litigation which has a reasonable
likelihood of leading to actual litigation, suits, claims or
disputes against Guarantor or any of its Subsidiaries involving
potential monetary damages payable by Guarantor or its
Subsidiaries of $10,000,000 or more alone and/or $20,000,000 or
more in the aggregate; (C) any other event or condition which is
reasonably likely to have a Material Adverse Effect; or (D) any
Default or Event of Default; the statement of the president or
chief financial officer of Guarantor setting forth details of
such event, condition, Default or Event of Default and the
action which Guarantor proposes to take with respect thereto;
(vi) As soon as available and in no event later than
five (5) Business Days after they are sent, made available or
filed, copies of (A) all registration statements and reports
filed by Guarantor or any of its Subsidiaries with any
securities exchange or the Securities and Exchange Commission
(including,
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without limitation, all 10-Q, 10-K and 8-K reports); (B) all
reports, proxy statements and financial statements sent or made
available by Guarantor or any of its Subsidiaries to its
security holders; and (C) all press releases and other similar
public statements concerning any material developments in the
business of Guarantor or any of its Subsidiaries made available
by Guarantor or any of its Subsidiaries to the public generally;
(vii) Contemporaneously with any Investment by Guarantor
consisting of any purchase or other acquisition of any Equity
Securities or Indebtedness of any other Person or any capital
contribution to or any other investment in any other Person
having a value in excess of $60,000,000, a pro forma Compliance
Certificate certified by the chief executive officer, president,
chief financial officer or treasurer of Guarantor which sets
forth the calculation of the financial ratios and tests provided
in Subparagraph 5(l) hereof after giving effect to any such
Investment; and
(viii) Such other instruments, agreements, certificates,
opinions, statements, documents and information relating to the
operations or condition (financial or otherwise) of Guarantor or
its Subsidiaries, and compliance by Guarantor with the terms of
this Guaranty and the other Borrower Loan Documents as Agent may
from time to time reasonably request.
(b) Books and Records. Guarantor and its Subsidiaries shall at
all times keep proper books of record and account in which full, true
and correct entries will be made of their transactions in accordance
with GAAP, or if, with respect to any Subsidiary for which United States
accounting principles are inapplicable, generally accepted accounting
principles in the jurisdiction in which such Subsidiary is organized.
(c) Inspections. Guarantor and its Subsidiaries shall permit any
Person designated by Agent or any Lender, upon reasonable notice and
during normal business hours, to visit and inspect any of the properties
and offices of Guarantor and its Subsidiaries, to examine the books and
records of Guarantor and its Subsidiaries and make copies thereof and to
discuss the affairs, finances and accounts of Guarantor and its
Subsidiaries with, and to be advised as to the same by, their officers,
auditors and accountants, all at such times and intervals as Agent or
any Lender may reasonably request; provided, however, so long as no
Default or Event of Default has occurred and is continuing, such
inspection and examination by any Lender (other than Agent) shall be at
the expense of such Lender.
(d) Insurance. Guarantor and its Subsidiaries shall:
(i) Carry and maintain insurance of the types and in the
amounts customarily carried from time to time during the term of
this Guaranty by others engaged in substantially the same
business as such Person and operating in the same geographic
area as such Person, including, but not limited to, fire, public
liability, property damage and worker's compensation; and
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(ii) Deliver to Agent from time to time, as Agent may
request, schedules setting forth all insurance then in effect.
(e) Governmental Charges and Other Indebtedness. Guarantor and
its Subsidiaries shall promptly pay and discharge when due (i) all taxes
and other Governmental Charges prior to the date upon which penalties
accrue thereon, (ii) all indebtedness which, if unpaid, could become a
Lien upon the property of Guarantor or its Subsidiaries and (iii) all
other Indebtedness which, if unpaid, is reasonably likely to have a
Material Adverse Effect, except such Indebtedness as may in good faith
be contested or disputed, or for which arrangements for deferred payment
have been made, provided that in each such case appropriate reserves are
maintained to the reasonable satisfaction of Agent.
(f) Use of Proceeds. Borrower shall not use any part of the
proceeds of any loan under the Borrower Loan Agreement, directly or
indirectly, for the purpose of purchasing or carrying any Margin Stock
or for the purpose of purchasing or carrying or trading in any
securities under such circumstances as to involve Guarantor, any Lender
or Agent in a violation of Regulations T, U or X issued by the Federal
Reserve Board.
(g) General Business Operations. Except as permitted in
Subparagraph 5(d) hereof, each of Guarantor and its Subsidiaries shall
(i) preserve and maintain its corporate existence and all of its rights,
privileges and franchises reasonably necessary to the conduct of its
business; provided, however, that from time to time, Guarantor may, in
the ordinary course of business, dissolve any Subsidiary which is not a
Material Subsidiary, so long as both immediately before and after giving
effect to such dissolution, no Default or Event of Default shall have
occurred and be continuing, (ii) conduct its business activities in
compliance with all Requirements of Law and Contractual Obligations
applicable to such Person, the violation of which is reasonably likely
to have a Material Adverse Effect, and (iii) keep all property useful
and necessary in its business in good working order and condition,
ordinary wear and tear excepted. Guarantor shall maintain its chief
executive office and principal place of business in the United States.
(h) Pari Passu Ranking. Guarantor shall take, or cause to be
taken, all actions necessary to ensure that the obligations of Guarantor
under this Guaranty are and continue to rank at least pari passu in
right of payment with all other unsecured Senior Indebtedness of
Guarantor.
5. NEGATIVE COVENANTS. Until all obligations of Agent or any Lender to
extend credit to Guarantor have terminated and all of the Guaranteed Obligations
have been fully, finally and indefeasibly paid, Guarantor shall comply, and
shall cause compliance, with the following negative covenants, unless Majority
Lenders shall otherwise consent in writing:
(a) Indebtedness. Neither Guarantor nor any of its Subsidiaries
shall create, incur, assume or permit to exist any Indebtedness except
for the following ("Permitted Indebtedness"):
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(i) The obligations of Guarantor under the Guarantor
Credit Documents;
(ii) Indebtedness of Guarantor and its Subsidiaries
listed in Schedule 5(a) hereto and existing on the date of this
Guaranty;
(iii) Indebtedness of Guarantor and its Subsidiaries
arising from the endorsement of instruments for collection in
the ordinary course of Guarantor's or a Subsidiary's business;
(iv) Indebtedness of Guarantor and its Subsidiaries for
trade accounts payable, provided that (A) such accounts arise in
the ordinary course of business and (B) no material part of any
such account is more than ninety (90) days past due (unless
subject to a bona fide dispute and for which adequate reserves
have been established);
(v) Indebtedness of Guarantor and its Subsidiaries under
interest rate protection, currency swap and foreign exchange
arrangements, provided that all such arrangements are entered
into in connection with bona fide hedging operations and not for
speculation;
(vi) Indebtedness of Guarantor and its Subsidiaries
under purchase money loans (including any synthetic leases) and
Capital Leases incurred by Guarantor or any of its Subsidiaries
to finance the acquisition by such Person of real property,
fixtures or equipment provided that in each case, (A) such
Indebtedness is incurred by such Person at the time of, or not
later than ninety (90) days after, the acquisition by such
Person of the property so financed and (B) such Indebtedness
does not exceed the purchase price of the property so financed;
(vii) Indebtedness of Guarantor and its Subsidiaries
under initial or successive refinancings of any Indebtedness
permitted by clause (ii) above, provided that (A) the principal
amount of any such refinancing does not exceed the principal
amount of the Indebtedness being refinanced and (B) the material
terms and provisions of any such refinancing (including
maturity, redemption, prepayment, default and subordination
provisions) are no less favorable to the Lenders than the
Indebtedness being refinanced;
(viii) Indebtedness of Guarantor and its Subsidiaries
with respect to surety, appeal, indemnity, performance or other
similar bonds in the ordinary course of business;
(ix) Guaranty Obligations of Guarantor in respect of
Permitted Indebtedness of its Subsidiaries;
(x) Indebtedness of Guarantor to any of its
Subsidiaries, Indebtedness of any of Guarantor's Subsidiaries to
Guarantor or Indebtedness of any of
24
<PAGE> 25
Guarantor's Subsidiaries to any of Guarantor's other
Subsidiaries, provided that any Indebtedness of Guarantor to any
of its Subsidiaries and any Indebtedness of any of Guarantor's
Subsidiaries to Guarantor shall be subject to Subparagraph 5(e)
hereof;
(xi) Unsecured Indebtedness of Guarantor which is
subordinated to the obligations of Guarantor under the Guarantor
Credit Documents, provided that the payment terms, interest rate
and subordination provisions of such Indebtedness are reasonably
acceptable to "Required Lenders" under the Guarantor Credit
Agreement;
(xii) Indebtedness of Guarantor and its Subsidiaries
with respect to the sale, transfer or assignment of accounts
receivable of Guarantor and its Subsidiaries and certain rights
and property related to the collection of or constituting
proceeds of such accounts receivable, provided that such sale,
assignment or transfer is (A) in the ordinary course of
business, (B) for cash, (C) with recourse to Guarantor or such
Subsidiary in an amount not to exceed the aggregate face amount
of the accounts receivable sold and certain additional interest
charges with respect to such Indebtedness, (D) otherwise
permitted under clause (vii) of Subparagraph 5(c) hereof, and
(E) both immediately before and after giving effect to such
Indebtedness, no Default or Event of Default shall have occurred
and be continuing; and
(xiii) Other unsecured Senior Indebtedness of Guarantor
and its Subsidiaries in addition to that otherwise permitted
above, provided that both immediately before incurring and after
giving effect to such unsecured Senior Indebtedness, Guarantor
shall be in compliance with the financial covenants set forth in
Subparagraph 5(l) hereof and no other Default or Event of
Default shall have occurred and be continuing.
(b) Liens. Neither Guarantor nor any of its Subsidiaries shall
create, incur, assume or permit to exist any Lien on or with respect to
any of its assets or property of any character, whether now owned or
hereafter acquired, except for the following ("Permitted Liens"):
(i) Liens securing the obligations of Guarantor under
the Guarantor Credit Documents;
(ii) Liens listed in Schedule 5(b) hereof and existing
on the date of this Guaranty;
(iii) Liens for taxes or other Governmental Charges not
at the time delinquent or thereafter payable without penalty or
being contested in good faith, provided that adequate reserves
for the payment thereof have been established in accordance with
GAAP;
25
<PAGE> 26
(iv) Liens of carriers, warehousemen, mechanics,
materialmen, vendors, and landlords and other similar Liens
imposed by law incurred in the ordinary course of business for
sums not overdue or being contested in good faith, provided that
adequate reserves for the payment thereof have been established
in accordance with GAAP;
(v) Deposits under workers' compensation, unemployment
insurance and social security laws or to secure the performance
of bids, tenders, contracts (other than for the repayment of
borrowed money) or leases, or to secure statutory obligations of
surety or appeal bonds or to secure indemnity, performance or
other similar bonds in the ordinary course of business;
(vi) Zoning restrictions, easements, rights-of-way,
title irregularities and other similar encumbrances, which alone
or in the aggregate are not substantial in amount and do not
materially detract from the value of the property subject
thereto or interfere with the ordinary conduct of the business
of Guarantor or any of its Subsidiaries;
(vii) Banker's Liens and similar Liens (including
set-off rights) in respect of bank deposits;
(viii) Liens on property or assets of any corporation
which becomes a Subsidiary of Guarantor after the date of this
Guaranty, provided that (A) such Liens exist at the time the
stock of such corporation is acquired by Guarantor and (B) such
Liens were not created in contemplation of such acquisition by
Guarantor;
(ix) Judgement Liens, provided that such Liens do not
have a value in excess of $5,000,000 or such Liens are released,
stayed, vacated or otherwise dismissed within sixty (60) days
after issue or levy and, if so stayed, such stay is not
thereafter removed;
(x) Rights of vendors or lessors under conditional sale
agreements, Capital Leases or other title retention agreements
(including synthetic leases), provided that, in each case, (A)
such rights secure or otherwise relate to Permitted
Indebtedness, (B) such rights do not extend to any property
other than property acquired with the proceeds of such Permitted
Indebtedness (other than cash pledged to secure obligations
under synthetic leases in an amount not to exceed, together with
any amounts pledged under clause (xiii), $53,000,000 in the
aggregate during the term of this Guaranty, provided that both
immediately before and after giving effect to any such cash
collateralization, Guarantor shall be in compliance with the
financial covenants set forth in Subparagraph 5(l) hereof and no
other Default or Event of Default shall have occurred and be
continuing) and (C) such rights do not secure any Indebtedness
other than such Permitted Indebtedness;
26
<PAGE> 27
(xi) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties
and in connection with the importation of goods in the ordinary
course of Guarantor's and its Subsidiaries' businesses;
(xii) Liens securing Indebtedness which constitutes
Permitted Indebtedness under clause (vi) of Subparagraph 5(a)
provided that, in each case, such Lien (A) covers only those
assets, the acquisition of which was financed by such Permitted
Indebtedness, and (B) secures only such Permitted Indebtedness;
(xiii) Liens securing Indebtedness which constitutes
Permitted Indebtedness under clause (xii) of Subparagraph 5(a)
hereof provided that, in each case, such Lien (A) secures only
such Permitted Indebtedness, and (B) such Liens do not extend to
any assets or property other than the assets or property sold
(other than cash pledged under certain circumstances to secure
such Permitted Indebtedness in an aggregate amount not to
exceed, together with any amounts pledged under clause (x),
$53,000,000 in the aggregate during the term of this Guaranty,
provided that both immediately before and after giving effect to
any such cash collateralization, Guarantor shall be in
compliance with the financial covenants set forth in
Subparagraph 5(1) hereof and no other Default or Event of
Default shall have occurred and be continuing);
(xiv) Liens on the property or assets of any Subsidiary
of Guarantor in favor of Guarantor or any other Subsidiary of
Guarantor;
(xv) Liens incurred in connection with the extension,
renewal or refinancing of the Indebtedness secured by the Liens
described in clause (ii) or (xii) above, provided that any
extension, renewal or replacement Lien (A) is limited to the
property covered by the existing Lien and (B) secures
Indebtedness which is no greater in amount and has material
terms no less favorable to the Lenders than the Indebtedness
secured by the existing Lien; and
(xvi) Liens on insurance proceeds in favor of insurance
companies with respect to the financing of insurance premiums.
(c) Asset Dispositions. Neither Guarantor nor any of its
Subsidiaries shall sell, lease, transfer or otherwise dispose of any of
its assets or property, whether now owned or hereafter acquired, except
for the following:
(i) Sales of inventory by Guarantor and its Subsidiaries
in the ordinary course of their businesses;
(ii) Sales of surplus, damaged, worn or obsolete
equipment or inventory for not less than fair market value;
27
<PAGE> 28
(iii) Sales or other dispositions of Investments
permitted by clause (i) of Subparagraph 5(e) hereof for not less
than fair market value;
(iv) Sales or assignments of defaulted receivables to a
collection agency in the ordinary course of business;
(v) Licenses by Guarantor or its Subsidiaries of its
patents, copyrights, trademarks, trade names and service marks
in the ordinary course of its business;
(vi) Sales or other dispositions of assets and property
by Guarantor to any of Guarantor's Subsidiaries or by any of
Guarantor's Subsidiaries to Guarantor or any of its other
Subsidiaries, provided that the terms of any such sales or other
dispositions by or to Guarantor are terms which are no less
favorable to Guarantor then would prevail in the market for
similar transactions between unaffiliated parties dealing at
arm's length;
(vii) Sales, for cash, in the ordinary course of
business of (A) accounts receivable of Guarantor's foreign
Subsidiaries and certain rights and property of Guarantor's
foreign Subsidiaries related to the collection of or
constituting proceeds of such accounts receivable, and (B)
accounts receivable of Guarantor and certain rights and property
of Guarantor related to the collection of or constituting
proceeds of such accounts receivable in an aggregate amount not
to exceed at any time twenty percent (20%) of Guarantor's
aggregate accounts receivable, as measured at the end of each
fiscal quarter of Guarantor, and in each case with respect to
the foregoing (A) and (B), with or without recourse, at a
discount rate not to exceed twenty percent (20%); and
(viii) Other sales, leases, transfers and disposals of
assets and property (other than sales, leases, transfers and
disposals of accounts receivable and related rights and property
which shall be permitted only as expressly set forth in clause
(vii) above), provided that the aggregate value of all such
assets and property (based upon the greater of the fair market
or book value of such assets and property) so sold, leased,
transferred or otherwise disposed of in any fiscal year on a
rolling aggregate basis does not exceed ten percent (10%) of
Guarantor's Tangible Net Worth as measured at the end of each
fiscal quarter of Guarantor.
(d) Mergers, Acquisitions, Etc. Neither Guarantor nor any of its
Subsidiaries shall consolidate with or merge into any other Person or
permit any other Person to merge into it, acquire or establish any
Subsidiary or acquire all or substantially all of the assets of any
other Person, except for the following:
(i) Any wholly-owned Subsidiary of Guarantor may merge
into Guarantor or any other wholly-owned Subsidiary of
Guarantor; and
(ii) Guarantor or any wholly-owned Subsidiary of
Guarantor may (A) acquire all or substantially all of the assets
of any Person, (B) any Person may
28
<PAGE> 29
merge into Guarantor or any other wholly-owned Subsidiary of
Guarantor, and (C) Guarantor or any wholly-owned Subsidiary of
Guarantor may establish or acquire Subsidiaries, provided that:
(1) in the event of any merger by any Person
into Guarantor or any wholly-owned Subsidiary of
Guarantor, Guarantor or such wholly-owned Subsidiary is
the surviving entity; and
(2) both immediately prior to and after giving
effect to such merger, acquisition or establishment of a
Subsidiary (y) the aggregate cost of any such merger,
acquisition or establishment of a Subsidiary shall not
exceed the amounts permitted under clause (ii) of
Subparagraph 5(e) hereof and (z) no Default or Event of
Default shall have occurred and be continuing.
(e) Investments. Neither Guarantor nor any of its Subsidiaries
shall make any Investment except for Investments in the following:
(i) Investments in accordance with the terms of
Guarantor's Cash Investment Guidelines as in effect on the date
of this Guaranty; and
(ii) Other Investments, provided that the aggregate
amount of such other Investments plus the aggregate cost of
assets acquired, mergers consummated and Subsidiaries
established or acquired by Guarantor and its Subsidiaries
pursuant to Subparagraph 5(d) hereof does not exceed in any
fiscal year $150,000,000 for any amounts paid in cash.
(f) Dividends, Redemptions, Etc. Neither Guarantor nor any of
its Subsidiaries shall pay any dividends or make any distributions on
its Equity Securities; return any capital to any holder of its Equity
Securities as such; make any distribution of assets, Equity Securities,
obligations or securities to any holder of its Equity Securities as
such; or set apart any sum for any such purpose. Notwithstanding the
foregoing, Guarantor may purchase, redeem, retire, defease or otherwise
acquire for value any of its Equity Securities so long as both
immediately before and after such purchase, redemption or acquisition,
no Default or Event of Default shall have occurred and be continuing and
Guarantor is in compliance with each of the financial covenants set
forth in Subparagraph 5(l) hereof.
(g) Change in Business. Neither Guarantor nor any of its
Subsidiaries shall engage, either directly or indirectly through
Affiliates, in any business substantially different from its present
business; provided, however, that Subsidiaries which are not Material
Subsidiaries may operate as holding companies or special tax purpose
entities as may be necessary for the overall operation of the business
of Guarantor and its Subsidiaries, so long as the terms of this Guaranty
and the other Borrower Loan Documents would not otherwise be violated.
29
<PAGE> 30
(h) Indebtedness Payments, Etc. Neither Guarantor nor any of its
Subsidiaries shall amend, modify or otherwise change any of the
subordination or other provisions of any document, instrument or
agreement evidencing Subordinated Debt in a manner which adversely
affects the material rights of the Agent and Lenders. Neither the
Guarantor nor any Subsidiary shall purchase, redeem or prepay any
Subordinated Debt, now or hereafter outstanding, except for any de
minimis redemption required in connection with the conversion of any
class of Subordinated Debt into equity.
(i) ERISA. Neither Guarantor nor any ERISA Affiliate shall (i)
adopt or institute any Employee Benefit Plan that is an employee pension
benefit plan within the meaning of Section 3(2) of ERISA, (ii) take any
action which will result in the partial or complete withdrawal, within
the meanings of sections 4203 and 4205 of ERISA, from a Multiemployer
Plan, (iii) engage or permit any Person to engage in any transaction
prohibited by section 406 of ERISA or section 4975 of the Code involving
any Employee Benefit Plan or Multiemployer Plan which would subject
either Guarantor or any ERISA Affiliate to any tax, penalty or other
liability including a liability to indemnify, (iv) incur or allow to
exist any accumulated funding deficiency (within the meaning of section
412 of the Code or section 302 of ERISA), (v) fail to make full payment
when due of all amounts due as contributions to any Employee Benefit
Plan or Multiemployer Plan, (vi) fail to comply with the requirements of
section 4980B of the Code or Part 6 of Title I(B) of ERISA, or (vii)
adopt any amendment to any Employee Benefit Plan which would require the
posting of security pursuant to section 401(a)(29) of the Code, where
singly or cumulatively, the above would have a Material Adverse Effect.
(j) Transactions With Affiliates. Neither Guarantor nor any of
its Subsidiaries shall enter into any Contractual Obligation with any
Affiliate or engage in any other transaction with any Affiliate except
upon terms at least as favorable to Guarantor or such Subsidiary as an
arms-length transaction with unaffiliated Persons.
(k) Accounting Changes. Neither Guarantor nor any of its
Subsidiaries shall change (i) its fiscal year (currently July 1 through
June 30) or (ii) its accounting practices except as required by GAAP.
(l) Financial Covenants.
(i) Guarantor shall not permit its Quick Ratio during
any period set forth below to be less than the ratio set forth
opposite such period below:
<TABLE>
<S> <C>
March 28, 1998 - June 30, 1999 1.50 to 1.00;
Thereafter 1.35 to 1.00.
</TABLE>
(ii) Guarantor shall not permit its Debt Service
Coverage Ratio during any period set forth below to be less than
the ratio set forth opposite such period below:
30
<PAGE> 31
<TABLE>
<S> <C>
July 1, 1999 - September 26, 1999 1.25 to 1.00;
September 27, 1999 - December 26, 1999 1.50 to 1.00;
December 27, 1999 - March 26, 2000 1.75 to 1.00;
March 27, 2000 - June 30, 2000 2.00 to 1.00;
July 1, 2000 - September 24, 2000 2.75 to 1.00;
Thereafter 3.00 to 1.00.
</TABLE>
(iii) Guarantor shall not permit its Senior Indebtedness
Ratio during any period to be greater than 0.25 to 1.00.
(iv) Guarantor shall not permit its Tangible Net Worth
on any date of determination (such date to be referred to herein
as a "determination date") which occurs after March 29, 1998
(such date to be referred to herein as the "base date") to be
less than the sum on such determination date of the following:
(A) $450,000,000;
plus
(B) Seventy-five percent (75%) of the sum of
Guarantor's consolidated quarterly net income (ignoring
any quarterly losses) for each quarter ending after the
base date through and including the quarter ending
immediately prior to the determination date;
plus
(C) One hundred percent (100%) of the Net
Proceeds of all Equity Securities issued by Guarantor
and its Subsidiaries during the period commencing on the
base date and ending on the determination date;
plus
(D) One hundred percent (100%) of the aggregate
decrease in the total liabilities of Guarantor and its
Subsidiaries resulting from conversions of convertible
Subordinated Indebtedness or other liabilities of
Guarantor and its Subsidiaries into Equity Securities of
Guarantor and its Subsidiaries during the period
commencing on the base date and ending on the
determination date.
(v) Guarantor shall not incur a cumulative net loss
(exclusive of net income) greater than $45,000,000, determined
in accordance with GAAP, for the four quarter period commencing
on July 1, 1998 and ending on June 30, 1999.
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<PAGE> 32
6. AUTHORIZATIONS, WAIVERS, ETC.
(a) Authorizations. Guarantor authorizes Agent and the Lenders,
in their discretion, without notice to Guarantor, irrespective of any
change in the financial condition of Borrower, Guarantor or any other
guarantor of the Guaranteed Obligations since the date hereof, and
without affecting or impairing in any way the liability of Guarantor
hereunder, from time to time to:
(i) Create new Guaranteed Obligations and renew,
compromise, extend, accelerate or otherwise change the time for
payment or performance of, or otherwise amend or modify the
Borrower Loan Documents or change the terms of the Guaranteed
Obligations or any part thereof, including increase or decrease
of the rate of interest thereon;
(ii) Take and hold security for the payment or
performance of the Guaranteed Obligations and exchange, enforce,
waive or release any such security; apply such security and
direct the order or manner of sale thereof; and purchase such
security at public or private sale;
(iii) Otherwise exercise any right or remedy they may
have against Borrower, Guarantor, any other guarantor of the
Guaranteed Obligations or any security, including, without
limitation, the right to foreclose upon any such security by
judicial or nonjudicial sale;
(iv) Settle, compromise with, release or substitute any
one or more makers, endorsers or guarantors of the Guaranteed
Obligations; and
(v) Assign the Guaranteed Obligations, this Guaranty or
the other Borrower Loan Documents in whole or in part to the
extent provided in the Borrower Loan Agreement and the other
Borrower Loan Documents.
(b) Waivers. Guarantor hereby waives:
(i) Any right to require Agent or any Lender to (A)
proceed against Borrower or any other guarantor of the Guaranteed
Obligations, (B) proceed against or exhaust any security received
from Borrower, Guarantor or any other guarantor of the Guaranteed
Obligations or otherwise marshall the assets of Borrower,
Guarantor or any other guarantor of the Guaranteed Obligations or
(C) pursue any other remedy in Agent's or any Lender's power
whatsoever;
(ii) Any defense arising by reason of the application by
Borrower of the proceeds of any borrowing;
(iii) Any defense resulting from the absence, impairment
or loss of any right of reimbursement, subrogation, contribution
or other right or remedy of
32
<PAGE> 33
Guarantor against Borrower, any other guarantor of the
Guaranteed Obligations or any security, whether resulting from
an election by Agent or any Lender to foreclose upon security by
nonjudicial sale, or otherwise;
(iv) Any setoff or counterclaim of Borrower or any defense
which results from any disability or other defense of Borrower or
the cessation or stay of enforcement from any cause whatsoever of
the liability of Borrower (including, without limitation, the
lack of validity or enforceability of any of the Borrower Loan
Documents);
(v) Any defense based upon any law, rule or regulation
which provides that the obligation of a surety must not be
greater or more burdensome than the obligation of the principal;
(vi) Until all obligations of Agent or any Lender to
extend credit to Borrower have terminated and all of the
Guaranteed Obligations have been fully, finally and indefeasibly
paid, any right of subrogation, reimbursement, indemnification or
contribution and other similar right to enforce any remedy which
Agent, the Lenders or any other Person now has or may hereafter
have against Borrower on account of the Guaranteed Obligations,
and any benefit of, and any right to participate in, any security
now or hereafter received by Agent, any Lender or any other
Person on account of the Guaranteed Obligations;
(vii) All presentments, demands for performance, notices
of non-performance, notices delivered under the Borrower Loan
Documents, protests, notice of dishonor, and notices of
acceptance of this Guaranty and of the existence, creation or
incurring of new or additional Guaranteed Obligations and notices
of any public or private foreclosure sale;
(viii) The benefit of any statute of limitations to the
extent permitted by law;
(ix) Any appraisement, valuation, stay, extension,
moratorium redemption or similar law or similar rights for
marshalling;
(x) Any right to be informed by Agent or any Lender of the
financial condition of Borrower or any other guarantor of the
Guaranteed Obligations or any change therein or any other
circumstances bearing upon the risk of nonpayment or
nonperformance of the Guaranteed Obligations;
(xi) Until all obligations of Agent or any Lender to
extend credit to Borrower have terminated and all of the
Guaranteed Obligations have been fully, finally and indefeasibly
paid, any right to revoke this Guaranty;
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<PAGE> 34
(xii) Any defense arising from an election for the
application of Section 1111(b)(2) of the United States Bankruptcy
Code which applies to the Guaranteed Obligations;
(xiii) Any defense based upon any borrowing or grant of a
security interest under Section 364 of the United States
Bankruptcy Code; and
(xiv) Any right it may have to a fair value hearing to
determine the size of a deficiency judgment following any
foreclosure on any security for the Guaranteed Obligations.
Without limiting the scope of any of the foregoing provisions of this
Paragraph 6, Guarantor hereby further waives (A) all rights and defenses
arising out of an election of remedies by Agent or any Lender, even
though that election of remedies, such as a nonjudicial foreclosure with
respect to security for a Guaranteed Obligation, has destroyed
Guarantor's rights of subrogation and reimbursement against Borrower by
the operation of Section 580d of the Code of Civil Procedure or
otherwise, (B) all rights and defenses Guarantor may have by reason of
protection afforded to Borrower with respect to the Guaranteed
Obligations pursuant to the antideficiency or other laws of California
limiting or discharging the Guaranteed Obligations, including, without
limitation, Section 580a, 580b, 580d, or 726 of the California Code of
Civil Procedure, and (C) all other rights and defenses available to
Guarantor by reason of Sections 2787 to 2855, inclusive, Section 2899 or
Section 3433 of the California Civil Code or Section 3605 of the
California Commercial Code.
(c) Financial Condition of Borrower, Etc. Guarantor is fully
aware of the financial condition and affairs of Borrower. Guarantor has
executed this Guaranty without reliance upon any representation,
warranty, statement or information concerning Borrower furnished to
Guarantor by Agent or any Lender and has, independently and without
reliance on Agent or any Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of the
financial condition and affairs of Borrower and of other circumstances
affecting the risk of nonpayment or nonperformance of the Guaranteed
Obligations. Guarantor is in a position to obtain, and assumes full
responsibility for obtaining, any additional information about the
financial condition and affairs of Borrower and of other circumstances
affecting the risk of nonpayment or nonperformance of the Guaranteed
Obligations and will, independently and without reliance upon Agent or
any Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own appraisals and
decisions in taking or not taking action in connection with this
Guaranty.
7. SUBORDINATION. Guarantor hereby subordinates any and all debts,
liabilities and obligations owed to Guarantor by Borrower (the "Subordinated
Obligations") to the Guaranteed Obligations as provided in this Paragraph 7.
34
<PAGE> 35
(a) Prohibited Payments, Etc. Until the occurrence of a Default
or an Event of Default or any default by Guarantor hereunder, Guarantor
may receive regularly scheduled payments from Borrower on account of
Subordinated Obligations. After the occurrence and during the
continuance of any Default or Event of Default or any default by
Guarantor hereunder (including the commencement and continuation of any
Insolvency Proceeding relating to Borrower), however, unless Agent
otherwise agrees, Guarantor shall not demand, accept or take any action
to collect any payment on account of the Subordinated Obligations.
(b) Prior Payment of Guaranteed Obligations. In any Insolvency
Proceeding relating to Borrower, Guarantor agrees that Agent and the
Lenders shall be entitled to receive payment of all Guaranteed
Obligations (including any and all Disallowed Post-Commencement Interest
and Expenses) before Guarantor receives payment of any Subordinated
Obligations.
(c) Turn-Over. After the occurrence and during the continuance of
any Default or Event of Default (including the commencement and
continuation of any Insolvency Proceeding relating to Borrower),
Guarantor shall, if Agent so requests, collect, enforce and receive
payments on account of the Subordinated Obligations as trustee for Agent
and the Lenders and deliver such payments to Agent on account of the
Guaranteed Obligations (including any and all Disallowed
Post-Commencement Interest and Expenses), together with any necessary
endorsements or other instruments of transfer, but without reducing or
affecting in any manner the liability of Guarantor under the other
provisions of this Guaranty.
(d) Agent Authorization. After the occurrence and during the
continuance of any Default or Event of Default or any default by
Guarantor hereunder (including the commencement and continuation of any
Insolvency Proceeding relating to Borrower), Agent is authorized and
empowered (but without any obligation to so do), in its discretion, (i)
in the name of Guarantor, to collect and enforce, and to submit claims
in respect of, Subordinated Obligations and to apply any amounts
received thereon to the Guaranteed Obligations (including any and all
Disallowed Post-Commencement Interest and Expenses), and (ii) to require
Guarantor (A) to collect and enforce, and to submit claims in respect
of, Subordinated Obligations and (B) to pay any amounts received on such
obligations to Agent for application to the Guaranteed Obligations
(including any and all Disallowed Post-Commencement Interest and
Expenses).
8. MISCELLANEOUS.
(a) Notices. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or
upon Guarantor or Agent under this Guaranty or the other Borrower Loan
Documents shall be in writing and faxed, mailed or delivered to
Guarantor or Agent at its respective facsimile number or address set
forth below or (or to such other facsimile number or address for either
party as
35
<PAGE> 36
indicated in any notice given by that party to the other party). All
such notices and communications shall be effective (i) when sent by any
overnight courier service of recognized standing, on the second Business
Day following the deposit with such service; (ii) when mailed, first
class postage prepaid and addressed as aforesaid through the United
States Postal Service or registered mail through the Japanese Post
Office, upon receipt; (iii) when delivered by hand, upon delivery; and
(iv) when faxed, upon confirmation of receipt.
Agent: ABN AMRO Bank N.V.
Tokyo Branch
13F, Shiroyama JT Mori Building
4-3-1, Toranomon, Minato-ku
Tokyo 105
Japan
Attn: Structured Finance
Tel: 81-3-5405-6503
Fax: 81-3-5405-6903/6902
With a copy to:
ABN AMRO Bank N.V.
San Francisco International Branch
101 California Street, Suite 4550
San Francisco, CA 94111-5812
U.S.A.
Attn: Robin S. Yim
Tel: (415) 984-3710
Fax: (415) 362-3524
36
<PAGE> 37
Borrower: Lam Research Corporation
4650 Cushing Parkway
Fremont, CA 94538
U.S.A.
Attn: Brian Sereda
Telephone: (510) 572-4888
Fax No: (510) 572-1586
(b) Payments.
(i) Guarantor shall make all payments required hereunder
to Agent, or its order, at Agent's office located at the address
set forth in Subparagraph 8(a) hereof, or at such other office as
Agent may designate, on demand, in lawful money as provided in
clause (ii) below and in same day or immediately available funds
not later than 11:00 a.m. (Tokyo time) on the date due.
(ii) Guarantor shall make all payments of the Guaranteed
Obligations hereunder in the currency in which such Guaranteed
Obligations are required to be paid by Borrower pursuant to the
Borrower Loan Documents and shall make all other payments
hereunder in Yen or Dollars, as Agent may specify; provided,
however, that, if Agent shall request Guarantor to pay any amount
hereunder which would otherwise be payable in another currency in
the lawful currency of the United States, Guarantor shall pay to
Agent the Dollar Equivalent of such amount.
(iii) If any sum due from Guarantor under this Guaranty or
any other Borrower Loan Document to which Guarantor is a party or
any order, judgment or award given or rendered in relation hereto
or thereto has to be converted from the currency (the "first
currency") in which the same is payable hereunder or thereunder
into another currency (the "second currency") for the purpose of
(A) making or filing a claim or proof against Guarantor with any
Governmental Authority, (B) obtaining an order or judgment in any
court or other tribunal or (C) enforcing any order or judgment
given or made in relation hereto, Guarantor shall, to the fullest
extent permitted by law, indemnify and hold harmless each of the
Persons to whom such sum is due from and against any loss
suffered as a result of any discrepancy between (1) the rate of
exchange used for such purpose to convert the amounts in question
from the first currency into the second currency and (2) the rate
or rates of exchange at which such Person may, using reasonable
efforts in the ordinary course of business, purchase the first
currency with the second currency upon receipt of a sum paid to
it in satisfaction, in whole or in part, of any such order,
judgment, claim or proof. The foregoing indemnity shall
constitute a separate obligation of Guarantor distinct from its
other obligations hereunder and
37
<PAGE> 38
shall survive the giving or making of any judgment or order in
relation to all or any of such obligations.
(iv) If any amounts required to be paid by Guarantor under
this Guaranty or any order, judgment or award given or rendered
in relation hereto remain unpaid after such amounts are due,
Guarantor shall pay interest on the aggregate, outstanding
balance of such amounts from the date due until those amounts are
paid in full at a per annum rate equal to:
(A) In the case of amounts payable in Yen, the
Overnight Rate plus two percent (2.0%), such rate to
change from time to time as the Overnight Rate shall
change; or
(B) In the case of amounts payable in Dollars, the
Base Rate plus two percent (2.00%), such rate to change
from time to time as the Base Rate shall change.
(c) Expenses. Guarantor shall pay on demand (i) all reasonable
fees and expenses, including reasonable attorneys' fees and expenses,
incurred by Agent in connection with the preparation, execution and
delivery of, and the exercise of its duties under, this Guaranty and the
preparation, execution and delivery of amendments and waivers hereunder
and (ii) all reasonable fees and expenses, including reasonable
attorneys' fees and expenses, incurred by Agent and the Lenders in
connection with the enforcement or attempted enforcement of this
Guaranty or any of the Guaranteed Obligations or in preserving any of
Agent's or the Lenders' rights and remedies (including, without
limitation, all such fees and expenses incurred in connection with any
"workout" or restructuring affecting the Borrower Loan Documents or the
Guaranteed Obligations or any bankruptcy or similar proceeding involving
Guarantor, Borrower or any of their affiliates).
(d) Waivers; Amendments. This Guaranty may not be amended or
modified, nor may any of its terms be waived, except by written
instruments signed by Guarantor and Agent. Each waiver or consent under
any provision hereof shall be effective only in the specific instances
for the purpose for which given. No failure or delay on Agent's or any
Lender's part in exercising any right hereunder shall operate as a
waiver thereof or of any other right nor shall any single or partial
exercise of any such right preclude any other further exercise thereof
or of any other right.
(e) Assignments. This Guaranty shall be binding upon and inure to
the benefit of Agent, the Lenders and Guarantor and their respective
successors and assigns; provided, however, that Guarantor may not assign
or transfer any of its rights and obligations under this Guaranty
without the prior written consent of Agent and the Lenders, and,
provided, further, that Agent or any Lender may sell, assign and
delegate their respective rights and obligations hereunder only as
permitted by the Borrower Loan Agreement. All references in this
Guaranty to any Person shall be deemed to include all permitted
successors and assigns of such Person.
38
<PAGE> 39
(f) Cumulative Rights, etc. The rights, powers and remedies of
Agent and the Lenders under this Guaranty shall be in addition to all
rights, powers and remedies given to Agent and the Lenders by virtue of
any applicable Governmental Rule, the Borrower Loan Agreement, any other
Borrower Loan Document or any other agreement (including any other
guaranty), all of which rights, powers, and remedies shall be cumulative
and may be exercised successively or concurrently without impairing
Agent's or any Lender's rights hereunder.
(g) Payments Free of Taxes, Etc. All payments made by Guarantor
under this Guaranty shall be made by Guarantor free and clear of and
without deduction for any and all present and future taxes, levies,
charges, deductions and withholdings. In addition, Guarantor shall pay
upon demand any stamp or other taxes, levies or charges of any
jurisdiction with respect to the execution, delivery, registration,
performance and enforcement of this Guaranty. If any taxes, levies,
charges or other amounts are required to be withheld from any amounts
payable to Agent or any Lender hereunder, the amounts so payable to
Agent or such Lender shall be increased to the extent necessary to yield
to Agent or such Lender (after payment of all such amounts) any such
amounts payable hereunder in the amounts specified in this Guaranty.
Upon request by Agent or any Lender, Guarantor shall furnish evidence
satisfactory to Agent or such Lender that all requisite authorizations
and approvals by, and notices to and filings with, governmental
authorities and regulatory bodies have been obtained and made and that
all requisite taxes, levies and charges have been paid.
(h) Partial Invalidity. If at any time any provision of this
Guaranty is or becomes illegal, invalid or unenforceable in any respect
under the law or any jurisdiction, neither the legality, validity or
enforceability of the remaining provisions of this Guaranty nor the
legality, validity or enforceability of such provision under the law of
any other jurisdiction shall in any way be affected or impaired thereby.
(i) Governing Law, Consent to Jurisdiction, Etc.
(i) This Guaranty shall be governed by and construed in
accordance with the laws of the State of California without
reference to conflicts of law rules.
(ii) Guarantor irrevocably submits to the non-exclusive
jurisdiction of the courts of the State of California and the
courts of the United States of America located in the Northern
District of California and agrees that any legal action, suit or
proceeding arising out of or relating to this Guaranty may be
brought against such party in any such courts. Final judgment
against Guarantor in any such action, suit or proceeding shall be
conclusive and may be enforced in any other jurisdiction by suit
on the judgment, a certified or exemplified copy of which shall
be conclusive evidence of the judgment, or in any other manner
provided by law. Nothing in this Subparagraph 8(i) shall affect
the right of Agent or any Lender to commence legal proceedings or
otherwise sue Guarantor in any other appropriate jurisdiction, or
concurrently in more than one jurisdiction, or to serve process,
39
<PAGE> 40
pleadings and other papers upon Guarantor in any manner
authorized by the laws of any such jurisdiction.
(iii) Guarantor irrevocably consents to service of process
of summons, complaint and other legal process in any action, suit
or proceeding arising out of or relating to this Guaranty being
made out of the courts designated in clause (ii) above by mailing
copies of the papers by registered United States air mail,
postage prepaid, to Guarantor at its address specified in
Subparagraph 8(a). In such a case, any serving party shall also
send by telex or facsimile, or have sent by telex or facsimile, a
copy of the papers to the served party. Service in the manner
provided in this clause (iii) in any such action, suit or
proceeding will be deemed personal service, will be accepted by
the served party as such and will be valid and binding upon such
party for all purposes of any such action, suit or proceeding.
(j) Jury Trial. EACH OF GUARANTOR, THE LENDERS AND AGENT, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY
ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
GUARANTY.
[The signature page follows.]
40
<PAGE> 41
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed as
of the day and year first above written.
LAM RESEARCH CORPORATION
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
41
<PAGE> 42
SCHEDULE 3(g)
SUBSIDIARIES
3(q)-1
<PAGE> 43
SCHEDULE 5(a)
EXISTING INDEBTEDNESS
5(a)-1
<PAGE> 44
SCHEDULE 5(b)
EXISTING LIENS
5(b)-1
<PAGE> 1
EXHIBIT 10.60
SECOND ADDENDUM TO EMPLOYMENT AGREEMENT
This Second Addendum to Employment Agreement (the "Second Addendum")
is made and effective this 1st day of September, 1998, by and between Roger D.
Emerick (the "Executive") and Lam Research Corporation (the "Company").
R E C I T A L S
A. The Executive is currently employed by the Company pursuant to an
Employment Agreement entered into by the parties effective as of July 1, 1996,
and as amended by Addendum dated June 26, 1997 (the "Employment Agreement"). The
Executive currently also serves as Chairman of the Company's Board of Directors.
B. Section 1(a) of the Employment Agreement provides, inter alia, that
the Company shall use its best efforts to elect the Executive as a director of
the Company and as Chairman of the Board of Directors. Section 3(a) identifies
certain Base Compensation payable to the Executive during the Employment Period.
Sections 8(d) and (e) identify certain circumstances which may constitute
termination, involuntary or otherwise, of the Executive's responsibilities and
trigger an acceleration of certain benefits or a change in the Executive's
employment status with the Company.
C. The Executive has tendered his voluntary resignation as Chairman of
the Board of Directors, effective September 1, 1998, and wishes to release the
Company from any further obligation or commitment to use efforts to elect him in
the future to the position as Chairman.
D. The Company and the Executive desire to amend further the Employment
Agreement to provide for the Executive's continued employment by the Company
following his resignation as Chairman of the Board of Directors.
<PAGE> 2
E. Capitalized terms used in this Second Addendum and not otherwise
defined herein shall have the meanings ascribed to them in the Employment
Agreement.
In consideration of the mutual covenants herein contained, and for
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties agree that the Employment Agreement shall be and is
amended as follows:
1. Duties and Scope of Employment.
(a) The Executive shall continue as an employee of the Company
with, notwithstanding the provisions of the first sentence of Section 1(a) of
the Employment Agreement, such strategic, senior level duties and
responsibilities as the Company's Chief Executive Officer may from time to time
reasonably assign to the Executive.
(b) The Company shall continue to use its best efforts to elect
the Executive as a director of the Company. However, notwithstanding the
provisions of the second sentence of Section 1(a) of the Employment Agreement,
the Company shall be relieved of any obligation or commitment to use its efforts
to elect the Executive as Chairman of the Board of Directors.
2. Compensation and Benefits.
(a) Notwithstanding the provisions of the first sentence of
Section 3(a) of the Employment Agreement, during the Employment Period, and
commencing as of September 1, 1998, the Company shall pay the Executive as
compensation for services a base salary equivalent on an annualized basis to the
fee identified in Section 6(a) of the Employment Agreement.
3. Survival. Except as otherwise provided herein, the terms and
conditions of the Employment Agreement shall remain in full force and effect.
Notwithstanding the provision of Section 8(d) of the Employment Agreement,
nothing herein or hereby shall
<PAGE> 3
be deemed or have the effect of a material breach of the Employment Agreement or
otherwise constitute an "Involuntary Termination."
4. Counterparts. This Second Addendum may be executed in
counterparts, each of which shall be deemed an original, but both of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Second
Addendum, in the case of the Company, by its duly authorized officer or
representative, as of the day and year first above written.
COMPANY: LAM RESEARCH CORPORATION
By:
------------------------------------
Its:
EXECUTIVE: /S/
--------- --------------------------
Roger D. Emerick
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF OPERATIONS, THE CONSOLIDATED BALANCE SHEET AND THE
ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 129,841
<SECURITIES> 209,999
<RECEIVABLES> 157,677
<ALLOWANCES> 5,102
<INVENTORY> 214,233
<CURRENT-ASSETS> 825,416
<PP&E> 298,392
<DEPRECIATION> 160,862
<TOTAL-ASSETS> 1,070,038
<CURRENT-LIABILITIES> 243,309
<BONDS> 310,000
0
0
<COMMON> 39
<OTHER-SE> 495,045
<TOTAL-LIABILITY-AND-EQUITY> 1,070,038
<SALES> 142,137
<TOTAL-REVENUES> 142,199
<CGS> 92,043
<TOTAL-COSTS> 168,993
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,871
<INCOME-PRETAX> (26,772)
<INCOME-TAX> 0
<INCOME-CONTINUING> (26,772)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (26,772)
<EPS-PRIMARY> (0.70)
<EPS-DILUTED> (0.70)
</TABLE>
