<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 DECEMBER 31, 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 December 31, 1998 there were 38,404,364 shares of Registrant's Common
Stock outstanding.
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
Page
No.
----
<S> <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 ....................................10
Liquidity and Capital Resources ..........................15
Risk Factors............................................. 15
Item 3. Quantitative and Qualitative Disclosures about Market
Risk ...........................................................21
PART II. OTHER INFORMATION ..............................................22
Item 1. Legal Proceedings ..............................................22
Item 4. Submission of Matters to Vote of Security Holders ..............22
Item 6. Exhibits and Reports on Form 8-K ...............................23
</TABLE>
2
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
<TABLE>
<CAPTION>
December 31,
1998 June 30,
(unaudited) 1998
----------- -----------
<S> <C> <C>
Assets
Cash and cash equivalents $ 44,000 $ 13,509
Short-term investments 267,510 383,647
Accounts receivable, net 141,421 176,029
Inventories 191,254 220,610
Prepaid expenses and other assets 43,639 25,809
Deferred income taxes 77,485 77,485
----------- -----------
Total Current Assets 765,309 897,089
Equipment and leasehold improvements, net 107,912 144,252
Restricted cash 51,357 51,357
Other assets 55,088 58,074
----------- -----------
$ 979,666 $ 1,150,772
=========== ===========
Liabilities and Stockholders' Equity
Trade accounts payable $ 31,214 $ 67,703
Accrued expenses and other current liabilities 186,031 208,442
Current portion of long-term debt and capital lease obligations 11,925 17,364
----------- -----------
Total Current Liabilities 229,170 293,509
Long-term debt and capital lease obligations, less current portion 337,486 334,174
----------- -----------
Total Liabilities 566,656 627,683
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 38,404 shares at December 31, 1998 and 38,267 shares
at June 30, 1998 38 38
Additional paid-in capital 381,033 381,011
Accumulated other comprehensive income (loss) (268) 295
Retained earnings 32,207 141,745
----------- -----------
Total Stockholders' Equity 413,010 523,089
----------- -----------
$ 979,666 $ 1,150,772
=========== ===========
</TABLE>
- ------------------------
See Notes to condensed consolidated financial statements.
3
<PAGE> 4
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------------- --------------------------
December 31, December 31,
-------------------------- --------------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Total revenue $ 141,895 $ 292,056 $ 284,094 $ 581,982
Costs and expenses:
Cost of goods sold 94,803 178,960 186,846 355,900
Research and development 33,992 54,474 69,106 108,651
Selling, general and administrative 37,578 53,455 79,414 106,659
Restructuring charge 53,372 -- 53,372 --
Purchased technology for
research and development 5,000 -- 5,000 --
Merger costs -- -- -- 17,685
--------- --------- --------- ---------
Operating income (loss) (82,850) 5,167 (109,644) (6,913)
Other (income) expense, net (84) 466 (106) 1,264
--------- --------- --------- ---------
Income (loss) before taxes (82,766) 4,701 (109,538) (8,177)
Income taxes -- 1,176 -- 470
--------- --------- --------- ---------
Net income (loss) $ (82,766) $ 3,525 $(109,538) $ (8,647)
========= ========= ========= =========
Net income (loss) per share
Basic $ (2.16) $ 0.09 $ (2.85) $ (0.23)
========= ========= ========= =========
Diluted $ (2.16) $ 0.09 $ (2.85) $ (0.23)
========= ========= ========= =========
Number of shares used in
per share calculations
Basic 38,400 38,000 38,400 37,800
========= ========= ========= =========
Diluted 38,400 38,600 38,400 37,800
========= ========= ========= =========
</TABLE>
See Notes to condensed consolidated financial statements.
4
<PAGE> 5
LAM RESEARCH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
------------------------------
December 31, December 31,
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (109,538) $ (8,647)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization 28,792 32,111
Deferred taxes -- 1,976
Restructuring 34,141 --
Change in certain working capital
accounts (21,322) (17,559)
----------- -----------
Net cash provided by (used in) operating
activities (67,927) 7,881
Cash flows from investing activities:
Capital expenditures, net (17,137) (22,851)
Purchase of short-term investments (1,665,335) (5,573,042)
Sale/maturities of short-term investments 1,781,472 5,202,203
Other 6,350 (1,295)
----------- -----------
Net cash provided by (used in)
investing activities 105,350 (394,985)
----------- -----------
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 3,959 14,277
Net proceeds from issuance of
long-term debt 12,076 301,000
Principal payments on long-term debt
and capital lease obligations (18,467) (12,821)
Foreign currency translation adjustment (563) (166)
----------- -----------
Net cash provided by (used in) financing
activities (6,932) 267,290
----------- -----------
Net increase (decrease) in cash and
cash equivalents 30,491 (119,814)
Cash and cash equivalents at beginning
of period 13,509 140,872
----------- -----------
Cash and cash equivalents at end of
period $ 44,000 $ 21,058
=========== ===========
</TABLE>
See Notes to condensed consolidated financial statements.
5
<PAGE> 6
LAM RESEARCH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 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>
December 31, June 30,
(in thousands) 1998 1998
------------ --------
<S> <C> <C>
Raw materials $150,838 $147,794
Work-in-process 33,641 52,374
Finished goods 6,775 20,442
-------- --------
$191,254 $220,610
======== ========
</TABLE>
NOTE C -- EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements consist of the following:
<TABLE>
<CAPTION>
December 31, June 30,
(in thousands) 1998 1998
------------ ---------
<S> <C> <C>
Equipment $ 112,554 $ 139,358
Furniture & fixtures 52,176 60,353
Leasehold improvements 76,440 95,075
--------- ---------
241,170 294,786
Accumulated depreciation and
amortization (133,258) (150,534)
--------- ---------
$ 107,912 $ 144,252
========= =========
</TABLE>
6
<PAGE> 7
NOTE D -- OTHER (INCOME) EXPENSE, NET
The significant components of other (income) expense, net are as
follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
(in thousands) December 31, December 31,
------------------------ ------------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest expense $ 5,121 $ 5,302 $ 9,992 $ 8,018
Interest income (5,853) (6,280) (11,785) (9,479)
Other 648 1,444 1,687 2,725
-------- -------- -------- --------
$ (84) $ 466 $ (106) $ 1,264
======== ======== ======== ========
</TABLE>
NOTE E -- NET INCOME (LOSS) PER SHARE
All net income (loss) amounts for all periods have been presented to
conform to the FAS 128 requirements. Basic net income (loss) per share is
calculated using the weighted average number of shares of common stock
outstanding during the period. Diluted net income (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 was excluded from diluted earnings per share because its
effect would have been antidilutive. Options were outstanding during the three
month period ended December 31, 1998 and the six month periods ended December
31, 1998 and December 31, 1997, respectively, but were excluded from the
computation of diluted net income (loss) per share because the effect in periods
with a net loss would have been antidilutive. The Company's basic and diluted
net income (loss) per share amounts, as calculated according to FAS 128, are as
follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
----------------------- -------------------------
(in thousands, except per share data) 1998 1997 1998 1997
-------- ------- --------- --------
<S> <C> <C> <C> <C>
Numerator:
Numerator for basic net income (loss) per share $(82,766) $ 3,525 $(109,538) $ (8,647)
-------- ------- --------- --------
Numerator for diluted net income (loss) per
share $(82,766) $ 3,525 $(109,538) $ (8,647)
-------- ------- --------- --------
Denominator:
Basic net income (loss) per share - average
shares outstanding 38,400 38,000 38,400 37,800
-------- ------- --------- --------
Effect of potential dilutive securities:
Employee stock options -- 600 -- --
-------- ------- --------- --------
Potential dilutive common shares -- 600 -- --
-------- ------- --------- --------
Diluted net income (loss) per share - average
shares outstanding and assumed conversions 38,400 38,600 38,400 37,800
-------- ------- --------- --------
Basic net income (loss) per share $ (2.16) $ 0.09 $ (2.85) $ (0.23)
======== ======= ========= ========
Diluted net income (loss) per share $ (2.16) $ 0.09 $ (2.85) $ (0.23)
======== ======= ========= ========
</TABLE>
7
<PAGE> 8
NOTE F -- COMPREHENSIVE INCOME (LOSS)
As of July 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 13, "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 income (loss) or stockholders' equity. FAS 130 requires that
unrealized gains or losses on available-for-sale securities and foreign currency
translation adjustments are to be included in other comprehensive income (loss).
Prior to adoption, unrealized gains and losses and foreign currency translation
adjustments were reported by the Company as a component of stockholders' equity.
The components of comprehensive income (loss), net of tax, are as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
(in thousands) December 31, December 31,
----------------------- ------------------------
1998 1997 1998 1997
-------- ------- --------- -------
<S> <C> <C> <C> <C>
Net income (loss) $(82,766) $ 3,525 $(109,538) $(8,647)
Foreign currency translation adjustment 442 (124) (563) (166)
-------- ------- --------- -------
Comprehensive income (loss) $(82,324) $ 3,401 $(110,101) $(8,813)
======== ======= ========= =======
</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 quarter ended December 31, 1998, in response to continued
deterioration of the semiconductor equipment market and continued decline in
product revenues, the Company announced plans to reduce its workforce and
eliminate additional facilities and fixed assets. The Company recorded a
restructuring charge of $53.4 million, relating primarily to severance
compensation and benefits, the write-off of facilities and fixed assets and
other restructuring charges. At December 31, 1998, $14.1 million of the charge
remained accrued on the balance sheet. During the quarter ended December 31,
1998, the Company made approximately $5.1 million of cash payments relating
primarily to severance and benefits. At December 31, 1998, the Company has
approximately $14.1 million of remaining future cash payments relating to the
restructuring charge taken during the second quarter of fiscal 1999. There will
be further charges against the restructuring reserves established during the
second quarter of fiscal 1999 during the remainder of fiscal 1999 and into
fiscal 2000, as the Company completes this restructuring program.
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. During fiscal 1998, the Company recorded a total restructuring
charge of
8
<PAGE> 9
$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 December 31, 1998, $27.2 million of the charge remains accrued on the balance
sheet. During the six month period ended December 31, 1998, the Company made
approximately $20.7 million of cash payments in connection with those fiscal
1998 charges, relating primarily to severance benefits and rent on idle
facilities. At December 31, 1998, the Company has approximately $24.8 million of
future cash payments relating to the fiscal 1998 restructurings. There will be
further charges against the restructuring reserves established in fiscal 1998
during the remainder of fiscal 1999 and into fiscal 2000, as the Company
completes this restructuring program.
Restructuring activity:
<TABLE>
<CAPTION>
Facilities
Severance and Excess and
and Fixed Obsolete Other 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
Additional restructuring provision 16,521 29,266 -- 7,585 53,372
Spending and charges 24,408 30,107 -- 6,000 60,515
------- ------- ------- ------- --------
Balance at December 31, 1998 $22,664 $14,639 $ -- $ 3,997 $ 41,300
======= ======= ======= ======= ========
</TABLE>
NOTE H -- DEBT
During the quarter ended September 30, 1998, the Company renegotiated a
replacement facility for a Yen 1.7 billion yen-denominated loan ($12.6 million),
reducing the amount of available borrowing to Yen 1.4 billion ($12.1 million at
December 31, 1998). 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.
During the quarter ended December 31, 1998, the Company also amended its
Credit Agreement and revised some of its financial covenant requirements.
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 Securities Exchange Act of
1934, 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
9
<PAGE> 10
and objectives for current and future operations of the Company, the effects of
the Company's on-going restructuring and consolidation of operations and
facilities, the ability of the Company to complete restructurings 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 three and six
months ended December 31, 1998.
Results of Operations
Net sales for both the three and six month periods ended December 31,
1998 decreased 51% compared to the comparable periods of the prior fiscal year.
The Company experienced decreased revenues for all of its product lines during
both the three and six month periods of fiscal 1999 compared to the year-ago
periods.
Geographic breakdown of revenue is as follows:
<TABLE>
<CAPTION>
Three months ended Six Months ended
December 31, December 31,
------------------- -------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
North America 51% 44% 54% 46%
Europe 22% 19% 21% 15%
Asia Pacific 19% 32% 17% 32%
Japan 8% 5% 8% 7%
</TABLE>
The global semiconductor industry has been experiencing a worldwide
slowdown in equipment demand which was brought on by depressed DRAM pricing,
production overcapacity as well as uncertainty in the worldwide financial
markets. However, the Company anticipates that net sales may increase slightly
during the third or fourth quarters of fiscal 1999, compared to the quarter
ended December 31, 1998, as the Company sees signs of increased order activity
in the semiconductor industry.
Gross margin percentage declined to 33.2% and 34.2%, respectively, in
the three and six month periods ended December 31, 1998, compared with 38.7% and
38.8%, respectively, for the year-ago periods. The lower overall gross margin
percentage is a result of competitive pricing
10
<PAGE> 11
pressures and excess manufacturing capacity resulting from the Company's lower
volume of sales.
Research and development ("R&D") expenses for the three and six month
periods ended December 31, 1998 were 37.6% and 36.4%, lower than the year-ago
periods, respectively. As a percentage of total revenue R&D expenses for the
three and six month periods ended December 31, 1998 increased to 24.0% and
24.3%, respectively, of total revenue compared to 18.7% of total revenue for
both the three and six month periods of the prior fiscal year. The decrease in
R&D expenses is a result of the Company's program to exit from its FPD and CVD
operations. However, the Company will continue to invest heavily in strategic
R&D programs and initiatives in etch and CMP.
Selling, general and administrative ("SG&A") expenses decreased by 29.7%
and 25.5%, respectively, for the three and six month periods of fiscal 1999 when
compared to the year-ago period. The decrease in SG&A expenses is a result of
the Company's restructurings in both fiscal 1998 and 1999. The Company continues
to monitor closely its expenditures and capital spending relative to revenue
levels.
During the quarter ended December 31, 1998, in response to continued
deterioration of the semiconductor equipment market and continued decline in
product revenues, the Company announced plans to reduce its workforce and
eliminate additional facilities and fixed assets. The Company recorded a
restructuring charge of $53.4 million, relating primarily to severance
compensation and benefits, the write-off of facilities and fixed assets and
other restructuring charges. At December 31, 1998, $14.1 million of the charge
remained accrued on the balance sheet. During the quarter ended December 31,
1998, the Company made approximately $5.1 million of cash payments relating
primarily to severance and benefits. At December 31, 1998, the Company has
approximately $14.1 million of remaining future cash payments relating to the
restructuring charge taken during the second quarter of fiscal 1999. There will
be further charges against the restructuring reserves established during the
second quarter of fiscal 1999 during the remainder of fiscal 1999 and into
fiscal 2000, as the Company completes this restructuring program.
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 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.
During fiscal 1998, 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 December
31, 1998, $27.2 million of the charge remains accrued on the balance sheet.
During the six month period ended December 31, 1998, the Company made
approximately $20.7 million of cash payments in connection with those fiscal
1998 charges, relating primarily to severance benefits and rent on idle
facilities. At December 31, 1998, the Company has approximately $24.8 million of
future cash payments relating to the restructurings. There will be further
charges against the restructuring reserves established in fiscal 1998 during the
remainder of fiscal 1999 and into fiscal 2000, as the Company completes this
restructuring program.
11
<PAGE> 12
During the third quarter of fiscal 1998, Lam purchased a non-exclusive
license for Trikon's MRI(TM) source technology. Lam recorded a charge of $12.1
million for the license and for the purchase of an R&D system from Trikon. The
technology was acquired for use in a discrete technology development project and
has no alternative future uses in other development projects. The results of
this ongoing development effort have not yet to date reached technological
feasibility. Pursuant to the license and achievement of certain milestones, $5.0
million in additional fees became due and payable under the agreement during the
second quarter of fiscal 1999 (separate from royalties owed on any shipments of
MRI source-based systems, determined by rates prescribed in the license). During
the quarter ended December 31, 1998, the Company recorded the additional $5.0
million of fees as a result of this obligation.
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 related to investment advisory fees, legal and accounting fees,
financial printing costs and other merger-related costs.
Other (income) and expenses, net increased $0.5 million and $1.4
million, respectively, during the three and six month periods of fiscal 1999,
compared to the year-ago periods. 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 six months of fiscal 1999, the Company's rate of return on its investments
exceeded the interest rate it pays on the Notes. During the three and six month
periods ended December 31, 1997, the Company recorded higher foreign currency
translation losses, primarily due to the exchange rate fluctuations in Korea and
Taiwan.
Due to tax benefits for the Company's significant tax loss and credit
carryovers being recorded in future periods, Lam did not record any tax benefit
during the first six months of fiscal 1999.
The Company 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
met all related legal requirements by January 1, 1999, and expects to meet all
legal requirements 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
12
<PAGE> 13
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 internal 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 internal systems, the Company has identified all
critical systems necessary to the Company's operations and has asked suppliers
to provide assurances that such systems are Year 2000 compliant, or to identify
replacement or upgrade systems. The Company has received and is in the process
of evaluating and assessing the adequacy of responses from its various
suppliers, and requesting further responses and assurances where appropriate.
This process is expected to be completed by the middle of calendar 1999.
The Company's next-generation enterprise resource planning and
information system will replace many of the system operations currently being
performed by existing internal system software. Implementation of this
next-generation system is on schedule for completion during the second half of
calendar 1999, and the Company has received assurances that it will be Year 2000
compliant. As a contingency, in the event implementation of the next generation
system is delayed or experiences problems, the Company's internal system
encompassing core manufacturing, service, sales, inventory and warranty
operations, which will be replaced by the next-generation system, is currently
Year 2000 compliant and can continue to support the Company's significant
operational systems, if needed. Many of the Company's cash management and
payroll operations are handled on an out-sourced basis, and the Company has
received assurances that the systems providing these outsourced services are
Year 2000 compliant. As separate internal systems affecting individual and
group-level company operations are replaced or upgraded over time in the
ordinary course of business, all such replacement or upgrade systems will be
Year 2000 compliant. Such separate individual and group level internal systems
are not believed to affect material operations of the Company and the cost to
replace or upgrade such individual or group level internal systems in the
ordinary course of business, though not fully known at this time, is not
expected to be material.
With respect to compliance of the products the Company supplies to its
customers, the Company intends to adhere to Year 2000 test case scenarios
established by SEMATECH, an industry group comprised of US semiconductor
manufacturers. The Company's compliance efforts and review and identification of
corrective measures and contingency planning (where necessary) are substantially
complete. The application systems and software of a significant number of the
products currently supplied to the Company's customers are Year 2000 compliant,
with the remainder expected to be so by the end of fiscal 1999. With respect to
certain of the Company's products already installed in the field, the Company
has determined that in most all instances where the application systems and
software are not Year 2000 compliant, there is either no appreciable effect or
the effect during the product's operation is limited to certain aspects of the
product's ability to report data concerning its operational parameters. However,
the products' operation, manufacturing capabilities or quality are not affected.
The Company is in the process of identifying and offering to customers
13
<PAGE> 14
product upgrades by the end of fiscal 1999, with the goal of resolving all
material programs and systems prior to the Year 2000 date transition. 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.
Through the end of this second fiscal quarter, these costs have totaled less
than $2 million, with total program costs estimated going forward and through
completion to be less than $5 million. The Company estimates that most, if not
substantially all, of these estimated costs going forward will be off-set by
revenues from product upgrades and customer service and support. Accordingly,
the full cost of these activities is not expected to be material and, to the
extent will be borne by the Company, have already in large part been incurred by
the Lam.
In connection with its review and implementation of corrective measures,
both to ensure that its internal products and systems, and the application
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
application systems and software with systems and software 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'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
ability of the Company's customers 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 otherwise in the normal course of
business may be accelerated to provide solutions to Year 2000 compliance
issues).
14
<PAGE> 15
Liquidity and Capital Resources
As of December 31, 1998, the Company had $362.9 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. During the quarter ended
December 31, 1998, the Company amended its Credit Agreement and revised some of
its financial covenant requirements.
Net cash used in operating activities was $67.9 million for the six
months ended December 31, 1998. The Company used $21.3 million of working
capital. Cash payouts relating to the fiscal 1998 and 1999 restructurings were
approximately $25.8 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 $21.3 million. Cash
provided by investing activities was $105.4 million, which was primarily from
the net sales of short-term investments. Capital expenditures, net of
retirements, for the six month period ended December 31, 1998 were $17.1
million. The Company used $6.9 million in financing activities from the
principal payments of long-term debt and capital lease obligations of $18.5
million offset by proceeds from the issuance of long-term debt of $12.1 million.
The Company renegotiated a replacement facility for a Yen 1.7 billion
yen-denominated loan ($12.6 million), reducing the amount of available borrowing
to Yen 1.4 billion ($12.1 million at December 31, 1998). During the quarter
ended September 30, 1998, the Company used $3.9 million for the repurchase of
common stock which was partially offset by the sale of common stock through the
Company's employee stock purchase program.
The Company's cash, cash equivalents, short-term investments and
available lines of credit at the end of the second 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.
15
<PAGE> 16
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 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 that 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 twelve months
the semiconductor industry has been experiencing a severe slowdown of product
demand and extreme volatility in product pricing. This slowdown and volatility
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; however, the Company is beginning to see indications of a potential
but slow recovery. As previously described, a continued slowdown and market
volatility 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
16
<PAGE> 17
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.
The Company expects to continue to make significant investments in R&D
and to pursue joint development relationships with customers or 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(TM) 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 such 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
17
<PAGE> 18
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, Brooks Automation, Inc. Lam's supplier of transport
modules and robotics, Coors Technical Ceramics Company, which supplies ceramics,
Dorsey Guage, Inc. which supplies electrostatic chucks 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 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 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
18
<PAGE> 19
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 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 46% and 54%, respectively, of net
revenues for the first six months 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 Asian regions have accounted for a substantial
portion of international sales. Recent economic, banking and currency problems
in the Asian 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 are subject to certain
provisions governing the transition of commercial transactions to the Euro. Lam
met the related legal requirements by January 1, 1999, and expects to be able to
meet the related legal requirements 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.
19
<PAGE> 20
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, actual or anticipated fluctuations in interest rates,
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
20
<PAGE> 21
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 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's Discussion and Analysis of Financial
Condition and Results of Operations on page 12 to 15.
Restructurings and Consolidation of Operations
The Company substantially restructured and consolidated its operations
during the quarters ended December 31, 1998, 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 sales
and service 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 charges 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 and timely managing and
completing the restructurings and consolidations.
ITEM 3. Quantitative And Qualitative Disclosures About Market Risk
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,
21
<PAGE> 22
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.
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 4. Submission of Matters to Vote of Security Holders
The Annual Meeting of Stockholders of Lam Research Corporation was held
at the principal office of the Company at 4300 Cushing Parkway, Fremont,
California 94538 on November 5, 1998.
Out of 38,128,300 shares of Common Stock entitled to vote at the
meeting, 34,871,576 shares were present in person or by proxy.
The vote for nominated directors, to serve for the ensuing year, and
until their successors are elected, was as follows:
<TABLE>
<CAPTION>
NOMINEE IN FAVOR WITHHELD
---------- -------
<S> <C> <C>
James W. Bagley 34,427,641 443,935
Roger D. Emerick 34,315,866 555,710
David G. Arscott 34,386,076 485,500
Richard J. Elkus, Jr 34,433,380 438,196
Jack R. Harris 34,377,893 493,683
Grant M. Inman 34,416,798 454,778
Kenneth M. Thompson 34,414,611 456,965
</TABLE>
The results of voting on the following items were as set forth below:
(a) Approval and adoption of the Company's 1999 Employee Stock Purchase
Plan:
<TABLE>
<CAPTION>
IN FAVOR OPPOSED ABSTAIN BROKER NON-VOTE
-------- ------- ------- ---------------
<S> <C> <C> <C>
21,598,973 669,464 79,293 12,523,846
</TABLE>
(b) Ratification of appointment of Ernst & Young LLP as independent auditors
for the Company for the fiscal year ending June 30, 1999:
<TABLE>
<CAPTION>
IN FAVOR OPPOSED ABSTAIN
-------- ------- -------
<S> <C> <C>
34,734,709 87,381 49,486
</TABLE>
22
<PAGE> 23
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<S> <C>
Exhibit 4.8 1999 Stock Option Plan.
Exhibit 4.9 Amended and Restated 1997 Stock Incentive
Plan.
Exhibit 10.61 Second Amendment To Credit Agreement
between ABN AMRO BANK, N.V. and Lam Research
Corporation, dated December 18, 1998.
Exhibit 10.62 First Amendment To Guaranty between ABN
AMRO BANK, N.V. and Lam Research Corporation,
dated December 25, 1998.
Exhibit 10.63 Supplemental Agreement of Receivables
Purchase Agreement dated December 26, 1997
between ABN AMRO BANK, N.V. and Lam Research
Corporation, dated December 25, 1998.
Exhibit 10.64 Supplemental Agreement of Loan Agreement
dated September 30, 1998 between ABN AMRO BANK,
N.V. and Lam Research Corporation, dated
December 25, 1998.
Exhibit 27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
The Company filed a Form 8-K on November 16, 1998 making an Item 5
disclosure to disclose the Company's announcement of a restructuring.
The Company filed a Form 8-K on January 20, 1999 making an Item 5
disclosure to disclose the Company's previously announced restructuring
charge.
23
<PAGE> 24
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: February 11, 1999
LAM RESEARCH CORPORATION
By: /s/ Mercedes Johnson
---------------------------------
Mercedes Johnson, Vice President,
Finance & Chief Financial Officer
24
<PAGE> 25
(a) Exhibits
<TABLE>
<S> <C>
Exhibit 4.8 1999 Stock Option Plan
Exhibit 4.9 Amended and Restated 1997 Stock Incentive
Plan.
Exhibit 10.61 Second Amendment To Credit Agreement
between ABN AMRO BANK, N.V and Lam Research
Corporation, dated December 18, 1998.
Exhibit 10.62 First Amendment To Guaranty between ABN
AMRO BANK, N.V and Lam Research Corporation,
dated December 25, 1998.
Exhibit 10.63 Supplemental Agreement of Receivables
Purchase Agreement dated December 26, 1997
between ABN AMRO BANK, N.V and Lam Research
Corporation, dated December 25, 1998.
Exhibit 10.64 Supplemental Agreement of Loan Agreement
dated September 30, 1998 between ABN AMRO BANK,
N.V and Lam Research Corporation, dated December
25, 1998.
Exhibit 27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
<PAGE> 1
Exhibit 4.8
LAM RESEARCH CORPORATION
1999 STOCK OPTION PLAN
SECTION 1 PURPOSE OF PLAN
This 1999 Stock Option Plan (the "Plan") is adopted as of November 5,
1998 (the "Effective Date"). The purpose of the Plan is to enable Lam Research
Corporation, a Delaware corporation (the "Company"), to attract and retain
highly qualified personnel who will contribute to the Company's success by their
ability, ingenuity and industry by allowing eligible individuals to acquire or
increase proprietary interests in the Company as an incentive to remain in the
service of the Company.
SECTION 2 DEFINITIONS
For purposes of the Plan, the following terms shall be defined as set
forth below:
(a) "Administrator" means the Board, or if and to the extent the
Board does not administer the Plan, the Committee appointed by the Board
to administer the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor thereto.
(d) "Committee" means the Stock Committee of the Board or any
Committee the Board may subsequently appoint to administer the Plan. If
at any time or to any extent the Board shall not administer the Plan,
then the functions of the Board or Administrator specified in the Plan
shall be exercised by the Committee.
(e) "Designated Subsidiaries" means the Subsidiaries that have
been designated by the Board or Administrator from time to time in its
sole discretion, whose Employees are thereon eligible to participate in
this Plan.
(f) "Date of Grant" means the date on which the award of a Stock
Option is effective.
(g) "Disability" means the inability of a Participant to perform
substantially his or her duties and responsibilities to the Company by
reason of a physical or mental disability or infirmity (i) for a
continuous period of six months, or (ii) at such earlier time as the
Participant submits medical evidence satisfactory to the Administrator
that he or she has a physical or mental disability or infirmity which
will likely prevent him or her from returning to the performance of his
or her work duties for six months or longer. The date of such Disability
shall be the date of interruption of or separation from employment with
the Company due to such Disability or the day on which the Participant
submits such satisfactory medical evidence establishing such Disability,
as the case may be.
<PAGE> 2
(h) "Employee" means any person who is customarily and
continuously employed for at least 20 hours per week by the Company or
one of its Designated Subsidiaries. Unless the Administrator makes a
contrary determination, the Employees of the Company shall, for all
purposes of this Plan, be those individuals who satisfy the customary
employment criteria set forth above and are carried as employees by the
Company or a Designated Subsidiary for regular payroll purposes;
provided however, that an Employee's continuous employment shall not be
considered interrupted in the case of a leave of absence agreed to in
writing by the Company, where such leave is for a period of not more
than 90 days or where re-employment upon the expiration of any such
leave is guaranteed by contract or statute.
(i) "Fair Market Value" means, as of any given date, with respect
to any Stock Option award granted hereunder, and at the discretion of
the Administrator, any of the following: (i) if the Stock is publicly
traded, the closing sale price of the Stock on such date as reported in
the Wall Street Journal, or the average of the closing price of the
Stock on each day on which the Stock was traded over a period of up to
twenty trading days immediately prior to such date, (ii) the fair market
value of the Stock as determined in accordance with a method prescribed
in the agreement evidencing any award hereunder, or (iii) the fair
market value of the Stock as otherwise determined by the Administrator
in the good faith exercise of its discretion.
(j) "Parent Corporation" means any corporation (other the
Company) in an unbroken chain of corporations ending with the Company,
if each of the corporations in the chain (other than the Company) owns
stock possessing 50% or more of the combined voting power of all classes
of stock in one of the other corporations in the chain.
(k) "Participant" means any Employee determined to be eligible to
be awarded Stock Options under this Plan.
(l) "Stock" means the common stock, par value $0.001 per share
(the "Common Stock"), of the Company.
(m) "Stock Option" means any option to purchase shares of Stock
granted pursuant to this Plan. Each Stock Option shall be a
non-qualified stock option which, as of the time such Stock Option is
granted, shall not be treated as an Incentive Stock Option within the
meaning of Section 422 of the Code.
(n) "Subsidiary" means any corporation (other than the Company)
in an unbroken chain of corporations beginning with the Company, if each
of the corporations (other than the last corporation) in the unbroken
chain owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in the
chain.
SECTION 3 ADMINISTRATION OF PLAN
The Administrator shall have full authority (subject to the provisions
of this Plan) to establish such rules and regulations as it deems appropriate
for the proper administration of this Plan, and to make such determinations and
interpretations concerning this Plan and Stock Options awarded under this Plan
as it deems necessary or advisable.
In particular, the Administrator shall have the authority, consistent
with the terms of the Plan:
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(a) to select those Employees who shall be Participants;
(b) to determine whether and to what extent Stock Options are to
be awarded hereunder to Participants;
(c) to determine the number of shares of Stock to be covered by
each such Stock Option awarded hereunder, including the maximum term for
which a Stock Option is to be outstanding;
(d) to determine the terms and conditions of any Stock Option
awarded hereunder; and
(e) to determine the terms and conditions which shall govern all
written instruments evidencing the Stock Options awarded to
Participants.
The Administrator shall have the authority, in its discretion, to adopt, alter
and repeal such administrative rules, guidelines and practices governing the
Plan as it shall from time to time deem advisable; to interpret the terms and
provisions of the Plan and any Stock Option awarded under the Plan (and any
agreements relating thereto); and otherwise to supervise the administration of
the Plan. All decisions made by the Administrator pursuant to the
administration, interpretation and execution of the Plan shall be final and
binding on all persons, including the Company and the Participants.
SECTION 4 STOCK SUBJECT TO PLAN
The total number of shares of Stock reserved and available for issuance
under the Plan shall initially be three million (3,000,000), subject to
adjustment from time to time in accordance with this Section, or as provided by
amendment of the Board. The shares may be authorized but unissued shares of
Common Stock or reaquired shares of Common Stock, including shares repurchased
by the Company on the open market or in private purchases.
To the extent that (i) a Stock Option expires or is otherwise terminated
without being exercised, or (ii) any shares of Stock awarded hereunder are
forfeited, such shares shall again be available for issuance in connection with
future awards under the Plan. If any shares of Stock have been pledged as
collateral for indebtedness incurred by a Participant in connection with the
exercise of a Stock Option, and such shares are returned to the Company in
satisfaction of such indebtedness, such shares shall again be available for
issuance in connection with future awards under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend or other change in corporate structure of the
Company affecting the Stock, a substitution or adjustment shall be made in (i)
the aggregate number of shares reserved for issuance under the Plan, and/or (ii)
the kind, number and class of shares and option price of shares subject to
outstanding Stock Options granted under the Plan, as may be determined by the
Administrator, in its sole discretion. Such other substitutions or adjustments
shall be made as may be determined by the Administrator, in its sole discretion.
In connection with any event described in this paragraph, the Administrator may
provide, in its discretion, for the cancellation of any outstanding grants and
payment in cash or other property therefor. The adjustments determined by the
Administrator shall be final, binding, and conclusive.
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SECTION 5 ELIGIBILITY
Unless otherwise designated by the Administrator, Participants eligible
to be awarded Stock Options under the Plan include Employees whose services
contribute to the management, growth or financial success of the Company (or a
Parent Corporation or a Subsidiary), or consultants, advisors or independent
contractors who provide valuable services to the Company (or a Parent
Corporation or a Subsidiary). Any Member of the Board or member of the Company's
senior management (which specifically includes, but is not limited to, all
"officers" of the Company, as that term is intended under Rule 16(b) of the
Securities Exchange Act of 1934, as amended ("Rule 16(b)")), and any principal
stockholder otherwise an eligible Employee, consultant, advisor or independent
contractor of the Company, is not eligible to be awarded Stock Options under
this Plan.
SECTION 6 DISCRETIONARY GRANTS OF STOCK OPTIONS
Any Stock Option granted under the Plan shall be in such form as the
Administrator may from time to time approve, and the provisions of Stock Option
awards need not be the same with respect to each optionee. Recipients of Stock
Options shall enter into an option agreement with the Company, in such form as
the Administrator shall determine, which agreement shall set forth, among other
things, the exercise price of the option, the term of the option and provisions
regarding exercisability of the option awarded thereunder. More than one option
may be awarded to the same optionee and be outstanding concurrently hereunder.
Stock Options awarded under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Administrator shall deem
desirable:
(a) Option Price. The option price per share of Stock purchasable
under a Stock Option shall be determined by the Administrator in its
sole discretion as of the Date of Grant but shall not be less than 100%
of the Fair Market Value of the Stock on such date.
(b) Option Term. The term of each Stock Option shall be fixed by
the Administrator, but no Stock Option shall be exercisable more than
ten years after the date such Stock Option is granted.
(c) Exercisability. Stock Options shall be exercisable at such
time or times and subject to such terms and conditions as shall be
determined by the Administrator at or after grant. The Administrator may
provide, in its discretion, that any Stock Option shall be exercisable
only in installments, and the Administrator may waive such installment
exercise provisions at any time in whole or in part based on such
factors as the Administrator may determine, in its sole discretion,
including, but not limited to, in connection with any "change in
control" of the Company, as defined in any stock option agreement or
otherwise.
(d) Method of Exercise. Subject to Section 6(c), above, Stock
Options may be exercised in whole or in part at any time during the
option period, by giving written notice of exercise to the Company
specifying the number of shares to be purchased, accompanied by payment
in full of the option exercise price, as provided below or as otherwise
determined by the Administrator. As determined by the Administrator, in
its sole discretion, payment in whole or
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in part may also be made by means of any cashless exercise procedure
approved by the Administrator. An optionee shall generally have the
rights to dividends and any other rights of a stockholder with respect
to the Stock subject to the Stock Option, including the right to vote
any such Stock, only after the optionee has given written notice of
exercise, has paid in full for such shares, and, if requested, has given
the representation described in paragraph (a) of Section 9, below. The
option exercise price shall be immediately due upon exercise of the
Stock Option and shall be payable in one or a combination of the
following forms:
(i) cash or check payable to the Company drawn on good
and sufficient funds;
(ii) shares of Common Stock held by the optionee for the
period necessary to avoid a charge to the Company's
earnings for financial reporting purposes and
valued at Fair Market Value on the exercise date;
or
(iii) a broker-dealer sale-and-remittance procedure
pursuant to which the optionee shall provide
irrevocable written instructions (x) to a
designated brokerage firm to effect the immediate
sale of the option shares and remit to the Company,
from the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate
option exercise price, plus all income and
employment taxes required to be withheld by the
Company in connection with the exercise and (y) to
the Company to deliver the certificates for the
purchased shares directly to the brokerage firm to
complete the transaction.
(e) Re-Pricing of Options. The Administrator may require the
voluntary surrender of all or a portion of any Stock Option granted
under the Plan as a condition precedent to the award of a new Stock
Option. Subject to the provisions of the Plan, such new Stock Option
shall be exercisable at the price, during such period and on such other
terms and conditions as are specified by the Administrator at the time
the new Stock Option is granted. Upon their surrender, Stock Options
shall be canceled and the shares previously subject to such canceled
Stock Options shall again be available for awards of Stock Options and
other awards hereunder.
(f) Loans. The Company may make loans available to Stock Option
holders in connection with the exercise of outstanding options granted
under the Plan, as the Administrator, in its discretion, may determine.
Such loans shall (i) be evidenced by promissory notes entered into by
the Stock Option holders in favor of the Company, (ii) be subject to the
terms and conditions set forth in this Section and such other terms and
conditions, not inconsistent with the Plan, as the Administrator shall
determine, (iii) bear interest, if any, at such rate as the
Administrator shall determine, and (iv) be subject to Board approval (or
to approval by the Administrator to the extent the Board may delegate
such authority). In no event may the principal amount of any such loan
exceed the sum of (x) the exercise price less the par value (if any) of
the shares of Stock covered by the Stock Option, or portion thereof,
exercised by the holder, and (y) any Federal, state, and local income
tax attributable to such exercise. The initial term of the loan, the
schedule of payments of principal and interest under the loan, the
extent to which the loan is to be with or without recourse against the
holder with respect to principal or interest and the conditions upon
which the loan will become payable in the event of the holder's
termination of employment shall be determined by the Administrator.
Unless the Administrator
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determines otherwise, when a loan is made, shares of Stock having a Fair
Market Value at least equal to the principal amount of the loan shall be
pledged by the holder to the Company as security for payment of the
unpaid balance of the loan, and such pledge shall be evidenced by a
pledge agreement, the terms of which shall be determined by the
Administrator, in its discretion; provided, however, that each loan
shall comply with all applicable laws, regulations and rules of the
Board of Governors of the Federal Reserve System and any other
governmental agency having jurisdiction.
(g) Non-Transferability of Options. Unless otherwise provided
herein or as otherwise determined by the Administrator, no Stock Option
shall be transferable by the optionee, and all Stock Options shall be
exercisable, during the optionee's lifetime, only by the optionee.
(h) Termination of Employment or Service. If an optionee's
employment with or service as an Employee, consultant, advisor or
independent contractor to the Company terminates by reason of death,
Disability or for any other reason, the Stock Option may thereafter be
exercised as provided below, or as otherwise provided in the applicable
award agreement or determined by the Administrator.
If an optionee's employment with or service to the Company is
terminated:
(i) for or without cause (and whether termination is
voluntary or involuntary), each then-outstanding
unexercised Stock Option vested and held by the
optionee as of the termination date shall expire
within thirty (30) days of such termination;
(ii) by reason of Disability, each then-outstanding
unexercised Stock Option vested and held by the
optionee as of the termination date shall expire
within six (6) months of such termination date; and
(iii) by reason of the optionee's death during
employment, or if the optionee dies during the
three (3) month period after termination of his or
her employment (or such other shorter period of
time as may be determined by the Administrator),
where such termination is other than for cause or
by reason of Disability, each then-outstanding
unexercised Stock Option vested and held by the
optionee as of the termination date shall expire
within six (6) months of such termination date.
After the optionee's death, the Stock Option may be
exercised by the personal representative of the
optionee's estate or by the person(s) to whom the
option is transferred pursuant to the optionee's
will or in accordance with the laws of descent and
distribution.
Following termination of the optionee's employment or service, a Stock
Option shall not be exercisable to any greater extent than on the
termination date; provided, however, that the Administrator shall have
complete discretion, at any time while the Stock Option remains
outstanding, to permit the Stock Option to be exercised, not only with
respect to the number of shares for which the Stock Option is
exercisable at the time of the termination, but also with
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respect to one or more subsequent installments of purchasable shares for
which the Stock Option would otherwise have become exercisable had
termination not occurred.
SECTION 7 AMENDMENT AND TERMINATION OF PLAN
The Board may amend, alter or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made that would impair the rights of a
Participant under any Stock Option theretofore awarded without such
Participant's consent. The Administrator may amend the terms of any Stock Option
theretofore awarded, prospectively or retroactively, but, as herein provided, no
such amendment shall impair the rights of any Participant without his or her
consent.
SECTION 8 GENERAL PROVISIONS
(a) The Administrator may require each person purchasing shares
pursuant to the exercise of a Stock Option to represent to and agree
with the Company in writing that such person is acquiring the shares
without a view to distribution thereof. The certificates for such shares
may include any legend which the Administrator deems appropriate to
reflect any restrictions on transfer.
(b) All certificates for shares of Stock delivered under the Plan
shall be subject to such stock-transfer orders and other restrictions as
the Administrator may deem advisable under the rules, regulations, and
other requirements of the Securities and Exchange Commission ("SEC"),
any stock exchange upon which the Stock is then listed, and any
applicable Federal or state securities law, and the Administrator may
cause a legend or legends to be placed on any such certificates to make
appropriate reference to such restrictions.
(c) Nothing contained in the Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements
may be either generally applicable or applicable only in specific cases.
(d) Each Participant shall, no later than the date as of which
the value of a stock option exercise first becomes includable in the
gross income of the Participant for Federal income tax purposes, pay to
the Company, or make arrangements satisfactory to the Administrator
regarding payment of, any Federal, state, or local taxes of any kind
required by law (as determined by the Administrator, in its sole
discretion) to be withheld with respect to the award. The obligations of
the Company under the Plan shall be conditional on the making of such
payments or arrangements, and the Company shall, to the extent permitted
by law, have the right to deduct any such taxes from any payment of any
kind otherwise due to the Participant.
SECTION 9 NON-LIABILITY
No member of the Board or the Administrator, nor any officer or employee
of the Company acting on behalf of the Board or the Administrator, shall be
personally liable for any action, determination, or interpretation taken or made
in good faith with respect to the Plan, and all members of the Board or the
Administrator and each and any officer or employee of the Company acting on
their behalf shall, to the extent permitted by law, be fully indemnified and
protected by the Company in respect of any such action, determination or
interpretation.
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SECTION 10 TERM OF PLAN
No Stock Option award shall be awarded pursuant to the Plan on or after
the tenth anniversary of the Effective Date, but awards theretofore awarded may
extend and be exercisable beyond that date.
SECTION 11 CORPORATE TRANSACTIONS/CHANGES OF CONTROL
(a) In the event of any of the following stockholder-approved
transactions (a "Corporate Transaction"):
(i) a merger or consolidation in which the Company is
not the surviving entity, except for a transaction
whose principal purpose is to change the State of
the Company's incorporation,
(ii) the sale, transfer, or other disposition of all or
substantially all of the assets of the Company in
liquidation or dissolution, or
(iii) any "reverse" merger in which the Company is the
surviving entity but in which securities possessing
more than 50% of the total combined voting power of
the Company's outstanding securities are
transferred to holders other than those who owned
such voting power immediately before the merger,
then immediately before the effective date of the Corporate Transaction,
each Stock Option granted under this Plan shall become fully exercisable
("accelerate") with respect to the total number of shares of Common
Stock then subject to the Stock Option. However, a Stock Option shall
not accelerate if and to the extent: (i) the Stock Option is, in
connection with the Corporate Transaction, either to be assumed by the
successor corporation or parent thereof or to be replaced by an option
on equivalent terms to purchase shares of the capital stock of the
successor corporation or parent thereof, or (ii) acceleration of the
Stock Option is subject to other limitations imposed by the
Administrator at the Date of Grant. The determination of equivalence
under clause (i) above shall be made by the Administrator and shall be
final, binding, and conclusive as to all parties.
(b) Upon consummation of the Corporate Transaction, all Stock
Options granted under this Plan shall terminate and cease to be
outstanding, except to the extent assumed by the successor (or
surviving) corporation or its parent company.
(c) Each Stock Option granted under this Plan that is replaced by
an equivalent option in a Corporate Transaction or that otherwise
continues in effect shall be appropriately adjusted, immediately after
the Corporate Transaction, to apply to the number and class of
securities that would have been issued in the Corporate Transaction to
an actual holder of the number of shares of Common Stock that were
subject to the Stock Option immediately before the Corporate
Transaction. Appropriate adjustment shall also be made to the Option
Price payable per share; provided that the aggregate Option Price
payable for such securities shall remain the same. In addition, the
class and number of securities available for issuance under this Plan
following the consummation of the Corporate Transaction shall be
appropriately adjusted.
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(d) The Administrator shall have full discretionary authority,
exercisable either in advance of, or at the time of, a Change in
Control, to provide for the automatic acceleration of Stock Options
granted under this Plan upon the occurrence of the Change in Control.
The Administrator shall also have full discretionary authority to
condition any such acceleration upon the subsequent termination of the
optionee's service to the Company (or a parent or subsidiary) within a
specified period after the Change in Control. Any Stock Option
accelerated in connection with the Change in Control shall remain fully
exercisable until the expiration of the option term. For all purposes of
this Plan, a Change in Control shall mean a change in control of the
Company of a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
whether or not the Company is then subject to such reporting
requirement, other than a Corporate Transaction; provided that, without
limitation, a Change in Control shall be deemed to have occurred if:
(i) any individual, partnership, firm, corporation,
association, trust, unincorporated organization or
other entity, or any syndicate or group deemed to
be a "person" under Section 14(d) (2) of the
Exchange Act, is or becomes the "beneficial owner"
(as defined in Rule 13d-3 of the General Rules and
Regulations under the Exchange Act), directly or
indirectly, of securities of the Company
representing 40% or more of the combined voting
power of the Company's then-outstanding securities
entitled to vote in the election of directors of
the Company, pursuant to a tender or exchange offer
that the Board does not recommend that the
Company's stockholders accept; or
(ii) during any period of two consecutive years,
individuals who at the beginning of such period
constituted the Board and any new members of the
Board, whose election by the Board or nomination
for election by the Company's stockholders was
approved by a vote of at least three-quarters of
the directors then in office who either were
directors at the beginning of the period or whose
election or nomination for election was previously
so approved, cease for any reason to constitute a
majority thereof.
(e) The grant of Stock Options under this Plan shall not affect
the right of the Company to adjust, reclassify, reorganize, or otherwise
change its capital or business structure or to merge, consolidate,
dissolve, liquidate, or sell or transfer all or any part of its business
or assets.
SECTION 12 MISCELLANEOUS
(a) Use of Proceeds. Any cash proceeds received by the Company
from the sale of shares pursuant to Stock Options granted under this
Plan may be used for general corporate purposes.
(b) Regulatory Approvals. The implementation of this Plan, the
awarding of any Stock Option hereunder, and the issuance of Stock upon
the exercise or surrender of any such
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Stock Option shall be subject to and conditional upon the procurement by
the Company of all approvals and permits required by regulatory
authorities having jurisdiction over this Plan, Stock Options granted
under it, and Stock issued pursuant to it.
(c) Securities Laws. No shares of Common Stock or other assets
shall be issued or delivered under this Plan unless and until there
shall have been compliance with all applicable requirements of federal
and state securities laws, including the filing and effectiveness of a
Form S-8 registration statement for the shares of Common Stock issuable
under this Plan, and all applicable listing requirements of any
securities exchange on which stock of the same class is then listed.
(d) No Employment Rights. Neither the action of the Company in
establishing this Plan, nor any action taken by the Administrator
hereunder, nor any provision of this Plan, shall be construed so as to
grant or offer any individual the right to remain in the employ or
service of the Company (or any parent or subsidiary corporation) for any
period, and the Company (or any parent or subsidiary corporation
retaining the services of such individual) may terminate such
individual's employment or service at any time and for any reason, with
or without cause.
(e) Assignment. Except as otherwise provided in this Plan, the
right to acquire Common Stock or other assets under this Plan may not be
assigned, encumbered, or otherwise transferred by any optionee.
(f) Governing Law. The provisions of this Plan shall be governed
by the laws of the State of California, as such laws are applied to
contracts entered into and performed in that State. The provisions of
this Plan shall inure to the benefit of, and be binding upon, the
Company and its successors or assigns, and the optionees, the legal
representatives of their respective estates, their respective heirs or
legatees, and their permitted assignees.
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Exhibit 4.9
LAM RESEARCH CORPORATION
1997 STOCK INCENTIVE PLAN
Amended and restated effective as of November 5 and December 15, 1998
SECTION 1. GENERAL PURPOSE OF PLAN; DEFINITIONS.
The name of this plan is the Lam Research Corporation 1997 Stock
Incentive Plan (the "Plan"). The Plan was adopted by the Board on May 6, 1997,
subject to the approval of the stockholders of the Company, which approval was
obtained on August 5, 1997. The purpose of the Plan is to enable the Company to
attract and retain highly qualified personnel who will contribute to the
Company's success by their ability, ingenuity and industry and to provide
incentives to the participating officers, directors, employees, consultants and
advisors that are linked directly to increases in stockholder value and will
therefore inure to the benefit of all stockholders of the Company.
For purposes of the Plan, the following terms shall be defined as set
forth below:
(1) "Administrator" means the Board, or if and to the extent the
Board does not administer the Plan, the Committee in accordance with
Section 2.
(2) "Annual Non-Employee Director Stock Option" means an annual
grant of Stock Options to a non-employee director of the Company
pursuant to Section 6.
(3) "Board" means the Board of Directors of the Company.
(4) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor thereto.
(5) "Committee" means the Stock Committee of the Board or any
Committee the Board may subsequently appoint to administer the Plan. To
the extent applicable, the Committee shall be composed entirely of
individuals who meet the qualifications referred to in Section 162(m) of
the Code and Rule 16b-3 under the Securities Exchange Act of 1934, as
amended. If at any time or to any extent the Board shall not administer
the Plan, then the functions of the Board specified in the Plan shall be
exercised by the Committee.
(6) "Company" means Lam Research Corporation, a Delaware
corporation (or any successor corporation).
(7) "Deferred Stock" means an award made pursuant to Section 7
below of the right to receive Stock at the end of a specified deferral
period.
(8) "Disability" means the inability of a Participant to perform
substantially his or her duties and responsibilities to the Company by
reason of a physical or mental disability or infirmity (i) for a
continuous period of six months, or (ii) at such earlier time as the
Participant submits medical evidence satisfactory to the Administrator
that he or she has a physical or mental disability or infirmity which
will likely prevent him or her from returning to the performance of his
or her work duties for six months or longer. The date of such Disability
shall be on the last day of such six-month period or the day on which
the Participant submits such satisfactory medical evidence, as the case
may be.
(9) "Effective Date" shall mean the date set forth in Section
11.
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(10) "Eligible Recipient" means an officer, director, employee,
consultant or advisor of the Company or any Subsidiary.
(11) "Fair Market Value" means, as of any given date, with
respect to any awards granted hereunder, (A) if the Stock is publicly
traded, the closing sale price of the Stock on such date as reported in
the Western Edition of the Wall Street Journal, or the average of the
closing price of the Stock on each day on which the Stock was traded
over a period of up to twenty trading days immediately prior to such
date, (B) the fair market value of the Stock as determined in accordance
with a method prescribed in the agreement D-1 evidencing any award
hereunder, or (C) the fair market value of the Stock as otherwise
determined by the Administrator in the good faith exercise of its
discretion.
(12) "Incentive Stock Option" means any Stock Option intended to
be designated as an "incentive stock option" within the meaning of
Section 422 of the Code.
(13) "Non-Qualified Stock Option" means any Stock Option that is
not an Incentive Stock Option, including any Stock Option that provides
(as of the time such option is granted) that it will not be treated as
an Incentive Stock Option.
(14) "Parent Corporation" means any corporation (other the
Company) in an unbroken chain of corporations ending with the Company,
if each of the corporations in the chain (other than the Company) owns
stock possessing 50% or more of the combined voting power of all classes
of stock in one of the other corporations in the chain.
(15) "Participant" means any Eligible Recipient selected by the
Administrator, pursuant to the Administrator's authority in Section 2
below, to receive grants of Stock Options, Restricted Stock awards,
Deferred Stock awards, Performance Shares or any combination of the
foregoing and each non-employee director of the Company who receives an
Annual Non-Employee Director Stock Option pursuant to Section 6.
(16) "Performance Share" means an award of shares of Stock
pursuant to Section 7 that is subject to restrictions based upon the
attainment of specified performance objectives.
(17) "Restricted Stock" means an award granted pursuant to
Section 7 of shares of Stock subject to certain restrictions.
(18) "Stock" means the common stock, par value $.001 per share,
of the Company.
(19) "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 5 or any Annual Non-Employee Director Stock
Option granted pursuant to Section 6.
(20) "Subsidiary" means any corporation (other than the Company)
in an unbroken chain of corporations beginning with the Company, if each
of the corporations (other than the last corporation) in the unbroken
chain owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in the
chain.
SECTION 2. ADMINISTRATION.
The Plan shall be administered in accordance with the requirements of
Section 162(m) of the Code (but only to the extent necessary to maintain
qualification of the Plan under Section 162(m) of the Code) and, to the extent
applicable, Rule 16b-3 under the Securities Exchange Act of 1934, as amended
("Rule 16b-3") by the Board or by the Committee which shall be appointed by the
Board and which shall serve at the pleasure of the Board.
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Pursuant to the terms of the Plan, the Administrator shall have the
power and authority to grant to Eligible Recipients pursuant to the terms of the
Plan: (a) Stock Options, (b) Restricted Stock, (c) Deferred Stock, (d)
Performance Shares or (e) any combination of the foregoing.
In particular, the Administrator shall have the authority:
(a) to select those Eligible Recipients who shall be
Participants;
(b) to determine whether and to what extent Stock Options,
Restricted Stock, Deferred Stock, Performance Shares or a combination of
the foregoing, are to be granted hereunder to Participants;
(c) to determine the number of shares of Stock to be covered by
each such award granted hereunder;
(d) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder (including, but
not limited to, (x) the restrictions applicable to Restricted or
Deferred Stock awards and the conditions under which restrictions
applicable to such Restricted or Deferred Stock shall lapse, and (y) the
performance goals and periods applicable to an award of Performance
Shares); and
(e) to determine the terms and conditions, not inconsistent with
the terms of the Plan, which shall govern all written instruments
evidencing the Stock Options, Restricted Stock, Deferred Stock,
Performance Shares or any combination of the foregoing granted hereunder
to Participants.
The Administrator shall have the authority, in its discretion, to adopt,
alter and repeal such administrative rules, guidelines and practices governing
the Plan as it shall from time to time deem advisable; to interpret the terms
and provisions of the Plan and any award issued under the Plan (and any
agreements relating thereto); and to otherwise supervise the administration of
the Plan.
All decisions made by the Administrator pursuant to the provisions of
the Plan shall be final and binding on all persons, including the Company and
the Participants.
SECTION 3. STOCK SUBJECT TO PLAN.
The total number of shares of Stock reserved and available for issuance
under the Plan shall initially be three million; provided, however, that the
number of shares so reserved shall automatically be increased at the beginning
of each calendar quarter if and to the extent that, as of such date, the
quotient determined by dividing (x) the total number of shares of Stock reserved
for issuance under all of Lam's stock-based incentive plans pursuant to
outstanding and future awards by (y) the sum of (i) the total number of shares
of Stock outstanding plus (ii) the number determined under clause (x), is less
than 20%, such that immediately following any such increase such quotient will
equal 18.5%; and provided, further, that the number of shares reserved for
issuance under the Plan shall in no event exceed five million shares, as
adjusted to take into account changes in capitalization as set forth below. Such
shares may consist, in whole or in part, of authorized and unissued shares or
treasury shares. The aggregate number of shares of Stock as to which Stock
Options, Restricted Stock, Deferred Stock and Performance Shares may be granted
to any individual during any calendar year may not, subject to adjustment as
provided in this Section 3, exceed 20% of the shares of Stock reserved for the
purposes of the Plan in accordance with the provisions of this Section 3.
Consistent with the provisions of Section 162(m) of the Code, as from
time to time applicable, to the extent that (i) a Stock Option expires or is
otherwise terminated without being exercised, or (ii) any shares of Stock
subject to any Restricted Stock, Deferred Stock or Performance Share award
granted hereunder are forfeited, such shares shall again be available for
issuance in connection with future awards under the Plan. If any shares of Stock
have been pledged as collateral for indebtedness incurred by a Participant in
connection with the exercise of a Stock
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<PAGE> 4
Option and such shares are returned to the Company in satisfaction of such
indebtedness, such shares shall again be available for issuance in connection
with future awards under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend or other change in corporate structure
affecting the Stock, a substitution or adjustment shall be made in (i) the
aggregate number of shares reserved for issuance under the Plan, (ii) the kind,
number and option price of shares subject to outstanding Stock Options granted
under the Plan, and (iii) the kind, number and purchase price of shares issuable
pursuant to awards of Restricted Stock, Deferred Stock and Performance Shares,
as may be determined by the Administrator, in its sole discretion. Such other
substitutions or adjustments shall be made as may be determined by the
Administrator, in its sole discretion. In connection with any event described in
this paragraph, the Administrator may provide, in its discretion, for the
cancellation of any outstanding awards and payment in cash or other property
therefor.
SECTION 4. ELIGIBILITY.
Officers, directors and employees of the Company or any Subsidiary, and
consultants and advisors to the Company or any Subsidiary, who are responsible
for or are in a position to contribute to the management, growth and/or
profitability of the business of the Company shall be eligible to be granted
Stock Options, Restricted Stock awards, Deferred Stock awards or Performance
Shares hereunder. The Participants under the Plan shall be selected from time to
time by the Administrator, in its sole discretion, from among the Eligible
Recipients recommended by the senior management of the Company, and the
Administrator shall determine, in its sole discretion, the number of shares of
Stock covered by each award.
SECTION 5. DISCRETIONARY GRANTS OF STOCK OPTIONS.
Stock Options may be granted alone or in addition to other awards
granted under the Plan. Any Stock Option granted under the Plan shall be in such
form as the Administrator may from time to time approve, and the provisions of
Stock Option awards need not be the same with respect to each optionee.
Recipients of Stock Options shall enter into an award agreement with the
Company, in such form as the Administrator shall determine, which agreement
shall set forth, among other things, the exercise price of the option, the term
of the option and provisions regarding exercisability of the option granted
thereunder.
The Stock Options granted under the Plan may be of two types: (i)
Incentive Stock Options and (ii) Non-Qualified Stock Options.
The Administrator shall have the authority to grant any officer or
employee of the Company (including directors who are also officers of the
Company) Incentive Stock Options, Non-Qualified Stock Options, or both types of
Stock Options. Directors who are not officers of the Company, consultants and
advisors may only be granted Non-Qualified Stock Options. To the extent that any
Stock Option does not qualify as an Incentive Stock Option, it shall constitute
a separate Non-Qualified Stock Option. More than one option may be granted to
the same optionee and be outstanding concurrently hereunder.
Stock Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Administrator shall deem
desirable:
(1) Option Price. The option price per share of Stock
purchasable under a Stock Option shall be determined by the
Administrator in its sole discretion at the time of grant but
shall not be less than 100% of the Fair Market Value of the
Stock on such date. If an employee owns or is deemed to own (by
reason of the attribution rules applicable under Section 424(d)
of the Code) more than 10% of the combined voting power of all
classes of stock of the Company or any Parent Corporation and
an Incentive Stock Option is granted to such employee, the
option price of such Incentive Stock Option (to the extent
required by the Code at the time of
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<PAGE> 5
grant) shall be no less than 110% of the Fair Market Value of the Stock
on the date such Incentive Stock Option is granted.
(2) Option Term. The term of each Stock Option shall be fixed by
the Administrator, but no Stock Option shall be exercisable more than
ten years after the date such Stock Option is granted; provided,
however, that if an employee owns or is deemed to own (by reason of the
attribution rules of Section 424(d) of the Code) more than 10% of the
combined voting power of all classes of stock of the Company or any
Parent Corporation and an Incentive Stock Option is granted to such
employee, the term of such Incentive Stock Option (to the extent
required by the Code at the time of grant) shall be no more than five
years from the date of grant.
(3) Exercisability. Stock Options shall be exercisable at such
time or times and subject to such terms and conditions as shall be
determined by the Administrator at or after grant. The Administrator may
provide, in its discretion, that any Stock Option shall be exercisable
only in installments, and the Administrator may waive such installment
exercise provisions at any time in whole or in part based on such
factors as the Administrator may determine, in its sole discretion,
including but not limited to in connection with any "change in control"
of the Company, as defined in any stock option agreement or otherwise.
(4) Method of Exercise. Subject to Section 5(3) above, Stock
Options may be exercised in whole or in part at any time during the
option period, by giving written notice of exercise to the Company
specifying the number of shares to be purchased, accompanied by payment
in full of the purchase price in cash or its equivalent as determined by
the Administrator. As determined by the Administrator, in its sole
discretion, payment in whole or in part may also be made (i) by means of
any cashless exercise procedure approved by the Administrator, (ii) in
the form of unrestricted Stock already owned by the optionee, or (iii)
in the case of the exercise of a Non-Qualified Stock Option, in the form
of Restricted Stock or Performance Shares subject to an award hereunder
(based, in each case, on the Fair Market Value of the Stock on the date
the option is exercised); provided, however, that in the case of an
Incentive Stock Option, the right to make payment in the form of already
owned shares may be authorized only at the time of grant. If payment of
the option exercise price of a Non-Qualified Stock Option is made in
whole or in part in the form of Restricted Stock or Performance Shares,
the shares received upon the exercise of such Stock Option shall be
restricted in accordance with the original terms of the Restricted Stock
or Performance Share award in question, except that the Administrator
may direct that such restrictions shall apply only to that number of
shares equal to the number of shares surrendered upon the exercise of
such option. An optionee shall generally have the rights to dividends
and any other rights of a stockholder with respect to the Stock subject
to the option only after the optionee has given written notice of
exercise, has paid in full for such shares, and, if requested, has given
the representation described in paragraph (1) of Section 10.
The Administrator may require the voluntary surrender of all or
a portion of any Stock Option granted under the Plan as a condition
precedent to the grant of a new Stock Option. Subject to the provisions
of the Plan, such new Stock Option shall be exercisable at the price,
during such period and on such other terms and conditions as are
specified by the Administrator at the time the new Stock Option is
granted. Consistent with the provisions of Section 162(m), to the extent
applicable, upon their surrender, Stock Options shall be canceled and
the shares previously subject to such canceled Stock Options shall again
be available for grants of Stock Options and other awards hereunder. Any
re-pricing of Stock Options granted under the Plan will be limited to
preclude participation by an Eligible Recipient who, at the time of any
such re-pricing, is a member of the Board, a member of the Company's
senior management (which specifically includes, but is not necessarily
limited to, all Officers of the Company, as that term is intended under
Rule 16b of the Securities Exchange Act of 1934, as amended), or a
principal stockholder of the Company.
(5) Loans. The Company may make loans available to Stock Option
holders in connection with the exercise of outstanding options granted
under the Plan, as the Administrator, in its discretion, may determine.
Such loans shall (i) be evidenced by promissory notes entered into by
the Stock Option holders in favor of the Company, (ii) be subject to the
terms and
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<PAGE> 6
conditions set forth in this Section 5(5) and such other terms and
conditions, not inconsistent with the Plan, as the Administrator shall
determine, (iii) bear interest, if any, at such rate as the
Administrator shall determine, and (iv) be subject to Board approval (or
to approval by the Administrator to the extent the Board may delegate
such authority). In no event may the principal amount of any such loan
exceed the sum of (x) the exercise price less the par value (if any) of
the shares of Stock covered by the option, or portion thereof, exercised
by the holder, and (y) any Federal, state, and local income tax
attributable to such exercise. The initial term of the loan, the
schedule of payments of principal and interest under the loan, the
extent to which the loan is to be with or without recourse against the
holder with respect to principal or interest and the conditions upon
which the loan will become payable in the event of the holder's
termination of employment shall be determined by the Administrator.
Unless the Administrator determines otherwise, when a loan is made,
shares of Stock having a Fair Market Value at least equal to the
principal amount of the loan shall be pledged by the holder to the
Company as security for payment of the unpaid balance of the loan, and
such pledge shall be evidenced by a pledge agreement, the terms of which
shall be determined by the Administrator, in its discretion; provided,
however, that each loan shall comply with all applicable laws,
regulations and rules of the Board of Governors of the Federal Reserve
System and any other governmental agency having jurisdiction.
(6) Non-Transferability of Options. Unless otherwise determined
by the Administrator in accordance with Rule 16b-3, no Stock Option
shall be transferable by the optionee, and all Stock Options shall be
exercisable, during the optionee's lifetime, only by the optionee.
(7) Termination of Employment or Service. If an optionee's
employment with or service as a director, consultant or advisor to the
Company terminates by reason of death, Disability or for any other
reason, the Stock Option may thereafter be exercised to the extent
provided in the applicable subscription or award agreement, or as
otherwise determined by the Administrator.
(8) Annual Limit on Incentive Stock Options. To the extent that
the aggregate Fair Market Value (determined as of the date the Incentive
Stock Option is granted) of shares of Stock with respect to which
Incentive Stock Options granted to an Optionee under this Plan and all
other option plans of the Company or its Parent Corporation become
exercisable for the first time by the Optionee during any calendar year
exceeds $100,000, such Stock Options shall be treated as Non-Qualified
Stock Options.
SECTION 6. ANNUAL NON-EMPLOYEE DIRECTOR STOCK OPTION GRANTS
Each non-employee director of the Company shall automatically be granted
a Non-Qualified Stock Option to purchase 6,000 shares of Stock on December 15 of
each calendar year, or if December 15 in any particular year is not a business
day on the first business day thereafter (an "Annual Non-Employee Director
Stock Option"). The terms and conditions of the Annual Non-Employee Director
Stock Options granted pursuant to this Section 6 shall be as follows:
(1) Option Term. The term of the option shall be ten (10) years
from the date of grant.
(2) Exercise Price. The exercise price per share of Stock
subject to such option shall be 100% of the Fair Market Value of the
Stock on the date of grant.
(3) Vesting and Exercisability. The option shall be 100% vested
and exercisable as of the date of grant.
(4) Non-Transferability of Options. Unless otherwise determined
by the Administrator in accordance with Rule 16b-3, the option shall not
be transferable by the optionee, and shall be exercisable, during the
optionee's lifetime, only by the optionee.
(5) Payment of Exercise Price. The exercise price of such option
shall be paid in cash or its equivalent as determined by the
Administrator.
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(6) Termination of Service. If a non-employee director ceases to
serve as a director of the Company the option shall terminate
immediately (except in the event of the Outside Director's death,
Disability or retirement, as described below):
(a) In the event a non-employee director's continuous status
as an outside director terminates as a result of his or her disability,
he or she may, but only within twelve (12) months from the date of
termination, exercise his or her options.
(b) In the event of the death of a non-employee director,
the options may be exercised at any time within twelve (12) months
following the date of death by the optionee's estate or by a person who
acquired the right to exercise the options by bequest or inheritance.
(c) In the event of the retirement of a non-employee
director, the director's length of service as a director shall determine
the time period for exercising options:
(i) for non-employee directors with less than one (1)
year of service prior to retirement, the director may exercise his or
her options at any time within three (3) months following retirement;
(ii) for non-employee directors with more than one (1)
year but less than three (3) years of service prior to retirement, the
director may exercise his or her options at any time within six (6)
months following retirement;
(iii) for non-employee directors with more than three
(3) years but less than five (5) years of service prior to retirement,
the director may exercise his or her options at any time within twelve
(12) months following retirement; and
(iv) for non-employee directors with more than five (5)
years of service prior to retirement, the director may exercise his or
her options at any time within eighteen (18) months following
retirement.
In no event shall the options be exercisable after expiration of the Option
Term. If the options are not exercised (to the extent they were entitled to be
exercised) within the time specified above, the options shall terminate.
SECTION 7. RESTRICTED STOCK, DEFERRED STOCK AND PERFORMANCE SHARES.
(1) General. Restricted Stock, Deferred Stock or Performance Share
awards may be issued either alone or in addition to other awards granted under
the Plan. The Administrator shall determine the Eligible Recipients to whom, and
the time or times at which, grants of Restricted Stock, Deferred Stock or
Performance Share awards shall be made; the number of shares to be awarded; the
price, if any, to be paid by the recipient of Restricted Stock, Deferred Stock
or Performance Share awards; the Restricted Period (as defined in paragraph (3)
hereof) applicable to Restricted Stock or Deferred Stock awards; the performance
objectives applicable to Restricted Stock, Deferred Stock or Performance Share
awards; the date or dates on which restrictions applicable to such Restricted
Stock or Deferred Stock awards shall lapse during such Restricted Period; and
all other conditions of the Restricted Stock, Deferred Stock and Performance
Share awards. The Administrator may also condition the grant of Restricted
Stock, Deferred Stock awards or Performance Shares upon the exercise of Stock
Options, or upon such other criteria as the Administrator may determine, in its
sole discretion. The provisions of Restricted Stock, Deferred Stock or
Performance Share awards need not be the same with respect to each recipient. In
the discretion of the Administrator, loans may be made to Participants in
connection with the purchase of Restricted Stock under substantially the same
terms and conditions as provided in Section 5(5) with respect to the exercise of
Stock Options.
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<PAGE> 8
(2) Awards and Certificates. The prospective recipient of a Restricted
Stock, Deferred Stock or Performance Share award shall not have any rights with
respect to such award, unless and until such recipient has executed an agreement
evidencing the award (a "Restricted Stock Award Agreement," "Deferred Stock
Award Agreement" or "Performance Share Award Agreement," as appropriate) and
delivered a fully executed copy thereof to the Company, within a period of sixty
days (or such other period as the Administrator may specify) after the award
date. Except as otherwise provided below in this Section 7(2), (i) each
Participant who is awarded Restricted Stock or Performance Shares shall be
issued a stock certificate in respect of such shares of Restricted Stock or
Performance Shares; and (ii) such certificate shall be registered in the name of
the Participant, and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such award.
The Company may require that the stock certificates evidencing
Restricted Stock or Performance Share awards hereunder be held in the custody of
the Company until the restrictions thereon shall have lapsed, and that, as a
condition of any Restricted Stock award or Performance Share award, the
Participant shall have delivered a stock power, endorsed in blank, relating to
the Stock covered by such award.
With respect to Deferred Stock awards, at the expiration of the
Restricted Period, stock certificates in respect of such shares of Deferred
Stock shall be delivered to the Participant, or his or her legal representative,
in a number equal to the number of shares of Stock covered by the Deferred Stock
award.
(3) Restrictions and Conditions. The Restricted Stock, Deferred Stock
and Performance Share awards granted pursuant to this Section 7 shall be subject
to the following restrictions and conditions:
(a) Subject to the provisions of the Plan and the Restricted
Stock Award Agreement, Deferred Stock Award Agreement or Performance
Share Award Agreement, as appropriate, governing such award, during such
period as may be set by the Administrator commencing on the grant date
(the "Restricted Period"), the Participant shall not be permitted to
sell, transfer, pledge or assign shares of Restricted Stock, Deferred
Stock or Performance Shares awarded under the Plan; provided, however,
that the Restricted Period shall not be less than (i) three years with
respect to restrictions based solely on continued employment with the
Company and (ii) one year with respect to restrictions based on the
achievement of performance-related goals; and provided, further, that
the Administrator may, in its sole discretion, provide for the lapse of
such restrictions in installments and may accelerate or waive such
restrictions in whole or in part based on the attainment of certain
performance related goals, the Participant's termination of employment
or service, death or Disability or the occurrence of a "Change of
Control" as defined in the agreement evidencing such award or otherwise.
(b) Except as provided in paragraph (3)(a) of this Section 7,
the Participant shall generally have, with respect to the shares of
Restricted Stock or Performance Shares, all of the rights of a
stockholder with respect to such stock during the Restricted Period. The
Participant shall generally not have the rights of a stockholder with
respect to stock subject to Deferred Stock awards during the Restricted
Period; provided, however, that dividends declared during the Restricted
Period with respect to the number of shares covered by a Deferred Stock
award shall be paid to the Participant. Certificates for shares of
unrestricted Stock shall be delivered to the Participant promptly after,
and only after, the Restricted Period shall expire without forfeiture in
respect of such shares of Restricted Stock, Performance Shares or
Deferred Stock, except as the Administrator, in its sole discretion,
shall otherwise determine.
(c) The rights of holders of Restricted Stock, Deferred Stock
and Performance Share awards upon termination of employment or service
for any reason during the Restricted Period shall be set forth in the
Restricted Stock Award Agreement, Deferred Stock Award Agreement or
Performance Share Award Agreement, as appropriate, governing such
awards.
(d) With respect to awards intended to constitute "qualified
performance based compensation" for purposes of Section 162(m) of the
Code, the applicable performance goals shall be based upon earnings,
earnings per share, revenue growth or return on equity.
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SECTION 8. AMENDMENT AND TERMINATION.
The Board may amend, alter or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made that would impair the rights of a
Participant under any award theretofore granted without such Participant's
consent, or that without the approval of the stockholders (as described below)
would:
(1) except as provided in Section 3, increase the total number
of shares of Stock reserved for the purpose of the Plan;
(2) change the class of directors, officers, employees,
consultants and advisors eligible to participate in the Plan;
(3) extend the maximum option period under paragraph (2) of
Section 5 of the Plan; or
(4) change the material terms of grants of Annual Non-Employee
Director Stock Options pursuant to Section 6.
Notwithstanding the foregoing, stockholder approval under this Section 8
shall only be required at such time and under such circumstances as stockholder
approval would be required under Section 162(m) of the Code or other applicable
law, rule or regulation with respect to any material amendment to any employee
benefit plan of the Company.
The Administrator may amend the terms of any award theretofore granted,
prospectively or retroactively, but, subject to Section 3 above, no such
amendment shall impair the rights of any holder without his or her consent.
SECTION 9. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for incentive
compensation. With respect to any payments not yet made to a Participant by the
Company, nothing contained herein shall give any such Participant any rights
that are greater than those of a general creditor of the Company.
SECTION 10. GENERAL PROVISIONS.
(1) The Administrator may require each person purchasing shares pursuant
to a Stock Option to represent to and agree with the Company in writing that
such person is acquiring the shares without a view to distribution thereof. The
certificates for such shares may include any legend which the Administrator
deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Stock delivered under the Plan shall be
subject to such stock-transfer orders and other restrictions as the
Administrator may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Stock is then listed, and any applicable Federal or state securities
law, and the Administrator may cause a legend or legends to be placed on any
such certificates to make appropriate reference to such restrictions.
(2) Nothing contained in the Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to stockholder approval
if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of the Plan shall
not confer upon any officer, director, employee, consultant or advisor of the
Company any right to continued employment or service with the Company, as the
case may be, nor shall it interfere in any way with the right of the Company to
terminate the employment or service of any of its officers, directors,
employees, consultants or advisors at any time.
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<PAGE> 10
(3) Each Participant shall, no later than the date as of which the value
of an award first becomes includible in the gross income of the Participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Administrator regarding payment of, any Federal, state, or
local taxes of any kind required by law to be withheld with respect to the
award. The obligations of the Company under the Plan shall be conditional on the
making of such payments or arrangements, and the Company shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment of
any kind otherwise due to the Participant.
(4) No member of the Board or the Administrator, nor any officer or
employee of the Company acting on behalf of the Board or the Administrator,
shall be personally liable for any action, determination, or interpretation
taken or made in good faith with respect to the Plan, and all members of the
Board or the Administrator and each and any officer or employee of the Company
acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company in respect of any such action,
determination or interpretation.
SECTION 11. EFFECTIVE DATE OF PLAN.
The Plan became effective (the "Effective Date") on August 5, 1997, the
date the Company's stockholders formally approved the Plan.
SECTION 12. TERM OF PLAN.
No Stock Option, Restricted Stock, Deferred Stock or Performance Share
award shall be granted pursuant to the Plan on or after the tenth anniversary of
the Effective Date, but awards theretofore granted may extend beyond that date.
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Exhibit 10.61
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as
of December 18, 1998, is entered into by and among:
(1) LAM RESEARCH CORPORATION, a Delaware corporation
("Borrower");
(2) Each of the financial institutions listed in Schedule I to
the Credit Agreement referred to in Recital A below (collectively, the
"Lenders") that execute this Amendment; and
(3) ABN AMRO BANK, N.V., San Francisco International Branch, as
agent for the Lenders (in such capacity, "Agent").
RECITALS
A. Borrower, the Lenders and Agent are parties to a Credit Agreement
dated as of April 13, 1998, as amended by that certain First Amendment to Credit
Agreement dated as of August 10, 1998 (as amended, the "Credit Agreement").
B. Borrower has requested the Lenders and Agent to amend the Credit
Agreement in certain respects.
C. The Lenders executing this Amendment and Agent are willing so to
amend the Credit Agreement upon the terms and subject to the conditions set
forth below.
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, Borrower, the Lenders executing this Amendment and Agent hereby
agree as follows:
1. DEFINITIONS, INTERPRETATION. All capitalized terms defined above and
elsewhere in this Amendment shall be used herein as so defined. Unless otherwise
defined herein, all other capitalized terms used herein shall have the
respective meanings given to those terms in the Credit Agreement, as amended by
this Amendment. The rules of construction set forth in Section I of the Credit
Agreement shall, to the extent not inconsistent with the terms of this
Amendment, apply to this Amendment and are hereby incorporated by reference.
2. AMENDMENTS TO CREDIT AGREEMENT. Subject to the satisfaction of the
conditions set forth in Paragraph 4 below, the Credit Agreement is hereby
amended as follows:
<PAGE> 2
(a) Paragraph 1.01 is amended by adding thereto, in the
appropriate alphabetical order, definitions of the term "Cash Balances"
and "Second Amendment Effective Date" to read in their entirety as
follows:
"Cash Balances" shall mean, with respect to Borrower and
its Subsidiaries at any time, the remainder, determined on a
consolidated basis in accordance with GAAP, of:
(a) The unrestricted, unencumbered sum of (i) the
cash of Borrower and its Subsidiaries at such time and
(ii) the market value of cash equivalents (less than
ninety (90) days in term) and short-term marketable
securities (less than one (1) year in term) at such time;
minus
(b) The sum of (i) the aggregate principal amount
of all Loans outstanding at such time, (ii) the aggregate
amount available for drawing under all Letters of Credit
outstanding at such time and (iii) the aggregate amount of
all Reimbursement Obligations outstanding at such time.
"Second Amendment Effective Date" shall mean December 18,
1998.
(b) Subparagraph 5.02(l) is amended by changing clause (iv)
thereof to read in its entirety as follows:
(iv) Borrower shall not permit its Tangible Net Worth (A)
on December 27, 1998 to be less than $350,000,000 and (B) on any
date of determination (such date to be referred to herein as a
"determination date") which occurs after December 27, 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:
(1) $350,000,000;
plus
(2) Seventy-five percent (75%) of the sum of
Borrower'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
(3) One hundred percent (100%) of the Net
Proceeds of all Equity Securities issued by
Borrower and its Subsidiaries during the period
commencing on the base date and ending on the
determination date;
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<PAGE> 3
plus
(4) One hundred percent (100%) of the
aggregate decrease in the total liabilities of
Borrower and its Subsidiaries resulting from
conversions of convertible Subordinated
Indebtedness or other liabilities of Borrower and
its Subsidiaries into Equity Securities of Borrower
and its Subsidiaries during the period commencing
on the base date and ending on the determination
date.
(c) Subparagraph 5.02(l) is further amended by changing clause
(v) thereof to read in its entirety as follows:
(v) Borrower shall not incur a cumulative net loss
(exclusive of net income) greater than $35,000,000, determined in
accordance with GAAP, for the two quarter period commencing on
December 28, 1998 and ending on June 30, 1999.
(d) Subparagraph 5.02(l) is further amended by adding thereto a
new clause (vi) to read in its entirety as follows:
(vi) Borrower shall not permit the Cash Balances of
Borrower and its Subsidiaries to be less than $150,000,000 at any
time; provided, however, that if the net profits of Borrower and
its Subsidiaries, determined in accordance with GAAP, for each of
the fiscal quarter periods ending on September 26, 1999 and
December 26, 1999 is $1.00 or greater, commencing on the
fifteenth day following the date Borrower is first required to
deliver the Financial Statements for the fiscal quarter period
ending on December 26, 1999, Borrower shall no longer be required
to maintain such minimum Cash Balances.
(e) Schedule 1.01(a) is hereby amended to read in its entirety as
set forth on Attachment 1 hereto.
3. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants to Agent and the Lenders that, after giving effect to the amendments
set forth in Paragraph 2 above, the following will be true and correct on the
Effective Date (as defined below):
(a) The representations and warranties of Borrower and its
Subsidiaries set forth in Paragraph 4.01 of the Credit Agreement and in
the other Credit Documents are true and correct in all material
respects;
(b) No Default or Event of Default has occurred and is
continuing; and
(c) All of the Credit Documents are in full force and effect.
3
<PAGE> 4
(Without limiting the scope of the term "Credit Documents," Borrower expressly
acknowledges in making the representations and warranties set forth in this
Paragraph 3 that, on and after the date hereof, such term includes this
Amendment.)
4. EFFECTIVE DATE. The amendments effected by Paragraph 2 above shall
become effective on December 18, 1998 (the "Effective Date"), subject to receipt
by Agent and the Lenders of the following, each in form and substance
satisfactory to Agent, the Lenders executing this Amendment and their respective
counsel:
(a) This Amendment duly executed by Borrower, the Required
Lenders and Agent;
(b) A Certificate of the Secretary of Borrower, dated the
Effective Date, certifying that (i) the Certificate of Incorporation and
Bylaws of Borrower, in the form delivered to Agent on the Closing Date,
are in full force and effect and have not been amended, supplemented,
revoked or repealed since such date and (ii) resolutions have been duly
adopted by the Board of Directors of Borrower and are continuing in
effect, which authorize the execution, delivery and performance by
Borrower of this Amendment and the consummation of the transactions
contemplated hereby;
(c) A favorable written opinion of Steve Debenham, internal
counsel to Borrower, and Jackson Tufts Cole & Black, LLP, external
counsel to Borrower, each dated the Effective Date, addressed to Agent,
covering such legal matters as Agent may reasonably request and
otherwise in form and substance satisfactory to Agent;
(d) A nonrefundable amendment fee equal to one-tenth of one
percent (0.10%) of the Total Commitment to be shared among the Lenders
that execute this Amendment on or before December 18, 1998 pro rata in
accordance with such Lenders' respective Proportionate Share; and
(e) Such other evidence as Agent or any Lender executing this
Amendment may reasonably request to establish the accuracy and
completeness of the representations and warranties and the compliance
with the terms and conditions contained in this Amendment and the other
Credit Documents.
5. EFFECT OF THIS AMENDMENT. On and after the Effective Date, each
reference in the Credit Agreement and the other Credit Documents to the Credit
Agreement shall mean the Credit Agreement as amended hereby. Except as
specifically amended above, (a) the Credit Agreement and the other Credit
Documents shall remain in full force and effect and are hereby ratified and
confirmed and (b) the execution, delivery and effectiveness of this Amendment
shall not, except as expressly provided herein, operate as a waiver of any
right, power, or remedy of the Lenders or Agent, nor constitute a waiver of any
provision of the Credit Agreement or any other Credit Document.
4
<PAGE> 5
6. MISCELLANEOUS.
(a) Counterparts. This Amendment may be executed in any number of
identical counterparts, any set of which signed by all the parties
hereto shall be deemed to constitute a complete, executed original for
all purposes.
(b) Headings. Headings in this Amendment are for convenience of
reference only and are not part of the substance hereof.
5
<PAGE> 6
IN WITNESS WHEREOF, Borrower, Agent and the Lenders executing this
Amendment have caused this Amendment to be executed as of the day and year first
above written.
BORROWER: LAM RESEARCH CORPORATION
By:
----------------------------------------
Name:
Title:
AGENT: ABN AMRO BANK, N.V., SAN FRANCISCO
INTERNATIONAL BRANCH, AS AGENT
By:
----------------------------------------
Name:
Title:
By:
----------------------------------------
Name:
Title:
LENDERS: ABN AMRO BANK, N.V., SAN FRANCISCO
INTERNATIONAL BRANCH, AS A LENDER
By:
----------------------------------------
Name:
Title:
By:
----------------------------------------
Name:
Title:
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, AS A LENDER
By:
----------------------------------------
Name:
Title:
6
<PAGE> 7
DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN
ISLANDS BRANCHES, AS A LENDER
By:
----------------------------------------
Name:
Title:
By:
----------------------------------------
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN, AS A LENDER
By:
----------------------------------------
Name:
Title:
BANKBOSTON, N.A., AS A LENDER
By:
----------------------------------------
Name:
Title:
UNION BANK OF CALIFORNIA, N.A., AS A LENDER
By:
----------------------------------------
Name:
Title:
7
<PAGE> 8
ATTACHMENT 1
SCHEDULE 1.01(a)
PRICING GRID
<TABLE>
<CAPTION>
LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 4 LEVEL 5
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
APPLICABLE MARGINS:
Base Rate Loans 0.00% 0.00% 0.00% 0.00% 0.00%
LIBOR Loans 0.55% 0.75% .90% 1.00% 1.25%
COMMITMENT FEE PERCENTAGE:
0.225% 0.25% 0.30% 0.325% 0.40%
LC USAGE FEE PERCENTAGE:
Non-Financial Performance
Letters of Credit 0.275%* 0.25%* 0.45%* 0.50%* 0.625%*
Financial Performance Letters
of Credit 0.55%* 0.75%* 0.90%* 1.00%* 1.25%*
</TABLE>
* Does not include LC Issuance Fees payable to Issuing Bank
EXPLANATION
1. The Applicable Margin for each Borrowing and Loan, the Commitment Fee
Percentage, and the LC Usage Fee Percentage will be determined as
provided below and will vary depending upon whether Level 1 pricing,
Level 2 pricing, Level 3 pricing, Level 4 pricing or Level 5 pricing is
applicable.
2. From the Closing Date until the First Amendment Effective Date, Level 1
pricing shall apply.
3. From the First Amendment Effective Date until the Second Amendment
Effective Date, Level 3 pricing shall apply.
4. On and after the Second Amendment Effective Date until the date that
either Paragraph 5 or Paragraph 6 below is applicable, Level 5 Pricing
will apply.
5. Commencing on the fifteenth day following the date Borrower is required
to deliver the quarterly Financial Statements and information under
Subparagraphs 5.01(a)(i) of the Credit Agreement for the fiscal quarter
period ending on December 26, 1999, the pricing
1-1
<PAGE> 9
will vary depending upon Borrower's profitability and Senior
Indebtedness Ratio (as applicable) as set forth in such Financial
Statements and information for the immediately preceding fiscal quarter
as follows:
(a) If Borrower does not have net profits of $1.00 or greater,
determined in accordance with GAAP, during both the fiscal
quarter period ending on September 26, 1999 and the fiscal
quarter period ending on December 26, 1999, Level 5 pricing will
still apply.
(b) If Borrower has net profits of $1.00 or greater, determined in
accordance with GAAP, during both the fiscal quarter period
ending on September 26, 1999 and the fiscal quarter period ending
on December 26, 1999 and Borrower's Senior Indebtedness Ratio is
less than 0.10, Level 2 pricing will apply.
(c) If Borrower has net profits of greater than $1.00, determined in
accordance with GAAP, during both the fiscal quarter ending on
September 26, 1999 and the fiscal quarter ending on December 26,
1999 and Borrower's Senior Indebtedness Ratio is greater than or
equal to 0.10 but less than 0.15, Level 4 pricing will apply.
(d) If Borrower has net profits of greater than $1, determined in
accordance with GAAP, during both the fiscal quarter ending on
September 26, 1999 and the fiscal quarter ending on December 26,
1999 and Borrower's Senior Indebtedness Ratio is greater than or
equal to 0.15, Level 5 pricing will apply.
6. On and after the fifteenth day following the Borrower's failure to
deliver to Agent the Financial Statements and information required under
Subparagraphs 5.01(a)(i) and (iii) of the Credit Agreement within the
time periods set forth therein commencing with the fifteenth day
following the date Borrower is required to deliver such Financial
Statements and information for the fiscal quarter ending on December 26,
1999, and until the fifteenth day following receipt by Agent of such
Financial Statements and information, Level 5 pricing will apply.
7. Examples:
(a) The Senior Indebtedness Ratio for the fiscal quarter ending March
26, 2000 is 0.09. Assuming Borrower had net profits of greater
than $1.00, determined in accordance with GAAP, during both the
fiscal quarter period ending on September 26, 1999 and the fiscal
quarter period ending on December 26, 1999 and the Financial
Statements and information are delivered within the time periods
required under the Credit Agreement, commencing May 30, 2000,
Level 2 pricing will apply.
1-2
<PAGE> 10
(b) The Senior Indebtedness Ratio for the fiscal quarter ending June
30, 2000 is 0.14. Assuming Borrower had net profits of greater
than $1.00, determined in accordance with GAAP, during both the
fiscal quarter period ending on September 26, 1999 and the fiscal
quarter period ending on December 26, 1999 and the Financial
Statements and information are delivered within the time periods
set forth in the Credit Agreement, commencing September 3, 2000,
Level 4 pricing will apply.
1-3
<PAGE> 1
Exhibit 10.62
FIRST AMENDMENT TO GUARANTY
THIS FIRST AMENDMENT TO GUARANTY (this "Amendment"), dated as of
December 25, 1998, is entered into by and between:
(1) LAM RESEARCH CORPORATION, a Delaware corporation (the
"Guarantor"); and
(2) ABN AMRO BANK N.V., acting as agent (in such capacity,
"Agent") for the financial institutions which are from time to time the
parties to the Loan Agreement referred to in Recital A below
(collectively, the "Lenders").
RECITALS
A. Pursuant to a Loan Agreement dated as of September 30, 1998 (as
amended pursuant to that certain Supplemental Agreement dated as of December 25,
1998, and as further amended or supplemented 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 obligations of Borrower to Agent and the Lenders arising under
the Loan Agreement have been guaranteed by the Guarantor pursuant to that
certain Guaranty, dated as of September 30, 1998 (the "Guaranty"), executed by
the Guarantor in favor of Agent for the benefit of the Lenders.
C. The Guarantor has requested that Agent and the Lenders amend the
Guaranty in certain respects. Agent and the Lenders are willing so to amend the
Guaranty upon the terms and subject to the conditions set forth below.
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, the Guarantor, Agent and the Lenders hereby agree as follows:
1. DEFINITIONS, INTERPRETATION. All capitalized terms defined above and
elsewhere in this Amendment shall be used herein as so defined. Unless otherwise
defined herein, all other capitalized terms used herein shall have the
respective meanings given to those terms in the Guaranty, as amended by this
Amendment. The rules of construction set forth in Paragraph 1 of the Guaranty
shall, to the extent not inconsistent with the terms of this Amendment, apply to
this Amendment and are hereby incorporated by reference.
<PAGE> 2
2. AMENDMENT TO THE GUARANTY. Subject to the satisfaction of the
conditions set forth in Paragraph 4 below, the Guaranty is hereby amended as
follows:
(a) Subparagraph 1(a) is amended by adding thereto, in the
appropriate alphabetical order, definitions of the term "Cash Balances",
"Letters of Credit", "Loans" and "Reimbursement Obligations" to read in
their entirety as follows:
"Cash Balances" shall mean, with respect to Guarantor and
its Subsidiaries at any time, the remainder, determined on a
consolidated basis in accordance with GAAP, of:
(a) The unrestricted, unencumbered sum of (i) the
cash of Guarantor and its Subsidiaries at such time and
(ii) the market value of cash equivalents (less than
ninety (90) days in term) and short-term marketable
securities (less than one (1) year in term) at such time;
minus
(b) The sum of (i) the aggregate principal amount
of all Loans outstanding at such time, (ii) the aggregate
amount available for drawing under all Letters of Credit
outstanding at such time and (iii) the aggregate amount of
all Reimbursement Obligations outstanding at such time.
"Letters of Credit" shall have the meaning given to the
term "Letters of Credit" under the Guarantor Credit Agreement.
"Loans" shall have the meaning given to the term "Loans"
under the Guarantor Credit Agreement.
"Reimbursement Obligation" shall have the meaning given to
the term "Reimbursement Obligation" under the Guarantor Credit
Agreement.
(b) Subparagraph 5(l) is amended by changing clause (iv) thereof
to read in its entirety as follows:
(iv) Guarantor shall not permit its Tangible Net Worth (A)
on December 27, 1998 to be less than $350,000,000 and (B) on any
date of determination (such date to be referred to herein as a
"determination date") which occurs after December 27, 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) $350,000,000;
plus
2
<PAGE> 3
(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.
(c) Subparagraph 5(l) is further amended by changing clause (v)
thereof to read in its entirety as follows:
(v) Guarantor shall not incur a cumulative net loss
(exclusive of net income) greater than $35,000,000, determined in
accordance with GAAP, for the two quarter period commencing on
December 28, 1998 and ending on June 30, 1999.
(d) Subparagraph 5(l) is further amended by adding thereto a new
clause (vi) to read in its entirety as follows:
(vi) Guarantor shall not permit the Cash Balances of
Guarantor and its Subsidiaries to be less than $150,000,000 at
any time; provided, however, that if the net profits of Guarantor
and its Subsidiaries, determined in accordance with GAAP, for
each of the fiscal quarter periods ending on September 26, 1999
and December 26, 1999 is $1.00 or greater, commencing on the
fifteenth day following the date Guarantor is first required to
deliver the Financial Statements for the fiscal quarter period
ending on December 26, 1999, Guarantor shall no longer be
required to maintain such minimum Cash Balances.
3. REPRESENTATIONS AND WARRANTIES. The Guarantor hereby represents and
warrants to Agent and the Lenders that the following are true and correct on the
date of this
3
<PAGE> 4
Amendment and that, after giving effect to the amendment set forth in Paragraph
2 above, the following will be true and correct on the Effective Date (as
defined below):
(a) The representations and warranties of the Guarantor set forth
in Paragraph 3 of the Guaranty are true and correct in all material
respects; and
(b) No Default or Event of Default has occurred and is
continuing.
4. EFFECTIVE DATE. The amendments effected by Paragraph 2 above shall
become effective as of December 25, 1998 (the "Effective Date"), subject to
receipt by Agent and the Lenders on or prior to the Effective Date of the
following, each in form and substance satisfactory to Agent, the Lenders and
their respective counsel:
(a) This Amendment duly executed by the Guarantor and Agent;
(b) The Supplemental Agreement dated as of the date hereof, duly
executed by Borrower and Agent; and
(c) Such other evidence as Agent or any Lender may reasonably
request to establish the accuracy and completeness of the
representations and warranties and the compliance with the terms and
conditions contained in this Amendment and the Guaranty.
5. EFFECT OF THIS AMENDMENT. On and after the Effective Date, each
reference in the Loan Agreement to the Guaranty shall mean the Guaranty as
amended hereby. Except as specifically amended above, (a) the Guaranty shall
remain in full force and effect and is hereby ratified and confirmed and (b) the
execution, delivery and effectiveness of this Amendment shall not, except as
expressly provided herein, operate as a waiver of any right, power, or remedy of
Agent or the Lenders, nor constitute a waiver of any provision of the Guaranty.
4
<PAGE> 5
6. MISCELLANEOUS.
(a) Counterparts. This Amendment may be executed in any number of
identical counterparts, any set of which signed by all the parties
hereto shall be deemed to constitute a complete, executed original for
all purposes.
(b) Headings. Headings in this Amendment are for convenience of
reference only and are not part of the substance hereof.
(c) Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of California without
reference to conflicts of law rules.
IN WITNESS WHEREOF, the Guarantor and Agent have caused this Amendment
to be executed as of the day and year first above written.
GUARANTOR LAM RESEARCH CORPORATION
By:
----------------------------------------
Name:
Title:
AGENT ABN AMRO BANK N.V
By:
----------------------------------------
Name:
Title:
By:
----------------------------------------
Name:
Title:
5
<PAGE> 1
Exhibit 10.63
SUPPLEMENTAL AGREEMENT
in respect of
RECEIVABLES PURCHASE AGREEMENT DATED DECEMBER 26, 1997
between
LAM RESEARCH CO., LTD.
as Seller
BANKS AND OTHER INSTITUTIONS NAMED HEREIN
as Purchasers
ABN AMRO BANK N.V., TOKYO BRANCH
as Representative Purchaser
ABN AMRO BANK N.V., TOKYO BRANCH
as Initial Purchaser
and
LAM RESEARCH CO., LTD.
as Collection Agent
<PAGE> 2
THIS SUPPLEMENTAL AGREEMENT is deemed effective as of the 25th day of December,
1998
BETWEEN:
(1) LAM RESEARCH CO., LTD., a Japanese corporation having its registered
office at 1-1-10, Oyama, Sagamihara-shi, Kanagawa Prefecture, Japan as
seller of receivables (in such capacity, the "SELLER");
(2) BANKS AND OTHER INSTITUTIONS NAMED IN THE SIGNATURE PAGE HEREOF as
purchasers (collectively, the "PURCHASERS" and each a "PURCHASER");
(3) ABN AMRO BANK N.V. acting through its TOKYO BRANCH, a branch licensed in
Japan and having its registered office at Shiroyama JT Mori Building,
4-3-1, Toranomon, Minato-ku, Tokyo 105-6013, Japan, as representative of
the Purchasers (in such capacity, the "REPRESENTATIVE PURCHASER");
(4) ABN AMRO BANK N.V. acting through its TOKYO BRANCH, a branch licensed in
Japan and having its registered office at Shiroyama JT Mori Building,
4-3-1, Toranomon, Minato-ku, Tokyo 105-6013, Japan, as the Initial
Purchaser (in such capacity, the "INITIAL PURCHASER"); and
(5) LAM RESEARCH CO., LTD., a Japanese corporation having its registered
office at 1-1-10, Oyama, Sagamihara-shi, Kanagawa Prefecture, Japan, as
collection agent in relation to receivables (in such capacity, the
"COLLECTION AGENT").
WHEREAS:
(A) The Seller, the Initial Purchaser, the Representative Purchaser and the
Collection Agent have entered into a Receivables Purchase Agreement
dated December 26, 1997 (the "ORIGINAL AGREEMENT"), pursuant to which
the Seller and the Initial Purchaser have agreed, on the terms and
subject to the conditions thereof, that the Seller will sell to the
Initial Purchaser certain receivables which have arisen, or will arise
during its term, out of the sales by the Seller of certain equipment,
and the Collection Agent has agreed, upon the terms and subject to the
conditions thereof, to act as the agent of the Initial Purchaser in
connection with the collection of receivables from time to time assigned
to the Initial Purchaser in accordance with the terms thereof; and
(B) The parties hereto wish to amend certain terms of the Original
Agreement, to the extent provided below.
IT IS HEREBY AGREED as follows:-
1. GENERAL
(1) Terms defined in the Original Agreement (if applicable, as amended
by this Agreement) shall, when used in this Agreement (including in the
Recital), have the same meanings herein as therein, unless otherwise
specifically provided herein.
<PAGE> 3
-2-
(2) Except insofar as amended by this Agreement, the Original Agreement
shall continue in full force and effect and shall be read and construed as one
with this Agreement. Upon this Agreement taking effect, references in the
Original Agreement to "this Agreement", "herein", "hereunder" and other similar
expressions shall be deemed to be references to the Original Agreement to the
extent amended and restated by this Agreement.
(3) This Agreement shall be governed by and construed in accordance with
the laws of Japan and the provisions of Clause 38 (Jurisdiction) of the Original
Agreement shall be deemed to apply to this Agreement as though they were set out
in full herein.
(4) The headings are for convenience of reference only and shall not
affect the construction hereof.
(5) This Agreement may be signed in any number of counterparts. Any
single counterpart or a set of counterparts signed, in either case, by all the
parties hereto shall constitute a full and original agreement for all purposes.
2. AMENDMENT TO ORIGINAL AGREEMENT
Subject to Clause 4 hereof, effective as of December 25, 1998 (the
"EFFECTIVE DATE"), the Original Agreement shall be amended as follows:
(1) in Clause 1.1 of the Original Agreement, the definition of
"Applicable Margin" shall be amended in its entirety to read as follows:
"APPLICABLE MARGIN" means (a) in the case of a Purchased Receivable
which is a Post-Acceptance Receivable as of two (2) Business Days prior
to the first day of the relevant Fixed Period, 1.00 percent per annum,
and (b) in the case of a Purchased Receivable which is not a
Post-Acceptance Receivable as of two (2) Business Days prior to the
first day of the relevant Fixed Period, such rate per annum (expressed
as a percentage) as shall be determined pursuant to Clause 19.9;
(2) in Clause 1.1 of the Original Agreement, the definition of "Total
Purchase Commitments" shall be amended by replacing "Six Billion Yen
((Y)6,000,000,000)" with "Four Billion Yen ((Y)4,000,000,000)";
(3) in Clause 1.1 of the Original Agreement, the following definitions
shall be added in their appropriate alphabetical locations:
"AGENT" has the meaning set forth in the Loan Agreement (it being
understood that the definition of "Agent" in the Loan Agreement shall be
deemed to be incorporated herein as if it was fully set out herein);
"DEFAULT" has the meaning set forth in the Loan Agreement (it being
understood that the definition of "Default" in the Loan Agreement shall
be deemed to be incorporated herein as if it was fully set out herein);
"EVENT OF DEFAULT" has the meaning set forth in the Loan Agreement (it
being understood that the definition of "Event of Default" in the Loan
Agreement as well as Clause 11.1 (including the definitions of the
defined terms used
<PAGE> 4
-3-
therein) of the Loan Agreement shall be deemed to be incorporated herein
as if it was fully set out herein);
"FINANCIAL STATEMENT" has the meaning set forth in the Loan Guaranty (it
being understood that the definition of "Financial Statements" and other
defined terms used in such definition in the Loan Guaranty shall be
deemed to be incorporated herein as if they were fully set out herein);
"GAAP" has the meaning set forth in the Loan Guaranty (it being
understood that the definition of "GAAP" the Loan Guaranty shall be
deemed to be incorporated herein as if it was fully set out herein);
"LOAN AGREEMENT" means the Loan Agreement dated as of September 30, 1998
between Lam Research Co., Ltd. as Borrower, the banks and financial
institutions named therein as Lenders, and ABN AMRO Bank N.V., Tokyo
Branch as Agent;
"LOAN GUARANTY" means the Guaranty dated as of September 30, 1998
executed by Lam Research Corporation, as Guarantor, in favor of ABN AMRO
Bank N.V., Tokyo Branch as Agent for the Lenders to the Loan Agreement;
"MARGIN CERTIFICATE" means a certificate in the form of the Eleventh
Schedule;
"MARGIN DETERMINATION DATE" means the fifteenth day following the date
by which the Seller is required to deliver the quarterly financial
statements and information under subclauses (i) and (iii) of Clause
19.9(c) (it being understood that the delivery by the Guarantor to the
Agent of the quarterly financial statements and information required
under clauses (i) and (iii) of Subparagraph 4(a) of the Loan Guaranty
shall be deemed effective delivery by the Seller to the Representative
Purchaser of the quarterly financial statements and information required
under subclauses (i) and (iii) of Clause 19.9(c));
"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;
"SENIOR INDEBTEDNESS RATIO" has the meaning set forth in the Loan
Guaranty (it being understood that the definition of "Senior
Indebtedness Ratio" and other defined terms used in such definition in
the Loan Guaranty shall be deemed to be incorporated herein as if they
were fully set out herein);
"SUBSIDIARY" has the meaning set forth in the Loan Guaranty (it being
understood that the definition of "Subsidiary" and other defined terms
used in such definition in the Loan Guaranty shall be deemed to be
incorporated herein as if it was fully set out herein);
(4) in Clause 2.1 of the Original Agreement, "Six Billion Yen
((Y)6,000,000,000)" in the third sentence shall be replaced with "Four Billion
Yen ((Y)4,000,000,000)";
<PAGE> 5
-4-
(5) in Clause 19 of the Original Agreement, the following clause shall
be added as Clause 19.9:
19.9 (a) The Applicable Margin (for the purposes of item (b) of
the definition thereof) shall be (i) in respect of the
period from and including the Initial Purchase Date to and
including the date immediately preceding December 25, 1998
(the "EFFECTIVE DATE"), 0.90 percent per annum and (ii) in
respect of the period from and including the Effective
Date to and including December 26, 1999, 1.50 percent per
annum.
(b) On or after December 27, 1999, the Applicable Margin (for
the purposes of item (b) of the definition thereof) 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, 1.50 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 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, 1.00
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
<PAGE> 6
-5-
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 but
less than or equal to 0.25, 1.25 percent per annum.
(c) Until the later of the expiry of the Purchase Commitment
Period and the date on which the obligation to pay the
Reduced Amount pursuant to Clause 10 and the repurchase
obligations pursuant to Clause 16 shall have been fully
satisfied by the Seller in respect of all the Purchased
Receivables, the Seller shall, unless the Majority
Purchasers shall otherwise consent in writing, furnish or
cause to be furnished to the Representative Purchaser for
each Purchaser the following, each in such form and such
detail as the Representative Purchaser shall reasonably
request (copies of which the Representative Purchaser
shall promptly deliver to each Purchaser):
(i) as soon as available and in no event later than
fifty (50) days after the last day of each fiscal
quarter of the Guarantor, a copy of the Financial
Statements of the Guarantor and its Subsidiaries
(prepared on a consolidated basis) for such quarter
and for the fiscal year to date, certified by the
chief executive officer, president, chief financial
officer or treasurer of the 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 the Guarantor, (A) copies of the audited
Financial Statements of the Guarantor and its
Subsidiaries (prepared on a consolidated basis) for
such year, prepared by independent certified public
accountants of recognized national standing
acceptable to the Representative Purchaser, and (B)
copies of the unqualified opinions (or qualified
opinions reasonably acceptable to the
Representative Purchaser) and management letters
delivered by such accountants in connection with
all such Financial Statements; and
(iii) contemporaneously with the quarterly and year-end
Financial Statements required by the foregoing
subclauses (i) and (ii), a compliance certificate
(the "COMPLIANCE CERTIFICATE") of the chief
executive officer, president, chief financial
officer or treasurer of the 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
<PAGE> 7
-6-
what action the 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) of the Loan Guaranty.
(d) Notwithstanding the provisions of Clause 19.9(b), if the
Seller fails to deliver to the Representative Purchaser
the financial statements and information required under
subclauses (i) and (ii) of Clause 19.9(c) within the time
periods set forth therein (it being understood that the
delivery by the Guarantor to the Agent of the financial
statements and information required under clauses (i) and
(ii) of Subparagraph 4(a) of the Loan Guaranty shall be
deemed effective delivery by the Seller to the
Representative Purchaser of the financial statements and
information required under subclauses (i) and (ii) of
Clause 19.9(c)), the Applicable 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 Representative
Purchaser of such financial statements and information (at
which time Clause 19.9(b) shall apply), 1.50 percent per
annum.
(e) Except where item (i) of Clause 19.9(b) shall be
applicable, the Borrower shall notify the Representative
Purchaser of the Senior Indebtedness Ratio of the
Guarantor 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.;
(6) Clause 29.2 of the Original Agreement shall be amended by replacing
"0.25 percent per annum" with "0.40 percent per annum";
(7) Exhibit I to the Original Agreement shall be replaced with Exhibit I
attached hereto; and
(8) the Eleventh Schedule attached hereto shall be attached to and shall
form an integral part of the Original Agreement as the Eleventh Schedule
thereto.
3. REPRESENTATIONS AND WARRANTIES
The Seller (in such capacity and as the Collection Agent) represents and
warrants to the Representative Purchaser and the Purchasers as follows:
(1) it has power to enter into this Agreement and perform its
obligations hereunder and has taken all necessary action required to authorize
the execution and delivery of this Agreement, and the performance of the
Original Agreement as amended by this Agreement, upon the terms and conditions
of the Original Agreement as amended by this Agreement;
(2) all necessary consents, approvals and authorizations required in
connection with the execution, delivery, performance, validity or enforceability
of
<PAGE> 8
-7-
this Agreement have been obtained and made and are in full force and effect and
each of this Agreement and the Original Agreement as amended by this Agreement
constitutes a legal, valid and binding obligation of the Seller enforceable in
accordance with its terms;
(3) the execution, delivery and performance of this Agreement and the
performance of the Original Agreement as amended by this Agreement will not
violate, result in a breach of, or constitute a default under, any provision of
any indenture, contract or other undertaking to which the Seller is a party or
by which it or its property is bound or of any law or any regulation or, of any
order, writ, or decree applicable to it; and
(4) no event has occurred and no condition exists which, with the giving
of notice or lapse of time or the satisfaction of any other condition, would
constitute a Termination Event under the Original Agreement as amended by this
Agreement.
4. CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THIS AGREEMENT
(1) The provisions of Clause 2 hereof shall not come into effect until
the Representative Purchaser has received a confirmation letter from the
Guarantor substantially in the form of Annex A attached hereto.
(2) The effectiveness of Clause 2 hereof is subject to the further
condition precedent that as of the Effective Date the representations and
warranties made by the Seller in Clause 3 hereof are true and accurate as if the
same had been made on such date.
5. EXPENSES
The Seller shall reimburse the Representative Purchaser and the
Purchasers for all reasonable expenses incurred by it in connection with the
negotiation, preparation and execution of this Agreement (including all legal
fees and expenses and any stamp and other duties and taxes to which this
Agreement is subject).
<PAGE> 9
-8-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
on the day and year first before written.
THE SELLER AND THE COLLECTION AGENT
LAM RESEARCH CO., LTD.
By:
----------------------------------------
Name:
Title:
THE REPRESENTATIVE PURCHASER AND INITIAL PURCHASER
ABN AMRO BANK N.V., TOKYO BRANCH
By:
----------------------------------------
Name:
Title:
By:
----------------------------------------
Name:
Title:
<PAGE> 10
ANNEX A
[LETTERHEAD OF LAM RESEARCH CORPORATION]
Date: December 25,1998
ABN AMRO Bank N.V.
Tokyo Branch
as Representative Purchaser
to the Purchase Agreement referred to below
Shiroyama JT Mori Building
4-3-1, Toranomon,
Minato-ku, Tokyo 105-6013
Japan
Dear Sirs:
Re: Receivables Purchase Agreement
We refer to a Receivables Purchase Agreement dated December 26,
1997 (the "ORIGINAL AGREEMENT") between Lam Research Co., Ltd. ("LAM JAPAN") as
Seller, the banks and other institutions named therein as Purchasers, ABN AMRO
Bank N.V., Tokyo Branch as Representative Purchaser and Lam Japan as Collection
Agent and a Supplemental Agreement dated December 25, 1998 (the "SUPPLEMENTAL
AGREEMENT") between Lam Japan as Seller, the banks and other institutions named
therein as Purchasers, ABN AMRO Bank N.V., Tokyo Branch as Representative
Purchaser and Initial Purchaser and Lam Japan as Collection Agent. Terms defined
in the Original Agreement as amended by the Supplemental Agreement shall have
the same meanings herein, unless otherwise defined herein.
We give consent to the amendments of the Original Agreement by
the Supplemental Agreement and confirm that our obligations and liabilities
under the Guaranty dated as of December 26, 1997 executed by us in connection
with the Original Agreement will continue and remain in full force and effect
with respect to the Original Agreement as amended.
Very truly yours,
LAM RESEARCH CORPORATION
By:
--------------------------------
Name:
Title:
<PAGE> 11
EXHIBIT I
PURCHASER'S COMMITMENTS
(subject to the third sentence of Clause 2.1)
<TABLE>
<CAPTION>
Purchaser(s) and their/its Address Commitment(s)
- ---------------------------------- -------------
<S> <C>
ABN AMRO Bank N.V. (Y)4,000,000,000
Tokyo Branch
13F, Shiroyama JT Mori Building
4-3-1, Toranomon, Minato-ku
Tokyo 105-6013
Telefax: 81-3-5405-6903/6902
Attention: Structured Finance
Total (Y)4,000,000,000
-------------
</TABLE>
<PAGE> 12
THE ELEVENTH SCHEDULE
FORM OF MARGIN CERTIFICATE
To: [Name and address of Representative Purchaser]
Attention: [Date]
Receivables Purchase Agreement of December 26, 1997 (as amended by
Supplemental Agreement of December 25, 1998)
We refer to the above Supplemental 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:
<PAGE> 1
Exhibit 10.64
SUPPLEMENTAL AGREEMENT
in respect of
LOAN AGREEMENT DATED SEPTEMBER 30, 1998
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
and
ABN AMRO BANK N.V., TOKYO BRANCH
as Initial Lender
<PAGE> 2
THIS SUPPLEMENTAL AGREEMENT is entered into on the 25th of December, 1998
BETWEEN:
(1) LAM RESEARCH CO., LTD., a Japanese corporation having its registered
office at 1-1-10, Oyama, Sagamihara-shi, Kanagawa Prefecture, Japan as
borrower (the "BORROWER");
(2) THE BANKS AND FINANCIAL INSTITUTIONS NAMED IN THE SIGNATURE PAGE HEREOF
as lenders (collectively, the "LENDERS" and each a "LENDER");
(3) ABN AMRO BANK N.V. acting through its TOKYO BRANCH, a branch licensed in
Japan and having its registered office at Shiroyama JT Mori Building,
4-3-1, Toranomon, Minato-ku, Tokyo 105-6013, Japan, as agent of the
Lenders (in such capacity, the "AGENT"); and
(4) ABN AMRO BANK N.V. acting through its TOKYO BRANCH, a branch licensed in
Japan and having its registered office at Shiroyama JT Mori Building,
4-3-1, Toranomon, Minato-ku, Tokyo 105-6013, Japan, as the initial
lender (the "INITIAL LENDER").
WHEREAS:
(A) The Borrower, the Initial Lender and the Agent have entered into a Loan
Agreement dated September 30, 1998 (the "ORIGINAL AGREEMENT"), pursuant
to which the Initial Lender has provided a loan to the Borrower in the
amount of (Y)1,700,000,000; and
(B) The parties hereto wish to amend certain terms of the Original
Agreement, to the extent provided below.
IT IS HEREBY AGREED as follows:-
1. GENERAL
(1) Terms defined in the Original Agreement (if applicable, as amended
by this Agreement) shall, when used in this Agreement (including in the
Recital), have the same meanings herein as therein, unless otherwise
specifically provided herein.
(2) Except insofar as amended by this Agreement, the Original Agreement
shall continue in full force and effect and shall be read and construed as one
with this Agreement. Upon this Agreement taking effect, references in the
Original Agreement to "this Agreement", "herein", "hereunder" and other similar
expressions shall be deemed to be references to the Original Agreement to the
extent amended and restated by this Agreement.
(3) This Agreement shall be governed by and construed in accordance with
the laws of Japan and the provisions of Clause 18.2 (Jurisdiction) of the
Original Agreement shall be deemed to apply to this Agreement as though they
were set out in full herein.
<PAGE> 3
-2-
(4) The headings are for convenience of reference only and shall not
affect the construction hereof.
(5) This Agreement may be signed in any number of counterparts. Any
single counterpart or a set of counterparts signed, in either case, by all the
parties hereto shall constitute a full and original agreement for all purposes.
2. AMENDMENT TO ORIGINAL AGREEMENT
Subject to Clause 4 hereof, effective as of December 25, 1998 (the
"EFFECTIVE DATE"), the Original Agreement shall be amended as follows:
(1) Clause 5.3 of the Original Agreement shall be amended in its
entirety to read as follows:
(a) The Margin shall be (i) in respect of the period from and
including the Drawdown Date to and including the date immediately
preceding December 25, 1998 (the "EFFECTIVE DATE"), 0.90 percent
per annum and (ii) in respect of the period from and including
the Effective Date to and including December 26, 1999, 1.50
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, 1.50 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 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, 1.00
percent per annum; or
<PAGE> 4
-3-
(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 but less than or equal to
0.25, 1.25 percent per annum.
(c) Notwithstanding the provisions of Clauses 5.3(a) and 5.3(b), if
and so long as cash collateral is deposited by the Borrower in
accordance with Clause 10.1(h), the Margin applicable to the
portion of the Loan that corresponds to the amount of such cash
collateral shall be 0.30 percent per annum.
(d) 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 Clause
5.3(b) or 5.3(c) above, as applicable, shall apply), 1.50 percent
per annum.
(e) Except where item (i) of Clause 5.3(b) above shall be applicable,
the Borrower shall notify the Agent of the Senior Indebtedness
Ratio of the Guarantor 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.
(2) The following Clause 10.1(h) shall be inserted immediately after
Clause 10.1(g) of the Original Agreement:
(h) No later than March 1, 1999, the Borrower shall deposit
cash collateral in the amount of(Y)850,000,000 with ABN
AMRO Bank N.V., acting through its Tokyo Branch (the
"INITIAL LENDER") at the Borrower's account (current
account, account No.: [ ]) at the Initial Lender (the
"COLLATERAL ACCOUNT"). To secure the Borrower's
obligations to the Initial Lender under this Agreement, as
of the date the Borrower deposits such cash collateral in
the Collateral Account, the Borrower hereby creates a
pledge (shichiken) in favor of the Initial Lender over all
its rights and interests in and to the Collateral Account
and any moneys and balances from time to time deposited
therein or standing to the credit thereto or any proceeds
thereof and submits a passbook or deposit certificate for
the Collateral Account to the Initial Lender. The Borrower
shall also take such necessary steps as the Initial Lender
reasonably requires
<PAGE> 5
-4-
in order to satisfy the Initial Lender that such cash
collateral is duly pledged or otherwise constitute
security to secure the Loan (in part) and is duly
perfected. Such cash collateral shall be held by the
Initial Lender and may (upon the occurrence of an Event of
Default) be applied by the Initial Lender as security
against the Borrower's obligations to the Initial Lender
under this Agreement or through the exercise by the
Initial Lender against such cash collateral of its set-off
rights in accordance with Clause 14.1 (it being understood
that such cash collateral shall be deposited solely for
the benefit of the Initial Lender and Clause 14.2 shall
not apply to the application of such cash collateral to
discharge the Borrower's obligations to the Initial Lender
under this Agreement). The Borrower hereby consents to the
Initial Lender's immediate enforcement of such rights and
interests as pledgee without any notice or proof and the
Initial Lender shall be immediately entitled to apply any
funds held at the Collateral Account to satisfy the
Borrower's obligations to the Initial Lender under this
Agreement. If the Initial Lender has transferred a portion
(corresponding to(Y)850,000,000) of its rights, benefits
and/or obligations under this Agreement to another person
in accordance with Clause 15.4, the Borrower may withdraw
the above-mentioned cash collateral.
3. REPRESENTATIONS AND WARRANTIES
As of the Effective Date (or, with respect to the obligations of the
Borrower set forth in Clause 10.1(h), upon obtaining additional internal and
external authorizations, consents and/or approvals which shall occur no later
than March 1, 1999) the Borrower represents and warrants to the Agent and the
Lenders as follows:
(1) it has power to enter into this Agreement and perform its
obligations hereunder and has taken all necessary action required to authorize
the execution and delivery of this Agreement, and the performance of the
Original Agreement as amended by this Agreement, upon the terms and conditions
of the Original Agreement as amended by this Agreement;
(2) all necessary consents, approvals and authorizations required in
connection with the execution, delivery, performance, validity or enforceability
of this Agreement have been obtained and made and are in full force and effect
and each of this Agreement and the Original Agreement as amended by this
Agreement constitutes a legal, valid and binding obligation of the Borrower
enforceable in accordance with its terms;
(3) the execution, delivery and performance of this Agreement and the
performance of the Original Agreement as amended by this Agreement will not
violate, result in a breach of, or constitute a default under, any provision of
any indenture, contract or other undertaking to which the Borrower is a party or
by which it or its property is bound or of any law or any regulation or, of any
order, writ, or decree applicable to it; and
<PAGE> 6
-5-
(4) no event has occurred and no condition exists which, with the giving
of notice or lapse of time or the satisfaction of any other condition, would
constitute an Event of Default under the Original Agreement as amended by this
Agreement.
4. CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THIS AGREEMENT
(1) The provisions of Clause 2 hereof shall not come into effect until
the Agent has received (i) a First Amendment to Guaranty in form and substance
satisfactory to Agent duly executed by Guarantor and (ii) a confirmation letter
from the Guarantor substantially in the form of Annex A attached hereto.
(2) The effectiveness of Clause 2 hereof is subject to the further
condition precedent that as of the Effective Date the representations and
warranties made by the Borrower in Clause 3 hereof are true and accurate as if
the same had been made on such date.
5. FEES AND EXPENSES
The Borrower shall reimburse the Agent and the Lenders for all
reasonable expenses incurred by it in connection with the negotiation,
preparation and execution of this Agreement (including all legal fees and
expenses and any stamp and other duties and taxes to which this Agreement is
subject).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
on the day and year first before written.
THE BORROWER
LAM RESEARCH CO., LTD.
By:
--------------------------------
Name:
Title:
THE AGENT AND (INITIAL) LENDER
ABN AMRO BANK N.V., TOKYO BRANCH
By:
--------------------------------
Name:
Title:
By:
--------------------------------
<PAGE> 7
ANNEX A
[LETTERHEAD OF LAM RESEARCH CORPORATION]
Date: December 25,1998
ABN AMRO Bank N.V.
Tokyo Branch
as Agent
to the Loan Agreement referred to below
Shiroyama JT Mori Building
4-3-1, Toranomon,
Minato-ku, Tokyo 105-6013
Japan
Dear Sirs:
Re: Loan Agreement
We refer to a Loan Agreement dated September 30, 1998 (the
"ORIGINAL AGREEMENT") between Lam Research Co., Ltd. ("LAM JAPAN") as Borrower,
the banks and financial institutions named therein as Lenders, and ABN AMRO Bank
N.V., Tokyo Branch as Agent and a Supplemental Agreement dated December 25, 1998
(the "SUPPLEMENTAL AGREEMENT") between Lam Japan as Borrower, the banks and
financial institutions named therein as Lenders, and ABN AMRO Bank N.V., Tokyo
Branch as Agent and Initial Lender. Terms defined in the Original Agreement as
amended by the Supplemental Agreement shall have the same meanings herein,
unless otherwise defined herein.
We give consent to the amendments of the Original Agreement by
the Supplemental Agreement and confirm that our obligations and liabilities
under the Guaranty dated as of September 30, 1998 executed by us in connection
with the Original Agreement will continue and remain in full force and effect
with respect to the Original Agreement as amended, except to the extent amended
pursuant to that certain First Amendment to Guaranty dated as of the date
hereof.
Very truly yours,
LAM RESEARCH CORPORATION
By:
----------------------------------------
Name:
Title:
<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> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 44,000
<SECURITIES> 267,510
<RECEIVABLES> 146,395
<ALLOWANCES> 4,974
<INVENTORY> 191,254
<CURRENT-ASSETS> 765,309
<PP&E> 241,170
<DEPRECIATION> 133,258
<TOTAL-ASSETS> 979,666
<CURRENT-LIABILITIES> 229,170
<BONDS> 310,000
0
0
<COMMON> 38
<OTHER-SE> 412,972
<TOTAL-LIABILITY-AND-EQUITY> 979,666
<SALES> 284,094
<TOTAL-REVENUES> 284,094
<CGS> 186,846
<TOTAL-COSTS> 393,738
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,992
<INCOME-PRETAX> (109,538)
<INCOME-TAX> 0
<INCOME-CONTINUING> (109,538)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (109,538)
<EPS-PRIMARY> (2.85)
<EPS-DILUTED> (2.85)
</TABLE>
