<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) June 11, 1999
------------------
Lam Research Corporation
------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware
----------------------------------------------
(State or Other Jurisdiction of Incorporation)
0-12933 94-2634797
------------------------ ---------------------------------
(Commission File Number) (IRS Employer Identification No.)
4650 Cushing Parkway, Fremont, California 94538
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (510) 659-0200
-----------------------------
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
ITEM 5. OTHER EVENTS.
The Board of Directors of the Company has authorized the Company to acquire from
independent third parties (the "Third Parties") options to purchase up to 3.5
million shares of the Company's common stock. These call options are to be
acquired to offset the anticipated dilutive effect of a potential conversion
into common stock of subordinated debt previously issued by the Company and due
September 2, 2002. The Board also authorized the Company to enter into put
options with the same Third Parties covering up to 5.25 million shares of the
Company's common stock. The premiums the Company will receive over the course of
the program from the sale of the put options to the Third Parties are intended
to offset in full the premium cost to the Company of the call options.
Pursuant to this authorization, described above, the Company has as of June 11,
1999 acquired options to purchase 1.24 million shares of common stock; the
weighted average exercise price of these options is $33.87. The call options
provide that the maximum benefit to the Company of the call options at
expiration is $53.90 per option share (the difference between $87.77, which is
the conversion price of the debentures, and the weighted average exercise price
of the call options). The Company has also entered put options with the same
Third Parties covering 1.86 million shares of its common stock, giving those
Third Parties the right to sell to the Company shares of the Company's common
stock at a weighted average price of $28.43 per share.
The call and put options are European style options exercisable upon expiration;
all of the options expire not later than September 3, 2002, which is the
business day preceding the date on which the Company's subordinated debt must
either be converted or retired. Upon option exercise, the Company has the
ability, at its option, to permit the options to be physically settled (i.e.,
shares would be delivered to the Company against payment of the exercise price),
settled in cash (i.e., by a payment from one party to the other of the value of
the option being exercised) or, "net settled" in shares (i.e., by delivery of a
number of shares of common stock having a value equal to the value of the option
being exercised). The Company can also unwind the options prior to expiration
for a settlement value determined from time to time by the appropriate Third
Party. While the options are only exercisable at expiration, the terms of the
contracts with the Third Parties provide for early termination and settlement of
the options upon the occurrence of certain events, including without limitation
the Company's material breach of the agreement, default on certain indebtedness
or covenants relating to the Company's financial condition, reduction in the
Company's Standard & Poor's credit rating below B or a drop in the price of the
Company's common stock to less than $5.00 per share.
<PAGE> 3
The option positions described above will be of value to the Company if the
Company's stock price exceeds the exercise price of the call options at the time
the option is exercised. Of course, the Company's stock price could also
decline. If the Company's stock price on the exercise date of the options were
below the put option exercise price, the Company would have to settle its
obligations with respect to the put options based on the difference between the
then price of the Company's stock and the put option exercise price, and the
resulting expenditure (whether settled in cash or stock) could be significant.
If settlement were to occur prior to option expiration because of the occurrence
of an event giving the Third Parties the right to terminate the transactions,
the Company will be required both to pay to the Third Parties the value of their
position (which would depend on a number of factors, including the time
remaining to expiration and the volatility of the Company's common stock) which
could be greater or lesser than the difference between the options' exercise
prices and the then market price of the Company's stock, as well as any costs or
expenses incurred by the Third Parties as a result of unwinding the
transactions.
The Company has to date deposited $8.49 million as security for its obligations
under the put options. The Company is required to increase this amount if the
Company enters into additional option transactions with the Third Parties. The
Company will also have to increase the amount of this security deposit by the
amount from time to time that the put options are actually in the money.
The Company may enter into additional call or put option transactions with the
Third Parties or others, pursuant to the board authorization described above and
subject to market conditions and the Company's normal blackout periods and
prices.
This option purchase program is separate from share repurchase programs
previously announced by the Company in Form 8-K filings with the Securities and
Exchange Commission dated September 16, 1998 and March 4, 1999.
ITEM 7. EXHIBITS.
All options transactions completed to date have been completed pursuant to
documents either in the form of those attached as Exhibit 10.67 or as Exhibit
10.68.
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10.67 OTS Issuer Stock Option Master Agreement
between the Company and Goldman Sachs & Co.
and Collateral Appendix thereto.
10.68 Form of ISDA Master Agreement and related
documents between the Company and Credit
Suisse Financial Products.
99.1 Press Release dated June 21, 1999.
</TABLE>
<PAGE> 4
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 hereunto duly authorized.
Lam Research Corporation
----------------------------------------
(Registrant)
Date June 21, 1999 By: Mercedes Johnson
------------------------ -----------------------------------
Title: Vice President
--------------------------------
Chief Financial Officer
--------------------------------
<PAGE> 5
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10.67 OTS Issuer Stock Option Master Agreement
between the Company and Goldman Sachs & Co.
and Collateral Appendix thereto.
10.68 Form of ISDA Master Agreement and related
documents between the Company and Credit
Suisse Financial Products.
99.1 Press Release dated June 21, 1999.
</TABLE>
<PAGE> 1
EXHIBIT 10.67
OTC ISSUER STOCK OPTION MASTER AGREEMENT
TERMS AND CONDITIONS
The terms and conditions below shall govern all transactions in Options
(as hereinafter defined) between Goldman Sachs & Co. ("GS&Co.") and the
undersigned (the "Company") if the Confirmation relating thereto refers to this
Agreement. These terms and conditions are collectively referred to as the
"Agreement". Please acknowledge your agreement to and acceptance of this
Agreement by signing and returning the enclosed copy hereof
1. Definitions.
As used herein, the following terms have the following meanings:
(a) American Option: An Option that may be exercised on any Business Day, except
on the Expiration Date, between the hours of 9:00 A.M. and 2:30 P.M. New York
time, and on the Expiration Date between the hours of 9:00 A.M. and 4:30 P.M.,
New York time.
(b) Averaging Period: The number of consecutive Business Days indicated in the
Confirmation to be used in determining the Settlement Value, beginning on and
including the Exercise Date.
(c) Business Day: A day (other than a Saturday or Sunday) that (i) Federal
Reserve Member Banks in New York, NY are open for business, and (ii) the primary
market for trading the Option Securities is (or, but for the existence of a
Market Disruption Event, would be) open for business.
(d) Common Stock of GS&Co.: The common stock of GS&Co. The market price of the
Common Stock of GS&Co. shall be equal to the closing sale price per share
reported on the New York Stock Exchange, Inc.
(e) Confirmation: The written evidence of an Option delivered by GS&Co. to the
Company, containing the specific terms with respect thereto. Each Confirmation,
signed by both the Company and GS&Co., together with this Agreement, shall
constitute the written agreement between the Company and GS&Co. with respect to
the related Option. GS&Co. shall send the Confirmation to the Company by
facsimile on the Trade Date (or as otherwise directed by the Company) and the
Company shall immediately review the terms thereof for accuracy and, if
accurate, countersign and return the Confirmation (by facsimile) to GS&Co.
within one Business Day of receipt. If the Confirmation is inaccurate, GS&Co.
will promptly correct the Confirmation and resend it to the Company for
signature. Such confirmation delivered by GS&Co. and signed by the Company,
together with this Agreement shall constitute the written agreement between the
Company and GS&Co. with respect to such option.
<PAGE> 2
(f) Contract: The "trading unit" of an Option that specifies the number of
Option Securities that underlie each Option. Unless otherwise specified in the
related Confirmation, a Contract shall consist of 100 shares of the Option
Security, subject to adjustment as provided in Section 2.
(g) Default Payment Amount: The net amount payable in the event of an Event of
Default by one party to the other, as reasonably calculated by the
Non-Defaulting Party by aggregating and setting-off, as applicable, and without
duplication:
(i) the outstanding payments due (or that would have been due but for
Section 6) under this Agreement to each party immediately prior to the Default
Termination Date (as defined in Section 10);
(ii) the Replacement Value of Options to be settled under Section 10
which are unexercised immediately prior to the Default Termination Date;
(iii) the Non-Defaulting Party's Other Expenses; and
(iv) at the option of the Non-Defaulting Party, any Cash Performance
Assurance or collateral or the liquidation value of Non-Cash Performance
Assurance or collateral.
(h) Early Termination Amount: The net amount payable in the event of an Early
Termination Event by one party to the other, as reasonably calculated by GS&Co.
by aggregating and setting-off, as applicable, and without duplication:
(i) the outstanding payments due (or that would have been due but for
Section 6) under this Agreement to each party immediately prior to the Early
Termination Date; and
(ii) the Replacement Value of Options to be settled under Section 10
which are unexercised immediately prior to the Early Termination Date;
(iii) at the option of the Non-Defaulting Party, any Cash Performance
Assurance or collateral or the liquidation value of Non-Cash Performance
Assurance or collateral.
(i) European Option: An Option that may be exercised only on the Expiration Date
between the hours of 9:00 A.M. and 4:30 P.M. New York time.
(j) Exercise Date: The Business Day on which exercise of an Option is, or is
deemed to be, effective.
(k) Exercise Price: The price per share, as set forth in a Confirmation, at
which an Option Security may be purchased or sold or otherwise settled upon
exercise of the related Option.
2
<PAGE> 3
(l) Expiration Date: For an American or European Option, 4:30 P.M., New York
time, on the date identified as the Expiration Date in the related Confirmation,
at which time, if the Option has not been exercised, the rights granted to the
holder thereunder expire and the Option is deemed terminated. If an Expiration
Date is not a Business Day, then the next following Business Day shall be the
Expiration Date.
(m) Major Dealer: A securities broker/dealer or bank other than an affiliate of
either party selected by GS&Co., which has a net worth of at least
U.S.$200,000,000 (or its equivalent) and regularly makes markets in options on
securities and indices.
(n) Market Disruption Event: The occurrence, at any time during the half hour
period immediately prior to the time at which a valuation of an Option will take
place, of a suspension or material limitation of trading in (i) Option
Securities on the primary market or (ii) options or futures on Option Securities
on the primary market or on any other exchange on which such options or futures
are traded. For the purposes of this definition, (X) a limitation on the hours
and number of days of trading will not by itself constitute a Market Disruption
Event if it results from an announced change in the regular business hours of
the primary market or other relevant exchange and (Y) a limitation on trading of
the Option Securities or securities generally imposed during the course of a day
by reason of movements in price levels that exceed the movements permitted by
the primary market or other relevant stock exchange, if GS&Co. so reasonably
determines, will constitute a Market Disruption Event.
(o) Market Price: If the Option Security is listed on the New York Stock
Exchange, Inc. or the American Stock Exchange, the closing sale price per share
reported on the New York Stock Exchange, Inc. or on the American Stock Exchange,
as applicable. If the Option Security is not listed on the New York Stock
Exchange, Inc. or the American Stock Exchange, then the Market Price will be the
average of the closing bid and asked prices per share quoted by The NASDAQ Stock
Market or, in the event such closing bid and asked prices are not quoted, the
average of the bid prices obtained by GS & Co. from Major Dealers (GS & Co.
using reasonable efforts to obtain at least thee such bid prices).
(p) Option: An instrument conveying the right, but not the obligation, of the
holder (purchaser) of an Option to purchase from the issuer (seller) of the
Option (in the case of a "Call Option") or to sell to its issuer (in the case of
a "Put Option") the number of Contracts set forth in the applicable
Confirmation, subject to adjustment as provided in Section 2.
(q) Option Security: With respect to any Option, the security of the Company
identified in the related Confirmation for purchase or sale upon exercise of the
Option.
(r) Other Expenses: In relation to a Default Termination Date or an Early
Termination Date, all reasonable costs, losses, expenses, damages or liabilities
(including, without limitation, legal fees, stamp, registration, documentation
and similar taxes, and value added taxes actually incurred or suffered by a
party as a result of (i) the occurrence of an Early Termination Event or Event
of Default with respect to or by
3
<PAGE> 4
the other party or (ii) the other party's breach of its material obligations
hereunder, including, without limitation, the costs and expenses of all steps
taken by the Non-Defaulting Party to implement, protect or enforce its rights
under the Agreement and all commercially reasonable steps taken by the
Non-Defaulting Party, including, without limitation, purchase or sale of Option
Securities or other securities, in order to unwind any hedges or cover any
market positions, provided, however, that, except as otherwise expressly
recoverable hereunder, neither party hereto shall be entitled, in the event of a
Default or an Early Termination of this Agreement, to recovery from the other of
any consequential or punitive damages.
(s) Premium: The purchase price of an Option specified in the Confirmation.
(t) Replacement Value: With respect to an Option, the amount that would be
required to be paid by or to the Non-Defaulting Party for an instrument that
would have the effect of preserving the economic equivalent of the payment
and/or delivery obligations of the parties under the Option that would, but for
the occurrence of an Event of Default or an Early Termination Event (as the case
may be), otherwise have fallen due as reasonably calculated by GS & Co. using
the "Black-Scholes" or other applicable method of option valuation. In
calculating the Replacement Value, GS&Co. shall use the six month volatility of
the Option Security calculated over the six month period preceding the Business
Day prior to the Default Termination Date, the Early Termination Date or, in the
case of an Early Termination Event as specified in Section 8(v), the
announcement date of such event, as the case may be.
(u) Settlement Value: The amount in U.S. dollars by which the Exercise Price
exceeds the Market Price (in the case of a Put Option), or the Market Price
exceeds the Exercise Price (in the case of a Call Option), in either case
multiplied by the number of shares of the Option Security covered by the
exercise of the Option. The Market Price shall be determined as of the Exercise
Date, or, if an Averaging Period is specified in the related confirmation, the
average of the Market Prices for each Business Day in the Averaging Period,
subject to adjustment as provided in Section 5(f).
2. Adjustments. The Exercise Price and the Trading Units of an Option are each
subject to adjustments as follows:
(a) During the term an Option is in effect (the "Exercise Period"), if any
adjustment is made by the Options Clearing Corporation or its successors ("OCC")
in the terms of outstanding OCC-issued options ("OCC Options") on the Option
Securities, an equivalent and pro rata adjustment shall be made in the terms of
such Option to the extent such adjustment is applicable on the date of any
exercise of such Option. Except as provided in Section 2(b) below, no
adjustments shall be made in the terms of such Option in any event that does not
result in an adjustment to the terms of outstanding OCC Options on Option
Securities. Without limiting the generality of the foregoing no adjustment shall
be made in the terms of any option for ordinary cash dividends on Option
Securities. A summary of the terms under which the OCC may make adjustments is
set forth below:
4
<PAGE> 5
(i) Whenever there is a dividend, stock dividend, stock distribution,
stock split, reverse stock split, rights offering, distribution, reorganization,
recapitalization, reclassification or similar event in respect of the Option
Securities or a merger, consolidation, dissolution or liquidation of the issuer
of the Option Securities, the number of option contracts, the unit of trading,
the exercise price, and the Option Securities, or any of them, with respect to
all outstanding option contracts open for trading in the Option Securities may
be adjusted.
(ii) All adjustments pursuant to this Section shall be made by GS&Co. by
reference to actions taken by the Securities Committee of the OCC and in
consultation with the Company. The Securities Committee determines whether to
make adjustments to reflect particular events in respect of the Option
Securities and the nature and extent of any such adjustment, based on its
judgment as to what is appropriate for the protection of investors and the
public interest, taking into account such factors as fairness to holders and
writers of option contracts on the Option Securities, the maintenance of a fair
and orderly market in options on the Option Securities, consistency of
interpretation and practice, efficiency of exercise settlement procedures, and
the coordination with other clearing agencies of the clearance and settlement of
transactions in the Option Securities. The Securities Committee of the OCC may,
in addition to determining adjustments on a case-by-case basis, adopt statements
of policy or interpretation having general application to specified types of
events.
(iii) In the case of a stock dividend, stock distribution or stock split
whereby one or more Option Securities are issued with respect to each
outstanding Option Security, each Option covering the Option Securities shall be
increased by the same number of additional rights as the number of shares issued
with respect to each Option Security under the Option. The Exercise Price per
share in effect immediately prior to such event shall be proportionately
reduced, and the unit of trading shall remain the same.
(iv) In the case of a stock dividend, stock distribution or stock split
whereby other than a whole number of Option Securities are issued in respect of
each outstanding share, the Exercise Price in effect immediately prior to such
event shall be proportionately reduced, and conversely, in the case of a reverse
stock split or combination of shares of the Option Security, the Exercise Price
in effect immediately prior to such event shall be proportionately increased.
Whenever the Exercise Price with respect to an Option has been reduced or
increased in accordance with this sub-paragraph (iv), the unit of trading shall
be proportionately increased or reduced, as the case may be.
(v) In the case of any distribution made with respect to Option
Securities, other than cash distributions subject to Section 2(a) and other than
distributions for which adjustments are provided in sub-paragraph (iii) or (iv),
if an adjustment is determined by the Securities Committee of the OCC to be
appropriate, 1) the Exercise Price in effect immediately prior to such event
shall be reduced by the value per share of the distributed property, in which
event the unit of trading shall not be adjusted, or 2) the unit of trading in
effect immediately prior to such event shall be adjusted so as to include the
amount of property distributed with respect to the number of shares of the
Option
5
<PAGE> 6
Security represented by the unit of trading in effect prior to such adjustment,
in which event the Exercise Price shall not be adjusted.
(vi) Adjustments shall as a general rule become effective on the
"ex-date" established by the primary market on which the Option Securities are
open for trading.
(b) If at any time during the life of an Option there shall be no outstanding
OCC options on Option Securities, and an event shall occur for which an
adjustment might have been required under the By-Laws, Rules and stated policies
of the OCC applicable to the adjustment of OCC options, as described above, (the
"OCC Adjustment Rules"), GS&Co. shall determine, applying the principles set
forth in the OCC Adjustment Rules, whether to adjust the terms of such Option,
and the terms of any such adjustment. Any such reasonable adjustment shall be
binding on the parties.
(c) No adjustment of the Exercise Price shall be required unless such adjustment
would require an increase or decrease in such price of at least one U.S. cent:
provided however, that any adjustment which by reason of this Section 2(c) is
not required to be made shall be carried forward and taken into account (as if
such adjustment had been made at the time when it would have made but for the
provisions of this Section 2(c)) in any subsequent adjustment. All calculations
under this Section 2(c) shall be made to the nearest U.S. cent with five tenths
or more of a U.S. cent to be considered (rounded up) a full cent.
(d) If the Exercise Date falls on or after a date with effect from which an
adjustment takes retroactive effect pursuant to any of the provisions of this
Section 2 and such adjustment has not yet been reflected on such Exercise Date,
the Settlement Value will be adjusted to reflect the additional Option
Securities, being equal to the excess of the number of the Option Securities
which would have been used in the calculation of the Settlement Value at such
retroactively adjusted Exercise Price over the number of Option Securities
covered by the Option immediately prior to such adjustment.
3. Exercise Procedure; Automatic Exercise.
(a) An Option may be exercised in accordance with its terms by the holder
thereof by giving notice of exercise either orally or in writing to the person
specified for such purpose by the writer of such Option in the space provided
below the signature block of this Agreement or as otherwise notified in writing
by the writer of such Option to the holder of such Option. Oral notice of
exercise shall be confirmed in writing by 2:30 P.M. New York time on the
following Business Day. An Option may be exercised only in whole and not in part
unless "Exercisable in part" is specified in the related Confirmation.
(b) If the holder of an Option has not given notice of exercise or notice of
intent not to exercise to the writer by 4:30 P.M., New York time, on the
Expiration Date, the Option shall be deemed to have been exercised by the holder
if such Option is in-the-money based upon the Market Price on the Expiration
Date. An Option is "in the money" as of 4:30 P.M. on the Expiration Date if the
Settlement Value of the unexercised portion of
6
<PAGE> 7
such Option is based on an amount equal to or greater than twenty-five cents
($.25) per underlying Option Security. Each party shall attempt to notify the
other party of such automatic exercise as soon as practicable but in any case by
4.30 p.m. New York time on the Business Day following the Expiration Date.
Failure or inability to give such notice will not affect the validity of
exercise pursuant to this Section 3(b).
4. Exercise Limit. If an Option is an American style option, the maximum
aggregate number of shares of the Option Security as to which such Option and
any similar (i.e., put or call) Option then outstanding may be exercised by the
holder on any Business Day is the number of shares, if any, specified in the
related Confirmation as the "Exercise Limit".
5. Settlement upon Exercise.
(a) If "Physical Settlement" is specified in the related Confirmation, within
three Business Days following the Exercise Date (or such other period as agreed
to by the Company and GS&Co.) payment for the Option Securities relating to that
Option exercise shall be made at the Exercise Price per share therefor in
clearing house funds against delivery of such Option Securities. Option
Securities will be delivered in good transferable form as is customary for that
type of Option Security. Whenever an Option Security is transferable or
deliverable by book entry at a depository or clearing house at which both
parties or their clearing agents are members, such method shall be used to
effect transfer or delivery. Physical delivery shall only be made if the
transfer or delivery cannot be effected reasonably through a depositary or
clearinghouse.
(b) If "Cash Settlement" is specified in the related Confirmation, an Option
shall be settled by a payment in clearing house funds of an amount equal to the
Settlement Value on the third Business Day following the Exercise Date or as
otherwise stated in the Confirmation or agreed to by the Company and GS&Co.
(c) If "Physical Settlement" is specified in the related Confirmation and "Cash
Settlement at Company's Election" is specified in such Confirmation, then,
unless the Company has notified GS&Co. that the Option will settle for cash
pursuant to Section 5(b) above at least two Business Days before the Exercise
Date (or such other period as may be specified in the related Confirmation), the
Option will settle by physical delivery of the Option Securities pursuant to
Section 5(a) above. Such notice may be given orally or in writing. Oral notice
shall be confirmed by 4:30 P.M. New York time on the following Business Day.
(d) If "Net Share Settlement" is specified in the related Confirmation, then the
Company may elect to have the related Option settled by payment of the
Settlement Value in shares of the Option Security by giving notice of such
election to GS&Co. not less than five Business Days before the Exercise Date.
If Net Share Settlement applies, settlement shall be made by delivery of
the number of shares of the Option Security equal in value to the Settlement
Value, with such shares valued based on the average of the Market Prices for the
consecutive
7
<PAGE> 8
Business Days in the Net Share Valuation Period. The "Net Share Valuation
Period" shall commence on (but exclude) the final Business Day of the applicable
Averaging Period and end on (and include) the date which follows it by the same
number of Business Days in the Averaging Period. If no Averaging Period is
indicated on the Confirmation, the Net Share Valuation Period shall be deemed to
be the Business Day following the Exercise Date. Delivery of such shares shall
be made "free" in good transferable form by the third Business Day following the
last day of the Net Share Valuation Period.
Net Share Settlement of an Option issued by the Company is subject to
Section 8, Section 9 and Section 10 hereof and the following conditions: the
Company at its sole expense shall (i) have, prior to the Exercise Date,
registered pursuant to an effective registration statement reasonably
satisfactory to GS&Co. (the "Registration Statement") filed under the Securities
Act of 1933, as amended, (the "Securities Act") the offering and sale by GS&Co.
of not less than 150% of the shares of the Option Security necessary to fulfill
the Net Share Settlement delivery obligation by the Company (determining the
number of such shares to be registered on the basis of the average of the Market
Prices on the five (5) Business Days prior to the Exercise Date); (ii) maintain
the effectiveness of the Registration Statement from the Exercise Date until the
earlier of (a) the one year anniversary of the Exercise Date and (b) the date
GS&Co. has sold all shares to be delivered by the Company in satisfaction of its
Net Share Settlement obligations, (iii) have entered into an underwriting
agreement with GS&Co. and/or its designee(s) in a form reasonably satisfactory
to GS&Co., prior to the Exercise Date, covering the shares to be delivered by
the Company in satisfaction of its Net Share Settlement obligations, (iv) have
delivered to GS&Co. prior to the Exercise Date such number of prospectuses
relating thereto as GS&Co. shall have reasonably requested and shall promptly
update and provide GS&Co. with replacement prospectuses as necessary to ensure
the prospectus does not contain any untrue statement of a material fact or any
omission of a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances in which they were
made, not misleading, (v) have delivered to GS&Co. prior to the Exercise Date an
opinion of counsel and an accountant's comfort letter with respect to the
Registration Statement and prospectus in each case as is customary in
underwritten public offerings, (vi) have taken all steps necessary for the
shares sold by GS&Co. to be listed or quoted on the primary exchange or
quotation system that the Option Securities are listed or quoted on, (vii)
entered into an indemnification agreement reasonably acceptable to GS&Co.
covering the information contained in such Registration Statement and prospectus
and (viii) take such action as is required to ensure that GS&Co.'s sale of the
Option Securities does not violate, or result in a violation of, the federal
securities laws. If any of these conditions are not satisfied on or after the
Exercise Date and prior to the delivery of the Option Securities by the Company,
GS&Co. may require such Option to be settled, at its option in cash pursuant to
Section 5(b) or physically pursuant to Section 5(a). Subject to the next
Section, if any of these conditions are not satisfied at any time after the
delivery of the Option Securities by the Company, GS&Co. may require the Company
to repurchase any or all of the unsold Option Securities, upon three Business
Days notice, for cash at the Market Price per Option Security used to determine
the
8
<PAGE> 9
Settlement Value; provided, however, that the Company has the right (the
"Black-out Right"), at any time following the delivery of Net Share Settlement
shares to GS&Co., notify GS&Co. that the then-current prospectus, in the
Company's judgment, requires amendment; provided, further, that in such case,
(x) the Company shall file an appropriate amendment reasonably satisfactory to
GS&Co. within five (5) Business Days; (y) GS&Co. shall not use any prior
prospectus pending such amendment, and (z) if such amendment is not so filed or
a prospectus reasonably acceptable to GS&Co. cannot be used by GS&Co. for not
less than five (5) consecutive business days following the filing of the
amendment, GS&Co. shall have the right to require repurchase by the Company on
demand of all unsold Option Securities delivered hereunder at the market price
per Option Security used to determine the Settlement Value.
(e) Settlement for Fair Value. On any Business Day prior to the Expiration Date,
the Company may request that GS&Co. provide a Settlement Value for the Net Share
Settlement of an Option or portion thereof, by orally notifying GS&Co. of the
number of Contracts (and underlying Option Securities) for which such request
applies. The Company shall deliver written confirmation to GS&Co. of such
request by 2:30 P.M. New York time on the following Business Day. Upon receipt
of such request, GS&Co. will quote to the Company a Settlement Value. If the
Company accepts such Settlement Value, it shall notify GS&Co. of its irrevocable
election to Cash Settle or Net Share Settle such Option (or portion thereof) and
deliver written confirmation of such irrevocable acceptance by 2:30 P.M. New
York time on the Business Day (the "Notification Date") following the date
GS&Co. quotes such Settlement Value. Where an Option is to be Cash Settled by
Settlement for Fair Value, the options shall settle on the third Business Day
following the Notification Date by payment in clearing house funds to the holder
of the Option of an amount equal to the Settlement Value. Where an Option is to
be Net Share Settled by Settlement for Fair Value, the options shall settle on
the third Business Day following the Notification Date by delivery to the holder
of the Option of a number of shares of the Option Security equal to the
Settlement Value in the manner specified in Section 5(a), with such shares
valued based on the Market Price on the Business Day following the Notification
Date. Where settlement pursuant to this Section 5(e) would entail a delivery of
Option Securities by the Company to GS&Co., then delivery of such Option
Securities under this Section 5(e) is subject to the conditions precedent set
forth in Section 5(d) (with the Notification Date being the Exercise Date for
purposes of such conditions) and, if the Company fails to satisfy such
conditions, GS&Co. shall have the rights specified in Section 5(d).
(f) With respect to any Option that is to be cash-settled or that is to be
settled by Net Share Settlement, if GS&Co. determines that a Market Disruption
Event is occurring on what would otherwise be the Exercise Date, then the
Exercise Date shall be the next Business Day on which a Market Disruption Event
is not occurring, provided that if a Market Disruption Event is still subsisting
on the fifth Business Day after the Exercise Date, then such fifth Business Day
shall be the Exercise Date and GS&Co. shall determine the Market Price as of
such fifth day. In the event that GS&Co. determines that a Market Disruption
Event is occurring on a Business Day in an Averaging Period or a Net Share
Valuation Period, then such period shall be extended so that the number of
Business Days in such period on which a Market Disruption Event is not occurring
9
<PAGE> 10
equals the number of days indicated in the Confirmation for the Averaging
Period, provided that if a Market Disruption Event is subsisting for five
Business Days, then such fifth Business Day shall be deemed to conclude the
Averaging Period or the Net Share Valuation Period.
(g) Adjustment of number of shares of the Option Security used to Net Share
Settle. If (i) the Company elects to Net Share Settle under subsection (d) or
(e) hereof, (ii) the Company elects to exercise its Black-out Right under
subsection (d) hereof, and (iii) on the Business Day that GS&Co. is first able
to use a prospectus reasonably satisfactory to it to sell Option Securities (the
"Restart Date") the Market Price of the Option Securities is less than the
Market Price of the Option Securities used to determine the Settlement Value,
then, on or before the Restart Date, the Company shall deliver an additional
number of shares of the Option Security (the "Top-up Shares") so that (x) equals
(y) where (x) is the Market Price of the Option Securities on the Restart Date
multiplied by the number of Top-up Shares and (y) is the difference between the
Market Price of the Option Securities used to determine the Settlement Value and
the Market Price of the Option Securities on the Restart Date multiplied by the
number of unsold Option Securities held by GS&Co. on the Restart Date prior to
the delivery of the Top-up Shares.
(h) The number of shares required to be delivered by the Company pursuant to
subsection (d), (e) or (g) hereof, in order that their value equals the
Settlement Value shall be rounded up to the next whole number and GS&Co.
undertakes to return to the Company, if applicable, an amount of cash equal to
the value of the fraction of a share of the Option Security that exceeds the
Settlement Value.
6. No Event of Default or Early Termination Event . Each obligation of a party
in respect of each Option to make a payment or deliver Option Securities is
subject to the condition precedent that no Event of Default or Early Termination
Event (or event that, with the lapse of time or the giving of notice or both,
would become an Event of Default) in each case by or with respect to the other
party has occurred and is continuing.
7. Representations, Warranties and Covenants.
(a) At the time of this Agreement and at the time each Option is entered into,
the Company and GS&Co. each represent and warrant to and covenant with the other
with respect to this Agreement and each Option that:
(i) each party is duly organized and validly existing under the laws of
the jurisdiction of its organization or incorporation and, if relevant under
such laws, in good standing;
(ii) this Agreement has been duly authorized, executed and delivered by
such party and constitutes its valid and legally binding obligation, enforceable
against such party in accordance with its terms; and the issuance, sale and
purchase, as the case may be, of each Option will be duly authorized, executed
and, when delivered by such party, will constitute the valid and legally binding
obligation of such party
10
<PAGE> 11
enforceable against such party in accordance with the terms thereof (subject to
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors' rights generally and subject, as to enforceability, to
equitable principles of general application (regardless of whether enforcement
is sought in a proceeding in equity or at law));
(iii) the execution and delivery of this Agreement by such party does
not, and the performance by it of its obligations hereunder and under each
Option will not, violate, conflict with or constitute a breach under any law
applicable to it, any provision of its constitutional documents, any order or
judgement of any court or other agency of government applicable to it or any
agreement or instrument to which it is party or which is binding on any of its
properties;
(iv) all governmental and other consents that are required to have been
obtained by it with respect to this Agreement have been obtained and are in full
force and effect and all conditions of any such consents have been complied
with;
(v) no Event of Default or, to its knowledge, Early Termination Event
with respect to it has occurred and is continuing and no such event or
circumstance would occur as a result of its entering into or performing its
obligations under this Agreement; and
(vi) there is not pending or, to its knowledge, threatened against it
any action, suit or proceeding at law or in equity or before any court,
tribunal, governmental body, agency or official or any arbitrator that is likely
to affect the legality, validity or enforceability against it of this Agreement
or its ability to perform its obligations under this Agreement.
(b) At the time of this Agreement and at the time each Option is entered into,
each party represents and warrants to the other that it has the power (corporate
or otherwise) to enter into Option transactions.
(c) In addition to the foregoing, the Company represents and warrants to GS&Co.
that as of the date hereof and as of the trade date of each Option:
(i) the Company's most recent Annual Report on Form 10-K, together with
all reports subsequently filed by the Company pursuant to the Securities
Exchange Act of 1934 (the "Exchange Act"), when filed did not contain any untrue
statement of a material fact or any omission of a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading; and the Company is not in
possession of any material non-public information that would make it unlawful
for the Company to effect transactions in its own securities;
(ii) it has taken such advice from its legal, tax and accounting
advisors as it has deemed necessary prior to entering into this Agreement, is
not relying on GS&Co. for any such advice regarding this Agreement or any action
either party may take or
11
<PAGE> 12
refrain from taking thereunder, including, without limitation, the purchase or
writing of Options;
(iii) it is fully familiar with the purposes, techniques and uses of
options and understands and accepts the risks involved in their use. It
understands and acknowledges that GS&Co. may, at its own expense, liability and
risk, hedge its exposure with respect to Options and that such hedging may
involve transactions in Option Securities or options or other derivatives in
respect thereof (collectively "Hedging Transactions"), such Hedging Transactions
may be effected at any time and the Company shall not have any financial
interest in or any right to direct the amount or timing of such Hedging
Transactions;
(iv) it confirms that it is familiar with the rules of the National
Association of Securities Dealers, Inc. (the "NASD") applicable to the purchase
and/or sale of options, including without limitation rules relating to position
and exercise limits, as such limits may be in effect from time to time, and
agrees that, whether acting by itself or in concert with others, it will not
violate or attempt to violate any position or exercise limits established by the
NASD; and
(v) with respect to the purchase or writing of each Option, the Option
Securities or securities that are convertible into, or exchangeable or
exercisable for Option Securities, are not subject to a "restricted period" as
such term is defined in Regulation M under the Exchange Act (a "Restricted
Period") and the purchase or writing of the Option will not violate Rule 13e-1
or Rule 13e-4 under the Exchange Act. It will use its best efforts to ensure
that physically-settled American Options are not exercised during a Restricted
Period.
(d) In addition to the foregoing, GS&Co. represents to the Company now and as of
the trade date of each Option, that (i) it will not engage in any transactions
hereunder in the Option Securities (whether in connection with its hedging
activities or otherwise) in violation of applicable securities laws, (ii) GS&Co.
is an "accredited investor" as defined in Rule 501(a) of Regulation D under the
Securities Act, and (iii) at the time each transaction is entered into, GS&Co.
is acquiring all Options for its own account and without a specific intent to
distribute.
(e) In addition to the foregoing, the Company covenants that on the first
Business Day of each and every calendar month until the Master Agreement is
terminated, it will send to GS &Co. written confirmation that the Company's
unrestricted cash balance as of the final Business Day in the previous calendar
month exceeds $75,000,000. Such confirmation should be marked "Confidential" and
sent by facsimile to Vincent J. DiMassimo, Credit Department, Goldman Sachs &
Co. at (212) 428-1224.
8. Early Termination . If any of the following events (each an "Early
Termination Event") shall occur, then (a) in the case of clauses (i), (iii), (v)
and (vi), GS&Co. shall have the right to terminate and settle all (but not some)
Options by providing written notice of such election to the Company, (b) in the
case of clauses (ii) and (iv), the Company shall have the right to terminate and
settle all (but not some) Options by providing written notice of such election
to GS&Co., and (c) in the case of clause (vii), both the Company and GS&Co.
shall have the right to terminate and settle all (but not some) Options by
12
<PAGE> 13
providing written notice of such election to the other party. The date of such
notice shall be the "Early Termination Date". In the case of an event specified
in clause (vi), the right of GS&Co. to terminate all of the Options shall expire
at 5:30 pm (New York time) on the 10th Business Day after the announcement of
such event. Any decision by GS&Co. not to terminate all of the Options upon the
occurrence of such event shall not operate as a waiver of the right to terminate
all of the Options upon the announcement of a subsequent event specified in
clause (vi). The party exercising its termination rights pursuant to this
Section 8 shall have the rights and obligations of the Non-Defaulting Party and
the other party shall have the rights and obligations of the Defaulting Party,
each as set forth in Section 10(b) through Section 10(e):
(i) The Market Price falls below $5.00 per share;
(ii) The market price of the Common Stock of GS&Co. falls below $5.00
per share;
(iii) The unsecured and unsubordinated long-term obligations of the
Company are rated either below B by Standard & Poor's Rating Services or below
b2 by Moody's Investors Services, Inc.;
(iv) The unsecured and unsubordinated long-term obligations of GS&Co.
are rated either below B by Standard & Poor's Rating Services or below b2 by
Moody's Investors Services, Inc.;
(v) The Company consolidates or amalgamates with, or merges with or
into, or transfers all or substantially all its assets to, another entity, where
(a) the Company is not the surviving entity, (b) the common stock of the other
entity is not traded on the New York Stock Exchange, Inc. or the American Stock
Exchange, Inc. or quoted by The NASDAQ Stock Market, or (c) such entity has a
market capitalization of more than 50% of the market capitalization of the
Company (measured with respect to the Company and such entity without giving
effect to the consolidation, amalgamation, merger or transfer of assets);
(vi) the unrestricted cash balance of the Company falls below
$75,000,000 at any time; or
(vii) it becomes unlawful to perform any absolute or contingent
obligation to make a payment or delivery or to receive a payment or delivery in
respect of such Option or to comply with any other material provision of this
Agreement relating to an Option, due to the adoption of, or any change in,
applicable law after the date on which an Option is entered into, or due to the
promulgation of, or any change in, the interpretation by any court, tribunal or
regulatory authority with competent jurisdiction of any applicable law after
such date.
13
<PAGE> 14
9. Default. If any of the following events (each an "Event of Default") shall
occur with respect to a party to an Option (the "Defaulting Party"), the party
which is not in default (the "Non-Defaulting Party") shall have the rights set
forth in Section 10(a) through Section 10(e):
(i) the Defaulting Party fails to perform any material obligation
required to be performed under this Agreement or any Option entered into
hereunder, including, without limitation, the failure to pay any Premium when
due, and such failure is not cured within three Business Days after receipt of
notice thereof;
(ii) the Defaulting Party repudiates any of its obligations hereunder or
under any Option;
(iii) a case in bankruptcy shall be commenced or consented to or a
petition for the appointment of a receiver shall be filed by the Defaulting
Party or brought against the Defaulting Party or the Defaulting Party shall make
a general assignment for the benefit of creditors or admit in writing that it is
unable to pay its debts as they become due, or shall suspend the transaction of
its usual business or any material portion thereof or (if a corporation) shall
be dissolved or shall be a party, other than the surviving party, to a merger or
consolidation;
(iv) a representation made or repeated or deemed to have been made or
repeated by a party proves to have been incorrect or misleading in any material
respect when made or repeated or deemed to have been made or repeated;
(v) the Option Securities are not listed or quoted (as the case may be)
on the New York Stock Exchange, Inc., the American Stock Exchange or The NASDAQ
Stock Market;
(vi) a default, event of default or other similar condition or event in
respect of the Company under one or more agreements or instruments relating to
indebtedness of the Company in an aggregate amount in excess of $20,000,000
which has resulted in such indebtedness becoming due and payable shall have
occurred; or a default by the Company in making one or more payments on the due
date thereof in an aggregate amount in excess of $20,000,000 under such
agreements or instruments (after giving effect to any applicable notice
requirement or grace period) shall have occurred; or
(vii) a default, event of default or other similar condition or event in
respect of GS&Co. under one or more agreements or instruments relating to
indebtedness of GS&Co. in an aggregate amount in excess of $50,000,000 which has
resulted in such indebtedness becoming due and payable shall have occurred; or a
default by GS&Co. in making one or more payments on the due date thereof in an
aggregate amount in excess of $50,000,000 under such agreements or instruments
(after giving effect to any applicable notice requirement or grace period) shall
have occurred.
14
<PAGE> 15
10. Remedies.
(a) Upon the occurrence of an Event of Default and with respect to all unexpired
but unexercised Options (for which purpose a partially exercised Option is an
unexercised Option but only as to the unexercised portion), the Non-Defaulting
Party may by written notice to the Defaulting Party sent at any time while an
Event of Default is continuing and specifying the Event of Default, elect to
terminate and settle all (but not some) Options in accordance with this Section
10 on the date specified in and no earlier than the date of the notice (the
"Default Termination Date").
(b) If a Default Termination Date or Early Termination Date (as the case may be)
occurs, (i) GS&Co. shall reasonably calculate the Replacement Value and shall
give the Company written notice thereof (including reasonable detail of the
calculation thereof) and (ii) the Non-Defaulting Party shall calculate the
Default Payment Amount or Early Termination Amount (as the case may be) payable
by one party to the other and shall as soon as reasonably practicable give to
the Defaulting Party a statement thereof.
(c) The Default Payment Amount shall be payable on the Business Day immediately
after notice of its amount is given to the Defaulting Party and, unless payable
by the Non-Defaulting Party, shall be paid in cash in immediately available
funds together with interest thereon from (and including) the Default
Termination Date to (but excluding) the date of payment at the rate, to the
extent permitted by applicable law, of 2 per cent per annum above Morgan
Guaranty Trust Company's prime (or base) commercial loan rate for short term
borrowings as in effect from time to time.
(d) The Early Termination Amount shall be payable on the Business Day
immediately after notice of its amount is given to the Defaulting Party and,
unless payable by the Non-Defaulting Party, shall be payable in cash, in
immediately available funds. Notwithstanding the previous sentence, if the
following conditions are satisfied, the Company may elect to Net Share Settle
the Early Termination Amount by delivering to GS&Co. a number of shares
reasonably estimated by GS&Co. to have a value equal to 120% of the Early
Termination Amount; (i) the Company shall have delivered to GS&Co. Performance
Assurance equal to its Aggregate Performance Assurance Requirement in the event
that it wishes to Net Share Settle the Early Termination Amount, and (ii) the
conditions specified in Section 5(d) hereof are satisfied, provided that for the
avoidance of doubt, the Black-out-Right shall not be available to the Company if
it elects to Net Share Settle the Early Termination Amount. If after three
Business Days immediately following the Early Termination Date (the third such
Business Day being the "Resale Date"), the aggregate proceeds of any sales of
any shares of the Option Security so delivered, net of customary fees,
commissions and expenses incurred in connection with the offer and sale of the
shares of the Option Security so delivered (including, but without limitation to
the covering of any over-allotment or short position (syndicated or
otherwise))(the "Net Proceeds") are less than the Early Termination Amount (it
being understood that, subject to the following proviso, GS&Co. shall use
commercially reasonable efforts to sell the shares of the Option Security on or
before the Resale Date, provided that GS&Co. shall be under no obligation to
sell any of such shares unless GS&Co.'s Commitments Committee, in accordance
with its customary review
15
<PAGE> 16
process, shall have approved the undertaking of GS&Co. to sell the shares of the
Option Security), the Company agrees to indemnify GS&Co. to the extent of such
shortfall by the payment of that short-fall amount in cash, in immediately
available funds, on the date that is two Business Days after the Resale Date
(the "Final Payment Due Date"). Within two Business Days after the Early
Termination Amount is paid in full, GS&Co. will refund in cash, in immediately
available funds, any excess of the Net Proceeds over the Early Termination
Amount and if any of the shares of the Option Security so delivered remain
unsold as of the Resale Date, such unsold shares will be refunded to the
Company.
(e) The Company and GS&Co. hereby agree that the Default Payment Amount or the
Early Termination Amount (as the case may be) and all other amounts due
hereunder shall rank pari passu with that party's senior most debt.
(f) The parties agree that this Agreement shall be treated as a securities
contract upon the occurrence of any of the events specified in clause (iii) of
Section 9.
(g) The parties hereby agree that the amounts recoverable under this Section 10
are not a penalty.
(h) The Non-Defaulting Party's rights under this Section 10 shall be cumulative
and in addition to, and not in limitation or exclusion of, any other rights
which the Non-Defaulting Party may have (whether by agreement, operation of law
or otherwise) against the Defaulting Party.
11. Miscellaneous.
(a) A Confirmation sent by GS&Co. to the Company on a Business Day shall be
deemed to have been received by the Company on the same day (or, if sent on a
day which is not a Business Day, on the next succeeding Business Day) if sent by
same-day messenger, by telex or other telecommunication device capable of
transmitting or creating a written record of transmission, and on the third day
after the day it is sent if by first class mail, postage prepaid (or, if mailed
on a day which is a Federal holiday, three days after the next succeeding day
which is not a Federal holiday). If the Company fails to object to the terms
contained in a Confirmation within three Business Days after receipt thereof,
the terms of such Option (as evidenced by the Confirmation) shall be deemed to
have been accepted.
(b) Neither this Agreement nor any Option may be assigned or transferred by
either party hereto without the consent of the other party, except for an
assignment and delegation of all of GS&Co.'s rights and obligations hereunder in
whatever form GS&Co. determines may be appropriate to a partnership,
corporation, trust or other organization in whatever form that succeeds to all
or substantially all of GS&Co.'s assets and business and that assumes such
obligations by contract, operation of law or otherwise. Upon any such delegation
and assumption of obligations, GS&Co. shall be relieved of and fully discharged
from all obligations hereunder, whether such obligations arose before or after
such delegation and assumption.
16
<PAGE> 17
(c) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA.
(d) This Agreement and each Option entered into hereunder shall be subject to
all laws, rules and regulations applicable thereto, including, but not by way of
limitation, the provisions of the Securities Act, and the Exchange Act and all
rules and regulations, promulgated or to be promulgated thereunder. The Company
and GS&Co. each acknowledge that the Options acquired by it from the other party
hereunder will not be registered under the Securities Act and will be sold by
the issuer of the Option in reliance upon the exemption for private placements
pursuant to Section 4(2) of the Securities Act.
(e) The parties hereby agree that this Agreement and the terms of each Option
entered into hereunder are confidential and may not be publicly disclosed by
either party except (a) as reasonably determined by the Company to be required
or desirable to comply with its obligations under the Securities Act or the
Exchange Act or (b) with the prior written consent of the other party or
pursuant to the demand or requirement of any court, or (c) regulatory agency
having jurisdiction over a party.
(f) Each Option is being entered into by the parties hereto acting as principal
for their respective own account. Subject to the termination of any Option by
expiration or full performance upon exercise, no failure on the part of either
party to exercise, and no delay in exercising, any contractual right prior to
termination of any such Option as aforesaid will operate as a waiver thereof,
nor will any single or partial exercise by either party of any right preclude
any other or future exercise thereof or the exercise of any other right. No
modification or waiver of any provision hereof nor any consent to any departure
by either party therefrom shall in any event be effective unless the same shall
be in writing, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. All written notices
hereunder shall be sent to a party at its address by mail, hand delivery or
facsimile transmission as set forth below, or to such other address or telex
number as a party shall have last notified the other party in writing, or to
such other address as either party shall have last notified the other party in
writing. For purposes of telephone notice, GS&Co.'s relevant telephone number
and the Company's relevant telephone number are set forth below and each of
GS&Co. and the Company shall notify the other in writing of any change thereof.
12. Arbitration.
(a) ARBITRATION IS FINAL AND BINDING ON THE COMPANY AND GS&CO.
(b) THE COMPANY AND GS&CO. ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT,
INCLUDING THE RIGHT TO A JURY TRIAL.
(c) PRE-ARBITRATION DISCOVERY SHALL BE GENERALLY MORE LIMITED THAN AND DIFFERENT
FROM DISCOVERY ALLOWED IN COURT PROCEEDINGS.
17
<PAGE> 18
(d) THE ARBITRATOR'S AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL
REASONING AND ANY PARTY'S RIGHT TO APPEAL OR TO SEEK MODIFICATION OF RULINGS BY
THE ARBITRATORS IS STRICTLY LIMITED.
(e) THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS
WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY.
ANY CONTROVERSY BETWEEN OR AMONG GS&CO. OR ITS AFFILIATES, OR ANY OF ITS
OR THEIR PARTNERS, DIRECTORS, AGENTS OR EMPLOYEES, ON THE ONE HAND, AND THE
COMPANY OR ITS AGENTS AND AFFILIATES, ON THE OTHER HAND, ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OPTION ENTERED INTO HEREUNDER, SHALL BE
SETTLED BY BINDING ARBITRATION, INCLUDING, WITHOUT LIMITATION, EITHER PARTY
SEEKING INJUNCTIVE OR OTHER PRELIMINARY RELIEF NECESSARY TO PRESERVE THE STATUS
QUO OR MATERIAL RIGHTS HEREUNDER PENDING ARBITRATION OF CLAIMS, IN ACCORDANCE
WITH THE THEN CURRENT RULES OF, AT THE COMPANY'S ELECTION, THE AMERICAN
ARBITRATION ASSOCIATION ("AAA") OR THE BOARD OF ARBITRATION OF THE NEW YORK
STOCK EXCHANGE, INC. ("BANYSE"). IF THE COMPANY DOES NOT MAKE SUCH ELECTION BY
REGISTERED MAIL ADDRESSED TO GS&CO. WITHIN FIVE (5) BUSINESS DAYS AFTER RECEIPT
OF NOTIFICATION FROM GS&CO. REQUESTING SUCH ELECTION, THEN THE COMPANY
IRREVOCABLY AUTHORIZES GS&CO. TO MAKE SUCH ELECTION ON BEHALF OF THE COMPANY.
THE AWARD OF THE ARBITRATORS SHALL BE FINAL, AND JUDGMENT UPON THE AWARD
RENDERED MAY BE ENTERED IN ANY COURT, STATE OR FEDERAL, HAVING JURISDICTION
THEREOF.
NEITHER PARTY SHALL BRING A PUTATIVE OR CERTIFIED CLASS ACTION TO
ARBITRATION, NOR SEEK TO ENFORCE ANY PRE-DISPUTE ARBITRATION AGREEMENT AGAINST
ANY PERSON WHO HAS INITIATED IN COURT A PUTATIVE CLASS ACTION; WHO IS A MEMBER
OF A PUTATIVE CLASS WHO HAS NOT OPTED OUT OF THE CLASS WITH RESPECT TO ANY
CLAIMS ENCOMPASSED BY THE PUTATIVE CLASS ACTION UNTIL:
(i) THE CLASS CERTIFICATION IS DENIED;
(ii) THE CLASS IS DECERTIFIED; OR
(iii) THE CUSTOMER IS EXCLUDED FROM THE CLASS BY THE COURT.
SUCH FORBEARANCE TO ENFORCE AN AGREEMENT TO ARBITRATE SHALL NOT CONSTITUTE A
WAIVER OF ANY RIGHTS UNDER THIS AGREEMENT EXCEPT TO THE EXTENT STATED HEREIN.
18
<PAGE> 19
BY SIGNING BELOW, THE COMPANY ACKNOWLEDGES RECEIPT OF A COPY OF THIS
OPTIONS AGREEMENT. A PRE-DISPUTE ARBITRATION CLAUSE IS CONTAINED IN SECTION 12
HEREOF.
GOLDMAN, SACHS & CO.
Name: Tony Monaco
Address: 85 Broad Street
New York, New York 10004
Telex No.:
Domestic: WU Tlex 12-5654 Goldsachs
International: ITT421344GOLSAX
TRT 177784 GSUT
WUI62506GOLSAC
Telefax No.: 212-902-8996
Telephone No.: 212-902-0112
Exercise Notice to: Equity Operations: Options
and Derivatives
Accepted and Agreed to this
14th day of June, 1999.
By: LAM RESEARCH
Name: Craig Garber
Address: 4300 Cushing Parkway
Freemont CA 94538
Telefax No.: 510-572-1586
Telephone No.: 510-572-1875
Exercise Notice to: Craig Garber
19
<PAGE> 20
PERFORMANCE ASSURANCE AMENDMENT TO
OTC ISSUER STOCK OPTION MASTER AGREEMENT
Goldman, Sachs & Co. ("GS&Co.") and Lam Research Corporation (the "Company"),
having entered into an OTC Issuer Stock Option Master Agreement (the "Master
Agreement"), agree that the Master Agreement is hereby amended and modified by
adding the following subsections which shall form and be deemed an integral
part of the Master Agreement as though included therein as of the date the
Master Agreement became effective. All terms used but not defined herein shall
have the meanings ascribed to such terms in the Master Agreement.
1. PERFORMANCE ASSURANCE
(a) For each Put Option, the Company's "Performance Assurance Requirement" as
of any day shall equal such Put Option's In-the-money amount on such day (if
any); provided that in no event shall the Performance Assurance Requirement for
any Put Option be less than zero. No Performance Assurance Requirement shall be
applicable to Call Options or to any other obligation, duty or liability of the
Company under the Master Agreement.
(b) The Company's "Aggregate Performance Assurance Requirement" as of any day
shall equal the sum of (i) the Company's Basic Amount, plus the amount, if any,
representing (ii) the sum of the Performance Assurance Requirements on such day
for all outstanding Put Options written by the Company under the Master
Agreement; provided that, notwithstanding the foregoing, if an Early
Termination Event has occurred and is continuing and the Company elects to Net
Share Settle the Early Termination Amount then the Company's "Aggregate
Performance Assurance Requirement" shall be an amount equal to 110% of the
aggregate strike price value of all of the Put Options.
(c) "Performance Assurance" will have the meaning specified in Section 4
hereof.
(d) "Basic Amount" shall mean an amount equal to 30% of the aggregate strike
price value of all of the Put Options.
(e) "In-the-money" shall mean, in respect of a Put Option, an amount equal to
the product of the excess (if any) of such Put Option's Exercise Price over the
Market Price, multiplied by the quantity of Option Securities in respect of
such Put Option.
(f) "Cash Performance Assurance" will have the meaning specified in Section 4
hereof.
<PAGE> 21
(g) "Non-Cash Performance Assurance" will have the meaning specified in
Section 4 hereof.
2. PAYMENT/DELIVERY OF PERFORMANCE ASSURANCE
The Company will, on demand by GS&Co., pay or deliver to GS&Co., by the close
of business in New York on the second Business Day following such demand,
Performance Assurance equal to the Company's Aggregate Performance Assurance
Requirement;
3. GRANT OF SECURITY INTEREST
(a) The Company hereby grants to GS&Co. a first priority security interest in
and a lien on, and a right of set-off against, all Performance Assurance and
all property included therein, together with the proceeds thereof, any
distributions thereon and any property delivered in substitution therefor, as
security for the satisfaction of the obligations of the Company in respect of
Put Options under the Master Agreement. In the event of an Event of Default or
an Early Termination Event, GS&Co. shall have all of the rights with respect to
the Performance Assurance granted to a secured party under the Uniform
Commercial Code as then in effect in the State of New York. All Performance
Assurance shall at all times remain the property of the Company subject only to
the extent of the interest and rights therein of GS&Co. as the pledgee and
secured party thereof.
(b) GS&Co. shall have the unrestricted right to use any Cash Performance
Assurance included in the Performance Assurance (subject only to its obligation
to return such Cash Performance Assurance to the Company in accordance with the
terms hereof), including but not limited to the right to rehypothecate or
transfer such Cash Performance Assurance to third parties.
(c) GS&Co. shall hold all Performance Assurance in a segregated account which
identifies the Company as the owner thereof (subject to GS&Co.'s security
interest therein) and shall take all action necessary to ensure that no
creditor of GS&Co. obtains any interest whatsoever in the Non-Cash Performance
Assurance therein.
4. PERFORMANCE ASSURANCE
(a) "Performance Assurance" shall be provided by the deposit with GS&Co. of
cash ("Cash Performance Assurance") or securities reasonably acceptable to
GS&Co. ("Non-Cash Performance Assurance"), which shall consist of the following
types and shall be valued at the current market value as determined in good
faith by GS&Co. less the percentage of the current market value indicated below:
-2-
<PAGE> 22
<TABLE>
<S> <C>
Securities issued or guaranteed by the United States
or its Agencies
Less than one year to maturity 1%
One year but less than three years to maturity 2
Three years but less than five years to maturity 3
Five years but less than ten years to maturity 4
Ten years but less than twenty years to maturity 5
Twenty years or more to maturity 6
U.S. Dollar denominated commercial paper rated at least
A1/P1 with less than 90 days to maturity (cannot
constitute more than 20% of the required Performance
Assurance) 5
Other Securities acceptable to GS&Co. (to be determined)
</TABLE>
(b) Any Cash Performance Assurance shall bear interest at a rate equal to the
13-week T-Bill Rate as in effect from time to time minus 25 basis points. Such
accrued interest and any accrued interest and all products and proceeds of
Non-Cash Performance Assurance that would constitute Performance Assurance
hereunder shall automatically be included in the Performance Assurance.
(c) Provided that no Event of Default or Early Termination Event has occurred
and is continuing under the Master Agreement, the Company may substitute other
Performance Assurance for all or part of the Performance Assurance held by
GS&Co. provided that the current market value of such substitute Performance
Assurance as determined in good faith by GS&Co. less the percentage of the
current market value indicated above, is at least equal to that of the
Performance Assurance being replaced.
5. REPRESENTATIONS.
The Company continuously represents and warrants that (i) this Performance
Assurance Amendment to the Master Agreement has been duly authorized, executed
and delivered by the Company and constitutes a valid and legally binding
obligation of the Company enforceable in accordance with its terms, (ii) the
grant of the security interest hereunder and the delivery of the Performance
Assurance pursuant to this Performance Assurance Amendment to the Master
Agreement will create a valid first-priority lien on and first-priority
perfected security interest in the Performance Assurance securing the
obligations
-3-
<PAGE> 23
of the Company in respect of Put Options under the Master Agreement, (iii) it
has, and will have upon the deposit of any additional Performance Assurance
with GS&Co., title to all of the Performance Assurance, free and clear of all
claims, mortgages, pledges, liens, encumbrances and security interests of every
nature whatsoever ("Liens") and no Liens other than the Lien created hereby in
favor of GS&Co. exist upon or with respect to any of the Performance Assurance,
(iv) no consent or approval of any person, entity or governmental or regulatory
authority, or of any securities exchange, was or is necessary to create or
perfect the Company's pledge of Performance Assurance hereunder, (v) the
execution and delivery of this Performance Assurance Amendment to the Master
Agreement by the Company and the performance by the Company of its obligations
hereunder do not violate or conflict with, and will not result in a breach of
or default under, any law applicable to it, any of its constitutional
documents, any order, judgment or decree of any court or other agency or body
or any contract, agreement or instrument to which it is a party or affecting
any of its assets and will not result in the creation or imposition of a Lien
on any of its assets (other than the Lien created hereby), (vi) the Company
will faithfully preserve and protect GS&Co.'s security interest in the
Performance Assurance, will defend GS&Co.'s right, title, lien and security
interest in and to the Performance Assurance against the claims and demands of
all persons whomsoever, and will do all such acts and things and execute and
deliver all such documents and instruments, as GS&Co. in its sole discretion
may reasonably deem necessary or advisable from time to time in order to
preserve, protect and perfect such security interest or to enable GS&Co. to
exercise or enforce its rights under this Performance Assurance Amendment to
the Master Agreement with respect to any Performance Assurance, and (vii) the
Company will not permit any Liens other than the Lien created hereby in favor
of GS&Co. to exist upon any of the Performance Assurance.
6. CHARGING AGAINST PERFORMANCE ASSURANCE
(a) Upon the occurrence of an Event of Default or an Early Termination event,
GS&Co. may upon 1 Business Day's notice to the Company net the amount, if any,
then due, in respect of Put Options, to GS&Co. by the Company, against the
Performance Assurance held by GS&Co. The liquidation of Non-Cash Performance
Assurance shall be accomplished by a public or private sale of the Performance
Assurance conducted by GS&Co. in a commercially reasonable manner. The Company
agrees that GS&Co. may be the purchaser of any or all of the Performance
Assurance so sold.
(b) Promptly after any such netting, GS&Co. shall deliver to the Company a
detailed written itemization of amounts so charged and discharged. In the case
of all sales of Non-Cash Performance Assurance, public or private, the Company
shall pay all reasonable and customary costs and expenses of every kind for
sale or delivery, including brokers' and attorneys' fees and all liabilities
and advances made or incurred by GS&Co. in connection with such sale or
delivery, and after deducting such costs and expenses
-4-
<PAGE> 24
from the proceeds of sale, GS&Co. shall apply any residue first, to the payment
of the costs and expenses, including legal fees, incurred by GS&Co. in
connection with the enforcement of this Performance Assurance Amendment to the
Master Agreement and second, to the payment of any amounts owed to GS&Co. by
the Company in respect of Put Options. The balance, if any, remaining after
payment in full of all such amounts shall be paid to or on the order of the
Company in accordance with Section 7(b) hereof.
(c) The Company shall in all events remain liable for any amounts remaining
unpaid after any such netting.
7. RETURN OF PERFORMANCE ASSURANCE
(a) Provided that no Event of Default or Early Termination Event has occurred
and is continuing under the Master Agreement, if the value of Performance
Assurance held by GS&Co. exceeds the Company's Aggregate Performance Assurance
Requirement by more than $250,000, then GS&Co. shall, at the Company's written
request, return Performance Assurance to the Company sufficient to reduce the
amount of Performance Assurance held by GS&Co. to an amount not less than the
Company's Aggregate Performance Assurance Requirement at such time. Such return
shall not be later than the close of business in New York on the second
Business Day following such written request.
(b) Not later than the close of business in New York on the second Business Day
after there shall have been no Put Options outstanding under the Master
Agreement and the Company shall have satisfied its monetary obligations to
GS&Co. in respect of such Put Options, GS&Co. shall return to the Company all
Performance Assurance (including the Basic Amount) and all accrued interest
thereon and proceeds thereof.
Agreed to on June 14, 1999
Goldman, Sachs & Co. Lam Research Corporation
By: By:
------------------------- -------------------------------------
Name: Name: Craig Garber
Title: Managing Director Title: Vice President and Treasurer
-5-
<PAGE> 1
EXHIBIT 10.68
(MULTICURRENCY--CROSS BORDER)
ISDA(R)
International Swaps & Derivatives Association, Inc.
MASTER AGREEMENT
dated as of 1 June 1999
CREDIT SUISSE FINANCIAL PRODUCTS and LAM RESEARCH CORPORATION have entered
and/or anticipate entering into one or more transactions (each a "Transaction")
that are or will be governed by this Master Agreement, which includes the
schedule (the "Schedule"), and the documents and other confirming evidence
(each a "Confirmation") exchanged between the parties confirming those
Transactions.
Accordingly, the parties agree as follows:--
1. INTERPRETATION
(a) DEFINITIONS. The terms defined in Section 14 and in the Schedule will have
the meanings therein specified for the purpose of this Master Agreement.
(b) INCONSISTENCY. In the event of any inconsistency between the provisions of
the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purpose of the relevant Transaction.
(c) SINGLE AGREEMENT. All Transactions are entered into in reliance on the
fact that this Master Agreement and all Confirmations form a single agreement
between the parties (collectively referred to as this "Agreement"), and the
parties would not otherwise enter into any Transactions.
2. OBLIGATIONS
(a) GENERAL CONDITIONS.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of this
Agreement.
(ii) Payments under this Agreement will be made on the due date for value
on that date in the place of the account specified in the relevant
Confirmation or otherwise pursuant to this Agreement, in freely
transferable funds and in the manner customary for payments in the
required currency. Where settlement is by delivery (that is, other than by
payment), such delivery will be made for receipt on the due date in the
manner customary for the relevant obligation unless otherwise specified in
the relevant Confirmation or elsewhere in this Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject to
(1) the condition precedent that no Event of Default or Potential Event of
Default with respect to the other party has occurred and is continuing,
(2) the condition precedent that no Early Termination Date in respect of
the relevant Transaction has occurred or been effectively designated and
(3) each other applicable condition precedent specified in this Agreement.
Copyright(c)1991 by International Swaps & Derivatives Association, Inc.
<PAGE> 2
(b) CHANGE OF ACCOUNT. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to which
such change applies unless such other party gives timely notice of a reasonable
objection to such change.
(c) NETTING. If on any date amounts would otherwise be payable:-
(i) in the same currency; and
(ii) in respect of the same Transaction,
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be
made in the Schedule or a Confirmation by specifying that subparagraph (ii)
above will not apply to the Transactions identified as being subject to the
election, together with the starting date (in which case subparagraph (ii)
above will not, or will cease to, apply to such Transactions from such date).
This election may be made separately for different groups of Transactions and
will apply separately to each pairing of Offices through which the parties make
and receive payments or deliveries.
(d) DEDUCTION OR WITHHOLDING FOR TAX.
(i) GROSS-UP. All payments under this Agreement will be made without any
deduction or withholding for or on account of any Tax unless such deduction
or withholding is required by any applicable law, as modified by the
practice of any relevant governmental revenue authority, then in effect. If
a party is so required to deduct or withhold, then that party ("X") will:-
(1) promptly notify the other party ("Y") of such requirement;
(2) pay to the relevant authorities the full amount required to be
deducted or withheld (including the full amount required to be
deducted or withheld from any additional amount paid by X to Y under
this Section 2(d)) promptly upon the earlier of determining that such
deduction or withholding is required or receiving notice that such
amount has been assessed against Y;
(3) promptly forward to Y an official receipt (or a certified copy),
or other documentation reasonably acceptable to Y, evidencing such
payment to such authorities; and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to the
payment to which Y is otherwise entitled under this Agreement, such
additional amount as is necessary to ensure that the net amount
actually received by Y (free and clear of Indemnifiable Taxes, whether
assessed against X or Y) will equal the full amount Y would have
received had no such deduction or withholding been required. However,
X will not be required to pay any additional amount to Y to the extent
that it would not be required to be paid but for:-
(A) the failure by Y to comply with or perform any agreement
contained in Section 4(a)(i), 4(a)(iii) or 4(d); or
(B) the failure of a representation made by Y pursuant to Section
3(f) to be accurate and true unless such failure would not have
occurred but for (I) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the
date on which a Transaction is entered into (regardless of
whether such action is taken or brought with respect to a party
to this Agreement) or (II) a Change in Tax Law.
2
<PAGE> 3
(ii) Liability. If:
(1) X is required by any applicable law, as modified by the practice
of any relevant governmental revenue authority, to make any deduction
or withholding in respect of which X would not be required to pay an
additional amount to Y under Section 2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed directly against
X.
then, except to the extent Y has satisfied or then satisfies the liability
resulting from such Tax, Y will promptly pay to X the amount of such
liability (including any related liability for interest, but including any
related liability for penalties only if Y has failed to comply with or
perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)).
(e) DEFAULT INTEREST; OTHER AMOUNTS. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment obligation will, to the
extent permitted by law and subject to Section 6(c), be required to pay interest
(before as well as after judgment) on the overdue amount to the other party on
demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the date of
actual payment, at the Default Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed. If, prior to
the occurrence or effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other
party on demand if and to the extent provided for in the relevant Confirmation
or elsewhere in this Agreement.
3. REPRESENTATIONS
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered into
and, in the case of the representations in Section 3(f), at all times until the
termination of this Agreement) that:--
(a) BASIC REPRESENTATIONS.
(i) STATUS. It is duly organised and validly existing under the laws of
the jurisdiction of its organisation or incorporation and, if relevant
under such laws, in good standing;
(ii) POWERS. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to deliver
this Agreement and any other documentation relating to this Agreement that
it is required by this Agreement to deliver and to perform its obligations
under this Agreement and any obligations it has under any Credit Support
Document to which it is a party and has taken all necessary action to
authorise such execution, delivery and performance;
(iii) NO VIOLATION OR CONFLICT. Such execution, delivery and performance do
not violate or conflict with any law applicable to it, any provision of its
constitutional documents, any order or judgment of any court or other
agency of government applicable to it or any of its assets or any
contractual restriction binding on or affecting it or any of its assets;
(iv) CONSENTS. All governmental and other consents that are required to
have been obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party have been obtained and are in full
force and effect and all conditions of any such consents have been complied
with; and
(V) OBLIGATIONS BINDING. Its obligations under this Agreement and any
Credit Support Document to which it is a party constitute its legal, valid
and binding obligations, enforceable in accordance with their respective
terms (subject to applicable bankruptcy, reorganisation, insolvency,
moratorium or similar laws affecting creditors' rights generally and
subject, as to enforceability, to equitable principles of general
application (regardless of whether enforcement is sought in a proceeding in
equity or at law)).
3
<PAGE> 4
(b) ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential Event of
Default or, to its knowledge, Termination Event with respect to it has occurred
and is continuing and no such event or circumstance would occur as a result of
its entering into or performing its obligations under this Agreement or any
Credit Support Document to which it is a party.
(c) ABSENCE OF LITIGATION. There is not pending or, to its knowledge,
threatened against it or any of its Affiliates any action, suit or proceeding at
law or in equity or before any court, tribunal, governmental body, agency or
official or any arbitrator that is likely to affect the legality, validity or
enforceability against it of this Agreement or any Credit Support Document to
which it is a party or its ability to perform its obligations under this
Agreement or such Credit Support Document.
(d) ACCURACY OF SPECIFIED INFORMATION. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.
(e) PAYER TAX REPRESENTATION. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(e) is accurate and true.
(f) PAYEE TAX REPRESENTATIONS. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(f) is accurate and true.
4. AGREEMENTS
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party: --
(a) FURNISH SPECIFIED INFORMATION. It will deliver to the other party or, in
certain cases under subparagraph (iii) below, to such government or taxing
authority as the other party reasonably directs: --
(i) any forms, documents or certificates relating to taxation specified
in the Schedule or any Confirmation;
(ii) any other documents specified in the Schedule or any Confirmation;
and
(iii) upon reasonable demand by such other party, any form or document that
may be required or reasonably requested in writing in order to allow such
other party or its Credit Support Provider to make a payment under this
Agreement or any applicable Credit Support Document without any deduction
or withholding for or on account of any Tax or with such deduction or
withholding at a reduced rate (so long as the completion, execution or
submission of such form or document would not materially prejudice the
legal or commercial position of the party in receipt of such demand), with
any such form or document to be accurate and completed in a manner
reasonably satisfactory to such other party and to be executed and to be
delivered with any reasonably required certification,
in each case by the date specified in the Schedule or such Confirmation or, if
none is specified, as soon as reasonably practicable.
(b) MAINTAIN AUTHORISATIONS. It will use all reasonable efforts to maintain in
full force and effect all consents of any governmental or other authority that
are required to be obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party and will use all reasonable efforts to
obtain any that may become necessary in the future.
(c) COMPLY WITH LAWS. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
(d) TAX AGREEMENT. It will give notice of any failure of a representation made
by it under Section 3(f) to be accurate and true promptly upon learning of such
failure.
(e) PAYMENT OF STAMP TAX. Subject to Section 11, it will pay any Stamp Tax
levied or imposed upon it or in respect of its execution or performance of this
Agreement by a jurisdiction in which it is incorporated,
4 ISDA (C) 1992
<PAGE> 5
organised, managed and controlled, or considered to have its seat, or in which
a branch or office through which it is acting for the purpose of this Agreement
is located ("Stamp Tax Jurisdiction") and will indemnify the other party
against any Stamp Tax levied or imposed upon the other party or in respect of
the other party's execution or performance of this Agreement by any such Stamp
Act Jurisdiction which is not also a Stamp Tax Jurisdiction with respect to the
other party.
5. EVENTS OF DEFAULT AND TERMINATION EVENTS
(a) Events of Default. The occurrence at any time with respect to a party,
or, if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any of the following events constitutes an event of
default (an "Event of Default") with respect to such party:--
(i) Failure to Pay or Deliver. Failure by the party to make, when
due, any payment under this Agreement or delivery under Section 2(a)(i)
or (2e) required to be made by it if such failure is not remedied on or
before the third Local Business Day after notice of such failure is
given to the party;
(ii) Breach of Agreement. Failure by the party to comply with or
perform any agreement or obligation (other than an obligation to make
any payment under this Agreement or delivery under Section 2(a)1) or
2(e) or to give notice of a Termination Event or any agreement or
obligation under Section 4(a)(i), 4(a)(iii) or 4(d) to be complied with
or performed by the party in accordance with this Agreement if such
failure is not remedied on or before the thirtieth day after notice of
such failure is given to the party;
(iii) Credit Support Default.
(1) Failure by the party or any Credit Support Provider of such
party to comply with or perform any agreement or obligation to
be complied with or performed by it in accordance with any
Credit Support Document if such failure is continuing after any
applicable grace period has elapsed;
(2) the expiration or termination of such Credit Support
Document or the failing or ceasing of such Credit Support
Document to be in full force and effect for the purpose of this
Agreement (in either case other than in accordance with its
terms) prior to the satisfaction of all obligations of such
party under each Transaction to which such Credit Support
Document relates without the written consent of the other party;
or
(3) the party or such Credit Support Provider disaffirms,
repudiates or rejects, in whole or in part, or challenges the
validity of, such Credit Support Document:
(iv) Misrepresentation. A representation (other than a
representation under Section 3(e) of (f)) made or repeated or deemed to
have been made or repeated by the party or any Credit Support Provider
of such party in this Agreement or any Credit Support Document proves to
have been incorrect or misleading in any material respect when made or
repeated or deemed to have been made or repeated;
(v) Default under Specified Transaction. The party, any Credit
Support Provider of such party or any applicable Specified Entity of
such party (1) defaults under a Specified Transaction and, after giving
effect to any applicable notice requirement or grace period, there
occurs a liquidation of, an acceleration of obligations under, or an
early termination of, that Specified Transaction, (2) defaults, after
giving effect to any applicable notice requirement or grace period, in
making any payment or delivery due on the last payment, delivery or
exchange date of, or any payment on early termination of, a Specified
Transaction (or such default continues for at least three Local Business
Days if there is no applicable notice requirement or grace period) or
(3) disaffirms, disclaims, repudiates or rejects, in whole or in part, a
Specified Transaction (or such action is taken by any person or entity
appointed or empowered to operate it or act on its behalf;
(vi) Cross Default. If "Cross Default" is specified in the Schedule as
applying to the party, the occurrence or existence of (1) a default,
event of default or other similar conditions or event (however
5
<PAGE> 6
described) in respect of such party, any Credit Support Provider of such
party or any applicable Specified Entity of such party under one or more
agreements or instruments relating to Specified Indebtedness of any of them
(individually or collectively) in an aggregate amount of not less than the
applicable Threshold Amount (as specified in the Schedule) which has
resulted in such Specified Indebtedness becoming, or becoming capable at
such time of being declared, due and payable under such agreements or
instruments, before it would otherwise have been due and payable or (2) a
default by such party, such Credit Support Provider or such Specified
Entity (individually or collectively) in making one or more payments on the
due date thereof in as aggregate amount of net less than the applicable
Threshold Amount under such agreement or instruments (after giving effect
to any applicable notice requirement or grace period);
(vii) Bankruptcy. The party, any Credit Support Provider of such party or
any applicable Specified Entity of such party:-
(1) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (2) becomes insolvent or is unable to pay
its debt or fails or admits in writing its inability generally to pay
its debts as they become due; (3) makes a general assignment,
arrangement or composition with or for the benefit of its creditors;
(4) institutes or has instituted against it a proceeding seeking a
judgment of insolvency or bankruptcy or any other relief under any
bankruptcy of insolvency law or other similar law affecting
creditor's rights, or a petition is presented for its winding-up or
liquidation, and, in the case of any such proceeding or petition
instituted or presented against it, such proceeding or petition (A)
results in a judgment of insolvency or bankruptcy or the entry of an
order for relief or the making of an order for its winding-up or
liquidation or (B) is not dismissed, discharged, stayed or restrained
in each case within 30 days of the instruction or presentation
thereof; (5) has a resolution passed for its winding-up, official
management or liquidation (other than pursuant to a consolidation,
amalgamation or merger); (6) seeks or becomes subject to the
appointment of an administrator, provisional liquidator, conservator,
receiver, trustee, custodian or other similar official for it of for
all or substantially all its assets; (7) has a secured party take
possession of all or substantially all its assets or has a distress,
execution, attachment, sequestration or other legal process levied,
enforced or sued on or against all or substantially all its assets
and such secured party maintains possession, or any such process is
not dismissed, discharged, stayed or restrained, in each case within
30 days thereafter; (8) causes or is subject to any event with
respect to it which, under the applicable laws of any jurisdiction,
has an analogous effect to any of the events specified in clauses (1)
to (7) (inclusive); or (9) takes any action in furtherance of, or
indicating its consent to, approval or, or acquiescence in, any of
the foregoing acts; or
(viii) Merger Without Assumption. The party or any Credit Support Provider
of such party consolidates or amalgamates with, or merges with or into, or
transfers all or substantially all its assets to, another entity and, at
the time of such consolidation, amalgamation, merger or transfer:-
(1) the resulting, surviving or transferee entry fails to assume all
the obligations of such party or such Credit Support Provider under
this Agreement or any Credit Support Document to which it or its
predecessor was a party by operation of law or pursuant to an
agreement reasonably satisfactory to the other party to this Agreement
or
(2) the benefits of any Credit Support Document fail to extent
(without the consent of the other party) to the performance by such
resulting, surviving or transferee entity of its obligations under
this Agreement.
(b) Termination Events. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any event specified below constitutes an Illegality if
the event is specified in (i) below, a Tax Event if the event is specified in
(ii) below or a Tax Event Upon Merger if the event is specified in (iii) below,
and, if specified to be applicable, a Credit Event
6
<PAGE> 7
Upon Merger if the event is specified pursuant to (iv) below or an Additional
Termination Event if the event is specified pursuant to (v) below: --
(i) ILLEGALITY. Due to the adoption of, or any change in, any applicable
law after the date on which a Transaction is entered into, or due to the
promulgation of, or any change in, the interpretation by any court,
tribunal or regulatory authority with competent jurisdiction of any
applicable law after such date, it becomes unlawful (other than as a result
of a breach by the party of Section 4(b)) for such party (which will be the
Affected Party); --
(1) to perform any absolute or contingent obligation to make a
payment or delivery or to receive a payment or delivery in respect of
such Transaction or to comply with any other material provision of
this Agreement relating to such Transaction; or
(2) to perform, or for any Credit Support Provider of such party to
perform, any contingent or other obligation which the party (or such
Credit Support Provider) has under any Credit Support Document
relating to such Transaction;
(ii) TAX EVENT. Due to (x) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the date on which
a Transaction is entered into (regardless of whether such action is taken
or brought with respect to a party to this Agreement) or (y) a Change in
Tax Law, the party (which will be the Affected Party) will, or there is a
substantial likelihood that it will, on the next succeeding Scheduled
Payment Date (1) be required to pay to the other party an additional amount
in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in
respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a
payment from which an amount is required to be deducted or withheld for or
on account of Tax (except in respect of interest under Section 2(e),
6(d)(ii) or 6(e)) and no additional amount is required to be paid in
respect of such Tax under Section 2(d)(i)(4) (other than by reason of
Section 2(d)(i)(4)(A) or (B));
(iii) TAX EVENT UPON MERGER. The party (the "Burdened Party") on the next
succeeding Scheduled Payment Date will either (1) be required to pay an
additional amount in respect of an Indemnifiable Tax under Section
2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or
6(e)) or (2) receive a payment from which an amount has been deducted or
withheld for or on account of any Indemnifiable Tax in respect of which the
other party is not required to pay an additional amount (other than by
reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of a
party consolidating or amalgamating with, or merging with or into, or
transferring all or substantially all its assets to, another entity (which
will be the Affected Party) where such action does not constitute an event
described in Section 5(a)(viii);
(iv) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is specified
in the Schedule as applying to the party, such party ("X"), any Credit
Support Provider of X or any applicable Specified Entity of X consolidates
or amalgamates with, or merges with or into, or transfers all of
substantially all its assets to, another entity and such action does not
constitute an event described in Section 5(a)(viii) but the
creditworthiness of the resulting, surviving or transferee entity is
materially weaker than that of X, such Credit Support Provider or such
Specified Entity, as the case may be, immediately prior to such action
(and, in such event, X or its successor or transferee, as appropriate, will
be the Affected Party); or
(v) ADDITIONAL TERMINATION EVENT. If any "Additional Termination Event"
is specified in the Schedule or any Confirmation as applying, the
occurrence of such event (and, in such event, the Affected Party or
Affected Parties shall be as specified for such Additional Termination
Event in the Schedule or such Confirmation).
(e) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which would
otherwise constitute or give rise to an Event of Default also constitutes an
Illegality, it will be treated as an Illegality and will not constitute an Event
of Default.
7
<PAGE> 8
6. EARLY TERMINATION
(a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event of
Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions. If, however,
"Automatic Early Termination" is specified in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding Transactions
will occur immediately upon the occurrence with respect to such party of an
Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding the
institution of the relevant proceeding or the presentation of the relevant
petition upon the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).
(b) RIGHT TO TERMINATE FOLLOWING TERMINATION EVENT.
(i) NOTICE. If a Termination Event occurs, an Affected Party will,
promptly upon becoming aware of it, notify the other party, specifying the
nature of that Termination Event and such Affected Transaction and will
also give such other information about that Termination Event as the other
party may reasonably require.
(ii) TRANSFER TO AVOID TERMINATION EVENT. If either an Illegality under
Section 5(b)(i)(1) or a Tax Event occurs and there is only one Affected
Party, or if a Tax Event Upon Merger occurs and the Burdened Party is the
Affected Party, the Affected Party will, as a condition to its right to
designate an Early Termination Date under Section 6(b)(iv), use all
reasonable efforts (which will not require such party to incur a loss,
excluding immaterial, incidental expenses) to transfer within 20 days after
it gives notice under Section 6(b)(i) all its rights and obligations under
this Agreement in respect of the Affected Transactions to another of its
Offices or Affiliates so that such Termination Event ceases to exist.
If the Affected Party is not able to make such transfer it will give notice
to the other party to that effect within such 20 day period, whereupon the
other party may effect such a transfer within 30 days after the notice is
given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be subject to
and conditional upon the prior written consent of the other party, which
consent will not be withheld if such other party's policies in effect at
such time would permit it to enter into transactions with the transferee on
the terms proposed.
(iii) TWO AFFECTED PARTIES. If an Illegality under Section 5(b)(i)(1) or a
Tax Event occurs and there are two Affected Parties, each party will use
all reasonable efforts to reach agreement within 30 days after notice
thereof is given under Section 6(b)(i) on action to avoid that Termination
Event.
(iv) RIGHT TO TERMINATE. If:--
(1) a transfer under Section 6(b)(ii) or an agreement under Section
6(b)(iii), as the case may be, has not been effected with respect to
all Affected Transactions within 30 days after an Affected Party
gives notice under Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon
Merger or an Additional Termination Event occurs, or a Tax Event Upon
Merger occurs and the Burdened Party is not the Affected Party.
either party in the case of an Illegality, the Burdened Party in the case
of a Tax Event Upon Merger, any Affected Party in the case of a Tax Event
or an Additional Termination Event if there is more than one Affected
Party, or the party which is not the Affected Party in the case of a Credit
Event. Upon Merger or an Additional Termination Event if there is only one
Affected Party may, by not more than 20 days notice to the other party and
provided that the relevant Termination Event is then
8
<PAGE> 9
continuing, designate a day not earlier than the day such notice is
effective as an Early Termination Date in respect of all Affected
Transactions.
(c) EFFECT OF DESIGNATION.
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the date
so designated, whether or not the relevant Event of Default or
Termination Event is then continuing.
(ii) Upon the occurrence of effective designation of an Early
Termination Date, no further payments or deliveries under Section
2(a)(i) or 2(e) in respect of the Terminated Transactions will be
required to be made, but without prejudice to the other provisions of
this Agreement. The amount, if any, payable in respect of an Early
Termination Date shall be determined pursuant to Section 6(e).
(d) CALCULATIONS.
(i) STATEMENT. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and
will provide to the other party a statement (1) showing, in reasonable
detail, such calculations (including all relevant quotations and
specifying any amount payable under Section 6(e)) and (2) giving
details of the relevant account to which any amount payable to it is
to be paid. In the absence of written confirmation from the source of
a quotation obtained in determining a Market Quotation, the records of
the party obtaining such quotation will be conclusive evidence of the
existence and accuracy of such quotation.
(ii) PAYMENT DATE. An amount calculated as being due in respect of any
Early Termination Date under Section 6(c) will be payable on the day
that notice of the amount payable is effective (in the case of an
Early Termination Date which is designated or occurs as a result of an
Event of Default) and on the day which is two Local Business Days
after the day on which notice of the amount payable is effective (in
the case of an Early Termination Date which is designated as a result
of a Termination Event). Such amount will be paid together with (to
the extent permitted under applicable law) interest thereon (before as
well as after judgment) in the Termination Currency, from (and
including) the relevant Early Termination Date to (but excluding) the
date such amount is paid, at the Applicable Rate. Such interest will
be calculated on the basis of daily compounding and the actual number
of days elapsed.
(e) PAYMENTS ON EARLY TERMINATION. If an Early Termination Date occurs,
the following provisions shall apply based on the parties' election in the
Schedule of a payment measure, either "Market Quotation" or "Loss", and a
payment method, either the "First Method" or the "Second Method". If the
parties fail to designate a payment measure or payment method in the
Schedule, it will be deemed that "Market quotation" or the "Second method",
as the case may be, shall apply. The amount, if any, payable in respect of
an Early Termination Date and determined pursuant to this Section will be
subject to any Set-off.
(i) EVENTS OF DEFAULT. If the Early Termination Date results from an
Event of Default:--
(1) FIRST METHOD AND MARKET QUOTATION. If the First Method and
market Quotation apply, the Defaulting Party will pay to the
Non-defaulting party the excess, if a positive number, of (A) the
sum of the Settlement Amount (determined by the Non-defaulting
Party) in respect of the Terminated Transactions and the
Termination Currency Equivalent of the Unpaid Amounts owing to
the Non-defaulting Party over (B) the Termination Currency
Equivalent of the Unpaid Amounts owing to the Defaulting Party.
(2) FIRST METHOD AND LOSS. If the First Method and Loss apply,
the Defaulting Party will pay to the Non-defaulting Party, if a
positive number, the Non-defaulting Party's Loss in respect of
this Agreement.
(3) SECOND METHOD AND MARKET QUOTATION. If the Second method and
Market quotation apply, an amount will be payable equal to (A)
the sum of the Settlement Amount (determined by the
9
<PAGE> 10
Non-defaulting Party) in respect of the Terminated Transactions and the
Termination Currency Equivalent of the Unpaid Amounts owing to the
Non-defaulting Party less (B) the Termination Currency Equivalent of the
Unpaid Amounts owing to the Defaulting Party. If that amount is a
positive number, the Defaulting Party will pay it to the Non-defaulting
Party: if it is a negative number, the Non-defaulting Party will pay the
absolute value of that amount to the Defaulting Party.
(4) Second Method and Loss. If the Second Method and Loss apply, an
amount will be payable equal to the Non-defaulting Party's Loss in
respect of this Agreement. If that amount is a positive number, the
Defaulting Party will pay it to the Non-Defaulting Party: if it is a
negative number, the Non-defaulting Party will pay the absolute value of
that amount to the Defaulting Party.
(ii) Termination Events. If the Early Termination Date results from a
Termination Event --
(1) One Affected Party. If there is one Affected Party, the amount
payable will be determined in accordance with Section 6(e)(i)(3), if
Market Quotation applies, or Section 6(e)(i)(4), if Loss applies, except
that, in either case, references to the Defaulting Party and to the
Non-defaulting Party will be deemed to be references to the Affected
Party and the party which is not the Affected Party, respectively, and,
if Loss applies and fewer than all the Transactions are being
terminated. Loss shall be calculated in respect of all Terminated
Transactions.
(2) Two Affected Parties. If there are two Affected Parties: --
(A) if Market Quotation applies, each party will determine a
Settlement Amount in respect of the Terminated Transactions, and
an amount will be payable equal (I) the sum of (a) one-half of
the difference between the Settlement Amount of the party with
the higher Settlement Amount ("X") and the Settlement Amount of
the party with the lower Settlement Amount ("Y") and (b) the
Termination Currency Equivalent of the Unpaid Amounts owing to X
less than (II) the Termination Currency Equivalent of the Unpaid
Amounts owing Y: and
(B) if Loss applies, each party will determine its Loss in
respect of this Agreement (or, if fewer than all the
Transactions are being terminated in respect of all Terminated
Transactions) and an amount will be payable equal to one-half of
the difference between the Loss of the party with the higher
Loss ("X") and the Loss of the party with the lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to X; if it is
a negative number, X will pay the absolute value to Y.
(iii) Adjustment for Bankruptcy. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination" applies in
respect of a party, the amount determined under this Section 6(e) will
be subject to such adjustments as are appropriate and permitted by law
to reflect any payments or deliveries made by one party to the other
under this Agreement (and retained by such other party) during the
period from the relevant Early Termination Date to the date for payment
determined under Section 6(d)(ii).
(iv) Pre-Estimate. The parties agree that if Market Quotation applies an
amount recoverable under this Section 6(e) is a reasonable pre-estimate
of loss and not a penalty. Such amount is payable for the loss of
bargain and the loss of protection against future risks and except as
otherwise provided in this Agreement neither party will be entitled to
recover any additional damages as a consequence of such losses.
10
<PAGE> 11
7. TRANSFER
Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of the
other party except that--
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to another entity (but without prejudice to any
other right or remedy under this Agreement; and
(b) a party may make such a transfer of all or any part of its interest in
any amount payable to it from a Defaulting Party under Section 6(c)
8. CONTRACTUAL CURRENCY
(a) PAYMENT IN THE CONTRACTUAL CURRENCY. Each payment under this Agreement
will be made in the relevant currency specified in this Agreement for that
payment (the "Contractual Currency"). To the extent permitted by applicable law,
any obligation to make payments under this Agreement in the Contractual
Currency, except to the extent such tender results in the accrual receipt by the
party to which payment is owed, acting in a reasonable manner and in good faith
in converting the currency so tendered into the Contractual Currency, of the
full amount in the Contractual Currency of all amounts payable in respect of
this Agreement. If for any reason the amount in the Contractual Currency so
received falls short of the amount in the Contractual Currency payable in
respect of this agreement, the party required to make the payment will, to the
extent permitted by applicable law, immediately pay such additional amount in
the Contractual Currency as may be necessary to compensate for the shortfall. If
for any reason the amount in the Contractual Currency so received exceeds the
amount in the Contractual Currency payable in respect of this Agreement, the
party receiving the payment will refund promptly the amount of such excess.
(b) JUDGMENTS. To the extent permitted by applicable law, if any judgment or
order expressed in a currency other than the Contractual Currency is rendered
(i) for the payment of any amount owing in respect of this Agreement, (ii) for
the payment of any amount relating to any early termination in respect of this
Agreement or (iii) in respect of a judgment or order of another court for the
payment of any amount described in (i) or (ii) above, the party seeking
recovery, after recovery in full of the aggregate amount to such party is
entitled pursuant to the judgment or order, will be entitled to receive
immediately from the other party the amount of any shortfall of the Contractual
Currency received by such party as a consequence of sums paid in such other
currency and will refund promptly to the other party any excess of the
Contractual Currency received by such party as a consequence of sums paid in
such other currency if such shortfall or such excess arises or results from any
variation between the rate of exchange at which the Contractual Currency is
converted into the currency of the judgment or order for the purposes of such
judgment or order and the rate of exchange at which such party is able, acting
in a reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency with the
amount of the currency of the judgment or order actually received by such party.
The term "rate of exchange" includes, without limitation, any premiums and costs
of exchanges payable in connection with the purchase of conversion into the
Contractual Currency.
(c) SEPARATE INDEMNITIES. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the party
to which any payment is owed and will not be affected by judgment being obtained
or claim or proof being made for any other sums payable in respect of this
Agreement.
(d) EVIDENCE OF LOSS. For the purpose of this section 8, it will be
sufficient for a party to demonstrate that it would have suffered a loss had an
actual exchange or purchase been made.
<PAGE> 12
9. MISCELLANEOUS
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) AMENDMENTS. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by an
exchange of telexes or electronic messages on an electronic messaging system.
(c) SURVIVAL OF OBLIGATIONS. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.
(d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(e) COUNTERPARTS AND CONFIRMATIONS.
(i) This Agreement (and each amendment, modification and waiver in respect
of it) may be executed and delivered in counterparts (including by
facsimile transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of each
Transaction from the moment they agree to those terms (whether orally or
otherwise). A Confirmation shall be entered into as soon as practicable and
may be executed and delivered in counterparts (including by facsimile
transmission) or be created by an exchange of telexes or by an exchange of
electronic messages on an electronic messaging system, which in each case
will be sufficient for all purposes to evidence a binding supplement to
this Agreement. The parties will specify therein or through another
effective means that any such counterpart, telex or electronic message
constitutes a Confirmation.
(f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power or
privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or the exercise of any other right, power or privilege.
(g) HEADINGS. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
10. OFFICES: MULTIBRANCH PARTIES
(a) If Section 10(a) is specified in the Schedule as applying, each party that
entered into a Transaction through an Office other than its head or home office
represents to the other party that, notwithstanding the place of booking office
or jurisdiction of incorporation or organisation of such party, the obligations
of such party are the same as if it had entered into the Transaction through its
head or home office. This representation will be deemed to be repeated by such
party on each date on which a Transaction is entered into.
(b) Neither party may change the Office through which it makes and receives
payments or deliveries for the purpose of a Transaction without the prior
written consent of the other party.
(c) If a party is specified as a Multibranch Party in the Schedule, such
Multibranch Party may make and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office through
which it makes and receives payments or deliveries with respect to a
Transaction will be specified in the relevant Confirmation.
11. EXPENSES
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or any Credit Support Document
12
<PAGE> 13
to which the Defaulting Party is a party or by reason of the early termination
of any Transaction, including, but not limited to, costs of collection.
12. NOTICES
(a) EFFECTIVENESS. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated: --
(i) if in writing and delivered in person or by courier, on the date it
is delivered;
(ii) if sent by telex, on the date the recipient's answerback is received;
(iii) if sent by facsimile transmission, on the date that transmission is
received by a responsible employee of the recipient in legible form (it
being agreed that the burden of proving receipt will be on the sender and
will not be met by a transmission report generated by the sender's
facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas) or the
equivalent (return receipt requested), on the date that mail is delivered
or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that electronic
message is received,
unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) CHANGE OF ADDRESSES. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
13. GOVERNING LAW AND JURISDICTION
(a) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) JURISDICTION. With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably: --
(i) submits to the jurisdiction of the English courts, if this Agreement
is expressed to be governed by English law, or to the non-exclusive
jurisdiction of the courts of the State of New York and the United States
District Court located in the Borough of Manhattan in New York City, if
this Agreement is expressed to be governed by the laws of the State of New
York; and
(ii) waives any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any claim that
such Proceedings have been brought in an inconvenient forum and further
waives the right to object, with respect to such Proceedings, that such
court does not have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) SERVICE OF PROCESS. Each party irrevocably appoints the Process Agent (if
any) specified opposite its name in the Schedule to receive, for it and on its
behalf, service of process in any Proceedings. If for any
13
<PAGE> 14
reason any party's Process Agent is unable to act as such, such party will
promptly notify the other party and within 30 days appoint a substitute process
agent acceptable to the other party. The parties irrevocably consent to service
of process given in the manner provided for notices in Section 12. Nothing in
this Agreement will affect the right of either party to serve process in any
other manner permitted by law.
(d) Waiver of Immunities. Each party irrevocably waives to the fullest extent
permitted by applicable law, with respect to itself and its revenues and assets
(irrespective of their use or intended use), all immunity on the grounds of
sovereignty or other similar grounds form (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
14. DEFINITIONS
As used in this Agreement --
"Additional Termination Event" has the meaning specified in Section 5(b).
"Affected Party" has the meaning specified in Section 5(b).
"Affected Transactions" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Transactions.
"Affiliate" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"Applicable Rate" means: --
(a) in respect of obligations payable or deliverable (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section 6(d)(ii))
on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which would
have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default
Rate; and
(d) in all other cases, the Termination Rate.
"Burdened Party" has the meaning specified in Section 5(b).
"Change in Tax Law" means the enactment, promulgation, execution or ratification
of, or any change in or amendment to, any law (or in the application or official
interpretation of any law) that occurs on or after the date on which the
relevant Transaction is entered into.
"Consent" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"Credit Event Upon Merger" has the meaning specified in Section 5(b).
"Credit Support Document" means any agreement or instrument that is specified as
such in this Agreement.
"Credit Support Provider" has the meaning specified in the Schedule.
"Default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
14
<PAGE> 15
"DEFAULTING PARTY" has the meaning specified in Section 6(a).
"EARLY TERMINATION DATE" means the date determined in accordance with Section
6(a) or 6(b)(iv).
"EVENT OF DEFAULT" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule;
"ILLEGALITY" has the meaning specified in Section 5(b).
"INDEMNIFIABLE TAX" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former connection
between the jurisdiction of the government or taxation authority imposing such
Tax and the recipient of such payment of a person related to such recipient
(including, without limitation, a connection arising from such recipient or
related person being or having been a citizen or resident of such jurisdiction,
or being or having been organised, present or engaged in a trade or business in
such jurisdiction, or having or having had a permanent establishment of fixed
place of business in such jurisdiction, but excluding a connection arising
solely from such recipient or related person having executed, delivered,
performed its obligations or received a payment under, or enforced, this
Agreement or a Credit Support Document).
"LAW" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority)
and "LAWFUL" and "UNLAWFUL" will be construed accordingly.
"LOCAL BUSINESS DAY" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located and, if
different, in the principal financial centre, if any, of the currency of such
payment, (c) in relation to any notice or other communication, including notice
contemplated under Section 5(a)(i), in the city specified in the address for
notice provided by the recipient and, in the case of a notice contemplated by
Section 2(b), in the place where the relevant new account is to be located and
(d) in relation to Section 5(a)(v)(2), in the relevant locations for performance
with respect to such Specified Transaction.
"LOSS" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonably determines in good faith to be its
total losses and costs (or gain, in which case expressed as a negative number)
in connection with this Agreement or that Terminated Transaction or group of
Terminated Transactions, as the case may be, including any loss of bargain, cost
of funding or, at the election of such party but without duplication, loss or
cost incurred as a result of its terminating, liquidating, obtaining or
reestablishing any hedge or related trading position (or any gain resulting from
any of them). Loss includes losses and costs (or gains) in respect of any
payment or delivery required to have been made (assuming satisfaction of each
applicable condition precedent) on or before the relevant Early Termination Date
and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or (3)
or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and
out-of-pocket expenses referred to under Section 11. A party will determine its
Loss as of the relevant Early Termination Date, or, if that is not reasonably
practicable, as of the earliest date thereafter as is reasonably practicable. A
party may (but need not) determine its Loss by reference to quotations of
relevant rates or prices from one or more leading dealers in the relevant
markets.
"MARKET QUOTATION" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that
would have the effect of preserving for such party the economic equivalent of
any payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition precedent)
by the parties under Section 2(a)(i) in respect of such Terminated Transaction
or group of Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have
15
<PAGE> 16
been required after that date. For this purpose, Unpaid Amounts in respect of
the Terminated Transaction or group of Terminated Transactions are to be
excluded but, without limitation, any payment or delivery that would, but for
the relevant Early Termination Date, have been required (assuming satisfaction
of such applicable condition precedent) after that Early Termination Date is to
be included. The Replacement Transaction would be subject to such documentation
as such party and the Reference Marker-maker may, in good faith, agree. The
party making the determination (or its agent) will request each Reference
Market-maker to provide its quotation to the extent reasonably practicable as of
the same day and time (without regard to different time zones) on or as soon as
reasonably practicable after the relevant Early Termination Date. The day and
time as of which those quotations are to be obtained will be selected in good
faith by the party obliged to make a determination under Section 6(e), and, if
each party is so obliged, after consultation with the other. If more than three
quotations are provided, the Market Quotation will be the arithmetic mean of the
quotations, without regard to the quotations having the highest and lowest
values. If exactly three such quotations are provided, the Market Quotation will
be the quotation remaining after disregarding the highest and lowest quotations.
For this purpose, if more than one quotation has the same highest value or
lowest value, then one of such quotations shall be disregarded. If fewer than
three quotations are provided, it will be deemed that the Market Quotation in
respect of such Terminated Transaction or group of Terminated Transactions
cannot be determined.
"Non-default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.
"Non-defaulting Party" has the meaning specified in Section 6(a)
"Office" means a branch or office of a party, which may be such party's head or
home office.
"Potential Event of Default" means any event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.
"Reference Market-makers" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
an extension of credit and (b) to the extent practicable from among such dealers
having an office in the same city.
"Relevant Jurisdiction" means, with respect to a party, the jurisdictions (a) in
which the party is incorporated, organised, managed and controlled or considered
to have its seat, (b) where an Office through which the party is acting for
purposes of this Agreement is located, (c) in which the party executes this
Agreement and (d) in relation to any payment, from or through which such payment
is made.
"Scheduled Payment Date" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"Set-off" means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement
another contract applicable law or otherwise) that is exercised by, or imposed
on, such payer.
"Settlement Amount" means, with respect to a party and any Early Termination
Date, the sum of:--
(a) the Termination Currency Equivalent of the Market Quotations (whether
positive of negative) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation is determined; and
(b) such party's Less (whether positive or negative and without reference to
any Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not (in
the reasonable belief of the party making the determination) produce a
commercially reasonable result.
"Specified Entity" has the meaning specified in the Schedule
16
<PAGE> 17
"Specified Indebtedness" means, subject to the Schedule, any obligation
(whether present or future, contingent or otherwise, as principal or surety or
otherwise) in respect of borrowed money.
"Specified Transaction" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.
"Stamp Tax" means any stamp, registration, documentation or similar tax.
"Tax" means any present or future tax, levy, impost, duty, charge, assessment or
fee of any nature (including interest, penalties and additions thereto) that is
imposed by any government or other taxing authority in respect of any payment
under this Agreement other than a stamp, registration, documentation or similar
tax.
"Tax Event" has the meaning specified in Section 5(b).
"Tax Event Upon Merger" has the meaning specified in Section 5(b).
"Terminated Transactions" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"Termination Currency" has the meaning specified in the Schedule.
"Termination Currency Equivalent" means, in respect of any amount denominated in
the Termination Currency, such Termination Currency amount and, in respect of
any amount denominated in a currency other than the Termination Currency (the
"Other Currency"), the amount in the Termination Currency determined by the
party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date or, if
the relevant Market Quotation or Loss (as the case may be), is determined as of
a later date, that later date, with the Termination Currency at the rate equal
to the spot exchange rate of the foreign exchange agent (selected as provided
below) for the purchase of such Other Currency with the Termination Currency at
or about 11:00 a.m. (in the city in which such foreign exchange agent is
located) on such date as would be customary for the determination of such a rate
for the purchase of such Other Currency for value on the relevant Early
Termination Date or that later date. The foreign exchange agent will, if only
one party is obliged to make a determination under Section 6(c), be selected in
good faith by that party and otherwise will be agreed by the parties.
"Termination Event" means an Illegality, a Tax Event or a Tax Event Upon Merger
or, if specified to be applicable, a Credit Event Upon Merger or an Additional
Termination Event.
"Termination Rate" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.
"Unpaid Amounts" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled as at such Early Termination Date, an amount equal
to the fair market
17
<PAGE> 18
value of that which was (or would have been) required to be delivered as of the
originally scheduled date for delivery, in each case together with (to the
extent permitted under applicable law) interest, in the currency of such
amounts, from (and including) the date such amounts or obligations were or would
have been required to have been paid or performed to (but excluding) such Early
Termination Date, at the Applicable Rate. Such amounts of interest will be
calculated on the basis of daily compounding and the actual number of days
elapsed. The fair market value of any obligation referred to in clause (b) above
shall be reasonably determined by the party obliged to make the determination
under Section 6(e) or, if each party is so obliged, it shall be the average of
the Termination Currency Equivalents of the fair market values reasonably
determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
CREDIT SUISSE FINANCIAL PRODUCTS LAM RESEARCH CORPORATION
- ---------------------------------- ----------------------------------
(Name of Party) (Name of Party)
By: /s/ EDMOND CURTIN By: [SIG]
------------------------------- -------------------------------
Name: Edmond Curtin Name: Craig Garber
Title: Director - Legal and Title: VP/Treasurer
Compliance Department Date: 6/15/99
Date:
By: /s/ PAUL MANN
----------------------------------
Name: Paul Mann
Title: Vice President - Legal
and Compliance Department
Date:
18
<PAGE> 19
SCHEDULE
to the
MASTER AGREEMENT
dated as of 1 June 1999
between
CREDIT SUISSE FINANCIAL PRODUCTS, AND LAM RESEARCH CORPORATION,
an unlimited company incorporated a corporation established
under the laws of England and Wales under the laws of the State
("PARTY A") of Delaware
("PARTY B")
PART 1
TERMINATION PROVISIONS
In this Agreement the following terms shall be given the following meaning.
Unless otherwise specified, references below to "Section" or "Sections" are to
those sections of the Master Agreement dated 1 June 1999 (the "Agreement"):-
(a) SPECIFIED ENTITY. "Specified Entity" means "Affiliates" in relation to Party
A and Party B for the purpose of the "Default under Specified Transaction"
provision Section 5(a)(v).
(b) SPECIFIED TRANSACTION. "Specified Transaction" will have the meaning
specified in Section 14.
(c) CROSS DEFAULT. The "Cross Default" provision Section 5(a)(vi) will apply to
Party A and Party B amended as follows:-
Specified Indebtedness
Instead of the definition in Section 14 of this Agreement, "Specified
Indebtedness" shall mean any obligation (whether present or future,
contingent or otherwise, as principal or surety or otherwise) (a) in
respect of borrowed money, and/or (b) in respect of any Specified
Transaction (except that, for this purpose only, the words "and any
other entity" shall be substituted for the words "and the other party
to this Agreement (or any Credit Support Provider of such other party
or any applicable Specified Entity of such other party)" where they
appear in the definition of Specified Transaction).
Threshold Amount
"Threshold Amount" means $10,000,000 (including the United States
Dollar equivalent of obligations stated in any other currency or
currency unit).
1
<PAGE> 20
(d) CREDIT EVENT UPON MERGER. The "Credit Event Upon Merger" provision Section
5(b)(iv) will apply to Party A and Party B restated as follows:-
"Credit Event Upon Merger" shall mean that a Designated Event (as defined below)
occurs with respect to a party ("X"), and such Designated Event does not
constitute an event described in Section 5(a)(viii) but the creditworthiness of
X or, if applicable, the successor, surviving or transferee entity of X, is
materially weaker than that of X immediately prior to such action (and, in such
event, such party or its successor or transferee, as appropriate, will be the
Affected Party). For purposes hereof, a Designated Event with respect to X means
that, after the Trade Date of the first Transaction between the parties:
(i) X consolidates or amalgamates with or merges with or into, or
transfers all or substantially all its assets (or any
substantial part of the assets comprising the business
conducted by X as of the execution date hereof) to, or
receives all or substantially all the assets or obligations
of, another entity;
(ii) any person or entity acquires directly or indirectly the
beneficial ownership of equity securities having the power to
elect a majority of the board of directors of X or otherwise
acquires directly or indirectly the power to control the
policy-making decisions of X; or
(iii) X effects any substantial change in its capital structure by
means of the issuance, incurrence or guarantee of debt or the
issuance of preferred stock or other securities convertible
into, or exchangeable for, debt or preferred stock.
(e) AUTOMATIC EARLY TERMINATION. The "Automatic Early Termination" provision of
Section 6(a) will apply to Party A and Party B.
(f) PAYMENTS ON EARLY TERMINATION. For the purpose of Section 6(e), the Second
Method and Market Quotation will apply.
(g) TERMINATION CURRENCY. "Termination Currency" means United States Dollars.
(h) ADDITIONAL TERMINATION EVENT. The following shall be an Additional
Termination Event with respect to Party B for the purposes of this Agreement
with Party B as the sole Affected Party:-.
Party B fails to maintain, as reasonably determined by Party A, a Cash
Balance of USD75,000,000.
For the purpose of this Additional Termination Event "Cash Balance" shall be
defined as being the sum of cash and cash equivalents as reported in Party B's
last filed quarterly unaudited or annually audited accounts and for the
avoidance of doubt "Cash Balance" shall not include restricted cash as reported
in Party B's last filed quarterly unaudited or annually audited accounts.
2
<PAGE> 21
PART 2
TAX REPRESENTATIONS
(a) PAYER TAX REPRESENTATIONS. For the purpose of Section 3(e), Party A and
Party B each makes the following representation:
It is not required by any applicable law, as modified by the practice
of any relevant governmental revenue authority, of any Relevant
Jurisdiction to make any deduction or withholding for or on account of
any Tax from any payment (other than interest under Section 2(e),
6(d)(ii) or 6(e)) to be made by it to the other party under this
Agreement. In making this representation, it may rely on:
(i) the accuracy of any representation made by the other party
pursuant to Section 3(f);
(ii) the satisfaction of the agreement of the other party contained
in Section 4(a)(i) or 4(a)(iii) and the accuracy and
effectiveness of any document provided by the other party
pursuant to Section 4(a)(i) or 4(a)(iii); and
(iii) the satisfaction of the agreement of the other party contained
in Section 4(d);
provided that it shall not be a breach of this representation where
reliance is placed on clause (ii), and the other party does not deliver
a form or document under Section 4(a)(iii) by reason of material
prejudice to its legal or commercial position.
(b) PAYEE TAX REPRESENTATIONS. For the purpose of Section 3(f),
(i) Party A represents that (A) it is entering into each
Transaction in the ordinary course of its trade as, and is, a
recognised U.K. bank and (B) it will bring into account
payments made and received in respect of each Transaction in
computing its income for United Kingdom tax purposes.
(ii) Party B makes no Payee Tax Representations.
3
<PAGE> 22
PART 3
AGREEMENT TO DELIVER DOCUMENTS
Each party agrees to deliver the following documents as applicable:-
(a) For the purpose of Section 4(a)(i), tax forms, documents or certificates to
be delivered are:-
<TABLE>
<CAPTION>
PARTY REQUIRED TO FORM/DOCUMENT/ DATE BY WHICH
DELIVER DOCUMENTS CERTIFICATE TO BE DELIVERED
<S> <C> <C>
Not Applicable Not Applicable Not Applicable
</TABLE>
(b) For the purpose of Section 4(a)(ii), other documents to be delivered are:-
<TABLE>
<CAPTION>
PARTY REQUIRE TO FORM/DOCUMENT/ DATE BY WHICH COVERED BY
DELIVER DOCUMENT CERTIFICATE TO BE DELIVERED SECTION 3(d)
REPRESENTATION
<S> <C> <C> <C>
Party A and Party B Evidence reasonably Upon execution of this Yes
satisfactory to the Agreement and, if
other party as to the requested, upon
names, true signatures execution of any
and authority of the Confirmation
officers or officials
signing this Agreement
or any Confirmation on
its behalf.
Party A and Party B A copy of the annual Upon request, as soon Yes
report for such party as publicly available
containing audited or
certified financial
statements for the most
recently ended
financial year
</TABLE>
4
<PAGE> 23
PART 4
MISCELLANEOUS
(a) ADDRESSES FOR NOTICES. For the purpose of Section 12(a):-
(i)(1) Address for notices or communications to Party A (other than by
facsimile):-
<TABLE>
<S> <C> <C> <C>
Office: London
Address: One Cabot Square Attention: (1) Co-Heads of Global Trading;
London E14 4QJ (2) Managing Director -
England Operations Department;
(3) Director - Legal Department
Telex No.: 264521 Answerback: CSFINP G
</TABLE>
(For all purposes.)
(2) For the purpose of facsimile notices or communications under this
Agreement (other than a notice or communication under Section 5 or 6):-
Facsimile No.: 0171 888 2686
Attention: Director - Legal Department
Telephone number for oral confirmation of receipt of facsimile in
legible form: 0171 888 2028 Designated responsible employee for the
purposes of Section 12(a)(iii): Senior Legal Secretary
(ii) Address for notices or communications to Party B:-
<TABLE>
<S> <C> <C> <C>
Office:
Address: Lam Research Corporation Attention: Craig Garber
4650 Cushing Parkway
Fremont, California
94538-6470
Telephone No.: (i) (510) 659-0200 Facsimile No.: (510) 572-1586
(ii) (510) 572-1875
</TABLE>
(For all purposes.)
(b) PROCESS AGENT. For the purpose of Section 13(c):-
Party A appoints as its Process Agent:- CSFP Capital, Inc., Eleven Madison
Avenue, New York, NY 10010 (Attention: Director, Legal and Compliance
Department)
(c) OFFICES. The provisions of Section 10(a) will apply to this Agreement.
5
<PAGE> 24
(d) MULTIBRANCH PARTY. For the purpose of Section 10(c):-
Party A is a Multibranch Party and may act through its London Office as
specified in Paragraph (a) above and through its Tokyo Office specified in
Exhibit 1 attached hereto.
Party B is not a Multibranch Party.
(e) CALCULATION AGENT. The Calculation Agent is Party A unless otherwise agreed
in a Confirmation in relation to the relevant Transaction.
(f) CREDIT SUPPORT DOCUMENT. Details of any Credit Support Document: Not
applicable.
(g) CREDIT SUPPORT PROVIDER.
Credit Support Provider means in relation to Party A: Not applicable.
Credit Support Provider means in relation to Party B: Not applicable.
(h) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of New York without reference to choice of
law doctrine.
(i) NETTING OF PAYMENTS. Section 2(c)(ii) of this Agreement will not apply to
any Transactions from the date of this Agreement.
(j) AFFILIATE. Affiliate will have the meaning specified in Section 14.
6
<PAGE> 25
PART 5
OTHER PROVISIONS
(a) DEFINITIONS. Unless otherwise specified in a Confirmation or this Agreement,
this Agreement and each Transaction between the parties are subject to the 1991
ISDA Definitions as published by the International Swap Dealers Association,
Inc. (the "Definitions"), and will be governed in all relevant respects by the
provisions set forth in the Definitions, without regard to any amendment to the
Definitions subsequent to the date hereof. The provisions of the Definitions are
incorporated by reference in and shall be deemed a part of this Agreement,
except that references in the Definitions to a "Swap Transaction" shall be
deemed references to a "Transaction" for purposes of this Agreement. In the
event of any inconsistency between the provisions of this Agreement and the
Definitions, this Agreement will prevail.
(b) CONFIRMATIONS. Each Confirmation shall be substantially in the form of one
of the Exhibits to the Definitions or in such other form as the parties may
agree.
(c) INDEPENDENT RELIANCE. Except as provided in Section 3 of this Agreement,
Party A and Party B each represents to the other that it is entering into this
Agreement and will enter into each Transaction in reliance upon such tax,
accounting, regulatory, legal, and financial advice as it deems necessary and
not upon any view expressed by the other.
(d) CHANGE OF ACCOUNT. Section 2(b) of this Agreement is hereby amended by the
addition of the following after the word "delivery" in the first line thereof:-
"to another account in the same legal and tax jurisdiction as the
original account"
(e) ESCROW PAYMENTS. If (whether by reason of the time difference between the
cities in which payments are to be made or otherwise) it is not possible for
simultaneous payments to be made on any date on which both parties are required
to make payments hereunder, either party may at its option and in its sole
discretion notify the other party that payments on that date are to be made in
escrow. In this case deposit of the payment due earlier on that date shall be
made by 2.00 p.m. (local time at the place for the earlier payment) on that date
with an escrow agent selected by the notifying party, accompanied by irrevocable
payment instructions (i) to release the deposited payment to the intended
recipient upon receipt by the escrow agent of the required deposit of the
corresponding payment from the other party on the same date accompanied by
irrevocable payment instructions to the same effect or (ii) if the required
deposit of the corresponding payment is not made on that same date, to return
the payment deposited to the party that paid it into escrow. The party that
elects to have payments made in escrow shall pay all costs of the escrow
arrangements.
(f) SET-OFF. Without affecting the provisions of this Agreement requiring the
calculation of certain net payment amounts, all payments under this Agreement
will be made without set-off or counterclaim; provided, however, that upon the
designation of any Early Termination Date, in addition to and not in limitation
of any other right or remedy (including any right to set-off, counterclaim, or
otherwise withhold payment) under applicable law:
the Non-defaulting Party or the party that is not the Affected Party
(in either case, "X") may, without prior notice to any person, set off
any sum or obligation (under this Agreement, whether matured or
unmatured and irrespective of the currency, place of payment or booking
office of the sum or obligation) owed by the Defaulting Party or
Affected Party (in either case, "Y") to X or to any Affiliate of X,
against any sum or obligation (under this Agreement, whether matured or
unmatured and irrespective of the currency, place of payment or booking
office of the sum or obligation) owed by X or any Affiliate of X to Y,
and, for this purpose, may convert one currency into another. If any
sum or obligation is unascertained, X may in good faith estimate that
sum or obligation and set off in respect of that estimate, subject to X
or Y, as the case may be, accounting to the other party when such sum
or obligation is ascertained.
Nothing in this Agreement shall be effective or deemed to create any charge
under English law.
7
<PAGE> 26
(g) NEGATIVE INTEREST RATES. Party A and Party B agree that:
(i) if, with respect to a Calculation Period for a Transaction, a party
("X") is obligated to pay a Floating Amount that is a negative number
(either by reason of a negative Floating Rate or the subtraction of a
Spread from the Floating Rate), the Floating Amount with respect to X
for that Calculation Period will be deemed to be zero, and the other
party ("Y") will pay to X the absolute value of the negative Floating
Amount, in addition to any amounts otherwise owed by Y to X, on the
Payment Date such Floating Amount would have been payable if it had
been a positive number. Any amounts paid by Y to X pursuant to this
provision will be paid to such account as X may designate (unless Y
gives timely notice of a reasonable objection to such designation) in
the currency in which that Floating Amount would have been paid if it
had been a positive number (and without regard to the currency in which
Y is otherwise obligated to make payments).
(ii) if with respect to one or more Compounding Periods for a Transaction
for which "Compounding" or "Flat Compounding" is specified to be
applicable, the Compounding Period Amount, the Basic Compounding Period
Amount or the Additional Compounding Period Amount is a negative number
(either by reason of a negative Floating Rate or by the subtraction of
a Spread from the Floating Rate), then the Floating Amount for the
Calculation Period in which that Compounding Period or those
Compounding Periods occur will be either the sum of all the Compounding
Period Amounts, or the sum of all Basic Compounding Period Amounts and
all Additional Compounding Period Amounts in that Calculation Period
(whether positive or negative). If such sum is a negative number,
subparagraph (i) of this provision shall apply in respect of such
Floating Amount.
(h) WAIVER OF RIGHT TO TRIAL BY JURY. Each party waives, to the fullest extent
permitted by applicable law, any right it may have to a trial by jury in respect
of any suit, action or proceeding relating to this Agreement or any Credit
Support Document. Each party (i) certifies that no representative, agent or
attorney of the other party or any Credit Support Provider has represented,
expressly or otherwise, that such other party would not, in the event of such a
suit action or proceeding, seek to enforce the foregoing waiver and (ii)
acknowledges that it and the other party have been induced to enter into this
Agreement and provide for any Credit Support Document, as applicable, by, among
other things, the mutual waivers and certifications in this Section.
(i) ADDITIONAL AGREEMENT. Section 4 of the Agreement is hereby amended in
respect of Party A and Party B by the addition of the following:-
"(f) Upon any amendment to the U.S. Dollar amount referenced under
Section 6.01(e) of the Credit Agreement dated as of April 13, 1998
between Party B, ABN Amro Bank, N.V., San Francisco International
Branch, as agent for the Lenders and the Lenders thereto (which, as of
the date of execution hereof consist of Deutsche Bank A.G., New York
Branch, Bank of America National Trust and Savings Association, The
Industrial Bank of Japan, BankBoston, N.A. and Union Bank of
California, N.A.) (the "Credit Agreement"), where such an amendment
shall be an increase to the U.S. Dollar amount referenced thereto, (i)
Party B shall notify Party A (Attention:- Director, Credit Risk
Management, Credit Suisse First Boston, Eleven Madison Avenue, New
York, NY 10010) of any such amendment together with such documentary
evidence reasonably requested by Party A to illustrate such an
amendment; and (ii) Party A and Party B shall enter into good faith
negotiations to amend this Agreement such that the Threshold Amount as
referenced under Part 1(c) of the Schedule to this Agreement shall be
amended to reflect the new U.S. Dollar amount referenced under Section
6.01(e) of the Credit Agreement, provided, however, that any such
amendment to the Threshold Amount hereunder shall not exceed any other
threshold amount applicable to Party B for cross default or cross
acceleration purposes, howsoever described, in any of its other
third-party agreements."
8
<PAGE> 27
EXHIBIT 1
(1) Address for notices or communications to Party A's Tokyo Office (other
than by facsimile):-
<TABLE>
<S> <C> <C> <C>
Address: JT Mori Building Attention: (1) Head of Operations
Shiroyama Hills (2) Head of Legal Department
4-3-1 Toranomon
Minato - ku, Tokyo 105-6027
Japan
Telex: J28559 Answerback: FCSFBTKB
</TABLE>
(only with respect to Transactions through that Office.)
(2) For the purpose of facsimile notices or communications under this Agreement
to Party A's Tokyo Office (other than a notice or communication under Section 5
or 6):-
Facsimile No.: (03) 5403 4100
Attention: Head of Legal Department
Telephone number for oral confirmation of receipt of facsimile in legible form:
(03) 5403 4106 Designated responsible employee for the purposes of Section
12(a)(iii): Senior Master Agreement Negotiator
With a copy to Party A's London Office.
9
<PAGE> 28
COLLATERAL APPENDIX IN RESPECT OF THE CONFIRMATION
OF THE TRANSACTION BETWEEN
CREDIT SUISSE FINANCIAL PRODUCTS
AND
LAM RESEARCH CORPORATION
(REF: 5579880)
This Appendix constitutes a security agreement under Articles 8 and 9 of the
Uniform Commercial Code of the State of New York (the "UCC") with respect to any
Collateral.
1. DEFINITIONS:
1.1 In this Appendix, the following expressions have the following
meanings:
"BANKING DAY" means any day on which commercial banks are open for
business (including dealings in foreign exchange and foreign currency
deposits) in (a) London and New York, and (b) in the case of a Transfer
of Permitted Collateral (i) the location of the account into which such
Transfer is to be made, and (ii) either, in the case of a Transfer of
Cash, the principal financial centre of the currency of such Cash or,
in the case of a Transfer of other Permitted Collateral, the location
of the account out of which such Transfer shall be made and, if
different, the place where the Transfer will be registered (if
applicable);
"CASH" means US Dollars;
"CASH COLLATERAL" means Collateral comprising Cash;
"COLLATERAL" means all the Permitted Collateral Transferred to and held
by or for the Secured Party pursuant to this Appendix together with all
proceeds, distributions, substitutions for and additions to the
foregoing in accordance with this Appendix and which has not been
retransferred to the Pledgor;
"PERMITTED COLLATERAL" means collectively Cash Collateral, US
Government Obligations and such other assets as may from time to time
be acceptable to the Secured Party for the purposes of this Appendix;
"PLEDGOR" means Party B;
"QUASI AGENCY OBLIGATIONS" means the negotiable debt obligations of the
US Government National Mortgage Association, the US Federal National
Mortgage Association, the US Federal Home Loan Mortgage Corporation,
the US Student Loan Marketing Association or a US Federal Home Loan
Bank;
"RELEVANT PERCENTAGE" means, on any date, the percentage appearing
below opposite the relevant Permitted Collateral:
<TABLE>
<CAPTION>
Type of Permitted Collateral Relevant Percentage
---------------------------- -------------------
<S> <C>
Cash Collateral 100%
US Government Obligations:
with a Residual Maturity of less than one year 100%
with a Residual Maturity equal to or greater than 1 year but less than 5 years 97%
with a Residual Maturity equal to or greater than 5 years but less than 10 years 95%
Other Permitted Collateral (excluding such percentage as shall from time to time be
US Dollars) specified by the Valuation Agent;
</TABLE>
<PAGE> 29
"REQUIRED AMOUNT" means, on any date, an amount expressed in US
Dollars, agreed upon (orally or in writing) by the Pledgor and the
Secured Party on such date or, if the Pledgor and the Secured Party are
unable promptly to agree upon an amount on such date, the amount (if
any) determined by the Valuation Agent, which would be payable by the
Pledgor to the Secured Party under Section 6(e)(ii)(1) of the Agreement
if an Early Termination Date were to occur in respect of all
outstanding Transactions on such date as a result of a Termination
Event on the basis that the Secured Party is not the Affected Party and
provided that Market Quotation will be determined by the Valuation
Agent on behalf of the Secured Party using its estimates at mid-market
of the amounts that would be paid for Replacement Transactions (as that
term is defined in the definition of Market Quotation), and provided
that the Required Amount shall be deemed to be zero whenever the
calculation of such amount yields a number less than zero;
"RESIDUAL MATURITY" means, on any date, in respect of any Permitted
Collateral comprising securities, the residual maturity of such
securities as of such date;
"SECURED PARTY" means Party A;
"TRANSFER" OR "TRANSFERRED" means the transfer by one party to the
other party (or its account) of Permitted Collateral:
(a) in the case of Cash, by wire transfer into one or more bank
accounts specified by the recipient;
(b) in the case of Permitted Collateral that cannot be delivered by
book entry, by delivery in appropriate physical form for
transfer and accompanied by duly executed instruments of
transfer in blank and such other documentation as the recipient
of such transfer may at any time reasonably request; or
(c) in the case of Permitted Collateral (other than Cash) that can
be delivered by book entry, by giving written instructions to
a Federal Reserve Bank, or the Euroclear or CEDEL clearing
systems, or any other depositary institution or entity agreed
between the parties, together with a written copy thereof to
the recipient of such Permitted Collateral, which if complied
with would result in a legally effective transfer of the
relevant interest to such recipient; or
(d) by any other method mutually acceptable to the parties;
As used herein, "Transfer" is intended to have the same meaning as when
used in UCC Section 8-313 or, where applicable, in any federal
regulation governing transfers of Permitted Collateral;
"US DOLLARS" AND "US$" means the lawful currency of the United States of
America;
"US GOVERNMENT OBLIGATIONS" means the negotiable debt obligations of
the United States of America issued by the US Treasury Department or
any other agency thereof, or negotiable debt obligations which are
fully guaranteed or guaranteed as to principal and interest by the
United States of America, provided that such obligations shall have a
Residual Maturity as of the date of their Transfer to the Secured Party
of less than ten (10) years, and, for the avoidance of doubt, Quasi
Agency Obligations shall not constitute US Government Obligations;
"VALUATION AGENT" means Party A; and
"VALUE" means on any date:
(a) with respect to US Dollars, the amount thereof;
<PAGE> 30
(b) with respect to any US Government Obligations, the bid price
for such US Government Obligations, obtained by the Valuation
Agent and expressed in US Dollars, multiplied by the
applicable Relevant Percentage; and
(c) with respect to any other Permitted Collateral, the fair
market value thereof (expressed in US Dollars) on such date as
determined in any reasonable manner by the Valuation Agent
multiplied by the applicable Relevant Percentage.
1.2 References to Paragraphs are to Paragraphs of this Appendix.
2. GRANT OF SECURITY INTEREST:
2.1 As continuing security for the payment and discharge of all its
obligations under this Transaction and subject to Paragraph 2.2, the
Pledgor, as sole beneficial owner hereby pledges and grants to the
Secured Party a first priority security interest in, lien on, and right
of set-off against, the Collateral and agrees to do all acts and
execute and deliver all documents necessary to ensure that the
Collateral remains at all times subject to the pledge and security
interest referred to in this Paragraph 2.
2.2 Although the parties intend that the Pledgor shall have no continuing
right, title or interest in or to Cash Collateral, in the event that
the Pledgor is deemed to have any right, title or interest therein, the
foregoing Paragraph 2.1 shall apply to such Cash Collateral.
2.3 The rights of the Secured Party with respect to any Cash Collateral
Transferred hereunder shall include, in addition to and without
limiting any other rights provided for in this Appendix, the right on
any terms to use, commingle, sell, pledge, repledge, hypothecate,
assign, or otherwise dispose of such Collateral, provided that no such
transaction shall relieve the Secured Party of its obligations to
return such Collateral pursuant to this Appendix.
2.4 Notwithstanding the foregoing, and pursuant to Paragraph 11(a) hereof,
the Secured Party agrees that it shall not foreclose upon any
Collateral until two Local Business Days after having delivered written
notice to the Pledgor of its intention to exercise such a right under
Paragraph 11(a).
2.5 The Secured Party shall hold all Collateral (other than Cash
Collateral) in a segregated account which identifies the Pledgor as the
owner thereof (subject to the Secured Party's security interest
therein) and the Secured Party shall take all action necessary to
ensure no creditor of the Secured Party obtains any interest whatsoever
therein.
2.6 Any interest or investment proceeds of any Collateral (except as
provided in Paragraph 6.1 hereof) shall be for the account of the
Pledgor and shall accrue to the benefit and in the name of the Pledgor.
2.7 Collateral shall at all times remain the property of the Pledgor,
subject only to the extent of the interest, rights and remedies hereof
of the Secured Party as the pledgee and/or secured party hereof.
3. CONDITIONS PRECEDENT:
Any obligation on the part of the Secured Party to make a Transfer
pursuant to this Appendix is subject to the following conditions
precedent:
no Event of Default, Termination Event and/or any event or condition
that with the giving of notice or passage of time, or both, would
constitute such an Event of Default or Termination Event, has occurred
and is continuing as of the date for such Transfer with the Pledgor as
the Defaulting Party or the Affected Party (as the case may be).
<PAGE> 31
4. DELIVERY OF COLLATERAL:
(a) If, on the date at the beginning of each calendar quarter, the
Required Amount exceeds the Value of the Collateral held by the Secured
Party on such a date, the Pledgor shall, if requested by the Secured
Party, Transfer to the Secured Party Permitted Collateral having a
Value equal to such excess (rounded upwards to the nearest integral
multiple of US$250,000) within two (2) Banking Days of such written
request.
(b) If, on any date during each calendar quarter, the price per share of
the common stock of the Pledgor, as reasonably determined by the
Valuation Agent with reference to the NASDAQ closing price on such a
date, falls by twenty-five (25) percent or more below the price per
share of the common stock of the Pledgor as of the Starting Date, then
if so requested by the Secured Party and within two (2) Business Day of
such a written request, the Pledgor shall Transfer to the Secured Party
Permitted Collateral having a Value equal to the Required Amount less
the Value of the Collateral then held by the Secured Party, rounded
upwards to the nearest integral multiple of US$250,000.
For the purpose of this Section 4(b) the "Starting Date" shall be
defined as the date at the beginning of each calendar quarter and if
the Pledgor Transfers Permitted Collateral to the Secured Party under
this Section 4(b) during such a calendar quarter, then the new Starting
Date shall be the date of the latest such Transfer under this Section
4(b).
5. RETURN OF COLLATERAL:
5.1 Where, on the date at the beginning of each calendar quarter, the Value
of Collateral held by the Secured Party exceeds the Required Amount on
such a date, the Secured Party shall, if requested by the Pledgor and
subject to Paragraph 3, Transfer to the Pledgor Collateral having a
Value equal to such excess rounded downwards to the nearest integral
multiple of US$250,000 within two (2) Banking Days of such request.
5.2 The Secured Party may in lieu of returning to the Pledgor any
Collateral comprising securities (as such term is defined in the UCC)
return securities which are fungible (as such term is used in the UCC)
therewith in satisfaction of its obligations under this Paragraph 5.
6. INTEREST ON CASH COLLATERAL:
6.1 Cash Collateral shall accrue interest for the benefit of the Pledgor at
a rate equal to the overnight rate for deposits in US Dollars as
displayed on Telerate page 118 provided that if, for any reason,
Telerate Page 118 shall be unavailable interest shall accrue at such
rate as and be compounded on such days as the Secured Party shall
reasonably determine. Such interest will be compounded on each New York
Business Day and, subject to Paragraph 3, be paid to the Pledgor on any
Local Business Day and shall accrue from the date that the deposit of
such Cash Collateral is confirmed to or to the order of the Secured
Party provided that such interest shall only be paid to the Pledgor to
the extent that such interest when added to the Value of the Collateral
held by the Secured Party, as of the date of such payment, exceeds the
Required Amount in respect of the Pledgor on such date and any such
interest not paid to the Pledgor shall be an accretion to the
Collateral held by the Secured Party.
6.2 Any interest or investment proceeds on any Collateral (other than Cash
Collateral) shall accrue for the benefit of the Pledgor and, subject to
Paragraph 3, be paid to the Pledgor on any Local Business Day, provided
that such interest or investment proceeds shall only be paid to the
Pledgor to the extent that such interest or investment proceeds, when
added to the Value of the Collateral held by the Secured Party, as of
the date of such payment, exceeds the Required Amount in respect of the
Pledgor on such date and any such interest or investment proceeds not
paid to the Pledgor shall be an accretion to the Collateral held by the
Secured Party.
<PAGE> 32
7. SUBSTITUTION:
The Pledgor may, with the prior consent of the Secured Party,
substitute existing Collateral. In the event of the Secured Party
granting its consent thereto the Pledgor shall pay all the costs
involved in effecting such substitution and, subject to Paragraph 3,
the Secured Party shall Transfer to the Pledgor the existing Collateral
which is the subject of the substitution as soon as practicable after
the Secured Party shall be satisfied that it has received Permitted
Collateral in replacement therefor having a Value, on the date of
Transfer, not less than that of the Collateral being substituted.
8. RESPONSIBILITY FOR AND CARE OF COLLATERAL:
8.1 Subject to Paragraph 11, all rights and powers conferred on or
exercisable by the registered holder, bearer or legal owner of the
Collateral (excluding Cash Collateral) shall be exercisable by the
Pledgor or as the Pledgor shall direct and the Pledgor shall remain
liable to observe and perform all conditions and obligations in respect
of the Collateral (excluding Cash Collateral). The Secured Party shall,
upon its receiving express and unequivocal instructions from the
Pledgor, take all action necessary on its part to ensure that all such
rights and powers are exercised in accordance with the Pledgor's
instructions, provided that the Secured Party shall not be obliged to
act in accordance with the Pledgor's instructions where: (a) such
instructions involve any expense, and such expense has not been funded
in advance by the Pledgor; or (b) to act in accordance with such
instructions may reduce or in any way prejudice the value of such
Collateral, and provided further that the Secured Party shall otherwise
have no duty with respect to Collateral including, without limitation,
any duty to collect any proceeds or enforce or preserve any rights
pertaining thereto.
8.2 The Pledgor and the Secured Party hereby undertake not to exercise such
rights it may have retained in respect of the Collateral in such a way
as to reduce or prejudice in any way the value of the Collateral.
8.3 The parties acknowledge and agree that upon the Transfer of Collateral
to the Secured Party, or to an agent or custodian to receive and hold
Collateral for or on behalf of the Secured Party, such Collateral will
not necessarily be registered in the Pledgor's name.
9. REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS:
The Pledgor represents and warrants that the provisions of Section 3 of
the Agreement apply in full force and effect and, without limiting the
foregoing:
(a) it has the power to enter into the Transaction and to execute
and deliver this Confirmation and perform its obligations
hereunder (including, for the avoidance of doubt, under this
Appendix);
(b) its obligations under the Transaction (including, for the
avoidance of doubt, under this Appendix) constitute its legal,
valid and binding obligations, enforceable in accordance with
their respective terms;
(c) it has taken all necessary action to authorise such entry,
execution, delivery and performance;
(d) such entry, execution, delivery and performance do not violate
or conflict with any applicable law, any provision of its
constituent documents, any order or judgement of any court or
other agency of government applicable to it or any of its
assets or any contractual restriction binding on or affecting
it or any of its assets;
(e) it is and, subject to Paragraph 2.2, will at all times be the
sole, lawful and beneficial owner of the Collateral free from
all encumbrances and forms of security interests (except for
the charge or other security interest, howsoever described,
created hereby), and no other person has, or will at any time
have, any proprietary right or interest therein;
<PAGE> 33
(f) except for the first priority security interest (howsoever
described) in favour of the Secured Party and subject to
Paragraph 2.2, no person has, (or in the case of
after-acquired Collateral, at the time the Pledgor acquires
rights therein, will have) any right, title, claim or interest
(by way of charge, lien, mortgage, pledge, security interest
(however described) or other encumbrance, or otherwise) in,
against or to the Collateral;
(g) it will not (without the prior written consent of the Secured
Party at any time) sell or agree to sell or otherwise dispose
of, or agree to dispose of, the Collateral; and
(h) it will ensure, so far as it is able, that the Collateral is
and at all times remains free from any restrictions on
transfer.
10. EVENTS OF DEFAULT:
Notwithstanding anything to the contrary in the Agreement, the
occurrence at any time with respect to the Pledgor of any of the
following events constitutes an Event of Default with respect to it for
the purposes of the Agreement:
(a) failure by it to Transfer Permitted Collateral in accordance
with Paragraph 4, if such failure is not remedied within one
Banking Day of written notice of such failure being given to
the Pledgor;
(b) failure by it to comply with or perform any other material
provision required to be complied with or performed by it
which is contained in this Appendix if such failure is not
remedied within three Banking Days of notice of such failure
given to the Pledgor;
(c) the failing or ceasing of any material provision of this
Appendix to be in full force and effect prior to the
satisfaction by the Pledgor of all its obligations to the
Secured Party under the Agreement; or
(d) the Pledgor disaffirms, disclaims, repudiates or rejects, in
whole or in part, or challenges the validity of, any material
part of this Appendix.
11. SECURED PARTY'S RIGHTS AND REMEDIES:
Upon the occurrence and continuance of any Event of Default with
respect to the Pledgor or any Termination Event, the Secured Party may,
to the extent permitted by applicable law, exercise as to all
Collateral then held by the Secured Party the rights and remedies of a
secured party under the UCC and as otherwise provided by law and, in
addition, at its sole option and without notice to or demand upon the
Pledgor, may exercise any or all of the following remedies upon two (2)
Local Business Days written notice to the Pledgor:
(a) set off the Secured Party's obligation to repay any Cash to
the Pledgor, against any amounts owing to the Secured Party by
the Pledgor under this Transaction; and/or
(b) liquidate and apply all or any part of any Collateral other
than Cash in any manner deemed commercially reasonable by the
Secured Party, with the proceeds of such liquidation
constituting Cash Collateral hereunder; and/or
(c) set off the Value of such Collateral against any amounts owing
to the Secured Party by the Pledgor.
12. DELIVERY DEFAULT:
If the Pledgor fails to make, when due, any Transfer of Collateral, it
shall pay to the Secured Party, to the extent permitted under
applicable law, an amount equal to interest at the Default Rate (as
that
<PAGE> 34
expression is defined in the Agreement) multiplied by the Value of
the Collateral which was required to be Transferred, from (and
including) the date that such Collateral was required to be Transferred
to (but excluding) the date of the Transfer. This interest will be
calculated on a daily rate by reference to the actual number of days
elapsed.
13. SET-OFF:
Upon the designation or deemed designation of any Early Termination
Date, in addition to and not in limitation of any other right or remedy
(including any right to set-off, counterclaim, or otherwise withhold
payment) under applicable law, the Non-defaulting Party or the party
that is not the Affected Party (in either case, "X") may, without prior
notice to any person, set off any sum or obligation under the Agreement
(including, without limitation this Appendix), whether matured or
unmatured and irrespective of the currency, place of payment or booking
office of the sum or obligation) owed by the Defaulting Party or
Affected Party (in either case, "Y") to X or to any Affiliate of X,
against any sum or obligation under the Agreement (including, without
limitation this Appendix), whether matured or unmatured and
irrespective of the currency, place of payment or booking office of the
sum or obligation) owed by X or any Affiliate of X to Y, and, for this
purpose, may convert one currency into another. If any sum or
obligation is unascertained, X may in good faith estimate that sum or
obligation and set off in respect of that estimate, subject to X or Y,
as the case may be, accounting to the other party when such sum or
obligation is ascertained.
14. SECURITY AND PERFORMANCE ASSURANCE:
For the avoidance of doubt the parties agree that:
(a) Cash Collateral, is not and shall not be deemed to be "client
money" for the purposes of the Financial Services (Client
Money) Regulations 1991 and the Secured Party shall not hold
Cash Collateral as "client money" as contemplated by the
Regulations; and
(b) Collateral constitutes security and performance assurance
without which the Secured Party would not otherwise enter into
and continue any and all Transactions.
15. NOTICES:
Any notice or demand to be given to or made by the Secured Party or the
Pledgor pursuant to this Appendix shall be made in writing as specified
in Section 12 of the Agreement save that such notice or demand:
(a) if given to the Secured Party, shall be given to or made in
accordance with the following details:-
Address: One Cabot Square, London E14 4QJ
Telephone: 0171-888 2502
Facsimile: 0171-888 3866
Telex: 264521 Answerback: CSFINPG
Swift: CSFP GB 2L
Attention: CSFP Operations Settlements
or in accordance with such other details as the Secured Party
may from time to time notify (in accordance with the terms of
this Paragraph 16) to the Pledgor; and
(b) shall be deemed to be effective at the time such written
notice is actually received unless such notice is received on
a day which is not a Banking Day, or after 4.00 p.m. London
time on any Banking Day, in which event such notice shall be
deemed to be effective at 9.00 a.m.
London time on the next succeeding Banking Day.
<PAGE> 35
16. DOCUMENTATION AND INCONSISTENCY:
The parties agree to execute a collateral agreement (or such other form
of documentation as Party A deems appropriate) in the form provided by
Party A, subject to good faith negotiation, as an appendix to the
Agreement
<PAGE> 36
[CREDIT SUISSE LETTERHEAD]
PRELIMINARY CONFIRMATION
14 June 1999
Lam Research Corporation
4650 Cushing Parkway
Fremont, CA 94538-6470
Attn.: Steve Debenham
Fax.: (510) 572-1628
Credit Suisse Financial Products
One Cabot Square
London E14 4QJ
England
- ------------------------------------------------------------------------------
Dear Sirs,
The purpose of this letter agreement (this "Confirmation") is to confirm the
terms and conditions of the Transaction entered into between Party A and Party B
through the Agent on the Trade Date specified below (the "Transaction"). This
Confirmation constitutes a "Confirmation", as referred to in the Agreement
specified below.
1. The definitions and provisions contained in the 1996 ISDA Equity
Derivatives Definitions (the "1996 Definitions"), as published by the
International Swaps and Derivatives Association, Inc., are incorporated
into this Confirmation. In the event of any inconsistency between those
definitions and provisions and this Confirmation, this Confirmation will
govern.
If Party A and Party B are parties to the 1992 ISDA Master Agreement, (the
"Agreement"), this Confirmation supplements, forms a part of, and is
subject to such Agreement. If Party A and Party B are not yet parties to
the Agreement, Party A and Party B agree to use their best efforts promptly
to negotiate and, in the event of execution, to deliver the Agreement,
including Party A's standard form of Schedule and Addendum relating to
Physical Delivery of Shares attached thereto and made a part thereof, with
such modifications as Party A and Party B shall in good faith agree. Upon
execution and delivery by Party A and Party B of the Agreement, this
Confirmation shall supplement, form a part of, and be subject to such
Agreement. Until Party A and Party B execute and deliver the Agreement,
this Confirmation, including the Collateral Appendix hereto (the
"Collateral Appendix") (together with all other Confirmations of
Transactions previously entered into between Party A and Party B,
notwithstanding anything to the contrary therein) shall supplement, form a
part of, and be subject to the 1992 ISDA Master Agreement as if, on the
Trade Date of the first such Transaction between them, Party A and Party B
had executed that agreement (without any Schedule thereto) and had
specified that the Automatic Early Termination provisions contained in
Section 6(a) of such agreement would apply.
The Agreement and each Confirmation thereunder will be governed by and
construed in accordance with the laws of the State of New York without
reference to choice of law doctrine and each party hereby submits to the
Courts of the State of New York or the federal courts located within the
State of New York.
<PAGE> 37
[CREDIT SUISSE LETTERHEAD]
PRELIMINARY CONFIRMATION
Party A and Party B each represents to the other that it has entered into
this Transaction in reliance upon such tax, accounting, regulatory, legal,
and financial advice as it deems necessary and not upon any view expressed
by the other.
IN THIS CONFIRMATION, "PARTY A" MEANS CREDIT SUISSE FINANCIAL PRODUCTS AND
"PARTY B" MEANS LAM RESEARCH CORPORATION AND "AGENT" MEANS CSFP CAPITAL,
INC. SOLELY IN ITS CAPACITY AS AGENT FOR PARTY A AND PARTY B.
2. The terms of the particular Transaction to which this Confirmation relates
are as follows:
General Terms:
<TABLE>
<S> <C>
Trade Date:
Options Style: European
Options Types: (I) Party A purchase of a Put Option, and
(II) Party A sale of a Call Option ("Call Option I") and
(III) Party A purchase of a
Call Option ("Call Option II").
Put Seller/Call Option I
Buyer/Call Option II Seller: Party B
Put Buyer/Call Option I
Seller/Call Option II Buyer: Party A
Shares: Common Stock of Lam Research Corporation
(the "Issuer") par value $0.001
(Bloomberg Reference LRCX; ISIN US5128071082)
Number of Options: In the case of the Put Option,
__________ Options and in the case of each of
Call Option I and Call Option II,
__________ Options.
Option Entitlement: One Share per Option
Put Option Strike Price:
Call Option I Strike Price:
Call Option II Strike Price
Net Premium: Zero
Exchange: NASDAQ National Market System
Related Exchange(s): The exchanges or quotation systems, if any, on
which options or futures
contracts on the Shares are traded or quoted.
</TABLE>
-2-
<PAGE> 38
[CREDIT SUISSE LETTERHEAD]
PRELIMINARY CONFIRMATION
<TABLE>
<S> <C>
Clearance System: The Depository Trust Company.
Calculation Agent: Party A, whose determinations and calculations
shall be binding in the absence
of manifest error.
If, in respect of any information published by a third party
(the "Third Party Source"), the Calculation Agent has relied
in good faith upon such information in making any
determinations or calculations herein and that information
is subsequently corrected and the correction is published by
the Third Party Source, or any successor to such Third Party
Source, within thirty (30) days of the original publication
the Calculation Agent shall promptly notify the parties
hereto of (i) that correction and (ii) the amount that is
payable as a result of that correction. The party that
originally either received or retained such amount shall,
not later than three (3) Currency Business Days after the
effectiveness of such notice, pay to the other party the
amount that is payable as a result of that correction
together with the amount which represents the amount equal
to the cost (without proof or evidence of any actual cost)
to the other party of funding that amount for the period
from, and including, the day on which payment originally was
(or was not) made to, but excluding, the day of payment of
the refund or payment resulting from that correction.
Neither the Calculation Agent nor the parties hereto shall be
liable for any foreseeable, consequential, incidental or other
damages or any other additional costs suffered by either party by
virtue of a good faith error or omission made by the Calculation
Agent in reliance on information provided by the Third Party
Source or as a result of a correction by a Third Party Source, or
any successor thereto.
Procedure for Exercise:
Expiration Time: The Valuation Time.
Put Option
Expiration Date: 3 June 2002.
Call Option I
Expiration Date: 3 September 2002.
Call Option II
Expiration Date: 3 September 2002.
Automatic Exercise: Applicable.
Reference Price: The price per Share at the Valuation Time on the Valuation Date; provided,
however, that if the Method of Settlement
</TABLE>
-3-
<PAGE> 39
[CREDIT SUISSE LETTERHEAD]
PRELIMINARY CONFIRMATION
<TABLE>
<S> <C>
has been selected by Party B to be either Net Share
Settlement or Net Cash Settlement, in accordance with the
terms of the Method of Settlement Options provision set out
in Appendix A, then the Reference Price shall be the
Termination Price per Share (as such term is defined in
Appendix A hereto).
Valuation:
Valuation Time: The close of regular trading on the Exchange.
Valuation Date: In respect of each Option, the relevant Expiration Date.
Settlement Terms:
Settlement Date: The Clearance System Business Day that is three (3) Exchange Business Days after
the Exercise Date; provided, however, that if the Method of
Settlement has been selected by Party B to be Net Cash
Settlement, in accordance with the terms of the Method of
Settlement Options provision set out in Appendix A, then the
Settlement Date shall be the Currency Business Day that is
three (3) Exchange Business Days after the Exercise Date.
Put Option: Physical Settlement; subject to the terms of the Method of Settlement Options
provision set out in Appendix A hereto.
Call Option I: Physical Settlement; subject to the terms of the Method of Settlement Options
provision set out in Appendix A hereto.
Call Option II: Physical Settlement; subject to the terms of the Method of Settlement Options
provision set out in Appendix A hereto.
provided, however, that in respect of Call
Option I and Call Option II, if the
Reference Price is greater than the Call
Option II Strike Price, then (A) any
exercise of Call Option I shall be deemed
to be an automatic exercise of Call Option
II of an equal number of Options with
respect to an equal number of shares and
(B) in order to accomplish settlement
efficiency, both parties will be deemed to
have delivered an equal number of Shares
and in lieu of any payments by Party A of
the Call Option II Strike Price and by
Party B of the Call Option I Strike Price,
Party A will make a single payment to Party
B hereunder in an amount equal to the
product of (i) the number of Options
exercised and (ii) the result of the Call
Option II Strike Price, minus the Call
Option I Strike Price.
Adjustments:
Method of Adjustment: Calculation Agent Adjustment
</TABLE>
-4-
<PAGE> 40
[CREDIT SUISSE LETTERHEAD]
PRELIMINARY CONFIRMATION
<TABLE>
<S> <C>
Extraordinary Events:
Consequences of Merger Events:
(a) Share-for-Share: Alternative Obligation
(b) Share-for-Other: Cancellation and Payment
(c) Share-for-Combined: Cancellation and Payment
Nationalization
or Insolvency: Cancellation and Payment
</TABLE>
3. Early Termination Option:
3.1 In addition to any other termination rights that Party B may have under the
Agreement, Party B may direct, at its sole option and through the Agent,
that Party A provide to it a quotation representing the amount in U.S.
Dollars (the "Early Termination Amount") that the Calculation Agent
determines that one party should pay to the other in order to terminate
this Transaction (in whole but not in part) on a date selected by Party B
which is prior to the originally scheduled Termination Date (the "Early
Termination Date"). The Early Termination date shall not be less than ten
(10) Business Days after the date of such request if the Method of
Settlement is either Net Cash Settlement or Net Share Settlement and shall
be not less than three (3) Business Days after the date of such request if
the Method of Settlement is Gross Physical Settlement (as such terms are
described in the Termination Settlement Payment Options provisions set out
in Appendix A hereto).
3.2 Upon receipt of the quotation described in paragraph 3.1 above, Party B may
elect, by giving on that day notice to Party A, through the Agent, that
this Transaction be terminated on the Early Termination Date and on the
date that is two (2) Business Days after the Early Termination Date the
party identified by the calculation Agent shall discharge its obligation to
the other party in respect of the Early Termination Amount in accordance
with the appropriate Method of Settlement in accordance with the terms of
the Method of Settlement Options provision set out in Appendix A hereto and
as if the Early Termination Amount were the Net Termination Amount and, for
the purposes of determining the Termination Price per Share, as if the
Early Termination Date were the Expiration Date in respect of each of the
Put Option and Call Option I and Call Option II.
4. Additional Termination Event
For the purposes of this Transaction the following shall be an Additional
Termination Event with respect to Party B with Party B as the sole Affected
Party:-
Party B fails to maintain, as reasonably determined by Party
A, a Cash Balance of USD 75,000,000.
For the purpose of this Additional Termination Event "Cash Balance"
shall be defined as being the sum of cash and cash equivalents as
reported in Party B's last filed quarterly unaudited or annually
audited accounts and, for the avoidance of doubt, Cash Balance shall
not include restricted cash as reported in Party B's last filed
quarterly unaudited or annually audited accounts.
-5-
<PAGE> 41
[CREDIT SUISSE LETTERHEAD]
PRELIMINARY CONFIRMATION
5. Matters relating to the Agent:
(a) As a broker-dealer registered with the U.S. Securities and Exchange
Commission ("SEC"), CSFP Capital, Inc., in its capacity as Agent, will
be responsible for (i) effecting this Transaction, (ii) issuing all
required confirmations and statements to Party A and Party B, (iii)
maintaining books and records relating to this Transaction as required
by Rules 17a-3 and 17a-4 under the Securities Exchange Act of 1934
(the "Exchange Act") and (iv) unless otherwise requested by Party B,
receiving, delivering, and safeguarding Party B's funds and any
securities in connection with this Transaction, in compliance with
Rule 15c3-3 under the Exchange Act.
(b) CSFP Capital, Inc. is acting in connection with this Transaction
solely in its capacity as Agent for Party A and Party B pursuant to
instructions from Party A and Party B. CSFP Capital, Inc. shall have
no responsibility or personal liability to Party A or Party B arising
from any failure by Party A or Party B to pay or perform any
obligations hereunder, or to monitor or enforce compliance by Party A
or Party B with any obligation hereunder, including without
limitation, any obligations to maintain collateral. Each of Party A
and Party B agrees to proceed solely against the other to collect or
recover any securities or monies owing to it by the other in
connection with or as a result of this Transaction. CSFP Capital, Inc.
shall otherwise have no liability in respect of this Transaction,
except for its gross negligence or wilful misconduct in performing its
duties as Agent.
(c) Any and all notices, demands, or communications of any kind relating
to this Transaction, including without limitation, any option exercise
notice, between Party A and Party B shall be transmitted in writing
exclusively through Agent at the following address:
CSFP Capital, Inc.
Eleven Madison Avenue
New York, NY 10010
Facsimile No.: (212) 325 8175
Telephone No.: (212) 325 8678
Attention: Ricardo Harewood
(d) The date and time of the Transaction evidenced hereby will be
furnished by the Agent to Party A and Party B upon written request.
(e) The Agent will furnish to Party B upon written request a statement as
to the source and amount of any remuneration received or to be
received by the Agent in connection with the Transaction evidenced
hereby.
(f) Party A and Party B each represents and agrees (i) that this
Transaction is not unsuitable for it in the light of such party's
financial situation, investment objectives and needs and (ii) that it
is entering into this Transaction in reliance upon such tax,
accounting, regulatory, legal and financial advice as it deems
necessary and not upon any view expressed by the other or the Agent.
(g) Party A and Party B each is aware of and agrees to be bound by the
rules of the National Association of Securities Dealers, Inc. ("NASD")
applicable to option trading and is aware of and agrees not to
violate, either alone or in concert with others, the position or
exercise limits established by the NASD.
-6-
<PAGE> 42
[CREDIT SUISSE LETTERHEAD]
PRELIMINARY CONFIRMATION
6. U.S. Private Placement Representations:
As this Transaction constitutes, or may constitute, the sale by Party A to
Party B and by Party B to Party A, each through Agent, of a Security or
Securities (as defined in the United States Securities Act of 1933, as
amended (the "Securities Act")), in addition to the representations
contained in Section 3 of the Agreement, each party hereby represents to
the other, to the extent applicable, in accordance with Section 3 of the
Agreement, as follows:
(a) Such party is acquiring such Securities through Agent for its own
account as principal, for investment purposes only, and not with a
view to, or for, resale, distribution or fractionalisation thereof, in
whole or in part, and no other person has a direct or indirect
beneficial interest in any such Securities acquired by such party B
through Agent;
(b) Such party understands that the offer and sale by the other party,
through Agent, of such Securities are intended to be exempt from
registration under the Securities Act, by virtue of Section 4(2)
thereof. In furtherance thereof, such party represents and warrants
that (i) it has the financial ability to bear the economic risk of its
investment and has adequate means of providing for its current needs
and other contingencies, (ii) it is experienced in investing in
options and similar instruments and has determined that such
securities are a suitable investment for it, and (iii) it is an
institution that qualifies as an "accredited investor", as that term
is defined in Regulation D under the Securities Act; and
(c) Such party has been given the opportunity to ask questions of, and
receive answers from, the other party through Agent concerning the
terms and conditions of such Securities and concerning the financial
condition and business operations of that other party and has been
given the opportunity to obtain such additional information necessary
in order for such party to evaluate the merits and risks of purchase
of such Securities to the extent that the other party possesses such
information or can acquire it without unreasonable effort or expense.
Such party hereby acknowledges that it understands and agrees that
disposition of any such Securities is restricted under the Agreement,
the Securities Act and state securities laws. For example, such
Securities have not been registered under the Securities Act or under
the securities laws of certain states and, therefore, cannot be
resold, pledged, assigned or otherwise disposed of unless they have
been registered under the Securities Act and under the applicable laws
of such states or an exemption from such registration is available.
7. Currency Provision:
"U.S. Dollar", "Dollar", "U.S.$", "$" and "USD" each means the lawful
currency of the United States of America.
8. Credit Support
Party A: Inapplicable
Party B: Applicable
-7-
<PAGE> 43
[CREDIT SUISSE LETTERHEAD]
PRELIMINARY CONFIRMATION
9. Account Details:
Payments to Agent: The Bank of New York
ABA#: 021 000 018
Chips ABA: 001
A/C: CSFP Capital, Inc.
A/C No: 890 - 0361 - 344
Payments to Party A: To be advised
Payments to Party B: To be advised
Deliveries to Agent: Euroclear SA
A/c No. 97699
10. Office:
Party A is acting through its London Office for the purposes of this
Transaction.
Credit Suisse Financial Products is regulated by The Securities and Futures
Authority and has entered into this transaction as principal. The time at which
the above transaction was executed will be notified to Party B (through the
Agent) on request.
-8-
<PAGE> 44
[CREDIT SUISSE LETTERHEAD]
PRELIMINARY CONFIRMATION
Please confirm that the foregoing correctly sets forth the terms of the
agreement by signing and returning this Confirmation.
Yours faithfully,
CSFP CAPITAL, INC., solely in its capacity as Agent
By: _____________________________
Name:
Title:
Confirmed as of the date first written above:
LAM RESEARCH CORPORATION
By: ________________________________
Name:
Title:
CREDIT SUISSE FINANCIAL PRODUCTS
By: _____________________________
Name:
Title:
-9-
<PAGE> 45
[CREDIT SUISSE LETTERHEAD]
PRELIMINARY CONFIRMATION
APPENDIX A
to the
CONFIRMATION
of the
TRANSACTION
between
CREDIT SUISSE FINANCIAL PRODUCTS
and
LAM RESEARCH CORPORATION
through
CSFP CAPITAL, INC., solely in its capacity as agent
(CSFP REFERENCE NO. (5579880))
1. Method of Settlement Options:
In respect of the Expiration Date in respect of each Option (whether
pursuant to an Early Termination Date or otherwise designated pursuant to
the terms hereof) Party B shall, at Party B's sole option and discretion,
elect one of the following Settlement Options (each a "Method of
Settlement") in respect of all parts of this Transaction by giving to Party
A, through the Agent, not less than thirty (30) Business Days' notice in
writing (or on such shorter notice as provided in the event of an Early
Termination Date, in accordance with the terms of the Early Termination
Option provision set out above):
(A) Gross Physical Settlement: Unless Party B has specified Net Cash
Settlement or Net Share Settlement in accordance with the terms
hereof, on the Settlement Date, the terms of the Settlement Terms
provision of this Transaction will apply.
(B) Net Cash Settlement: If Party B has specified Net Cash Settlement as
the Method of Settlement, then the Calculation Agent shall determine
the Net Termination Amount (as such term is defined below) and the
identity of the party (the "Payer Party") who owes such Net
Termination Amount to the other (the "Payee Party").
On the Cash Settlement Payment Date the Payer Party shall pay to the
Payee Party, through the Agent, an amount in U.S. Dollars equal to the
Net Termination Amount.
(C) Net Share Settlement: If Party B has specified Net Share Settlement as
the Method of Settlement, then the Calculation Agent shall determine
the Net Termination Amount (as such term is defined below) and the
identity of the party (the "Deliveror") who owes such Net Termination
Amount to the other (the "Deliveree").
On the applicable Settlement Date, the Deliveror shall deliver to the
Deliveree, through the Agent, a number of Shares equal to the quotient
of: (i) the Net Termination Amount; divided by (ii) the Termination
Price per Share (as such term is defined below), rounded down to the
nearest whole number of Shares. The Deliveror shall also pay to the
Deliveree, through the Agent, a sum in U.S. Dollars equivalent to the
cash value of any fractional number of
-10-
<PAGE> 46
[CREDIT SUISSE LETTERHEAD]
PRELIMINARY CONFIRMATION
Shares not able to be delivered in accordance with the terms of this
provision.
2. Make-whole Provision:
2.1 If the Method of Settlement selected by Party B in accordance with the
Method of Settlement Options set out above is either Net Share Settlement
or Net Cash Settlement then Party A shall provide to the Calculation Agent
and Party B information concerning a hypothetical number of Shares which
Party A reasonably believes to be representative of the number of Shares
that would be held by a recognised derivatives dealer that uses a
proprietary risk management model for option hedging that is based upon
Black-Scholes models and that is substantially similar to the model
employed by Party A in the conduct of its ordinary hedging business (the
"Hypothetical Hedge") and not later than 5:00 p.m. (New York time) on any
of the three (3) Exchange Business Days following the Settlement Date and
on which it would have sold approximately one-third of the Shares
constituting the Hypothetical Hedge, the volume-weighted average sale price
for the Shares as reported on Bloomberg, net of any fees, commissions or
expenses, as described below, (the "Average Sale Price"). On the day that
is two (2) Currency Business Days following the Resale Date Party B shall
pay to Party A, through the Agent, an amount in U.S. Dollars equal to the
product of the number of Shares constituting the Hypothetical Hedge
multiplied by the result of the Termination Price per Share less the
Average Sale Price.
2.2 In addition to the amounts described in paragraph 2.1 above, if the Method
of Settlement selected by Party B in accordance with the Method of
Settlement Options set out above is Net Share Settlement then, within the
three (3) Exchange Business Days immediately following the Settlement Date
(the third such Exchange Business Day being the "Resale Date"), the
Deliveree sells all, or any portion, of the Shares so delivered and the
aggregate proceeds of such sale(s), net of reasonable and customary fees,
commissions and expenses incurred in connection with the offer and sale of
the Shares (including, but without limitation to, the covering of any
over-allotment or short position (syndicate or otherwise)) (the "Net
Proceeds") exceed the Net Termination Amount, the Deliveree will refund in
U.S. Dollars such excess to the Deliveror, through the Agent, on the date
that is two (2) Currency Business Days following the Resale Date, and, if
any of the Shares so delivered remains unsold as of the Resale Date, such
unsold Shares.
2.3 If the Net Proceeds described in paragraph 2.2 above are less than the Net
Termination Amount the Deliveror hereby agrees to indemnify the Deliveree
to the extent of such short-fall by the payment of that short-fall amount
in U.S. Dollars on the date that is two (2) Currency Business Days
following the Resale Date and, if any of the Shares delivered remain
unsold, the Deliveree shall return to the Deliveror on that date such
unsold Shares.
2.4 The Deliveree agrees to make good faith and commercially reasonable efforts
to have sold on or before the Resale Date all of the Shares delivered.
3. Offering Method:
Any Shares to be delivered by Party B to Party A in accordance with the
terms of this Transaction:
(i) shall be delivered pursuant to an effective registration statement
filed or to be filed (a "Registered Offering") pursuant to the
Securities Act of 1933 (the "1933 Act"), subject to Party A's consent
as to the form and substance of the contemplated offering, including
any form of offering documents, which consent shall not be
unreasonably withheld; and
-11-
<PAGE> 47
[CREDIT SUISSE LETTERHEAD]
PRELIMINARY CONFIRMATION
(ii) shall comply in all material respects with the Registration Procedures
set forth in Appendix B attached hereto.
(iii) provided, however, that Party B has the right (the "Black-out
Right"), at any time following the delivery of Shares to notify Party
A that the then-current prospectus, in Party B's judgement, requires
amendment; provided, further, that in such case (x) Party B shall file
within five (5) Business Days (such fifth Business Day being the
"Refiling Date") of such notification to Party A an appropriate
amendment reasonably satisfactory to Party A; (y) that Party A shall
not use any prior prospectus pending such amendment; and (z) Party A
shall have the right to require the repurchase by Party B upon demand
by Party A of all unsold Shares delivered hereunder at the market
price per Share used to determine the Termination Price per Share,
such repurchase to take place either (a) on the Refiling Date if such
an amendment is not filed within five (5) Business Days as described
above or (b) on the Business Day which is five (5) Business Days
following the Refiling Date if an amendment is filed which is
acceptable to Party A but which cannot be used by Party A for that
period of five (5) Business Days following the Refiling Date.
4. Definitions:
For the purposes of Net Share Settlement and Net Cash Settlement as
described in this Transaction the following terms shall have the meanings
ascribed to them below:
"Net Termination Amount" means, with respect to any Settlement Date,
an amount in U.S. Dollars equal to the sum of:
(i) with respect to the Put Option, the Number of Shares to be
Delivered thereunder in respect of that Settlement Date
multiplied by the difference between the Termination Price
per Share and the Put Strike Price, but in no event less
than zero; and
(ii) with respect to Call Option I, the Number of Shares to be
Delivered thereunder in respect of that Settlement Date
multiplied by the difference between the Termination Price
per Share and the Call Option I Strike Price, but in no
event less than zero; and
(iii) with respect to Call Option II, the Number of Shares to be
Delivered thereunder in respect of that Settlement Date
multiplied by the difference between the Termination Price
per Share and the Call Option II Strike Price, but in no
event less than zero.
"Termination Price
per Share" means the arithmetic mean of the price per Share at
the Valuation Time on each of the five (5) Exchange
Business Days prior to, and including, the relevant
Expiration Date or (if applicable) the
Early Termination Date.
-12-
<PAGE> 48
[CREDIT SUISSE LETTERHEAD]
PRELIMINARY CONFIRMATION
APPENDIX B
to the
CONFIRMATION
of the
TRANSACTION
between
CREDIT SUISSE FINANCIAL PRODUCTS
and
LAM RESEARCH CORPORATION
through
CSFP CAPITAL, INC., solely in its capacity as agent
(CSFP REFERENCE NO. (5579880))
Unless otherwise agreed in writing by Party A and Party B with respect to
specific sales of Shares by the Selling Agent or specific Shares to be delivered
to the Selling Agent by Party B, the provisions of this Appendix B shall apply
to all Shares in satisfaction of a Party B Net Cash Settlement or Net Share
Settlement Delivery including the resale of the Number of Shares which were
acquired in a transaction not involving any public offering and, in the case of
Net Share Settlement, any additional Shares (collectively, the "Shares").
(a) Party B shall have available, free from pre-emptive rights, out of its
authorised but unissued capital stock, for the purpose of effecting the
payment of any Party B Net Share Settlement Delivery in Shares as provided
in the Confirmation, the full number of shares of capital stock that would
then be issuable with respect to such payment.
(b) There shall be an effective registration statement with respect to such
Shares (the "Registration Statement").
(c) Party B shall have registered or qualified such Shares under such
securities or "blue sky" laws of such States and other jurisdictions in the
United States and Puerto Rico as Party A or any underwriter shall have
reasonably requested, and shall have done any and all other acts and things
as may be reasonably necessary to be done by Party B to enable Party A or
any underwriter to consummate the disposition in such jurisdictions of the
Shares covered by the Registration Statement; provided that Party B shall
not be required to make any filing or take any action as a result of this
paragraph (c) that would required it to qualify as a foreign corporation or
file a general consent to service of process in any jurisdiction.
(d) Party B shall have caused such Shares to be registered with or approved by
such other governmental agencies or authorities in the United States as may
be reasonably necessary to be done by Party B to enable Party A or any
underwriter to consummate the disposition of such Shares.
(e) Party B shall have (i) given Party A and its underwriter(s), if any, and
their respective counsel and accountants, the opportunity to be consulted
during the preparation of all materials filed with the SEC or any other
governmental agency (the "Filed Materials") prior to the first day of such
Final Reference Share Price Pricing Period, (ii) furnished to each of them
copies of all such Filed Materials (and all documents incorporated therein
by reference) sufficiently in advance of filing to provide them with a
reasonable opportunity to review such documents and comment thereon, (iii)
given each of them such opportunities to discuss the business of Party B
with its officers and the independent public accountants who have issued a
report on its financial statement as shall be reasonably necessary, in the
opinion of Party A and such underwriter(s) or their respective counsel, to
conduct a reasonable investigation (within the meaning of the 1933 Act, as
amended) with respect to such Filed Materials, (iv) delivered to Party A
and its underwriter(s), if any, the financial statements of Party B filed
with the SEC, (v) included in such Filed Materials material, furnished to
Party B in writing, which in the reasonable judgement of Party A or its
underwriter(s), if any, subject to the consent of Party B (which shall not
be unreasonably withheld), should be included with respect to Party A,
Party A's underwriter(s) and the "Plan of Distribution", including, without
limitation, language to the effect that the holding by Party A of the
Shares is not to be construed as a recommendation by Party A of the
investment quality thereof and (vi) if requested by Party A, deleted from
such Filed Materials any reference to Party A if in the written opinion of
counsel
-13-
<PAGE> 49
[CREDIT SUISSE LETTERHEAD]
PRELIMINARY CONFIRMATION
to Party A, in form and substance to Party B, such reference to
Party A by name or otherwise is not required by the 1933 Act or any similar
Federal statute then in force.
(f) Party B shall have furnished to Party A and any underwriter, addressed to
Party A and any such underwriter and dated the first day of the Final
Reference Share Price Pricing Period, (i) an opinion of counsel for Party B
(which opinion may be from internal counsel for Party B) and (ii) a "cold
comfort" letter signed by the independent public accountants who have
issued a report on Party B's financial statements included in such
Registration Statement, covering substantially the same matters with
respect to such Shares and the offering, sale and issuance thereof as are
customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriter(s) in underwritten public offerings of
securities and, in the case of the accountants' letter, such other
financial matters as Party A may have reasonably requested.
(g) Party B shall have complied with all applicable provisions of the 1933 Act
and the 1934 Act, all applicable rules of the SEC and all other applicable
laws, rules and regulations of any governmental or regulatory authority
with respect to such Filing Materials and such Shares and the offering,
sale and issuance thereof.
(h) Party B shall have caused all such Shares to be listed on the Exchange and
on each securities exchange on which Party B has caused similar securities
issued by Party B to be listed.
(i) Party B shall have provided a transfer agent and registrar for such Shares.
(j) Party B shall have taken such other actions as Party A or any underwriter
of such Shares shall have reasonably requested in order to expedite or
facilitate the disposition of such Shares.
(k) Party B shall provide Party A and its underwriter(s), if any, with
indemnity and contribution in form and substance acceptable to Party A
covering the information contained in the Registration Statement or
prospectus and Party A and its underwriter shall provide indemnification
and contribution in form and substance acceptable to Party B covering such
matters relating to information provided to Party B in writing for
inclusion in the Registration Statement. For purposes of this Appendix, the
attached Annex I sets forth a general form of indemnification and
contribution which may be considered by the parties, but both parties
recognise and agree that any form of indemnity ultimately agreed to by the
parties may differ, in part or substantially, from the form and substance
of such Annex I in light of the prevailing circumstances at the time of any
offering.
(l) Party B shall have paid all customary costs and expenses reasonably
incurred in connection with the foregoing, provided, that unless otherwise
agreed, Party A and its underwriter(s) shall be responsible for the fees
and expenses of their respective counsel, accountants and other advisors
(if any).
(m) Party B shall deliver all such registered Shares through the Clearance
System.
-14-
<PAGE> 50
[CREDIT SUISSE LETTERHEAD]
PRELIMINARY CONFIRMATION
COLLATERAL APPENDIX IN RESPECT OF THE CONFIRMATION
OF THE TRANSACTION BETWEEN
CREDIT SUISSE FINANCIAL PRODUCTS
AND
LAM RESEARCH CORPORATION
through
CSFP CAPITAL, INC., solely in its capacity as agent
(CSFP REFERENCE NO. (5579880))
This Appendix constitutes a security agreement under Articles 8 and 9 of the
Uniform Commercial Code of the State of New York (the "UCC") with respect to any
Collateral.
1. DEFINITIONS:
1.1 In this Appendix, the following expressions have the following meanings:
"BANKING DAY" means any day on which commercial banks are open for business
(including dealings in foreign exchange and foreign currency deposits) in
(a) London and New York, and (b) in the case of a Transfer of Permitted
Collateral (i) the location of the account into which such Transfer is to
be made, and (ii) either, in the case of a Transfer of Cash, the principal
financial centre of the currency of such Cash or, in the case of a Transfer
of other Permitted Collateral, the location of the account out of which
such Transfer shall be made and, if different, the place where the Transfer
will be registered (if applicable);
"CASH" means US Dollars;
"CASH COLLATERAL" means Collateral comprising Cash;
"COLLATERAL" means all the Permitted Collateral Transferred to and held by
or for the Secured Party pursuant to this Appendix together with all
proceeds, distributions, substitutions for and additions to the foregoing
in accordance with this Appendix and which has not been retransferred to
the Pledgor;
"PERMITTED COLLATERAL" means collectively Cash Collateral, US Government
Obligations and such other assets as may from time to time be acceptable to
the Secured Party for the purposes of this Appendix;
"PLEDGOR" means Party B;
"QUASI AGENCY OBLIGATIONS" means the negotiable debt obligations of the US
Government National Mortgage Association, the US Federal National Mortgage
Association, the US Federal Home Loan Mortgage Corporation, the US Student
Loan Marketing Association or a US Federal Home Loan Bank;
"RELEVANT PERCENTAGE" means, on any date, the percentage appearing below
opposite the relevant Permitted Collateral:
<TABLE>
<CAPTION>
Type of Permitted Collateral Relevant Percentage
---------------------------- -------------------
<S> <C>
Cash Collateral 100%
US Government Obligations:
with a Residual Maturity of less than one year 100%
</TABLE>
-15-
<PAGE> 51
[CREDIT SUISSE LETTERHEAD]
PRELIMINARY CONFIRMATION
<TABLE>
<S> <C>
with a Residual Maturity equal to or greater than 1 year but less than 5 years 97%
with a Residual Maturity equal to or greater than 5 years but less than 10 years 95%
Other Permitted Collateral (excluding such percentage as shall from time to time be
US Dollars) specified by the Valuation Agent;
</TABLE>
"REQUIRED AMOUNT" means, on any date, an amount expressed in US
Dollars, agreed upon (orally or in writing) by the Pledgor and the
Secured Party on such date or, if the Pledgor and the Secured Party
are unable promptly to agree upon an amount on such date, the amount
(if any) determined by the Valuation Agent, which would be payable by
the Pledgor to the Secured Party under Section 6(e)(ii)(1) of the
Agreement if an Early Termination Date were to occur in respect of all
outstanding Transactions on such date as a result of a Termination
Event on the basis that the Secured Party is not the Affected Party
and provided that Market Quotation will be determined by the Valuation
Agent on behalf of the Secured Party using its estimates at mid-market
of the amounts that would be paid for Replacement Transactions (as
that term is defined in the definition of Market Quotation), and
provided that the Required Amount shall be deemed to be zero whenever
the calculation of such amount yields a number less than zero;
"RESIDUAL MATURITY" means, on any date, in respect of any Permitted
Collateral comprising securities, the residual maturity of such
securities as of such date;
"SECURED PARTY" means Party A;
"TRANSFER" OR "TRANSFERRED" means the transfer by one party to the
other party (or its account) of Permitted Collateral:
(a) in the case of Cash, by wire transfer into one or more bank
accounts specified by the recipient;
(b) in the case of Permitted Collateral that cannot be delivered by
book entry, by delivery in appropriate physical form for transfer
and accompanied by duly executed instruments of transfer in blank
and such other documentation as the recipient of such transfer
may at any time reasonably request; or
(c) in the case of Permitted Collateral (other than Cash) that can be
delivered by book entry, by giving written instructions to a
Federal Reserve Bank, or the Euroclear or CEDEL clearing systems,
or any other depositary institution or entity agreed between the
parties, together with a written copy thereof to the recipient of
such Permitted Collateral, which if complied with would result in
a legally effective transfer of the relevant interest to such
recipient; or
(d) by any other method mutually acceptable to the parties;
As used herein, "Transfer" is intended to have the same meaning as
when used in UCC Section 8-313 or, where applicable, in any federal
regulation governing transfers of Permitted Collateral;
"US DOLLARS" AND "US$" means the lawful currency of the United States
of America;
"US GOVERNMENT OBLIGATIONS" means the negotiable debt obligations of
the United States of America issued by the US Treasury Department or
any other agency thereof, or negotiable debt obligations which are
fully guaranteed or guaranteed as to principal and interest by the
United States of America, provided that such obligations shall have a
Residual Maturity as of the date of their Transfer to the Secured
Party of less than ten (10) years, and, for the avoidance of doubt,
Quasi Agency Obligations shall not constitute US Government
Obligations;
-16-
<PAGE> 52
[CREDIT SUISSE LETTERHEAD]
PRELIMINARY CONFIRMATION
"VALUATION AGENT" means Party A; and
"VALUE" means on any date:
(a) with respect to US Dollars, the amount thereof;
(b) with respect to any US Government Obligations, the bid price for
such US Government Obligations, obtained by the Valuation Agent
and expressed in US Dollars, multiplied by the applicable
Relevant Percentage; and
(c) with respect to any other Permitted Collateral, the fair market
value thereof (expressed in US Dollars) on such date as
determined in any reasonable manner by the Valuation Agent
multiplied by the applicable Relevant Percentage.
1.2 References to Paragraphs are to Paragraphs of this Appendix.
2. GRANT OF SECURITY INTEREST:
2.1 As continuing security for the payment and discharge of all its obligations
under this Transaction and subject to Paragraph 2.2, the Pledgor, as sole
beneficial owner hereby pledges and grants to the Secured Party a first
priority security interest in, lien on, and right of set-off against, the
Collateral and agrees to do all acts and execute and deliver all documents
necessary to ensure that the Collateral remains at all times subject to the
pledge and security interest referred to in this Paragraph 2.
2.2 Although the parties intend that the Pledgor shall have no continuing
right, title or interest in or to Cash Collateral, in the event that the
Pledgor is deemed to have any right, title or interest therein, the
foregoing Paragraph 2.1 shall apply to such Cash Collateral.
2.3 The rights of the Secured Party with respect to any Cash Collateral
Transferred hereunder shall include, in addition to and without limiting
any other rights provided for in this Appendix, the right on any terms to
use, commingle, sell, pledge, repledge, hypothecate, assign, or otherwise
dispose of such Collateral, provided that no such transaction shall relieve
the Secured Party of its obligations to return such Collateral pursuant to
this Appendix.
2.4 Notwithstanding the foregoing, and pursuant to Paragraph 11(a) hereof, the
Secured Party agrees that it shall not foreclose upon any Collateral until
two Local Business Days after having delivered written notice to the
Pledgor of its intention to exercise such a right under Paragraph 11(a).
2.5 The Secured Party shall hold all Collateral (other than Cash Collateral) in
a segregated account which identifies the Pledgor as the owner thereof
(subject to the Secured Party's security interest therein) and the Secured
Party shall take all action necessary to ensure no creditor of the Secured
Party obtains any interest whatsoever therein.
2.6 Any interest or investment proceeds of any Collateral (except as provided
in Paragraph 6.1 hereof) shall be for the account of the Pledgor and shall
accrue to the benefit and in the name of the Pledgor.
2.7 Collateral shall at all times remain the property of the Pledgor, subject
only to the extent of the interest, rights and remedies hereof of the
Secured Party as the pledgee and/or secured party hereof.
-17-
<PAGE> 53
[CREDIT SUISSE LETTERHEAD]
PRELIMINARY CONFIRMATION
3. CONDITIONS PRECEDENT:
Any obligation on the part of the Secured Party to make a Transfer pursuant
to this Appendix is subject to the following conditions precedent:
no Event of Default, Termination Event and/or any event or condition
that with the giving of notice or passage of time, or both, would
constitute such an Event of Default or Termination Event, has occurred
and is continuing as of the date for such Transfer with the Pledgor as
the Defaulting Party or the Affected Party (as the case may be).
4. DELIVERY OF COLLATERAL:
(a) If, on the date at the beginning of each calendar quarter, the
Required Amount exceeds the Value of the Collateral held by the
Secured Party on such a date, the Pledgor shall, if requested by the
Secured Party, Transfer to the Secured Party Permitted Collateral
having a Value equal to such excess (rounded upwards to the nearest
integral multiple of US$250,000) within two (2) Banking Days of such
written request.
(b) If, on any date during each calendar quarter, the price per share of
the common stock of the Pledgor, as reasonably determined by the
Valuation Agent with reference to the NASDAQ closing price on such a
date, falls by twenty-five (25) percent or more below the price per
share of the common stock of the Pledgor as of the Starting Date, then
if so requested by the Secured Party and within two (2) Business Day
of such a written request, the Pledgor shall Transfer to the Secured
Party Permitted Collateral having a Value equal to the Required Amount
less the Value of the Collateral then held by the Secured Party,
rounded upwards to the nearest integral multiple of US$250,000.
For the purpose of this Section 4(b) the "Starting Date" shall be
defined as the date at the beginning of each calendar quarter and if
the Pledgor Transfers Permitted Collateral to the Secured Party under
this Section 4(b) during such a calendar quarter, then the new
Starting Date shall be the date of the latest such Transfer under this
Section 4(b).
5. RETURN OF COLLATERAL:
5.1 Where, on the date at the beginning of each calendar quarter, the Value of
Collateral held by the Secured Party exceeds the Required Amount on such a
date, the Secured Party shall, if requested by the Pledgor and subject to
Paragraph 3, Transfer to the Pledgor Collateral having a Value equal to
such excess rounded downwards to the nearest integral multiple of
US$250,000 within two (2) Banking Days of such request.
5.2 The Secured Party may in lieu of returning to the Pledgor any Collateral
comprising securities (as such term is defined in the UCC) return
securities which are fungible (as such term is used in the UCC) therewith
in satisfaction of its obligations under this Paragraph 5.
6. INTEREST ON CASH COLLATERAL:
6.1 Cash Collateral shall accrue interest for the benefit of the Pledgor at a
rate equal to the overnight rate for deposits in US Dollars as displayed on
Telerate page 118 provided that if, for any reason, Telerate Page 118 shall
be unavailable interest shall accrue at such rate as and be compounded on
such days as the Secured Party shall reasonably determine. Such interest
will be compounded on each New York Business Day and, subject to Paragraph
3, be paid to the Pledgor on any Local Business Day and shall accrue from
the date that
-18-
<PAGE> 54
[CREDIT SUISSE LETTERHEAD]
PRELIMINARY CONFIRMATION
the deposit of such Cash Collateral is confirmed to or to the
order of the Secured Party provided that such interest shall only be paid
to the Pledgor to the extent that such interest when added to the Value of
the Collateral held by the Secured Party, as of the date of such payment,
exceeds the Required Amount in respect of the Pledgor on such date and any
such interest not paid to the Pledgor shall be an accretion to the
Collateral held by the Secured Party.
6.2 Any interest or investment proceeds on any Collateral (other than Cash
Collateral) shall accrue for the benefit of the Pledgor and, subject to
Paragraph 3, be paid to the Pledgor on any Local Business Day, provided
that such interest or investment proceeds shall only be paid to the Pledgor
to the extent that such interest or investment proceeds, when added to the
Value of the Collateral held by the Secured Party, as of the date of such
payment, exceeds the Required Amount in respect of the Pledgor on such date
and any such interest or investment proceeds not paid to the Pledgor shall
be an accretion to the Collateral held by the Secured Party.
7. SUBSTITUTION:
The Pledgor may, with the prior consent of the Secured Party, substitute
existing Collateral. In the event of the Secured Party granting its consent
thereto the Pledgor shall pay all the costs involved in effecting such
substitution and, subject to Paragraph 3, the Secured Party shall Transfer
to the Pledgor the existing Collateral which is the subject of the
substitution as soon as practicable after the Secured Party shall be
satisfied that it has received Permitted Collateral in replacement therefor
having a Value, on the date of Transfer, not less than that of the
Collateral being substituted.
8. RESPONSIBILITY FOR AND CARE OF COLLATERAL:
8.1 Subject to Paragraph 11, all rights and powers conferred on or exercisable
by the registered holder, bearer or legal owner of the Collateral
(excluding Cash Collateral) shall be exercisable by the Pledgor or as the
Pledgor shall direct and the Pledgor shall remain liable to observe and
perform all conditions and obligations in respect of the Collateral
(excluding Cash Collateral). The Secured Party shall, upon its receiving
express and unequivocal instructions from the Pledgor, take all action
necessary on its part to ensure that all such rights and powers are
exercised in accordance with the Pledgor's instructions, provided that the
Secured Party shall not be obliged to act in accordance with the Pledgor's
instructions where: (a) such instructions involve any expense, and such
expense has not been funded in advance by the Pledgor; or (b) to act in
accordance with such instructions may reduce or in any way prejudice the
value of such Collateral, and provided further that the Secured Party shall
otherwise have no duty with respect to Collateral including, without
limitation, any duty to collect any proceeds or enforce or preserve any
rights pertaining thereto.
8.2 The Pledgor and the Secured Party hereby undertake not to exercise such
rights it may have retained in respect of the Collateral in such a way as
to reduce or prejudice in any way the value of the Collateral.
8.3 The parties acknowledge and agree that upon the Transfer of Collateral to
the Secured Party, or to an agent or custodian to receive and hold
Collateral for or on behalf of the Secured Party, such Collateral will not
necessarily be registered in the Pledgor's name.
9. REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS:
The Pledgor represents and warrants that the provisions of Section 3 of the
Agreement apply in full force and effect and, without limiting the
foregoing:
(a) it has the power to enter into the Transaction and to execute and
deliver this Confirmation and perform its obligations hereunder
(including, for the avoidance of doubt, under this Appendix);
-19-
<PAGE> 55
[CREDIT SUISSE LETTERHEAD]
PRELIMINARY CONFIRMATION
(b) its obligations under the Transaction (including, for the avoidance of
doubt, under this Appendix) constitute its legal, valid and binding
obligations, enforceable in accordance with their respective terms;
(c) it has taken all necessary action to authorise such entry, execution,
delivery and performance;
(d) such entry, execution, delivery and performance do not violate or
conflict with any applicable law, any provision of its constituent
documents, any order or judgement of any court or other agency of
government applicable to it or any of its assets or any contractual
restriction binding on or affecting it or any of its assets;
(e) it is and, subject to Paragraph 2.2, will at all times be the sole,
lawful and beneficial owner of the Collateral free from all
encumbrances and forms of security interests (except for the charge or
other security interest, howsoever described, created hereby), and no
other person has, or will at any time have, any proprietary right or
interest therein;
(f) except for the first priority security interest (howsoever described)
in favour of the Secured Party and subject to Paragraph 2.2, no person
has, (or in the case of after-acquired Collateral, at the time the
Pledgor acquires rights therein, will have) any right, title, claim or
interest (by way of charge, lien, mortgage, pledge, security interest
(however described) or other encumbrance, or otherwise) in, against or
to the Collateral;
(g) it will not (without the prior written consent of the Secured Party at
any time) sell or agree to sell or otherwise dispose of, or agree to
dispose of, the Collateral; and
(h) it will ensure, so far as it is able, that the Collateral is and at
all times remains free from any restrictions on transfer.
10. EVENTS OF DEFAULT:
Notwithstanding anything to the contrary in the Agreement, the occurrence
at any time with respect to the Pledgor of any of the following events
constitutes an Event of Default with respect to it for the purposes of the
Agreement:
(a) failure by it to Transfer Permitted Collateral in accordance with
Paragraph 4, if such failure is not remedied within one Banking Day of
written notice of such failure being given to the Pledgor;
(b) failure by it to comply with or perform any other material provision
required to be complied with or performed by it which is contained in
this Appendix if such failure is not remedied within three Banking
Days of notice of such failure given to the Pledgor;
(c) the failing or ceasing of any material provision of this Appendix to
be in full force and effect prior to the satisfaction by the Pledgor
of all its obligations to the Secured Party under the Agreement; or
(d) the Pledgor disaffirms, disclaims, repudiates or rejects, in whole or
in part, or challenges the validity of, any material part of this
Appendix.
-20-
<PAGE> 56
[CREDIT SUISSE LETTERHEAD]
PRELIMINARY CONFIRMATION
11. SECURED PARTY'S RIGHTS AND REMEDIES:
Upon the occurrence and continuance of any Event of Default with respect to
the Pledgor or any Termination Event, the Secured Party may, to the extent
permitted by applicable law, exercise as to all Collateral then held by the
Secured Party the rights and remedies of a secured party under the UCC and
as otherwise provided by law and, in addition, at its sole option and
without notice to or demand upon the Pledgor, may exercise any or all of
the following remedies upon two (2) Local Business Days written notice to
the Pledgor:
(a) set off the Secured Party's obligation to repay any Cash to the
Pledgor, against any amounts owing to the Secured Party by the Pledgor
under this Transaction; and/or
(b) liquidate and apply all or any part of any Collateral other than Cash
in any manner deemed commercially reasonable by the Secured Party,
with the proceeds of such liquidation constituting Cash Collateral
hereunder; and/or
(c) set off the Value of such Collateral against any amounts owing to the
Secured Party by the Pledgor.
12. DELIVERY DEFAULT:
If the Pledgor fails to make, when due, any Transfer of Collateral, it
shall pay to the Secured Party, to the extent permitted under applicable
law, an amount equal to interest at the Default Rate (as that expression is
defined in the Agreement) multiplied by the Value of the Collateral which
was required to be Transferred, from (and including) the date that such
Collateral was required to be Transferred to (but excluding) the date of
the Transfer. This interest will be calculated on a daily rate by reference
to the actual number of days elapsed.
13. SET-OFF:
Upon the designation or deemed designation of any Early Termination Date,
in addition to and not in limitation of any other right or remedy
(including any right to set-off, counterclaim, or otherwise withhold
payment) under applicable law, the Non-defaulting Party or the party that
is not the Affected Party (in either case, "X") may, without prior notice
to any person, set off any sum or obligation under the Agreement
(including, without limitation this Appendix), whether matured or unmatured
and irrespective of the currency, place of payment or booking office of the
sum or obligation) owed by the Defaulting Party or Affected Party (in
either case, "Y") to X or to any Affiliate of X, against any sum or
obligation under the Agreement (including, without limitation this
Appendix), whether matured or unmatured and irrespective of the currency,
place of payment or booking office of the sum or obligation) owed by X or
any Affiliate of X to Y, and, for this purpose, may convert one currency
into another. If any sum or obligation is unascertained, X may in good
faith estimate that sum or obligation and set off in respect of that
estimate, subject to X or Y, as the case may be, accounting to the other
party when such sum or obligation is ascertained.
14. SECURITY AND PERFORMANCE ASSURANCE:
For the avoidance of doubt the parties agree that:
(a) Cash Collateral, is not and shall not be deemed to be "client
money" for the purposes of the Financial Services (Client Money)
Regulations 1991 and the Secured Party shall not hold Cash Collateral
as "client money" as contemplated by the Regulations; and
-21-
<PAGE> 57
[CREDIT SUISSE LETTERHEAD]
PRELIMINARY CONFIRMATION
(b) Collateral constitutes security and performance assurance without
which the Secured Party would not otherwise enter into and continue
any and all Transactions.
15. NOTICES:
Any notice or demand to be given to or made by the Secured Party or the
Pledgor pursuant to this Appendix shall be made in writing as specified in
Section 12 of the Agreement save that such notice or demand:
(a) if given to the Secured Party, shall be given to or made in accordance
with the following details:-
Address: One Cabot Square, London E14 4QJ
Telephone: 0171-888 2502
Facsimile: 0171-888 3866
Telex: 264521 Answerback: CSFINPG
Swift: CSFP GB 2L
Attention: CSFP Operations Settlements
or in accordance with such other details as the Secured Party
may from time to time notify (in accordance with the terms of
this Paragraph 16) to the Pledgor; and
(b) shall be deemed to be effective at the time such written notice is
actually received unless such notice is received on a day which is not
a Banking Day, or after 4.00 p.m. London time on any Banking Day, in
which event such notice shall be deemed to be effective at 9.00 a.m.
London time on the next succeeding Banking Day.
16. DOCUMENTATION AND INCONSISTENCY:
The parties agree to execute a collateral agreement (or such other form of
documentation as Party A deems appropriate) in the form provided by Party
A, subject to good faith negotiation, as an appendix to the Agreement
-22-
<PAGE> 1
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
Contacts: Lisa Garber Mercedes Johnson
Corporate Communications Investor Relations
Lam Research Corporation Lam Research Corporation
Phone: 510/572-4538 Phone: 510/572-4522
Fax: 510/572-2935 Fax: 510/572-4442
e-mail: [email protected] e-mail: [email protected]
LAM RESEARCH CORPORATION ANNOUNCES OPTION PURCHASE PROGRAM
FREMONT, Calif., June 21, 1999 -- Lam Research Corporation (Nasdaq: LRCX), a
leading supplier of wafer fabrication equipment to the worldwide semiconductor
industry, today announced a program authorized by the company's Board of
Directors to acquire from independent third parties options to purchase up to
3.5 million shares of the company's common stock. These call options are to be
acquired to offset the anticipated dilutive effect of a potential conversion
into common stock of subordinated debt previously issued by the company. As part
of the program, the Board also authorized the company to enter into put options
with the same third parties covering up to 5.25 million shares of the company's
common stock. The premiums the company will receive over the course of the
program from the sale of the put options to the third parties is intended to
offset in full the premium cost to the company of its purchases of call
<PAGE> 2
options from those same parties. This option purchase program is separate from
share repurchase programs previously announced by the company.
For further details concerning this program please see the company's filing
relating to this disclosure on Form 8-K, which is to be filed in conjunction
with this release.
~ more ~
<PAGE> 3
LAM ANNOUNCES OPTION PURCHASE PROGRAM................................PAGE 2 OF 3
This press release contains certain forward-looking statements which are subject
to the Safe Harbor provisions created by the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements relate to possible or
anticipated further activity by the company concerning call and put option
transactions involving its common stock. Such statements are based on current
expectations and are subject to risks, uncertainties and changes in condition,
such as may arise from changes in market conditions effecting the company's
common stock, or the company's business strategies generally or specifically
relating to the potential conversion of its subordinated debt into common stock
of the company, and other risks detailed in documents filed with the Securities
and Exchange Commission, including specifically the report on Form 10-K for the
year ended June 30, 1998, and the Form 10-Q for the quarter ended March 31,
1999. The company undertakes no obligation to update the information in this
Press Release.
Lam Research Corporation is a leading supplier of wafer fabrication equipment
and services to the world's semiconductor industry. The company's common stock
trades on the Nasdaq National Securities Market under the symbol "LRCX". Lam's
World Wide Web address is http://www.lamrc.com.
###
