-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BO3sRuYpHdhnRVynQuRN9IJg++d5qTmuL31Z/0ltawBZlfAQSdailoZsQCE2sNUK +7q0DvAB9k2EZiNpBYte6w== 0000891618-98-000701.txt : 19980218 0000891618-98-000701.hdr.sgml : 19980218 ACCESSION NUMBER: 0000891618-98-000701 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980213 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LAM RESEARCH CORP CENTRAL INDEX KEY: 0000707549 STANDARD INDUSTRIAL CLASSIFICATION: SPECIAL INDUSTRY MACHINERY, NEC [3559] IRS NUMBER: 942634797 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12701 FILM NUMBER: 98538010 BUSINESS ADDRESS: STREET 1: 4650 CUSHING PKWY CITY: FREMONT STATE: CA ZIP: 94538 BUSINESS PHONE: 5106590200 MAIL ADDRESS: STREET 1: 4650 CUSHING PARKWAY CITY: FREMONT STATE: CA ZIP: 94538 10-Q 1 FORM 10-Q FOR PERIOD ENDED DECEMBER 31, 1997 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR QUARTER ENDED DECEMBER 31, 1997 Commission File No. 0-12933 LAM RESEARCH CORPORATION (Exact name of Registrant as specified in its charter) DELAWARE 94-2634797 - ------------------------------ ---------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 4650 CUSHING PARKWAY, FREMONT, CALIFORNIA 94538 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (510) 659-0200 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO As of December 31, 1997 there were 37,985,846 shares of Registrant's Common Stock outstanding. 2 INDEX
Page No. ----- PART I. FINANCIAL INFORMATION............................................... 3 Item 1. Financial Statements(unaudited)..................................... 3 Condensed Consolidated Balance Sheets............ 3 Condensed Consolidated Statements of Operations.. 4 Condensed Consolidated Statements of Cash Flows.. 5 Notes to Condensed Consolidated Financial Statements.............................. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 10 Results of Operations............................ 11 Liquidity and Capital Resources.................. 13 Risk Factors..................................... 14 PART II. OTHER INFORMATION.................................................. 17 Item 1. Legal Proceedings.................................................. 17 Item 4. Results of Votes of Stockholders................................... 17 Item 6. Exhibits and Reports on Form 8-K................................... 18
2 3 ITEM 1. FINANCIAL STATEMENTS LAM RESEARCH CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share data)
December 31, 1997 June 30, (unaudited) 1997 ---------- ---------- Assets Cash and cash equivalents $ 21,058 $ 140,872 Short-term investments 425,660 54,821 Accounts receivable, net 235,382 232,073 Inventories 258,104 261,738 Prepaid expenses and other assets 26,115 37,707 Deferred income taxes 75,509 75,935 ---------- ---------- Total current assets 1,041,828 803,146 Equipment and leasehold improvements, net 193,059 196,992 Other assets 40,959 34,911 ---------- ---------- Total assets $1,275,846 $1,035,049 ========== ========== Liabilities and Stockholders' Equity Trade accounts payable $ 83,449 $ 117,163 Accrued expenses and other current liabilities 174,553 167,685 Line of credit borrowings -- 35,000 Current portion of long-term debt and capital lease obligations 18,584 21,127 ---------- ---------- Total current liabilities 276,586 340,975 Long-term debt and capital lease obligations, less current portion 346,314 46,592 Preferred stock: 5,000 shares authorized; none outstanding Common stock at par value of $.001 per share Authorized -- 90,000 shares; issued and outstanding 37,986 shares at December 31, 1997 and 37,334 shares at June 30, 1997 38 37 Additional paid-in capital 375,211 361,101 Retained earnings 277,697 286,344 ---------- ---------- Total stockholders' equity 652,946 647,482 ---------- ---------- $1,275,846 $1,035,049 ========== ==========
- -------------------------------------------- See Notes to condensed consolidated financial statements. 3 4 LAM RESEARCH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited)
Three Months Ended Six Months Ended ------------------------- -------------------------- December 31, December 31, ------------------------- -------------------------- 1997 1996 1997 1996 --------- --------- --------- --------- Net sales $ 291,291 $ 253,354 $ 580,683 $ 546,041 Royalty income 765 4,710 1,299 11,269 --------- --------- --------- --------- Total revenue 292,056 258,064 581,982 557,310 Costs and expenses: Cost of goods sold 178,960 161,185 355,900 336,731 Research and development 54,474 43,909 108,651 90,039 Selling, general and administrative 53,455 48,568 106,659 100,132 Merger costs -- -- 17,685 -- Restructuring charge -- -- -- 9,021 --------- --------- --------- --------- Operating income (loss) 5,167 4,402 (6,913) 21,387 Other expense, net 466 184 1,264 309 --------- --------- --------- --------- Income (loss) before taxes 4,701 4,218 (8,177) 21,078 Income taxes 1,176 941 470 6,053 --------- --------- --------- --------- Net income (loss) $ 3,525 $ 3,277 $ (8,647) $ 15,025 ========= ========= ========= ========= Net income (loss) per share Basic $ 0.09 $ 0.09 $ (0.23) $ 0.41 ========= ========= ========= ========= Diluted $ 0.09 $ 0.09 $ (0.23) $ 0.40 ========= ========= ========= ========= Number of shares used in per share calculations Basic 38,000 36,709 37,800 36,619 ========= ========= ========= ========= Diluted 38,600 37,593 37,800 37,439 ========= ========= ========= =========
See Notes to condensed consolidated financial statements. 4 5 LAM RESEARCH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
Six Months Ended ------------------------------ December 31, December 31, 1997 1996 ----------- ----------- Cash flows from operating activities: Net income (loss) $ (8,647) $ 15,025 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 32,111 24,436 Deferred income taxes 1,976 (1,085) Change in certain working capital accounts (17,559) 52,942 ----------- ----------- Net cash provided by operating activities 7,881 91,318 Cash flows from investing activities: Capital expenditures (22,851) (40,881) Purchase of short-term investments (5,573,042) (387,294) Sale of short-term investments 5,202,203 307,325 Other (1,295) (6,642) ----------- ----------- Net cash used in investing activities (394,985) (127,492) ----------- ----------- Cash flows from financing activities: Proceeds from borrowings under line of credit -- 45,000 Repayments of borrowings under line of credit (35,000) (60,000) Sale of stock, net of issuance costs 14,111 7,379 Proceeds from issuance of long-term debt 301,000 184 Principal payments on long-term debt and capital lease obligations (12,821) (9,454) ----------- ----------- Net cash provided by (used in) financing activities 267,290 (16,891) ----------- ----------- Net decrease in cash and cash equivalents (119,814) (53,065) Cash and cash equivalents at beginning of period 140,872 87,096 ----------- ----------- Cash and cash equivalents at end of period $ 21,058 $ 34,031 =========== ===========
See Notes to condensed consolidated financial statements. 5 6 LAM RESEARCH CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS December 31, 1997 (Unaudited) NOTE A -- BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited supplemental consolidated financial statements of Lam Research Corporation (the "Company" or "Lam") for the year ended June 30, 1997, which are included on Form S-3 File number 333-39167. The prior period amounts have been restated to reflect the Company's merger with OnTrak Systems, Inc. ("OnTrak"), accounted for as a pooling of interests. The results of operations for the three and six month periods ended December 31, 1997 are not necessarily indicative of the results that may be expected for the entire fiscal year ending June 30, 1998. NOTE B - - MERGER WITH ONTRAK On August 5, 1997, the stockholders of each of Lam and OnTrak approved the merger of Lam and OnTrak (the "Merger") and the issuance of Lam common stock, par value $0.001 per share ("Lam Common Stock") under the Agreement and Plan of Merger between Lam and OnTrak. The Company issued approximately 6.5 million shares of Lam Common Stock and options and rights to acquire approximately two million shares of Lam Common Stock in connection with the Merger. The transaction has been accounted for as a pooling of interests and was structured to qualify as a tax-free reorganization. Costs associated with the Merger were approximately $17.7 million, including investment advisory fees, legal and accounting fees, financial printing costs and other merger related costs. Such costs associated with the Merger negatively impacted the results of operations for the quarter ended September 30, 1997. 6 7 NOTE C -- INVENTORIES Inventories consist of the following:
Dec. 31, June 30, 1997 1997 -------- -------- (in thousands) Raw materials $156,458 $136,698 Work-in-process 67,967 93,057 Finished goods 33,679 31,983 -------- -------- $258,104 $261,738 ======== ========
NOTE D -- EQUIPMENT AND LEASEHOLD IMPROVEMENTS Equipment and leasehold improvements consist of the following:
Dec. 31, June 30, 1997 1997 --------- --------- (in thousands) Equipment $ 174,361 $ 158,475 Furniture & fixtures 60,531 58,642 Leasehold improvements 105,298 100,222 --------- --------- 340,190 317,339 Accumulated depreciation and amortization (147,131) (120,347) --------- --------- $ 193,059 $ 196,992 ========= =========
NOTE E -- OTHER EXPENSE, NET The significant components of other expense, net are as follows (in thousands):
Three Months Ended Six Months Ended ---------------------- ----------------------- December 31, December 31, 1997 1996 1997 1996 ------- ------- ------- ------- Interest expense $ 5,302 $ 1,271 $ 8,018 $ 2,807 Interest income (6,280) (1,316) (9,479) (2,435) Other 1,444 229 2,725 (63) ------- ------- ------- ------- $ 466 $ 184 $ 1,264 $ 309 ======= ======= ======= =======
NOTE F -- NET INCOME (LOSS) PER SHARE In 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128 "Earnings per Share" ("FAS 128"). FAS 128 replaced the previously reported primary and fully diluted earnings per share with basic and diluted earnings 7 8 per share. All net income (loss) amounts for all periods have been presented, and where necessary, restated to conform to the FAS 128 requirements. Basic net income (loss) per share is calculated using the weighted average number of shares of common stock outstanding during the period. Diluted net income per share for the three month periods ended December 31, 1997 and 1996 and the six month period ended December 31, 1996 is calculated using the weighted average number of shares of common stock and the potential common shares that were dilutive and outstanding during the period. The potential common shares include shares issuable upon the assumed exercise of stock options reflected under the treasury stock method. The conversion of the convertible subordinated notes to potential common shares was excluded from the diluted earnings per share calculation for the three month period ended December 31, 1997, because its effect was antidilutive. Diluted net loss per share for the six months ended December 31, 1997 is calculated using the weighted average number of shares of common stock outstanding during the period. The Company's basic and diluted net income (loss) per share as calculated according to FAS 128 are as follows:
(in thousands, except per share data) ------------------------------------------------------ Three Months Ended Six Months Ended December 31, December 31, ----------------------- ------------------------ 1997 1996 1997 1996 -------- -------- -------- -------- NUMERATOR: Net income $ 3,525 $ 3,277 ($ 8,647) $ 15,025 -------- -------- -------- -------- Numerator for basic and diluted net income (loss) per share $ 3,525 $ 3,277 ($ 8,647) $ 15,025 ======== ======== ======== ======== DENOMINATOR: Basic net income (loss) per share - average shares outstanding 38,000 36,709 37,800 36,619 Effect of potential dilutive securities: Employee stock options 600 884 -- 820 -------- -------- -------- -------- Potential dilutive common shares 600 884 -- 820 Denominator for diluted net income (loss) per share - average shares outstanding and assumed conversions 38,600 37,593 37,800 37,439 ======== ======== ======== ======== Basic net income (loss) per share $ 0.09 $ 0.09 ($ 0.23) $ 0.41 ======== ======== ======== ======== Diluted net income (loss) per share $ 0.09 $ 0.09 ($ 0.23) $ 0.40 ======== ======== ======== ========
NOTE G -- APPROVAL OF LAM RESEARCH CORPORATION 1997 STOCK INCENTIVE PLAN On August 5, 1997 the stockholders of the Company approved the Lam Research Corporation 1997 Stock Incentive Plan, which provides for the grant of stock options, restricted stock, deferred stock and 8 9 performance share awards to participating officers, directors, employees, consultants and advisors of the Company and its subsidiaries. Initially, 3,000,000 shares were reserved for issuance. The number of shares to be issued will automatically be increased each calendar quarter subject to certain provisions and restrictions, but in no event shall exceed 5,000,000 shares. NOTE H -- CONVERTIBLE SUBORDINATED NOTES During August 1997, Lam completed an offering of $310.0 million of Convertible Subordinated Notes (the "Notes"). The Notes bear interest at five percent, mature on September 1, 2002 and are convertible into shares of Lam's Common Stock at $87.77 per share. Expenses associated with the offering of approximately $9.0 million were deferred and are included in other assets. Such deferred costs will be amortized ratably over the term of the Notes. NOTE I -- SUBSEQUENT EVENT On February 12, 1998, the Company announced a restructuring of its operations, which is expected to include an approximately 14% reduction in its global workforce. The reorganization plan will allow the Company to focus more on its core etch and Chemical Mechanical Planarization ("CMP") product groups and reduce its flat panel display and thermal Chemical Vapor Deposition ("CVD") operations. Manufacturing operations will be downsized and consolidated. As a result, the Company expects to take a pre-tax restructuring charge in the range of $80 million to $85 million in the third quarter of fiscal 1998 for costs related to severance compensation and closure of certain of its facilities as well as write-offs of assets utilized in affected operations. The restructuring is in response to the lower industry demand for semiconductor equipment as a result of the recent financial crisis in Asia and the continued depressed pricing environment for DRAM devices. NOTE J -- LITIGATION See Part II, item 1 for discussion of litigation. 9 10 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations With the exception of historical facts, the statements contained in this discussion are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the Safe Harbor provisions created by that statute. Such forward-looking statements include, but are not limited to, statements that relate to the Company's future revenue, royalty income, gross margins, levels of research and development and operating expenses, management's plans and objectives for future operations of the Company, the sufficiency of financial resources to support future operations and capital expenditures and the Company's application and software systems. Such statements are based on current expectations that involve risks and uncertainties, including those discussed below and under the heading Risk Factors, as well as those disclosed in the Company's most recent Annual Report on Form 10-K which are herein incorporated by reference, that could cause actual results to differ materially from those expressed. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. This discussion should be read in conjunction with the Condensed Consolidated Financial Statements and Notes presented thereto on pages 3 to 9 of this Form 10-Q for a full understanding of the Company's financial position and results of operations for the quarter ended December 31, 1997. RESULTS OF OPERATIONS All financial data of the Company included herein reflect the combination of the historical financial information of both Lam and OnTrak as described in Note A. 10 11 The following table sets forth, for the fiscal periods indicated, certain income and expense items as a percentage of total revenue:
Three Months Ended Six Months Ended December 31, December 31, --------------------------------------- 1997 1996 1997 1996 ----- ----- ----- ----- Net sales 99.7% 98.2% 99.8% 98.0% Royalty income 0.3 1.8 0.2 2.0 ----- ----- ----- ----- 100.0 100.0 100.0 100.0 Cost of goods sold 61.3 62.5 61.2 60.4 Research and development 18.6 17.0 18.7 16.2 Selling, general & administrative 18.3 18.8 18.3 18.0 Merger costs -- -- 3.0 -- Restructuring charge -- -- -- 1.6 ----- ----- ----- ----- Operating income (loss) 1.8 1.7 (1.2) 3.8 Other expense, net 0.2 0.1 0.2 -- ----- ----- ----- ----- Income (loss) before taxes 1.6 1.6 (1.4) 3.8 Income tax expense 0.4 0.3 0.1 1.1 ----- ----- ----- ----- Net income (loss) 1.2% 1.3% (1.5%) 2.7% ===== ===== ===== =====
Results of Operations Total revenue for the three and six month periods ended December 31, 1997 was 13% and 4% higher, respectively, compared to the year ago periods. The Company continues to experience a shift in its product sales from single-chamber to multi-chamber products. Increased sales of the Company's Alliance(TM) cluster system, which utilizes from one to four TCP etch chambers each, were partially offset by a decrease in stand-alone TCP system sales for both the three and six month periods ended December 31, 1997 compared to the year ago periods. Sales of the Company's advanced capability Rainbow(TM), CMP cleaning systems were higher than the year ago periods. The Company's revenues will decrease due to the reduction of its flat panel display and CVD operations as well as the result of unfavorable market conditions for other products. Total international sales were 56% and 54%, respectively, for the three and six month periods ended December 31, 1997 compared with 65% and 66% for the year ago periods. Regionally, the Company experienced increases in revenues for its North America, Korea and Taiwan regions for both the three and six month periods ended December 31, 1997 compared to the year ago periods. All other regions experienced decreases in net sales for both the three and six month periods ended December 31, 1997. The Asian regions are currently experiencing uncertainty surrounding their financial markets and economies. The 11 12 Company anticipates that its revenues for the current calendar year will be adversely affected by the uncertainty in the Asian regions, particularly in Korea, which has historically comprised a significant portion of the Company's revenue base. Total spares and service revenue increased 33% and 22%, respectively, during the three and six month periods ended December 31, 1997 compared to the year ago periods due primarily to the Company's increasing installed base. Service revenue represented approximately 5% of total revenue for both the three and six month periods of fiscal 1998. Royalty income for the three and six month periods ended December 31, 1997 decreased 84% and 88%, respectively, from the year ago periods. The reduction in royalty rate is due to the extended royalty agreement with Tokyo Electron Limited which reduced the previous royalty rate from 5% to 1%, effective January 1, 1997. Fiscal 1998 will be the first full year with royalty income calculated at the reduced royalty rate of 1%. The Company's gross margin percentage increased to 38.7% in the second quarter of fiscal 1998 compared with 37.5% for the year ago quarter. Gross margin percentage was 38.8% for the first six months of fiscal 1998 compared with 39.6% for the year ago period. Gross margin percentage for the three month period ended December 31, 1997 as compared to the year ago period was favorably impacted by improved utilization of manufacturing capacity and product mix. Offsetting the increase in gross margin percentage for the three month period was a decrease in royalty income. The decrease in gross margin percentage for the six month period ended December 31, 1997 was due to a shift in product mix as the Company continued to sell a higher percentage of its Alliance cluster tools and the decrease in royalty income. Research and development ("R&D") expenses for the three and six month periods ended December 31, 1997 were 24.1% and 20.7%, respectively, higher than the year ago periods. The Company believes that in order to remain competitive, it must continue to invest substantially in R&D. The Company continues to develop its CMP polishing system, to invest in advanced etch applications and to make enhancements to its Alliance and TCP products, including developing the technology necessary to incorporate 300mm wafer processing capabilities into its products. As discussed in Note I, the Company has announced plans to significantly reduce R&D efforts relating to flat panel display and thermal CVD. Selling, general and administrative ("SG&A") expenses for the three and six month periods ended December 31, 1997 were 10.1% and 6.5%, respectively, higher than the year ago periods. However as a percentage of total revenue, SG&A expenses remained flat for both the three and six month periods ended December 31, 1997 as compared to the year ago periods. The Company continues to closely monitor expenditures and capital additions relative to revenue levels. SG&A expenses are expected to be lower throughout calendar 1998, as a result of the restructuring described in Note I. During the first quarter of fiscal 1998, the Company recorded costs of $17.7 million relating to the merger with OnTrak. Such expenses relate to investment advisory fees, legal and accounting fees, financial printing costs and other merger-related costs. During the first quarter of fiscal 1997, the Company restructured its operations by consolidating its previous business unit structure 12 13 into a centralized functional organization. As a result, the Company recorded a restructuring charge of $9.0 million for costs related primarily to severance compensation and consolidation of facilities. Other expenses increased $1.0 million to $1.3 million during the first six months of fiscal 1998 compared to the first six months of fiscal 1997. During the first quarter of fiscal 1998, the Company issued $310.0 million of Notes bearing interest at 5% which are due to mature on September 1, 2002. The Company anticipates that interest expense will increase as a result of the Notes and interest income will increase as a result of the additional invested cash realized from the sale of the Notes. Also, in the three month period ended December 31, 1997, the Company recognized higher foreign currency translation losses, primarily due to exchange rate fluctuations in Korea and Taiwan. The Company recorded a relatively small provision for income taxes despite a pre-tax loss for the fiscal 1998 six month period. A significant portion of the Merger charge recorded in the first quarter of fiscal 1998 consists of non tax-deductible expenses. As the year 2000 approaches, an issue impacting all companies has emerged regarding how existing application software programs and operating systems can accommodate the year 2000 date value. The Company has assembled a task force to review all internal software, and systems to ensure that they do not malfunction as a result of the year 2000. The Company expects to both replace some software and systems and upgrade others. The task force is also reviewing the operating systems the Company sells with its machines to ensure that they are year 2000 compliant. The Company has not fully evaluated the potential future financial impact of the year 2000 compliance. Liquidity and Capital Resources Net cash provided by operating activities was $7.9 million for the six months ended December 31, 1997. Non-cash depreciation and amortization charges of $32.1 million, increases in accrued liabilities and decreases in inventory were offset by decreases in accounts payable of $33.7 million and increases in accounts receivable of $3.3 million. Cash used in investing activities was $395.0 million derived primarily by net purchases of short-term investments of $370.8 million. Capital expenditures for the six month period ended December 31, 1997 were $22.9 million. During the first quarter of fiscal 1998, the Company received approximately $301.0 million of net cash from the issuance of the Notes. The Company incurred $9.0 million of debt issuance costs which will be amortized over the life of the Notes. The Company repaid $35.0 million of borrowings under its syndicated line of credit. As of December 31, 1997, the Company had $446.7 million in cash, cash equivalents and short-term investments compared with $195.7 million at June 30, 1997. The Company has a total of $210.0 million available under a syndicated bank line of credit which was due to expire in December 1998 but has been extended to December 2000. Borrowings under the line of credit bear interest at the bank's prime rate or 0.55% to 0.75% over London Interbank Offered Rate. Borrowings under the line of credit are subject to the Company's compliance with 13 14 financial covenants. At December 31, 1997, the Company was in compliance with the financial covenants. The Company's cash, cash equivalents, short-term investments and available lines of credit at the end of the second quarter of fiscal 1998 are considered adequate to support current levels of operations for at least the next twelve months. RISK FACTORS Fluctuations in Quarterly Revenues and Operating Results The Company's quarterly revenues have fluctuated in the past and may fluctuate in the future. The Company's revenues are dependent on many factors, including but not limited to the economic conditions in the semiconductor industry, customer capacity requirements, the size and timing of the receipt of orders from customers, customer cancellations or delays of shipments, the Company's ability to develop, introduce and market new and enhanced products on a timely basis, the introduction of new products by its competitors, changes in average selling prices and product mix, and exchange rate fluctuations, among others. The Company's expense levels will be based, in part, on expectations of future revenues. If revenue levels in a particular quarter do not meet expectations, operating results could be affected. The Company derives its revenue primarily from the sale of a relatively small number of high-priced systems. The Company's systems can range in price from approximately $150,000 to over $3 million per unit. The sale of fewer systems than anticipated in any quarter may have a substantial negative impact on the operating results for the quarter. The Company's results of operations for a particular quarter could be adversely affected if anticipated orders are not received in time to enable shipment during such quarter, if anticipated shipments are delayed or canceled by one or more customers, or if shipments are delayed due to procurement shortages or manufacturing difficulties. The Company generally realizes a higher margin on sales of its mature products, such as Rainbow etch systems and CMP cleaning systems, than on sales of Alliance, CVD, FPD, and newly released TCP products. Newer products usually have lower margins in the initial phase of production. International Sales International sales accounted for 57%, 63%, 53%, 54% and 66% respectively, of the Company's net revenues in the fiscal years 1997, 1996 and 1995 and the first six months of fiscal 1998 and 1997. Historically, sales to the Asian regions have accounted for a substantial portion of international sales. Recent banking and currency problems in the Asian regions, however, will have an adverse impact on the Company's revenue and operations. Sales of products by the Company currently are denominated in United States dollars. In Korea, devaluation of the Won and difficulties in obtaining credit have curtailed semiconductor 14 15 equipment investment and have recently and may continue to lead to cancellation or delay of orders for the Company's products. In Japan, the Company's sales are denominated in the Japanese yen. A weakening of the value of the Japanese yen as compared to the U.S. dollar could negatively impact operating margins. Currently, the Company enters into foreign currency forward contracts to minimize the impact of exchange rate fluctuations on the value of the yen-denominated assets and liabilities, and the Company will enter into such hedging transactions in the future. The impact of these and other factors on the Company's revenues and operating results in any future period is difficult for the Company to forecast. There can be no assurance that these and other factors will not materially adversely affect the Company's future business and financial results. Introduction of New Product The CMP polishing system to be launched by the Company is expected to face significant competition from multiple current and future competitors. Companies currently offering polishing systems include Applied Materials, Inc., Cybeq Systems, Ebara Corporation, Integrated Process Equipment Corp. ("IPEC"), SpeedFam Corp., Strasbaugh and Sumitomo Metals Limited. IPEC currently has the largest installed base of CMP polishers and also offers an integrated CMP polishing and cleaning system. Lam believes that other companies are developing polishing systems and are planning to introduce new products to this market before or during the same time frame as the Company's planned introduction of its CMP polishing system. Potential Volatility Common Stock Price The market price for Lam Common Stock has been volatile. The market price of Lam Common Stock could be subject to significant fluctuations in response to variations in quarterly operating results, shortfalls in revenues or earnings from levels expected by securities analysts and other factors such as announcements of the restructuring, technological innovations or new products by the Company or by the Company's competitors, government regulations, developments in patent or other proprietary rights. In addition, the stock market has in recent years experienced significant price fluctuations. These fluctuations often have been unrelated to the operating performance of the specific companies whose stocks are traded. Recent fluctuations have been tied to the Asian financial crisis and the price of semiconductors. Broad market fluctuations, as well as economic conditions generally in the semiconductor industry, may adversely affect the market price of Lam Common Stock. Intellectual Property Matters From time to time, the Company has received notices from third parties alleging infringement of such parties' patent rights by the Company's products. In such cases, it is the policy of the Company to defend against the claims or negotiate licenses on commercially reasonable terms where considered appropriate. However, no assurance 15 16 can be given that the Company will be able to negotiate necessary licenses on commercially reasonable terms, or at all, or that any litigation resulting from such claims would not have a material adverse effect on the Company's business and financial results. The Company's success depends in part on its proprietary technology. While the Company attempts to protect its proprietary technology through patents, copyrights and trade secret protection, it believes that the success of the Company will depend on more technological expertise, continuing the development of new systems, market penetration and growth of its installed base and the ability to provide comprehensive support and service to customers. There can be no assurance that the Company will be able to protect its technology or that competitors will not be able to develop similar technology independently. The Company currently has a number of United States and foreign patents and patent applications. There can be no assurance that any patents issued to the Company will not be challenged, invalidated or circumvented or that the rights granted thereunder will provide competitive advantages to the Company. Year 2000 Computer Problem The Company relies heavily on the Company's existing application software programs and operating systems. In order to assess and minimize the year 2000 computer problem (in which systems do not properly recognize date sensitive information when the year changes to 2000), the Company has formed a task force to review all software and systems. The Company expects both to replace some software and systems and upgrade others. In addition, the task force is reviewing the operating systems the Company sells with its machines to ensure they are year 2000 compliant. While the Company has incurred and will continue to incur internal staff costs as well as consulting and other expenses as a result of year 2000 issues, it has not fully evaluated the potential financial impacts of the year 2000 compliance project. The Company believes that its year 2000 compliance project will be completed on a timely basis. However, there can be no assurance that unexpected delays or problems will not have an adverse effect on the Company. Restructuring of Operations As stated in Note I, the Company announced a restructuring of its operations in February 1998. Implementation of this restructuring involves several risks, including the risk that by simplifying and modifying its product line the Company will increase its dependence on fewer products and potentially reduce overall sales. Although the Company believes that the actions it is taking in connection with the restructuring, including the reduction in workforce, the consolidation of manufacturing operations and reduction of flat panel display and thermal CVD operations, should help align the Company with its business outlook, there can be no assurance that 16 17 such actions will enable the Company to achieve its objectives of reducing costs and maintaining sustainable profitability. In addition, there can be no assurance that the size of the restructuring charge will not exceed the Company's estimates. The Company's future consolidated operating results and financial condition could be adversely affected should it encounter difficulty in effectively managing the restructuring. PART II. OTHER INFORMATION ITEM 1. Legal Proceedings In October 1993, Varian Associates, Inc. ("Varian") brought suit against the Company in the United States District Court, Northern District of California, seeking monetary damages and injunctive relief based on the Company's alleged infringement of certain patents held by Varian. The lawsuit was reassigned a new judge and no trial date has been set. The Company has asserted defenses of invalidity and unenforceability of the patents that are the subject of the lawsuit, as well as noninfringement of such patents by the Company's products. While litigation is subject to inherent uncertainties and no assurance can be given that the Company will prevail in such litigation or will obtain a license under such patents on commercially reasonable terms or at all if such patents are held valid and infringed by the Company's products, the Company believes that the Varian lawsuit will not have a material adverse effect on the Company's consolidated financial position, operating results or cash flows. In addition, the Company is from time to time notified by various parties that it may be in violation of certain patents. In such cases, it is the Company's intention to seek negotiated licenses where it is considered appropriate. The outcome of these matters will not, in management's opinion, have a material impact on the Company's consolidated financial position, operating results or cash flows. ITEM 4. Results of the Votes of Stockholders The Annual Meeting of Stockholders of Lam Research Corporation was held at the principal office of the Company at 4650 Cushing Parkway, Fremont, California 94538 on November 7, 1997. Out of 36,612,676 shares of Common Stock entitled to vote at the meeting, 32,440,146 shares were present in person or by proxy. 17 18 The vote for nominated directors, to serve for the ensuing year, and until their successors are elected, was as follows:
NOMINEE IN FAVOR WITHHELD Roger D. Emerick 32,213,144 227,002 James W. Bagley 32,227,524 212,622 David G. Arscott 32,253,093 187,053 Richard J.Elkus,Jr 32,256,255 183,891 Jack R. Harris 32,137,660 302,486 Grant M. Inman 32,124,022 316,124 Osamu Kano 32,226,664 213,482
The results of voting on the following items were as set forth below: (a) Approval of amendment of the Company's 1984 Employee Stock Purchase Plan to increase the number of shares reserved for issuance thereunder by 350,000 shares.
IN FAVOR OPPOSED ABSTAIN 32,098,681 280,163 61,302
(b) Ratification of appointment of Ernst & Young LLP as independent auditors for the Company for the fiscal year ending June 30, 1998:
IN FAVOR OPPOSED ABSTAIN 32,369,068 41,539 29,539
ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits: 10.46 Receivables Purchase Agreement between Lam Research Co., LTD. and ABN AMRO Bank N.V., Tokyo Branch, dated December 26, 1997. 10.47 Third Amendment to Term Loan between Lam Research Co., Ltd., and The Sakura Bank, dated December 19, 1997. 10.48 Second Amendment to Continuing Guaranty between Lam Research Corporation and The Sakura Bank, dated December 19, 1997. 10.49 Guaranty to the Receivables Purchase Agreement between Lam Research Co., LTD. and ABN AMRO Bank N.V., Tokyo Branch, dated December 26, 1997. 27 Financial Data Schedule (b) No reports on Form 8-K were filed by the Registrant during the quarter ended December 31, 1997. 18 19 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. Date: February 13, 1998 LAM RESEARCH CORPORATION By:/s/ MERCEDES JOHNSON ----------------------------- Mercedes Johnson, Vice President, Finance & Chief Financial Officer 19 20 EXHIBIT INDEX ------------- 10.46 Receivables Purchase Agreement between Lam Research Co., LTD. and ABN AMRO Bank N.V., Tokyo Branch, dated December 26, 1997. 10.47 Third Amendment to Term Loan between Lam Research Co., Ltd., and The Sakura Bank, dated December 19, 1997. 10.48 Second Amendment to Continuing Guaranty between Lam Research Corporation and The Sakura Bank, dated December 19, 1997. 10.49 Guaranty to the Receivables Purchase Agreement between Lam Research Co., LTD. and ABN AMRO Bank N.V., Tokyo Branch, dated December 26, 1997. 27 Financial Data Schedule
EX-10.46 2 RECEIVABLES PURCHASE AGREEMENT 1 Exhibit 10.46 RECEIVABLES PURCHASE AGREEMENT dated December 26, 1997 between LAM RESEARCH CO., LTD. as Seller BANKS AND OTHER INSTITUTIONS NAMED HEREIN as Purchasers ABN AMRO BANK N.V., TOKYO BRANCH as Representative Purchaser and LAM RESEARCH CO., LTD. as Collection Agent 2 TABLE OF CONTENTS Part 1 INTERPRETATION 1. Definitions and Interpretation . . . . . . . . . 1 Part 2 GENERAL PROVISIONS FOR SALE OF RECEIVABLES 2. Terms of Purchase. . . . . . . . . . . . . . . . 12 Part 3 SALE OF INITIAL RECEIVABLES 3. Sale and Purchase. . . . . . . . . . . . . . . . 13 4. Consideration. . . . . . . . . . . . . . . . . . 14 5. Initial Purchase . . . . . . . . . . . . . . . . 14 Part 4 SALE OF ADDITIONAL RECEIVABLES 6. Offers of Additional Receivables . . . . . . . . 15 7. Acceptance of Offers . . . . . . . . . . . . . . 17 8. Consideration. . . . . . . . . . . . . . . . . . 17 9. Assignment of Accepted Receivables . . . . . . . 17 Part 5 ADJUSTMENT OF CONSIDERATION 10. Adjustment due to Reduction of Face Value. . . . 18 Part 6 REPRESENTATIONS, WARRANTIES AND COVENANTS 11. Representations and Warranties . . . . . . . . . 19 12. Financial Information. . . . . . . . . . . . . . 19 13. Seller's Covenants . . . . . . . . . . . . . . . 20 14. Purchasers' Covenants. . . . . . . . . . . . . . 23 15. Seller's Indemnity . . . . . . . . . . . . . . . 23 Part 7 REPURCHASE OF RECEIVABLES 16. Repurchase of Receivables. . . . . . . . . . . . 25 Part 8 INDEMNITY FOR FUNDING LOSSES 17. Indemnity by the Seller for Funding Losses . . . 29 Part 9 3 COLLECTION OF RECEIVABLES 18. Appointment of Collection Agent. . . . . . . . . 30 19. Collection of Receivables; Payment of Purchasers' Yield. . . . . . . . . . . . . . . . 31 20. Cost, Expenses and Remuneration. . . . . . . . . 34 21. Removal or Termination of Collection Agent . . . 35 Part 10 PAYMENTS 22. Currency of Account and Payment. . . . . . . . . 36 23. Payments by the Seller or the Collection Agent . 37 24. Payments by each Purchaser . . . . . . . . . . . 37 Part 11 TAXES 25. Taxes. . . . . . . . . . . . . . . . . . . . . . 38 Part 12 TERMINATION 26. Consequence of a Termination Event . . . . . . . 39 Part 13 REPRESENTATIVE PURCHASER 27. Representative Purchaser . . . . . . . . . . . . 40 Part 14 MISCELLANEOUS 28. Default Interest and Indemnity . . . . . . . . . 44 29. Fees, Costs and Expenses and Stamp Duty. . . . . 44 30. Benefit of Agreement . . . . . . . . . . . . . . 45 31. Remedies and Waivers . . . . . . . . . . . . . . 47 32. Partial Invalidity . . . . . . . . . . . . . . . 47 33. Counterparts . . . . . . . . . . . . . . . . . . 47 34. Notices. . . . . . . . . . . . . . . . . . . . . 47 35. Prior Understandings . . . . . . . . . . . . . . 48 36. Pro Rata Sharing . . . . . . . . . . . . . . . . 49 Part 15 LAW AND JURISDICTION 37. Governing Law. . . . . . . . . . . . . . . . . . 49 38. Jurisdiction . . . . . . . . . . . . . . . . . . 49 4 EXHIBIT I PURCHASER'S COMMITMENTS THE FIRST SCHEDULE Description of Initial Receivables THE SECOND SCHEDULE Part 1 : Conditions Precedent to the Initial Purchase Part 2 : Conditions Precedent to Subsequent Purchases THE THIRD SCHEDULE Part 1 - Form of Seller Assignment of Initial Receivables Part 2 - Form of Offer Part 3 - Form of Seller Assignment of Accepted Receivable Part 4 - Form of Reassignment of Receivables THE FOURTH SCHEDULE Part 1 : Eligible Buyers Part 2 : Eligible Receivables THE FIFTH SCHEDULE Termination Events THE SIXTH SCHEDULE Part 1 : Representations as to Matters of Law Part 2 : Representations as to Matters of Fact Part 3 : Representations relating to Receivables THE SEVENTH SCHEDULE Covenants and Undertakings of the Collection Agent THE EIGHTH SCHEDULE Form of Guaranty THE NINTH SCHEDULE Part 1: Form of Opinion of Nagashima & Ohno Part 2: Form of Opinion of Jan J. Kang THE TENTH SCHEDULE Form of Transfer Certificate 5 THIS RECEIVABLES PURCHASE AGREEMENT is made the 26th day of December, 1997 BETWEEN: (1) LAM RESEARCH CO., LTD., a Japanese corporation having its registered office at 1-1-10, Oyama, Sagamihara-shi, Kanagawa Prefecture, Japan as seller of receivables (in such capacity the "Seller"); (2) BANKS AND OTHER INSTITUTIONS NAMED IN EXHIBIT I HERETO as purchasers (collectively the "Purchasers" and each a "Purchaser"); (3) ABN AMRO BANK N.V. acting through its TOKYO BRANCH, a branch licensed in Japan and having its registered office at Shiroyama JT Mori Building, 4-3-1, Toranomon, Minatoku, Tokyo 105, Japan as representative of the Purchasers (in such capacity the "Representative Purchaser"); and (4) LAM RESEARCH CO., LTD., a Japanese corporation having its registered office at 1-1-10, Oyama, Sagamihara-shi, Kanagawa Prefecture, Japan as collection agent in relation to receivables (in such capacity the "Collection Agent"). WHEREAS: (A) The Seller and the Purchasers have agreed, on the terms and subject to the conditions hereof, that the Seller will sell to the Purchasers certain receivables which have arisen, or will arise, out of the sales by the Seller of certain equipment. (B) The Collection Agent has agreed, upon the terms and subject to the conditions hereof, to act as the agent of the Purchasers in connection with the collection of receivables from time to time assigned to the Purchasers in accordance with the terms hereof. IT IS HEREBY AGREED as follows:- Part 1 INTERPRETATION 1. Definitions and Interpretation 1.1 In this Agreement and in the Exhibit and Schedules, unless otherwise defined therein or unless the context otherwise requires, the following terms shall have the following meanings:- "A-rated Buyer" means a Buyer who is given and maintains a rating in respect of its long-term unsecured and unsubordinated debt being "A" or higher by any of Standard & Poor's Corporation, Moody's Investors Service Inc. or Japan Bond Research Institute; "Acceptance" means, in relation to Equipment, the 6 acceptance by the Buyer of such Equipment which, in accordance with the relevant Sales Agreement, renders the obligation of such Buyer to pay the Face Value of the Purchased Receivable arising out of the sale of such Equipment unconditional (only subject to the lapse of the credit period agreed between the Seller and such Buyer); "Accepted Receivables" has the meaning set out in Clause 7.2; "Additional Receivables" means Receivables other than the Initial Receivables; "Additional Sales Agreement" means the Sales Agreement relating to the Additional Receivables; "Alternate Rate" applicable to a Purchased Receivable in respect of each Fixed Period means the rate per annum, expressed as a decimal, equal to the sum of (i) such rate as shall be mutually agreed upon among the Seller and the Purchasers and (ii) the Applicable Margin; "Applicable Margin" means (a) in the case of a Purchased Receivable which is a Post-Acceptance Receivable as of two (2) Business Days prior to the first day of the relevant Fixed Period, 0.45 percent per annum, and (b) in the case of a Purchased Receivable which is not a Post-Acceptance Receivables as of two (2) Business Days prior to the first day of the relevant Fixed Period, 0.90 percent per annum; "Assignments" means, collectively, any Seller Assignment and the Syndicate Assignment relating thereto; "Available Receivables" has the meaning set out in Clause 6.2(i); "Business Day" means a day, other than a Saturday, Sunday or legal holiday, on which banks are open for business in Tokyo; "Buyer Insolvency Event" means, in relation to any Buyer, its winding-up or dissolution or the judgment or declaration of insolvency or bankruptcy or the appointment of an administrator, trustee, liquidator, sequestrator or similar official over it or any of its reserves or assets, the filing of a petition in relation to any of the foregoing or the commencement of any analogous proceedings in relation thereto, and, in the case of such filing made by any third party against it, such filing (i) having resulted in a judgment or declaration of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or dissolution or (ii) having not been dismissed, discharged, stayed or restrained within sixty (60) days; "Buyers" means buyers of the Equipment from the Seller; "Collection Account" means the account specified in Clause 19.2; 7 "Collections" means all payments by or on behalf of Buyers received in respect of the Receivables, whether in the form of cash, electronic money transfer or any other form of payment (including, but not limited to, the payment by means of collection of the obligations represented by the P/N) in accordance with a Sales Agreement in effect from time to time; "Confirmation to Issue P/N's" means a written confirmation duly executed by the relevant Buyer and delivered to the Seller of the issuance of the P/N's in relation to the Receivables which may arise out of the relevant Sales Agreement, subject to (but promptly upon, only subject to the applicable terms of the relevant Sales Agreement) the Acceptance or the Partial Acceptance of the relevant Equipment, such confirmation being in a form and substance reasonably satisfactory to the Representative Purchaser; "Debt" of any person means, at any date, without duplication, (i) all obligations of such person for borrowed money, (ii) all obligations of such person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such person as lessee which are capitalized in accordance with the generally accepted accounting principles, (v) all Debt secured by an encumbrance on any asset of such person, whether or not such Debt is otherwise an obligation of such person, (vi) all Debt of others guaranteed by such person and (vii) all off-balance sheet indebtedness of such person; "Deposit" means, in relation to a Purchased Receivable, the amount, if any, which has been or will have been as of the relevant Purchase Date paid to or deposited with the Seller by the relevant Buyer by way of deposit or downpayment (however it is called) for the purchase of the relevant Equipment; "Designated Portion" has the meaning set out in Clause 2.1; "Disapplication of Prohibition of Assignment" means a written consent duly executed by the relevant Buyer to the disapplication of prohibition of the assignment by the Seller of the Receivables arising out of the relevant Sales Agreement, such consent being in a form and substance reasonably satisfactory to the Representative Purchaser; "Eligible Buyers" has the meaning set out in Part 1 of the Fourth Schedule; "Eligible Receivables" has the meaning set out in Part 2 of the Fourth Schedule; "Equipment" means semiconductor capital equipment sold by 8 the Seller in the ordinary course of its business; "Existing Agreement" means a Receivables Purchase Agreement dated June 22, 1995 (as amended from time to time) between Lam Research Co., Ltd. as seller, ABN AMRO Bank N.V., acting through its Tokyo Branch as purchaser and Lam Research Co., Ltd. as collection agent; "Face Value" means, in relation to a Purchased Receivable, the amount in Yen which is to be payable pursuant to the Sales Agreement in respect of such Purchased Receivable (less the Deposit, if any, in relation to such Purchased Receivable), which shall be specified in the Seller Assignment relating to such Purchased Receivables; "Fixed Period" means, with respect to each purchase hereunder, the period commencing on and including the relevant Purchase Date and ending on but excluding the next succeeding Settlement Date and each successive period thereafter commencing on and including the last preceding Settlement Date and ending on but excluding the next succeeding Settlement Date; "Guaranty" means a guaranty of the Guarantor substantially in the form of the Eighth Schedule; "Guarantor" means Lam Research Corporation, a Delaware corporation; "Indemnified Amounts" has the meaning set out in Clause 15.1; "Initial Purchase Date" means December 26, 1997 or such later date as the parties hereto may agree; "Initial Receivables" means those Receivables, being the Eligible Receivables, particulars of which are set out in the First Schedule; "Initial Sales Agreements" means the Sales Agreements relating to the Initial Receivables; "Insolvency Event" means, in relation to any party hereto its winding-up or dissolution or the judgment or declaration of insolvency or bankruptcy or the appointment of an administrator, trustee, liquidator, sequestrator or similar official over it or any of its reserves or assets, the filing of a petition in relation to any of the foregoing or the commencement of any analogous proceedings in relation thereto, and, in the case of such filing made by any third party against it, such filing (i) having resulted in a judgment or declaration of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or dissolution or (ii) having not been dismissed, discharged, stayed or restrained within ninety (90) days with respect to the Seller and thirty (30) days with respect to the Guarantor; "LIBOR" applicable to a Purchased Receivable means the 9 rate for deposits in Yen for a period of one month which appears on the Telerate Page 3750 as of 11:00 a.m., London time, on the day that is two London Banking Days (which means a day on which commercial banks are open for business (including dealing in foreign exchange and foreign currency deposits) in London) preceding the first day of the relevant Fixed Period, provided that if such rate does not appear on the Telerate Page 3750, "LIBOR" shall mean the arithmetic mean of the rates, expressed as a decimal, quoted to ABN AMRO Bank N.V. at such time on such day by two or more major banks in the London interbank market selected in good faith by ABN AMRO Bank N.V. as a rate per annum at which such deposit, for such period commencing on such first day and in such amount that ABN AMRO Bank N.V. reasonably determines is representative for a single transaction in such market on such day, is offered; "LIBOR Based Rate" applicable to a Purchased Receivable in respect of each Fixed Period means the rate per annum, expressed as a decimal, equal to the sum of (i) the LIBOR applicable to such Purchased Receivable and (ii) the Applicable Margin; "Majority Purchasers" means at any time Purchasers holding in excess of sixty-six percent (66%) of the aggregate unpaid Face Value of the Purchased Receivables, or if no Purchased Receivables are at the time outstanding, Purchasers having in excess of sixty-six percent (66%) of the Total Purchase Commitments; "Material Adverse Effect" means in relation to any matter, event or circumstance concerning the Seller, the Guarantor or the Collection Agent (insofar as Lam Research Co., Ltd. is the Collection Agent), a likely material adverse effect on the ability of the person concerned to perform its obligations under this Agreement, the Guaranty, the Assignment or any of the other Transaction Documents; "Non-Eligible Buyers" means the Buyers other than the Eligible Buyers; "Offer" means any offer made by the Seller to sell and assign Additional Receivables to the Purchaser in accordance with Clause 6; "Original Financial Statements of the Seller" means the audited financial statements of the Seller for the financial year ended June 30, 1997; "Original Financial Statements of the Guarantor" means the audited financial statements of the Guarantor for the financial year ended June 30, 1997; "Paid Amount" in relation to a Purchased Receivable means the amount which has been paid to the Representative Purchaser for the account of the Purchasers through the Collection Account on account of such Purchased Receivable pursuant to Clause 19.4(a) or collected by the Representative Purchaser by means of collection of the 10 obligations represented by the P/N pursuant to Clause 19.3, as the case may be, or otherwise paid to the Purchasers in accordance with this Agreement, in each case in immediately available funds; "Partial Acceptance" means, in relation to Equipment, such acceptance of the Buyer of such Equipment as renders the obligation of such Buyer to pay the Revised Face Value of the Purchased Receivable arising out of the sale of such Equipment unconditional (only subject to the lapse of credit period agreed between the Seller and the Buyer); "Perfection Document" means, in relation to a Purchased Receivable, a written consent duly executed by the relevant Buyer, or a written notice to the relevant Buyer duly executed by the Seller, detailing the assignment by the Seller to the Representative Purchaser of such Purchased Receivable pursuant to the relevant Seller Assignment, such consent or notice being in the form of a document duly date-stamped (kakutei hizuke) by a notary public or through contents certified mail (naiyo shomei yubin) with delivery certification (haitatsu shomei) by post office or otherwise in any case in accordance with Article 467(1) and (2) of the Civil Code (Min Po) of Japan (Law No.89 of 1896, as amended) and in a form and substance reasonably satisfactory to the Representative Purchaser. In addition, "Perfection Documents" includes any other document, certificate, statement or instrument for the perfection of the assignment of accounts receivable pursuant to any provisions of Japanese law that may be promulgated after the date hereof; "P/N" means, in relation to a Receivable, a promissory note (yakusoku tegata) duly issued by the relevant Buyer in accordance with the Law on Bills of Exchange and Promissory Notes (Tegata Ho) of Japan (Law No.20 of 1932, as amended) for the payment of such Receivable, which shall be assignable; "P/N Account" means the account specified in Clause 19.3; "Post-Acceptance Receivables" means Eligible Receivables with respect to which (x) the Acceptance of the Equipment in relation to such Receivables has occurred, (y) the conditions precedent set out in Paragraph 2(a) of Part 1 or Part 2, as the case may be, of the Second Schedule have been satisfied and the Scheduled Receivables Due Date has been determined, or, as the case may be, the P/N in relation to such Receivables has been issued by the relevant Buyer to the Seller and endorsed without recourse by the Seller to the Representative Purchaser for the ratable benefit of the Purchasers, and (z) the relevant Buyer is an A-rated Buyer. For the purpose of item (x) of the definition of "Post-Acceptance Receivables", the Partial Acceptance shall be deemed the Acceptance to the extent relating to the Revised Face Value of the relevant Receivable; "Potential Termination Event" means any event or circumstances which, if it continued after the giving of 11 any notice and/or the expiry of any grace period, would become a Termination Event; "Proposed Acceptance Date" means, in relation to each Purchased Receivable, the date which is agreed upon between the Seller and the Representative Purchaser in the relevant Seller Assignment as a date on which the Acceptance of the Equipment relating to such Purchased Receivable is likely to occur, but shall in no event be later than the date which is two hundred seventy (270) days after the date of Shipment of such Equipment; "Proposed Acceptance Period" means, in relation to each Purchased Receivable, a period commencing on the relevant Purchase Date and ending on the Proposed Acceptance Date for such Purchased Receivable; "Proposed Credit Period" means, in relation to each Purchased Receivable, the period which is agreed upon, based on the payment terms provided for in the Purchase Order for the Equipment relating to such Purchased Receivable, between the Seller and the Representative Purchaser in the relevant Seller Assignment as a period commencing on the date immediately following the date of Acceptance of such Equipment and ending on the date on which such Purchased Receivable is due to be paid by the relevant Buyer, but shall in no event be longer than two hundred twenty-five (225) days; "Proposed Receivables Due Date" means, in relation to each Purchased Receivable, the date which is specified in the relevant Seller Assignment as the last day of the Proposed Receivables Period for such Purchased Receivable; "Proposed Receivables Period" means, in relation to each Purchased Receivable, the period commencing on the first day of the Proposed Acceptance Period and ending on the last day of the Proposed Credit Period for such Purchased Receivable; "Purchase Commitment" means, (subject to the third sentence of Clause 2.1) with respect to each Purchaser, the amount set forth opposite such Purchaser's name under the caption "Commitment" in Exhibit I attached hereto (together being equal to the Total Purchase Commitments), as may be cancelled from time to time as a whole or in part pursuant to Clause 2.1; "Purchase Commitment Period" means the period from and including the Initial Purchase Date up to and including a day which is the second (2nd) anniversary of the date hereof; "Purchase Dates" means the Initial Purchase Date and the Subsequent Purchase Dates; "Purchase Order" means, in relation to Equipment, the purchase order (or its equivalent regardless of whether it is titled as such) for such Equipment duly executed and delivered to the Seller by the Buyer of such 12 Equipment, which shall detail the description and the ordered quantity of, and the payment terms for, such Equipment; "Purchase Price" has the meaning set out in Clause 4.1 or 8.1, as the case may be; "Purchased Receivables" means all of those Initial Receivables and Accepted Receivables which have actually been purchased by the Purchaser in accordance with Clause 5 or 9, as the case may be, other than Receivables which have been repurchased by the Seller pursuant to this Agreement; "Receivables" means all amounts owed by Buyers to the Seller pursuant to the Sales Agreements; "Records" means all Sales Agreements, contracts, other documents, books, records and other information maintained by the Seller (in that capacity and as Collection Agent) with respect to the Purchased Receivables; "Reduced Amount" means, in relation to a Purchased Receivable, the amount (if any) in Yen equal to the Face Value minus the Revised Face Value of such Purchased Receivable; "Related Security" means in relation to any Purchased Receivable (i) all of the Seller's interest, if any, in the Equipment (including returned Equipment, if any), the sale of which by the Seller gave rise to such Purchased Receivables, (ii) all other encumbrance, if any, purporting to secure payment of such Purchased Receivable, whether pursuant to the Sales Agreement relating to such Purchased Receivable or otherwise and (iii) all guarantees, insurance or other agreements or arrangements of any kind from time to time supporting or securing payment of such Purchased Receivable whether pursuant to the Sales Agreement relating to such Purchased Receivable or otherwise; "Revised Face Value" means, in relation to a Purchased Receivable, the amount in Yen less than the Face Value of such Purchased Receivable which has been agreed upon between the Seller and the relevant Buyer as an amount payable as a purchase price of the Equipment relating to such Purchased Receivable (less the Deposit, if any, in relation to such Purchased Receivable) following the performance test of such Equipment; "Sales Agreement" means the agreement (whether in writing or oral) between the Seller and the Buyer with respect to a sale of Equipment (including the Purchase Order) governing the terms and conditions of such sale (including all the agreements, instruments and any other documents relating or ancillary thereto), as such agreement may be amended or modified from time to time; "Scheduled Receivables Due Date" means, in relation to each Purchased Receivable, the date on which the Face 13 Value or the Revised Face Value, as the case may be, of such Purchased Receivable will be unconditionally due and payable by such Buyer pursuant to the terms of the relevant Sales Agreement; "Seller Assignment" means, in relation to the sale of each Initial Receivables, an assignment substantially in the form set out in Part 1 of the Third Schedule or, in relation to the sale of each Accepted Receivable, an assignment substantially in the form of Part 3 of the Third Schedule; "Settlement Date" means the fourth Friday of each calendar month, provided that if such day is not a Business Day, the Settlement Date shall be the immediately preceding Business Day; "Shipment" means, in relation to any Equipment, the shipment by the Seller of such Equipment in accordance with the relevant Sales Agreement, the occurrence and the date of which shall be certified by the Seller to the reasonable satisfaction of the Representative Purchaser; "Subsequent Purchase Date" means each such date as agreed upon between the Seller and the Purchaser in accordance with Clause 7 as a date on which an Accepted Receivable is to be assigned to the Purchaser pursuant to Clause 9, which must be a Settlement Date and must not be a date later than the last day of the Purchase Commitment Period; "Syndicate Assignment" means, in relation to each Initial (or Accepted) Receivable assigned by the Seller to the Representative Purchaser pursuant to the Seller Assignment, an assignment by the Representative Purchaser to each Purchaser (other than the Representative Purchaser) according to its Designated Portion of such Initial (or Accepted) Receivable with the Representative Purchaser's Designated Portion thereof retained by itself, as evidenced by a notice (in form and substance deemed appropriate by the Representative Purchaser) sent by the Representative Purchaser to each such Purchaser, accompanied by a copy of the relevant Seller Assignment; "Termination" has the meaning set out in Clause 26.1; "Termination Event" has the meaning ascribed to it in the Fifth Schedule; "TIBOR" applicable to a Purchased Receivable means (i) the average rate at which deposits in Yen are offered to all banks for a period of one month (or a period most comparable to that period) calculated in accordance with Reuter Screen TIBM page or, if that page is no longer published, its successor or equivalent in respect of a deposit for that period (or a period most comparable to that period) at or about 11:00 a.m., Tokyo time, on the date falling two Business Days prior to the first day of the relevant Fixed Period, or (ii) if no such rate is quoted, the rate which a major Japanese city bank selected by ABN AMRO Bank N.V. in its discretion was 14 offering deposits to prime banks in the Tokyo interbank market for that period (or a period most comparable to that period) at or about 11:00 a.m., Tokyo time, on the date falling two Business Days prior to the first day of the relevant Fixed Period; "TIBOR Based Rate" applicable to a Purchased Receivable in respect of each Fixed Period means the rate, expressed as a decimal, equal to the sum of (i) the TIBOR applicable to such Purchased Receivable and (ii) the Applicable Margin; "Total Purchase Commitments" means, subject to the third sentence of Clause 2.1, Six Billion Yen (yen6,000,000,000), as may be cancelled from time to time as a whole or in part pursuant to Clause 2.1; "Transaction Documents" means any agreement or document entered into pursuant to this Agreement or in connection with this Agreement or the transactions contemplated hereby; "Transfer Certificate" means a transfer certificate executed by a transferor Purchaser and a transferee substantially in the form of the Tenth Schedule; "Yen" and the sign "yen" denote lawful currency of Japan; and "Yield Rate" applicable to a Purchased Receivable in respect of each Fixed Period means either of (i) the LIBOR Based Rate, (ii) the TIBOR Based Rate or (iii) the Alternate Rate, as selected or deemed to be selected by the Seller in accordance with Clause 19.5. 1.2 In this Agreement: a "Clause", "Part", "Recital", "Exhibit" or "Schedule" is, subject to any contrary indication, a reference to a clause or part hereof or a recital, exhibit or schedule hereto; an "encumbrance" shall be construed as a reference to a mortgage, charge, pledge, lien or other encumbrance securing any obligation of any person or any other type of preferential arrangement (including, without limitation, title transfer and retention arrangements) having a similar effect; a "person" shall be construed as a reference to any person, firm, company, corporation, government, state or agency of a state or any association or partnership (whether or not having separate legal personality) or two or more of the foregoing; "stamp duty" shall be construed as a reference to any stamp, registration or to the transaction or documentary tax (including, without limitation any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same); 15 "tax" shall be construed so as to include any tax, levy, impost, duty or other charge of a similar nature (including, without limitation, any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same); and the "rehabilitation", "bankruptcy", "dissolution", "insolvency", "liquidation", "receivership" or "winding-up" of any person shall be construed so as to include any equivalent or analogous proceedings under the laws of the jurisdiction in which such person is incorporated (or, if not a company or corporation, domiciled) or any jurisdiction in which such person carries on business. 1.3 Save where the contrary is indicated, any reference in this Agreement to: (i) this Agreement or any other agreement or document shall be construed as a reference to this Agreement, or, as the case may be, such other agreement or document as the same may have been, or may from time to time be, amended, varied, novated or supplemented; (ii) a statute shall be construed as a reference to such statute as same may have been, or may from time to time be, amended or re-enacted; and (iii) a time of day (including opening and closing of business) shall be construed as a reference to Tokyo time. 1.4 Clause, Part, Exhibit and Schedule headings are for ease of reference only. Part 2 GENERAL PROVISIONS FOR SALE OF RECEIVABLES 2. Terms of Purchase 2.1 On the terms and conditions hereinafter set forth, the Seller agrees to sell, and each Purchaser severally agrees to purchase in the proportion of the Face Value as its Purchase Commitment bears to the Total Purchase Commitments ("Designated Portion"), the Receivables, which must be Eligible Receivables, from time to time during the Purchase Commitment Period. Such purchase shall be made by the Seller selling the entire Receivables to the Representative Purchaser and thereupon by the Representative Purchaser reselling such Receivables to each Purchaser (other than the Representative Purchaser) according to its Designated Portion with the Representative Purchaser's Designated Portion of such Receivables retained by itself. For the purposes of this Agreement, so long as any "Purchased Receivables" that have been purchased by ABN AMRO Bank N.V., Tokyo Branch under the Existing Agreement are outstanding and remain unpaid, the Total Purchase Commitments shall mean Six Billion Yen (yen6,000,000,000) less the aggregate sum of the "Purchase Price" (as defined in the Existing Agreement) of such 16 "Purchased Receivables" and the Purchase Commitment of each Purchaser shall be ratably reduced. Under no circumstances shall any Purchaser make any purchase of a Receivable if, after giving effect to such purchase, its pro rata share of the aggregate sum of the Purchase Price of the Purchased Receivables, the Collections of which have not been received by such Purchaser through the Representative Purchaser, would exceed its Purchase Commitment. The Seller may cancel the Total Purchase Commitments, or any part of it which is Fifty Million Yen (yen50,000,000) or a whole multiple of that amount, without premium or penalty at any time before the last day of the Purchase Commitment Period by giving to the Representative Purchaser not less than three (3) Business Days' notice of the date and amount of the cancellation. If the Total Purchase Commitments are partially cancelled, the Purchase Commitment of each Purchaser shall be ratably reduced, provided that such cancellation shall not affect the rights and obligations of the parties hereto with respect to the Purchased Receivables as of such date of cancellation. 2.2 The sale referred to in Parts 3 and 4 does not constitute and is not intended to result in the creation or assumption by any Purchaser or the Representative Purchaser of any obligation of the Seller or any other person in connection with the Receivables or the Sales Agreements, or under any other agreement or instrument relating thereto. 2.3 For purposes of this Agreement, if as of the relevant Purchase Date a Purchased Receivable is, in accordance with the Sales Agreement for the Equipment in relation to such Purchased Receivable, to be payable by the relevant Buyer in two or more installments, each amount owed by such Buyer payable in each such installment shall be deemed and treated as if each such amount were a separate and distinct Purchased Receivable. Part 3 SALE OF INITIAL RECEIVABLES 3. Sale and Purchase 3.1 Subject to the terms and conditions of this Agreement, the Seller hereby agrees to sell on the Initial Purchase Date, and each Purchaser severally agrees to, according to its Designated Portion, join with the other Purchasers in the purchase on such date of, all of the Seller's right, title and interest in, to and under the Initial Receivables including for the avoidance of doubt:- (i) the right to receive all Collections in respect thereof; and (ii) all Related Security with respect to the Initial Receivables and all proceeds thereof (for the avoidance of doubt, it being agreed and understood that title to the underlying Equipment that is reserved to the Seller prior to the Acceptance under the Sales Agreement shall be assigned to the Representative 17 Purchaser for the ratable benefit of the Purchasers to secure the obligations of the Seller under Clause 10 and Clause 16 hereof). Such purchase of the Initial Receivables will be made as stated in the second sentence of Clause 2.1. 3.2 The sale and purchase of each of the Initial Receivables referred to in Clause 3.1 shall be effected by a Seller Assignment substantially in the form set out in Part 1 of the Third Schedule and by the Syndicate Assignment relating thereto. 4. Consideration 4.1 Subject to the adjustment as provided for in Clause 10, the consideration payable by each Purchaser for the sale and purchase of each of the Initial Receivables shall be an amount in Yen equal to its Designated Portion of the Face Value in relation to such Initial Receivable (the "Purchase Price"). The Purchase Price shall be payable in accordance with Clause 5.1. 5. Initial Purchase 5.1 Completion of the sale and purchase contemplated by Clause 3.1 shall take place on the Initial Purchase Date (subject to the satisfaction of the conditions precedent set out in Part 1 of the Second Schedule, any of which may (if requested by the Seller not less than twenty (20) Business Days before the Initial Purchase Date) be waived by the Representative Purchaser with the consent of all the Purchasers), whereupon: (i) the Seller shall assign to the Representative Purchaser, for resale to the Purchasers, each of the Initial Receivables by the Seller and the Representative Purchaser executing and delivering to the other the Seller Assignment in relation to such Initial Receivables; (ii) thereupon the Representative Purchaser shall reassign to the Purchasers (other than the Representative Purchaser) their respective Designated Portion of such Initial Receivables by the Representative Purchaser delivering to each such Purchaser the Syndicate Assignment in relation to such Initial Receivables; (iii) the Seller shall deliver the Initial Sales Agreements to the Representative Purchaser, which will keep the same on behalf of the Purchasers, copies of which shall then be delivered to each Purchaser (other than the Representative Purchaser); (iv) if the P/N in relation to an Initial Receivable has been issued by the Buyer in favor of the Seller, the Seller shall make endorsement without recourse (mutanpo uragaki) on such P/N in favor of the Representative Purchaser, for 18 the ratable benefit of the Purchasers, and deliver such P/N to the Representative Purchaser; and (v) each Purchaser shall through the Representative Purchaser pay its Designated Portion of the aggregate Purchase Price of the Initial Receivables to the Seller in accordance with Clause 24.1. Part 4 SALE OF ADDITIONAL RECEIVABLES 6. Offers of Additional Receivables 6.1 The Seller may invite each Purchaser through the Representative Purchaser to take an assignment of Additional Receivables, which must be Eligible Receivables, at any time during the Purchase Commitment Period by delivering to the Representative Purchaser not less than five (5) Business Days before the proposed date of assignment an Offer substantially in the form set out in Part 2 of the Third Schedule. Notwithstanding the foregoing, in the case of a sale of an Additional Receivable in respect of which the Buyer is not an A-rated Buyer at the time the Offer is made, such Offer shall be delivered to the Representative Purchaser not less than fifteen (15) Business Days before the proposed date of assignment. 6.2 Each Offer delivered by the Seller pursuant to Clause 6.1 shall: (i) constitute an offer by the Seller to sell and assign on the proposed date of assignment to the Representative Purchaser (by way of outright sale and not merely by way of security), for resale to the Purchasers, of all of the Seller's right, title and interest in and to an Additional Receivable to which such Offer relates (the "Available Receivable"), including for the avoidance of doubt: (a) the right to receive all Collections in respect thereof; and (b) all Related Security with respect to such Available Receivable and all proceeds thereof (for the avoidance of doubt, it being agreed and understood that title to the underlying Equipment that is reserved to the Seller prior to the Acceptance under the Sales Agreement shall be assigned to the Representative Purchaser for the ratable benefit of the Purchasers to secure the obligations of the Seller under Clause 10 and Clause 16 hereof); (ii) specify in relation to the Available Receivable: 19 (a) the name of the Buyer who owes the Available Receivable; (b) the Face Value thereof; (c) description of the Equipment sold in relation to the Available Receivable; (d) the date of the Purchase Order relating to the Available Receivable; (e) the proposed date of assignment, which must be a Settlement Date and must not be a date later than the last day of the Purchase Commitment Period; (f) the payment terms as provided for in the Purchase Order relating to the Available Receivable; (g) the date of Shipment of the Equipment relating to the Available Receivable; (h) (in the case of the Available Receivable in respect of which the Acceptance of the Equipment has taken place) the date of Acceptance, whether it qualifies as a Post-Acceptance Receivable, the rating of the relevant Buyer and the Scheduled Receivables Due Date; (i) (in the case of the Available Receivable in respect of which the Acceptance of the Equipment has not taken place) the date and the period which the Seller proposes as the Proposed Acceptance Date and the Proposed Credit Period, respectively, for the Available Receivable; and (j) whether a P/N in relation to the Available Receivable has been or is to be issued by the Buyer; and (iii) be accompanied by a copy of the Sales Agreement relating to the Available Receivable. 6.3 Each Available Receivable will, if accepted pursuant to Clause 7, be purchased as stated in the second sentence of Clause 2.1. 6.4 The Seller shall disclose to each Purchaser through the Representative Purchaser such documents or other information as such Purchaser may reasonably request to enable it to determine whether an Available Receivable is an Eligible Receivable. 7. Acceptance of Offers 7.1 The Representative Purchaser shall with the consent of all the Purchasers and on behalf of each Purchaser accept any Offer of the Available Receivable which is an Eligible 20 Receivable made by the Seller pursuant to Clause 6. Each Purchaser hereby authorizes the Representative Purchaser to accept such Offer on its behalf (an "Accepted Offer"). Each Accepted Offer shall be irrevocable and binding upon the Purchasers. 7.2 The Representative Purchaser shall notify the Seller in accordance with Clause 34 and shall also notify each Purchaser of such Accepted Offer. Each Available Receivable to which such Accepted Offer relates shall become an "Accepted Receivable". The Representative Purchaser shall confirm the Applicable Margin for each Accepted Receivable to the Seller and the Purchasers. 8. Consideration 8.1 Subject to the adjustment as provided for in Clause 10, the consideration payable by each Purchaser for sale and purchase of an Accepted Receivable shall be an amount in Yen equal to its Designated Portion of the Face Value in relation to such Accepted Receivable (the "Purchase Price"). The Purchase Price shall be payable in accordance with Clause 9.1. 9. Assignment of Accepted Receivables 9.1 If the Available Receivable has become the Accepted Receivable in accordance with Clause 7.2, completion of the sale and purchase of an Accepted Receivable shall take place on the Subsequent Purchase Date for such Accepted Receivable (subject to the satisfaction of the conditions precedent set out in Part 2 of the Second Schedule, any of which may (if requested by the Seller not less than twenty (20) Business Days before the Subsequent Purchase Date for such Accepted Receivable) be waived by the Representative Purchaser with the consent of all the Purchasers), whereupon: (i) the Seller shall assign to the Representative Purchaser, for resale to the Purchasers, such Accepted Receivable by the Seller and the Representative Purchaser executing and delivering to the other a Seller Assignment in relation to such Accepted Receivable; (ii) thereupon the Representative Purchaser shall reassign to the Purchasers (other than the Representative Purchaser) their respective Designated Portion of such Accepted Receivable by the Representative Purchaser delivering to each such Purchaser a Syndicate Assignment; (iii) the Seller shall deliver to the Representative Purchaser the Additional Sales Agreement to which such Accepted Receivable relates (it being understood that the Representative Purchaser shall keep such Additional Sales Agreement on behalf of the Purchasers), a copy of which shall then be delivered to each Purchaser (other than the Representative Purchaser); (iv) if the P/N in relation to such Accepted Receivable has been issued by the Buyer in 21 favor of the Seller, the Seller shall make endorsement without recourse (mutanpo uragaki) on such P/N in favor of the Representative Purchaser, for the ratable benefit of the Purchasers, and deliver such P/N to the Representative Purchaser; and (v) each Purchaser shall through the Representative Purchaser make a payment of the Purchase Price of such Accepted Receivable in accordance with Clause 24.1. Part 5 ADJUSTMENT OF CONSIDERATION 10. Adjustment due to Reduction of Face Value 10.1 On the earlier of the fifth (5th) Business Day after the date on which the Partial Acceptance (if any) occurs or the Settlement Date immediately following the date of such Partial Acceptance, the Reduced Amount (if any) shall be paid by the Seller into the Collection Account. If the Reduced Amount is paid over to the Representative Purchaser for the account of the Purchasers in accordance with Clause 19.4(a), the Purchased Receivable concerned shall be deemed to have been collected on the relevant Settlement Date (and deemed to have been outstanding until such date) to the extent of the Reduced Amount. Part 6 REPRESENTATIONS, WARRANTIES AND COVENANTS 11. Representations and Warranties 11.1 The Seller (in such capacity and as the Collection Agent) represents and warrants to the Representative Purchaser and the Purchasers that as of (i) the date hereof, (ii) the Initial Purchase Date, (iii) each Subsequent Purchase Date, (iv) the date of each Offer, and (v) (except in relation to the representations and warranties that the Buyer by whom the relevant Purchased Receivable is owed is the Eligible Buyer, or that the relevant Purchased Receivable is not overdue or is legally and beneficially owned by the Seller) each day on which any Purchased Receivable is outstanding until the Scheduled Receivables Due Date has been determined for all of the Purchased Receivable and sixty (60) days have passed after the last Scheduled Receivables Due Date, each of the statements set out in the Sixth Schedule is true, by reference to the facts and circumstances existing at the relevant time, provided that, in connection with Paragraphs (ii), (iii) and (iv) above, the representations and warranties provided for in Part 3 of the Sixth Schedule in relation to a Purchased Receivable shall be deemed to be made by the Seller on the relevant Purchase Date and the date of the relevant Offer. 12. Financial Information 22 12.1 The Seller shall, until the later of the expiry of the Purchase Commitment Period and the date on which the obligation to pay the Reduced Amount pursuant to Clause 10 and the repurchase obligations pursuant to Clause 16 shall have been fully satisfied by the Seller in respect of all the Purchased Receivables: (i) within one hundred (100) days after the end of each of its financial years, deliver to the Representative Purchaser a sufficient number of copies for distribution to each Purchaser its financial statements for such financial year; and (ii) within fifty-five (55) days after the end of each of its financial quarters, deliver to the Representative Purchaser a sufficient number of copies for distribution to each Purchaser its financial statements for such financial quarter. 12.2 The Seller shall ensure that: (i) each set of financial statements delivered by it pursuant to Clause 12.1(i) is prepared in accordance with accounting principles generally accepted in Japan and consistently applied (except for changes disclosed therein); (ii) each set of financial statements delivered by it pursuant to Clause 12.1(i) is certified by a duly authorized officer as giving a true and fair view of its financial condition as at the end of the period to which those financial statements relate and of the results of its operations during such period; (iii) each set of financial statements delivered by it pursuant to Clause 12.1(i) has been reviewed by an internationally recognized firm of independent auditors; and (iv) each set of quarterly financial statements delivered by it pursuant to Clause 12.1(ii) is prepared in accordance with accounting principles generally accepted in Japan and consistently applied (except for changes disclosed therein). 13. Seller's Covenants 13.1 The Seller shall, until the later of the expiry of the Purchase Commitment Period and the date on which the obligation to pay the Reduced Amount pursuant to Clause 10 and the repurchase obligations pursuant to Clause 16 shall have been fully satisfied by the Seller in respect of all the Purchased Receivables: (i) obtain, comply in all material respects with the terms of and do all that is necessary and reasonably practicable to maintain in full 23 force and effect all authorizations, approvals, licenses and consents required in or by the laws and regulations of Japan to enable it lawfully to enter into and perform its obligations under this Agreement and each Assignment from time to time in respect of any Purchased Receivables or to ensure the legality, validity, enforceability against the Seller or admissibility in evidence in Japan of this Agreement or any such Assignment; (ii) ensure that at all times the claims against it under this Agreement rank at least pari passu with the claims of all its other unsecured creditors save those whose claims are preferred by any bankruptcy, insolvency or other similar laws of general application; (iii) permit audit and inspection under its guidance of its Records by or on behalf of the Representative Purchaser during normal working hours upon reasonable notice and with reasonable frequency; (iv) maintain sufficient operating procedures to manage the transactions contemplated herein and to perform its obligations hereunder; (v) (without prejudice to Clause 15.1) indemnify the Representative Purchaser and each Purchaser from and against all liabilities, losses and fees, costs and expenses in respect of any breach by the Seller of the representations and warranties made by it pursuant to the terms of Clause 11; (vi) furnish to the Representative Purchaser sufficient copies for distribution to each Purchaser of such other information relating to its business as may be reasonably requested in writing by the Representative Purchaser in order to enable it to carry out its functions hereunder; (vii) do all things necessary to remain duly organized, validly existing under the laws of Japan and maintain all requisite authority to conduct its business in Japan; (viii) comply in all respects which could be regarded as material in the context of the transactions contemplated by this Agreement, with all laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject; (ix) deliver to the Representative Purchaser the certificate of delivery (if applicable) of the Perfection Document issued by the postal service as soon as practicable after it receives the same; 24 (x) ensure, in relation to a Purchased Receivable to which the conditions precedent set out in Paragraph 2(b) of Part 1 or Part 2, as the case may be, of the Second Schedule have been satisfied, that the relevant Buyer issues the P/N to the Seller promptly upon (but subject to the applicable terms of the relevant Sales Agreement) the Acceptance or the Partial Acceptance of the relevant Equipment, and if the P/N is issued (regardless of whether or not such conditions precedent were applicable) to the Seller, promptly notify the Representative Purchaser thereof and make endorsement without recourse (mutanpo uragaki) on such P/N in favor of the Representative Purchaser for the ratable benefit of the Purchasers and deliver, or cause to be delivered, such P/N to the Representative Purchaser; (xi) give the Representative Purchaser notice of any material change to its administrative and operating procedures in relation to the keeping and maintaining of Records; (xii) at its expense, in a timely manner fully perform and comply with all provisions, covenants and other promises required to be observed by it under the Sales Agreements related to the Purchased Receivables as if interests in such Purchased Receivables have not been assigned and sold hereunder; (xiii) promptly after it becomes aware of the occurrence of any of the Termination Events or the Potential Termination Events, notify the Representative Purchaser thereof; and (xiv) cooperate with the Representative Purchaser and execute and deliver to the Representative Purchaser such other instruments and documents and take such other actions as may be reasonably requested from time to time in order to carry out, evidence and confirm each Purchaser's rights and the intended purpose of this Agreement, including, but not limited to, perfecting, protecting or evidencing each Purchaser's right and interest in or to the Purchased Receivables. 13.2 The Seller shall not: (i) sell, assign, convey, transfer, create security interest over or otherwise dispose of any Purchased Receivables other than pursuant hereto, or attempt, purport or agree to do any of the foregoing; (ii) cancel, terminate, amend, modify or waive any material term or condition of any Sales Agreement relating to Purchased Receivables, 25 except insofar as the provisions contained in Clauses 10, 15 and 16 are complied with by the Seller; (iii) compromise or settle any dispute or claim in respect of any Purchased Receivable; (iv) take any action which is reasonably likely to prejudice the validity or recoverability of any Purchased Receivable; (v) seek to challenge the validity of any sale of Receivables in any legal proceedings; or (vi) do anything which would materially and adversely affect the interests of the Representative Purchaser and of any Purchaser hereunder or the maintenance by the Representative Purchaser and by any Purchaser of any licenses, exemptions, authorizations or consents necessary in connection with this Agreement or the transactions contemplated hereby. 14. Purchasers' Covenants 14.1 Each Purchaser shall obtain, comply with the terms of and do all that is necessary to maintain in full force and effect all authorizations, approvals, licenses and consents required in or by the laws and regulations of Japan to enable it lawfully to enter into and perform its obligations under this Agreement or to ensure the legality, validity, enforceability or admissibility in evidence in Japan of this Agreement or of any Syndicate Assignment and (in the case of the Representative Purchaser) any Seller Assignment pursuant to the terms of this Agreement. 15. Seller's Indemnity 15.1 Without limiting any other rights which the Representative Purchaser and the Purchasers may have hereunder or under applicable law, the Seller (in such capacity and as the Collection Agent) hereby agrees to indemnify the Representative Purchaser and each Purchaser and their officers, directors, agents and employees from and against any and all damages, losses, claims, liabilities, costs and expenses, including without limitation reasonable attorneys' fees and disbursements including any tax thereon (all of the foregoing being collectively referred to as "Indemnified Amounts") awarded against or incurred by any of them in connection with this Agreement, or the acquisition of an interest by any Purchaser in the Purchased Receivables, as a result of any breach by the Seller or the Collection Agent (insofar as the Seller is the Collection Agent) of any representation, warranty or covenant made or deemed to be made hereunder or in connection herewith or the transactions contemplated hereby, excluding, however, (i) Indemnified Amounts to the extent that a final judgment of a court of competent jurisdiction holds that such Indemnified Amounts resulted solely from gross negligence or wilful misconduct on the part of the Representative Purchaser or the relevant 26 Purchaser, as the case may be, or any of its officers, directors, agents or employees or (ii) Indemnified Amounts arising out of the failure of any Buyer to pay amounts lawfully owed in respect of a Purchased Receivable. Without limiting the generality of the foregoing (and without prejudice to Clause 16), the Seller shall indemnify the Representative Purchaser and each Purchaser for Indemnified Amounts relating to or resulting from: (i) the sale and assignment (through the Representative Purchaser) to each Purchaser hereunder of any Receivable other than an Eligible Receivable; (ii) reliance on any representation or warranty made or deemed made by the Seller (or any officers of the Seller), under or in connection with this Agreement or any of the Transaction Documents or any other material information or report delivered by the Seller to the Representative Purchaser or any Purchaser which shall have been false, incorrect or omitting of any material fact at the time made or deemed made; (iii) the failure by the Seller (or any officer of the Seller) to comply with any applicable law, rule or regulation with respect to any Purchased Receivable or the related Sales Agreement or the non-conformity of any Purchased Receivables or the related Sales Agreement with any such applicable law, rule or regulation; (iv) the failure to vest and maintain in the Purchaser the Purchased Receivables free and clear of any encumbrance; (v) any dispute, claim, offset or defense (other than the discharge in bankruptcy of the Buyer) of the Buyer to the payment of a Purchased Receivable, including, without limitation, a defense based on such Receivable or the related Sales Agreement not being a legal, valid and binding obligation of such Buyer enforceable against it in accordance with its terms, any defect of the Equipment which has been sold under the Sales Agreements or the failure by the Seller to perform any obligations related to such related Sales Agreement under any applicable laws, rules or regulations; (vi) any failure of the Seller to perform its duties or obligations in accordance with the provisions of this Agreement or the other Transaction Documents; (vii) any disclosure of information regarding the Buyer by the Seller to the Representative Purchaser or any Purchaser or the supply of any Sales Agreements, Records and all other related 27 documents to the Representative Purchaser or any Purchaser; and (viii) any claim arising from collection activities conducted by the Seller. Part 7 REPURCHASE OF RECEIVABLES 16. Repurchase of Receivables 16.1 Upon demand in writing from the Representative Purchaser (which demand the Representative Purchaser may make at any time with the consent of all the Purchasers in accordance with this Clause 16.1, but will in no event be required to make unless the Seller gives the Representative Purchaser a written notice of occurrence of an event enumerated in any of items (i) through (viii) of this Clause 16.1 describing in reasonable detail such event and attaching any supporting documents relating to such event, in which case any such demand shall be made within ninety (90) days after such notice is received by the Representative Purchaser) in relation to any Purchased Receivable in respect of which, at the time of giving such demand:- (i) (a) the conditions set forth in Paragraph 2(a) of Part 1 or Part 2, as the case may be, of the Second Schedule have been satisfied (or such conditions would have been applicable, but have been waived by the Purchasers), but the obligation of the Buyer to pay the Face Value or (if applicable) the Revised Face Value of such Purchased Receivable is, or the Buyer claims that such obligation is, not enforceable in full by the Purchasers in accordance with the terms of the relevant Sales Agreement for any reason whatsoever, including, without limitation, any defense or asserted defense, of the Buyer to such obligation (but excluding the discharge in accordance with applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally) or subject to set-off; (b) the condition precedent set forth in Paragraph 2(b) of Part 1 or Part 2, as the case may be, of the Second Schedule has been satisfied (or such condition would have been applicable, but has been waived by the Purchasers), but (1) the P/N is not delivered by the Buyer to the Seller in accordance with the relevant Sales Agreement following the Acceptance or the Partial Acceptance or (2) the obligation represented by the P/N held by the Representative Purchaser for the ratable benefit of the Purchasers is, or the Buyer claims that such obligation is, not enforceable in full for any reason whatsoever, including, without limitation, any defense or asserted defense, of the Buyer to such obligation or the 28 underlying Purchased Receivable (but excluding the discharge in accordance with applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally) or subject to set-off; (ii) any representation or warranty set out in Part 3 of the Sixth Schedule proves to have been incorrect when made or deemed to be made pursuant to Clause 11.1; (iii) the Seller, or the Buyer claims that the Seller, has failed to comply with any applicable law, rule or regulation, in a manner which is likely to affect Buyer's obligation to pay the Face Value or (if applicable) the Revised Face Value or to adversely affect the relevant Related Security (if any); (iv) the Seller, or the Buyer claims that the Seller, has failed, or is unable, to perform any of its obligations under the related Sales Agreement; (v) (without prejudice to the generality of any of the foregoing) the Acceptance or the Partial Acceptance of the Equipment relating to such Purchased Receivable has not occurred on or before two hundred seventy (270) days after the date of Shipment for such Purchased Receivable; (vi) (without prejudice to the generality of any of the foregoing) the Scheduled Receivables Due Date for such Purchased Receivable has been determined to be a date which renders the period from the Acceptance or (if applicable) the Partial Acceptance relating to such Purchased Receivable to such Scheduled Receivables Due Date longer than the period equal to two hundred twenty-five (225) days; (vii) (without prejudice to the generality of any of the foregoing) it has been determined between the Seller and the relevant Buyer that the Acceptance or the Partial Acceptance of the Equipment relating to such Purchased Receivable will not occur, including, but not limited to, the case where it has been determined that such Equipment is to be replaced in whole; or (viii) (without prejudice to the generality of any of the foregoing) the conditions set forth in Paragraph 2(a) or 2(b), as applicable, of Part 1 or Part 2, as the case may be, of the Second Schedule have been waived, provided that the Buyer's claim referred to in Paragraphs (i), (iii) and (iv) must be, if such claim is presented after the Acceptance or the Partial Acceptance of the relevant Equipment, presented with such ground as is, in 29 the opinion of the Representative Purchaser, reasonable under the circumstances, the Seller shall repurchase such Purchased Receivable. The Seller shall not be obligated to repurchase any Purchased Receivable until the Representative Purchaser's demand is made in accordance with this Clause 16.1 or repurchase is required under Clause 26.2. 16.2 Upon payment by the Seller of the repurchase price (to be calculated in accordance with Clause 16.3) in respect of a repurchase of any Receivable pursuant to Clause 16.1 (at the cost of the Seller and without recourse or warranty, except for the warranty expressly given in the relevant assignment, on the part of the Purchasers): (i) the Purchasers shall re-assign to the Seller or its designee all its right, title and interest in and to the Receivable(s) concerned, including for the avoidance of doubt: (a) the right to receive all Collections in respect thereof; and (b) all Related Security with respect to such Receivable(s) and all proceeds thereof (including without limitation title to the underlying Equipment that has been assigned to the Representative Purchaser), by the Seller's (or its designee's) and the Representative Purchaser's execution and delivery to the other of an assignment in relation to each such Receivable substantially in the form of Part 4 of the Third Schedule. Each Purchaser hereby authorizes the Representative Purchaser to execute such assignment on its behalf; (ii) the Representative Purchaser will deliver to the Seller (or its designee) the relevant Sales Agreement and take all such other steps and comply with all such other formalities as the Seller may reasonably request to perfect or more fully to evidence or secure the Seller's (or its designee's) title to such Receivable, including, where appropriate, by giving notice of such re-assignment to the relevant Buyer in the form of a document duly date-stamped (kakutei hizuke) and making endorsement without recourse (mutanpo uragaki) in favor of the Seller (or its designee) on, and delivering to the Seller (or its designee), the P/N (if any) which has been assigned to the Representative Purchaser for the ratable benefit of the Purchasers in relation to such Receivable; and (iii) if the repurchase price is paid over to the Representative Purchaser for the account of the Purchasers in accordance with Clause 19.4(a), such Receivable(s) shall be deemed to have been 30 collected on the relevant Settlement Date (and deemed to have been outstanding until such date), provided that in the case of the proviso of the second sentence of Clause 16.3, such Receivables(s) shall be deemed to have been collected on the date of payment of the repurchase price. 16.3 The repurchase price payable by the Seller to the Representative Purchaser for the ratable benefit of the Purchasers in accordance with Clause 16.1 shall be an amount in Yen equal to the Face Value or (if the Reduced Amount has been paid in accordance with Clause 10.1) the Revised Face Value of such Purchased Receivable. So long as no Termination Event or Potential Termination Event shall have occurred, the repurchase price shall be paid by the Seller into the Collection Account no later than the fifth (5th) Business Day following the date of the demand made by the Representative Purchaser pursuant to Clause 16.1, provided that if any Termination Event or Potential Termination Event shall have occurred, the repurchase price shall immediately upon such demand be paid by the Seller to the Representative Purchaser for the ratable benefit of the Purchasers in accordance with Clause 23. The payment of the repurchase price shall be made together with an amount calculated at the Yield Rate applicable to the relevant Fixed Period up to the date of the payment of the repurchase price and any other amount payable hereunder. Part 8 INDEMNITY FOR FUNDING LOSSES 17. Indemnity by the Seller for Funding Losses 17.1 The Seller shall reimburse the Representative Purchaser and each Purchaser on demand for any resulting loss or expense incurred by them, including (without limitation) any loss incurred in obtaining, liquidating or redeploying deposits from third parties, provided that in the case of paragraph (i) below in this Clause 17.1 the amount of such loss or expense (which shall not be less than zero) shall be determined in good faith by the Representative Purchaser based on the formula set out in each such paragraph, provided further that the Representative Purchaser shall have delivered to the Seller a certificate as to the amount of such loss or expense setting out in reasonable detail the calculations resulting in such amount, which certificate shall be conclusive in the absence of manifest error, if:- (i) any amount in relation to a Purchased Receivable (including, but not limited to, a Paid Amount, a repurchase price pursuant to Clause 16.3 and a Reduced Amount) other than amounts payable pursuant to Clause 29 is received by the Representative Purchaser for the account of the Purchasers on a date other than a Settlement Date, in which event the following formula shall apply: 31 Loss = A x (B - C) x (D/360) where: A = the amount (or the relevant portion thereof) required of the Purchasers to fund the purchase of such Purchased Receivable B = the LIBOR or the TIBOR, as the case may be, applicable to the relevant Fixed Period C = the rate per annum, expressed as a decimal, of interest which, in the opinion of the Representative Purchaser, each Purchaser is reasonably able to obtain by placing an amount equal to such amount so received on deposit in the Tokyo Yen money market as of the date of receipt of such amount for the period from and including the date of such receipt of payment and to but excluding the next succeeding Settlement Date D = the actual number of days remaining during the period referred to in "C" above; or (ii) the assignment of any of the Initial Receivables or an Accepted Receivable does not occur on the Initial Purchase Date or the relevant Subsequent Purchase Date in accordance with Clause 5.1 or 9.1 (as the case may be) by reason of non-fulfillment of any of the conditions set out in the Second Schedule. Part 9 COLLECTION OF RECEIVABLES 18. Appointment of Collection Agent 18.1 Lam Research Co., Ltd. is hereby appointed by the Purchasers as their agent to service, collect and administer all Purchased Receivables, to perform all related functions and to enforce the Purchasers' rights and interests in and under the Purchased Receivables, and Lam Research Co., Ltd. hereby accepts such appointment as Collection Agent on the terms and subject to the conditions of this Agreement. 18.2 The Representative Purchaser may at any time after the occurrence of a Termination Event in the circumstances described in Clause 21, remove Lam Research Co., Ltd. as Collection Agent. 18.3 Upon Lam Research Co., Ltd. being removed as Collection Agent pursuant to Clause 21, the Representative Purchaser may, upon written instruction given by all the Purchasers, appoint a successor to act as Collection Agent. The Representative Purchaser and the Purchasers and such successor shall, upon such successor confirming in writing to the Representative Purchaser and the Purchasers that it agrees so to act, thereafter have the same rights and obligations among them as would have been the case had they then entered 32 into an agreement in the form mutatis mutandis of this Agreement. 18.4 For the avoidance of doubt, it is hereby agreed that the Collection Agent is not authorized to enter into any commitment on behalf of the Representative Purchaser or any Purchaser. 18.5 The Collection Agent hereby covenants and undertakes with the Representative Purchaser and the Purchasers as set out in the Seventh Schedule. 18.6 The Collection Agent agrees to indemnify the Representative Purchaser and the Purchasers, including their officers, directors and employees from and against any liability, loss, expense, action, proceeding or claim which may be brought against, or suffered or sustained, by the Representative Purchaser and/or the Purchasers, and/or such directors, officers and employees by reason of any wrongful or negligent acts or omissions of the Collection Agent or any of its directors, officers, employees or agents in the performance of its duties hereunder. 18.7 The Collection Agent shall have no liability for any obligation of a Buyer under any Purchased Receivable and nothing herein shall constitute a guarantee, or similar obligation, by the Collection Agent of any Purchased Receivable or any Buyer. 19. Collection of Receivables; Payment of Purchasers' Yield 19.1 Save as otherwise provided herein, the Collections proceeds of each Purchased Receivable will, when paid, be collected by the Collection Agent, and yield on the Purchased Receivables will be paid by the Collection Agent on behalf of the Seller. 19.2 The Collection Agent has opened a collection account (account no. 13-23-016) (the "Collection Account") in its own name maintained at ABN AMRO Bank N.V., Tokyo Branch and if at any time the Collection Agent ceases to be the agent of the Purchasers for the purposes hereof, then its successor shall open in its name such a Collection Account (maintained at such bank as the Representative Purchaser shall have approved) and the retiring Collection Agent shall transfer to the credit thereof any amount standing to the credit of the Collection Account opened by it together with accrued interest thereon. 19.3 The Collection Agent shall cause the Buyers to make all payments in respect of the Purchased Receivables into the Collection Account, provided that if the P/N has been issued in relation to a Purchased Receivable in favor of the Seller and endorsed without recourse by the Seller and delivered to the Representative Purchaser in accordance herewith, the Representative Purchaser shall collect on behalf of the Purchasers the amount represented by such P/N and (if the date of such collection is not a Settlement Date) deposit such collected amount with its own account (the "P/N Account") at ABN AMRO Bank N.V., Tokyo Branch or (if the date of such collection is a Settlement Date) apply such collected amount to the payment of the Purchased Receivable to which the 33 collected P/N relates. In respect of any amounts deposited in the P/N Account, the Representative Purchaser shall pay a custody fee to the Seller in an amount equal (for each day during the period from and including the relevant deposit date to but excluding the Settlement Date falling immediately following such deposit date) to the product of (i) the amount then deposited in the P/N Account, times (ii) one-tenth of one percent (0.1%), times (iii) 1/360. 19.4 (a) On each Settlement Date, the Collection Agent shall pay any Collection collected in the Collection Account with respect to Purchased Receivables and any Reduced Amount and any repurchase price paid by the Seller into the Collection Account pursuant to Clause 10.1 or Clause 16.3, as the case may be, during the Fixed Period ending thereon and on such Settlement Date over to the Representative Purchaser for the ratable benefit of the Purchasers in accordance with Clause 23 by giving a standing debit and transfer authorization to ABN AMRO Bank N.V., Tokyo Branch in a form reasonably satisfactory to the Representative Purchaser and maintaining such authorization. To secure the obligations of the Collection Agent under Clause 19.4, the Collection Agent hereby agrees to take such reasonable measures as may be requested by the Representative Purchaser so as to create a pledge in favor of the Representative Purchaser for the benefit of itself and the Purchasers over all its rights and interests in and to the Collection Account and any moneys and balances from time to time deposited therein or standing to the credit thereto or any proceeds thereof and has submitted a deposit certificate for the Collection Account to the Representative Purchaser, provided that so long as no Termination Event or Potential Termination Event shall have occurred and subject to the following sentence of this Clause 19.4(a), the Representative Purchaser and the Purchasers shall allow the Seller to withdraw a sum equal to any interest accrued on the amounts deposited in the Collection Account. If the Collection Agent fails to perform its obligations under the first sentence of this Clause 19.4(a), (i) the Collection Agent hereby consents to the Representative Purchaser's immediate enforcement of such rights and interests as pledgee directly against ABN AMRO Bank N.V., Tokyo Branch without any notice or proof, and (ii) the Representative Purchaser, as a bank with whom the Collection Account is held, shall be immediately entitled to, on behalf of itself and the Purchasers, apply any funds held at the Collection Account to satisfy any of such obligations of the Collection Agent. The Collection Agent will procure a consent in writing to creation of the pledge from ABN AMRO Bank N.V., Tokyo Branch, such 34 consent being in the form of a document duly date-stamped (kakutei hizuke) by a notary public in accordance with Article 467(1) and (2) of the Civil Code of Japan and in form and substance satisfactory to the Representative Purchaser. (b) On each Settlement Date, the Representative Purchaser shall apply any amount deposited in the P/N Account during the Fixed Period ending thereon and on such Settlement Date to the payment of the Purchased Receivable to which the collected P/N relates. (c) Also, on each Settlement Date, the Seller shall pay to the Representative Purchaser for the ratable benefit of the Purchasers an amount equal to the product of (aa) the Yield Rate applicable to the Fixed Period ending thereon, times (bb) the outstanding amount of the Purchased Receivables during such Fixed Period, times (cc) the actual number of days during such Fixed Period, times (dd) 1/360. The payment of such amount shall be made by the Collection Agent on behalf of the Seller and in accordance with Clause 23. For the purposes of this subclause (c), any Purchased Receivables with respect to which Collection is made by the Collection Agent (or the Representative Purchaser, as the case may be) during such Fixed Period shall be deemed to be outstanding throughout such Fixed Period. For the avoidance of doubt, the Collection Agent shall be obligated to pay the aforementioned amount on behalf of the Seller, even though payments were not made by the Buyers in respect of any Purchased Receivables, provided that the aforementioned amount shall cease to accrue (x) in relation to a Purchased Receivable owed by a Buyer who is, as of the Purchase Date of such Purchased Receivable, an A-rated Buyer, on the earlier of (i) the date on which a Buyer Insolvency Event occurs to the Buyer by whom the relevant Purchased Receivable is owed, or (ii) the date which is ninety (90) days after the Representative Purchaser receives the notice from the Seller that is referred to in Clause 16.1 in respect of the relevant Purchased Receivable, in each case to the extent relating to such Purchased Receivable, or (y) in relation to a Purchased Receivable owed by a Buyer other than the Buyer referred to in (x) above, on the date which is ninety (90) days after the Representative Purchaser receives the notice from the Seller that is referred to in Clause 16.1 in respect of the relevant Purchased Receivable, to the extent relating to such Purchased Receivable. 19.5 The Seller may select either the LIBOR Based Rate or the TIBOR Based Rate as the Yield Rate applicable to each 35 Fixed Period by giving the Representative Purchaser an irrevocable written notice thereof not later than five (5) Business Days prior to the first day of such Fixed Period. If the Seller fails to give such notice, it shall be deemed to have selected the Alternate Rate, which rate shall be mutually agreed upon among the Seller and the Purchasers as soon as possible as contemplated by the definition thereof. The Representative Purchaser shall notify the Seller's selection under this Clause 19.5 to each Purchaser (other than the Representative Purchaser). 19.6 If any Purchased Receivable that is not a Post-Acceptance Receivable becomes a Post-Acceptance Receivable, the Seller shall promptly give written notice thereof to the Representative Purchaser, which shall be further notified by the Representative Purchaser to each Purchaser (other than the Representative Purchaser). The Seller and the Representative Purchaser shall confirm the Applicable Margin for each Purchased Receivable no later than two (2) Business Days prior to the first day of the Fixed Period immediately following the Acceptance of the underlying Equipment in respect of such Purchased Receivable. 19.7 If, at any time the Collection Agent receives any Collections in respect of any Purchased Receivables and the authority of the Collection Agent to collect such Receivables has been terminated in accordance with this Agreement, then the Collection Agent shall pay such amount to the credit of such account in Tokyo as the Representative Purchaser shall have notified in writing for this purpose in each case for value the same day. 19.8 Any amounts in respect of the collection proceeds of any Purchased Receivable received by the Collection Agent (whether or not the appointment of the Collection Agent has been terminated hereunder) shall be held for the Purchasers. 20. Cost, Expenses and Remuneration 20.1 The Representative Purchaser and the Purchasers authorize the Collection Agent on their behalf, and the Collection Agent undertakes to incur reasonable cost, expenses and charges in connection with the enforcement of any Purchased Receivable and/or the Representative Purchaser's and the Purchasers' rights and remedies in relation thereto and it is agreed that notwithstanding any provisions under the applicable laws (including, but not limited to, Articles 649 and 650 of the Civil Code of Japan), the Collection Agent shall have no recourse or claim for indemnification or payment against the Representative Purchaser or the Purchasers in respect of such reasonable costs, expenses and charges. Without prejudice to the generality of the foregoing, the Representative Purchaser and the Purchasers, at the request of the Collection Agent, shall provide it with reasonable assistance in connection with such enforcement. 20.2 The Collection Agent is not entitled to any remuneration or indemnity in respect of the performance of its duties under this Agreement. 21. Removal or Termination of Collection Agent 36 21.1 If a Termination Event occurs, the Representative Purchaser may at any time with the consent of all the Purchasers, without prejudice to its or the Purchasers' other rights: (i) by notice in writing to the Collection Agent terminate the appointment of the Collection Agent under this Agreement and designate as a successor collection agent any person to succeed the Collection Agent; and/or (ii) notify the relevant Buyers that all payments in respect of Purchased Receivables shall be made to the Representative Purchaser or a successor collection agent. 21.2 On and after termination of the appointment of the Collection Agent under this Agreement pursuant to Clause 21.1, all rights, obligations (other than liability for breaches ofAgreement by the Collection Agent or liability in tort or for breach of trust (or other fiduciary duty) on the part of the Collection Agent prior to such termination and the Collection Agent's obligations under Clause 21.3 with respect to the performance of its duties hereunder), authority and power of the Collection Agent under this Agreement shall be terminated and of no further effect and the Collection Agent shall not hold itself out in any way as the agent of the Purchasers. 21.3 Upon termination of the appointment of the Collection Agent under this Agreement pursuant to Clause 21.1, the Collection Agent shall forthwith deliver to the Representative Purchaser or to any other person appointed by the Representative Purchaser the Records in its possession or under its control relating to the affairs of or belonging to the Representative Purchaser, the Purchasers and the Purchased Receivables and any other security therefor and any moneys then held by the Collection Agent on behalf of the Representative Purchaser and the Purchasers and shall take such action as the Representative Purchaser may reasonably direct. 21.4 The appointment of the Collection Agent under this Agreement shall terminate (but without affecting any accrued rights and liabilities hereunder) at such time as (i) no Purchaser has any further interest in any of the Purchased Receivables and (ii) the Collection Agent is notified by the Representative Purchaser in accordance with Clause 34 that such is the case. 21.5 If there is any change in the identity of the Collection Agent in accordance with this Agreement, the new collection agent and the Purchasers shall execute such documents and take such actions as such collection agent and the Purchasers may require for the purpose of vesting in such new collection agent the rights and obligations of the Collection Agent under this Agreement and releasing the retiring Collection Agent from its future obligations under this Agreement. 37 Part 10 PAYMENTS 22. Currency of Account and Payment 22.1 Yen is the currency of account and payment for each and every sum at any time due from any person hereunder provided that: (i) each payment in respect of costs and expenses shall be made in the currency in which the same were incurred; and (ii) each payment which is expressed herein to be payable in another currency shall be made in that other currency. 22.2 If any sum due from a person (a "relevant person") under this Agreement or any order or judgment given or made in relation hereto has to be converted from the currency (the "first currency") in which the same is payable hereunder or under such order or judgment into another currency (the "second currency") for the purpose of (i) making or filing a claim or proof against the relevant person, (ii) obtaining an order or judgment in any court or other tribunal or (iii) enforcing any order or judgment given or made in relation hereto, the relevant person shall indemnify and hold harmless the other person to whom such sum is due from and against any loss suffered as a result of any discrepancy between (a) the rate of exchange used for such purpose to convert the sum in question from the first currency into the second currency and (b) the best rate or rates of exchange at which such other person is reasonably able to purchase the first currency with the second currency upon receipt of a sum paid to it in satisfaction, in whole or in part, of any such order, judgment, claim or proof. To the extent that the person to whom such payment is due receives an amount in excess of the amount due to it under this Agreement, such person shall forthwith pay an amount equal to any such excess to the relevant person. 22.3 All payments made by any person hereunder shall be made free and clear of and without any deduction for or on account of any set-off or counterclaim. 23. Payments by the Seller or the Collection Agent 23.1 On each date upon which this Agreement requires an amount to be paid by the Seller or the Collection Agent to any Purchaser hereunder, the Seller or the Collection Agent (as the case may be) shall, save as expressly provided otherwise herein, make the same available to the Representative Purchaser for the account of the Purchasers pro rata according to their respective Designated Portion, no later than 11:00 a.m. (Tokyo time) on such due date, in Yen and in immediately available funds to such account and bank in Tokyo as the Representative Purchaser shall have specified in writing for this purpose at least two Business Days prior to such amount becoming payable. 38 24. Payments by each Purchaser 24.1 On each date upon which this Agreement requires an amount to be paid to the Seller hereunder by each Purchaser, such Purchaser shall, save as otherwise provided herein, make the same available in Yen and in immediately available funds to the Representative Purchaser not later than 11:00 a.m. (Tokyo time) on such due date. The Representative Purchaser shall credit the aggregate amount of funds so made available to it to the Seller's account as specified in a written notice provided by the Seller at least two Business Days prior to such amount becoming payable. 24.2 The failure of a Purchaser to pay its Purchase Price on any Purchase Date shall not relieve any other Purchaser of its obligation to pay its Purchase Price hereunder on such date, and no Purchaser shall be responsible for the failure of any other Purchaser to pay the Purchase Price to be paid by such other Purchaser on such date. Unless the Representative Purchaser shall have been notified by a Purchaser prior to the relevant Purchase Date (which notice shall be effective only upon receipt) that such Purchaser does not intend to make available to it such Purchaser's Purchase Price to be paid on such date, it may assume that such Purchaser has made such Purchaser's Purchase Price available to it on such date and it may, in reliance upon such assumption, make available to the Seller on such date a corresponding amount. If such corresponding amount is not in fact made available to the Representative Purchaser by such Purchaser, the Representative Purchaser shall be entitled to recover such amount on demand from either the Seller or such Purchaser together with interest thereon at a rate per annum representing the interest cost to the Representative Purchaser (as determined by the Representative Purchaser) of funding the amount in question to and including the date of reimbursement thereof to the Representative Purchaser. Part 11 TAXES 25. Taxes 25.1 All payments to be made by or on behalf of the Seller or the Collection Agent to the Representative Purchaser or the Purchasers under or pursuant to any of the provisions of this Agreement shall be made free and clear of and without deduction for or on account of tax unless the Seller or the Collection Agent (as the case may be) is required by any applicable law to make such payment subject to the deduction or withholding of tax in which case the sum payable by the Seller or the Collection Agent (as the case may be) in respect of which such deduction or withholding is required to be made shall be increased to the extent necessary to ensure that, after the making of such deduction or withholding (including any additional deduction or withholding on such increased amount), the Representative Purchaser or the Purchasers, as the case may be, receives and retains (free from any liability in respect of any such deduction or withholding) a net sum 39 equal to the sum which it would have received and so retained had no such deduction or withholding been made or required to be made. 25.2 If the Seller or the Collection Agent makes any payment to the Purchasers under or pursuant to this Agreement in respect of which it is required to make any such deduction or withholding, the Seller or the Collection Agent (as the case may be) shall deliver to the Representative Purchaser as soon as practicable a certificate of deduction of tax and/or a receipt or other evidence issued by the relevant taxation or other authority demonstrating the payment to such authority of all amounts so required to be deducted or withheld. 25.3 If an event occurs which would result in the Seller or the Collection Agent becoming obliged to make any payment pursuant to this Clause 25 then each of the parties hereto shall in good faith use reasonable endeavors to take such reasonable steps as may be open to it to mitigate or avoid the effects of such event, provided that nothing in this Clause 25.3 shall: (i) obligate any party hereto to incur any costs or expenses or to take or refrain from taking any action where in the reasonable opinion of such party to take or refrain from taking any action would be prejudicial to its interests; or (ii) obligate any party hereto to disclose any confidential information relating to the organization of its affairs; or (iii) interfere with the right of any party hereto to arrange its internal affairs in whatever manner it thinks fit. Part 12 TERMINATION 26. Consequence of a Termination Event 26.1 If a Termination Event shall occur and be continuing, the Representative Purchaser may, at the written instruction of all the Purchasers and by notice to the Seller, declare that the Termination has occurred, at which time Termination shall be deemed to have occurred; provided, however, that if a Termination Event is the occurrence of an Insolvency Event in relation to the Seller or the Guarantor, Termination shall be deemed to have occurred automatically, without notice by the Representative Purchaser, as of the time immediately preceding the institution of the relevant proceeding or the filing of the relevant petition. 26.2 Immediately upon Termination: (i) the Purchase Commitment Period shall be deemed to have expired; and (ii) all of the Purchased Receivables, except for 40 the Post-Acceptance Receivables, shall be immediately repurchased by the Seller or its designee, in which event the provisions contained in Clauses 16.2 and 16.3 shall be applied mutatis mutandis. 26.3 If the Termination shall have occurred as a result of the Guarantor's breach of any of its obligations set out in sub-paragraph (f) (by reference to the financial covenants of the Guarantor (as "Borrower" therein) set forth in the Credit Agreement (as defined in the Guaranty)) of paragraph 4 of the Guaranty, the Seller shall cause cash in the amount equal to thirty percent (30%) of the total amount of the Face Value or (if the Reduced Amount has been paid) the Revised Face Value of all of Purchased Receivables as described in Paragraph (ii) of Clause 26.2 shall be provided to the Representative Purchaser by way of security for the Seller's obligations hereunder and the Guarantor's obligations under the Guaranty in relation to such Purchased Receivables in a manner reasonably satisfactory to the Representative Purchaser within five (5) Business Days after the date on which the Termination occurred and such cash by way of security shall be lawfully maintained. If and insofar as (i) the Seller's such obligation detailed in the first sentence of this Clause 26.3 shall be complied with and (ii) no other Termination Event or Potential Termination Event shall have occurred, notwithstanding Paragraph (ii) of Clause 26.2, such Purchased Receivables shall not be required to be repurchased by the Seller. The Representative Purchaser shall hold any funds delivered to it pursuant to the first sentence of this Clause 26.3 in an interest bearing account in the name of the Seller or its designee. Part 13 REPRESENTATIVE PURCHASER 27. Representative Purchaser The Purchasers and the Representative Purchaser agree among themselves and, where the context of Clause 27.7 so requires, with the Seller as follows: 27.1 Each Purchaser irrevocably authorizes the Representative Purchaser to receive all payments of Purchased Receivables, amounts payable thereon at the Yield Rate and other amounts due hereunder and under the Guaranty and to take all other actions on behalf of such Purchaser and to exercise such powers hereunder as are specifically delegated to the Representative Purchaser by the terms hereof and the terms of the Guaranty, together with all such other powers as shall be reasonably incidental thereto. Without prejudice to the generality of the foregoing, each Purchaser agrees that (i) the Perfection Document will cover the sale of a Purchased Receivable by the Seller to the Representative Purchaser pursuant to the Seller Assignment and may state, in effect, that the Purchased Receivable has been assigned by the Seller to the Representative Purchaser and payments in respect thereof shall be made to the Collection Agent at the Collection Account, and (ii) the P/N issued in relation to a 41 Purchased Receivable may be endorsed without recourse by the Seller to the Representative Purchaser (instead of each Purchaser being named as an endorsee). The relationship between the Representative Purchaser and the Purchasers is and shall be that of agent and principal only and nothing herein shall be construed to constitute the Representative Purchaser a trustee for any Purchaser or any participant in such Purchaser's rights hereunder or under the Guaranty nor to impose on the Representative Purchaser duties and obligations other than those expressly provided for herein or therein. Neither the Representative Purchaser nor any of its directors, officers, employees or agents shall be liable to any Purchaser for any action taken or omitted to be taken by it or them hereunder or under the Guaranty or in connection herewith or therewith, except for its own or their own gross negligence or willful misconduct. Each Purchaser agrees to indemnify the Representative Purchaser (to the extent not reimbursed by the Seller), in amounts which are pro rata to their respective Purchase Commitments, from and against any and all losses, claims, damages, liabilities and expenses which may be imposed on, incurred by or asserted against the Representative Purchaser (in its capacity as such) in any way related to or arising out of this Agreement, the Guaranty or the Purchased Receivables or any action taken or omitted to be taken by the Representative Purchaser under this Agreement or the Guaranty, except (i) normal administrative expenses incidental to the performance of its duties as the Representative Purchaser hereunder and (ii) any losses, claims, damages, liabilities or expenses resulting from its gross negligence or willful misconduct. 27.2 The Representative Purchaser shall be entitled to rely on any written communication, instrument or document reasonably believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and with respect to all legal matters shall be entitled to rely on the advice of legal advisors selected by it concerning all matters relating to this Agreement, the Guaranty and its duties hereunder and thereunder, and shall not be liable to any Purchaser for the consequences of such reliance. 27.3 The Representative Purchaser shall not be bound by any waiver, amendment, supplement or modification of this Agreement or the Guaranty which affects its duties under this Agreement or the Guaranty unless it shall have given its prior written consent as Representative Purchaser thereto. 27.4 The Representative Purchaser does not make any warranty or representation to any Purchaser, nor shall it be responsible for any recitals, statements, representations or warranties herein or in any document prepared by or given by the Seller or by the Collection Agent to the Purchasers (or for the accuracy or completeness of any such document) or for the execution, effectiveness, genuineness, validity or enforceability of this Agreement or the Guaranty, or be liable for failing to make any inquiry concerning the performance or observance of any of the terms, provisions or conditions of this Agreement or the Guaranty. The Representative Purchaser shall be entitled to retain for its own use any amounts paid to it in its capacity as such. The Representative Purchaser shall not be deemed to have knowledge of the occurrence of any 42 Event of Termination or other event which with the giving of notice or lapse of time or both would become an Event of Termination unless the Representative Purchaser has received written notice from a Purchaser or the Seller specifying such Event of Termination or other event and stating that such notice is a "Notice of Default". In the event that (i) the Representative Purchaser is notified that any Buyer fails to make payment in respect of any Purchased Receivable, (ii) the Representative Purchaser has knowledge that the Seller or the Collection Agent fails to perform its obligation hereunder or (iii) the Representative Purchaser receives such a notice of an Event of Termination or other event, the Representative Purchaser shall promptly give written notice thereof to the Purchasers. 27.5 (a) The Representative Purchaser may, with the prior consent of all the Purchasers, amend, modify or otherwise vary or waive breaches of, or defaults under, or otherwise excuse performance of, any provisions of this Agreement and/or the Guaranty, provided that the Representative Purchaser may, with the prior consent of the Majority Purchasers, amend, modify or otherwise vary or waive breaches of, or defaults under, or otherwise excuse performance of, the provisions of sub-paragraph (f) (which set out the Guarantor's obligations by reference to the financial covenants of the Guarantor (as "Borrower" therein) set forth in the Credit Agreement (as defined in the Guaranty)) of paragraph 4 of the Guaranty. Any such action so authorized and effected by the Representative Purchaser shall be promptly notified to the Purchasers by the Representative Purchaser and binding on all the Purchasers. (b) Subject to subclause (a) above, only the Representative Purchaser shall be authorized to take any action on behalf of the Purchasers under this Agreement and the Guaranty. In relation to its taking such action, the Representative Purchaser may decline to take any action except upon the written direction of all the Purchasers and the Representative Purchaser may obtain a ratification by all the Purchasers of any action taken by it under this Agreement or the Guaranty. In each case, the Representative Purchaser shall have no liability to any of the Purchasers for any action taken by it upon the direction of all the Purchasers or if ratified by all the Purchasers, nor shall the Representative Purchaser have any such liability for any failure to act unless the Representative Purchaser has been instructed to act by all the Purchasers. The action of all the Purchasers shall in each case bind all of the Purchasers hereunder. The Representative Purchaser shall not be required to take any action which exposes the Representative Purchaser to 43 personal liability (unless indemnified to its satisfaction for any and all consequences of such action) or which is contrary to this Agreement, the Guaranty or applicable law. 27.6 In relation to its Purchase Commitments, the Representative Purchaser, in its capacity as a Purchaser, shall have the same rights and powers hereunder as any Purchaser and may exercise them as though it were not the Representative Purchaser. The Representative Purchaser and its affiliates may (without having to account therefor to any Purchaser) accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with the Seller or the Collection Agent and any of the Seller's or Collection Agent's affiliates, as if it were not acting in such capacity hereunder. 27.7 Each Purchaser acknowledges that it has, independently and without reliance upon the Representative Purchaser or any other Purchaser, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and the transactions contemplated hereunder. Each Purchaser also acknowledges that it shall, independently and without reliance upon the Representative Purchaser or any other Purchaser, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement and the Guaranty. 27.8 Subject to the appointment and acceptance of a successor Representative Purchaser as provided below, the Representative Purchaser may resign at any time by giving written notice thereof to the Purchasers, the Seller and the Collection Agent. Upon any such resignation, the Majority Purchasers shall have the right to appoint a successor Representative Purchaser. If no successor Representative Purchaser shall have been so appointed by the Majority Purchasers and shall have accepted such appointment within thirty (30) days after the retiring Representative Purchaser's giving notice of resignation, then the retiring Representative Purchaser may appoint a successor Representative Purchaser. Such successor Representative Purchaser shall be a bank having an office in Tokyo, Japan and shall, to the extent practicable, be chosen from among the Purchasers. No such successor Representative Purchaser shall be appointed without the consent of the Seller, which consent shall not be unreasonably withheld or delayed. Upon the acceptance of any appointment as Representative Purchaser hereunder by a successor Representative Purchaser, such successor Representative Purchaser shall thereupon succeed to and become vested with all the rights, powers, privileges, duties and obligations of the retiring Representative Purchaser, and the retiring Representative Purchaser shall be discharged from its duties and obligations hereunder. After any retiring Representative Purchaser's resignation hereunder as Representative Purchaser, the provisions of this Clause 27 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Representative Purchaser hereunder. 44 Part 14 MISCELLANEOUS 28. Default Interest and Indemnity 28.1 If any sum due and payable by or on behalf of a party hereto (the "Payer") to the other party (the "Payee") hereunder is not paid on the due date therefor in accordance with the provisions hereof or if any sum due and payable by the Payer under any judgment of any court in connection herewith is not paid on the date of such judgment (the balance of such sum for the time being unpaid being herein referred to as an "unpaid sum"), an unpaid sum shall bear interest (to the extent permitted by law) at the rate per annum which is the sum of two percent (2.0%) and the short-term prime lending rate quoted by ABN AMRO Bank N.V., Tokyo Branch from time to time for the period beginning on, and including, such due date or, as the case may be, the date of such judgment and ending on, but excluding, the date upon which the obligation of the Payer to pay such sum is discharged (calculated on a basis of a year of 360 days). Such default interest shall be payable upon demand of the Payee. 28.2 Each of the Seller and the Collection Agent shall indemnify the Representative Purchaser and each Purchaser against any loss or expense, including legal fees reasonably incurred, which the Representative Purchaser and such Purchaser may sustain or incur as a consequence of any default by the Seller or the Collection Agent (as the case may be) in the performance of any of the obligations expressed to be assumed by it in this Agreement. 29. Fees, Costs and Expenses and Stamp Duty 29.1 The Seller shall pay to ABN AMRO Bank N.V., San Francisco International Branch, acting as arranger, an arrangement fee designated in the Letter Agreement dated on or around December 19, 1997 from the Representative Purchaser to the Seller. 29.2 The Seller shall pay a commitment fee at the rate of 0.25 percent per annum on the amount equal to the Total Purchase Commitments minus the aggregate sum of the Purchase Price of the Purchased Receivables the payment of which has not been received by the Purchasers from day to day during the period beginning on the date of this Agreement and ending on the last day of the Purchase Commitment Period, but only to such extent as permitted by law. Such fee shall be payable in arrears quarterly from the date of this Agreement and on the last day of the Purchase Commitment Period. 29.3 The Seller shall, from time to time upon demand of the Purchasers through the Representative Purchaser reimburse the Representative Purchaser and the Purchasers for all reasonable costs and expenses (including reasonable legal fees) incurred by them in or in connection with the negotiation, preparation and execution of this Agreement, any Assignment or any Transaction Document or amendment thereto or any waiver thereof. 45 29.4 The Seller or the Collection Agent will upon demand pay to the Representative Purchaser and the Purchasers and any permitted assignee in accordance with this Agreement, the amount of any and all reasonable expenses, including all court costs, attorneys' fees and expenses, which they may incur in connection with the exercise or enforcement against it of any of their respective rights or interests under this Agreement, any Assignment or any other Transaction Document or amendment thereto or any waiver thereof. 29.5 The Seller shall be responsible for all stamp, registration and other taxes to which this Agreement, any Assignment, any other Transaction Document, any transaction contemplated hereby or thereby or any order or judgment given in connection herewith or therewith are or at any time may be subject in Japan, except, for the avoidance of doubt, for taxes payable by the Purchasers based on its entire taxable net income. 30. Benefit of Agreement 30.1 This Agreement shall be binding upon and enure to the benefit of each party hereto and its successors and permitted assigns. 30.2 The Seller and the Collection Agent shall not be entitled to assign or transfer all or any of their rights, benefits and obligations hereunder. 30.3 Any Purchaser may, at any time hereafter, assign or transfer the whole or any part of its rights and/or obligations under this Agreement, the Guaranty and the Assignments to a bank or other institution; provided that no such assignment or transfer shall be effective unless (a) such Purchaser obtains the prior written consent of the Representative Purchaser (if such Purchaser is not the Representative Purchaser) and the Seller (which consents shall not be unreasonably withheld or delayed) and (b) such transfer is effected in accordance with Clause 30.4. 30.4 If any Purchaser wishes to transfer all or any of its rights, benefits and/or obligations hereunder, under the Guaranty and under the Assignments as contemplated in Clause 30.3, and subject to the proviso to Clause 30.3, then such transfer may be effected by the delivery to the Representative Purchaser of a duly completed and duly executed Transfer Certificate in which event, on the later of the Transfer Date specified in such Transfer Certificate and the fifth (5th) Business Day after (or such earlier Business Day endorsed by the Representative Purchaser on such Transfer Certificate falling on or after) the date of delivery of such Transfer Certificate to the Representative Purchaser: (a) to the extent that in such Transfer Certificate the Purchaser party thereto seeks to transfer its rights and obligations hereunder and under the Guaranty or the Assignments, the Seller (in such capacity and as the Collection Agent) and such Purchaser shall each be released from further obligations to each other hereunder and 46 under the Guaranty and the Assignments and their respective rights against each other (other than any rights accruing to such Purchaser under Clause 15 and under the Guaranty in respect of the period from the date on which such Purchaser became a Purchaser to the date on which the transfer takes place) shall be cancelled (such rights and obligations being referred to in this Clause 30.4 as "discharged rights and obligations"); (b) the Seller (in such capacity and as the Collection Agent) and the Transferee party thereto shall each assume obligations towards each other and/or acquire rights against each other which differ from such discharged rights and obligations only insofar as the Seller (in such capacity and as the Collection Agent) and such Transferee have assumed and/or acquired the same in place of the Seller (in such capacity and as the Collection Agent) and such Purchaser; and (c) the Representative Purchaser, such Transferee and the other Purchasers shall acquire the same rights and assume the same obligations between themselves as they would have acquired and assumed had such Transferee been an original party hereto as a Purchaser with the rights and/or obligations acquired or assumed by it as a result of such transfer. 30.5 Any Purchaser may enter into any agreement to permit another bank or other institution to participate in all or part of such Purchaser's rights and benefits under this Agreement, the Guaranty and the Assignments. 30.6 The Seller agrees that in relation to any such assignment, transfer or participation as contemplated in Clause 30 each Purchaser may disclose to the proposed assignee, transferee or participant any information relating to, or obtained by such Purchaser pursuant to, this Agreement or the Guaranty or relating to the Purchased Receivables. 30.7 For the purposes of this Agreement the terms "Representative Purchaser," "Purchaser" and "Purchasers" shall where the context so admits include their respective successors and permitted assigns and permitted transferees. 31. Remedies and Waivers 31.1 No failure to exercise, nor any delay in exercising, on the part of any party hereto, any right or remedy hereunder shall operate as a waiver hereof, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise thereof or the exercise of any other right or remedy. 31.2 The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law. 47 32. Partial Invalidity 32.1 Without prejudice to any other provision hereof, if one or more provisions hereof is or becomes invalid, illegal or unenforceable in any respect in any jurisdiction or with respect to such party or parties, it shall not, to the fullest extent permitted by applicable law, render invalid, illegal or unenforceable other provisions hereof or such provision or provisions in any other jurisdiction or with respect to any other party or parties hereto. 33. Counterparts 33.1 This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement. 34. Notices 34.1 Unless otherwise stated herein, each communication to be made hereunder shall be made in writing and may be made by telex, telefax or letter. 34.2 Any communication or document to be made or delivered by any one person to another pursuant to this Agreement shall (unless that other person has by fifteen days' written notice to the other parties hereto specified another address) be made or delivered to that other person at the address set out below and shall be deemed to have been made or delivered when received by that other person, provided that each communication made by one party hereto to another shall be made to that other person at such other address or number as notified to such party by that other person from time to time. If to the Seller or the Collection Agent: Address: Lam Research Co., Ltd. 1-1-10, Oyama, Sagamihara-shi, Kanagawa Prefecture 229, Japan Attention: Mr. Hiroyuki Ishihara Controller, Finance & Accounting Department Telefax: 81-427-70-0347 Telephone: 81-427-70-0820 with a copy to: Address: Lam Research Corporation 4650 Cushing Parkway Fremont, CA 94538-6470 U.S.A. Attention: Ms. Jan J. Kang Director, General Counsel Telefax: 1-510-659-2876 48 Telephone: 1-510-659-6467 If to the Representative Purchaser: Address: ABN AMRO Bank N.V., Tokyo Branch 13F, Shiroyama JT Mori Building 4-3-1, Toranomon, Minato-ku Tokyo 105, Japan Attention: Structured Finance Telefax: 81-3-5405-6903/6902 Telephone: 81-3-5405-6503 If to a Purchaser: at its address set out in Exhibit I attached hereto. 34.3 Unless specifically waived by the Representative Purchaser, each communication and document made or delivered by one person to another person pursuant hereto shall be in the English language or in Japanese accompanied by a translation thereof into English certified (by an officer of the person making or delivering the same) as being a true and accurate translation thereof. 35. Prior Understandings 35.1 This Agreement and the Transaction Documents set forth the entire understanding of the parties relating to the subject matter hereof, and supersedes all prior understandings and agreements, whether written or oral, except the Existing Agreement. 36. Pro Rata Sharing 36.1 In the event that any Purchaser shall have received an amount in excess of its ratable share of payments hereunder through the exercise of any lien, set-off or similar right or any voluntary payment by any Buyer, the Seller or the Collection Agent, such Purchaser shall promptly purchase for cash without recourse such participation in each other Purchaser's share of Purchased Receivables as will result in each Purchaser receiving its ratable share of the amount received through the exercise of such lien, set-off or similar right, or voluntary payment; provided that to the extent that such excess amount or any portion thereof is subsequently recovered from the purchasing Purchaser, its purchases from the other Purchasers shall be rescinded and the price repaid without interest; and provided further that if any Purchaser shall commence an action or proceeding in any court to collect the Purchased Receivables and as a result thereof, or in connection therewith, shall receive an amount in excess of its ratable share of payments hereunder, such Purchaser shall not be required to share any portion of such excess amount with a Purchaser which has the legal right to, but does not, join such action or proceeding or commence and diligently prosecute a separate action or proceeding to collect the Purchased Receivables in another court. Nothing herein contained shall 49 in any way affect the right of any Purchaser to obtain payment of indebtedness of any Buyer, the Seller or the Collection Agent other than indebtedness hereunder. Part 15 LAW AND JURISDICTION 37. Governing Law 37.1 This Agreement shall be governed by and construed in accordance with the laws of Japan. 38. Jurisdiction 38.1 Each of the parties hereto irrevocably agrees that the Tokyo District Court shall have jurisdiction to hear and determine any suit, action or proceeding, and to settle any disputes, which may arise out of or in connection with this Agreement and, for such purposes, irrevocably submits to the jurisdiction of such court. 38.2 Each of the parties hereto irrevocably waives any objection which it might now or hereafter have to the court referred to in Clause 38.1 being nominated as the forum to hear and determine any suit, action or proceeding, and to settle any disputes, which may arise out of or in connection with this Agreement and agrees not to claim that such court is not a convenient or appropriate forum. 38.3 The submission to the jurisdiction of the court referred to in Clause 38.1 shall not (and shall not be construed so as to) limit the right of any party hereto to take proceedings against the other party in any other court of competent jurisdiction nor shall the taking of proceedings in any one or more jurisdictions preclude the taking of proceedings in any other jurisdiction (whether concurrently or not) if and to the extent permitted by applicable law. 38.4 Each of the parties hereto hereby consents generally in respect of any legal action or proceeding arising out of or in connection with this Agreement to the giving of any relief or the issue of any process in connection with such action or proceeding including, without limitation, the making, enforcement or execution against any property whatsoever (irrespective of its use or intended use) of any order or judgment which may be made or given in such action or proceeding. 50 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the day and year first before written. The Seller and the Collection Agent LAM RESEARCH CO., LTD. By Name: Title: The Representative Purchaser and Purchaser ABN AMRO BANK N.V., TOKYO BRANCH By Name: Title: By Name: Title: 51 EXHIBIT I PURCHASER'S COMMITMENTS (subject to the third sentence of Clause 2.1) Purchaser(s) and their/its Address Commitment(s) ABN AMRO Bank N.V. yen6,000,000,000 Tokyo Branch 13F, Shiroyama JT Mori Building 4-3-1, Toranomon, Minato-ku Tokyo 105 Telefax: 81-3-5405-6903/6902 Attention: Structured Finance Total yen6,000,000,000 52 THE FIRST SCHEDULE Description of Initial Receivables 53 THE SECOND SCHEDULE Part 1 : Conditions Precedent to the Initial Purchase 1. The receipt by the Representative Purchaser on or prior to the Initial Purchase Date, each in form and substance reasonably satisfactory to the Representative Purchaser, of: (a) a copy, certified as of the Initial Purchase Date as a true copy by a duly authorized officer of the Seller, of the resolutions of the Seller's board of directors approving: (i) the outright transfer of all the Seller's right, title and interest in and to the Initial Receivables; and (ii) the execution and delivery on behalf of the Seller (in such capacity and as the Collection Agent) of the Receivables Purchase Agreement, the Assignment and all other Transaction Documents to which the Seller is to be a signatory; (b) a copy, certified as of the Initial Purchase Date as a true copy by a duly authorized officer of the Seller, of the Articles of Incorporation of the Seller; (c) a certified copy, as of the date which is as close as practicably possible to the Initial Purchase Date, of a commercial registry of the Seller; (d) an incumbency certificate, certified as of the Initial Purchase Date by a duly authorized officer of the Seller, setting forth the name(s), title(s) and specimen signature(s) of individual(s) authorized to execute and deliver on behalf of the Seller (in such capacity and as the Collection Agent) the Receivables Purchase Agreement, the Seller Assignment and all other Transaction Documents to which the Seller is to be a signatory; (e) the Guaranty, duly executed by the Guarantor; (f) a copy, certified as of the Initial Purchase Date as a true copy by a duly authorized officer of the Guarantor, of the resolution of the Guarantor's board of directors approving the execution and delivery on behalf of the Guarantor of the Guaranty and all other Transaction Documents to which the Guarantor is to be a signatory; (g) a copy, certified as of the Initial Purchase Date as a true copy by a duly authorized officer of the Guarantor, of the Certificate of Incorporation and the Bylaws of the Guarantor; (h) a good standing certificate from California and Delaware, as of the date which is as close as practicably possible to the Initial Purchase Date, of the Guarantor; (i) an incumbency certificate, certified as of the Initial Purchase Date by a duly authorized officer of the Guarantor, setting forth the names(s), title(s) and 54 specimen signature(s) of individual(s) authorized to execute and deliver on behalf of the Guarantor the Guaranty and all other Transaction Documents to which the Guarantor is to be a signatory; (j) a copy, certified as of the Initial Purchase Date as a true copy by a duly authorized officer of the Seller, of the general terms and conditions of the Sales Agreements applicable to the Buyers relating to the Initial Receivables, or (if such written agreement does not exist) a certificate of a duly authorized officer of the Seller describing the agreed terms and conditions applicable to a particular Buyer(s); (k) such evidence as the Representative Purchaser may request to establish that the Initial Receivables are the Eligible Receivables; (l) such financial statements and other financial information for the Seller and the Guarantor as the Representative Purchaser may reasonably request; (m) opinions, dated the Initial Purchase Date and addressed to the Purchasers from (i) Nishimura & Partners, Japanese counsel to the Purchasers, in a form and substance reasonably satisfactory to the Representative Purchaser, (ii) Nagashima & Ohno, Japanese counsel to the Seller, substantially in the form of Part 1 of the Ninth Schedule and (iii) Ms. Jan J. Kang, counsel to the Guarantor, substantially in the form of Part 2 of the Ninth Schedule; and (n) such other instruments, agreements, certificates, opinions and other documents as the Representative Purchaser may reasonably request. 2. The receipt by the Representative Purchaser on or prior to the Initial Purchase Date, each in form and substance reasonably satisfactory to the Representative Purchaser, of either of following (a) or (b), as chosen by the Seller: (a) (i) Disapplication of Prohibition of Assignment from a Buyer who owes an Initial Receivable, if it is required pursuant to the terms and conditions of the relevant Sales Agreement; and (ii) Perfection Document in relation to the assignment of each of the Initial Receivables; or (b) Confirmation to Issue P/N from a Buyer who owes an Initial Receivable. 3. The representations and warranties contained in the Sixth Schedule (with respect to those provided for in Part 3 thereof, to the extent such representations and warranties relate to the Initial Receivables) being correct on and as of the Initial Purchase Date by reference to the facts and circumstances then existing. 4. The Seller having paid to ABN AMRO Bank N.V., San Francisco International Branch the arrangement fees 55 pursuant to Clause 29.1 of the Receivables Purchase Agreement. 5. Neither a Termination Event nor a Potential Termination Event having occurred and remaining unremedied on the Initial Purchase Date. 6. No event having occurred and no condition existing which could have a Material Adverse Effect on the Seller, the Guarantor or the Collection Agent. Part 2 : Conditions Precedent to Subsequent Purchases 1. The receipt by the Representative Purchaser on or prior to the relevant Subsequent Purchase Date, each in form and substance reasonably satisfactory to the Representative Purchaser, of: (a) such evidence as the Representative Purchaser may reasonably request to establish that the relevant Accepted Receivable is the Eligible Receivable; (b) unless the same has been theretofore submitted to the Representative Purchaser, a copy, certified as of the relevant Subsequent Purchase Date as a true copy by a duly authorized officer of the Seller, of the general terms and conditions of the Sales Agreement applicable to the Buyer relating to the relevant Accepted Receivable, or (if such written agreement does not exist) a certificate of a duly authorized officer of the Seller describing the agreed terms and conditions applicable to such Buyer; and (c) such other instruments, agreements, certificates, opinions and other documents as the Representative Purchaser may reasonably request. 2. The receipt by the Representative Purchaser on or prior to the relevant Subsequent Purchase Date, each in form and substance reasonably satisfactory to the Representative Purchaser, of either of following (a) or (b), as chosen by the Seller: (a) (i) unless the same has been theretofore submitted to the Representative Purchaser, Disapplication of Prohibition of Assignment from the Buyer who owes the relevant Accepted Receivable, if it is required pursuant to the terms and conditions of the relevant Sales Agreement; and (ii) Perfection Document in relation to the assignment of the relevant Accepted Receivable; or (b) unless the same has been theretofore submitted to the Purchaser, Confirmation to Issue P/N from the Buyer who owes the relevant Accepted Receivable. 3. The representations and warranties contained in the Sixth Schedule (with respect to those provided for in Part 3 thereof, to the extent such representations and warranties relate to the relevant Accepted Receivable) being correct on 56 and as of the relevant Subsequent Purchase Date by reference to the facts and circumstances then existing. 4. The Seller having performed its obligations (including, but not limited to, the payment of fees) in compliance with the Receivables Purchase Agreement. 5. Neither a Termination Event nor a Potential Termination Event having occurred and remaining unremedied on the relevant Subsequent Purchase Date. 6. No event having occurred and no condition existing which could have a Material Adverse Effect on the Seller, the Collection Agent or the Guarantor. 57 THE THIRD SCHEDULE Part 1 - Form of Seller Assignment of Initial Receivables THIS ASSIGNMENT made on [the Initial Purchase Date] BY: (1) Lam Research Co., Ltd. (the "Seller") IN FAVOR OF: (2) ABN AMRO Bank N.V., Tokyo Branch (the "Representative Purchaser") as representative of the Purchasers named in the Purchase Agreement (as defined below) WITNESSES as follows: 1. Interpretation 1.1 In this Assignment "Purchase Agreement" means the receivables purchase agreement dated December 26, 1997 between the Seller in its capacity as Seller, the Purchasers named therein, the Representative Purchaser and the Seller in its capacity as Collection Agent. 1.2 Terms defined in the Purchase Agreement have the same meaning in this Assignment. 1.3 Headings in this Assignment are for ease of reference only. 2. Transfer 2.1 Subject to, and in accordance with, the terms and conditions of the Purchase Agreement, the Seller hereby sells and assigns to the Representative Purchaser (by way of outright assignment and not merely by way of security), for resale to the Purchasers pro rata according to their respective Designated Portion, all of the Seller's right, title and interest in and to an Initial Receivable (the "Assigned Receivable") specified in the Exhibit hereto, to all Collections thereof and to the Related Security relating thereto and all proceeds thereof. For the avoidance of doubt, the Seller assigns title to the underlying Equipment that is reserved to the Seller prior to the Acceptance to the Representative Purchaser, for the ratable benefit of the Purchasers, to secure the obligations of the Seller under Clause 10 and Clause 16 of the Purchase Agreement. 2.2 The Proposed Acceptance Date, the Proposed Credit Period and the Proposed Receivables Due Date for the Assigned Receivable shall be as follows:- (a) Proposed Acceptance Date [ ] (b) Proposed Credit Period [ ] 58 (c) Proposed Receivables Due Date [ ] Upon the Syndicate Assignment relating to this Assignment being made, in accordance with Clause 4.1 of the Purchase Agreement, the Purchase Price of the Assigned Receivable shall be as follows: yen for ABN AMRO Bank N.V., Tokyo Branch yen for yen for Total yen 3. Representations and Warranties The Seller hereby represents and warrants to the Representative Purchaser for itself and for the benefit of the Purchasers as of the date hereof in the terms set out in Clause 11 of the Purchase Agreement by reference to the fact and circumstances currently existing. 4. Governing Law and Jurisdiction 4.1 This Assignment shall be governed by and construed in accordance with the laws of Japan. 4.2 The parties hereto agree that the Tokyo District Court shall have jurisdiction to hear and determine any suit, action or proceedings, and to settle any disputes, which may arise out of or in connection with this Assignment and, for such purpose, irrevocably submits to the jurisdiction of such court. 4.3 The parties hereto irrevocably waive any objection which they might now or hereafter have to the court referred to in Clause 4.2 being nominated as the forum to hear and determine any suit, action or proceeding, and to settle any disputes, which may arise out of or in connection with this Assignment and agree not to claim that such court is not a convenient or appropriate forum. 4.4 The submission to the jurisdiction of the court referred to in Clause 4.2 shall not (and shall not be construed so as to) limit the right of either of the Seller, the Representative Purchaser or the Purchasers to take proceedings against the other(s) in any other court of competent jurisdiction nor shall the taking of proceedings in any one or more jurisdictions preclude the taking of proceedings in any other jurisdiction (whether concurrently or not) if and to the extent permitted by applicable law. 4.5 Each of the Seller and the Representative Purchaser hereby consents generally in respect of any legal action 59 or proceeding arising out of or in connection with this Assignment to the giving of any relief or the issue of any process in connection with such action or proceeding including, without limitation, the making, enforcement or execution against any property whatsoever (irrespective of its use or intended use) of any order or judgment which may be made or given in such action or proceeding. AS WITNESS the hands of the duly authorized representatives of the parties hereto the day and year first before written. Lam Research Co., Ltd. By Name: Title: ABN AMRO Bank N.V., Tokyo Branch By Name: Title: 60 Exhibit to the Assignment Description of Assigned Receivable (1) Face Value (2) Name of Buyer (3) Description of Equipment Sold. (4) Date of Purchase Order (5) Date of Shipment (6) Payment Terms Including Whether Promissory Note Has Been or Is to be Issued 61 Part 2 - Form of Offer To: ABN AMRO Bank N.V., Tokyo Branch, as Representative Purchaser for itself and on behalf of the Purchasers named in the Purchase Agreement (as defined below) From: Lam Research Co., Ltd., as Seller Dated: [ ] Dear Sirs: 1. We refer to the Receivables Purchase Agreement dated December 26, 1997 (the "Purchase Agreement") between ourselves as Seller, the Purchasers named therein, the Representative Purchaser and ourselves as Collection Agent. 2. Terms defined in the Purchase Agreement shall have the same meaning herein. 3. We hereby offer for purchase by the Representative Purchaser, for resale to the Purchasers, on [ (the proposed date of assignment) ] an Additional Receivable(s), details of which are set out in the Exhibit hereto. 4. We hereby represent and warrant to you for yourself and for the benefit of the Purchasers as of the date hereof in the terms set out in Clause 11 of the Purchase Agreement by reference to the facts and circumstances currently existing. Subject to the terms of the Purchase Agreement, this Offer constitutes an irrevocable offer by us binding us to assign and sell to the Representative Purchaser, for resale to the Purchasers, on the proposed date of assignment as specified above an ownership interest in the Receivable(s) referred to in this Offer. Yours faithfully, for and on behalf of Lam Research Co., Ltd. By Name: Title: We accept the foregoing Offer for itself and on behalf of the Purchasers. Applicable Margin in respect of the Receivable(s) referred to in this Offer: for and on behalf of ABN AMRO Bank N.V., Tokyo Branch By Name: Title: 62 Exhibit to the Offer 1. Description of Offered Receivable (1) Face Value (2) Name of Buyer (3) Description of Equipment Sold (4) Date of Purchase Order (5) Payment terms as provided for in the Purchase Order (6) Date of Shipment (7) Whether Promissory Note Has Been or Is to be Issued 2. Proposed Acceptance Date [ ] 3. Proposed Credit Period [ ] 63 Part 3 - Form of Seller Assignment of Accepted Receivable THIS ASSIGNMENT made on [the relevant Subsequent Purchase Date] By: (1) Lam Research Co., Ltd. (the "Seller") IN FAVOR OF: (2) ABN AMRO Bank N.V., Tokyo Branch (the "Representative Purchaser") as representative of the Purchasers named in the Purchase Agreement (as defined below) WITNESSES as follows: 1. Interpretation 1.1 In this Assignment "Purchase Agreement" means the receivables purchase agreement dated December 26, 1997 between the Seller in its capacity as Seller, the Purchasers named therein, the Representative Purchaser and the Seller in its capacity as Collection Agent. 1.2 Terms defined in the Purchase Agreement have the same meaning in this Assignment. 1.3 Headings in this Assignment are for ease of reference only. 2. Transfer 2.1 Subject to, and in accordance with, the terms and conditions of the Purchase Agreement, the Seller hereby sells and assigns to the Representative Purchaser (by way of outright assignment and not merely by way of security), for resale to the Purchasers pro rata according to their respective Designated Portion, all of Seller's right, title and interest in and to an Accepted Receivable (the "Assigned Receivable") specified in the Exhibit hereto, to all Collections thereof and to the Related Security relating thereto and all proceeds thereof. For the avoidance of doubt, the Seller assigns title to the underlying Equipment that is reserved to the Seller prior to the Acceptance to the Representative Purchaser, for the ratable benefit of the Purchasers, to secure the obligations of the Seller under Clause 10 and Clause 16 of the Purchase Agreement. 2.2 The Proposed Acceptance Date, the Proposed Credit Period and the Proposed Receivables Due Date for the Assigned Receivable shall be as follows:- (a) Proposed Acceptance Date [ ] (b) Proposed Credit Period [ ] 64 (c) Proposed Receivables Due Date [ ] Upon the Syndicate Assignment relating to this Assignment being made, in accordance with Clause 8.1 of the Purchase Agreement, the Purchase Price of the Assigned Receivable shall be as follows: yen for ABN AMRO Bank N.V., Tokyo Branch yen for yen for Total yen 3. Representations and Warranties The Seller hereby represents and warrants to the Representative Purchaser for itself and for the benefit of the Purchasers as of the date hereof in the terms set out in Clause 11 of the Purchase Agreement by reference to the fact and circumstances currently existing. 4. Governing Law and Jurisdiction 4.1 This Assignment shall be governed by and construed in accordance with the laws of Japan. 4.2 The parties hereto agree that the Tokyo District Court shall have jurisdiction to hear and determine any suit, action or proceedings, and to settle any disputes, which may arise out of or in connection with this Assignment and, for such purpose, irrevocably submits to the jurisdiction of such court. 4.3 The parties hereto irrevocably waive any objection which they might now or hereafter have to the court referred to in Clause 4.2 being nominated as the forum to hear and determine any suit, action or proceeding, and to settle any disputes, which may arise out of or in connection with this Assignment and agree not to claim that such court is not a convenient or appropriate forum. 4.4 The submission to the jurisdiction of the court referred to in Clause 4.2 shall not (and shall not be construed so as to) limit the right of either of the Seller, the Representative Purchaser or the Purchasers to take proceedings against the other(s) in any other court of competent jurisdiction nor shall the taking of proceedings in any one or more jurisdictions preclude the taking of proceedings in any other jurisdiction (whether concurrently or not) if and to the extent permitted by applicable law. 4.5 Each of the Seller and the Representative Purchaser hereby consents generally in respect of any legal action or proceeding arising out of or in connection with this 65 Assignment to the giving of any relief or the issue of any process in connection with such action or proceeding including, without limitation, the making, enforcement or execution against any property whatsoever (irrespective of its use or intended use) of any order or judgment which may be made or given in such action or proceeding. AS WITNESS the hands of the duly authorized representatives of the parties hereto the day and year first before written. Lam Research Co., Ltd. By Name: Title: ABN AMRO Bank N.V., Tokyo Branch By Name: Title: 66 Exhibit to the Assignment Description of Assigned Receivable (1) Face Value (2) Name of Buyer (3) Description of Equipment Sold (4) Date of Purchase Order (5) Date of Shipment (6) Payment Terms Including Whether Promissory Note Has Been or Is to be Issued 67 Part 4 - Form of Reassignment of Receivables THIS ASSIGNMENT made on [date] By: (1) ABN AMRO Bank N.V., Tokyo Branch ("ABN AMRO") for and on behalf of the Purchasers named in the Purchase Agreement (as defined below) IN FAVOR OF: (2) Lam Research Co., Ltd. ("Lam Japan") WITNESSES as follows: 1. Interpretation 1.1 In this Assignment "Purchase Agreement" means the receivables purchase agreement dated December 26, 1997 between the Seller in its capacity as Seller, the Purchasers named therein, the Representative Purchaser and the Seller in its capacity as Collection Agent. 1.2 Terms defined in the Purchase Agreement have the same meaning in this Agreement unless otherwise defined herein. 1.3 Headings in this Assignment are for ease of reference only. 2. Transfer 2.1 Subject to, and in accordance with, the terms and conditions of the Purchase Agreement, ABN AMRO on behalf of the Purchasers hereby sells and assigns to Lam Japan (by way of outright assignment and not merely by way of security, and without any representation or warranty on the part of ABN AMRO or the Purchasers except for the representation set out in Clause 2.2) all of each Purchaser's pro rata share of right, title and interest in and to a Receivable (the "Assigned Receivable") specified in the Exhibit hereto, to all Collections thereof and to the Related Security relating thereto and all proceeds thereof (including without limitation title to the underlying Equipment that has been assigned to the Representative Purchaser). 2.2 ABN AMRO on behalf of the Purchasers hereby represents and warrants to Lam Japan that as of the date hereof no Purchaser has sold, transferred, assigned, created security interest over or otherwise disposed of the Assigned Receivable. 3. Governing Law and Jurisdiction 3.1 This Assignment shall be governed by and construed in accordance with the laws of Japan. 3.2 The parties hereto agree that the Tokyo District Court shall have jurisdiction to hear and determine any suit, 68 action or proceedings, and to settle any disputes, which may arise out of or in connection with this Assignment and, for such purpose, irrevocably submits to the jurisdiction of such court. 3.3 The parties hereto irrevocably waive any objection which they might now or hereafter have to the court referred to in Clause 3.2 being nominated as the forum to hear and determine any suit, action or proceeding, and to settle any disputes, which may arise out of or in connection with this Assignment and agree not to claim that such court is not a convenient or appropriate forum. 3.4 The submission to the jurisdiction of the court referred to in Clause 3.2 shall not (and shall not be construed so as to) limit the right of any of ABN AMRO, the Purchasers or Lam Japan to take proceedings against other(s) in any other court of competent jurisdiction nor shall the taking of proceedings in any one or more jurisdictions preclude the taking of proceedings in any other jurisdiction (whether concurrently or not) if and to the extent permitted by applicable law. AS WITNESS the hands of the duly authorized representatives of the parties hereto the day and year first before written. ABN AMRO Bank N.V., Tokyo Branch for and on behalf of the Purchasers By Name: Title: Lam Research Co., Ltd. By Name: Title: 69 Exhibit to the Assignment Description of Assigned Receivable (1) Face Value or Revised Face Value (2) Name of Buyer (3) Description of Equipment Sold (4) Date of Purchase Order (5) Date of Shipment 70 THE FOURTH SCHEDULE Part 1 : Eligible Buyers "Eligible Buyers" means those Buyers which are listed below or approved by the Representative Purchaser with the consent of all the Purchasers to be added to such list and notified to the Seller as such, provided that any of such Buyers is not an Eligible Buyer insofar as:- (i) if such Buyer is given a rating in respect of its long-term unsecured and unsubordinated debt by any of the recognized rating agencies, any of such ratings is below (and not) "A"; or (ii) if such Buyer is not so given a rating, the Representative Purchaser has determined in its sole discretion and notified to the Seller that such Buyer is ineligible based on its assessment of creditworthiness of such Buyer and has not altered such determination and notified the Seller to that effect, and provided further that any Eligible Buyer is subject to such concentration limits as may be established from time to time by the Representative Purchaser. List of Initial Eligible Buyers Fijitsu Ltd. Hitachi, Ltd. Matsushita Electric Industrial Co., Ltd. Sharp Corporation SONY Corporation TOSHIBA Corporation Part 2 : Eligible Receivables "Eligible Receivables" are Receivables which: 1. have arisen under a Sales Agreement; 2. were originated in the Seller's ordinary course of business; 3. are obligations of the Eligible Buyers; 4. are payable in Yen; 5. are not overdue and in relation to which the Buyer is solvent; 6. are debts, the rights in which can be transferred by way of sale and assignment to the Purchasers pursuant to this Agreement; 7. are legally and beneficially owned by the Seller; 8. are free and clear of any liens, or other encumbrances 71 exercisable against the Seller or the Purchaser; 9. are not subject to withholding taxes; 10. have been created in compliance with all applicable laws and all required consents, approvals and authorizations have been obtained in respect thereof; 11. subject to the terms and conditions of the relevant Sales Agreement, constitute an unconditional and irrevocable obligation of the Eligible Buyer to pay the full sum of the Face Value of such Receivable; 12. subject to the terms and conditions of the relevant Sales Agreement, constitute legal, valid, binding and enforceable obligations of Eligible Buyer to pay the full sum of the Face Value of such Receivable subject only to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally and are not subject to any defense, dispute, counterclaim or discount; 13. are Receivables the sale and assignment of which will not violate any law or any agreement by which the Seller or any of its assets may be bound; 14. are Receivables arising out of the sale of the Equipment in relation to which the Shipment has occurred; and 15. are Receivables, in connection with the sale and assignment of which no further act, condition or thing will be required to be done to enable the Purchasers to require payment of such Receivable or the enforcement of any such right in any court other than (i) the due performance by the Seller of the terms and conditions of the relevant Sales Agreement and (ii) obtaining the Buyer's Disapplication of Prohibition of Assignment (if applicable) and obtaining from or delivering to the Buyer the Perfection Document. In addition, the Proposed Acceptance Date for an Eligible Receivable shall not be later than the date which is two hundred seventy (270) days after the date of Shipment of the Equipment, and the Proposed Credit Period for an Eligible Receivable shall not be longer than two hundred twenty-five (225) days. 72 THE FIFTH SCHEDULE Termination Events 1. The Seller (in that capacity or in its capacity as the Collection Agent) or the Guarantor is in breach of any of its obligations under this Agreement, the Guaranty or any of the Transaction Documents and such breach is not remedied, if it is capable of being remedied, within five (5) Business Days (in the case of the obligation to pay monies) or twenty (20) Business Days (in the case of other obligations). 2. Either of the Seller or the Guarantor goes into the Insolvency Event or becomes unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due or ceases to carry on its business. 3. Any representation or warranty referred to in Part 1 or Part 2 of the Sixth Schedule or in paragraph 3 of the Guaranty is incorrect when made or deemed to be made. 4. If, after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority charged with the interpretation or administration thereof makes it unlawful or impossible for any party hereto or the Guarantor to perform its obligation under this Agreement, the Guaranty or any of the Transaction Documents. 5. The Seller or the Guarantor fails to pay any Debt in the aggregate amount in excess of ten million U.S. dollars (US$10,000,000)(or its equivalent in any other currency) when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure continues after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt, or any other default under any agreement or instrument relating to any such Debt or any other event occurs and continues after the applicable grace period, if any, specified in such agreement or instrument if the effect of such default or event is to accelerate, or to permit the acceleration of, the maturity of such Debt, or any such Debt shall be declared to be due and payable or required to be prepaid (other than by a regularly scheduled required prepayment) prior to the stated maturity thereof. 6. A material adverse change occurs in the financial condition of the Seller or the Guarantor in relation to the Original Financial Statements of the Seller or the Guarantor, as the case may be, which has had or can reasonably be expected to have a Material Adverse Effect. 73 THE SIXTH SCHEDULE Part 1 : Representations as to Matters of Law 1. The Seller (in such capacity or, as the case may be, as the Collection Agent, in such status being referred to in Part 1 and 2 of this Sixth Schedule merely as the "Seller") is a corporation duly organized and is validly existing under the laws of Japan with power to enter into this Agreement and each assignment to be entered into by it in respect of any Receivables assigned or scheduled to be assigned pursuant hereto and to exercise its rights and perform its obligations hereunder and thereunder and all corporate and other action required to authorize its execution of this Agreement and each such assignment and its performance of its obligations hereunder and thereunder has been duly taken. All of the issued and outstanding shares of the Seller is legally and beneficially owned by the Guarantor directly. 2. The Seller has corporate power and all governmental licenses, authorizations, consents and approvals to carry on its business in Japan. 3. The execution, delivery and performance of this Agreement and the transactions contemplated hereby by the Seller require no action by or in respect of, or filing, recording or enrolling with, any governmental body, agency, court official or other authority, and do not contravene, or constitute a default under, any provision of applicable law or regulation or its Articles of Incorporation or other internal regulations or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Seller or any of its assets. 4. Under the laws of Japan in force as at the date of making this representation, the claim of the Purchaser against the Seller under this Agreement will rank at least pari passu with the claims of all its other unsecured creditors save those whose claims are preferred solely by any bankruptcy, insolvency or other similar laws of general application. 5. In any proceedings taken in Japan in relation to this Agreement or any Seller Assignment, the Seller will not be entitled to claim for itself or any of its assets immunity from suit, execution, attachment or other legal process. 6. In any proceedings taken in Japan in relation to this Agreement or any Seller Assignment, the choice of Japanese law by the Seller as the governing law of this Agreement or, as the case may be, such Seller Assignment will be recognized and enforced subject to bankruptcy, insolvency, moratorium or other similar laws affecting creditor's rights generally and to principles of equity. 7. All acts, conditions and things required to be done, fulfilled and performed by the Seller in order (a) to enable the Seller lawfully to enter into, exercise its rights under and perform and comply with the obligations 74 expressed to be assumed by it in this Agreement or in any Assignment, (b) to ensure that the obligations expressed to be assumed by the Seller in this Agreement or in any Assignment are legal, valid and binding on it and (c) to make this Agreement and each Assignment admissible in evidence in Japan have been done, fulfilled and performed. 8. Under the laws of Japan in force as at the date of making this representation, it is not necessary that this Agreement or any Assignment be filed, recorded or enrolled with any court or other authority in Japan or that any stamp, registration or similar tax be paid on or in relation to this Agreement or such Assignment, save for the payment of stamp duty on this Agreement or any Assignment under any applicable law. 9. The obligations expressed to be assumed by the Seller in this Agreement and in each Assignment are legal and valid obligations binding on it and enforceable in accordance with their respective terms. Part 2 : Representations as to Matters of Fact 1. The Seller has not taken any corporate action nor have legal proceedings been started or threatened (to the best of its knowledge and belief) against the Seller for its winding-up, dissolution, rehabilitation or re- organization or for the appointment of a receiver, administrator, administrative receiver, trustee, liquidator, sequestrator or similar office of it or of any or all of its assets or revenues. 2. No action or administrative proceeding of or before any court or agency has been started or threatened against the Seller which might, if it were adversely determined, reasonably be expected to have a Material Adverse Effect. 3. The Original Financial Statements of the Seller were prepared in accordance with accounting principles generally accepted in Japan and consistently applied and give (in conjunction with the notes thereto) a true and fair view of its financial condition at the date as of which they were prepared and the results of its operations during the financial year then ended. 4. Since publication of the Original Financial Statements of the Seller, there has been no change in its financial condition or operations of the Seller so as to have a Material Adverse Effect. Part 3 : Representations relating to Receivables 1. Each Purchased Receivable is an Eligible Receivable owed by an Eligible Buyer with the Face Value specified in the relevant Seller Assignment or (if applicable) the Revised Face Value, subject to the applicable statute of limitations. 2. The assignment of each Purchased Receivable in the manner herein contemplated will be effective to pass to the 75 Purchasers full and unencumbered title thereto and the benefit thereof and no further act, condition or thing will be required to be done in connection therewith to enable the Purchasers to require payment of any such Purchased Receivable or the enforcement of any such right in the courts of Japan. 3. In all material respects the Seller has performed and is in compliance with the terms of the Sales Agreement relating to each Purchased Receivable. 4. The governing law of the Sales Agreement relating to each Purchased Receivable is Japanese law. 5. The Buyer owing each of the Purchased Receivables has, where required by the general terms and conditions of the relevant Sales Agreement, validly given the Disapplication of Prohibition of Assignment, except for the Purchased Receivables for which the conditions precedent set out in Paragraph 2(b) of Part 1 or Part 2, as the case may be, of the Second Schedule have been chosen or the conditions precedent set out in Paragraph 2 of Part 1 or Part 2, as the case may be, have been waived by the Representative Purchaser. 76 THE SEVENTH SCHEDULE Covenants and Undertakings of the Collection Agent The Collection Agent hereby covenants with the Representative Purchaser and the Purchasers that it shall at all times: (i) give such time and attention and exercise the same degree of care, responsibility, diligence, prudent and skill with respect to the servicing, collection and administration of the Purchased Receivables and all related functions as if it were performing such functions on its own behalf; (ii) take all reasonable action as to ensure that all Purchased Receivables are paid promptly into the Collection Account in accordance with the terms of this Agreement and the related Sales Agreement; (iii) not take any steps which have the effect of in any manner disposing of any right or interest to or in, or transferring or withdrawing any amount from, the Collection Account otherwise than in accordance with this Agreement; (iv) keep proper, complete, accurate and up to date Records in a manner reasonably acceptable to the Representative Purchaser; (v) keep and maintain Records, on a Receivable-by-Receivable basis, for the purposes of identifying, in particular, at any time, any amount paid by and to each Buyer, any amount due by or to a Buyer and the source of receipts which are paid into the Collection Account; (vi) permit audit and inspection under its guidance of its Records by or on behalf of the Representative Purchaser during normal working hours upon reasonable notice and with reasonable frequency; (vii) notify the Representative Purchaser of material developments in the Seller's performance of its obligations under the Sales Agreements, including, but not limited to, the Shipment, the Acceptance and the Partial Acceptance of the Equipment and the refusal thereof by the Buyers; (viii) notify the Representative Purchaser of the Scheduled Receivables Due Date and (if applicable) the Revised Face Value promptly after it is confirmed between the Seller and the relevant Buyer and, if the payment by the Buyer of the relevant Purchased Receivable is known to be made on the date which is not the Scheduled Receivables Due Date, notify the Representative Purchaser of such date of 77 payment at least two Business Days prior to the Scheduled Receivables Due Date or such date of payment, whichever comes earlier; (ix) use its best endeavors to maintain records of all correspondence with the Buyer in respect of the Purchased Receivables; (x) promptly obtain, comply in all material respects with the terms of and do all that is necessary and within its control to maintain in full force and effect all authorizations, approvals, licenses and consents required in or by the laws and regulations of Japan to enable it lawfully to enter into and perform its obligations under this Agreement or to ensure the legality, validity, enforceability or admissibility in evidence of this Agreement; (xi) do all things necessary to remain duly organized, validly existing under the laws of Japan and maintain all requisite authority to conduct its business in Japan; (xii) comply in all respects which could be regarded as material in the context of the transactions contemplated by this Agreement, with all laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject; (xiii) maintain sufficient operating procedures, employees and other resources to perform its obligations as Collection Agent hereunder; and (xiv) submit to the Representative Purchaser a monthly report relating to the Purchased Receivables and the Buyer owing them in such a form as is reasonably requested by the Representative Purchaser. 78 THE EIGHTH SCHEDULE Form of Guaranty 79 THE NINTH SCHEDULE Part 1: Form of Opinion of Nagashima & Ohno , 1997 ABN AMRO Bank N.V. Tokyo Branch Shiroyama JT Mori Building 3-1, 4-chome, Toranomon Minato-ku, Tokyo 105 (the "Representative Purchaser") and each of the Purchasers named in the Agreement (as defined below) Dear Sirs: We have acted as Japanese counsel to Lam Research Co., Ltd., a Japanese corporation (the "Seller"), in connection with the preparation, execution and delivery of the Receivables Purchase Agreement dated as of December 26, 1997 (the "Agreement") among the Seller, the Purchasers named therein, the Representative Purchaser, and Lam Research Co., Ltd. as Collection Agent. Capitalized terms used but not otherwise defined herein shall have the respective meanings assigned to such terms in the Agreement. In this opinion, Lam Research Co., Ltd. in its capacity as the Seller and as the Collection Agent is referred to merely as "Lam." In rendering the opinions expressed herein, we have examined a photostatic copy of the executed original of the Agreement, a certificate from the representative director of Lam, and such corporate records and other documents, and have made such investigations of law as in our judgment are necessary or appropriate to enable us to render the opinions expressed below. As to factual matters, however, we have solely relied upon the above-described certificate, and have not conducted any independent examination or investigation with respect to any factual matters, including those contained in said certificate. For the purposes of rendering this opinion, we have assumed without independently verifying: (A) the genuineness of all seal impressions and signatures on documents that we have examined, and the authenticity and completeness of all documents submitted to us as originals or copies of originals; (B) the exact conformity to complete original documents of all documents submitted to us as copies; (C) the Representative Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the kingdom of Netherlands, and the Tokyo branch of the Representative Purchaser has full and complete corporate power and authority to execute and 80 deliver, and to perform its obligations under the Agreement; (D) the execution and delivery of the Agreement by the Representative Purchaser and the Purchasers, and the performance by the Representative Purchaser and the Purchasers of their obligations under the Agreement, have been duly authorized by all necessary corporate action; and (E) the Agreement and all other documents submitted to us have been duly executed and delivered by or on behalf of all persons and entities that are signatories thereto (other than Lam). Based upon and subject to the foregoing, and further subject to the qualifications hereinafter set forth, we are of the opinion that: 1. Lam is a corporation validly existing under the laws of Japan with corporate power to enter into the Agreement and each Seller Assignment and to exercise its rights and perform its obligations under the Agreement and each Seller Assignment, and all corporate action required to authorize its execution of the Agreement and each Seller Assignment and its performance of its obligations thereunder has been duly taken. 2. Lam has corporate power and all governmental license, authorizations, consents and approvals necessary to carry on its business currently conducted in Japan. 3. There is no consent, approval, order or authorization of, or registration, filing, recordation or enrollment with, or giving of prior notice to, any Japanese governmental body or agency or any Japanese court required with respect to the execution, delivery and performance of the Agreement by Lam. The execution, delivery and performance of the Agreement by Lam do not contravene any provision of applicable laws of Japan or Lam's Articles of Incorporation or other internal regulations. 4. The claims of the Representative Purchaser and the Purchasers against Lam under the Agreement will rank at least pari passu with the claims of all of Lam's other unsecured creditors. 5. In any legal proceedings taken in Japan in relation to the Agreement or any Seller Assignment, Lam will not be entitled to claim for itself or any of its assets sovereign immunity from suit, execution, attachment or other legal process. 6. The choice of Japanese law to govern the Agreement is a valid choice of law, and the submission by Lam to the jurisdiction of the Tokyo District Court is a valid submission to the jurisdiction of such court as a court of first instance, except in cases where other courts in Japan have exclusive jurisdiction. 7. Save for Japanese stamp duties, no similar taxes are 81 payable in respect of the execution and delivery of the Agreement or any Seller Assignment. 8. The Agreement has been duly executed and delivered by Lam, and the obligations expressed to be assumed by Lam in the Agreement are legal and valid obligations binding on Lam and enforceable against Lam in accordance with their respective terms. Our opinions set forth herein are subject to the following qualifications and limitations: (a) we express no opinion as to: (i) except as set forth in paragraph 7, compliance with or the effect of any tax law; or (ii) the availability of specific performance, injunctive relief, or any other similar remedy; (b) the opinions expressed above are subject to limitation by statute of limitation, appropriate court procedures and the full discretion of the court, which must consider the public order and good morals doctrine and the abuse of rights doctrine; (c) the legality, validity, binding nature and enforceability of the Agreement may be limited by the application of: (i) bankruptcy, insolvency, reorganization, fraudulent conveyance and other similar laws affecting the rights, powers, privileges, remedies and/or interests of creditors generally; or (ii) the Interest Rate Restriction Law, Risoku Seigen Ho (the "Interest Rate Law"). Under the Interest Rate Law, the maximum rate of interest per annum recoverable by action in the courts of Japan is as set forth below:
Principal Amount Interest Rate (%) Less than yen100,000 20 yen100,000 or more but 18 less than yen1,000,000 yen1,000,000 or more 15
The Interest Rate Law further provides that if any stipulated default interest amount sought to be recoverable by action in the courts of Japan exceeds double the amount calculated in accordance with the interest rate set forth above, the right of the party seeking recovery to recover an amount in excess of double the amount as calculated above shall be unenforceable; (d) we express no opinion on any provision in the Agreement requiring written amendments and waivers of the Agreement insofar as it suggests that oral or other modifications, 82 amendments or waivers could not be effectively agreed upon or granted between or by the parties or by a duly authorized agent; and (e) the court may not give full effect to an indemnity for legal costs. We are members of the bar of Japan and, with your permission, our opinion is limited to the laws of Japan. This opinion is given as of the date hereof and only for the benefit of the addressees and on the basis that it will be relied upon only by such addressees and will not be disclosed to any third party other than such addressees' professional advisers. Very truly yours, 83 Part 2: Form of Opinion of Jan J. Kang , 1997 ABN AMRO Bank Tokyo Branch Shiroyama JT Mori Building 3-1, 4-chome, Toranomon Minato-ku, Tokyo 105 (the "Representative Purchaser") and each of the Purchasers named in the Agreement (as defined below) Dear Sirs: I am senior counsel for Lam Research Corporation, a Delaware corporation (the "Guarantor"), in connection with its preparation, execution and delivery of the Guaranty (the "Guaranty") dated as of December 26, 1997 in relation to the Receivables Purchase Agreement dated as of December 26, 1997 (the "Agreement") among the Purchasers named therein, the Representative Purchaser and Lam Research Co., Ltd., a Japanese corporation, as Seller and Collection Agent. Capitalized terms used but not otherwise defined herein shall have the respective meanings assigned to such terms in the Guaranty or the Agreement. Based on my examination of such corporate records, certificates and other documents and questions of law as I have considered necessary or appropriate, it is my opinion that: 1. The Guarantor is a corporation duly organized and is validly existing and in good standing under the laws of the state of Delaware with power to enter into the Guaranty and to exercise its rights and perform its obligations thereunder and all corporate and other action required to authorize its execution of the Guaranty and its performance of its obligations thereunder has been duly taken. 2. The execution, delivery and performance of the Guaranty and the transactions contemplated thereby by the Guarantor require no action by or in respect of, or filing, recording or enrolling with, any governmental body, agency, court official or other authority, and do not contravene, or constitute a default under, any provision of applicable law or regulation or its constitutive documents or other internal regulations or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Guarantor or any of its assets. 3. The claim of the Representative Purchaser and the Purchasers against the Guarantor under the Guaranty will rank at least pari passu with the claims of all its other unsecured creditors. 84 4. In any proceedings taken in the United States in relation to the Guaranty, the choice of California law by the Guarantor as the governing law of, and the submission to jurisdiction under, the Guaranty will be recognized and enforced. 5. The obligations expressed to be assumed by the Guarantor in the Guaranty are legal and valid obligations binding on it and enforceable in accordance with its terms. 6. No deduction or withholding (whether on account of tax or otherwise) will be required from any payment by the Guarantor arising out of or under the Guaranty. For purposes of this opinion, I have assumed: (i) the authenticity and completeness of all documents submitted to us as copies; (ii) the authenticity of all signatures and seals of parties; and (iii) the conformity to complete original documents of all documents submitted to us as copies or facsimiles. This opinion must be read subject to the following qualifications: (a) I neither express nor imply any opinion as to laws other than the laws of the United States, the laws of the State of California and the General Corporation Law of the State of Delaware as at the date of this opinion. (b) Enforcement may be limited by any laws from time to time in effect relating to bankruptcy, insolvency, liquidation, receivership, reconstruction, reorganization, moratorium or other similar laws affecting creditors' rights generally. This opinion is given solely for your benefit, and except with my prior written consent is not to be disclosed to or relied on by any other person. This opinion is limited to the matters stated herein and is not to be construed as extending by implication to any other matter. Very truly yours, 85 THE TENTH SCHEDULE Form of Transfer Certificate To: ABN AMRO Bank N.V. Tokyo Branch as Representative Purchaser Attention: Structured Finance TRANSFER CERTIFICATE Reference is made to the Receivables Purchase Agreement (as from time to time amended, modified, renewed or supplemented, the "Purchase Agreement") dated December 26, 1997 among Lam Research Co., Ltd. as Seller, banks and other institutions named therein as Purchasers, ABN AMRO Bank N.V., Tokyo Branch as Representative Purchaser, and Lam Research Co., Ltd. as Collection Agent. 1. Words and expressions defined in the Purchase Agreement shall, subject to any contrary indication, have the same respective meanings herein. The terms Purchaser, Transferee, Transfer Date, Purchaser's Participation and Amount Transferred are defined in the schedule hereto. 2. The Purchaser confirms that the Purchaser's Participation is an accurate summary of its participation in the Purchase Agreement and the Assignments and requests the Transferee to accept and procure the transfer to the Transferee of rights and obligations of the Purchaser in respect of a percentage of the Purchaser's Participation (equal to the percentage that the Amount Transferred is of the aggregate of the component amounts (as set out in the schedule hereto) of the Purchaser's Participation) by counter-signing and delivering this Transfer Certificate to the Representative Purchaser at its address for the service of notices specified in the Purchase Agreement. 3. The Transferee hereby requests the Representative Purchaser to accept this Transfer Certificate as being delivered to the Representative Purchaser pursuant to and for the purposes of Clause 30.4 of the Purchase Agreement so as to take effect in accordance with the terms thereof on the Transfer Date or on such later date as may be determined in accordance with the terms of the Purchase Agreement. 4. The Transferee warrants that it has received a copy of the Purchase Agreement and the other Transaction Documents together with such other information as it has required in connection with this transaction and that it has not relied and will not hereafter rely on the Purchaser, the Representative Purchaser or any other party to the Purchase Agreement (other than the Seller and the Collection Agent) to check or enquire on its 86 behalf into the legality, validity, effectiveness, adequacy, accuracy or completeness of any of the Transaction Documents or of any such information and further agrees that it has not relied and will not rely on the Purchaser, the Representative Purchaser or any other party to the Purchase Agreement (other than the Seller and the Collection Agent) to assess or keep under review on its behalf the financial condition, creditworthiness, condition, affairs, status or nature of the Seller, the Guarantor, any Buyer or any other party to the Transaction Documents. 5. The Transferee hereby undertakes with the Purchaser and each of the other parties to the Purchase Agreement that it will perform in accordance with their terms all those obligations which by the terms of the Purchase Agreement will be assumed by it after delivery of this Transfer Certificate to the Representative Purchaser and satisfaction of the conditions (if any) subject to which this Transfer Certificate is expressed to take effect and expressly agrees to the terms of each of the Transaction Documents. 6. None of the Purchaser, the Representative Purchaser or any other party to the Purchase Agreement (other than the Seller and the Collection Agent) makes any representation or warranty or assumes any responsibility with respect to the legality, validity, effectiveness, adequacy or enforceability of any Transaction Document nor assumes any responsibility for the financial condition of the Seller, any Buyer or any other party to the Transaction Documents or for the performance and observance by the Seller or any other person of any of its obligations under the Purchase Agreement or any other Transaction Document and any and all such representations and warranties, whether express or implied by law or otherwise, are hereby excluded. 7. The Purchaser hereby gives notice that nothing herein or in the Purchase Agreement or any other Transaction Document shall obligate the Purchaser to (i) accept a re-transfer from the Transferee of the whole or any part of its rights, benefits and/or obligations under the Purchase Agreement and the Assignments transferred pursuant hereto or (ii) support any losses directly or indirectly sustained or incurred by the Transferee for any reason whatsoever including, without limitation, the non-performance by the Seller, any Buyer or any other party to the Transaction Documents of its obligations thereunder. The Transferee hereby acknowledges the absence of any such obligation as is referred to in (i) or (ii) above. 8. The Transfer Certificate and the rights and obligations of the parties hereunder shall be governed by and construed in accordance with the laws of Japan. Schedule 1. Purchaser: 87 2. Transferee: 3. Transfer Date: 4. Purchaser's Participation: Purchaser's Available Purchaser's Portion Commitment of the Purchased Receivables yen yen 5. Amount Transferred: yen [Transferor Purchaser] [Transferee Purchaser] By By Name: Name: Title: Title: Date: Date: [Address and Notice Details] Acknowledged. ABN AMRO Bank N.V. Tokyo Branch By Name: Title:yen EX-10.47 3 3RD AMENDMENT TO TERM LOAN AGREEMENT W/SAKURA BANK 1 Exhibit 10.47 THIRD AMENDMENT TO TERM LOAN THIS THIRD AMENDMENT TO TERM LOAN (this "Third Amendment") is made as of December 19, 1997, by and between Lam Research Co., Ltd., a Japanese corporation ("Borrower"), and The Sakura Bank, a Japanese banking corporation ("Lender"). WHEREAS, the parties hereto have entered into that certain Term Loan Agreement, dated as of June 26, 1996, and amended on January 22, 1997 and June 27, 1997 (as amended, the "Loan Agreement"), pursuant to which Lender agreed to lend to Borrower and Borrower agreed to borrow from Lender a certain sum, subject to the terms and conditions contained in the Loan Agreement; and WHEREAS, the parties hereto desire to amend the Loan Agreement, as set forth below. NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants contained in the Agreement, the parties hereto hereby agree as follows: 1. Definitions, Interpretation. All capitalized terms defined above and elsewhere in this Amendment shall be used herein as so defined. Unless otherwise defined herein, all other capitalized terms used herein shall have the respective meanings given to those terms in the Loan Agreement, as amended by this Amendment. 2. Amendments to Loan Agreement. The Loan Agreement is hereby amended as follows: (a) The definition of "Equity Securities" set forth in Section 1.1 is amended to read in its entirety as follows: "Equity Securities" of any Person shall mean (i) all common stock, preferred stock, participations, shares, partnership interests or other equity interests in and of such Person (regardless of how designated and whether or not voting or non-voting) and (ii) all warrants, options and other rights to acquire any of the foregoing, other than convertible debt securities which have not been converted into common stock, preferred stock, participations, shares, partnership interests or other equity interests in any such Person. (b) The definition of "Subordinated Debt" set forth in Section 1.1 is amended to read in its entirety as follows: 2 "Subordinated Debt" shall mean, collectively, (i) Guarantor's $310,000,000 Five Percent (5%) Convertible Subordinated Notes due 2002, and (ii) and any other subordinated debt permitted by Section 6.1(xi). (c) Section 5.1 is hereby amended by (i) renumbering clause (g) as clause (h); and (ii) adding a new clause (g) to read in its entirety as follows: (g) COMPLIANCE CERTIFICATE. Contemporaneously with any Investment by Borrower consisting of any purchase or other acquisition of any Equity Securities or Indebtedness of any other Person or any capital contribution to or any other investment in any other Person having a value in excess of $60,000,000, a pro forma Compliance Certificate certified by the president, chief financial officer or treasurer of Borrower which sets forth the calculation of the financial ratios and tests provided in Section 3.1.2 after giving effect to any such Investment; and (d) Clause (ii) of Section 6.5 is hereby amended to read in its entirety as follows: (ii) Other Investments, provided that the aggregate amount of such other Investments plus the aggregate cost of assets acquired, mergers consummated and Subsidiaries established or acquired by Borrower and its Subsidiaries pursuant to Section 6.4 does not exceed in any fiscal year $150,000,000 for any amounts paid in cash. 3. Balance of Agreement Unaffected. Except as expressly set forth herein, the Loan Agreement shall not be affected hereby and shall remain in full force and effect in accordance with its terms. 4. Governing Law. This Second Amendment shall in all respects be governed by and construed in accordance with the laws of the State of California applicable to agreements made and to be performed entirely within such state, including all matters of construction, validity and performance. 2 3 5. Counterparts. This Second Amendment may be executed in one or more counterparts, each of which shall be an original and all of which together shall be one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be executed by their respective officers thereunto duly authorized as of the date first above written. LENDER: The Sakura Bank, a Japanese banking corporation By: /s/ T. Nakajima ---------------------------------- Name: Takao Nakajima Title: Senior Vice President BORROWER: Lam Research Co., Ltd., a Japanese corporation By: /s/ Yoichi Isago ---------------------------------- Name: Yoichi Isago Title: President 3 EX-10.48 4 2ND AMENDMENT TO CONTINUING GUARANTY W/SAKURA BANK 1 Exhibit 10.48 SECOND AMENDMENT TO CONTINUING GUARANTY THIS SECOND AMENDMENT TO CONTINUING GUARANTY (this "Amendment") is made as of December 19, 1997, by and between Lam Research Corporation, a Delaware corporation ("Guarantor"), and The Sakura Bank, a Japanese banking corporation ("Lender"). WHEREAS, the parties hereto have entered into that certain Continuing Guaranty dated as of June 26, 1996 and amended on March 30, 1997 (as amended, the "Guaranty") with respect to the Term Loan Agreement of even date therewith and amended on January 22, 1997 (as amended, the "Loan Agreement"), pursuant to which Lender agreed to lend to Lam Research Co., Ltd., a Japanese corporation, ("Borrower") and Borrower agreed to borrow from Lender a certain sum, subject to the terms and conditions contained in the Loan Agreement; and WHEREAS, the parties hereto mutually desire to amend the Guaranty, as set forth below. NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants contained in the Loan Agreement and Guaranty, the parties hereto hereby agree as follows: 1. Definitions, Interpretation. All capitalized terms defined above and elsewhere in this Amendment shall be used herein as so defined. Unless otherwise defined herein, all other capitalized terms used herein shall have the respective meanings given to those terms in the Guaranty, as amended by this Amendment. 2. Amendments to Guaranty. The Guaranty is hereby amended as follows: (a) The definition of "EBIT" set forth in Section 3.1.1 is amended to read in its entirety as follows: "EBIT" shall mean, with respect to any Person for any period, the sum of the following, determined on a consolidated basis in accordance with GAAP where applicable: (i) The net income or net loss of such Person and its Subsidiaries (excluding interest income) for such period before provision for income taxes; PLUS 2 (ii) All Interest Expenses of such Person and its Subsidiaries accruing during such period (to the extent deducted in calculating net income or loss in clause (i) above). (b) The definition of "Interest Expenses" set forth in Section 3.1.1 is amended to read in its entirety as follows: "Interest Expenses" shall mean, with respect to any Person for any period, the sum, determined on a consolidated basis in accordance with GAAP, of all interest accruing on the Indebtedness of such Person during such period (including interest attributable to Capital Leases). (c) The definition of "Equity Securities" set forth in Section 3.1.1 is amended to read in its entirety as follows: "EQUITY SECURITIES" of any Person shall mean (i) all common stock, preferred stock, participations, shares, partnership interests or other equity interests in and of such Person (regardless of how designated and whether or not voting or non-voting) and (ii) all warrants, options and other rights to acquire any of the foregoing, other than convertible debt securities which have not been converted into common stock, preferred stock, participations, shares, partnership interests or other equity interests in any such Person. (d) The definition of "Subordinated Debt" set forth in Section 3.1.1 is amended to read in its entirety as follows: "SUBORDINATED DEBT" shall mean, collectively, (i) Guarantor's $310,000,000 Five Percent (5%) Convertible Subordinated Notes due 2002, and (ii) and any other subordinated debt permitted by Section 6.1(xi) of the Loan Agreement. (e) Section 3.1.1 is amended by adding a new definition of "Debt Service Coverage Ratio" thereto in alphabetical order to read in its entirety as follows: "DEBT SERVICE COVERAGE RATIO" shall mean, with respect to any Person for any fiscal quarter, the ratio, determined on a consolidated basis in accordance with GAAP where applicable, of; (i) The EBIT of such Person and its Subsidiaries for such quarter; to 2 3 (ii) The sum of (a) all Interest Expenses of such Person and its Subsidiaries for such quarter and (b) one-fourth of all principal payments on Indebtedness for borrowed money of such Person and its Subsidiaries scheduled for payment during the four quarters immediately succeeding the quarter for which EBIT is calculated pursuant to clause (i). (f) Section 3.1.1 is amended by deleting in their entirety the definitions of "Interest Coverage Ratio", "Leverage Ratio" and "Total Liabilities" set forth therein. (g) Section 3.1.2 is hereby amended to read in its entirety as follows: 3.1.2 FINANCIAL COVENANTS. Guarantor covenants that until all Obligations have been fully and completely satisfied, Guarantor shall comply with, and cause compliance with, each of the following covenants: (a) QUICK RATIO. Guarantor shall not permit its Quick Ratio during any period to be less than 1.10 to 1.00. (b) DEBT SERVICE COVERAGE RATIO. Guarantor shall not permit its Debt Service Coverage Ratio during any period set forth below to be less than the ratio set forth opposite such period below: January 1, 1998 - March 31, 1998.........1.25 to 1.00; April 1, 1998 - June 30, 1998..........1.50 to 1.00; July 1, 1998 - December 31, 1998......2.00 to 1.00; Thereafter.....................3.00 to 1.00.
(c) SENIOR INDEBTEDNESS RATIO. Guarantor shall not permit its Senior Indebtedness Ratio during any period to be greater than 0.35 to 1.00. (d) TANGIBLE NET WORTH. Guarantor shall not permit its Tangible Net Worth on any date of determination (such date to be referred to herein as a "determination date") which occurs after September 30, 1997 (such date to be referred to herein as the "base date") to be less than the sum on such determination date of the following: (i) Ninety percent (90%) of Guarantor's and its Subsidiaries Tangible Net Worth as of September 30, 1997, as set forth in the Financial Statements of Guarantor and its 3 4 Subsidiaries for the fiscal quarter ending on September 30, 1997; (ii) Seventy-five percent (75%) of the sum of Guarantor's consolidated quarterly net income (ignoring any quarterly losses) for each quarter ending after the base date through and including the quarter ending immediately prior to the determination date; (iii) One hundred percent (100%) of the Net Proceeds of all Equity Securities issued by Guarantor and its Subsidiaries during the period commencing on the base date and ending on the determination date; and (iv) One hundred percent (100%) of the aggregate decrease in the total liabilities of Guarantor and its Subsidiaries resulting from conversions of convertible Subordinated Indebtedness or other liabilities of Guarantor and its Subsidiaries into Equity Securities of Guarantor and its Subsidiaries during the period commencing on the base date and ending on the determination date. (E) NET INCOME. Guarantor shall generate a net profit of at least $1.00, determined in accordance with GAAP, for the fiscal quarter ending December 31, 1997. 3. Balance of Agreement Unaffected. Except as expressly set forth herein, the Guaranty shall not be affected hereby and shall remain in full force and effect in accordance with its terms. 4. Reaffirmation of Obligations. Guarantor hereby reaffirms all obligations under the Guaranty, as amended by this Amendment. 4 5 5. Governing Law. This Amendment shall in all respects be governed by and construed in accordance with the laws of the State of California applicable to agreements made and to be performed entirely within such state, including all matters of construction, validity and performance. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized as of the date first above written. LENDER: The Sakura Bank, Limited a Japanese banking corporation By: /s/ T. Nakajima --------------------------- Name: Takao Nakajima Title: Senior Vice President GUARANTOR: Lam Research Corporation, a Delaware corporation By: /s/ Richard H. Lovgren --------------------------- Name: Richard H. Lovgren Title: Vice President, General Counsel and Secretary 5 EX-10.49 5 GUARANTY TO RECEIVABLES PURCHASE AGREEMENT 1 Exhibit 10.49 GUARANTY THIS GUARANTY, dated as of December 26, 1997, is executed by LAM RESEARCH CORPORATION, a Delaware corporation ("Guarantor"), in favor of ABN AMRO BANK N.V., acting as representative (in such capacity, "Representative Purchaser") for the financial and other institutions which are from time to time the parties to the Purchase Agreement referred to in Recital A below (collectively, the "Purchasers"). RECITALS A. At the request of Guarantor, Representative Purchaser, acting through its Tokyo Branch, and the Purchasers have entered into a Receivables Purchase Agreement dated as of December 26, 1997 (the "Purchase Agreement") with Lam Research Company, Ltd., a Japanese corporation which is a wholly-owned subsidiary of Guarantor ("Seller"), pursuant to which (i) Purchasers have agreed to purchase from Seller certain accounts, promissory notes and other obligations payable to Seller ("Receivables") upon the terms and subject to the conditions set forth in the Purchase Agreement and (ii) Seller has agreed to act as collection agent for the Receivables so purchased by Purchasers from Seller (the "Purchased Receivables"). B. Purchasers' obligation to purchase any Receivables from Seller under the Purchase Agreement is subject, among other conditions, to receipt by Purchasers of this Guaranty, duly executed by Guarantor. AGREEMENT NOW, THEREFORE, in consideration of the above recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Guarantor hereby agrees with Representative Purchaser, for itself and for the ratable benefit of the Purchasers, as follows: 1. DEFINITIONS AND INTERPRETATION. (a) Definitions. Unless otherwise indicated in this Guaranty, each term set forth in Schedule 1, when used in this Guaranty, shall have the respective meaning given to that term in Schedule 1 or in the provision of this Guaranty referenced in Schedule 1. 2 (b) Other Interpretive Provisions. Headings in this Guaranty are for convenience of reference only and are not part of the substance hereof. All terms defined in this Guaranty in the singular form shall have comparable meanings when used in the plural form and vice versa. This Guaranty shall be governed by and construed in accordance with the laws of the State of California without reference to conflicts of law rules. References in this Guaranty to any document, instrument or agreement (i) shall include all exhibits, schedules and other attachments thereto, (ii) shall include all documents, instruments or agreements issued or executed in replacement thereof and (iii) shall mean such document, instrument or agreement, or replacement or predecessor thereto, as amended, modified and supplemented from time to time and in effect at any given time. 2. CONTINUING GUARANTY. Guarantor unconditionally guarantees and promises to pay and perform as and when due, upon the demand of Representative Purchaser, all obligations of Seller under the Purchase Agreement and all other documents, instruments and agreements delivered to Representative Purchaser or the Purchasers in connection therewith (collectively, including this Guaranty, the "Transaction Documents"), including (a) the obligations of Seller to repurchase Purchased Receivables (whether pursuant to Part 7 or Part 12 of the Purchase Agreement or otherwise), (b) the obligations of Seller as collection agent under the Purchase Agreement (whether pursuant to Part 9 of the Purchase Agreement or otherwise) and (c) all other obligations of Seller under the Transaction Documents (all such obligations, including the obligations described in clauses (a) and (b) above, to be referred to herein collectively as the "Guaranteed Obligations"). Guarantor shall make all payments required hereunder to Representative Purchaser, or its order, for itself and for the ratable benefit of the Purchasers, at Representative Purchaser's office located at the address set forth in subparagraph 8(a) hereof, or at such other office as Representative Purchaser may designate, on demand in such lawful currency as is required by subparagraph 8(d) hereof. Notwithstanding any termination of this Guaranty in accordance with paragraph 6 hereof, this Guaranty shall continue to be in full force and effect and applicable to any Guaranteed Obligations arising thereafter which arise because prior payments of Guaranteed Obligations are rescinded or otherwise required to be surrendered by Representative Purchaser or the Purchasers after receipt. The liability of Guarantor hereunder is independent of the obligations of Seller and the obligors under the Receivables ("Buyers"), and a separate action or actions may be brought and prosecuted against Guarantor irrespective of whether action is brought against Seller, any Buyer or any other 2 3 guarantor of the Guaranteed Obligations or whether Seller, any Buyer or any other guarantor of the Guaranteed Obligations is joined in any such action or actions. This Guaranty is a guaranty of payment and not of collection. 3 4 3. REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Representative Purchaser and the Purchasers, as of the date hereof, the date each Receivable is purchased pursuant to the Purchase Agreement and each other date on which Seller makes (pursuant to Clause 12.1 of the Purchase Agreement or otherwise) the representations and warranties set forth in the Sixth Schedule to the Purchase Agreement, that (a) each of Guarantor and Seller is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and is duly qualified and in good standing in each jurisdiction where the nature of its business or properties requires such qualification, except where the failure to qualify could not have a Material Adverse Effect; (b) the execution, delivery and performance by Guarantor and Seller of this Guaranty and the other Transaction Documents are within the power of Guarantor and Seller and have been duly authorized by all necessary actions on the part of Guarantor and Seller; (c) this Guaranty and the other Transaction Documents have been duly executed and delivered by Guarantor and Seller and constitute legal, valid and binding obligations of Guarantor and Seller, enforceable against them in accordance with their terms, except as limited by bankruptcy, insolvency or other laws of general application relating to or affecting the enforcement of creditors' rights generally; (d) the execution, delivery and performance of this Guaranty and the other Transaction Documents do not (i) violate any Requirement of Law, (ii) contravene any material Contractual Obligation, or (iii) result in the creation or imposition of any Lien upon any property, asset or revenue of Guarantor or Seller; (e) no consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Authority or other Person (including, without limitation, the shareholders of any Person) is required in connection with the execution, delivery and performance of this Guaranty and the other Transaction Documents, except such consents, approvals, orders, authorizations, registrations, declarations and filings that are so required and which have been obtained and are in full force and effect; (f) each of Guarantor and Seller has paid all taxes and other charges imposed by any Governmental Authority due and payable by Guarantor or Seller other than those which are being challenged in good faith by appropriate proceedings and for which adequate reserves have been established; (g) neither Guarantor nor Seller is in violation of any Requirement of Law or Contractual Obligation other than those the consequences of which could not have a Material Adverse Effect; (h) the financial statements of Guarantor and Seller which have been delivered to Representative Purchaser and the Purchasers fairly present the respective financial positions and results of Guarantor and Seller for the periods and as of the dates covered thereby; (i) no litigation, investigation or proceeding of any Governmental Authority is pending or, to the 4 5 knowledge of Guarantor, threatened against Guarantor or Seller which, if adversely determined, could have a Material Adverse Effect; (j) Seller is a wholly-owned subsidiary of Guarantor; (k) the obligations of Guarantor hereunder rank at least pari passu with all other unsecured debt of Guarantor; and (l) no event or condition which could have a Material Adverse Effect has occurred or arisen and is continuing. 4. COVENANTS. Until the Purchase Agreement is terminated and all Purchased Receivables are paid in full, Guarantor hereby agrees (a) to deliver to Representative Purchaser and the other Purchasers (i) within 55 days after the last day of each of its fiscal quarters, its financial statements for such quarter, (ii) within 100 days after the last day of each of its fiscal years, its audited financial statements for such year, (iii) notice of any Potential Termination Event, any Termination Event or any other default under the Transaction Documents or of any other event or condition which could have a Material Adverse Effect, and (iv) such other information regarding the business, operations or financial or other condition of Guarantor or Seller as Representative Purchaser or any Purchaser may reasonably request; (b) to keep, and cause Seller to keep, proper books of record and account and to permit Representative Purchaser or any Purchaser to examine the same; (c) to the extent failure to do so could have a Material Adverse Effect, to comply and cause Seller to comply with all Requirements of Law and Contractual Obligations; (d) to maintain and cause Seller to maintain its corporate existence and all rights, privileges and franchises necessary for the conduct of its business; (e) to cause the obligations of Guarantor hereunder to rank at least pari passu with all other unsecured debt of Guarantor at all times; (f) to comply with each of the financial covenants of Guarantor (as "Borrower" therein) set forth in Subparagraph 5.02(l) of the Credit Agreement (as such financial covenants may be waived or amended from time to time in accordance with Paragraph 8.04 of the Credit Agreement with the consent of the Majority Purchasers); provided, however, that in the event the Credit Agreement ceases to be a binding obligation on the parties thereto, the financial covenants of Guarantor (as "Borrower" therein) most recently set forth in Subparagraph 5.02(l) of the Credit Agreement shall be deemed to be the financial covenants of Guarantor (as "Borrower" therein) to have been incorporated herein by this reference. 5. AUTHORIZED ACTIONS. Guarantor authorizes each of Representative Purchaser and each Purchaser, in its discretion, without notice to Guarantor, irrespective of any change in the financial condition of Seller, Guarantor, any Buyer or any other guarantor of the Guaranteed Obligations since the date hereof, and without affecting or impairing in any way the liability of 5 6 Guarantor hereunder, from time to time to (a) purchase from Seller new Receivables and create new Guaranteed Obligations, and, either before or after receipt of notice of revocation, renew, compromise, extend, accelerate or otherwise change the time for payment or performance of, or otherwise change the terms of the Purchased Receivables and Guaranteed Obligations or any part thereof, including increase or decrease of the rate of interest or discount thereon; (b) take and hold security for the payment or performance of the Purchased Receivables and Guaranteed Obligations and exchange, enforce, waive or release any such security; (c) apply such security and direct the order or manner of sale thereof; (d) purchase such security at public or private sale; (e) otherwise exercise any right or remedy it may have against Seller, Guarantor, any Buyer, any other guarantor of the Guaranteed Obligations or any security, including, without limitation, the right to foreclose upon any such security by judicial or nonjudicial sale; (f) settle, compromise with, release or substitute any one or more makers, endorsers or guarantors of the Purchased Receivables or Guaranteed Obligations; and (g) assign the Purchased Receivables, the Guaranteed Obligations, this Guaranty, or the other Transaction Documents in whole or in part. 6. WAIVERS. Guarantor waives (a) any right to require Representative Purchaser and the Purchasers to (i) proceed against Seller, any Buyer or any other guarantor with respect to the Guaranteed Obligations, (ii) proceed against or exhaust any security received from Seller, any Buyer or any other guarantor with respect to the Guaranteed Obligations, or (iii) pursue any other remedy in Representative Purchaser's or any Purchaser's power whatsoever; (b) any defense arising by reason of the application by Seller of the proceeds of any purchase; (c) any defense resulting from the absence, impairment or loss of any right of reimbursement, subrogation, contribution or other right or remedy of Guarantor against Seller, any Buyer, any other guarantor with respect to the Guaranteed Obligations or any security, whether resulting from an election by Representative Purchaser or any Purchaser to foreclose upon security by nonjudicial sale, or otherwise; (d) any setoff or counterclaim of Seller or any defense which results from any disability or other defense of Seller or the cessation or stay of enforcement from any cause whatsoever of the liability of Seller (including, without limitation, the lack of validity or enforceability of any Transaction Document); (e) any right to exoneration of sureties which would otherwise be applicable; (f) until all obligations of Representative Purchaser and the other Purchasers under the Transaction Documents have been terminated and the Guaranteed Obligations have been fully satisfied, any right of subrogation or reimbursement and, if there are any other guarantors of the Guaranteed Obligations, any right of contribution, and right to 6 7 enforce any remedy which Representative Purchaser or any Purchaser now has or may hereafter have against Seller, and any benefit of, and any right to participate in, any security now or hereafter received by Representative Purchaser or any Purchaser; (g) all presentments, demands for performance, notices of non-performance, notices delivered under the Purchase Agreement or any other Transaction Document, protests, notice of dishonor, and notices of acceptance of this Guaranty and of the existence, creation or incurring of new or additional Purchased Receivables or Guaranteed Obligations and notices of any public or private foreclosure sale; (h) the benefit of any statute of limitations to the extent permitted by law; (i) any appraisement, valuation, stay, extension, moratorium redemption or similar law or similar rights for marshalling; (j) any right to be informed by Representative Purchaser or any Purchaser of the financial condition of Seller, any Buyer or any other guarantor with respect to the Guaranteed Obligations or any change therein or any other circumstances bearing upon the risk of nonpayment or nonperformance of the Purchased Receivables or Guaranteed Obligations; and (k) any right to revoke this Guaranty prior to the termination of the Transaction Documents and the satisfaction in full of all the Guaranteed Obligations. Guarantor has the ability and assumes the responsibility for keeping informed of the financial condition of Seller, the Buyers and any other guarantors of the Guaranteed Obligations and of other circumstances affecting such nonpayment and nonperformance risks. Without limiting the scope of any of the foregoing waivers, Guarantor hereby waives (i) all rights and defenses arising out of an election of remedies by Representative Purchaser or any Purchaser, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a Guaranteed Obligation, has destroyed Guarantor's rights of subrogation and reimbursement against Seller by the operation of Section 580d of the Code of Civil Procedure or otherwise, (ii) all rights and defenses Guarantor may have by reason of protection afforded to Seller with respect to the Guaranteed Obligations pursuant to the antideficiency or other laws of California limiting or discharging the Guaranteed Obligations, including, without limitation, Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure, and (iii) all other rights and defenses available to Guarantor by reason of Sections 2787 to 2855, inclusive, of the California Civil Code. 7. SUBORDINATION. Guarantor hereby subordinates any obligations of Seller to Guarantor (the "Subordinated Obligations") to the Guaranteed Obligations as provided in this paragraph 7. Until the occurrence of a Potential Termination Event or Termination Event, Guarantor may receive regularly scheduled payments from Seller on account of Subordinated 7 8 Obligations. Upon the occurrence and during the continuance of any Potential Termination Event or Termination Event, however: (a) Representative Purchaser and the Purchasers shall be entitled to receive payment of all Guaranteed Obligations before Guarantor receives payment of any Subordinated Obligations; (b) Any payments on the Subordinated Obligations, if Representative Purchaser or any Purchaser so requests, shall be collected, enforced and received by Guarantor as trustee for Representative Purchaser and the Purchasers and be paid over to Representative Purchaser on account of the Guaranteed Obligations, but without reducing or affecting in any manner the liability of Guarantor under the other provisions of this Guaranty; and (c) Representative Purchaser is authorized and empowered (but without any obligation to so do), in its discretion, (i) in the name of Guarantor, to collect and enforce, and to submit claims in respect of, the Subordinated Obligations and to apply any amounts received thereon to the Guaranteed Obligations and (ii) to require Guarantor (A) to collect and enforce, and to submit claims in respect of, the Subordinated Obligations and (B) to pay any amounts received on such Subordinated Obligations to Representative Purchaser for application to the Guaranteed Obligations. 8. MISCELLANEOUS. (a) Notices. Except as otherwise provided herein, all notices, requests, demands, consents, instructions or other communications to or upon Representative Purchaser, any Purchaser or Guarantor under this Guaranty shall be in writing and telecopied, mailed or delivered to each party at its telecopier number or address set forth below (or to such other telecopier number or address for any party as indicated in any notice given by that party to the other party) and if to any Purchaser to the address set forth in Exhibit 1 to the Purchase Agreement. All such notices and communications shall be effective (i) when sent by Federal Express or other overnight service of recognized standing, on the Business Day following the deposit with such service; (ii) when mailed, first class postage prepaid and addressed as aforesaid through the United States Postal Service, upon receipt; (iii) when delivered by hand, upon delivery; and (iv) when telecopied, upon confirmation of receipt. 8 9 Representative Purchaser: ABN AMRO Bank N.V. --------- 101 California Street Suite 4550 San Francisco, California 94111-5812 Attn: Robert N. Hartinger Telephone: (415) 984-3710 Facsimile: (415) 362-3524 Guarantor: Lam Research Corporation 47300 Bayside Parkway Fremont, California 94538 Attn: Craig Garber Telephone: (510) 572-1875 Facsimile: (510) 572-1586
(b) Expenses. Guarantor shall pay on demand, whether or not any Receivable is purchased under the Transaction Documents, (i) all reasonable fees and expenses, including reasonable attorneys' fees and expenses, incurred by Representative Purchaser in connection with the preparation, execution and delivery of, and the exercise of its duties under, this Guaranty and the other Transaction Documents, and the preparation, execution and delivery of amendments and waivers hereunder and thereunder; and (ii) all reasonable fees and expenses, including reasonable attorneys' fees and expenses, incurred by Representative Purchaser and the Purchasers in the enforcement or attempted enforcement of this Guaranty or any of the Guaranteed Obligations or in preserving any of Representative Purchaser's or any Purchaser's rights and remedies (including, without limitation, all such fees and expenses incurred in connection with any "workout" or restructuring affecting the Transaction Documents or the Guaranteed Obligations or any bankruptcy or similar proceeding involving Guarantor, Seller or any of their affiliates). (c) Indemnifications. To the fullest extent permitted by law, Guarantor agrees to protect, indemnify, defend and hold harmless Representative Purchaser, the Purchaser's and their affiliates and their respective directors, officers, employees, agents and advisors ("Indemnitees") from and against any and all liabilities, losses, damages or expenses of any kind or nature and from any and all suits, claims or demands (including in respect of or for reasonable attorney's fees and other expenses) arising on account of or in connection with any matter or thing or action or failure to act by Indemnitees, or any of them, arising out of or relating to this Guaranty or the other Transaction Documents, including without limitation any use by Guarantor of any proceeds of any Receivables purchases, except to the 9 10 extent such liability arises from the willful misconduct or gross negligence of the Indemnitees. Upon receiving knowledge of any suit, claim or demand asserted by a third party that Representative Purchaser or any Purchaser believes is covered by this indemnity, Representative Purchaser or such Purchaser shall give Guarantor reasonable notice of the matter and an opportunity to defend it, at Guarantor's sole cost and expense, with legal counsel satisfactory to Representative Purchaser or such Purchaser, as the case may be. Any failure or delay of Representative Purchaser or any Purchaser so to notify Guarantor of any such suit, claim or demand shall not relieve Guarantor of its obligations under this subparagraph 8(c) but shall reduce such obligations to the extent of any increase in those obligations caused solely by such failure or delay. The obligations of Guarantor under this subparagraph 8(c) shall survive the payment and performance of the Guaranteed Obligations. (d) Currency of Payment. (i) Guarantor shall make all payments of the Guaranteed Obligations hereunder in the currency in which such Guaranteed Obligations are required to be paid by Seller pursuant to the other Transaction Documents and shall make all other payments hereunder in the lawful currency of the United States. (ii) If any sum due from Guarantor under this Guaranty or any order or judgment given or made in relation hereto has to be converted from the currency (the "first currency") in which the same is payable hereunder or under such order or judgment into another currency (the "second currency") for the purpose of (A) making or filing a claim or proof against Guarantor with any Governmental Authority, (B) obtaining an order or judgment in any court or other tribunal or (C) enforcing any order or judgment given or made in relation hereto, Guarantor shall, to the fullest extent permitted by law, indemnify and hold harmless each of the Persons to whom such sum is due from and against any loss suffered as a result of any discrepancy between (1) the rate of exchange used for such purpose to convert the sum in question from the first currency into the second currency and (2) the rate or rates of exchange at which such Person may, using reasonable efforts in the ordinary course of business, purchase the first currency with the second currency upon receipt of a sum paid to it in satisfaction, in whole or in part, of any such order, judgment, claim or 10 11 proof. The foregoing indemnity shall constitute a separate obligation of Guarantor distinct from its other obligations hereunder and shall survive the giving or making of any judgment or order in relation to all or any of such obligations. (e) Waivers; Amendments. Any term, covenant, agreement or condition of this Guaranty may be amended or waived if such amendment or waiver is in writing and is signed by Guarantor and Representative Purchaser. No failure or delay by Representative Purchaser or any Purchaser in exercising any right hereunder shall operate as a waiver thereof or of any other right nor shall any single or partial exercise of any such right preclude any other further exercise thereof or of any other right. Unless otherwise specified in such waiver or consent, a waiver or consent given hereunder shall be effective only in the specific instance and for the specific purpose for which given. (f) Assignments. This Guaranty shall be binding upon and inure to the benefit of Guarantor, Representative Purchaser and Purchasers and their respective successors and permitted assigns, except that Guarantor may not assign or transfer any of its rights or obligations under this Guaranty without the prior written consent of Representative Purchaser and the Purchasers. All references in this Guaranty to any Person shall be deemed to include all successors and assigns of such Person. (g) Cumulative Rights, etc. The rights, powers and remedies of Representative Purchaser and the Purchasers under this Guaranty shall be in addition to all rights, powers and remedies given to Representative Purchaser and the Purchasers by virtue of any applicable law, rule or regulation of any Governmental Authority, the other Transaction Documents or any other agreement, all of which rights, powers, and remedies shall be cumulative and may be exercised successively or concurrently without impairing Representative Purchaser's or any Purchaser's rights hereunder. (h) Payments Free of Taxes, Etc. All payments made by Guarantor under this Guaranty shall be made by Guarantor free and clear of and without deduction for any and all present and future taxes, levies, charges, deductions and withholdings. In addition, Guarantor shall pay upon demand any stamp or other taxes, levies or charges of any jurisdiction with respect to the execution, delivery, registration, performance and enforcement of this Guaranty. 11 12 If any taxes, levies, charges or other amounts are required to be withheld from any amounts payable to Representative Purchaser or any Purchaser hereunder, the amounts so payable to Representative Purchaser and such Purchaser shall be increased to the extent necessary to yield to Representative Purchaser and such Purchaser (after payment of all such amounts) any such amounts payable hereunder in the amounts specified in this Guaranty. Upon request by Representative Purchaser or any Purchaser, Guarantor shall furnish evidence satisfactory to Representative Purchaser or such Purchaser that all requisite authorizations and approvals by, and notices to and filings with, governmental authorities and regulatory bodies have been obtained and made and that all requisite taxes, levies and charges have been paid. (i) Partial Invalidity. If at any time any provision of this Guaranty is or becomes illegal, invalid or unenforceable in any respect under the law or any jurisdiction, neither the legality, validity or enforceability of the remaining provisions of this Guaranty nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby. (j) JURY TRIAL. EACH OF GUARANTOR, REPRESENTATIVE PURCHASER AND THE PURCHASERS, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS GUARANTY. (k) Submission to Jurisdiction. Guarantor hereby irrevocably and unconditionally: (i) Submits for itself and its property in any legal action or proceeding relating to this Guaranty, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive jurisdiction of the courts of the State of California and the courts of the United States of America for the Northern District of California, and consents and agrees to suit being brought in such courts as Representative Purchaser may elect; (ii) Waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such proceeding was brought in an inconvenient court and agrees not to plead or claim the same; and 12 13 (iii) Agrees that nothing herein shall affect Representative Purchaser's right to effect service of process in any manner permitted by law, and that Representative Purchaser shall have the right to bring any legal proceedings (including a proceeding for enforcement of a judgment entered by any of the aforementioned courts) against Guarantor in such courts or in any other court or jurisdiction in accordance with applicable law. [The signature page follows] 13 14 IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed as of the day and year first above written. LAM RESEARCH CORPORATION By: --------------------------------------- Name: Title: 14 15 SCHEDULE 1 DEFINITIONS "Buyers" shall have the meaning given to that term in subparagraph 2(a) hereof. "Contractual Obligation" of any Person shall mean, any indenture, note, security, deed of trust, mortgage, security agreement, lease, guaranty, instrument, contract, agreement or other form of obligation or undertaking to which such Person is a party or by which such Person or any of its property is bound. "Credit Agreement" shall mean that certain Credit Agreement, dated as of December 20, 1995, by and among Guarantor, each of the financial institutions from time to time a party thereto (the "Lenders") and ABN AMRO Bank N.V., acting through its San Francisco International Branch, as agent for the Lenders (as amended and as further amended, restated or otherwise modified from time to time in accordance with Paragraph 7.04 thereof). "Governmental Authority" shall mean any domestic or foreign national, state or local government, any political subdivision thereof, any department, agency, authority or bureau of any of the foregoing, or any other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including, without limitation, the Federal Deposit Insurance Corporation, the Federal Reserve Board, the Comptroller of the Currency, any central bank or any comparable authority. "Governmental Rule" shall mean any law, rule, regulation, ordinance, order, code interpretation, judgment, decree, directive, guidelines, policy or similar form of decision of any Governmental Authority. "Guaranteed Obligations" shall have the meaning given to that term in subparagraph 2(a) hereof. "Guarantor" shall have the meaning given to that term in the introductory paragraph hereof. "Guaranty" shall mean this Guaranty. "Lien" shall mean, with respect to any property, any security interest, mortgage, pledge, lien, claim, charge or other encumbrance in, of, or on such property or the income therefrom, including, without limitation, the interest of a vendor or lessor under a conditional sale agreement, capital lease or other title 1-1 16 retention agreement, or any agreement to provide any of the foregoing, and the filing of any financing statement or similar instrument under the Uniform Commercial Code or comparable law of any jurisdiction. "Material Adverse Effect" shall mean a material adverse effect on (a) the business, assets, operations, prospects or financial or other condition of Guarantor or Seller; (b) the ability of Guarantor or Seller to pay or perform the Guaranteed Obligations in accordance with the terms of this Guaranty and the other Transaction Documents; or (c) the rights and remedies of Representative Purchase and the Purchasers under this Guaranty, the other Transaction Documents, any Purchased Receivables or any related document, instrument or agreement. "Person" shall mean and include an individual, a partnership, a corporation (including a business trust), a joint stock company, an unincorporated association, a joint venture, a trust or other entity or a Governmental Authority. "Potential Termination Event" shall have the meaning given to that term in the Purchase Agreement. "Purchase Agreement" shall have the meaning given to that term in Recital A hereof. "Purchased Receivables" shall have the meaning given to that term in Recital A hereof. "Purchaser(s)" shall have the meaning given to that term in the introductory paragraph hereof. "Receivables" shall have the meaning given to that term in Recital A hereof. "Representative Purchaser" shall have the meaning given to that term in the introductory paragraph hereof. "Requirement of Law" applicable to any Person shall mean (a) the Articles or Certificate of Incorporation and By-laws, Partnership Agreement or other organizational or governing documents of such Person, (b) any Governmental Rule applicable to such Person, (c) any license, permit, approval or other authorization granted by any Governmental Authority to or for the benefit of such Person and (d) any judgment, decision or determination of any Governmental Authority or arbitrator, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. 1-2 17 "Seller" shall have the meaning given to that term in Recital A hereof. "Subordinated Obligations" shall have the meaning given to that term in paragraph 7 hereof. "Termination Event" shall have the meaning given to that term in the Purchase Agreement. "Transaction Documents" shall have the meaning given to that term in subparagraph 2(a) hereof. 1-3 EX-27 6 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENT OF OPERATIONS, THE CONSOLIDATED BALANCE SHEET AND THE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS JUN-30-1998 JUL-01-1997 DEC-31-1997 21,058 425,660 237,686 2,304 258,104 1,041,828 340,190 147,131 1,275,846 276,586 310,000 0 0 38 652,908 1,275,846 580,683 581,982 355,900 588,895 0 0 8,018 (8,177) 470 (8,647) 0 0 0 (8,647) (0.23) (0.23)
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