-----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, SbjvJomMy1uKiADUbk7QVAiejFq9uMXthbtJl9pDkDIPrTQu3z33XlRsuFkSLwet SZR3C+eB5gKhqVespVc5LA== 0001095811-01-503430.txt : 20010730 0001095811-01-503430.hdr.sgml : 20010730 ACCESSION NUMBER: 0001095811-01-503430 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20010727 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: S-3 SEC ACT: SEC FILE NUMBER: 333-66050 FILM NUMBER: 1690918 BUSINESS ADDRESS: STREET 1: 4650 CUSHING BLVD CITY: FREMONT STATE: CA ZIP: 94538 BUSINESS PHONE: 5106590200 MAIL ADDRESS: STREET 1: 4650 CUSHING PARKWAY CITY: FREMONT STATE: CA ZIP: 94538 S-3 1 f74092s-3.txt FORM S-3 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 27, 2001 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------- LAM RESEARCH CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 94-2634797 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
4650 CUSHING PARKWAY, FREMONT, CALIFORNIA 94538 (510) 659-0200 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) CRAIG GARBER VICE PRESIDENT, CORPORATE FINANCE AND TREASURER LAM RESEARCH CORPORATION 4650 CUSHING PARKWAY FREMONT, CALIFORNIA 94538 (510) 659-0200 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------- COPIES TO: TIMOTHY G. HOXIE, ESQUIRE HELLER EHRMAN WHITE & MCAULIFFE LLP 333 BUSH STREET SAN FRANCISCO, CALIFORNIA 94104 TELEPHONE: (415) 772-6000 FACSIMILE: (415) 772-6268 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box: [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box: [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ] ____________ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, as amended check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ] ____________ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: [ ] CALCULATION OF REGISTRATION FEE - ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- PROPOSED MAXIMUM TITLE OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER PROPOSED MAXIMUM AMOUNT OF REGISTERED REGISTERED SHARE AGGREGATE OFFERING PRICE REGISTRATION FEE - ----------------------------------------------------------------------------------------------------------------------- 4% Convertible Subordinated Notes due June 1, 2006............... $300,000,000 100%(1) $300,000,000 $75,000 - ----------------------------------------------------------------------------------------------------------------------- Common Stock, $0.001 par value... (2) (2) (2) (3) - ----------------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(i) under the Securities Act of 1933, as amended. (2) Includes 6,677,054 shares of common stock issuable upon conversion of the notes at a conversion price of $44.93 per share. Pursuant to Rule 416 under the Securities Act, the number of shares of common stock registered shall include an indeterminate number of shares of common stock that may be issued under the antidilution provisions of the Notes. (3) Pursuant to Rule 457(i), there is no additional filing fee with respect to the shares of common stock issuable upon conversion of the notes because no additional consideration will be received by the registrant. ------------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED JULY 27, 2001 PROSPECTUS [LOGO] LAM RESEARCH CORPORATION $300,000,000 4% CONVERTIBLE SUBORDINATED NOTES DUE JUNE 1, 2006 AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES ------------------------- We issued the notes in a private placement in May 2001. This prospectus will be used by selling securityholders to resell their notes and the common stock issuable upon conversion of their notes. The notes are convertible, at the option of the securityholder, at any time prior to maturity into shares of our common stock at an initial conversion price of $44.93 per share, subject to adjustment. We will pay interest on the notes on June 1 and December 1 of each year, beginning on December 1, 2001. The notes will mature on June 1, 2006, unless either converted or redeemed. We may redeem some or all of the notes on or after June 5, 2004 at the redemption prices set forth in this prospectus, plus accrued and unpaid interest. In addition, holders may require us to repurchase the notes upon some types of change in control transactions. Our common stock is quoted on the Nasdaq National Market under the symbol "LRCX." On July 26, 2001, the last reported sales price of our common stock was $26.90 per share. ------------------------- INVESTING IN THE NOTES OR THE COMMON STOCK OFFERED IN THIS PROSPECTUS INVOLVES RISK. BEGINNING ON PAGE 8, WE HAVE LISTED SEVERAL "RISK FACTORS" WHICH YOU SHOULD CONSIDER. YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY BEFORE YOU MAKE YOUR INVESTMENT DECISION. ------------------------- THE SECURITIES AND EXCHANGE COMMISSION AND STATE REGULATORY AUTHORITIES HAVE NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------- The date of this prospectus is , 2001 3 YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED, OR INCORPORATED BY REFERENCE, IN THIS PROSPECTUS OR THE REGISTRATION STATEMENT. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS. THE SELLING SECURITYHOLDER IS OFFERING TO SELL, AND SEEKING OFFERS TO BUY, THE NOTES AND THE SHARES OF OUR COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY SALE OF THE NOTES OR SHARES. TABLE OF CONTENTS
PAGE ---- WHERE YOU CAN FIND MORE INFORMATION... 1 FORWARD-LOOKING STATEMENTS............ 2 PROSPECTUS SUMMARY.................... 3 RECENT DEVELOPMENTS................... 5 RISK FACTORS.......................... 8 USE OF PROCEEDS....................... 16 RATIO OF EARNINGS TO FIXED CHARGES.... 16
PAGE ---- DESCRIPTION OF THE NOTES.............. 17 DESCRIPTION OF LAM CAPITAL STOCK...... 31 SELLING SECURITYHOLDERS............... 35 CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS.................. 42 PLAN OF DISTRIBUTION.................. 49 LEGAL MATTERS......................... 50 EXPERTS............................... 50
UNLESS STATED OTHERWISE, REFERENCES IN THIS PROSPECTUS TO "LAM RESEARCH," "LAM," "WE," "OUR," OR "US," REFER TO LAM RESEARCH CORPORATION, A DELAWARE CORPORATION, AND NOT TO ANY OF ITS SUBSIDIARIES. WE MAINTAIN A WEBSITE AT WWW.LAMRC.COM. INFORMATION CONTAINED ON OUR WEBSITE DOES NOT CONSTITUTE PART OF THIS PROSPECTUS. EACH TRADEMARK, TRADE NAME OR SERVICE MARK OF ANY OTHER COMPANY APPEARING IN THIS PROSPECTUS BELONGS TO ITS HOLDER. i 4 WHERE YOU CAN FIND MORE INFORMATION This prospectus is part of a registration statement that we filed with the SEC (Registration No. 333- ). The registration statement contains more information than this prospectus regarding Lam and our common stock, including certain exhibits and schedules. You may read and copy this information at the following locations of the SEC: Public Reference Room North East Regional Office Midwest Regional Office 450 Fifth Street, N.W. 7 World Trade Center 500 West Madison Street Room 1024 Suite 1300 Suite 1400 Washington, D.C. 20549 New York, New York 10048 Chicago, Illinois 60661
You may also obtain copies of this information at prescribed rates by mail from the Public Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. The SEC also maintains a web site that contains reports, proxy statements and other information about issuers, like us, who file electronically with the SEC. The address of that site is www.sec.gov. You can also inspect reports, proxy statements and other information about our company at the offices of The National Association of Securities Dealers, Inc., 1735 K. Street, N.W., Washington, D.C. 20006. The SEC allows us to "incorporate" into this prospectus information we file with the SEC in other documents. This means that we can disclose important information to you by referring to other documents that contain that information. The information may include documents filed after the date of this prospectus which update and supersede the information you read in this prospectus. We incorporate by reference the documents listed below, except to the extent information in those documents is different from the information contained in this prospectus, and all future documents filed with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until we terminate the offering of the notes and shares of common stock offered by this prospectus.
LAM SEC FILINGS (FILE NO. 000-12933) PERIOD ------------------------------------ ------ Annual Report on Form 10-K Fiscal Year ended June 25, 2000 Quarterly Reports on Form 10-Q Quarterly periods ended September 24, 2000, December 24, 2000 and March 25, 2001 Current Reports on Form 8-K Filed on May 18, 2001 and July 25, 2001 The description of our common stock as set Filed on April 11, 1990 forth in our Registration Statement on Form 8-B and any amendment or report filed for the purpose of updating such description The description of our rights agreement and Filed on January 28, 1997 and January 30, preferred stock purchase rights as set forth 1997 in our Registration Statements on Forms 8-A and 8-A/A
You may request a copy of these filings at no cost, by writing or calling us at the following address or telephone number: Lam Research Corporation 4650 Cushing Parkway Fremont, California 94538 (510) 572-5910 Attn: Office of Investor Relations Exhibits to the filings will not be sent, however, unless those exhibits have specifically been incorporated by reference in this document. 1 5 FORWARD-LOOKING STATEMENTS With the exception of historical facts, the statements contained in this prospectus, including the section entitled "Risk Factors," are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, and are subject to the "safe harbor" provisions created by these statutes. These forward-looking statements include, but are not limited to, statements that relate to: - our future revenue; - product development; - demand, acceptance and market share; - competitiveness; - royalty income; - gross margins; - levels of research and development and operating expenses; - management's plans and objectives for current and future operations; and - the sufficiency of financial resources to support future operations and capital expenditures. These statements are based on current expectations and are subject to risks, uncertainties and changes in condition, significance, value and effect, including those discussed under the heading "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this document and in the documents we file from time to time with the SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. These risks, uncertainties and changes in condition, significance, value and effect could cause actual results to differ materially from those expressed in this prospectus and in ways not readily foreseeable. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this prospectus and of information currently and reasonably known. We undertake no obligation to release any revisions to these forward-looking statements which may be made to reflect events or circumstances which occur after the date of this prospectus or to reflect the occurrence or effect of anticipated or unanticipated events. 2 6 PROSPECTUS SUMMARY Because this is a summary, it may not contain all information that may be important to you. You should read the entire prospectus carefully, including the risks of investing discussed under "Risk Factors," beginning on page 8 and the financial statements included in our other filings with the Securities and Exchange Commission, before making an investment decision. ABOUT LAM RESEARCH We design, manufacture, market and service semiconductor processing equipment used in the fabrication of integrated circuits. We are recognized as a leading supplier of front-end wafer processing equipment to the worldwide semiconductor industry. Our products are used to selectively remove portions of various films to create an integrated circuit. Etch processes, which are repeated numerous times during the fabrication cycle, are required to manufacture every type of semiconductor device produced today. Chemical Mechanical Planarization ("CMP") is used to planarize the surface of the processed wafer to prepare it for further processing. CMP is currently the planarization technology of choice for manufacturing sub-0.35 micron integrated circuits with multiple metal layers. Post-CMP clean processes are used to remove residues left on the wafer after CMP processing. We sell a broad range of plasma ("dry") etch products to address specific applications. Our Transformer Coupled Plasma ("TCP(R)") etchers utilize a high-density plasma process to etch device features down to 0.18 micron and below. We also market both the DSS-200(R) and Synergy(TM) product lines of post-CMP cleaners, which are used to remove residual slurries and other contaminants from wafer surfaces, both after CMP polishing and before and after essential semiconductor process steps. Our Teres CMP polishing system leverages our post-CMP cleaning expertise to provide fully integrated polishing and cleaning solutions. Our common stock is traded on the Nasdaq National Market under the symbol "LRCX." The postal address for our principal executive offices is 4650 Cushing Parkway, Fremont, CA 94538. Our telephone number is (510) 659-0200. THE OFFERING The following is a brief summary of some of the terms of the notes offered for resale in this prospectus. For a more complete description of the terms of the notes, see "Description of Notes" in this prospectus. Securities Offered............ $300 million aggregate principal amount of 4% Convertible Subordinated Notes due June 1, 2006. Maturity Date................. June 1, 2006. Interest Payment Dates........ We will pay interest semiannually on June 1 and December 1 of each year, beginning December 1, 2001. Conversion Rights............. You may convert your notes at any time prior to maturity at a conversion price of $44.93 per share, subject to adjustment as set forth under "Description of the Notes -- Conversion Rights." Sinking Fund.................. None. Optional Redemption........... We may redeem the notes at any time on or after June 5, 2004 at specified prices, plus accrued and unpaid interest to, but excluding, the redemption date. 3 7 Change in Control............. In the event of some types of change in control transactions, you may require us to purchase your notes at 100% of the principal amount of the notes, plus accrued and unpaid interest to, but excluding, the purchase date. We may not have sufficient funds to pay the purchase price for all duly tendered notes upon a change in control. In addition, certain of our debt agreements may prohibit the redemption or repurchase of the notes and provide that a change in control constitutes an event of default. Subordination................. The notes are general unsecured obligations of Lam and rank junior to our designated senior indebtedness as that term is defined in "Description of the Notes -- Subordination of Notes." The notes will be effectively subordinated to all existing and future indebtedness and other liabilities, including trade payables, of our subsidiaries. As of March 25, 2001 we had $115.4 million that would constitute senior indebtedness for purposes of the indenture, while our subsidiaries had approximately $20.3 million in outstanding indebtedness or other liabilities (excluding intercompany liabilities and indebtedness included as senior indebtedness as a result of our guarantees). In addition, the notes rank equally with our 5% Convertible Subordinated Notes due 2002. The aggregate principal amount of those notes outstanding as of March 25, 2001 was approximately $309.8 million. Neither we nor our subsidiaries are restricted under the indenture from incurring additional senior indebtedness. Use of Proceeds............... We will not receive any of the proceeds of the resale of the notes by the selling securityholders or the common stock into which the notes may be converted. Trading....................... The notes are eligible for trading in the PORTAL market. However, we can give no assurance as to the liquidity of, or the trading market for. the notes. Our common stock is quoted on the Nasdaq National Market under the symbol "LRCX." Registration Rights........... Pursuant to a registration rights agreement, we have filed a shelf registration statement, of which this prospectus is a part, with the SEC with respect to the notes and the common stock issuable upon conversion of the notes. See "Description of the Notes -- Registration Rights." Risk Factors.................. See "Risk Factors" and the other information in this prospectus for a discussion of the factors you should carefully consider before deciding to invest in the notes and the common stock into which the notes are convertible offered through this prospectus. Indenture and Trustee......... We have issued the notes under an indenture, dated as of May 22, 2001, between us and LaSalle Bank National Association, as trustee. 4 8 RECENT DEVELOPMENTS CHANGE IN ACCOUNTING PRINCIPLE ADOPTION OF STAFF ACCOUNTING BULLETIN NO. 101, "REVENUE RECOGNITION IN FINANCIAL STATEMENTS" In December 1999 the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements." SAB 101 provides guidance on the recognition of revenue for sales that involve contractual customer acceptance provisions and product installation commitments. In October 2000 the SEC issued implementation guidance for SAB 101 in the form of "Frequently Asked Questions and Answers." Based on the guidance provided by SAB 101, during the fourth quarter of fiscal 2001, the Company changed its revenue recognition policy for equipment sales effective June 26, 2000, the beginning of fiscal 2001. Prior to SAB 101, the Company generally recognized revenue on equipment sales on the date the equipment was shipped to customers. Under SAB 101, the Company now recognizes revenue on the date of customer acceptance or the date the contractual customer acceptance provisions lapse, resulting in a delay in revenue recognition as compared to prior practice. The following table, "Unaudited Restated Quarterly Income Statements Using SAB 101 Accounting Guidelines" summarizes the impact of the adoption of SAB 101 on previously reported interim financial information for fiscal 2001. 5 9 LAM RESEARCH CORPORATION UNAUDITED RESTATED QUARTERLY INCOME STATEMENTS USING SAB 101 ACCOUNTING GUIDELINES (IN MILLIONS, EXCEPT PER SHARE DATA)
FOR THE QUARTER ENDED NINE MONTHS ---------------------------------------- ENDED SEPTEMBER 24, DECEMBER 24, MARCH 25, MARCH 25, 2000 2000 2001 2001 ------------- ------------ --------- ----------- (RESTATED) Total revenue................................... $ 305.0 $384.1 $465.1 $1,154.2 Cost and expenses: Cost of goods sold............................ 172.3 214.1 262.1 648.5 ------- ------ ------ -------- Gross margin............................... 132.7 170.0 203.0 505.7 Research and development...................... 56.5 58.7 58.8 174.0 Selling, general and administrative........... 52.5 62.0 55.6 170.1 Purchased technology for research and development................................ -- 8.0 -- 8.0 ------- ------ ------ -------- Operating income........................... 23.7 41.3 88.6 153.6 Other income, net............................... 4.6 2.9 4.4 11.9 ------- ------ ------ -------- Income before income tax expense................ 28.3 44.2 93.0 165.5 Income tax expense.............................. 8.5 13.2 27.9 49.6 ------- ------ ------ -------- Income before cumulative effect of change in accounting principle.......................... 19.8 31.0 65.1 115.9 Cumulative effect of the application of SAB 101, "Revenue Recognition in Financial Statements", net of $81.4 related tax benefit.............. (122.1) -- -- (122.1) ------- ------ ------ -------- Net income (loss)............................... $(102.3) $ 31.0 $ 65.1 $ (6.2) ======= ====== ====== ======== Net income (loss) per share -- diluted(1): Income before cumulative effect of change in accounting principles...................... $ 0.15 $ 0.24 $ 0.48 $ 0.88 Cumulative effect of change in accounting principle, application of SAB 101.......... $ (0.91) $ -- $ -- $ (0.86) ------- ------ ------ -------- Diluted net income (loss) per share........... $ (0.76) $ 0.24 $ 0.48 $ 0.02 ======= ====== ====== ======== Number of shares used in per share calculation-- diluted....................................... 133.7 130.4 141.9 142.4 ======= ====== ====== ======== Number of shares for per share calculation -- basic.......................... 124.5 123.4 123.2 123.7 ======= ====== ====== ========
- ------------------------- (1) For the quarters ended September 24, 2000 and December 24, 2000, assumed conversion of the Company's 5% convertible subordinated notes was antidilutive and therefore excluded from the calculation of diluted earnings per share. Diluted earnings per share for the three and nine month periods ended March 25, 2001 includes the dilutive effect of the Company's 5% convertible subordinated notes which were dilutive for those periods after adding back $3.0 million and $9.1 million, respectively, in interest expense net of tax. 6 10 RECENT OPERATING RESULTS On July 25, 2001, the Company reported operating results for the fourth quarter and fiscal year ended June 24, 2001. Total revenue for fiscal 2001 was $1,519.8 million and net income was $52.1 million. Included in the results for the year was a $122.1 million charge, net of tax, reflecting the cumulative effect as of June 26, 2000, of adopting SAB 101 and a gain of $33.1 million, recorded in the fourth quarter, reflecting the cumulative effect as of June 24, 2001 of adopting EITF 00-19, "Accounting for Derivative Financial Instruments Indexed to and Potentially Settled in a Company's Own Stock." 7 11 RISK FACTORS In deciding whether to purchase the notes and the common stock issuable upon conversion of the notes, you should consider carefully the following risk factors, along with the other information contained or incorporated by reference in this prospectus. These factors, among others, may cause actual results, events or performance to differ materially from those expressed in any forward-looking statements we make or incorporate by reference in this prospectus. RISKS RELATED TO OUR BUSINESS OUR QUARTERLY REVENUES AND OPERATING RESULTS ARE UNPREDICTABLE. Our revenues and operating results may fluctuate significantly from quarter to quarter due to a number of factors, not all of which are in our control. These factors include, but are not limited to: - economic conditions in the semiconductor industry generally, and the equipment industry specifically; - customer capacity requirements; - the size and timing of orders from customers; - customer cancellations or delays in our shipments; - our ability to successfully install our systems at customer facilities and obtain customer acceptance; - our ability in a timely manner to develop, introduce and market new, enhanced and competitive products; - our competitors' introduction of new products; - legal or technical challenges to our products and technology, - new or modified accounting regulations; - changes in average selling prices and product mix; and - exchange rate fluctuations. We manage our expense levels in part on our expectations of future revenues. If revenue levels in a particular quarter do not meet our expectations, our operating results are adversely affected. We derive our revenue primarily from the sale of a relatively small number of high-priced systems. Our systems can range in price from approximately $400,000 to $4 million per unit. Our operating results for a quarter may suffer substantially if: - we sell fewer systems than we anticipate in any quarter; - we do not receive anticipated orders in time to enable actual shipment during that quarter; - one or more customers delay or cancel anticipated shipments; - shipments are delayed by procurement shortages or manufacturing difficulties; or - our customers delay final acceptance of our shipments due to delays in their evaluation of our systems. Because most of our manufacturing operations and capacity is located at our Fremont, California facility, natural, physical, logistical or other events or disruptions affecting this facility (including labor disruptions) could adversely impact our financial performance. 8 12 VARIATIONS IN THE AMOUNT OF TIME IT TAKES FOR OUR CUSTOMERS TO ACCEPT OUR SYSTEMS MAY CAUSE FLUCTUATIONS IN OUR OPERATING RESULTS. In December 1999 the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") No. 101 "Revenue Recognition in Financial Statements." SAB 101 provides guidance on the recognition of revenue for sales that involve contractual customer acceptance provisions and product installation commitments. Based on the guidance provided by SAB 101, we changed our revenue recognition policy for equipment sales effective June 26, 2000. Prior to SAB 101, the Company generally recognized revenue on equipment sales on the date the equipment was shipped to customers. Under SAB 101, the Company now recognizes revenue on the date of customer acceptance or the date the contractual customer acceptance provisions lapse. As a result, the fiscal period in which we are able to recognize revenues from shipments of systems to customers is subject to the length of time that our customers require to evaluate the performance of our systems, which could cause our quarterly operating results to fluctuate. THE SEMICONDUCTOR EQUIPMENT INDUSTRY IS VOLATILE, AND THE INDUSTRY IS CURRENTLY EXPERIENCING A FALL IN PRODUCT DEMAND WHICH IS EXPECTED TO HAVE A NEGATIVE IMPACT ON SHIPMENTS. Our business depends on the capital equipment expenditures of semiconductor manufacturers, which in turn depend on the current and anticipated market demand for integrated circuits and products using integrated circuits. The semiconductor industry is cyclical in nature and historically experiences periodic downturns. During the past three years the semiconductor industry has experienced severe swings of product demand and volatility in product pricing. In early fiscal 1998 and fiscal 1999, the semiconductor industry reduced or delayed significantly purchases of semiconductor manufacturing equipment and construction of new fabrication facilities because of an industry downturn. However, beginning in late fiscal 1999, we experienced a recovery in demand for our products, which drove sales growth throughout calendar year 2000. In the second half of the December 2000 quarter, we began to see signs that this upturn was slowing and that customers were likely to reduce equipment purchases during the first half of calendar year 2001. These signs were confirmed in the March 2001 and June 2001 quarters as semiconductor manufacturers canceled or delayed many orders. These order reductions are expected to have a negative impact on the level of system shipments through at least the December 2001 quarter. Fluctuating levels of investment by the semiconductor manufacturers and pricing volatility will continue to materially affect our aggregate bookings, revenues and operating results. Even during periods of reduced revenues, we must continue to invest in research and development and to maintain extensive ongoing worldwide customer service and support capabilities to remain competitive, which may temporarily harm our financial results. WE DEPEND ON NEW PRODUCTS AND PROCESSES FOR OUR SUCCESS, AND FOR THIS REASON, WE ARE SUBJECT TO RISKS ASSOCIATED WITH RAPID TECHNOLOGICAL CHANGE. Rapid technological changes in semiconductor manufacturing processes subject us to increased pressure to develop technological advances enabling such processes. We believe that our future success depends in part upon our ability to develop, manufacture and successfully introduce new products with improved capabilities and to continue to enhance our existing products. Due to the risks inherent in transitioning to new products, we must forecast accurately demand for new products while managing the transition from older products. If new products have reliability or quality problems our performance may be impacted by reduced orders, higher manufacturing costs, delays in acceptance of and payment for new products, and additional service and warranty expenses. In the past, some product introductions have caused delays and reliability and quality problems. We may be unable to develop and manufacture new products successfully, or new products that we introduce may fail in the marketplace, which would materially and adversely affect our results from operations. We expect to continue to make significant investments in research and development and to pursue joint development relationships with customers or other members of the industry. We must manage 9 13 product transitions and joint development relationships successfully, as introduction of new products could adversely affect our sales of existing products. Future technologies, processes or product developments may render our current product offerings obsolete, or we may be unable in a timely manner to develop and introduce new products or enhancements to our existing products which satisfy customer needs or achieve market acceptance. In addition, in connection with the development of new products, we will invest in pilot production inventory. Our failure in a timely manner to complete commercialization of these new products could result in inventory obsolescence, which would adversely affect our financial results. WE ARE SUBJECT TO RISKS ASSOCIATED WITH THE INTRODUCTION OF NEW PRODUCTS. We expect to face significant competition from multiple current and future competitors. We believe that other companies are developing systems and products that are competitive to ours and are planning to introduce new products to this market, which may affect our ability to sell our new products. Furthermore, new products represent significant investments of our resources and their success, or lack thereof, could have a material affect on our financial results. WE ARE SUBJECT TO RISKS RELATING TO PRODUCT CONCENTRATION AND LACK OF PRODUCT REVENUE DIVERSIFICATION. We derive a substantial percentage of our revenues from a limited number of primary products, and we expect these primary products to continue to account for a large percentage of our revenues in the near term. Continued market acceptance of our primary products is, therefore, critical to our future success. Our business, operating results, financial condition and cash flows could therefore be adversely affected by: - a decline in demand for our products; - a failure to achieve continued market acceptance of our products; - an improved version of products being offered by a competitor in the market we participate in; - technological change that we are unable to address with our products; and - a failure to release new enhanced versions of our products on a timely basis. WE ARE DEPENDENT UPON A LIMITED NUMBER OF KEY SUPPLIERS. We obtain certain components and sub-assemblies included in our products from a single supplier or a limited group of suppliers. Each of our key suppliers has a one year blanket purchase contract under which we may issue purchase orders. We may renew these contracts periodically. Each of these suppliers sold us a material amount of products during at least the last four years, and we expect that we will continue to renew these contracts in the future or that we will otherwise replace them with competent alternative source suppliers. Nevertheless, a prolonged inability to obtain certain components could adversely affect our operating results and result in damage to our customer relationships. ONCE A SEMICONDUCTOR MANUFACTURER COMMITS TO PURCHASE ONE OF OUR COMPETITOR'S SEMICONDUCTOR MANUFACTURING EQUIPMENT, THE MANUFACTURER TYPICALLY CONTINUES TO PURCHASE THAT COMPETITOR'S EQUIPMENT, MAKING IT MORE DIFFICULT FOR US TO SELL OUR EQUIPMENT TO THAT CUSTOMER. Semiconductor manufacturers must make a substantial investment to qualify and integrate capital processing equipment into a semiconductor production line. We believe that once a semiconductor manufacturer selects a particular supplier's processing equipment, the manufacturer generally relies upon that equipment for that specific production line application. Accordingly, we expect it to be more difficult to sell to a given customer if that customer initially selects a competitor's equipment. We believe that to remain competitive we will require significant financial resources to offer a broad range of products, to maintain customer service and support centers worldwide, and to invest in product and process research and development. 10 14 WE MAY LACK THE FINANCIAL RESOURCES OR TECHNOLOGICAL CAPABILITIES OF CERTAIN OF OUR COMPETITORS NEEDED TO CAPTURE INCREASED MARKET SHARE. Certain of our competitors have substantially greater financial resources and more extensive engineering, manufacturing, marketing and customer service and support resources than we do and therefore are increasingly dominating the semiconductor equipment industry. In addition, there are smaller emerging semiconductor equipment companies that may provide innovative technology that may have performance advantages over systems we currently, or expect to, offer. We anticipate our competitors will continue to improve the design and performance of their current products and processes and to introduce new products and processes with enhanced performance characteristics. If our competitors enter into strategic relationships with leading semiconductor manufacturers covering products similar to those we sell or may develop, it could adversely affect our ability to sell products to those manufacturers. In addition, competitors with higher levels of financial resources than we have may continue to deeply discount products similar to those we sell. For these reasons, we may fail to continue to compete successfully worldwide. Our present or future competitors may be able to develop products comparable or superior to those we offer or that adapt more quickly to new technologies or evolving customer requirements. In particular, while we currently are developing additional product enhancements that we believe will address customer requirements, we may fail in a timely manner to complete the development or introduction of these additional product enhancements successfully, or these product enhancements may not achieve market acceptance or be competitive. Accordingly, we may be unable to continue to compete effectively in our markets, competition may intensify or future competition may have a material adverse effect on our revenues, operating results, financial condition and cash flows. OUR FUTURE SUCCESS DEPENDS ON INTERNATIONAL SALES. International sales accounted for approximately 70% of our total revenue in the first nine months of fiscal 2001, 71% in fiscal 2000, 54% in fiscal 1999, and 55% in fiscal 1998. We expect that international sales will continue to account for a significant portion of our total revenue in future years. International sales are subject to risks, including, but not limited to: - foreign exchange risks; - foreign trade disputes; and - economic, political, banking and currency problems in the relevant region. We currently enter into foreign currency forward contracts to minimize the short-term impact of exchange rate fluctuations on yen-denominated sales and assets, and will continue to enter into hedging transactions in the future. A FAILURE TO COMPLY WITH ENVIRONMENTAL REGULATIONS MAY ADVERSELY AFFECT OUR OPERATING RESULTS. We are subject to a variety of governmental regulations related to the discharge or disposal of toxic, volatile or otherwise hazardous chemicals. We believe that we are in general compliance with these regulations and that we have obtained (or will obtain or are otherwise addressing) all necessary environmental permits to conduct our business. Nevertheless, the failure to comply with present or future regulations could result in fines being imposed on us, suspension of production, cessation of our operations or reduction in our customers' acceptance of our products. These regulations could require us to alter our current operations, to acquire significant equipment or to incur substantial other expenses to comply with environmental regulations. Our failure to control the use, sale, transport or disposal of hazardous substances could subject us to future liabilities. 11 15 OUR ABILITY TO MANAGE POTENTIAL GROWTH OR DECLINE, INTEGRATION OF POTENTIAL ACQUISITIONS AND POTENTIAL DISPOSITION OF PRODUCT LINES AND TECHNOLOGIES CREATES RISKS FOR US. Our management may face significant challenges in maintaining adequate financial and business controls, management processes, information systems and procedures on a timely basis, and expanding, training and managing our work force if we experience additional growth. We may not be able to perform such actions successfully. Alternatively, we may be faced with a sudden decrease in demand for our products, which would challenge our management to reduce spending on operations and inventory. In the future, we may make acquisitions of complementary companies, products or technologies, or we may reduce or dispose of certain product lines or technologies, which no longer fit our long-term strategy. Managing an acquired business or disposing of product technologies entails numerous operational and financial risks, including difficulties in assimilating acquired operations and new personnel or separating existing business or product groups, diversion of management's attention to other business concerns, amortization of acquired intangible assets and potential loss of key employees or customers of acquired or disposed operations. Our success will depend, to a significant extent, on the ability of our executive officers and other members of our senior management to identify and respond to these challenges effectively. There can be no assurance that we will be able to achieve and manage successfully any such growth, decline, integration of potential acquisitions or disposition of product lines or technologies, or that our management, personnel or systems will be adequate to support continued operations. Any such inabilities or inadequacies would have a material adverse effect on our business, operating results, financial condition and cash flows. An important element of our management strategy is to review acquisition prospects that would complement our existing products, augment our market coverage and distribution ability, or enhance our technological capabilities. We may acquire additional businesses, products or technologies in the future. Any acquisitions could result in changes such as potentially dilutive issuances of equity securities, the incurrence of debt and contingent liabilities and the amortization expense related to goodwill and other intangible assets, any of which could materially adversely affect our business, financial condition and results of operations and/or the price of our common stock. THE MARKET FOR OUR COMMON STOCK IS VOLATILE, WHICH MAY AFFECT OUR ABILITY TO RAISE CAPITAL OR MAKE ACQUISITIONS. The market price for our common stock is extremely volatile and has fluctuated significantly over the past years. The trading price of our common stock could continue to be highly volatile and fluctuate widely in response to factors, including the following: - general market or semiconductor industry conditions; - global economic fluctuations; - variations in our quarterly operating results; - variations in our revenues or earnings from levels securities analysts forecast; - announcements of restructurings, technological innovations, reductions in force, departure of key employees, consolidations of operations or introduction of new products; - government regulations; - disruptions with key customers; or - political, economic or environmental events occurring globally or in our key sales regions. In addition, the stock market has, in recent years, experienced increasing significant price and volume fluctuations. Recent volatility in the price of our common stock was tied in part to the actual or anticipated movement in interest rates and the price of and markets for semiconductors. These broad market and industry factors may adversely affect the price of our common stock, regardless of our actual operating performance. In the past, following volatile periods in the price of stock, many companies 12 16 become the object of securities class action litigation. If we are sued in a securities class action, we could incur substantial costs and it could divert management's attention and resources and have an unfavorable impact in the price for our common stock. RISK ASSOCIATED WITH OUR CALL AND PUT OPTIONS. We have entered into third party option transactions for the purchase and sale of our stock. The option positions will be of value to us if our stock price exceeds the exercise price of the call options at the time the options are exercised. Conversely, our stock price could also decline. If our stock price on the exercise date of the options is below the put option exercise price, we would have to settle the put obligation by paying cash or the equivalent value in shares of our common stock. If settlement were to occur prior to option expiration because of the occurrence of an event giving the third parties the right to terminate the transactions, we will be required both to pay to the third parties the value of their position (which would depend on a number of factors, including the time remaining to expiration and the volatility of our common stock) which could be greater or lesser than the difference between the options' exercise prices and the then market price of our common stock as well as any costs or expenses incurred by the third parties as a result of unwinding the transactions. THE POTENTIAL ANTI-TAKEOVER EFFECTS OF OUR CHARTER PROVISIONS AND OUR RIGHTS PLAN MAY AFFECT OUR STOCK PRICE AND INHIBIT A CHANGE OF CONTROL DESIRED BY SOME OF OUR STOCKHOLDERS. In 1997, we adopted a rights plan in which rights were distributed as a dividend at the rate of one right for each share of our common stock held by stockholders. In connection with the adoption of our rights plan, our board of directors also adopted a number of amendments to our bylaws, including amendments requiring advance notice of stockholder nominations of directors and stockholder proposals. Our rights plan may have certain anti-takeover effects. Our rights plan will cause substantial dilution to a person or group that attempts to acquire Lam in certain circumstances. Accordingly, the existence of our rights plan and the issuance of the related rights may deter certain acquirers from making takeover proposals or tender offers. Our rights plan, however, is not intended to prevent a takeover. Rather it is designed to enhance the ability of our board of directors to negotiate with a potential acquirer on behalf of all of our stockholders. In addition, our certificate of incorporation authorizes issuance of 5,000,000 shares of undesignated preferred stock. Our board of directors, without further stockholder approval, may issue this preferred stock on such terms as they may determine, which also could have the effect of delaying or preventing a change in control of Lam. The issuance of preferred stock could also adversely affect the voting power of the holders of our common stock, including causing the loss of voting control. Moreover, Section 203 of the Delaware General Corporation Law restricts certain business combinations with "interested stockholders," as defined by that statute. INTELLECTUAL PROPERTY AND OTHER CLAIMS AGAINST US CAN BE COSTLY AND COULD RESULT IN THE LOSS OF SIGNIFICANT RIGHTS WHICH ARE NECESSARY TO OUR CONTINUED BUSINESS AND PROFITABILITY. Other parties may assert infringement, unfair competition or other claims against us. Additionally, from time to time, other parties send us notices alleging that our products infringe their patent or other intellectual property rights. In such cases, it is our policy either to defend the claims or to negotiate licenses on commercially reasonable terms. However, we may be unable in the future to negotiate necessary licenses on commercially reasonable terms, or at all, and any litigation resulting from these claims by other parties may materially adversely affect our business and financial results. In October 1993, Varian Associates, Inc. sued us in the United States District Court for the Northern District of California, seeking monetary damages and injunctive relief based on our alleged infringement of certain patents Varian held. We asserted defenses that the subject patents are invalid and unenforceable, and that our products do not infringe these patents. Litigation is inherently uncertain and we may fail to 13 17 prevail in this litigation. However, we believe that the Varian lawsuit will not materially adversely affect our operating results or financial position. Additionally, in September 1999, Tegal Corporation sued us in the United States District Court for the Eastern District of Virginia, seeking monetary damages and injunctive relief based on our alleged infringement of certain patents Tegal holds. Specifically, Tegal identified our 4520XLe(TM) and Exelan(TM) products as infringing the patents Tegal is asserting. Litigation is inherently uncertain and we may fail to prevail in this litigation. However, we believe that the Tegal lawsuit will not materially adversely affect our operating results or financial position. WE MAY FAIL TO PROTECT OUR PROPRIETARY TECHNOLOGY RIGHTS, WHICH WOULD AFFECT OUR BUSINESS. Our success depends in part on our proprietary technology. While we attempt to protect our proprietary technology through patents, copyrights and trade secret protection, we believe that our success also depends on increasing our technological expertise, continuing our development of new systems, increasing market penetration and growth of our installed base, and providing comprehensive support and service to our customers. However, we may be unable to protect our technology in all instances, or our competitors may develop similar or more competitive technology independently. We currently hold a number of United States and foreign patents and pending patent applications. However, other parties may challenge or attempt to invalidate or circumvent any patents the United States or foreign governments issue to us or these governments may fail to issue pending applications. In addition, the rights granted or anticipated under any of these patents or pending patent applications may be narrower than we expect or in fact provide no competitive advantages. RISKS RELATED TO THE NOTES THE NOTES ARE SUBORDINATED AND THERE ARE NO FINANCIAL COVENANTS IN THE INDENTURE. The notes are general unsecured obligations of Lam and are subordinated in right of payment to all of our existing and future senior indebtedness. In the event of our bankruptcy, liquidation or reorganization or upon acceleration of the notes due to an event of default under the indenture and in certain other events, our assets will be available to pay obligations on the notes only after all senior indebtedness has been paid. As a result, there may not be sufficient assets remaining to pay amounts due on any or all of the outstanding notes. In addition, we will not make any payments on the notes in the event of payment defaults on our senior indebtedness or other specified defaults on our designated senior indebtedness. The notes are also effectively subordinated to the liabilities, including trade payables, of our subsidiaries. We conduct a significant portion of our operations through subsidiaries. As of March 25, 2001 we had approximately $115.4 million that would constitute senior indebtedness for purposes of the indenture, while our subsidiaries had approximately $20.3 million outstanding indebtedness or other liabilities (excluding intercompany liabilities and indebtedness included as senior indebtedness as a result of our guarantees). In addition, the notes rank equally with our 5% Convertible Subordinated Notes due 2002. The aggregate principal amount of these notes outstanding as of March 25, 2001 was approximately $309.8 million. We are not prohibited from incurring additional debt, including senior indebtedness, under the indenture. If we or our subsidiaries were to incur additional debt or liabilities, our ability to pay our obligations on the notes could be adversely affected. In addition, we are not restricted from paying dividends or issuing or repurchasing our securities under the indenture. WE MAY BE UNABLE TO MEET THE REQUIREMENTS TO PURCHASE THE NOTES UPON A CHANGE IN CONTROL. Upon a change in control, as defined in the indenture, you may require us to purchase all or a portion of your notes. If a change in control were to occur, we may not have enough funds to pay the purchase price for all tendered notes. Certain of our debt agreements may prohibit the redemption or repurchase of the notes and provide that a change in control constitutes an event of default. Future credit agreements or other agreements relating to our indebtedness might contain similar provisions. If a change in control occurs at a time when we are prohibited from purchasing the notes, we could seek the consent of our 14 18 lenders to purchase the notes or could attempt to refinance this debt. If we do not obtain a consent, we could not purchase the notes. Our failure to purchase tendered notes would constitute an event of default under the indenture, which might constitute a default under the terms of our other debt. In such circumstances, or if a change in control would constitute an event of default under our senior indebtedness, the subordination provisions of the indenture would possibly limit or prohibit payments to you. The term "change in control" is limited to certain specified transactions and may not include other events that might harm our financial condition. Our obligation to offer to purchase the notes upon a change in control would not necessarily afford you protection in the event of a highly leveraged transaction, reorganization, merger or similar transaction involving us. AN ACTIVE TRADING MARKET FOR THE NOTES MAY NOT DEVELOP OR BE SUSTAINED. There is no established trading market for the notes. At the time of the original issuance of the notes in May, 2001, the initial purchasers in the private placement advised us that they intended to make a market in the notes. However, the initial purchasers are not obligated to make a market and may discontinue this market-making activity at any time without notice. In addition, market-making activity by the initial purchasers will be subject to the limits imposed by the Securities Act and the Exchange Act. As a result, an active trading market for the notes may not develop or, if one does develop, it may not be maintained. If an active market for the notes fails to develop or be sustained, the trading price of the notes could decline significantly. Furthermore, if a market were to develop, the market price for the notes may be adversely affected by changes in our financial performance, changes in the overall market for similar securities and performance or prospects for companies in our industry. THE PRICE AT WHICH OUR COMMON STOCK MAY BE PURCHASED ON THE NASDAQ NATIONAL MARKET IS CURRENTLY LOWER THAN THE CONVERSION PRICE OF THE NOTES AND MAY REMAIN LOWER IN THE FUTURE. Prior to electing to convert notes, the note holder should compare the price at which our common stock is trading in the market to the conversion price of the notes. Our common stock is quoted on the Nasdaq National Market under the symbol "LRCX." On July 26, 2001, the last reported bid price of our common stock on Nasdaq was $26.90 per share. The initial conversion price of the notes is $44.93 per share. The market prices of our securities are subject to significant fluctuations. Such fluctuations, as well as economic conditions generally, may adversely affect the market price of our securities, including our common stock and the notes. THE RATING ON THE NOTES MAY CHANGE. The notes have received a "B" rating by Moody's Investors Service. It is possible that Moody's may reduce this rating in the future or that other rating agencies may assign the notes a rating lower than the Moody's rating. If the rating on the notes is reduced in the future, the market price of the notes and our common stock may be negatively affected. 15 19 USE OF PROCEEDS We will not receive any proceeds from the sale by the selling securityholders of the notes or the shares of common stock issuable upon conversion of the notes. RATIO OF EARNINGS TO FIXED CHARGES The ratio of earnings to fixed charges has been computed by dividing earnings available for fixed charges (income before taxes plus fixed charges) by fixed charges (interest charges plus amortization of bond issuance costs related to indebtedness, and that portion of rental expense representative of interest). Our ratio of earnings to fixed charges for each of the periods shown is as follows:
YEAR ENDED NINE MONTHS ENDED -------------------------------------------------------- ---------------------- JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 25, MARCH 26, MARCH 25, 1996 1997 1998 1999 2000 2000 2001 -------- -------- -------- -------- -------- --------- --------- (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) Ratio of earnings to fixed charges(1), (2).................. 10.6x -- -- -- 8.1x 7.1x 10.1x
- ------------------------- (1) During the fiscal years ended June 30, 1997, 1998 and 1999, there was a deficiency of earnings to cover fixed charges of approximately $60.9 million, $179.1 million and $112.9 million, respectively. (2) On a restated basis, reflecting the application of SAB 101 since the beginning of fiscal 2001, the ratio of earnings to fixed charges was 6.8x for the nine months ended March 25, 2001. 16 20 DESCRIPTION OF THE NOTES We issued the notes under an indenture dated as of May 22, 2001 between us and LaSalle Bank National Association, as trustee. The following summarizes some, but not all, provisions of the notes and the indenture. We urge you to read the indenture because the indenture, and not this description, defines your rights as a holder of the notes. A copy of the form of indenture, the form of certificate evidencing the notes and the registration rights agreement is filed as an exhibit to the registration statement of which this prospectus is a part. GENERAL The notes are unsecured general obligations of Lam and are subordinate in right of payment as described under "Subordination of Notes." The notes are convertible into common stock as described under "Conversion of Notes." We issued $300 million aggregate principal amount in notes. The notes are issued only in denominations of $1,000 or in multiples of $1,000. The notes will mature on June 1, 2006, unless earlier redeemed at our option or purchased by us at your option upon a change in control. We are not restricted from paying dividends, incurring debt, or issuing or repurchasing our securities under the indenture. In addition, there are no financial covenants in the indenture. You are not protected under the indenture in the event of a highly leveraged transaction or a change in control of Lam, except to the extent described under "Purchase of Notes at Your Option upon a Change in Control." The notes bear interest at the annual rate of 4%, which rate may be increased as described in "Registration Rights" below, from May 22, 2001. Interest will be payable on June 1 and December 1 of each year, beginning December 1, 2001, subject to limited exceptions if the notes are converted, redeemed or purchased prior to the interest payment date. The record dates for the payment of interest will be May 15 and November 15. We may, at our option, pay interest on the notes by check mailed to the holders. However, a holder with an aggregate principal amount in excess of $2 million will be paid by wire transfer in immediately available funds upon its election if the holder has provided us with wire transfer instructions at least 10 business days prior to the payment date. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. We will maintain an office in the City of New York where the notes may be presented for registration, transfer, exchange or conversion. This office will initially be an office or agency of the trustee. CONVERSION OF NOTES You have the right, at your option, to convert your notes into shares of our common stock at any time prior to maturity, unless previously redeemed or purchased, at the conversion price of $44.93 per share, subject to the adjustments described below. This is equivalent to a conversion rate of approximately 22.26 shares per $1,000 principal amount of notes. Except as described below, we will not make any payment or other adjustment for accrued interest or dividends on any common stock issued upon conversion of the notes. If you submit your notes for conversion between a record date and the opening of business on the next interest payment date (except for notes or portions of notes called for redemption or subject to purchase following a change in control on a redemption date or a purchase date, as the case may be, occurring during the period from the close of business on a record date and ending on the opening of business on the first business day after the next interest payment date, or if this interest payment date is not a business day, the second business day after the interest payment date), you must pay funds equal to the interest payable on the converted principal amount. We will not issue fractional shares of common stock upon conversion of notes. Instead, we will pay cash for the fractional amount based upon the closing market price of the common stock on the last trading day prior to the date of conversion. 17 21 If the notes are called for redemption or are subject to purchase following a change in control, your conversion rights on the notes called for redemption or so subject to purchase will expire at the close of business on the last business day before the redemption date or purchase date, as the case may be, unless we default in the payment of the redemption price or purchase price, in which case your conversion right will terminate at the close of business on the date the default is cured and the notes are redeemed or purchased. If you have submitted your notes for purchase upon a change in control, you may only convert your notes if you withdraw your election in accordance with the indenture. The conversion price will be adjusted upon the occurrence of: (1) the issuance of shares of our common stock as a dividend or distribution on our common stock; (2) the subdivision or combination of our outstanding common stock; (3) the issuance to all or substantially all holders of our common stock of rights or warrants entitling them for a period of not more than 60 days to subscribe for or purchase our common stock, or securities convertible into our common stock, at a price per share or a conversion price per share less than the then current market price per share, provided that the conversion price will be readjusted to the extent that such rights or warrants are not exercised prior to the expiration; (4) the distribution to all or substantially all holders of our common stock of shares of our capital stock, evidences of indebtedness or other non-cash assets, or rights or warrants, excluding: - dividends, distributions and rights or warrants referred to in clause (1) or (3) above; and - dividends or distributions exclusively in cash referred to in clause (5) below; (5) the dividend or distribution to all or substantially all holders of our common stock of all-cash distributions in an aggregate amount that together with (A) any cash and the fair market value of any other consideration payable in respect of any tender offer by us or any of our subsidiaries for our common stock consummated within the preceding 12 months not triggering a conversion price adjustment and (B) all other all-cash distributions to all or substantially all holders of our common stock made within the preceding 12 months not triggering a conversion price adjustment exceeds an amount equal to 10% of our market capitalization on the business day immediately preceding the day on which we declare such distribution; and (6) the purchase of our common stock pursuant to a tender offer made by us or any of our subsidiaries to the extent that the same involves aggregate consideration that together with (A) any cash and the fair market value of any other consideration payable in respect of any tender offer by us or any of our subsidiaries for our common stock consummated within the preceding 12 months not triggering a conversion price adjustment and (B) all-cash distributions to all or substantially all holders of our common stock made within the preceding 12 months not triggering a conversion price adjustment, exceeds an amount equal to 10% of our market capitalization on the expiration date of such tender offer. To the extent that our rights plan is still in effect, upon conversion of the notes into common stock, the holders will receive, in addition to the common stock, the rights described in our rights plan, whether or not the rights have separated from the common stock at the time of conversion, subject to certain limited exceptions. See "Description of Lam Capital Stock." If we implement a new rights plan, we will be required under the indenture to provide that the holder of notes will receive the rights upon conversion of the notes, whether or not these rights were separated from the common stock prior to conversion, subject to certain limited exceptions. In the event of: - any reclassification of our common stock, or - a consolidation, merger or combination involving Lam, or 18 22 - a sale or conveyance to another person of the property and assets of Lam as an entirety or substantially as an entirety, in which holders of our outstanding common stock would be entitled to receive stock, other securities, other property, assets or cash for their common stock, holders of notes will generally be entitled to convert their notes into the same type of consideration received by common stock holders immediately prior to one of these types of events. You may, in some circumstances, be deemed to have received a distribution or dividend subject to United States federal income tax as a result of an adjustment or the nonoccurrence of an adjustment to the conversion price. We are permitted to reduce the conversion price of the notes by any amount for a period of at least 20 days if our board of directors determines that such reduction would be in our best interest. We are required to give at least 15 days prior notice of any reduction in the conversion price. We may also reduce the conversion price to avoid or diminish income tax to holders of our common stock in connection with a dividend or distribution of stock or similar event. No adjustment in the conversion price will be required unless it would result in a change in the conversion price of at least one percent. Any adjustment not made will be taken into account in subsequent adjustments. Except as stated above, we will not adjust the conversion price for the issuance of our common stock or any securities convertible into or exchangeable for our common stock or the right to purchase our common stock or such convertible or exchangeable securities. SUBORDINATION OF NOTES The indebtedness evidenced by the notes is subordinated in right of payment to the extent provided in the indenture to the prior payment in full of all existing and future senior indebtedness. In addition, the notes rank equally with our 5% Convertible Subordinated Notes due 2002. The aggregate principal amount of those notes outstanding as of March 25, 2001, was approximately $309.8 million. Upon any distribution of our assets upon any dissolution, winding-up, liquidation or reorganization (including any such event as a result of bankruptcy or moratorium of payment), any payment on the notes (including on account of a change in control) will be subordinated to the extent provided in the indenture in right of payment to the prior payment in full in cash, or other payment satisfactory to the holders of the senior indebtedness, of all senior indebtedness. In the event of any acceleration of the notes because of an event of default, the holders of any senior indebtedness then outstanding would be entitled to payment in full in cash, or other payment satisfactory to the holders of the senior indebtedness, of all obligations before any of the note holders are entitled to receive any payment or other distribution on the notes. We are required to promptly notify the trustee if payment of the notes is accelerated because of an event of default. We also will not make any payment on the notes if: (1) a default in the payment of the principal of, premium, if any, interest, rent or other obligations of senior indebtedness occurs and is continuing beyond any applicable grace period; or (2) any other default occurs and is continuing with respect to designated senior indebtedness that permits the holders of the designated senior indebtedness to accelerate its maturity and the trustee receives a notice of the default (a "payment blockage notice") from us or another person permitted to give this notice under the indenture. We will resume payments on the notes if: - in the case of a payment default, the date on which the default is cured, waived or ceases to exist; and 19 23 - in the case of any other default under clause (2) above, the earliest of the date on which the default is cured, waived, ceases to exist or 179 days after the date on which the applicable payment blockage notice is received if the maturity of the designated senior indebtedness has not been accelerated. No new period of payment blockage may be commenced pursuant to a payment blockage notice based on a default under clause (2) above until 365 days after the effectiveness of the prior payment blockage notice. No nonpayment default that existed or was continuing on the date of delivery of any payment blockage notice to the trustee will be, or be made, the basis for a subsequent payment blockage notice. By reason of the subordination provisions described above, in the event of our bankruptcy, dissolution or reorganization, holders of senior indebtedness may receive more, ratably, and note holders may receive less, ratably, than our other creditors. Subordination will not prevent the occurrence of any event of default under the indenture. In the event that the trustee or any note holder receives any payment or distribution of our assets of any kind in contravention of any of the subordination provisions of the indenture, whether in cash, property or securities, including by way of set-off or otherwise, before all senior indebtedness is paid in full, then that payment or distribution will be held by the recipient in trust for the benefit of holders of our senior indebtedness or their representatives to the extent necessary to make payment in full of all our senior indebtedness remaining unpaid, after giving effect to any concurrent payment or distribution, or provision for payment or distribution, to or for the holders of senior indebtedness. The notes are unsecured and subordinated in right of payment to all our existing and future senior indebtedness. The notes are also effectively subordinated to the existing and future liabilities, including trade payables, of our subsidiaries, and we conduct a significant portion of our operations through subsidiaries. As of March 25, 2001, we had approximately $115.4 million that would constitute senior indebtedness for purposes of the indenture, while our subsidiaries had approximately $20.3 million in outstanding indebtedness and other liabilities (excluding intercompany liabilities and indebtedness included as senior indebtedness as a result of our guarantees). The indenture does not prohibit or limit us or our subsidiaries from incurring senior or other indebtedness and other liabilities. Should we incur any additional indebtedness or liabilities, our ability to pay our obligations on the notes could be adversely affected. We anticipate that from time to time we will incur additional indebtedness, including senior indebtedness, and that we and our subsidiaries will from time to time incur other additional indebtedness and liabilities. We are obligated to pay reasonable compensation to the trustee and to indemnify the trustee against any losses, liabilities or expenses incurred by it in connection with its duties relating to the notes. The trustee's claims for these payments will be senior to those of the note holders in respect of all funds collected or held by the trustee. The term "designated senior indebtedness" means any particular senior indebtedness in which the instrument creating or evidencing the indebtedness or the assumption or guarantee of indebtedness (or related agreements or documents to which we are a party) expressly provides that the senior indebtedness is "designated senior indebtedness" for purposes of the indenture (provided that the instrument, agreement or other document may place limitations and conditions on the right of the senior indebtedness to exercise the rights of designated senior indebtedness). The term "indebtedness" means, with respect to any person: (1) all indebtedness, obligations and other liabilities (contingent or otherwise) of the person for borrowed money (including obligations of the person in respect of overdrafts, foreign exchange contracts, currency exchange agreements, interest rate protection agreements, and any loans or advances from banks, whether or not evidenced by notes or similar instruments) or evidenced by bonds, debentures, notes or similar instruments (whether or not the recourse of the lender is to the 20 24 whole of the assets of the person or to only a portion thereof) other than any account payable or other accrued current liability or obligation incurred in the ordinary course of business in connection with the obtaining of materials or services; (2) all reimbursement obligations and other liabilities (contingent or otherwise) of the person with respect to letters of credit, bank guarantees or bankers' acceptances; (3) all obligations and liabilities (contingent or otherwise) in respect of leases of the person required, in conformity with generally accepted accounting principles, to be accounted for as capitalized lease obligations on the balance sheet of the person and all obligations and other liabilities (contingent or otherwise) under any lease or related document (including a purchase agreement) in connection with the lease of real property which provides that the person is contractually obligated to purchase or cause a third party to purchase the leased property or pay an agreed upon residual value of the leased property to the lessor and the obligations of the person under such lease or related document to purchase or to cause a third party to purchase such leased property, including, without limitation, with respect to Lam, certain of our synthetic leases and other agreements specified in the indenture; (4) all obligations of the person (contingent or otherwise) with respect to an interest rate or other swap, cap or collar agreement or other similar instrument or agreement or foreign currency hedge, exchange, purchase or similar instrument or agreement; (5) all direct or indirect guaranties or similar agreements by the person in respect of, and obligations or liabilities (contingent or otherwise) of the person to purchase or otherwise acquire or otherwise assure a creditor against loss in respect of, indebtedness, obligations or liabilities of another person of the kind described in clauses (1) through (4); (6) any indebtedness or other obligations described in clauses (1) through (4) secured by any mortgage, pledge, lien or other encumbrance existing on property which is owned or held by the person, regardless of whether the indebtedness or other obligation secured thereby will have been assumed by the person; and (7) any and all deferrals, renewals, extensions and refundings of, or amendments, modifications or supplements to, any indebtedness, obligation or liability of the kind described in clauses (1) through (6). The term "senior indebtedness" means the principal of, premium, if any, interest (including all interest accruing subsequent to the commencement of any bankruptcy or similar proceeding, whether or not a claim for post-petition interest is allowable as a claim in the proceeding) and rent payable on or in connection with, and all fees, costs, expenses and other amounts accrued or due on or in connection with, our indebtedness, whether outstanding on the date of the indenture or thereafter created, incurred, assumed, guaranteed or in effect guaranteed by us (including all deferrals, renewals, extensions or refundings of, or amendments, modifications or supplements to, the foregoing), unless in the case of any particular indebtedness the instrument creating or evidencing the same or the assumption or guarantee thereof expressly provides that the indebtedness will not be senior in right of payment to the notes or expressly provides that the indebtedness is pari passu or "junior" to the notes. Senior indebtedness does not include: - any of our indebtedness to any of our majority-owned subsidiaries; - the notes; or - our 5% Convertible Subordinated Notes due 2002. 21 25 OPTIONAL REDEMPTION BY LAM We may redeem the notes on or after June 5, 2004, on at least 20 days and no more than 60 days notice, in whole or in part, at the following redemption prices expressed as percentages of the principal amount of the note:
PERIOD REDEMPTION PRICE ------ ---------------- June 5, 2004 through May 31, 2005.................... 101.00% June 1, 2005 and thereafter.......................... 100.00%
In each case, we will pay accrued but unpaid interest to, but excluding, the redemption date. If the redemption date is an interest payment date, interest will be paid to the record holder on the relevant record date. If we decide to redeem fewer than all of the notes, the trustee will select the notes to be redeemed by lot, or in its discretion, on a pro rata basis. If any note is to be redeemed in part only, a new note in principal amount equal to the unredeemed principal portion will be issued. If a portion of your notes is selected for partial redemption and you convert a portion of your notes, the converted portion will be deemed to be of the portion selected for redemption. No sinking fund is provided for the notes. PURCHASE OF NOTES AT YOUR OPTION UPON A CHANGE IN CONTROL If a change in control occurs, you have the right to require us to purchase all or any part of your notes 35 business days after the occurrence of such change in control at a purchase price equal to 100% of the principal amount of the notes plus accrued and unpaid interest to, but excluding, the purchase date. Notes submitted for purchase must be in integral multiples of $1,000 principal amount. We will mail to the trustee and to each holder a written notice of the change in control within 15 business days after the occurrence of such change in control. This notice shall state certain specified information, including: - information about and the terms and conditions of the change in control; - information about the holders' right to convert the notes; - the holders' right to require us to purchase the notes; - the procedures required for exercise of the purchase option upon the change in control; and - the name and address of the paying and conversion agents. You must deliver written notice of your exercise of this purchase right to the paying agent at any time prior to the close of business on the business day prior to the change in control purchase date. The written notice must specify the notes for which the purchase right is being exercised. If you wish to withdraw this election, you must provide a written notice of withdrawal to the paying agent at any time prior to the close of business on the business day prior to the change in control purchase date. Under the indenture, a change in control will be deemed to have occurred if any of the following occurs: - any "person" or "group" is or becomes the "beneficial owner," directly or indirectly, of shares of our voting stock representing 50% or more of the total voting power of all outstanding classes of our voting stock or has the power, directly or indirectly, to elect a majority of the members of our board of directors; - we consolidate with, or merge with or into, another person or we sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of our assets, or any person consolidates with, or merges with or into, us, in any such event other than pursuant to a transaction in which the persons 22 26 that "beneficially owned," directly or indirectly, the shares of our voting stock immediately prior to such transaction "beneficially own," directly or indirectly, shares of our voting stock representing at least a majority of the total voting power of all outstanding classes of voting stock of the surviving or transferee person; or - we are dissolved or liquidated. However, a change in control will not be deemed to have occurred if either: - the last sale price of our common stock for any five trading days during the ten trading days immediately preceding the change in control is at least equal to 105% of the conversion price in effect on such day; or - in the case of a merger or consolidation, all of the consideration, excluding cash payments for fractional shares in the merger or consolidation constituting the change in control consists of common stock traded on a United States national securities exchange or quoted on the Nasdaq National Market (or which will be so traded or quoted when issued or exchanged in connection with such change in control) and as a result of such transaction or transactions the notes become convertible solely into such common stock. For purposes of this change in control definition: - "person" or "group" have the meanings given to them for purposes of Sections 13(d) and 14(d) of the Exchange Act or any successor provisions, and the term "group" includes any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act, or any successor provision; - a "beneficial owner" will be determined in accordance with Rule 13d-3 under the Exchange Act, as in effect on the date of the indenture, except that the number of shares of our voting stock will be deemed to include, in addition to all outstanding shares of our voting stock and unissued shares deemed to be held by the "person" or "group" or other person with respect to which the change in control determination is being made, all unissued shares deemed to be held by all other persons; - "beneficially own" and "beneficially owned" have meanings correlative to that of beneficial owner; - "unissued shares" means shares of voting stock not outstanding that are subject to options, warrants, rights to purchase or conversion privileges exercisable within 60 days of the date of determination of a change in control; and - "voting stock" means any class or classes of capital stock or other interests then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of the board of directors, managers or trustees. The term "all or substantially all" as used in the definition of change in control will likely be interpreted under applicable state law and will be dependent upon particular facts and circumstances. There may be a degree of uncertainty in interpreting this phrase. As a result, we cannot assure you how a court would interpret this phrase under applicable law if you elect to exercise your rights following the occurrence of a transaction which you believe constitutes a transfer of "all or substantially all" of our assets. Under the terms of the indenture we will: - comply with the provisions of Rule 13e-4 and Rule 14e-1, if applicable, under the Exchange Act; - file a Schedule TO or any successor or similar schedule, if required, under the Exchange Act; and - otherwise comply with all federal and state securities laws in connection with any offer by us to purchase the notes upon a change in control. This change in control purchase feature may make more difficult or discourage a takeover of us and the removal of incumbent management. We are not, however, aware of any specific effort to accumulate 23 27 shares of our common stock or to obtain control of us by means of a merger, tender offer, solicitation or otherwise. In addition, the change in control purchase feature is not part of a plan by management to adopt a series of anti-takeover provisions. Instead, the change in control purchase feature is a result of negotiations between us and the initial purchasers. We could, in the future, enter into certain transactions, including recapitalizations, that would not constitute a change in control but would increase the amount of debt, including senior indebtedness, outstanding or otherwise adversely affect a holder. Neither we nor our subsidiaries are prohibited from incurring debt, including senior indebtedness, under the indenture. The incurrence of significant amounts of additional debt could adversely affect our ability to service our debt, including the notes. Certain of our debt agreements may prohibit our redemption or repurchase of the notes and provide that a change in control constitutes an event of default. If a change in control were to occur, we may not have sufficient funds to pay the change in control purchase price for the notes tendered by holders. In addition, we may in the future incur debt that has similar change of control provisions that permit holders of this debt to accelerate or require us to repurchase this debt upon the occurrence of events similar to a change in control. Our failure to repurchase the notes upon a change in control will result in an event of default under the indenture, whether or not the purchase is permitted by the subordination provisions of the indenture. EVENTS OF DEFAULT Each of the following is an event of default under the indenture: (1) we fail to pay principal or premium, if any, on any note when due, whether or not prohibited by the subordination provisions of the indenture; (2) we fail to pay any interest, including any additional interest, on any note when due if such failure continues for 30 days, whether or not prohibited by the subordination provisions of the indenture; (3) we fail to perform any other covenant required of us in the indenture if such failure continues for 60 days after notice is given in accordance with the indenture; (4) any indebtedness for money borrowed by us or one of our significant subsidiaries in an outstanding principal amount in excess of $25 million is not paid at final maturity or upon acceleration and such default in payment or acceleration is not cured or rescinded within 30 days after written notice as provided in the indenture; and (5) certain events in bankruptcy, insolvency or reorganization of us or any of our significant subsidiaries. If an event of default, other than an event of default described in clause (5) above with respect to us, occurs and is continuing, either the trustee or the holders of at least 25% in aggregate principal amount of the outstanding notes may declare the principal amount of the notes to be due and payable immediately. If an event of default described in clause (5) above occurs with respect to us, the principal amount of the notes will automatically become immediately due and payable. Any payment by us on the notes following any acceleration will be subject to the subordination provisions described above. After any such acceleration, but before a judgment or decree based on acceleration, the holders of a majority in aggregate principal amount of the notes may, under certain circumstances rescind and annul such acceleration if all events of default, other than the non-payment of accelerated principal, have been cured or waived. Subject to the trustee's duties in the case of an event of default, the trustee is not obligated to exercise any of its rights or powers at the request of the holders, unless the holders have offered to the trustee reasonable indemnity. Subject to the indenture, applicable law and the trustee's indemnification, the holders of a majority in aggregate principal amount of the outstanding notes may direct the time, 24 28 method and place of conducting any proceeding for any remedy available to the trustee or exercising any trust or power conferred on the trustee with respect to the notes. No holder will have any right to institute any proceeding under the indenture, or for the appointment of a receiver or a trustee, or for any other remedy under the indenture unless: - the holder has previously given the trustee written notice of a continuing event of default; - the holders of at least 25% in aggregate principal amount of the notes then outstanding have made a written request and have offered reasonable indemnity to the trustee to institute such proceeding as trustee; and - the trustee has failed to institute such proceeding, and has not received from the holders of a majority in aggregate principal amount of the notes then outstanding a direction inconsistent with such request within 60 days after such notice, request and offer. However, the above limitations do not apply to a suit instituted by a holder for the enforcement of payment of the principal of or any premium or interest on any note on or after the applicable due date or the right to convert the note in accordance with the indenture. Generally, the holders of not less than a majority of the aggregate principal amount of outstanding notes may waive any default or event of default unless: - we fail to pay principal, premium or interest on any note when due; - we fail to convert any note into common stock; or - we fail to comply with any of the provisions of the indenture that would require the consent of the holder of each outstanding note affected. We are required to furnish to the trustee, on an annual basis, a statement by our officers as to whether or not Lam, to the officer's knowledge, is in default in the performance or observance of any of the terms, provisions and conditions of the indenture, specifying any known defaults. MODIFICATION AND WAIVER We and the trustee may amend or supplement the indenture or the notes with the consent of the holders of a majority in aggregate principal amount of the outstanding notes. In addition, the holders of a majority in aggregate principal amount of notes may waive our compliance in any instance with any provision of the indenture without notice to the note holders. However, no amendment, supplement or waiver may be made without the consent of the holder of each outstanding note if such amendment, supplement or waiver would: - change the stated maturity of the principal of or interest on any note; - reduce the principal amount of, or any premium or interest on, any note; - reduce the amount of principal payable upon acceleration of the maturity of any note; - change the place or currency of payment of principal of, or any premium or interest on, any note; - impair the right to institute suit for the enforcement of any payment on, or with respect to, any note; - modify the provisions with respect to the purchase right of the holders upon a change in control in a manner adverse to holders; - modify the subordination provisions in a manner materially adverse to the holders of notes; - adversely affect the right of holders to convert notes other than as provided in the indenture; - reduce the percentage in principal amount of outstanding notes required for modification or amendment of the indenture; 25 29 - reduce the percentage in principal amount of outstanding notes necessary for waiver of compliance with certain provisions of the indenture or for waiver of certain defaults; or - modify provisions with respect to modification and waiver (including waiver of events of default), except to increase the percentage required for modification or waiver or to provide for consent of each affected note holder. We and the trustee may amend or supplement the indenture or the notes without notice to, or the consent of, the note holders to, among other things, cure any ambiguity, defect or inconsistency or make any other change that does not adversely affect the rights of any note holder. CONSOLIDATION, MERGER AND SALE OF ASSETS We may not consolidate with or merge into any other person, in a transaction in which we are not the surviving corporation, or convey, transfer or lease our properties and assets substantially as an entirety to any successor person, unless: - the successor person, if any, is a corporation, limited liability company, partnership or trust organized and existing under the laws of the United States, any state of the United States, or the District of Columbia and assumes our obligations on the notes and under the indenture; - immediately after giving effect to the transaction, no default or event of default shall have occurred and be continuing; and - other conditions specified in the indenture are met. REGISTRATION RIGHTS The following summary of the registration rights provided in the registration rights agreement and the notes is not complete. You should refer to the registration rights agreement and the notes for a full description of the registration rights that apply to the notes. A copy of the registration rights agreement is attached as an exhibit to the registration statement of which this prospectus is a part. We and the initial purchaser entered into the registration rights agreement on May 22, 2001. This prospectus is part of a shelf registration statement that we filed to meet our obligations under the registration rights agreement to register resales of the notes and the shares of common stock into which the notes are convertible as soon as practicable after the original issuance of the notes. The notes and the common stock issuable upon conversion of the notes are referred to collectively as registrable securities. We will use our reasonable best efforts to have this shelf registration statement declared effective as soon as practicable after the latest date of original issuance of the notes, and to keep it effective until the earliest of: - two years from the date we file the shelf registration statement; - the date when all registrable securities shall have been registered under the Securities Act and disposed of; and - the date on which all registrable securities held by non-affiliates are eligible to be sold to the public pursuant to Rule 144(k) under the Securities Act. A holder of registrable securities that sells registrable securities pursuant to the shelf registration statement generally will be required to provide information about itself and the specifics of the sale, be named as a selling securityholder in the related prospectus, deliver a prospectus to purchasers, be subject to relevant civil liability provisions under the Securities Act in connection with such sales and be bound by the provisions of the registration rights agreements which are applicable to such holder. If: (1) on or prior to the 90th day after the latest date of original issuance of the notes, the shelf registration statement has not been filed with the SEC; 26 30 (2) on or prior to the 180th day after the latest date of original issuance of the notes, the shelf registration statement has not been declared effective by the SEC; (3) we fail, with respect to a holder that supplies the questionnaire described below, to supplement the shelf registration statement in a timely manner as provided in the registration rights agreement in order to name additional selling securities holders; or (4) after the shelf registration statement has been declared effective, such shelf registration statement ceases to be effective or usable (subject to certain exceptions) in connection with resales of notes and the common stock issuable upon the conversion of the notes in accordance with and during the periods specified in the registration rights agreement, (we refer to each event described above in clauses (1) through (4) as a registration default), additional interest will accrue on the notes and underlying common stock that are registrable securities in addition to the rate set forth in the title of the notes, from and including the date on which any such registration default occurs to, but excluding, the date on which the registration default has been cured, at the rate of 0.5% per year for the notes (or an equivalent amount for any common stock issued upon conversion of the notes that are registrable securities). In the case of a registration default described in clause (3), our obligation to pay additional interest extends only to the affected notes. We will have no other liabilities for monetary damages with respect to our registration obligations. With respect to each holder, our obligations to pay additional interest remain in effect only so long as the notes and the common stock issuable upon the conversion of the notes held by the holder are "registrable securities" within the meaning of the registration rights agreement. We will give notice of the effectiveness of the shelf registration statement to all holders who have provided us with the selling securityholder notice and questionnaire described below. Each holder must complete the notice and questionnaire in order to be named as a selling securityholder in the prospectus and prior to any intended distribution of registrable securities pursuant to the shelf registration statement. If we receive completed questionnaires from holders after the effectiveness of the shelf registration statement, we will, as promptly as practicable, file amendments or supplements to the registration statement naming those holders as selling securityholders, thereby allowing them to sell their securities under the registration statement. Any use of the registration statement by selling securityholders is, however, subject to our right to suspend use of the prospectus under certain circumstances. If a filing necessary to list a holder as a named selling securityholder requires a post-effective amendment to the shelf registration statement, we will pay additional interest if the amendment is not declared effective within 45 business days of the date we filed it with the SEC. We will pay all registration expenses of the shelf registration, provide each holder that is selling registrable securities pursuant to the shelf registration statement copies of the related prospectus and take other actions as are required to permit, subject to the foregoing, unrestricted resales of the registrable securities. Selling security holders remain responsible for all selling expenses (i.e., commissions and discounts). SATISFACTION AND DISCHARGE We may discharge our obligations under the indenture while notes remain outstanding if (1) all outstanding notes have or will become due and payable at their scheduled maturity within one year or (2) all outstanding notes are scheduled for redemption within one year, and, in either case, we have deposited with the trustee an amount sufficient to pay and discharge all outstanding notes on the date of their scheduled maturity or the scheduled date of redemption. 27 31 TRANSFER AND EXCHANGE We have initially appointed the trustee as the note registrar, paying agent and conversion agent, acting through its corporate trust office. We reserve the right to: - vary or terminate the appointment of the security registrar, paying agent or conversion agent; - appoint additional paying agents or conversion agents; or - approve any change in the office through which any security registrar or any paying agent or conversion agent acts. PURCHASE AND CANCELLATION All notes surrendered for payment, redemption, registration of transfer or exchange or conversion shall, if surrendered to any person other than the trustee, be delivered to the trustee. All notes delivered to the trustee shall be cancelled promptly by the trustee. No notes shall be authenticated in exchange for any notes cancelled as provided in the indenture. We may, to the extent permitted by law, purchase notes in the open market or by tender offer at any price or by private agreement. Any notes purchased by us may, to the extent permitted by law, be reissued or resold or may, at our option, be surrendered to the trustee for cancellation. Any notes surrendered for cancellation may not be reissued or resold and will be promptly cancelled. Any notes held by us or one of our subsidiaries shall be disregarded for voting purposes in connection with any notice, waiver, consent or direction requiring the vote or concurrence of note holders. REPLACEMENT OF NOTES We will replace mutilated, destroyed, stolen or lost notes at your expense upon delivery to the trustee of the mutilated notes, or evidence of the loss, theft or destruction of the notes satisfactory to us and the trustee. In the case of a lost, stolen or destroyed note, indemnity satisfactory to the trustee and us may be required at the expense of the holder of such note before a replacement note will be issued. GOVERNING LAW The indenture and the notes are governed by, and construed in accordance with, the law of the State of New York, without regard to conflicts of laws principles. CONCERNING THE TRUSTEE LaSalle Bank National Association is the trustee under the indenture. The trustee is permitted to deal with us and any of our affiliates with the same rights as if it were not trustee. However, under the Trust Indenture Act, if the trustee acquires any conflicting interest and there exists a default with respect to the notes, the trustee must eliminate such conflict or resign. The holders of a majority in principal amount of all outstanding notes may direct the time, method and place of conducting any proceeding for exercising any remedy or power available to the trustee. However, any such direction may not conflict with any law or the indenture, may not be unduly prejudicial to the rights of another holder or the trustee and may not involve the trustee in personal liability. BOOK-ENTRY, DELIVERY AND FORM We have issued the notes in the form of a global security. The global security has been deposited with the trustee as custodian for DTC and registered in the name of a nominee of DTC. Except as set forth below, the global security may be transferred, in whole and not in part, only to DTC or another nominee of DTC. You may hold your beneficial interests in the global security directly through DTC if you have an account with DTC or indirectly through organizations that have accounts with DTC. Notes in definitive 28 32 certificated form (called "certificated securities") will be issued only in certain limited circumstances described below. DTC has advised us that it is: - a limited purpose trust company organized under the laws of the State of New York; - a member of the Federal Reserve System; - a "clearing corporation" within the meaning of the New York Uniform Commercial Code; and - a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities of institutions that have accounts with DTC (called "participants") and to facilitate the clearance and settlement of securities transactions among its participants in such securities through electronic book-entry changes in accounts of the participants, thereby eliminating the need for physical movement of securities certificates. DTC's participants include securities brokers and dealers, which may include the initial purchasers, banks, trust companies, clearing corporations and certain other organizations. Access to DTC's book-entry system is also available to others such as banks, brokers, dealers and trust companies (called, the "indirect participants") that clear through or maintain a custodial relationship with a participant, whether directly or indirectly. We expect that pursuant to procedures established by DTC upon the deposit of the global security with DTC, DTC will credit, on its book-entry registration and transfer system, the principal amount of notes represented by such global security to the accounts of participants. The accounts to be credited shall be designated by the initial purchasers. Ownership of beneficial interests in the global security will be limited to participants or persons that may hold interests through participants. Ownership of beneficial interests in the global security will be shown on, and the transfer of those beneficial interests will be effected only through, records maintained by DTC (with respect to participants' interests), the participants and the indirect participants. The laws of some jurisdictions may require that certain purchasers of securities take physical delivery of such securities in definitive form. These limits and laws may impair the ability to transfer or pledge beneficial interests in the global security. Owners of beneficial interests in global securities who desire to convert their interests into common stock should contact their brokers or other participants or indirect participants through whom they hold such beneficial interests to obtain information on procedures, including proper forms and cut-off times, for submitting requests for conversion. So long as DTC, or its nominee, is the registered owner or holder of a global security, DTC or its nominee, as the case may be, will be considered the sole owner or holder of the notes represented by the global security for all purposes under the indenture and the notes. In addition, no owner of a beneficial interest in a global security will be able to transfer that interest except in accordance with the applicable procedures of DTC. Except as set forth below, as an owner of a beneficial interest in the global security, you will not be entitled to have the notes represented by the global security registered in your name, will not receive or be entitled to receive physical delivery of certificated securities and will not be considered to be the owner or holder of any notes under the global security. We understand that under existing industry practice, if an owner of a beneficial interest in the global security desires to take any action that DTC, as the holder of the global security, is entitled to take, DTC would authorize the participants to take such action, and the participants would authorize beneficial owners owning through such participants to take such action or would otherwise act upon the instructions of beneficial owners owning through them. We will make payments of principal of, premium, if any, and interest on the notes represented by the global security registered in the name of and held by DTC or its nominee to DTC or its nominee, as the case may be, as the registered owner and holder of the global security. Neither we, the trustee nor any paying agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial interests in the global security or for maintaining, supervising or reviewing any records relating to such beneficial interests. 29 33 We expect that DTC or its nominee, upon receipt of any payment of principal of, premium, if any, or interest on the global security, will credit participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of the global security as shown on the records of DTC or its nominee. We also expect that payments by participants or indirect participants to owners of beneficial interests in the global security held through such participants or indirect participants will be governed by standing instructions and customary practices and will be the responsibility of such participants or indirect participants. We will not have any responsibility or liability for any aspect of the records relating to, or payments made on account of, beneficial interests in the global security for any note or for maintaining, supervising or reviewing any records relating to such beneficial interests or for any other aspect of the relationship between DTC and its participants or indirect participants or the relationship between such participants or indirect participants and the owners of beneficial interests in the global security owning through such participants. Transfers between participants in DTC will be effected in the ordinary way in accordance with DTC rules and will be settled in same-day funds. DTC has advised us that it will take any action permitted to be taken by a holder of notes only at the direction of one or more participants to whose account the DTC interests in the global security is credited and only in respect of such portion of the aggregate principal amount of notes as to which such participant or participants has or have given such direction. However, if DTC notifies us that it is unwilling to be a depository for the global security or ceases to be a clearing agency or there is an event of default under the notes, DTC will exchange the global security for certificated securities which it will distribute to its participants and which will be legended, if required. Although DTC is expected to follow the foregoing procedures in order to facilitate transfers of interests in the global security among participants of DTC, it is under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. Neither we nor the trustee will have any responsibility, or liability for the performance by DTC or the participants or indirect participants of their respective obligations under the rules and procedures governing their respective operations. 30 34 DESCRIPTION OF LAM CAPITAL STOCK Set forth below is a summary of certain information concerning our capital stock, and a brief description of certain provisions contained in our certificate of incorporation, bylaws and our rights plan. The summaries and descriptions below do not purport to be complete statements of these provisions and are qualified in their entirety by reference to these documents. Our authorized capital stock consists of 400,000,000 shares of common stock, $0.001 par value, and 5,000,000 shares of preferred stock, $0.001 par value. COMMON STOCK As of July 20, 2001, we had approximately 126,016,609 shares of common stock issued, of which 1,065,403 shares were treasury stock and 124,951,206 shares were outstanding. Our common stock is listed on the Nasdaq National Market under the symbol "LRCX." In addition, we had options to purchase an aggregate of approximately 24,662,837 shares of common stock outstanding on that date. Holders of our common stock are entitled to one vote per share on all matters to be voted upon by the stockholders. Our stockholders are entitled to cumulate votes in connection with the election of directors. Subject to the preferences of outstanding preferred stock, if any, holders of our common stock are entitled to receive ratably dividends, if any, that may be declared from time to time by our board of directors out of legally available funds. In the event of a liquidation, dissolution or winding up, holders of our common stock are entitled to share ratably in all assets remaining after payment of liabilities subject to the preferences of outstanding preferred stock, if any. Our common stock has no preemptive or conversion rights or other subscription rights and no redemption or sinking fund provisions are applicable to our common stock. All of our outstanding shares of common stock are fully paid and nonassessable. PREFERRED STOCK No shares of preferred stock are outstanding. Our board of directors has authority to issue shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions granted to or imposed upon any unissued and undesignated shares of preferred stock and to fix the number of shares constituting any series and the designations of any series, without any further vote or action by our stockholders. Although it presently has no intention to do so, our board of directors, without stockholder approval, can issue preferred stock with voting and conversion rights which could adversely affect the voting power or other rights of the holders of common stock. Our issuance of preferred stock may also have the effect of delaying, deferring or preventing a change in control. Our board of directors has designated one class of preferred stock, Series A junior participating preferred stock, consisting of 100,000 shares. All of these shares are reserved for issuance under our rights plan. RIGHTS PLAN Our board of directors adopted a rights plan on January 23, 1997. In the event of hostile takeover attempts, including the accumulation of shares in the open market or through private transactions, the rights plan enhances the ability of our board of directors to negotiate with a potential acquirer for a fair price to all of the stockholders. Under our rights plan, rights were distributed as a dividend at the rate of one right (a "Lam right") for each share of common stock held by stockholders of record as of the close of business on January 31, 1997 and after that each holder of shares of common stock is entitled to a Lam right in respect of each share held by the stockholder. The Lam rights will expire on January 31, 2007. Under our rights plan, each Lam right initially entitles stockholders to buy one unit of a share of preferred stock for $250. The Lam rights will be exercisable only if a person or group acquires beneficial ownership of 15% or more of the common stock or commences a tender or exchange offer upon consummation of which the person or group would beneficially own 15% or more of our common stock. 31 35 If any person becomes the beneficial owner of 15% or more of our common stock other than pursuant to a tender or exchange offer for all outstanding shares approved by a majority of the independent directors not affiliated with the person, then each Lam right not owned by the person or related parties will entitle its holder to purchase, at the Lam right's then current exercise price, shares of common stock (or, in certain circumstances as determined by our board of directors, cash, other property or other securities) having a value of twice the Lam right's then current exercise price. In addition, if after any person has become a 15% stockholder, Lam is involved in a merger or other business combination transaction with another person in which Lam does not survive or in which the common stock is changed or exchanged, or if we sell 50% or more of our assets or earning power to another person, each Lam right will entitle its holder to purchase, at the Lam right's then current exercise price, shares of common stock of the other person having a value of twice the Lam right's then current exercise price. Lam is generally entitled to redeem the Lam rights at $0.001 per Lam right at any time until ten business days (subject to extension) following a public announcement that a 15% position has been acquired. SELECTED PROVISIONS OF DELAWARE LAW AND OUR CHARTER AND BYLAWS Size of the Board of Directors. Our bylaws authorize our board of directors to set the exact number of directors within the range of four to seven and specify that the exact number will be seven until changed by our board of directors or the stockholders. Our bylaws also provide that the indefinite number of directors may be changed or a definite number may be fixed by a duly adopted amendment to the certificate of incorporation or by an amendment to our bylaws adopted by the vote of a majority of stockholders entitled to vote. Cumulative Voting. Cumulative voting, when authorized by a company's certificate of incorporation pursuant to Delaware General Corporation Law, entitles each stockholder to cast a number of votes that is equal to the number of voting shares held by the stockholder multiplied by the total number of directors to be elected, and to cast all those votes for one nominee or distribute those votes among up to as many candidates as there are positions to be filled. Our certificate of incorporation and our bylaws currently provide for cumulative voting in the election of directors. Power to Call Special Stockholders Meetings; Advance Notice of Stockholder Business and Nominees. Under Delaware law, a special meeting of stockholders may be called by our board of directors or by any other person authorized to do so in the certificate of incorporation or the bylaws. Pursuant to our bylaws, special meetings may be called only by our board of directors, the Chairman or the President. Our bylaws further require timely advance notice in proper written form of stockholder nominees for election as director or stockholder business to be brought before a meeting of stockholders, and require that the chairman of the meeting refuse to acknowledge the nomination of any person or the proposal of any business not made in compliance with the procedures set forth in our bylaws. Removal of Directors. Our bylaws provide that directors may be removed with or without cause upon the approval of a majority of the outstanding shares entitled to vote; provided, however, that so long as the stockholders are entitled to cumulative voting, if less than our entire board of directors is to be removed, no director may be removed without cause if the votes cast against his or her removal would be sufficient to elect him or her if then cumulatively voted at an election of the entire board of directors. Filling Vacancies on the Board of Directors. Our bylaws allow a vacancy on the board of directors created by a resignation or increase in the authorized number of directors to be filled by a majority of the directors then in office. A vacancy created by the removal of a director by a vote of the stockholders may be filled only by a majority of the outstanding shares entitled to vote. Indemnification and Limitation of Liability. Our bylaws provide that Lam will indemnify each of our officers, directors, and other employees or agents to the maximum extent permitted by Delaware law for expenses and liability incurred by reason of the fact that the person is or was an agent of Lam. 32 36 Under Delaware law, an indemnity provision may not eliminate or limit director monetary liability for: - breaches of the director's duty of loyalty to the corporation or its stockholders; - acts or omissions not in good faith or involving intentional misconduct or knowing violations of law; - the payment of unlawful dividends or unlawful stock repurchases or redemptions; or - transactions in which the director received an improper personal benefit. Limitation of liability provisions also may not limit a director's liability for violation of, or otherwise relieve a company or its directors from, the necessity of complying with, federal or state securities laws, or affect the availability of non-monetary remedies such as injunctive relief or rescission. A provision of Delaware law states that the indemnification provided by statute will not be deemed exclusive of any other rights under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise. Delaware law generally permits indemnification of expenses, including attorneys' fees, actually and reasonably incurred in the defense or settlement of a derivative or third-party action, provided there is a determination by a majority vote of a disinterested quorum of directors, by independent legal counsel or by a majority vote of a quorum of the stockholders that the person seeking indemnification acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the corporation. Without court approval, however, no indemnification may be made in respect of any derivative action in which the person is adjudged liable for negligence or misconduct in the performance of his or her duty to the corporation. The Delaware law requires indemnification of expenses when the individual being indemnified has successfully defended the action on the merits or otherwise. Stockholder Action by Written Consent. Our bylaws provide that any action required or permitted to be taken at any annual or special meeting of stockholders of Lam, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, describing the action so taken, is signed by stockholders representing not less than the minimum number of votes that would be necessary to authorize or take the action at a meeting at which all shares entitled to vote on that action were present and voted. Stockholder Approval of Certain Business Combinations. Under Section 203 of the Delaware law ("Section 203"), certain "business combinations" with "interested stockholders" of Delaware corporations are subject to a three-year moratorium unless specified conditions are met. Section 203 prohibits a Delaware corporation from engaging in a "business combination" with an "interested stockholder" for three years following the date that the person becomes an interested stockholder. With certain exceptions, an interested stockholder is a person, entity or group who or which owns 15% or more of the corporation's outstanding voting stock (including any rights to acquire stock pursuant to an option, warrant, agreement, arrangement or understanding, or upon the exercise of conversion or exchange rights, and stock with respect to which the person has voting rights only), or is an affiliate or associate of the corporation and was the owner of 15% or more of the voting stock at any time within the previous three years, or is an affiliate or associate of any of the foregoing. For purposes of Section 203, the term "business combination" is defined broadly to include mergers with or caused by the interested stockholder, sales or other dispositions to the interested stockholder (except proportionately with the corporation's other stockholders) of assets of the corporation or a subsidiary equal to 10% or more of the aggregate market value of the corporation's consolidated assets or its outstanding stock, the issuance or transfer by the corporation or a subsidiary of stock of the corporation or the subsidiary to the interested stockholder (except for transfers in a conversion or exchange or a pro rata distribution or certain other transactions, none of which increase the interested stockholder's proportionate ownership of any class or series of the corporation's or the subsidiary's stock); or receipt by the interested stockholder (except proportionately as a stockholder), directly or indirectly, of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation or a subsidiary. 33 37 The three-year moratorium imposed on business combinations by Section 203 does not apply if: - prior to the date on which the stockholder becomes an interested stockholder the board of directors approves either the business combination or the transaction which resulted in the person becoming an interested stockholder; - the interested stockholder owns 85% of the corporation's voting stock outstanding at the time the transaction commenced upon consummation of the transaction which made him or her an interested stockholder (excluding from the 85% calculation shares owned by directors who are also officers of the target corporation and shares held by employee stock plans which do not permit employees to decide confidentially whether to accept a tender or exchange offer); or - on or after the date the person becomes an interested stockholder, the board approves the business combination and it is also approved at a stockholder meeting by 66 2/3% of the voting stock not owned by the interested stockholder. Section 203 only applies to Delaware corporations which have a class of voting stock that is listed on a national securities exchange, authorized for quotation on an inter-dealer quotation system such as the Nasdaq National Market, or are held of record by more than 2,000 stockholders. However, a Delaware corporation may elect not to be governed by Section 203 by a provision in its original certificate of incorporation or an amendment thereto or to the bylaws, which amendment must be approved by majority stockholder vote and may not be further amended by the board of directors. Because we did not opt out of Section 203, Section 203 applies to Lam. TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for our common stock is Mellon Investor Services L.L.C. Securities Transfer Services, P.O. Box 3312, South Hackensack, New Jersey 07606. 34 38 SELLING SECURITYHOLDERS We originally issued the notes in a private placement in May 2001. The notes were resold by the initial purchasers to qualified institutional buyers within the meaning of Rule 144A under the Securities Act in transactions exempt from registration under the Securities Act. The notes and the shares of common stock issuable upon conversion of the notes that may be offered pursuant to this prospectus will be offered by the selling securityholders, which includes their transferees, pledgees or donees or their successors. The selling securityholders may sell the notes and the underlying common stock pursuant to this prospectus. The following table sets forth certain information as of July 24, 2001 concerning the principal amount of notes beneficially owned by each selling securityholder and the number of conversion shares that may be offered from time to time by each selling securityholder under this prospectus. The information is based on information provided by or on behalf of the selling securityholders. The number of conversion shares shown in the table below assumes conversion of the full amount of notes held by such holder at an initial conversion price of $44.93 per share. This conversion price is subject to adjustment in certain events. Accordingly, the number of conversion shares may increase or decrease from time to time. Because the selling securityholders may offer all or some portion of the notes or the conversion shares, no estimate can be given as to the amount of the notes or the conversion shares that will be held by the selling securityholders upon termination of any sales. The column showing ownership after completion of the offering assumes that the selling securityholders will sell all of the securities offered by this prospectus. In addition, the selling securityholders identified below may have sold, transferred or otherwise disposed of all or a portion of their notes since the date on which they provided the information regarding their notes in transactions exempt from the registration requirements of the Securities Act. As of July 20, 2001, we had $300,000,000 in principal amount of the notes and 124,951,206 shares of common stock outstanding.
PRINCIPAL AMOUNT AT MATURITY OF PERCENTAGE OF NOTES BENEFICIALLY PERCENTAGE CONVERSION COMMON STOCK COMMON OWNED THAT MAY OF NOTES SHARES THAT MAY OWNED AFTER STOCK NAME BE OFFERED OUTSTANDING BE OFFERED THE OFFERING OUTSTANDING ---- ------------------ ----------- --------------- ------------ ------------- 1976 Distribution Trust FBO A.R. Lauder/Zinterhofer.... 10,000 * 222 -- -- 1976 Distribution Trust FBO Jene A. Lauder............. 17,000 * 378 -- -- 2000 Revocable Trust FBO A.R. Lauder/Zinterhofer......... 10,000 * 222 -- -- ABN AMRO Securities LLC...... 200,000 * 4,451 -- -- AIG/National Union Fire Insurance.................. 580,000 * 12,908 -- -- Alexandra Global Investment Fund I, Ltd. .............. 4,000,000 1.33% 89,027 -- -- Allstate Insurance Company... 1,600,000 * 35,610 88,365(1) * Allstate Life Insurance Company.................... 400,000 * 8,902 115,073(2) * Aloha Airlines Non-Pilots Pension Trust.............. 200,000 * 4,451 -- -- Aloha Airlines Pilots Retirement Trust........... 120,000 * 2,670 -- -- Amaranth Securities LLC...... 6,050,000 2.02% 134,653 -- -- American Motorist Insurance Company.................... 631,000 * 14,044 -- -- Arapahoe County Colorado..... 62,000 * 1,379 -- --
35 39
PRINCIPAL AMOUNT AT MATURITY OF PERCENTAGE OF NOTES BENEFICIALLY PERCENTAGE CONVERSION COMMON STOCK COMMON OWNED THAT MAY OF NOTES SHARES THAT MAY OWNED AFTER STOCK NAME BE OFFERED OUTSTANDING BE OFFERED THE OFFERING OUTSTANDING ---- ------------------ ----------- --------------- ------------ ------------- Argent Classic Convertible Arbitrage Fund (Bermuda) L.P. ...................... 3,000,000 1.00% 66,770 -- -- Argent Classic Convertible Arbitrage Fund L.P. ....... 3,000,000 1.00% 66,770 -- -- Argent Convertible Arbitrage Fund Ltd. ................. 1,000,000 * 22,256 -- -- Arkansas PERS................ 415,000 * 9,236 -- -- Auspicis Ltd. ............... 400,000 * 8,902 -- -- AXP Bond Fund, Inc. ......... 2,840,000 * 63,209 -- -- AXP Variable Portfolio -- Bond Fund, a series of AXP Variable Portfolio Income Series, Inc. ...................... 1,170,000 * 26,040 -- -- AXP Variable Portfolio -- Managed Fund, a series of AXP Variable Portfolio Managed Series, Inc. ...... 880,000 * 19,586 -- -- B.C. McCabe Foundation....... 250,000 * 5,564 -- -- Bank Austria Cayman Island, Ltd. ...................... 6,000,000 2.00% 133,541 -- -- Bankers Trust Company Trustee for DaimlerChrysler Corp. Emp. #1 Pension Plan DTD 4/1/89..................... 3,350,000 1.12% 74,560 -- -- BBT Fund, L.P. .............. 5,000,000 1.67% 111,284 -- -- Bear Stearns & Co. Inc. ..... 1,250,000 * 27,821 -- -- Boilermakers Blacksmith Pension Trust.............. 575,000 * 12,797 -- -- British Virgin Island Social Security Board............. 47,000 * 1,046 -- -- BTES Convertible............. 1,500,000 * 33,385 -- -- BTPO Growth Vs Value......... 3,000,000 1.00% 66,770 -- -- C&H Sugar Company, Inc. ..... 300,000 * 6,677 -- -- CALAMOS(R) Market Neutral Fund -- CALAMOS(R) Investment Trust........... 2,000,000 * 44,513 -- -- CFFX, LLC.................... 3,500,000 1.17% 77,898 -- -- Chrysler Corporation Master Retirement Trust........... 2,785,000 * 61,985 -- -- CIBC World Markets (International) Arbitrage.................. 8,500,000 2.83% 189,183 -- -- City of New Orleans.......... 256,000 * 5,697 -- -- City University of New York....................... 153,000 * 3,405 -- -- Colgate-Palmolive Company Retirement Trust........... 1,000,000 * 22,256 -- -- College Retirement Equities Fund....................... 1,000,000 * 22,256 -- --
36 40
PRINCIPAL AMOUNT AT MATURITY OF PERCENTAGE OF NOTES BENEFICIALLY PERCENTAGE CONVERSION COMMON STOCK COMMON OWNED THAT MAY OF NOTES SHARES THAT MAY OWNED AFTER STOCK NAME BE OFFERED OUTSTANDING BE OFFERED THE OFFERING OUTSTANDING ---- ------------------ ----------- --------------- ------------ ------------- Commerzbank Financial Products Frankfurt......... 9,750,000 3.25% 217,004 -- -- Convert Arbitrage Qib........ 3,515,000 1.17% 78,232 -- -- Credit Suisse First Boston Corporation................ 30,200,000 10.07% 672,156 -- -- Delaware PERS................ 635,000 * 14,133 -- -- Delta Air Lines Master Trust (c/o Oaktree Capital Management, LLC)........... 790,000 * 17,582 -- -- Delta Pilots D & S Trust..... 390,000 * 8,680 -- -- Drury University............. 95,000 * 2,114 -- -- F.R. Conv Sec FN............. 65,000 * 1,446 -- -- Franklin and Marshall College.................... 220,000 * 4,896 -- -- GLG Market Neutral Fund...... 11,500,000 3.83% 255,953 -- -- Grady Hospital Foundation.... 134,000 * 2,982 -- -- Granville Capital Corporation................ 7,500,000 2.50% 166,926 387,376(3) * Hawaiian Airlines Employees Pension Plan -- IAM........ 100,000 * 2,225 -- -- Hawaiian Airlines Pension Plan for Salaried Employees.................. 20,000 * 445 -- -- Hawaiian Airlines Pilots Retirement Plan............ 190,000 * 4,228 -- -- HFR Convertible Arbitrage Fund....................... 285,000 * 6,343 -- -- Highbridge International LLC........................ 1,000,000 * 22,256 -- -- ICI American Holdings Trust...................... 275,000 * 6,120 -- -- Income Portfolio, a series of IDS Life Series Fund, Inc. ...................... 70,000 * 1,557 -- -- Independence Blue Cross...... 116,000 * 2,581 -- -- Jefferies Umbrella Fund -- Global Convertible Bonds... 160,000 * 3,561 -- -- Jersey (IMA) Ltd. ........... 400,000 * 8,902 -- -- JM Hull Associates L.P. ..... 250,000 * 5,564 -- -- KBC Financial Products USA... 1,100,000 * 24,482 -- -- Kentfield Trading, Ltd. ..... 6,680,000 2.23% 148,675 -- -- Landesbank Schleswig-Holstein International S.A. ........ 1,000,000 * 22,256 -- -- Lehman Brothers Inc. ........ 6,000,000 2.00% 133,541 -- -- Liberty View Funds LLC....... 200,000 * 4,451 -- -- Liberty View Funds L.P. ..... 1,400,000 * 31,159 -- -- Lipper Convertibles, L.P. ... 5,500,000 1.83% 122,412 -- -- Lincoln National Global Asset Allocation Fund............ 50,000 * 1,112 -- -- Local Initiatives Support Corporation................ 52,000 * 1,157 -- -- McMahan Securities Co. L.P. ...................... 100,000 * 2,225 -- -- Merrill Lynch Insurance Group...................... 287,000 * 6,387 -- -- Morgan Stanley & Co. ........ 15,000,000 5.00% 333,852 34,180(3) *
37 41
PRINCIPAL AMOUNT AT MATURITY OF PERCENTAGE OF NOTES BENEFICIALLY PERCENTAGE CONVERSION COMMON STOCK COMMON OWNED THAT MAY OF NOTES SHARES THAT MAY OWNED AFTER STOCK NAME BE OFFERED OUTSTANDING BE OFFERED THE OFFERING OUTSTANDING ---- ------------------ ----------- --------------- ------------ ------------- Morgan Stanley Dean Witter Convertible Securities Trust...................... 1,000,000 * 22,256 -- -- Motion Picture Industry Health Plan -- Active Member Fund................ 280,000 * 6,231 -- -- Motion Picture Industry Health Plan -- Retiree Member Fund................ 135,000 * 3,004 -- -- Municipal Employees.......... 134,000 * 2,982 -- -- Nabisco Holdings............. 29,000 * 645 -- -- National Fuel Gas Company Retirement Plan............ 50,000 * 1,112 -- -- New Orleans Firefighters Pension/Relief Fund........ 140,000 * 3,115 -- -- New York Life Insurance and Annuity Corporation........ 1,275,000 * 28,377 -- -- New York Life Insurance Company.................... 10,500,000 3.50% 233,696 -- -- Occidental Petroleum Corporation................ 259,000 * 5,764 -- -- OCM Convertible Trust........ 1,955,000 * 43,512 -- -- Ohio Bureau of Workers Compensation............... 152,000 * 3,383 -- -- Ondeo Nalco.................. 190,000 * 4,228 -- -- Onyx Fund Holdings, LDC...... 7,500,000 2.50% 166,926 -- -- Oxford, Lord Abbett & Co. ... 1,000,000 * 22,256 -- -- Pacific Life Insurance Company.................... 500,000 * 11,128 -- -- Paloma Securities LLC........ 6,050,000 2.02% 134,653 -- -- Parker-Hannifin Corporation................ 80,000 * 1,780 -- -- Partner Reinsurance Company Ltd. ...................... 465,000 * 10,349 -- -- Penn Treaty Network America Insurance Company.......... 275,000 * 6,120 -- -- Pensionskasse der Antalis AG......................... 130,000 * 2,893 -- -- Pensionskasse der Ems Chemie AG......................... 140,000 * 3,115 -- -- Pensionskasse der Ems Dottikon AG................ 250,000 * 5,564 -- -- Pensionskasse der Rockwell Automation AG.............. 180,000 * 4,006 -- -- Personalvorsorge der PV Promea..................... 240,000 * 5,341 -- -- Pimco Convertible Fund....... 800,000 * 17,805 -- -- Pitney Bowes Retirement Plan....................... 1,000,000 * 22,256 -- -- Policemen and Firemen Retirement System of the City of Detroit............ 669,000 * 14,889 -- -- ProMutual.................... 757,000 * 16,848 -- --
38 42
PRINCIPAL AMOUNT AT MATURITY OF PERCENTAGE OF NOTES BENEFICIALLY PERCENTAGE CONVERSION COMMON STOCK COMMON OWNED THAT MAY OF NOTES SHARES THAT MAY OWNED AFTER STOCK NAME BE OFFERED OUTSTANDING BE OFFERED THE OFFERING OUTSTANDING ---- ------------------ ----------- --------------- ------------ ------------- Putnam Asset Allocation Funds -- Balanced Portfolio.................. 390,000 * 8,680 -- -- Putnam Asset Allocation Funds -- Conservative Portfolio.................. 290,000 * 6,454 -- -- Putnam Convertible Income -- Growth Trust............... 4,230,000 1.41% 94,146 -- -- Putnam Convertible Opportunities and Income Trust...................... 100,000 * 2,225 -- -- Putnam Variable Trust -- Putnam VT Global Asset Allocation Fund............ 100,000 * 2,225 -- -- Queens Health Plan........... 70,000 * 1,557 -- -- Raytheon Master Pension Trust...................... 683,000 * 15,201 -- -- RCG Latitude Master Fund..... 2,000,000 * 44,513 -- -- RJR Reynolds................. 89,000 * 1,980 -- -- Robertson Stephens........... 5,000,000 1.67% 111,284 -- -- Sagamore Hill Hub Fund Ltd. ...................... 15,700,000 5.23% 349,432 -- -- Salomon Brothers Asset Management, Inc. .......... 4,000,000 1.33% 89,027 -- -- Shell Pension Trust.......... 478,000 * 10,638 -- -- Southern Farm Bureau Life Insurance.................. 580,000 * 12,908 -- -- Starvest Combined Portfolio.................. 630,000 * 14,021 -- -- State Employees' Retirement Fund of the State of Delaware................... 1,180,000 * 26,263 -- -- State of Connecticut Combined Investment Funds........... 2,560,000 * 56,977 -- -- State of Maryland Retirement System..................... 3,235,000 1.08% 72,000 -- -- State of Oregon Equity....... 2,025,000 * 45,070 -- -- State of Oregon/SAIF Corporation................ 6,900,000 2.30% 153,572 -- -- State Street Bank Custodian for GE Pension Trust....... 1,655,000 * 36,835 -- -- Syngenta AG.................. 110,000 * 2,448 -- -- The Grable Foundation........ 120,000 * 2,670 -- -- Total Fina Elf Finance U.S.A. Inc. ...................... 150,000 * 3,338 -- -- Total Return Portfolio, a series of Growth and Income Trust...................... 1,040,000 * 23,147 -- -- TQA Master Plus Fund Ltd. ... 3,000,000 1.00% 66,770 -- -- UBS O'Connor LLC F/B/O UBS Global Equity Arbitrage Master Ltd. ............... 4,750,000 1.58% 105,720 -- -- Van Kampen Harbor Fund....... 2,000,000 * 44,513 2,522,115(4) 2.02%
39 43
PRINCIPAL AMOUNT AT MATURITY OF PERCENTAGE OF NOTES BENEFICIALLY PERCENTAGE CONVERSION COMMON STOCK COMMON OWNED THAT MAY OF NOTES SHARES THAT MAY OWNED AFTER STOCK NAME BE OFFERED OUTSTANDING BE OFFERED THE OFFERING OUTSTANDING ---- ------------------ ----------- --------------- ------------ ------------- Vanguard Convertible Securities Fund, Inc. ..... 2,960,000 * 65,880 -- -- White River Securities L.L.C. .................... 2,500,000 * 55,642 -- -- William Blair & Company, LLC........................ 400,000 * 8,902 -- -- Zeneca Holdings Trust........ 155,000 * 3,449 -- -- Any other holder of notes or future transferee from any such holder(5)(6).......... 22,705,000 7.57% 505,341 -- --
- ------------------------- * Less than 1.0% (1) Includes 46,288 shares of our common stock held by the selling securityholder, 8,902 shares issuable upon conversion of the notes offered through this prospectus that are held by Allstate Life Insurance Company, a subsidiary of the selling securityholder, 3,525 shares of our common stock held by Allstate Life Insurance Company, and 2,200 shares of our common stock held by Allstate New Jersey Insurance Company, a subsidiary of the selling securityholder. Also includes 8,225 shares held by Agents Pension Plan and 19,225 shares held by Allstate Retirement Plan, each of which are qualified ERISA plans. The selling securityholder disclaims any interest in securities held in these plan trusts, although the Investment Committee for such plans consists of Allstate Insurance Company officers. (2) Includes 3,525 shares of our common stock held by the selling securityholder, 35,610 shares issuable upon conversion of the notes offered through this prospectus that are held by Allstate Insurance Company, the parent of the selling securityholder, 46,288 shares of our common stock held by Allstate Insurance Company, and 2,200 shares of our common stock held by Allstate New Jersey Insurance Company, a subsidiary of the selling securityholder's parent. Also includes 8,225 shares held by Agents Pension Plan and 19,225 shares held by Allstate Retirement Plan, each of which are qualified ERISA plans. The selling securityholder disclaims any interest in securities held in these plan trusts, although the Investment Committee for such plans consists of Allstate Insurance Company officers. (3) All shares are issuable upon conversion of our 5% convertible subordinated notes due September 2, 2002. (4) Represents securities over which Van Kampen Asset Management, Inc. ("Asset Manager"), as the selling securityholder's investment advisor, has discretionary authority. The Asset Manager disclaims beneficial ownership of all such securities. Includes 510,000 shares held by Van Kampen Enterprise Fund, 210,000 shares held by Van Kampen Harbor Fund, 30,000 shares held by Van Kampen Life Investment Trust Enterprise Fund, 400,000 shares held by Van Kampen Aggressive Growth Fund, 230 shares held by U.S. Allianz Aggressive Growth, 350 shares held by Van Kampen Life Investment Trust Aggressive Growth Fund, 25,600 shares held by VMSDW All Star Growth Fund, 435 shares held by Van Kampen Life Investment Trust Technology Fund, 1,300,000 shares held by Van Kampen Technology Fund, 5,500 shares held by Van Kampen Small Cap Value Fund, and 40,000 shares held by SBA Variable Series Enterprise. (5) Information concerning other selling holders will be set forth in prospectus supplements from time to time, if required. (6) Assumes that any other holders of notes, or any future transferees, do not beneficially own any common stock other than the common stock issuable upon conversion of the notes at the initial conversion rate. 40 44 Except as described in this prospectus, none of the above selling securityholders nor any of their affiliates, officers, directors or principal equity holders has held any position or office or has had any material relationship with us within the past three years except that CSFB and ABN AMRO Rothschild LLC were initial purchasers in connection with the offer and sale of the notes in May 2001. The initial purchasers and their affiliates engage in transactions with and perform services for Lam in the ordinary course of business and have engaged and may in the future engage in commercial banking and/or investment banking transactions for us. 41 45 CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS This section summarizes some of the U.S. federal income tax considerations relating to the purchase, ownership, and disposition of the notes and of common stock into which the notes may be converted. This summary does not provide a complete analysis of all potential tax considerations. We do not intend to seek a ruling from the Internal Revenue Service (the "IRS") with respect to the analysis in the following summary. Neither the IRS nor the courts are bound by the conclusions set forth below, and they may come to different conclusions. The information provided below is based on existing authorities; these authorities may change, including retroactively. In either the case of a change in authorities or in the case of a different interpretation by the IRS or the courts, the tax consequences of purchasing, owning or disposing of notes or common stock could differ from those described below. This summary generally applies only to "U.S. holders" that purchase notes and hold the notes and any common stock into which the notes may be converted as "capital assets" (generally, held for investment). A U.S. holder is: - a citizen or resident of the United States; - a corporation organized under the laws of the United States or any state; - a trust that is subject to the primary supervision of a U.S. court and the control of one or more U.S. persons. Special rules apply to nonresident alien individuals and foreign corporations or trusts ("Non-U.S. holders"). This summary describes some, but not all, of these special rules. This summary generally does not address tax considerations that may be relevant to particular investors because of their specific circumstances, or because they are subject to special rules, such as, for example, banks, tax-exempt organizations, insurance companies, dealers in securities or currencies, or persons that hold the notes or common stock as a position in a hedge, straddle or conversion transaction for tax purposes. Finally, this summary does not describe the effect of the federal estate and gift tax laws on U.S. holders or the effects of any applicable foreign, state, or local laws. Investors considering the purchase of notes should consult their own tax advisors regarding the application of the U.S. federal income tax laws to their particular situations and the consequences of federal estate or gift tax laws, foreign, state, or local laws, and tax treaties. U.S. HOLDERS Taxation of Interest U.S. holders will be required to recognize as ordinary income any interest paid or accrued on the notes, in accordance with their regular method of accounting for United States federal income tax purposes. In general, if a holder of a debt instrument may receive payments that exceed the issue price of the instrument, other than fixed periodic interest, the holder may be required to recognize additional interest as "original issue discount" over the term of the instrument. We believe that the notes will not be issued with original issue discount. We may be required to make additional payments to holders of the notes in the form of additional interest if we do not file or cause to be declared effective a registration statement, as described under "Description of the Notes -- Registration Rights." The original issue discount rules allow contingent payments such as these to be disregarded in computing a holder's interest income if the contingency is "remote." We believe that the possibility that we will pay this additional interest is remote. Our determination in this regard is binding on any U.S. holder that does not disclose a contrary position on the holder's U.S. federal income tax return. If, contrary to expectations, we pay additional interest, U.S. holders would be required to recognize additional interest income. Under the terms of the notes, if a note holder converts a note into our common stock after the record date but prior to the interest payment date, the note holder is obligated to pay us funds equal to the interest payable on the converted principal amount. The tax consequences to the note holder of the receipt 42 46 of this interest and the repayment to us of an equal amount are uncertain. Although we intend to report any such transaction as the return of interest to which the note holder was not entitled, so that neither the receipt nor the repayment is taxable, a taxing authority may require the note holder to recognize ordinary income in an amount equal to the interest received. In that case, the note holder may also be required to capitalize (rather than deduct) the amounts repaid as an addition to the tax basis in the common stock received in the conversion. If the note holder is entitled to deduct the amounts repaid, that deduction may be subject to limitation. Sale, Exchange or Redemption of Notes A U.S. holder will generally recognize capital gain or loss if the holder disposes of a note in a sale, redemption or exchange other than a conversion of the note into common stock. The holder's gain or loss will equal the difference between the proceeds received by the holder and the holder's adjusted tax basis in the note. The proceeds received by the holder will include the amount of any cash and the fair market value of any other property received for the note. The holder's tax basis in the note will generally equal the amount the holder paid for the note. The gain or loss recognized by a holder on a disposition of the note will be long-term capital gain or loss if the holder held the note for more than one year. Long-term capital gains of individual taxpayers are generally taxed at lower rates. The deductibility of capital losses is subject to limitation. Net capital gains of corporations are subject to tax at the same rates as ordinary income. The portion of any proceeds that is attributable to accrued interest will not be taken into account in computing the holder's capital gain or loss. Instead, that portion will be recognized as ordinary interest income to the extent that the holder has not previously included the accrued interest in income. Considerations for Secondary Market Purchasers The rules described above under "Taxation of Interest" and "Sale, Exchange or Redemption of Notes" are modified for U.S. holders that do not purchase their notes at original issuance. Accrued Interest. If a U.S. holder purchases a note with interest that accrued, but was not paid, while the seller held that note, the purchaser excludes the previously accrued interest from the amount it reports as interest income. Conversely, the seller reports a portion of the sales price equal to the interest that accrued in its hands as a payment of that interest. Market Discount. A note will be treated as purchased at a market discount (a "market discount note") if the note's stated redemption price at maturity (here $1,000 per note) exceeds the amount for which the U.S. holder purchased the note by at least 1/4 of 1% of such note's stated redemption price at maturity (here $2.50) multiplied by the number of complete years from the date of such purchase to the note's maturity. If such excess is not sufficient to cause the note to be a market discount note, then such excess constitutes "de minimis market discount" and the note is not subject to the rules discussed in the following paragraph. Any gain recognized on the maturity or disposition of a market discount note will be treated as ordinary income to the extent that such gain does not exceed the accrued market discount on such note. Alternatively, a U.S. holder of a market discount note may elect to include market discount in income currently over the life of the note. Such an election applies to all debt instruments with market discount acquired by the electing U.S. holder on or after the first day of the first taxable year to which the election applies, and may not be revoked without the consent of the IRS. Market discount on a market discount note will accrue on a straight-line basis unless the U.S. holder elects to accrue such market discount on a constant-yield method. Such an election shall apply only to the note with respect to which it is made and may not be revoked. A U.S. holder of a market discount note that does not elect to include market discount in income currently generally will be required to defer deductions for interest on borrowings allocable to such note, in an amount not exceeding the accrued market discount on such note, until the maturity or disposition of the note. Election to Treat All Interest as Original Issue Discount. A U.S. holder may elect to include in gross income all interest that accrues on a note using a constant-yield original issue discount method. For 43 47 purposes of this election, interest includes stated interest, original issue discount, de minimis original issue discount, market discount, de minimis market discount and unstated interest, as adjusted by any amortizable bond premium (described below under "-- Notes Purchased at a Premium") or acquisition premium. In applying the constant-yield method to a note with respect to which this election has been made, the issue price of the note will equal its cost to the electing U.S. holder, the issue date of the note will be the date of its acquisition by the electing U.S. holder, and no payments on the note will be treated as payments of qualified stated interest. This election will generally apply only to the note with respect to which it is made and may not be revoked without the consent of the IRS. If this election is made with respect to a note with amortizable bond premium, then the electing U.S. holder will be deemed to have elected to apply amortizable bond premium against interest with respect to all debt instruments with amortizable bond premium (other than debt instruments the interest on which is excludible from gross income) held by the electing U.S. holder as of the beginning of the taxable year in which the note with respect to which the election is made is acquired. The deemed election with respect to amortizable bond premium may not be revoked without the consent of the IRS. If the election to apply the constant-yield method to all interest on a note is made with respect to a market discount note, the electing U.S. holder will be treated as having made the election discussed above under "-- Market Discount" to include market discount in income currently over the life of all debt instruments held or thereafter acquired by such U.S. holder. Notes Purchased at a Premium. A U.S. holder that purchases a note for an amount, in excess of its principal amount, disregarding any amount paid for the note that is attributable to its conversion feature, may elect to treat such excess as "amortizable bond premium," in which case the amount required to be included in the U.S. holder's income each year with respect to interest on the note will be reduced by the amount of amortizable bond premium allocable (based on the note's yield to maturity) to such year. The amount attributable to the conversion feature is generally determined by comparing the yields of debt instruments with and without such a feature. Any election to amortize bond premium shall apply to all bonds (other than bonds the interest on which is excludible from gross income) held by the U.S. holder at the beginning of the first taxable year to which the election applies or thereafter acquired by the U.S. holder, and is irrevocable without the consent of the IRS. See also "-- Election to Treat All Interest as Original Issue Discount" above. Conversion of Notes A U.S. holder generally will not recognize any income, gain or loss on converting a note into common stock. If the holder receives cash in lieu of a fractional share of stock the holder will be treated as if the holder had received the fractional share and then had the fractional share redeemed for the cash. In general, the holder should recognize capital gain or loss on the deemed redemption equal to the difference between the cash received and that portion of the holder's basis in the stock attributable to the fractional share. The holder's aggregate basis in the common stock (including any fractional shares deemed redeemed) will equal the adjusted basis in the note. The holder's holding period for the stock will include the period during which the note was held. Distributions If, after a U.S. holder converts a note into common stock, we make a distribution in respect of that stock, the distribution will be treated as a dividend, taxable to the U.S. holder as ordinary income, to the extent it is paid from our current or accumulated earnings and profits. If the distribution exceeds our current and accumulated profits, the excess will be treated as a tax-free return of the holder's investment, up to the holder's basis in his common stock. Any remaining excess will be treated as capital gain. If the U.S. holder is a U.S. corporation, it would generally be able to claim a deduction equal to a portion of any dividends received. The terms of the notes allow for changes in the conversion price of the notes in certain circumstances. A change in conversion price that allows note holders to receive more shares of common stock on 44 48 conversion may increase the note holders' proportionate interest in our earnings and profits or assets. In that case, note holders would be treated as though they received a dividend in the form of our stock. Such a constructive stock dividend would be taxable to the note holders even though they would not actually receive any cash or other property. A taxable constructive stock dividend would result, for example, if the conversion price were adjusted to compensate note holders for distributions of cash or property to our stockholders. Not all changes in conversion price that allow note holders to receive more stock on conversion, however, will result in constructive dividends to the note holders. For instance, a change in conversion price could simply prevent the dilution of the note holders' interest upon a stock split or other change in capital structure. Changes of this type, if made by a bona fide, reasonable adjustment formula, are not treated as constructive stock dividends. Conversely, if an event occurs that dilutes the note holders' interests and the conversion price is not adjusted, the resulting increase in the proportionate interests of our stockholders could be treated as a taxable stock dividend to them. Any taxable constructive stock dividends resulting from a change to, or failure to change, the conversion price would be treated like dividends paid in cash or other property. They would result in ordinary income to the recipient, to the extent of our current or accumulated earnings and profits, with any excess treated as a tax-free return of capital or as capital gain. Sale of Common Stock A U.S. holder will generally recognize capital gain or loss on a sale or exchange of common stock. The holder's gain or loss will equal the difference between the proceeds received by the holder and the holder's adjusted tax basis in the stock. The proceeds received by the holder will include the amount of any cash and the fair market value of any other property received for the stock. The gain or loss recognized by a holder on a sale or exchange of stock will be long-term capital gain or loss if the holder held the stock for more than one year. SPECIAL TAX RULES APPLICABLE TO NON-U.S. HOLDERS Taxation of Interest Payments of interest to nonresident persons or entities are generally subject to U.S. federal income tax at a rate of 30% (or at a lesser rate if a tax treaty applies), collected by means of withholding by the payor. Payments of interest on the notes to most Non-U.S. holders, however, will qualify as "portfolio interest," and thus will be exempt from the withholding tax, if the holders certify their nonresident status as described below. The portfolio interest exception will not apply to payments of interest to a Non-U.S. holder that: - owns, directly or indirectly, at least 10% of our voting stock (for this purpose, the stock into which the notes are convertible into will be treated as being indirectly owned); or - is a "controlled foreign corporation" that is related to us. In general, a foreign corporation is a controlled foreign corporation if more than 50% of its stock is owned, directly or indirectly, by one or more U.S. persons that each owns, directly or indirectly, at least 10% of the corporation's voting stock. A foreign corporation is not related to us unless there is a more than 50% or greater overlap of ownership, directly or by attribution, between us and the foreign corporation. The portfolio interest exception and several of the special rules for Non-U.S. holders described below apply only if the holder certifies its nonresident status. A Non-U.S. holder can meet this certification requirement by providing a Form W-8BEN or appropriate substitute form to us or to our paying agent. If the holder holds the note through a financial institution or other agent acting on the holder's behalf, the holder will be required to provide appropriate documentation to the agent. The holder's agent will then be required to provide certification to us or to our paying agent, either directly or through other intermediaries. If payments are made to a foreign partnership, the certification requirements generally apply to the partners rather than the partnership. 45 49 Sale, Exchange or Redemption of Notes Non-U.S. holders generally will not be subject to U.S. federal income tax on any gain realized on the sale, exchange or other disposition of notes. This general rule, however, is subject to several exceptions. For example, the gain would be subject to U.S. federal income tax: - if the gain is effectively connected with the conduct by the Non-U.S. holder of a U.S. trade or business; - if the Non-U.S. holder was a citizen or resident of the United States and is subject to special rules that apply to expatriates; - if the rules of the Foreign Investment in Real Property Tax Act ("FIRPTA") (described below) treat the gain as effectively connected with a U.S. trade or business; or - to the extent the gain represents accrued but unpaid interest, and interest on the notes is not eligible for the "portfolio interest" exemption described above. The FIRPTA rules may apply to a sale, exchange or other disposition of notes if we are, or were within five years before the transaction, a "U.S. real property holding corporation" ("USRPHC"). In general, we would be a USRPHC if interests in U.S. real estate comprised most of our assets. We do not believe that we are a USRPHC or that we will become one in the future. Moreover, the FIRPTA rules would apply to a disposition of notes by a Non-U.S. holder only if the holder owned, directly or indirectly, more than 5 percent of our common stock while the holder held our notes. For this purpose, the Non-U.S. holder would be treated as owning the stock that the holder could acquire on conversion of the holder's notes. If all of these conditions were met, and the FIRPTA rules applied to the sale, exchange, or other disposition of notes by a Non-U.S. holder, then any gain recognized by the holder would be treated as effectively connected with a U.S. trade or business, and would thus be subject to U.S. federal income tax (including withholding on the sales proceeds). Conversion of Notes A Non-U.S. holder generally will not recognize any income, gain or loss on converting a note into common stock. Any gain recognized as a result of the holder's receipt of cash in lieu of a fractional share of stock would also generally not be subject to U.S. federal income tax. See "Special Tax Rules Applicable to Non-U.S. Holders -- Sale of Common Stock," below. Dividends Dividends paid to a Non-U.S. holder on common stock received on conversion of a note will generally be subject to U.S. withholding tax at a 30% rate. The withholding tax might not apply, however, or might apply at a reduced rate, under the terms of a tax treaty between the United States and the Non-U.S. holder's country of residence. A Non-U.S. holder must demonstrate its entitlement to treaty benefits by certifying its nonresident status. Some of the ways of meeting this requirement are described above under "Special Tax Rules Applicable to Non-U.S. Holders -- Taxation of Interest." Sale of Common Stock A Non-U.S. holder will generally not be subject to U.S. federal income tax on any gains realized on the sale, exchange, or other disposition of common stock. This general rule, however, is subject to exceptions, some of which are described under "Special Tax Rules Applicable to Non-U.S. Holders -- Sale, Exchange or Redemption of Notes." Income or Gains Effectively Connected With a U.S. Trade or Business The preceding discussion of the tax consequences of the purchase, ownership or disposition of notes or common stock by a Non-U.S. holder assumes that the holder is not engaged in a U.S. trade or business. If any interest on the notes, dividends on common stock, or gain from the sale, exchange or other disposition 46 50 of the notes or stock is effectively connected with a U.S. trade or business conducted by the Non-U.S. holder, then the income or gain will be subject to U.S. federal income tax at the regular graduated rates. If the Non-U.S. holder is eligible for the benefits of a tax treaty between the United States and the holder's country of residence, any "effectively connected" income or gain will be subject to U.S. federal income tax only if it is also attributable to a permanent establishment maintained by the holder in the United States. Payments of dividends that are effectively connected with a U.S. trade or business, and therefore included in the gross income of a Non-U.S. holder, will not be subject to the 30% withholding tax. To claim exemption from withholding, the holder must certify its qualification, which can be done by filing a Form W-8ECI. If the Non-U.S. holder is a corporation, that portion of its earnings and profits that is effectively connected with its U.S. trade or business would generally be subject to a "branch profits tax." The branch profits tax rate is generally 30 percent, although an applicable tax treaty might provide for a lower rate. U.S. Federal Estate Tax The estates of nonresident alien individuals are subject to U.S. federal estate tax on property with a U.S. situs. The notes will not be U.S. situs property as long as interest on the notes paid immediately before the death of the holder would have qualified as portfolio interest, exempt from withholding tax as described above under "Special Tax Rules Applicable to Non-U.S. Holders -- Taxation of Interest." Because we are a U.S. corporation, our common stock will be U.S. situs property, and therefore will be included in the taxable estate of a nonresident alien decedent. The U.S. federal estate tax liability of the estate of a nonresident alien may be affected by a tax treaty between the United States and the decedent's country of residence. BACKUP WITHHOLDING AND INFORMATION REPORTING Payors of specified types of payments are required to report the payments to the IRS. Among the specified payments are interest, dividends, and proceeds paid by brokers to their customers. The required information returns enable the IRS to determine whether the recipient properly included the payments in income. This reporting regime is reinforced by "backup withholding" rules. These rules require a payor to withhold tax at a 31 percent rate from payments subject to information reporting if the recipient fails to cooperate with the reporting regime by failing to provide his taxpayer identification number to the payor, furnishing an incorrect identification number, or repeatedly failing to report interest or dividends on his returns. The information reporting and backup withholding rules do not apply to payments to corporations, whether domestic or foreign. Payments of interest or dividends to individual U.S. holders of notes or common stock will generally be subject to information reporting, and will be subject to backup withholding unless the holder provides us or our paying agent with a correct taxpayer identification number. The information reporting and backup withholding rules do not apply to payments that are subject to the 30 percent withholding tax on dividends or interest paid to nonresidents, or to payments that are exempt from that tax by application of a tax treaty or special exception. Therefore, payments of dividends on common stock, or interest on notes, to Non-U.S. holders will generally not be subject to information reporting or backup withholding. To avoid backup withholding on dividends, a Non-U.S. holder must certify its nonresident status. Some of the common means of doing so are described under "Special Rules Applicable to Non-U.S. Holders -- Taxation of Interest." Payments made to U.S. holders by a broker upon a sale of notes or common stock will generally be subject to information reporting and backup withholding. If, however, the sale is made through a foreign office of a U.S. broker, the sale will be subject to information reporting but not backup withholding. If the sale is made through a foreign office of a foreign broker, the sale will generally not be subject to either information reporting or backup withholding. This exception may not apply, however, if the foreign broker is owned or controlled by U.S. persons, or is engaged in a U.S. trade or business. 47 51 Payments made to a Non-U.S. holder by a broker upon a sale of notes or common stock will not be subject to information reporting or backup withholding as long as the Non-U.S. holder certifies its foreign status. Any amounts withheld from a payment to a holder of notes or common stock under the backup withholding rules may be credited against any U.S. federal income tax liability of the holder. THE PRECEDING DISCUSSION OF CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR U.S. FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF PURCHASING, HOLDING, AND DISPOSING OF OUR NOTES OR COMMON STOCK, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAWS. 48 52 PLAN OF DISTRIBUTION The selling securityholders and their successors, which includes their transferees, pledgees or donees or their successors, may sell the notes and the underlying common stock directly to purchasers or through underwriters, broker-dealers or agents. Underwriters, broker-dealers or agents may receive compensation in the form of discounts, concessions or commissions from the selling securityholders or the purchasers. These discounts, concessions or commissions may be in excess of those customary in the types of transactions involved. The notes and the underlying common stock may be sold in one or more transactions. - at fixed prices; - at prevailing market prices at the time of sale; - at varying prices determined at the time of sale; or - at negotiated prices. Such sales may be effected in transactions in the following manner: - on any national securities exchange or quotation service on which the notes or the common stock may be listed or quoted at the time of sale; - in the over-the-counter-market; - in transactions otherwise than on such exchanges or services or in the over-the-counter market; or - through the writing of options, whether such options are listed on an options exchange or otherwise. Selling securityholders may enter into hedging transactions with broker-dealers or other financial institutions which may in turn engage in short sales of the notes or the underlying common stock and deliver these securities to close out such short positions, or loan or pledge the notes or the common stock into which the notes are convertible to broker-dealers that in turn may sell these securities. The aggregate proceeds to the selling securityholders from the sale of the notes or underlying common stock will be the purchase price of the notes or common stock less any discounts and commissions. A selling securityholder reserves the right to accept and, together with their agents, to reject, any proposed purchase of notes or common stock to be made directly or through agents. We will not receive any of the proceeds from this offering. Our outstanding common stock is listed for trading on the Nasdaq National Market. We do not intend to list the notes for trading on any national securities exchange or on Nasdaq. We cannot guarantee that any trading market will develop for the notes. The selling securityholders and any underwriters, broker-dealers or agents that participate in the sale of the notes and common stock into which the notes are convertible may be "underwriters" within the meaning of Section 2(11) of the Securities Act. Any discounts, commissions, concessions or profit they earn on any resale of the notes or the shares of the underlying common stock may be underwriting discounts and commissions under the Securities Act. Selling securityholders who are "underwriters" within the meaning of Section 2(11) of the Securities Act will be subject to the prospectus delivery requirements of the Securities Act. The selling securityholders have acknowledged that they understand their obligations to comply with the provisions of the Exchange Act and the rules thereunder relating to stock manipulation, particularly Regulation M, and have agreed that they will not engage in any transaction in violation of such provisions. In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 or Rule 144A under the Securities Act may be sold under Rule 144 or Rule 144A rather than pursuant to this prospectus. Each selling securityholder has represented that it will not sell any notes or common stock described in this prospectus except as described in this prospectus. 49 53 If required, the specific notes or common stock to be sold, the names of the selling securityholders, the respective purchase prices and public offering prices, the names of any agent, dealer or underwriter, and any applicable commissions or discounts with respect to a particular offer will be set forth in an accompanying prospectus supplement or, if appropriate, a post-effective amendment to the registration statement of which this prospectus is a part. LEGAL MATTERS Heller Ehrman White & McAuliffe LLP, San Francisco, California, has issued an opinion about the enforceability of the notes and the validity of the securities being offered by this prospectus. Shareholders of Heller Ehrman beneficially own 2,100 shares of common stock of Lam Research. EXPERTS Ernst & Young LLP, independent auditors, have audited our consolidated financial statements and schedule included in our Annual Report on Form 10-K for the year ended June 25, 2000 as amended, as set forth in their report, which is incorporated by reference in this prospectus and elsewhere in the registration statement. Our financial statements and schedule are incorporated by reference in reliance on Ernst & Young LLP's report, given on their authority as experts in accounting and auditing. 50 54 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the costs and expenses, payable by the registrant in connection with issuance and distribution of the securities being registered. All amounts are estimated except the SEC Registration Fee and the Nasdaq listing application fee. SEC Registration Fee..................................... $ 75,000 Printing and Engraving................................... 50,000 Accounting Fees and Expenses............................. 100,000 Legal Fees and Expenses.................................. 425,000 Rating Agency and Trustee Fees........................... 27,500 Miscellaneous............................................ 322,500 ---------- Total.................................................. $1,000,000 ==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 102 of the Delaware General Corporation Law allows a corporation to eliminate the personal liability of directors of a corporation to the corporation or to any of its stockholders for monetary damage for a breach of his or her fiduciary duty as a director, except in the case where the director breached his or her duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained an improper personal benefit. Lam Research's Certificate of Incorporation contains a provision that eliminates directors' personal liability as set forth above. Section 145 of the Delaware General Corporation Law, as amended, provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation or is or was serving at its request in such capacity in another corporation or business association against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. Lam Research's Certificate of Incorporation provides that, to the fullest extent permitted by the DGCL, no director of the Company shall be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director. The Certificate of Incorporation also provides that no amendment or repeal of such provision or adoption of an inconsistent provision shall apply to or have any effect on the protection from personal liability to the Company or its stockholders permitted thereunder with respect to any matter occurring, or any cause of action, suit or claim that, but for the Certificate of Incorporation, would accrue or arise prior to such amendment, repeal or adoption of an inconsistent provision. Additionally, Lam Research's Bylaws provide that Lam Research will indemnify to the maximum extent authorized by law each of its directors and officers against expenses incurred in connection with any proceeding arising by reason of the fact that such person is or was an agent of the corporation. Lam Research has entered into indemnification agreements with its directors and certain of its officers. Lam Research has also obtained on behalf of its officers and directors insurance against losses arising from any claim asserted against or incurred by such individual in any such capacity, subject to certain exclusions. II-1 55 ITEM 16. EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 4.1 Indenture dated as of May 22, 2001, between Lam Research Corporation and LaSalle Bank, National Association, as Trustee 4.2 Form of Note (included in Exhibit 4.1) 4.3 Registration Rights Agreement, dated May 22, 2001, among Lam Research Corporation, Credit Suisse First Boston Corporation and ABN Amro Rothschild LLC 5.1 Opinion of Heller Ehrman White & McAuliffe LLP 12.1 Statement re Computation of Ratios 23.1 Consent of Heller Ehrman White & McAuliffe (contained in opinion filed as Exhibit 5.1) 23.2 Consent of Independent Auditors 24.1 Power of Attorney (see page II-4) 25.1 Statement of Eligibility of Trustee (Form T-1)
ITEM 17. UNDERTAKINGS A. The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (a) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (b) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; (c) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; provided, however, that paragraphs A(1)(a) and A(1)(b) do not apply if the registration statement is on Form S-3, Form S-8 or Form F-3, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. B. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offering herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. C. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the registrant's Restated Certificate of Incorporation and Bylaws, and the Delaware General Corporation Law, the registrant has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public II-2 56 policy as expressed in the Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in a successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person for liabilities arising under the Act in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against policy as expressed in the Act and will be governed by the final adjudication of such issue. D. The undersigned registrant hereby undertakes to file an application for the purposes of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture Act in accordance with the rules and regulations presented by the SEC under Section 305(b)(2) of the Act. II-3 57 SIGNATURE Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto duly authorized, in Fremont, California on July 27, 2001. LAM RESEARCH CORPORATION By: /s/ CRAIG GARBER ------------------------------------ Craig Garber Vice President, Corporate Finance and Treasurer POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Craig Garber and Mercedes Johnson his or her true and lawful attorneys in fact and agents, each acting alone, with full power of substitution and resubstitution, for him or her and in his name, place and stead, in any and all capacities, to sign any or all amendments (including post effective amendments) to the Registration Statement, and to sign any registration statement for the same offering covered by this Registration Statement that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and all post effective amendments thereto, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. II-4 58 Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities indicated as of July 27, 2001.
SIGNATURE TITLE --------- ----- /s/ JAMES W. BAGLEY Chairman, Chief Executive Officer and Director - --------------------------------------------------- James W. Bagley /s/ MERCEDES JOHNSON Vice President, Finance and Chief Financial - --------------------------------------------------- Officer (Principal Financial Officer) Mercedes Johnson /s/ CRAIG GARBER Vice President, Corporate Finance and Treasurer - --------------------------------------------------- Craig Garber /s/ MARK S. FREY Corporate Controller (Principal Accounting - --------------------------------------------------- Officer) Mark S. Frey /s/ DAVID G. ARSCOTT Director - --------------------------------------------------- David G. Arscott /s/ ROBERT BERDAHL Director - --------------------------------------------------- Robert Berdahl /s/ RICHARD J. ELKUS, JR. Director - --------------------------------------------------- Richard J. Elkus, Jr. /s/ JACK R. HARRIS Director - --------------------------------------------------- Jack R. Harris /s/ GRANT M. INMAN Director - --------------------------------------------------- Grant M. Inman /s/ KENNETH M. THOMPSON Director - --------------------------------------------------- Kenneth M. Thompson
II-5 59 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 4.1 Indenture dated as of May 22, 2001, between Lam Research Corporation and LaSalle Bank, National Association, as Trustee 4.2 Form of Note (included in Exhibit 4.1) 4.3 Registration Rights Agreement, dated May 22, 2001, among Lam Research Corporation, Credit Suisse First Boston Corporation and ABN Amro Rothschild LLC 5.1 Opinion of Heller Ehrman White & McAuliffe LLP 12.1 Statement re Computation of Ratios 23.1 Consent of Heller Ehrman White & McAuliffe (contained in opinion filed as Exhibit 5.1) 23.2 Consent of Independent Auditors 24.1 Power of Attorney (see page II-4) 25.1 Statement of Eligibility of Trustee (Form T-1)
EX-4.1 2 f74092ex4-1.txt EXHIBIT 4.1 1 EXHIBIT 4.1 TABLE OF CONTENTS
PAGE ---- ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE.............................................1 SECTION 1.1. DEFINITIONS............................................................1 SECTION 1.2. OTHER DEFINITIONS......................................................6 SECTION 1.3. TRUST INDENTURE ACT PROVISIONS.........................................7 SECTION 1.4. RULES OF CONSTRUCTION..................................................7 ARTICLE 2 THE SECURITIES.........................................................................8 SECTION 2.1. FORM AND DATING........................................................8 SECTION 2.2. EXECUTION AND AUTHENTICATION...........................................9 SECTION 2.3. REGISTRAR, PAYING AGENT AND CONVERSION AGENT..........................10 SECTION 2.4. PAYING AGENT TO HOLD MONEY IN TRUST...................................10 SECTION 2.5. SECURITYHOLDER LISTS..................................................11 SECTION 2.6. TRANSFER AND EXCHANGE.................................................11 SECTION 2.7. REPLACEMENT SECURITIES................................................12 SECTION 2.8. OUTSTANDING SECURITIES................................................12 SECTION 2.9. TREASURY SECURITIES...................................................13 SECTION 2.10. TEMPORARY SECURITIES..................................................13 SECTION 2.11. CANCELLATION..........................................................13 SECTION 2.12. LEGEND; ADDITIONAL TRANSFER AND EXCHANGE REQUIREMENTS.................13 SECTION 2.13. CUSIP NUMBERS.........................................................16 ARTICLE 3 REDEMPTION AND PURCHASES..............................................................16 SECTION 3.1. RIGHT TO REDEEM; NOTICE TO TRUSTEE....................................16 SECTION 3.2. SELECTION OF SECURITIES TO BE REDEEMED................................16 SECTION 3.3. NOTICE OF REDEMPTION..................................................17 SECTION 3.4. EFFECT OF NOTICE OF REDEMPTION........................................17 SECTION 3.5. DEPOSIT OF REDEMPTION PRICE...........................................18 SECTION 3.6. SECURITIES REDEEMED IN PART...........................................18 SECTION 3.7. CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION.........................18 SECTION 3.8. PURCHASE OF SECURITIES AT OPTION OF THE HOLDER UPON CHANGE IN CONTROL.19 SECTION 3.9. EFFECT OF CHANGE IN CONTROL PURCHASE NOTICE...........................21 SECTION 3.10. DEPOSIT OF CHANGE IN CONTROL PURCHASE PRICE...........................22 SECTION 3.11. SECURITIES PURCHASED IN PART..........................................22 SECTION 3.12. COMPLIANCE WITH SECURITIES LAWS UPON PURCHASE OF SECURITIES...........22 SECTION 3.13. REPAYMENT TO THE COMPANY..............................................23 ARTICLE 4 CONVERSION............................................................................23 SECTION 4.1. CONVERSION PRIVILEGE..................................................23 SECTION 4.2. CONVERSION PROCEDURE..................................................23 SECTION 4.3. FRACTIONAL SHARES.....................................................24
-i- 2 TABLE OF CONTENTS (CONTINUED)
PAGE ---- SECTION 4.4. TAXES ON CONVERSION...................................................25 SECTION 4.5. COMPANY TO PROVIDE STOCK..............................................25 SECTION 4.6. ADJUSTMENT OF CONVERSION PRICE........................................25 SECTION 4.7. NO ADJUSTMENT.........................................................29 SECTION 4.8. ADJUSTMENT FOR TAX PURPOSES...........................................29 SECTION 4.9. NOTICE OF ADJUSTMENT..................................................29 SECTION 4.10. NOTICE OF CERTAIN TRANSACTIONS........................................30 SECTION 4.11. EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE ON CONVERSION PRIVILEGE.............................................................30 SECTION 4.12. TRUSTEE'S DISCLAIMER..................................................31 SECTION 4.13. VOLUNTARY REDUCTION...................................................31 ARTICLE 5 SUBORDINATION.........................................................................31 SECTION 5.1. AGREEMENT OF SUBORDINATION............................................31 SECTION 5.2. PAYMENTS TO HOLDERS...................................................32 SECTION 5.3. SUBROGATION OF SECURITIES.............................................34 SECTION 5.4. AUTHORIZATION TO EFFECT SUBORDINATION.................................35 SECTION 5.5. NOTICE TO TRUSTEE.....................................................35 SECTION 5.6. TRUSTEE'S RELATION TO SENIOR INDEBTEDNESS OF THE COMPANY..............36 SECTION 5.7. NO IMPAIRMENT OF SUBORDINATION........................................36 SECTION 5.8. ARTICLE APPLICABLE TO PAYING AGENTS...................................36 SECTION 5.9. SENIOR INDEBTEDNESS OF THE COMPANY ENTITLED TO RELY...................37 SECTION 5.10. CERTAIN CONVERSIONS DEEMED PAYMENT....................................37 ARTICLE 6 COVENANTS.............................................................................37 SECTION 6.1. PAYMENT OF SECURITIES.................................................37 SECTION 6.2. SEC REPORTS...........................................................38 SECTION 6.3. COMPLIANCE CERTIFICATES...............................................38 SECTION 6.4. FURTHER INSTRUMENTS AND ACTS..........................................38 SECTION 6.5. MAINTENANCE OF CORPORATE EXISTENCE....................................38 SECTION 6.6. RULE 144A INFORMATION REQUIREMENT.....................................38 SECTION 6.7. STAY, EXTENSION AND USURY LAWS........................................39 SECTION 6.8. PAYMENT OF ADDITIONAL INTEREST........................................39 ARTICLE 7 CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE..................................39 SECTION 7.1. COMPANY MAY CONSOLIDATE, ETC, ONLY ON CERTAIN TERMS...................39 SECTION 7.2. SUCCESSOR SUBSTITUTED.................................................40 ARTICLE 8 DEFAULT AND REMEDIES..................................................................40 SECTION 8.1. EVENTS OF DEFAULT.....................................................40 SECTION 8.2. ACCELERATION..........................................................42
ii 3 TABLE OF CONTENTS (CONTINUED)
PAGE ---- SECTION 8.3. OTHER REMEDIES........................................................42 SECTION 8.4. WAIVER OF DEFAULTS AND EVENTS OF DEFAULT..............................42 SECTION 8.5. CONTROL BY MAJORITY...................................................43 SECTION 8.6. LIMITATIONS ON SUITS..................................................43 SECTION 8.7. RIGHTS OF HOLDERS TO RECEIVE PAYMENT AND TO CONVERT...................43 SECTION 8.8. COLLECTION SUIT BY TRUSTEE............................................43 SECTION 8.9. TRUSTEE MAY FILE PROOFS OF CLAIM......................................44 SECTION 8.10. PRIORITIES............................................................44 SECTION 8.11. UNDERTAKING FOR COSTS.................................................44 ARTICLE 9 TRUSTEE...............................................................................45 SECTION 9.1. DUTIES OF TRUSTEE.....................................................45 SECTION 9.2. RIGHTS OF TRUSTEE.....................................................46 SECTION 9.3. INDIVIDUAL RIGHTS OF TRUSTEE..........................................47 SECTION 9.4. TRUSTEE'S DISCLAIMER..................................................47 SECTION 9.5. NOTICE OF DEFAULT OR EVENTS OF DEFAULT................................47 SECTION 9.6. REPORTS BY TRUSTEE TO HOLDERS.........................................47 SECTION 9.7. COMPENSATION AND INDEMNITY............................................47 SECTION 9.8. REPLACEMENT OF TRUSTEE................................................48 SECTION 9.9. SUCCESSOR TRUSTEE BY MERGER, ETC......................................49 SECTION 9.10. ELIGIBILITY; DISQUALIFICATION.........................................49 SECTION 9.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.....................49 ARTICLE 10 SATISFACTION AND DISCHARGE OF INDENTURE..............................................49 SECTION 10.1. SATISFACTION AND DISCHARGE OF INDENTURE...............................49 SECTION 10.2. APPLICATION OF TRUST MONEY............................................50 SECTION 10.3. REPAYMENT TO COMPANY..................................................50 SECTION 10.4. REINSTATEMENT.........................................................51 ARTICLE 11 AMENDMENTS, SUPPLEMENTS AND WAIVERS..................................................51 SECTION 11.1. WITHOUT CONSENT OF HOLDERS............................................51 SECTION 11.2. WITH CONSENT OF HOLDERS...............................................51 SECTION 11.3. COMPLIANCE WITH TRUST INDENTURE ACT...................................52 SECTION 11.4. REVOCATION AND EFFECT OF CONSENTS.....................................53 SECTION 11.5. NOTATION ON OR EXCHANGE OF SECURITIES.................................53 SECTION 11.6. TRUSTEE TO SIGN AMENDMENTS, ETC.......................................53 ARTICLE 12 MISCELLANEOUS........................................................................53 SECTION 12.1. TRUST INDENTURE ACT CONTROLS..........................................53 SECTION 12.2. NOTICES...............................................................53 SECTION 12.3. COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS..........................54 SECTION 12.4. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT....................54 SECTION 12.5 RECORD DATE FOR VOTE OR CONSENT OF
iii 4 TABLE OF CONTENTS (CONTINUED)
PAGE ---- SECURITYHOLDERS ......................................................55 SECTION 12.6. RULES BY TRUSTEE, PAYING AGENT, REGISTRAR AND CONVERSION AGENT........55 SECTION 12.7. LEGAL HOLIDAYS........................................................55 SECTION 12.8. GOVERNING LAW.........................................................55 SECTION 12.9. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.........................56 SECTION 12.10. NO RECOURSE AGAINST OTHERS............................................56 SECTION 12.11. SUCCESSORS............................................................56 SECTION 12.12. MULTIPLE COUNTERPARTS.................................................56 SECTION 12.13. SEPARABILITY..........................................................56 SECTION 12.14. TABLE OF CONTENTS, HEADINGS, ETC......................................56
iv 5 ================================================================================ LAM RESEARCH CORPORATION 4% CONVERTIBLE SUBORDINATED NOTES DUE JUNE 1, 2006 -------------------- INDENTURE DATED AS OF MAY 22, 2001 -------------------- LASALLE BANK NATIONAL ASSOCIATION AS TRUSTEE ================================================================================ 6 CROSS-REFERENCE TABLE*
TIA INDENTURE SECTION SECTION - ------- --------- Section 310(a)(1)................................................... 9.10 (a)(2)...................................................... 9.10 (a)(3)...................................................... N.A.** (a)(4)...................................................... N.A. (a)(5)...................................................... 9.10 (b)......................................................... 9.8; 9.10 (c)......................................................... N.A. Section 311(a)...................................................... 9.11 (b)......................................................... 9.11 (c)......................................................... N.A. Section 312(a)...................................................... 2.5 (b)......................................................... 12.3 (c)......................................................... 12.3 Section 313(a)...................................................... 9.6 (b)(1)...................................................... N.A. (b)(2)...................................................... 9.6 (c)......................................................... 9.6; 12.2 (d)......................................................... 9.6 Section 314(a)...................................................... 6.2; 6.4; 12.2 (b)......................................................... N.A. (c)(1)...................................................... 12.4(a) (c)(2)...................................................... 12.4(a) (c)(3)...................................................... N.A. (d)......................................................... N.A. (e)......................................................... 12.4(b) (f)......................................................... N.A. Section 315(a)...................................................... 9.1(b) (b)......................................................... 9.5; 12.2 (c)......................................................... 9.1(a) (d)......................................................... 9.1(c) (e)......................................................... 8.11 Section 316(a)(last sentence)....................................... 2.9 (a)(1)(A)................................................... 8.5 (a)(1)(B)................................................... 8.4 (a)(2)...................................................... N.A. (b)......................................................... 8.7 (c)......................................................... 12.5 Section 317(a)(1)................................................... 8.8 (a)(2)...................................................... 8.9 (b)......................................................... 2.4
- ---------- * This Cross-Reference Table shall not, for any purpose, be deemed a part of this Indenture. ** N.A. means Not Applicable. 7 THIS INDENTURE dated as of May 22, 2001 is between Lam Research Corporation, a Delaware corporation (the "Company"), and LaSalle Bank National Association, a national banking association organized and existing under the laws of the United States, as Trustee (the "Trustee"). In consideration of the premises and the purchase of the Securities by the Holders thereof, both parties agree as follows for the benefit of the other and for the equal and ratable benefit of the registered Holders of the Company's 4% Convertible Subordinated Notes due June 1, 2006. ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.1. DEFINITIONS. "Additional Interest" has the meaning specified in Section 2(e) of the Registration Rights Agreement. All references herein to interest accrued or payable as of any date shall include any Additional Interest accrued or payable as of such date as provided in the Registration Rights Agreement. "Affiliate" means, with respect to any specified person, any other person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person. For the purposes of this definition, "control" when used with respect to any person means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agent" means any Registrar, Paying Agent or Conversion Agent. "Applicable Procedures" means, with respect to any transfer or exchange of beneficial ownership interests in a Global Security, the rules and procedures of the Depositary that are applicable to such transfer or exchange. "The Bank of Nova Scotia Agreements" means (i) the Participation Agreement, dated as of December 6, 2000, by and among the Company, as Lessee, the Cushing 2000 Trust, a Delaware business trust, as Lessor (the "Trust"), Wilmington Trust Company, Wilmington Trust FSB, Scotiabanc Inc., as a Holder, Fleet National Bank, as a Lender and The Bank of Nova Scotia, as a Lender and as the Agent, (ii) the Lease, dated as of December 6, 2000, by and among the Company and the Trust, and (iii) any and all other documents, instruments or agreements related to such agreements, each as amended, modified, extended, supplemented, restated or replaced from time to time. "Board of Directors" means the board of directors of the Company or any authorized committee of the Board of Directors. "Business Day" means each day that is not a Legal Holiday. "Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, but excluding any debt securities convertible into such equity. 1 8 "Cash" or "cash" means such coin or currency of the United States as at any time of payment is legal tender for the payment of public and private debts. "Certificated Security" means a Security that is in substantially the form attached hereto as Exhibit A and that does not include the information or the schedule called for by footnotes 1, 3 and 4 thereof. "Common Stock" means the common stock of the Company, $.001 par value, as it exists on the date of this Indenture and any shares of any class or classes of capital stock of the Company resulting from any reclassification or reclassifications thereof and which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company and which are not subject to redemption by the Company; provided, however, that if at any time there shall be more than one such resulting class, the shares of each such class then so issuable on conversion of Securities shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications. "Company" means the party named as such in this Indenture until a successor replaces it pursuant to this Indenture, and thereafter means the successor. "Corporate Trust Office" means the principal office of the Trustee at which at any particular time its corporate trust business shall be administered which office at the date of the execution of this Indenture is located at 135 South LaSalle Street, Chicago, Illinois 60603, Attention: Corporate Trust Administration (Lam Research Corporation -- 4% Convertible Subordinated Notes due June 1, 2006) or at any other time at such other address as the Trustee may designate from time to time by notice to the Company. "Default" or "default" means, when used with respect to the Securities, any event which is or, after notice or passage of time or both, would be an Event of Default. "Designated Senior Indebtedness" means the Company's obligations under any particular Senior Indebtedness of the Company in which the instrument creating or evidencing the same or the assumption or guarantee thereof (or related agreements or documents to which the Company is a party) expressly provides that such Senior Indebtedness shall be "Designated Senior Indebtedness" for purposes of the Indenture (provided that such instrument, agreement or other document may place limitations and conditions on the right of such Senior Indebtedness to exercise the rights of the Designated Senior Indebtedness). "Exchange Act" means the Securities and Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, as in effect from time to time. "Final Maturity Date" means June 1, 2006. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the date of this Indenture, including those set forth in (1) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, (2) the statements and pronouncements of the Financial Accounting Standards Board, (3) such other statements by such other entity as approved by a significant segment of the accounting profession and (4) the rules and regulations of the SEC governing the inclusion of financial statements (including pro forma financial statements) in registration statements filed under the Securities Act and periodic reports required to be filed pursuant to Section 13 of the 2 9 Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the SEC. "Global Security" means a permanent Global Security that is in substantially the form attached hereto as Exhibit A and that includes the information and schedule called for by footnotes 1, 3 and 4 thereof and which is deposited with the Depositary or its custodian and registered in the name of the Depositary or its nominee. "Holder" or "Securityholder" means the person in whose name a Security is registered on the Primary Registrar's books. "IBJTC Agreements" means (i) the Amended and Restated Participation Agreement, dated as of March 30, 1998, by and among the Company, as Lessee, IBJTC Leasing Corporation-BSC, as Lessor and Participation Agent, and The Industrial Bank of Japan, Limited, as Agent, (ii) the Lease Agreement dated as of March 27, 1996, by and among the Company and Industrial Bank of Japan, Limited, and (iii) any and all other documents, instruments or agreements related to such agreements, each as amended, modified, extended, supplemented, restated or replaced from time to time. "Indebtedness" means, with respect to any Person, and without duplication, (a) all indebtedness, obligations and other liabilities (contingent or otherwise) of the Person for borrowed money (including obligations of the Person in respect of overdrafts, foreign exchange contracts, currency exchange agreements, interest rate protection agreements, and any loans or advances from banks, whether or not evidenced by notes or similar instruments) or evidenced by bonds, debentures, notes or similar instruments (whether or not the recourse of the lender is to the whole of the assets of the Person or to only a portion thereof) (other than any account payable or other accrued current liability or obligation incurred in the ordinary course of business in connection with the obtaining of materials or services), (b) all reimbursement obligations and other liabilities (contingent or otherwise) of the Person with respect to letters of credit, bank guarantees or bankers' acceptances, (c) all obligations and liabilities (contingent or otherwise) in respect of leases of the Person required, in conformity with generally accepted accounting principles, to be accounted for as capitalized lease obligations on the balance sheet of the Person and all obligations and other liabilities (contingent or otherwise) under any lease or related document (including a purchase agreement) in connection with the lease of real property which provides that the Person is contractually obligated to purchase or cause a third party to purchase the leased property or pay an agreed upon residual value of the leased property to the lessor and the obligations of the Person under such lease or related document to purchase or to cause a third party to purchase such leased property, including, without limitation, the IBJTC Agreements, the Scotiabanc Agreements and The Bank of Nova Scotia Agreements, (d) all obligations of the Person (contingent or otherwise) with respect to an interest rate or other swap, cap or collar agreement or other similar instrument or agreement or foreign currency hedge, exchange, purchase or similar instrument or agreement, (e) all direct or indirect guaranties or similar agreements by the Person in respect of, and obligations or liabilities (contingent or otherwise) of the Person to purchase or otherwise acquire or otherwise assure a creditor against loss in respect of, indebtedness, obligations or liabilities of another Person of the kind described in clauses (a) through (d), (f) any indebtedness or other obligations described in clauses (a) through (d) secured by any mortgage, pledge, lien or other encumbrance existing on property which is owned or held by the Person, regardless of whether the indebtedness or other obligation secured thereby shall have been assumed by the Person and (g) any and all deferrals, renewals, extensions, refinancings and refundings of, or amendments, modifications or supplements to, any indebtedness, obligation or liability of the kind described in clauses (a) through (f). 3 10 "Indenture" means this Indenture as amended or supplemented from time to time pursuant to the terms of this Indenture. "Initial Purchasers" means Credit Suisse First Boston Corporation and ABN AMRO Rothschild LLC. "Officer" means the Chairman or any Co-Chairman of the Board, any Vice Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer, the Controller, the Secretary or any Assistant Secretary of the Company. "Officers' Certificate" means a certificate signed by two Officers; provided, however, that for purposes of Sections 4.11 and 6.3, "Officers' Certificate" means a certificate signed by the principal executive officer, principal financial officer or principal accounting officer of the Company and by one other Officer. "Opinion of Counsel" means a written opinion from legal counsel. The counsel may be an employee of or counsel to the Company or the Trustee. "Person" or "person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Principal" or "principal" of a debt security, including the Securities, means the principal of the security plus, when appropriate, the premium, if any, on the security. "Redemption Date", when used with respect to any Security to be redeemed, means the date fixed for such redemption pursuant to this Indenture. "Redemption Price", when used with respect to any Security to be redeemed, means the price fixed for such redemption pursuant to this Indenture, as set forth in the form of Security annexed as Exhibit A hereto. "Registration Rights Agreement" means the Registration Rights Agreement dated, as of May 22, 2001, among the Company and the Initial Purchasers. "Representative" means the (a) indenture trustee or other trustee, agent or representative for any Senior Indebtedness or (b) with respect to any Senior Indebtedness that does not have any such trustee, agent or other representative, (i) in the case of such Senior Indebtedness issued pursuant to an agreement providing for voting arrangements as among the holders or owners of such Senior Indebtedness, any holder or owner of such Senior Indebtedness acting with the consent of the required persons necessary to bind such holders or owners of such Senior Indebtedness and (ii) in the case of all other such Senior Indebtedness, the holder or owner of such Senior Indebtedness. "Responsible Officer", when used with respect to the Trustee, means any officer of the Trustee including without limitation any vice president, assistant vice president, assistant treasurer, assistant secretary, corporate trust officer, assistant corporate trust officer or other employee of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge and familiarity with the particular subject. "Restricted Global Security" means a Global Security that is a Restricted Security. 4 11 "Restricted Security" means a Security required to bear the restricted legend set forth in the form of Security set forth in Exhibit A of this Indenture. "Regulation S" means Regulation S under the Securities Act or any successor to such Rule. "Rule 144" means Rule 144 under the Securities Act or any successor to such Rule. "Rule 144A" means Rule 144A under the Securities Act or any successor to such Rule. "Scotiabanc Agreements" means (i) the Participation Agreement, dated as of January 19, 2000, by and among the Company, as Lessee, Scotiabanc Inc., as Lessor, and The Bank of Nova Scotia, as a Rent Purchaser and as the Agent, (ii) the Lease, dated as of January 19, 2000, by and between the Company and Scotiabanc Inc., and (iii) any and all other documents, instruments or agreements related to such agreements, each as amended, modified, extended, supplemented, restated or replaced from time to time. "SEC" means the Securities and Exchange Commission. "Securities" means the 4% Convertible Subordinated Notes due June 1, 2006 or any of them (each, a "Security"), as amended or supplemented from time to time, that are issued under this Indenture. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, as in effect from time to time. "Senior Indebtedness" means the principal of, premium, if any, interest (including all interest accruing subsequent to the commencement of any bankruptcy or similar proceeding, whether or not a claim for post-petition interest is allowable as a claim in such proceeding) and rent payable on or in connection with, and all fees, costs, expenses and other amounts accrued or due on or in connection with, Indebtedness of the Company, whether outstanding on the date of this Indenture or thereafter created, incurred, assumed, guaranteed or in effect guaranteed by the Company (including all deferrals, renewals, extensions or refundings of, or amendments, modifications or supplements to, the foregoing), unless in the case of any particular Indebtedness the instrument creating or evidencing the same or the assumption or guarantee thereof expressly provides that such Indebtedness shall not be senior in right of payment to the Securities or expressly provides that such Indebtedness is "pari passu" or "junior" to the Securities. Notwithstanding the foregoing, Senior Indebtedness shall not include (i) any Indebtedness of the Company to any Subsidiary of the Company a majority of the voting stock of which is owned, directly or indirectly, by the Company, (ii) the Securities or (iii) the Company's 5% Convertible Subordinated Notes due 2002. "Significant Subsidiary" means, with respect to any Person, a Subsidiary of such Person organized under the laws of any State of the United States of America or the District of Columbia that would constitute a "significant subsidiary" as such term is defined under Rule 1-02 of Regulation S-X of the Securities and Exchange Commission. "Subsidiary" means, in respect of any Person, any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, general partners or trustees thereof is at the time owned or controlled, directly or indirectly, by (i) such Person; (ii) such Person and one or more Subsidiaries of such Person; or (iii) one or more Subsidiaries of such Person. 5 12 "TIA" means the Trust Indenture Act of 1939, as amended, as in effect on the date of this Indenture, except as provided in Section 11.3, and except to the extent any amendment to the Trust Indenture Act expressly provides for application of the Trust Indenture Act as in effect on another date. "Trading Day" means, with respect to any security, each Monday, Tuesday, Wednesday, Thursday and Friday, other than any day on which securities are not generally traded on the principal exchange or market in which such security is traded. "Trustee" means the party named as such in this Indenture until a successor replaces it in accordance with the provisions of this Indenture, and thereafter means the successor. "Trust Officer" means, with respect to the Trustee, any officer assigned to the Corporate Trust Office, and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer's knowledge of and familiarity with the particular subject. "Voting Stock" of a Person means all classes of Capital Stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. SECTION 1.2. OTHER DEFINITIONS.
TERM DEFINED IN SECTION ---- ------------------ "Agent Members"........................................................ 2.1 "Bankruptcy Law"....................................................... 8.1 "Change in Control".................................................... 3.8 "Change in Control Purchase Date"...................................... 3.8 "Change in Control Purchase Notice".................................... 3.8 "Change in Control Purchase Price"..................................... 3.8 "Closing Price"........................................................ 4.6(e) "Company Order"........................................................ 2.2 "Conversion Agent"..................................................... 2.3 "Conversion Date"...................................................... 4.2 "Conversion Price"..................................................... 4.6 "Current Market Price"................................................. 4.6(e) "Custodian"............................................................ 8.1 "DTC".................................................................. 2.1 "Depositary"........................................................... 2.1 "Determination Date"................................................... 4.6(d) "Event of Default"..................................................... 8.1 "Expiration Date"...................................................... 4.6(d) "Expiration Time"...................................................... 4.6(d) "Legal Holiday"........................................................ 12.7 "NNM".................................................................. 4.6(e) "Paying Agent"......................................................... 2.3 "Payment Blockage Notice".............................................. 5.2 "Primary Registrar".................................................... 2.3
6 13
TERM DEFINED IN SECTION ---- ------------------ "Purchase Agreement"................................................... 2.1 "Purchased Shares"..................................................... 4.6(d) "QIB".................................................................. 2.1 "Registrar"............................................................ 2.3 "Triggering Distribution".............................................. 4.6(d)
SECTION 1.3. TRUST INDENTURE ACT PROVISIONS. Whenever this Indenture refers to a provision of the TIA, that provision is incorporated by reference in and made a part of this Indenture. The Indenture shall also include those provisions of the TIA required to be included herein by the provisions of the Trust Indenture Reform Act of 1990. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Securities; "indenture security holder" means a Securityholder; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the indenture securities means the Company or any other obligor on the Securities. All other terms used in this Indenture that are defined in the TIA, defined by TIA reference to another statute or defined by any SEC rule and not otherwise defined herein have the meanings assigned to them therein. SECTION 1.4. RULES OF CONSTRUCTION. Unless the context otherwise requires: (A) a term has the meaning assigned to it; (B) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (C) words in the singular include the plural, and words in the plural include the singular; (D) provisions apply to successive events and transactions; (E) the term "merger" includes a statutory share exchange and the term "merged" has a correlating meaning; (F) the masculine gender includes the feminine and the neuter; (G) references to agreements and other instruments include subsequent amendments thereto; and 7 14 (H) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. ARTICLE 2 THE SECURITIES SECTION 2.1. FORM AND DATING. The Securities and the Trustee's certificate of authentication shall be substantially in the respective forms set forth in Exhibit A, which Exhibit is incorporated in and made part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Security shall be dated the date of its authentication. The Securities are being offered and sold by the Company pursuant to a Purchase Agreement, dated May 17, 2001 (the "Purchase Agreement"), between the Company and the Initial Purchasers, in transactions exempt from, or not subject to, the registration requirements of the Securities Act. (a) Restricted Global Securities. All of the Securities are initially being offered and sold to qualified institutional buyers as defined in Rule 144A (collectively, "QIBs" or individually, each a "QIB") in reliance on Rule 144A under the Securities Act or to non-U.S. Persons in offshore transactions in reliance on Regulation S under the Securities Act and shall be issued initially in the form of one or more Restricted Global Securities, which shall be deposited on behalf of the purchasers of the Securities represented thereby with the Trustee, at its Corporate Trust Office, as custodian for the depositary, The Depository Trust Company ("DTC") (such depositary, or any successor thereto, being hereinafter referred to as the "Depositary"), and registered in the name of its nominee, Cede & Co., duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the Restricted Global Security may from time to time be increased or decreased by adjustments made on the records of the Trustee as hereinafter provided, subject in each case to compliance with the Applicable Procedures. (b) Global Securities In General. Each Global Security shall represent such of the outstanding Securities as shall be specified therein and each shall provide that it shall represent the aggregate amount of outstanding Securities from time to time endorsed thereon and that the aggregate amount of outstanding Securities represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges, redemptions, purchases or conversions of such Securities. Any adjustment of the aggregate principal amount of a Global Security to reflect the amount of any increase or decrease in the amount of outstanding Securities represented thereby shall be made by the Trustee in accordance with instructions given by the Holder thereof as required by Section 2.12 hereof and shall be made on the records of the Trustee and the Depositary. Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depositary or under the Global Security, and the Depositary (including, for this purpose, its nominee) may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner and Holder of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall (A) prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or (B) impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Security. 8 15 (c) Book Entry Provisions. The Company shall execute and the Trustee shall, in accordance with this Section 2.1(c), authenticate and deliver initially one or more Global Securities that (a) shall be registered in the name of the depositary, (b) shall be delivered by the Trustee to the Depositary or pursuant to the Depositary's instructions and (c) shall bear legends substantially to the following effect: "UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO LAM RESEARCH CORPORATION (THE "COMPANY") OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE TWO OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF." SECTION 2.2. EXECUTION AND AUTHENTICATION. An Officer shall sign the Securities for the Company by manual or facsimile signature attested by the manual or facsimile signature of the Secretary or an Assistant Secretary of the Company. Typographic and other minor errors or defects in any such facsimile signature shall not affect the validity or enforceability of any Security which has been authenticated and delivered by the Trustee. If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee shall authenticate and make available for delivery Securities for original issue in the aggregate principal amount of up to $300,000,000 upon receipt of a written order or orders of the Company signed by two Officers of the Company (a "Company Order"). The Company Order shall specify the amount of Securities to be authenticated, shall provide that all such Securities will be represented by a Restricted Global Security and the date on which each original issue of Securities is to be authenticated. The aggregate principal amount of Securities outstanding at any time may not exceed $300,000,000, except as provided in Section 2.7. The Trustee shall act as the initial authenticating agent. Thereafter, the Trustee may appoint an authenticating agent acceptable to the Company to authenticate Securities. An authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent shall have the same rights as an Agent to deal with the Company or an Affiliate of the Company. 9 16 The Securities shall be issuable only in registered form without coupons and only in denominations of $1,000 and any integral multiple thereof. SECTION 2.3. REGISTRAR, PAYING AGENT AND CONVERSION AGENT. The Company shall maintain one or more offices or agencies where Securities may be presented for registration of transfer or for exchange (each, a "Registrar"), one or more offices or agencies where Securities may be presented for payment (each, a "Paying Agent"), one or more offices or agencies where Securities may be presented for conversion (each, a "Conversion Agent") and one or more offices or agencies where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company will at all times maintain a Paying Agent, Conversion Agent, Registrar and an office or agency where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served in the Borough of Manhattan, the City of New York. One of the Registrars (the "Primary Registrar") shall keep a register of the Securities and of their transfer and exchange. The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any Agent not a party to this Indenture. If the Company fails to maintain a Registrar, Paying Agent, Conversion Agent or agent for service of notices and demands in any place required by this Indenture, or fails to give the foregoing notice, the Trustee shall act as such. The Company or any Affiliate of the Company may act as Paying Agent (except for the purposes of Section 6.1 and Article 10). The Company hereby initially designates the Trustee as Paying Agent, Registrar, Custodian and Conversion Agent, and each of the Corporate Trust Office of the Trustee and the office of the agent of the Trustee in New York, New York (which shall initially be IBJ Schroder Bank and Trust Company, as agent of the Trustee located at One State Street, New York, New York 10004, Attention: Corporate Trust Administration (Lam Research Corporation -- 4% Convertible Subordinated Notes due June 1, 2006)), one such office or agency of the Company for each of the aforesaid purposes. SECTION 2.4. PAYING AGENT TO HOLD MONEY IN TRUST. Prior to 11:00 a.m., New York City time, on each due date of the principal of or interest, if any, on any Securities, the Company shall deposit with a Paying Agent a sum sufficient to pay such principal or interest, if any, so becoming due. Subject to Section 5.7, a Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all money held by the Paying Agent for the payment of principal of or interest, if any, on the Securities, and shall notify the Trustee of any default by the Company (or any other obligor on the Securities) in making any such payment. If the Company or an Affiliate of the Company acts as Paying Agent, it shall, before 11:00 a.m., New York City time, on each due date of the principal of or interest on any Securities, segregate the money and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee, and the Trustee may at any time during the continuance of any default, upon written request to a Paying Agent, require such Paying Agent to forthwith pay to the Trustee all sums so held in trust by such Paying Agent. Upon doing so, the Paying Agent (other than the Company) shall have no further liability for the money. 10 17 SECTION 2.5. SECURITYHOLDER LISTS. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Primary Registrar, the Company shall furnish to the Trustee on or before each semiannual interest payment date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders. SECTION 2.6. TRANSFER AND EXCHANGE. (a) Subject to compliance with any applicable additional requirements contained in Section 2.12, when a Security is presented to a Registrar with a request to register a transfer thereof or to exchange such Security for an equal principal amount of Securities of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested; provided, however, that every Security presented or surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by an assignment form and, if applicable, a transfer certificate each in the form included in Exhibit A, and in form satisfactory to the Registrar duly executed by the Holder thereof or its attorney duly authorized in writing. To permit registration of transfers and exchanges, upon surrender of any Security for registration of transfer or exchange at an office or agency maintained pursuant to Section 2.3, the Company shall execute and the Trustee shall authenticate Securities of a like aggregate principal amount at the Registrar's request. Any exchange or transfer shall be without charge, except that the Company or the Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto, and provided, that this sentence shall not apply to any exchange pursuant to Section 2.7, 2.10, 2.12(a)(1), 3.6, 3.11, 4.2 (last paragraph) or 11.5. Neither the Company, any Registrar nor the Trustee shall be required to exchange or register a transfer of (a) any Securities for a period of 15 days next preceding any mailing of a notice of Securities to be redeemed, (b) any Securities or portions thereof selected or called for redemption (except, in the case of redemption of a Security in part, the portion not to be redeemed) or (c) any Securities or portions thereof in respect of which a Change in Control Purchase Notice has been delivered and not withdrawn by the Holder thereof (except, in the case of the purchase of a Security in part, the portion not to be purchased). All Securities issued upon any transfer or exchange of Securities shall be valid obligations of the Company, evidencing the same debt and entitled to the same benefits under this Indenture, as the Securities surrendered upon such transfer or exchange. (b) Any Registrar appointed pursuant to Section 2.3 hereof shall provide to the Trustee such information as the Trustee may reasonably require in connection with the delivery by such Registrar of Securities upon transfer or exchange of Securities. (c) Each Holder of a Security agrees to indemnify the Company and the Trustee against any liability that may result from the transfer, exchange or assignment of such Holder's Security in violation of any provision of this Indenture and/or applicable United States federal or state securities law. The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Agent Members or other beneficial owners of interests in any Global Security) other than to require delivery of such certificates and other 11 18 documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. SECTION 2.7. REPLACEMENT SECURITIES. If any mutilated Security is surrendered to the Company, a Registrar or the Trustee, or the Company, a Registrar and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Security, and there is delivered to the Company, the applicable Registrar and the Trustee such Security or indemnity as will be required by them to save each of them harmless, then, in the absence of notice to the Company, such Registrar or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute, and upon its written request the Trustee shall authenticate and deliver, in exchange for any such mutilated Security or in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount, bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, or is about to be redeemed or purchased by the Company pursuant to Article 3, the Company in its discretion may, instead of issuing a new Security, pay, redeem or purchase such Security, as the case may be. Upon the issuance of any new Securities under this Section 2.7, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses (including the reasonable fees and expenses of the Trustee or the Registrar) in connection therewith. Every new Security issued pursuant to this Section 2.7 in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. The provisions of this Section 2.7 are (to the extent lawful) exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 2.8. OUTSTANDING SECURITIES. Securities outstanding at any time are all Securities authenticated by the Trustee, except for those canceled by it, those delivered to it for cancellation and those described in this Section 2.8 as not outstanding. If a Security is replaced pursuant to Section 2.7, it ceases to be outstanding unless the Company receives proof satisfactory to it that the replaced Security is held by a bona fide purchaser. If a Paying Agent (other than the Company or an Affiliate of the Company) holds on a Redemption Date, a Change in Control Purchase Date or the Final Maturity Date money sufficient to pay the principal of (including premium, if any) and accrued interest on Securities (or portions thereof) payable on that date, then on and after that date such Securities (or portions thereof, as the case may be) cease to be outstanding and interest on them ceases to accrue. 12 19 Subject to the restrictions contained in Section 2.9, a Security does not cease to be outstanding because the Company or an Affiliate of the Company holds the Security. SECTION 2.9. TREASURY SECURITIES. In determining whether the Holders of the required principal amount of Securities have concurred in any notice, direction, waiver or consent, Securities owned by the Company or any other obligor on the Securities or by any Subsidiary of the Company or of such other obligor shall be disregarded, except that, for purposes of determining whether the Trustee shall be protected in relying on any such notice, direction, waiver or consent, only Securities which a Trust Officer of the Trustee actually knows are so owned shall be so disregarded. Securities so owned which have been pledged in good faith shall not be disregarded if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to the Securities and that the pledgee is not the Company or any other obligor on the Securities or any Affiliate of the Company or of such other obligor. SECTION 2.10. TEMPORARY SECURITIES. Until definitive Securities are ready for delivery, the Company may prepare and execute, and, upon receipt of a Company Order, the Trustee shall authenticate and deliver, temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company with the consent of the Trustee considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate and deliver definitive Securities in exchange for temporary Securities. SECTION 2.11. CANCELLATION. The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar, the Paying Agent and the Conversion Agent shall forward to the Trustee or its agent any Securities surrendered to them for transfer, exchange, payment or conversion. The Trustee and no one else shall cancel, in accordance with its standard procedures, all Securities surrendered for transfer, exchange, redemption, payment, conversion or cancellation and shall deliver the canceled Securities to the Company. All Securities which are redeemed, purchased or otherwise acquired by the Company or any of its Subsidiaries prior to the Final Maturity Date shall be delivered to the Trustee for cancellation and the Company may not hold or resell such Securities or issue any new Securities to replace any such Securities or any Securities that any Holder has converted pursuant to Article 4. Without limitation to the foregoing, any Securities acquired by any investment bankers or other purchasers pursuant to Section 3.7 shall be surrendered for conversion and thereafter cancelled, and may not be reoffered, sold or otherwise transferred. SECTION 2.12. LEGEND; ADDITIONAL TRANSFER AND EXCHANGE REQUIREMENTS. (a) If Securities are issued upon the transfer, exchange or replacement of Securities subject to restrictions on transfer and bearing the legends set forth on the forms of Securities attached hereto as Exhibit A setting forth such restrictions (collectively, the "Legend"), or if a request is made to remove the Legend on a Security, the Securities so issued shall bear the Legend, or the Legend shall not be removed, as the case may be, unless there is delivered to the Company and the Registrar such satisfactory evidence, which shall include an Opinion of Counsel if requested by the Company or such Registrar, as may be reasonably required by the Company and the Registrar, that neither the Legend nor the restrictions on transfer set forth 13 20 therein are required to ensure that transfers thereof comply with the provisions of Rule 144A or Rule 144 under the Securities Act or that such Securities are not "restricted" within the meaning of Rule 144 under the Securities Act; provided that no such evidence need be supplied in connection with the sale of such Security pursuant to a registration statement that is effective at the time of such sale. Upon (i) provision of such satisfactory evidence if requested, or (ii) notification by the Company to the Trustee and registrar of the sale of such Security pursuant to a registration statement that is effective at the time of such sale, the Trustee, at the written direction of the Company, shall authenticate and deliver a Security that does not bear the Legend. If the Legend is removed from the face of a Security and the Security is subsequently held by an Affiliate of the Company, the Legend shall be reinstated. (b) A Global Security may not be transferred, in whole or in part, to any Person other than the Depositary or a nominee or any successor thereof, and no such transfer to any such other Person may be registered; provided that the foregoing shall not prohibit any transfer of a Security that is issued in exchange for a Global Security but is not itself a Global Security. No transfer of a Security to any Person shall be effective under this Indenture or the Securities unless and until such Security has been registered in the name of such Person. Notwithstanding any other provisions of this Indenture or the Securities, transfers of a Global Security, in whole or in part, shall be made only in accordance with this Section 2.12. (c) Subject to the succeeding paragraph, every Security shall be subject to the restrictions on transfer provided in the Legend other than a Restricted Global Security. Whenever any Restricted Security other than a Restricted Global Security is presented or surrendered for registration of transfer or for exchange for a Security registered in a name other than that of the Holder, such Restricted Security must be accompanied by a certificate in substantially the form set forth in Exhibit B, dated the date of such surrender and signed by the Holder of such Security, as to compliance with such restrictions on transfer. The Registrar shall not be required to accept for such registration of transfer or exchange any Security not so accompanied by a properly completed certificate. (d) The restrictions imposed by the Legend upon the transferability of any Security shall cease and terminate when such Security has been sold pursuant to an effective registration statement under the Securities Act or transferred in compliance with Rule 144 under the Securities Act (or any successor provision thereto) or, if earlier, upon the expiration of the holding period applicable to sales thereof under Rule 144(k) under the Securities Act (or any successor provision). Any Security as to which such restrictions on transfer shall have expired in accordance with their terms or shall have terminated may, upon a surrender of such Security for exchange to the Registrar in accordance with the provisions of this Section 2.12 (accompanied, in the event that such restrictions on transfer have terminated by reason of a transfer in compliance with Rule 144 or any successor provision, by, if requested, an opinion of counsel reasonably acceptable to the Company, addressed to the Company and in form acceptable to the Company, to the effect that the transfer of such Security has been made in compliance with Rule 144 or such successor provision), be exchanged for a new Security, of like tenor and aggregate principal amount, which shall not bear the restrictive Legend. The Company shall inform the Trustee of the effective date of any registration statement registering the Securities under the Securities Act. The Trustee shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the aforementioned opinion of counsel or registration statement. (e) As used in the preceding two paragraphs of this Section 2.12, the term "transfer" encompasses any sale, pledge, transfer, hypothecation or other disposition of any Security. (f) The provisions of clauses (A), (B), (C) and (D) below shall apply only to Global Securities: 14 21 (A) Notwithstanding any other provisions of this Indenture or the Securities, a Global Security shall not be exchanged in whole or in part for a Security registered in the name of any Person other than the Depositary or one or more nominees thereof, provided that a Global Security may be exchanged for Securities registered in the names of any person designated by the Depositary in the event that (i) the Depositary has notified the Company that it is unwilling or unable to continue as Depositary for such Global Security or such Depositary has ceased to be a "clearing agency" registered under the Exchange Act, and a successor Depositary is not appointed by the Company within 90 days, (ii) the Company has provided the Depositary with written notice that it has decided to discontinue use of the system of book entry transfer through the Depositary or any successor Depositary or (iii) an event of default has occurred and is continuing with respect to the Securities. Any Global Security exchanged pursuant to clauses (i) or (ii) above shall be so exchanged in whole and not in part, and any Global Security exchanged pursuant to clause (iii) above may be exchanged in whole or from time to time in part as directed by the Depositary. Any Security issued in exchange for a Global Security or any portion thereof shall be a Global Security; provided that any such Security so issued that is registered in the name of a Person other than the Depositary or a nominee thereof shall not be a Global Security. (B) Securities issued in exchange for a Global Security or any portion thereof shall be issued in definitive, fully registered form, without interest coupons, shall have an aggregate principal amount equal to that of such Global Security or portion thereof to be so exchanged, shall be registered in such names and be in such authorized denominations as the Depositary shall designate and shall bear the applicable legends provided for herein. Any Global Security to be exchanged in whole shall be surrendered by the Depositary to the Trustee, as Registrar. With regard to any Global Security to be exchanged in part, either such Global Security shall be so surrendered for exchange or, if the Trustee is acting as custodian for the Depositary or its nominee with respect to such Global Security, the principal amount thereof shall be reduced, by an amount equal to the portion thereof to be so exchanged, by means of an appropriate adjustment made on the records of the Trustee. Upon any such surrender or adjustment, the Trustee shall authenticate and deliver the Security issuable on such exchange to or upon the order of the Depositary or an authorized representative thereof. (C) Subject to the provisions of clause (E) below, the registered Holder may grant proxies and otherwise authorize any Person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a holder is entitled to take under this Indenture or the Securities. (D) In the event of the occurrence of any of the events specified in clause (1) above, the Company will promptly make available to the Trustee a reasonable supply of Certificated Securities in definitive, fully registered form, without interest coupons. (E) Neither Agent Members nor any other Persons on whose behalf Agent Members may act shall have any rights under this Indenture with respect to any Global Security registered in the name of the Depositary or any nominee thereof, or under any such Global Security, and the Depositary or such nominee, as the case may be, may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner and holder of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the 15 22 Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or such nominee, as the case may be, or impair, as between the Depositary, its Agent Members and any other person on whose behalf an Agent Member may act, the operation of customary practices of such Persons governing the exercise of the rights of a holder of any Security. SECTION 2.13. CUSIP NUMBERS. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption or purchase as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption or purchase and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption or purchase shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee of any change in the "CUSIP" numbers. ARTICLE 3 REDEMPTION AND PURCHASES SECTION 3.1. RIGHT TO REDEEM; NOTICE TO TRUSTEE. The Securities may be redeemed at the election of the Company, as a whole or from time to time in part, at any time on or after June 5, 2004, at the Redemption Prices specified in paragraph 5 of the form of Security attached hereto as Exhibit A, together with accrued interest up to but not including the Redemption Date; provided that if the Redemption Date is an interest payment date, interest will be payable to the Holders in whose name the Securities are registered at the close of business on the relevant record dates for payment of such interest. If the Company elects to redeem Securities pursuant to this Section and paragraph 5 of the Securities, it shall notify the Trustee at least 25 days prior to the Redemption Date as fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee) of the Redemption Date and the principal amount of Securities to be redeemed. If fewer than all of the Securities are to be redeemed, the record date relating to such redemption shall be selected by the Company and given to the Trustee, which record date shall not be less than ten days after the date of notice to the Trustee. SECTION 3.2. SELECTION OF SECURITIES TO BE REDEEMED. If less than all of the Securities are to be redeemed, the Trustee shall, not more than 60 days prior to the Redemption Date, select the Securities to be redeemed. The Trustee shall make the selection from the Securities outstanding and not previously called for redemption, by lot, or in its discretion, on a pro rata basis. Securities in denominations of $1,000 may only be redeemed in whole. The Trustee may select for redemption portions (equal to $1,000 or any multiple thereof) of the principal of Securities that have denominations larger than $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. If any Security selected for partial redemption is converted in part before termination of the conversion right with respect to the portion of the Security so selected, the converted portion of such Security shall be deemed to be the portion selected for redemption. Securities which have been converted during a 16 23 selection of Securities to be redeemed shall be treated by the Trustee as outstanding for the purpose of such selection. SECTION 3.3. NOTICE OF REDEMPTION. At least 20 days but not more than 60 days before a Redemption Date, the Company shall mail or cause to be mailed a notice of redemption to each Holder of Securities to be redeemed at such Holder's address as it appears on the Primary Registrar's books. The notice shall identify the Securities (including CUSIP numbers) to be redeemed and shall state: (1) the Redemption Date; (2) the Redemption Price; (3) the then current Conversion Price; (4) the name and address of each Paying Agent and Conversion Agent; (5) that Securities called for redemption must be presented and surrendered to a Paying Agent to collect the Redemption Price; (6) that Holders who wish to convert Securities must surrender such Securities for conversion no later than the close of business on the Business Day immediately preceding the Redemption Date and must satisfy the other requirements in paragraph 8 of the Securities; (7) that, unless the Company defaults in making the redemption payment, interest on Securities called for redemption shall cease accruing on and after the Redemption Date and the only remaining right of the Holder shall be to receive payment of the Redemption Price, plus accrued interest, if any upon presentation and surrender to a Paying Agent of the Securities; and (8) if any Security is being redeemed in part, the portion of the principal amount of such Security to be redeemed and that, after the Redemption Date, upon presentation and surrender of such Security, a new Security or Securities in aggregate principal amount equal to the unredeemed portion thereof will be issued. If any of the Securities to be redeemed is in the form of a Global Security, then the Company shall modify such notice to the extent necessary to accord with the procedures of the Depositary applicable to redemptions. At the Company's written request, which request shall (i) be irrevocable once given and (ii) set forth all relevant information required by clauses (1) through (8) of the preceding paragraph, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. SECTION 3.4. EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is mailed, Securities called for redemption become due and payable on the Redemption Date and at the Redemption Price stated in the notice, together with accrued interest, if any, except for Securities that are converted in accordance with the provisions of Article 4. Upon presentation and surrender to a Paying Agent, Securities called for redemption shall be paid at the Redemption Price, plus accrued interest up to but not including the Redemption Date; provided if the Redemption Date is an interest 17 24 payment date, interest will be payable to the Holders in whose names the Securities are registered at the close of business on the relevant record dates for payment of such interest. SECTION 3.5. DEPOSIT OF REDEMPTION PRICE. Prior to 11:00 a.m. New York City time, on the Redemption Date, the Company shall deposit with a Paying Agent (or, if the Company acts as Paying Agent, shall segregate and hold in trust) money sufficient to pay the Redemption Price of and accrued interest on all Securities to be redeemed on that date, other than Securities or portions thereof called for redemption on that date which have been delivered by the Company to the Trustee for cancellation or have been converted. The Paying Agent shall return to the Company any money not required for that purpose because of the conversion of Securities pursuant to Article 4 or, if such money is then held by the Company in trust and is not required for such purpose, it shall be discharged from the trust. SECTION 3.6. SECURITIES REDEEMED IN PART. Upon presentation and surrender of a Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate and deliver to the Holder a new Security equal in principal amount to the unredeemed portion of the Security surrendered. SECTION 3.7. CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION. In connection with any redemption of Securities, the Company may arrange for the purchase and conversion of any Securities called for redemption by an agreement with one or more investment bankers or other purchasers to purchase such Securities by paying to a Paying Agent (other than the Company or any of its Affiliates) in trust for the Holders, on or before 11:00 a.m. New York City time on the Redemption Date, an amount that, together with any amounts deposited with such Paying Agent by the Company for the redemption of such Securities, is not less than the Redemption Price, together with interest accrued to, but not including, the Redemption Date, of such Securities. Notwithstanding anything to the contrary contained in this Article 3, the obligation of the Company to pay the Redemption Price of such Securities, including all accrued interest, shall be deemed to be satisfied and discharged to the extent such amount is so paid by such purchasers; provided, however, that nothing in this Section 3.7 shall relieve the Company of its obligation to pay the Redemption Price, plus accrued interest to but excluding the relevant Redemption Date, on Securities called for redemption. If such an agreement with one or more investment banks or other purchasers is entered into, any Securities called for redemption and not surrendered for conversion by the Holders thereof prior to the relevant Redemption Date may, at the option of the Company upon written notice to the Trustee, be deemed, to the fullest extent permitted by law, acquired by such purchasers from such Holders and (notwithstanding anything to the contrary contained in Article 4) surrendered by such purchasers for conversion, all as of 11:00 a.m. New York City time on the Redemption Date, subject to payment of the above amount as aforesaid. The Paying Agent shall hold and pay to the Holders whose Securities are selected for redemption any such amount paid to it for purchase in the same manner as it would money deposited with it by the Company for the redemption of Securities. Without the Paying Agent's prior written consent, no arrangement between the Company and such purchasers for the purchase and conversion of any Securities shall increase or otherwise affect any of the powers, duties, responsibilities or obligations of the Paying Agent as set forth in this Indenture, and the Company agrees to indemnify the Paying Agent from, and hold it harmless against, any loss, liability or expense arising out of or in connection with any such arrangement for the purchase and conversion of any Securities between the Company and such purchasers, including the costs and expenses incurred by the Paying Agent in the defense of any claim or liability arising out of or in 18 25 connection with the exercise or performance of any of its powers, duties, responsibilities or obligations under this Indenture. SECTION 3.8. PURCHASE OF SECURITIES AT OPTION OF THE HOLDER UPON CHANGE IN CONTROL. (a) (i) If at any time that Securities remain outstanding there shall occur a Change in Control, Securities shall be purchased in cash by the Company at the option of the Holders, but subject to the provisions of Section 3.8(a)(ii) thereof as of the date that is 35 Business Days after the occurrence of the Change in Control (the "Change in Control Purchase Date") at a purchase price equal to the principal amount of the Securities, plus accrued and unpaid interest to, but excluding, the Change in Control Purchase Date (the "Change in Control Purchase Price"). A "Change in Control" shall be deemed to have occurred if any of the following occurs after the date hereof: (1) any "person" or "group" (as such terms are defined below) is or becomes the "beneficial owner" (as defined below), directly or indirectly, of shares of Voting Stock of the Company representing 50% or more of the total voting power of all outstanding classes of Voting Stock of the Company or has the power, directly or indirectly, to elect a majority of the members of the Board of Directors of the Company; or (2) the Company consolidates with, or merges with or into, another Person or the Company sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of the assets of the Company, or any Person consolidates with, or merges with or into, the Company, in any such event other than pursuant to a transaction in which the Persons that "beneficially owned" (as defined below), directly or indirectly, shares of Voting Stock of the Company immediately prior to such transaction "beneficially own" (as defined below), directly or indirectly, shares of Voting Stock of the Company representing at least a majority of the total voting power of all outstanding classes of Voting Stock of the surviving or transferee Person; or (3) there shall occur the liquidation or dissolution of the Company. For the purpose of the definition of "Change in Control", (i) "person" and "group" have the meanings given such terms under Section 13(d) and 14(d) of the Exchange Act or any successor provision to either of the foregoing, and the term "group" includes any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act (or any successor provision thereto), (ii) a "beneficial owner" shall be determined in accordance with Rule 13d-3 under the Exchange Act, as in effect on the date of this Indenture, except that the number of shares of Voting Stock of the Company shall be deemed to include, in addition to all outstanding shares of Voting Stock of the Company and Unissued Shares deemed to be held by the "person" or "group" (as such terms are defined above) or other Person with respect to which the Change in Control determination is being made, all Unissued Shares deemed to be held by all other Persons, and (iii) the terms "beneficially owned" and "beneficially own" shall have meanings correlative to that of "beneficial owner". The term "Unissued Shares" means shares of Voting Stock not outstanding that are subject to options, warrants, rights to purchase or conversion privileges exercisable within 60 days of the date of determination of a Change in Control. 19 26 Notwithstanding anything to the contrary set forth in this Section 3.8, a Change in Control will not be deemed to have occurred if either: (1) the Closing Price (determined in accordance with Section 4.6(e) of this Indenture) of the Common Stock for any five Trading Days during the ten Trading Days immediately preceding the Change in Control is at least equal to 105% of the Conversion Price in effect on such Trading Day; or (2) in the case of a merger or consolidation, all of the consideration excluding cash payments for fractional shares in the merger or consolidation constituting the Change in Control consists of common stock traded on a United States national securities exchange or quoted on the Nasdaq National Market (or which will be so traded or quoted when issued or exchanged in connection with such Change In Control) and as a result of such transaction or transactions the Securities become convertible solely into such common stock. (b) Within 15 Business Days after the occurrence of a Change in Control, the Company shall mail a written notice of the Change in Control to the Trustee and to each Holder (and to beneficial owners as required by applicable law). The notice shall include the form of a Change in Control Purchase Notice to be completed by the Holder and shall state: (1) the date of such Change in Control and, briefly, the events causing such Change in Control; (2) the date by which the Change in Control Purchase Notice pursuant to this Section 3.8 must be given; (3) the Change in Control Purchase Date; (4) the Change in Control Purchase Price; (5) briefly, the conversion rights of the Securities; (6) the name and address of each Paying Agent and Conversion Agent; (7) the Conversion Price and any adjustments thereto; (8) that Securities as to which a Change in Control Purchase Notice has been given may be converted into Common Stock pursuant to Article 4 of this Indenture only to the extent that the Change in Control Purchase Notice has been withdrawn in accordance with the terms of this Indenture; (9) the procedures that the Holder must follow to exercise rights under this Section 3.8; (10) the procedures for withdrawing a Change in Control Purchase Notice, including a form of notice of withdrawal; and (11) that the Holder must satisfy the requirements set forth in the Securities in order to convert the Securities. 20 27 If any of the Securities is in the form of a Global Security, then the Company shall modify such notice to the extent necessary to accord with the procedures of the Depositary applicable to the repurchase of Global Securities. (c) A Holder may exercise its rights specified in subsection (a) of this Section 3.8 upon delivery of a written notice (which shall be in substantially the form included in Exhibit A hereto and which may be delivered by letter, overnight courier, hand delivery, facsimile transmission or in any other written form and, in the case of Global Securities, may be delivered electronically or by other means in accordance with the Depositary's customary procedures) of the exercise of such rights (a "Change in Control Purchase Notice") to any Paying Agent at any time prior to the close of business on the Business Day next preceding the Change in Control Purchase Date. The delivery of such Security to any Paying Agent (together with all necessary endorsements) at the office of such Paying Agent shall be a condition to the receipt by the Holder of the Change in Control Purchase Price therefor. The Company shall purchase from the Holder thereof, pursuant to this Section 3.8, a portion of a Security if the principal amount of such portion is $1,000 or an integral multiple of $1,000. Provisions of the Indenture that apply to the purchase of all of a Security pursuant to Sections 3.8 through 3.13 also apply to the purchase of such portion of such Security. Notwithstanding anything herein to the contrary, any Holder delivering to a Paying Agent the Change in Control Purchase Notice contemplated by this subsection (c) shall have the right to withdraw such Change in Control Purchase Notice in whole or in a portion thereof that is a principal amount of $1,000 or in an integral multiple thereof at any time prior to the close of business on the Business Day next preceding the Change in Control Purchase Date by delivery of a written notice of withdrawal to the Paying Agent in accordance with Section 3.9. A Paying Agent shall promptly notify the Company of the receipt by it of any Change in Control Purchase Notice or written withdrawal thereof. Anything herein to the contrary notwithstanding, in the case of Global Securities, any Change in Control Purchase Notice may be delivered or withdrawn and such Securities may be surrendered or delivered for purchase in accordance with the Applicable Procedures as in effect from time to time. SECTION 3.9. EFFECT OF CHANGE IN CONTROL PURCHASE NOTICE. Upon receipt by any Paying Agent of the Change in Control Purchase Notice specified in Section 3.8(c), the Holder of the Security in respect of which such Change in Control Purchase Notice was given shall (unless such Change in Control Purchase Notice is withdrawn as specified below) thereafter be entitled to receive the Change in Control Purchase Price with respect to such Security. Such Change in Control Purchase Price shall be paid to such Holder promptly following the later of (a) the Change in Control Purchase Date with respect to such Security (provided the conditions in Section 3.8(c) have been satisfied) and (b) the time of delivery of such Security to a Paying Agent by the Holder thereof in the manner required by Section 3.8(c). Securities in respect of which a Change in Control Purchase Notice has been given by the Holder thereof may not be converted into shares of Common Stock on or after the date of the delivery of such Change in Control Purchase Notice unless such Change in Control Purchase Notice has first been validly withdrawn. 21 28 A Change in Control Purchase Notice may be withdrawn by means of a written notice (which may be delivered by letter, overnight courier, hand delivery, facsimile transmission or in any other written form and, in the case of Global Securities, may be delivered electronically or by other means in accordance with the Depositary's customary procedures) of withdrawal delivered by the Holder to a Paying Agent at any time prior to the close of business on the Business Day immediately preceding the Change in Control Purchase Date, specifying the principal amount of the Security or portion thereof (which must be a principal amount of $1,000 or an integral multiple of $1,000 in excess thereof) with respect to which such notice of withdrawal is being submitted. SECTION 3.10. DEPOSIT OF CHANGE IN CONTROL PURCHASE PRICE. On or before 11:00 a.m. New York City time on the Change in Control Purchase Date, the Company shall deposit with the Trustee or with a Paying Agent (other than the Company or an Affiliate of the Company) an amount of money (in immediately available funds if deposited on such Business Day) sufficient to pay the aggregate Change in Control Purchase Price of all the Securities or portions thereof that are to be purchased as of such Change in Control Purchase Date. The manner in which the deposit required by this Section 3.10 is made by the Company shall be at the option of the Company, provided that such deposit shall be made in a manner such that the Trustee or a Paying Agent shall have immediately available funds on the Change in Control Purchase Date. If a Paying Agent holds, in accordance with the terms hereof, money sufficient to pay the Change in Control Purchase Price of any Security for which a Change in Control Purchase Notice has been tendered and not withdrawn in accordance with this Indenture then, on the Change in Control Purchase Date, such Security will cease to be outstanding and the rights of the Holder in respect thereof shall terminate (other than the right to receive the Change in Control Purchase Price as aforesaid). The Company shall publicly announce the principal amount of Securities purchased as a result of such Change in Control on or as soon as practicable after the Change in Control Purchase Date. SECTION 3.11. SECURITIES PURCHASED IN PART. Any Security that is to be purchased only in part shall be surrendered at the office of a Paying Agent and promptly after the Change in Control Purchase Date the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security, without service charge, a new Security or Securities, of such authorized denomination or denominations as may be requested by such Holder, in aggregate principal amount equal to, and in exchange for, the portion of the principal amount of the Security so surrendered that is not purchased. SECTION 3.12. COMPLIANCE WITH SECURITIES LAWS UPON PURCHASE OF SECURITIES. In connection with any offer to purchase or purchase of Securities under Section 3.8, the Company shall (a) comply with Rule 13e-4 and Rule 14e-1 (or any successor to either such Rule), if applicable, under the Exchange Act, (b) file the related Schedule TO (or any successor or similar schedule, form or report) if required under the Exchange Act, and (c) otherwise comply with all federal and state securities laws in connection with such offer to purchase or purchase of Securities, all so as to permit the rights of the Holders and obligations of the Company under Sections 3.8 through 3.11 to be exercised in the time and in the manner specified therein. 22 29 SECTION 3.13. REPAYMENT TO THE COMPANY. To the extent that the aggregate amount of cash deposited by the Company pursuant to Section 3.10 exceeds the aggregate Change in Control Purchase Price together with interest, if any, thereon of the Securities or portions thereof that the Company is obligated to purchase, then promptly after the Change in Control Purchase Date the Trustee or a Paying Agent, as the case may be, shall return any such excess cash to the Company. ARTICLE 4 CONVERSION SECTION 4.1. CONVERSION PRIVILEGE. Subject to the further provisions of this Section 4.1, a Holder of a Security may convert the principal amount of such Security (or any portion thereof equal to $1,000 or any integral multiple of $1,000 in excess thereof) into Common Stock at any time prior to the close of business on the Final Maturity Date, at the Conversion Price then in effect; provided, however, that, if such Security is called for redemption or submitted for presented for purchase pursuant to Article 3, such conversion right shall terminate at the close of business on the Business Day immediately preceding the Redemption Date or Change in Control Purchase Date, as the case may be, for such Security or such earlier date as the Holder presents such Security for redemption or for purchase (unless the Company shall default in making the redemption payment or Change in Control Purchase Price payment when due, in which case the conversion right shall terminate at the close of business on the date such default is cured and such Security is redeemed or purchased, as the case may be). The number of shares of Common Stock issuable upon conversion of a Security shall be determined by dividing the principal amount of the Security or portion thereof surrendered for conversion by the Conversion Price in effect on the Conversion Date. The initial Conversion Price is set forth in paragraph 8 of the Securities and is subject to adjustment as provided in this Article 4. Provisions of this Indenture that apply to conversion of all of a Security also apply to conversion of a portion of a Security. A Security in respect of which a Holder has delivered a Change in Control Purchase Notice pursuant to Section 3.8(c) exercising the option of such Holder to require the Company to purchase such Security may be converted only if such Change in Control Purchase Notice is withdrawn by a written notice of withdrawal delivered to a Paying Agent prior to the close of business on the Business Day immediately preceding the Change in Control Purchase Date in accordance with Section 3.9. A Holder of Securities is not entitled to any rights of a holder of Common Stock until such Holder has converted its Securities to Common Stock, and only to the extent such Securities are deemed to have been converted into Common Stock pursuant to this Article 4. SECTION 4.2. CONVERSION PROCEDURE. To convert a Security, a Holder must (a) complete and manually sign the conversion notice on the back of the Security and deliver such notice to a Conversion Agent, (b) surrender the Security to a Conversion Agent, (c) furnish appropriate endorsements and transfer documents if required by a Registrar or a Conversion Agent, and (d) pay any transfer or similar tax, if required. The date on which the Holder satisfies all of those requirements is the "Conversion Date." As soon as practicable after the Conversion Date, the 23 30 Company shall deliver to the Holder through a Conversion Agent a certificate for the number of whole shares of Common Stock issuable upon the conversion and cash in lieu of any fractional shares pursuant to Section 4.3. Anything herein to the contrary notwithstanding, in the case of Global Securities, conversion notices may be delivered and such Securities may be surrendered for conversion in accordance with the Applicable Procedures as in effect from time to time. The person in whose name the Common Stock certificate is registered shall be deemed to be a stockholder of record on the Conversion Date; provided, however, that no surrender of a Security on any date when the stock transfer books of the Company shall be closed shall be effective to constitute the person or persons entitled to receive the shares of Common Stock upon such conversion as the record holder or holders of such shares of Common Stock on such date, but such surrender shall be effective to constitute the person or persons entitled to receive such shares of Common Stock as the record holder or holders thereof for all purposes at the close of business on the next succeeding day on which such stock transfer books are open; provided, further, that such conversion shall be at the Conversion Price in effect on the Conversion Date as if the stock transfer books of the Company had not been closed. Upon conversion of a Security, such person shall no longer be a Holder of such Security. No payment or adjustment will be made for dividends or distributions on shares of Common Stock issued upon conversion of a Security. Securities so surrendered for conversion (in whole or in part) during the period from the close of business on any regular record date to the opening of business on the next succeeding interest payment date (excluding Securities or portions thereof called for redemption or presented for purchase upon a Change in Control on a Redemption Date or Change in Control Purchase Date, as the case may be, during the period beginning at the close of business on a regular record date and ending at the opening of business on the first Business Day after the next succeeding interest payment date, or if such interest payment date is not a Business Day, the second such Business Day) shall also be accompanied by payment in funds acceptable to the Company of an amount equal to the interest payable on such interest payment date on the principal amount of such Security then being converted, and such interest shall be payable to such registered Holder notwithstanding the conversion of such Security, subject to the provisions of this Indenture relating to the payment of defaulted interest by the Company. Except as otherwise provided in this Section 4.2, no payment or adjustment will be made for accrued interest on a converted Security. If the Company defaults in the payment of interest payable on such interest payment date, the Company shall promptly repay such funds to such Holder. Nothing in this Section shall affect the right of a Holder in whose name any Security is registered at the close of business on a record date to receive the interest payable on such Security on the related interest payment date in accordance with the terms of this Indenture and the Securities. If a Holder converts more than one Security at the same time, the number of shares of Common Stock issuable upon the conversion shall be based on the aggregate principal amount of Securities converted. Upon surrender of a Security that is converted in part, the Company shall execute, and the Trustee shall authenticate and deliver to the Holder, a new Security equal in principal amount to the unconverted portion of the Security surrendered. SECTION 4.3. FRACTIONAL SHARES. The Company will not issue fractional shares of Common Stock upon conversion of Securities. In lieu thereof, the Company will pay an amount in cash based upon the Closing Price (determined as set forth in Section 4.6(e)) of the Common Stock on the Trading Day immediately prior to the Conversion Date. 24 31 SECTION 4.4. TAXES ON CONVERSION. If a Holder converts a Security, the Company shall pay any documentary, stamp or similar issue or transfer tax due on the issue of shares of Common Stock upon such conversion. However, the Holder shall pay any such tax which is due because the Holder requests the shares to be issued in a name other than the Holder's name. The Conversion Agent may refuse to deliver the certificate representing the Common Stock being issued in a name other than the Holder's name until the Conversion Agent receives a sum sufficient to pay any tax which will be due because the shares are to be issued in a name other than the Holder's name. Nothing herein shall preclude any tax withholding required by law or regulation. SECTION 4.5. COMPANY TO PROVIDE STOCK. The Company shall, prior to issuance of any Securities hereunder, and from time to time as may be necessary, reserve, out of its authorized but unissued Common Stock, a sufficient number of shares of Common Stock to permit the conversion of all outstanding Securities into shares of Common Stock. All shares of Common Stock delivered upon conversion of the Securities shall be newly issued shares, shall be duly authorized, validly issued, fully paid and nonassessable and shall be free from preemptive rights and free of any lien or adverse claim. The Company will endeavor promptly to comply with all federal and state securities laws regulating the offer and delivery of shares of Common Stock upon conversion of Securities, if any, and will list or cause to have quoted such shares of Common Stock on each national securities exchange or on the Nasdaq National Market or other over-the-counter market or such other market on which the Common Stock is then listed or quoted; provided, however, that if rules of such automated quotation system or exchange permit the Company to defer the listing of such Common Stock until the first conversion of the Notes into Common Stock in accordance with the provisions of this Indenture, the Company covenants to list such Common Stock issuable upon conversion of the Notes in accordance with the requirements of such automated quotation system or exchange at such time. Any Common Stock issued upon conversion of a Security hereunder which at the time of conversion was a Restricted Security will also be a Restricted Security. SECTION 4.6. ADJUSTMENT OF CONVERSION PRICE. The conversion price as stated in paragraph 8 of the Securities (the "Conversion Price") shall be adjusted from time to time by the Company as follows: (a) In case the Company shall (i) pay a dividend on its Common Stock in shares of Common Stock, (ii) make a distribution on its Common Stock in shares of Common Stock, (iii) subdivide its outstanding Common Stock into a greater number of shares, or (iv) combine its outstanding Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior thereto shall be adjusted so that the Holder of any Security thereafter surrendered for conversion shall be entitled to receive that number of shares of Common Stock which it would have owned had such Security been converted immediately prior to the happening of such event. An adjustment made pursuant to this subsection (a) shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of subdivision or combination. (b) In case the Company shall issue rights or warrants to all or substantially all holders of its Common Stock entitling them (for a period commencing no earlier than the record date described below and 25 32 expiring not more than 60 days after such record date) to subscribe for or purchase shares of Common Stock (or securities convertible into Common Stock) at a price per share (or having a conversion price per share) less than the Current Market Price per share of Common Stock (as determined in accordance with subsection (e) of this Section 4.6) on the record date for the determination of stockholders entitled to receive such rights or warrants, the Conversion Price in effect immediately prior thereto shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to such record date by a fraction of which the numerator shall be the number of shares of Common Stock outstanding on such record date plus the number of shares which the aggregate offering price of the total number of shares of Common Stock so offered (or the aggregate conversion price of the convertible securities so offered, which shall be determined by multiplying the number of shares of Common Stock issuable upon conversion of such convertible securities by the conversion price per share of Common Stock pursuant to the terms of such convertible securities) would purchase at the Current Market Price per share (as defined in subsection (e) of this Section 4.6) of Common Stock on such record date, and of which the denominator shall be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock offered (or into which the convertible securities so offered are convertible). Such adjustment shall be made successively whenever any such rights or warrants are issued, and shall become effective immediately after such record date. If at the end of the period during which such rights or warrants are exercisable not all rights or warrants shall have been exercised, the adjusted Conversion Price shall be immediately readjusted to what it would have been based upon the number of additional shares of Common Stock actually issued (or the number of shares of Common Stock issuable upon conversion of convertible securities actually issued). (c) In case the Company shall distribute to all or substantially all holders of its Common Stock any shares of capital stock of the Company (other than Common Stock), evidences of indebtedness or other non-cash assets (including securities of any person other than the Company but excluding (1) dividends on distributions paid exclusively in cash or (2) dividends or distributions referred to in subsection (a) of this Section 4.6, or shall distribute to all or substantially all holders of its Common Stock rights or warrants to subscribe for or purchase any of its securities (excluding those rights and warrants referred to in subsection (b) of this Section 4.6 and also excluding the distribution of rights to all holders of Common Stock pursuant to the adoption of a stockholders rights plan or the detachment of such rights under the terms of such stockholder rights plan), then in each such case the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the current Conversion Price by a fraction of which the numerator shall be the Current Market Price per share (as defined in subsection (e) of this Section 4.6) of the Common Stock on the record date mentioned below less the fair market value on such record date (as determined by the Board of Directors, whose determination shall be conclusive evidence of such fair market value and which shall be evidenced by an Officers' Certificate delivered to the Trustee) of the portion of the capital stock, evidences of indebtedness or other non-cash assets so distributed or of such rights or warrants applicable to one share of Common Stock (determined on the basis of the number of shares of Common Stock outstanding on the record date), and of which the denominator shall be the Current Market Price per share (as defined in subsection (e) of this Section 4.6) of the Common Stock on such record date. Such adjustment shall be made successively whenever any such distribution is made and shall become effective immediately after the record date for the determination of shareholders entitled to receive such distribution. Under the provisions of the Company's Preferred Shares Rights Plan adopted January 23, 1997 (the "Rights Plan"), upon conversion of the Securities into Common Stock, to the extent that the Rights Plan is still in effect upon such conversion, the Holders of Securities will receive, in addition to the Common Stock, the rights described therein (whether or not the rights have separated from the Common Stock at the time of conversion), subject to the limitations set forth in the Rights Plan. In addition, if the Company implements a new rights plan ("New Rights Plan"), the Company will provide under such New Rights Plan that the Holders 26 33 of the Securities will receive, in addition to the Common Stock, the rights under the New Rights Plan (whether or not the rights under the New Rights Plan have separated from the Common Stock at the time of conversion), subject to any limitations set forth in the New Rights Plan. (1) In case the Company shall, by dividend or otherwise, at any time distribute (a "Triggering Distribution") to all or substantially all holders of its Common Stock cash in an aggregate amount that, together with the aggregate amount of (A) any cash and the fair market value (as determined by the Board of Directors, whose determination shall be conclusive evidence thereof and which shall be evidenced by an Officers' Certificate delivered to the Trustee) of any other consideration payable in respect of any tender offer by the Company or a Subsidiary of the Company for Common Stock consummated within the 12 months preceding the date of payment of the Triggering Distribution and in respect of which no Conversion Price adjustment pursuant to this Section 4.6 has been made and (B) all other cash distributions to all or substantially all holders of its Common Stock made within the 12 months preceding the date of payment of the Triggering Distribution and in respect of which no Conversion Price adjustment pursuant to this Section 4.6 has been made, exceeds an amount equal to 10.0% of the product of the Current Market Price per share of Common Stock (as determined in accordance with subsection (e) of this Section 4.6) on the Business Day (the "Determination Date") immediately preceding the day on which such Triggering Distribution is declared by the Company multiplied by the number of shares of Common Stock outstanding on the Determination Date (excluding shares held in the treasury of the Company), the Conversion Price shall be reduced so that the same shall equal the price determined by multiplying such Conversion Price in effect immediately prior to the Determination Date by a fraction of which the numerator shall be the Current Market Price per share of the Common Stock (as determined in accordance with subsection (e) of this Section 4.6) on the Determination Date less the sum of the aggregate amount of cash and the aggregate fair market value (determined as aforesaid in this Section 4.6(d)(1)) of any such other consideration so distributed, paid or payable within such 12 months (including, without limitation, the Triggering Distribution) applicable to one share of Common Stock (determined on the basis of the number of shares of Common Stock outstanding on the Determination Date) and the denominator shall be such Current Market Price per share of the Common Stock (as determined in accordance with subsection (e) of this Section 4.6) on the Determination Date, such reduction to become effective immediately prior to the opening of business on the day following the date on which the Triggering Distribution is paid. (2) In case any tender offer made by the Company or any of its Subsidiaries for Common Stock shall expire and such tender offer (as amended upon the expiration thereof) shall involve the payment of aggregate consideration in an amount (determined as the sum of the aggregate amount of cash consideration and the aggregate fair market value (as determined by the Board of Directors, whose determination shall be conclusive evidence thereof and which shall be evidenced by an Officers' Certificate delivered to the Trustee thereof) of any other consideration) that, together with the aggregate amount of (A) any cash and the fair market value (as determined by the Board of Directors, whose determination shall be conclusive evidence thereof and which shall be evidenced by an Officers' Certificate delivered to the Trustee) of any other consideration payable in respect of any other tender offers by the Company or any Subsidiary of the Company for Common Stock consummated within the 12 months preceding the date of the Expiration Date (as defined below) and in respect of which no Conversion Price adjustment pursuant to this Section 4.6 has been made and (B) all cash distributions to all or substantially all holders of its Common Stock made within the 12 months preceding the Expiration Date and in respect of which no Conversion Price adjustment pursuant to this Section 4.6 has been made, exceeds an amount equal to 10.0% of the product of the Current Market Price per share of Common Stock (as determined in accordance with subsection (e) of this Section 4.6) as of the last date (the "Expiration Date") tenders could have been made pursuant to such tender offer (as it may be amended) (the last time at which such tenders could have been made on the Expiration 27 34 Date is hereinafter sometimes called the "Expiration Time") multiplied by the number of shares of Common Stock outstanding (including tendered shares but excluding any shares held in the treasury of the Company) at the Expiration Time, then, immediately prior to the opening of business on the day after the Expiration Date, the Conversion Price shall be reduced so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to close of business on the Expiration Date by a fraction of which the numerator shall be the product of the number of shares of Common Stock outstanding (including tendered shares but excluding any shares held in the treasury of the Company) at the Expiration Time multiplied by the Current Market Price per share of the Common Stock (as determined in accordance with subsection (e) of this Section 4.6) on the Trading Day next succeeding the Expiration Date and the denominator shall be the sum of (x) the aggregate consideration (determined as aforesaid) payable to stockholders based on the acceptance (up to any maximum specified in the terms of the tender offer) of all shares validly tendered and not withdrawn as of the Expiration Time (the shares deemed so accepted, up to any such maximum, being referred to as the "Purchased Shares") and (y) the product of the number of shares of Common Stock outstanding (less any Purchased Shares and excluding any shares held in the treasury of the Company) at the Expiration Time and the Current Market Price per share of Common Stock (as determined in accordance with subsection (e) of this Section 4.6) on the Trading Day next succeeding the Expiration Date, such reduction to become effective immediately prior to the opening of business on the day following the Expiration Date. In the event that the Company is obligated to purchase shares pursuant to any such tender offer, but the Company is permanently prevented by applicable law from effecting any or all such purchases or any or all such purchases are rescinded, the Conversion Price shall again be adjusted to be the Conversion Price which would have been in effect based upon the number of shares actually purchased. If the application of this Section 4.6(d)(2) to any tender offer would result in an increase in the Conversion Price, no adjustment shall be made for such tender offer under this Section 4.6(d)(2). (3) For purposes of this Section 4.6(d), the term "tender offer" shall mean and include both tender offers and exchange offers, all references to "purchases" of shares in tender offers (and all similar references) shall mean and include both the purchase of shares in tender offers and the acquisition of shares pursuant to exchange offers, and all references to "tendered shares" (and all similar references) shall mean and include shares tendered in both tender offers and exchange offers. (d) For the purpose of any computation under subsections (b), (c) and (d) of this Section 4.6, the Current Market Price per share of Common Stock on any date shall be deemed to be the average of the daily closing prices for the 30 consecutive Trading Days commencing 45 Trading Days before (i) the Determination Date or the Expiration Date, as the case may be, with respect to distributions or tender offers under subsection (d) of this Section 4.6 or (ii) the record date with respect to distributions, issuances or other events requiring such computation under subsection (b) or (c) of this Section 4.6. The closing price ("Closing Price") for each day shall be the last reported sales price or, in case no such reported sale takes place on such date, the average of the reported closing bid and asked prices in either case on the Nasdaq National Market (the "NNM") or, if the Common Stock is not listed or admitted to trading on the NNM, on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if not listed or admitted to trading on the NNM or any national securities exchange, the last reported sales price of the Common Stock as quoted on NASDAQ or, in case no reported sales takes place, the average of the closing bid and asked prices as quoted on NASDAQ or any comparable system or, if the Common Stock is not quoted on NASDAQ or any comparable system, the closing sales price or, in case no reported sale takes place, the average of the closing bid and asked prices, as furnished by any two members of the National Association of Securities Dealers, Inc. selected from time to time by the Company for that purpose. If no such prices are available, the Current Market Price per share shall be the fair value of a share of Common Stock as 28 35 determined by the Board of Directors (which shall be evidenced by an Officers' Certificate delivered to the Trustee). (e) In any case in which this Section 4.6 shall require that an adjustment be made following a record date or a Determination Date or Expiration Date, as the case may be, established for purposes of this Section 4.6, the Company may elect to defer (but only until five Business Days following the filing by the Company with the Trustee of the certificate described in Section 4.9) issuing to the Holder of any Security converted after such record date or Determination Date or Expiration Date the shares of Common Stock and other capital stock of the Company issuable upon such conversion over and above the shares of Common Stock and other capital stock of the Company issuable upon such conversion only on the basis of the Conversion Price prior to adjustment; and, in lieu of the shares the issuance of which is so deferred, the Company shall issue or cause its transfer agents to issue due bills or other appropriate evidence prepared by the Company of the right to receive such shares. If any distribution in respect of which an adjustment to the Conversion Price is required to be made as of the record date or Determination Date or Expiration Date therefor is not thereafter made or paid by the Company for any reason, the Conversion Price shall be readjusted to the Conversion Price which would then be in effect if such record date had not been fixed or such effective date or Determination Date or Expiration Date had not occurred. SECTION 4.7. NO ADJUSTMENT. No adjustment in the Conversion Price shall be required unless the adjustment would require an increase or decrease of at least 1% in the Conversion Price as last adjusted; provided, however, that any adjustments which by reason of this Section 4.7 are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article 4 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. No adjustment need be made for issuances of Common Stock pursuant to a Company plan for reinvestment of dividends or interest or for a change in the par value or a change to no par value of the Common Stock. To the extent that the Securities become convertible into the right to receive cash, no adjustment need be made thereafter as to the cash. Interest will not accrue on the cash. SECTION 4.8. ADJUSTMENT FOR TAX PURPOSES. The Company shall be entitled to make such reductions in the Conversion Price, in addition to those required by Section 4.6, as it in its discretion shall determine to be advisable in order that any stock dividends, subdivisions of shares, distributions of rights to purchase stock or securities or distributions of securities convertible into or exchangeable for stock hereafter made by the Company to its stockholders shall not be taxable. SECTION 4.9. NOTICE OF ADJUSTMENT. Whenever the Conversion Price or conversion privilege is adjusted, the Company shall promptly mail to Securityholders a notice of the adjustment and file with the Trustee an Officers' Certificate briefly stating the facts requiring the adjustment and the manner of computing it. Unless and until the Trustee shall receive an Officers' Certificate setting forth an adjustment of the Conversion Price, the Trustee may assume without 29 36 inquiry that the Conversion Price has not been adjusted and that the last Conversion Price of which it has knowledge remains in effect. SECTION 4.10. NOTICE OF CERTAIN TRANSACTIONS. In the event that: (1) the Company takes any action which would require an adjustment in the Conversion Price; (2) the Company consolidates or merges with, or transfers all or substantially all of its property and assets to, another corporation and shareholders of the Company must approve the transaction; or (3) there is a dissolution or liquidation of the Company, the Company shall mail to Holders and file with the Trustee a notice stating the proposed record or effective date, as the case may be. The Company shall mail the notice at least ten days before such date. Failure to mail such notice or any defect therein shall not affect the validity of any transaction referred to in clause (1), (2) or (3) of this Section 4.10. SECTION 4.11. EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE ON CONVERSION PRIVILEGE. If any of the following shall occur, namely: (a) any reclassification or change of shares of Common Stock issuable upon conversion of the Securities (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination, or any other change for which an adjustment is provided in Section 4.6); (b) any consolidation or merger or combination to which the Company is a party other than a merger in which the Company is the continuing corporation and which does not result in any reclassification of, or change (other than in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination) in, outstanding shares of Common Stock; or (c) any sale or conveyance as an entirety or substantially as an entirety of the property and assets of the Company, directly or indirectly, to any person, then the Company, or such successor, purchasing or transferee corporation, as the case may be, shall, as a condition precedent to such reclassification, change, combination, consolidation, merger, sale or conveyance, execute and deliver to the Trustee a supplemental indenture providing that the Holder of each Security then outstanding shall have the right to convert such Security into the kind and amount of shares of stock and other securities and property (including cash) receivable upon such reclassification, change, combination, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock deliverable upon conversion of such Security immediately prior to such reclassification, change, combination, consolidation, merger, sale or conveyance. Such supplemental indenture shall provide for adjustments of the Conversion Price which shall be as nearly equivalent as may be practicable to the adjustments of the Conversion Price provided for in this Article 4. If, in the case of any such consolidation, merger, combination, sale or conveyance, the stock or other securities and property (including cash) receivable thereupon by a holder of Common Stock include shares of stock or other securities and property of a person other than the successor, purchasing or transferee corporation, as the case may be, in such consolidation, merger, combination, sale or conveyance, then such supplemental indenture shall also be executed by such other person and shall contain such additional provisions to protect the interests of the Holders of the Securities as the Board of Directors shall reasonably consider necessary by reason of the foregoing. The provisions of this Section 4.11 shall similarly apply to successive reclassifications, changes, combinations, consolidations, mergers, sales or conveyances. 30 37 In the event the Company shall execute a supplemental indenture pursuant to this Section 4.11, the Company shall promptly file with the Trustee (x) an Officers' Certificate briefly stating the reasons therefor, the kind or amount of shares of stock or other securities or property (including cash) receivable by Holders of the Securities upon the conversion of their Securities after any such reclassification, change, combination, consolidation, merger, sale or conveyance, any adjustment to be made with respect thereto and that all conditions precedent have been complied with and (y) an Opinion of Counsel that all conditions precedent have been complied with, and shall promptly mail notice thereof to all Holders. SECTION 4.12. TRUSTEE'S DISCLAIMER. The Trustee shall have no duty to determine when an adjustment under this Article 4 should be made, how it should be made or what such adjustment should be, but may accept as conclusive evidence of that fact or the correctness of any such adjustment, and shall be protected in relying upon, an Officers' Certificate including the Officers' Certificate with respect thereto which the Company is obligated to file with the Trustee pursuant to Section 4.9. The Trustee makes no representation as to the validity or value of any securities or assets issued upon conversion of Securities, and the Trustee shall not be responsible for the Company's failure to comply with any provisions of this Article 4. The Trustee shall not be under any responsibility to determine the correctness of any provisions contained in any supplemental indenture executed pursuant to Section 4.11, but may accept as conclusive evidence of the correctness thereof, and shall be fully protected in relying upon, the Officers' Certificate with respect thereto which the Company is obligated to file with the Trustee pursuant to Section 4.11. SECTION 4.13. VOLUNTARY REDUCTION. The Company from time to time may reduce the Conversion Price by any amount for any period of time if the period is at least 20 days and if the reduction is irrevocable during the period if our Board of Directors determines that such reduction would be in the best interest of the Company and the Company provides 15 days prior notice of any reduction in the Conversion Price; provided, however, that in no event may the Company reduce the Conversion Price to be less than the par value of a share of Common Stock. ARTICLE 5 SUBORDINATION SECTION 5.1. AGREEMENT OF SUBORDINATION. The Company covenants and agrees, and each Holder of Securities issued hereunder by his acceptance thereof likewise covenants and agrees, that all Securities shall be issued subject to the provisions of this Article 5; and each Person holding any Security, whether upon original issue or upon transfer, assignment or exchange thereof, accepts and agrees to be bound by such provisions. The payment of the principal of, premium, if any, and interest on all Securities (including, but not limited to, the Redemption Price with respect to the Securities called for redemption in accordance with Article 3, or the Change in Control Purchase Price with respect to Securities submitted for repurchase in accordance with Article 3, as the case may be, as provided in this Indenture and Additional Interest, if any, issued hereunder shall, to the extent and in the manner hereinafter set forth, be subordinated and subject in right of payment to the prior payment in full in cash of all Senior Indebtedness of the Company, whether outstanding at the date of this Indenture or thereafter incurred. 31 38 No provision of this Article 5 shall prevent the occurrence of any default or Event of Default hereunder. SECTION 5.2. PAYMENTS TO HOLDERS. No payment shall be made with respect to the principal of, or premium, if any, or interest on the Securities by the Company (including, but not limited to, the Redemption Price with respect to the Securities to be called for redemption in accordance with Article 3 or the Change in Control Purchase Price with respect to Securities submitted for repurchase in accordance with Article 3, as the case may be, as provided in this Indenture and Additional Interest, if any), except payments and distributions made by the Trustee as permitted by the first or second paragraph of Section 5.5, if: (i) a default in the payment of principal, premium, interest, rent or other obligations due on any Senior Indebtedness of the Company has occurred and is continuing (or, in the case of Senior Indebtedness of the Company for which there is a period of grace, in the event of such a default that continues beyond the period of grace, if any, specified in the instrument or lease evidencing such Senior Indebtedness of the Company), unless and until such default shall have been cured or waived or shall have ceased to exist; or (ii) a default (other than a payment default but including any default in the payment of principal, premium, interest, rent or other obligations on Designated Senior Indebtedness that would be a payment default but for the period of grace specified in such instrument or lease) on Designated Senior Indebtedness occurs and is continuing that then permits holders of such Designated Senior Indebtedness to accelerate its maturity and the Trustee receives a notice of the default (a "Payment Blockage Notice") from a Representative of Designated Senior Indebtedness or a holder of Designated Senior Indebtedness or the Company. If the Trustee receives any Payment Blockage Notice pursuant to clause (ii) above, no subsequent Payment Blockage Notice shall be effective for purposes of this Section unless and until at least 365 days shall have elapsed since the initial effectiveness of the immediately prior Payment Blockage Notice. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee (unless such default was waived, cured or otherwise ceased to exist and thereafter subsequently reoccurred) shall be, or be made, the basis for a subsequent Payment Blockage Notice. The Company may and shall resume payments on and distributions in respect of the Securities upon the earlier of: (1) in the case of a payment default, the date upon which the default is cured or waived or ceases to exist, or (2) in the case of a default referred to in clause (ii) above, the earlier of the date on which such default is cured or waived or ceases to exist or 179 days after the date on which the applicable Payment Blockage Notice is received if the maturity of such Designated Senior Indebtedness has not been accelerated, unless this Article 5 otherwise prohibits the payment or distribution at the time of such payment or distribution (including without limitation, in the case of default referred to in clause (ii) above, as a result of a payment default with respect to the applicable Designated Senior Indebtedness as a consequence of the acceleration of the maturity thereof or otherwise). 32 39 Upon any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, moratorium of payments, insolvency, receivership or other proceedings, all amounts due or to become due upon all Senior Indebtedness of the Company shall first be paid in full in cash or other payment satisfactory to the holders of such Senior Indebtedness of the Company, or payment thereof in accordance with its terms provided for in cash or other payment satisfactory to the holders of such Senior Indebtedness of the Company before any payment is made on account of the principal of, premium, if any, or interest (including Additional Interest, if any) on the Securities by the Company (except payments by the Company made pursuant to Article 10 from monies deposited with the Trustee pursuant thereto prior to commencement of proceedings for such dissolution, winding-up, liquidation or reorganization); and upon any such dissolution or winding-up or liquidation or reorganization of the Company or bankruptcy, insolvency, receivership or other proceeding, any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holders or the Trustee would be entitled, except for the provision of this Article 5, shall (except as aforesaid) be paid by the Company or by any receiver, trustee in bankruptcy, moratorium of payments, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders or by the Trustee under this Indenture if received by them or it, directly to the holders of Senior Indebtedness of the Company (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness of the Company held by such holders, or as otherwise required by law or a court order) or their Representative or Representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any Senior Indebtedness of the Company may have been issued, as their respective interests may appear, to the extent necessary to pay all Senior Indebtedness of the Company in full, in cash or other payment satisfactory to the holders of such Senior Indebtedness of the Company, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness of the Company, before any payment or distribution is made to the Holders or to the Trustee. For purposes of this Article 5, the words, "cash, property or securities" shall not be deemed to include shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated at least to the extent provided in this Article 5 with respect to the Securities to the payment of all Senior Indebtedness of the Company which may at the time be outstanding; provided that (i) the Senior Indebtedness of the Company is assumed by the new corporation, if any, resulting from any reorganization or readjustment, and (ii) the rights of the holders of Senior Indebtedness of the Company (other than leases which are not assumed by the Company or the new corporation, as the case may be) are not, without the consent of such holders, altered by such reorganization or readjustment. The consolidation of the Company with, or the merger of the Company into another corporation or the liquidation or dissolution of the Company following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided for in Article 7 shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section 5.2 if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article 7. In the event of the acceleration of the Securities because of an Event of Default, no payment or distribution shall be made to the Trustee or any Holder of Securities in respect of the principal of, premium, if any, or interest on the Securities by the Company (including, but not limited to, the Redemption Price with respect to the Securities called for redemption in accordance with Article 3 or the Change in Control Purchase Price with respect to Securities submitted for repurchase in accordance with Article 3, as the case may be, as provided in this Indenture and Additional Interest), except payments and distributions made by the Trustee as permitted by the first or second paragraph of Section 5.5, until all Senior Indebtedness of the Company has 33 40 been paid in full in cash or other payment satisfactory to the holders of Senior Indebtedness of the Company or such acceleration is rescinded in accordance with the terms of this Indenture. If payment of the Securities is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Indebtedness of the Company of the acceleration. In the event that, notwithstanding the foregoing provisions, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities (including, without limitation, by way of setoff or otherwise), prohibited by the foregoing, shall be received by the Trustee or the Holders of the Securities before all Senior Indebtedness of the Company is paid in full in cash or other payment satisfactory to the holders of such Senior Indebtedness of the Company, or provision is made for such payment thereof in accordance with its terms in cash or other payment satisfactory to the holders of such Senior Indebtedness of the Company, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of Senior Indebtedness of the Company or their Representative or Representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any Senior Indebtedness of the Company may have been issued, as their respective interests may appear, as calculated by the Company, for application to the payment of all Senior Indebtedness of the Company remaining unpaid to the extent necessary to pay all Senior Indebtedness of the Company in full in cash or other payment satisfactory to the holders of such Senior Indebtedness of the Company, after giving effect to any concurrent payment or distribution, or provision therefor, to or for the holders of such Senior Indebtedness of the Company. Nothing in this Article 5 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 9.7. This Section 5.2 shall be subject to the further provisions of Section 5.5. SECTION 5.3. SUBROGATION OF SECURITIES. Subject to the payment in full in cash of all Senior Indebtedness of the Company, the Holders of the Securities shall be subrogated to the extent of the payments or distributions made to the holders of such Senior Indebtedness of the Company pursuant to the provisions of this Article 5 (equally and ratably with the holders of all indebtedness of the Company which by its express terms is subordinated to other indebtedness of the Company to substantially the same extent as the Securities are subordinated and is entitled to like rights of subrogation) to the rights of the holders of Senior Indebtedness of the Company to receive payments or distributions of cash, property or securities of the Company applicable to the Senior Indebtedness of the Company until the principal, premium, if any, and interest on the Securities shall be paid in full; and, for the purposes of such subrogation, no payments or distributions to the holders of the Senior Indebtedness of the Company of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article 5, and no payment over pursuant to the provisions of this Article 5, to or for the benefit of the holders of Senior Indebtedness of the Company by Holders of the Securities or the Trustee, shall, as between the Company, its creditors other than holders of Senior Indebtedness of the Company, and the Holders of the Securities, be deemed to be a payment by the Company to or on account of the Senior Indebtedness of the Company. It is understood that the provisions of this Article 5 are and are intended solely for the purposes of defining the relative rights of the Holders of the Securities, on the one hand, and the holders of the Senior Indebtedness of the Company, on the other hand. Nothing contained in this Article 5 or elsewhere in this Indenture or in the Securities is intended to or shall impair, as among the Company, its creditors other than the holders of Senior Indebtedness of the Company, and the Holders of the Securities, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Securities the principal of (and premium, if any) and interest on the 34 41 Securities as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders of the Securities and creditors of the Company other than the holders of the Senior Indebtedness of the Company, nor shall anything herein or therein prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article 5 of the holders of Senior Indebtedness of the Company in respect of cash, property or securities of the Company received upon the exercise of any such remedy. Upon any payment or distribution of assets of the Company referred to in this Article 5, the Trustee, subject to the provisions of Section 9.1, and the Holders of the Securities shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which such bankruptcy, dissolution, winding-up, liquidation or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of the Securities, for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Indebtedness of the Company and other Indebtedness of the Company, the amount thereof or payable thereon and all other facts pertinent thereto or to this Article 5. SECTION 5.4. AUTHORIZATION TO EFFECT SUBORDINATION. Each Holder of a Security by the Holder's acceptance thereof authorizes and directs the Trustee on the Holder$s behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 5 and appoints the Trustee to act as the Holder$s attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 8.9 hereof at least 30 days before the expiration of the time to file such claim, the holders of any Senior Indebtedness of the Company or their Representatives are hereby authorized to file an appropriate claim for and on behalf of the Holders of the Securities. SECTION 5.5. NOTICE TO TRUSTEE. The Company shall give prompt written notice in the form of an Officers' Certificate to a Responsible Officer of the Trustee and to any Paying Agent of any fact known to the Company which would prohibit the making of any payment of monies deposited by the Company to or by the Trustee or any Paying Agent in respect of the Securities pursuant to the provisions of this Article 5. Notwithstanding the provisions of this Article 5 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment of monies deposited by the Company to or by the Trustee in respect of the Securities pursuant to the provisions of this Article 5, unless and until a Responsible Officer of the Trustee shall have received written notice thereof at the Corporate Trust Office from the Company (in the form of an Officers' Certificate) or a Representative of Senior Indebtedness or of a holder or holders of Senior Indebtedness of the Company or from any trustee thereof; and before the receipt of any such written notice, the Trustee shall be entitled in all respects to assume that no such facts exist; provided that if on a date not fewer than two Business Days prior to the date upon which by the terms hereof any such monies may become payable for any purpose (including, without limitation, the payment of the principal of, or premium, if any, or interest on any Security) the Trustee shall not have received, with respect to such monies, the notice provided for in this Section 5.5, then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such monies deposited by the Company and to apply the same to the purpose for which they were received, and shall not be affected by any notice to the contrary which may be received by it on or after such prior date. 35 42 Notwithstanding anything in this Article 5 to the contrary, nothing shall prevent any payment by the Trustee to the Holders of monies deposited with it pursuant to Section 10.1, and any such payment shall not be subject to the provisions of Section 5.1 or 5.2. The Trustee shall be entitled to rely on the delivery to it of a written notice by a Representative or a Person representing himself to be a holder of Senior Indebtedness of the Company (or a trustee on behalf of such holder) to establish that such notice has been given by a Representative or a holder of Senior Indebtedness of the Company or a trustee on behalf of any such holder or holders. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness of the Company to participate in any payment or distribution pursuant to this Article 5, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness of the Company held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article 5, and if such evidence is not furnished the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 5.6. TRUSTEE'S RELATION TO SENIOR INDEBTEDNESS OF THE COMPANY. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article 5 in respect of any Senior Indebtedness of the Company at any time held by it, to the same extent as any other holder of Senior Indebtedness of the Company, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. With respect to the holders of Senior Indebtedness of the Company, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article 5, and no implied covenants or obligations with respect to the holders of Senior Indebtedness of the Company shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of the Company and the Trustee shall not be liable to any holder of Senior Indebtedness of the Company if it shall pay over or deliver to Holders of Securities, the Company or any other Person money or assets to which any holder of Senior Indebtedness of the Company shall be entitled by virtue of this Article 5 or otherwise. SECTION 5.7. NO IMPAIRMENT OF SUBORDINATION. No right of any present or future holder of any Senior Indebtedness of the Company to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof which any such holder may have or otherwise be charged with. SECTION 5.8. ARTICLE APPLICABLE TO PAYING AGENTS. If at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article shall (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article in addition to or in place of the 36 43 Trustee; provided, however, that the first paragraph of Section 5.5 shall not apply to the Company or any Affiliate of the Company if it or such Affiliate acts as Paying Agent. SECTION 5.9. SENIOR INDEBTEDNESS OF THE COMPANY ENTITLED TO RELY. The holders of Senior Indebtedness of the Company (including, without limitation, Designated Senior Indebtedness) shall have the right to rely upon this Article 5, and no amendment or modification of the provisions contained herein shall diminish the rights of such holders unless such holders shall have agreed in writing thereto. SECTION 5.10. CERTAIN CONVERSIONS DEEMED PAYMENT. For the purposes of this Article 5 only, (1) the issuance and delivery of junior securities upon conversion of Securities in accordance with Article 4 shall not be deemed to constitute a payment or distribution on account of the principal of (or premium, if any) or interest on Securities or on account of the purchase or other acquisition of Securities, and (2) the payment, issuance or delivery of cash (except in satisfaction of fractional shares pursuant to Section 4.3), property or securities (other than junior securities) upon conversion of a Security shall be deemed to constitute payment on account of the principal of such Security. For the purposes of this Section 5.10, the term "junior securities" means (a) shares of any stock of any class of the Company (including, without limitation, the Common Stock of the Company), or (b) securities of the Company which are subordinated in right of payment to all Senior Indebtedness of the Company which may be outstanding at the time of issuance or delivery of such securities to substantially the same extent as, or to a greater extent than, the Securities are so subordinated as provided in this Article 5. Nothing contained in this Article 5 or elsewhere in this Indenture or in the Securities is intended to or shall impair, as among the Company, its creditors other than holders of Senior Indebtedness of the Company and the Holders, the right, which is absolute and unconditional, of the Holder of any Security to convert such Security in accordance with Article 4. ARTICLE 6 COVENANTS SECTION 6.1. PAYMENT OF SECURITIES. The Company shall promptly make all payments in respect of the Securities on the dates and in the manner provided in the Securities and this Indenture. An installment of principal or interest or Additional Interest, if any, shall be considered paid on the date it is due if the Paying Agent (other than the Company) holds by 11:00 a.m., New York City time, on that date money, deposited by the Company or an Affiliate thereof, sufficient to pay the installment. The Company shall, to the fullest extent permitted by law, pay interest on overdue principal (including premium, if any) and overdue installments of interest at the rate borne by the Securities per annum. Payment of the principal of (and premium, if any) and any interest on the Securities shall be made at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York (which shall initially be State Street Bank and Trust Company, N.A., an Affiliate of the Trustee, as agent of the Trustee) or at the Corporate Trust Office of the Trustee in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company payment of interest may be made by check mailed to the address 37 44 of the Person entitled thereto as such address appears in the Register; provided further that a Holder with an aggregate principal amount in excess of $2,000,000 will be paid by wire transfer in immediately available funds at the election of such Holder if such Holder has provided written wire transfer instructions to the Company at least 10 Business Days prior to such payment date. SECTION 6.2. SEC REPORTS. The Company shall file all reports and other information and documents which it is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act, and within 15 days after it files them with the SEC, the Company shall file copies of all such reports, information and other documents with the Trustee. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). SECTION 6.3. COMPLIANCE CERTIFICATES. The Company shall deliver to the Trustee, within 90 days after the end of each fiscal year of the Company (beginning with the fiscal year ending June 30, 2000), an Officers' Certificate as to the signer's knowledge of the Company's compliance with all conditions and covenants on its part contained in this Indenture and stating whether or not the signer knows of any default or Event of Default. If such signer knows of such a default or Event of Default, the Officers' Certificate shall describe the default or Event of Default and the efforts to remedy the same. For the purposes of this Section 6.3, compliance shall be determined without regard to any grace period or requirement of notice provided pursuant to the terms of this Indenture. SECTION 6.4. FURTHER INSTRUMENTS AND ACTS. Upon request of the Trustee, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture. SECTION 6.5. MAINTENANCE OF CORPORATE EXISTENCE. Subject to Article 7, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence. SECTION 6.6. RULE 144A INFORMATION REQUIREMENT. Within the period prior to the expiration of the holding period applicable to sales thereof under Rule 144(k) under the Securities Act (or any successor provision), the Company covenants and agrees that it shall, during any period in which it is not subject to Section 13 or 15(d) under the Exchange Act, make available to any Holder or beneficial holder of Securities or any Common Stock issued upon conversion thereof which continue to be Restricted Securities in connection with any sale thereof and any prospective purchaser of Securities or such Common Stock designated by such Holder or beneficial holder, the information required pursuant to Rule 144A(d)(4) under the Securities Act upon the request of any Holder or beneficial holder of the Securities or such Common Stock and it will take such further action as any Holder or beneficial holder of such Securities or such Common Stock may reasonably request, all to the extent required 38 45 from time to time to enable such Holder or beneficial holder to sell its Securities or Common Stock without registration under the Securities Act within the limitation of the exemption provided by Rule 144A, as such Rule may be amended from time to time. Upon the request of any Holder or any beneficial holder of the Securities or such Common Stock, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements. SECTION 6.7. STAY, EXTENSION AND USURY LAWS. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of, premium, if any, or interest (including Additional Interest, if any) on the Securities as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture and the Company (to the extent it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 6.8. PAYMENT OF ADDITIONAL INTEREST. If Additional Interest is payable by the Company pursuant to the Registration Rights Agreement, the Company shall deliver to the Trustee a certificate to that effect stating (i) the amount of such Additional Interest that is payable and (ii) the date on which such Additional Interest is payable. Unless and until a Trust Officer of the Trustee receives such a certificate, the Trustee may assume without inquiry that no such Additional Interest is payable. If the Company has paid Additional Interest directly to the Persons entitled to it, the Company shall deliver to the Trustee a certificate setting forth at the particulars of such payment. ARTICLE 7 CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE SECTION 7.1. COMPANY MAY CONSOLIDATE, ETC, ONLY ON CERTAIN TERMS. The Company shall not consolidate with or merge into any other Person (in a transaction in which the Company is not the surviving corporation) or convey, transfer or lease its properties and assets substantially as an entirety to any Person, unless: (1) in case the Company shall consolidate with or merge into another Person (in a transaction in which the Company is not the surviving corporation) or convey, transfer or lease its properties and assets substantially as an entirety to any Person, the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Company substantially as an entirety shall be a corporation, limited liability company, partnership or trust, shall be organized and validly existing under the laws of the United States of America, any State thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of and any premium and interest on all the Securities and the performance or observance of every covenant of this Indenture on the part of the Company to be performed or observed and the conversion rights shall be provided for in accordance with Article 4, by supplemental indenture 39 46 satisfactory in form to the Trustee, executed and delivered to the Trustee, by the Person (if other than the Company) formed by such consolidation or into which the Company shall have been merged or by the Person which shall have acquired the Company's assets; (2) immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. SECTION 7.2. SUCCESSOR SUBSTITUTED. Upon any consolidation of the Company with, or merger of the Company into, any other Person or any conveyance, transfer or lease of the properties and assets of the Company substantially as an entirety in accordance with Section 7.1, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities. ARTICLE 8 DEFAULT AND REMEDIES SECTION 8.1. EVENTS OF DEFAULT. An "Event of Default" shall occur if: (1) the Company defaults in the payment of any interest or Additional Interest, if any, payable to all holders of Registrable Securities (as defined in the Registration Rights Agreement) on any Security when the same becomes due and payable and the default continues for a period of 30 days, whether or not such payment shall be prohibited by the provisions of Article 5 hereof; (2) the Company defaults in the payment of any principal of (including, without limitation, any premium, if any, on) any Security when the same becomes due and payable (whether at maturity, upon redemption, on a Change of Control Purchase Date or otherwise), whether or not such payment shall be prohibited by the provisions of Article 5 hereof; (3) the Company fails to comply with any of its other agreements contained in the Securities or this Indenture and the default continues for the period and after the notice specified below; (4) any indebtedness under any bond, debenture, note or other evidence of indebtedness for money borrowed by the Company or any Significant Subsidiary or under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company or any Significant Subsidiary ("an Instrument") with a principal amount 40 47 then outstanding in excess of U.S. $25,000,000 whether such indebtedness now exists or shall hereafter be created, is not paid at final maturity of the Instrument (either at its stated maturity or upon acceleration thereof), and such indebtedness is not discharged, or such acceleration is not rescinded or annulled, within a period of 30 days after there shall have been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities a written notice specifying such default and requiring the Company to cause such indebtedness to be discharged or cause such default to be cured or waived or such acceleration to be rescinded or annulled and stating that such notice is a "Notice of Default" hereunder; or (5) the Company or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case or proceeding; (B) consents to the entry of an order for relief against it in an involuntary case or proceeding; (C) consents to the appointment of a Custodian of it or for all or substantially all of its property; or (D) makes a general assignment for the benefit of its creditors; or (6) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company or any Significant Subsidiary in an involuntary case or proceeding; (B) appoints a Custodian of the Company or any Significant Subsidiary or for all or substantially all of the property of the Company or any Significant Subsidiary; or (C) orders the liquidation of the Company or any Significant Subsidiary; and in each case the order or decree remains unstayed and in effect for 60 days. The term "Bankruptcy Law" means Title 11 of the United States Code (or any successor thereto) or any similar federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law. A default under clause (3) above is not an Event of Default until the Trustee notifies the Company, or the Holders of at least 25% in aggregate principal amount of the Securities then outstanding notify the Company and the Trustee, of the default, and the Company does not cure the default within 60 days after receipt of such notice. The notice given pursuant to this Section 8.1 must specify the default, demand that it be remedied and state that the notice is a "Notice of Default." When any default under this Section 8.1 is cured, it ceases. 41 48 The Trustee shall not be charged with knowledge of any Event of Default unless written notice thereof shall have been given to a Trust Officer at the Corporate Trust Office of the Trustee by the Company, a Paying Agent, any Holder or any agent of any Holder. SECTION 8.2. ACCELERATION. If an Event of Default (other than an Event of Default specified in clause (5) or (6) of Section 8.1 with respect to the Company) occurs and is continuing, the Trustee may, by notice to the Company, or the Holders of at least 25% in aggregate principal amount of the Securities then outstanding may, by notice to the Company and the Trustee, declare all unpaid principal to the date of acceleration on the Securities then outstanding (if not then due and payable) to be due and payable upon any such declaration, and the same shall become and be immediately due and payable. If an Event of Default specified in clause (5) or (6) of Section 8.1 occurs with respect to the Company, all unpaid principal of the Securities then outstanding shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. The Holders of a majority in aggregate principal amount of the Securities then outstanding by notice to the Trustee may rescind an acceleration and its consequences if (a) all existing Events of Default, other than the nonpayment of the principal of the Securities which has become due solely by such declaration of acceleration, have been cured or waived; (b) to the extent the payment of such interest is lawful, interest (calculated at the rate per annum borne by the Securities) on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid; (c) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction; and (d) all payments due to the Trustee and any predecessor Trustee under Section 9.7 have been made. No such rescission shall affect any subsequent default or impair any right consequent thereto. SECTION 8.3. OTHER REMEDIES. If an Event of Default occurs and is continuing, the Trustee may, but shall not be obligated to, pursue any available remedy by proceeding at law or in equity to collect the payment of the principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative to the extent permitted by law. SECTION 8.4. WAIVER OF DEFAULTS AND EVENTS OF DEFAULT. Subject to Sections 8.7 and 11.2, the Holders of a majority in principal amount of the Securities then outstanding by notice to the Trustee may waive an existing default or Event of Default and its consequence, except a default or Event of Default in the payment of the principal of or interest on any Security, a failure by the Company to convert any Securities into Common Stock or any default or Event of Default in respect of any provision of this Indenture or the Securities which, under Section 11.2, cannot be modified or amended without the consent of the Holder of each Security affected. When a default or Event of Default is waived, it is cured and ceases. 42 49 SECTION 8.5. CONTROL BY MAJORITY. The Holders of a majority in principal amount of the Securities then outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, that the Trustee determines may be unduly prejudicial to the rights of another Holder or the Trustee, or that may involve the Trustee in personal liability unless the Trustee is offered indemnity satisfactory to it; provided, however, that the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. SECTION 8.6. LIMITATIONS ON SUITS. A Holder may not pursue any remedy with respect to this Indenture or the Securities (except actions for payment of overdue principal or interest or for the conversion of the Securities pursuant to Article 4) unless: (1) the Holder gives to the Trustee written notice of a continuing Event of Default; (2) the Holders of at least 25% in principal amount of the then outstanding Securities make a written request to the Trustee to pursue the remedy; (3) such Holder or Holders offer to the Trustee reasonable indemnity to the Trustee against any loss, liability or expense; (4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Securities then outstanding. A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over such other Securityholder. SECTION 8.7. RIGHTS OF HOLDERS TO RECEIVE PAYMENT AND TO CONVERT. Notwithstanding any other provision of this Indenture, the right of any Holder of a Security to receive payment of the principal of and interest on the Security, on or after the respective due dates expressed in the Security and this Indenture, to convert such Security in accordance with Article 4 and to bring suit for the enforcement of any such payment on or after such respective dates or the right to convert, is absolute and unconditional and shall not be impaired or affected without the consent of the Holder. SECTION 8.8. COLLECTION SUIT BY TRUSTEE. If an Event of Default in the payment of principal or interest specified in clause (1) or (2) of Section 8.1 occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or another obligor on the Securities for the whole amount of principal and accrued interest remaining unpaid, together with, to the extent that payment of such interest is lawful, interest on overdue principal and on overdue installments of interest, in each case at the rate per annum borne by the Securities and such further amount as shall be sufficient to cover the costs and expenses of collection, 43 50 including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 8.9. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relative to the Company (or any other obligor on the Securities), its creditors or its property and shall be entitled and empowered to collect and receive any money or other property payable or deliverable on any such claims and to distribute the same, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 9.7, and to the extent that such payment of the reasonable compensation, expenses, disbursements and advances in any such proceedings shall be denied for any reason, payment of the same shall be secured by a lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other property which the Holders may be entitled to receive in such proceedings, whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to, or, on behalf of any Holder, to authorize, accept or adopt any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 8.10. PRIORITIES. If the Trustee collects any money pursuant to this Article 8, it shall pay out the money in the following order: First, to the Trustee for amounts due under Section 9.7; Second, to the holders of Senior Indebtedness to the extent required by Article 5; Third, to Holders for amounts due and unpaid on the Securities for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and interest, respectively; and Fourth, to the Company. The Trustee may fix a record date and payment date for any payment to Holders pursuant to this Section 8.10. SECTION 8.11. UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This 44 51 Section 8.11 does not apply to a suit made by the Trustee, a suit by a Holder pursuant to Section 8.7, or a suit by Holders of more than 10% in principal amount of the Securities then outstanding. ARTICLE 9 TRUSTEE SECTION 9.1. DUTIES OF TRUSTEE. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (b) Except during the continuance of an Event of Default: (1) the Trustee need perform only those duties as are specifically set forth in this Indenture and no others; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. The Trustee, however, shall examine any certificates and opinions which by any provision hereof are specifically required to be delivered to the Trustee to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) this paragraph does not limit the effect of subsection (b) of this Section 9.1; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 8.5. (d) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers unless the Trustee shall have received adequate indemnity in its opinion against potential costs and liabilities incurred by it relating thereto. (e) Every provision of this Indenture that in any way relates to the Trustee is subject to subsections (a), (b), (c) and (d) of this Section 9.1. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. 45 52 SECTION 9.2. RIGHTS OF TRUSTEE. Subject to Section 9.1: (a) The Trustee may rely conclusively on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel, which shall conform to Section 12.4(b). The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Certificate or Opinion. (c) The Trustee may act through its agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers. (e) The Trustee may consult with counsel of its selection, and the advice or opinion of such counsel as to matters of law shall be full and complete authorization and protection in respect of any such action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity satisfactory to the Trustee against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. (g) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation. (h) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Trust Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office, and such notice references the Securities and this Indenture. (i) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder. 46 53 SECTION 9.3. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or an Affiliate of the Company with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to Sections 9.10 and 9.11. SECTION 9.4. TRUSTEE'S DISCLAIMER. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement in the Securities other than its certificate of authentication. SECTION 9.5. NOTICE OF DEFAULT OR EVENTS OF DEFAULT. If a default or an Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Securityholder notice of the default or Event of Default within 90 days after it occurs. However, the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding notice is in the interests of Securityholders, except in the case of a default or an Event of Default in payment of the principal of or interest on any Security. SECTION 9.6. REPORTS BY TRUSTEE TO HOLDERS. If such report is required by TIA Section 313, within 60 days after each March 15, beginning with the March 15, 2002 following the date of this Indenture, the Trustee shall mail to each Securityholder a brief report dated as of such March 15 that complies with TIA Section 313(a). The Trustee also shall comply with TIA Section 313(b)(2) and (c). A copy of each report at the time of its mailing to Securityholders shall be mailed to the Company and filed with the SEC and each stock exchange, if any, on which the Securities are listed. The Company shall notify the Trustee whenever the Securities become listed on any stock exchange or listed or admitted to trading on any quotation system and any changes in the stock exchanges or quotation systems on which the Securities are listed or admitted to trading and of any delisting thereof. SECTION 9.7. COMPENSATION AND INDEMNITY. The Company shall pay to the Trustee from time to time such compensation (as agreed to from time to time by the Company and the Trustee in writing) for its services (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust). The Company shall reimburse the Trustee upon request for all reasonable disbursements, expenses and advances incurred or made by it. Such expenses may include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee or any predecessor Trustee (which for purposes of this Section 9.7 shall include its officers, directors, employees and agents) for, and hold it harmless against, any and all loss, liability or expense including taxes (other than taxes based upon, measured by or determined by the income of the Trustee), (including reasonable legal fees and expenses) incurred by it in connection with the acceptance or administration of its duties under this Indenture or any action or failure to act as authorized or within the discretion or rights or powers conferred upon the Trustee hereunder including the reasonable 47 54 costs and expenses of the Trustee and its counsel in defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The Trustee shall notify the Company promptly of any claim asserted against the Trustee for which it may seek indemnity. The Company need not pay for any settlement without its written consent, which shall not be unreasonably withheld. The Company need not reimburse the Trustee for any expense or indemnify it against any loss or liability incurred by it resulting from its gross negligence or bad faith. To secure the Company's payment obligations in this Section 9.7, the Trustee shall have a senior claim to which the Securities are hereby made subordinate on all money or property held or collected by the Trustee, except such money or property held in trust to pay the principal of and interest on the Securities. The obligations of the Company under this Section 9.7 shall survive the satisfaction and discharge of this Indenture or the resignation or removal of the Trustee. When the Trustee incurs expenses or renders services after an Event of Default specified in clause (5) or (6) of Section 8.1 occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Law. The provisions of this Section shall survive the termination of this Indenture. SECTION 9.8. REPLACEMENT OF TRUSTEE. The Trustee may resign by so notifying the Company. The Holders of a majority in principal amount of the Securities then outstanding may remove the Trustee by so notifying the Trustee and may, with the Company's written consent, appoint a successor Trustee. The Company may remove the Trustee if: (1) the Trustee fails to comply with Section 9.10; (2) the Trustee is adjudged a bankrupt or an insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. The resignation or removal of a Trustee shall not be effective until a successor Trustee shall have delivered the written acceptance of its appointment as described below. If a successor Trustee does not take office within 45 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of 10% in principal amount of the Securities then outstanding may petition any court of competent jurisdiction for the appointment of a successor Trustee at the expense of the Company. If the Trustee fails to comply with Section 9.10, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after that, the retiring Trustee shall transfer all property held by it as Trustee to 48 55 the successor Trustee and be released from its obligations (exclusive of any liabilities that the retiring Trustee may have incurred while acting as Trustee) hereunder, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Holder. A retiring Trustee shall not be liable for the acts or omissions of any successor Trustee after its succession. Notwithstanding replacement of the Trustee pursuant to this Section 9.8, the Company's obligations under Section 9.7 shall continue for the benefit of the retiring Trustee. SECTION 9.9. SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust assets (including the administration of this Indenture) to, another corporation, the resulting, surviving or transferee corporation, without any further act, shall be the successor Trustee, provided such transferee corporation shall qualify and be eligible under Section 9.10. Such successor Trustee shall promptly mail notice of its succession to the Company and each Holder. SECTION 9.10. ELIGIBILITY; DISQUALIFICATION. The Trustee shall always satisfy the requirements of paragraphs (1), (2) and (5) of TIA Section 310(a). The Trustee (or its parent holding company) shall have a combined capital and surplus of at least $50,000,000. If at any time the Trustee shall cease to satisfy any such requirements, it shall resign immediately in the manner and with the effect specified in this Article 9. The Trustee shall be subject to the provisions of TIA Section 310(b). Nothing herein shall prevent the Trustee from filing with the SEC the application referred to in the penultimate paragraph of TIA Section 310(b). SECTION 9.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. ARTICLE 10 SATISFACTION AND DISCHARGE OF INDENTURE SECTION 10.1. SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture shall cease to be of further effect (except as to any surviving rights of conversion, registration of transfer or exchange of Securities herein expressly provided for and except as further provided below), and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (1) either (A) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided 49 56 in Section 2.7 and (ii) Securities for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company as provided in Section 10.3) have been delivered to the Trustee for cancellation; or (B) all such Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at the Final Maturity Date within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of clause (i), (ii) or (iii) above, has irrevocably deposited or caused to be irrevocably deposited with the Trustee or a Paying Agent (other than the Company or any of its Affiliates) as trust funds in trust for the purpose cash in an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal and interest to the date of such deposit (in the case of Securities which have become due and payable) or to the Final Maturity Date or Redemption Date, as the case may be; (2) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 9.7 shall survive and, if money shall have been deposited with the Trustee pursuant to subclause (B) of clause (1) of this Section, the provisions of Sections 2.3, 2.4, 2.5, 2.6, 2.7, 2.12, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13 and 12.5, Article 4, the last paragraph of Section 6.2 and this Article 10, shall survive until the Securities have been paid in full. SECTION 10.2. APPLICATION OF TRUST MONEY. Subject to the provisions of Section 10.3, the Trustee or a Paying Agent shall hold in trust, for the benefit of the Holders, all money deposited with it pursuant to Section 10.1 and shall apply the deposited money in accordance with this Indenture and the Securities to the payment of the principal of and interest on the Securities. Money so held in trust shall not be subject to the subordination provisions of Article 5. SECTION 10.3. REPAYMENT TO COMPANY. The Trustee and each Paying Agent shall promptly pay to the Company upon request any excess money (i) deposited with them pursuant to Section 10.1 and (ii) held by them at any time. The Trustee and each Paying Agent shall pay to the Company upon request any money held by them for the payment of principal or interest that remains unclaimed for two years after a right to such money has 50 57 matured; provided, however, that the Trustee or such Paying Agent, before being required to make any such payment, may at the expense of the Company cause to be mailed to each Holder entitled to such money notice that such money remains unclaimed and that after a date specified therein, which shall be at least 30 days from the date of such mailing, any unclaimed balance of such money then remaining will be repaid to the Company. After payment to the Company, Holders entitled to money must look to the Company for payment as general creditors. SECTION 10.4. REINSTATEMENT. If the Trustee or any Paying Agent is unable to apply any money in accordance with Section 10.2 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 10.1 until such time as the Trustee or such Paying Agent is permitted to apply all such money in accordance with Section 10.2; provided, however, that if the Company has made any payment of the principal of or interest on any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive any such payment from the money held by the Trustee or such Paying Agent. ARTICLE 11 AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 11.1. WITHOUT CONSENT OF HOLDERS. The Company and the Trustee may amend or supplement this Indenture or the Securities without notice to or consent of any Securityholder: (a) to comply with Sections 4.11 and 7.1; (b) to cure any ambiguity, defect or inconsistency; (c) to make any other change that does not adversely effect the rights of any Securityholder; (d) to comply with the provisions of the TIA; or (e) to appoint a successor Trustee. SECTION 11.2. WITH CONSENT OF HOLDERS. The Company and the Trustee may amend or supplement this Indenture or the Securities with the written consent of the Holders of at least a majority in aggregate principal amount of the Securities then outstanding. The Holders of at least a majority in aggregate principal amount of the Securities then outstanding may waive compliance in a particular instance by the Company with any provision of this Indenture or the Securities without notice to any Securityholder. However, notwithstanding the foregoing but subject to Section 11.4, without the written consent of each Securityholder affected, an amendment, supplement or waiver, including a waiver pursuant to Section 8.4, may not: (a) change the stated maturity of the principal of, or interest on, any Security; 51 58 (b) reduce the principal amount of, or any premium or interest on, any Security; (c) reduce the amount of principal payable upon acceleration of the maturity of any Security; (d) change the place or currency of payment of principal of, or any premium or interest on, any Security; (e) impair the right to institute suit for the enforcement of any payment on, or with respect to, any Security; (f) modify the subordination provisions of Article 5 in a manner materially adverse to the Holders of Securities; (g) modify the provisions with respect to the purchase right of Holders pursuant to Article 3 upon a Change in Control in a manner adverse to Holders; (h) adversely affect the right of Holders to convert Securities other than as provided in or under Section 4 of this Indenture; (i) reduce the percentage of the aggregate principal amount of the outstanding Securities whose Holders must consent to a modification or amendment; (j) reduce the percentage of the aggregate principal amount of the outstanding Securities necessary for the waiver of compliance with certain provisions of this Indenture or the waiver of certain defaults under this Indenture; and (k) modify any of the provisions of this Section or Section 8.4, except to increase any such percentage or to provide that certain provisions of this Indenture cannot be modified or waived without the consent of the Holder of each outstanding Security affected thereby. It shall not be necessary for the consent of the Holders under this Section 11.2 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 11.2 becomes effective, the Company shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amendment, supplement or waiver. An amendment or supplement under this Section 11.2 or under Section 11.1 may not make any change that adversely affects the rights under Article 5 of any holder of an issue of Senior Indebtedness unless the holders of that issue, pursuant to its terms, consent to the change. SECTION 11.3. COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment to or supplement of this Indenture or the Securities shall comply with the TIA as in effect at the date of such amendment or supplement. 52 59 SECTION 11.4. REVOCATION AND EFFECT OF CONSENTS. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security. However, any such Holder or subsequent Holder may revoke the consent as to its Security or portion of a Security if the Trustee receives the notice of revocation before the date the amendment, supplement or waiver becomes effective. After an amendment, supplement or waiver becomes effective, it shall bind every Securityholder, unless it makes a change described in any of clauses (a) through (k) of Section 11.2. In that case the amendment, supplement or waiver shall bind each Holder of a Security who has consented to it and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security. SECTION 11.5. NOTATION ON OR EXCHANGE OF SECURITIES. If an amendment, supplement or waiver changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security about the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. SECTION 11.6. TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall sign any amendment or supplemental indenture authorized pursuant to this Article 11 if the amendment or supplemental indenture does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, in its sole discretion, but need not sign it. In signing or refusing to sign such amendment or supplemental indenture, the Trustee shall be entitled to receive and, subject to Section 9.1, shall be fully protected in relying upon, an Opinion of Counsel stating that such amendment or supplemental indenture is authorized or permitted by this Indenture. The Company may not sign an amendment or supplement indenture until the Board of Directors approves it. ARTICLE 12 MISCELLANEOUS SECTION 12.1. TRUST INDENTURE ACT CONTROLS. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by any of Sections 310 to 317, inclusive, of the TIA through operation of Section 318(c) thereof, such imposed duties shall control. SECTION 12.2. NOTICES. Any notice, request or communication shall be given in writing and delivered in person or mailed by first-class mail, postage prepaid, addressed as follows: 53 60 If to the Company: Lam Research Corporation 4650 Cushing Parkway Fremont, California 94536 Attention: General Counsel If to the Trustee: Corporate Trust Office 135 South LaSalle Street Chicago, Illinois 60603 Attention: Corporate Trust Department (Lam Research Corporation -- 4% Convertible Subordinated Notes due June 1, 2006) Such notices or communications shall be effective when received. The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Securityholder shall be mailed by first-class mail to it at its address shown on the register kept by the Primary Registrar. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication to a Securityholder is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 12.3. COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS. Securityholders may communicate pursuant to TIA Section 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and any other person shall have the protection of TIA Section 312(c). SECTION 12.4. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. (a) Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee at the request of the Trustee: (1) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent (including any covenants, compliance with which constitutes a condition precedent), if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent (including any covenants, compliance with which constitutes a condition precedent) have been complied with. (b) Each Officers' Certificate and Opinion of Counsel with respect to compliance with a condition or covenant provided for in this Indenture shall include: 54 61 (1) a statement that the person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such person, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with; provided, however, that with respect to matters of fact an Opinion of Counsel may rely on an Officers' Certificate or certificates of public officials. SECTION 12.5. RECORD DATE FOR VOTE OR CONSENT OF SECURITYHOLDERS. The Company (or, in the event deposits have been made pursuant to Section 10.1, the Trustee) may set a record date for purposes of determining the identity of Holders entitled to vote or consent to any action by vote or consent authorized or permitted under this Indenture, which record date shall not be more than thirty (30) days prior to the date of the commencement of solicitation of such action. Notwithstanding the provisions of Section 11.4, if a record date is fixed, those persons who were Holders of Securities at the close of business on such record date (or their duly designated proxies), and only those persons, shall be entitled to take such action by vote or consent or to revoke any vote or consent previously given, whether or not such persons continue to be Holders after such record date. SECTION 12.6. RULES BY TRUSTEE, PAYING AGENT, REGISTRAR AND CONVERSION AGENT. The Trustee may make reasonable rules (not inconsistent with the terms of this Indenture) for action by or at a meeting of Holders. Any Registrar, Paying Agent or Conversion Agent may make reasonable rules for its functions. SECTION 12.7. LEGAL HOLIDAYS. A "Legal Holiday" is a Saturday, Sunday or a day on which state or federally chartered banking institutions in New York, New York and the state in which the Corporate Trust Office is located are not required to be open. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record shall not be affected. SECTION 12.8. GOVERNING LAW. This Indenture and the Securities shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to principles of conflicts of laws. 55 62 SECTION 12.9. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or a Subsidiary of the Company. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 12.10. NO RECOURSE AGAINST OTHERS. All liability described in paragraph 18 of the Securities of any director, officer, employee or shareholder, as such, of the Company is waived and released. SECTION 12.11. SUCCESSORS. All agreements of the Company in this Indenture and the Securities shall bind its successor. All agreements of the Trustee in this Indenture shall bind its successor. SECTION 12.12. MULTIPLE COUNTERPARTS. The parties may sign multiple counterparts of this Indenture. Each signed counterpart shall be deemed an original, but all of them together represent the same agreement. SECTION 12.13. SEPARABILITY. In case any provisions in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 12.14. TABLE OF CONTENTS, HEADINGS, ETC. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. SIGNATURE PAGE FOLLOWS 56 63 IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of the date and year first above written. LAM RESEARCH CORPORATION By: -------------------------------------- Name: Title: LASALLE BANK NATIONAL ASSOCIATION, AS TRUSTEE By: -------------------------------------- Name: Title: [SIGNATURE PAGE TO THE INDENTURE] 64 EXHIBIT A [FORM OF FACE OF SECURITY] "UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO LAM RESEARCH CORPORATION (THE "COMPANY") OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE TWO OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY."(1) [THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION THEREOF MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.](2) THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS SECURITY AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION THEREOF MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE U.S. IN A TRANSACTION COMPLYING WITH THE PROVISIONS OF RULE 904 UNDER THE SECURITIES ACT (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF - ---------- (1) These paragraphs should be included only if the Security is a Global Security. (2) These paragraphs to be included only if the Security is a Restricted Security. A-1 65 CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. THE HOLDER HEREOF WILL NOT, DIRECTLY OR INDIRECTLY, ENGAGE IN ANY HEDGING TRANSACTION WITH REGARD TO THIS SECURITY OR ANY COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY EXCEPT AS PERMITTED BY THE SECURITIES ACT.](2) [THE HOLDER OF THIS SECURITY IS ENTITLED TO THE BENEFITS OF A REGISTRATION RIGHTS AGREEMENT (AS SUCH TERM IS DEFINED IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF) AND, BY ITS ACCEPTANCE HEREOF, AGREES TO BE BOUND BY AND TO COMPLY WITH THE PROVISIONS OF SUCH REGISTRATION RIGHTS AGREEMENT.](2) - ---------- (2) These paragraphs to be included only if the Security is a Restricted Security. A-2 66 LAM RESEARCH CORPORATION CUSIP: 512807 AD 0 R-______ 4% CONVERTIBLE SUBORDINATED NOTES DUE JUNE 1, 2006 Lam Research Corporation, a Delaware corporation (the "Company," which term shall include any successor corporation under the Indenture referred to on the reverse hereof), promises to pay to Cede & Co., or registered assigns, the principal sum of _____________________________ Dollars ($__________) on June 1, 2006 [or such greater or lesser amount as is indicated on the Schedule of Exchanges of Notes on the other side of this Note].(3) Interest Payment Dates: June 1 and December 1, beginning December 1, 2001 Record Dates: May 15 and November 15 This Note is convertible as specified on the other side of this Note. Additional provisions of this Note are set forth on the other side of this Note. SIGNATURE PAGE FOLLOWS - ---------- (3) This phrase should be included only if the Security is a Global Security. A-3 67 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed. LAM RESEARCH CORPORATION By: -------------------------------------- Name: Title: Attest: - ------------------------------------- Name: Title: Dated: Trustee's Certificate of Authentication: This is one of the Securities referred to in the within-mentioned Indenture. LASALLE BANK NATIONAL ASSOCIATION, as Trustee - ------------------------------------- Authorized Signatory By: A-4 68 [FORM OF REVERSE SIDE OF SECURITY] LAM RESEARCH CORPORATION 4% CONVERTIBLE SUBORDINATED NOTES DUE JUNE 1, 2006 1. INTEREST Lam Research Corporation, a Delaware corporation (the "Company," which term shall include any successor corporation under the Indenture hereinafter referred to), promises to pay interest on the principal amount of this Note at the rate of 4% per annum. The Company shall pay interest semiannually on June 1 and December 1 of each year, commencing December 1, 2001. Interest on the Notes shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from May 22, 2001; provided, however, that if there is not an existing default in the payment of interest and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding interest payment date, interest shall accrue from such interest payment date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Any reference herein to interest accrued or payable as of any date shall include any Additional Interest accrued or payable on such date as provided in the Registration Rights Agreement. 2. METHOD OF PAYMENT The Company shall pay interest on this Note (except defaulted interest) to the person who is the Holder of this Note at the close of business on May 15 or November 15, as the case may be, next preceding the related interest payment date. The Holder must surrender this Note to a Paying Agent to collect payment of principal. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. The Company may, however, pay principal and interest in respect of any Certificated Security by check or wire payable in such money; provided, however, that a Holder with an aggregate principal amount in excess of $2,000,000 will be paid by wire transfer in immediately available funds at the election of such Holder if such Holder has provided written wire transfer instructions to the Company not less than 10 days prior to such payment date. The Company may mail an interest check to the Holder's registered address. Notwithstanding the foregoing, so long as this Note is registered in the name of a Depositary or its nominee, all payments hereon shall be made by wire transfer of immediately available funds to the account of the Depositary or its nominee. 3. PAYING AGENT, REGISTRAR AND CONVERSION AGENT Initially, LaSalle Bank National Association (the "Trustee," which term shall include any successor trustee under the Indenture hereinafter referred to) will act as Paying Agent, Registrar and Conversion Agent. The Company may change any Paying Agent, Registrar or Conversion Agent without notice to the Holder. The Company or any of its Subsidiaries may, subject to certain limitations set forth in the Indenture, act as Paying Agent or Registrar. 4. INDENTURE, LIMITATIONS This Note is one of a duly authorized issue of Securities of the Company designated as its 4% Convertible Subordinated Notes due June 1, 2006 (the "Notes"), issued under an Indenture dated as of May 22, 2001 (together with any supplemental indentures thereto, the "Indenture"), between the Company and the Trustee. The terms of this Note include those stated in the Indenture and those required by or made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended, as in effect on the date of A-5 69 the Indenture. This Note is subject to all such terms, and the Holder of this Note is referred to the Indenture and said Act for a statement of them. The Notes are subordinated unsecured obligations of the Company limited to $300,000,000 aggregate principal amount, subject to Section 2.2 of the Indenture. The Indenture does not limit other debt of the Company, secured or unsecured, including Senior Indebtedness. 5. OPTIONAL REDEMPTION The Notes are subject to redemption, at any time on or after June 5, 2004, as a whole or from time to time in part, at the election of the Company. The Redemption Prices (expressed as percentages of the principal amount) are as follows for Notes redeemed during the periods set forth below:
PERIOD REDEMPTION PRICE ------ ---------------- June 5, 2004 through May 31, 2005........................... 101.00% June 1, 2005 and thereafter................................. 100.00%
In each case together with accrued interest up to but not including the Redemption Date; provided that if the Redemption Date is an interest payment date, interest will be payable to the Holders in whose names the Notes are registered at the close of business on the relevant record dates. 6. NOTICE OF REDEMPTION Notice of redemption will be mailed by first-class mail at least 20 days but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part, but only in whole multiples of $1,000. On and after the Redemption Date, subject to the deposit with the Paying Agent of funds sufficient to pay the Redemption Price plus accrued interest, if any, accrued to, but excluding, the Redemption Date, interest shall cease to accrue on Notes or portions of them called for redemption. 7. PURCHASE OF NOTES AT OPTION OF HOLDER UPON A CHANGE IN CONTROL At the option of the Holder and subject to the terms and conditions of the Indenture, the Company shall become obligated to purchase all or any part specified by the Holder (so long as the principal amount of such part is $1,000 or an integral multiple of $1,000 in excess thereof) of the Notes held by such Holder on the date that is 35 Business Days after the occurrence of a Change in Control, at a purchase price in cash equal to 100% of the principal amount thereof together with accrued interest up to, but excluding, the Change in Control Purchase Date. The Holder shall have the right to withdraw any Change in Control Purchase Notice (in whole or in a portion thereof that is $1,000 or an integral multiple of $1,000 in excess thereof) at any time prior to the close of business on the Business Day next preceding the Change in Control Purchase Date by delivering a written notice of withdrawal to the Paying Agent in accordance with the terms of the Indenture. 8. CONVERSION A Holder of a Note may convert the principal amount of such Note (or any portion thereof equal to $1,000 or any integral multiple of $1,000 in excess thereof) into shares of Common Stock at any time prior to maturity; provided, however, that if the Note is called for redemption or subject to purchase upon a Change in A-6 70 Control, the conversion right will terminate at the close of business on the Business Day immediately preceding the Redemption Date or the Change in Control Purchase Date, as the case may be, for such Note or such earlier date as the Holder presents such Note for redemption or purchase (unless the Company shall default in making the Redemption Price or Change in Control Purchase Price, as the case may be, when due, in which case the conversion right shall terminate at the close of business on the date such default is cured and such Note is redeemed or purchased). The initial Conversion Price is $44.93 per share, subject to adjustment under certain circumstances. The number of shares of Common Stock issuable upon conversion of a Note is determined by dividing the principal amount of the Note or portion thereof converted by the Conversion Price in effect on the Conversion Date. No fractional shares will be issued upon conversion; in lieu thereof, an amount will be paid in cash based upon the Closing Price (as defined in the Indenture) of the Common Stock on the Trading Day immediately prior to the Conversion Date. To convert a Note, a Holder must (a) complete and manually sign the conversion notice set forth below and deliver such notice to a Conversion Agent, (b) surrender the Note to a Conversion Agent, (c) furnish appropriate endorsements and transfer documents if required by a Registrar or a Conversion Agent, and (d) pay any transfer or similar tax, if required. Notes so surrendered for conversion (in whole or in part) during the period from the close of business on any regular record date to the opening of business on the next succeeding interest payment date (excluding Notes or portions thereof called for redemption or subject to purchase upon a Change in Control on a Redemption Date or Change in Control Purchase Date, as the case may be, during the period beginning at the close of business on a regular record date and ending at the opening of business on the first Business Day after the next succeeding interest payment date, or if such interest payment date is not a Business Day, the second such Business Day) shall also be accompanied by payment in funds acceptable to the Company of an amount equal to the interest payable on such interest payment date on the principal amount of such Note then being converted, and such interest shall be payable to such registered Holder notwithstanding the conversion of such Note, subject to the provisions of this Indenture relating to the payment of defaulted interest by the Company. If the Company defaults in the payment of interest payable on such interest payment date, the Company shall promptly repay such funds to such Holder. A Holder may convert a portion of a Note equal to $1,000 or any integral multiple thereof. A Note in respect of which a Holder had delivered a Change in Control Purchase Notice exercising the option of such Holder to require the Company to purchase such Note may be converted only if the Change in Control Purchase Notice is withdrawn in accordance with the terms of the Indenture. 9. CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION Any Notes called for redemption, unless surrendered for conversion before the close of business on the Business Day immediately preceding the Redemption Date, may be deemed to be purchased from the Holders of such Notes at an amount not less than the Redemption Price, together with accrued interest, if any, to, but not including, the Redemption Date, by one or more investment bankers or other purchasers who may agree with the Company to purchase such Notes from the Holders, to convert them into Common Stock of the Company and to make payment for such Notes to the Paying Agent in trust for such Holders. 10. SUBORDINATION The indebtedness evidenced by the Notes is, to the extent and in the manner provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness of A-7 71 the Company. Any Holder by accepting this Note agrees to and shall be bound by such subordination provisions and authorizes the Trustee to give them effect. In addition to all other rights of Senior Indebtedness described in the Indenture, the Senior Indebtedness shall continue to be Senior Indebtedness and entitled to the benefits of the subordination provisions irrespective of any amendment, modification or waiver of any terms of any instrument relating to the Senior Indebtedness or any extension or renewal of the Senior Indebtedness. 11. DENOMINATIONS, TRANSFER, EXCHANGE The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. A Holder may register the transfer of or exchange Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes or other governmental charges that may be imposed in relation thereto by law or permitted by the Indenture. 12. PERSONS DEEMED OWNERS The Holder of a Note may be treated as the owner of it for all purposes. 13. UNCLAIMED MONEY If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent will pay the money back to the Company at its written request. After that, Holders entitled to money must look to the Company for payment. 14. AMENDMENT, SUPPLEMENT AND WAIVER Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Company and Holders of a majority in principal amount of the Notes then outstanding, and an existing default or Event of Default and its consequence or compliance with any provision of the Indenture or the Notes may be waived in a particular instance with the consent of the Holders of a majority in principal amount of the Notes then outstanding. Without the consent of or notice to any Holder, the Company and the Trustee may amend or supplement the Indenture or the Notes to, among other things, cure any ambiguity, defect or inconsistency or make any other change that does not adversely affect the rights of any Holder. 15. SUCCESSOR CORPORATION When a successor corporation assumes all the obligations of its predecessor under the Notes and the Indenture in accordance with the terms and conditions of the Indenture, the predecessor corporation will (except in certain circumstances specified in the Indenture) be released from those obligations. 16. DEFAULTS AND REMEDIES If an Event of Default (other than as a result of certain events of bankruptcy, insolvency or reorganization of the Company) occurs and is continuing under the Indenture, the Trustee or the Holders of at least 25% in principal amount of the Notes then outstanding may declare all unpaid principal to the date of acceleration on the Notes then outstanding to be due and payable immediately, all as and to the extent provided in the Indenture. If an Event of Default occurs as a result of certain events of bankruptcy, insolvency or reorganization of the Company under the Indenture, unpaid principal of the Notes then A-8 72 outstanding shall become due and payable immediately without any declaration or other act on the part of the Trustee or any Holder, all as and to the extent provided in the Indenture. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Notes. Subject to certain limitations, Holders of a majority in principal amount of the Notes then outstanding may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing default (except a default in payment of principal or interest) if it determines that withholding notice is in their interests. The Company is required to file periodic reports with the Trustee as to the absence of default. 17. TRUSTEE DEALINGS WITH THE COMPANY LaSalle Bank National Association, the Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from and perform services for the Company or an Affiliate of the Company, and may otherwise deal with the Company or an Affiliate of the Company, as if it were not the Trustee. 18. NO RECOURSE AGAINST OTHERS A director, officer, employee or shareholder, as such, of the Company shall not have any liability for any obligations of the Company under the Notes or the Indenture nor for any claim based on, in respect of or by reason of such obligations or their creation. The Holder of this Note by accepting this Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of this Note. 19. AUTHENTICATION This Note shall not be valid until the Trustee or an authenticating agent manually signs the certificate of authentication on the other side of this Note. 20. ABBREVIATIONS AND DEFINITIONS Customary abbreviations may be used in the name of the Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian) and UGMA (= Uniform Gifts to Minors Act). All terms defined in the Indenture and used in this Note but not specifically defined herein are defined in the Indenture and are used herein as so defined. 21. INDENTURE TO CONTROL; GOVERNING LAW In the case of any conflict between the provisions of this Note and the Indenture, the provisions of the Indenture shall control. This Note shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to principals of conflicts of law. The Company will furnish to any Holder, upon written request and without charge, a copy of the Indenture. Requests may be made to the Trustee at the address of the Corporate Trust Office. A-9 73 ASSIGNMENT FORM To assign this Note, fill in the form below: I or we assign and transfer this Note to - -------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. no.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint - -------------------------------------------------------------------------------- agent to transfer this Note on the books of the Company. The agent may substitute another to act for him or her. Your Signature: Date: - ---------------------------------- ----------------------------------------- (Sign exactly as your name appears on the other side of this Note) *Signature guaranteed by: By: - ---------------------------------- * The signature must be guaranteed by an institution which is a member of one of the following recognized signature guaranty programs: (i) the Securities Transfer Agent Medallion Program (STAMP); (ii) the New York Stock Exchange Medallion Program (MSP); (iii) the Stock Exchange Medallion Program (SEMP); or (iv) such other guaranty program acceptable to the Trustee. A-10 74 CONVERSION NOTICE To convert this Note into Common Stock of the Company, check the box:[ ] To convert only part of this Note, state the principal amount to be converted (must be $1,000 or a multiple of $1,000): $____________. If you want the stock certificate made out in another person's name, fill in the form below: - -------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. no.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) Your Signature: Date: - ---------------------------------- ----------------------------------------- (Sign exactly as your name appears on the other side of this Note) *Signature guaranteed by: By: - ---------------------------------- * The signature must be guaranteed by an institution which is a member of one of the following recognized signature guaranty programs: (i) the Securities Transfer Agent Medallion Program (STAMP); (ii) the New York Stock Exchange Medallion Program (MSP); (iii) the Stock Exchange Medallion Program (SEMP); or (iv) such other guaranty program acceptable to the Trustee. A-11 75 OPTION TO ELECT PURCHASE UPON A CHANGE OF CONTROL To: Lam Research Corporation The undersigned registered owner of this Security hereby irrevocably acknowledges receipt of a notice from Lam Research Corporation (the "Company") as to the occurrence of a Change in Control with respect to the Company and requests and instructs the Company to redeem the entire principal amount of this Security, or the portion thereof (which is $1,000 or an integral multiple thereof) below designated, in accordance with the terms of the Indenture referred to in this Security at the Change in Control Purchase Price, together with accrued interest to, but excluding, such date, to the registered Holder hereof. Dated: -------------- ---------------------------------------- ---------------------------------------- Signature(s) Signature(s) must be guaranteed by a qualified guarantor institution with membership in an approved signature guarantee program pursuant to Rule 17Ad-15 under the Securities Exchange Act of 1934. ---------------------------------------- Signature Guaranty Principal amount to be redeemed (in an integral multiple of $1,000, if less than all): - ----------------------------------- NOTICE: The signature to the foregoing Election must correspond to the Name as written upon the face of this Security in every particular, without alteration or any change whatsoever. A-12 76 SCHEDULE OF EXCHANGES OF NOTES(3) The following exchanges, redemptions, repurchases or conversions of a part of this global Note have been made: PRINCIPAL AMOUNT OF THIS GLOBAL NOTE AUTHORIZED AMOUNT OF FOLLOWING SUCH SIGNATORY OF AMOUNT OF DECREASE IN INCREASE IN DECREASE DATE SECURITIES PRINCIPAL AMOUNT PRINCIPAL AMOUNT OF EXCHANGE (OR INCREASE) CUSTODIAN OF THIS GLOBAL NOTE OF THIS GLOBAL NOTE ------------------------- ------------ --------------------- -------------------
- ---------- (4) This schedule should be included only if the Security is a global Security. A-13 77 EXHIBIT B CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF RESTRICTED SECURITIES(1) Re: 4% Convertible Subordinated Notes due June 1, 2006 (the "Notes") of Lam Research Corporation. The Transferor has requested a Registrar or the Trustee to exchange or register the transfer of such Notes. In connection with such request and in respect of each such Note, the transfer of such Note is being made pursuant to an effective registration statement under the Securities Act of 1933, as amended (the "Securities Act") (check applicable box) or the transfer or exchange, as the case may be, of such Note does not require registration under the Securities Act because (check applicable box): [ ] Such Note is being transferred pursuant to an effective registration statement under the Securities Act. [ ] Such Note is being acquired for the Transferor's own account, without transfer. [ ] Such Note is being transferred to the Company or a Subsidiary (as defined in the Indenture) of the Company. [ ] Such Note is being transferred to a person the Transferor reasonably believes is a "qualified institutional buyer" (as defined in Rule 144A or any successor provision thereto ("Rule 144A") under the Securities Act) that is purchasing for its own account or for the account of a "qualified institutional buyer", in each case to whom notice has been given that the transfer is being made in reliance on such Rule 144A, and in each case in reliance on Rule 144A. [ ] Such Note is being transferred to a purchaser who is not a U.S. person (as defined in Regulation S under the Securities Act) in an offshore transaction pursuant to Regulation S under the Securities Act. [ ] Such Note is being transferred pursuant to and in compliance with an exemption from the registration requirements under the Securities Act in accordance with Rule 144 (or any successor thereto) ("Rule 144") under the Securities Act. Date: - ------------------------------------- ----------------------------------- (Insert Name of Transferor) - -------- (1) This certificate should only be included if this is a Restricted Security A-14 EX-4.3 3 f74092ex4-3.txt EXHIBIT 4.3 1 EXHIBITS 4.3 REGISTRATION RIGHTS AGREEMENT by and among LAM RESEARCH CORPORATION as Issuer and THE INITIAL PURCHASERS NAMED HEREIN Dated as of May 22, 2001 2 THIS REGISTRATION RIGHTS AGREEMENT is made and entered into as of May 22, 2001 by and among Lam Research Corporation, a Delaware corporation (the "COMPANY"), and Credit Suisse First Boston Corporation and ABN Amro Rothschild LLC, (the "INITIAL PURCHASERS") pursuant to the Purchase Agreement, dated May 17, 2001 (the "PURCHASE AGREEMENT"), among the Company and the Initial Purchasers. In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Company has agreed to provide the registration rights set forth in this Agreement. The execution of this Agreement is a condition to the closing under the Purchase Agreement. The Company agrees with the Initial Purchasers, (i) for their benefit as Initial Purchasers and (ii) for the benefit of the beneficial owners (including the Initial Purchasers) from time to time of the Notes (as defined herein) and the beneficial owners from time to time of the Underlying Common Stock (as defined herein) issued upon conversion of the Notes (each of the foregoing a "HOLDER" and, together, the "HOLDERS"), as follows: SECTION 1. DEFINITIONS. Capitalized terms used herein without definition have their respective meanings set forth in the Purchase Agreement. As used in this Agreement, the following terms have the following meanings: "Additional Interest" has the meaning set forth in Section 2(e) hereof. "Additional Interest Accrual Period" has the meaning set forth in Section 2(e) hereof. "Additional Interest Payment Date" means each interest payment date under the Indenture. "Affiliate" with respect to any specified person, means an "affiliate," as defined in Rule 144, of such person. "Amendment Effectiveness Deadline Date" has the meaning set forth in Section 2(d) hereof. "Applicable Conversion Price" as of any date of determination means the Conversion Price in effect as of such date of determination or, if no Notes are then outstanding, the Conversion Price that would be in effect were Notes then outstanding. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in The City of New York or San Francisco are authorized or obligated by law or executive order to close. "Common Stock" means the shares of common stock, par value $0.001 per share, of the Company and any other shares of common stock as may constitute "Common Stock" for purposes of the Indenture, including the Underlying Common Stock. "Company" has the meaning set forth in the first paragraph of this Agreement and also includes the Company's successors. -1- 3 "Conversion Price" has the meaning assigned such term in the Indenture. "Deferral Notice" has the meaning set forth in Section 3(i) hereof. "Deferral Period" has the meaning set forth in Section 3(i) hereof. "Effectiveness Deadline Date" for the purposes of determining the payment of Additional Interest under Section 2(e) shall mean the one hundred and eightieth (180th) day after the Issue Date. "Effectiveness Period" means two years from the date of filing of the Initial Shelf Registration Statement or, if a shorter period, from the date of the Initial Shelf Registration Statement until either of (i) the sale pursuant to a Shelf Registration Statement of all the Registrable Securities or (ii) the expiration of the holding period applicable to the Registrable Securities held by Holders that are not Affiliates of the Company under Rule 144(k) under the Securities Act. "Event" has the meaning set forth in Section 2(e) hereof. "Event Date" has the meaning set forth in Section 2(e) hereof. "Event Termination Date" has the meaning set forth in Section 2(e) hereof. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. "Filing Deadline Date" for the purposes of determining the payment of Additional Interest under Section 2(e) shall mean the ninetieth (90th) day after the Issue Date. "Holder" has the meaning set forth in the second paragraph of this Agreement. "Indenture" means the Indenture dated as of the date hereof between the Company and LaSalle Bank National Association, as trustee, pursuant to which the Notes are being issued. "Initial Purchasers" has the meaning set forth in the first paragraph of this Agreement. "Initial Shelf Registration Statement" has the meaning set forth in Section 2(a) hereof. "Issue Date" means May 22, 2001, or if later, the latest date of original issuance of the Notes. "Losses" has the meaning set forth in Section 6 hereof. "Managing Underwriters" has the meaning set forth in Section 8 hereof. "Material Event" has the meaning set forth in Section 3(i) hereof. "Notes" means the 4% Convertible Subordinated Notes due June 1, 2006 of the Company to be purchased pursuant to the Purchase Agreement. -2- 4 "Notice and Questionnaire" means a written notice delivered to the Company by a Holder containing any information with respect to the Holder necessary to amend the Registration Statement or supplement the related Prospectus with respect to the intended distribution of Registrable Securities by such Holder. "Notice Holder" means, on any date, any Holder that has delivered a Notice and Questionnaire to the Company on or prior to such date and holds Registrable Securities, as of such dates. "Offering Circular" means the offering circular dated May 17, 2001 relating to the issuance of the Notes. "Prospectus" means the prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any amendment or prospectus supplement, including post-effective amendments, and all materials incorporated by reference or explicitly deemed to be incorporated by reference in such Prospectus. "Purchase Agreement" has the meaning set forth the first paragraph of this Agreement. "Record Holder" means the holder of record of such Note on the record date with respect to the interest payment date under the Indenture on which such Additional Interest Payment Date shall occur. "Registrable Securities" means the Notes, until such Notes have been converted into or exchanged for the Underlying Common Stock and, at all times subsequent to any such conversion or exchange, the Underlying Common Stock and any securities into or for which such Underlying Common Stock have been converted or exchanged, and any security issued with respect thereto upon any stock dividend, split or similar event until, in the case of any such security, (A) the earliest of (i) its effective registration under the Securities Act and resale in accordance with the Registration Statement covering it, (ii) expiration of the holding period that would be applicable thereto under Rule 144(k) under the Securities Act were it not held by an Affiliate of the Company or (iii) its sale to the public pursuant to Rule 144, and (B) as a result of the event or circumstance described in any of the foregoing clauses (i) through (iii), the legends with respect to transfer restrictions required under the Indenture are removed or removable in accordance with the terms of the Indenture or such legend, as the case may be. "Registration Expenses" has the meaning set forth in Section 5 hereof. "Registration Statement" means any registration statement of the Company that covers any of the Registrable Securities pursuant to the provisions of this Agreement including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits, and all materials incorporated by reference or explicitly deemed to be incorporated by reference in such registration statement. -3- 5 "Restricted Securities" has the meaning for this term as defined in Rule 144. "Rule 144" means Rule 144 under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC. "Rule 144A" means Rule 144A under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated by the SEC thereunder. "Shelf Registration Statement" has the meaning set forth in Section 2(a) hereof. "Subsequent Shelf Registration Statement" has the meaning set forth in Section 2(b) hereof. "TIA" means the Trust Indenture Act of 1939, as amended. "Trustee" means LaSalle Bank National Association (or any successor entity), the Trustee under the Indenture. "Underlying Common Stock" means the Common Stock into which the Notes are convertible or issued upon any such conversion. SECTION 2. SHELF REGISTRATION. (a) The Company shall prepare and file or cause to be prepared and filed with the SEC, as soon as practicable, a Registration Statement for an offering to be made on a delayed or continuous basis pursuant to Rule 415 of the Securities Act (a "SHELF REGISTRATION STATEMENT") registering the resale from time to time by Holders thereof of all of the Registrable Securities (the "INITIAL SHELF REGISTRATION STATEMENT"). The Initial Shelf Registration Statement shall be on an appropriate form permitting registration of such Registrable Securities for resale by such Holders in accordance with the methods of distribution elected by the Holders and set forth in the Initial Shelf Registration Statement. The Company shall use its reasonable best efforts to cause the Initial Shelf Registration Statement to be declared effective under the Securities Act as promptly as is practicable, and to keep the Initial Shelf Registration Statement (or any Subsequent Shelf Registration Statement) continuously effective under the Securities Act until the expiration of the Effectiveness Period. At the time the Initial Shelf Registration Statement is declared effective, each Holder that became a Notice Holder and that has provided the Company with an appropriately completed Notice and Questionnaire, in each case on or prior to the date five (5) Business Days prior to such time of effectiveness, shall be named as a selling securityholder in the Initial Shelf Registration Statement and the related Prospectus in such a manner as to permit such Holder to deliver such Prospectus to purchasers of Registrable Securities in accordance with applicable law. -4- 6 None of the Company's security holders (other than the Holders of Registrable Securities) shall have the right to include any of the Company's securities in the Shelf Registration Statement. (b) If the Initial Shelf Registration Statement or any Subsequent Shelf Registration Statement ceases to be effective for any reason at any time during the Effectiveness Period (other than because all Registrable Securities registered thereunder have been resold pursuant thereto or have otherwise ceased to be Registrable Securities), the Company shall use its reasonable best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event shall within thirty (30) days of such cessation of effectiveness amend the Shelf Registration Statement in a manner reasonably expected to obtain the withdrawal of the order suspending the effectiveness thereof, or file an additional Shelf Registration Statement covering all of the securities that as of the date of such filing are Registrable Securities (a "SUBSEQUENT SHELF REGISTRATION STATEMENT"). If a Subsequent Shelf Registration Statement is filed, the Company shall use its reasonable best efforts to cause the Subsequent Shelf Registration Statement to become effective as promptly as is practicable after such filing and to keep such Registration Statement (or subsequent Shelf Registration Statement) continuously effective until the end of the Effectiveness Period. (c) The Company shall supplement and amend the Shelf Registration Statement if required by the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement, if required by the Securities Act or, to the extent to which the Company does not reasonably object, as reasonably requested by an Initial Purchaser in the event that it is participating in the Shelf Registration Statement or by the Trustee on behalf of a majority in interest of the registered Holders or by any Managing Underwriter in the event of an underwritten offering. (d) Each Holder of Registrable Securities agrees that if such Holder wishes to sell Registrable Securities pursuant to a Shelf Registration Statement and related Prospectus, it will do so only in accordance with this Section 2(d) and Section 3(i). Each Holder of Registrable Securities wishing to sell Registrable Securities pursuant to a Shelf Registration Statement and related Prospectus agrees to deliver a Notice and Questionnaire to the Company at least five (5) Business Days prior to any intended distribution of Registrable Securities under the Shelf Registration Statement. From and after the date the Initial Shelf Registration Statement is declared effective, the Company shall, as promptly as practicable after the date a Notice and Questionnaire is delivered (i) if required by applicable law, file with the SEC a post-effective amendment to the Shelf Registration Statement or prepare and, if required by applicable law, file a supplement to the related Prospectus or a supplement or amendment to any document incorporated therein by reference or file any other document required under the Securities Act so that the Holder delivering such Notice and Questionnaire is named as a selling securityholder in the Shelf Registration Statement and the related Prospectus in such a manner as to permit such Holder to deliver such Prospectus to purchasers of the Registrable Securities in accordance with applicable law and, if the Company shall file a post-effective amendment to the Shelf Registration Statement, use reasonable best efforts to cause such post-effective amendment to be declared effective under the Securities Act as promptly as is practicable, but in any event by the date (the "AMENDMENT EFFECTIVENESS DEADLINE DATE") that is -5- 7 forty-five (45) days after the date such post-effective amendment is required by this clause to be filed; (ii) provide such Holder copies of any documents filed pursuant to Section 2(d)(i); and (iii) notify such Holder as promptly as practicable after the effectiveness under the Securities Act of any post-effective amendment filed pursuant to Section 2(d)(i); provided that if such Notice and Questionnaire is delivered during a Deferral Period, the Company shall so inform the Holder delivering such Notice and Questionnaire and shall take the actions set forth in clauses (i), (ii) and (iii) above upon expiration of the Deferral Period in accordance with Section 3(i). Notwithstanding anything contained herein to the contrary, (i) the Company shall be under no obligation to name any Holder that is not a Notice Holder as a selling securityholder in any Registration Statement or related Prospectus; and the Company shall not be obligated to file more than one (1) post-effective amendment or supplement for the purpose of naming Holders as selling securityholders who were not named in the Initial Shelf Registration Statement at the time of effectiveness in any thirty (30) day period following the effectiveness of the Initial Shelf Registration Statement. Any Holder who subsequently provides a Notice and Questionnaire required by this Section 2(d) pursuant to the provisions of this Section (whether or not such Holder has supplied the Notice and Questionnaire at the time the Initial Shelf Registration Statement was declared effective) shall be named as a selling securityholder in the Shelf Registration Statement and related Prospectus in accordance with the requirements of this Section 2(d). (e) The parties hereto agree that the Holders of Registrable Securities will suffer damages, and that it would not be feasible to ascertain the extent of such damages with precision, if (i) the Initial Shelf Registration Statement has not been filed on or prior to the Filing Deadline Date, (ii) the Initial Shelf Registration Statement has not been declared effective under the Securities Act on or prior to the Effectiveness Deadline Date, (iii) the Company has failed to perform its obligations set forth in Section 2(d) within the time period required therein or (iv) the aggregate duration of Deferral Period in any period exceeds the number of days permitted in respect of such period pursuant to Section 3(i) hereof (each of the events of a type described in any of the foregoing clauses (i) through (iv) are individually referred to herein as an "EVENT," and the Filing Deadline Date in the case of clause (i), the Effectiveness Deadline Date in the case of clause (ii), the Amendment Effectiveness Deadline Date in the case of clause (iii), and the date on which the aggregate duration of Deferral Periods in any period exceeds the number of days permitted by Section 3(i) hereof in the case of clause (iv) being referred to herein as an "EVENT DATE"). Events shall be deemed to continue until the "EVENT TERMINATION DATE," which shall be the following dates with respect to the respective types of Events: the date the Initial Shelf Registration Statement is filed in the case of an Event of the type described in clause (i), the date the Initial Shelf Registration Statement is declared effective under the Securities Act in the case of an Event of the type described in clause (ii), the date the Company performs its obligations set forth in Section 2(d) in the case of an Event of the type described in clause (iii) (including, without limitation, the date the relevant post-effective amendment to the Shelf Registration Statement is declared effective under the Securities Act), and termination of the Deferral Period that caused the limit on the aggregate duration of Deferral Periods in a period set forth in Section 3(i) to be exceeded in the case of the commencement of an Event of the type described in clause (iv). -6- 8 Accordingly, subject to the last sentence of Section 3(i), commencing on (and including) any Event Date and ending on (but excluding) the relevant Event Termination Date (an "ADDITIONAL INTEREST ACCRUAL PERIOD"), the Company agrees to pay, as additional interest and not as a penalty, an amount (the "ADDITIONAL INTEREST"), payable on the Additional Interest Payment Dates to Record Holders of Registrable Securities and of shares of Underlying Common Stock issued upon conversion of Notes that are Registrable Securities, as the case may be, accruing for each portion of such Additional Interest Accrual Period beginning on and including an Additional Interest Payment Date (or, in respect of the first time that the Additional Interest is to be paid to Holders on an Additional Interest Payment Date as a result of the occurrence of any particular Event, from the Event Date) and ending on but excluding the first to occur of (A) the date of the end of the Additional Interest Accrual Period or (B) the next Additional Interest Payment Date at a rate per annum equal to one-half of one percent (0.5%) of the aggregate principal amount of such Notes or, in the case of Notes that have been converted into or exchanged for Underlying Common Stock, the Applicable Conversion Price of such shares of Underlying Common Stock, as the case may be, in each case determined as of the Business Day immediately preceding the next Additional Interest Payment Date; provided that in the case of an Additional Interest Accrual Period that is in effect solely as a result of an Event of the type described in clause (iii) of the immediately preceding paragraph, such Additional Interest shall be paid only to the Holders that have delivered Notice and Questionnaires that caused the Company to incur the obligations set forth in Section 2(d) the non-performance of which is the basis of such Event, provided, further, that any Additional Interest accrued with respect to any Note or portion thereof called for redemption on a redemption date or converted into Underlying Common Stock on a conversion date prior to the Additional Interest Payment Date, shall, in any such event, be paid instead to the Holder who submitted such Note or portion thereof for redemption or conversion on the applicable redemption date or conversion date, as the case may be, on such date (or promptly following the conversion date, in the case of conversion). Notwithstanding the foregoing, no Additional Interest shall accrue as to any Registrable Security from and after the earlier of (x) the date such security is no longer a Registrable Security and (y) the expiration of the Effectiveness Period. The rate of accrual of the Additional Interest with respect to any period shall not exceed the rate provided for in this paragraph notwithstanding the occurrence of multiple concurrent Events. Following the cure of all Events requiring the payment by the Company of Additional Interest to the Holders of Registrable Securities pursuant to this Section, the accrual of Additional Interest will cease (without in any way limiting the effect of any subsequent Event requiring the payment of Additional Interest by the Company). The Trustee shall be entitled, on behalf of Holders of Notes or Underlying Common Stock, to seek any available remedy for the enforcement of this Agreement, including for the payment of any Additional Interest. All of the Company's obligations set forth in this Section 2(e) that are outstanding with respect to any Registrable Security at the time such security ceases to be a Registrable Security shall survive until such time as all such obligations with respect to such security have been satisfied in full (notwithstanding termination of this Agreement pursuant to Section 9(k)). -7- 9 The parties hereto agree that the additional interest provided for in this Section 2(e) constitute a reasonable estimate of the damages that may be incurred by Holders of Registrable Securities by reason of the failure of the Initial Shelf Registration Statement to be filed or declared effective or available for effecting resales of Registrable Securities in accordance with the provisions hereof. SECTION 3. REGISTRATION PROCEDURES. In connection with the registration obligations of the Company under Section 2 hereof, the Company shall: (a) Before filing any Registration Statement or Prospectus or any amendments or supplements thereto with the SEC, furnish to the Initial Purchasers and counsel to the Initial Purchasers copies of all such documents proposed to be filed and use its reasonable best efforts to reflect in each such document when so filed with the SEC such comments as the Initial Purchasers and counsel to the Initial Purchasers shall reasonably propose provided that such comments are proposed within three (3) Business Days following the delivery of such copies to the Initial Purchasers and counsel to the Initial Purchasers. (b) Prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement continuously effective for the applicable period specified in Section 2(a); cause the related Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act; and use its reasonable best efforts to comply with the provisions of the Securities Act applicable to it with respect to the disposition of all securities covered by such Registration Statement during the Effectiveness Period in accordance with the intended methods of disposition by the sellers thereof as such methods of disposition are set forth in such Registration Statement as so amended or such Prospectus as so supplemented. (c) As promptly as practicable (i) give notice to the Notice Holders, counsel to the Notice Holders and the Initial Purchasers when any Registration Statement or any post-effective amendment has been declared effective, (ii) give notice to counsel to the Notice Holders and the Initial Purchasers of any request, following the effectiveness of the Initial Shelf Registration Statement under the Securities Act, by the SEC or any other federal or state governmental authority for amendments or supplements to any Registration Statement or related Prospectus or for additional information and (iii) give notice to the Notice Holders, counsel to the Notice Holders and the Initial Purchasers, (A) of the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of any Registration Statement or the initiation or threatening of any proceedings for that purpose, (B) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, (C) of the occurrence of (but not the nature of or details concerning) a Material Event and (D) of the determination by the Company that a post-effective amendment to a Registration Statement will be filed with the SEC, which notice may, at the discretion of the Company (or as required pursuant to Section 3(i)), state that it constitutes a Deferral Notice, in which event the provisions of Section 3(i) shall apply. -8- 10 (d) Use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement or the lifting of any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction in which they have been qualified for sale, in either case as promptly as practicable. (e) As promptly as practicable (if reasonably requested by any Notice Holder or by an Initial Purchaser (with respect to any portion of an unsold allotment from the original offering if such Initial Purchaser is participating in the Shelf Registration Statement)), incorporate in a Prospectus supplement or post-effective amendment to a Registration Statement such information as such Notice Holder or Initial Purchaser shall, on the basis of an opinion of nationally recognized counsel experienced in such matters, determine to be required to be included therein and make any required filings of such Prospectus supplement or such post-effective amendment; provided, that the Company shall not be required to take any actions under this Section 3(e) that, in the reasonable opinion of counsel for the Company are not required. (f) As promptly as practicable furnish to each Initial Purchaser and counsel to the Notice Holders, without charge, at least one (1) conformed copy of the Registration Statement and any amendment thereto, including financial statements but excluding schedules, all documents incorporated or deemed to be incorporated therein by reference and all exhibits (unless requested in writing to the Company by such Notice Holder or Initial Purchaser, as the case may be); provided that the Company will as promptly as practicable furnish a copy of the Registration Statement and any amendment thereto if requested by a Notice Holder. (g) During the Effectiveness Period, deliver to each Notice Holder in connection with any sale of Registrable Securities pursuant to a Registration Statement, without charge, as many copies of the Prospectus or Prospectuses relating to such Registrable Securities (including each preliminary prospectus) and any amendment or supplement thereto as such Notice Holder may reasonably request; and the Company hereby consents (except during such periods that a Deferral Notice is outstanding and has not been revoked) to the use of such Prospectus or each amendment or supplement thereto by each Notice Holder in connection with any offering and sale of the Registrable Securities covered by such Prospectus or any amendment or supplement thereto in the manner set forth therein. (h) Prior to any public offering of the Registrable Securities pursuant to a Shelf Registration Statement, register or qualify or cooperate with the Notice Holders in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any Notice Holder reasonably requests in writing (which request may be included in the Notice and Questionnaire); prior to any public offering of the Registrable Securities pursuant to a Shelf Registration Statement, keep each such registration or qualification (or exemption therefrom) effective during the Effectiveness Period in connection with such Notice Holder's offer and sale of Registrable Securities pursuant to such registration or qualification (or exemption therefrom) and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of such Registrable Securities in the manner set forth in the relevant -9- 11 Registration Statement and the related Prospectus; provided, that the Company will not be required to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Agreement or (ii) take any action that would subject it to general service of process in suits or to taxation in any such jurisdiction where it is not then so subject. (i) Upon (A) the issuance by the SEC of a stop order suspending the effectiveness of a Shelf Registration Statement or the initiation of proceedings with respect to a Shelf Registration Statement under Section 8(d) or 8(e) of the Securities Act, (B) the occurrence of any event or the existence of any fact (a "MATERIAL EVENT") as a result of which any Registration Statement shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or any Prospectus shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or (C) the occurrence or existence of any pending corporate development, public filing with the SEC or other similar event with respect to the Company that, in the reasonable discretion of the Company, makes it appropriate to suspend the availability of a Shelf Registration Statement and the related Prospectus, (i) in the case of clause (B) above, subject to the next sentence, as promptly as practicable prepare and file, if necessary pursuant to applicable law, a post-effective amendment to such Registration Statement or a supplement to the related Prospectus or any document incorporated therein by reference or file any other required document that would be incorporated by reference into such Registration Statement and Prospectus so that such Registration Statement does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and such Prospectus does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and, in the case of a post-effective amendment to a Registration Statement, subject to the next sentence, use its reasonable efforts to cause it to be declared effective as promptly as is practicable, and (ii) give notice to the Notice Holders that the availability of the Shelf Registration Statement is suspended (a "DEFERRAL NOTICE") and, upon receipt of any Deferral Notice, each Notice Holder agrees not to sell any Registrable Securities pursuant to the Registration Statement until such Notice Holder's receipt of copies of the supplemented or amended Prospectus provided for in clause (i) above, or until it is advised in writing by the Company that the Prospectus may be used, and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in such Prospectus. The Company will use its reasonable best efforts to ensure that the use of the Prospectus may be resumed (x) in the case of clause (A) above, as promptly as is practicable, (y) in the case of clause (B) above, as soon as, in the sole judgment of the Company, public disclosure of such Material Event would not be prejudicial to or contrary to the interests of the Company or, if necessary to avoid unreasonable burden or expense, as soon as practicable thereafter and (z) in the case of clause (C) above, as soon as, in the discretion of the Company, such suspension is no longer appropriate. The Company shall be entitled to exercise its right under this Section 3(i) to suspend the availability of the Shelf Registration Statement or any Prospectus, without incurring or accruing any obligation to pay Additional Interest pursuant to Section 2(e), for one or more periods not to -10- 12 exceed 60 days in any 6 month period (such period, during which the availability of the Registration Statement and any Prospectus is suspended being a "DEFERRAL PERIOD"). (j) Use its reasonable best efforts to comply with all applicable rules and regulations of the SEC and make generally available to its securityholders earning statements (which need not be audited) satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any 3-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) commencing on the first day of the first fiscal quarter of the Company commencing after the effective date of a Registration Statement, which statements shall cover said periods. (k) In the case of registration of resales of the Notes, cause the Indenture to be qualified under the TIA, cooperate with the Trustee and the Notice Holders to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the TIA and execute, and use commercially reasonable efforts to cause the Trustee to execute, all documents as may be required to effect such changes and all other forms and documents required to be filed with the SEC to enable the Indenture to be so qualified in a timely manner. (l) Cooperate with each Notice Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities sold or to be sold pursuant to a Registration Statement, which certificates shall not bear any restrictive legends unless required by applicable law, and cause such Registrable Securities to be in such denominations as are permitted by the Indenture and registered in such names as such Notice Holder may request in writing at least two (2) Business Days prior to any sale of such Registrable Securities. (m) Provide a CUSIP number for all Registrable Securities covered by each Registration Statement not later than the effective date of such Registration Statement and provide the Trustee and the transfer agent for the Common Stock with printed certificates for the Registrable Securities that are in a form eligible for deposit with The Depository Trust Company. (n) Use its reasonable best efforts to cause the Underlying Common Stock to be listed on any securities exchange or any automated quotation system on which similar securities issued by the Company are then listed, to the extent the Underlying Common Stock satisfies applicable listing requirements. (o) Provide such information as is required for any filings required to be made with the National Association of Securities Dealers, Inc. (p) In the event of an underwritten offering, enter into such agreements and take all such other reasonable actions in connection therewith (including those reasonably and customarily requested by the Managing Underwriters, if any, or the Holders of a majority of the Registrable Securities being sold) in order to expedite or facilitate the disposition of such Registrable Securities. If the registration is an underwritten offering, (i) make such representations and warranties, subject to the Company's ability to do so, to the Holders of such Registrable Securities and the underwriters with respect to the business of the Company and its subsidiaries, the -11- 13 Registration Statement, Prospectus and documents incorporated by reference or deemed incorporated by reference, if any, in each case, in form, substance and scope as are customarily made by issuers to underwriters in underwritten offerings and confirm the same if and when requested; (ii) to obtain opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the Managing Underwriters, if any, and counsel to the Holders of a majority of the Registrable Securities being sold) addressed to each of the underwriters covering the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by the Managing Underwriters; (iii) obtain "cold comfort" letters and updates thereof from the independent certified public accountants of the Company (and, if necessary, any other certified public accountants of any subsidiary of the Company or any business acquired or to be acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to each of the Managing Underwriters, if any, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings; and (iv) deliver such documents and certificates as may be reasonably requested by counsel to the Holders of a majority of the Registrable Securities being sold or the Managing Underwriters to evidence the continued validity of the representations and warranties of the Company and its subsidiaries made pursuant to clause (i) above and to evidence compliance with any customary conditions contained in the underwriting agreement entered into by the Company. The above shall be done at each closing under such underwriting as and to the extent required thereunder. (q) If requested in connection with a disposition of Registrable Securities pursuant to a Registration Statement, make available for inspection by a representative of the Holders of a majority of the Registrable Securities being sold, any Managing Underwriter participating in any disposition of Registrable Securities, if any, and any attorney or accountant retained by the majority of Registrable Securities being sold or Managing Underwriter, all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries, and cause the executive officers, directors and employees of the Company and its subsidiaries to supply all information reasonably requested by any such representative of the Holders of a majority of the Registrable Securities being sold, Managing Underwriter, or their respective attorneys or accountants as customary for similar due diligence examinations; subject to reasonable assurances by each such person that such information will be used only in connection with matters relating to such Registration Statement, provided, however, that such persons shall first agree in writing with the Company that any information made available by the Company shall be kept confidential by such persons, unless (i) disclosure of such information is required by court or administrative order or is necessary to respond to inquiries of regulatory authorities, (ii) disclosure of such information is required by law, (iii) such information becomes generally available to the public other than as a result of a disclosure or failure to safeguard by any such person or (iv) such information becomes available to any such person from a source other than the Company and such source is not bound by a confidentiality agreement. SECTION 4. HOLDER'S OBLIGATIONS. Each Holder agrees, by acquisition of the Registrable Securities, that no Holder of Registrable Securities shall be entitled to sell any of such -12- 14 Registrable Securities pursuant to a Registration Statement or to receive a Prospectus relating thereto, unless such Holder has furnished the Company with a Notice and Questionnaire as required pursuant to Section 2(d) hereof and the information set forth in the next sentence. Each Notice Holder agrees promptly to furnish to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Notice Holder not misleading and any other information regarding such Notice Holder and the distribution of such Registrable Securities as the Company may from time to time reasonably request. Any sale of any Registrable Securities by any Holder shall constitute a representation and warranty by such Holder that the information relating to such Holder and its plan of distribution is as set forth in the Prospectus delivered by such Holder in connection with such disposition, that such Prospectus does not as of the time of such sale contain any untrue statement of a material fact relating to or provided by such Holder or its plan of distribution and that such Prospectus does not as of the time of such sale omit to state any material fact relating to or provided by such Holder or its plan of distribution necessary to make the statements in such Prospectus, in the light of the circumstances under which they were made, not misleading. SECTION 5. REGISTRATION EXPENSES. The Company shall bear all fees and expenses incurred in connection with the performance by the Company of its obligations under this Agreement whether or not any of the Registration Statements are declared effective. Such fees and expenses shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses of counsel (x) with respect to filings required to be made with the National Association of Securities Dealers, Inc. and (y) of compliance with federal and state securities or Blue Sky laws (including, without limitation, reasonable fees and disbursements of the counsel specified in the next sentence in connection with Blue Sky qualifications of the Registrable Securities under the laws of such jurisdictions as the Notice Holders of a majority of the Registrable Securities being sold pursuant to a Registration Statement may designate), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities in a form eligible for deposit with The Depository Trust Company), (iii) duplication expenses relating to copies of any Registration Statement or Prospectus delivered to any Holders hereunder, (iv) fees and disbursements of counsel for the Company in connection with the Shelf Registration Statement, (v) the fees and disbursements of the independent public accountants of the Company, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, (vi) reasonable fees and disbursements of the Trustee and of the registrar and transfer agent for the Common Stock and their respective counsel and (vii) Securities Act liability insurance obtained by the Company in its sole discretion. In addition, the Company shall bear or reimburse the Notice Holders for the reasonable fees and disbursements of one firm of legal counsel for the Holders, which shall initially be Wilson Sonsini Goodrich & Rosati, Professional Corporation, but which may, with the written consent of the Initial Purchasers (which shall not be unreasonably withheld), be another nationally recognized law firm experienced in securities law matters designated by the Company. In addition, the Company shall pay the internal expenses of the Company (including, without limitation, all salaries and expenses of officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange on which similar securities of the Company are then listed and the fees and expenses of any person, -13- 15 including special experts, retained by the Company. Notwithstanding the provisions of this Section 5, each seller of Registrable Securities shall pay selling expenses (which include, without limitation, all underwriting fees, discounts and commissions) and all registration expenses to the extent the Company is prohibited from paying such registration expenses under applicable law. SECTION 6. INDEMNIFICATION. (a) INDEMNIFICATION BY THE COMPANY. The Company shall indemnify and hold harmless each Notice Holder and each person, if any, who controls any Notice Holder (within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act) from and against any losses, liabilities, claims, damages and expenses (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) (collectively, "LOSSES"), arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Company shall not be liable in any such case to the extent that any such Losses arise out of or are based upon an untrue statement or alleged untrue statement contained in or omission or alleged omission from any of such documents in reliance upon and conformity with any of the information relating to the Holders furnished to the Company in writing by a Holder expressly for use therein; provided further that the indemnification contained in this paragraph shall not inure to the benefit of any Holder of Registrable Securities (or to the benefit of any person controlling such Holder) on account of any such Losses arising out of or based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any preliminary prospectus provided in each case the Company has complied with its several obligations under Section 3(a) hereof if, to the extent that a prospectus relating to such Securities was required to be delivered by such Holder under the Securities Act, either (A) (i) such Holder failed to send or deliver a copy of the Prospectus with or prior to the delivery of written confirmation of the sale by such Holder to the person asserting the claim from which such Losses arise and (ii) the Prospectus would have corrected such untrue statement or alleged untrue statement or such omission or alleged omission, or (B) (x) such untrue statement or alleged untrue statement, omission or alleged omission is corrected in an amendment or supplement to the Prospectus and (y) having previously been furnished by or on behalf of the Company with copies of the Prospectus as so amended or supplemented, such Holder thereafter fails to deliver such Prospectus as so amended or supplemented, with or prior to the delivery of written confirmation of the sale of a Registrable Security to the person asserting the claim from which such Losses arise. (b) INDEMNIFICATION BY HOLDERS OF REGISTRABLE SECURITIES. Each Holder agrees, severally and not jointly, to indemnify and hold harmless the Company and its respective directors and officers, and each person, if any, who controls the Company (within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act) or any other Holder, from and against all Losses arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or based upon -14- 16 any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with information furnished to the Company in writing by such Holder expressly for use in such Registration Statement or Prospectus or amendment or supplement thereto. In no event shall the liability of any selling Holder of Registrable Securities hereunder be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities pursuant to the Registration Statement giving rise to such indemnification obligation. (c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to either of the two preceding paragraphs, such person (the "INDEMNIFIED PARTY") shall promptly notify the person against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the reasonable fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all indemnified parties, and that all such fees and expenses shall be reimbursed as they are incurred. Such separate firm shall be designated in writing by, in the case of parties indemnified pursuant to Section 6(a), the Holders of a majority (with Holders of Notes deemed to be the Holders, for purposes of determining such majority, of the number of shares of Underlying Common Stock into which such Notes are or would be convertible or exchangeable as of the date on which such designation is made) of the Registrable Securities covered by the Registration Statement held by Holders that are indemnified parties pursuant to Section 6(a) and, in the case of parties indemnified pursuant to Section 6(b), the Company. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding and does not include a statement as to, or an admission of, fault, culpability or a failure to act by or on behalf of an indemnified party. -15- 17 (d) CONTRIBUTION. To the extent that the indemnification provided for in this Section 6 is unavailable to an indemnified party under Section 6(a) or 6(b) hereof in respect of any Losses or is insufficient to hold such indemnified party harmless, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such Losses (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party or parties on the other hand or (ii) if the allocation provided in clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also to the relative fault of the indemnifying party or parties on the one hand and of the indemnified party or parties on the other hand in connection with the statements or omissions that resulted in such Losses, as well as any other relevant equitable considerations. Benefits received by the Company shall be deemed to be equal to the total net proceeds from the initial placement pursuant to the Purchase Agreement (before deducting expenses) of the Notes pursuant to the Purchase Agreement. Benefits received by any Holder shall be deemed to be equal to the value of receiving Registrable Securities that are registered under the Securities Act. The relative fault of the Holders on the one hand and the Company on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Holders or by the Company, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Benefits received by any underwriter shall be deemed to be equal to the total underwriting discounts and commissions, as set forth on the cover page of the Prospectus forming a part of the Registration Statement, which resulted in such Losses. The Holders' respective obligations to contribute pursuant to this paragraph are several in proportion to the respective number of Registrable Securities they have sold pursuant to a Registration Statement, and not joint. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 6(d) were determined by pro rata allocation or by any other method or allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the Losses referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding this Section 6(d), an indemnifying party that is a selling Holder of Registrable Securities shall not be required to contribute any amount in excess of the amount by which the net proceeds received by such indemnifying party from Registrable Securities sold and distributed to the public exceeds the amount of any damages that such indemnifying party has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (e) The indemnity, contribution and expense reimbursement obligations of the parties hereunder shall be in addition to any liability any indemnified party may otherwise have hereunder, under the Purchase Agreement or otherwise. -16- 18 (f) The indemnity and contribution provisions contained in this Section 6 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Holder or any person controlling any Holder, or the Company, or the Company's officers or directors or any person controlling the Company and (iii) the sale of any Registrable Securities by any Holder. SECTION 7. INFORMATION REQUIREMENTS. The Company covenants that, if at any time before the end of the Effectiveness Period the Company is not subject to the reporting requirements of the Exchange Act, it will cooperate with any Holder of Registrable Securities and take such further reasonable action as any Holder of Registrable Securities may reasonably request in writing (including, without limitation, making such reasonable representations as any such Holder may reasonably request), all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 and Rule 144A under the Securities Act and customarily taken in connection with sales pursuant to such exemptions. Upon the written request of any Holder of Registrable Securities, the Company shall deliver to such Holder a written statement as to whether it has complied with such filing requirements, unless such a statement has been included in the Company's most recent report filed pursuant to Section 13 or Section 15(d) of Exchange Act. Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to require the Company to register any of its securities (other than the Common Stock) under any section of the Exchange Act. The Company shall file the reports required to be filed by it under the Exchange Act and shall comply with all other requirements set forth in the instructions to Form S-3 in order to allow the Company to be eligible to file registration statements on Form S-3 as soon as is permissible under the Securities Act. SECTION 8. UNDERWRITTEN REGISTRATIONS. If any of the Registrable Securities covered by any Shelf Registration Statement are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering ("MANAGING UNDERWRITERS") will be selected by the Holders of a majority of the Registrable Securities to be included in such offering, provided, however, that such Managing Underwriters must be reasonably satisfactory to the Company. No person may participate in any underwritten registration hereunder unless such person (i) agrees to sell such person's Registered Securities on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting agreements. Notwithstanding anything herein to the contrary, the Company shall not be required to facilitate an underwritten offering pursuant to the Shelf Registration Statement by any Holders unless the offering relates to at least $50,000,000 aggregate principal amount of Notes. SECTION 9. MISCELLANEOUS. (a) NO CONFLICTING AGREEMENTS. The Company (i) is not, as of the date hereof, a party to, nor shall it, on or after the date of this Agreement, enter into, any agreement with -17- 19 respect to its securities that conflicts with the rights granted to the Holders of Registrable Securities in this Agreement or that permits other holders of the Company's outstanding securities to offer such securities for resale under the Registration Statement, and (ii) represents and warrants that the rights granted to the Holders of Registrable Securities hereunder do not in any way conflict with the rights granted to the holders of the Company's securities under any other agreements. (b) AMENDMENTS AND WAIVERS. The provisions of this Agreement (other than with respect to the payment of Additional Interest), including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of Holders of a majority of the then outstanding Underlying Common Stock constituting Registrable Securities (with Holders of Notes deemed to be the Holders, for purposes of this Section, of the number of outstanding shares of Underlying Common Stock into which such Notes are or would be convertible or exchangeable as of the date on which such consent is requested). Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders of Registrable Securities whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other Holders of Registrable Securities may be given by Holders of at least a majority of the Registrable Securities being sold by such Holders pursuant to such Registration Statement; provided, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately preceding sentence. Each Holder of Registrable Securities outstanding at the time of any such amendment, modification, supplement, waiver or consent or thereafter shall be bound by any such amendment, modification, supplement, waiver or consent effected pursuant to this Section 9(b), whether or not any notice, writing or marking indicating such amendment, modification, supplement, waiver or consent appears on the Registrable Securities or is delivered to such Holder. (c) NOTICES. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, by telecopier, by courier guaranteeing overnight delivery or by first-class mail, return receipt requested, and shall be deemed given (i) when made, if made by hand delivery, (ii) upon confirmation, if made by telecopier, (iii) one (1) Business Day after being deposited with such courier, if made by overnight courier or (iv) on the date indicated on the notice of receipt, if made by first-class mail, to the parties as follows: (1)if to a Holder of Registrable Securities that is not a Notice Holder, at the address for such Holder then appearing in the Note Register (as defined in the Indenture); (2)if to a Notice Holder, at the most current address given by such Holder to the Company in a Notice and Questionnaire or any amendment thereto; (3)if to the Company, to: Lam Research Corporation 4650 Cushing Parkway -18- 20 Fremont, California 94538 Attention: General Counsel Telecopy No.: (510) 572-1866 with a copy to: Heller Ehrman White & McAuliffe 333 Bush Street San Francisco, California 94104 Attention: Timothy G. Hoxie, Esq. Telecopy No.: (415) 772-6268 if to the Initial Purchasers to: Credit Suisse First Boston Corporation 11 Madison Avenue New York, New York 10010 Attention: Transaction Advisory Group Telecopy No.: (212) 325-8278 with a copy to: Wilson Sonsini Goodrich & Rosati, P.C. 650 Page Mill Road Palo Alto, CA 94304 Attention: John Fore, Esq. Telecopy No.: (650) 845-5000 (4) if to counsel for the Initial Purchasers, to Wilson Sonsini Goodrich & Rosati, P.C. at the above address and telecopy number (or as otherwise requested by the Notice Holders), or to such other address as such person may have furnished to the other persons identified in this Section 9(c) in writing in accordance herewith. (d) APPROVAL OF HOLDERS. Whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company or its affiliates (other than the Initial Purchasers or subsequent Holders of Registrable Securities if such subsequent Holders are deemed to be such affiliates solely by reason of their holdings of such Registrable Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (e) SUCCESSORS AND ASSIGNS. Any person who purchases any Registrable Securities from the Initial Purchasers shall be deemed, for purposes of this Agreement, to be an assignee of the Initial Purchasers. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties and shall inure to the benefit of and be binding upon each Holder of any Registrable Securities. -19- 21 (f) COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be original and all of which taken together shall constitute one and the same agreement. (g) HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. (i) SEVERABILITY. If any term provision, covenant or restriction of this Agreement is held to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, and the parties hereto shall use their reasonable best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law. (j) ENTIRE AGREEMENT. This Agreement is intended by the parties as a final expression of their agreement and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and the registration rights granted by the Company with respect to the Registrable Securities. Except as provided in the Purchase Agreement, there are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein, with respect to the registration rights granted by the Company with respect to the Registrable Securities. This Agreement supersedes all prior agreements and undertakings among the parties with respect to such registration rights. No party hereto shall have any rights, duties or obligations other than those specifically set forth in this Agreement. (k) TERMINATION. This Agreement and the obligations of the parties hereunder shall terminate upon the end of the Effectiveness Period, except for any liabilities or obligations under Section 5 or 6 hereof and the obligations to make payments of and provide for additional interest under Section 2(e) hereof to the extent such damages have accrued prior to the end of the Effectiveness Period, each of which shall remain in effect in accordance with its terms. [Signature page follows] -20- 22 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. LAM RESEARCH CORPORATION By: ---------------------------------- Name: ---------------------------------- Title: ---------------------------------- The foregoing Registration Rights Agreement is hereby confirmed and accepted as of the date first above written. By: CREDIT SUISSE FIRST BOSTON CORPORATION, Acting on behalf of itself and as the Representative of the several Initial Purchasers By: ---------------------------------- Name: ---------------------------------- Title: ---------------------------------- [SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT] EX-5.1 4 f74092ex5-1.txt EXHIBIT 5.1 1 [LETTERHEAD OF HELLER EHRMAN WHITE & McAULIFFE LLP] EXHIBIT 5.1 JULY 26, 2001 Lam Research Corporation 4650 Cushing Parkway Fremont, CA 94538 RE: Registration Statement on Form S-3 Ladies and Gentlemen: We have acted as counsel to Lam Research Corporation, a Delaware corporation (the "Company"), in connection with the Registration Statement on Form S-3 to be filed with the Securities and Exchange Commission on or about July 26, 2001 (as may be further amended or supplemented, the "Registration Statement") for the purpose of registering under the Securities Act of 1933 $300,000,000 aggregate principal amount of the Company's 4% Convertible Subordinated Notes due June 1, 2006 (the "Notes") and the shares of the Company's common stock, par value $.001 per share, issuable upon conversion of the Notes (the "Conversion Shares") to be sold by certain selling securityholders listed in the Registration Statement (the "Selling Securityholders"). The Notes were issued pursuant to an Indenture, dated as of May 22, 2001, between the Company and The LaSalle Bank-National Association, as trustee (the "Indenture"). We have assumed the authenticity of all records, documents and instruments submitted to us as originals, the genuineness of all signatures, the legal capacity of natural persons and the conformity to the originals of all records, documents and instruments submitted to us as copies. In rendering our opinion, we have examined the following records, documents, instruments and certificates and such additional certificates relating to factual matters as we have deemed necessary or appropriate for an opinion: (a) The Amended Certificate of Incorporation of the Company certified by the Secretary of the State of Delaware as of July 24, 2001; 2 [HELLER EHRMAN LETTERHEAD] Lam Research Corporation July 26, 2001 Page 2 (b) The Bylaws of the Company certified to us by an officer of the Company as being complete and in full force and effect as of the date of this opinion; (c) A Certificate of an officer of the Company (i) attaching records certified to us as constituting all records of proceedings and actions of the Board of Directors of the Company, including any committee thereof, and stockholders of the Company relating to the Notes, the Indenture, the Conversion Shares and the Registration Statement, and (ii) certifying as to certain factual matters; (d) A Certificate of Good Standing relating to the Company issued by the Secretary of State of the State of Delaware as of July 24, 2001; (e) A Certificate of Status Foreign Corporation issued by the Secretary of State of the State of California as of July 24, 2001; (f) The Registration Statement; (g) The Indenture, including the Form of Note attached thereto; and (h) A letter from the Company's transfer agent, dated July 24, 2001, as to the number of shares of the Company's Common Stock that were outstanding on July 20, 2001. We have assumed that the number of shares of common stock outstanding has not changed from July 20, 2001 to the date of this letter and that the number of Conversion Shares will be less than 220,048,794, the number of shares of common stock of the Company currently authorized but not outstanding or otherwise reserved for issuance, and that this number of shares of common stock of the Company will be available for issuance at the time the Notes are converted. This opinion is limited to the federal laws of the United States of America, the General Corporation Law of the State of Delaware (which includes applicable provisions of the Delaware Constitution and reported judicial decisions interpreting the Delaware General Corporation Law and the Delaware Constitution) and, insofar as it relates to the enforceability opinion expressed in paragraph 1, the laws of the State of New York, and we disclaim any opinion as to the laws of any other jurisdiction. We express no opinion as to the applicable choice of law rules that may affect the interpretation or enforcement on the Indenture and the Notes; the enforceability of any waiver of immunities contained in the Indenture or the Notes; or the enforceability of any liquidated damages provision contained in the Indenture or the Notes. We further disclaim any opinion as to any other statute, rule, regulation, ordinance, order or other promulgation of any other jurisdiction or any regional or local governmental body. 3 [HELLER EHRMAN LETTERHEAD] Lam Research Corporation July 26, 2001 Page 3 Based upon the foregoing and our examination of such questions of law as we have deemed necessary or appropriate for the purpose of this opinion, and assuming that (i) the Registration Statement becomes and remains effective during the period when the Notes and Conversion Shares are offered and sold, (ii) the Conversion Shares will be issued, delivered and paid for in accordance with the terms of the Notes and (iii) appropriate certificates evidencing the Conversion Shares will be executed and delivered by the Company, it is our opinion that: 1. The Notes, when sold by the Selling Securityholders in the manner described in the Registration Statement, will constitute the legal, valid and binding obligations of the Company, enforceable against it in accordance with their terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity). 2. When issued upon conversion of the Notes and upon receipt by the Company of the conversion price therefor, the Conversion Shares will be legally issued, fully paid and non-assessable. This opinion is rendered to you in connection with the Registration Statement. This opinion may not be relied upon by you for any other purpose without our prior written consent. We disclaim any obligation to advise you of any change of law that occurs, or any facts of which we may become aware, after the date of this opinion. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to us under the caption "Legal Matters" in the Registration Statement. Very truly yours, /s/ Heller Ehrman White & McAuliffe LLP 3 EX-12.1 5 f74092ex12-1.txt EXHIBIT 12.1 1 EXHIBIT 12.1 Lam Research Corporation Computation of Ratio of Earnings to Fixed Charges (In thousands, except ratio data) Pro Forma
Year ended ---------------------------------------------------------------- June 30, June 25, 1996 1997 1998 1999 2000 ---------------------------------------------------------------- CONSOLIDATED EARNINGS Income (loss) before taxes (1)** 216,399 (60,859) (179,125) (112,913) 236,813 Fixed Charges per below 22,576 24,650 37,208 33,958 33,168 ---------------------------------------------------------------- 238,975 (36,209) (141,917) (78,955) 269,981 ---------------------------------------------------------------- FIXED CHARGES Interest expense 8,051 5,222 17,102 18,368 18,705 Interest portion of annual rent expense 14,525 19,428 18,606 13,790 12,513 Amortization of Debenture Costs - - 1,500 1,800 1,950 ---------------------------------------------------------------- 22,576 24,650 37,208 33,958 33,168 ---------------------------------------------------------------- Earnings to fixed charges (deficit) ratio (2) 10.6 (1.5) (3.8) (2.3) 8.1 ================================================================
**Includes Ontrak Income before taxes for FY96 & FY97
Nine Months Ended ----------------------- March 26, March 25, 2000 2001(3) ----------------------- CONSOLIDATED EARNINGS Income (loss) before taxes 148,033 262,832 Fixed Charges per below 24,327 28,801 ----------------------- 172,360 291,633 ----------------------- FIXED CHARGES Interest expense 13,237 15,374 Interest portion of annual rent expense 9,740 12,227 Amortization of Debenture Costs 1,350 1,200 ----------------------- 24,327 28,801 ----------------------- Earnings to fixed charges (deficit) ratio 7.1 10.1 =======================
(1) During fiscal 1997, Lam recorded one-time charges and other significant adjustments totaling approximately $78 million on a pre-tax basis for restructuring costs; inventory, product warranty and other adjustments; and bad debt reserves. During fiscal 1998, Lam recorded one-time charges and other significant adjustments totaling approximately $167 million on a pre-tax basis for restructuring and merger costs. During fiscal 1999, Lam recorded restructuring charges of $53.4 million. (2) For purposes of calculating the ratio of earnings to fixed charges, (i) earnings consist of consolidated income (loss) before income taxes plus fixed charges and (ii) fixed charges consist of interest expense incurred, including capital leases, amortization of debenture costs and the portion of rental expense under operating leases deemed by the Company to be representative of the interest factor in rent expense. (3) On a restated basis, reflecting the application of SAB 101 since the beginning of fiscal 2001, the ratio of earnings to fixed charges was 6.8 for the nine months ended March 25, 2001. As restated for SAB 101, consolidated earnings before taxes is $165.5 million. Fixed charges are not impacted by the application of SAB 101. EX-23.2 6 f74092ex23-2.txt EXHIBIT 23.2 1 Exhibit 23.2 Consent of Independent Auditors We consent to the reference to our firm under the caption "Experts" in the Registration Statement (Form S-3 No. ) and related Prospectus of Lam Research Corporation for the registration of its 4% Convertible Subordinated Notes due June 1, 2006 and shares of common stock issuable upon conversion thereof and to the incorporation by reference herein of our report dated July 21, 2000, with respect to the consolidated financial statements and schedule of Lam Research Corporation included in its Annual Report, (Form 10-K) as amended, for the year ended June 25, 2000, filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP San Jose, California July 26, 2001 EX-25.1 7 f74092ex25-1.txt EXHIBIT 25.1 1 EXHIBIT 25.1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE ----------------------- CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) [ ] LASALLE BANK NATIONAL ASSOCIATION (Exact name of trustee as specified in its charter) 36-0884183 (I.R.S. Employer Identification No.) 135 South LaSalle Street, Chicago, Illinois 60603 (Address of principal executive offices) (Zip Code) ----------------------- Willie J. Miller, Jr. Group Senior Vice President Chief Legal Officer and Secretary Telephone: (312) 904-2018 135 South LaSalle Street, Suite 925 Chicago, Illinois 60603 (Name, address and telephone number of agent for service) ----------------------- LAM RESEARCH CORPORATION (Exact name of obligor as specified in its charter) Delaware 94-2634797 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4650 Cushing Parkway Fremont, California 94538 (Address of principal executive offices) (Zip Code) ----------------------- 4% Convertible Subordinated Notes Due June 1, 2006 (Title of the indenture securities) 2 ITEM 1. GENERAL INFORMATION* Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. 1. Comptroller of the Currency, Washington D.C. 2. Federal Deposit Insurance Corporation, Washington, D.C. 3. The Board of Governors of the Federal Reserve Systems, Washington, D.C. (b) Whether it is authorized to exercise corporate trust powers. Yes. ITEM 2. AFFILIATIONS WITH THE OBLIGOR. If the obligor is an affiliate of the trustee, describe each such affiliation. Not Applicable *Pursuant to General Instruction B, the trustee has responded only to items 1, 2 and 16 of this form since to the best knowledge of the trustee the obligor is not in default under any indenture under which the trustee is a trustee. 3 ITEM 16. LIST OF EXHIBITS. List below all exhibits filed as part of this statement of eligibility and qualification. 1. A copy of the Articles of Association of LaSalle Bank National Association now in effect. (incorporated herein by reference to Exhibit 1 filed with Form T-1 filed with the Current Report on Form 8-K, dated June 29, 2000, in File No. 333-61691). 2. A copy of the certificate of authority to commence business (incorporated herein by reference to Exhibit 2 filed with Form T-1 filed with the Current Report on Form 8-K, dated June 29, 2000, in File No. 333-61691). 3. A copy of the authorization to exercise corporate trust powers (incorporated herein by reference to Exhibit 3 filed with Form T-1 filed with the Current Report on Form 8-K, dated June 29, 2000, in File No. 333-61691). 4. A copy of the existing By-Laws of LaSalle Bank National Association (incorporated herein by reference to Exhibit 4 filed with Form T-1 filed with the Current Report on Form 8-K, dated June 29, 2000, in File No. 333-61691). 5. Not applicable. 6. The consent of the trustee required by Section 321(b) of the Trust Indenture Act of 1939 (incorporated herein by reference to Exhibit 6 filed with Form T-1 filed with the Current Report on Form 8-K, dated June 29, 2000, in File No. 333-61691). 7. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority. 8. Not applicable. 9. Not applicable. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee, LaSalle Bank National Association, a corporation organized and existing under the laws of the United States of America, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Chicago, State of Illinois, on the 24th day of July, 2001. LASALLE BANK NATIONAL ASSOCIATION By: /s/ RUSSELL C. BERGMAN --------------------------------- Russell C. Bergman First Vice President 4 Exhibit 7. Report of Condition of the Trustee LaSalle Bank N.A. Call Date: 3/31/2001 ST-BK: 17-1520 FFIEC 031 135 South LaSalle Street RC-1 Chicago, IL 60603 Vendor ID: D CERT: 15407
Transit Number: 71000505 Consolidated Report of Condition for Insured Commercial and State-Chartered Savings Banks for March 31 , 2001 All schedules are to be reported in thousands of dollars. Unless otherwise indicated, report the amount outstanding as of the last business day of the quarter. Schedule RC - Balance Sheet
Dollar Amounts in Thousands - ------------------------------------------------------------------------------------------------------------------------------------ ASSETS 1. Cash and balances due from depository institutions (from Schedule RC-A): RCFD a. Noninterest-bearing balances and currency and coin(1) 0081 1,080,311 1.a b. Interest-bearing balances(2) 0071 55,458 1.b 2. Securities: a. Held-to-maturity securities (from Schedule RC-B, column A) 1754 665,587 2.a b. Available-for-sale securities (from Schedule RC-B, column D) 1773 14,402,952 2.b 3. Federal funds sold and securities purchased under agreements to resell 1350 1,820,079 3. 4. Loans and lease financing receivables: a. Loans and leases held for sale 5369 112,079 4.a b. Loans and leases, net of unearned income (from Schedule RC-C) 2122 31,530,369 4.b c. LESS: Allowance for loan and lease losses 3128 436,799 4.c d. Loans and leases, net of unearned income, allowance, and reserve (item 4.a minus 4.b and 4.c) 2125 31,093,570 4.d 5. Trading assets (from Schedule RC-D) 3545 335,536 5. 6. Premises and fixed assets (including capitalized leases) 2145 276,523 6. 7. Other real estate owned (from Schedule RC-M) 2150 4,093 7. 8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) 2130 0 8. 9. Customers' liability to this bank on acceptances outstanding 2155 17,200 9. 10. Intangible assets (from Schedule RC-M) a. Goodwill 3163 180,767 10.a b. Other Intangible assets 0426 414,318 10.b 11. Other assets (from Schedule RC-F) 2160 2,138,331 11. 12. Total assets (sum of items 1 through 11) 2170 52,596,804 12. 52,596,804
- ---------------- (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposit not held for trading. 5 LaSalle Bank N.A. Call Date: 3/31/2001 ST-BK: 17-1520 FFIEC 031 135 South LaSalle Street RC- 2 Chicago, IL 60603 Vendor ID: D CERT: 15407
Transit Number: 71000505
Dollar Amounts in Thousands - ----------------------------------------------------------------------------------------------------------------------------- LIABILITIES 13. Deposits: a. In domestic offices (sum of totals of RCON columns A and C from Schedule RC-E, part I) 2200 25,980,885 13.a RCON (1) Noninterest-bearing (1) 6631 3,502,938 13.a.1 (2) Interest-bearing 6636 22,477,947 13.a.2 25,980,885 RCFN b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, part II) 2200 4,094,415 13.b RCFN (1) Noninterest-bearing 6631 0 13.b.1 (2) Interest-bearing 6636 4,094,415 13.b.2 RCFD 14. Federal funds purchased and securities sold under agreements to repurchase 2800 4,782,914 14. 15. (from Schedule RC-D) 3548 118,214 15 16. Other borrowed money (includes mortgage indebtedness and obligations under 3190 11,564,626 16 capitalized leases): From schedule RC-M 17. Not applicable. 18. Bank's liability on acceptances executed and outstanding 2920 17,200 18. 19. Subordinated notes and debentures (2) 3200 836,000 19. 20. Other liabilities (from Schedule RC-G) 2930 1,691,113 20. 21. Total liabilities (sum of items 13 through 20) 2948 49,085,367 21. 49,085,367 22. Minority Interest in consolidated subsidiaries 3000 0 22. EQUITY CAPITAL RCFD 23. Perpetual preferred stock and related surplus 3838 135,410 23. 24. Common stock 3230 41,234 24. 25. Surplus (exclude all surplus related to preferred stock) 3839 1,903,169 25. 26. a. Retained Earnings 3632 1,393,571 26.a b. Accumulated Other Comprehensive income.(3) B530 38,053 26.b 27. Other Equity capital components (4) 3284 0 27. 28. Total equity capital (sum of items 23 through 27) 3210 3,511,437 28. 3,511,437 29. Total liabilities, minority interest, and equity capital 3300 52,596,804 29. (sum of items 21, 22, and 28) Memorandum To be reported only with the March Report of Condition. 1. Indicate in the box at the right the number of the statement below that best describes the most comprehensive level of auditing work performed for the bank by independent RCFD Number external auditors as of any date during 1999 6724 2 M.1 1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank conducted in accordance with generally accepted auditing standards by a certified with generally accepted auditing standards by a certified public accounting firm which submits a report on the bank accounting firm. (may be required by state chartering 2 = Independent audit of the bank's parent holding company authority) conducted in accordance with generally accepted auditing 5 = Directors' examination of the bank performed by other standards by a certified public accounting firm which external auditors (may be required by state chartering submits a report on the consolidated holding company (but authority) not on the bank separately) 6 = Review of the bank's financial statements by external auditors 3 = Attestation on bank managements assertion on the effectiveness of the internal control over financial reporting by a certified public accounting firm with generally accepted auditing standards. 7 = Compilation of the bank's financial statements by external auditors 8 = Other audit procedures (excluding tax preparation work) 9 = No external audit work
- ---------------- (1) Includes total demand deposits and noninterest-bearing time and savings deposits. (2) Includes limited-life preferred stock and related surplus. (3) Includes net unrealized holding gains(losses) on available for sale securities, accumulated net gains (losses) on cash flow hedges, cumulative foreign currency translation adjustments, and minimum pension liability adjustments. (4) Includes treasury stock and unearned Employee Stock Ownership plan shares. -----END PRIVACY-ENHANCED MESSAGE-----