1
FILED PURSUANT TO RULE 424(b)(3)
REGISTRATION NO. 333-66050
PROSPECTUS
LAM 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 August 9, 2001, the last reported sales price of our common stock was
$27.25 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 August 10, 2001
2
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
<Table>
<Caption>
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
</Table>
<Table>
<Caption>
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
</Table>
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
3
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement that we filed with the
SEC (Registration No. 333-66050). 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:
<Table>
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
</Table>
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.
<Table>
<Caption>
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
</Table>
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
4
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
5
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
6
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
7
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
8
LAM RESEARCH CORPORATION
UNAUDITED RESTATED QUARTERLY INCOME STATEMENTS USING
SAB 101 ACCOUNTING GUIDELINES
(IN MILLIONS, EXCEPT PER SHARE DATA)
<Table>
<Caption>
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
======= ====== ====== ========
</Table>
- -------------------------
(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
9
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
10
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
11
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
12
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
13
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
14
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
15
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
16
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
17
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 August 9, 2001, the last reported bid price of our common
stock on Nasdaq was $27.25 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
18
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:
<Table>
<Caption>
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
</Table>
- -------------------------
(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
19
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
20
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
21
- 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
22
- 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
23
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
24
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:
<Table>
<Caption>
PERIOD REDEMPTION PRICE
------ ----------------
June 5, 2004 through May 31, 2005.................... 101.00%
June 1, 2005 and thereafter.......................... 100.00%
</Table>
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
25
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
26
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
27
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
28
- 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
29
(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
30
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
31
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
32
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
33
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
34
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
35
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
36
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
37
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 August 8, 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.
<Table>
<Caption>
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...... 16,050,000 5.35% 357,222 -- --
American Motorist Insurance
Company.................... 631,000 * 14,044 -- --
Arapahoe County Colorado..... 62,000 * 1,379 -- --
</Table>
35
38
<Table>
<Caption>
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 -- --
</Table>
36
39
<Table>
<Caption>
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........ 3,590,000 1.20% 79,902 -- --
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....................... 210,000 * 4,673 -- --
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) *
</Table>
37
40
<Table>
<Caption>
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........ 16,050,000 5.35% 357,222 -- --
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 -- --
</Table>
38
41
<Table>
<Caption>
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 -- --
SG Cowen Securities
Corporation................ 775,000 * 17,249 -- --
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 -- --
</Table>
39
42
<Table>
<Caption>
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
---- ------------------ ----------- --------------- ------------ -------------
Van Kampen Harbor Fund....... 2,000,000 * 44,513 2,522,115(4) 2.02%
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).......... 1,930,000 * 42,955 -- --
</Table>
- -------------------------
* 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
43
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
44
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
45
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
46
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
47
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
48
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
49
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
50
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
51
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
52
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