[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [x] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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To the Stockholders:
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders of Lam Research Corporation, a Delaware corporation (the "Company"), will be held on Thursday, November 2, 2000, 11:00 a.m., local time, at the principal executive offices of the Company at 4650 Cushing Parkway, Fremont, California 94538, for the following purposes:
1. To elect directors to serve for the ensuing year, and until their successors are elected;
2. To ratify the appointment of Ernst & Young LLP as independent auditors of the Company for the fiscal year ending June 30, 2001; and
3. To transact such other business as may properly come before the meeting, or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy Statement accompanying this Notice.
Only stockholders of record at the close of business on September 5, 2000 are entitled to notice of and to vote at the meeting, and for any adjournment thereof.
All stockholders are cordially invited to attend the meeting in person. However, to assure your representation at the meeting, you are urged to mark, sign and date the enclosed proxy and return it as promptly as possible in the postage-prepaid and return-addressed envelope enclosed for that purpose. However, any stockholder of record attending the meeting may vote in person, even if he or she has returned a proxy.
By Order of the Board of Directors,
PAGE ---- Information Concerning Solicitation and Voting.............. 1 Proposal No. 1 -- Election of Directors..................... 3 Security Ownership of Certain Beneficial Owners and Management............................................. 5 Director Compensation..................................... 6 Executive Compensation and Other Information.............. 7 Certain Relationships and Related Transactions............ 10 Compensation Committee Interlocks and Insider Participation.......................................... 11 Report of the Compensation Committee...................... 11 Comparative Stock Performance............................. 14 Proposal No. 2 -- Ratification of Appointment of Independent Auditors.................................................. 14 Section 16(a) Beneficial Ownership Reporting Compliance..... 15 Other Matters............................................... 15
The enclosed proxy is solicited on behalf of Lam Research Corporation, a Delaware corporation (the "Company"), for use at the Annual Meeting of Stockholders to be held Thursday, November 2, 2000 at 11:00 a.m., local time (the "Annual Meeting"), or for any adjournment thereof, for the purposes set forth herein and in the accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting will be held at the principal executive offices of the Company at 4650 Cushing Parkway, Fremont, California 94538. The Company's telephone number at that location is (510) 659-0200.
These proxy solicitation materials will be mailed on or about October 6, 2000 to all stockholders entitled to vote at the meeting. A copy of Lam Research Corporation's 2000 Annual Report to Stockholders accompanies this Proxy Statement.
RECORD DATE AND PRINCIPAL SHARE OWNERSHIP
Stockholders of record at the close of business on September 5, 2000 are entitled to receive notice of and to vote at the Annual Meeting. At the record date, 124,559,636 shares of the Company's Common Stock were outstanding. All references to the number of shares in this proxy statement give effect to the three-for-one split of the Company's stock that became effective March 7, 2000.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before its use by delivering to the Company a written notice of revocation or a duly executed proxy bearing a later date, or by attending the Annual Meeting and voting in person. However, attending the Annual Meeting in and of itself does not constitute a revocation of a proxy.
VOTING AND SOLICITATION
Each stockholder voting on the election of directors may cumulate such stockholder's votes and give one candidate a number of votes equal to the number of directors to be elected (seven at this meeting) multiplied by the number of shares held by such stockholder, or distribute the stockholder's votes on the same principle among as many candidates as the stockholder deems appropriate. However, votes cannot be cast for more than seven candidates. No stockholder shall be entitled to cumulate votes for a candidate unless the candidate's name has been placed in nomination prior to the voting.
Where no vote is specified or where a vote FOR all nominees is marked, the cumulative votes represented by a proxy will be cast, unless contrary instructions are given, at the discretion of the proxy holders in order to elect as many nominees as believed possible under the then-prevailing circumstances. If a stockholder desires to cumulate his or her votes, the accompanying proxy card should be marked to indicate clearly that the stockholder desires to exercise the right to cumulate votes and should specify how the votes are to be allocated among the nominees for directors. For example, a stockholder may write next to the name of the nominee or nominees for whom the stockholder desires to cast votes the number of votes to be cast for such nominee or nominees. Alternatively, without exercising his or her right to vote cumulatively, a stockholder may instruct the proxy holders not to vote for one or more nominees by striking through the name(s) of such nominee or nominees on the proxy card. Unless indicated to the contrary in the space provided on the proxy card, if a stockholder withholds authority to vote for one or more nominees, all cumulative votes of such stockholder will be distributed among the remaining nominees at the discretion of the proxy holders.
On all other matters, each share has one vote.
In general, Delaware law also provides that a quorum consists of a majority of the shares entitled to vote at the Annual Meeting. The Inspector will treat abstentions as shares that are present or represented and entitled to vote for purposes of determining the presence of a quorum, but will not treat abstentions as votes in favor of approving any matter submitted to the stockholders for a vote. Thus, abstentions have the same effect in this regard as negative votes. Any proxy which is properly dated, executed and returned using the form of proxy enclosed will be voted at the Annual Meeting in accordance with the instructions of the stockholder. If no specific instructions are given, the shares will be voted for the election of directors, for ratification of the appointment of the designated independent auditors and, with respect to any other matter or matters that may come before the meeting, as the proxy holders deem advisable in accordance with their best judgment. If a broker indicates on the enclosed proxy or its substitute that it does not have discretionary authority as to certain shares to vote on a particular matter ("broker non-votes"), or with respect to shares as to which proxy authority has been withheld with respect to any matter, those shares will be counted in determining whether a quorum is present but will not be considered as present or represented with respect to that matter. The Company believes that the tabulation procedures to be followed by the Inspector are consistent with the general statutory requirements in Delaware concerning voting of shares and determination of a quorum.
The cost of soliciting proxies will be borne by the Company. The Company has retained the services of ChaseMellon Shareholder Services ("ChaseMellon") to act as agent in the solicitation of proxies from bankers, bank nominees and other institutional owners. The Company estimates that it will pay ChaseMellon a fee of approximately $8,500 for its services and will reimburse ChaseMellon for certain out-of-pocket expenses. The Company may reimburse brokerage firms and other persons representing beneficial owners of shares for their expenses in forwarding solicitation materials to such beneficial owners. Proxies may also be solicited by certain of the Company's directors, officers and regular employees, without additional compensation, personally or by telephone or other communication means.
STOCKHOLDER PROPOSALS TO BE INCLUDED IN THE COMPANY'S 2001 PROXY STATEMENT
Pursuant to Rule 14a-8(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), some stockholder proposals may be eligible for inclusion in the Company's 2001 Proxy Statement. Any such proposal must be received by the Company no later than June 8, 2001. Stockholders interested in submitting such a proposal are advised to contact counsel familiar with the detailed requirements of the applicable securities rules.
STOCKHOLDER PROPOSALS AND NOMINATIONS TO BE VOTED ON AT 2001 ANNUAL MEETING
In addition to the Rule 14a-8(e) proposals referred to above stockholders of the Company may submit proposals which they believe should be voted on at the annual meeting or nominate persons for election to the Board of Directors. In accordance with the Company's bylaws, any such proposal or nomination for the 2001 annual meeting currently scheduled for November 8, 2001 must be submitted in writing to the Secretary of the Company no earlier than August 10, 2001 and no later than September 9, 2001. The submission must include certain specified information concerning the proposal or nominee, as the case may be, and information about the proponent and the proponent's ownership of Common Stock of the Company. Proposals or nominations that do not meet these requirements will not be entertained at the annual meeting. The Secretary should be contacted in writing at the address on the first page of this Proxy Statement to make any submission, or to obtain additional information as to the proper form and content of submissions.
A board of seven directors is to be elected at the Annual Meeting. The bylaws of the Company provide that the number of directors shall be fixed at seven. The proxies cannot be voted for a greater number of persons than the seven nominees named below. Unless otherwise instructed, the proxy holders will vote the proxies received by them for the Company's seven nominees named below, each of whom is currently a director of the Company. If any nominee of the Company should decline or be unable to serve as a director as of the time of the Annual Meeting, the proxies will be voted for any substitute nominee whom shall be designated by the present Board of Directors to fill the vacancy. In the event that additional persons are nominated for election as directors, the proxy holders intend to vote all proxies received by them in such a manner in accordance with cumulative voting as will assure the election of as many of the nominees listed below as possible, and in such event the specific nominees to be voted for will be determined by the proxy holders. Discretionary authority to cumulate the votes held by the proxy holders is solicited by this Proxy Statement. The Company is not aware of any nominee who will be unable or will decline to serve as a director. The term of office of each person elected as a director will continue until the next Annual Meeting of Stockholders, or until a successor has been elected and qualified.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" EACH OF THE SEVEN
The following table sets forth certain information concerning the nominees, which is based on data furnished by them:
NOMINEES DIRECTOR PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE FOR DIRECTOR AGE SINCE DURING PAST FIVE YEARS ------------------------- --- -------- ---------------------------------------------------- James W. Bagley.......... 61 1997 Mr. Bagley has been Chief Executive Officer and a director of the Company since August 6, 1997, the day following consummation of the merger between OnTrak Systems, Inc., a Delaware corporation ("OnTrak"), and the Company (the "Merger"). As of September 1, 1998, Mr. Bagley became Chairman of the Board of Directors. He is currently a director of Teradyne, Inc., and Micron Technology, Inc. From June 1996 to August 1997, Mr. Bagley served as Chairman of the Board and Chief Executive Officer of OnTrak. Prior to joining OnTrak, Mr. Bagley was employed by Applied Materials, Inc., most recently as Chief Operating Officer and Vice Chairman of the Board. Mr. Bagley began his career in the semiconductor industry with Texas Instruments, Inc., where he held various positions over a 15-year period. Roger D. Emerick......... 61 1982 Mr. Emerick has been a director of the Company since 1982, and was Chairman of the Board of Directors from 1984 to 1998. From July 1982 to August 1997, Mr. Emerick was Chief Executive Officer of the Company. Mr. Emerick currently is a director of Electroglas, Inc. and Brooks Automation, Inc. Until September 1999, Mr. Emerick also served as a director of the Fremont Bank.
NOMINEES DIRECTOR PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE FOR DIRECTOR AGE SINCE DURING PAST FIVE YEARS ------------------------- --- -------- ---------------------------------------------------- David G. Arscott(1,2).... 56 1980 Mr. Arscott has been a director of the Company since 1980, and was Chairman of the Board of Directors from 1982 to 1984. He is currently, and has been since 1988, a General Partner of Compass Management Partners, an investment management firm. From 1978 to 1988, Mr. Arscott was a Managing General Partner of Arscott, Norton & Associates, a venture capital firm. Mr. Arscott currently is a director of Silicon Valley Research, Inc. Richard J. Elkus, 65 1997 Mr. Elkus has been a director of the Company since Jr.(1)................. August 6, 1997, the day following consummation of the Merger. He is currently, and has been since 1996, Co-Chairman of Voyan Technology and is currently a director of KLA-Tencor Corporation, Virage Logic and Sopra SA. From February 1994 until consummation of the merger between Tencor Instruments, Inc. ("Tencor") and KLA Instruments, Inc. in April 1997, Mr. Elkus was Vice Chairman of the Board of Tencor. From February 1994 to September 1996, Mr. Elkus was Executive Vice President of Tencor, and was one of the founders of Prometrix Corporation, which was acquired by Tencor in February 1994. Mr. Elkus was Chairman of the Board and Chief Executive Officer of Prometrix Corporation from 1983 until February 1994. Jack R. Harris(1,2)...... 58 1982 Mr. Harris has been a director of the Company since 1982. From 1986 until September 1999, Mr. Harris was Chairman, Chief Executive Officer and President of Optical Specialties, Inc. Mr. Harris is currently Chairman of HT, Inc., First Derivative Systems and Innovative Robotics Solutions. Grant M. Inman(1,2)...... 58 1981 Mr. Inman has been a director of the Company since 1981. From 1985 until 1998, Mr. Inman was a General Partner of Inman & Bowman. Mr. Inman is currently President of Inman Investment Management and a director of Paychex, Inc. and Wind River Systems, Inc. Mr. Inman is currently a Trustee of the University of California, Berkeley, and the University of Oregon. Kenneth M. Thompson(1)... 62 1998 Mr. Thompson has been a director of the Company since 1998. Prior to joining the Board, Mr. Thompson was employed by Intel Corporation for 25 years in various management positions, most recently as Vice President of Technology Manufacturing Engineering. Before joining Intel Corporation, Mr. Thompson worked with Ampex Corporation in its core memory group. Mr. Thompson currently serves as a director of PRI Automation, Inc., GaSonics International Corporation, and Baguda Wear Inc. Mr. Thompson is President and CEO of AvantCom Network, Inc.
(2) Member of Compensation Committee.
There is no family relationship between any of the foregoing nominees, or between any of such nominees and any of the Company's executive officers.
The Board of Directors of the Company held a total of five regularly scheduled or special meetings during the fiscal year ended June 25, 2000. The Board of Directors has an Audit Committee and a Compensation Committee.
The Audit Committee, which consisted of Messrs. Arscott, Elkus, Harris, Inman and Thompson, all non-employee directors, held five meetings during fiscal 2000. This committee recommends to the Board for its approval and for ratification by the stockholders the engagement of the Company's independent auditors to serve the following fiscal year, reviews the scope of the audit, considers comments made by the independent auditors with respect to accounting procedures and internal controls and the consideration given thereto by the Company's management, and reviews internal accounting procedures and controls with the Company's financial and accounting staff.
The Compensation Committee, which consisted of Messrs. Arscott, Harris and Inman, held one meeting during fiscal 2000. This committee recommends salaries, incentives and other forms of compensation for directors, officers and other employees of the Company, administers the Company's various incentive compensation and benefit plans, and recommends policies relating to such compensation and benefit plans. This committee also approves grants of stock options, restricted stock, deferred stock and performance share awards to officers and other employees of the Company.
The table below sets forth the beneficial ownership of shares of Common
Stock of the Company by: (i) each person or entity whom, based on information
obtained, the Company believes beneficially owned more than 5% of the Company's
Common Stock, and the address of each such person or entity ("5% stockholder");
(ii) each current director of the Company; (iii) each named executive officer described below in the section of this proxy statement captioned "Executive Compensation and Other Information"; and (iv) all current directors and current executive officers as a group. With the exception of 5% stockholders, the information below concerning the number of shares beneficially owned is provided with respect to holdings as of September 5, 2000 and, with respect to the 5% stockholders, the information below is provided with respect to holdings as of June 30, 2000 (unless otherwise identified). The percentage is calculated using 124,559,636 as the number of shares outstanding as of September 5, 2000.
SHARES BENEFICIALLY PERCENT OF NAME OF PERSON OR IDENTITY OF GROUP OWNED CLASS ----------------------------------- ------------------- ---------- Fidelity Management & Research.............................. 14,853,366(1) 11.92% 82 Devonshire Street Boston, Massachusetts 02109 Putnam Investment Management, Inc. ......................... 8,329,536(1) 6.69% 1 Post Office Square Boston, Massachusetts 02109 MFS Investment Management................................... 7,632,155(1) 6.13% 500 Boylston St. Boston, Massachusetts 02116 James W. Bagley............................................. 2,508,000(2) 2.01% Roger D. Emerick............................................ 155,476(2) * David G. Arscott............................................ 235,617(2) * Richard J. Elkus, Jr. ...................................... 123,720(2) * Jack R. Harris.............................................. 162,000(2) * Grant M. Inman.............................................. 264,699(2) * Kenneth M. Thompson......................................... 36,000(2) * Stephen G. Newberry......................................... 560,000(2) * Hsui-Sheng (Way) Tu......................................... 144,001(2) *
SHARES BENEFICIALLY PERCENT OF NAME OF PERSON OR IDENTITY OF GROUP OWNED CLASS ----------------------------------- ------------------- ---------- Mercedes Johnson............................................ 88,666(2) * Richard H. Lovgren.......................................... 23,614(2) * All current directors and current executive officers as a group (11 persons)(3)..................................... 4,204,898(2) 3.38%
(1) This information was obtained from the Nasdaq National Market, Inc., and was identified as representing the entity's quarterly 13F filing reflecting holdings as of June 30, 2000.
(2) Includes 2,208,000, 135,000, 144,000, 91,350, 126,000, 108,000, 36,000, 500,000, 84,585, 78,900, 16,140 and 47,106 shares subject to outstanding options that are currently exercisable or exercisable within 60 days after September 5, 2000 in favor of Mr. Bagley, Mr. Emerick, Mr. Arscott, Mr. Elkus, Jr., Mr. Harris, Mr. Inman, Mr. Thompson, Mr. Newberry, Mr. Tu, Ms. Johnson and Mr. Lovgren, and Mr. Craig Garber, respectively. Mr. Garber's shares include 16,545 options held by his spouse.
(3) Current directors and current executive officers include: Mr. Bagley, Mr.
Emerick, Mr. Arscott, Mr. Elkus, Jr., Mr. Harris, Mr. Inman, Mr. Thompson, Mr. Newberry, Ms. Johnson, Mr. Lovgren and Mr. Garber.
Directors who are not employees of the Company receive annual retainers of $15,000; meeting fees of $1,000 for each Board of Directors meeting attended, plus reimbursement for reasonable travel expenses; fees of $500 for each telephonic Board meeting attended (with aggregate fees for such Board meetings not to exceed $8,000 per fiscal year); committee meeting fees of $500 per meeting attended, plus reimbursement for reasonable travel expenses; and fees of $250 for each telephonic committee meeting attended (with no aggregate fee limit for committee meetings). In addition, each person who is a non-employee director is automatically granted on or about December 15 of each calendar year an option to purchase 6,000 shares of the Company's Common Stock under the Company's Amended and Restated 1991 Incentive Stock Option Plan or Amended and Restated 1997 Stock Incentive Plan, at an exercise price per share equal to the fair market value of one share of the Company's Common Stock on the date of grant. Each option has a term of ten years and is immediately exercisable. The plans provide that unexercised options may be exercisable for specified periods following termination of director status, whether by death, disability or retirement, determined by years of service as a director to the Company.
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides, for the three fiscal years ended June 25, 2000, and June 30, 1999, and 1998, respectively, certain summary information concerning compensation paid or accrued by the Company to or on behalf of the Company's Chief Executive Officer, James W. Bagley, and each of the four other most highly compensated executive officers of the Company (determined at the end of the last fiscal year) (the "named executives").
LONG-TERM COMPENSATION ------------------------- ANNUAL COMPENSATION NUMBER OF ----------------------------------------------- RESTRICTED SECURITIES NAME AND OTHER ANNUAL STOCK UNDERLYING ALL OTHER PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($)(1) COMPENSATION($)(3) AWARDS($)(5) OPTIONS(#) COMPENSATION($) --------------------------- ---- ------------ ----------- ------------------ ------------ ---------- --------------- James W. Bagley............ 2000 99,507 4,758(6) Chairman of the Board 1999 91,704 17,632(4) 1,440,000 4,738(6) and Chief Executive 1998 100,000 1,425,000 5,343(6) Officer Stephen G. Newberry........ 2000 596,942 1,539 126,310(7) President and Chief 1999 416,479 1,252 900,000 126,321(7) Operating Officer 1998 392,892 1,200,000 924(7) Hsui-Sheng (Way) Tu........ 2000 455,559 1,008 2,912(8) President, Asia Pacific 1999 415,475 6,862 120,000 3,510(8) Operations 1998 449,251 264 240,000 3,508(8) Mercedes Johnson........... 2000 297,043 37,500(2) 99 6,315(9) Vice President, Finance, 1999 241,295 37,500(2) 826 240,000 4,714(9) and Chief Financial 1998 260,000 37,500(2) 23 90,000 7,067(9) Officer Richard H. Lovgren......... 2000 243,428 53,180 6,598(10) Vice President, General 1999 213,792 26,910 72,000 5,272(10) Counsel and Secretary 1998 228,422 30,000 4,074(10)
(2) Reflects a bonus paid on the anniversary of Ms. Johnson's employment, which Ms. Johnson designated be used to offset the principal amount of a loan extended by the Company to Ms. Johnson in April 1997. See "Certain Relationships and Related Transactions," below.
(3) Includes interest earned on deferred compensation, to the extent that the interest rate exceeded 120% of the applicable federal long-term rate.
(4) Includes $9,979 and $4,998 in Company-provided reimbursements for certain medical and health services.
(5) No dividends are paid on restricted stock. The Company last issued restricted stock awards in June 1996.
(6) Consists of the Company's matching contributions to the Company's 401(k) plan in the amounts of $1,947 for 2000, $1,597 for 1999 and $1,500 for 1998; and $2,811, $3,141 and $3,843 for term life insurance premiums for 2000, 1999 and 1998, respectively.
(7) Includes for fiscal 2000 and 1999 $125,000 reflecting Mr. Newberry's interest in signing bonus received at the outset of his employment with the Company and held in his deferred compensation account, which interest vested on the first anniversary of his employment with the Company. See "Employment and Termination Agreements, Change of Control Arrangements and Retirement Benefits," "Employment Agreement with Stephen G. Newberry", below. Also includes $1,310, $1,321 and $924 for term life insurance premiums for 2000, 1999 and 1998, respectively.
(8) Consists of the Company's matching contributions to the Company's 401(k) plan in the amounts of $2,113 for 2000, $2,606 for 1999, $2,500 for 1998, and $799, $904 and $1,008, for term life insurance premiums for 2000, 1999 and 1998, respectively.
(9) Consists of the Company's matching contributions to the Company's 401(k) plan in the amounts of $5,260 for 2000, $3,640 for 1999 and $6,059 for 1998; and $1,055, $1,074 and $1,008, for term life insurance premiums for 2000, 1999 and 1998, respectively.
(10) Consists of the Company's matching contributions to the Company's 401(k) plan in the amounts of $5,543 for 2000, $4,326 for 1999, and $3,066 for 1998; and $1,055, $946 and $1,008 for term life insurance premiums paid in 2000, 1999 and 1998 respectively.
In fiscal 1999, all named executives agreed to a reduction in base salaries and certain benefits in recognition of the financial environment effecting the semiconductor equipment industry and the Company.
No option grants were made to any of the named executives during fiscal 2000.
The following table provides certain information concerning the exercise of options to purchase the Company's Common Stock in the fiscal year ended June 25, 2000, and the unexercised options held as of June 25, 2000 by the named executives.
VALUE OF UNEXERCISED NO. OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS NO. OF SHARES VALUE AT FISCAL YEAR-END AT FISCAL YEAR-END(2) ACQUIRED ON REALIZED ---------------------------- --------------------------- NAME EXERCISE ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ---- ------------- ----------- ----------- -------------- ----------- ------------- James W. Bagley......... 504,000 $20,033,148 2,208,000 2,145,000 $75,035,078 $57,342,260 Stephen G. Newberry..... 150,000 $ 3,597,813 500,000 1,450,000 $17,423,970 $39,383,835 Hsui-Sheng (Way) Tu..... 329,032 $ 9,681,108 83,960 225,469 $ 2,692,994 $ 6,876,071 Mercedes Johnson........ 195,150 $ 5,723,011 78,900 280,950 $ 2,824,786 $ 9,073,482 Richard Lovgren......... 103,500 $ 3,351,666 16,140 91,860 $ 474,786 $ 2,928,592
(2) Market value of underlying securities at fiscal year-end, minus the exercise price.
EMPLOYMENT AGREEMENT WITH JAMES W. BAGLEY
On July 1, 1997, the Company signed an employment agreement with James W. Bagley which became effective on August 6, 1997, the day following consummation of the Merger (the "Bagley Agreement"). The term of the Bagley Agreement is five years, unless earlier terminated by the Company or Mr. Bagley. The Bagley Agreement provides for a base salary at the annualized rate of $100,000. Mr. Bagley is not entitled to participate in any performance bonus plan of the Company, unless otherwise determined by the Board of Directors. As an incentive to joining the Company, Mr. Bagley was granted non-qualified stock options to purchase 750,000 shares of Common Stock (the "Incentive Options"). In lieu of additional base compensation or participation in performance bonus plans, the Company granted Mr. Bagley non-qualified stock options to purchase 675,000 shares of Common Stock (the "Base Options"). In November 1998, Mr. Bagley was granted options to purchase an additional 1,440,000 shares of the Company's Common Stock. Under the Bagley Agreement, Mr. Bagley is also entitled to participate in the Company's Executive Deferred Compensation Plan and other benefit plans and compensation programs generally maintained for other key executives of the Company.
In the event of a change in control of the Company or the involuntary termination of Mr. Bagley without cause, all unvested Incentive Options will automatically be accelerated in full so as to become fully vested. Mr. Bagley will have two years from the date of termination in which to exercise such options. If Mr. Bagley's employment is involuntarily terminated without cause on or after the first anniversary of the effective date of the Bagley Agreement, he will be entitled to receive a lump sum payment of $100,000, and an automatic vesting of any unvested portion of the Base Options that would have vested within the 1-year period following the date of such termination (which vested options may be exercised within two years of termination).
The Bagley Agreement provides that for a period of 12 months following Mr. Bagley's termination of employment with the Company (other than through expiration of the Bagley Agreement), Mr. Bagley may not perform services respecting certain aspects of semiconductor manufacturing equipment and/or software for anyone other than the Company, and may not solicit any of the Company's employees to become employed by any other business enterprise.
On August 5, 1997, the Company signed an employment agreement with Stephen G. Newberry (the "Newberry Agreement"). The term of the Newberry Agreement is five years, unless earlier terminated by the Company or Mr. Newberry. The Newberry Agreement provides for a base salary at the annualized rate of $450,000, which is to be reviewed at least annually by the Board of Directors for possible increases. Mr. Newberry is not entitled to participate in any performance bonus plan of the Company, unless otherwise determined by the Board of Directors. As an incentive to joining the Company, Mr. Newberry was granted non-qualified stock options to purchase 600,000 shares of Common Stock (the "Incentive Options"). In lieu of additional base compensation or participation in performance bonus plans, the Company granted Mr. Newberry non-qualified stock options to purchase 300,000 shares of Common Stock (the "Base Options"). In November 1998, Mr. Newberry was granted options to purchase an additional 900,000 shares of the Company's Common Stock.
Under the Newberry Agreement, Mr. Newberry is also entitled to participate in the Company's Executive Deferred Compensation Plan and other benefit plans and compensation programs generally maintained for other key executives of the Company. Mr. Newberry also received a deferred signing bonus in the amount of $500,000, the entire amount of which was held in a deferred compensation account, pursuant to the Company's Executive Deferred Compensation Plan, with Mr. Newberry's interest in the account vesting in equal installments of 25% on each of the first four anniversaries following August 5, 1997.
In the event of a change in control of the Company or involuntary termination without cause, all unvested Incentive Options will automatically be accelerated in full so as to become fully vested, as will any Base Options that would have vested within the 1-year period following the date of such termination. Mr. Newberry will have two years from the date of termination in which to exercise such options. If Mr. Newberry's employment is involuntarily terminated without cause on or after the first anniversary of the effective date of the Newberry Agreement, he will be entitled to receive a lump sum payment equal to one times his then annual base compensation.
The Newberry Agreement provides that for a period of 12 months following Mr. Newberry's termination of employment with the Company (other than through expiration of the Newberry Agreement), Mr. Newberry may not solicit any of the Company's employees to become employed by any other business enterprise.
EMPLOYMENT AGREEMENT WITH MERCEDES JOHNSON
On December 11, 1999, the Company signed an employment agreement with Mercedes Johnson (the "Johnson Agreement"). The term of the Johnson Agreement is three years, unless earlier terminated by the Company or Ms. Johnson. The Johnson Agreement provides for a base salary, which is unspecified and is to be reviewed at least annually by the Board of Directors for possible increases. Ms. Johnson is not entitled to participate in any performance bonus plan of the Company, unless otherwise determined by the Board of Directors. As an incentive to joining the Company, Ms. Johnson was granted non-qualified stock options to purchase 225,000 shares of Common Stock; and, during 1998, Ms. Johnson was granted non-qualified stock options to purchase an additional 330,000 shares of Common Stock (collectively, these option grants are referred to as the "Incentive Options"). Under the Johnson Agreement, Ms. Johnson is entitled to participate in the Company's Executive Deferred Compensation Plan and other benefit plans and compensation programs generally maintained for other key executives of the Company.
In the event of Ms. Johnson's involuntary termination without cause, Ms. Johnson will be placed on a one year leave of absence beginning on the termination date. During the leave of absence, Ms. Johnson will continue to make herself available for special projects as are delegated to her by the Company's Chief Executive Officer. She will receive her base compensation, any targeted bonus, her executive benefits (except those that are available only to Lam employees), the bonus applicable to reducing her loan from the Company (see "Loan to Mercedes Johnson" under "Certain Relationships and Related Transactions" below) and continued vesting of all previously granted stock options during the leave of absence. If the involuntary termination occurs after a change in control of the company, the Incentive Options shall automatically be accelerated in full so as to become completely vested on the termination date.
CHANGE OF CONTROL ARRANGEMENTS
In addition to the change of control provisions in the foregoing agreements, the Company's Stock Option Plans and Employee Stock Purchase Plans provide that, upon a merger of the Company with or into another corporation, or the sale of substantially all of the assets of the Company, each outstanding option or right to purchase Common Stock shall be assumed, or an equivalent option or right substituted by the successor corporation or a parent or subsidiary of the successor corporation. In the event that the successor corporation does not agree to assume the option or right, or substitute an equivalent option or right, some or all of the options granted under certain of the Stock Option Plans shall be fully exercisable and all of the rights granted under the Employee Stock Purchase Plans shall be fully exercisable following the merger for a period of time from the date of notice by the Board of Directors. Following the expiration of such periods, the options and rights will terminate. Under certain other Stock Option Plans, the Plan Administrator may make other adjustments or provisions to compensate option holders.
RETIREMENT MEDICAL AND DENTAL BENEFITS
The Board of Directors approved a plan in July 1996 allowing executives who retire from the Company to continue to participate in the Company's group medical and dental plans after retirement. Additionally, in July 1998, the Board amended the Executive Deferred Compensation Plan to provide that any participant 55 years or older may petition the Board for an early distribution of benefits under the Plan. Any such early distribution would not effect a participant's ability to continue to participate and earn benefits under this Plan.
LOAN TO ROGER D. EMERICK
In April 1996, Roger D. Emerick, then Chairman of the Board and Chief Executive Officer of the Company, borrowed $600,000 from the Company pursuant to a promissory note bearing interest at 5.05% per annum. In April 1997, and again in April 1998 and April 1999, the loan was renewed by the Company. In August 1999, Mr. Emerick repaid in full the promissory note and all accrued interest. As of September 1, 1999, no loan principal or accrued interest remains outstanding.
LOAN TO MERCEDES JOHNSON
In connection with her initial and continued employment, the Company made Mercedes Johnson, Vice President, Finance and Chief Financial Officer as of May 1, 1997, a loan in the amount of $150,000. The loan bears no interest and is payable in equal annual installments over a 4-year period. On each of the first four anniversaries of Ms. Johnson's employment, the Company will pay Ms. Johnson a bonus in the amount of $37,500, which amount will be used to offset the loan. In the event Ms. Johnson terminates her employment with the Company, she will be required to pay the outstanding balance of the loan in accordance with its terms. As of September 5, 2000, $37,500 remains due and owing under the loan (and subject to future offset).
EMPLOYMENT AGREEMENT WITH ROGER D. EMERICK
In July 1996, the Company signed an employment agreement with Roger D. Emerick, then Chairman of the Board and Chief Executive Officer of the Company. The agreement, which became effective on July 1, 1996, provided that Mr. Emerick was to serve as Chief Executive Officer of the Company for a period of two years, which period extended automatically (but not beyond June 30, 2002) unless terminated by the Company or Mr. Emerick with at least 180 days' advance notice. In the event Mr. Emerick ceased to serve as the Chief Executive Officer of the Company, Mr. Emerick was originally to serve as a consultant to the Company through June 30, 2002. The agreement was amended, however, on June 26, 1997, to provide for the continued employment of Mr. Emerick following the appointment of James W. Bagley as Chief Executive
The Emerick Agreement provided for an initial annual base salary of $621,857 during the employment period. Effective September 1, 1998, the salary was adjusted to an annualized rate equivalent to $33,333 per month. The Emerick Agreement also provides for an annual performance bonus of up to 50% of base salary based on attainment of certain performance targets established by the Company's Board of Directors. For services as a consultant, the Company will pay Mr. Emerick a monthly consulting fee of $33,333. Mr. Emerick also participates in all of the incentive compensation plans and programs generally available to the senior management of the Company, as well as any employee benefit plan maintained by the Company for its employees. If Mr. Emerick's employment is involuntarily terminated without cause, he will be entitled to receive his targeted bonus amount, plus an amount equal to the consulting fee, for the period beginning on the date of termination and ending June 30, 2002, subject to a maximum of 48 months, as well as certain other benefits. In addition, upon involuntary termination without cause or a change in control of the Company, the unvested portion of Mr. Emerick's stock options and restricted stock will automatically be accelerated in full so as to become fully vested. The Emerick Agreement provides that for a period of 24 months following Mr. Emerick's termination of employment with the Company, Mr. Emerick may not perform services for any direct competitor of the Company, and may not solicit any of the Company's employees to become employed by any other business enterprise.
In July 1998, Mr. Emerick petitioned the Board to receive an early distribution of benefits under the Company's Executive Deferred Compensation Plan. Beginning September 1, 1998, Mr. Emerick received a monthly distribution of $8,000 of benefits due him under the plan.
No persons who were members of the Compensation Committee during fiscal year 2000 had any relationship requiring disclosure under this section.
Notwithstanding anything to the contrary set forth in any of the Company's previous filings under the Securities Act of 1933, as amended ("Securities Act"), or the Securities Exchange Act of 1934, as amended ("Exchange Act"), that might incorporate all or portions of future filings, including this Proxy Statement, the following Report of the Compensation Committee, and the Performance Graph below, shall not be incorporated by reference into any such filings, nor shall they be deemed to be soliciting material or deemed filed with the Securities and Exchange Commission ("SEC") under the Securities Act or the Exchange Act.
The Compensation Committee (the "Committee") of the Board of Directors, composed of three non-employee directors, determines and administers the Company's executive compensation policies and programs. This committee also approves grants of stock options, restricted stock, deferred stock and performance share awards to officers and other employees of the Company.
One of the Committee's primary goals in setting compensation policies is to maintain competitive, progressive programs to attract, retain and motivate high-caliber executives, foster teamwork and maximize the long-term success of the Company by appropriately rewarding such individuals for their achievements.
In formulating and administering the individual elements of the Company's executive compensation program, the Committee emphasizes planning, implementing and achieving long-term objectives and strives to use prudent judgment in establishing performance objectives, evaluating performance and determining actual incentive awards.
The Committee believes that the Company's executive compensation programs have met these objectives. The Company has been able to attract and retain the executive talent necessary to support the corporation and promote long-term growth. The Company has also been able to reduce the payment of bonuses during those periods, such as fiscal 1999, in which the Company's revenue and gross margins were depressed.
The Committee establishes the base salaries of executive officers, after review of relevant data of other executives with similar responsibilities from published industry reports and surveys of similarly situated companies. Accordingly, the Committee strives to maintain the Company's annual executive salaries at levels competitive with the market average base salaries of executive officers in similar positions. The market comprises similarly sized high-technology companies within and outside the Company's industry. In addition, a large portion of each executive officer's compensation may be annual incentives in the form of a cash bonus, provided certain target performance objectives are met.
Incentive bonuses may be provided to executives as part of a competitive compensation package. The bonus levels are intended to provide the appropriate elements of variability and risk. Bonus payments may be tied specifically to targeted corporate performance. The Committee will establish a base bonus amount, determined through review of a competitive market survey for executives at similar levels, which will be incrementally reduced if the Company does not meet its targeted performance or increased if the Company exceeds its targeted performance. There is no minimum or maximum percentage by which a bonus can be reduced or increased.
The Committee grants stock options to focus an executive's attention on the long-term performance of the Company and on maximizing stockholder value. The grant of stock options is closely tied to individual executive performance. The Committee grants such stock options after a review of various factors, including the executive's potential contributions to the Company, current equity ownership in the Company and vesting rates of existing stock options, if any. Stock options are granted with an exercise price equal to the current fair market value of the Company's stock and utilize vesting periods intended to encourage retention of executive officers. Because of the direct benefit executive officers receive through improved stock performance, the Committee believes stock options serve to align the interests of executive officers closely with those of other stockholders.
Restricted stock awards may be granted to executives under the 1996 Restricted Stock Plan (which was approved by the Company's stockholders in 1995). The award of restricted stock is based on the Company's performance measured against quarterly targets. Because the restricted stock does not vest until five years
Another component of the Company's executive compensation program is the Executive Deferred Compensation Plan (the "Deferred Plan"), a voluntary, non-tax-qualified, deferred compensation plan that encourages officers to save for retirement. Under the Deferred Plan, participants are entitled to defer compensation until retirement, death, other termination of employment, or until specified dates. As amended by the Board in July 1998, Deferred Plan participants 55 years or older may petition the Board for an early distribution of benefits, which early distribution would not affect the participant's ability to continue to participate or earn benefits under the Deferred Plan. Participants receive a fixed-rate yield based on the average annual interest rate of 10-year United States Treasury Notes for the previous ten years. An enhanced yield of up to 115% of the fixed-rate yield will be payable in the event of death, retirement under certain circumstances, and termination of employment after plan participation for a specified number of years. Because the benefits of the Deferred Plan increase with each year of participation, offering the Deferred Plan to executives encourages them to stay with the Company.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Committee bases the compensation of the Company's Chief Executive Officer on the policies and procedures described above. In determining the Chief Executive Officer's base salary and bonus (if any), the Committee examines compensation levels for other chief executive officers in high-technology firms within and outside the industry. The Committee compares this information to the relevant performance of such firms relative to the Company's performance.
In accordance with the Bagley Agreement, Mr. Bagley, Chief Executive Officer since August 6, 1997, received a base salary in fiscal 2000 of $100,000. Mr. Bagley is not entitled to participate in any performance bonus plan of the Company, unless otherwise determined by the Board of Directors. As an incentive to joining the Company, Mr. Bagley was granted in 1997 non-qualified stock options to purchase 1,425,000 shares of Common Stock and received an additional grant in fiscal 1999 of options to purchase 1,440,000 shares of Common Stock. See the discussion of Mr. Bagley's Employment Agreement in "Employment and Termination Agreements, Change of Control Arrangements and Retirement Benefits," above.
EFFECT OF SECTION 162(M) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Code generally limits the corporate deduction for compensation paid to certain executive officers to $1 million, unless the compensation is performance-based. The Committee has carefully considered the potential impact of this tax code provision on the Company and has concluded in general that the best interests of the Company and the stockholders will be served if certain of the Company's stock-based long-term incentives qualify as performance-based compensation within the meaning of the Code. It is the Committee's intention that, so long as it is consistent with the Company's overall compensation objectives, virtually all executive compensation will be deductible by the Company for federal income tax purposes.
Set forth below is a line graph comparing the cumulative total stockholder
return on the Company's Common Stock ("LRCX") for the last five fiscal years
against the cumulative total return on the Nasdaq National Market Index (U.S.
companies only) ("NASD") and the Salomon Smith Barney Semiconductor Equipment
Index ("SSB") over the same period. The graph and table assume that the
investment in the Company's Common Stock and each index was $100 on July 1,
1995, and that dividends, if any, were reinvested. This data was furnished by
Salomon Smith Barney. The Nasdaq National Market Index and the Salomon Smith
Barney Semiconductor Equipment Index are based on a calendar year. The Company's
return is based on its fiscal year. The stock price performance shown on the
graph is not necessarily indicative of future price performance.
SSB NASD LRCX --- ---- ---- 1-Jul-95 100.0000 100.0000 100.0000 120.1060 107.2590 106.6420 118.4530 109.2840 94.1405 30-Sep-95 115.6740 111.7940 93.3624 110.4560 110.9930 95.1202 103.2640 113.4710 85.5482 31-Dec-95 86.1175 112.7140 71.4855 83.6383 113.5350 66.7979 81.1331 117.8480 57.6197 31-Mar-96 75.3714 117.9920 54.6899 89.8739 127.5400 63.2822 87.1972 133.2080 62.1103 30-Jun-96 70.2484 126.9510 40.6272 58.9536 115.7630 34.7677 61.6134 122.2880 36.9146 30-Sep-96 68.5633 131.4390 41.6022 65.8488 130.8600 38.0865 88.7207 137.9100 56.0540 31-Dec-96 86.6293 138.3070 43.9460 116.3820 147.8230 63.0854 110.3180 140.2320 59.5697 31-Mar-97 101.6350 130.8800 52.7352 110.2370 135.0640 45.3148 135.4020 150.0160 56.8368 30-Jun-97 142.1840 154.4880 57.9103 182.7660 170.7440 82.6185 193.3600 170.0490 88.2811 30-Sep-97 201.7570 180.5870 72.6574 144.6320 170.7230 56.4478 134.7620 171.4660 47.8507 31-Dec-97 123.6580 168.2310 45.7038 128.9040 173.4810 35.6443 155.3440 189.6740 44.1429 31-Mar-98 146.3000 196.6550 43.9460 153.1710 200.1620 48.4367 130.4850 190.5690 37.2053 30-Jun-98 117.5010 202.9820 29.8833 122.5680 200.5880 28.0270 88.8206 160.6140 17.0909 30-Sep-98 85.9747 181.4600 15.6237 120.7430 189.7680 22.5613 135.1450 208.8530 27.9286 31-Dec-98 147.8430 234.9020 27.8301 212.8150 268.4550 59.9634 183.0820 245.1150 46.1913 31-Mar-99 195.0110 263.6890 45.3148 176.0440 272.4140 49.2195 183.8830 264.6650 43.3601 30-Jun-99 245.1730 287.7630 72.9527 241.3270 282.6600 86.5232 239.6340 293.4650 88.1873 30-Sep-99 264.5470 294.1950 95.3124 299.8600 317.7920 131.9360 331.7220 357.4010 121.2910 31-Dec-99 422.0650 435.9430 174.3170 453.6890 422.1280 195.1200 609.5050 503.1540 243.9510 31-Mar-00 589.7370 489.8850 211.2310 608.6290 413.5910 215.0420 488.0040 364.3380 150.5880 30-Jun-00 567.2950 424.8870 175.7840 481.1940 403.5560 137.1110
Unless marked to the contrary, proxies received will be voted "FOR" the ratification of the appointment of Ernst & Young LLP as the independent auditors for the Company for the current fiscal year. Ernst & Young LLP has been the Company's independent auditors since fiscal year 1981.
The audit services of Ernst & Young LLP during fiscal 2000 included the examination of the consolidated financial statements of the Company and services related to filings with the SEC and other regulatory bodies.
The Audit Committee of the Company meets with Ernst & Young LLP on an annual or more frequent basis. At such time, the Audit Committee reviews both audit and non-audit services performed by Ernst & Young LLP for the preceding year, as well as the fees charged for such services. Among other things, the
A representative of Ernst & Young LLP is expected to be present at the Annual Meeting and will have an opportunity to make a statement if he or she so desires. The representative will also be available to respond to appropriate questions from the stockholders.
Approval of Proposal No. 2 will require the affirmative vote of a majority of the outstanding shares of Common Stock present or represented and entitled to vote at the Annual Meeting.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive officers, directors and persons who own more than 10% of a registered class of the Company's equity securities to file an initial report of ownership on Form 3 and changes in ownership on Forms 4 or 5 with the SEC. Executive officers, directors and greater than 10% stockholders are also required by SEC rules to furnish the Company with copies of all Section 16(a) forms they file. Specific due dates for these reports have been established, and the Company is required to disclose in this Proxy Statement any failure to file such reports on a timely basis. Based solely on its review of the copies of such forms received by it, or written representations from certain reporting persons, the Company believes that all of these requirements were satisfied during the last fiscal year.
The Company knows of no other matters to be submitted to the meeting. If any other matters properly come before the meeting, it is the intention of the proxy holders named in the enclosed form of Proxy to vote the shares they represent as the Board of Directors may recommend.
It is important that your stock be represented at the meeting, regardless of the number of shares which you hold. You are, therefore, urged to execute and return, at your earliest convenience, the accompanying proxy card in the envelope which has been enclosed.
By Order of the Board of Directors,
Dated: October 6, 2000
The undersigned stockholder of LAM RESEARCH CORPORATION, a Delaware corporation (the "Company"), hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement, each dated October 6, 2000, and 2000 Annual Report to Stockholders, and hereby appoints James W. Bagley and Richard H. Lovgren, or either of them, proxy holders and attorneys-in-fact, with full power to each of substitution, on behalf and in the name of the undersigned, to represent the undersigned at the 2000 Annual Meeting of Stockholders of LAM RESEARCH CORPORATION to be held on Thursday, November 2, 2000 at 11:00 a.m. local time, at the principal executive offices of the Company at 4650 Cushing Parkway, Fremont, California 94538, and for any adjournment or adjournments thereof, and to vote all shares of Common Stock which the undersigned would be entitled to vote if then and there personally present, on the matters set forth below and, in their discretion, upon such other matter or matters which may properly come before the meeting or any adjournment or adjournments thereof.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR THE CURRENT FISCAL YEAR AND, AS SAID PROXY HOLDERS DEEM ADVISABLE, ON SUCH OTHER MATTER OR MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
1. Election of Directors:
FOR all nominees listed WITHHOLD
below (except as
[ ] [ ]
(IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THAT NOMINEE'S NAME IN THE LIST BELOW)
James W. Bagley; Roger D. Emerick; David G. Arscott; Richard J. Elkus, Jr.; Jack R. Harris; Grant M. Inman; Kenneth M. Thompson
2. Proposal to ratify the appointment of Ernst & Young LLP as the independent auditors of the Company for the fiscal year 2001:
For Against Abstain
[ ] [ ] [ ]
(This Proxy should be marked, dated and signed by the stockholder(s)
exactly as his or her name appears hereon, and returned promptly in the enclosed envelope. Persons signing in a fiduciary capacity should so indicate. If shares are held by joint tenants or as community property, all such stockholders should sign.)
Dated: --------------------------, 2000
Please mark, sign, date and return the proxy card promptly, using the enclosed
return-addressed and postage-paid envelope.