HMT TECHNOLOGY CORP
S-3, 1997-04-02
MAGNETIC & OPTICAL RECORDING MEDIA
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<PAGE>   1

     AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 2, 1997

                                                    REGISTRATION NO. 333-
================================================================================



                       SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D.C.  20549

                              -------------------

                                    FORM S-3

                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933

                              -------------------

                           HMT TECHNOLOGY CORPORATION
             (Exact name of registrant as specified in its charter)

           DELAWARE                                  94-3084354
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
incorporation or organization)                       

                              -------------------

                                1055 PAGE AVENUE
                           FREMONT, CALIFORNIA 94538
                                 (510) 683-6000
  (Address, including zip code, and telephone number, including area code, of
                   registrant's principal executive offices)

                               RONALD L. SCHAUER
                     PRESIDENT AND CHIEF EXECUTIVE OFFICER
                           HMT TECHNOLOGY CORPORATION
                                1055 PAGE AVENUE
                           FREMONT, CALIFORNIA 94538
                                 (510) 683-6000
 (Name, address, including zip code, and telephone number, including area code,
                             of agent for service)

                              -------------------

                                   COPIES TO:
                              JAMES C. KITCH, ESQ.
                               COOLEY GODWARD LLP
                             FIVE PALO ALTO SQUARE
                              3000 EL CAMINO REAL
                          PALO ALTO, CALIFORNIA 94706
                                 (415) 843-5000

                              -------------------

        Approximate date of commencement of proposed sale to the public:
   FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.

                              -------------------

If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box.  [ ]

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box.  [X]

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.  [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.  [ ]

                        CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
=========================================================================================================
    Title of Class of                         Proposed Maximum      Proposed Maximum     
     Securities to be       Amount to be     Offering Price Per    Aggregate Offering       Amount of
        Registered           Registered          Security(1)            Price (1)        Registration Fee
- ---------------------------------------------------------------------------------------------------------
<S>                         <C>                     <C>               <C>                    <C>
5 3/4% Convertible          $230,000,000            85.0%              $195,500,000          $59,243
Subordinated Notes Due
2004
- ---------------------------------------------------------------------------------------------------------
Common Stock, par value          (2)                 (2)                   (2)                 None
$.001 per share(2)
=========================================================================================================
</TABLE>

(1)  Estimated solely for the purpose of calculating the registration fee
     pursuant to Rules 457(c) and 457(i) of the Securities Act of 1933.

(2)  Such indeterminate number of shares of Common Stock as shall be issuable
     upon conversion of the Convertible Notes being registered hereunder.  No
     additional consideration will be received for the Common Stock and
     therefore no registration fee is required pursuant to Rule 457(i).

================================================================================

     The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>   2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT.  A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.  THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE.  THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.



                   SUBJECT TO COMPLETION, DATED APRIL 2, 1997

PROSPECTUS

                                  $230,000,000
                 5 3/4% CONVERTIBLE SUBORDINATED NOTES DUE 2004
                                      AND
            SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION THEREOF


                                   [HMT LOGO]

                              -------------------

         This Prospectus covers the resale from time to time by the holders
(the "Selling Securityholders") of up to $230,000,000 aggregate principal
amount of 5 3/4% Convertible Subordinated Notes due 2004 (the "Convertible
Notes") of HMT Technology Corporation (the "Company").  This Prospectus also
covers sales by the Selling Securityholders from time to time of shares of
common stock, par value $.001 (the "Common Stock") of the Company into which
the Convertible Notes are convertible (the "Conversion Shares").

         The Convertible Notes will mature on January 15, 2004.  Interest on
the Convertible Notes will be paid semiannually on January 15 and July 15 of
each year, commencing July 15, 1997.  The Convertible Notes are convertible, at
the option of the holder thereof, at any time after 90 days following the last
date of original issuance thereof (January 27, 1997) and prior to maturity,
unless previously redeemed or repurchased, into up to 9,684,210 shares of
Common Stock of the Company (the "Common Stock"), at an initial conversion
price of $23.75 per share (equivalent to a conversion rate of approximately
42.1053 shares per $1,000 principal amount of Convertible Notes), subject to
adjustment in certain events (the "Conversion Rate").

         The Convertible Notes are redeemable, in whole or in part, at the
option of the Company, at any time on and after January 20, 2000, at the
redemption prices set forth herein together with accrued interest. The
Convertible Notes do not provide for any sinking fund. Upon a Designated Event
(as defined), holders of the Convertible Notes will have the right, subject to
certain restrictions and conditions, to require the Company to purchase all or
any part of the Convertible Notes at a purchase price equal to 101% of the
principal amount thereof together with accrued and unpaid interest to the date
of purchase. See "Description of Convertible Notes -- Repurchase at the Option
of Holders."

         The Convertible Notes are unsecured obligations of the Company and are
subordinate in right of payment to all existing and future Senior Debt (as
defined) of the Company.  The Convertible Notes also are structurally
subordinated to all liabilities of subsidiaries of the Company.  As of January
31, 1997, the Company had approximately $5.8 million of indebtedness
outstanding that constituted Senior Debt.  See "Description of Convertible
Notes."

         The Convertible Notes were originally issued by the Company on January
21, 1997 and January 27, 1997, to Salomon Brothers Inc, Alex.  Brown & Sons
Incorporated, Hambrecht & Quist LLC and Robertson, Stephens & Company LLC (the
"Initial Purchasers"), pursuant to an exemption from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
provided by Section 4(2) and Rule 144A thereof, as part of their sale in a
private placement to qualified institutional buyers or other accredited
investors in transactions exempt from registration under the Securities Act,
and in sales outside the United States within the meaning of Regulation S under
the Act.

         The Selling Securityholders, directly or through agents,
broker-dealers or underwriters, may sell the Convertible Notes or the
Conversion Shares offered hereby from time to time on terms to be determined at
the time of sale.  Such Convertible Notes or Conversion Shares may be sold at
market prices prevailing at the time of sale or at negotiated prices.  The
Selling Securityholders and any agents, broker- dealers or underwriters that
participate in the distribution of the Convertible Notes or Conversion Shares
may be deemed to be "underwriters" within the meaning of the Act, and any
commission received by them and any profit on the resale of the Common Stock
purchased by them may be deemed to be underwriting discounts or commissions
under the Act.  The Company will not receive any proceeds from the sale of
Convertible Notes or Conversion Shares by the Selling Securityholders.  See
"Selling Securityholders" and "Plan of Distribution."

         Prior to the registration of the Convertible Notes under the
registration statement of which this Prospectus is a part (the "Registration
Statement"), the Convertible Notes have been eligible for trading in The Portal
Market.  Prior to this offering there has been no public market for the
Convertible Notes.  The Common Stock of the Company is quoted on the Nasdaq
National Market under the symbol "HMTT."  The last reported sales price of the
Company's Common Stock on the Nasdaq National Market on March 31, 1997 was
$12.25 per share.

                              -------------------

         SEE "RISK FACTORS" BEGINNING ON PAGE 3 OF THIS PROSPECTUS FOR CERTAIN
INFORMATION RELATED TO THE SALE OF THE CONVERTIBLE NOTES.

                              -------------------

    THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
         AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
            HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
               SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
                ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
                     TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>   3
Expenses of preparing and filing the Registration Statement to which this
Prospectus relates and all post-effective amendments will be borne by the
Company.  No underwriting commissions or discounts will be paid by the Company
in connection with this offering.  Estimated expenses payable by the Company in
connection with this offering are approximately $200,000.  The aggregate
proceeds to the Selling Securityholders from the Convertible Notes or
Conversion Shares will be the purchase price of the Convertible Notes or
Conversion Shares sold less the aggregate agents' commissions and underwriters'
discounts, if any, and other expenses of issuance and distribution not borne
the Company.  See "Plan of Distribution."

         The Company has agreed to indemnify the Selling Securityholders and
certain other persons against certain liabilities, including liabilities under
the Act.  See "Plan of Distribution."


                  The date of this Prospectus is ________ __, 1997
<PAGE>   4
                             AVAILABLE INFORMATION

         The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information
with the Commission. Such reports, proxy statements and other information can
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, NW, Washington, D.C. 20549, and at
the Commission's Regional Offices located at Seven World Trade Center, 13th
Floor, New York, New York 10048 and at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. The Commission maintains a website
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The address
of such web site is http://www.sec.gov. The Company's Common Stock is listed on
the Nasdaq National Market, 1735 K Street, N.W., Washington, D.C.  20006, and
reports, proxy statements and other information concerning the Company can be
inspected at said office.

         A registration statement on Form S-3 with respect to the Notes and
Conversion Shares offered hereby (together with all amendments and exhibits,
the "Registration Statement") has been filed with the Commission under the Act.
This Prospectus does not contain all of the information contained in such
Registration Statement and the exhibits and schedules thereto, certain portions
of which have been omitted pursuant to the rules and regulations of the
Commission.  For further information with respect to the Company and the
Convertible Notes and Conversion Shares offered hereby, reference is made to
the Registration Statement and the exhibits and schedules thereto.  Statements
contained in this Prospectus regarding the contents of any contract or any
other documents are not necessarily complete and, in each instance, reference
is hereby made to the copy of such contract or document filed as an exhibit to
the Registration Statement.  The Registration Statement, including exhibits
thereto, may be inspected without charge at the Securities and Exchange
Commission's principal office in Washington, D.C., and copies of all or any
part thereof may be obtained from the Public Reference Section, Securities and
Exchange Commission, Washington, D.C., 20549, upon payment of the prescribed
fees.

                INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

         The following documents filed by the Company with the Commission (File
No. 0-27586) pursuant to the Exchange Act are incorporated herein by reference:

         1.      The Company's Annual Report on Form 10-K for the fiscal year
                 ended March 31, 1996.

         2.      The Company's Proxy Statement for its 1996 Annual Meeting of
                 Stockholders, dated August 22, 1996 (other than the portions
                 thereof not deemed filed with the Commission).

         3.      The Company's Quarterly Reports on Form 10-Q for the quarters
                 ended June 30, 1996, September 30, 1996 and December 31, 1996.

         4.      The Company's Registration Statement on Form 8-A filed with
                 the Commission on January 19, 1996.

         5.      The Company's Report on Form 8-K, dated January 21, 1997,
                 filed with the Commission on February 6, 1997, as amended by
                 Form 8-K/A filed with the Commission on March 11, 1997.

         In addition, all reports and other documents subsequently filed by the
Company pursuant to Sections 13(a), 13(c), 14 or 15 of the Exchange Act after
the date of this Prospectus and prior to the termination of the offering shall
be deemed to be incorporated by reference herein and to be a part hereof from
the date of filing of such documents. Any statement contained in a document
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document that is also or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.

         The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon the written or
oral request of such person, a copy of any and all of the documents that are
incorporated herein by reference (other than exhibits to such documents, unless
such exhibits are specifically incorporated by reference into such documents).
Requests for such documents should be directed to HMT Technology Corporation,
Attn: Investor Relations, 1055 Page Avenue, Fremont, California 94538,
telephone number: (510) 683- 6000.

                              ____________________





                                       2.
<PAGE>   5
                                  THE COMPANY

         HMT Technology Corporation is an independent supplier of
high-performance thin film disks for high-end, high-capacity hard disk drives,
which in turn are used in high-end PCs, network servers and workstations. HMT
was incorporated in Delaware in 1988 as a subsidiary of Hitachi Metals, Ltd. to
acquire certain assets and certain liabilities of the thin film division of
Xidex Corporation, which had been producing thin film disks since 1983. Since
completing the acquisition, the Company has continued to supply thin film disks
to manufacturers of hard disk drives. As used in this Prospectus, unless
otherwise indicated, the terms "Company" and "HMT" refer to HMT Technology
Corporation, a Delaware corporation, and its subsidiary. The Company's
principal offices are located at 1055 Page Avenue, Fremont, California 94538,
and its telephone number is (510) 490-3100.

                                  RISK FACTORS

         This Prospectus and documents incorporated by reference in this
Prospectus include forward-looking statements which involve risks and
uncertainties.  Actual results of the Company's activities may differ
significantly from the results anticipated in such forward-looking statements.
Factors that might cause or contribute to such differences include, but are not
limited to, those factors identified below and under the caption "Risk Factors"
in documents incorporated herein by reference.  In addition to the other
information in this Prospectus, prospective investors should consider the
following factors, together with the information and financial data included or
incorporated by reference in this Prospectus, before purchasing any Notes or
Conversion Shares offered hereby.

FLUCTUATIONS IN OPERATING RESULTS

         The Company's operating results historically have been, and may
continue to be, subject to significant quarterly and annual fluctuations. As a
result, the Company's operating results in any quarter may not be indicative of
its future performance. Factors affecting operating results include: market
acceptance of new products; timing of significant orders; changes in pricing by
the Company or its competitors; timing of product announcements and product
transitions by the Company, its customers or its competitors; order
cancellations, modifications and quantity adjustments and shipment
reschedulings; changes in product mix; manufacturing yields; the level of
utilization of the Company's production capacity; increases in production and
engineering costs associated with initial manufacture of new products; and
changes in the cost of or limitations on the availability of materials. The
impact of these and other factors on the Company's revenues and operating
results in any future period cannot be forecasted with certainty. The Company's
expense levels are based, in part, on its expectations as to future revenues.
Because the Company's sales are generally made pursuant to purchase orders that
are subject to cancellation, modification, quantity reduction or rescheduling
on short notice and without significant penalties, the Company's backlog as of
any particular date may not be indicative of sales for any future period, and
such changes could cause the Company's net sales to fall below expected levels.
If revenue levels are below expectations, operating results are likely to be
materially adversely affected. Net income, if any, and gross margins may be
disproportionately affected by a reduction in net sales because a
proportionately smaller amount of the Company's expenses varies with its
revenues.

         The Company derives substantially all of its net sales from the sale
of thin film disks to a small number of customers. The Company typically
supplies disks in volume for a limited number of disk drive products at any one
time, and these products have an extremely short life cycle. Due to the rapid
technological change and frequent development of new disk drive products, it is
common in the industry for the relative mix of customers and products to change
rapidly, even from quarter to quarter. Generally, new products have higher
average selling prices than more mature products. Therefore, the Company's
ability to introduce new products in a timely fashion is an important factor in
its continued success. Moreover, manufacturing yields and production capacity
utilization impact the Company's operating results. New products often have
lower manufacturing yields and are produced in lower quantities than more
mature products. Manufacturing yields generally improve as the product matures
and production volumes increase. Manufacturing yields also vary depending on
the complexity and uniqueness of product specifications. The ability to adjust
manufacturing procedures to reduce costs and improve manufacturing yields and
productivity during a product's life is limited, and many adjustments can only
be implemented in connection with new product introductions or upgrades. Small
variations in manufacturing yields and productivity can have a significant
impact on operating results. Furthermore, because the thin film disk industry
is capital intensive and requires a high level of fixed costs, operating
results are also extremely sensitive to changes in volume.  Substantial advance
planning and commitment of financial and other resources is necessary for
expansion of manufacturing capacity, while the Company's sales are generally
made pursuant to purchase orders that are subject to cancellation,
modification, quantity reduction or rescheduling without significant penalties.
The impact of any of the foregoing factors could have a material adverse effect
on the Company's business, operating results and financial condition.





                                       3.
<PAGE>   6
DEPENDENCE ON A LIMITED NUMBER OF CUSTOMERS; LENGTHY SALES CYCLE

         During fiscal 1996, the Company shipped most of its thin film disks to
three customers: Maxtor Corporation ("Maxtor"), Western Digital Corporation
("Western Digital") and Micropolis Corporation ("Micropolis"). Aggregate
shipments to Maxtor, Western Digital and Micropolis represented 40.5%, 35.8%
and 9.1%, respectively, of net sales in fiscal 1996. During the last nine
months ending December 31, 1996, aggregate shipments to Maxtor, Western Digital
and Micropolis represented 44.5%, 11.8% and 9.1%, respectively, of net sales.
Additionally, aggregate shipments to customers Samsung and Iomega Corporation
represented 15.7% and 11.6%, respectively, of net sales during the last nine
months ending December 31, 1996. There are a relatively small number of disk
drive manufacturers, and the Company expects that its dependence on a few
customers will continue in the future. Loss of or a reduction in orders from
one or more of the Company's customers could result in a substantial reduction
in net sales and operating results. For example, due to lower than anticipated
shipments to a customer, revenue and operating results for the quarter ended
December 31, 1996 were below those of the preceding quarter. Because many of
the Company's expense levels are based, in part, on its expectations as to
future revenues, decreases in net sales may result in a disproportionately
greater negative impact on operating results. The Company's success will
therefore depend on the success of its key customers. For example, in fiscal
1994 the Company's operating results were adversely affected by operating
difficulties experienced by the Company's then largest customer. One or more of
the Company's customers could develop or expand their ability to produce thin
film disks internally and, as a result, could reduce the level of purchases or
cease purchasing from the Company or could sell thin film disks in competition
with the Company. For example, one of the Company's customers, Western Digital,
manufactures thin film disks for its own use and an affiliate of another
customer, Maxtor, has announced plans to do so. There has also been a trend
toward consolidation in the disk drive industry, which the Company expects to
continue.  For example, in February 1996, two leading disk drive manufacturers,
Seagate Technology, Inc. ("Seagate") and Conner Peripherals, Inc., combined to
form the world's largest disk drive manufacturing company. In addition, during
the second calendar quarter of 1996, Hewlett-Packard announced its intentions
to exit the disk drive business. Also, due to cessation of its high-end
manufacturing operations, Quantum's high-end products are now being made by
Matsushita Kotobuki Electronics Industries ("MKE"). If any of the Company's
customers or competitors were to combine and reduce suppliers and competitive
product lines, the Company's business, operating results and financial
condition could be materially adversely affected.

         The Company has generally sold its products to customers pursuant to
purchase orders and similar short-term arrangements. In June 1996, the Company
entered into a long-term supply agreement with Maxtor covering the supply of
disks to Maxtor over the next five years. While this agreement contemplates a
significant increase in the purchases of disks by Maxtor from current levels,
it is subject to a number of conditions and qualifications; and there can be no
assurance that Maxtor will in fact remain a significant customer during the
term of the agreement.

         Qualifying thin film disks for incorporation into a new disk drive
product requires the Company to work extensively with the customer and the
customer's other suppliers to meet product specifications. Therefore, customers
often require a significant number of product presentations and demonstrations,
as well as substantial interaction with the Company's senior management, before
making a purchasing decision.  Accordingly, the Company's products typically
have a lengthy sales cycle, which can range from six to 12 months, during which
the Company may expend substantial financial resources and management time and
effort with no assurance that a sale will result.

EXPANSION OF CAPACITY

         Because the Company has been operating at close to full capacity,
growth, if any, in the Company's net sales depends on the successful expansion
by the Company of its manufacturing capacity. The Company has recently
constructed a new 120,000 square foot production facility at its Fremont,
California site, in which it plans to install up to 16 additional production
scale sputtering lines. The Company recently initiated production in this new
facility in early calendar 1997. In addition, the Company is in the final
stages of an expansion of its facility in Eugene, Oregon to increase the
production of aluminum substrates, and has commenced volume production of
nickel-plated and polished substrates at that site. The Company currently
expects to spend in excess of $200 million during calendar 1997 for expansion
of production capacity, a substantial majority of which will be spent on the
Company's Fremont, California facility. Any delay in the completion of any of
these expansion programs could have a material adverse effect on the Company's
business, results of operations and financial condition.





                                       4.
<PAGE>   7
INTENSE COMPETITION

         The market for the Company's products is highly competitive, and the
Company expects competition to continue in the future. Certain of the Company's
competitors have significantly greater financial, technical and marketing
resources than the Company. There can be no assurance that in the future the
Company will be able to develop and manufacture products on a timely basis with
the quality and features necessary in order to remain competitive. Competitors
in the thin film disk industry fall into three groups: U.S. non-captive
manufacturers, Japan-based manufacturers and U.S. captive manufacturers.
Historically, each of these groups has supplied approximately one-third of the
worldwide thin film disk unit output. The Company's primary U.S. non-captive
competitors are Akashic Memories Corporation, a subsidiary of Kubota, Inc.,
Komag, Incorporated ("Komag") and StorMedia Incorporated. Japan-based
competitors include Fuji Electric Company, Ltd., Mitsubishi Kasei Corporation,
Showa Denko K.K. and Hoya Corporation. In addition, U.S. captive manufacturers,
which include certain computer manufacturers, as well as disk drive
manufacturers such as Seagate, Western Digital and an affiliate of Maxtor,
manufacture disks or plan to manufacture disks for their internal use as part
of their vertical integration programs. These companies could increase their
internal production and reduce or cease purchasing from independent disk
suppliers such as the Company. In the event of an oversupply of disks, these
customers are likely to utilize their internal capacity prior to purchasing
disks from independent suppliers such as the Company. Moreover, while captive
manufacturers have, to date, sold only nominal quantities of thin film disks in
the open market, there can be no assurance that such companies will not in the
future do so in direct competition with the Company. Furthermore, there can be
no assurance that other current and potential customers will not acquire or
develop capacity to produce thin film disks for internal use. Any such changes
could have a material adverse effect on the Company's business, operating
results and financial condition. Announcement or implementation of any of the
following by the Company's competitors could have a material adverse effect on
the Company's business, operating results and financial condition: changes in
pricing, product introductions, increases in production capacity, changes in
product mix and technological innovation. Specifically, the thin film disk
industry is characterized by intense price competition. The Company has
experienced pricing pressures in the past, and there can be no assurance that
the Company will not experience increased price competition in the future.
Pricing pressure has included, and may in the future include, demands for
discounts, long-term supply commitments and extended payment terms. Any
increase in price competition could have a material adverse effect on the
Company's business, operating results and financial condition.

         The Company and certain of its competitors are currently engaged in
substantial efforts to increase disk manufacturing capacity in light of the
apparent imbalance between current levels of demand for disks and existing
industry capacity. These efforts should result in significant additional
capacity in the industry within the next one to two years. To the extent that
these efforts result in industry capacity in excess of levels of demand, the
Company could experience increased levels of competition, which could have a
material adverse effect on the Company's business, operating results and
financial condition.

MANAGEMENT OF GROWTH

         The Company has experienced a period of rapid expansion in its
operations that has placed, and may continue to place, a significant strain on
the Company's management and other resources. In addition, through November
1995, some managerial functions were performed by Hitachi Metals, Ltd., and the
Company has only recently added resources necessary to enable it to operate as
an independent company. The Company's status as a public company since its
March 1996 initial public offering has placed additional demands on the
Company's management, including its finance and accounting organization. The
Company's ability to manage its operations effectively will require it to
continue to improve its operational, financial and management information
systems, and to train, motivate and manage its employees. If the Company's
management is unable to manage its operations effectively, the Company's
business, operating results and financial condition could be adversely
affected.

DEPENDENCE ON INTENSELY COMPETITIVE AND CYCLICAL HARD DISK DRIVE INDUSTRY

         The Company's operating results are dependent on current and
anticipated demand for high-end, high-capacity hard disk drives, which in turn
depend on the demand for high-end PCs, network servers and workstations. The
disk drive industry is cyclical and historically has experienced periods of
oversupply and reduced production levels, resulting in significantly reduced
demand for thin film disks, as well as pricing pressures. The effect of these
cycles on suppliers, including thin film disk manufacturers, has been magnified
by hard disk drive manufacturers' practice of ordering components, including
thin film disks, in excess of their needs during periods of rapid growth, which
increases the severity of the drop in the demand for components during periods
of reduced growth or contraction. In recent years, the disk drive industry has
experienced significant growth, providing the Company with





                                       5.
<PAGE>   8
the opportunity to expand its capacity. There can be no assurance that such
growth will continue, that the level of demand will not decline, or that future
demand will be sufficient to support existing and future capacity. A decline in
demand for hard disk drives would have a material adverse effect on the
Company's business, operating results and financial condition.  Additionally,
the hard disk drive industry is intensely competitive, and, in the past, some
disk drive manufacturers have experienced substantial financial difficulties.
To date, the Company has not incurred significant bad debt expense. However,
there can be no assurance that the Company will not face greater difficulty in
collecting receivables or be required to offer more liberal payment terms in
the future, particularly in a period of reduced demand. Any failure to collect
or delay in collecting receivables could have a material adverse effect on the
Company's business, operating results and financial condition.

RAPID TECHNOLOGICAL CHANGE

         The thin film disk industry has been characterized by rapid
technological development and short product life cycles. Product life cycles
typically range from nine to twelve months. As a result, the Company must
continually anticipate, and adapt its products to meet, demand for increased
storage capacity. Although the Company is continually developing new products
and production techniques, there can be no assurance that the Company will be
able to anticipate technological advances in disk drives and develop products
incorporating such advances in a timely manner or to compete effectively
against its competitors' new products. In addition, there can be no assurance
that customers will certify the Company's products for inclusion in new disk
drive products. The Company anticipates continued changes in the requirements
of the disk drive industry and thin film disk manufacturing technologies, and
there can be no assurance that the future technological innovations will not
reduce demand for thin film disks. The Company's business, operating results
and financial condition will be materially adversely affected if the Company's
efforts are not successful, if the technologies that the Company has chosen not
to develop prove to be competitive alternatives or if any trend develops toward
technology that would replace thin film disks as a storage medium.

DEPENDENCE ON SUPPLIERS

         The Company relies on a limited number of suppliers for many materials
used in its manufacturing processes, including aluminum blanks, substrates,
texturizers, plating chemicals, abrasive tapes and slurries, certifier heads,
sputter targets and certain other materials. In general, the Company seeks to
have two or three suppliers for its requirements; however, there can be no
assurance that the Company can secure more than one source for all of its
materials requirements in the future or that its suppliers will be able to meet
the Company's requirements on a timely basis or on acceptable terms. Shortages
have occurred in the past and there can be no assurance that shortages will not
occur in the future, or that materials will be available without longer lead
times. Moreover, changing suppliers for certain materials, such as lube or
buffing tape, would require that the product be requalified with each customer.
Requalification could prevent an early design-in, or could prevent or delay
continued participation in disk drive programs for which the Company's products
have been qualified. In addition, long lead times are required to obtain many
materials. Regardless of whether these materials are available from established
or new sources of supply, these lead times could impede the Company's ability
to quickly respond to changes in demand and product requirements. Furthermore,
a significant increase in the price of one or more of these materials could
adversely affect the Company's business, operating results and financial
condition. In addition, there are only a limited number of providers for thin
film disk manufacturing equipment, such as sputtering machines, glide testers
and certifiers, and ordering additional equipment for replacement or expansion
requires long lead times, limiting the rate and flexibility of capacity
expansion. Any limitations on, or delays in, the supply of materials or
equipment could disrupt the Company's production volume and could have a
material adverse effect on the Company's business, operating results and
financial condition.

         While the Company has implemented procedures to monitor the quality of
the materials received from its suppliers, there can be no assurance that
materials will meet the Company's specifications and will not adversely impact
manufacturing yields or cause other production problems. Minor variations from
the Company's specifications could have a disproportionately adverse impact on
manufacturing yields. For example, in the quarter ended March 31, 1995, the
Company's operating results were materially adversely affected by chlorine
contamination of its thin film disk products that it believes resulted from
chlorine contamination of disk carriers provided by one of its suppliers.

NEED FOR ADDITIONAL FINANCING

         The disk media business is capital intensive, and the Company believes
that in order to remain competitive, it will need significant additional
financing resources over the next several years for capital expenditures,
working





                                       6.
<PAGE>   9
capital, and research and development. Among other things, the Company's
customers prefer suppliers that can meet a substantial portion of their volume
requirements, so the Company will need to expand its manufacturing capacity to
remain competitive. The Company currently expects to spend in excess of $200
million on capital expenditures directed toward expansion of production
capacity during calendar 1997. The Company believes that it will be able to
fund planned expenditures for at least the next twelve months from a
combination of funds available under its revolving credit facility, cash flow
from operations and existing cash balances. If it were to accelerate or
increase the scope of its facilities expansion, the Company could require
additional capital prior to that time.  As of January 31, 1997, the Company had
approximately $29.1 million from the exercise of the Initial Purchasers'
over-allotment option and approximately $99.0 million in working capital,
including approximately $47.1 million in cash and cash equivalents. In
addition, the Company's operations generated cash flow of $50.4 million during
the year ended March 31, 1996, and $51.6 million during the nine months ended
December 31, 1996.

INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS

         Although the Company attempts to protect its intellectual property
rights through patents, copyrights, trade secrets and other measures, there can
be no assurance that the Company will be able to protect its technology
adequately or that competitors will not be able to develop similar technology
independently. Patents may not be issued with respect to the Company's pending
patent applications, and its issued patents may not be sufficiently broad to
protect the Company's technology. No assurance can be given that any patent
issued to the Company will not be challenged, invalidated or circumvented or
that the rights granted thereunder will provide adequate protection to the
Company's products. In addition, the Company has only limited patent rights
outside the United States, and the laws of certain foreign countries may not
protect the Company's intellectual property rights to the same extent as do the
laws of the United States.

         The Company may from time to time be notified by third parties that it
may be infringing patents owned by such third parties. If necessary, the
Company may have to seek a license under such patent or modify its products and
processes in order to avoid infringement of such patents. There can be no
assurance that such a license would be available on acceptable terms, if at
all, or that the Company could so avoid infringement of such patents, in which
case the Company's business, operating results and financial condition could be
materially adversely affected.

         The Company has been contacted by Virgil L. Hedgcoth concerning the
use of certain disk preparation techniques allegedly patented by Mr. Hedgcoth
(the "Hedgcoth Patents"). Based on its review of the Hedgcoth Patents, the
Company believes that it is not infringing any claims of the Hedgcoth Patents
that would be found valid if contested in court. Mr. Hedgcoth has informed the
Company that he disagrees with its position, and he has filed and served an
action against the Company. The Company intends to defend any such action
vigorously. The Company does not believe that Mr. Hedgcoth's claims or any
litigation he may pursue would have a material adverse effect on the Company's
business, operating results or financial condition.

         Litigation may be necessary to enforce the Company's patents,
copyrights or other intellectual property rights, to protect the Company's
trade secrets, to determine the validity and scope of the proprietary rights of
others, or to defend against claims of infringement or claims for
indemnification resulting from infringement claims by third parties. Such
litigation, even if successful, could result in substantial costs and diversion
of resources and could have a material adverse effect on the Company's
business, operating results and financial condition.

DEPENDENCE ON KEY PERSONNEL

         The Company's future operating results depend in significant part upon
the continued contributions of its officers and personnel, many of whom would
be difficult to replace. The Company does not have employment agreements with
any employee. The loss of its officers or other key personnel, who are critical
to the Company's success, could have a material adverse effect on the business,
operating results and financial condition of the Company. In addition, the
Company's future operating results depend in part upon its ability to attract,
train, retain and motivate other qualified management, technical,
manufacturing, sales and support personnel for its operations. Competition for
such personnel is intense, especially since many of the Company's competitors
are located near the Company's facilities in Fremont, California. Among the
competitive factors in attracting personnel are compensation and benefits,
equity incentives and geographic location. There can be no assurance that the
Company will be successful in attracting or retaining such personnel. The loss
of the services of existing personnel as well as the failure to recruit
additional personnel could materially adversely effect the Company's business,
operating results and financial condition.





                                       7.
<PAGE>   10
DEPENDENCE ON FREMONT MANUFACTURING FACILITIES; ENVIRONMENTAL ISSUES

         The Company's Fremont facilities, which currently account for all of
its finished products, are located near major earthquake faults.  Disruption of
operations for any reason, including power failures, work stoppages or natural
disasters such as fire, floods or earthquakes, would cause delays in, or an
interruption of, production and shipment of products, which could materially
adversely affect the Company's business, operating results and financial
condition.

         The Company's operations and manufacturing processes are subject to
certain environmental laws and regulations, which govern the Company's use,
handling, storage, transportation, disposal, emission and discharge of
hazardous materials and wastes, the pre-treatment and discharge of process
waste waters and its emission of air pollutants. The Company has from time to
time been notified of minor violations of environmental laws and regulations.
These violations have been corrected in all material respects without undue
expense. Environmental laws and regulations, however, may become more stringent
over time, and there can be no assurance that the Company's failure to comply
with either present or future laws or regulations, which may become more
stringent, would not subject the Company to significant compliance expenses,
production suspension or delay, restrictions on expansion or the acquisition of
costly equipment.

RISKS OF INTERNATIONAL SALES

         In fiscal 1995 and 1996, substantially all of the Company's net sales
consisted of products delivered to customers in Asia, primarily foreign
subsidiaries of U.S. companies, and the Company anticipates that the
substantial majority of its products will be delivered to customers outside of
the United States for the foreseeable future. Accordingly, the Company's
operating results are subject to the risks of doing business in foreign
jurisdictions, including compliance with, or changes in, the law and regulatory
requirements of foreign jurisdictions, local content rules, taxes, tariffs or
other barriers, and transportation delays and other interruptions. Although
presently all of the Company's sales are made in U.S. dollars, there can be no
assurance that future international sales will not be denominated in foreign
currency.

CONTROL BY EXISTING STOCKHOLDERS AND ANTI-TAKEOVER EFFECTS

         Based on shares outstanding at December 31, 1996, directors, officers
and holders of 5% or more of the outstanding shares of Common Stock of the
Company owned approximately 54% of the outstanding shares of Common Stock (53%
assuming exercise of all outstanding options and warrants to purchase Common
Stock). As a result, the directors, officers and holders of 5% or more of the
outstanding shares of the Company's Common Stock, acting together, will have
the ability to elect all of the Company's directors and control most corporate
actions. Certain provisions of the Company's Amended and Restated Certificate
of Incorporation, Bylaws and Delaware law, including the provisions of Section
203 of the Delaware General Corporation Law, which restrict the ability of a
substantial stockholder to acquire the Company, may also discourage certain
transactions involving a change in control of the Company. In addition to the
foregoing, the ability of the Board of Directors to issue "blank check"
preferred stock without further stockholder approval could have the effect of
delaying, deferring or preventing a change in control of the Company.  See
"Description of Capital Stock."

SUBORDINATION AND ABSENCE OF FINANCIAL COVENANTS

         The Convertible Notes are unsecured and subordinated in right of
payment in full to all existing and future Senior Debt of the Company.  As a
result of such subordination, in the event of any insolvency of the Company,
the assets of the Company will be available to satisfy obligations on the
Convertible Notes only after all Senior Debt has been paid in full, and there
may not be sufficient assets remaining to pay amounts due on any or all of the
Convertible Notes then outstanding. The Indenture does not prohibit or limit
the incurrence of Senior Debt or the incurrence of other indebtedness and other
liabilities by the Company, and the incurrence of additional indebtedness and
other liabilities by the Company could adversely affect the Company's ability
to satisfy its obligations on the Convertible Notes. As of January 31, 1997,
the Company had approximately $5.8 million of outstanding indebtedness that
constituted Senior Debt. The Company anticipates that from time to time it will
incur additional indebtedness, including Senior Debt. Moreover, the cash flow
and consequent ability of the Company to service debt, including the
Convertible Notes, may become dependent in part upon the earnings from the
business conducted by the Company through subsidiaries and the distribution of
those earnings, or upon loans or other payments of funds by those subsidiaries,
to the Company. See "Description of Convertible Notes -- Subordination of
Convertible Notes."





                                       8.
<PAGE>   11
         The Indenture does not contain any financial performance covenants.
Consequently, the Company is not required under the Indenture to meet any
financial tests such as those that measure the Company's working capital,
interest coverage, fixed charge coverage or net worth in order to maintain
compliance with the terms of the Indenture.

LIMITATIONS ON REPURCHASE UPON A DESIGNATED EVENT

         If a Designated Event were to occur, there can be no assurance that
the Company would have sufficient financial resources, or would be able to
arrange financing, to pay the repurchase price for all Convertible Notes
tendered by holders thereof. The Company's credit agreement with respect to its
senior bank revolving credit facility prohibits the Company from repurchasing
any Convertible Notes, which would constitute an event of default under such
credit agreement. Any future credit agreements or other agreements relating to
other indebtedness (including other Senior Debt) to which the Company becomes a
party may contain similar restrictions and provisions. If the Company does not
obtain a consent to any repurchase of the Convertible Notes upon a Designated
Event, the Company would remain prohibited from repurchasing the Convertible
Notes. Any failure by the Company to repurchase the Convertible Notes when
required following a Designated Event would result in an Event of Default under
the Indenture whether or not such repurchase is permitted by the subordination
provisions of the Indenture. Any such default may, in turn, cause a default
under Senior Debt of the Company. Moreover, the occurrence of a Designated
Event may cause an event of default under Senior Debt of the Company. As a
result, in each case, any repurchase of the Convertible Notes would, absent a
waiver, be prohibited under the subordination provisions of the Indenture until
the Senior Debt is paid in full. See "Description of Convertible Notes --
Repurchase at the Option of Holders."

SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS

         Sales of substantial amounts of the Company's Common Stock in the
public market after the Offering could adversely affect the market price of the
Company's Common Stock and the Company's ability to raise additional capital at
a price favorable to the Company. Based on beneficial ownership of Common Stock
as set forth under "Principal Stockholders" and "Leveraged Recapitalization,"
executive officers, directors and certain stockholders holding an aggregate of
28,290,926 shares of Common Stock have entered into lockup agreements with the
Initial Purchasers (the "Lockup Agreements") pursuant to which shares may not
be offered, sold or otherwise disposed of without the prior written consent of
Salomon Brothers Inc until April 15, 1997. Upon expiration of the Lockup
Agreements, 3,392,596 of such shares will be available for immediate sale
pursuant to Rule 144 and Rule 701, and 3,136,098 of such shares will be subject
to rights of repurchase that expire at various dates through December 2004
pursuant to monthly vesting (or in some cases earlier upon the achievement of
certain performance goals) and may not be resold until such rights expire. The
remaining approximately 21,968,057 shares covered by the Lockup Agreements are
"restricted" shares within the meaning of Rule 144 adopted under the Securities
Act (the "Restricted Shares"). Such shares will be eligible for sale pursuant
to Rule 144 upon the expiration of a two-year holding period from the date such
shares were acquired (November 30, 1995), subject to certain volume limitations
under Rule 144. Upon effectiveness of amendments to the Rule 144 holding period
on April 29, 1997, which reduce the holding period from two years to one year,
such shares shall be immediately available for resale pursuant to Rule 144,
subject to certain volume limitations under Rule 144. The Holders of the
Restricted Shares also have the right to require the Company to register such
shares for sale to the public under agreements with the Company. In January
1997, the Company received Notices to Register Securities from two warrant
holders pursuant to that certain Warrant Purchase Agreement, dated as of
November 30, 1995 (the "Warrant Purchase Agreement"), by and among the Company,
The First National Bank of Boston ("FNBB") and Banque Paribas. Pursuant to
Section 7.02(b)(vi) of the Warrant Purchase Agreement, the Board of Directors
of the Company made a good faith judgment that a registration pursuant to FNBB
and Banque Paribas' requests would be detrimental to the Company and that it is
in the best interests of the Company and its stockholders to defer the filing
of such registration statement for 90 days. See "Description of Capital Stock
- -- Registration Rights." Certain stockholders have indicated that they may
exercise their registration rights following the expiration of the Lockup
Agreements.

         The Company has registered under the Securities Act an aggregate of
7,312,029 shares of Common Stock reserved for issuance under the Company's 1995
Management Stock Option Plan, 1995 Stock Option Plan, 1996 Equity Incentive
Plan, 1996 Non-Employee Directors' Stock Option Plan and Employee Stock
Purchase Plan (collectively, the "Stock Plans"), thus permitting the sale of
such shares by non-affiliates in the public market without restriction under
the Securities Act. The shares registered include shares issuable upon exercise
of options to purchase 12,553,614 shares that were issued and outstanding at
February 28, 1997, of which options to purchase approximately 5,811,110 shares
were exercisable and immediately saleable. The remainder of these shares will
become exercisable and saleable at various dates through December 1999 pursuant
to monthly vesting.





                                       9.
<PAGE>   12
LIMITED PUBLIC MARKET FOR THE CONVERTIBLE NOTES; VOLATILITY OF CONVERTIBLE NOTE
AND COMMON STOCK PRICES

         The Company does not intend to list the Convertible Notes on any
national securities exchange or to seek the admission thereof to trading in the
National Association of Securities Dealers Automated Quotation system.  The
Initial Purchasers may make a market in the Convertible Notes and the
underlying Common Stock.  However, the Initial Purchasers are not obligated to
make such a market and may discontinue any market-making activities at any time
without notice.  In addition, such market-making activities are subject to
limits imposed by the Exchange Act.

         Although prior to the registration of the Convertible Notes under the
Registration Statement the Convertible Notes were designated for trading
through The PORTAL Market, the Convertible Notes sold hereunder will no longer
be eligible for trading through The PORTAL Market, and no assurance can be
given that an active trading market for the Convertible Notes will develop or,
if such market develops, as to the liquidity or sustainability of such market.
If a trading market does not develop or is not maintained, holders of the
Convertible Notes may experience difficulty in reselling, or an inability to
sell, the Convertible Notes.  If a market for the Convertible Notes develops,
any such market may be discontinued at any time.  If a public trading market
develops for the Convertible Notes, future trading prices of the Convertible
Notes will depend on many factors, including, among other things, prevailing
interest rates, the Company's operating results and the market for similar
securities.  Depending on prevailing interest rates, the market for similar
securities and other factors, including the financial condition of the Company,
the Convertible Notes may trade at a discount from their principal amount.

         Various factors such as changes in prevailing interest rates or
changes in perceptions of the Company's creditworthiness could cause the market
price of the Convertible Notes to fluctuate significantly. The trading price of
the Convertible Notes could also be significantly affected by the market price
of the Common Stock, which could be subject to wide fluctuations in response to
a variety of factors, including quarterly variations in operating results,
announcements of technological innovations or new products by the Company, its
customers or its competitors, developments in patents or other intellectual
property rights, general conditions in the computer or disk drive industry and
general economic and market conditions.

                       RATIO OF EARNINGS TO FIXED CHARGES

<TABLE>
<CAPTION>
                                   Year Ended March 31,                 Nine Months Ended
                          ------------------------------------     ----------------------------      
                                                                   December 31,    December 31,
                          1992    1993    1994    1995    1996         1995            1996
                          ----    ----    ----    ----    ----     ------------    ------------      
<S>                       <C>     <C>     <C>     <C>     <C>          <C>             <C>
Ratio of earnings to
    fixed charges(1)      --      --      --      --      6.3          5.9             12.8
</TABLE>

____________________

(1)  The ratio of earnings to fixed charges is computed by dividing (x) pretax
     income from continuing operations plus fixed charges less interest
     capitalized during the period, by (y) fixed charges.  Fixed charges
     consist of interest on all indebtedness, amortization of debt expense and
     discount or premium relating to indebtedness.  Earnings were inadequate to
     cover fixed charges for all periods prior to fiscal 1996.  The
     deficiencies of earnings were approximately $21.1 million, $17.1 million,
     $17.3 million and $8.9 million, for fiscal 1992, 1993, 1994 and 1995,
     respectively.

                                USE OF PROCEEDS

         The Company will not receive any proceeds from the sale of the
Convertible Notes and Conversion Shares by the Selling Securityholders in the
offering.





                                      10.
<PAGE>   13
                          DESCRIPTION OF CAPITAL STOCK

         The authorized capital stock of the Company consists of 100,000,000
shares of Common Stock, $0.001 par value, and 9,100,000 shares of Preferred
Stock, $0.001 par value.

COMMON STOCK

         As of February 28, 1997, there were 40,970,847 shares of Common Stock
outstanding held of record by approximately 154 stockholders. The holders of
Common Stock are entitled to one vote per share on all matters to be voted on
by the stockholders. Subject to preferences that may be applicable to
outstanding shares of Preferred Stock, if any, the holders of Common Stock are
entitled to receive ratably such dividends as may be declared from time to time
by the Board of Directors out of funds legally available therefor. In the event
of the liquidation, dissolution or winding up of the Company, the holders of
Common Stock are entitled to share ratably in all assets remaining after
payment of liabilities, subject to prior liquidation rights of Preferred Stock,
if any, then outstanding. The Common Stock has no preemptive rights or other
subscription rights. There are no redemption or sinking funds provisions
applicable to the Common Stock. All outstanding shares of Common Stock are
fully paid and non-assessable.

PREFERRED STOCK

         No shares of Preferred Stock are currently outstanding.  The Board of
Directors is authorized, without further action by the Company's stockholders,
to issue up to 9,100,000 shares of Preferred Stock in one or more series and to
fix the rights, preferences, privileges and restrictions granted to or imposed
upon such Preferred Stock, including dividend rights, conversion rights, terms
of redemption, liquidation preference, sinking fund terms and the number of
shares constituting any series or the designation of such series, without any
further vote or action by the stockholders.  The Board of Directors, without
stockholder approval, can issue Preferred Stock with voting and conversion
rights which could adversely affect the voting power of the holders of Common
Stock. The issuance of Preferred Stock may have the effect of delaying,
deferring or preventing a change in control of the Company. The Company has no
present plan to issue any additional shares of Preferred Stock.

WARRANTS

         In connection with the Leveraged Recapitalization, pursuant to a
warrant purchase agreement dated November 30, 1995, the Company issued to
certain senior lenders (the "Warrantholders") warrants to purchase an aggregate
of 701,344 shares of Common Stock at a price of $0.0003 per share. The warrants
terminate on November 30, 2002. Upon any reorganization or reclassification,
consolidation or merger or any sale or other transfer of substantially all of
its assets the warrants may be repurchased by the Company with the consent of
the Warrantholder. In the event the Warrantholders do not consent to such
repurchase, the warrants must be exercised prior to the consummation of such
transaction and will be converted into the right to receive a comparable number
of securities or property of the surviving corporation. The warrants include a
net exercise provision, and the Warrantholders have the right to cause the
Company to repurchase the warrants and any shares issued upon exercise thereof
under certain circumstances. Upon payment of the outstanding balance of the
senior bank term loan in March 1996, the Company redeemed warrants for 280,550
shares of Common Stock at the Warrantholders' cost ($0.02 per share), leaving a
balance of 420,794 shares subject to the remaining warrants. In addition, the
Warrantholders have certain registration rights with respect to the shares of
Common Stock issuable upon exercise of such warrants.

REGISTRATION RIGHTS

         Pursuant to an agreement between the Company and the holders (or their
permitted transferees) of approximately 29,656,057 shares of Common Stock
("Holders"), the Holders are entitled to certain rights with respect to the
registration of such shares under the Securities Act of 1933, as amended (the
"Securities Act"). If the Company proposes to register its Common Stock,
subject to certain exceptions, under the Securities Act, the Holders are
entitled to notice of the registration and are entitled to include, at the
Company's expense, such shares therein, provided that the managing underwriters
have the right to limit the number of such shares included in the registration.
In addition, certain of the Holders may require the Company at its expense on
no more than two occasions within six months to file a registration statement
under the Securities Act with respect to their shares of Common Stock. Such
rights became exercisable in September 1996. Further, certain Holders may
require the Company at its expense to register their shares on Form S-3 when
such form becomes available to the Company, subject to certain conditions and
limitations. Such right expires in March 2001.





                                      11.
<PAGE>   14
         The Warrantholders also have certain registration rights with respect
to the shares of Common Stock issuable upon exercise of the warrants pursuant
to the Warrant Purchase Agreement. If the Company proposes to register Common
Stock, the Warrantholders are entitled at the Company's expense, to include
such shares therein, provided that the maximum number of shares to be offered,
as determined by the managing underwriters, exceeds the number of shares that
the Company intends to offer. In addition, the Warrantholders holding at least
25% of the outstanding warrants may require the Company at its expense on one
occasion to file a registration statement under the Securities Act with respect
to the Common Stock issuable upon the exercise of the warrants. The Company
will also make efforts in good faith to ensure the availability of sales
pursuant Form S-3 and Rule 144. In January 1997, the Company received Notices
to Register Securities from two warrant holders pursuant to that certain
Warrant Purchase Agreement, dated as of November 30, 1995 (the "Warrant
Purchase Agreement"), by and among the Company, The First National Bank of
Boston ("FNBB") and Banque Paribas. Pursuant to Section 7.02(b)(vi) of the
Warrant Purchase Agreement, the Board of Directors of the Company made a good
faith judgment that a registration pursuant to FNBB and Banque Paribas'
requests would be detrimental to the Company and that it is in the best
interests of the Company and its stockholders to defer the filing of such
registration statement for 90 days.

         In connection with the original issuance of the Convertible Notes by
the Company, the Company agreed pursuant to a registration rights agreement for
the benefit the holders of the Convertible Notes and the Common Stock issuable
upon conversion thereof the "Registration Agreement," to register the resale of
such securities pursuant to a shelf registration statement of which this
Prospectus is a part.  The other registration rights described above do not
give any other holders of securities of the Company (other than the
Warrantholders) the right to participate in any such registration statement
because such registration rights are inapplicable by their terms or, to the
extent otherwise applicable, have been waived. See "Description of Convertible
Notes -- Registration Rights."

DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS

         The Company is governed by the provisions of Section 203 of the
Delaware Law. In general, Section 203 prohibits a public Delaware corporation
from engaging in a "business combination" with an "interested stockholder" for
a period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved
in a prescribed manner. A "business combination" includes mergers, asset sales
and other transactions resulting in a financial benefit to the stockholder. An
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years, did own) 15% or more of a
corporation's voting stock. The statute could have the effect of delaying,
deferring or preventing a change in control of the Company.

         The Company's Certificate of Incorporation and Bylaws also require
that any action required or permitted to be taken by stockholders of the
Company must be effected at a duly called annual or special meeting of the
stockholders and may not be effected by a consent in writing. In addition,
special meetings of the stockholders of the Company may be called only by the
Board of Directors, the Chairman of the Board, the Chief Executive Officer of
the Company or by any person or persons holding shares representing at least
20% of the outstanding capital stock.  The Company's Certificate of
Incorporation also specifies that the authorized number of directors may be
changed only by resolution of the Board of Directors. These provisions may have
the effect of deterring hostile takeovers or delaying changes in control or
management of the Company.

TRANSFER AGENT AND REGISTRAR

         The transfer agent and registrar for the Company's Common Stock is
Boston EquiServe Limited Partnership. Its telephone number is (617) 575-2000.





                                      12.
<PAGE>   15
                        DESCRIPTION OF CONVERTIBLE NOTES

GENERAL

         The Convertible Notes were initially issued by the Company on January
21, 1997 and January 27, 1997, pursuant to an Indenture dated as of January 15,
1997 (the "Indenture"), between the Company and State Street Bank and Trust
Company, as trustee (the "Trustee").  The terms of the Convertible Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (the "Trust Indenture Act") as in
effect on the date of the Indenture.  The Convertible Notes are subject to all
such terms, and holders of the Convertible Notes are referred to the Indenture
and the Trust Indenture Act for a statement thereof.  The following summary of
certain provisions of the Indenture does not purport to be complete and is
qualified in its entirety by reference to the Indenture including the
definition therein of certain terms used below.  The Indenture has been filed
as an exhibit to the Company's Current Report on Form 8-K filed with the
Commission on February 6, 1997, and is also an exhibit to the Registration
Statement.  The following summary of certain provisions of the Indenture and
the Registration Agreement does not purport to be complete and is qualified in
its entirety by reference to the Indenture and the Registration Agreement,
including the definitions therein of certain terms used below. The definitions
of certain terms used in the following summary are set forth below under
"Certain Definitions." References in this section to the "Company" are solely
to HMT Technology Corporation, a Delaware corporation, and not to its
subsidiary.

         The Convertible Notes are unsecured obligations of the Company,
subordinated in right of payment to all existing and future Senior Debt of the
Company to the extent set forth in the Indenture. The Indenture does not limit
the amount of other indebtedness or securities that may be issued by the
Company or any of its subsidiaries.

         The Company does not intend to list the Convertible Notes on any
national securities exchange or to seek the admission thereof to trading in the
National Association of Securities Dealers Automated Quotation system.  The
Initial Purchasers may make a market in the Convertible Notes and the
underlying Common Stock.  However, the Initial Purchasers are not obligated to
make such a market and may discontinue any market-making activities at any time
without notice.  In addition, such market-making activities are subject to
limits imposed by the Exchange Act.

         Although prior to the registration of the Convertible Notes under the
Registration Statement the Convertible Notes were designated for trading
through The PORTAL Market, the Convertible Notes sold hereunder will no longer
be eligible for trading through The PORTAL Market, and no assurance can be
given that an active trading market for the Convertible Notes will develop or,
if such market develops, as to the liquidity or sustainability of such market.
If a trading market does not develop or is not maintained, holders of the
Convertible Notes may experience difficulty in reselling, or an inability to
sell, the Convertible Notes.  If a market for the Convertible Notes develops,
any such market may be discontinued at any time.  If a public trading market
develops for the Convertible Notes, future trading prices of the Convertible
Notes will depend on many factors, including, among other things, prevailing
interest rates, the Company's operating results and the market for similar
securities.  Depending on prevailing interest rates, the market for similar
securities and other factors, including the financial condition of the Company,
the Convertible Notes may trade at a discount from their principal amount.

PRINCIPAL, MATURITY AND INTEREST

         The Convertible Notes bear interest from January 21, 1997, at the rate
per annum set forth on the cover page of this Prospectus and will mature on
January 15, 2004.

         Interest on the Convertible Notes is payable semiannually on January
15 and July 15 of each year (each an "Interest Payment Date"), commencing on
July 15, 1997, to holders of record at the close of business on the December 31
or June 30 (each a "Regular Record Date") immediately preceding such Interest
Payment Date. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.

         Interest on the Convertible Notes accrues from the most recent date to
which interest has been paid or, if no interest has been paid, from January 21,
1997.

         The Convertible Notes are payable both as to principal and interest at
the office or agency of the Company maintained for such purpose within the City
and State of New York or, at the option of the Company, payment of interest may
be made by check mailed to the holders of the Convertible Notes at their
respective addresses set forth in the register of holders of Convertible Notes.
Until otherwise designated by the Company, the Company's office or agency in
New York will be the office of the Trustee or its agent maintained for such
purpose. The Convertible





                                      13.
<PAGE>   16
Notes will be issued in registered form, without coupons, and in denominations
of $1,000 and integral multiples thereof.

OPTIONAL REDEMPTION

         The Convertible Notes are redeemable at the option of the Company, in
whole or in part (in any integral multiple of $1,000), at any time on and after
January 20, 2000, upon not less than 15 nor more than 60 days' prior notice by
mail at the following redemption prices (expressed as percentages of the
principal amount), if redeemed during the 12-month period beginning January 15
of the years indicated:

<TABLE>
<CAPTION>
                                                           REDEMPTION
                          YEAR                               PRICE   
                          ----                             ----------
                          <S>                               <C>
                          2000                              103.286%
                          2001                              102.464%
                          2002                              101.643%
                          2003                              100.821%
</TABLE>

and at January 15, 2004, 100%, in each case together with accrued interest to
the redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on an Interest Payment Date). If less than
all the Convertible Notes are to be redeemed, the Trustee will select the
Convertible Notes to be redeemed by lot, pro rata. On or after the redemption
date, interest will cease to accrue on the Convertible Notes, or portion
thereof, called for redemption.

MANDATORY REDEMPTION

         The Company is not required to make mandatory redemption or sinking
fund payments with respect to the Convertible Notes.

REPURCHASE AT THE OPTION OF HOLDERS

         Upon the occurrence of a Designated Event, each holder of Convertible
Notes shall have the right to require the Company to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such holder's Convertible
Notes pursuant to the offer described below (the "Designated Event Offer") at a
purchase price equal to 101% of the principal amount thereof, together with
accrued and unpaid interest thereon to the Designated Event Payment Date (the
"Designated Event Payment"). Within 30 days following any Designated Event, the
Company shall mail a notice to each holder stating: (1) that the Designated
Event Offer is being made pursuant to the covenant entitled "Designated Event"
and that all Convertible Notes tendered will be accepted for payment; (2) the
purchase price and the purchase date, which shall be no earlier than 30 days
nor later than 40 days from the date such notice is mailed (the "Designated
Event Payment Date"); (3) that any Convertible Notes not tendered will continue
to accrue interest; (4) that, unless the Company defaults in the payment of the
Designated Event Payment, all Convertible Notes accepted for payment pursuant
to the Designated Event Offer shall cease to accrue interest after the
Designated Event Payment Date; (5) that holders electing to have any
Convertible Notes purchased pursuant to a Designated Event Offer will be
required to surrender the Convertible Notes, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Convertible Notes completed, to
the Paying Agent at the address specified in the notice prior to the close of
business on the third Business Day preceding the Designated Event Payment Date;
(6) that holders will be entitled to withdraw their election if the Paying
Agent receives, not later than the close of business on the second Business Day
preceding the Designated Event Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the holder, the principal
amount of Convertible Notes delivered for purchase, and a statement that such
holder is withdrawing his election to have such Convertible Notes purchased;
and (7) that holders whose Convertible Notes are being purchased only in part
will be issued new Convertible Notes equal in principal amount to the
unpurchased portion of the Convertible Notes surrendered, which unpurchased
portion must be equal to $1,000 in principal amount or an integral multiple
thereof.

         The Company will comply with the requirements of Rules 13e-4 and 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of the Convertible Notes in connection with a Designated Event.

         On the Designated Event Payment Date, the Company will, to the extent
lawful, (1) accept for payment Convertible Notes or portions thereof tendered
pursuant to the Designated Event Offer, (2) deposit with the Paying Agent an
amount equal to the Designated Event Payment in respect of all Convertible
Notes or portions thereof so





                                      14.
<PAGE>   17
tendered and (3) deliver or cause to be delivered to the Trustee the
Convertible Notes so accepted together with an Officers' Certificate stating
the Convertible Notes or portions thereof tendered to the Company. The Paying
Agent shall promptly mail to each holder of Convertible Notes so accepted
payment in an amount equal to the purchase price for such Convertible Notes,
and the Trustee shall promptly authenticate and mail to each holder a new
Convertible Note equal in principal amount to any unpurchased portion of the
Convertible Notes surrendered, if any; provided, that each such new Convertible
Note shall be in a principal amount of $1,000 or an integral multiple thereof.
The Company will publicly announce the results of the Designated Event Offer on
or as soon as practicable after the Designated Event Payment Date. There can be
no assurance that the Company will have the financial resources necessary to
repurchase the Convertible Notes in such circumstances.

         Except as described above with respect to a Designated Event, the
Indenture does not contain any other provisions that permit the holders of the
Convertible Notes to require that the Company repurchase or redeem the
Convertible Notes in the event of a takeover, recapitalization or similar
restructuring.

         The Designated Event purchase feature of the Convertible Notes may in
certain circumstances make more difficult or discourage a takeover of the
Company, and, thus, the removal of incumbent management. The Designated Event
purchase feature, however, is not the result of management's knowledge of any
specific effort to accumulate the Company's stock or to obtain control of the
Company by means of a merger, tender offer, solicitation or otherwise, or part
of a plan by management to adopt a series of antitakeover provisions. Instead,
the Designated Event purchase feature is a result of negotiations between the
Company and the Initial Purchasers. Management has no present intention to
engage in a transaction involving a Designated Event, although it is possible
that the Company could decide to do so in the future. Subject to the
limitations on mergers, consolidations and sale of assets described herein, the
Company could, in the future, enter into certain transactions, including
acquisitions, refinancings or other recapitalizations, that would not
constitute a Designated Event under the Indenture, but that could increase the
amount of indebtedness (including Senior Debt) outstanding at such time or
otherwise affect the Company's capital structure or credit ratings. The payment
of the Designated Event Payment is subordinated to the prior payment of Senior
Debt as described under "Subordination of Convertible Notes" below.

         If a Designated Event were to occur, there can be no assurance that
the Company would have sufficient financial resources, or would be able to
arrange financing, to pay the repurchase price for all Convertible Notes
tendered by holders thereof. The Company's credit agreement with respect to its
senior bank revolving credit facility prohibits the Company from repurchasing
any Convertible Notes. Any future credit agreements or other agreements
relating to other indebtedness (including other Senior Debt) to which the
Company becomes a party may contain similar restrictions and provisions. If the
Company does not obtain such a consent or repay the Convertible Notes upon a
Designated Event, the Company would remain prohibited from repurchasing the
Convertible Notes. Any failure by the Company to repurchase the Convertible
Notes when required following a Designated Event would result in an Event of
Default under the Indenture whether or not such repurchase is permitted by the
subordination provisions of the Indenture. Any such default may, in turn, cause
a default under Senior Debt of the Company. Moreover, the occurrence of a
Designated Event may cause an event of default under Senior Debt of the
Company. As a result, in each case, any repurchase of the Convertible Notes
would, absent a waiver, be prohibited under the subordination provisions of the
Indenture until the Senior Debt is paid in full.

         A "Designated Event" will be deemed to have occurred upon a Change of
Control or a Termination of Trading.

         A "Change of Control" will be deemed to have occurred when: (i) any
"person" or "group" (as such terms are used in Section 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rules 13d-3
and 13d-5 under the Exchange Act) of shares representing more than 50% of the
combined voting power of the then outstanding securities entitled to vote
generally in elections of directors of the Company ("Voting Stock"), (ii) the
Company consolidates with or merges into any other corporation, or any other
corporation merges into the Company, and, in the case of any such transaction,
the outstanding Common Stock of the Company is reclassified into or exchanged
for any other property or security, unless the stockholders of the Company
immediately before such transaction own, directly or indirectly immediately
following such transaction, at least a majority of the combined voting power of
the outstanding voting securities of the corporation resulting from such
transaction in substantially the same proportion as their ownership of the
Voting Stock immediately before such transaction, (iii) the Company conveys,
transfers or leases all or substantially all of the assets of the Company or
(iv) any time the Continuing Directors do not constitute a majority of the
Board of Directors of the Company (or, if applicable, a successor corporation
to the Company); provided, that a Change of Control shall not be deemed to have
occurred if at least 90% of the consideration (excluding cash payments for
fractional shares) in the transaction or transactions constituting the Change
of Control consists of shares of common stock that are, or upon issuance will
be, traded





                                      15.
<PAGE>   18
on a United States national securities exchange or approved for trading on an
established automated over-the-counter trading market in the United States.

         The definition of Change of Control includes a phrase relating to the
lease, transfer or conveyance of "all or substantially all" of the assets of
the Company. Although there is a developing body of case law interpreting the
phrase "substantially all," there is no precise established definition of the
phrase under applicable law. Accordingly, the ability of a holder of
Convertible Notes to require the Company to repurchase such Convertible Notes
as a result of a lease, transfer or conveyance of less than all of the assets
of the Company to another person or group may be uncertain.

         "Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date of the Indenture or (ii) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election.

         A "Termination of Trading" will be deemed to have occurred if the
Common Stock (or other common stock into which the Convertible Notes are then
convertible) is neither listed for trading on a United States national
securities exchange nor approved for trading on an established automated
over-the-counter trading market in the United States.

SELECTION AND NOTICE

         If less than all of the Convertible Notes are to be redeemed at any
time, selection of Convertible Notes for redemption will be made by the Trustee
in compliance with the requirements of the principal national securities
exchange, if any, on which the Convertible Notes are listed, or, if the
Convertible Notes are not so listed, on a pro rata basis, provided that no
Convertible Notes of $1,000 or less shall be redeemed in part. Notice of
redemption shall be mailed by first class mail at least 30 but not more than 60
days before the redemption date to each holder of Convertible Notes to be
redeemed at its registered address. If any Convertible Note is to be redeemed
in part only, the notice of redemption that relates to such Convertible Note
shall state the portion of the principal amount thereof to be redeemed. A new
Convertible Note in principal amount equal to the unredeemed portion thereof
will be issued in the name of the holder thereof upon cancellation of the
original Convertible Note. On and after the redemption date, interest ceases to
accrue on Convertible Notes or portions of them called for redemption.

REGISTRATION RIGHTS

         Pursuant to the Registration Agreement, the Company agreed for the
benefit of the holders of the Convertible Notes and Common Stock issued upon
conversion thereof that are, in either case, Registrable Securities, that (i)
it would, at its cost, within 75 days after the first closing of the sale of
the Convertible Notes (the "Closing", which occurred on January 21, 1997), file
a shelf registration statement (the "Shelf Registration Statement") of which
this Prospectus is a part with the Commission with respect to resales of the
Convertible Notes and the Common Stock issuable upon conversion thereof, (ii)
the Company would use all reasonable efforts to cause such Shelf Registration
Statement to be declared effective under the Securities Act as soon as
practicable but in any event, within 105 days after the Closing and (iii) the
Company would use all reasonable efforts to keep such Shelf Registration
Statement continuously effective under the Securities Act until the earlier of
(a) the third anniversary of the last date of original issuance of the
Convertible Notes, (b) the date on which all of the Convertible Notes or the
Common Stock issuable upon conversion thereof may be sold by non-affiliates of
the Company pursuant to paragraph (k) of Rule 144 (or any successor provision)
promulgated by the Commission under the Securities Act and (c) the date as of
which all the Convertible Notes or the Common Stock issuable upon conversion
thereof have been sold pursuant to such Shelf Registration Statement (the
"Shelf Registration Period").  The Company shall have the right, however, to
defer the use of this Prospectus, as more fully described below.

         In the event the Company failed to file the Shelf Registration
Statement within 75 days after Closing, the Shelf Registration Statement was
not declared effective under the Securities Act within 105 days after the
Closing, a stop order is issued by the Commission prior to the end of the Shelf
Registration Period or Selling Periods have been deferred more frequently or
for longer periods than are described above, the Company has agreed to pay
liquidated damages to all Notice Holders of Convertible Notes and of Common
Stock issuable upon conversion thereof until such event is cured. Further, if
such event continues for a period in excess of 30 days, the Company has agreed
to pay liquidated damages to all holders of Convertible Notes and Common Stock
issued upon conversion thereof which are, in either case, Registrable
Securities, without regard to whether such holder is a Notice Holder.
Liquidated damages shall be calculated, with respect to Convertible Notes held
by a holder, at a rate of one-half





                                      16.
<PAGE>   19
of one percent (50 basis points) per annum of the aggregate principal amount of
such Convertible Notes and, with respect to shares of Common Stock held by a
holder and issued upon conversion of Convertible Notes, the same percentage of
the aggregate principal amount of Convertible Notes that were converted into
such shares. Liquidated damages will not accrue as to any Convertible Notes or
Common Stock issuable upon the conversion thereof from and after the earlier of
(i) the date such Convertible Notes or Common Stock are no longer Registrable
Securities and (ii) the expiration of the Shelf Registration Period. In
addition, liquidated damages will not accrue as to any Convertible Notes or
Common Stock issuable upon the conversion thereof represented by the
Unrestricted Global Note (as defined) provided that such securities are not
subject to limitations on transfer under U.S. federal or state securities laws
and there shall have been at least six months during which the Shelf
Registration Statement was effective and available for effecting resales of the
Convertible Notes and the Common Stock issuable upon conversion thereof.

         "Registrable Securities" means the Convertible Notes and shares of
Common Stock issued upon conversion thereof, excluding any such securities
that, and any such securities the predecessors of which, were previously sold
pursuant to a registration statement or Rule 144 under the Securities Act.

CONVERSION

         The holder of any Convertible Note has the right, exercisable at any
time after 90 days following the date of original issuance of any Convertible
Notes and prior to maturity, to convert the principal amount thereof (or any
portion thereof that is an integral multiple of $1,000) into shares of Common
Stock at the conversion price set forth on the cover page of this Prospectus,
subject to adjustment as described below (the "Conversion Price"), except that
if a Convertible Note is called for redemption, the conversion right will
terminate at the close of business on the Business Day immediately preceding
the date fixed for redemption. Except as described below, no adjustment will be
made on conversion of any Convertible Notes for interest accrued thereon or for
dividends on any Common Stock issued. If Convertible Notes not called for
redemption are converted after a record date for the payment of interest and
prior to the next succeeding Interest Payment Date, such Convertible Notes must
be accompanied by funds equal to the interest payable on such succeeding
Interest Payment Date on the principal amount so converted. No fractional
shares will be issued upon conversion but a cash adjustment will be made for
any fractional interest.

         The Conversion Price is subject to adjustment upon the occurrence of
certain events, including: (i) the issuance of shares of Common Stock as a
dividend or distribution on the Common Stock; (ii) the subdivision or
combination of the outstanding Common Stock; (iii) the issuance to
substantially all holders of Common Stock of rights or warrants to subscribe
for or purchase Common Stock (or securities convertible into Common Stock) at a
price per share less than the then current market price per share, as defined;
(iv) the distribution of shares of capital stock of the Company (other than
Common Stock), evidences of indebtedness or other assets (excluding dividends
in cash, except as described in clause (v) below) to all holders of Common
Stock; (v) the distribution, by dividend or otherwise, of cash to all holders
of Common Stock in an aggregate amount that, together with the aggregate of any
other distributions of cash that did not trigger a Conversion Price adjustment
to all holders of its Common Stock within the 12 months preceding the date
fixed for determining the stockholders entitled to such distribution and all
Excess Payments in respect of each tender offer or other negotiated transaction
by the Company or any of its Subsidiaries for Common Stock concluded within the
preceding 12 months not triggering a Conversion Price adjustment, exceeds 15%
of the product of the current market price per share (determined as set forth
below) on the date fixed for the determination of stockholders entitled to
receive such distribution times the number of shares of Common Stock
outstanding on such date; (vi) payment of an Excess Payment in respect of a
tender offer or other negotiated transaction by the Company or any of its
Subsidiaries for Common Stock, if the aggregate amount of such Excess Payment,
together with the aggregate amount of cash distributions made within the
preceding 12 months not triggering a Conversion Price adjustment and all Excess
Payments in respect of each tender offer or other negotiated transaction by the
Company or any of its Subsidiaries for Common Stock concluded within the
preceding 12 months not triggering a Conversion Price adjustment, exceeds 15%
of the product of the current market price per share (determined as set forth
below) on the expiration of such tender offer times the number of shares of
Common Stock outstanding on such date; and (vii) the distribution to
substantially all holders of Common Stock of rights or warrants to subscribe
for securities (other than those securities referred to in clause (iii) above).
In the event of a distribution to substantially all holders of Common Stock of
rights to subscribe for additional shares of the Company's capital stock (other
than those securities referred to in clause (iii) above), the Company may,
instead of making any adjustment in the Conversion Price, make proper provision
so that each holder of a Convertible Note who converts such Convertible Note
after the record date for such distribution and prior to the expiration or
redemption of such rights shall be entitled to receive upon such conversion, in
addition to shares of Common Stock, an appropriate number of such rights. No
adjustment of the Conversion Price will be made until cumulative adjustments
amount to one percent or more of the Conversion Price as last adjusted.





                                      17.
<PAGE>   20
         The Indenture provides that, if the Company implements a stockholder
rights plan, such rights plan must provide that upon conversion of the
Convertible Notes the holders will receive, in addition to the Common Stock
issuable upon such conversion, such rights (whether or not such rights have
separated from the Common Stock at the time of such conversion).

         If the Company reclassifies or changes its outstanding Common Stock,
or consolidates with or merges into any person or transfers or leases all or
substantially all its assets, or is a party to a merger that reclassifies or
changes its outstanding Common Stock, the Convertible Notes will become
convertible into the kind and amount of securities, cash or other assets which
the holders of the Convertible Notes would have owned immediately after the
transaction if the holders had converted the Convertible Notes immediately
before the effective date of the transaction.

         The Indenture also provides that if rights, warrants or options expire
unexercised the Conversion Price shall be readjusted to take into account the
actual number of such warrants, rights or options which were exercised.

         In the Indenture, the "current market price" per share of Common Stock
on any date is deemed to be the average of the Daily Market Prices for the
shorter of (i) 30 consecutive business days ending on the last full trading day
on the exchange or market referred to in determining such Daily Market Prices
prior to the time of determination (as defined in the Indenture) or (ii) the
period commencing on the date next succeeding the first public announcement of
the issuance of such rights or warrants or such distribution through such last
full trading day prior to the time of determination.

         "Excess Payment" means the excess of (A) the aggregate of the cash and
fair market value of other consideration paid by the Company or any of its
Subsidiaries with respect to the shares acquired in the tender offer or other
negotiated transaction over (B) the market value of such acquired shares after
giving effect to the completion of the tender offer or other negotiated
transaction.

         The Company from time to time may to the extent permitted by law
reduce the Conversion Price by any amount for any period of at least 20 days,
in which case the Company shall give at least 15 days' notice of such
reduction, if the Board of Directors has made a determination that such
reduction would be in the best interests of the Company, which determination
shall be conclusive. The Company may, at its option, make such reductions in
the Conversion Price, in addition to those set forth above, as the Board of
Directors deems advisable to avoid or diminish any income tax to holders of
Common Stock resulting from any dividend or distribution of stock (or rights to
acquire stock) or from any event treated as such for income tax purposes. See
"Certain Federal Income Tax Considerations."

SUBORDINATION OF CONVERTIBLE NOTES

         The Convertible Notes are subordinate in right of payment to all
existing and future Senior Debt. The Indenture does not restrict the amount of
Senior Debt or other indebtedness of the Company or any Subsidiary of the
Company. In addition, the Convertible Notes are structurally subordinated to
all indebtedness and other liabilities of the Company's Subsidiaries. As of
January 31, 1997, the Company had approximately $5.8 million of indebtedness
outstanding that constituted Senior Debt, none of which constituted Designated
Senior Debt.

         The payment of the principal of, interest on or any other amounts due
on the Convertible Notes are subordinated in right of payment to the prior
payment in full of all Senior Debt of the Company. No payment on account of
principal of, redemption of, interest on, liquidated damages on or any other
amounts due on the Convertible Notes (including, without limitation, any
Designated Event Payments), and no redemption, purchase or other acquisition of
the Convertible Notes (including, without limitation, pursuant to a Designated
Event Offer) may be made unless (i) full payment of amounts then due on all
Senior Debt have been made or duly provided for pursuant to the terms of the
instrument governing such Senior Debt, and (ii) at the time for, or immediately
after giving effect to, any such payment, redemption, purchase or other
acquisition, there shall not exist under any Senior Debt or any agreement
pursuant to which any Senior Debt has been issued, any default which shall not
have been cured or waived and which shall have resulted in the full amount of
such Senior Debt being declared due and payable. In addition, the Indenture
provides that if any of the holders of any issue of Designated Senior Debt
notify (the "Payment Blockage Notice") the Company and the Trustee that a
default has occurred giving the holders of such Designated Senior Debt or the
Representative of such holders the right to accelerate the maturity thereof, no
payment on account of principal of, redemption of, interest on, liquidated
damages on or any other amounts due on the Convertible Notes (including,
without limitation, any Designated Event Payments), and no purchase, redemption
or other acquisition of the Convertible Notes (including, without limitation,
pursuant to a Designated





                                      18.
<PAGE>   21
Event Offer) will be made for the period (the "Payment Blockage Period")
commencing on the date notice is received and ending on the earlier of (A) the
date on which such event of default shall have been cured or waived or (B) 180
days from the date notice is received. Notwithstanding the foregoing (but
subject to the provisions contained in the first sentence of this paragraph),
unless the holders of such Designated Senior Debt or the Representative of such
holders shall have accelerated the maturity of such Designated Senior Debt, the
Company may resume payments on the Convertible Notes after the end of such
Payment Blockage Period. Not more than one Payment Blockage Notice may be given
in any consecutive 360-day period, irrespective of the number of defaults with
respect to Senior Debt during such period.

         Upon any distribution of its assets in connection with any
dissolution, winding-up, liquidation or reorganization of the Company or
acceleration of the principal amount due on the Convertible Notes because of an
Event of Default, all Senior Debt must be paid in full before the holders of
the Convertible Notes are entitled to any payments whatsoever.

         If payment of the Convertible Notes is accelerated because of an Event
of Default, the Company or the Trustee will promptly notify the holders of
Senior Debt or the trustee(s) for such Senior Debt of the acceleration. The
Company may not pay the Convertible Notes until five days after such holders or
trustee(s) of Senior Debt receive notice of such acceleration and, thereafter,
may pay the Convertible Notes only if the subordination provisions of the
Indenture otherwise permit payment at that time.

         As a result of these subordination provisions, in the event of the
Company's insolvency, holders of the Convertible Notes may recover ratably less
than general creditors of the Company.

MERGER, CONSOLIDATION OR SALE OF ASSETS

         The Indenture provides that the Company may not consolidate or merge
with or into (whether or not the Company is the surviving corporation) any
person, or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets unless (i) (a) the Company is the
surviving or continuing corporation or (b) the person formed by or surviving
any such consolidation or merger (if other than the Company) or the person
which acquires by sale, assignment, transfer, lease, conveyance or other
disposition the properties and assets of the Company is a corporation organized
or existing under the laws of the United States, any state thereof or the
District of Columbia; (ii) the entity or person formed by or surviving any such
consolidation or merger (if other than the Company) assumes all the Obligations
of the Company, pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee, under the Convertible Notes and the Indenture;
(iii) such sale, assignment, transfer, lease, conveyance or other disposition
of all or substantially all of the Company's properties or assets shall be as
an entirety or virtually as an entirety to one person and such person shall
have assumed all the obligations of the Company, pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee, under the
Convertible Notes and the Indenture; (iv) immediately after such transaction no
Default or Event of Default exists; and (v) the Company or such person shall
have delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that such transaction and the supplemental indenture
comply with the Indenture and that all conditions precedent in the Indenture
relating to such transaction have been satisfied.

PAYMENTS FOR CONSENT

         The Indenture provides that neither the Company nor any of its
Subsidiaries will, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any holder of
any Convertible Notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the Indenture or the Convertible
Notes unless such consideration is offered to be paid or agreed to be paid to
all holders of the Convertible Notes that consent, waive or agree to amend in
the time frame set forth in the solicitation documents relating to such
consent, waiver or agreement.

REPORTS

         Whether or not required by the rules and regulations of the
Commission, so long as any Convertible Notes are outstanding, the Company will
file with the Commission and furnish to the holders of Convertible Notes all
quarterly and annual financial information required to be contained in a filing
with the Commission on Forms 10-Q and 10-K, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual consolidated financial statements only, a report
thereon by the Company's independent auditors.





                                      19.
<PAGE>   22
EVENTS OF DEFAULT AND REMEDIES

         The Indenture provides that each of the following constitutes an Event
of Default: (i) default for 30 days in the payment when due of interest on the
Convertible Notes; (ii) default in payment when due of principal on the
Convertible Notes; (iii) default in the payment of the Designated Event Payment
in respect of the Convertible Note on the date therefor, whether or not such
payment is prohibited by the subordination provisions of the Indenture; (iv)
failure to provide timely notice of a Designated Event; (v) failure by the
Company for 60 days after notice to comply with any other covenants and
agreements contained in the Indenture or the Convertible Notes; (vi) default
under any mortgage, indenture or instrument under which there may be issued or
by which there may be secured or evidenced any indebtedness for money borrowed
by the Company or any of its Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Subsidiaries), whether such
indebtedness or guarantee now exists or is created after the date on which the
Convertible Notes are first authenticated and issued, which default (a) is
caused by a failure to pay when due principal or interest on such indebtedness
within the grace period provided in such indebtedness (which failure continues
beyond the longer of any applicable grace period or 30 days) (a "Payment
Default") or (b) results in the acceleration of such indebtedness prior to its
express maturity and, in each case, the principal amount of any such
indebtedness, together with the principal amount of any other such indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $10 million or more; (vii) failure by the Company or
any Subsidiary of the Company to pay final judgments (other than any judgment
as to which a reputable insurance company has accepted full liability)
aggregating in excess of $10 million, which judgments are not stayed within 60
days after their entry; and (viii) certain events of bankruptcy or insolvency
with respect to the Company or any of its Material Subsidiaries.

         If any Event of Default occurs and is continuing, the Trustee or the
holders of at least 25% in principal amount of the then outstanding Convertible
Notes may declare all the Convertible Notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, with respect to the Company or any
Material Subsidiary, all outstanding Convertible Notes will become due and
payable without further action or notice. Holders of the Convertible Notes may
not enforce the Indenture or the Convertible Notes except as provided in the
Indenture. Subject to certain limitations, holders of a majority in principal
amount of the then outstanding Convertible Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from holders of the
Convertible Notes notice of any continuing Default or Event of Default (except
a Default or Event of Default relating to the payment of principal or interest)
if it determines that withholding notice is in their interest.

         The holders of a majority in aggregate principal amount of the
Convertible Notes then outstanding by notice to the Trustee may on behalf of
the holders of all of the Convertible Notes waive any existing Default or Event
of Default and its consequences under the Indenture except a continuing Default
or Event of Default in the payment of the Designated Event Payment or interest
on, or the principal of, the Convertible Notes.

         The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required, upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.

TRANSFER AND EXCHANGE

         A holder may transfer or exchange Convertible Notes in accordance with
the Indenture. The Registrar and the Trustee may require a holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to exchange or register
the transfer of (i) any Convertible Note for a period of 15 days next preceding
any selection of Convertible Notes to be redeemed, (ii) any Convertible Note or
portion thereof selected for redemption or (iii) any Convertible Note or
portion thereof surrendered for repurchase (and not withdrawn) in connection
with a Designated Event.

         The registered holder of a Convertible Note will be treated as the
owner of it for all purposes.

AMENDMENT, SUPPLEMENT AND WAIVER

         Except as provided in the next succeeding paragraph, the Indenture or
the Convertible Notes may be amended or supplemented with the consent of the
holders of at least a majority in principal amount of the then outstanding
Convertible Notes (including consents obtained in connection with a tender
offer or exchange offer for Convertible Notes), and any existing default or
compliance with any provision of the Indenture or the Convertible





                                      20.
<PAGE>   23
Notes may be waived with the consent of the holders of a majority in principal
amount of the then outstanding Convertible Notes (including consents obtained
in connection with a tender offer or exchange offer for Convertible Notes).

         Without the consent of each holder affected, an amendment or waiver
may not (with respect to any Convertible Notes held by a nonconsenting holder
of Convertible Notes) (i) reduce the amount of Convertible Notes whose holders
must consent to an amendment, supplement or waiver, (ii) reduce the principal
of or change the fixed maturity of any Convertible Note or alter the provisions
with respect to the redemption of the Convertible Notes, (iii) reduce the rate
of or change the time for payment of interest on any Convertible Note, (iv)
waive a default in the payment of principal of or interest on any Convertible
Notes (except a rescission of acceleration of the Convertible Notes by the
holders of at least a majority in aggregate principal amount of the Convertible
Notes and a waiver of the payment default that resulted from such
acceleration), (v) make any Convertible Note payable in money other than that
stated in the Convertible Notes, (vi) make any change in the provisions of the
Indenture relating to waivers of past Defaults or the rights of holders of
Convertible Notes to receive payments of principal of or interest on the
Convertible Notes, (vii) waive a redemption payment with respect to any
Convertible Note, (viii) impair the right to convert the Convertible Notes into
Common Stock, (ix) modify the conversion or subordination provisions of the
Indenture in a manner adverse to the holders of the Convertible Notes or (x)
make any change in the foregoing amendment and waiver provisions.

         Notwithstanding the foregoing, without the consent of any holder of
Convertible Notes, the Company and the Trustee may amend or supplement the
Indenture or the Convertible Notes to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Convertible Notes in addition to
or in place of certificated Convertible Notes, to provide for the assumption of
the Company's obligations to holders of the Convertible Notes in the case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the holders of the Convertible Notes or that does not
adversely affect the legal rights under the Indenture of any such holder, or to
comply with requirements of the Commission in order to qualify, or maintain the
qualification of, the Indenture under the Trust Indenture Act.

CONCERNING THE TRUSTEE

         The Indenture contains certain limitations on the rights of the
Trustee, should it become a creditor of the Company, to obtain payment of
claims in certain cases, or to realize on certain property received in respect
of any such claim as security or otherwise. The Trustee will be permitted to
engage in other transactions; however, if it acquires any conflicting interest
it must eliminate such conflict within 90 days, apply to the Commission for
permission to continue or resign.

         An affiliate of the Trustee is a lender to the Company under the
Company's existing revolving credit facility. An affiliate of the Trustee is
also the transfer agent for the Company's Common Stock.

         The holders of a majority in principal amount of the then outstanding
Convertible Notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that, in case an Event of
Default shall occur (which shall not be cured), the Trustee will be required,
in the exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any holder of Convertible Notes, unless such holder shall
have offered to the Trustee security and indemnity satisfactory to it against
any loss, liability or expense.

ADDITIONAL INFORMATION

         Anyone who receives this Prospectus may obtain copies of the Indenture
and the Registration Agreement without charge by writing to HMT Technology
Corporation, Attn: Investor Relations, 1055 Page Avenue, Fremont, California
94538.

CERTAIN DEFINITIONS

         Set forth below are certain defined terms used in the Indenture.
Reference is made to the Indenture for a full disclosure of all such terms, as
well as any other capitalized terms used herein, for which no definition is
provided.





                                      21.
<PAGE>   24
         "Capital Stock" means any and all shares, interests, participations,
rights or other equivalents (however designated) of equity interests in any
entity, including, without limitation, corporate stock and partnership
interests.

         "Default" means any event that is or, with the passage of time or the
giving of notice or both, would be an Event of Default.

         "Designated Senior Debt" means (i) the obligations of the Company
under the Credit Agreement (defined as the Company's existing bank credit
agreement, as amended or modified from time to time) and (ii) any other Senior
Debt which, at the date of determination, has an aggregate principal amount
outstanding of, or commitments to lend up to, at least $10.0 million and is
specifically designated by the Company in the instrument evidencing or
governing such Senior Debt as "Designated Senior Debt" for purposes of the
Indenture.

         "GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect from time to time.

         "Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
indebtedness.

         "Indebtedness" means, with respect to any person, all obligations,
whether or not contingent, of such person (i)(a) for borrowed money (including,
but not limited to, any indebtedness secured by a security interest, mortgage
or other lien on the assets of such person which is (1) given to secure all or
part of the purchase price of property subject thereto, whether given to the
vendor of such property or to another, or (2) existing on property at the time
of acquisition thereof), (b) evidenced by a note, debenture, bond or other
written instrument, (c) under a lease required to be capitalized on the balance
sheet of the lessee under GAAP or under any lease or related document
(including a purchase agreement) which provides that such person is
contractually obligated to purchase or to cause a third party to purchase such
leased property, (d) in respect of letters of credit, bank guarantees or
bankers' acceptances, (e) with respect to Indebtedness secured by a mortgage,
pledge, lien, encumbrance, charge or adverse claim affecting title or resulting
in an encumbrance to which the property or assets of such person are subject,
whether or not the obligation secured thereby shall have been assumed or
guaranteed by or shall otherwise be such person's legal liability, (f) in
respect of the balance of deferred and unpaid purchase price of any property or
assets, (g) under interest rate or currency swap agreements, cap, floor and
collar agreements, spot and forward contracts and similar agreements and
arrangements; (ii) with respect to any obligation of others of the type
described in the preceding clause (i) or under clause (iii) below assumed by or
guaranteed in any manner by such person or in effect guaranteed by such person
through an agreement to purchase (including, without limitation, "take or pay"
and similar arrangements), contingent or otherwise (and the obligations of such
person under any such assumptions, guarantees or other such arrangements); and
(iii) any and all deferrals, renewals, extensions, refinancings and refundings
of, or amendments, modifications or supplements to, any of the foregoing.

         "Material Subsidiary" means any Subsidiary of the Company which is
"significant subsidiary" as defined in Rule 1-02(w) of Regulation S- X under
the Securities Act and the Exchange Act (as such Regulation is in effect on the
date hereof).

         "Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.

         "Representative" means the trustee, agent or representative (if any)
for an issue of Senior Debt.

         "Senior Debt" means the principal of, interest on, fees, costs and
expenses in connection with, and other amounts due on Indebtedness of the
Company, whether outstanding on the date of the Indenture or thereafter
created, incurred, assumed or guaranteed by the Company, unless, in the
instrument creating or evidencing or pursuant to which Indebtedness is
outstanding, it is expressly provided that such Indebtedness is not senior in
right of payment to the Convertible Notes. Senior Debt includes, with respect
to the obligations described above, interest accruing, pursuant to the terms of
such Senior Debt, on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company, whether or not post-filing interest is
allowed in such proceeding, at the rate specified in the instrument governing
the relevant obligation. Notwithstanding anything to the contrary in the
foregoing, Senior Debt shall not include: (a) Indebtedness of or amounts owed
by the Company for compensation





                                      22.
<PAGE>   25
to employees, or for goods, services or materials purchased in the ordinary
course of business; (b) Indebtedness of the Company to a Subsidiary of the
Company; or (c) any liability for Federal, state, local or other taxes owed or
owing by the Company.

         "Subsidiary" means any corporation, association or other business
entity of which more than 50% of the total voting power of shares of Capital
Stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by any person or one or more of the other
Subsidiaries of that person or a combination thereof.





                                      23.
<PAGE>   26
                            SELLING SECURITYHOLDERS

         The following table sets forth the name of each Selling Securityholder
and relationship, if any, with the Company and (i) the amount of Convertible
Notes owned by each Selling Securityholder as of March 20, 1997 (assuming no
Convertible Notes have been sold under this Prospectus as of such date), (ii)
the maximum amount of Convertible Notes which may be offered for the account of
such Selling Securityholder under this Prospectus, (iii) the amount of Common
Stock owned by each Selling Securityholder as of March 20, 1997, and (iv) the
maximum amount of Common Stock which may be offered for the account of such
Selling Securityholder under this Prospectus.

<TABLE>
<CAPTION>
                                                             PRINCIPAL
                                           PRINCIPAL         AMOUNT OF
                                           AMOUNT OF        CONVERTIBLE       COMMON STOCK      COMMON STOCK
                                          CONVERTIBLE      NOTES OFFERED     OWNED PRIOR TO       OFFERED
  NAME OF SELLING SECURITYHOLDER        NOTES OWNED ($)      HEREBY ($)       OFFERING(1)        HEREBY(2)   
- ----------------------------------      ---------------    -------------     --------------     ------------  
<S>                                         <C>               <C>                 <C>               <C>
Lincoln National Life Insurance             6,455,000         6,455,000           271,789           271,789
AARP Growth and Income Fund                 5,700,000         5,700,000           240,000           240,000
Scudder Growth and Income Fund              5,300,000         5,300,000           223,157           223,157
Putnam Capital Appreciation Fund            3,850,000         3,850,000           162,105           162,105
Oregon Equity Fund                          3,500,000         3,500,000           147,368           147,368
SAIF Corporation                            3,000,000         3,000,000           126,315           126,315
OCM Convertible Trust                       2,985,000         2,985,000           125,684           125,684
Lincoln National Convertible                2,420,000         2,420,000           101,894           101,894
  Securities Fund
State of Connecticut Combined               2,360,000         2,360,000            99,368            99,368
  Investment Funds
Delta Air Lines Master Trust                1,815,000         1,815,000            76,421            76,421
Vanguard Convertible Securities             1,700,000         1,700,000            71,578            71,578
  Fund, Inc.
Pension Reserves Investment                 1,325,000         1,325,000            55,789            55,789
  Management Board
San Diego County                            1,265,000         1,265,000            53,263            53,263
Arkansas P.E.R.S.                           1,200,000         1,200,000            50,526            50,526
State of Delaware - Froley, Revy            1,020,000         1,020,000            42,947            42,947
Nicholas-Applegate Income &                   958,000           958,000            40,336            40,336
  Growth Fund
Hughes Aircraft Company Master                940,000           940,000            39,578            39,578
  Retirement Trust
Weirton Trust                                 750,000           750,000            31,578            31,578
State Employees' Retirement Fund              740,000           740,000            31,157            31,157
  of the State of Delaware
ICI American Holdings                         410,000           410,000            17,263            17,263
  Pension Trust
Zeneca Holdings Pension Trust                 410,000           410,000            17,263            17,263
Walker Art Center                             300,000           300,000            12,631            12,631
Starvest Discretionary Portfolio              300,000           300,000            12,631            12,631
San Diego City Retirement                     297,000           297,000            12,505            12,505
J.M. Hull Associates, L.P.                    250,000           250,000            10,526            10,526
Wake Forest University                        236,000           236,000             9,936             9,936
Partner Reinsurance Company, Limited          210,000           210,000             8,842             8,842
</TABLE>





                                      24.
<PAGE>   27
<TABLE>
<S>                                      <C>               <C>                  <C>               <C>
Kapiolani Medical Center                      200,000           200,000             8,421             8,421
Engineers Joint Pension Fund                  150,000           150,000             6,315             6,315
Nalco Chemical Co. Retirement                 135,000           135,000             5,684             5,684
  Trust
United National Life Insurance                115,000           115,000             4,842             4,842
Austin Firefighters                           109,000           109,000             4,589             4,589
Retirement Plan for Pilots of                 100,000           100,000             4,210             4,210
  Hawaiian Airlines, Inc.
Baptist Hospital                               95,000            95,000             4,000             4,000
Occidental College                             90,000            90,000             3,789             3,789
Boston Museum of Fine Arts                     40,000            40,000             1,684             1,684
Dunham & Associates Fund II                     7,000             7,000               294               294
Dunham & Associates Ser. II                     3,000             3,000               126               126
Delaware Group Dividend &                       1,000             1,000                42                42
  Income Fund, Inc.


Subtotal                                  $50,741,000       $50,741,000         2,136,446         2,136,446

Unnamed holders of Convertible Notes
or any future transferees, pledgees,
  donees or successors of or from
  any such unnamed holders (3)  . . .    $179,259,000      $179,259,000         7,547,764         7,547,764
         Total                           $230,000,000      $230,000,000         9,684,210         9,684,210
</TABLE>

__________________________

(1)      Comprises the shares of Common Stock into which the Convertible Notes
         held by such Selling Securityholder are convertible at the initial
         conversion rate.  The Conversion Rate and the number of shares of
         Common Stock issuable upon conversion of the Convertible Notes are
         subject to adjustment under certain circumstances.  See "Description
         of Convertible Notes -- Conversion."  Accordingly, the number of
         shares of Common Stock issuable upon conversion of the Convertible
         Notes may increase or decrease from time to time.

(2)      Assumes conversion into Common Stock of the full amount of Convertible
         Notes held by the Selling Securityholder at the initial conversion
         rate and the offering of such shares by such Selling Securityholder
         pursuant to this Prospectus.  The Conversion Rate and the number of
         shares of Common Stock issuable upon conversion of the Convertible
         Notes is subject to adjustment under certain circumstances.  See
         "Description of Convertible Notes -- Conversion."  Accordingly, the
         number of shares of Common Stock issuable upon conversion of the
         Convertible Notes may increase or decrease from time to time.
         Fractional shares will not be issued upon conversion of the
         Convertible Notes; rather, cash will be paid in lieu of fractional
         shares, if any.

(3)      No such holder may offer Convertible Notes pursuant to this Prospectus
         until such holder is included as a Selling Securityholder in a
         supplement to this Prospectus in accordance with the Registration
         Agreement (as defined).

(4)      Assumes that the unnamed holders of Convertible Notes or any future
         transferees, pledgees, donees or successors of or from any such
         unnamed holder do not beneficially own any Common Stock other than the
         Common Stock issuable upon conversion of the Convertible Notes at the
         initial conversion rate.

         Because the Selling Securityholders may, pursuant to this Prospectus,
offer all or some portion of the Convertible Notes and Common Stock they
presently hold or, with respect to Common Stock, have the right to acquire upon
conversion of such Convertible Notes, no estimate can be given as to the amount
of the Convertible Notes and Common Stock that will be held by the Selling
Securityholders upon termination of any such sales.  In addition, the Selling
Securityholders identified above may have sold, transferred or otherwise
disposed of all or a portion of their Convertible Notes and Common Stock since
the date on which they provided the information





                                      25.
<PAGE>   28
regarding their Convertible Notes and Common Stock, in transactions exempt from
the registration requirements of the Securities Act.  See "Plan of
Distribution."

         Only Selling Securityholders identified above who beneficially own the
Convertible Notes and Common Stock set forth opposite each such Selling
Securityholder's name in the foregoing table on the effective date of the
Registration Statement may sell such Convertible Notes and Common Stock
pursuant to this Prospectus.  The Company may from time to time, in accordance
with the Registration Agreement, include additional Selling Securityholders in
supplements to this Prospectus.

         Other than as set forth in the table, none of the Selling
Securityholders listed above had any material relationship with the Company
other than as a result of ownership of the Convertible Notes, within the
three-year period ending on the date of this Prospectus.

         The Company will pay the expenses of registering the Convertible Notes
and Common Stock being sold hereunder.





                                      26.
<PAGE>   29
                              PLAN OF DISTRIBUTION

         The Company will not receive any of the proceeds from this offering.
The Selling Securityholders may sell all or a portion of the Convertible Notes
and the Conversion Shares beneficially owned by them and offered hereby from
time to time on any exchange on which the securities are listed on terms to be
determined at the times of such sales.  The Selling Securityholders may also
make private sales directly or through a broker or brokers.  Alternatively, any
of the Selling Securityholders may from time to time offer the Convertible
Notes or shares of Common Stock beneficially owned by them through
underwriters, dealers or agents, who may receive compensation in the form of
underwriting discounts, commissions or concessions from the Selling
Securityholders and the purchasers of the Convertible Notes or Conversion
Shares for whom they may act as agent.  Each Selling Securityholder will be
responsible for payment of commissions, concessions and discounts of
underwriters, dealers or agents.  The aggregate proceeds to the Selling
Securityholders from the sale of the Convertible Notes or Conversion Shares
offered by them hereby will be the purchase price of such Convertible Notes or
Conversion Shares less discounts and commissions, if any.

         The Convertible Notes and the Conversion Shares offered hereby may be
sold from time to time by the Selling Securityholders to purchasers directly by
any of the Selling Securityholders acting as principal for its own account in
one or more transactions at a fixed price, which may be changed, or at varying
prices determined at the time of sale or at negotiated prices.  Such prices
will be determined by the holders of such securities or by agreement between
such holders and underwriters or dealers who may receive fees or commissions in
connection therewith.

         The Company's outstanding Common Stock is listed for trading on the
Nasdaq National Market.  The Initial Purchasers may make a market in the
Convertible Notes; however, they are not obligated to do so and any such
market-making may be discontinued at any time without notice, in the sole
discretion of the Initial Purchasers.  The Company does not intend to apply for
listing of the Convertible Notes on any securities exchange.  Accordingly, no
assurance can be given as to the development of any trading market that may
develop for the Convertible Notes.  See "Risk Factors -- Lack of Trading Market
for the Convertible Notes; Volatility of Convertible Note and Common Stock
Prices."

         In order to comply with the securities laws of certain states, if
applicable, the Convertible Notes and Conversion Shares may be sold in such
jurisdictions only through registered or licensed brokers or dealers.  In
addition, in certain states the Convertible Notes and Conversion Shares may not
be sold unless it has been registered or qualified for sale or an exemption
from registration or qualification requirements is available and is complied
with.

         The Selling Securityholders and any underwriters, dealers or agents
that participate in the distribution of the Convertible Notes and Conversion
Shares offered hereby may be deemed to be underwriters within the meaning of
the Act, and any discounts, commissions or concessions received by them and any
provided pursuant to the sale of shares by them might be deemed to be
underwriting discounts and commissions under the Act.

         In addition, any securities covered by this Prospectus which qualify
for sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold
under Rule 144 or Rule 144A rather than pursuant to this Prospectus.  There is
no assurance that any Selling Securityholder will sell any or all of the
Convertible Notes or Conversion Shares described herein, and any Selling
Securityholder may transfer, devise or gift such securities by other means not
described herein.

         The Convertible Notes were originally sold to the Initial Purchasers
in January 1997 in a private placement.  The Company agreed to indemnify and
hold the Initial Purchasers harmless against certain liabilities which they may
incur under the Securities Act, the Exchange Act or otherwise that could arise
in connection with the offering of the Convertible Notes by the Initial
Purchasers.

         The Company entered into a Registration Agreement with the Initial
Purchasers for the benefit of holders of the Convertible Notes to register
their Convertible Notes and Conversion Shares under applicable Federal and
state securities laws under certain circumstances and at certain times.  The
Registration Agreement provides for cross-indemnification of the Selling
Securityholders and the Company to the extent permitted by law, for losses,
claims, damages, liabilities and expenses arising, under certain circumstances,
out of any registration of the Convertible Notes and Conversion Shares.





                                      27.
<PAGE>   30
         The Company will use its best efforts to cause the registration
statement to which this prospectus relates to become effective as soon as
practicable and to keep the registration statement effective for a period of
three years from January 27, 1997 (the latest date of original issuance of the
Convertible Notes), or until the registration statement is no longer required
for transfer of the Convertible Notes or the Conversion Shares.  The Company is
permitted to suspend the use of this Prospectus in connection with the sales of
Convertible Notes and the Conversion Shares by holders upon the happening of
certain events or if there exists any fact that makes any statement of material
fact made in this Prospectus untrue or that requires the making of additions to
or changes in the prospectus in order to make the statements herein not
misleading until such time as the Company advises the Selling Securityholders
that use of the prospectus may be resumed.  Expenses of preparing and filing
the registration statement and all post-effective amendments will be borne by
the Company.  Such expenses are estimated to be $200,000.

                    CERTAIN FEDERAL INCOME TAX CONSEQUENCES

         The following is a general discussion of certain United States federal
income tax considerations relevant to holders of the Convertible Notes. This
discussion is based upon the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury Regulations, Internal Revenue Service ("IRS") rulings and
judicial decisions now in effect all of which are subject to change (possibly
with retroactive effect) or different interpretations. This discussion does not
purport to deal with all aspects of federal income taxation that may be
relevant to a particular investor's decision to purchase the Convertible Notes,
and it is not intended to be wholly applicable to all categories of investors,
some of which, such as dealers in securities, banks, insurance companies,
tax-exempt organizations and non-United States persons, may be subject to
special rules. In addition, this discussion is limited to persons that purchase
the Convertible Notes pursuant to this Prospectus and hold the Convertible
Notes as a "capital asset" within the meaning of Section 1221 of the Code.

         ALL PROSPECTIVE PURCHASERS OF THE CONVERTIBLE NOTES ARE ADVISED TO
CONSULT THEIR OWN TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN
TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE CONVERTIBLE
NOTES AND THE COMMON STOCK.

INTEREST INCOME

         A holder of a Convertible Note will generally be required to report as
income for federal income tax purposes interest earned on the Convertible Note
in accordance with the holder's method of tax accounting. A holder of a
Convertible Note using the accrual method of accounting for tax purposes is
required to include interest in ordinary income as such interest accrues, while
a cash basis holder must include interest in income when payments are received
(or made available for receipt).

CONVERSION OF CONVERTIBLE NOTES INTO COMMON STOCK

         In general, no gain or loss will be recognized for federal income tax
purposes on a conversion of the Convertible Notes into shares of Common Stock.
However, cash paid in lieu of a fractional share of Common Stock will likely
result in taxable gain (or loss), which will be capital gain or loss, to the
extent that the amount of such cash exceeds (or is exceeded by) the portion of
the adjusted basis of the Convertible Note allocable to such fractional share.
The adjusted basis of shares of Common Stock received on conversion will equal
the adjusted basis of the Convertible Note converted, reduced by the portion of
adjusted basis allocated to any fractional share of Common Stock exchanged for
cash. The holding period of an investor in the Common Stock received on
conversion will include the period during which the converted Convertible Notes
were held.

         The conversion price of the Convertible Notes is subject to adjustment
under certain circumstances. See "Description of Convertible Notes --
Conversion." Section 305 of the Code and the Treasury Regulations issued
thereunder may treat the holders of the Convertible Notes as having received a
constructive distribution, resulting in ordinary income (subject to a possible
dividends received deduction in the case of corporate holders) to the extent of
the Company's then current and/or accumulated earnings and profits, if and to
the extent that certain adjustments in the conversion price that may occur in
limited circumstances (particularly an adjustment to reflect a taxable dividend
to holders of Common Stock) increase the proportionate interest of a holder of
Convertible Notes in the fully diluted Common Stock, whether or not such holder
ever exercises its conversion privilege. Moreover, if there is not a full
adjustment to the conversion price of the Convertible Notes to reflect a stock
dividend or other event increasing the proportionate interest of the holders of
outstanding Common Stock in the assets or earnings and profits of the Company,
then such increase in the proportionate interest of the holders of the Common
Stock





                                      28.
<PAGE>   31
generally will be treated as a distribution to such holders, taxable as
ordinary income (subject to a possible dividends received deduction in the case
of corporate holders) to the extent of the Company's then current and/or
accumulated earnings.

MARKET DISCOUNT

         Investors acquiring Convertible Notes pursuant to this Prospectus
should note that the resale of those Convertible Notes may be adversely
affected by the market discount provisions of sections 1276 through 1278 of the
Code. Under the market discount rules, if a holder of a Convertible Note
purchases it at market discount (i.e., at a price below its stated redemption
at maturity) in excess of a statutorily-defined de minimis amount and
thereafter recognizes gain upon a disposition or retirement of the Convertible
Note, then the lesser of the gain recognized or the portion of the market
discount that accrued on a ratable basis (or, if elected, on a constant
interest rate basis) generally will be treated as ordinary income at the time
of the disposition. Moreover, any market discount on a Convertible Note may be
taxable to an investor to the extent of appreciation at the time of certain
otherwise non-taxable transactions (e.g., gifts). Any accrued market discount
not previously taken into income prior to a conversion of a Convertible Note,
however, should carry over to the Common Stock received on conversion and be
treated as ordinary income upon a subsequent disposition of such Common Stock
to the extent of any gain recognized on such disposition.  In addition, absent
an election to include market discount in income as it accrues, a holder of a
market discount debt instrument may be required to defer a portion of any
interest expense that otherwise may be deductible on any indebtedness incurred
or maintained to purchase or carry such debt instrument until the holder
disposes of the debt instrument in a taxable transaction.

SALE, EXCHANGE OR RETIREMENT OF CONVERTIBLE NOTES

         Each holder of Convertible Notes generally will recognize gain or loss
upon the sale, exchange, redemption, repurchase, retirement or other
disposition of those Convertible Notes measured by the difference (if any)
between (i) the amount of cash and the fair market value of any property
received (except to the extent that such cash or other property is attributable
to the payment of accrued interest not previously included in income, which
amount will be taxable as ordinary income) and (ii) the holder's adjusted tax
basis in those Convertible Notes (including any market discount previously
included in income by the holder). Each holder of Common Stock into which the
Convertible Notes are converted, in general, will recognize gain or loss upon
the sale, exchange, redemption or other disposition of the Common Stock
measured under rules similar to those described in the preceding sentence for
the Convertible Notes. Special rules may apply to redemptions of Common Stock
which may result in different treatment. Any such gain or loss recognized on
the sale, exchange, redemption, repurchase, retirement or other disposition of
a Convertible Note or share of Common Stock should be capital gain or loss
(except as discussed under "-- Market Discount" above), and would be long-term
capital gain or loss if the Convertible Note or the Common Stock had been held
for more than one year at the time of the sale or exchange. An investor's
initial basis in a Convertible Note will be the cash price paid therefor.

BACK-UP WITHHOLDING

         A holder of Convertible Notes or Common Stock may be subject to
"back-up withholding" at a rate of 31% with respect to certain "reportable
payments," including interest payments, dividend payments and, under certain
circumstances, principal payments on the Convertible Notes. These back-up
withholding rules apply if the holder, among other things, (i) fails to furnish
a social security number or other taxpayer identification number ("TIN")
certified under penalties of perjury within a reasonable time after the request
therefor, (ii) furnishes an incorrect TIN, (iii) fails to report properly
interest or dividends, or (iv) under certain circumstances, fails to provide a
certified statement, signed under penalty of perjury, that the TIN furnished is
the correct number and that the holder is not subject to back-up withholding. A
holder who does not provide the Company with its correct TIN also may be
subject to penalties imposed by the IRS. Any amount withheld from a payment to
a holder under the back-up withholding rules is creditable against the holder's
federal income tax liability, provided the required information is furnished to
the IRS. Back-up withholding will not apply, however, with respect to payments
made to certain holders, including corporations, tax-exempt organizations and
certain foreign persons, provided their exemption from back-up withholding is
properly established.

         The Company will report to the holders of Convertible Notes and Common
Stock and to the IRS the amount of any "reportable payments" for each calendar
year and the amount of tax withheld, if any, with respect to such payments.





                                      29.
<PAGE>   32
                                 LEGAL MATTERS

         The validity of the issuance of the Convertible Notes and Conversion
Shares offered hereby has been passed upon for the Company by Cooley Godward
LLP, Palo Alto, California.

                                    EXPERTS

         The consolidated financial statements of the Company included in the
Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1996,
incorporated by reference in this Prospectus and elsewhere in the Registration
Statement, have been audited by Coopers & Lybrand L.L.P., independent
accountants, as set forth in their report dated April 25, 1996, except for Note
11 as to which the date is May 6, 1996, and are incorporated by reference
herein in reliance upon the report of such firm, which report is given upon
their authority as experts in accounting and auditing.





                                      30.
<PAGE>   33
         No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such other information and representations
must not be relied upon as having been authorized by the Company.  This
Prospectus does not constitute an offer or solicitation by anyone in any state
in which such offer or solicitation is not authorized, or in which the person
making such offer or solicitation is not qualified to do so, or to any person
to whom it is unlawful to make such offer or solicitation.  The delivery of
this Prospectus at any time does not imply that the information herein is
correct as of any time subsequent to the date hereof.

                             ---------------------

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                         Page
                                                                         ----
<S>                                                                       <C>
Available Information . . . . . . . . . . . . . . . . . . . . . . . . .    2

Incorporation of Certain Documents By Reference . . . . . . . . . . . .    2

The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    3

Risk Factors  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    3

Ratio of Earnings To Fixed Charges  . . . . . . . . . . . . . . . . . .   10

Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . .   10

Decription of Capital Stock . . . . . . . . . . . . . . . . . . . . . .   11

Description of Convertible Notes  . . . . . . . . . . . . . . . . . . .   13

Selling Securityholders . . . . . . . . . . . . . . . . . . . . . . . .   24

Plan of Distribution  . . . . . . . . . . . . . . . . . . . . . . . . .   27

Certain Federal Income Tax Consequences . . . . . . . . . . . . . . . .   28

Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   30

Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   30

</TABLE>

                             ---------------------





                                      31.
<PAGE>   34
                                    PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

         The following table sets forth all expenses, other than the
underwriting discounts and commissions, payable by the Registrant in connection
with the sale of the Convertible Notes and Conversion Shares being registered.
All the amounts shown are estimates except for the registration fee.

<TABLE>
                 <S>                                                               <C>
                 Registration fee . . . . . . . . . . . . . . . . . . . . .        $ 59,243
                 Printing and engraving expenses  . . . . . . . . . . . . .          30,000
                 Legal fees and expenses  . . . . . . . . . . . . . . . . .          50,000
                 Accounting fees and expenses . . . . . . . . . . . . . . .          15,000
                 Fees of Trustee  . . . . . . . . . . . . . . . . . . . . .           7,500
                 Miscellaneous  . . . . . . . . . . . . . . . . . . . . . .          38,257
                                                                                   --------
                         TOTAL  . . . . . . . . . . . . . . . . . . . . . .        $200,000
                                                                                   ========
</TABLE>

ITEM 15.  INDEMNIFICATION OF OFFICERS AND DIRECTORS.

         The Registrant's Certificate of Incorporation and Bylaws include
provisions to (i) eliminate the personal liability of its directors for
monetary damages resulting from breaches of their fiduciary duty to the extent
permitted by Section 102(b)(7) of the General Corporation Law of Delaware (the
"Delaware Law") and (ii) require the Registrant to indemnify its directors and
officers to the fullest extent permitted by Section 145 of the Delaware Law,
including circumstances in which indemnification is otherwise discretionary.
Pursuant to Section 145 of the Delaware Law, a corporation generally has the
power to indemnify its present and former directors, officers, employees and
agents against expenses incurred by them in connection with any suit to which
they are, or are threatened to be made, a party by reason of their serving in
such positions so long as they acted in good faith and in a manner they
reasonably believed to be in, or not opposed to, the best interests of a
corporation, and, with respect to any criminal action, they had no reasonable
cause to believe their conduct was unlawful.  The Registrant believes that
these provisions are necessary to attract and retain qualified persons as
directors and officers.  These provisions do not eliminate liability for breach
of the director's duty of loyalty to the Registrant or its stockholders, for
acts or omissions not in good faith or involving intentional misconduct or
knowing violations of law, for any transaction from which the director derived
an improper personal benefit or for any willful or negligent payment of any
unlawful dividend or any unlawful stock purchase agreement or redemption.

         The Registrant has entered into agreements with its directors and
executive officers that require the Registrant to indemnify such persons
against expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred (including expenses of a derivative action) in connection
with any proceeding, whether actual or threatened, to which any such person may
be made a party by reason of the fact that such person is or was a director or
officer of the Registrant or any of its listed enterprises, provided such
person acted in good faith and in a manner such person reasonably believed to
be in or not opposed to the best interests of the Registrant and, with respect
to any criminal proceeding, had no reasonable cause to believe his or her
conduct was unlawful.  The indemnification agreements also set forth certain
procedures that will apply in the event of a claim for indemnification
thereunder.

         The Registrant has purchased an insurance policy covering the officers
and directors of the Registrant with respect to certain liabilities arising
under the Securities Act or otherwise.





                                      II-1
<PAGE>   35
ITEM 16.         EXHIBITS

         (a)     Exhibits.

<TABLE>
<CAPTION>
      EXHIBIT
      NUMBER                              DESCRIPTION OF DOCUMENT
      ------                              -----------------------
      <S>        <C>
       4.1(1)    Specimen Stock Certificate
       4.8(2)    Indenture dated as of January 15, 1996, between the Company and State Street Bank and Trust 
                 Company of California, N.A.
       4.13      Form of Convertible Subordinated Note due 2004
       5.1       Opinion of Cooley Godward LLP
      10.27(3)   Registration Agreement dated January 15, 1997, among the Company, Salomon Brothers Inc, 
                 Alex. Brown & Sons Incorporated, Hambrecht & Quist LLC and Robertson, 
                 Stephens & Company LLC
      10.28(4)   Purchase Agreement dated January 15, 1997 among the Company, Salomon Brothers Inc, 
                 Alex. Brown & Sons Incorporated, Hambrecht & Quist LLC and Robertson, 
                 Stephens & Company LLC
      12.1       Computation of Ratio of Earnings to Fixed Charges.
      23.1       Consent of Coopers & Lybrand, L.L.P.
      23.2       Consent of Cooley Godward LLP.  Reference is made to Exhibit 5.1.
      24.1       Power of Attorney.  Reference is made to page II-4.
      25.1       Statement of Eligibility of Indenture Trustee on Form T-1.
</TABLE>

_________________

         (1)     Incorporated by reference from the Company's Registration
                 Statement on Form S-1 (File No. 333-450), as amended.

         (2)     Incorporated by reference from Exhibit 4.8 to the Company's 
                 Current Report on Form 8-K filed February 6, 1997, as amended.

         (3)     Incorporated by reference from Exhibit 4.9 to the Company's 
                 Current Report on Form 8-K filed February 6, 1997, as amended.

         (4)     Incorporated by reference from Exhibit 4.10 to the Company's 
                 Current Report on Form 8-K filed February 6, 1997, as amended.

        

ITEM 17.  UNDERTAKINGS.

         The undersigned registrant hereby undertakes:

         (1)     To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.

         (2)     That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and

         (3)     To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.

         The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

         The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the Prospectus, to each person to whom the Prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the Prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where
interim financial information required to be presented by Article 3 or
Regulation S-X are not set forth in the Prospectus, to deliver, or cause to be
delivered to each person to whom the Prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
Prospectus to provide such interim financial information.





                                      II-2
<PAGE>   36
         Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to provisions described in Item 15, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.  In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

         The undersigned Registrant hereby undertakes that:

                 (1)      For purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

                 (2)      For the purpose of determining any liability under
the Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.





                                      II-3
<PAGE>   37
                                   SIGNATURES

         Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Fremont, County of Alameda, State of
California, on the 31st day of March, 1997.

                                  HMT TECHNOLOGY CORPORATION


                                  By         /s/ Ronald L. Schauer
                                     -----------------------------------------
                                                 Ronald L. Schauer
                                        President and Chief Executive Officer
                                            (Principal Executive Officer)

                               POWER OF ATTORNEY

         KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Ronald L. Schauer and Peter S. Norris,
and each or any one of them, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his substitutes or substitute, may
lawfully do or cause to be done by virtue hereof.

         Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capabilities and on the dates indicated.

<TABLE>
<CAPTION>
                  SIGNATURE                                TITLE                                  DATE
                  ---------                                -----                                  ----
           <S>                              <C>                                              <C>
                                                                                             March 31, 1997
            /s/ Ronald L. Schauer           President, Chief Executive
- -----------------------------------------      Officer and Director
              Ronald L. Schauer               (Principal Executive Officer)                         
                                                                     
             /s/ Peter S. Norris            Vice President, Finance, Chief Financial         March 31, 1997
- -----------------------------------------      Officer, Treasurer and Assistant Secretary                     
               Peter S. Norris                (Principal Financial and
                                               Accounting Officer)
                                                                                            
            /s/ Bruce C. Edwards            Director                                         March 31, 1997
- -----------------------------------------                                                                  
              Bruce C. Edwards

            /s/ Neil M. Garfinkel           Director                                         March 31, 1997
- -----------------------------------------                                                                  
              Neil M. Garfinkel

           /s/ Walter G. Kortschak          Director                                         March 31, 1997
- -----------------------------------------                                                                  
             Walter G. Kortschak


                                            Director                                         March __, 1997
- -----------------------------------------                                                                          
               Robert G. Teal
</TABLE>





                                      II-4
<PAGE>   38
                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
      EXHIBIT
      NUMBER                   DESCRIPTION OF DOCUMENT
      ------                   -----------------------
      <S>        <C>
       4.1(1)    Specimen Stock Certificate.
       4.8(2)    Indenture dated as of January 15, 1996, between the Company and State Street Bank and Trust 
                 Company of California, N.A.
       4.13      Form of Convertible Subordinated Note due 2004.
       5.1       Opinion of Cooley Godward LLP.
      10.27(3)   Registration Agreement dated January 15, 1997, among the Company, Salomon Brothers Inc, 
                 Alex. Brown & Sons Incorporated,  Hambrecht & Quist LLC and Robertson, 
                 Stephens & Company LLC.
      10.28(4)   Purchase Agreement dated January 15, 1997 among the Company, Salomon Brothers Inc, 
                 Alex. Brown & Sons Incorporated, Hambrecht & Quist LLC and Robertson, 
                 Stephens & Company LLC
      12.1       Computation of Ratio of Earnings to Fixed Charges.
      23.1       Consent of Coopers & Lybrand, L.L.P.
      23.2       Consent of Cooley Godward LLP.  Reference is made to Exhibit 5.1.
      24.1       Power of Attorney.  Reference is made to page II-4.
      25.1       Statement of Eligibility of Indenture Trustee on Form T-1.
</TABLE>

_________________

         (1)     Incorporated by reference from the Company's Registration
                 Statement on Form S-1 (File No. 333-450), as amended.

         (2)     Incorporated by reference from Exhibit 4.8 to the Company's 
                 Current Report on Form 8-K filed February 6, 1997, as amended.

         (3)     Incorporated by reference from Exhibit 4.9 to the Company's 
                 Current Report on Form 8-K filed February 6, 1997, as amended.

         (4)     Incorporated by reference from Exhibit 4.10 to the Company's 
                 Current Report on Form 8-K filed February 6, 1997, as amended.




                                      II-5

<PAGE>   1
                                                                    EXHIBIT 4.13

No. 3

                                                             Cusip No. ________

                           HMT TECHNOLOGY CORPORATION
                      5 3/4% CONVERTIBLE SUBORDINATED NOTE
                                    DUE 2004

                           HMT TECHNOLOGY CORPORATION

         HMT Technology Corporation, a Delaware corporation (the "Company")
promises to pay to ______________ or registered assigns, the principal sum of
$___________ on January 15, 2004, and to pay interest thereon accruing
from January 21, 1997 at the rate of 5 3/4% per annum.

   Interest Payment Dates:  January 15 and July 15, commencing July 15, 1997

   Record Date:             June 30 and December 31

         Reference is hereby made to the further provisions of this Convertible
Note set forth on the reverse hereof which further provisions shall for all
purposes have the same effect as if set forth at this place.

 

                                       -1-
<PAGE>   2
         IN WITNESS WHEREOF, HMT Technology Corporation has caused this
Convertible Note to be signed manually or by facsimile by its duly authorized
officers and a facsimile of its corporate seal to be affixed hereto or imprinted
hereon.

Dated: January 21, 1997

                       HMT TECHNOLOGY CORPORATION

                 By:___________________________________________________________
                    Peter S. Norris, Vice President, Finance, Chief
                    Financial Officer, Treasurer and Assistant
                    Secretary

                 By:___________________________________________________________
                    James C. Kitch, Secretary

[Seal]

TRUSTEE'S CERTIFICATE OF
AUTHENTICATION

This is one of the 5 3/4% Convertible
Subordinated Notes due 2004 described in
the within-mentioned Indenture.

State Street Bank and Trust Company of California, N.A.,
as Trustee

By:_____________________________
         Authorized Officer

 

                                       -2-
<PAGE>   3
                           HMT TECHNOLOGY CORPORATION

                  5 3/4% Convertible Subordinated Note Due 2004

         1. Interest. HMT Technology Corporation, a Delaware corporation (the
"Company"), is the issuer of this 5 3/4% Convertible Subordinated Note due 2004
(the "Convertible Note"). The Company promises to pay interest on the
Convertible Notes in cash semiannually on each January 15 and July 15,
commencing on July 15, 1997, to holders of record on the immediately preceding
June 30 and December 31.

                  Interest on the Convertible Notes will accrue from the most
recent date to which interest has been paid, or if no interest has been paid,
from January 21, 1997. Interest will be computed on the basis of a 360-day year
of 12 30-day months. To the extent lawful, the Company shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest (without regard to any applicable grace period)
at the rate borne by the Convertible Notes, compounded annually.

         2. Method of Payment. The Company will pay interest and Liquidated
Damages, if any, on the Convertible Notes (except defaulted interest) to the
persons who are registered holders of the Convertible Notes entitled to such
payments at the close of business on the record date for the next interest
payment date even though Convertible Notes are cancelled after the record date
and on or before the interest payment date. The Noteholder hereof must surrender
Convertible Notes to a Paying Agent to collect principal payments. The Company
will pay principal and interest and Liquidated Damages, if any, in money of the
United States that at the time of payment is legal tender for payment of public
and private debts. However, the Company may pay principal and interest and
Liquidated Damages, if any, by check payable in such money. It may mail an
interest check to a holder's registered Address.

         3. Paying Agent and Registrar. The Trustee will act as Paying Agent,
Registrar and Conversion Agent. The Company may change any Paying Agent,
Registrar, co-registrar or Conversion Agent without prior notice. The Company or
any of its Affiliates may act in any such capacity.

         4. Indenture. The Company issued the Convertible Notes under an
indenture, dated as of January 15, 1997 (the "Indenture"), between the Company
and State Street Bank and Trust Company of California, N.A., as Trustee. The
terms of the Convertible Notes include those stated in the Indenture (which is
incorporated hereby as though fully set forth herein) and those made part of the
Indenture by the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) as in effect on the date of the Indenture. The Convertible Notes
are subject to, and ratified by, all such terms, certain of which are summarized
hereon, and Noteholders are referred to the Indenture and such Act for a
statement of such terms. The Convertible Notes are unsecured obligations of the
Company limited to (except as otherwise provided in the Indenture) up to an
aggregate principal amount of $200,000,000 (plus up to $30,000,000 aggregate
principal amount of Convertible Notes that may be sold by the Company pursuant
to the over-allotment option granted pursuant to the Purchase Agreement), and

 

                       
<PAGE>   4
are subordinated in right of payment to all existing and future Senior Debt of
the Company as provided in the Indenture. The Indenture does not limit the
ability of the Company or any of its Subsidiaries to incur indebtedness or to
grant security interests or liens in respect of their assets. Any holder of this
Convertible Note shall be deemed to have agreed to and be bound by all the terms
and conditions contained in the Indenture applicable to a holder of a
Convertible Note.

         5. Optional Redemption. The Convertible Notes are not subject to
redemption at the Company's option prior to January 20, 2000. On such date and
thereafter, the Convertible Notes will be subject to redemption at the option of
the Company, in whole or in part (in any integral multiple of $1,000), upon not
less than 15 nor more than 60 days' prior notice by mail at the following
redemption prices (expressed as -percentages of the principal amount set forth
below), if redeemed during the 12-month period beginning January 15 of the years
indicated:

<TABLE>
<CAPTION>
                                                            Redemption
                        Year                                   Price
                        ----                                   -----
<S>                                                         <C>

2000.................................................       103.286%
2001.................................................       102.464
2002.................................................       101.643
2003.................................................       100.821
</TABLE>


and, at January 15, 2004, 100% in each case together with accrued and unpaid
interest and Liquidation Damages, if any, up to but not including the redemption
date (subject to the right of holders of record an the relevant record date to
receive interest due on an interest payment date). On or after the redemption
date, interest will cease to accrue on the Convertible Notes, or portion
thereof, called for redemption.

         6. Notice of Redemption. Notice of redemption will be mailed at least
15 days but not more than 60 days before the redemption date to each holder of
the Convertible Notes to be redeemed at his address of record. The Convertible
Notes in denominations larger than $1,000 may be redeemed in part but only in
integral multiples of $1,000. In the event of a redemption of less than all of
the Convertible Notes, the Convertible Notes will be chosen for redemption by
the Trustee in accordance with the Indenture. Unless the Company defaults in
making such redemption payment, or the Paying Agent is prohibited from making
such payment pursuant to the Indenture, interest and Liquidated Damages cease to
accrue on the Convertible Notes or portions of them called for redemption on and
after the redemption date.

                  If this Convertible Note is redeemed subsequent to a record
date with respect to any interest payment date specified above and on or prior
to such interest payment date, then any accrued interest or Liquidated Damages,
if any, payable on such interest payment date will be paid to the person in
whose name this Convertible Note is registered at the close of business on such
record date.

 

                                       -2-
<PAGE>   5
         7. Mandatory Redemption. The Company will not be required to make
mandatory redemption payments with respect to the Convertible Notes. There are
no sinking fund payments with respect to the Convertible Notes.

         8. Repurchase at Option of Holder. If there is a Designated Event, the
Company shall be required to offer to purchase on the Designated Event Payment
Date all outstanding Convertible Notes at a purchase price equal to 101% of the
principal amount thereof on the date of purchase, plus accrued and unpaid
interest and Liquidated Damages, if any, to the Designated Event Payment Date.
Holders of Convertible Notes that are subject to such a Designated Event Offer
will be mailed a notice of Designated Event Offer from the Company prior to any
related Designated Event Payment Date and, in accordance with the procedures and
terms set forth in the Indenture, may elect to have such Convertible Notes or
portions thereof in authorized denominations purchased by completing the form
entitled "Option of Noteholder To Elect Purchase." Noteholders have the right to
withdraw their election by delivering a written notice of withdrawal to the
Paying Agent in accordance with the terms of the Indenture.

         9. Subordination. The payment of the principal of, premium, if any,
interest on, Liquidated Damages, if any, or any other amounts due on the
Convertible Notes is subordinated in right of payment to all existing and future
Senior Debt of the Company, as described in the Indenture. Each Noteholder, by
accepting a Convertible Note, agrees to such subordination and authorizes and
directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate the subordination so provided and appoints the Trustee
as its attorney-in-fact for such purpose.

         10. Conversion. The holder of any Convertible Note has the right,
exercisable at any time after 90 days following the date of original issuance
thereof and prior to the close of business (New York time) on the date of the
Convertible Note's maturity, to convert the principal amount thereof (or any
portion thereof that is an integral multiple of $1,000) into shares of Common
Stock at the initial Conversion Price of $23.75 per share, subject to adjustment
under certain circumstances, except that if a Convertible Note is called for
redemption, the conversion right will terminate at the close of business on the
Business Day immediately preceding the date fixed for redemption.

                  To convert a Convertible Note, a holder must (1) complete and
sign a notice of election to convert substantially in the form set forth below,
(2) surrender the Convertible Note to a Conversion Agent, (3) furnish
appropriate endorsements or transfer documents if required by the Registrar or
Conversion Agent and (4) pay any transfer or similar tax, if required. Upon
conversion, no adjustment or payment will be made for interest or dividends, but
if any Noteholder surrenders a Convertible Note for conversion after the close
of business on the record date for the payment of an installment of interest and
Liquidated Damages, if any, and prior to the opening of business on the next
interest payment date, then, notwithstanding such conversion, the interest and
Liquidated Damages, if any, payable on such interest payment date will be paid
to the registered holder of such Convertible Note on such record date. In such
event, such Convertible Note, when surrendered for conversion, must be
accompanied by payment in funds acceptable to the Company of an amount equal to
the interest and Liquidated Damages, if any, payable on such interest payment
date on the portion so converted. The number of shares of Common Stock issuable
upon conversion of a

 

                                       -3-
<PAGE>   6
Convertible Note is determined by dividing the principal amount of the
Convertible Note converted by the Conversion Price in effect on the Conversion
Date. No fractional shares will be issued upon conversion but a cash adjustment
will be made for any fractional interest.

                  A Convertible Note in respect of which a holder has delivered
an "Option of Noteholder to Elect Purchase" form appearing below exercising the
option of such holder to require the Company to purchase such Convertible Note
may be converted only if the notice of exercise is withdrawn as provided above
and in accordance with the terms of the Indenture. The above description of
conversion of the Convertible Notes is qualified by reference to, and is subject
in its entirety by, the more complete description thereof contained in the
Indenture.

         11. Registration Rights. The holder of this Convertible Note is
entitled to the benefits of a Registration Agreement, dated as of January 15,
1997, between Company and the Initial Purchasers (the "Registration Agreement").
Pursuant to the Registration Agreement the Company has agreed for the benefit of
the holders of the Convertible Notes and the Common Stock issuable upon
conversion thereof that are, in either case, Registrable Securities, that (i) it
will, at its cost, within 75 days after the first closing of the sale of the
Convertible Notes (the "Closing"), file a shelf registration statement (the
"Shelf Registration Statement") with the Securities and Exchange Commission (the
"Commission") with respect to resales of the Convertible Notes and the Common
Stock issuable upon conversion thereof, (ii) the Company will use all reasonable
efforts to cause such Shelf Registration Statement to be declared effective
under the Securities Act as soon as practicable but in any event, within 105
days after the Closing and (iii) the Company will use all reasonable efforts to
keep such Shelf Registration Statement continuously effective under the
Securities Act until the earlier of (a) the third anniversary of the last date
of original issuance of the Convertible Notes, (b) the date on which the
Convertible Notes or the Common Stock issuable upon conversion thereof may be
sold by non-affiliates of the Company pursuant to paragraph (k) of Rule 144 (or
any successor provision) promulgated by the Commission under the Securities Act
and (c) the date as of which all the Convertible Notes or the Common Stock
issuable upon conversion thereof have been sold pursuant to such Shelf
Registration Statement. Any resale of the Convertible Notes or the Common Stock
issued upon conversion thereof pursuant to the Shelf Registration Statement must
be made in accordance with the terms provided in the Registration Agreement.
Pursuant to the Registration Agreement, the Company may suspend the use of the
prospectus which is a part of the Shelf Registration Statement for one period in
any three month period or three periods in any twelve month period under certain
circumstances (each, a "Deferral Period") and no deferral shall exceed 30 days.

                  If (i) the Shelf Registration Statement has not been filed on
or prior to the date seventy-five days following the Closing Date (as defined in
the Purchase Agreement), (ii) the Shelf Registration Statement has not been
declared effective under the Securities Act on or before the date one hundred
five days following the Closing Date, (iii) prior to the end of the Shelf
Registration Period (as defined in the Registration Agreement), the Commission
shall have issued a stop order suspending the effectiveness of the Shelf
Registration Statement or proceedings have been initiated with respect to the
Shelf Registration Statement under Section 8(d) or 8(e) of the Act, (iv) the
aggregate number of days in any one Deferral Period exceeds the periods
permitted pursuant to Section 2(c) of the Registration Agreement or (v) the
number of Deferral Periods exceeds the number

 

                                       -4-
<PAGE>   7
permitted pursuant to Section 2(c) of the Registration Agreement (each of the
events of a type described in any of the foregoing clauses (i) through (v) are
individually referred to herein as an "Event"; and the date seventy-five days
following the Closing Date in the case of clause (i), the date one hundred five
days following the Closing Date in the case of clause (ii), the date on which
the effectiveness of the Shelf Registration Statement has been suspended or
proceedings with respect to the Shelf Registration Statement under Section 8(d)
or 8(e) of the Act have been commenced in the case of clause (iii), the date on
which the duration of a Deferral Period exceeds the periods permitted by Section
2(c) of the Registration Agreement in the case of clause (iv), and the date of
the commencement of a Deferral Period that causes the limit on the number of
Deferral Periods under Section 2(c) of the Registration Agreement to be exceeded
in the case of clause (v), are referred to herein as an "Event Date"). Events
shall be deemed to continue until the date of the termination of such Event,
which shall be the following date with respect to the respective types of
Events: the date the Registration Statement is filed in the case of an Event of
the type described in clause (i), the date the Registration Statement is
declared effective under the Act in the case of an Event described in clause
(ii), the date that all stop orders suspending effectiveness of the Shelf
Registration Statement have been removed and the proceedings initiated with
respect to the Shelf Registration Statement under Section 8(d) or 8(e) of the
Act have terminated, as the case may be, in the case of Events of the types
described in clause (iii), termination of the Deferral Period which caused the
aggregate number of days in any one Deferral Period to exceed the number
permitted by Section 2(c) of the Registration Agreement to be exceeded in the
case of Events of the type described in clause (iv), and termination of the
Deferral Period the commencement of which caused the number of Deferral Periods
permitted by Section 2(c)(ii) of the Registration Agreement to be exceeded in
the case of Events of the type described in clause (v).

                  Accordingly, upon the occurrence of any Event and until such
time as there are no Events which have occurred and are continuing (a "Damages
Accrual Period"), commencing on the Event Date on which such Damages Accrual
Period began, the Company agrees to pay, as liquidated damages, and not as a
penalty, an additional amount (the "Liquidated Damages"): (A) to each holder of
the Convertible Notes, during such time as such holder is a Notice Holder (as
defined in the Registration Agreement), accruing at a rate equal to one-half of
one percent per annum (50 basis points) on (s) the aggregate principal amount of
the Convertible Notes held by such Notice Holder and (t) where such Convertible
Notes have been converted into shares of Common Stock, the aggregate principal
amount of the Convertible Notes that were converted into such shares and (B) if
the Damages Accrual Period continues for a period in excess of thirty days from
the Event Date, from and after the end of such thirty day period until such time
as there are no Events which have occurred and are continuing, to each holder of
the Convertible Notes (whether or not a Notice Holder), accruing at a rate equal
to one-half of one percent per annum (50 basis points) on (u) the aggregate
principal amount of the Convertible Notes held by such Notice Holder and (v)
where such Convertible Notes have been converted into shares of Common Stock,
the aggregate principal amount of the Convertible Notes that were converted into
such shares. Notwithstanding the fore going, no Liquidated Damages shall accrue
under clause (A) of the preceding sentence during any period for which
Liquidated Damages accrue under clause (B) of the preceding sentence or as to
the Convertible Notes or shares of Common Stock from and after the earlier of
(x) the date such Convertible Notes or shares of Common Stock are no longer
Registrable Securities (as defined in the

 

                                       -5-
<PAGE>   8
Registration Agreement), and (y) the expiration of the Shelf Registration
Period. In addition, Liquidated Damages will not accrue as to any Convertible
Note or Common Stock issuable upon conversion thereof represented by the
Unrestricted Global Note (as defined in the Indenture) provided that such
securities are not subject to limitations on transfer under U.S. federal or
state securities laws and there shall have been at least six months during which
the Shelf Registration Statement was effective and available for effecting
resales of the Convertible Notes and the Common Stock issuable upon conversion
thereof. The rate of accrual of the Liquidated Damages with respect to any
period shall not exceed the rate provided for in this paragraph notwithstanding
the occurrence of multiple concurrent Events. Liquidated Damages due on any of
the Convertible Notes or Common Stock into which they have been converted shall
be payable on each interest payment date occurring during the Damages Accrual
Period and on the interest payment date immediately following (or which would
have followed) the termination of such period, and shall be considered
additional interest for all purposes of the Convertible Notes and the Indenture.

         12. Denominations, Transfer, Exchange. The Convertible Notes are in
registered form, without coupons, in denominations of $1,000 and integral
multiples of $1,000. The transfer of Convertible Notes may be registered, and
Convertible Notes may be exchanged, as provided in the Indenture. The Registrar
may require a Noteholder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not exchange or register
the transfer of any Convertible Note or portion of a Convertible Note selected
for redemption (except the unredeemed portion of any Convertible Note being
redeemed in part). Also, it need not exchange or register the transfer of any
Convertible Note for a period of 15 days before a selection of Convertible Notes
to be redeemed.

         13. Persons Deemed Owners. Except as provided in paragraph 2 of this
Convertible Note, the registered Noteholder of a Convertible Note may be treated
as its owner for all purposes.

         14. Unclaimed Money. If money for the payment of principal, interest or
Liquidated Damages, if any, remains unclaimed for the shorter of two years after
such payment was due or a period ending 10 Business Days prior to the date such
funds would escheat to the State, the Trustee and the Paying Agent shall pay the
money back to the Company at its request. After that, Noteholders of Convertible
Notes entitled to the money must look to the Company for payment unless an
abandoned property law designates another person and all liability of the
Trustee and such Paying Agent with respect to such money shall cease.

         15. Defaults and Remedies. The Convertible Notes shall have the Events
of Default as set forth in Section 8.1 of the Indenture. Subject to certain
limitations in the Indenture, if an Event of Default occurs and is continuing,
the Trustee by notice to the Company or the Noteholders of at least 25% in
aggregate principal amount of the then outstanding Convertible Notes by notice
to the Company and the Trustee may declare all the Convertible Notes to be due
and payable immediately, except that in the case of an Event of Default arising
from certain events of bankruptcy or insolvency, all unpaid principal, interest
and Liquidated Damages, if any, accrued on the Convertible Notes shall become
due and payable immediately without further action or notice. Upon acceleration
as described in either of the preceding sentences, the subordination provisions
of the Indenture preclude

 

                                       -6-
<PAGE>   9
any payment being made to Noteholders for at least 5 days except as otherwise
provided in the Indenture and may preclude payment entirely.

                  The Noteholders of a majority in principal amount of the
Convertible Notes then outstanding by written notice to the Trustee may rescind
an acceleration and its consequences if the rescission would not conflict with
any judgment or decree and if all existing Events of Default have been cured or
waived except nonpayment of principal or interest that has become due solely
because of the acceleration. Noteholders may not enforce the Indenture or the
Convertible Notes except as provided in the Indenture. Subject to certain
limitations, Noteholders of a majority in principal amount of the then
outstanding Convertible Notes issued under the Indenture may direct the Trustee
in its exercise of any trust or power. The Company must furnish compliance
certificates to the Trustee annually. The above description of Events of Default
and remedies is qualified by reference to, and subject in its entirety by, the
more complete description thereof contained in the Indenture.

         16. Amendments, Supplements and Waivers. Subject to certain exceptions,
the Indenture or the Convertible Notes may be amended or supplemented with the
consent of the Noteholders of at least a majority in principal amount of the
then outstanding Convertible Notes (including consents obtained in connection
with a tender offer or exchange offer for Convertible Notes), and any existing
default may be waived with the consent of the Noteholders of a majority in
principal amount of the then outstanding Convertible Notes including consents
obtained in connection with a tender offer or exchange offer for Convertible
Notes. Without the consent of any Noteholder, the Indenture or the Convertible
Notes may be amended, among other things, to cure any ambiguity, defect or
inconsistency, to provide for assumption of the Company's obligations to
Noteholders, to make any change that does not adversely affect the rights of any
Noteholder, to qualify the Indenture under the TIA, and to comply with the
requirements of the SEC in order to maintain the qualification of the Indenture
under the TIA.

         17. Trustee Dealings with the Company. The Trustee, in its individual
or any other capacity, may become the owner or pledgee of Convertible Notes and
may otherwise deal with the Company or an Affiliate with the same rights it
would have if it were not Trustee, subject to certain limitations provided for
in the Indenture and in the TIA. Any Agent may do the same with like rights.

         18. No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Convertible Notes or the Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. Each Noteholder, by accepting a Convertible Note, waives and releases
all such liability. The waiver and release are part of the consideration for the
issue of the Convertible Notes.

         19. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL
GOVERN THE INDENTURE AND THE CONVERTIBLE NOTES WITHOUT REGARD TO CONFLICT OF LAW
PROVISIONS THEREOF.

         20. Authentication. The Convertible Notes shall not be valid until
authenticated by the manual signature of an authorized officer of the Trustee or
an authenticating agent.

 

                                       -7-
<PAGE>   10
         21. Abbreviations. Customary abbreviations may be used in the name of a
Noteholder or an assignee, such as: TEN COM (for tenants in common), TEN ENT
(for tenants by the entireties), JT TEN (for joint tenants with right of
survivorship and not as tenants in common), CUST (for Custodian), and U/G/M/A
(for Uniform Gifts to Minors Act).

         22. Definitions. Capitalized terms not defined in this Convertible Note
have the meaning given to them in the Indenture.

                  The Company will furnish to any Noteholder of the Convertible
Notes upon written request and without charge a copy of the Indenture and the
Registration Agreement. Request may be made to:

                  HMT Technology Corporation
                  1055 Page Avenue
                  Fremont, California 94538
                  Attention of:  Investor Relations

 

                                       -8-
<PAGE>   11
                   ASSIGNMENT FORM AND CERTIFICATE OF TRANSFER

         To assign this Convertible Note, fill in the form below:

         (I) or (we) assign and transfer this Convertible Note to

________________________________________________________________________________
               (Insert assignee's social security or tax I.D. no.)

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________
              (Print or type assignee's name, address and zip code)

and irrevocably appoint ___________________ agent to transfer this Convertible
Note on the books of the Company. The agent may substitute another to act for
him.

Your Signature:_______________________________________________________
               (Sign exactly as your name appears on the other side of this
                Convertible Note)

         Date:____________________

         Signature Guarantee: (1)_________________________________________


_______________
(1)     Signature must be guaranteed by a commercial bank, trust company or
        member firm of the New York Stock Exchange.

 
<PAGE>   12
                     OPTION OF NOTEHOLDER TO ELECT PURCHASE

         If you want to elect to have this Convertible Note or a portion thereof
repurchased by the Company pursuant to Section 3.8 or 4.7 of the Indenture,
check the box: \ \

         If the purchase is in part, indicate the portion (in denominations of
$1,000 or any integral multiple thereof) to be purchased: __________

   Your Signature:______________________________________________________
                  (Sign exactly as your name appears on the other side of this
                  Convertible Note)

         Date:___________________

         Signature Guarantee:(1)__________________________________________

_______________
(1)        Signature must be guaranteed by a commercial bank, trust
           company or member firm of the New York Stock Exchange.

 
<PAGE>   13
                               ELECTION TO CONVERT

To:  HMT Technology Corporation

         The undersigned owner of $________ in principal of HMT Technology
Corporation's 5 3/4% Convertible Subordinated Notes due 2004 (the "Convertible
Note") hereby irrevocably exercises the option to convert the Convertible Note,
or the portion below designated, into Common Stock of HMT Technology Corporation
in accordance with the terms of the Indenture referred to in the Convertible
Note, and directs that the shares issuable and deliverable upon conversion,
together with any check in payment for fractional shares, be issued in the name
of and delivered to the undersigned, unless a different name has been indicated
in the assignment below. If shares are to be issued in the name of a person
other than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto.

         Any Noteholder, upon the exercise of its conversion rights in
accordance with the terms of the Indenture and the Convertible Note, agrees to
be bound by the terms of the Registration Agreement relating to the Common Stock
issuable upon conversion of the Convertible Note.

Date:

                                     Amount of Convertible Note to be converted
                                     ($1,000 or integral multiples thereof);

                                     $______________________

                                     Signature (for conversion only)

                                     ________________________________________
                                     Please Print or Typewrite Name and Address,
                                     Including Zip Code, and Social Security or
                                     Other Identifying Number

                                     ________________________________________
                                     Signature Guarantee(1)

_____________________
(1)       Signature must be guaranteed by a commercial bank, trust
          company or member firm of the New York Stock Exchange.

 

<PAGE>   1
                                                                     EXHIBIT 5.1

April 2, 1997

HMT Technology Corporation
1055 Page Avenue
Fremont, California 94538

Ladies and Gentlemen:

You have requested our opinion with respect to certain matters in connection
with the filing by HMT Technology Corporation (the "Company") of a Registration
Statement on Form S-3 (the "Registration Statement") with the Securities and
Exchange Commission with respect to $230,000,000 aggregate principal amount of
the Company's 5 3/4% Convertible Subordinated Notes due 2004 (the "Convertible
Notes"), issued pursuant to the Indenture dated as of January 15, 1997 (the
"Indenture") between the Company and State Street Bank and Trust Company of
California, N.A., as trustee, and the shares of the Company's Common Stock,
$0.001 par value per share, into which the Convertible Notes are convertible
(the "Conversion Shares").

In connection with this opinion, we have examined the form of Convertible Notes,
the Indenture, the Registration Statement and related Prospectus, your Restated
Certificate of Incorporation, as amended, and Bylaws, as amended, and such other
documents, records, certificates, memoranda and other instruments as we deem
necessary as a basis for this opinion.  We have assumed the genuineness and
authenticity of all documents submitted to us as originals, the conformity to
originals of all documents submitted to us as copies thereof, the due execution,
delivery and binding effect of all documents where due execution and delivery
are a prerequisite to the effectiveness thereof, and that there are no extrinsic
agreements or understandings among the parties that would modify or interpret
the terms of the agreements or the respective rights or obligations of the
parties thereunder.  With respect to the opinion expressed in paragraph A, we
have assumed that the Convertible Notes have been duly authenticated and
delivered by the Trustee.

Our opinion is expressed only with respect to the federal laws of the United
States of America, the General Corporation Law of the State of Delaware and the
laws of the State of California.  We express no opinion as to whether the laws
of any particular jurisdiction other than those identified above are applicable
to the subject matter hereof.   With your permission, we have assumed that the
laws of the State of New York are the same in all material respects as the laws
of the State of California.

On the basis of the foregoing, and in reliance thereon, we are of the opinion
that:

                 A.        The Convertible Notes have been duly authorized,
executed and delivered and  are valid and binding obligations of the Company,
subject to applicable bankruptcy, insolvency, reorganization, arrangement,
moratorium or other similar laws affecting creditors' rights, and subject to
general equity principles and to limitations on availability of equitable
relief, including specific performance.

                 B.       The Conversion Shares, when issued and delivered upon
conversion of the Convertible Notes, in accordance with the Indenture, will be
validly issued, fully paid, and nonassessable.

This opinion is intended solely for your benefit and is not to be made
available to or be relied upon by any other person, firm, or entity without our
prior written consent.

We consent to the filing of this opinion as an exhibit to the Registration
Statement.

Very truly yours,

COOLEY GODWARD LLP



By:      /s/ James C. Kitch                        
    --------------------------------
         James C. Kitch

<PAGE>   1
                                                                    EXHIBIT 12.1


               COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

<TABLE>
<CAPTION>
                                                               Nine Months Ended
                                                                  December 31,       
                                                              --------------------
                                                                                      Fiscal
 (Dollars in thousands)                                        1995         1996       1996    
                                                              -------     --------    -------
 <S>                                                          <C>         <C>         <C>
 Earnings Before Taxes                                        $29,530     $68,381     $50,096

 Total Fixed Charges                                           $5,980      $5,688      $9,465

 Interest Capitalized                                            $106      $1,316        $253

 Ratio of Earnings to Fixed Charges                               5.9        12.8         6.3
                                                              =======     =======     =======
</TABLE>


The ratio of earnings to fixed charges is computed by dividing (x) pretax
income from continuing operations plus fixed charges less interest capitalized
during the period, by (y) fixed charges.  Fixed charges consist of interest on
all indebtedness, amortization of debt expense and discount or premium relating
to indebtedness.  Earnings were inadequate to cover fixed charges for all
periods prior to fiscal 1996.  The deficiencies of earnings were approximately
$21.1 million, $17.1 million, $17.3 million and $8.9 million, for fiscal 1992,
1993, 1994 and 1995, respectively.

<PAGE>   1
                                                                    EXHIBIT 23.1

                       CONSENT OF INDEPENDENT ACCOUNTANTS

         We consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated April 25, 1996 except for Note 11 as
to which the date is May 6, 1996, on our audits of the consolidated financial
statements of HMT Technology Corporation and its subsidiary, as of March 31,
1995 and 1996 and for each of the three years in the period ended March 31,
1996.  We also consent to the reference to our firm under the caption
"Experts."


                                        /s/ Coopers & Lybrand L.L.P.

San Jose, California
April 1, 1997

<PAGE>   1
                                                                    EXHIBIT 25.1
- --------------------------------------------------------------------------------


                                    FORM T-1

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

      STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A
                    CORPORATION DESIGNATED TO ACT AS TRUSTEE

CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)  [X]

               State Street Bank and Trust Company of California,
                              National Association
- --------------------------------------------------------------------------------
              (Exact name of trustee as specified in its charter)


United States                                                         06-1143380
- --------------------------------------------------------------------------------
(Jurisdiction of Incorporation)                (IRS Employer Identification No.)


725 South Figueroa Street, Suite 3100, Los Angeles, California         90017
- --------------------------------------------------------------------------------
(Address of principal executive offices)                             (Zip Code)


            State Street Bank and Trust Company of California, N.A.
     725 South Figueroa Street, Suite 3100, Los Angeles, California, 90017
                                  213-362-7338
- --------------------------------------------------------------------------------
           (Name, address and telephone number of agent for service)


                           HMT Technology Corporation
- --------------------------------------------------------------------------------
              (Exact Name of Obligor as specified in its charter)


Delaware                                                              94-3084354
- --------------------------------------------------------------------------------
(Jurisdiction of Incorporation)                (IRS Employer Identification No.)


1055 Page Avenue, Fremont, California                                      94538
- --------------------------------------------------------------------------------
(Address of principal executive offices                               (Zip code)


                 5 3/4% Convertible Subordinated Note due 2004
- --------------------------------------------------------------------------------
                      (Title of the indenture securities)


- --------------------------------------------------------------------------------
<PAGE>   2
Item 1.  General Information.

(a)      The trustee is subject to the supervision of the Comptroller of the
         Currency, Western District Office, 50 Fremont Street, Suite 3900, San
         Francisco, CA 94105-2292.

(b)      The trustee is authorized to exercise corporate trust powers.


Item 2.  Affiliations with the obligor.

The trustee is not affiliated with the obligor.

No responses are included for Items 3-15 of this form T-1 because the obligor
is not in default on securities issued under indentures under which State
Street Bank and Trust Company of California, N.A. is trustee.


Item 16.         List of Exhibits

1.       Articles of Association of State Street Bank and Trust Company of
         California, National Association.*

2.       Certificate of Corporate Existence (with fiduciary powers) from the
         Comptroller of the Currency, Administrator of National Banks.*

3.       Authorization of the Trustee to exercise fiduciary powers (included in
         Exhibits 1 and 2; no separate instrument).

4.       By-laws of State Street Bank and Trust Company of California, National
         Association.*

5.       Consent of State Street Bank and Trust Company of California, National
         Association required by Section 321(b) of the Act.*

6.       Consolidated Report of Income for the period January 1, 1996 -
         September 30, 1996, Federal Financial Institutions Examination
         Council, Consolidated Reports of Condition and Income for A Bank With
         Domestic Offices Only and Total Assets of Less Than $100 Million -
         FFIEC 034.*

*        The indicated documents have been filed as exhibits with corresponding
         exhibit numbers to the Form T-1 of Oasis Residential, Inc., filed
         pursuant to Section 305(b)(2) of the Act, filed with the Securities
         and Exchange Commission on November 18, 1996 (Registration No.
         033-90488), and are incorporated herein by reference.
<PAGE>   3
                                   SIGNATURE

         Pursuant to the requirements of the Trust Indenture Act of 1939 the
trustee, State Street Bank and Trust Company of California, National
Association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of Los
Angeles, and State of California, on the 2nd day of April, 1997.

                                        STATE STREET BANK AND TRUST COMPANY OF
                                        CALIFORNIA, NATIONAL ASSOCIATION


                                        By:  /s/ Jeanie Mar
                                             ---------------------------------
                                             Jeanie Mar
                                             Assistant Vice President


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