<PAGE>
As filed with the Securities and Exchange Commission on May 17, 1995
Registration No. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM S-3
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
-----------------
APPLIED MAGNETICS CORPORATION
(Exact name of Registrant as specified in its charter)
95-190506
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
-----------------
75 Robin Hill Road
Goleta, California 93117-3108
805 683 5353
(Name, address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
-----------------
RAYMOND P. LE BLANC, ESQ.
Vice President, Secretary and General Counsel
Applied Magnetics Corporation
75 Robin Hill Road
Goleta, California 93117-3108
805 683 5353
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-----------------
With a Copy to:
STEPHEN E. NEWTON, ESQ.
KINDEL & ANDERSON
555 SOUTH FLOWER STREET
TWENTY-NINTH FLOOR
LOS ANGELES, CALIFORNIA 90071
(213) 680-2222
-----------------
Approximate date of commencement of proposed sale to the public:
From time to time at the discretion of selling stockholders.
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]
-----------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================
Proposed Proposed
maximum maximum
Title of each class of Amount to be offering price aggregate Amount of
securities to be registered registered per unit (1) offering price (1) registration fee
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCK 250,000 $ 3.94 $ 985,000 $ 340
===================================================================================================================
(1) Estimated solely for purposes of determining the registration fee based on the average of the high and
low prices of the Common Stock on the New York Stock Exchange on May 10, 1995.
</TABLE>
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>
APPLIED MAGNETICS CORPORATION
Common Stock
________________
The shares of Common Stock of Applied Magnetics Corporation (the
"Company") which may be offered hereby by certain stockholders of the Company
(the "Selling Stockholders") named herein under the heading "Selling
Stockholders" will be sold to the Selling Stockholders on the exercise of
options to purchase shares of the Company's Common Stock. None of the proceeds
of any sales by the Selling Stockholders will be received by the Company. It is
anticipated that the shares will be sold through the usual brokerage channels on
the New York Stock Exchange, or otherwise, at prevailing market prices and
subject to the usual and customary commissions.
The Common Stock is traded on the New York Stock Exchange under the
symbol APM. The closing price of the Company's Common Stock on May ___, 1995
was $_______________.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A
CRIMINAL OFFENSE.
_____________________
The date of this Prospectus is _________________, 1995
<PAGE>
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 periodic reports, proxy statements and other information with
the Securities and Exchange Commission (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, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices
at 7 World Trade Center, Suite 1300, New York, New York 10048; and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
can be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. In addition, copies
of such reports, proxy statements and other information concerning the Company
may also be inspected and copied at the library of the New York Stock Exchange,
20 Broad Street, New York, New York 10007.
The Company has filed with the Commission a Registration Statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Common Stock being offered pursuant to
this Prospectus. This Prospectus does not contain all the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is hereby made to the Registration Statement and the
documents incorporated herein by reference which may be examined without charge
at the public reference facilities maintained by the Commission at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549. Copies thereof may be obtained
from the Commission upon payment of the prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No. 1-6635) pursuant
to the Exchange Act are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K, as amended, for the fiscal year
ended September 30, 1994;
2. The Company's Quarterly Report on Form 10-Q for the quarter ended December
31, 1995;
3. The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1995; and
4. All other documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Common Stock.
Any statement contained in a document incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus and the
Registration Statement of which it is a part to the extent that a statement
contained herein or in any other subsequently filed document which also is
incorporated herein modifies or replaces such statement. Any statement so
modified or superseded shall not be deemed, in its unmodified form, to
constitute a part of this Prospectus or such Registration Statement.
The Company will provide, without charge, upon written or oral request from
any person to whom a copy of the Prospectus is delivered, a copy of any of the
documents incorporated by reference in this Prospectus, not including exhibits
to such documents. Such requests should be directed to Applied Magnetics
Corporation, 75 Robin Hill Road, Goleta, California 93117-3108, Attention:
Secretary, telephone: (805) 683-5353.
_______________________
2
<PAGE>
THE COMPANY
The Company is a leading independent supplier of magnetic recording heads and
of head stack assemblies for rigid disk drives. The Company supplies advanced
inductive thin-film disk head products, magnetoresistive ("MR") disk head
products and ferrite disk head products, including ferrite metal-in-gap ("MIG")
and double-MIG disk heads and head stack assemblies.
The Company was incorporated in California in 1957 and reincorporated in
Delaware in 1987. The Company's principal offices are located at 75 Robin Hill
Road, Goleta, California 93117-3108, telephone number (805) 683-5353.
RISK FACTORS
In addition to the other information contained in the Prospectus and the
documents incorporated herein by reference, investors should consider the
following factors before purchasing the Common Stock being offered by this
Prospectus.
The Company has experienced losses during the years ended September 30, 1990,
1991, 1992, 1993 and 1994. During these years, the Company lost market share as
its competitors responded more rapidly to changes in the market and were able to
deliver products in volume more consistently. Operating margins fell due to
several factors, including the decline in relatively high margin ferrite disk
head shipments, difficulties in thin-film production, the combination of high
fixed costs and low production and shipment volumes for thin-film operations,
substantial research and development expenditures on thin-film technology,
restructuring charges of $12 million, $18 million and $49 million in fiscal
1991, 1992 and 1993, respectively, and substantial bad debt reserves taken
following customer bankruptcies. While the Company has taken steps to correct
these problems, there is no assurance that these problems will not continue in
the future, and operating losses have continued in the first half of fiscal
1995. In August, 1994, the Company engaged the consulting firm of Grisanti,
Galef & Goldress, Inc. ("GG&G") to provide crisis management and turnaround
assistance and advice to the Company. Mr. Craig D. Crisman of GG&G, who has
considerable experience in turnaround engagements, was appointed as the
Company's Chief Executive Officer. Significant cost reductions have been
implemented, including reductions in employment, curtailment of capital
expenditures, consolidations of manufacturing activities, production and other
resources and sales of excess properties and assets. The implementation of
aggressive cash management practices and the Company's sale of its tape head
business unit to Seagate in December, 1994, have, together with other cost
reductions and control practices, improved the Company's cash and working
capital resources. The Company has also implemented additional manufacturing and
process control procedures in an effort to resolve its thin-film production
problems. There is no assurance, however, that these efforts will be successful
and that management's plan to return the Company to profitability will be
realized.
TRANSITION TO THIN-FILM FROM FERRITE DISK HEAD PRODUCTS; THIN-FILM PRODUCTION
PROBLEMS
Historically, the Company was a leading independent supplier of ferrite disk
heads, which accounted for a majority of net sales as recently as the year ended
September 30, 1993. The market for ferrite heads is declining rapidly, both
absolutely and as a proportion of the Company's business, as the disk drive
industry moves to smaller, higher capacity, higher performance drives and the
availability of higher performance thin-film heads increases. Ferrite disk
heads accounted for approximately 16% of net sales for the quarter ended
December 31, 1994, compared to approximately 34% and 49%, respectively, for the
quarters ended September 30, 1994 and December 31, 1993. Ferrite disk head
sales dropped from $34,721,000 in the December quarter of 1993 to $8,984,000 in
the December quarter of 1994. As a result of the market shift away from ferrite
disk heads, the Company has focused its long range strategies on thin-film disk
head products. Although the Company expects to continue to produce ferrite disk
head products, as long as there is demand for sufficient volume to be
profitable, it is concentrating its financial and management resources on
improving and increasing production of inductive thin-film disk heads and on the
development and commercialization of MR disk heads. The Company has
historically experienced manufacturing problems and production yield and quality
issues in achieving volume production of thin-film disk heads, and its thin-film
operations have not been profitable to date. The Company reorganized its thin-
film operations and added key management and technical personnel in 1992 and
reorganized again in 1994 in an effort to resolve its production problems. The
production yield, quality and manufacturing difficulties experienced by the
Company during fiscal 1994 included problems relating to its ability to produce
wafers for thin-film disk heads with acceptable production yields from the
Company's six-inch line. The Company has implemented additional manufacturing
and process control procedures and other steps which resulted in improved yields
in its wafer fabrication activities, including the six-inch line, during the
last quarter of fiscal 1994, and continuing into the first quarter of 1995.
There is no assurance, however, that efforts to maintain production yields at
acceptable levels will
3
<PAGE>
not be adversely affected by similar or other difficulties that may arise with
respect to new products, new product designs or changes in manufacturing
processes which would result in lower than acceptable production yields. If the
Company is unable to increase inductive thin-film production, maintain quality
and compete profitably in the thin-film disk head market, there would be a
significant continuing adverse effect on the Company's future operating results.
ABILITY TO ACHIEVE DESIGN-IN POSITIONS AND RESPOND TO CUSTOMER DEMANDS
Disk drive manufacturers develop a variety of different drive programs to meet
different design, performance and cost requirements. Magnetic recording head
suppliers, such as the Company, seek to have their heads "designed-in" for a
particular drive program and to become qualified as a primary supplier for the
new drive. Achieving such a "design-in" position is usually a significant
competitive advantage relative to suppliers who are not initially qualified on
the new drive program. The development and commencement of production of disk
head products for a new drive program involves major expenditures for product
design, production engineering and capital equipment. Often, certain production
processes must also be adjusted to accommodate the unique specifications of the
new design. The disk head industry is intensely competitive, and if the
Company's production problems and related financial difficulties, including
operating losses and limitations on capital resources, continue or recur, the
Company's ability to achieve design-in positions on future, new disk head
products and its ability, once having achieved design-in status on such
products, to execute on production programs could be adversely affected.
Accordingly, there are no assurances that the Company will be able to continue
these design-in successes. Further, its financial difficulties, limited
resources and aggressive cash management/cost reduction activities may limit or
delay the Company's ability to direct sufficient technical, research or other
resources, on a timely basis, to new products or new generations of existing
products in response to customer demands. If the Company is unable to achieve
future design-in positions on major disk drive programs or respond adequately to
customer demands, its competitive position and future years' operations will be
materially and adversely affected.
RAPID TECHNOLOGICAL CHANGES; SHORT PRODUCT LIFE CYCLES
The magnetic recording head industry is characterized by rapidly changing
technology, short product life cycles and price erosion. The demand for
smaller, lighter products with greater data storage capacity requires disk drive
and disk head manufacturers to continue to build greater performance into
smaller products. To compete in this environment, the Company must work closely
with its customers to anticipate technological changes and product lives,
develop new products and production technologies and deliver new products in
volumes consistent with customer demand. In recent years, the Company's results
of operations and market share have been adversely affected because the Company
did not adapt quickly enough to changing market conditions and was unable to
resolve its thin-film production problems so as to deliver products in
sufficient volume. If the Company is unable to adapt quickly enough to future
changes, its operating results will continue to be adversely affected and
management's plans to return the Company to profitability may be unrealized.
The Company believes that as the trend toward smaller drives with higher
capacity and performance continues, there will be significant demand for MR disk
heads which offer performance advantages in small form factor disk drives. The
Company is concentrating substantial resources on MR development and is
currently delivering prototype volumes of MR disk heads. There is no assurance,
however, that the Company will not experience production problems similar to
those experienced with respect to volume production of thin-film disk heads. The
Company's operating results could be adversely affected, however, if a market
does not develop or if the Company cannot develop the ability on a timely basis
to produce MR disk heads in volume on a cost-effective basis.
CAPITAL NEEDS; RELIANCE ON SHORT-TERM BORROWING
The magnetic recording head industry is capital intensive and requires
significant expenditures for research and development to develop and exploit
technological improvements and new technologies. The Company believes that, in
order to achieve its objectives, it will need significant additional resources
over the next several years for capital expenditures, working capital and
research and development. In fiscal 1995, the Company plans to spend
approximately $49 million on capital expenditures, primarily to improve thin-
film production processes, expand thin-film production capacity and continue
development of MR technologies. The Company has implemented an operating and
cash flow management plan intended to provide sufficient cash flow from
operations to meet its operating and capital expenditure requirements. There is
no assurance, however, that the management plan will produce funds sufficient
for fiscal 1995 needs, and in any event, the Company expects that additional
sources of capital will be needed to meet requirements in future years. There
is no assurance that such additional funds will be available to the Company, and
the Company will have greater difficulty obtaining capital from external sources
if it is unable to achieve management's goal to return the Company to
profitability. If the Company is unable to obtain such capital, it would need
to curtail its capital equipment, research and development and working capital
4
<PAGE>
expenditures which could adversely affect the Company's future years' operations
and competitive position. At March 31, 1995, the Company had outstanding
approximately $46.8 million of short-term borrowings in a floating rate demand
loan made to the Company's Malaysian subsidiary by a bank in Malaysia. The
Company has substantial manufacturing operations in this country. In May 1995,
the Malaysian subsidiary accepted an offer from the bank to continue the credit
facility. The facility, as proposed, is secured by the subsidiary's real estate
and is subject to certain covenants which preclude the subsidiary from granting
liens and security interests in other assets. While the Company has no reason
to believe that the bank will not continue to make this credit available in the
future, if the loan were called it would produce a serious liquidity shortage
and result in breach of covenants in other borrowing facilities maintained by
the Company. The Company has also arranged a $35 million revolving credit
facility with CIT Group/Business Credit, Inc. under which it had drawn $10
million at March 31, 1995. The balance available for additional borrowings
under the credit facility, based on eligible trade accounts receivable, was
approximately $1.0 million as of March 31, 1995.
In March 1995, the Company obtained an extension until May 31. 1995, of the
maturity date of a $10.0 million revolving credit facility from a commercial
bank. This facility is secured by a letter of credit carried for the account of
Hitachi Metals, Ltd. ("HML"). The Company's obligation to reimburse HML for
any drawdown against the letter of credit is secured by deeds of trust on the
Company's real property in Santa Barbara County, California. The Company, the
commercial bank and HML have agreed in principle to extend the maturity dates of
the credit facility and HML's letter of credit for one year with the Company's
reimbursement obligation to be secured by a security interest and lien in
certain machinery and equipment in lieu of the deeds of trust on the real
property. This arrangement is subject to the preparation and execution of
definitive agreements which the Company expects to be concluded by May 31, 1995.
There is no assurance that the Company will be able to conclude the definitive
agreements in a timely manner or to otherwise obtain an acceptable arrangement
for the extension of the maturity date of the bank credit facility. In the
event the Company is unable to do so, there would be a material adverse affect
in the Company's near-term liquidity and working capital.
CYCLICAL PRODUCT DEMAND; UNCERTAIN LONG-TERM CAPACITY REQUIREMENTS
The disk drive industry is cyclical and has been characterized by periods of
intense product demand requiring high production levels followed by periods of
oversupply, order cancellations, pricing pressure and reduced production levels.
During periods of high demand, the Company has expanded production facilities
but at times has been unable to expand facilities and hire and train production
personnel rapidly enough to meet the demand for its products. Conversely, in
periods of lower demand, the Company has had excess production capacity and has
experienced margin declines. In recent years, both the Company and its major
competitors have expanded their production capacity, particularly for thin-film
products, and the Company intends to expand its capacity further in 1995. There
is no assurance that market demand will continue to be adequate to absorb this
expanded capacity. The Company's operating results would be adversely affected
during periods when production capacity is under-utilized and capacity exceeds
demand and the Company is unable to increase sales to cover fixed costs.
THIN-FILM PROCESS COMPLEXITY
Thin-film disk heads are produced in a complex manufacturing process involving
numerous steps, each of which is critical to high volume production at
acceptable yields and costs. The high performance characteristics of the
Company's thin-film heads require extremely fine tolerances and a controlled
manufacturing environment. Minor deviations in the wafer fabrication or
machining process or in the composition of raw materials can cause significant
yield loss and could result in the suspension of production. During the course
of the development of its thin-film manufacturing process, the Company
experienced difficulty in achieving volume production at acceptable yields. Due
to the number of steps and complexity involved in the thin-film manufacturing
process, technical and processing problems which may occur early in the
production process, but which may not be discovered until the later stages of
production, can result in a significant increase in the costs associated with
these production problems. Increasingly shortened product life cycles, which
require the Company to bring new products into production more rapidly, increase
the problems associated with process complexity. The Company believes that
manufacturing processes for MR products under development will be more complex
than for inductive thin-film products. The Company's future success will
depend, among other things, on its ability to continue to improve its yields of
thin-film products. There is no assurance that the Company will be able to
develop and produce new thin-film products in volume at commercially acceptable
yields.
FLUCTUATIONS IN OPERATING RESULTS
The Company's operating results have fluctuated and may continue to fluctuate
from quarter to quarter and year to year. Operating results may be adversely
affected by a variety of factors such as significant variations in product
yields, changes in product mix, increased production and engineering costs
associated with initial production for new customer programs, increases in cost
or limitations on availability of materials, labor shortages, excess or
inadequate production capacity and decreases in demand or selling prices.
Furthermore, the Company's sales are generally made pursuant to individual
purchase orders and production is scheduled and customer-specific materials are
ordered on the basis of such purchase orders. The Company has experienced
cancellation and rescheduling of orders or reductions in quantities as customer
requirements change. As a result, its backlog may not be a reliable indicator
of future sales. Even though the Company may in some cases be entitled to
adjust prices or recover certain costs, cancellation, rescheduling and quantity
reductions may nevertheless result in inventory losses, underutilization of
production capacity and writedowns of tooling and equipment.
COMPETITION; LIMITED NUMBER OF CUSTOMERS
The disk head industry is intensely competitive and largely dependent on sales
to a limited number of major disk drive manufacturers and systems companies. The
Company's ability to obtain new orders from customers depends
5
<PAGE>
on its ability to anticipate technological changes, develop products to meet
individualized customer requirements and timely deliver products that meet
customer specifications at competitive prices. In addition, the disk drive
industry is intensely competitive and disk drive manufacturers may quickly lose
market share as a result of technological innovations of their competitors or
various other factors. In recent years several disk drive manufacturers have
experienced bankruptcy. A reduction in orders from or the loss of a customer,
which could occur for any of a variety of reasons, could have a material adverse
effect on the Company's operations. The Company has depended and expects to
continue to depend upon a limited number of customers for most of its sales.
The Company's top four customers accounted for 86% of the Company's net sales in
fiscal 1994, and sales to Connor Peripherals, Inc. represented approximately 53%
of net sales. Maxtor, which accounted for approximately 13% of the Company's
fiscal 1994 net sales, has recently announced continuing operating losses and
significant actions to reorganize and consolidate its operations. In addition,
Quantum, which accounted for approximately 10% of the Company's fiscal 1994 net
sales, has acquired a controlling interest in a supplier that is engaged,
primarily, in the development, production and sale of MR disk heads. These or
other similar developments could restrict or limit the development of major, new
disk drive programs for which the Company anticipates supplying disk heads or
prevent Maxtor or other customers from completing existing, major disk drive
programs for which the Company supplies disk head. Similar events could occur
with respect to one or more of the Company's other customers. If the Company is
unable to increase its sales to other customers, there could be a material
adverse effect on the Company's operating results.
DEPENDENCE ON FOREIGN OPERATIONS
The Company conducts substantially all of its production assembly and test
operations at its facilities in Korea and Malaysia. In addition, the Company
has contractual relationships with unaffiliated parties who conduct
manufacturing and assembly operations on a contract-labor basis for the Company
in Malaysia and Korea. The Company's operations in Korea have, from time to
time in recent years, been affected by labor disruptions and slow downs. In
addition to risks of labor disruption, civil unrest and political instability,
the Company's foreign operations subject it to risks associated with obtaining
governmental permits and approvals, currency exchange fluctuations, currency
restrictions, trade restrictions and changes in tariff and freight rates.
DEPENDENCE ON KEY PERSONNEL
The success of the Company's thin-film and MR operations and development
programs largely depends on a limited number of key management and technical
personnel as well as on its continued ability to attract and retain skilled
engineering and technical personnel. The Company does not maintain key man life
insurance on the lives of key employees. Competition for qualified technical
and engineering personnel is intense and the Company's future will depend, in
large part, on its ability to continue to attract, retain, train and motivate
highly skilled and dedicated employees. Certain employees of the Company are
subject to the terms of confidentiality agreements with respect to proprietary
information of their former employers. The failure of these employees to comply
with the terms of their agreements could result in assertion of claims against
the Company and such employees which, if successful, might restrict their role
with the Company and could have a material adverse effect on the Company's
business.
SOURCES OF SUPPLY
The Company relies on multiple, independent suppliers for substrates,
photoresist, wire and other materials used in the manufacture of thin-film disk
heads and ferrite sliders, wire and other materials used in the manufacture of
ferrite disk heads. Although the Company has not experienced significant
limitations on the availability of these materials, shortages could occur in the
future. These developments could disrupt the Company's production volume and
have an adverse effect on the Company. While the Company itself manufactures
approximately one-half of its total requirements for suspensions used in both
ferrite and thin-film disk head products, it purchases most of its remaining
requirements for these components from Hutchinson Technology. Except for
standard purchase orders issued by it from time to time for the procurement of
these suspensions and customary agreements relating to proprietary and
confidential information, the Company does not have any contractual relationship
with Hutchinson. If the Company experienced quality or production problems with
its internal suspension manufacturing resources, its dependence on outside
suppliers, such as Hutchinson, for these components would be significantly
increased. Further, such circumstances could result in limited availability and
increased prices with respect to these materials. In addition, if the Company
for any reason was unable to obtain adequate quantities of suspensions from
Hutchinson, the Company's operating results would be adversely affected.
6
<PAGE>
ENVIRONMENTAL REGULATIONS AND WATER SUPPLY RESTRICTIONS
The Company uses certain hazardous chemicals in its manufacturing process and
is subject to a variety of environmental and land use regulations relating to
the use, storage, discharge and disposal of such chemicals and the conduct of
its manufacturing operations. California recently enacted legislation generally
referred to as "permit by rule." This legislation requires permits for any
treatment or transportation of materials considered hazardous wastes. Although
the Company has received the necessary permits, a failure by the Company to
comply with present or future regulations could subject it to liability or
result in production suspension or delay. In addition, environmental and land
use regulations could restrict the Company's ability to expand its present
production facilities or establish additional facilities in other locations, or
could require the Company to acquire costly equipment or to incur other
significant expenses to comply with environmental regulations or to clean up
prior discharges. The Company, which is subject to water use restrictions, uses
a significant amount of water in its manufacturing process. Although to date
the Company has been able to obtain sufficient water supplies without
significantly increased costs, stricter water use restrictions may be mandated
and additional expenditures for water reclamation and conservation may be
required. Any further restrictions on water use could require the Company to
reduce production and materially adversely affect the Company's operating
results.
VOLATILITY OF STOCK PRICE
The trading price of the Company's Common Stock has fluctuated widely in
response to quarter-to-quarter operating results, industry conditions, awards of
orders to the Company or its competitors, new product or product development
announcements by the Company or its competitors, general market and economic
conditions and other events or factors. The volatility of the stock markets in
recent years has caused wide fluctuations in trading prices of stocks of high
technology companies independent of their individual operating results. The
market value of the Company's Common Stock at any given time may be adversely
affected by factors independent of the Company's operating results.
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<PAGE>
STOCK OPTIONS
In August 1991, the Company engaged GG&G, a consulting firm specializing in
the turnaround of troubled businesses, to provide crisis management and advise
the Company in developing and implementing a turnaround plan. Craig D. Crisman
of GG&G has been appointed as President, Chief Executive Officer and Chief
Financial Officer of the Company. Other representatives of GG&G provide
services to the Company in various capacities.
In connection with GG&G's engagement, the Company agreed on September 29, 1994
to grant GG&G an option to purchase 250,000 shares of the Company's Common
Stock. GG&G has assigned the option to an affiliated partnership GG&G Equity
Partners ("GG&G Partners"). As permitted by the terms of the option, GG&G
Partners distributed interests in the option ("Partial Options") to 11 of its
partners or trusts for their benefit (the "Selling Stockholders").
The Partial Options are exercisable at any time until the earlier of five
years from the date of grant, the date of any termination by GG&G of its
consulting agreement with the Company or 30 days after any termination of such
consulting agreement by the Company if within such 30 days the Board of
Directors of the Company determines in good faith that the objectives set forth
in the consulting agreement have not been achieved. The exercise price of the
options is $4.125 per share, the fair market value of the Common Stock on the
date of the approval of the grant of the option by the Company's Board of
Directors. The Partial Options are not assignable and may be exercised only
by the holder or, in the event of the holder's death, by a person who acquired
the right to exercise by bequest or inheritance.
SELLING STOCKHOLDERS
This Prospectus may be used in connection with the sale of certain shares of
the Company's Common Stock by the Selling Stockholders. Such shares may be
acquired by the Selling Stockholders on the exercise of the Partial Options to
purchase shares of the Company's Common Stock granted in connection with the
engagement by the Company of GG&G. The following table provides information as
to the shares of Common Stock owned beneficially by the Selling Stockholders as
of May 12, 1995, the number of shares to be sold by the Selling Stockholders and
the number of shares which will be owned by Selling Stockholders after the
offering.
<TABLE>
<CAPTION>
Number Number
of of
Name and Shares Shares Number of Shares
Relationship Owned Before Shares to to be Owned After
to the Company the Offering (1) be Sold (2) the Offering (2)
- --------------------------------------- ---------------- ----------- -----------------
<S> <C> <C> <C>
Martin Batt-Keough MP 5,357 5,357 0
Craig D. Crisman, President and Chief 119,643 119,643 0
Executive Officer of the Company
Marvin A. Davis Inc. Defined Benefit 5,357 5,357 0
Pension Fund
American Consolidated Resources, Inc. 42,858 42,858 0
Retirement Trust
The J. Goldress Revocable Trust 37,500 37,500 0
Lynda Dawson 12,500 12,500 0
Lee N. Katz Profit Sharing Trust 5,357 5,357 0
Carole O'Connor 5,357 5,357 0
Richard J. Puricelli 5,357 5,357 0
Richard D. Saunders - IRA 5,357 5,357 0
W. Gary Suttle 5,357 5,357 0
-------
Total 250,000
=======
- ---------------------------
</TABLE>
(1) Consists of shares subject to the Partial Options and assumes the exercise
in full of all of the Partial Options.
(2) Assumes the sale of all shares purchased on the exercise of the Partial
Options.
8
<PAGE>
PLAN OF DISTRIBUTION
Shares acquired on the exercise of Partial Options may be offered and sold by
the Selling Stockholders from time to time and in such amounts as the Selling
Stockholders determine. It is anticipated that the shares will be resold to the
public through the usual brokerage channels on the New York Stock Exchange, or
otherwise, at prevailing market prices and subject to the usual and customary
commissions.
LEGAL MATTERS
The validity of the shares of Common Stock will be passed upon for the
Company by Raymond P. Le Blanc, Vice President, Secretary and General Counsel to
the Company. As of April 30, 1995, Mr. Le Blanc owned 23,133 shares of the
Company's Common Stock and held options to purchase 73,817 additional Shares.
EXPERTS
The financial statements and schedules incorporated by reference in this
Prospectus and elsewhere in the Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
INDEMNIFICATION
Section 145 of the Delaware General Corporation Law permits indemnification of
directors, officers and agents in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Act"). Article Seventh of the Bylaws of the Company requires
indemnification to the full extent authorized by the General Corporation Law of
Delaware. The Company also maintains insurance policies which insure its
officers and directors against certain liabilities.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and persons controlling the Company pursuant to
the foregoing provisions, the Company has been informed that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is therefore unenforceable.
9
<PAGE>
==============================================================================
No person is authorized to give any information or to make any representations
other than contained in this Prospectus in connection with the offer hereby
made, and, if given or made, such information or representations must not be
relied upon as having been authorized. This Prospectus does not constitute an
offer to buy any securities other than the registered securities to which it
relates or an offer to buy such securities in any jurisdiction to any person to
whom it is unlawful to make such offer or solicitation in such jurisdiction.
Neither the delivery of this Prospectus nor any sale made hereunder shall, under
any circumstances, create any implication that there has been no change in the
affairs of the Company since the date hereof or that the information herein is
correct as of any time subsequent to its date.
===============================================================================
APPLIED MAGNETICS CORPORATION
COMMON STOCK
----------
PROSPECTUS
----------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Other Expenses Of Issuance And Distribution
To be Paid
by
Registrant*
-------------
Registration fee ......................... $ 340
Listing fee .............................. **
Printing and engraving expenses .......... **
Accounting fees and expenses ............. **
Legal fees and expenses .................. **
Miscellaneous **
--------------
Total $ **
==============
- ------------------
* Estimated
** To be provided by amendment
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits indemnification of
directors, officers and agents in terms sufficiently broad to permit such
indemnification under certain circumstance for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended. Article Seventh of the Bylaws requires indemnification to the full
extent authorized by the General Corporation Law of Delaware. Registrant also
maintains insurance policies which insure its officers and directors against
certain liabilities.
Insofar as indemnification by Registrant of liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the 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 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 Act and
will be governed by the final adjudication of such issue.
ITEM 16. EXHIBITS
4.1 Special Nonstatutory Option Agreement dated as of December 21, 1994
between Registrant and GG&G Equity Partners
5.1 Opinion of Raymond P. Le Blanc, Esq. (to be supplied by amendment)
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Raymond P. Le Blanc, Esq. (included in Exhibit 5.1)
24.1 Power of Attorney of certain officers and directors (included on page
II-3)
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of 1933
(the "Act"), each filing of the Registration's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(2) For purposes of determining any liability under the 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 Act shall be
deemed to be a part of this Registration Statement as of the time it was
declared effective.
(3) For the purposes of determining any liability under the Act, each post-
effective amendment that contains a
II-1
<PAGE>
Prospectus shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at the time
shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
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 Goleta, State of California, on May 16, 1995.
APPLIED MAGNETICS CORPORATION
By /s/ Craig D. Crisman
--------------------------
Craig D. Crisman
President and Chief Executive Officer
POWER OF ATTORNEY
Each of the undersigned directors and officers of Applied Magnetics
Corporation constitutes and appoints Craig C. Crisman and Raymond P. Le Blanc,
and any or all of them, his true and lawful attorneys-in-fact and agents with
full power to do any and all things and to execute any and all instruments which
said attorneys-in-fact and agents may deem necessary or advisable to enable
Applied Magnetics Corporation to comply with the Securities Act of 1933, as
amended, and any rules, regulations and requirements of the Securities and
Exchange Commission in respect thereof in connection with the registration under
the Securities Act of 1933 of 250,000 Shares of Common Stock, $.10 par value, of
Applied Magnetics Corporation, to the same extent that he could do in person,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign the name of the undersigned directors and
officers in the capacities indicated below to any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same
with all exhibits to, and other documents in connection with, this Registration
Statement with the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
Signature Title Date
--------- ----- ----
President, Chief Executive Officer,
Chief Financial Officer
and Director
(Principal Executive Officer
and Principal Financial Officer) May 16, 1995
/s/ Craig D.Crisman
- -------------------
Craig D. Crisman
Corporate Controller
(Principal Accounting Officer) May 16, 1995
/s/ Peter T. Altavilla
- ----------------------
Peter T. Altavilla
/s/ Harold R. Frank Director May 16, 1995
- -------------------
Harold R. Frank
/s/ R. C. Mercure, Jr. Director May 16, 1995
- ----------------------
R. C. Mercure, Jr.
/s/ Herbert M. Dwight, Jr. Director May 16, 1995
- --------------------------
Herbert M. Dwight, Jr.
II-3
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated December 22, 1994
incorporated by reference in Applied Magnetics Corporation's Annual Report on
Form 10-K for the fiscal year ended September 30, 1994 and to all references to
our firm included in this registration statement.
ARTHUR ANDERSEN LLP
Los Angeles, California
May 12, 1995
II-4
<PAGE>
EXHIBIT INDEX
Exhibits
- --------
4.1 Special Nonstatutory Option Agreement dated December 21,
1994 between Stock Option Registrant and GG&G Equity Partners
23.1 Consent of Arthur Andersen LLP
(included on Page II-4)
24.1 Power of Attorney of certain officers
and directors (included on Page II-3)
II-5
<PAGE>
EXHIBIT 4.1
SPECIAL NONSTATUTORY STOCK OPTION AGREEMENT
THIS SPECIAL NONSTATUTORY STOCK OPTION AGREEMENT ("Agreement") is made and
entered into as of December 21, 1994, by and between APPLIED MAGNETICS
CORPORATION, a Delaware corporation (the "Company") and GG&G EQUITY PARTNERS, a
Nevada Limited Partnership (the "Partnership").
W I T N E S S E T H
WHEREAS, the Company has engaged Grisanti, Galef & Goldress, Inc., a Nevada
corporation ("GG&G") to provide certain executive management consulting services
to the Company pursuant to an agreement dated as of August 1, 1994, as amended
by that certain Term Sheet dated September 29, 1994 (the "Consulting
Agreement");
WHEREAS, under the Consulting Agreement, the Company has agreed to grant
to GG&G options to purchase shares of the Company's common stock, $.10 par value
(the "Common Stock"); and
WHEREAS, pursuant to a letter agreement dated December 21, 1994, GG&G has
assigned its rights to such option to GG&G Equity Partners, a Nevada Limited
Partnership (the "Partnership") and the Company has consented to such
assignment, subject to the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement and the Consulting Agreement, the parties agree as
follows:
1. GRANT OF OPTION
---------------
1.1 Grant. The Company hereby grants to the Partnership an option
-----
(the "Option") to purchase 250,000 shares (the "Shares") of Common Stock at
$4.125 per share.
1.2 Nonstatutory Stock Option. The Option is not intended to be an
-------------------------
incentive stock option under Section 422 of the Internal Revenue Code.
1.3 Term. The Option may be exercisable in whole or in part at any
----
time after the date hereof and will expire at the earlier of (a) five years
after the date hereof; (b) the date of any termination by GG&G of the Consulting
Agreement, or (c) thirty days after any termination by the Company of the
Consulting Agreement (provided, however, that in the case of termination by the
Company, the Option shall not terminate pursuant to this clause unless, within
such thirty-day period, the board of directors of the Company (the "Board")
shall have determined in good faith that the
-1-
<PAGE>
objectives set forth in the Consulting Agreement have not been achieved and have
expressed the same by resolution duly adopted by the Board).
1.4 Restrictions on Exercise. The Partnership acknowledges and
------------------------
agrees that the grant and exercise of the Option and the Company's obligation to
sell and deliver Shares under the Option shall be subject to all applicable
federal and state laws, rules and regulations, and to any approvals by any
regulatory or governmental agency as may be required.
1.5 Exercise of the Option. To exercise the Option in whole or in
----------------------
part, the Partnership must provide written notification to the Company's General
Counsel or Secretary. With any such exercise and notification, the Partnership
must include full payment of the exercise price by cashier's check or by wire
transfer to an account designated by the Company. No fractional Shares will be
issued pursuant to any exercise of the Option nor will any cash payment be made
in lieu of fractional shares. Notwithstanding the foregoing, this Option, if
exercised in part, may not be exercised for less than 100 shares.
1.6 No Transfer of Option. Except as, and to the extent, set forth
---------------------
in Section 2 hereof, only the Partnership may exercise the Option and any
attempted sale, assignment, transfer, pledge, hypothecation, encumbrance or
other disposition of the Option shall be null and void.
1.7 Retention Rights; Stockholder Rights. Neither this Agreement nor
------------------------------------
the grant of the Option hereunder shall give GG&G, the Partnership or any
Permitted Assigns (as defined in Section 2.1 hereof) an independent right to be
retained by the Company in any capacity. Further, GG&G, the Partnership and any
Permitted Assigns shall not have any rights as a stockholder of the Company with
respect to any Shares subject to the Option, except as to such Shares, if any,
that have been issued pursuant to the Option. No adjustment will be made for
dividends or other rights, except as provided herein, if the applicable record
date occurs before the stock certificate is issued by the Company to the
Partnership or any Permitted Assigns, as the case may be.
1.8 Adjustments. In the event of changes in the outstanding Common
-----------
Stock of the Company by reason of stock dividends, recapitalization, split-ups,
combinations, mergers (including reincorporation effected by means of a merger),
reclassification or exchanges of shares and the like, appropriate adjustment to
the number of Shares subject to the Option and the exercise price per share
shall be made in order to preserve the Partnership's (or the Permitted Assigns')
proportionate interest in the aggregate number of Shares under the Option and to
continue the aggregate exercise price of all Shares as nearly the same as
possible. The Option shall in no way prohibit the Company from effecting or
entering into a transaction involving a sale or transfer of all or substantially
all the Company's assets, or a
-2-
<PAGE>
merger, reorganization, or consolidation of the Company with another corporation
in which the Company is not the surviving corporation, or a liquidation or
dissolution of the Company (each, a "Reorganization"). In the event of any
Reorganization, all rights of the Partnership (or the Permitted Assigns) to
exercise the Option shall wholly and completely terminate at the time of the
closing of any such Reorganization, except to the extent that any agreement or
undertaking of all parties to any such Reorganization shall make specific
provision with respect to the Option and its continuation following any such
Reorganization. The Company agrees to give the Partnership (or the Permitted
Assigns) not less than thirty (30) days prior written notice of the closing of
any Reorganization such that the Partnership may exercise the Option prior to
the closing of such Reorganization.
2. ASSIGNMENT
----------
2.1 Permitted Assignments. Subject to the terms and conditions
---------------------
hereof, the Partnership may, at any time prior to May 31, 1995, make partial
assignments of the Option to one or more of the persons listed in Schedule 1
attached hereto (the "Permitted Assigns") by giving written notice thereof to
the Company (the "Assignment Notice"). The Assignment Notice shall be in the
form of that attached as Exhibit A and shall set forth the full and complete
name and mailing address of the Permitted Assign(s), each Permitted Assign's
social security or IRS Employee Identification Number and the number of shares
under the Option which are covered by such partial assignment. Any assignment
under this Section 2 must be as to all the Shares subject to the Option.
2.2 Agreement of Permitted Assigns. No assignment under this Section
------------------------------
2 shall be effective, and no Permitted Assigns shall have any rights to the
Option, unless and until the Assignment Notice required to be delivered under
Section 2.2 of the Agreement has been delivered to the Company together with an
Agreement of Permitted Assign executed by each Permitted Assign in the form of
that attached as Exhibit B.
3. RESTRICTIONS ON RESALE
----------------------
3.1 Representations. The Partnership represents and agrees that the
---------------
Shares will be acquired for investment, and not with a view to the sale or
distribution thereof. By signing this Agreement, the Partnership agrees not to
sell any Shares at a time when applicable laws, regulations or Company or
underwriter trading policies prohibit a sale. In the event that the sale of
Shares is not registered under the Securities Act of 1933, as amended (the
"Securities Act"), but an exemption is available which requires an investment
representation or other representation, the Partnership shall (a) represent and
agree at the time of exercise that the Shares are being acquired for investment
and not with a view to the sale or distribution thereof
-3-
<PAGE>
and (b) shall make such other representations as are deemed necessary or
appropriate by the Company and its counsel.
3.2 Legends. Subject to the provisions to Section 3.5 hereof, all
-------
certificates representing the Shares will, where applicable, have endorsed
thereon the following legends:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER SET FORTH IN AN AGREEMENT BETWEEN THE
COMPANY AND THE REGISTERED HOLDER, OR HIS OR HER PREDECESSOR IN
INTEREST. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICE OF THE COMPANY AND WILL BE FURNISHED UPON WRITTEN REQUEST
TO THE SECRETARY OF THE COMPANY BY THE HOLDER OF RECORD OF THE
SHARES REPRESENTED BY THIS CERTIFICATE.
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED,
OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO
THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED.
3.3 Exercise Prior to December 31, 1995. If the Option is exercised
-----------------------------------
prior to December 31, 1995, the Partnership agrees that it will not sell,
assign, transfer, pledge, hypothecate, encumber or otherwise dispose of the
Shares acquired upon such exercise earlier than the close of business at the
Company's headquarters on December 31, 1995. Notwithstanding the foregoing, if
the Consulting Agreement is thereafter terminated by the Company or GG&G prior
to December 31, 1995, the Board may, in its sole and absolute discretion,
release the Partnership from its agreement not to sell described in the prior
sentence.
3.4 Registration Rights. For purposes of this Section 3.4, the term
-------------------
"Selling Shareholders" shall mean the Partnership or, if the Partnership has
assigned this Option in accordance with the provisions of Section 2.1 hereof,
all, but not some, of Permitted Assigns. The Company shall, subject to the
requirements and provisions of the Securities Act and the rules and regulations
promulgated thereunder, file, one Registration Statement on a Form S-3 as soon
as practicable but in any event on or before May 31, 1995, covering the Shares
to be sold by the Selling Shareholders (a "Registration Statement"); provided,
however, that the Company shall not be required to file a registration statement
covering less than all the Shares subject to the Option.
-4-
<PAGE>
The Company shall use its reasonable best efforts to cause the
Registration Statement to be declared effective as soon as practicable after the
filing thereof with the Securities and Exchange Commission ("Commission"), and
shall keep such Registration Statement effective on a continuous basis pursuant
to Rule 415 of Regulation C promulgated under the Securities Act until the
earlier of (a) two (2) years following the last exercise of the Option or (b)
five (5) years following the date of this Agreement. In the event the Company
is, for any reason, not able to file and have declared effective a Registration
Statement on Form S-3 in accordance with this Section 3.4, the Company and the
Selling Shareholders shall, in good faith, consider such other means as are
available for either (a) filing and having declared effective a Registration
Statement with respect to the Shares under the Securities Act or (b) obtaining
an appropriate exemption from the registration requirements under the Securities
Act for the Shares.
The Selling Shareholders agree that, upon receipt of any notice
from the Company of the happening of any event during the registration period
and the period such Registration Statement is in effect thereafter which makes
any statement made in the Registration Statement, the Prospectus or any document
incorporated therein by reference untrue or which requires the making of any
changes in the Registration Statement, the Prospectus or any document
incorporated therein by reference in order to make the statements therein not
misleading, the Selling Shareholders will forthwith discontinue disposition of
Shares under the Prospectus related to the Shares until the Selling
Shareholders' receipt of the copies of a supplemented or amended Prospectus, or
until they are advised in writing by the Company that the use of the Prospectus
may be resumed, and has received copies of any additional or supplemental
filings which are incorporated by reference in the Prospectus. The Selling
Shareholders further agree to cooperate with the Company to facilitate the
timely preparation and filing of the Registration Statement and in connection
therewith to provide in writing such information as the Company is reasonably
advised by its counsel is necessary under applicable securities laws.
All costs and expenses, including but not limited to, legal,
accounting and filing fees relating to the filing of the Registration Statement,
maintaining the effectiveness of such Registration Statement and issuance of any
Shares pursuant to the exercise of the Option, shall be borne by the Company;
provided, however, that the Partnership shall bear all costs and expenses for
its own legal counsel relating to this Agreement and the Registration Statement
and all brokers discounts and commissions relating to the sale of any Shares.
3.5 Removal of Restrictive Legends. Subject to the provisions of
------------------------------
Sections 3.3 and the last paragraph of Section 3.4 hereof, upon the sale by a
Selling Shareholder, if any, Shares pursuant to a Registration Statement that
has been filed and declared effective under Section 3.4, the Company will
furnish, or cause to be furnished, to its Transfer Agent, such instructions as
may be appropriate to effect the
-5-
<PAGE>
removal of restrictive legends as to such Shares that have been imposed under
Section 3.2 hereof ("Restrictions") and to permit such Shares to be transferred
on the Transfer Agent's records free and clear of such Restrictions.
3.6 Material Non-Public Information Regarding the Company. The
-----------------------------------------------------
Partnership acknowledges and agrees: (a) that it may, from time to time,
directly or indirectly, through one or more of the Permitted Assigns, have
access to confidential, material, non-public information concerning the Company,
its business and financial condition, plans and strategies; (b) that with
respect to such material, non-public information, it is or may be subject to
restrictions imposed by the United States Securities Laws and Regulations
concerning (i) purchasing or selling the Company's Common Stock (or the
securities of other companies with whom the Company is or may be engaged in
business or other transactions) and (ii) communicating such information to any
other person under circumstances where it is reasonable to expect such person or
sell or purchase the Company's Common Stock (or the securities of such other
companies); (c) that it will exercise its best efforts at all times to comply
with such laws and regulations; and (d) that it has received a copy of the
Company's trading policies with respect to compliance with such laws and
regulations.
4. MISCELLANEOUS PROVISIONS
------------------------
4.1 Applicable Law. This Agreement will be interpreted and enforced
--------------
under the laws of the State of California (without regard to choice-of-law
provisions).
4.2 Other Agreements. Except as specifically provided herein, this
----------------
Agreement constitutes the entire understanding between the Partnership and the
Company regarding the Option. Any prior agreements, commitments or negotiations
concerning this Option are superseded.
4.3 Notices. All notices, requests, demands, claims, and other com-
-------
munications hereunder will be in writing. Any notice, request, demand, claim, or
other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Company: Applied Magnetics Corporation
75 Robin Hill Road
Goleta, CA 93117
Attn: General Counsel
Telecopy: (805) 967-2677
-6-
<PAGE>
If to the Partnership: GG&G Equity Partners
Grisanti, Galef & Goldress, Inc.
P.O. Box 5240
Incline Village, NV 89450
Telecopy: (702) 832-5236
Any party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the individual
for whom it is intended. Any party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other parties notice in the manner herein set forth.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
APPLIED MAGNETICS CORPORATION
A Delaware corporation
By___________________________________________
Its__________________________________________
GG&G EQUITY PARTNERS
A Nevada Limited Partnership
By___________________________________________
Its General Partners
------------------------------------------
-7-
