As filed with the Securities and Exchange Commission on July 30, 1996
Registration No. 333-_____
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)
Delaware 95-1950506
(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
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
------------------------------
CRAIG D. CRISMAN
Chairman of the Board and
Chief Executive Officer
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:
JAMES J. SLABY, JR., ESQ.
STANLEY SZE, ESQ.
Sheppard, Mullin, Richter & Hampton LLP
333 South Hope Street, 48th Floor
Los Angeles California 90071
(213) 620-1780
------------------------------
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. [ ]
Page 1 of 137 <PAGE>
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
=========================================================================
Proposed Proposed
Title of Each Maximum Maximum
Class of Offering Aggregate Amount of
Securities to Amount to be Price Per Offering Price Registra-
be Registered Registered Share <F1> <F1> tion Fee
-------------------------------------------------------------------------
7% Convertible
Subordinated
Debentures $93,000,000 100% $93,000,000 $32,068.97
Common Stock,
par value $0.10
per share 5,000,000<F2> -- -- --
=========================================================================
[FN]
<F1> Estimated solely for the purpose of calculating the
registration fee, pursuant to Rule 457(i) or (c), as
applicable, of Regulation C under the Securities Act of
1933.
<F2> Represents the maximum number of shares of Common Stock
presently issuable upon conversion of the Debentures being
registered hereunder. If issued, such shares of Common
Stock will be issued for no additional consideration and
therefore no registration fee is required. An indeterminate
number of additional shares of Common Stock that may be
issued pursuant to the antidilution provisions of the
Debentures is also registered hereunder.
Page 2 of 137 <PAGE>
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 this Registration Statement
shall become effective on such date as the Securities and
Exchange Commission (the "Commission"), acting pursuant to said
Section 8(a), may determine.
EXHIBIT INDEX ON PAGE 69
Page 3 of 137 <PAGE>
APPLIED MAGNETICS CORPORATION
Cross-Reference Sheet Pursuant to Item 501(b) of Regulation S-K
Showing Locations in Prospectus of the Information
Required by Items of Form S-3
Form S-3 Caption Caption in Prospectus
---------------- ---------------------
Item 1. Forepart of the Outside Front Cover Page of
Registration Statement Prospectus
and Outside Front Cover
Page of Prospectus
Item 2. Inside Front and Outside Inside Front and Outside Back
Back Cover Pages of Cover Pages of Prospectus
Prospectus
Item 3. Summary Information, Risk Prospectus Summary, Risk
Factors and Ratio of Factors; Ratio of Earnings to
Earnings to Fixed Charges Fixed Charges
Item 4. Use of Proceeds Use of Proceeds
Item 5. Determination of Offering Inapplicable
Price
Item 6. Dilution Inapplicable
Item 7. Selling Security Holders Selling Securityholders
Item 8. Plan of Distribution Plan of Distribution
Item 9. Description of Securities Outside Front Cover Page;
to be Registered Prospectus Summary;
Description of the Debentures;
Description of Capital Stock
Item 10. Interests of Named Inapplicable
Experts and Counsel
Item 11. Material Changes Inapplicable
Item 12. Incorporation of Certain Incorporation of Certain
Information by Reference Documents by Reference
Item 13. Disclosure of Commission Inapplicable
Position on Indemnifi-
cation for Securities Act
Liabilities
Page 4 of 137 <PAGE>
Subject to Completion, July ___, 1996
Prospectus
APPLIED MAGNETICS CORPORATION
$93,000,000
7% Convertible Subordinated Debentures
Due March 15, 2006 (Interest Payable
March 15 and September 15)
and
5,000,000 Shares of Common Stock
This Prospectus relates to the public offering by the
Selling Securityholders (see "Selling Securityholders") of up to
$93,000,000 aggregate principal amount of 7% Convertible
Subordinated Debentures due March 15, 2006 (the "Debentures") of
Applied Magnetics Corporation, a Delaware corporation (the
"Company"), and the shares of common stock, par value $0.10 per
share, of the Company (the "Common Stock" and, together with the
Debentures, the "Securities") that are issuable upon conversion
of the Debentures. The Debentures are convertible into a maximum
of 5,000,000 shares of Common Stock at a conversion price of
$18.60 per share (the "Conversion Price"), subject to adjustment
in certain circumstances, at any time prior to redemption or
maturity. See "Description of the Debentures." The Common Stock
is traded on the New York Stock Exchange (the "NYSE") under the
symbol "APM." The last reported sales price of the Common Stock
on the NYSE on July 29, 1996 was $10 3/8 per share. See
"Description of Capital Stock."
Interest on the Debentures is payable semi-annually in
arrears on each of March 15 and September 15, commencing
September 15, 1996, and the Debentures will mature on March 15,
2006, unless previously redeemed. See "Description of the
Debentures."
The Debentures are redeemable at the option of the
Company, in whole or in part, at the redemption prices set forth
in this Prospectus, together with accrued and unpaid interest to
the date fixed for redemption, except that no redemption may be
made prior to April 2, 1999. The Debentures are also redeemable
at any time at the option of the Company, in whole or in part, at
a redemption price of 100% of their principal amount, together
with accrued and unpaid interest through the date fixed for
redemption upon the occurrence of certain changes in the law,
rules, regulations or rulings related to the United States
federal income tax. Upon the occurrence of a Change of Control
(as defined herein), the Company, at its option, may redeem the
Page 5 of 137 <PAGE>
Debentures, in whole but not in part, prior to April 1, 1999, at
the redemption prices set forth in this Prospectus, together with
accrued and unpaid interest to the date fixed for redemption.
See "Description of Debentures -- Redemption."
The Debentures are general unsecured obligations of the
Company and are subordinated to all present and future Senior
Indebtedness (as defined herein) of the Company and will be
effectively subordinated to all indebtedness and liabilities of
subsidiaries of the Company. The Indenture does not restrict the
incurrence of any other indebtedness or liabilities by the
Company or its subsidiaries. See "Description of Debentures --
Subordination."
The Company will not receive any proceeds from this
offering. The aggregate proceeds to the Selling Securityholders
from the sale of the Securities will be the offering price of the
Securities sold, less applicable agents' commissions and
underwriters' discounts, if any. The Company will pay all
expenses incident to the preparation and filing of a registration
statement for the Securities under federal securities laws. The
Selling Securityholders may sell the Securities from time to time
on terms to be determined at the time of sale, either directly or
through agents designated from time to time or dealers or
underwriters designated from time to time. To the extent
required, the principal amount of Debentures or the number of
shares of Common Stock to be sold, the offering price thereof,
the name of each Selling Securityholder and each agent, dealer
and underwriter, if any, and any applicable commissions or
discounts with respect to a particular offering will be set forth
in an accompanying Prospectus Supplement. See "Plan of
Distribution."
The Debentures have been designated for trading in the
Private Offerings, Resales and Trading through Automated Linkages
("PORTAL") Market.
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A
DESCRIPTION OF CERTAIN FACTORS THAT SHOULD BE CAREFULLY
CONSIDERED BY PROSPECTIVE INVESTORS.
No dealer, salesman or any other person has been
authorized to give any information or to make any representation
not contained in this Prospectus and, if given or made, such
information or representation must not be relied upon as having
been authorized by the Company. This Prospectus does not relate
to any securities other than those described herein or constitute
an offer to sell, or the solicitation of an offer to buy,
securities in any jurisdiction where, or to any person to whom,
it is unlawful to make such an offer or solicitation. Neither
the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create an implication that the
information herein is correct as of any time subsequent to the
date hereof or that there has been no change in the affairs of
the Company since such date.
Page 6 of 137 <PAGE>
FOR NEW HAMPSHIRE RESIDENT: NEITHER THE FACT THAT A
REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN
FILED UNDER RSA 421-B WITH THE STATE OF NEW HAMPSHIRE NOR THE
FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS
LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY
THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS
TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE
FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY
OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE OF THE STATE
OF NEW HAMPSHIRE HAS PASSED IN ANY WAY UPON THE MERITS OR
QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY
PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR
CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR
CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF
THIS PARAGRAPH.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT
PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
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.
THE DATE OF THIS PROSPECTUS IS JULY ___, 1996.
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.
Page 7 of 137 <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 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 offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005 and are also
accessible by the public using the Internet at
http://www.sec.gov.
The Company has filed with the Commission a
registration statement on Form S-3 (such registration statement,
together with all amendments and exhibits thereto, being
hereinafter referred to as the "Registration Statement") under
the Securities Act, for the registration under the Securities Act
of the Debentures and Shares offered hereby. 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.
Statements herein as to the contents of any document referred to
are not necessarily complete and in each instance are qualified
in all respects by reference to the applicable documents filed
with the Commission.
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 for the
fiscal year ended September 30, 1995, as amended by Form 10-K/A
No. 1 filed with the Commission on June 11, 1996;
2. The Company's Quarterly Report on Form 10-Q for
the quarter ended December 30, 1995;
Page 8 of 137 <PAGE>
3. The Company's Quarterly Report on Form 10-Q/A
No. 1 for the quarter ended December 30, 1995;
4. The Company's Current Report on Form 8-K filed
with the Commission on March 11, 1996;
5. The Company's Current Report on Form 8-K filed
with the Commission on March 20, 1996;
6. The Company's Current Report on Form 8-K filed
with the Commission on April 2, 1996;
7. The Company's Quarterly Report on Form 10-Q for
the quarter ended March 30, 1996;
8. The Company's Proxy Statement with respect to the
1995 Annual Meeting of Stockholders; and
9. 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 Securities.
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.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS
(NOT INCLUDING EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS
ARE SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS) ARE
AVAILABLE WITHOUT CHARGE UPON WRITTEN OR ORAL REQUEST DIRECTED
TO: APPLIED MAGNETICS CORPORATION, 75 ROBIN HILL ROAD, GOLETA,
CALIFORNIA 93117-3108, ATTENTION: SECRETARY, TELEPHONE: (805)
683-5353.
------------------------------
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by,
and should be read in conjunction with, the more detailed
information appearing elsewhere in this Prospectus and in the
consolidated financial statements, including the notes thereto,
incorporated by reference therein. Prospective investors should
carefully consider the matters set forth under the heading "RISK
FACTORS" beginning on page 11.
Page 9 of 137 <PAGE>
The Company
The Company is one of the world's leading independent
manufacturers of advanced magnetic recording heads for hard disk
drives. The Company manufactures advanced inductive thin film
and magnetoresistive ("MR") disk head products and assembles
ferrite disk head products, in each case, primarily for supply to
manufacturers of 3.5 inch hard disk drives. The Company's
products compete on the basis of price, performance and
availability. The Company's products are used in disk drives
manufactured by, among others, International Business Machines
("IBM"), Maxtor Corporation ("Maxtor"), Micropolis Corporation
("Micropolis"), NEC Electronics, Inc. ("NEC"), Quantum
Corporation ("Quantum"), Seagate Technology, Inc. ("Seagate
Technology") and Western Digital ("Western Digital").
Although the demand for disk drive units has grown
significantly in recent years largely in response to the global
proliferation of PCs and the increasing demand for data storage
capacity, such demand recently appears to be subsiding. However,
due primarily to increased sales to Western Digital, the
industry's subsiding demand for disk drive units has so far not
adversely impacted the Company's operating and financial
performance.
The Company's product line is currently centered around
thin film disk heads, the largest segment of the recording head
industry. Thin film heads permit greater storage capacity per
disk and provide higher transfer rates than ferrite disk heads.
The Company continues to expand its thin film production capacity
and further develop its thin film technology. The Company is
also committing engineering and production resources to further
its MR disk head capability, which it believes to be the next
generation of recording head technology. MR disk heads offer
still greater recording densities and other performance
advantages demanded by the disk drive market.
The Company suffered substantial losses and financial
difficulties in fiscal years 1993 and 1994. In August 1994, in
an effort to reverse this situation, the Company engaged a
consulting firm to provide it with crisis management assistance.
Mr. Craig D. Crisman, then a member of the consulting firm, was
appointed the Company's Chief Executive Officer. Under his
direction, the Company has significantly improved its yields in
thin film disk head production, implemented a number of cost
reduction programs, instituted aggressive cash management
practices, consolidated its manufacturing activities and divested
itself of certain non-core assets. These measures have
significantly improved the Company's cash and working capital
positions. The Company and Mr. Crisman entered into a five-year
employment agreement in August 1995 and on November 3, 1995,
Mr. Crisman was elected Chairman.
Page 10 of 137 <PAGE>
In an effort to capitalize on these improvements and to
add to its existing market share, the Company intends to increase
its thin film and MR disk head capacity. To achieve this goal,
the Company currently plans approximately $125 million of capital
expenditures, including those financed by operated leases, in
fiscal 1996, primarily to improve inductive thin film production
processes and increase thin film and MR production volumes.
The Company's manufacturing and assembly operations are
located in California, Ireland, Korea, Malaysia and the People's
Republic of China (the "PRC"). The Company's principal place of
business is in Goleta, California; its telephone number at that
location is 805-683-5353.
RISK FACTORS
------------
In addition to the other information contained in this
Prospectus and the documents incorporated herein by reference,
prospective purchasers of the Debentures and the Shares should
carefully consider the following factors before purchasing the
Debentures or the Shares being offered by this Prospectus.
RAPID TECHNOLOGICAL CHANGES
The magnetic recording head industry has been
characterized by rapidly changing technology, short product life
cycles and price erosion. The Company estimates that the
industry product life cycle is currently running as short as 12
to 18 months. 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. There is no assurance that the Company's
products will achieve such performance or that the Company will
continue to qualify for disk drive manufacturers' programs.
During fiscal 1993 and 1994 and the first two quarters of fiscal
1995, the Company experienced substantial losses and significant
production and product quality problems as it sought to adapt to
the market's transition from ferrite disk heads to thin film disk
heads. There is no assurance that the Company will continue to
qualify for disk head manufacturing programs or that it will not
experience similar manufacturing and product quality problems in
the future. The Company's future success depends in large part
on its ability to develop and qualify new products on a timely
basis and in sufficient quantities that compete effectively on
the basis of price and performance. See "The Company."
FLUCTUATIONS IN QUARTERLY AND ANNUAL OPERATING RESULTS
The Company's operating results have fluctuated and may
continue to fluctuate from quarter to quarter and year to year.
The Company experienced net losses (i) for the fiscal year ended
September 30, 1991 of $18,284,000 on an aggregate basis, or $1.12
Page 11 of 137 <PAGE>
per share (a net loss from continuing operations of $15,805,000,
or $0.97 per share), (ii) for the fiscal year ended September 30,
1992 of $25,107,000 on an aggregate basis, or $1.51 per share
(net income from continuing operations of $315,000, or $0.02 per
share), (iii) for the fiscal year ended September 30, 1993 of
$43,728,000 on an aggregate basis, or $2.17 per share, and (iv)
for the fiscal year ended September 30, 1994 of $52,670,000 on an
aggregate basis, or $2.39 per share. As recently as the first
two quarters of fiscal 1995, the Company experienced substantial
losses. 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. As customer programs mature, the Company may
have to write-down inventory and equipment. In addition, the
Company must qualify on future programs to sell its products.
The Company has also, on occasion, experienced cancellation and
rescheduling of orders and reductions in quantities ordered as
customer requirements change. As a result, the Company's backlog
may not be a reliable indicator of future sales. Cancellation,
rescheduling and reductions of orders in the future could result
in inventory losses, under-utilization of production capacity and
write-downs of tooling and equipment which would have a material
adverse effect on the Company's future operating results.
Moreover, the Company and several of its major competitors have
announced large capital expenditure programs, and there is no
assurance that market demand will be adequate to absorb this
expanded capacity. The Company's operating results have in the
past and likely will in the future be adversely affected during
periods when production capacity is under-utilized.
DEPENDENCE ON CYCLICAL HARD DISK DRIVE INDUSTRY
Demand for the Company's products is driven first by
demand for disk drive units. Demand for more and faster disk
drives is in turn driven by demand for such products as personal
computers ("PCs"), network servers, disk arrays, workstation
drives, mainframes and internet servers and for memory intensive
services such as video on demand, voicemail and multimedia
services. The disk drive industry is cyclical and historically
has experienced periods of oversupply and reduced production
levels, resulting in significantly reduced demand for disk heads,
as well as pricing pressures. The effect of these cycles on
suppliers, including the Company, has been magnified by hard disk
drive manufacturers' practice of ordering components, including
disk heads, 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, and the Company has expanded its capacity and
expects to do so further. There is no assurance that such growth
will continue, that the level of demand for disk drives will not
decline, or that future demand will be sufficient to support
existing and future capacity. A decline in demand for hard disk
drives may have a material adverse effect on the Company's future
operating results.
Page 12 of 137 <PAGE>
SIGNIFICANT CAPITAL NEEDS
The magnetic disk head industry is capital intensive
and requires significant expenditures for research and
development in order to develop and take advantage of
technological improvements and new technologies such as thin film
and MR disk head products. 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 1996,
the Company plans to spend approximately $125 million (including
amounts financed through equipment leases) on capital
expenditures, of which approximately $70.2 million was incurred
during the nine months ended June 29, 1996. The Company believes
that it will be able to fund these expenditures from a
combination of the proceeds of the Debenture Offering (as defined
below), existing cash balances, cash flow from operations,
existing credit facilities and lease financing arrangements.
However, there is no assurance that these funds will be
sufficient for its needs, and in any event, the Company may need
additional sources of capital to meet requirements in future
years. There is no assurance that such additional funds will be
available to the Company or, if available, upon terms and
conditions acceptable to the Company. If the Company were unable
to obtain sufficient capital, it would need to curtail its
operating and capital expenditures, which could adversely affect
the Company's future operating results.
RELIANCE ON SHORT-TERM BORROWING
At June 29, 1996, the Company had outstanding
approximately $45.8 million of short-term borrowings in floating
rate demand loan facilities from a bank in Malaysia, where it has
substantial manufacturing operations. The proceeds of the loan
facilities were used in the construction of assembly facilities
in Malaysia and are used for working capital purposes. In May
1995, the Company and the Malaysian bank amended these loan
facilities to include a security interest in the Company's real
property holdings in Malaysia and to include certain covenants
which preclude the Company from granting liens on and security
interests in other assets in Malaysia. While the Company has no
reason to believe the loan will be called, there is no assurance
that the bank will continue to make this credit available. If
the loan were called and the Company were unable to refinance the
loan, it would result in breach of covenants in other borrowing
facilities maintained by the Company and, thereby, create a cash
shortfall for the Company. As of June 29, 1996, $2.0 million was
available under this credit facility. In addition, the Company
has a credit line with CIT Group/Business Credit, Inc., pursuant
to which $22.5 million was available to be drawn down by the
Company as of June 29, 1996.
Page 13 of 137 <PAGE>
COMPETITION
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 top six
customers accounted for 97% of the Company's net sales in fiscal
1995, and sales to Conner Peripherals Inc. ("Conner") and Maxtor
represented approximately 41% and 19% of total sales,
respectively. The Company's revenues from Conner and Maxtor
declined materially during fiscal 1996. However, the Company has
so far been able to replace the Conner and Maxtor business with
sales to other customers, principally Western Digital. See "--
Further Consolidation of the Disk Drive Industry." Many of the
Company's competitors are significantly larger and more
diversified and have substantially greater financial, technical
and marketing resources than does the Company. Additionally, a
number of disk drive manufacturers with significantly greater
financial, technical and marketing resources than the Company,
such as IBM, Seagate Technology, Quantum, Hitachi, Ltd.
("Hitachi"), Hewlett-Packard Company and Fujitsu Limited
("Fujitsu") currently produce thin film and, in some cases, MR
heads for their own use. Seagate Technology also makes its disk
head products available to other disk drive manufacturers. Other
disk drive manufacturers could develop or acquire the ability to
produce thin film and MR heads in the future. The Company's
ability to obtain new orders from customers depends on its
ability to anticipate technological changes, develop products to
meet individualized customer requirements and to achieve timely
delivery of products that meet customer specifications at
competitive prices. In addition, the disk drive industry is also
intensely competitive and disk drive manufacturers may quickly
lose market share as a result of the successful deployment of new
technologies by their competitors or various other factors. In
recent years, certain disk drive manufacturers have declared
bankruptcy. A significant reduction in orders from or the loss
of a major customer, which could occur for any of a variety of
reasons, could have a material adverse effect on the Company's
future operating results.
FURTHER CONSOLIDATION OF THE DISK DRIVE INDUSTRY
The information technology industry is experiencing
significant consolidation. In recent years, certain disk drive
and systems companies have acquired or merged with magnetic disk
head companies in an effort to produce magnetic disk heads for
their own use. In fiscal 1994, Quantum, a major disk drive
manufacturer, acquired Digital Equipment Corporation's ("DEC")
inductive thin film head operations as well as a controlling
interest in Rocky Mountain Magnetics, a joint venture between
Storage Technology and DEC. Rocky Mountain Magnetics is
primarily engaged in the development and production of MR disk
heads. In addition, Seagate Technology, a major manufacturer of
both disk drives and recording heads, and Conner, the Company's
largest customer in fiscal 1995, recently merged. The Company's
revenues from Conner declined materially during fiscal 1996. Net
Page 14 of 137 <PAGE>
sales attributable to Conner in fiscal 1994 and 1995 were $145.1
million and $119.6 million, respectively. The Company has so far
been able to replace the Conner business with sales to other
customers, principally Western Digital. There is no assurance,
however, that overall demand for the Company's products will
continue at present levels. There is no assurance that disk
drive and systems companies will not continue to vertically
integrate and acquire the ability to produce disk heads for their
own use. Further consolidation of the disk drive industry may
reduce the number of disk drive programs requiring the Company's
products and may increase credit risks for the Company due to the
concentration of its customers. As a result, there is no
assurance that further vertical integration of disk drive and
system companies and consolidation within the disk drive industry
will not have a material adverse effect on the Company's future
operating results. See "The Company."
DEPENDENCE ON FOREIGN OPERATIONS
The Company conducts substantially all of its
production, assembly and test operations in its facilities in
Ireland, Korea, Malaysia and the People's Republic of China
("PRC"). In addition, the Company has contractual relationships
with unaffiliated parties who conduct manufacturing and assembly
operations for the Company in Malaysia and the PRC. The
Company's operations in Korea have, from time to time in recent
years, been affected by labor disruptions and slow downs. During
fiscal 1995, the Company's production facility in Malaysia faced
labor shortages as other disk drive and component manufacturers
expanded their production facilities in Malaysia. In addition to
risks of labor disruption, civil unrest and political
instability, the Company's foreign operations subject it to
delays in obtaining governmental permits and approvals, currency
exchange fluctuations, currency restrictions, trade restrictions
and transportation problems. See "The Company."
DEPENDENCE ON KEY PERSONNEL
The success of the Company's operations and development
programs largely depends on a limited number of key technical and
management 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 success
will depend, in large part, on its ability to continue to
attract, retain, train and motivate highly skilled and dedicated
employees.
INTELLECTUAL PROPERTY
The Company relies primarily on a combination of
confidentiality agreements and internal procedures to protect its
proprietary rights in its manufacturing processes, product
designs and equipment. There is no assurance that the steps
Page 15 of 137 <PAGE>
taken by the Company will be adequate to protect its proprietary
rights or that the Company's competitors will not independently
develop or patent technologies that are equivalent or superior to
the Company's technology. In addition, 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 future operating
results. The Company does not believe that any of its employees
is in violation of his or her prior employment agreements in the
performance of his or her duties with the Company.
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. Such 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 future operating results.
MANAGEMENT OF GROWTH
The Company is experiencing growth and is planning
significant internal expansion. In order to maintain and improve
operating results, the Company's management will be required to
manage this growth and the related expansion effectively. There
is no assurance that the Company's expansion will remain on
schedule or will improve operating results. As the Company
continues to expand, it may become more difficult to manage
geographically dispersed operations. The Company's failure to
effectively manage growth could have a material adverse effect on
its future operating results.
SHAREHOLDER RIGHTS PLAN
The Company has adopted a shareholder rights plan
designed to prevent takeovers not approved by the Board of
Directors. This plan could adversely affect purchasers of the
Page 16 of 137 <PAGE>
Debentures and the Shares in that it could discourage tender
offers for the Company's Common Stock.
VOLATILITY OF STOCK PRICE
The market price of the Company's Common Stock has been
volatile, ranging in price from $7.88 to $21.75 per share over
the past year. The trading price of the Company's Common Stock
has fluctuated 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. In addition, the
volatility of the stock markets in recent years has caused wide
fluctuations in trading prices of stocks of technology companies
independent of their individual operating results. The market
price of the Company's Common Stock at any given time may be
adversely affected by factors independent of the Company's
operating results.
SUBORDINATION OF DEBENTURES
The Debentures are unsecured and subordinated
obligations of the Company and are subordinate to the prior
payment in full of all existing and future Senior Indebtedness
(as defined herein) of the Company and are structurally
subordinated to all indebtedness and other liabilities of the
Company's subsidiaries. At June 29, 1996, the Company's Senior
Indebtedness and the indebtedness of its subsidiaries aggregated
approximately $49.5 million. The Debentures are obligations
exclusively of the Company and not of any of its subsidiaries.
The Company's cash flow and ability to service debt, including
the Debentures, may be partially dependent upon the earnings of
its subsidiaries and the distribution of those earnings to the
Company, or upon other payments of funds by the subsidiaries to
the Company. In addition, the payment of dividends and the
making of loans and advances to the Company by its subsidiaries
may be subject to statutory, contractual or other restrictions,
are dependent upon the earnings of those subsidiaries and are
subject to various business considerations. Any right of the
Company to receive assets of any of its subsidiaries upon their
liquidation or reorganization (and the consequent right of the
holders of the Debentures to participate in those assets) will be
structurally subordinated to the claims of that subsidiary's
creditors (including trade creditors). See "Description of
Debentures -- Subordination."
ABSENCE OF EXISTING MARKET FOR DEBENTURES
The Debentures are a new issue of securities with no
established United States trading market. The Company does not
intend to list the Debentures on any national securities exchange
or to seek the admission thereof to trading in the National
Association of Securities Dealers Automated Quotation system.
Although the Debentures have been designated for trading through
Page 17 of 137 <PAGE>
PORTAL, no assurance can be given that an active trading market
for the Debentures 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
Debentures may experience difficulty in reselling the Debentures
or may be unable to sell them at all. If a market for the
Debentures develops, any such market may be discontinued at any
time. If a public trading market develops for the Debentures,
future trading prices of the Debentures will depend on many
factors, including, among other things, prevailing interest
rates, the Company's results of operations 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 Debentures may trade at a
discount from their principal amount.
LIMITATIONS ON REPURCHASE AND CONVERSION OF DEBENTURES
Upon a Change of Control (as defined herein), each
holder of Debentures will have certain rights, at the holder's
option, to require the Company to repurchase all or a portion of
such holder's Debentures. If a Change of Control were to occur,
there is no assurance that the Company would have sufficient
funds to pay the repurchase price for all Debentures tendered by
the holders thereof. The Company's failure to purchase tendered
Debentures would constitute an Event of Default under the
Indenture (as defined), which would, in turn, constitute a
further default under the Company's existing credit agreement and
may constitute a default under the terms of other indebtedness
that the Company may enter into from time to time. In such
circumstances, the subordination provisions in the Indenture (as
defined herein) would likely restrict payments to the holders of
Debentures. See "Description of Debentures -- Change of
Control."
MANDATORY CONVERSION
The Company has the right, without the consent of any
holder, to convert all (but not less than all) of the Debentures
if, at any time after April 1, 1999, the closing price of the
Company's Common Stock exceeds 130% of the Conversion Price then
in effect for at least 20 trading days within 30 consecutive
trading days. See "Description of the Debentures -- Conversion."
THE COMPANY
-----------
The Company is one of the world's leading independent
manufacturers of advanced magnetic recording heads for hard disk
drives. The Company manufactures advanced inductive thin film
and MR disk head products and assembles ferrite disk head
products, in each case, primarily for supply to manufacturers of
3.5 inch hard disk drives. The Company's products compete on the
basis of price, performance and availability. The Company's
Page 18 of 137 <PAGE>
products are used in disk drives manufactured by, among others,
IBM, Maxtor, Micropolis, NEC, Quantum, Seagate Technology and
Western Digital.
Although the demand for disk drive units has grown
significantly in recent years largely in response to the global
proliferation of PCs and the increasing demand for data storage
capacity, such demand recently appears to be subsiding. However,
due primarily to increased sales to Western Digital, the
industry's subsiding demand for disk drive units has so far not
adversely impacted the Company's operating and financial
performance.
The Company's product line is currently centered around
thin film disk heads, the largest segment of the recording head
industry. Thin film heads permit greater storage capacity per
disk and provide higher transfer rates than ferrite disk heads.
The Company continues to expand its thin film production capacity
and further develop its thin film technology. The Company is
also committing engineering and production resources to further
its MR disk head capability, which it believes to be the next
generation of recording head technology. MR disk heads offer
still greater recording densities and other performance
advantages demanded by the disk drive market.
The financial performance of manufacturers of magnetic
recording heads is, because of the high fixed cost nature of
their operations, particularly sensitive to the volume of unit
sales and the pricing of those units as well as to production
yields. The industry continues to experience rapid technological
change and compressed product life cycles. New product
development allows disk head manufacturers an opportunity to
differentiate their products and gain market share. However,
such development requires significant investment, including
substantial capital expenditures. The resulting financial
burdens make it imperative that disk head manufacturers maintain
acceptable yields at each step in the manufacturing process. In
addition, the compression of product life cycles necessitates the
rapid development and deployment of new products and limits the
period in which manufacturers may recoup their investment.
The Company experienced a decline in shipments in the
third and fourth quarters of fiscal 1992 due primarily to the
reduced demand by IBM for certain ferrite disk head products and
the continuing decline in overall demand for minislider form
factor thin film disk heads. The decline in net sales of ferrite
disk head products continued through the first quarter of fiscal
1993. As a result, in 1992 the Company began to shift its
business focus from ferrite assembly to the manufacture of the
thin film microslider form factor. The decision to pursue the
manufacture of the thin film microslider form factor required the
Company to invest significant resources in developing and
perfecting the wafer fabrication and other processes involved in
thin film microslider form factor production.
Page 19 of 137 <PAGE>
During fiscal 1993 and fiscal 1994, market demand
shifted to the thin film nanoslider form factor from the
microslider form factor and from ferrite disk heads. The
unexpectedly rapid market transition from minislider to
microslider to nanoslider form factors impacted fiscal 1993 as
the Company sustained significant losses and recorded a $49.6
million restructuring charge in the fourth quarter to consolidate
manufacturing resources and write-down production assets
(primarily related to ferrite and thin film microslider
production) to their estimated net realizable values. In fiscal
1994, the Company continued to incur operating and financial
difficulties as it struggled with its thin film nanoslider form
factor manufacturing process which impacted the Company's ability
to expand production capacity to achieve desired levels of volume
shipments in response to strong market demand.
In August 1994, in an effort to reverse this situation,
the Company engaged a consulting firm to provide it with crisis
management assistance. Mr. Craig D. Crisman, then a member of
the consulting firm, was appointed the Company's Chief Executive
Officer. Under his direction, the Company has significantly
improved its yields in thin film disk head production,
implemented a number of cost reduction programs, instituted
aggressive cash management practices, consolidated its
manufacturing activities and divested itself of certain non-core
assets. These measures have significantly improved the Company's
cash and working capital positions. The Company and Mr. Crisman
entered into a five-year employment agreement in August 1995 and
on November 3, 1995, Mr. Crisman was elected Chairman.
In an effort to capitalize on these improvements and to
add to its existing market share, the Company intends to increase
its thin film and MR disk head capacity. To achieve this goal,
the Company currently plans approximately $125 million of capital
expenditures, including those financed by operating leases, in
fiscal 1996, primarily to improve inductive thin film production
processes and increase thin film and MR production volumes.
DISK DRIVE INDUSTRY
Demand for the Company's products is driven first by
demand for disk drive units. Demand for more and faster disk
drives is in turn driven by demand for such products as PCs,
network servers, disk arrays, workstation drives, mainframes and
internet servers and for memory intensive services such as video
voicemail and multimedia services. There are a limited number of
suppliers of disk drives, of which the largest include Fujitsu,
Hewlett-Packard Company, Hitachi, IBM, Iomega Corporation,
Maxtor, Micropolis, NEC, Quantum, Samsung, Seagate Technology,
Toshiba and Western Digital. Hewlett-Packard Company recently
announced that it was discontinuing its disk drive manufacturing
operations. Some systems companies that manufacture disk drives
are vertically integrated and produce magnetic recording heads
for their own use. The Company focuses its marketing efforts on
those manufacturers with large volume disk drive programs. For
Page 20 of 137 <PAGE>
any given program, the Company may be one of several suppliers of
disk heads. The Company believes that certain disk drive
companies that are vertically integrated will continue to rely on
outside suppliers, such as the Company, as second and third
sources of supply. See "Risk Factors -- Further Consolidation of
the Disk Drive Industry."
PRODUCTS
The Company manufactures or assembles disk heads for
supply to manufacturers of hard disk drives, which are the
predominant high capacity data storage devices used in all
classes of computers. Hard disk drives typically include one to
ten disks onto and from which data is recorded and retrieved by
two to 20 recording heads. These heads are positioned by an
actuator assembly to "fly" within three one-millionths of an
inch, or less, of the surface of the disk. The head, consisting
of a slider attached to a suspension assembly, is generally
referred to as a "head gimbal assembly" or HGA. Multiple HGAs,
assembled together with other components, comprise a "head stack
assembly," or HSA. The Company supplies both HGAs and HSAs to
disk drive manufacturers.
The Company's thin film products are produced in volume
predominantly for 3.5 inch disk drives to achieve information
densities of up to 500 megabits of data per square inch of disk
surface. The Company is actively seeking to become qualified for
the production of higher capacity, low profile 3.5 inch disk
drives for use in next generation PCs and workstations. These
drives will have recording densities of up to 850 megabits per
square inch.
Development and commercialization of MR disk head
technology continues to be a major focus of the Company. MR
drives are expected to have densities of more than 1,000 megabits
per square inch. The Company currently assembles MR HSAs in
Ireland with HGAs provided by another manufacturer. The Company
is currently in production of MR disk heads and continues
development efforts to increase production capabilities.
The Company has also made important progress in the
design and production of new advanced thin film disk heads,
including higher efficiency products that increase the output
signal for a given number of coil turns. Additional advances
have been made in developing "track trimming" processes, which
produce core elements that are both narrower and of more equal
dimensions, allowing the head to write narrower and more densely
packed tracks of data onto the disk surface.
Advances have already been made in the Company's
efforts to develop and offer thin film and MR disk heads with
fully etched air bearing surfaces and other negative pressure air
bearing surfaces. These designs and processes will improve
production yields and permit heads to fly at lower, more uniform
heights or in light contact with the disk, thus contributing to
Page 21 of 137 <PAGE>
higher storage densities and improving the reliability of the
disk head. In addition, the Company has reduced the size of its
recording heads from the "microslider" to the "nanoslider" format
and is working on a further reduction to the "picoslider" format.
Smaller heads allow greater recording densities and higher
throughput in certain manufacturing operations.
TECHNOLOGY
FERRITE DISK HEADS. The Company does not manufacture
ferrite disk sliders, but rather buys ferrite sliders for
assembly into HGAs and HSAs. These heads represent older
technology and generally deliver a lower level of performance
compared to thin film or MR heads. However, recent advances in
ferrite technology have extended the useful life of ferrite heads
for incorporation in more price-competitive, lower capacity disk
drives.
Ferrite HGAs are produced by first manufacturing a
magnetic "core," which is then bonded into a slider "body" to
form the ferrite slider. This is followed by precision winding a
wire coil around the core and attaching the slider to a
suspension assembly to form an HGA.
THIN FILM DISK HEADS. Thin film disk heads are
produced with manufacturing processes adapted from semiconductor
manufacturing. First, ceramic substrates are cut into wafers.
Thin films of highly permeable magnetic material are deposited on
the wafer and electrical coils are electroplated on individual
heads on the wafer in a pattern which is imprinted through
photolithographic techniques. The wafers are then sliced into
individual heads. This process permits significantly greater
miniaturization and permits greater manufacturing precision. As
a result, thin film heads generally can be designed, developed
and manufactured in volume and with greater precision than
ferrite heads.
MR DISK HEADS. The Company is further developing its
magnetoresistive film head technology, which is an advancement
from the current thin film technology. The Company believes that
MR disk heads represent the next important magnetic recording
head technology. In contrast to thin film, which is typically
designed to "read" and "write" data using a single inductive
element, an MR disk head uses an inductive element to "write"
data onto the disk and a separate magnetoresistive element to
"read" data from the disk. MR employs magnetic materials that
vary in electrical resistance when in a magnetic field. MR heads
have the ability to read data at lower media velocities and
narrower track widths than previous technologies, permitting
their use in higher density and smaller disk drives. See "Risk
Factors -- Rapid Technological Changes."
Page 22 of 137 <PAGE>
MANUFACTURING
LOCATION AND VOLUME. The Company's manufacturing and
assembly operations are located in California, Ireland, Korea,
Malaysia and the PRC. During its fiscal year 1995, the Company
supplied HGAs in volume for eight different disk drive products
to three customers and supplied HSAs in volume for nine different
disk drive products to two customers. Over the period, the
Company sold on average 2.1 million HGAs per month (including
HGAs incorporated into HSAs) and on average 150,000 HSAs per
month. Approximately 71% of the Company's HGA shipments during
this period were shipments of nanosliders for use in 3.5 inch
disk drives.
WAFER/DISK HEAD FABRICATION -- THIN FILM AND MR
PRODUCTS. The Company's two wafer fabrication facilities are
located in Goleta, California and produce 150 millimeter
(approximately six-inch) diameter round wafers. Approximately
8,400 individual (unyielded) nanoslider heads can be produced
from one six-inch wafer. During fiscal 1995, the Company closed
its three-inch wafer fabrication operation in favor of the higher
efficiency six-inch production lines.
Completed wafers are sliced into row bars and after
testing are shipped to Penang, Malaysia for further processing.
There, row bars are converted into individual sliders in the
Company's slider fabrication facility. This process involves
high precision grinding and lapping as well as photolithography
and ion milling technologies, which define the critical air
bearing geometries permitting the head to fly within a few
millionths of an inch, or less, of the disk surface.
ASSEMBLY. The Company assembles HGAs and HSAs outside
of the United States. Principal sites are in Penang, Malaysia;
Chung-Ju, South Korea; Dublin, Ireland; and Beijing, PRC.
During fiscal 1995, due principally to growth and
intense local competition for manufacturing and assembly
personnel, the Company experienced a shortage of labor in both
South Korea and Malaysia. In an effort to mitigate this
competition for personnel, the Company has commenced a
manufacturing operation in the PRC. This location was chosen due
to the Company's previous experience with subcontractors in the
PRC and the area's abundance of labor resources.
MARKETING
As a result of the disk drive manufacturers' continuous
development of higher capacity products, head suppliers such as
the Company work closely with drive manufacturers to develop
customized HGAs and HSAs for each new disk drive. The Company
believes that the most effective means of marketing and selling
magnetic recording disk heads is to establish close relationships
with disk drive manufacturers at the engineering level, which
permits technical collaboration and are intended to result in the
Page 23 of 137 <PAGE>
Company's heads being "designed-in" for particular disk drives.
Through its product planning and marketing efforts, the Company
seeks to identify those disk drive programs whose volume and
pricing parameters will allow the Company to most efficiently
allocate its production resources.
The Company's magnetic recording disk heads are sold in
the U.S. and foreign countries by its direct sales personnel and
through subsidiaries in Singapore, Malaysia and Ireland. In
addition, the Company has granted certain exclusive marketing
rights in Japan to Hitachi Metals, Ltd.
RESEARCH AND DEVELOPMENT
In an effort to add to its existing market share, the
Company has and will continue to expend substantial amounts in
connection with its research and development efforts. The
Company's development efforts are devoted to commercialization of
advanced inductive thin film head technology and MR disk head
technology. Research and development expenditures were $32.6
million, $38.8 million and $33.7 million for fiscal years 1993,
1994 and 1995, respectively, before third party funding of $15.1
million in fiscal 1993 and $14.1 million in fiscal 1994.
CAPITAL EXPENDITURES
The Company currently plans approximately $125 million
of capital expenditures, including those financed by operating
leases, in fiscal 1996, primarily to improve inductive thin film
production processes and increase thin film and MR production
volumes. The Company believes that the net proceeds of the
Debenture Offering, together with existing cash balances, cash
flow from operations, existing credit facilities, operating lease
arrangements and the planned sales of certain real property
assets, will be sufficient to fund its planned capital
expenditures in fiscal 1996.
RATIO OF EARNINGS TO FIXED CHARGES
----------------------------------
The Company's ratio of earnings to fixed charges for
each of the periods indicated is as follows:
Page 24 of 137 <PAGE>
<TABLE>
<CAPTION>
Year Ended September 30
1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Fixed Fixed Fixed Fixed
Earnings Charges Earnings Charges Earnings Charges Earnings Charges Earnings Charges
Income (loss) $3,323 $ -- $1,174 $ -- $8,677 $ -- ($51,570) $ -- $2,332 $ --
before
provision for
income taxes
and
extraordinary
charges from
continuing
operations
Add: Fixed 5,803 5,803 5,957 5,958 5,632 5,632 4,216 4,216 4,826 4,826
Charges
Interest
expense
including
amortization of
deferred
financing costs
Interest factor 1,133 1,133 1,133 1,133 1,333 1,133 1,200 1,200 3,400 3,400
in rent expense
<F1>
$10,259 $6,936 $8,264 $7,091 $15,642 $6,965 ($46,154) $5,416 $10,558 $8,226
Ratio of 1.5 1.2 2.2 ___ 1.3
earnings to
fixed charges
Page 25 of 137 <PAGE>
Excess
(Deficiency) of $3,323 $1,173 $8,677 ($51,570) $2,332
earnings to
cover fixed
charges
<F1> Calculated as one-third of minimum rent expense:
Minimum rent $3,400 $3,400 $4,000 $3,600 $10,200
Interest factor x 1/3 x 1/3 x 1/3 x 1/3 x 1/3
$1,133 $1,133 $1,133 $1,200 $3,400
Six Months Ended
March 31, 1995 March 30, 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Fixed
Charges Earnings Charges
Earnings
Income (loss) ($14,006) $-- $18,007 $--
before
provision for
income taxes
and
extraordinary
charges from
continuing
operations
Add: Fixed 2,080 2,080 2,719 2,719
Charges
Interest
expense
including
amortization of
deferred
financing costs
Page 26 of 137 <PAGE>
Interest factor 1,688 1,688 2,300 2,300
in rent expense
<F1> ($10,238) $3,768 $23,026 $5,019
Ratio of 4.6
earnings to
fixed charges
Excess ($14,006) $18,007
(Deficiency) of
earnings to
cover fixed
charges
<F1> Calculated as one-third of minimum rent expense:
Minimum rent $5,064 $6,899
Interest factor x 1/3 x 1/3
$1,688 $2,300
</TABLE>
Page 27 of 137 <PAGE>
The ratio of earnings to fixed charges is computed by
dividing fixed charges into earnings from continuing operations
before income taxes, minority interest and extraordinary items
plus fixed charges. Fixed charges consist of interest expense,
amortization of financing costs and the estimated interest
component of rent expense.
USE OF PROCEEDS
---------------
The Company will not receive any of the proceeds from
the sales of the Debentures or the Shares by the Selling
Securityholders. See "Selling Securityholders" for a list of
those persons and entities receiving the proceeds from the sales
of the Debentures or the Shares.
DESCRIPTION OF THE DEBENTURES
-----------------------------
On March 22, 1996, the Company issued and sold
$93,000,000 (aggregate principal amount) of the Debentures to
"qualified institutional buyers" (as defined in Rule 144A under
the Securities Act) ("QIBs") and other "accredited investors" (as
defined in Rule 501(a) of Regulation D under the Securities Act)
("Accredited Investors") in a private placement as part of an
offering of 7% Convertible Subordinated Debentures offered by the
Company in the aggregate principal amount of $115,000,000 (the
"Debenture Offering"). All references to the term, "Debentures,"
in this section will refer to the entire issue of 7% Convertible
Subordinated Debentures, and not just to the Debentures offered
hereby. The Debentures are issued and outstanding under an
Indenture dated as of March 22, 1996 (the "Indenture"), between
the Company and The Chase Manhattan Bank, N.A., as Trustee (the
"Trustee"). Neither the Trustee nor any of its affiliates is
affiliated with or has any material relationship with the Company
or any of the Company's affiliates. The terms of the Debentures
and the Indenture are discussed in detail herein. The Indenture
is included as an exhibit to the Registration Statement of which
this Prospectus is a part. The following description of the
Debentures and the Indenture is qualified in its entirety by
reference to the Indenture. Capitalized terms used herein
without definition have the meaning ascribed to them in the
Indenture and/or in "Description of the Debentures -- Certain
Definitions" below.
General
-------
The Debentures are unsecured general obligations of the
Company, limited in aggregate principal amount to $115,000,000
(including the Initial Purchasers' over-allotment option) and
Page 28 of 137 <PAGE>
mature on March 15, 2006. The Debentures are subordinated in
right of payment to all existing and future Senior Indebtedness
of the Company, as described under "Subordination" below. At
June 29, 1996, Senior Indebtedness of the Company and
indebtedness of its subsidiaries aggregated $49.5 million.
Neither the Indenture nor the Debentures limit the amount of
Senior Indebtedness or other indebtedness that the Company or its
subsidiaries may incur.
The Debentures bear interest at the rate per annum
stated on the cover page of this Prospectus from the date of
original issuance of Debentures pursuant to the Indenture or from
the most recent Interest Payment Date to which interest has been
paid or provided for, payable semiannually in arrears on March 15
and September 15 of each year, commencing on September 15, 1996.
Interest will be calculated on the basis of a 360-day year
consisting of twelve 30-day months. The interest payable on
September 15, 1996, will amount to $33.639 per $1,000 principal
amount of the Debentures, and on each March 15 and September 15
thereafter will amount to $35.000 per $1,000 principal amount of
the Debentures.
Subordination
-------------
The Debentures are obligations exclusively of the
Company and not of its subsidiaries. The Company's subsidiaries
are separate and distinct legal entities and have no obligation,
contingent or otherwise, to pay any amounts due pursuant to the
Debentures or to make funds available therefor, whether by
dividends, loans or other payments. In addition, the payment of
dividends and the making of loans and advances to the Company by
its subsidiaries may be subject to statutory or contractual
restrictions, are contingent upon the earnings of those
subsidiaries and are subject to various business considerations.
Neither the Indenture nor the Debentures restrict the Company's
subsidiaries' ability to agree to such restrictions in the
future.
The Debentures are subordinated in right of payment to
all existing and future Senior Indebtedness of the Company and
rank PARI PASSU with other unsecured subordinated indebtedness of
the Company. The rights of holders of Debentures are
structurally subordinated to all existing and future liabilities
(including trade payables and commitments under leases) of the
Company's subsidiaries. Neither the Indenture nor the Debentures
restrict the incurrence of Senior Indebtedness or other
indebtedness by the Company or its subsidiaries. Any right of
the Company to receive assets of any of its subsidiaries upon
liquidation or reorganization of the subsidiary (and the
consequent right of the holders of the Debentures to participate
in those assets) will be effectively subordinated to the claims
of that subsidiary's creditors, except to the extent that the
Company is itself recognized as a creditor of such subsidiary, in
which case the claims of the Company would still be subject to
any security interests in the assets of such subsidiary and
Page 29 of 137 <PAGE>
subordinated to any indebtedness of such subsidiary senior to
that held by the Company.
The Indenture provides that no payment may be made by
the Company on account of the principal of, premium, if any,
interest on, or Additional Amounts (as defined herein) with
respect to, the Debentures, or to acquire any of the Debentures
(including repurchases of Debentures at the option of the holder
thereof) for cash or property (other than Junior Securities (as
defined herein)), or on account of the redemption provisions of
the Debentures, (i) upon the maturity of any Senior Indebtedness
of the Company by lapse of time, acceleration (unless waived) or
otherwise, unless and until all principal of, premium, if any,
and interest on such Senior Indebtedness and all other
Obligations in respect thereof are first paid in full (or such
payment is duly provided for), or (ii) in the event of default in
the payment of any principal of, premium, if any, interest on, or
any other Obligation in respect of, any Senior Indebtedness of
the Company when it becomes due and payable, whether at maturity
or at a date fixed for prepayment or by declaration or otherwise
(a "Payment Default"), unless and until such Payment Default has
been cured or waived or otherwise has ceased to exist.
Upon (i) the happening of an event of default (other
than a Payment Default) that permits the holders of Designated
Senior Indebtedness or their representative immediately to
accelerate its maturity and (ii) written notice of such event of
default given to the Company and the Trustee, by the requisite
holders of such Designated Senior Indebtedness or their
representative (a "Payment Notice"), then, unless and until such
event of default has been cured or waived or otherwise has ceased
to exist, no payment (by setoff or otherwise) may be made by or
on behalf of the Company on account of the principal of, premium,
if any, interest on, or Additional Amounts with respect to, the
Debentures, or to acquire or repurchase any of the Debentures for
cash or property, or on account of the redemption provisions of
the Debentures, in any such case other than payments made with
Junior Securities of the Company. Notwithstanding the foregoing,
unless (i) the Designated Senior Indebtedness in respect of which
such event of default exists has been declared due and payable in
its entirety within 179 days after the Payment Notice is
delivered as set forth above (the "Payment Blockage Period"), and
(ii) such declaration has not been rescinded or waived, at the
end of the Payment Blockage Period the Company shall be required
to pay all sums not paid to the holders of the Debentures during
the Payment Blockage Period due to the foregoing prohibitions and
to resume all other payments as and when due on the Debentures.
Any number of Payment Notices may be given; provided, however,
that (i) not more than one Payment Notice shall be given within
any period of 360 consecutive days, and (ii) no default that
existed upon the commencement of a Payment Blockage Period
(whether or not such event of default is on the same issue of
Designated Senior Indebtedness) shall be made the basis for the
commencement of any other Payment Blockage Period.
Page 30 of 137 <PAGE>
In the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Company (other than
Junior Securities) shall be received by the Trustee or the
holders of Debentures or any paying agent at a time when such
payment or distribution is prohibited by the foregoing
provisions, such payment or distribution shall be held in trust
for the benefit of the holders of Senior Indebtedness of the
Company, and shall be paid or delivered by the Trustee or such
holders of Debentures or such paying agent, as the case may be,
to the holders of the Senior Indebtedness of the Company
remaining unpaid or unprovided for or to their representative or
representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any of
such Senior Indebtedness of the Company may have been issued,
ratably according to the aggregate amounts remaining unpaid on
account of the Senior Indebtedness of the Company held or
represented by each, for application to the payment of all Senior
Indebtedness of the Company remaining unpaid, to the extent
necessary to pay or to provide for the payment of all such Senior
Indebtedness in full after giving effect to any concurrent
payment or distribution to the holders of such Senior
Indebtedness.
Upon any distribution of assets of the Company upon any
dissolution, winding up, total or partial liquidation or
reorganization of the Company, whether voluntary or involuntary,
in bankruptcy, insolvency, receivership or a similar proceeding
or upon assignment for the benefit of creditors or any marshaling
of assets or liabilities, (i) the holders of all Senior
Indebtedness of the Company will first be entitled to receive
payment in full (or have such payment duly provided for) before
the holders of Debentures are entitled to receive any payment on
account of the principal of, premium, if any, interest on, or
Additional Amounts with respect to, the Debentures (other than
Junior Securities) and (ii) any payment or distribution of assets
of the Company of any kind or character, whether in cash,
property or securities (other than Junior Securities) to which
the holders of Debentures or the Trustee on their behalf would be
entitled (by setoff or otherwise), except for the subordination
provisions contained in the Indenture and the Debentures, will be
paid by the liquidating trustee or agent or other person making
such a payment or distribution directly to the holders of Senior
Indebtedness of the Company or their representative to the extent
necessary to make payment in full of all such Senior Indebtedness
remaining unpaid, after giving effect to any concurrent payment
or distribution to the holders of such Senior Indebtedness.
No provision contained in the Indenture or the
Debentures affects the obligation of the Company, which is
absolute and unconditional, to pay, when due, principal of,
premium, if any, interest on, and Additional Amounts with respect
to, the Debentures. The subordination provisions of the
Indenture and the Debentures do not prevent the occurrence of any
default or Event of Default or limit the rights of any holder of
Debentures, subject to the four immediately preceding paragraphs,
Page 31 of 137 <PAGE>
to pursue any other rights or remedies with respect to the
Debentures.
As a result of these subordination provisions, in the
event of the liquidation, bankruptcy, reorganization, insolvency,
receivership or similar proceeding or an assignment for the
benefit of the creditors of the Company or any of its
subsidiaries or a marshaling of assets or liabilities of the
Company and its subsidiaries, holders of the Debentures may
receive ratably less than other creditors.
Delivery and Form of Debentures
-------------------------------
A portion of the Debentures were sold to QIBs in
reliance on Rule 144A under the Securities Act and were initially
deposited with, or on behalf of, The Depository Trust Company
("DTC") and registered in the name of Cede & Co., as DTC's
nominee (such nominee being referred to herein as the "Rule 144A
Global Security Holder"), in the form of a global Debenture (the
"Rule 144A Global Debenture"). Interests in the Rule 144A Global
Debenture will be shown in, and transfers thereof will be
effected only through, records maintained by DTC and its
participants ("participants"). Only QIBs may elect to hold
Debentures through the Depository. Debentures purchased by
(i) institutional accredited investors that are not QIBs and
(ii) persons outside the United States in offshore transactions
pursuant to Regulation S under the Securities Act ("Regulation S
Purchasers") are represented by Debentures issued in definitive
registered form. Only Debentures held by QIBs may be represented
by the Rule 144A Global Debenture. The Rule 144A Global
Debenture will be reduced in principal amount to reflect the
subsequent transfer by owners of beneficial interest in the
Rule 144A Global Debenture to a Regulation S Purchaser or another
person who is not a QIB. Transfer of the Debentures must be made
in accordance with the Indenture.
The Depository is a limited-purpose trust company that
was created to hold securities for its participating
organizations (collectively, the "Participants" or the
"Depository's Participants") and to facilitate the clearance and
settlement of transactions in such securities between
Participants through electronic book-entry changes in accounts of
its Participants. The Depository's Participants include
securities brokers and dealers, banks and trust companies,
clearing corporations and certain other organizations. Access to
the Depository's system is also available to other entities such
as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants" or the "Depository's Indirect
Participants") that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly.
Persons who are not Participants may beneficially own securities
held by or on behalf of the Depository only through the
Depository's Participants or the Depository's Indirect
Participants.
Page 32 of 137 <PAGE>
So long as the Rule 144A Global Security Holder is the
registered owner of the Rule 144A Debentures, the Rule 144A
Global Security Holder will be considered the sole holder under
the Indenture of the Debentures. Beneficial owners of Debentures
will not be considered the owners or holders thereof under the
Indenture for any purpose, including with respect to the giving
of any directions, instructions or approvals to the Trustee.
Neither the Company nor the Trustee will have any responsibility
or liability for any aspect of the records of the Depository or
for maintaining, supervising or reviewing any records of the
Depository relating to the Debentures.
Payments in respect of the principal of, premium, if
any, interest on, and Additional Amounts with respect to, the
Debentures registered in the name of the Rule 144A Global
Security Holder on the applicable record date will be payable by
the Trustee to or at the direction of the Rule 144A Global
Security Holder in its capacity as the registered holder under
the Indenture. Under the terms of the Indenture, the Company and
the Trustee may treat the persons in whose names the Debentures,
including the Rule 144A Global Security, are registered as the
owners thereof for the purpose of receiving such payments.
Consequently, neither the Company nor the Trustee has or will
have any responsibility or liability for the payment of such
amounts to beneficial owners of Debentures. The Company
believes, however, that it is currently the policy of the
Depository immediately to credit the accounts of the relevant
Participants with such payments, in amounts proportionate to
their respective holdings of beneficial interests in the relevant
security as shown on the records of the Depository. Payments by
the Depository's Participants and the Depository's Indirect
Participants to the beneficial owners of Debentures will be
governed by standing instructions and customary practice and will
be the responsibility of the Depository's Participants or the
Depository's Indirect Participants.
Exchange and Transfer
---------------------
At the option of the Holder and subject to the terms of
the Debentures and of the Indenture, the Debentures will be
exchangeable for an equal aggregate principal amount of
Debentures of different authorized denominations, in each case
without service charge (other than the cost of delivery) and upon
payment of any taxes and other governmental charges. Debentures
shall be registered as provided in the Indenture. The Holder of
a Debenture will be treated by the Company, the Trustee and their
respective agents for all purposes as the owner of such
Debenture.
The transfer of Debentures may be registered, and
Debentures may be presented in exchange for other Debentures of
different authorized denominations, at the office of the Trustee
in The City of New York, without service charge (other than the
cost of delivery) and upon payment of any taxes or other
governmental charges.
Page 33 of 137 <PAGE>
Subject to certain conditions, any person having a
beneficial interest in the Rule 144A Global Security may, upon
request to the Trustee, exchange such beneficial interest for
Debentures in the form of certificated Debentures. Upon any such
issuance, the Trustee is required to register such certificated
Debentures in the name of, and cause the same to be delivered to,
such person or persons (or the nominee of any thereof). All such
certificated Debentures will be subject to the legend
requirements described herein under "Notice to Investors." In
addition, if (i) the Company notifies the Trustee in writing that
the Depository is no longer willing or able to act as a
depository and the Company has not appointed a qualified
successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the
issuance of Debentures in the form of certificated Debentures
under the Indenture, then, upon surrender by the Rule 144A Global
Security Holder of the Rule 144A Global Security, Debentures in
certificated form will be issued to each person that the
Rule 144A Global Security Holder and the Depository identify as
being the beneficial owner of the related Debentures.
Neither the Company nor the Trustee will be liable for
any delay by the Rule 144A Global Security Holder or the
Depository in identifying the beneficial owners of Rule 144A
Debentures, and the Company and the Trustee may conclusively rely
on, and will be protected in relying on, instructions from the
Rule 144A Global Security Holder or the Depository for all
purposes.
Conversion
----------
The Debentures are convertible, at any time one year
after the date of original issuance of the Debentures pursuant to
the Indenture and prior to redemption or maturity, at the
holder's option, into shares of the Company's Common Stock at the
Conversion Price, provided that the Debentures may be converted
prior to such time upon the earlier of (i) the first date on
which a registration statement with respect to such Debentures is
declared effective by the U.S. Securities and Exchange Commission
and (ii) the day after the first date on which (A) any person (or
group of persons) announces that it is (or they are) commencing a
tender offer for all or part of the Company's Common Stock or (B)
the Company makes a public announcement of a proposed Change of
Control. The Conversion Price is subject to adjustment under
certain conditions. The right to convert a Debenture called for
redemption or delivered for repurchase will terminate at the
close of business on the Business Day next preceding the
redemption date or repurchase date for such Debenture.
If after April 1, 1999 and prior to maturity, the
closing price of the Company's Common Stock (determined as the
last reported sales price, in either case on the New York Stock
Exchange or, if the Common Stock is not listed or admitted to
trading on such Exchange, on the principal national securities
Page 34 of 137 <PAGE>
exchange on which the Common Stock is listed or admitted to
trading or, if not listed or admitted to trading on any national
securities exchange, the closing sale price quoted on the Nasdaq
Stock Market's National Market) exceeds an amount equal to 130%
of the Conversion Price for at least 20 trading days within 30
consecutive trading days, the Company at its option may convert
all (but not less than all) of the Debentures, together with
interest accrued and unpaid thereon, into fully paid and
nonassessable shares of Common Stock by giving the Trustee
written notice of its election together with information and
calculations supporting such election (the "Conversion Notice")
no later than five business days after the 20th such day (the
"Conversion Date").
Promptly after (and in any event within five business
days following) its receipt and verification of the Conversion
Notice, the Trustee shall mail notice of the Company's election
to each holder of a Debenture. Such notice shall, among things,
state (i) that the Trustee has received the Conversion Notice and
that, so long as the Company delivers a sufficient number of
shares of Common Stock (and cash in lieu of fractional shares) to
convert all outstanding Debentures and accrued and unpaid
interest thereon at the Conversion Price in effect on the first
business day following the Conversion Date by the 25th business
day following the Conversion Date (the "Surrender Date"), all
(but not less than all) Debentures shall be deemed to have been
converted on the Conversion Date, (ii) the identity of the
conversion agent for the conversion and the office or offices of
such conversion agent at which Debentures may be surrendered for
shares of Common Stock (and cash in lieu of fractional shares)
and (iii) that upon surrender to such conversion agent of such
holder's Debenture(s) and a duly completed notice of conversion
in the form attached to such holder's Debenture(s), such holder
shall receive its shares of Common Stock (and cash in lieu of
fractional shares) resulting from the Company's election to
convert all outstanding Debentures. See "-- Notices" below.
So long as the Company delivers to the applicable
conversion agent by the Surrender Date a sufficient number of
shares of Common Stock (and cash in lieu of fractional shares) to
convert all outstanding Debentures and accrued and unpaid
interest thereon through the Surrender Date at the Conversion
Price in effect on the Conversion Date, all (but not less than
all) Debentures shall be deemed to have been converted on the
Conversion Date and interest shall cease to accrue on the
Debentures from and after the Surrender Date.
The right of conversion attaching to any Debenture may
be exercised by the holder thereof by delivering the Debenture at
the specified office of a conversion agent (including such office
in Luxembourg, as described under "-- Payments, Paying Agents and
Conversion Agents" below), accompanied by a duly signed and
completed notice of conversion, in substantially the form set
forth in the Debentures. The conversion date shall be the date
Page 35 of 137 <PAGE>
on which the Debenture and the duly signed and completed notice
of conversion shall have been so delivered.
A holder delivering a Debenture for conversion will not
be required to pay any taxes or duties payable in respect of the
issuance or delivery of Common Stock on conversion but will be
required to pay any tax or duty which may be payable in respect
of any transfer involved in the issuance or delivery of the
Common Stock in a name other than that of the holder of the
Debenture. Certificates representing shares of Common Stock will
not be issued or delivered unless all taxes and duties, if any,
payable by such holder have been paid. Such certificates will be
delivered to the address specified by such holder in its
completed notice of conversion.
The Company shall not be required to make any payment
of interest in respect of any Debenture that is converted at the
option of the holder thereof on or prior to the Interest Payment
Date for the relevant period. In the case of any Debenture that
has been converted at the option of the holder thereof after any
Interest Record Date, but before the next Interest Payment Date,
interest, the stated due date of which is on such Interest
Payment Date, shall be payable on such Interest Payment Date
notwithstanding such conversion, and such interest shall be paid
to the holder of such Debenture who is a holder on such Interest
Record Date. Any Debenture so converted prior to such Interest
Payment Date must be accompanied by payment of an amount equal to
the interest payable on such Interest Payment Date on the
principal amount of Debentures being surrendered for conversion.
The Conversion Price will be subject to adjustment in
certain events, including (a) dividends (and other distributions)
payable in Common Stock on any class of capital stock of the
Company, (b) the issuance to all holders of Common Stock of
rights, options or warrants entitling them to subscribe for or
purchase Common Stock (or securities convertible into Common
Stock) at less than the then current market price (as determined
in accordance with the Debentures) unless holders of Debentures
are entitled to receive the same upon conversion,
(c) subdivisions, combinations and reclassifications of Common
Stock and (d) distributions to all holders of Common Stock of
evidences of indebtedness of the Company or assets (including
securities, but excluding those rights, options, warrants,
dividends and distributions referred to above, dividends and
distributions paid in cash out of the retained earnings of the
Company and regular quarterly dividends consistent with past
practice). In addition to the foregoing adjustments, the Company
will be permitted to make such downward adjustments in the
Conversion Price as it considers to be advisable in order that
any event treated for United States federal income tax purposes
as a dividend of stock or stock rights will not be taxable to the
holders of the Common Stock. Adjustments in the Conversion Price
of less than $0.25 will not be required, but any adjustment that
would otherwise be required to be made will be taken into account
in the computation of any subsequent adjustment. Fractional
Page 36 of 137 <PAGE>
shares of Common Stock are not to be issued or delivered upon
conversion, but, in lieu thereof, a cash adjustment will be paid
based upon the then current market price of Common Stock.
Subject to the foregoing, no payments or adjustments will be made
upon conversion on account of accrued interest on the Debentures
or for any dividends or distributions on any shares of Common
Stock delivered upon such conversion. Notice of any adjustment
of the Conversion Price will be given in the manner set forth
herein under "-- Notices" below.
Conversion Price adjustments or omissions in making
such adjustments may, under certain circumstances, be deemed to
be distributions that could be taxable as dividends under the
Internal Revenue Code to holders of Debentures or of Common
Stock.
If at any time the Company makes a distribution of
property to its stockholders that would be taxable to such
stockholders as a dividend for United States federal income tax
purposes (e.g., distribution of evidences of indebtedness or
assets of the Company, but generally not stock dividends or
rights to subscribe for Common Stock) and, pursuant to the
antidilution provisions of the Debentures, the Conversion Price
of the Debentures is reduced, such reduction may be deemed to be
the payment of a taxable dividend to holders of Debentures. Such
a deemed dividend might be subject to 30% (or then applicable)
United States withholding tax unless the holder is entitled to a
reduction of the tax under a tax treaty.
In the event that the Company should merge with another
company, become a party to a consolidation or sell or transfer
all or substantially all of its assets to another company, each
Debenture then outstanding would, without the consent of any
holder of Debentures, become convertible only into the kind and
amount of securities, cash and other property receivable upon the
merger, consolidation or transfer by a holder of the number of
shares of Common Stock into which such Debenture might have been
converted immediately prior to such merger, consolidation or
transfer.
Redemption
----------
Unless previously redeemed, converted or purchased and
canceled by the Company, the Debentures will mature on March 15,
2006 and shall be redeemed at their principal amount.
Optional Redemption
-------------------
The Debentures may be redeemed, at the option of the
Company, in whole or in part, at any time after April 1, 1999, at
a redemption price equal to that percentage of their principal
amount set forth below, together with accrued and unpaid interest
to the date fixed for redemption and Additional Amounts (as
defined herein), if any, that are due and payable upon notice as
described below:
Page 37 of 137 <PAGE>
Redemption
After April 1, Price
-------------- ----------
1999 . . . . . . . . . . . . . . . . . 103%
2000 . . . . . . . . . . . . . . . . . 102%
2001 . . . . . . . . . . . . . . . . . 101%
2002 and thereafter . . . . . . . . . . 100%
In the event of a partial redemption, the Debentures to be
redeemed will be selected by the Trustee not more than 75 days
before the date fixed for redemption, by such method as the
Trustee shall deem fair and appropriate.
The Debentures may also be redeemed upon the occurrence
of a Change of Control, at the option of the Company, in whole
but not in part, prior to April 1, 1999 at the redemption prices
(expressed as percentages of the principal amount) set forth
below, in each case, together with accrued and unpaid interest to
the date fixed for redemption and Additional Amounts, if any,
that are due and payable:
Redemption
Redemption Date Price
-------------- ----------
Closing Date to October 1, 1996 . . . 124.00%
October 2, 1996 to April 1, 1997 . . . 120.50%
April 2, 1997 to October 1, 1997 . . . 117.00%
October 2, 1997 to April 1, 1998 . . . 113.50%
April 2, 1998 to October 1, 1998 . . . 110.00%
October 2, 1998 to April 1, 1999 . . 106.50%
If at any time, the Company shall determine that as a
result of any change in or amendment to the laws (or any
regulations or rulings promulgated thereunder) of the United
States or any political subdivision or taxing authority thereof
or therein affecting taxation, or any amendment to, or change in,
an official application or interpretation of such laws,
regulations or rulings, which amendment or change is announced or
becomes effective on or after the date of this Prospectus, the
Company has or will become obligated to pay Additional Amounts on
any Debentures, as described below under "Payment of Additional
Amounts," and such obligation cannot be avoided by the Company
taking reasonable measures available to it then the Company may,
at its election, redeem such Debentures (as a whole but not in
part) upon notice as described below; provided, however, that no
such notice of redemption shall be given earlier than 90 days
prior to the earliest date on which the Company would be
obligated to pay such Additional Amounts were a payment in
respect of the Debentures then due; and provided further, that at
the time such notice is given, such obligation to pay such
Additional Amounts remains in effect. In case of any such
redemption, the redemption price will be 100% of the principal
Page 38 of 137 <PAGE>
amount of the Debentures, together in each case with accrued and
unpaid interest to the date fixed for redemption and any
Additional Amounts due and payable. The Company is required to
deliver to the Trustee a certificate stating that the Company is
entitled to effect such redemption and that the conditions
precedent to the right of the Company to redeem the Debentures
have occurred and an opinion of counsel stating that the legal
conditions precedent to the right of the Company to effect such
redemption have occurred.
Notices of Redemption
---------------------
Notice of intention to redeem Debentures will be given
as described under "-- Notices" below. In the case of redemption
of all Debentures, notice will be given once not more than 60 nor
less than 30 days prior to the date fixed for redemption. In the
case of a partial redemption, notice will be given twice, the
first such notice to be given not more than 90 nor less than 45
days prior to the date fixed for redemption and the second such
notice to be given not more than 45 nor less than 30 days prior
to the date fixed for redemption.
Notices of redemption will specify the date fixed for
redemption, the applicable redemption price, the date on which
the conversion privilege expires and, in the case of a partial
redemption, the aggregate principal amount of Debentures to be
redeemed and the aggregate principal amount of Debentures which
will be outstanding after such partial redemption. In addition,
in the case of a partial redemption, the first notice will
specify the last date on which exchanges or transfers of
Debentures may be made pursuant to the provisions of "-- Exchange
and Transfer" above and the second notice will specify the serial
numbers of the Debentures and the portions thereof called for
redemption.
As used herein, "United States" means the United States
of America (including the states and the District of Columbia),
its territories and, its possessions. The term "Foreign Holder"
means any person who, for United States federal income tax
purposes, is (i) a foreign corporation, (ii) a foreign
partnership one or more of the members of which are, for United
States federal income tax purposes, foreign corporations, non-
resident alien individuals or non-resident alien fiduciaries of a
foreign estate or trust, (iii) a non-resident alien individual or
(iv) a non-resident alien fiduciary of a foreign estate or trust.
In addition, the Company may at any time and from time
to time repurchase the Debentures in the open market or in
private transactions at prices it considers attractive.
Debentures repurchased by the Company will be canceled.
Change of Control
-----------------
Each holder of a Debenture will have the right, at such
holder's option, to cause the Company to purchase such Debenture,
Page 39 of 137 <PAGE>
in whole but not in part, for a cash amount equal to 100% of the
principal amount, together with accrued and unpaid interest to
the repurchase date, if a Change of Control (as defined herein)
occurs or has occurred. Notice with respect to the occurrence of
a Change of Control will be given as described under "-- Notices"
below and not later than 30 days after the date of the occurrence
of such Change of Control. The date fixed for such purchase will
be a date not less than 30 nor more than 60 days after notice of
the occurrence of a Change of Control is given (except as
otherwise required by law). To be purchased, a Debenture must be
received with a duly executed written notice, substantially in
the form provided on the reverse side of such Debenture, at the
office of a paying agent not later than the fifth day prior to
the date fixed for such purchase. All Debentures purchased by
the Company will be canceled. Holders of Debentures who have
tendered a notice of purchase will be entitled to revoke their
election by delivering a written notice of such revocation to a
paying agent on or prior to the date fixed for such purchase. In
addition, holders of Debentures will retain the right to require
such Debentures to be converted into Common Stock (or other
securities, property or cash payable in lieu thereof by reference
to the adjustment price as provided under the adjustment
provision, see "-- Conversion") prior to the purchase date, so
long as notice to that effect, including such holder's
nontransferable receipt for the Debentures from a paying agent,
is delivered to a paying agent on or prior to the close of
business on the fifth day next preceding the applicable
Redemption Date.
The Indenture provides that a "Change of Control" will
be deemed to have occurred (i) upon any merger or consolidation
of the Company with or into any person or any sale, transfer or
other conveyance, whether direct or indirect, of all or
substantially all of the assets of the Company, on a consolidated
basis, in one transaction or a series of related transactions,
if, immediately after giving effect to such transaction, any
"person" or "group" (as such terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, whether or not
applicable) is or becomes the "beneficial owner," directly or
indirectly, of more than 50% of the total voting power in the
aggregate normally entitled to vote in the election of directors,
managers, or trustees, as applicable, of the transferee or
surviving entity, (ii) when any "person" or "group" (as such
terms are used for purposes of Sections 13(d) and 14(d) of the
Exchange Act, whether or not applicable) is or becomes the
"beneficial owner," directly or indirectly, of more than 50% of
the total voting power in the aggregate normally entitled to vote
in the election of directors of the Company, or (iii) when,
during any period of 12 consecutive months after the Closing
Date, individuals who at the beginning of any such 12-month
period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board or
whose nomination for election by the stockholders of the Company
was approved by a vote of a majority of the directors then still
in office who were either directors at the beginning of such
Page 40 of 137 <PAGE>
period or whose election or nomination for election was
previously so approved), cease for any reason to constitute a
majority of the Board of Directors of the Company then in office.
The phrase "all or substantially all" of the assets of
the Company is likely to be interpreted by reference to
applicable state law at the relevant time, and will be dependent
on the facts and circumstances existing at such time. As a
result, there may be a degree of uncertainty in ascertaining
whether a sale or transfer of "all or substantially all" of the
assets of the Company has occurred. For purposes of this
definition, (i) the terms "person" and "group" shall have the
meaning used for purposes of Rules 13d-3 and 13d-5 of the
Exchange Act as in effect on the Closing Date, whether or not
applicable; and (ii) the term "beneficial owner" shall have the
meaning used in Rules 13d-3 and 13d-5 under the Exchange Act as
in effect on the Closing Date, whether or not applicable, except
that a "person" shall be deemed to have "beneficial ownership" of
all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage
of time or upon the occurrence of certain events.
The Change of Control provisions described above may
make more difficult or discourage a takeover of the Company, and,
thus, the removal of incumbent management. The Change of Control
provisions will not prevent a leveraged buyout led by Company
management, a recapitalization of the Company or change in a
majority of the members of the Board of Directors which is
approved by then-current Board of Directors and may not afford
the holders of Debentures protection in the event of a highly
leveraged transaction, reorganization, restructuring, merger,
spin-off or similar transaction that may adversely affect such
holders, if such transaction does not constitute a Change of
Control as set forth above.
The Company is required to comply with the provisions
of Rule 13e-4 and any other tender offer rules under the Exchange
Act which may then be applicable and is required to file a
Schedule 13E-4 or any other schedule required thereunder in
connection with any offer by the Company to purchase Debentures
at the option of holders thereof upon a Change of Control. The
Change of Control purchase feature is not however, as of the date
of this Prospectus, the result of management's knowledge of any
specific efforts to accumulate shares of Common Stock or to
obtain control of the Company by means of a merger, tender offer,
solicitation of proxies or consents or otherwise, or part of a
plan to implement a series of anti-takeover measures.
Certain of the Company's existing and future agreements
relating to its indebtedness could prohibit the purchase by the
Company of the Debentures pursuant to the exercise by a holder of
Debentures of the foregoing option, depending on the financial
circumstances of the Company at the time any such purchase may
occur, because such purchase could cause a breach of certain
covenants contained in such agreements. Such a breach may
Page 41 of 137 <PAGE>
constitute an event of default under such indebtedness as a
result of which any repurchase could, absent a waiver, be blocked
by the subordination provision of the Debentures. See
"-- Subordination." Failure of the Company to repurchase the
Debentures when required would result in an Event of Default with
respect to the Debentures whether or not such repurchase is
permitted by the subordination provisions.
Payments, Paying Agents and Conversion Agents
---------------------------------------------
The principal of, premium, if any, and interest on
Debentures will be payable in United States dollars. Payments of
such principal and premium, if any, will be made against
surrender of Debentures at the corporate trust office of the
Trustee in The City of New York or, subject to any applicable
laws and regulations, at the offices of the paying agents in
London or Luxembourg (or such other paying agencies as may be
specified in notices to the holders of Debentures in accordance
with "-- Notices" below) by United States dollar check drawn on,
or wire transfer to a United States dollar account maintained by
the holder with, a bank located in The City of New York.
Payments of any installment of interest on Debentures will be
made by a United States dollar check drawn on a bank in The City
of New York mailed to the holder at such holder's registered
address or (if arrangements satisfactory to the Company and the
Trustee are made) by wire transfer to a dollar account maintained
by the holder with a bank in The City of New York. Payment of
such interest on any Interest Payment Date will be made to the
person in whose name such Debenture is registered at the close of
business on the Interest Record Date prior to the relevant
Interest Payment Date. Accrued interest payable on any Debenture
that is redeemed will be payable against surrender of such
Debenture in the manner described above with respect to payments
of principal on Debentures, except Debentures that are redeemed
on a date after the close of business on the Interest Record Date
immediately preceding such Interest Payment Date and on or before
the Interest Payment Date, on which interest will be paid to the
holder of record on the Interest Record Date.
The Debentures may be surrendered for conversion or
exchange at the corporate trust office of the Trustee in The City
of New York or, at the option of the holder and subject to
applicable laws and regulations, at the office of any of the
conversion agents.
The Company has initially appointed the Trustee as
paying agent and conversion agent. This appointment may be
terminated at any time and additional or other paying and
conversion agents may be appointed, provided that until the
Debentures have been delivered for cancellation, or monies
sufficient to pay the principal of and premium, if any, and
interest on the Debentures have been made available for payment
and either paid or returned to the Company as provided in the
Indenture, a paying, conversion and transfer agent will be
maintained (a) in The City of New York for the payment of the
Page 42 of 137 <PAGE>
principal of and premium, if any, and interest on Debentures only
and for the surrender of Debentures for conversion and (b) in a
European city that, so long as the Debentures are listed on the
Luxembourg Stock Exchange, will be Luxembourg, for the payment of
the principal of and premium, if any, and interest on Debentures
and for the surrender of Debentures for conversion, payment,
redemption or transfer. Notice of any such termination or
appointment and of any change in the office through which any
paying, conversion, or transfer agent will act will be given in
accordance with "-- Notices" below.
All monies paid by the Company to a paying agent for
the payment of principal of, premium, if any, or interest on any
Debenture that remain unclaimed at the end of two years after
such principal, premium or interest shall have become due and
payable will be repaid to the Company, and the holder of such
Debenture will thereafter look only to the Company for payment
thereof.
Payment of Additional Amounts
-----------------------------
The Company will pay to the holder of any Debenture who
is a Foreign Holder (as defined above) such additional amounts
("Additional Amounts") as may be necessary in order that every
net payment of the principal of, interest on, of redemption price
of, such Debenture, and any cash payments made in lieu of issuing
shares of Common Stock upon conversion of a Debenture, after
withholding for or on account of any present or future tax,
assessment or governmental charge imposed upon or as a result of
such payment by the United States or any political subdivision or
taxing authority thereof or therein, will not be less than the
amount provided for in such Debenture to be then due and payable;
provided, however, that the foregoing obligations to pay
Additional Amounts shall not apply to any one or more of the
following:
(a) any tax, assessment or other governmental
charge which would not have been so imposed but for (i) the
existence of any present or former connection between such
holder (or between a fiduciary, settlor, beneficiary, member
or stockholder of, or a person holding a power over, such
holder, if such holder is an estate, trust, partnership or
corporation) and the United States, including, without
limitation, such holder (or such fiduciary, settlor,
beneficiary, member, stockholder or person holding a power)
being or having been a citizen or resident or treated as a
resident thereof or being or having been engaged in a trade
or business therein or being or having been present therein
or having had a permanent establishment therein, (ii) such
holder's present or former status as a personal holding
company, foreign personal holding company, passive foreign
investment company, foreign private foundation or other
foreign tax-exempt entity, or controlled foreign corporation
for United States federal income tax purposes or a
corporation which accumulates earnings to avoid United
Page 43 of 137 <PAGE>
States federal income tax, or (iii) such holder's status as
a bank extending credit pursuant to a loan agreement entered
into in the ordinary course of business;
(b) any tax, assessment or other governmental
charge which would not have been so imposed but for the
presentation by the holder of such Debenture for payment on
a date more than 15 days after the date on which such
payment became due and payable or on the date on which
payment thereof is duly provided, whichever occurs later;
(c) any estate, inheritance, gift, sales,
transfer or personal or intangible property tax or any
similar tax, assessment or other governmental charge;
(d) any tax, assessment or other governmental
charge which would not have been imposed but for the failure
to comply with certification, information, documentation or
other reporting requirements concerning the nationality,
residence, identity or present or former connection with the
United States of the holder or beneficial owner of such
Debenture if such compliance is required by statute,
regulation or ruling of the United States or any political
subdivision or taxing authority thereof or therein as a
precondition to relief or exemption from such tax,
assessment or other governmental charge;
(e) any tax, assessment or other governmental
charge which is payable otherwise than by deduction or
withholding from payments of principal of and premium, if
any, or interest on such Debenture;
(f) any tax, assessment or other governmental
charge imposed on interest received by a person holding,
actually or constructively, 10% or more of the total
combined voting power of all classes of stock of the Company
entitled to vote; or
(g) any tax, assessment or other governmental
charge required to be withheld by any paying agent from any
payment of principal of, or premium, if any, or interest on
any Debenture if such payment can be made without such
withholding by any other paying agent;
nor will Additional Amounts be paid with respect to payment of
the principal of, premium, if any, or interest on any such
Debenture (or cash in lieu of issuance of shares of Common Stock
upon conversion) to a person other than the sole beneficial owner
of such payment, or that is a partnership or a fiduciary to the
extent such beneficial owner, member of such partnership or
beneficiary or settlor with respect to such fiduciary would not
have been entitled to the Additional Amounts had such beneficial
owner, member, beneficiary or settlor been the holder of such
Debenture.
Page 44 of 137 <PAGE>
Events of Default
-----------------
The Indenture defines an Event of Default with respect
to the Debentures as any of the following events: (i) the
failure by the Company to pay any installment of interest on, or
Additional Amounts with respect to, the Debentures as and when
the same becomes due and payable and the continuance of any such
failure for a period of 30 days, (ii) the failure by the Company
to pay all or any part of the principal of, or premium, if any,
on the Debentures as and when the same becomes due and payable at
maturity, redemption, by acceleration or otherwise, (iii) the
failure of the Company to perform any conversion of Debentures
required under the Indenture and the continuance of any such
failure for a period of 60 days, (iv) the failure by the Company
to observe or perform any other covenant or agreement contained
in the Debentures or the Indenture and, subject to certain
exceptions, the continuance of such failure for a period of
60 days after appropriate written notice is given to the Company
by the Trustee or to the Company and the Trustee by the holders
of at least 25% in aggregate principal amount of the Debentures
outstanding, (v) certain events of bankruptcy, insolvency or
reorganization in respect of the Company or any of its
significant subsidiaries, (vi) a default in the payment of
principal, premium or interest when due that extends beyond any
stated period of grace applicable thereto or an acceleration for
any other reason of the maturity of any Indebtedness of the
Company or any of its significant subsidiaries with an aggregate
principal amount in excess of $5 million, and (vii) final
judgments not covered by insurance aggregating in excess of
$2 million, at any one time rendered against the Company or any
of its significant subsidiaries and not satisfied, stayed, bonded
or discharged within 60 days.
The Debentures provide that if an Event of Default
occurs and is continuing, then the Company will provide notice
thereof to the Trustee within five business days after the
Company becomes aware of such Event of Default, and the Trustee
shall then notify the holders of Debentures thereof within 90
days after its receipt of notice from the Company. If an Event
of Default occurs and is continuing, the Trustee or the holders
of 25% in aggregate principal amount of the Debentures then
outstanding may, by notice in writing to the Company (and to the
Trustee, if given by the holders) (an "Acceleration Notice"),
declare all principal and accrued interest thereon and Additional
Amounts thereof, if any, to be due and payable immediately,
whereupon such amounts shall, subject to the rights of the
holders of Senior Indebtedness, become immediately due and
payable.
Prior to the declaration of acceleration of the
maturity of the Debentures, the holders of a majority in
aggregate principal amount of the Debentures at the time
outstanding may waive on behalf of all the holders any default,
except a default in the payment of principal of, premium, if any,
or interest on or Additional Amount with respect to any Debenture
Page 45 of 137 <PAGE>
not yet cured, or a default with respect to any covenant or
provision that cannot be modified or amended without the consent
of the holder of each outstanding Debenture affected. Subject to
the provisions of the Indenture relating to the duties of the
Trustee, the Trustee will be under no obligation to exercise any
of its rights or powers under the Indenture at the request, order
or direction of any of the holders, unless such holders have
offered to the Trustee reasonable security or indemnity. Subject
to all provisions of the Indenture and applicable law, the
holders of a majority in aggregate principal amount of the
Debentures at the time outstanding will have the right to direct
the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power
conferred on the Trustee.
Limitation on Merger, Sale or Consolidation
-------------------------------------------
The Indenture provides that the Company may not,
directly or indirectly, consolidate with or merge with or into
another person or sell, lease, convey or transfer all or
substantially all of its assets (computed on a consolidated
basis), whether in a single transaction or a series of related
transactions, to another person or group of affiliated persons,
unless (i) either (a) the Company is the surviving entity or
(b) the resulting, surviving or transferee entity is a
corporation organized under the laws of the United States, any
state thereof or the District of Columbia and expressly assumes
by written agreement all of the obligations of the Company in
connection with the Debentures and the Indenture; and (ii) no
default or Event of Default shall exist or shall occur
immediately after giving effect on a pro forma basis to such
transaction.
Upon any consolidation or merger or any transfer of all
or substantially all of the assets of the Company in accordance
with the foregoing, the successor corporation formed by such
consolidation or into which the Company is merged or to which
such transfer is made, shall succeed to, and be substituted for,
and may exercise every right and power of, the Company under the
Indenture with the same effect as if such successor corporation
had been named therein as the Company, and the Company will be
released from its obligations under the Indenture and the
Debentures, except as to any obligations that arise from or as a
result of such transaction.
Amendments and Supplements
--------------------------
Modifications and amendments to the Indenture or to the
terms and conditions of the Debentures may be made and future
compliance with or any past default by the Company under any of
the provisions thereof may be waived, or any acceleration
thereunder annulled, with the consent of the holders of not less
than a majority in aggregate principal amount of the Debentures
at the time outstanding (excluding for purposes of such
calculation the aggregate principal amount of Debentures held by
Page 46 of 137 <PAGE>
the Company or any of its subsidiaries) or by the adoption of a
resolution, at a meeting of holders of the Debentures at which a
quorum (as defined below) is present and acting throughout, by
not less than a majority in aggregate principal amount of the
Debentures present or represented at such meeting (excluding for
purposes of such calculation the aggregate principal amount of
Debentures held by the Company or any of its subsidiaries);
provided, however, that the amount approving such resolution is
not less than 25% of the aggregate principal amount of the
Debentures then outstanding (excluding for purposes of such
calculation the aggregate principal amount of Debentures held by
the Company or any of its subsidiaries); and provided further
that no such modification or amendment to the terms and
conditions of the Debentures may, without the consent or the
affirmative vote of the holder of each Debenture affected thereby
may: (a) waive a default in the payment of principal of, premium,
if any, or interest on or Additional Amount with respect to any
Debenture; (b) change the stated maturity of the principal or
premium, if any, or any installment of interest on any Debenture;
(c) reduce the principal amount of or the rate (or extend the
time for payment) of interest on or any premium payable upon
redemption of or Additional Amounts payable with respect to any
such Debenture; (d) change the obligation of the Company to pay
Additional Amounts as described above (except as otherwise
permitted by the Debentures or the Indenture); (e) change the
coin or currency in which any Debenture or interest thereon is
payable; (f) adversely affect the right to cause the Company to
redeem or the right to convert any such Debenture; (g) modify the
obligations of the Company to maintain an office or agency in The
City of New York and outside the United States for payment of the
Debentures; (h) modify the subordination provisions of the
Debenture in a manner adverse to the holders of Debentures; or
(i) reduce the requirements under the Indenture for quorum or
voting, or reduce the percentage in principal amount of the
outstanding Debentures the consent of whose holders is required
for any amendment or modification of the Indenture or the terms
and conditions of the Debentures or the consent of whose holders
is required for any waiver (of compliance with certain provisions
of the Indenture or the Debentures or certain defaults thereunder
and their consequences) provided for in the Debentures. The
quorum at any meeting called to adopt a resolution will be the
persons holding or representing a majority in aggregate principal
amount of the Debentures at the time outstanding (excluding for
purposes of such calculation the aggregate principal amount of
Debentures held by the Company or any of its subsidiaries) and
the quorum at any adjourned meeting will be persons holding or
representing 25% in aggregate principal amount of the Debentures
at the time outstanding (excluding for purposes of such
calculation the aggregate principal amount of Debentures held by
the Company or any of its subsidiaries).
Any instrument given by or on behalf of any holder of a
Debenture in connection with any consent to any such
modification, amendment or waiver will be irrevocable once given
and will be conclusive and binding on all subsequent holders of
Page 47 of 137 <PAGE>
such Debenture. Any modifications, amendments or waivers to the
Indenture or to the terms and conditions of the Debentures will
be conclusive and binding on all holders of Debentures, whether
or not they have given such consent or were present at any
meeting, and on holders of Debentures, whether or not notation of
such modifications, amendments or waivers is made upon the
Debentures.
Rule 144A Information Requirement
---------------------------------
The Company has agreed to furnish to the holders or
beneficial owners of the Debentures or the underlying Common
Stock and prospective purchasers of the Debentures or the
underlying Common Stock designated by the holders of the
Debentures or the underlying Common Stock, upon their request,
the information required to be delivered pursuant to
Rule 144A(d)(4) under the Securities Act until such time as such
securities are no longer "restricted securities" within the
meaning of Rule 144 under the Securities Act.
Reports
-------
The Company shall deliver to the Trustee and to each
holder of Debentures, within 15 days after it is required to file
such with the Commission, annual and quarterly consolidated
financial statements substantially equivalent to financial
statements required to be included in reports filed with the
Commission including, with respect to annual information only, a
report thereon by the Company's certified independent public
accountants as such is required in such reports to the
Commission, in each case, together with management's discussion
and analysis of the Company's financial condition and results of
operations.
Notices
-------
Notices to holders of the Debentures will be given by
publication in a leading daily newspaper in the English language
of general circulation in The City of New York and in London and,
so long as the Debentures are listed on the Luxembourg Stock
Exchange, in a daily newspaper of general circulation in
Luxembourg or, if publication in either London or Luxembourg is
not practical, in Europe. Such publication is expected to be
made in The Wall Street
---------------
Journal (Eastern Edition), the Financial Times and the Luxembourg
------- --------------- ----------
Wort. In addition, notices to holders of Debentures will be
given
----
by mail to the addresses of such holders as they appear in the
register maintained by the Trustee on the fifteenth day prior to
such mailing. Such notices will be deemed to have been given on
the date of such publication or mailing or, if published in such
Page 48 of 137 <PAGE>
newspapers on different dates, on the date of the first such
publication.
Replacement of Debentures
-------------------------
Debentures that become mutilated, destroyed, stolen or
lost will be replaced by the Company at the expense of the holder
thereof upon delivery to the Trustee of the Debentures or
evidence of the loss, theft or destruction thereof satisfactory
to the Company and the Trustee. In the case of a lost, stolen or
destroyed Debenture, an indemnity satisfactory to the Company and
the Trustee may be required at the expense of the holder of such
Debenture before a replacement Debenture, as the case may be,
will be issued.
Governing Law
-------------
The Debentures and the Indenture are governed by and
construed in accordance with the laws of the State of New York,
United States, without giving effect to its conflicts of law
rules.
Registration Rights
----------------------------------
Pursuant to the Registration Rights Agreement between
the Company and the Initial Purchasers, the Company has filed
with the Commission a shelf registration statement on Form S-3
(the "Shelf Registration Statement") of which this Prospectus is
a part, to cover resales of Transfer Restricted Securities (as
defined herein) by the holders thereof who satisfy certain
conditions relating to the provision of information in connection
with the Shelf Registration Statement. For purposes of the
foregoing, "Transfer Restricted Securities" means each Debenture
and any underlying share of Common Stock issued upon conversion
thereof until the date on which such Debenture or share of Common
Stock has been effectively registered under the Securities Act
and disposed of in accordance with the Shelf Registration
Statement or the date on which such Debenture or share of Common
Stock is distributed to the public pursuant to Rule 144, under
the Securities Act or is salable pursuant to Rule 144(k) under
the Securities Act (or any similar provisions then in force).
Certain Definitions
-------------------
"Business Day" or "business day" means, with respect to
any act to be performed pursuant to the Indenture or the terms of
the Debentures, each Monday, Tuesday, Wednesday, Thursday or
Friday that is not a day on which banking institutions in the
place where such act is to occur are authorized or obligated by
applicable law, regulation or executive order to close; provided
however, if any such action is to be taken on a day that is not a
Business Day such action shall be taken on the next succeeding
Business Day
Page 49 of 137 <PAGE>
"Capital Stock" means, with respect to any corporation,
any and all shares, interests, rights to purchase (other than
convertible or exchangeable indebtedness), warrants, options,
participations or other equivalents of or interests (however
designated) in stock issued by that corporation.
"Designated Senior Indebtedness" means (i) the
Indebtedness outstanding under the Company's financing agreement
with The CIT Group/Credit Business, Inc. and (ii) any other
Senior Indebtedness having a principal amount of at least
$5,000,000 that is designated as "Designated Senior Indebtedness"
by written notice from the Company to the Trustee.
"Disqualified Capital Stock" means (a) except as set
forth in clause (b) below, with respect to any person, Capital
Stock of such person that, by its terms or by the terms of any
security into which it is convertible, exercisable or
exchangeable, is, or upon the happening of an event or the
passage of time would be, required to be redeemed or repurchased
(including at the option of the holder thereon by such person or
any of its subsidiaries, in whole or in part, on or prior to the
Stated Maturity of the Debentures and (b) with respect to any
subsidiary of such person (including with respect to any
subsidiary of the Company), any Capital Stock other than any
common stock with no preference, privileges, or redemption or
repayment provisions.
"Indebtedness" of any person means, without
duplication, (a) all liabilities and obligations, contingent or
otherwise, of any such person, (i) in respect of borrowed money
(whether or not the recourse of the lender is to the whole of the
assets of such person or only to a portion thereon,
(ii) evidenced by bonds, notes, debentures or similar
instruments, (iii) representing the balance deferred and unpaid
of the purchase price of any property or services, except such as
would constitute trade payables to trade creditors in the
ordinary course of business, (iv) evidenced by bankers
acceptances or similar instruments issued or accepted by banks,
(v) for the payment of money relating to a capitalized lease
obligation, or (vi) evidenced by a letter of credit or a
reimbursement obligation of such person with respect to any
letter of credit; (b) all net obligations of such person under
interest swap and hedging obligations; (c) all liabilities of
others of the kind described in the preceding clauses (a) or (b)
that such person has guaranteed or that is otherwise its legal
liability and all obligations to purchase, redeem or acquire any
Capital Stock; and (d) any and all deferrals, renewals,
extensions, refinancings and refundings (whether direct or
indirect) of any liability of the kind described in any of the
preceding clauses (a), (b) or (c), or this clause (d), whether or
not between or among the same parties.
"Junior Securities" of any person means any Qualified
Capital Stock and any Indebtedness of such person that is
(i) subordinated in right of payment to the Debentures and has no
Page 50 of 137 <PAGE>
scheduled installment of principal due, by redemption, sinking
fund payment or otherwise, on or prior to the Stated Maturity of
the Debentures and (ii) subordinated in right of payment to all
Senior Indebtedness at least to the same extent as the
Debentures.
"Obligations" means any principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and
other liabilities payable under the documentation governing any
Senior Indebtedness.
"Qualified Capital Stock" means any Capital Stock of
the Company that is not Disqualified Capital Stock.
"Senior Indebtedness" of the Company means any
Indebtedness of the Company, whether outstanding on the date of
the Indenture or thereafter created, incurred, assumed,
guaranteed or in effect guaranteed by the Company, unless the
instrument creating or evidencing such Indebtedness provides that
such Indebtedness is not senior or superior, in right of payment,
to the Debentures or to other Indebtedness which is PARI PASSU
with, or subordinated to, the Debentures. In no event shall
Senior Indebtedness include (a) indebtedness of the Company owed
or owing to any subsidiary of the Company or any officer,
director or employee of the Company or any subsidiary thereof;
(b) any liability for taxes owed or owing by the Company; or
(c) trade payables to trade creditors of the Company in the
ordinary course of business.
"Stated Maturity" when used with respect to any
Debenture, means March 15, 2006.
DESCRIPTION OF CAPITAL STOCK
----------------------------
PREFERRED STOCK
The Company has authorized a class of Preferred Stock
consisting of 5,000,000 shares, $.10 par value. The Board of
Directors of the Company has authority, without any further
action by the holders of Common Stock, to divide the Preferred
Stock into series, to fix the number of shares comprising any
series and to fix or alter the voting powers, designations,
preferences and relative, participating, optional or other
rights, and the qualifications, limitations or restrictions,
including dividend rights, dividend rates, conversion rights,
rights and terms of redemption, rights upon dissolution or
liquidation and sinking fund provisions, of any wholly unissued
series of Preferred Stock.
COMMON STOCK
The authorized Common Stock of the Company consists of
40,000,000 shares, $.10 par value. Holders of Common Stock have
one vote for each share held, are not entitled to cumulate their
Page 51 of 137 <PAGE>
votes for the election of directors and do not have preemptive
rights. The shares are not subject to redemption. Subject to
the terms of any shares of Preferred Stock which may be issued,
holders of Common Stock are entitled to receive such dividends as
are declared by the Board of Directors out of funds legally
available therefor and are entitled to participate equally in the
assets of the Company available for distribution in the event of
liquidation or dissolution. The Company is subject to certain
dividend restrictions under a loan agreement.
RIGHTS PLAN
In October 1988, the Board of Directors declared a
dividend of one Right for each outstanding share of Common Stock
of the Company to stockholders of record on November 4, 1988.
Each Right entitles the holder to buy the economic equivalent of
one share of Common Stock in the form of one one-hundredth of a
share of a newly created series of participating preferred stock
of the Company at an exercise price of $75.00 per share. The
Rights are exercisable only if a person or group acquires 20% or
more of the voting power of the Company (an "Acquiring Person")
or announces a tender or exchange offer which would result in a
person or group becoming an Acquiring Person, in either case,
without the prior consent of the Company.
If any person or group becomes the beneficial owner of
20% or more of the voting power of the Company (other than as a
result of a tender offer or exchange offer for all outstanding
shares of Common Stock at a price and on terms determined by at
least a majority of the members of the Board of Directors who are
not officers of the Company to be both adequate and otherwise in
the best interests of the Company and its stockholders), then
each Right (other than those owned by the Acquiring Person or
related parties) will entitle its holder to purchase, at the
Right's exercise price, shares of the Company's Common Stock or
common stock equivalents having a market value of twice the
Right's exercise price ("Flip-In Right"). The Flip-In Right will
result in substantial dilution of an Acquiring Persons' voting
and economic interest in the Company and a substantial economic
benefit to the other stockholders of the Company.
In addition, after a person or group becomes an
Acquiring Person, if the Company is involved in a merger or other
business combination transaction with another person in which its
common shares are changed or exchanged, or the Company sells 50%
or more of its assets or earning power to another person, each
Right (other than owned by the Acquiring Person or related
parties) will entitle its holder to purchase, at the Right's
exercise price, shares of Common Stock of such other person
having a market value of twice the Right's exercise price.
The Company will be entitled to redeem the Rights at
one cent per Right (i) at any time before a person or group
becomes an Acquiring Person without prior approval, (ii) in
connection with an acquisition of the Company not involving the
Page 52 of 137 <PAGE>
Acquiring Person and in which all stockholders are treated alike
or (iii) after the Flip-In Right is triggered and the exercise
period has expired if and for as long as no person owns 20% of
the Common Stock of the Company. The Rights expire at the
earlier of (i) ten years after adoption of the Rights Plan, or
(ii) consummation of a merger following a tender offer approved
by the Board, in either case unless earlier redeemed by the
Company.
The Exercise Price payable, and the number of shares of
Common Stock or other securities or property issuable, upon
exercise of the Rights are subject to adjustments from time to
time to prevent dilution (i) in the event of a stock dividend on,
or a subdivision, combination or reclassification of, the
Preferred Stock, (ii) upon the grant to holders of the Preferred
Stock of certain rights or warrants to subscribe for Preferred
Stock or convertible securities or securities having the same or
more favorable rights, privileges and preferences as the
Preferred Stock at less than the current market price of the
Preferred Stock, or (iii) upon the distribution to holders of the
Preferred Stock of evidences of indebtedness or assets or of
subscription rights or warrants (other than those referred to
above).
Stockholders of the Company may, depending upon the
circumstances, recognize taxable income in the event that the
Rights become exercisable for Common Stock of the Company (or
other consideration) or for common stock of the acquiring company
as set forth above.
SECTION 203 OF THE DELAWARE LAW
The Company is a Delaware corporation and is subject to
Section 203 of the Delaware General Corporation Law the ("DGCL").
Section 203 of the DGCL prevents an "interested stockholder"
(defined generally as a person owning 15% or more of a
corporation's outstanding voting stock or an affiliate of such
person) from engaging in a "business combination" (as defined)
with a Delaware corporation for three years following the date
such person became an interested stockholder unless (i) before
such person became an interested stockholder, the board of
directors of the corporation approved the transaction in which
the interested stockholder became an interested stockholder or
approved the business combination; (ii) upon consummation of the
transaction that resulted in the interested stockholder becoming
an interested stockholder, the interested stockholder owns at
least 85% of the voting stock of the corporation outstanding at
the time the transaction commenced (excluding stock held by
directors who are also officers of the corporation and employee
stock plans that do not provide employees with the right to
determine confidentially whether shares held subject to the plan
will be tendered in a tender or exchange offer); or (iii)
following the transaction in which such person became an
interested stockholder, the business combination is approved by
the board of directors of the corporation and authorized at a
Page 53 of 137 <PAGE>
meeting of stockholders by vote of the holders of two-thirds of
the outstanding voting stock of the corporation not owned by the
interested stockholder. Under Section 203 of the DGCL, the
restrictions described above also do not apply to certain
business combinations proposed by an interested stockholder
following the announcement or notification of one of certain
extraordinary transactions involving the corporation and a person
who had not been an interested stockholder during the previous
three years or became an interested stockholder with the approval
of a majority of the corporation's directors. The provisions of
Section 203 of the DGCL requiring a supermajority vote of
disinterested shares to approve certain corporate transactions
could enable a minority of the Company's stockholders to exercise
veto power over such transactions.
SELLING SECURITYHOLDERS
-----------------------
The following table sets forth certain information as
of July 10, 1996 (except as otherwise indicated) as to the
security ownership of the Selling Securityholders. Except as set
forth below, none of the Selling Securityholders has had a
material relationship with the Company or any of its predecessors
or affiliates within the past three years.
<TABLE>
Principal Amount
of Debentures
Beneficially Owned
Prior to Offering Principal Amount of
-------------------- Debentures That May
Name Amount Percent Be Sold
---- ------ ------- ------------------
<S> <C> <C> <C>
Advest, Inc. $ 50,000 <F*> $ 50,000
90 Statehouse Sq.
Hartford, CT 06103
Bank of New York $ 4,450,000 3.87% $ 4,450,000
925 Patterson Plank Road
Secaucus, NJ 07094
Bankers Trust Company $ 8,450,000 7.35% $ 8,450,000
c/o BT Services Tennessee
Inc.
Pension Trust Services
648 Grassmere Park Drive
Nashville, TN 37211
Page 54 of 137 <PAGE>
<S> <C> <C> <C>
Bear Stearns Securities $ 50,000 <F*> $ 50,000
Corp.
One Metrotech Center
North
Brooklyn, NY 11201-3862
Bankers Trust $ 65,000 <F*> $ 65,000
Company/NatWest
Securities, Ltd.
16 Wall Street, 5th Floor
New York, NY 10005
Boston Safe Deposit & $ 6,030,000 5.24% $ 6,030,000
Trust Co.
c/o ADP Proxy Services
51 Mercedes Way
Edgewood, NY 11717
Chase Manhattan Bank, $18,150,000 15.78% $18,150,000
N.A. (The)
One Chase Manhattan Plaza
3B - Proxy Dept.
New York, NY 10081
Chemical Bank $ 775,000 <F*> $ 775,000
Auto Settle Department
4 New York Plaza, 4th
Floor
New York, NY 10004
Citibank, N.A. $ 2,010,000 1.75% $ 2,010,000
111 Wall Street
20th Floor, Zone 9
New York, NY 10043
Custodial Trust Company $ 860,000 <F*> $ 860,000
101 Carnegie Center
Princeton, NJ 08540
First Tennessee Bank, $ 1,430,000 1.24% $ 1,430,000
N.A. (Memphis)
P.O. Box 84
Memphis, TN 38101
Page 55 of 137 <PAGE>
<S> <C> <C> <C>
First National Bank of $ 185,000 <F*> $ 185,000
Maryland (The)
Trust Division -
Operations Dept. 101-623
25 S. Charles Street
Baltimore, MD 21201
Harris Trust & Savings $ 100,000 <F*> $ 100,000
Bank
Proxy Operations
111 West Monroe Street,
1130
Chicago, IL 60690
Investors Bank & $ 180,000 <F*> $ 180,000
Trust/M.F. Custody
c/o ADP Proxy Services
51 Mercedes Way
Edgewood, NY 11717
Morgan (J.P.) Securities $ 1,000,000 <F*> $ 1,000,000
Inc., WF
60 Wall Street, 14th
Floor
New York, NY 10060-0060
Lehman Brothers, Inc. $ 2,025,000 1.76% $ 2,025,000
c/o BSCC ATT: Proxy Dept.
P.O. Box 29198
Brooklyn, NY 11202-9198
Mercantile, Safe Deposit $ 2,025,000 1.76% $ 2,025,000
and Trust Company
766 Old Hammonds Ferry
Road
Proxy Unit #230-20
Linthicum, MD 21090
Montgomery Securities $ 2,300,000 2.00% $ 2,300,000
c/o ADP Proxy Services
51 Mercedes Way
Edgewood, NY 11717
Morgan Guaranty Trust Co. $ 4,800,000 4.17% $ 4,800,000
of New York
37 Wall Street, 16th
Floor
New York, NY 10260
Northern Trust Co. - $ 900,000 <F*> $ 900,000
Trust
801 S. Canal C-In
Chicago, IL 60607
Page 56 of 137 <PAGE>
<S> <C> <C> <C>
Republic New York $ 500,000 <F*> $ 500,000
Securities Corp.
c/o ADP Proxy Services
51 Mercedes Way
Edgewood, NY 11717
Salomon Brothers Inc $ 2,945,000 2.56% $ 2,945,000
c/o ADP Proxy Services
51 Mercedes Way
Edgewood, NY 11717
SSB-Custodian $32,520,000 28.28% $32,520,000
Quincy Securities
Processing
A5W P.O. Box 1631
Boston, MA 02105-1631
UBS Securities Inc. $ 500,000 <F*> $ 500,000
299 Park Avenue, 8th
Floor
New York, NY 10171-0026
Wagner, Stott & Co. $ 700,000 <F*> $ 700,000
20 Broad Street
New York, NY 10005
<F*> Less than 1%
The following table sets forth certain information as of July 19,
1996 as to the security ownership of the Selling Securityholders.
</TABLE>
<TABLE>
<CAPTION>
Shares of Common Stock
Beneficially Owned Prior
Name to Offering
---- -----------------------
Number Percent
------ -------
<S> <C> <C>
Advest, Inc. 9,464 <F*>
90 Statehouse Sq.
Hartford, CT 06103
Bank of New York 534,255 2.30%
925 Patterson Plank Road
Secaucus, NJ 07094
Page 57 of 137 <PAGE>
<S> <C> <C>
Bankers Trust Company 980,842 4.23%
c/o BT Services Tennessee
Inc.
Pension Trust Services
648 Grassmere Park Drive
Nashville, TN 37211
Bear Stearns Securities 2,070,419 8.93%
Corp.
One Metrotech Center
North
Brooklyn, NY 11201-3862
Bankers Trust 0 --
Company/NatWest
Securities, Ltd.
16 Wall Street, 5th Floor
New York, NY 10005
Boston Safe Deposit & 635,164 2.74%
Trust Co.
c/o ADP Proxy Services
51 Mercedes Way
Edgewood, NY 11717
Chase Manhattan Bank, 400,000 1.72%
N.A. (The)
One Chase Manhattan Plaza
3B - Proxy Dept.
New York, NY 10081
Chemical Bank 0 --
Auto Settle Department
4 New York Plaza, 4th
Floor
New York, NY 10004
Citibank, N.A. 125,411 <F*>
111 Wall Street
20th Floor, Zone 9
New York, NY 10043
Custodial Trust Company 0 --
101 Carnegie Center
Princeton, NJ 08540
First Tennessee Bank, 0 --
N.A. (Memphis)
P.O. Box 84
Memphis, TN 38101
Page 58 of 137 <PAGE>
<S> <C> <C>
First National Bank of 0 --
Maryland (The)
Trust Division -
Operations Dept. 101-623
25 S. Charles Street
Baltimore, MD 21201
Harris Trust & Savings 0 --
Bank
Proxy Operations
111 West Monroe Street,
1130
Chicago, IL 60690
Investors Bank & 0 --
Trust/M.F. Custody
c/o ADP Proxy Services
51 Mercedes Way
Edgewood, NY 11717
Morgan (J.P.) Securities 0 --
Inc., WF
60 Wall Street, 14th
Floor
New York, NY 10060-0060
Lehman Brothers, Inc. 112,162 <F*>
c/o BSCC ATT: Proxy Dept.
P.O. Box 29198
Brooklyn, NY 11202-9198
Mercantile, Safe Deposit 9,400 <F*>
and Trust Company
766 Old Hammonds Ferry
Road
Proxy Unit #230-20
Linthicum, MD 21090
Montgomery Securities 42,500 <F*>
c/o ADP Proxy Services
51 Mercedes Way
Edgewood, NY 11717
Morgan Guaranty Trust Co. 112,900 <F*>
of New York
37 Wall Street, 16th
Floor
New York, NY 10260
Northern Trust Co. - 339,450 1.46%
Trust
801 S. Canal C-In
Chicago, IL 60607
Page 59 of 137 <PAGE>
<S> <C> <C>
Republic New York 0 --
Securities Corp.
c/o ADP Proxy Services
51 Mercedes Way
Edgewood, NY 11717
Salomon Brothers Inc 4,000 <F*>
c/o ADP Proxy Services
51 Mercedes Way
Edgewood, NY 11717
SSB-Custodian 1,295,587 5.59%
Quincy Securities
Processing
A5W P.O. Box 1631
Boston, MA 02105-1631
UBS Securities Inc. 500,000 2.16%
299 Park Avenue, 8th
Floor
New York, NY 10171-0026
Wagner, Stott & Co. 0 --
20 Broad Street
New York, NY 10005
<F*> Less than 1%
</TABLE>
Additional Selling Securityholders may be identified
and other information concerning Selling Securityholders may be
set forth in Prospectus Supplements from time to time.
Other than by ownership of the Debentures or Common
Stock, none of the Selling Securityholders has had any material
relationship with the Company within the past three years.
Because the Selling Securityholders may offer all or
only some of the Debentures that they now hold and/or shares of
Common Stock issued upon conversion thereof in the offering
contemplated by this Prospectus and because there are presently
no agreements, arrangements or understandings concerning the sale
of any of the Debentures or shares of Common Stock issuable upon
conversion thereof, no estimate can be given about the principal
amount of Debentures or shares of Common Stock that will be held
by the Selling Securityholders after completion of this offering.
See "Plan of Distribution" herein.
Page 60 of 137 <PAGE>
PLAN OF DISTRIBUTION
--------------------
The Debentures and the Shares are being registered to
permit public secondary trading of such securities by the holders
thereof from time to time after the date of this Prospectus. The
Company has agreed, among other things, to bear all expenses
(other than underwriting discounts, selling commissions and fees
and expenses of counsel and other advisors to holders of the
Debentures and the underlying Common Stock) in connection with
the registration and sale of the Debentures and the Shares
covered by this Prospectus.
The Company will not receive any of the proceeds from
the offering of Debentures and the Shares by the Selling
Securityholders. The Company has been advised by the Selling
Securityholders that the Selling Securityholders may sell all or
a portion of the Debentures and 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 Debentures 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 Debentures or shares or Common Stock from whom
they may act as agent. The aggregate proceeds to the Selling
Securityholders from the sale of the Debentures of shares or
Common Stock offered by them hereby will be the purchase price of
such Debentures or shares of Common Stock less discounts and
commissions, if any.
The Debentures and the Shares may be sold from time to
time in one or more transactions at fixed offering prices, 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 outstanding Common Stock is listed for trading on
the New York Stock Exchange, and the Shares of Common Stock have
been approved for listing on the New York Stock Exchange. The
Company does not intend to apply for listing of the Debentures on
any securities exchange. Accordingly, no assurance can be given
as to the development of liquidity of any trading market that may
develop for the Debentures.
In order to comply with the securities laws of certain
states, if applicable, the Debentures and Shares will be sold in
such jurisdictions only through registered or licensed brokers or
dealers. In addition, in certain states the Debentures and
Shares may not be sold unless they have been registered or
Page 61 of 137 <PAGE>
qualified for sale in the applicable state or an exemption from
the registration or qualification requirement is available and is
complied with.
The Selling Securityholders and any broker and any
broker-dealers, agents or underwriters that participate with the
Selling Securityholders in the distribution of the Debentures or
the Shares may be deemed to be, underwriters, within the meaning
of the Securities Act, in which event any commissions received by
such broker-dealers, agents or underwriters any profit on the
resale of the Debentures or the Shares purchased by them may be
deemed to be underwriting commissions or discounts under the
Securities 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 Debentures or
Shares described herein, and any Selling Securityholder may
transfer, devise or gift such securities by other means not
described herein.
The Debentures were originally sold to NatWest
Securities Limited, Salomon Brothers Inc and Montgomery
Securities in March 1996 in a private placement. The Company
agreed to indemnify and hold NatWest Securities Limited, Salomon
Brothers Inc and Montgomery Securities harmless against certain
liabilities under the Securities Act that could arise in
connection with the sale of the Debentures by NatWest Securities
Limited, Salomon Brothers Inc and Montgomery Securities. The
Company and the Selling Securityholders are obligated to
indemnify each other against certain liabilities arising under
the Securities Act.
The Company will use its best efforts to keep the
registration statement effective until the Shelf Registration
Statement is no longer required for transfer of the Debentures or
the underlying Common Stock. Expenses of preparing and filing
the registration statement and all post-effective amendments will
be borne by the Company.
To the Company's knowledge, no person presently intends
to make a market in the Debentures.
LEGAL MATTERS
-------------
The validity of the Securities offered hereby will be
passed upon for the Company by Sheppard, Mullin, Richter &
Hampton LLP, Los Angeles, California.
EXPERTS
-------
Page 62 of 137 <PAGE>
The consolidated balance sheets of Applied Magnetics
Corporation and Subsidiaries as of September 30, 1995 and 1994,
and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years
in the period ended September 30, 1995, and the related
schedules, incorporated by reference in this prospectus and
elsewhere in this registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated
in their reports with respect thereto, and are incorporated
herein in reliance upon the authority of said firm as experts in
giving said reports.
Page 63 of 137 <PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses in
connection with the sale and distribution of the securities being
registered, other than underwriting discounts and commissions.
All of the amounts shown are estimates, except the Securities and
Exchange Commission registration fee and the listing fee.
Securities and Exchange Commission
registration fee . . . . . . . . . . . . . . . . . $ 32,068.97
NASD Filing Fee . . . . . . . . . . . . . . . . . . . $ *
Blue Sky Fees and Expenses . . . . . . . . . . . . . $ *
Printing and Engraving Certificates . . . . . . . . . $ *
Legal Fees and Expenses . . . . . . . . . . . . . . . $ 15,000.00
Accounting Fees and Expense . . . . . . . . . . . . . $ 5,000.00
Registrar and Transfer Agent Fees . . . . . . . . . . $ *
Miscellaneous Expenses . . . . . . . . . . . . . . . $ 431.03
TOTAL. . . . . . . . . . . . . . . . . . . . . . . $ 52,500.00
* Not applicable or none.
ITEM 15. Indemnification of Directors and Officers
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation contains a
provision limiting the personal liability of directors to the
Company or its stockholders for monetary damages for breach of
fiduciary duty as a director. This provision is intended to
eliminate the risk that a director might incur personal liability
to the Company or its stockholders for breach of the duty of
care. Such provision absolves directors of liability for
negligence in the performance of their duties, including gross
negligence. Directors remain liable for breaches of the duty of
loyalty to the Company and its stockholders as well as for acts
or omissions not taken in good faith or which involve intentional
misconduct or a knowing violation of law and transactions from
which a director derived improper personal benefit. In addition,
the Company's Certificate of Incorporation does not absolve
directors of liability for unlawful dividends or stock
repurchases or redemptions to which a negligence standard
presently applies under the Delaware General Corporation Law (the
"DGCL"). Also, there may be certain liabilities, such as those
under the United States federal securities laws or other state or
federal laws, which a court may hold are unaffected by the
Certificate of Incorporation.
The Company's By-laws provide that each person who is
or was a director, legal representative, officer or employee of
Page 64 of 137 <PAGE>
the Company (or was serving at the request of the Company as a
director, legal representative, officer or employee of another
entity), will be indemnified and held harmless by the Company to
the fullest extent authorized by the DGCL (as it may be amended
to allow for broader indemnification rights) from any liability
incurred as a result of such service. Among other things, the
indemnification provisions provide indemnification for officers
and directors against liabilities for judgments in and
settlements of lawsuits and other proceedings and for the advance
and payment of fees and expenses reasonably incurred by the
director or officer in defense of any such lawsuit or proceeding.
The Company's By-laws provide that the rights to indemnification
and the payment of expenses conferred therein will not be
exclusive of any other right that any person may have or acquire
under any statute, provision of the Certificate of Incorporation,
by-law, agreement, vote of stockholders or disinterested
directors or otherwise. The Company's By-laws also provide that
the Company shall maintain insurance on behalf of any person who
is or was a director, officer, employee or agent of the Company
against any liability asserted against such person and incurred
by such person in any such capacity, whether or not the Company
would have the power to indemnify such person against such
liability under the DGCL. The Company maintains this insurance
coverage for its officers and directors as well as insurance
coverage to reimburse the Company for potential costs of its
corporate indemnification of officers and directors.
ITEM 16. EXHIBITS
4.1 Indenture dated as of March 22, 1996 by and
between the Company and The Chase Manhattan
Bank, N.A., as Trustee (filed as Exhibit 4 to
the Company's Quarterly Report on Form 10-Q
for the quarter ended March 30, 1996 (File
No. 1-6635) and incorporated herein by
reference)
4.2 Form of 7% Convertible Subordinated
Debentures due 2006
4.3 Registration Rights Agreement, dated as
March 22, 1996, by and among the Company and
NatWest Securities Limited, Salomon Brothers
Inc and Montgomery Securities
5.1 Opinion of Sheppard, Mullin, Richter & Hampton LLP
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Sheppard, Mullin, Richter &
Hampton LLP (included in Exhibit 5.1)
24.1 Power of Attorney of certain officers and
directors (included on page S-1)
Page 65 of 137 <PAGE>
25.1 Form T-1 Statement of Eligibility and
Qualification under the Trust Indenture Act
of 1933 of The Chase Manhattan Bank, N.A.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
Registration Statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the Registration
Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or
high and of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20
percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the Registration Statement or any material change to such
information in the Registration Statement;
Provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) do not apply if the Registration Statement is on
Form S-3, or Form S-8, and the information required to be
included in a post-effective amendment by those paragraphs
is contained in periodic reports filed with or furnished to
the Commission by the Registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
Page 66 of 137 <PAGE>
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934 that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the Registrant pursuant to
the provisions described in Item 15 hereof, 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 against the
Registrant 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.
Page 67 of 137 <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
July 30, 1996.
APPLIED MAGNETICS CORPORATION
By /s/ Craig D. Crisman*
-------------------------
Craig D. Crisman
Chairman of the Board and
Chief Executive Officer
S-1
Page 68 of 137 <PAGE>
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
--------- ----- ----
/s/ Craig D.Crisman* Chairman of the Board, July 30, 1996
----------------------- Chief Executive Officer
Craig D. Crisman and Director (Principal
Executive Officer and
Principal Financial
Officer)
/s/ Peter T. Altavilla Corporate Controller July 30, 1996
----------------------- (Principal Accounting
Peter T. Altavilla Officer)
/s/ Harold R. Frank* Chairman Emeritus and July 30, 1996
----------------------- Director
Harold R. Frank
/s/ R. C. Mercure, Jr.* Director July 30, 1996
-----------------------
R. C. Mercure, Jr.
/s/Herbert M. Dwight, Jr.* Director July 30, 1996
-----------------------
Herbert M. Dwight, Jr.
/s/ Jerry E. Goldress* Director July 30, 1996
-----------------------
Jerry E. Goldress
*By: /s/ Peter T. Altavilla
--------------------------
Peter T. Altavilla
Attorney-in-Fact**
** By authority of Power of Attorney filed with this
registration statement.
S-2
Page 69 of 137 <PAGE>
EXHIBIT INDEX
Exhibits Description Page
-------- ----------- ----
4.1 Indenture dated as of March 22,
1996 by and between the Company and
The Chase Manhattan Bank, N.A., as
Trustee (filed as Exhibit 4 to the
Company's Quarterly Report on
Form 10-Q for the quarter ended
March 30, 1996 (File No. 1-6635)
and incorporated herein by
reference)
4.2 Form of 7% Convertible Subordinated 69
Debentures due 2006
4.3 Registration Rights Agreement, 100
dated as March 22, 1996, by and
among the Company and NatWest
Securities Limited, Salomon
Brothers Inc and Montgomery
Securities
5.1 Opinion of Sheppard, Mullin, 123
Richter & Hampton LLP
23.1 Consent of Arthur Andersen LLP 129
23.2 Consent of Sheppard, Mullin,
Richter & Hampton LLP (included in
Exhibit 5.1)
24.1 Power of Attorney of certain
officers and directors (included on
page S-1)
25.1 Form T-1 Statement of Eligibility 130
and Qualification under the Trust
Indenture Act of 1933 of The Chase
Manhattan Bank, N.A.
Page 70 of 137 <PAGE>
EXHIBIT 4.2
Unless and until it is exchanged in whole or in part
for Debentures in definitive form, this Debenture may not be
transferred except as a whole by the Depositary to a nominee of
the Depositary or by a nominee of the Depositary to the
Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a
nominee of such successor Depositary. Unless this certificate is
presented by an authorized representative of The Depository Trust
Company, a New York corporation (55 Water Street, New York, New
York) ("DTC"), to the issuer or its agent for registration of
transfer, exchange or payment, and any certificate issued is
registered in the name of Cede & Co. or such other name as may be
requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or such other entity as may be requested by
an authorized representative of DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has
an interest herein.
THE DEBENTURES EVIDENCED HEREBY HAVE NOT BEEN REGIS-
TERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER
THIS DEBENTURE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
EACH PURCHASER OF THIS DEBENTURE IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS DEBENTURE, BY ITS ACCEPTANCE HEREOF, REP-
RESENTS, ACKNOWLEDGES AND AGREES FOR THE BENEFIT OF APPLIED
MAGNETICS CORPORATION (THE "COMPANY") THAT: (I) IT HAS ACQUIRED A
"RESTRICTED" DEBENTURE WHICH HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT; (II) IT WILL NOT OFFER, SELL OR OTHERWISE
TRANSFER THIS DEBENTURE, PRIOR TO THE DATE WHICH IS THREE YEARS
AFTER THE LATER OF THE DATE OF ORIGINAL ISSUANCE HEREOF AND THE
LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATED PERSON OF THE
COMPANY WAS THE OWNER OF THIS DEBENTURE (OR ANY PREDECESSOR OF
SUCH DEBENTURE) (THE "RESALE RESTRICTION TERMINATION DATE")
EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THIS DEBENTURE IS ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A, TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE RE-
QUIREMENTS OF RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT
OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION
S UNDER THE SECURITIES ACT, (E) IN A TRANSACTION ARRANGED BY A
BROKER OR DEALER REGISTERED UNDER THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED, TO AN INSTITUTIONAL "ACCREDITED INVESTOR"
(WITHIN THE MEANING OF SUBPARAGRAPHS (a)(1), (2), (3) OR (7) OF
RULE 501 UNDER THE SECURITIES ACT) THAT IS ACQUIRING THIS
Page 71 of 137 <PAGE>
DEBENTURE FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT
TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR
ANY APPLICABLE JURISDICTION; AND (III) IT WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF
THIS DEBENTURE OF THE RESALE RESTRICTIONS SET FORTH IN (II)
ABOVE. IF ANY RESALE OR OTHER TRANSFER OF THIS DEBENTURE IS
PROPOSED TO BE MADE PURSUANT TO CLAUSE II(E) ABOVE PRIOR TO THE
DATE WHICH IS THREE YEARS AFTER THE DATE OF ORIGINAL ISSUANCE
HEREOF, THE TRANSFEROR SHALL DELIVER A LETTER FROM THE TRANSFEREE
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS DEBENTURE. ANY OFFER, SALE OR
OTHER DISPOSITION PURSUANT TO THE FOREGOING CLAUSES (II)(D), (E)
AND (F) IS SUBJECT TO THE RIGHT OF THE ISSUER OF THIS DEBENTURE
TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS
OR OTHER INFORMATION ACCEPTABLE TO IT IN FORM AND SUBSTANCE.
THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER
THE RESALE RESTRICTION TERMINATION DATE.
APPLIED MAGNETICS CORPORATION
(Incorporated in the State of Delaware)
7% CONVERTIBLE SUBORDINATED DEBENTURE DUE 2006
CUSIP No. 038213AA2
No. R-l U.S. $93,000,000
Applied Magnetics Corporation, a corporation duly
incorporated and existing under the laws of the State of Delaware
(the "Company"), for value received, hereby promises to pay to
CEDE & CO., or registered assigns, the principal sum of NINETY
THREE MILLION United States Dollars on March 15, 2006 upon
presentation and surrender hereof and to pay interest thereon,
from March 22, 1996 or from the most recent Interest Payment Date
(as defined below) to which interest has been paid or duly
provided for, semiannually in arrears on March 15 and September
15 in each year (each an "Interest Payment Date"), commencing
September 15, 1996, at the rate of 7% per annum until the
principal hereof is paid or made available for payment. Interest
hereon shall be calculated on the basis of a 360-day year
comprised of twelve 30-day months. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment
Date will, as provided in the Indenture (as defined on the
reverse hereof), be paid to the person in whose name this
Debenture is registered at the close of business on the Interest
Record Date for such interest payment, which shall be March 1 or
September 1 (whether or not a Business Day) next preceding such
Interest Payment Date. To the extent lawful, the Company shall
pay interest on overdue principal and overdue installments of
Page 72 of 137 <PAGE>
interest at the rate borne by this Debenture, compounded semi-
annually. Except as otherwise provided in the Indenture, any
such interest not so punctually paid or duly provided for will
forthwith cease to be payable to the Holder on such Interest
Record Date and, together with Defaulted Interest relating
thereto, may be paid at any time in any lawful manner, all as
more fully provided in the Indenture. Payment of interest on
this Debenture shall be made by United States dollar check (or in
such coin or currency of the United States of America as at the
time of payment shall be legal tender for the payment of public
and private debts) drawn on a bank in the City of New York and
mailed to the person entitled thereto at his address as it shall
appear in the Debenture Register, or (if arrangements
satisfactory to the Company and the Trustee (as defined on the
reverse hereof) are made) by wire transfer to a United States
dollar account maintained by the payee with a bank in the City of
New York; provided, however, that if such mailing is not
-------- -------
possible and no such application shall have been made, payment of
interest shall be made at the principal corporate trust office of
the Trustee, or such other office or agency of the Company as may
be designated for such purpose in the City of New York, in United
States currency.
Reference is hereby made to the further provisions of
this Debenture set forth under Terms and Conditions of the
Debentures on the reverse hereof, which further provisions shall
for all purposes have the same effect as if set forth at this
place.
This Debenture shall not become valid or enforceable
for any purpose unless and until the certificate of
authentication hereon shall have been manually signed by a duly
authorized officer of the Trustee.
IN WITNESS WHEREOF, the Company has caused this
Debenture to be duly executed in its corporate name and under its
corporate seal by the manual or facsimile signature of a duly
authorized signatory.
Dated: March 22, 1996
APPLIED MAGNETICS CORPORATION
[Corporate Seal]
By: -------------------------
Craig D. Crisman
Chief Executive Officer
Attest:
-------------------
Page 73 of 137 <PAGE>
CERTIFICATE OF AUTHENTICATION
This is one of the Debentures described in the within-
mentioned Indenture.
THE CHASE MANHATTAN BANK, N.A.,
as Trustee
By: ------------------------
Authorized Officer
Dated: March 22, 1996
Page 74 of 137 <PAGE>
Terms and Conditions of the Debentures
1. GENERAL.
(a) This Debenture is one of a duly authorized issue
of securities of the Company designated as its 7% Convertible
Subordinated Debentures due 2006 (herein called the
Debentures"), limited in aggregate principal amount to U.S.
$115,000,000. The Company issued the Debentures under an Inden-
ture, dated as of March 22, 1996 (the "Indenture"), between the
Company and The Chase Manhattan Bank, N.A., as trustee (the
"Trustee"). Capitalized terms herein are used as defined in the
Indenture unless otherwise defined herein. The terms of the
Debentures include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of
1939, as amended, as in effect on the date of the Indenture. The
Debentures are subject to all such terms, and Holders of Debent-
ures are referred to the Indenture and said Act for a statement
of them. The Debentures are general unsecured obligations of the
Company.
(b) The Debentures are issuable as bearer securities
(the "Bearer Debentures"), with interest Coupons attached, in the
denominations of U.S. $1,000 and U.S. $10,000, and as registered
securities (the "Registered Debentures"), without coupons, in
denominations of U.S. $1,000 and integral multiples thereof. The
Registered Debentures, and transfers thereof, shall be registered
as provided in the Indenture. The holder of any Bearer Debenture
or any Coupon and the registered holder of a Registered Debenture
shall (to the fullest extent permitted by applicable law) be
treated at all times, by all persons and for all purposes, except
as provided in the Indenture, as the absolute owner of such
Debenture or Coupon, as the case may be, regardless of any notice
of ownership, theft or loss or of any writing thereon.
2. ADDITIONAL AMOUNTS. The Company will pay to the Holder
of this Debenture or of any Coupon appertaining hereto who is a
Foreign Holder (as defined below) such additional amounts
("Additional Amounts") as may be necessary in order that every
net payment of the principal of, premium, if any, and interest on
this Debenture, and any cash payments made in lieu of issuing
shares of Common Stock upon conversion of a Debenture, after
withholding for or on account of any present or future tax,
assessment or other governmental charge imposed upon or as a
result of such payment by the United States or any political
subdivision or taxing authority thereof or therein, will not be
less than the amount provided herein or any Coupon appertaining
hereto to be then due and payable; provided, however, that the
foregoing obligation to
-------- -------
pay Additional Amounts shall not apply to any one or more of the
following:
Page 75 of 137 <PAGE>
(a) any tax, assessment or other governmental charge
which would not have been so imposed but for (i) the
existence of any present or former connection between such
Holder (or between a fiduciary, settlor, beneficiary, member
or stockholder of, or a person holding a power over, such
Holder, if such Holder is an estate, trust, partnership or
corporation) and the United States, including, without
limitation, such Holder (or such fiduciary, settlor,
beneficiary, member, stockholder or person holding a power)
being or having been a citizen or resident or treated as a
resident thereof or being or having been engaged in a trade
or business therein or being or having been present therein
or having or having had a permanent establishment therein,
(ii) such Holder's present or former status as a personal
holding company, foreign personal holding company, passive
foreign investment company, foreign private foundation or
other foreign tax-exempt entity or controlled foreign
corporation for United States Federal income tax purposes or
a corporation which accumulates earnings to avoid United
States Federal income tax, or (iii) such Holder's status as
a bank extending credit pursuant to a loan agreement entered
into in the ordinary course of business;
(b) any tax, assessment or other governmental charge
which would not have been so imposed but for the
presentation by the Holder of this Debenture or any Coupon
appertaining hereto for payment on a date more than 15 days
after the date on which such payment became due and payable
or on the date on which payment thereof is duly provided,
whichever occurs later;
(c) any estate, inheritance, gift, sales, transfer or
personal or intangible property tax or any similar tax,
assessment or other governmental charge;
(d) any tax, assessment or other governmental charge
which would not have been imposed but for the failure to
comply with certification, information, documentation or
other reporting requirements concerning the nationality,
residence, identity or present or former connection with the
United States of the Holder or beneficial owner of such
Debenture or any related Coupon if such compliance is
required by statute, regulation or ruling of the United
States or any political subdivision or taxing authority
thereof or therein as a precondition to relief or exemption
from such tax, assessment or other governmental charge;
(e) any tax, assessment or other governmental charge
which is payable otherwise than by deduction or withholding
from payments of principal of and premium, if any, or
interest on this Debenture;
(f) any tax, assessment or other governmental charge
imposed on interest received by a person holding, actually
or constructively, 10% or more of the total combined voting
Page 76 of 137 <PAGE>
power of all classes of stock of the Company entitled to
vote; or
(g) any tax, assessment or other governmental charge
required to be withheld by any paying agent from any payment
of principal of and premium, if any, or interest on any
Debenture or interest on any Coupon appertaining hereto if
such payment can be made without such withholding by any
other paying agent;
nor shall Additional Amounts be paid with respect to any payment
of the principal of or premium, if any, or interest on this
Debenture (or cash in lieu of issuance of shares of Common Stock
upon conversion) to a person other than the sole beneficial owner
of such payment or that is a partnership or fiduciary to the
extent such beneficial owner, member of such partnership or
beneficiary or settlor with respect to such fiduciary would not
have been entitled to Additional Amounts had such beneficial
owner, member, beneficiary or settlor been the holder of this
Debenture or any Coupon appertaining hereto.
The term "Foreign Holder" means any person who, for
United States Federal income tax purposes, is (i) a foreign
corporation, (ii) a foreign partnership one or more of the
members of which are, for United States Federal income tax
purposes, foreign corporations, non-resident alien individuals or
non-resident alien fiduciaries of a foreign estate or trust,
(iii) a non-resident alien individual or (iv) a non-resident
alien fiduciary of a foreign estate or trust. The term "United
States" means the United States of America (including the several
States and the District of Columbia), its territories and its
possessions.
Except as specifically provided herein and in the
Indenture, the Company shall not be required to make any payment
with respect to any tax, assessment or other governmental charge
imposed by any government or any political subdivision or taxing
authority thereof or therein.
Whenever any Additional Amounts are to be paid on the
Debentures, the Company will give notice to the Trustee, the
Paying Agent and any paying agency of the Company, all as
provided in the Indenture.
3. REDEMPTION.
(a) (i) The Company, at its option, may redeem the
Debentures, in whole or in part (but if in part, in aggregate
principal amounts of not less than $1,000), at any time or times
after April 1, 1999, upon notice as hereinafter prescribed, at
the redemption prices (expressed as percentages of the principal
amount) set forth below, in each case, together with accrued and
unpaid interest to the date fixed for redemption and Additional
Amounts, if any, that are due and payable:
Page 77 of 137 <PAGE>
After April 1, Redemption Price
-------------- ----------------
1999 103%
2000 102%
2001 101%
2002 100%.
If fewer than all of the then outstanding Debentures are to be
redeemed, the Debentures to be redeemed will be selected by the
Trustee not more than 75 days prior to the date fixed for
redemption, by such method as the Trustee shall deem fair and
appropriate. Provisions of this Debenture that apply to
Debentures called for redemption also apply to portions of
Debentures called for redemption. The Trustee shall notify the
Company promptly of the Debentures or portions of Debentures to
be called for redemption.
(ii) Prior to April 1, 1999, the Company, at its
option, may redeem the Debentures, in whole but not in part, upon
the occurrence of a Change of Control, upon notice as hereinafter
prescribed, at the redemption prices (expressed as percentages of
the principal amount) set forth below, in each case, together
with accrued and unpaid interest to the date fixed for redemption
and Additional Amounts, if any, that are due and payable:
Redemption Date Redemption Price
--------------- ----------------
Closing Date to October 1, 1996 124.00%
October 2, 1996 to April 1, 1997 120.50%
April 2, 1997 to October 1, 1997 117.00%
October 2, 1997 to April 1, 1998 113.50%
April 2, 1998 to October 1, 1998 110.00%
October 2, 1998 to April 1, 1999 106.50%.
(b) If, at any time, the Company shall determine that
as a result of any change in or amendment to the laws or any
regulations or rulings of the United States or any political
subdivision or taxing authority thereof or therein affecting
taxation, or any amendment to or change in an official
application or interpretation of such laws, regulations or
rulings, which change or amendment becomes effective on or after
March 15, 1996, the Company has or will become obligated to pay
to the holder of any Debenture or Coupon Additional Amounts and
such obligation cannot be avoided by the Company taking
reasonable measures available to it, then the Company may, at its
election exercised at any time when such conditions continue to
exist, redeem such Debentures as a whole but not in part, upon
notice as hereinafter prescribed, at a redemption price equal to
100% of the principal amount, together with accrued interest, if
any, to the date fixed for redemption and any Additional Amounts
due and payable; provided that no such notice of
--------
Page 78 of 137 <PAGE>
redemption shall be given earlier than 90 days prior to the
earliest date on which the Company would be obligated to pay such
Additional Amounts were a payment in respect of such Debentures
then due; and provided further, that at the time
-------- -------
such notice is given, such obligation to pay such Additional
Amounts remains in effect.
Prior to any redemption of the Debentures pursuant to
the preceding paragraph, the Company shall provide the Trustee
with one or more certificates (signed by the President or any
Vice President and the Treasurer or the Secretary) of the Company
on which the Trustee may conclusively rely to the effect that the
Company is entitled to redeem such Debentures pursuant to such
paragraph and that the conditions precedent to the right of the
Company to redeem such Debentures pursuant to such paragraph have
occurred and a written Opinion of Counsel (who may be an employee
of the Company) stating that all legal conditions precedent to
the right of the Company to redeem such Debentures pursuant to
such paragraph have occurred.
(c) Except as set forth in the next succeeding
paragraph, the Company shall redeem the Bearer Debentures in
whole but not in part, upon notice as hereinafter prescribed, at
100% of their principal amount, together with interest accrued
and unpaid to the date fixed for redemption, less applicable
withholding taxes, if any, plus any applicable Additional Amounts
payable, in the event the Company determines that any
certification, identification or information reporting
requirement of any present or future law or regulation of the
United States with regard to the nationality, residence or
identity of a beneficial owner of a Bearer Debenture or a Coupon
appertaining thereto who is a Foreign Holder would be applicable
to a payment of principal of, premium, if any, or interest on a
Bearer Debenture or a Coupon appertaining thereto outside the
United States by the Company or a paying agent (other than a
requirement (a) which would not be applicable to a payment made
by the Company or any one of its paying agents (i) directly to
the beneficial owner or (ii) to a custodian, nominee or other
agent of the beneficial owner, or (b) which could be satisfied by
the Holder, custodian, nominee or other agent certifying that the
beneficial owner is a Foreign Holder, provided, however, in
-------- -------
each case referred to in clauses (a)(ii) and (b), payment by such
custodian, nominee or agent of the beneficial owner is not
otherwise subject to any requirement referred to in this
sentence). The Company shall make such determination on the
basis of a written Opinion of Counsel and will notify the Trustee
thereof in writing as soon as practicable, stating in the notice
the effective date of such certification, identification, or
information reporting requirement and the dates within which the
redemption shall occur, and the Trustee shall give prompt notice
thereof in accordance with the Indenture. The Company shall
determine the Redemption Date by notice to the Trustee at least
75 days before the Redemption Date. Such redemption of the
Page 79 of 137 <PAGE>
Debentures must take place on such date, not later than one year
after the publication of the initial notice of the Company's
determination of the existence of such certification,
identification or information reporting requirement. The Company
shall not so redeem the Bearer Debentures, however, if the
Company, based on a written Opinion of Counsel, determines not
less than 30 days prior to the date fixed for redemption, that no
such payment would be subject to any requirement described above,
in which case the Company shall notify the Trustee, which shall
give prompt notice of that determination in accordance with the
Indenture and any earlier redemption notice shall thereupon be
revoked and of no further effect.
Notwithstanding the immediately preceding paragraph, if
and so long as the certification, identification or information
reporting requirement referred to in the preceding paragraph
would be fully satisfied by payment of United States withholding,
backup withholding or similar taxes, the Company may elect, prior
to the giving of the notice of redemption, to have the provisions
of this paragraph apply in lieu of the provisions of the
preceding paragraph. In that event, the Company will pay such
Additional Amounts (without regard to clause (d) of Section 2
hereof) as are necessary in order that every net payment made
outside the United States by the Company or a paying agent of the
principal of, premium, if any, and interest on a Bearer Debenture
or a Coupon appertaining thereto to a Holder who is a Foreign
Holder (without regard to a certification, identification or
information reporting requirement as to the nationality,
residence or identity of such Holder), after deduction for United
States withholding, backup withholding or similar taxes (other
than withholding, backup withholding or similar taxes (i) which
would not be applicable in the circumstances referred to in the
parenthetical clauses of the first sentence of the immediately
preceding paragraph or (ii) imposed as a result of presentation
of such Bearer Debenture or Coupon for payment more than 10 days
after the date on which such payment becomes due and payable or
on which payment thereof is duly provided for, whichever is
later), will not be less than the amount provided in the Bearer
Debenture or the Coupon to be then due and payable. If the
Company elects to pay such Additional Amounts and as long as it
is obligated to pay such Additional Amounts, the Company may
subsequently redeem the Bearer Debentures, at any time, in whole
but not in part, upon not more than 60 days nor less than 30 days
notice, given as hereinafter prescribed, at 100% of their
principal amount, plus accrued interest to the date fixed for
redemption and Additional Amounts, if any.
(d) If there shall occur a Change of Control (as
defined in the Indenture) with respect to the Company, then the
Holder of this Debenture shall have the right, at such Holder's
option, exercised in accordance with this Section 3(d), to
require the Company to purchase this Debenture, in whole but not
in part, on the Holder Redemption Date at a Redemption Price
equal to 100% of the principal amount, together with accrued
interest to the Holder Redemption Date.
Page 80 of 137 <PAGE>
Notwithstanding the fact that a Debenture is called for
redemption by the Company otherwise than pursuant to this Section
3(d), each Holder of a Debenture desiring to exercise the option
for redemption set forth in this Section 3(d) shall, as a
condition to such redemption, on or before the close of business
on the fifth Business Day prior to the Holder Redemption Date,
surrender the Debenture to be redeemed (together with all
unmatured Coupons, if applicable), in whole but not in part,
together with the Redemption Notice hereon duly executed at the
place or places specified in the notice required by Section 3(e)
and otherwise comply with the provisions of Section 3(f). A
Holder of a Debenture who has tendered a Redemption Notice (i)
will be entitled to revoke its election by delivering a written
notice of such revocation together with the Holder's non-
transferable receipt for such Debenture to the office or agency
of the Company designated as the place for the payment of the
Debentures to be so redeemed on or before the Holder Redemption
Date and (ii) will retain the right to convert its Debentures
into shares of Common Stock of the Company on or before the close
of business on the fifth day (or if such day is not a Business
Day, on the next succeeding Business Day) next preceding the
Holder Redemption Date.
In connection with any repurchase of Debentures
pursuant to this Section 3(d), the Company will comply with any
applicable rules and regulations promulgated by the U.S.
Securities and Exchange Commission and nothing herein, including
the time periods in which redemption is to occur, shall require
the Company to take action which violates such applicable rules
and regulations.
(e) Notice of any redemption or notice in connection
with a Change of Control will be given in accordance with Section
3.1 of the Indenture.
(f) If (i) notice of redemption has been given in the
manner set forth in Section 3.1 of the Indenture with respect to
Debentures to be redeemed at the option of the Company, or (ii)
notice of redemption has been given by the Holder of a Debenture
to be redeemed pursuant to Section 3(d) hereof, the Debentures so
to be redeemed shall become due and payable on the applicable
Redemption Date specified in such notice and upon presentation
and surrender of the Debentures at the place or places specified
in the notice given by the Company with respect to such
redemption, together in the case of Bearer Debentures with all
appurtenant Coupons, if any, maturing subsequent to the
Redemption Date, the Debentures shall be paid and redeemed by the
Company, at the places and in the manner and currency herein
specified and at the applicable Redemption Price together with
accrued interest, if any, to the Redemption Date; provided,
however, that
-------- -------
interest due in respect of Coupons maturing on or prior to the
Redemption Date shall be payable only upon the presentation and
Page 81 of 137 <PAGE>
surrender of such Coupons (at an office or agency located outside
of the United States of America). If any Bearer Debenture
surrendered for redemption shall not be accompanied by all
appurtenant Coupons maturing after the Redemption Date, such
Debenture may be paid after deducting from the amount otherwise
payable an amount equal to the face amount of all such missing
Coupons, or the surrender of such missing Coupon or Coupons may
be waived by the Company and the Trustee if they are furnished
with such security or indemnity as they may require to save each
of them and each other paying agency of the Company harmless.
From and after the Redemption Date, if monies for the redemption
of Debentures shall have been available at the principal
corporate trust office of the Trustee for redemption on the
Redemption Date, the Debentures shall cease to bear interest, the
Coupons for interest appertaining to Bearer Debentures maturing
subsequent to the Redemption Date shall be void, and the only
right of the holders of such Debentures shall be to receive
payment of the Redemption Price together with accrued interest to
the Redemption Date. If monies for the redemption of the
Debentures are not made available by the Company for payment
until after the Redemption Date, the Debentures shall not cease
to bear interest until such monies have been so made available.
4. CONVERSION.
(a) Subject to and upon compliance with the provisions
of the Indenture, at the option of the holder thereof, (i) any
outstanding Registered Regulation S Debenture or Bearer Debenture
or, in the case of any Registered Regulation S Debenture or
Bearer Debenture of a denomination other than $1,000, any portion
of the principal amount thereof which is $1,000 or an integral
multiple of $1,000, may be converted on or after the Exchange
Date and (ii) any outstanding Rule 144A Debenture or Accredited
Investor Debenture or, in the case of any Rule 144A Debenture or
Accredited Investor Debenture of a denomination other than
$1,000, any portion of the principal amount thereof which is
$1,000 or an integral multiple of $1,000, may be converted at any
time one year after the Closing Date and prior to redemption or
maturity, provided that such Rule 144A Debenture or Accredited
Investor Debenture or portion thereof may be converted at the
Holder's option prior to such time upon the earlier of (A) the
first date on which the registration statement described in the
Registration Rights Agreement becomes effective, and (B) the day
after the first date on which (1) any person (or group of
persons) announces that it is (or they are) commencing a tender
offer for all or part of the Company's Common Stock or (2) the
Company makes a public announcement of a proposed Change of
Control, in each case, at the principal amount thereof, or of
such portion thereof, into fully paid and nonassessable shares
("Conversion Shares") of common stock, par value $.10 per share
("Common Stock"), of the Company (calculated as to each
conversion to the nearest 1/1000 of a share) at a Conversion
Price equal to U.S. $18.60 aggregate principal amount of
Debentures for each Conversion Share (the "Conversion Price") (or
at the current adjusted Conversion Price if an adjustment has
Page 82 of 137 <PAGE>
been made as provided herein) by surrender of the Debenture,
together with (1) if a Bearer Debenture, all unmatured Coupons
and any matured Coupons in default appertaining thereto, or (2)
if a Registered Debenture (if so required by the Company or the
Trustee), instruments of transfer in form satisfactory to the
Company and the Trustee, duly executed by the registered holder
or by his duly authorized attorney, and, in either case, (3) the
Conversion Notice hereon duly executed (x) at the principal
corporate trust office of the Trustee, or at such other office or
agency of the Company as may be designated by it for such purpose
in the City of New York, or (y) subject to any laws or
regulations applicable thereto and subject to the right of the
Company to terminate the appointment of any such conversion
agency, at the London office of The Chase Manhattan Bank, N.A.
located at Woolgate House, Coleman Street, London EC2P 2HD,
England, and Chase Manhattan Bank Luxembourg S.A., 5, rue
Plaetis, L-2338 Luxembourg, or at such other offices or agencies
as the Company may designate; provided, however, that if any
Debenture or a portion thereof
-------- -------
is called for redemption by the Company, or the holder thereof
elects to have such Debenture redeemed in whole by the Company
pursuant to Section 3(d) hereof, then in respect of such
Debenture (or, in the case of partial redemption by the Company,
such portion thereof) the right to convert such Debenture (or, in
the case of partial redemption by the Company, such portion
thereof) shall expire (unless the Company defaults in making the
payment due upon redemption) at the close of business on the
fifth day (or if such date is not a Business Day, on the next
succeeding Business Day) next preceding the Redemption Date or
the Holder Redemption Date (unless in the latter case the holder
shall have first revoked his redemption election in accordance
with Section 3(d) hereof).
(b) In the case of any Registered Debenture which is
converted at the option of the Holder thereof after any Interest
Record Date and on or prior to the next succeeding Interest
Payment Date, interest that is payable on such Interest Payment
Date shall be payable on such Interest Payment Date
notwithstanding such conversion, and such interest shall be paid
to the person in whose name that Registered Debenture is
registered at the close of business on such Interest Record Date.
Except as otherwise provided in the immediately preceding
sentence, no payment or adjustment shall be made upon any
conversion on account of any interest accrued on the Debentures
surrendered for conversion or on account of any dividends or
distributions on the Conversion Shares issued upon conversion.
Registered Debentures surrendered for conversion during the
period after the close of business on any Interest Record Date
next preceding any Interest Payment Date to the close of business
on such Interest Payment Date shall (except in the case of
Registered Debentures or portions thereof which are called for
redemption on a Redemption Date within such period) be
accompanied by payment of an amount equal to the interest payable
Page 83 of 137 <PAGE>
on such Interest Payment Date on the principal amount being
surrendered for conversion.
(c) If, after April 1, 1999 and prior to March 15,
2006, the closing price of the Common Stock (determined as the
last reported sales price regular way or, in case no such
reported sale takes place on a day, the average of the reported
bid and asked prices regular way, in either case on the New York
Stock Exchange or, if the Common Stock is not listed or admitted
to trading thereon, on the principal national securities exchange
on which the Common Stock is listed or admitted to trading or, if
the Common Stock is not listed or admitted to trading on any
national securities exchange, on the Nasdaq Stock Market's
National Market) exceeds an amount equal to 130% of the
Conversion Price for at least 20 trading days within 30
consecutive trading days, the Company, at its option, may convert
all (but not less than all) of the Debentures, together with the
interest accrued and unpaid thereon to the Surrender Date (as
defined below), into fully paid and nonassessable shares of
Common Stock by giving the Trustee written notice (the
"Conversion Notice") of its election, together with information
and calculations supporting such election (which information and
calculations shall be verified by the Trustee), no later than 5
Business Days after the twentieth such trading day (such
twentieth day, the "Conversion Date"). Promptly after (and in
any event within 5 Business Days following) its receipt of the
Conversion Notice, the Trustee shall, at the Company's expense,
give notice to each Debentureholder stating: (i) that it has
received the Conversion Notice and that, so long as the Company
delivers a sufficient number of shares of Common Stock (and cash
in lieu of fractional shares) to convert all outstanding
Debentures and accrued and unpaid interest thereon through the
Surrender Date (as defined below) at the Conversion Price in
effect on the Conversion Date, all (but not less than all)
Debentures shall be deemed to have been converted on the
Conversion Date, (ii) the Conversion Price in effect on the
Conversion Date, (iii) the identity of the conversion agent or
conversion agents for the conversion and the office of the
conversion agent or conversion agents at which Debentures may be
surrendered, (iv) that the Debentures of such Debentureholder
must be surrendered (together in the case of Bearer Debentures
with all unmatured Coupons, if any) at the office of a conversion
agent in order to obtain the shares of Common Stock issuable as a
result of the Company's election to convert the Debentures, (v)
that such Debentureholder must complete and manually sign the
mandatory conversion notice on the reverse side of each Debenture
held by such Debentureholder and deliver such notice to the
office of a conversion agent, (vi) the first date (the "Surrender
Date") on which Debentures may be surrendered in exchange for
shares of Common Stock, which date shall be no later than 25
Business Days after the Conversion Date, and (vii) so long as the
Company delivers to the conversion agent or conversion agents on
or before the Surrender Date a sufficient number of shares of
Common Stock (and cash in lieu of fractional shares) to convert
on the Surrender Date all outstanding Debentures and accrued and
Page 84 of 137 <PAGE>
unpaid interest thereon through the Surrender Date at the
Conversion Price in effect on the Conversion Date, all (but not
less than all) Debentures shall be deemed to have been converted
on the Conversion Date and interest shall cease to accrue on the
Debentures from and after the Conversion Date. In the event the
Company delivers a Conversion Notice but fails to deliver to the
conversion agent or conversion agents by the Surrender Date a
sufficient number of shares of Common Stock (and cash in lieu of
fractional shares) to convert on the Surrender Date all
outstanding Debentures and accrued and unpaid interest thereon
through the Surrender Date, then such conversion shall be revoked
and interest shall continue to accrue on the Debentures.
(d) No fractions of shares or scrip representing
fractions of shares will be issued or delivered on any
conversion, but instead of any fractional interest the Company
shall pay a cash adjustment as provided in the Indenture.
(e) (i) In case at any time the Company shall pay or
make a stock dividend or other distribution on any class of
equity securities of the Company in shares of Common Stock, the
Conversion Price in effect at the opening of business on the day
following the date fixed for the determination of stockholders
entitled to receive such dividend or other distribution shall be
reduced so that the same shall equal the price determined by
multiplying such Conversion Price by a fraction of which the
numerator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such
determination and the denominator shall be the sum of such number
of shares and the total number of shares of Common Stock
constituting such dividend or other distribution, such adjustment
to become effective immediately after the opening of business on
the day following the date fixed for such determination; and in
the event that such dividend or other distribution is not so
made, or is made in part, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect
(i) if such record date has not been fixed or (ii) based on the
actual number of shares actually issued, as the case may be.
(ii) In case at any time the Company shall (A)
subdivide its outstanding shares of Common Stock into a greater
number of shares, (B) combine its outstanding shares of Common
Stock into a smaller number of shares, or (C) issue by
reclassification of its shares of Common Stock (including any
such reclassification in connection with a consolidation or
merger in which the Company is the continuing corporation) any
shares of capital stock, the Conversion Price in effect at the
effective date of such subdivision, combination or
reclassification shall be proportionately adjusted so that the
holder of any Debenture surrendered for conversion after such
time shall be entitled to receive the aggregate number and kind
of shares which, if such Debenture had been converted immediately
prior to such time, he would have owned upon such conversion and
been entitled to receive upon such subdivision, combination or
reclassification. Such adjustment shall become effective
Page 85 of 137 <PAGE>
immediately after the effective date of such subdivision,
combination or reclassification. Such adjustment shall be made
successively whenever any event listed above shall occur.
(iii) In case at any time the Company shall fix a
record date for the issuance of rights or warrants to all holders
of its Common Stock entitling them to subscribe for or purchase
Common Stock at a price per share less than the Current Market
Price per share of Common Stock on such record date, the
Conversion Price in effect at the opening of business on the day
following such record date shall be reduced so that the same
shall equal the price determined by multiplying such Conversion
Price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on
such record date plus the number of shares of Common Stock which
the aggregate of the offering price of the total number of shares
so offered for subscription or purchase would purchase at such
Current Market Price per share of Common Stock and the
denominator shall be the number of shares of Common Stock
outstanding at the close of business on such record date plus the
number of shares so offered for subscription or purchase, such
reduction to become effective immediately after the opening of
business on the day following such record date; provided,
--------
however, that no adjustment to the Conversion Price shall be
-------
made pursuant to this Section 4(e)(iii) if the holders of
Debentures receive, or are entitled to receive upon conversion or
otherwise, the same rights or warrants as are issued to the
holders of Common Stock, on the same terms and conditions as such
rights or warrants are so issued to the holders of Common Stock.
Such reduction shall be made successively whenever such a record
date is fixed; and in the event that such rights or warrants are
not so issued, or are issued in part, or are issued but all or
part of which expire unexercised, the Conversion Price shall
again be adjusted to be the Conversion Price which would then be
in effect (i) if such record date had not been fixed or (ii)
based on the actual number of rights or warrants actually issued,
as the case may be.
(iv) In case at any time the Company shall fix a record
date for the making of a distribution, by dividend or otherwise,
to all holders of its shares of Common Stock, of evidences of its
indebtedness or assets (including securities, but excluding (x)
any dividend or distribution referred to in paragraph (i) of this
subsection (e) and any rights or warrants referred to in
paragraph (iii) of this subsection (e), and (y) any dividend,
return of capital or distribution paid in cash out of the
retained earnings of the Company), then in each such case the
Conversion Price in effect after such record date shall be
determined by multiplying the Conversion Price in effect
immediately prior to such record date by a fraction, of which the
numerator shall be the total number of outstanding shares of
Common Stock multiplied by the Current Market Price per share of
Common Stock on such record date, less the fair market value (as
Page 86 of 137 <PAGE>
determined by the Board of Directors of the Company, whose
determination shall be conclusive and described in a statement
filed with the Trustee) of the portion of the assets or evidences
of indebtedness so to be distributed, and of which the
denominator shall be the total number of outstanding shares of
Common Stock multiplied by such Current Market Price per share of
Common Stock. Such adjustment shall be made successively
whenever such a record date is fixed and shall become effective
immediately after the record date for the determination of
stockholders entitled to receive the distribution; and in the
event that such distribution is not so made, the Conversion Price
shall again be adjusted to be the Conversion Price which would
then be in effect if such record date has not been fixed.
(v) The Company may make such adjustments in the
Conversion Price, in addition to those required by paragraphs
(i), (ii), (iii) and (iv) of this section, as it considers to be
advisable in order that any event treated for United States
Federal income tax purposes as a dividend of stock or stock
rights shall not be taxable to the recipients.
(vi) No adjustment in the Conversion Price shall be
required unless such adjustment would require an increase or
decrease of at least U.S. $.25 in such Conversion Price;
provided, however, that any adjustment which by reason of
-------- -------
this paragraph (vi) is not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All
calculations under this subsection (e) shall be made to the
nearest cent or to the nearest 1/1000 of a share, as the case may
be.
(f) Whenever the Conversion Price is adjusted and in
the event of certain other corporate actions, as herein provided,
the Company shall give notice, all as provided in the Indenture.
(g) The Company shall use its reasonable best efforts
to cause all registrations with, and to obtain any approvals by,
any governmental authority under any Federal or state law of the
United States that may be required before the Conversion Shares
(or other securities issuable upon conversion of the Debentures)
may be lawfully issued or transferred and delivered.
5. TRANSFER AND EXCHANGE OF DEBENTURES.
(a) Title to Bearer Debentures and coupons shall pass
by delivery. As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of Registered
Debentures is registrable on the Debenture Register upon
surrender of a Registered Debenture for registration of transfer
at the office or agency of the Trustee in the City of New York,
or, subject to applicable laws and regulations, at the office of
the paying agency in Luxembourg, duly endorsed by, or accompanied
by a written instrument of transfer in form satisfactory to the
Company and the Debenture Registrar duly executed by, the holder
Page 87 of 137 <PAGE>
thereof or his attorney duly authorized in writing, and thereupon
one or more new Registered Debentures, of authorized
denominations and for the same aggregate principal amount, will
be issued to the designated transferee or transferees.
(b) As provided in the Indenture and subject to
certain limitations therein set forth, Bearer Debentures (with
all unmatured Coupons appertaining thereto) are exchangeable at,
subject to applicable laws and regulations, the offices of the
paying agencies in London and Luxembourg or as designated by the
Company for such purpose pursuant to the Indenture, for an equal
aggregate principal amount of Registered Debentures and/or Bearer
Debentures of authorized denominations, and Registered Debentures
are exchangeable at the principal corporate trust office of the
Trustee in the City of New York or, subject to applicable laws
and regulations, the offices of the paying agencies in London and
Luxembourg or as designated by the Company for such purpose
pursuant to the Indenture, for an equal aggregate principal
amount of Registered Debentures of authorized denominations as
requested by the Holder surrendering the same. Registered
Debentures will not be exchangeable for Bearer Debentures. The
Company shall not be required (a) to exchange Bearer Debentures
for Registered Debentures during the period between the close of
business on any Interest Record Date and the opening of business
on the next succeeding Interest Payment Date, (b) to exchange any
Bearer Debenture (or portion thereof) for a Registered Debenture
if the Company shall determine and inform the Trustee in writing
that, as a result thereof, the Company may incur adverse
consequences under the Federal income tax laws and regulations
(including proposed regulations) of the United States in effect
or proposed at the time of such exchange, or (c) in the event of
a redemption in part, (i) to register the transfer of Registered
Debentures or to exchange Bearer Debentures for Registered
Debentures during a period of 15 days immediately preceding the
date notice is given identifying the serial numbers of the
Debentures called for such redemption; (ii) to register the
transfer of or exchange any such Registered Debentures, or
portion thereof, called for redemption; or (iii) to exchange any
such Bearer Debentures called for redemption; provided, however,
-------- -------
that a Bearer Debenture called for redemption may be exchanged
for a Registered Debenture which is simultaneously surrendered,
with written instruction for payment on the Redemption Date,
unless the Redemption Date is during the period between the close
of business on any Interest Record Date and the close of business
on the next succeeding Interest Payment Date, in which case such
exchange may only be made prior to the close of business on the
Interest Record Date immediately preceding the Redemption Date.
The Company also shall not be required to exchange Debentures if,
as a result thereof, the Company would incur adverse consequences
under United States Federal income tax laws in effect at the time
of such exchange. In the event of redemption or conversion of a
Registered Debenture in part only, a new Registered Debenture or
Debentures for the unredeemed or unconverted portion hereof will
be issued in the name of the holder thereof.
Page 88 of 137 <PAGE>
(c) The costs and expenses of effecting any exchange
or registration of transfer pursuant to the foregoing provisions,
except for the expenses of delivery (if any) by other than
regular mail and except, if the Company shall so require, the
payment of a sum sufficient to cover any tax or other
governmental charge or insurance charges that may be imposed in
relation thereto, will be borne by the Company.
(d) The Company has initially appointed the Trustee as
registrar, transfer agent, paying agent and conversion agent
acting through the Trustee's principal corporate trust office in
the City of New York and its agents in London. The Company has
also initially appointed Chase Manhattan Bank Luxembourg S.A. as
a transfer agent, paying agent and conversion agent. The Company
may at any time terminate the appointment of the registrar and
such agents and appoint additional or other registrars and agents
or approve any change in an office through which the registrar or
any agent acts; provided that, until all of the Debentures have
been delivered to the Trustee for cancellation, or monies
sufficient to pay the Debentures have been made available for
payment and either paid or returned to the Company as provided in
the Debentures and the Indenture, the Company will maintain a
paying agent and a conversion agent (i) in the City of New York
in the United States for the payment of the principal and
interest on Registered Debentures and for the surrender of
Debentures for conversion or redemption and (ii) in a European
city that, so long as the Debentures are listed on the Luxembourg
Stock Exchange and such exchange shall so require, shall be
Luxembourg, for the payment of the principal and interest on
Debentures and for the surrender of Debentures for conversion or
redemption.
6. MEETINGS OF HOLDERS.
A meeting of holders of Debentures may be called at any
time and from time to time in the manner and for the purposes set
forth in the Indenture.
The Trustee may at any time call a meeting of holders
of the Debentures to be held at such time and at such place in
any of such designated locations as the Trustee shall determine.
Notice of every meeting of holders shall be made as specified in
the Indenture.
7. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture or the
Debentures may be amended or supplemented, and any existing
Default or Event of Default or compliance with any provision may
be waived, with the written consent of the Holders of a majority
in aggregate principal amount of the Debentures then outstanding.
Without notice to or consent of any Holder, the parties thereto
may amend or supplement the Indenture or the Debentures to, among
other things, cure any ambiguity, defect or inconsistency, or
Page 89 of 137 <PAGE>
make any other change that does not adversely affect the rights
of any Holder of a Debenture.
8. SUBORDINATION.
Payment of principal, premium, if any, interest on and
Additional Amounts with respect to the Debentures is subordinat-
ed, in the manner and to the extent set forth in the Indenture,
to the prior payment in full of all Senior Indebtedness. Amounts
owing from time to time by the Company to the Trustee are not so
contractually subordinated.
9. SUCCESSORS.
Except as otherwise provided in the Indenture, when a
successor assumes all the obligations of its predecessor under
the Debentures and the Indenture, the predecessor will be
released from those obligations.
10. DEFAULTS AND REMEDIES.
If an Event of Default occurs and is continuing (other
than an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization in which events all
principal, accrued interest and Additional Amounts, if any, with
respect to the Debentures will be immediately due and payable
without any declaration or other act on the part of the Trustee
or the Holders), then in every such case, unless the principal of
all of the Debentures shall have already become due and payable,
either the Trustee or the Holders of 25% in aggregate principal
amount of Debentures then outstanding may declare all the Debent-
ures to be due and payable immediately in the manner and with the
effect provided in the Indenture. Holders of Debentures may not
enforce the Indenture or the Debentures except as provided in the
Indenture. The Trustee may require indemnity satisfactory to it
before it enforces the Indenture or the Debentures. Subject to
certain limitations, Holders of a majority in aggregate principal
amount of the Debentures then outstanding may direct the Trustee
in its exercise of any trust or power. The Trustee may withhold
from Holders of Debentures notice of any continuing Default or
Event of Default (except a Default in payment of principal,
interest or Additional Amounts), if it determines that withhold-
ing notice is in their interest.
11. NO RECOURSE AGAINST OTHERS.
No stockholder, director, officer or employee, as such,
past, present or future, of the Company or any successor
corporation shall have any personal liability in respect of the
obligations of the Company under the Debentures or the Indenture
by reason of his, her or its status as such stockholder,
director, officer or employee. Each Holder of a Debenture by
accepting a Debenture waives and releases all such liability.
The waiver and release are part of the consideration for the
issuance of the Debentures.
Page 90 of 137 <PAGE>
12. NON-BUSINESS DAYS.
In any case where the date of maturity of the principal
of or interest on (or Additional Amounts, if any) the Debentures
or the date fixed for redemption of any Debenture shall be at any
place of payment a day other than a Business Day, then payment of
principal or interest or Redemption Price (or Additional Amounts,
if any) need not be made on such date at such place but may be
made on the next succeeding Business Day at such place of
payment, with the same force and effect as if made on the date of
maturity or the date fixed for redemption, and no interest shall
accrue for the period after such date.
13. NOTICES.
All notices to the Holders of Debentures will be
published on a Business Day in Authorized Newspapers in the City
of New York and in London, and, as long as the Debentures are
listed on the Luxembourg Stock Exchange, in an Authorized
Newspaper in Luxembourg or, if either publication in London or
Luxembourg is not practical, in an Authorized Newspaper in any
country in Europe. Notices shall be deemed to have been given on
the date of publication as aforesaid or, if published on
different dates, on the date of the first such publication. A
copy of each notice will be mailed by the Trustee, on behalf of
and at the expense of the Company, by first-class mail to each
holder of a Registered Debenture at the registered address of
such holder as the same shall appear in the Debenture Register on
the day fifteen days prior to such mailing. The Trustee shall
promptly furnish to the Company, the Paying Agent and to each
other paying agency of the Company a copy of each notice so
published or mailed.
14. GOVERNING LAW.
(a) The Indenture, this Debenture and any Coupons
appertaining hereto shall be governed by and construed in
accordance with the laws of the State of New York, United States
of America, without regard to principles of conflicts of laws.
(b) The Company has appointed the Trustee as its agent
upon whom process may be served in any legal action or proceeding
relating to or arising out of this Debenture, the Indenture or
any Coupon appertaining hereto.
15. AUTHENTICATION.
This Debenture and any Coupon appertaining thereto
shall not become valid or obligatory for any purpose until the
certificate of authentication hereon shall have been duly signed
by the Trustee acting under the Indenture.
16. WARRANTY OF THE ISSUER.
Page 91 of 137 <PAGE>
Subject to Section 15 hereof, the Company hereby
certifies and warrants that all acts, conditions and things
required to be done and performed and to have happened precedent
to the creation and issuance of this Debenture and any Coupons
appertaining thereto, and to constitute the same legal, valid and
binding obligations of the Company enforceable in accordance with
their terms, have been done and performed and have happened in
due and strict compliance with all applicable laws.
17. STATUS AS UNITED STATES REAL PROPERTY HOLDING
CORPORATION.
To the best of its knowledge, as of the date of the
issuance of this Debenture, the Company is not a "United States
real property holding corporation" as defined in Section
897(c)(2) of the Internal Revenue Code of 1986, as amended (the
"Code"). A non-United States person disposing of this Debenture
may request from the Company a statement as to whether this
Debenture constitutes a "United States real property interest"
(as defined in Code Section 897(c)(1)) as of the date of
disposition. It may be necessary to obtain a statement that this
Debenture does not constitute a "United States real property
interest" prior to the time that a tax return would otherwise be
required to be filed with the Internal Revenue Service with
respect to such disposition in order to avoid a withholding tax
on such disposition. If, at any time while this Debenture is
outstanding, the Company determines that it is at such time a
"United States real property holding corporation", it shall
provide notice of such determination in accordance with the
provisions of Section 13 hereof. The Holder of this Debenture
can contact the Company at 75 Robin Hill Road, Goleta, California
93117-3108 to obtain information as to the United States income
tax consequences of the classification of the Company as a
"United States real property holding corporation."
18. ABBREVIATIONS AND DEFINED TERMS.
Customary abbreviations may be used in the name of a
Holder of a Debenture or an assignee, such as: TEN COM (= tenants
in common), TEN ENT (= tenants by the entireties), JT TEN (=
joint tenants with right of survivorship and not as tenants in
common), CUST (= custodian), and U/G/M/A (= Uniform Gifts to
Minors Act).
19. CUSIP AND ISIN NUMBERS.
Pursuant to a recommendation promulgated by the Commit-
tee on Uniform Debenture Identification Procedures, the Company
will cause CUSIP numbers and ISIN numbers to be printed on the
Debentures as a convenience to the Holders of the Debentures. No
representation is made as to the accuracy of such numbers as
printed on the Debentures and reliance may be placed only on the
other identification numbers printed hereon.
20. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED DEBENTURES.
Page 92 of 137 <PAGE>
In addition to the rights provided to Holders of
Debentures under the Indenture, Holders of Restricted Debentures
shall have all the rights set forth in the Registration Rights
Agreement.
21. ACCOUNTING TERMS.
All accounting terms not otherwise defined herein shall
have the meanings assigned to them in accordance with generally
accepted accounting principles as applied in the United States.
22. DESCRIPTIVE HEADINGS.
The descriptive headings appearing herein are for
convenience of reference only and shall not alter, limit or
define the provisions hereof.
The Company will furnish to any Holder upon written
request and without charge a copy of the Indenture and/or the
Registration Rights Agreement. Request may be made to:
Applied Magnetics Corporation
75 Robin Hill Road
Goleta, California 93117-3108
Attention: Chief Executive Officer
Page 93 of 137 <PAGE>
TRANSFER NOTICE
---------------
FOR VALUE RECEIVED, the undersigned Holder hereby sell(s),
assign(s) and transfers) unto ____________________________
__________________________________________________________
__________________________________________________________
__________________________________________________________
__________________________________________________________
whose taxpayer identification number is ______________ and whose
address including postal/zip code is _______________
__________________________________________________________
the within Debenture and all rights thereunder, hereby
irrevocably constituting and appointing __________________
attorney-in-fact to transfer said Debenture on the books of the
Company with full power of substitution in the premises.
Only if a Restricted Debenture:
In connection with the transfer of this Debenture, the
undersigned certifies that:
(Check one)
___ (a) This Debenture is being transferred to a
"qualified institutional buyer" (as
defined in Rule 144A under the
Securities Act of 1933) in compliance
with the exemption from registration
under the Securities Act of 1933
provided by Rule 144A.
___ (b) This Debenture is being transferred in
an Offshore Transaction (as defined in
Regulation S under the Securities Act of
1933) in compliance with the exemption
from registration under the Securities
Act of 1933 provided by Regulation S.
___ (c) This Debenture is being transferred in a
transaction arranged by a broker or
dealer registered under the Securities
Exchange Act of 1934 to an institutional
"accredited investor" (within the
meaning of Rule 501(a)(1), (2), (3) or
(7) under the Securities Act of 1933) in
a transaction not involving any general
solicitation or general advertising and
in connection with which transfer the
Company has received, if it has so
requested, an opinion of counsel
(satisfactory to it in form and
substance) to the effect that the
transfer is being made pursuant to an
Page 94 of 137 <PAGE>
exemption from the registration
requirements of the Securities Act of
1933.
___ (d) This Debenture is being transferred to
Applied Magnetics Corporation
___ (e) Transfer other than those above in
connection with which the Company has
received an opinion of counsel
(satisfactory to it in form and
substance) to the effect that the
transfer is being made pursuant to an
exemption from, or in a transaction not
subject to, the registration
requirements of the Securities Act of
1933.
___ (f) This Debenture is being exchanged for a
beneficial interest in the Rule 144A
Global Debenture and the undersigned is
a "qualified institutional buyer" (as
defined in Rule 144A under the
Securities Act of 1933).
Dated: _______________ Name: _________________________
By: ______________________
Title:____________________
NOTICE: The signature of the Holder to
this assignment must correspond with the
name as written upon the face of the
within instrument in every particular,
without enlargement or any change
whatsoever.
SIGNATURE GUARANTEED
____________________________________
Page 95 of 137 <PAGE>
TO BE COMPLETED BY A BROKER OR DEALER IF (c) ABOVE IS CHECKED:
The undersigned represents and warrants that (i) it is
a broker or dealer registered under Section 15 of the Securities
Exchange Act of 1934, (ii) each person which will become a
beneficial owner of this Debenture upon transfer is an
institutional investor which is an accredited investor" (within
the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act of 1933); (iii) no general solicitation or general
advertising was made or used by it in connection with the offer
and sale of this Debenture to such person(s); and (iv) each such
person has been notified that this Debenture has not been
registered under the Securities Act of 1933 and is subject to the
restrictions on transfer of the Debenture set forth herein and in
the Indenture.
Dated: ____________ _______________________________
By: __________________________
IF NONE OF THE FOREGOING BOXES IS CHECKED, THE TRUSTEE
SHALL NOT BE OBLIGATED TO REGISTER THE TRANSFER OF THIS DEBENTURE
UNLESS AND UNTIL THE CONDITIONS TO ANY SUCH TRANSFER OF
REGISTRATION SET FORTH HEREIN, ON THE FACE HEREOF AND IN THE
INDENTURE SHALL HAVE BEEN SATISFIED.
Page 96 of 137 <PAGE>
CONVERSION NOTICE--HOLDER ELECTION
----------------------------------
If (i) Registered Debenture of denomination U.S. $1,000
or (ii) Bearer Debenture of denomination U.S. $1,000:
The undersigned holder of this Debenture hereby
irrevocably exercises the option to convert this Debenture into
shares of Common Stock of Applied Magnetics Corporation in
accordance with the terms of this Debenture and directs that such
shares be registered in the name of and delivered, together with
a check in payment for any fractional share, to the undersigned
unless a different name has been indicated below. If shares are
to be registered in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable
with respect thereto.
Dated: ________________ __________________________
Signature
MUST BE GUARANTEED IF STOCK IS
TO BE ISSUED IN A NAME OTHER
THAN THE REGISTERED HOLDER OF
THE DEBENTURE
If shares are to be registered in the name
of and delivered to a person other than the
holder, please print such person's name and
address and, if this is a Restricted Debenture,
complete a Transfer Notice:
________________________________
________________________________
________________________________
HOLDER
Please print name and address
of holder:
__________________________
__________________________
__________________________
Page 97 of 137 <PAGE>
CONVERSION NOTICE--HOLDER ELECTION
----------------------------------
If (i) Registered Debenture of denomination greater
than U.S. $1,000 or (ii) Bearer Debenture of denomination U.S.
$10,000:
The undersigned holder of this Debenture hereby
irrevocably exercises the option to convert this Debenture, or
portion hereof (which is U.S. $1,000 or an integral multiple
thereof) below designated, into shares of Common Stock of Applied
Magnetics Corporation in accordance with the terms of this
Debenture, and directs that such shares, together with a check in
payment for any fractional share and any Debentures representing
any unconverted principal amount hereof, be delivered to and be
registered (if a Registered Debenture) in the name of the
undersigned unless a different name has been indicated below. If
shares or Debentures are to be registered in the name of a person
other than the undersigned, the undersigned will pay all transfer
taxes payable with respect thereto.
Dated: ____________ _______________________________
Signature
MUST BE GUARANTEED IF THE STOCK IS
TO BE ISSUED IN A NAME OTHER THAN
THE REGISTERED HOLDER OF THE
DEBENTURE
If shares or Debentures If only a portion of the
are to be registered in Debentures is to be converted,
the name of a Person other please indicate:
than the holder, please
print such person's name 1. Principal Amount to be
and address and, if this converted: U.S. $________
is a Restricted Debenture,
complete a Transfer Notice: 2. Kind, amount and denomi-
nation of Debentures
__________________________ representing unconverted
principal amount to be
__________________________ issued:
__________________________ Bearer-U.S. $__________________
Denominations: U.S. $_________
(U.S. $1,000 or $10,000)
Registered-U.S. $______________
Denominations: U.S. $_________
(U.S. $1,000 or an integral
multiple thereof)
REGISTERED DEBENTURES ARE NOT
EXCHANGEABLE FOR BEARER DEBENTURES.
Page 98 of 137 <PAGE>
CONVERSION NOTICE--COMPANY ELECTION
-----------------------------------
As a result of the exercise by Applied Magnetics
Corporation of its option to convert all of the Debentures in
accordance with the terms of this Debenture, the undersigned
holder of this Debenture hereby directs that this Debenture be
converted into shares of Common Stock of Applied Magnetics
Corporation in accordance with the terms of this Debenture and
that such shares be registered in the name of and delivered,
together with a check in payment for any fractional share, to the
undersigned unless a different name has been indicated below. If
shares are to be registered in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto.
Dated: _______________
______________________________
Signature
MUST BE GUARANTEED IF STOCK IS TO
BE ISSUED IN A NAME OTHER THAN THE
REGISTERED HOLDER OF THE DEBENTURE
If shares are to be registered in the name
of and delivered to a person other than the
holder, please print such person's name and
address and, if this is a Restricted Debenture,
complete a Transfer Notice:
______________________________
______________________________
______________________________
HOLDER
Please print name and address
of holder:
_________________________
_________________________
Page 99 of 137 <PAGE>
REDEMPTION NOTICE UNDER SECTION 3(d)
------------------------------------
The undersigned holder of this Debenture hereby requests and
instructs the Company to redeem this Debenture in accordance with
the terms of Section 3(d) of this Debenture and directs that a
check in payment of the redemption amount be delivered to the
undersigned unless a different name has been indicated below.
The undersigned understands that this request can be revoked by
delivering written notice to the Paying Agent on or before the
Holder Redemption Date, together with the undersigned's non-
transferable receipt for such Debenture.
Dated: _________________
______________________________
Signature
MUST BE GUARANTEED IF CHECK IS TO
BE MADE PAYABLE TO A NAME OTHER
THAN THE REGISTERED HOLDER OF THE
DEBENTURE
If a check in payment of the
redemption amount is to be
delivered to a person other
than the holder, please print
such person's name and address:
______________________________
______________________________
______________________________
HOLDER
Please print name and address
of holder:
_________________________
_________________________
_________________________
Page 100 of 137 <PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTES
-----------------------------------------
The following exchanges of a part of this Rule 144A Global
Debenture for Accredited Investor Debentures have been made:
Amount of Amount of Principal Signature of
decrease in increase in Amount of this Authorized
Principal Principal Global Deben- Officer of
Amount of Amount of ture following Trustee or
Date of this Global this Global such decrease Debenture
Exchange Debenture Debenture (or increase) Registrar
------------------------------------------------------------------
Page 101 of 137 <PAGE>
EXHIBIT 4.3
[EXECUTION COPY]
============================================================
7% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2006
REGISTRATION RIGHTS AGREEMENT
Dated as of March 22, 1996
by and among
APPLIED MAGNETICS CORPORATION,
as the Company
and
Persons Listed on Schedule I hereto
============================================================
Page 102 of 137 <PAGE>
This REGISTRATION RIGHTS AGREEMENT is made and entered
into as of March 22, 1996, by and among Applied Magnetics
Corporation, a Delaware corporation (the "Company"), and the
parties listed on Schedule I hereto (the "Managers").
This Agreement is made pursuant to the Subscription
Agreement, dated March 15, 1996, among the Company and the
Managers (the "Subscription Agreement"). In order to induce the
Managers to enter into the Subscription Agreement, the Company
has agreed to provide the registration rights provided for in
this Agreement to the Managers and their respective direct and
indirect transferees. The execution of this Agreement is a
condition to the closing of the transactions contemplated by the
Subscription Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall
have the following meanings:
ACCREDITED INVESTOR DEBENTURES: Debentures initially
resold by the Managers pursuant to the Subscription Agreement to
institutional "accredited investors" (within the meaning of Rule
501(a)(1), (2), (3) or (7) promulgated by the SEC under the
Securities Act) and all Debentures issued upon registration of
transfer of or in exchange for such Debentures.
ADVICE: As defined in the last paragraph of Section 3
hereof.
AFFILIATE: of any specified person shall mean any
other person directly or indirectly controlling or controlled by
or under, direct or indirect common control with such specified
person. For the purposes of this definition, "control," when
used with respect to any person, means the power to direct the
management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract
or otherwise and the terms "affiliated," "controlling" and
"controlled" have meanings correlative to the foregoing.
AGREEMENT: This Registration Rights Agreement, as the
same may be amended, supplemented or modified from time to time
in accordance with the terms hereof.
BUSINESS DAY: Each Monday, Tuesday, Wednesday,
Thursday and Friday that is not a day on which banking
institutions in New York, New York are authorized or obligated by
law or executive order to close.
CLOSING DATE: The Closing Date as defined in the
Subscription Agreement.
Page 103 of 137 <PAGE>
COMMON STOCK: Common Stock, $.10 par value per share
of the Company.
COMPANY: Applied Magnetics Corporation, a Delaware
corporation, and any successor corporation thereto.
CONTROLLING PERSON: As defined in Section 5(a) hereof.
DEBENTURES: The $115,000,000 aggregate principal
amount of 7% Convertible Subordinated Debentures due 2006 of the
Company being issued pursuant to the Indenture.
EFFECTIVENESS PERIOD: As defined in Section 2(a)
hereof.
EFFECTIVENESS TARGET DATE: The 180th day after the
Closing Date.
EXCHANGE ACT: The Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the SEC
pursuant thereto.
HOLDER: Each registered holder of any Transfer
Restricted Securities.
INDEMNIFIED PERSON: As defined in Section 5(a) hereof.
INDENTURE: The Indenture, dated the date hereof,
between the company and the trustee thereunder, pursuant to which
the debentures are being issued, as amended, modified or
supplemented from time to time in accordance with the terms
thereof.
MANAGERS: As defined in the preamble hereof.
NEEDHAM WARRANT: The stock purchase warrant to
purchase 100,000 shares of Common Stock issued to Needham &
Company, Inc. on August 18, 1993.
PAYING AGENT: As defined in the Indenture.
PROCEEDING: An action, claim, suit or proceeding
(including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or
threatened.
PROSPECTUS: The prospectus included in any
Registration Statement (including, without limitation, a
prospectus that discloses information previously omitted from a
prospectus filed as part of an effective registration statement
in reliance upon Rule 430A promulgated pursuant to the Securities
Act), as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the
Transfer Restricted Securities covered by such Registration
Statement, and all other amendments and supplements to any such
Page 104 of 137 <PAGE>
prospectus, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by
reference, if any, in such prospectus.
REGISTRATION STATEMENT: Any registration statement of
the Company that covers any of the Transfer Restricted Securities
pursuant to the provisions of this Agreement, including the
Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference, if any,
in such registration statement.
RULE 144: Rule 144 promulgated by the SEC pursuant to
the Securities Act, as such Rule may be amended from time to
time, or any similar rule or regulation hereafter adopted by the
SEC as a replacement thereto having substantially the same effect
as such Rule.
RULE 144A: Rule 144A promulgated by the SEC pursuant
to the Securities Act, as such Rule may be amended from time to
time, or any similar rule or regulation hereafter adopted by the
SEC as a replacement thereto having substantially the same effect
as such Rule.
RULE 144A DEBENTURES: Debentures initially resold by
the Managers pursuant to the Subscription Agreement to "qualified
institutional buyers" (as such term is defined in Rule 144A) and
all Debentures issued upon registration of transfer of or in
exchange for such Debentures.
RULE 158: Rule 158 promulgated by the SEC pursuant to
the Securities Act, as such Rule may be amended from time to
time, or any similar rule or regulation hereafter adopted by the
SEC as a replacement thereto having substantially the same effect
as such Rule.
RULE 174: Rule 174 promulgated by the SEC pursuant to
the Securities Act, as such Rule may be amended from time to
time, or any similar rule or regulation hereafter adopted by the
SEC as a replacement thereto having substantially the same effect
as such Rule.
RULE 415: Rule 415 promulgated by the SEC pursuant to
the Securities Act, as such Rule may be amended from time to
time, or any similar rule or regulation hereafter adopted by the
SEC as a replacement thereto having substantially the same effect
as such Rule.
RULE 424: Rule 424 promulgated by the SEC pursuant to
the Securities Act, as such Rule may be amended from time to
time, or any similar rule or regulation hereafter adopted by the
SEC as a replacement thereto having substantially the same effect
as such Rule.
Page 105 of 137 <PAGE>
SEC: The Securities and Exchange Commission.
SECURITIES ACT: The Securities Act of 1933, as
amended, and the rules and regulations promulgated by the SEC
thereunder.
SHELF REGISTRATION: As defined in Section 2 hereof.
SPECIAL COUNSEL: Any special counsel to the Holders of
the Transfer Restricted Securities, for which the Holders of the
Transfer Restricted Securities will be reimbursed pursuant to
Section 4 hereof.
TIA: The Trust Indenture Act of 1939, as amended.
TRANSFER RESTRICTED SECURITIES: The Rule 144A
Debentures, the Accredited Investor Debentures and the shares of
Common Stock into which the Rule 144A Debentures and the
Accredited Investor Debentures are convertible, upon original
issuance thereof, and at all times subsequent thereto, until, in
the case of any such Rule 144A Debenture, Accredited Investor
Debenture or share, (i) the date on which it has been registered
effectively pursuant to the Securities Act and disposed of in
accordance with the Registration Statement relating to it, (ii)
the date on which either such Debentures or the shares of Common
Stock issued upon conversion of such Debentures are distributed
to the public pursuant to Rule 144 (or any similar provisions
then in effect) or are saleable pursuant to Rule 144(k)
promulgated by the SEC pursuant to the Securities Act or (iii)
the date on which it ceases to be outstanding.
TRUSTEE: The Chase Manhattan Bank, N.A., the trustee
under the Indenture.
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A
registration in connection with which securities of the Company
are sold to an underwriter for reoffering to the public pursuant
to an effective Registration Statement.
2. SHELF REGISTRATION
(a) SHELF REGISTRATION. The Company agrees to file
with the SEC as soon as practicable after the Closing Date a
Registration Statement for an offering to be made on a continuous
basis pursuant to Rule 415 covering all of the Transfer
Restricted Securities (the "Shelf Registration"). The Shelf
Registration shall be on Form S-3 under the Securities Act or
another appropriate form permitting registration of such Transfer
Restricted Securities for resale by the Holders in the manner or
manners reasonably designated by them (including, without
limitation, one or more underwritten offerings). The Company
shall not permit any securities other than the Transfer
Restricted Securities and, if the holder thereof so elects, the
Needham Warrant to be included in the Shelf Registration. The
Company shall use its reasonable best efforts, as described in
Page 106 of 137 <PAGE>
Section 3, to cause the Shelf Registration to be declared
effective pursuant to the Securities Act as promptly as
practicable following the filing thereof, but in no event later
than the Effectiveness Target Date, and to keep the Shelf
Registration continuously effective under the Securities Act
thereafter through the 36th month after the Closing Date (subject
to extension pursuant to clause (b) and the last paragraph of
Section 3 hereof), or such shorter period ending when there cease
to be outstanding any Transfer Restricted Securities (the
"Effectiveness Period").
(b) SUPPLEMENTS AND AMENDMENTS. The Company shall use
its reasonable best efforts to keep the Shelf Registration
continuously effective by supplementing and amending the Shelf
Registration if required by the rules, regulations or
instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if
reasonably requested by the Holders of a majority in aggregate
principal amount of the Transfer Restricted Securities covered by
such Registration Statement or by any underwriter of such
Transfer Restricted Securities; provided that the Effectiveness
Period shall be extended to the extent required to permit dealers
to comply with the applicable prospectus delivery requirements of
Rule 174 and as otherwise provided herein.
3. REGISTRATION PROCEDURES
In connection with the Company's registration
obligations hereunder, the Company shall effect such
registrations on the appropriate form available for the sale of
the Transfer Restricted Securities to permit the sale of the
Transfer Restricted Securities in accordance with the method or
methods of disposition thereof specified by the Holders of a
majority in aggregate principal amount of the then outstanding
Transfer Restricted Securities, and pursuant thereto the Company
shall as expeditiously as possible:
(a) No fewer than five Business Days prior to the
initial filing of a Registration Statement or Prospectus and no
fewer than two Business Days prior to the filing of any amendment
or supplement thereto (other than any document that would be
incorporated or deemed to be incorporated therein by reference),
furnish to the Holders of the Transfer Restricted Securities,
their Special Counsel and the managing underwriters, if any,
copies of all such documents proposed to be filed, which
documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such
Holders, their Special Counsel and such underwriters, if any, and
cause the officers and directors of the Company, counsel to the
Company and independent certified public accountants to the
Company to respond to such inquiries as shall be necessary in
connection with such Registration Statement, in the opinion of
respective counsel to such Holders and such underwriters, to
conduct a reasonable investigation within the meaning of the
Securities Act. The Company shall not file any such Registration
Page 107 of 137 <PAGE>
Statement or related Prospectus or any amendments or supplements
thereto to which the Holders of a majority in aggregate principal
amount of the Transfer Restricted Securities, their Special
Counsel, or the managing underwriters, if any, shall reasonably
object on a timely basis;
(b) Prepare and file with the SEC such amendments,
including post-effective amendments, to each Registration
Statement as may be necessary to keep such Registration Statement
continuously effective for the Effectiveness Period; cause the
related Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule
424 under the Securities Act; and comply with the provisions of
the Securities Act and the Exchange Act with respect to the
disposition of all securities covered by such Registration
Statement during such period in accordance with the intended
methods of disposition by the sellers thereof set forth in such
Registration Statement as so amended or in such Prospectus as so
supplemented; provided, however, that the Company shall not be
-------- -------
deemed to have kept a Registration Statement effective during the
Effectiveness Period if it voluntarily takes or fails to take any
action that results in selling Holders of the Transfer Restricted
Securities covered thereby not being able to sell such Transfer
Restricted Securities pursuant to Federal securities laws during
that period (and the time period during which such Registration
Statement is required to remain effective hereunder shall be
extended by the number of days during which such selling Holders
of the Transfer Restricted Securities are not able to sell
Transfer Restricted Securities as a result of such voluntary
action or failure to act);
(c) Notify the Holders of the Transfer Restricted
Securities to be sold or their Special Counsel and the managing
underwriters, if any, promptly (and in the case of an event
specified by clause (i)(A) of this paragraph in no event fewer
than two Business Days prior to such filing), and (if requested
by any such person), confirm such notice in writing, (i)(A) when
a Prospectus or any Prospectus supplement or post-effective
amendment is proposed to be filed, and (B) with respect to a
Registration Statement or any post-effective amendment, when the
same has become effective, (ii) of any request by the SEC or any
other Federal or state governmental authority for amendments or
supplements to a Registration Statement or related Prospectus or
for additional information, (iii) of the issuance by the SEC, any
state securities commission, any other governmental agency or any
court of any stop order, order or injunction suspending or
enjoining the use or the effectiveness of a Registration
Statement or the initiation of any proceedings for that purpose,
(iv) if at any time any of the representations and warranties of
the Company contained in any agreement (including any
underwriting agreement) contemplated by Section 3(m) hereof cease
to be true and correct in all material respects, (v) of the
receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification
Page 108 of 137 <PAGE>
of any of the Transfer Restricted Securities for sale in any
jurisdiction, or the initiation or threat of any proceeding for
such purpose, and (vi) of the happening of any event that makes
any statement made in such Registration Statement or related
Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect
or that requires the making of any changes in such Registration
Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein,
not misleading, and that in the case of the Prospectus, it will
not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(d) Use its reasonable best efforts to avoid the
issuance of, or, if issued, obtain the withdrawal of any order
enjoining or suspending the use or effectiveness of a
Registration Statement or the lifting of any suspension of the
qualification (or exemption from qualification) of any of the
Transfer Restricted Securities for sale in any jurisdiction, at
the earliest practicable moment;
(e) If requested by the managing underwriters, if any,
or the Holders of a majority in aggregate principal amount of the
Transfer Restricted Securities being sold in connection with such
offering, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment such information as the managing
underwriters, if any, and such Holders agree should be included
therein, and (ii) make all required filings of such Prospectus
supplement or such post-effective amendment as soon as
practicable after the Company has received notification of the
matters to be incorporated in such Prospectus supplement or
post-effective amendment; provided, however, that the Company
-------- -------
shall not be required to take any action pursuant to this Section
3(e) that would, in the opinion of counsel for the Company,
violate applicable law;
(f) Furnish to each Holder of the Transfer Restricted
Securities, their Special Counsel and each managing underwriter,
if any, without charge, at least one conformed copy of each
Registration Statement and each amendment thereto, including
financial statements (but excluding schedules, all documents
incorporated or deemed to be incorporated therein by reference
and all exhibits, unless requested in writing by such Holder,
counsel or managing underwriter);
(g) Deliver to each Holder of the Transfer Restricted
Securities, their Special Counsel, and the underwriters, if any,
without charge, as many copies of the Prospectus or Prospectuses
(including each form of Prospectus) and each amendment or
supplement thereto as such persons reasonably request; and the
Page 109 of 137 <PAGE>
Company hereby consents to the use of such Prospectus and each
amendment or supplement thereto by each of the selling Holders of
the Transfer Restricted Securities and the underwriters, if any,
in connection with the offering and sale of the Transfer
Restricted Securities covered by such Prospectus and any
amendment or supplement thereto;
(h) Prior to any public offering of the Transfer
Restricted Securities, use its reasonable best efforts to
register or qualify or cooperate with the Holders of the Transfer
Restricted Securities to be sold or tendered, the underwriters,
if any, and their respective counsel in connection with the
registration or qualification (or exemption from such
registration or qualification) of such Transfer Restricted
Securities for offer and sale under the securities or Blue Sky
laws of such jurisdictions within the United States as any Holder
or underwriter reasonably requests in writing; keep each such
registration or qualification (or exemption therefrom) effective
during the period such Registration Statement is required to be
kept effective and do any and all other acts or things necessary
or advisable to enable the disposition in such jurisdictions of
the Transfer Restricted Securities covered by the applicable
Registration Statement; provided, however, that the Company shall
-------- -------
not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any
action that would subject it to general service of process in any
such jurisdiction where it is not then so subject or subject the
Company to any tax in any such jurisdiction where it is not then
so subject;
(i) In connection with any sale or transfer of
Transfer Restricted Securities that will result in such
securities no longer being Transfer Restricted Securities,
cooperate with the Holders and the managing underwriters, if any,
to facilitate the timely preparation and delivery of certificates
representing the Transfer Restricted Securities to be sold, which
certificates shall not bear any restrictive legends and shall be
in a form eligible for deposit with The Depository Trust Company
and to enable such Transfer Restricted Securities to be in such
denominations and registered in such names as the managing
underwriters, if any, or Holders may request at least two
Business Days prior to any sale of the Transfer Restricted
Securities;
(j) Use its reasonable best efforts to cause the
offering of the Transfer Restricted Securities covered by the
Registration Statement to be registered with or approved by such
other governmental agencies or authorities within the United
States, except as may be required as a consequence of the nature
of such selling Holder's business, in which case the Company will
cooperate in all reasonable respects with the filing of such
Registration Statement and the granting of such approvals as may
be necessary to enable the seller or sellers thereof or the
Page 110 of 137 <PAGE>
underwriters, if any, to consummate the disposition of such
Transfer Restricted Securities; provided, however, that the
-------- -------
Company shall not be required to register the Transfer Restricted
Securities in any jurisdiction that would subject it to general
service of process in any such jurisdiction where it is not then
so subject or subject the Company to any tax in any such
jurisdiction where it is not then so subject or to require the
Company to qualify to do business in any jurisdiction where it is
not then so qualified;
(k) Upon the occurrence of any event contemplated by
Section 3(c)(vi) hereof, as promptly as practicable, prepare a
supplement or amendment, including, if appropriate, a
post-effective amendment, to each Registration Statement or a
supplement to the related Prospectus or any document incorporated
or deemed to be incorporated therein by reference, and file any
other required document so that, as thereafter delivered, such
Prospectus will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading;
(l) Prior to the effective date of the first
Registration Statement relating to the Transfer Restricted
Securities, to provide a CUSIP number for the Transfer Restricted
Securities;
(m) Enter into such agreements (including an
underwriting agreement in form, scope and substance as is
customary in underwritten offerings) and take all such other
reasonable actions in connection therewith (including those
reasonably requested by the managing underwriters, if any, or the
Holders of a majority in aggregate principal amount of the
Transfer Restricted Securities being sold) in order to expedite
or facilitate the disposition of such Transfer Restricted
Securities, and in such connection, whether or not an
underwriting agreement is entered into and whether or not the
registration is an underwritten registration, (i) make such
representations and warranties to the Holders of such Transfer
Restricted Securities and the underwriters, if any, with respect
to the business of the Company and its subsidiaries (including
with respect to businesses or assets acquired or to be acquired
by any of them), and the Registration Statement, Prospectus and
documents, if any, incorporated or deemed to be incorporated by
reference therein, in each case, in form, substance and scope as
are customarily made by issuers to underwriters in underwritten
offerings, and confirm the same if and when requested; (ii)
obtain opinions of counsel to the Company and updates thereof
(which counsel and opinions (in form, scope and substance) shall
be reasonably satisfactory to the managing underwriters, if any,
and Special Counsel to the Holders of the Transfer Restricted
Securities being sold), addressed to each selling Holder of the
Transfer Restricted Securities and each of the underwriters, if
any, covering the matters customarily covered in opinions
Page 111 of 137 <PAGE>
requested in underwritten offerings and such other matters as may
be reasonably requested by such Special Counsel and underwriters;
(iii) use its reasonable best efforts to obtain customary "cold
comfort" letters and updates thereof from the independent
certified public accountants of the Company (and, if necessary,
any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the
Company for which financial statements and financial data is, or
is required to be, included in the Registration Statement),
addressed (where reasonably possible) to each selling Holder of
the Transfer Restricted Securities and each of the underwriters,
if any, such letters to be in customary form and covering matters
of the type customarily covered in "cold comfort" letters in
connection with underwritten offerings; (iv) if an underwriting
agreement is entered into, the same shall contain indemnification
provisions and procedures no less favorable to the selling
Holders of the Transfer Restricted Securities and the
underwriters, if any, than those set forth in Section 5 hereof
(or such other provisions and procedures acceptable to Holders of
a majority in aggregate principal amount of the Transfer
Restricted Securities covered by such Registration Statement and
the managing underwriters); and (v) deliver such documents and
certificates as may be reasonably requested by the Holders of a
majority in aggregate principal amount of the Transfer Restricted
Securities being sold, their Special Counsel and the managing
underwriters, if any, to evidence the continued validity of the
representations and warranties made pursuant to clause (i) of
this Section 3(m) and to evidence compliance with any customary
conditions contained in the underwriting agreement or other
agreement entered into by the Company;
(n) Make available for inspection by a representative
of the Holders of the Transfer Restricted Securities being sold,
any underwriter participating in any such disposition of the
Transfer Restricted Securities, if any, and any attorney,
consultant or accountant retained by such selling Holders or
underwriter, at the offices where normally kept, during
reasonable business hours, all financial and other records,
pertinent corporate documents and properties of the Company and
its subsidiaries as they may reasonably request (including with
respect to business and assets acquired or to be acquired to the
extent that such information is available to the Company), and
cause the officers, directors, agents and employees of the
Company and its subsidiaries (including with respect to business
and assets acquired or to be acquired to the extent that such
information is available to the Company) to supply all
information in each case reasonably requested by any such
representative, underwriter, attorney, consultant or
accountant in connection with such Registration Statement;
provided, however, that such persons shall first agree in writing
-------- -------
with the Company that any information that is reasonably and in
good faith designated by the Company in writing as confidential
at the time of delivery of such information shall be kept
confidential by such persons, unless (i) disclosure of such
Page 112 of 137 <PAGE>
information is required by court or administrative order or is
necessary to respond to inquiries of regulatory authorities, (ii)
disclosure of such information is required by law (including any
disclosure requirements pursuant to Federal securities laws in
connection with the filing of any Registration Statement or the
use of any prospectus referred to in this Agreement), (iii) such
information becomes generally available to the public other than
as a result of a disclosure or failure to safeguard by any such
person or (iv) such information becomes available to any such
person from a source other than the Company and such source is
not bound by a confidentiality agreement or any duty or other
obligation to maintain such information in confidence;
(o) Provide an indenture trustee for the Transfer
Restricted Securities and cause the Indenture to be qualified
under the TIA not later than the effective date of the first
Registration Statement relating to the Transfer Restricted
Securities; and in connection therewith, cooperate with the
Trustee under the Indenture and the Holders of the Transfer
Restricted Securities to effect such changes to the Indenture as
may be required for such Indenture to be so qualified in
accordance with the terms of the TIA; and execute, and use its
reasonable best efforts to cause such Trustee to execute, all
customary documents as may be required to effect such changes,
and all other forms and documents required to be filed with the
SEC to enable the Indenture to be so qualified in a timely
manner;
(p) Comply with applicable rules and regulations of
the SEC and make generally available to its security holders
earning statements satisfying the provisions of Section 11(a) of
the Securities Act and Rule 158 thereunder (or any similar rule
promulgated under the Securities Act), no later than 45 days
after the end of any 12-month period (or 90 days after the end of
any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Transfer
Restricted Securities are sold to underwriters in a firm
commitment or reasonable efforts underwritten offering and (ii)
if not sold to underwriters in such an offering, commencing on
the first day of the first fiscal quarter after the effective
date of a Registration Statement, which statement shall cover
said period, consistent with the requirements of Rule 158; and
(q) (i) List all Common Stock covered by such
Registration Statement on any securities exchange on which the
Common Stock is then listed or (ii) authorize for quotation on
the Nasdaq Stock Market's National Market all Common Stock
covered by such Registration Statement if the Common Stock is
then so authorized for quotation.
The Company may require each seller of the Transfer
Restricted Securities as to which any registration is being
effected to furnish to the Company such information regarding the
distribution of such Transfer Restricted Securities as is
required by law to be disclosed in the applicable Registration
Page 113 of 137 <PAGE>
Statement and the Company may exclude from such registration the
Transfer Restricted Securities of any seller who fails to furnish
such information within a reasonable time after receiving such
request.
If any such Registration Statement refers to any Holder
by name or otherwise as the holder of any securities of the
Company, then such Holder shall have the right to require (i) the
insertion therein of language, in form and substance reasonably
satisfactory to such Holder, to the effect that the holding by
such Holder of such securities is not to be construed as a
recommendation by such Holder of the investment quality of the
Company's securities covered thereby and that such holding does
not imply that such Holder will assist in meeting any future
financial requirements of the Company, or (ii) in the event that
such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar Federal statute
then in force, the deletion of the reference to such Holder in
any amendment or supplement to the Registration Statement filed
or prepared subsequent to the time that such reference ceases to
be required.
Each Holder of the Transfer Restricted Securities
agrees by acquisition of such Transfer Restricted Securities
that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(c)(ii),
3(c)(iii), 3(c)(v) or 3(c)(vi) hereof, such Holder will forthwith
discontinue disposition of such Transfer Restricted Securities
covered by such Registration Statement or Prospectus until such
Holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 3(k) hereof, or until it is
advised in writing (the "Advice") by the Company that the use of
the applicable Prospectus may be resumed, and, in either case,
has received copies of any additional or supplemental filings
that are incorporated or deemed to be incorporated by reference
in such Prospectus. If the Company shall give any such notice,
the Effectiveness Period shall be extended by the number of days
during such period from and including the date of the giving of
such notice to and including the date when each seller of the
Transfer Restricted Securities covered by such Registration
Statement shall have received (x) the copies of the supplemented
or amended Prospectus contemplated by Section 3(k) hereof or (y)
the Advice, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or
deemed to be incorporated by reference in such Prospectus.
4. REGISTRATION EXPENSES
---------------------
(a) All fees and expenses incident to the performance
of or compliance with this Agreement by the Company shall be
borne by it whether or not any Registration Statement is filed or
becomes effective and whether or not any securities are issued or
sold pursuant to any Registration Statement. The fees and
expenses referred to in the foregoing sentence shall include,
without limitation, (i) all registration and filing fees
Page 114 of 137 <PAGE>
(including, without limitation, fees and expenses (A) with
respect to filings required to be made with the National
Association of Securities Dealers, Inc. and (B) in compliance
with securities or Blue Sky laws (including, without limitation
and in addition to that provided for in (b) below, reasonable
fees and disbursements of counsel for the underwriters or Special
Counsel for the Holders in connection with Blue Sky
qualifications of the Transfer Restricted Securities and
determination of the eligibility of the Transfer Restricted
Securities for investment under the laws of such jurisdictions as
the managing underwriters, if any, or Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities
may designate)), (ii) printing expenses (including, without
limitation, expenses of printing certificates for Transfer
Restricted Securities in a form eligible for deposit with The
Depository Trust Company and of printing Prospectuses if the
printing of Prospectuses is requested by the managing
underwriters, if any, or by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities
included in or tendered for in connection with any Registration
Statement), (iii) messenger, telephone and delivery expenses,
(iv) fees and disbursements of counsel for the Company and
Special Counsel for the Holders (plus any local counsel, deemed
appropriate by the Holders of a majority in aggregate principal
amount of the Transfer Restricted Securities) in accordance with
the provisions of Section 4(b) hereof, (v) fees and disbursements
of all independent certified public accountants referred to in
Section 3(m)(iii) (including, without limitation, the expenses of
any special audit and "cold comfort" letters required by or
incident to such performance), (vi) Securities Act liability
insurance, if the Company so desires such insurance, and (vii)
fees and expenses of all other persons retained by the Company.
In addition, the Company shall pay its internal expenses
(including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties),
the expense of any annual audit, and the fees and expenses
incurred in connection with the listing of the securities to be
registered on any securities exchange. Notwithstanding the
foregoing or anything in this Agreement to the contrary, each
Holder shall pay all underwriting discounts and commissions of
any underwriters or broker-dealers with respect to any Transfer
Restricted Securities sold by it.
(b) In connection with any registration hereunder, the
Company shall reimburse the Holders of the Transfer Restricted
Securities being registered or tendered for in such registration
for the reasonable fees and disbursements of not more than one
firm of attorneys representing the selling Holders (in addition
to any local counsel), which firm shall be chosen by the Holders
of a majority in aggregate principal amount of the Transfer
Restricted Securities.
5. INDEMNIFICATION
---------------
Page 115 of 137 <PAGE>
(a) The Company agrees to indemnify and hold harmless
(i) each of the Managers, (ii) each Holder of the Transfer
Restricted Securities, (iii) each person, if any, who controls
(within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) any of the foregoing (any of the
persons referred to in this clause (iii) being hereinafter
referred to as a "controlling person"), and (iv) the respective
officers, directors, partners, employees, representatives and
agents of the Managers, each Holder of the Transfer Restricted
Securities, or any controlling person (any person referred to in
clause (i), (ii), (iii) or (iv) may hereinafter be referred to as
an "Indemnified Person"), from and against any and all losses,
------------------
claims, damages, liabilities and judgments caused by any untrue
statement or alleged untrue statement of a material fact
contained in any Registration Statement, Prospectus or form of
Prospectus or in any amendment or supplement thereto or in any
preliminary Prospectus, or caused by any omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein (in the case
of any Prospectus or form of Prospectus or supplement thereto, in
light of the circumstances under which they were made) not
misleading, except insofar as such losses, claims, damages,
liabilities or judgments are caused by any such untrue statement
or omission or alleged untrue statement or omission based upon
information relating to any Indemnified Person furnished in
writing to the Company by or on behalf of such Indemnified Person
expressly for use therein; provided that the foregoing indemnity
--------
with respect to any preliminary Prospectus shall not inure to the
benefit of any Indemnified Person from whom the person asserting
such losses, claims, damages, liabilities and judgments purchased
securities if such untrue statement or omission or alleged untrue
statement or omission made in such preliminary Prospectus is
eliminated or remedied in the Prospectus and a copy of the
Prospectus shall not have been furnished to such person in a
timely manner due to the wrongful action or wrongful inaction of
such Indemnified Person.
(b) In case any action shall be brought against any
Indemnified Person, based upon any Registration Statement or any
such Prospectus or any amendment or supplement thereto and with
respect to which indemnity may be sought against the Company,
such Indemnified Person shall promptly notify the Company in
writing and the Company shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to
such Indemnified Person and payment of all fees and expenses.
Any Indemnified Person shall have the right to employ separate
counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Person, unless (i) the employment
of such counsel shall have been specifically authorized in
writing by the Company, (ii) the Company shall have failed to
assume the defense and employ counsel or (iii) the named parties
to any such action (including any impleaded parties) include both
Page 116 of 137 <PAGE>
such Indemnified Person and the Company and such Indemnified
Person shall have been advised by counsel that there may be one
or more legal defenses available to it which are different from
or additional to those available to the Company (in which case
the Company shall not have the right to assume the defense of
such action on behalf of such Indemnified Person, it being
understood, however, that the Company shall not, in connection
with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of
attorneys (in addition to any local counsel) for all such
Indemnified Persons, which firm shall be designated in writing by
such Indemnified Persons, and that all such fees and expenses
shall be reimbursed as they are incurred). The Company shall not
be liable for any settlement of any such action effected without
its written consent but if settled with the written consent of
the Company, the Company agrees to indemnify and hold harmless
any Indemnified Person from and against any loss or liability by
reason of such settlement. No indemnifying party shall, without
the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of
which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release
of such indemnified party from all liability on claims that are
the subject matter of such proceeding.
(c) In connection with any Registration Statement in
which a Holder of the Transfer Restricted Securities is
participating, such Holder of the Transfer Restricted Securities
agrees, severally and not jointly, to indemnify and hold harmless
the Company, its directors, its officers and any person
controlling the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act (and, in the
case of an underwriter registration, the underwriters and their
respective directors, officers and persons controlling such
underwriters within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act), to the same extent as the
foregoing indemnity from the Company to each Indemnified Person
but only with reference to information relating to such
Indemnified Person furnished in writing by or on behalf of such
Indemnified Person expressly for use in such Registration
Statement. In case any action shall be brought against the
Company, any of its directors, any such officer or any person
controlling the Company based on such Registration Statement and
in respect of which indemnity may be sought against any
Indemnified Person, the Indemnified Person shall have the rights
and duties given to the Company (except that if the Company shall
have assumed the defense thereof, such Indemnified Person shall
not be required to do so, but may employ separate counsel therein
and participate in defense thereof but the fees and expenses of
such counsel shall be at the expense of such Indemnified Person),
and the Company, its directors, any such officers and any person
Page 117 of 137 <PAGE>
controlling the Company shall have the rights and duties given to
the Indemnified Person, by Section 5(b) hereof.
(d) If the indemnification provided for in this
Section 5 is unavailable to an indemnified party in respect of
any losses, claims, damages, liabilities or judgments referred to
therein, then each indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses,
claims, damages, liabilities and judgments (i) in such proportion
as is appropriate to reflect the relative benefits received by
the Company on the one hand and each Indemnified Person on the
other hand from the offering of the Debentures or (ii) if the
allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above
but also the relative fault of the Company and each such
Indemnified Person in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable
considerations. The relative fault of the Company and each such
Indemnified Person shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to
information supplied by the Company or such Indemnified Person
and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement
or omission.
The Company and the Purchasers agree that it would not
be just and equitable if contribution pursuant to this Section
5(d) were determined by pro rata allocation (even if the
--- ----
Indemnified Person were treated as one entity for such purpose)
or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages,
liabilities or judgments referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations
set forth above, any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the
provisions of this Section 6, no Indemnified Person shall be
required to contribute any amount in excess of the amount by
which the total net profit received by it in connection with the
sale of the Debentures pursuant to this Agreement exceeds the
amount of any damages which such Indemnified Person has otherwise
been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
The Indemnified Persons' obligations to contribute pursuant to
this Section 5(d) are several in proportion to the respective
Page 118 of 137 <PAGE>
amount of Transfer Restricted Securities included in any such
Registration Statement by each Indemnified Person and not joint.
6. RULES 144 AND 144A
------------------
The Company shall use its best efforts to file the
reports required to be filed by it under the Securities Act and
the Exchange Act in a timely manner and, if at any time it is not
required to file such reports but in the past had been required
to or did file such reports, it will, upon the request of any
Holder of the Transfer Restricted Securities, make available
other information as required by, and so long as necessary to
permit, sales of its Transfer Restricted Securities pursuant to
Rule 144 and Rule 144A. Notwithstanding the foregoing, nothing
in this Section 6 shall be deemed to require the Company to
register any of its securities pursuant to the Exchange Act.
7. UNDERWRITTEN REGISTRATIONS
--------------------------
(a) If any of the Transfer Restricted Securities
covered by any Shelf Registration are to be sold in an
underwritten offering, the investment banker or investment
bankers and manager or managers that will administer the offering
will be selected by the Holders of a majority in aggregate
principal amount of such Transfer Restricted Securities included
in such offering, subject to the consent of the Company (which
will not be unreasonably withheld or delayed).
No person may participate in any underwritten
registration hereunder unless such person (i) agrees to sell such
person's Transfer Restricted Securities on the basis reasonably
provided in any underwriting arrangements approved by the persons
entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
(b) Each Holder of the Transfer Restricted Securities
agrees, if requested (pursuant to a timely written notice) by the
managing underwriters in an underwritten offering or placement
agent in a private offering of the Company's securities, not to
effect any private sale or distribution (including a sale
pursuant to Rule 144(k) and Rule 144A, but excluding non-public
sales to any of its affiliates, officers, directors, employees
and controlling persons of any of the Transfer Restricted
Securities, in the case of an offering of the Company's debt
securities, or the Common Stock, in the case of an offering of
the Company's equity securities), during the period beginning 10
days prior to, and ending 90 days after, the closing date of such
offering.
The foregoing provisions shall not apply to any Holder
of the Transfer Restricted Securities if such Holder is prevented
by applicable statute or regulation from entering into any such
agreement.
Page 119 of 137 <PAGE>
8. MISCELLANEOUS
-------------
(a) REMEDIES. In the event of a breach by the
Company, or by a Holder of the Transfer Restricted Securities, of
any of their obligations under this Agreement, each Holder of the
Transfer Restricted Securities or the Company, in addition to
being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of
its rights under this Agreement. The Company and each Holder of
the Transfer Restricted Securities agree that monetary damages
would not be adequate compensation for any loss incurred by
reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it
shall waive the defense that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. The Company shall not
enter into any agreement with respect to its securities that
could reasonably be expected to adversely impair the rights
granted to the Holders of the Transfer Restricted Securities in
this Agreement or otherwise conflicts with the provisions hereof.
Except for the Needham Warrant, the Company is not currently a
party to any agreement granting any registration rights with
respect to any of its debt securities to any person. Without
limiting the generality of the foregoing, without the written
consent of the Holders of a majority in aggregate principal
amount of the then outstanding Transfer Restricted Securities,
the Company shall not grant to any person the right to request it
to register any of its debt securities under the Securities Act
unless the rights so granted are subject in all respects to the
prior rights of the Holders of the Transfer Restricted Securities
set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement.
(c) NO PIGGYBACK ON REGISTRATIONS. The Company shall
not grant to any of its security holders (other than the Holders
of the Transfer Restricted Securities in such capacity and the
holder of the Needham Warrant) the right to include any of its
securities in any Shelf Registration other than Transfer
Restricted Securities.
(d) AMENDMENTS AND WAIVERS. The provisions of this
Agreement, including the provisions of this sentence, may not be
amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, without
the written consent of the Holders of a majority in aggregate
principal amount of the then outstanding Transfer Restricted
Securities on a fully converted basis; provided, however, that,
-------- -------
for the purposes of this Agreement, Transfer Restricted
Securities that are owned, directly or indirectly, by either the
Company or an Affiliate of the Company shall not be deemed
outstanding. Notwithstanding the foregoing, a waiver or consent
to depart from the provisions hereof with respect to a matter
Page 120 of 137 <PAGE>
that relate exclusively to the rights of Holders of the Transfer
Restricted Securities whose securities are being sold pursuant to
a Registration Statement and that does not directly or indirectly
affect the rights of other Holders of the Transfer Restricted
Securities may be given by Holders of a majority of the Transfer
Restricted Securities (on a fully converted basis) being sold
by such Holders pursuant to such Registration Statement;
provided, however, that the provisions of this sentence may
-------- ------- not be amended, modified, or supplemented
except in accordance with the provisions of the immediately
preceding sentence.
(e) NOTICES. All notices and other communications
provided for herein shall be made in writing by hand-delivery,
next-day air courier, certified first-class mail, return receipt
requested, telex or telecopy:
(i) if to the Company, as provided in the
Subscription Agreement,
(ii) if to the Managers, as provided in the
Subscription Agreement, or
(iii) if to any other person who is then the
registered Holder of any Transfer Restricted Securities, to the
address of such Holder as it appears in the Debenture or Common
Stock register of the Company.
Except as otherwise provided in this Agreement, all
such communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; one Business Day
after being timely delivered to a next-day air courier; five
Business Days after being deposited in the mail, postage prepaid,
if mailed; when answered back, if telexed; and when receipt is
acknowledged by the recipient's telecopier machine, if
telecopied.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall
inure to the benefit of and be binding upon the successors and
permitted assigns of each of the parties and shall inure to the
benefit of each Holder of the Transfer Restricted Securities.
The Company may not assign its rights or obligations hereunder
without the prior written consent of each Holder of the Transfer
Restricted Securities. Notwithstanding the foregoing, no
transferee shall have any of the rights granted under this
Agreement until such transferee shall acknowledge its rights and
obligations hereunder by a signed written statement of such
transferee's acceptance of such rights and obligations.
(g) COUNTERPARTS. This Agreement may be executed in
any number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to
be an original and, all of which taken together shall constitute
one and the same Agreement.
Page 121 of 137 <PAGE>
(h) GOVERNING LAW, SUBMISSION TO JURISDICTION.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE COMPANY HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK
OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE
CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE
COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT
May EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION THAT IT
May NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY
CLAIM THAT ANY SUCH SUIT, ACT ION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(i) SEVERABILITY. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law. If
any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or
invalidated, and the parties hereto shall use their reasonable
efforts to find and employ an alternative means to achieve the
same or substantially the same result as that contemplated by
such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may
be hereafter declared invalid, illegal, void or unenforceable.
(j) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof. All references made in this Agreement
to "Section" and "paragraph" refer to such Section or paragraph
of this Agreement, unless expressly stated otherwise.
(k) ATTORNEYS' FEES. In any action or proceeding
brought to enforce any provision of this Agreement, or where any
provision hereof is validly asserted as a defense, the prevailing
party, as determined by the court, shall be entitled to recover
its reasonable attorneys' fees in addition to any other available
remedy.
IN WITNESS WHEREOF, the parties have caused this
Registration Rights Agreement to be duly executed as of the date
first written above.
APPLIED MAGNETICS CORPORATION
By: /s/ Craig Crisman
Page 122 of 137 <PAGE>
Name: Craig Crisman
Title: Chairman & CEO
The foregoing Registration
Rights Agreement is hereby
confirmed and accepted as of
the date first above written.
NATWEST SECURITIES LIMITED
SALOMON BROTHERS INC
MONTGOMERY SECURITIES
By: NATWEST SECURITIES LIMITED
By: /s/ Melvyn Rowe
Name: Melvyn Rowe
Title: Director, Equity Capital Markets
Page 123 of 137 <PAGE>
SCHEDULE I
----------
MANAGERS
--------
NatWest Securities Limited
Salomon Brothers Inc
Montgomery Securities
Page 124 of 137 <PAGE>
EXHIBIT 5.1
Sheppard, Mullin, Richter & Hampton LLP
333 South Hope Street, 48th Floor
Los Angeles, California 90071-1448
(213) 620-1780
July 30, 1996
Applied Magnetics Corporation
75 Robin Hill Road
Goleta, California 93117
Ladies and Gentlemen:
This opinion is rendered to you in connection with a
registration statement (the "Registration Statement") on Form S-3
filed on July ___, 1996 with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the
"Act"), relating to the currently outstanding $93,000,000
aggregate principal amount of 7% Convertible Subordinated
Debentures due March 15, 2006 (the "Debentures"), of Applied
Magnetics Corporation, a Delaware corporation (the "Company"),
issued and sold to "qualified institutional buyers" (as defined
in Rule 144A under the Act) and other "accredited investors" (as
defined in Rule 501(a) of Regulation D under the Act) in a
private placement as part of an offering (the "Private Offering")
of 7% Convertible Subordinated Debentures offered by the Company
in the aggregate principal amount of $115,000,000, and the shares
of common stock, par value $0.10 per share, of the Company (the
"Common Stock" and together with the Debentures, the
"Securities") that are issuable upon conversion of the
Debentures. The capitalized terms used herein, unless otherwise
defined, have the meanings assigned to them in the Registration
Statement and the Indenture.
We have acted as counsel for the Company in connection
with the Private Offering and the preparation of the Registration
Statement. In rendering the opinion expressed below, we have
examined the following agreements, instruments and other
documents:
(a) the Registration Statement;
(b) the Indenture;
(c) the Subscription Agreement;
(d) the Registration Rights Agreement;
Page 125 of 137 <PAGE>
Applied Magnetics Corporation
July 30, 1996
Page 2
(e) the form of the Debentures; and
(f) such corporate records, officers' certificates and
other documents as we have deemed necessary as a basis for the
opinion expressed below.
In rendering the opinions set forth below, we have
assumed:
A. The genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the
conformity to the originals of all documents submitted to us as
copies, and the authenticity of all such originals.
B. The due authorization, execution and delivery of
the Indenture, the Subscription Agreement, the Registration
Rights Agreement, the Debentures and the documents and
instruments referred to therein by and on behalf of all parties
thereto other than the Company.
C. That the Indenture is the legal, valid and binding
obligation of the Trustee and that the Trustee has all requisite
power and authority and has taken any and all action necessary to
be taken by the Trustee to execute and deliver the Indenture and
perform the Trustee's obligations thereunder.
On the basis of the foregoing and subject to the
qualifications and limitations set forth below, it is our opinion
that:
1. The Debentures have been duly authorized, executed
and delivered by the Company and constitute valid and binding
obligations of the Company, enforceable against the Company in
accordance with their terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws
of general applicability relating to or affecting creditors'
rights and to general equity principles (regardless of whether
such enforceability is considered in a proceeding in equity or at
law).
2. The Common Stock has been duly authorized and,
when issued upon the conversion of the Debentures in accordance
with the terms of the Indenture, will be validly issued, fully
paid and non-assessable.
Our opinion above, insofar as it relates to
enforceability of the Debentures, which are by their terms
governed by New York law, is given solely in reliance on the
Page 126 of 137 <PAGE>
Applied Magnetics Corporation
July 30, 1996
Page 3
opinion of Kaye, Scholer, Fierman, Hays & Handler, LLP, dated as
of the date hereof, a copy of which is attached hereto, and such
opinion of ours is subject to the same assumptions, exceptions
and limitations as those set forth in the opinion of Kaye,
Scholer, Fierman, Hays & Handler, LLP.
We are members of the Bar of the State of California.
The opinion contained herein is based upon an examination of the
laws of the State of California, the General Corporation Law of
the State of Delaware and the laws of the United States in effect
on the date hereof and no opinion is expressed as to the
application of the laws of any other jurisdiction except the
opinion with respect to the laws of the State of New York in
reliance upon the opinion of Kaye, Scholer, Fierman, Hays &
Handler, LLP, as described above.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement, and we further consent to
the use of our name under the caption "Legal Matters" in the
Prospectus forming a part of such Registration Statement. Except
as stated above, without our prior written consent, this opinion
may not be furnished or quoted to, or relied upon by, any other
person or entity for any purpose.
Very truly yours,
/s/ Sheppard, Mullin, Richter & Hampton LLP
Page 127 of 137 <PAGE>
Kaye, Scholer, Fierman, Hays & Handler, LLP
A New York Limited Liability Partnership
425 Park Avenue
New York, New York 10022-3598
July 30, 1996
Sheppard, Mullin, Richter & Hampton LLP
333 South Hope Street
Los Angeles, California 90071-1448
Ladies and Gentlemen:
This opinion is furnished to you for the purposes of
your issuing your opinion in connection with a registration
statement (the "Registration Statement") on Form S-3 filed on
July 30, 1996 with the Securities and Exchange Commission under
the Securities Act of 1933, as amended (the "Act"), relating to
the currently outstanding $93,000,000 aggregate principal amount
of 7% Convertible Subordinated Debentures due March 15, 2006 (the
"Debentures"), of Applied Magnetics Corporation, a Delaware
corporation (the "Company"), issued and sold to "qualified
institutional buyers" (as defined in Rule 144A under the Act) and
other "accredited investors" (as defined in Rule 501(a) of
Regulation D under the Act) in a private placement as part of an
offering of 7% Convertible Subordinated Debentures offered by the
Company in the aggregate principal amount of $115,000,000, and
the shares of common stock, par value $0.10 per share, of the
Company that are issuable upon conversion of the Debentures. The
capitalized terms used herein, unless otherwise defined, have the
meanings assigned to them in the Registration Statement.
In connection herewith, we have examined:
3. the Registration Statement;
4. the Debentures; and
5. the Indenture (together with the Debentures, the
"Documents").
We have examined the originals, or copies certified to
our satisfaction, of such other agreements, instruments and
documents, and have made such other investigation, as we have
deemed necessary as a basis for the opinion expressed below. We
have assumed that (a) the Company (i) is duly organized, validly
existing and in good standing under the laws of the jurisdiction
in which it is incorporated and (ii) has the corporate power and
authority to enter into and perform the Documents, (b) the
Documents have been duly authorized, executed and delivered by
the Company, (c) the Documents do not conflict with or violate
Page 128 of 137 <PAGE>
July 30, 1996
Page 2
(i) the charter documents or board resolutions of the Company,
(ii) any contract or court order to which the Company is a party
or by which it is bound or (iii) the laws or regulations of any
jurisdiction (other than the State of New York), (d) all parties
have performed all of their obligations under the Documents, and
(e) all warranties and representations as to factual matters of
the Company under the Documents are true. We have further
assumed the due execution and delivery, pursuant to due
authorization, of the Documents and the documents and instruments
referred to therein by each of the parties thereto other than the
Company.
Based upon the foregoing and subject to the limitations
set forth below, we are of the opinion that the Debentures are
the legal, valid and binding obligations of the Company
enforceable against the Company in accordance with their terms,
subject to (a) applicable reorganization, insolvency,
liquidation, readjustment of debt, moratorium, fraudulent
transfer or other similar laws affecting the enforcement of
creditors, rights generally and (b) general principles of equity
(whether considered in a proceeding in equity or at law).
Our opinion set forth above is subject to the following
exceptions and qualifications:
(a) Provisions in the Documents which require that any
waiver be in writing to be effective may not be enforceable.
(b) We express no opinion as to the provision of the
last paragraph of Section 7.7 of the Indenture to the extent it
provides that obligations thereunder shall survive the discharge
thereof under the Bankruptcy Law.
(c) The enforceability of Section 14.15 of the
Indenture may be limited to circumstances in which the
unenforceable portion of the Indenture is not an essential part
thereof.
Our opinion herein is limited to the laws of the State
of New York. We hereby consent to the filing of this opinion as
an exhibit to the Registration Statement, and we further consent
to the use of our name under the caption "Legal Matters" in the
Prospectus forming a part of such Registration Statement. Except
as stated above, without our prior written consent, this opinion
Page 129 of 137 <PAGE>
July 30, 1996
Page 3
may not be furnished or quoted to, or relied upon by, any other
person or entity for any purpose.
Very truly yours,
/s/ Kaye, Scholer, Fierman,
Hays & Handler, LLP
Page 130 of 137 <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 12, 1995 included in Applied Magnetics
Corporation's Form 10-K for the year ended September 30, 1995 and
to all references to our Firm included in this registration
statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Los Angeles, California
July 22, 1996
Page 131 of 137 <PAGE>
EXHIBIT 25.1
_________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
_________________________
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
___________________________________________
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
________________________________________
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
New York 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 Park Avenue
New York, New York 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
_____________________________________________
APPLIED MAGNETICS CORPORATION
(Exact name of obligor as specified in its charter)
Delaware 95-1950506
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
75 Robin Hill Road
Goleta, California 93117-3108
(Address of principal executive offices) (Zip Code)
___________________________________________
7.00% Convertible Subordinated Debentures Due 2006
(Title of the indenture securities)
_____________________________________________________
Page 132 of 137 <PAGE>
GENERAL
-------
Item 1. General Information.
------ -------------------
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
New York State Banking Department, State House, Albany,
New York 12110.
Board of Governors of the Federal Reserve System,
Washington, D.C., 20551
Federal Reserve Bank of New York, District No. 2,
33 Liberty Street, New York, N.Y.
Federal Deposit Insurance Corporation, Washington,
D.C., 20429.
(b) Whether it is authorized to exercise corporate trust
powers.
Yes.
Item 2. Affiliations with the Obligor.
------ -----------------------------
If the obligor is an affiliate of the trustee, describe each
such affiliation.
None.
Item 16. List of Exhibits
------- ----------------
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as
now in effect, including the Organization Certificate and the
Certificates of Amendment dated February 17, 1969, August 31,
1977, December 31, 1980, September 9, 1982, February 28, 1985 and
December 2, 1991. (see Exhibit 1 to Form T-1 filed in connection
with Registration Statement No. 33-50010, which is incorporated
by reference).
2. A copy of the Certificate of Authority of the Trustee to
Commence Business (see Exhibit 2 to Form T-1 filed in connection
with Registration Statement No. 33-50010, which is incorporated
by reference).
Page 133 of 137 <PAGE>
3. None, authorization to exercise corporate trust powers
being contained in the documents identified above as Exhibits 1
and 2.
4. A copy of the existing By-Laws of the Trustee (see
Exhibit 4 to Form T-1 filed in connection with Registration
Statement No. 33-84460, which is incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of
the Act (see Exhibit 6 to Form T-1 filed in connection with
Registration Statement No. 33-50010, which is incorporated by
reference).
7. A copy of the latest report of condition of the Trustee,
published pursuant to law or the requirements of its supervising
or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
---------
Pursuant to the requirements of the Trust Indenture Act of
1939, the Trustee, The Chase Manhattan Bank, a corporation
organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the
City of New York and State of New York, on the 15th day of July,
1996.
THE CHASE MANHATTAN BANK
By /s/ John T. Needham, Jr.
------------------------
Assistant Treasurer
Page 134 of 137 <PAGE>
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
Chemical Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business March 31, 1996, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Millions
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin $ 3,391
Interest-bearing balances 2,075
Securities:
Held to maturity securities 3,607
Available for sale securities 29,029
Federal Funds sold and securities purchased under
agreements to resell in domestic offices of the
bank and of its Edge and Agreement subsidiaries,
and in IBF's:
Federal funds sold 1,264
Securities purchased under agreements to resell 354
Loans and lease financing receivables:
Loans and leases, net of unearned income $73,216
Less: Allowance for loan and lease losses 1,854
Less: Allocated transfer risk reserve 104
Loans and leases, net of unearned income,
allowance, and reserve 71,258
Trading Assets 25,919
Premises and fixed assets (including capitalized
leases) 1,337
Other real estate owned 30
Investments in unconsolidated subsidiaries and
associated companies 187
Customer's liability to this bank on acceptances
outstanding 1,082
Intangible assets 419
Other assets 7,406
TOTAL ASSETS $147,358
=========
Page 135 of 137 <PAGE>
LIABILITIES
Deposits
In domestic offices $45,786
Noninterest-bearing $14,972
Interest-bearing 30,814
In foreign offices, Edge and Agreement
subsidiaries, and IBF's 36,550
Noninterest-bearing $ 202
Interest-bearing 36,348
Federal funds purchased and securities sold under agree-
ments to repurchase in domestic offices of the bank and
of its Edge and Agreement subsidiaries, and in IBF's
Federal funds purchased 11,412
Securities sold under agreements to repurchase 2,444
Demand notes issued to the U.S. Treasury 699
Trading liabilities 19,998
Other Borrowed money:
With a remaining maturity of one year or less 11,305
With a remaining maturity of more than one year 130
Mortgage indebtedness and obligations under capitalized
leases 13
Bank's liability on acceptances executed and outstanding 1,089
Subordinated notes and debentures 3,411
Other liabilities 6,778
TOTAL LIABILITIES 139,615
EQUITY CAPITAL
Common stock 620
Surplus 4,664
Undivided profits and capital reserves 3,058
Net unrealized holding gains (Losses)
on available-for-sale securities (607)
Cumulative foreign currency translation adjustments 8
TOTAL EQUITY CAPITAL 7,743
______
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED
STOCK AND EQUITY CAPITAL $147,358
==========
I, Joseph L. Sclafani, S.V.P. & Controller of the
above-named bank, do hereby declare that this Report of
Condition has been prepared in conformance with the
instructions issued by the appropriate Federal regulatory
authority and is true to the best of my knowledge and
belief.
JOSEPH L. SCLAFANI
Page 136 of 137 <PAGE>
We, the undersigned directors, attest to the correctness
of this Report of Condition and declare that it has been
examined by us, and to the best of our knowledge and
belief has been prepared in conformance with the in-
structions issued by the appropriate Federal regulatory
authority and is true and correct.
WALTER V. SHIPLEY )
EDWARD D. MILLER )DIRECTORS
THOMAS G. LABRECQUE )
Page 137 of 137 <PAGE>
