Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
--------------------------------------
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Quarterly Period Ended June 28, 1997
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from _______to_______
Commission File No.1-6635
APPLIED MAGNETICS CORPORATION
-----------------------------
(Exact name of registrant as specified in its charter)
A Delaware Corporation 95-1950506
---------------------- ----------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
75 Robin Hill Road, Goleta, California 93117
---------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (805) 683-5353
(No Change)
------------------------------------------------------------
Former name, former address and former fiscal year, if changed since
last report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past ninety days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock: 23,912,328 $.10 par value common stock as of August 4, 1997.
EXHIBIT INDEX ON PAGE 20
Page 1 of 84
<PAGE>
PART 1. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
--------------------
The unaudited condensed consolidated financial statements included herein have
been prepared by Applied Magnetics Corporation and its subsidiaries (the
"Company") pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. The unaudited condensed consolidated financial statements and
selected notes included therein should be read in conjunction with the audited
consolidated financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended September 28,
1996.
The following unaudited condensed consolidated financial statements reflect all
adjustments, consisting only of normal and recurring adjustments, which, in the
opinion of management, are necessary to present fairly the consolidated
financial position and results of operations for the periods presented.
Page 2 of 84
<PAGE>
APPLIED MAGNETICS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations - Unaudited
(In thousands except per share data)
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
June 28, June 29, June 28, June 29,
------------ ------------ ------------ ------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales $ 124,073 $ 74,037 $ 372,011 $ 255,452
Cost of sales 84,189 56,155 236,981 188,759
------------ ------------ ------------ ------------
Gross profit 39,884 17,882 135,030 66,693
------------ ------------ ------------ ------------
Research and development expenses 15,749 12,374 37,712 39,661
Selling, general and administrative expenses 1,910 1,712 6,242 5,273
Terminated merger costs - - 2,906 -
------------ ------------ ------------ ------------
Total operating expenses 17,659 14,086 46,860 44,934
------------ ------------ ------------ ------------
Income from operations 22,225 3,796 88,170 21,759
Interest income 2,165 1,576 6,102 2,683
Interest expense (3,110) (3,128) (9,427) (5,847)
Other income, net 305 295 742 1,951
------------ ------------ ------------ ------------
Income before taxes 21,585 2,539 85,587 20,546
Provision for income taxes 557 189 1,596 472
------------ ------------ ------------ ------------
Net income $ 21,028 $ 2,350 $ 83,991 $ 20,074
============ ============ ============ ============
Net income per share:
Primary $0.85 $0.10 $3.39 $0.84
============ ============ ============ ============
Fully diluted $0.75 $0.10 $2.91 $0.84
============ ============ ============ ============
Weighted average common and common equivalent
shares outstanding:
Primary 24,723 24,039 24,749 23,902
============ ============ ============ ============
Fully diluted 30,904 24,039 30,981 23,902
============ ============ ============ ============
</TABLE>
The accompanying Selected Notes to Condensed Consolidated Financial Statements
are an integral part of these condensed consolidated statements.
Page 3 of 84
<PAGE>
APPLIED MAGNETICS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets - Unaudited
(In thousands except share and par value data)
ASSETS
<TABLE>
<CAPTION>
June 28, September 28,
------- -------------
1997 1996
---- ----
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 168,661 $ 127,400
Accounts receivable, net 50,743 43,403
Inventories 52,233 35,980
Prepaid expenses and other 11,550 10,122
------------ ------------
283,187 216,905
------------ ------------
Property, plant and equipment, at cost 344,023 288,856
Less-accumulated depreciation (172,877) (155,134)
------------ ------------
171,146 133,722
------------ ------------
Other assets 9,847 8,823
------------ ------------
$ 464,180 $ 359,450
============ ============
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Current portion of long-term debt $ 39 $ 1,865
Bank notes payable 50,182 45,789
Accounts payable 47,118 32,314
Accrued payroll and benefits 11,912 11,001
Other current liabilities 7,991 8,054
------------ ------------
117,242 99,023
------------ ------------
Long-term debt, net 115,097 116,263
------------ ------------
Other liabilities 4,213 4,465
------------ ------------
Page 4 of 84
<PAGE>
Shareholders' Investment:
Preferred stock, $.10 par value, authorized 5,000,000 shares,
none issued and outstanding - -
Common stock, $.10 par value, authorized 40,000,000 shares,
issued 23,872,466 shares and 23,283,047 shares at
June 28, 1997 and September 28, 1996, respectively 2,387 2,328
Paid-in capital 189,573 185,378
Retained earnings (deficit) 37,178 (46,813)
------------ ------------
229,138 140,893
Treasury stock, at cost (126,984 shares and 116,995 shares
at June 28, 1997 and September 28, 1996, respectively) (1,510) (1,194)
------------ ------------
227,628 139,699
------------ ------------
$ 464,180 $ 359,450
============ ============
</TABLE>
The accompanying Selected Notes to Condensed Consolidated Financial Statements
are an integral part of these condensed consolidated balance sheets.
Page 5 of 84
<PAGE>
APPLIED MAGNETICS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows - Unaudited
(In thousands)
<TABLE>
<CAPTION>
For the nine months ended
June 28, June 29,
------------ ------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from Operating Activities:
Net income $ 83,991 $ 20,074
Adjustments to derive cash flows:
Depreciation and amortization 27,758 20,958
Changes in assets and liabilities
Accounts receivable (7,340) (36)
Inventories (16,253) (3,833)
Prepaid expenses and other (1,422) 670
Accounts payable 14,804 (15,063)
Accrued payroll and benefits 1,019 210
Other assets and liabilities (164) 1,347
------------ ------------
Net cash provided by operating activities 102,393 24,327
------------ ------------
Cash flows from Investing Activities:
Additions to property, plant and equipment (66,026) (50,349)
Notes receivable 81 1,124
------------ ------------
Net cash used in investing activities (65,945) (49,225)
------------ ------------
Cash flows from Financing Activities:
Proceeds from issuance of convertible subordinated debentures - 115,000
Proceeds from issuance of debt 171,121 104,481
Repayment of debt (169,737) (124,494)
Payment of debt issuance costs - (4,064)
Proceeds from stock options exercised, net 3,830 2,560
------------ ------------
Net cash provided by financing activities 5,214 93,483
------------ ------------
Effect of Exchange Rate Changes on Cash and Equivalents (401) (140)
------------ ------------
Net Increase in Cash and Equivalents 41,261 68,445
------------ ------------
Cash and Equivalents at Beginning of Period 127,400 48,236
------------ ------------
Cash and Equivalents at End of Period $ 168,661 $ 116,681
============ ============
</TABLE>
The accompanying Selected Notes to Condensed Consolidated Financial Statements
are an integral part of these condensed consolidated statements.
Page 6 of 84
<PAGE>
Selected Notes to Condensed Consolidated Financial Statements
Unaudited
(June 28, 1997)
Note A: Inventories
- -------------------
Inventories are stated at the lower of cost (first-in, first-out) or market.
Inventory costs consist of purchased materials and services, direct production
labor and manufacturing overhead expense. The components of inventory are as
follows (in thousands):
June 28, September 28,
1997 1996
-------- -------------
Purchased parts and
manufacturing supplies $20,396 $10,957
Work in process 30,527 21,601
Finished goods 1,310 3,422
-------- -------
52,233 $35,980
======== =======
Note B: Terminated Merger Costs
- -------------------------------
Terminated merger costs of $2.9 million for the nine months ended June 28, 1997
include legal and accounting fees, financial advisory fees and miscellaneous
other expenses incurred related to the February 1997 proposed business
combination between the Company and Read-Rite Corporation. On March 14, 1997,
the Company announced its withdrawal of the proposal.
Note C: Credit Facilities
- -------------------------
During the second quarter of fiscal 1997, the Company's Malaysian subsidiary
completed credit facility agreements with two additional banks in Malaysia and
during the third quarter completed facility agreements with three additional
banks. The total amount available to borrow under these five new facilities was
approximately $46.0 million of which $13.5 million was outstanding at June 28,
1997. The new facilities are callable on demand, have no termination date, are
unsecured, and are guaranteed by the Company. The previously existing Malaysian
bank credit facilities allow for borrowings of up to $48.0 million of which
$36.7 million was outstanding for the same period.
Note D: Earnings Per Share Computation
- ---------------------------------------
Primary earnings per share is computed by dividing net income by the weighted
average number of shares of common stock and common stock equivalents
outstanding during the period. Common stock equivalents include the Company's
stock options. Fully diluted earnings per share is computed based
Page 7 of 84
<PAGE>
on weighted average number of shares of common stock and common stock
equivalents outstanding during the period and as if the Company's Convertible
Subordinated Debentures were converted, if dilutive, into common stock at the
beginning of the period after giving retroactive effect to the elimination of
interest expense, net of income tax effect, applicable to the Convertible
Subordinated Debentures.
Recent Accounting Pronouncements:
- ---------------------------------
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). SFAS
128 replaces the presentation of primary earnings per share ("EPS") with the
presentation of basic EPS. It also requires dual presentation of basic and fully
diluted EPS on the face of the income statement for all entities with complex
capital structures. This statement will become effective for financial
statements of the Company in the first quarter of fiscal 1998. Management
believes that the adoption of SFAS 128 will not have a material impact on the
Company's EPS disclosure when it is adopted.
Note E: Income Taxes
- --------------------
The Company has no income tax provision, other than minimum tax, due to the
utilization of the Company's net operating losses in the United States and the
fact that the Company operates in Malaysia where it has a tax holiday until
1999.
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations
---------------------------------------------
The Company increased inductive thin film disk head revenues by 90.5% for the
first nine months of fiscal 1997 compared to the same period of fiscal 1996.
This increase was achieved as a result of an increase in shipments of head stack
assemblies ("HSAs") as compared to head gimbal assemblies ("HGAs"), increased
capacity and continued high customer demand. The Company continued its
development of advanced inductive thin film technology during these periods,
transitioning from the nano slider ("50%") form factor on 1.3 gigabytes per 3.5"
disk products to the pico slider ("30%") form factor on 1.7 gigabytes per 3.5"
disk products. The pico form factor almost doubles the number of sliders that
can be processed from one wafer. During the fourth quarter of fiscal 1997, the
Company expects to ship approximately 25% of its products with the pico form
factor on the 1.7 gigabytes per 3.5" disk products. Gross margins will depend
heavily on the Company's ability to increase yields on these products, which are
currently in their first full quarter of production.
Page 8 of 84
<PAGE>
Samples of inductive thin film products with 2.1 gigabytes per 3.5" disk, in
conjunction with media that has been optimized for inductive thin film head
characteristics, are expected to be provided to several customers for evaluation
in the fourth quarter of fiscal 1997. The Company has targeted these products
for volume production in the second quarter of fiscal 1998.
The Company believes that inductive head-media solutions offer its customers
superior price/performance value compared to competing products utilizing
magnetoresistive ("MR") heads and disks. This is due to lower prices for
inductive heads and media compared to MR components and the cost effectiveness
of the pico form factor used in the Company's inductive thin film disk heads on
1.7 gigabytes per 3.5" disk products. The Company's product strategy has been to
extend the life of inductive thin film products in the high volume, low cost
desktop segment of the market while focusing MR technology on the portable and
high capacity market segments where MR technology can be better leveraged.
MR shipments are currently planned to represent approximately 40% of total
revenue by FQ398, by which time the Company anticipates that MR products will
become more commonly used in the desktop market.
The Company is increasing its investment in MR technology disk head products.
During April 1997, the Company completed its first clean room expansion of the
MR wafer fab in Goleta, California. This expansion is expected to be fully
equipped by October 1997, at a total estimated cost of $28.0 million. The
Company is currently underway with a second clean room expansion that is planned
to be completed by October 1997 and fully equipped by April 1998, at a total
additional estimated cost of $48.0 million. When fully equipped, this fab will
initially be capable of producing approximately 12 million HGAs per quarter,
assuming a pico form factor at comparable yields to inductive thin film. During
the second quarter of fiscal 1997, the Company's inductive thin film wafer fab
was converted to enable manufacturing of MR write heads. The combined fabs will
be capable of total output in excess of 40 million MR HGAs per quarter, assuming
a pico form factor, by the end of fiscal 1999.
The Company's continued shipment and revenue growth and increased profitability
will depend on the Company's ability to achieve "design-in" status with its
customers, achievement of satisfactory production yields and successful
execution of planned production ramps on advanced inductive thin film and MR
disk head products. While the Company is in the process of increasing plant
capacity and is devoting substantial engineering and manufacturing resources to
these efforts, there can be no assurances that the Company will realize
satisfactory product and process development results. To the extent that the
Company is unable to do so, there could be an adverse effect on the Company's
operating results.
Three Months Ended June 28, 1997
- --------------------------------
NET SALES. Net sales of $124.1 million in the third quarter of fiscal 1997
increased 67.7% from net sales of $74.0 million in the third quarter of fiscal
1996, as a result of higher shipments of advanced inductive thin film
Page 9 of 84
<PAGE>
disk head products. Inductive thin film disk head net sales of $114.6 million
increased 116.6% from the same quarter in the prior year and represented 92.3%
and 71.4% of the Company's total net sales for the third quarter of fiscal 1997
and fiscal 1996, respectively. By the end of fiscal 1996, the Company
successfully replaced ferrite disk head production with inductive thin film disk
head production. During fiscal 1997 the Company continued development of
advanced inductive thin film disk head products using the pico form factor and
MR disk head products. MR disk head net sales were $7.2 million for the third
quarter of fiscal 1997 and represented 5.8% of total net sales.
GROSS PROFIT. Gross profit as a percentage of net sales was 32.1% and 24.2%, for
the third quarter of fiscal 1997 and fiscal 1996, respectively. The increase in
gross profit percentage for the comparable quarters was due to higher inductive
thin film disk head sales volumes, resulting in economies of scale, coupled with
cost controls.
RESEARCH AND DEVELOPMENT. Research and development ("R&D") expenses as a
percentage of net sales were 12.7% and 16.7% for the third quarter of fiscal
1997 and fiscal 1996, respectively. The percentage decrease for the comparable
quarters was due to higher net sales. Expenses of $15.7 million in the third
quarter of fiscal 1997 increased from $12.4 million in the third quarter of
fiscal 1996 primarily due to the Company's increased investment in the
development of MR technology products.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of net sales decreased to 1.5% for the
third quarter of fiscal 1997 as compared to 2.3% for the third quarter of fiscal
1996 due to higher net sales. Expenses of $1.9 million in the third quarter of
fiscal 1997 increased slightly from $1.7 million in the third quarter of fiscal
1996.
INTEREST INCOME AND EXPENSE. Interest income in the third quarter of fiscal 1997
of $2.2 million increased from $1.6 million in the third quarter of fiscal 1996
due to investment of higher average cash balances. Interest expense in the third
quarter of fiscal 1997 of $3.1 million remained flat compared to the third
quarter of fiscal 1996, with average debt outstanding being slightly higher, due
to lower interest rates.
Nine Months Ended June 28, 1997
- -------------------------------
NET SALES. Net sales of $372.0 million for the first nine months of fiscal 1997
increased 45.6% from net sales of $255.5 million in the same period of the prior
fiscal year, as a result of continued increases in shipments of advanced
inductive thin film disk heads. Inductive thin film disk head net sales of
$342.9 million increased 90.5% from the same period in the prior fiscal year and
represented 92.2% and 70.5% of the Company's total net sales for the comparable
periods. MR disk head net sales were $18.9 million for the first nine months of
fiscal 1997 and represented 5.1% of total net sales. The Company began volume
production of MR disk heads in the fourth quarter of fiscal 1996.
GROSS PROFIT. Gross profit as a percentage of net sales was 36.3% and 26.1%, for
the first nine months of fiscal 1997 and fiscal 1996, respectively. The increase
Page 10 of 84
<PAGE>
in gross profit percentage for the comparable periods was due to higher
inductive thin film disk head sales volumes, resulting in economies of scale,
coupled with cost controls.
RESEARCH AND DEVELOPMENT. Research and development expenses as a percentage of
net sales were 10.1% and 15.5% for the first nine months of fiscal 1997 and
fiscal 1996, respectively. The percentage decrease for the comparable periods
was due to higher net sales. Expenses of $37.7 million for the first nine months
of fiscal 1997 decreased slightly from $39.7 million for the same period of the
prior fiscal year. The Company expects that total R&D expenditures in absolute
dollars for fiscal 1997 will exceed fiscal 1996 as it increases its efforts on
development of MR product technology and production processes.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of net sales decreased to 1.7% for the
first nine months of fiscal 1997 as compared to 2.1% for the same period of the
prior fiscal year due to higher net sales. Expenses of $6.2 million for the
first nine months of fiscal 1997 increased from $5.3 million for the first nine
months of fiscal 1996.
TERMINATED MERGER COSTS. Merger costs of $2.9 million for the first nine months
of fiscal 1997 include legal and accounting fees, financial advisory fees and
miscellaneous other expenses related to the February 1997 proposed business
combination between the Company and Read-Rite Corporation. On March 14, 1997,
the Company announced its withdrawal of the proposal.
INTEREST INCOME AND EXPENSE. Interest income for the first nine months of fiscal
1997 of $6.1 million increased from $2.7 million for the first nine months of
fiscal 1996 due to investment of higher average cash balances. Interest expense
for the first nine months of fiscal 1997 of $9.4 million increased from $5.8
million for the first nine months of fiscal 1996 due to higher average debt
outstanding. Increases in both categories were primarily as a result of the
Company's March 1996 issuance of $115.0 million of 7% Convertible Subordinated
Debentures due in 2006.
OTHER INCOME AND EXPENSE. Other income, net, was $0.7 million and $2.0 million
for the first nine months of fiscal 1997 and fiscal 1996, respectively. Other
income in the first nine months of fiscal 1996 included $1.3 million related to
the final payment from Seagate Technology, Inc., for their purchase of the
Company's Tape Head business unit in December 1994. Other income in the first
nine months of fiscal 1997 and the balance of the prior year amount was
primarily due to foreign currency exchange gains.
PROVISION FOR INCOME TAXES. The Company's provision for income taxes for the
nine months ended June 28, 1997, is primarily related to federal alternative
minimum taxes, state minimum taxes and foreign taxes. The Company has no income
tax provision, other than minimum tax, due to the utilization of the Company's
net operating losses in the United States, and the fact that the Company
operates in Malaysia where it has a tax holiday until 1999.
Page 11 of 84
<PAGE>
Liquidity and Capital Resources
- -------------------------------
At June 28, 1997, the Company's cash and equivalents increased to $168.7 million
from $127.4 million at September 28, 1996. During the first nine months of
fiscal 1997, the Company generated $102.4 million from operating activities,
comprised primarily of the net effect of the following: i) $84.0 million from
net income which included $27.8 million of depreciation and amortization
expense; ii) increase in accounts receivable of $7.3 million; iii) increase in
inventories of $16.3 million and iv) increase in the accounts payable balance of
$14.8 million. Increased production in response to increased customer orders for
advanced inductive thin film and MR products resulted in higher inventories and
accounts payable for the first nine months of fiscal 1997 as compared to the
same period in the prior year.
At June 28,1997, total debt, including notes payable, amounted to $165.3
million, an increase of $1.4 million from the balance outstanding at September
28, 1996, primarily due to a $4.4 million increase in borrowings on the
Malaysian credit facilities, offset by a $3.0 million payment of capital leases.
Included in total debt at June 28, 1997, was $50.2 million drawn against the
credit facilities at the Company's Malaysian subsidiary. All the credit
facilities are callable on demand, have no termination date and are guaranteed
by the Company. Credit facilities with one bank, which have been in place since
June 1990, are secured by the Company's real property holdings in Malaysia and
include certain covenants which preclude the Company from granting liens and
security interests in other assets in Malaysia. Credit facilities with five
other banks, established by the Company's Malaysian subsidiary during the second
and third quarters of fiscal 1997, are unsecured. Additional borrowings
available under all of these facilities were approximately $43.8 million at June
28, 1997. Should all or any significant portion of the Malaysian credit
facilities become unavailable for any reason, the Company would need to pursue
alternative financing sources. Also included in total debt is $115.0 million of
7.0% Convertible Subordinated Debentures, due 2006.
The Company has a secured, asset-based revolving line of credit of $35.0 million
from CIT Group/Business Credit, Inc. There were no borrowings outstanding and
the balance available to borrow under this line of credit was approximately
$30.6 million at June 28, 1997. The line of credit expires January 11, 1998.
Capital expenditures for the nine months ended June 28, 1997 were $66.0 million.
In addition, the Company leased $21.0 million of production equipment through
operating leases for the same period. During fiscal 1997, the Company plans to
spend approximately $140.0 million in capital expenditures, including equipment
to be obtained through operating leases, to increase overall production capacity
and improve MR and advanced thin film production processes. The Company believes
that it will have sufficient cash resources available from cash reserves,
operations and operating lease financing alternatives to meet its operating and
capital expenditure requirements. Market and customer demand continues to be
strong for the Company's products and the Company continues to work with its
customers to qualify on both advanced inductive thin film and MR disk drive
programs. In the event that demand for the Company's products declines,
management believes that it will be able to reduce its funding requirements for
planned, but not committed, capital expenditures. However, if the Company were
unable to continue to increase sales or maintain production yields at acceptable
levels in order to permit it to execute customer orders for new drive programs
Page 12 of 84
<PAGE>
in a timely manner, there could be a significant adverse impact on liquidity.
This may require the Company to either obtain additional capital from external
sources or to curtail its capital, research and development or working capital
expenditures. Such curtailment could adversely affect the Company's future
years' operations and competitive position.
Certain Additional Business Factors
- -----------------------------------
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 9 to 12
months. The demand for greater data storage capacity requires disk drive and
disk head manufacturers to continue to build greater performance into their
respective 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 1995, in response to increased
customer demands that began during fiscal 1994, the Company continued its shift
from production of ferrite disk heads to thin film disk heads, which offer
superior performance characteristics over ferrite disk heads and were
competitively priced. The Company furthered its technological development from
the thin film micro slider to the nano slider form factor and by the first
quarter of fiscal 1995, substantially all thin film shipments were nano slider
products. During fiscal 1996 and continuing through fiscal 1997, the Company has
experienced increased customer demand and significant revenue growth and
profitability. This success is due primarily to continued timely production
ramps on a number of qualified thin film programs and continued successful
transition to advanced inductive thin film disk head products as a result of
achievement of profitable yields. There can be no assurance that the Company
will continue to qualify for disk head manufacturing programs or that it will
not experience 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 to manufacture them in sufficient
quantities that compete effectively on the basis of price and performance.
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. As recently as the first half 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. 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
Page 13 of 84
<PAGE>
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 underutilized.
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, mainframe and internet servers and demand 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.
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 inductive 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.
Capital expenditures for the nine months ended June 28, 1997 were $66.0 million.
In addition, the Company leased $21.0 million of production equipment through
operating leases during the same period. During fiscal 1997, the Company plans
to spend approximately $140.0 million on capital expenditures. The Company
believes that it will be able to fund future expenditures from a combination of
existing cash balances, cash flow from operations, existing credit facilities
and lease financing arrangements. 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.
Page 14 of 84
<PAGE>
SHORT-TERM BORROWINGS
At June 28, 1997, the Company had outstanding approximately $50.2 million of
short-term borrowings in floating rate demand loan facilities from banks in
Malaysia, where it has substantial manufacturing operations. The facilities are
callable on demand, have no termination date and are guaranteed by the Company.
The loan facilities are used in the construction and expansion of assembly
facilities in California, Malaysia and the Philippines and for working capital
purposes. While the Company has no reason to believe the loan facilities will be
called, there is no assurance that the banks will continue to make this credit
available.
CUSTOMERS
The disk head industry is intensely competitive and largely dependent on sales
to a limited number of major disk drive manufacturers and systems companies. The
Company's top four customers accounted for 87.8% of the Company's net sales in
fiscal 1996. 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 Incorporated
("Seagate"), Quantum Corporation ("Quantum"), Hitachi, Ltd. ("Hitachi") and
Fujitsu Ltd. ("Fujitsu"), currently produce thin film and/or MR heads for their
own use. IBM and Seagate also make their 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. Historically, 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 has in recent years experienced significant
consolidation. 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. Seagate, a major manufacturer of both disk drives and
recording heads, and Conner Peripherals, Incorporated, ("Conner"), completed the
merger of their companies in fiscal 1996. Seagate has a large vertically
integrated capability in recording heads and its long term goal will likely be
to supply all head requirements for Conner products. Conner was the Company's
largest customer in fiscal 1995. Revenues from Conner declined materially during
fiscal 1996. 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
Page 15 of 84
<PAGE>
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.
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, the Philippines 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. The Company's production facility
in Malaysia faced potential labor shortages during fiscal 1996 and may face
potential labor shortages in the future, as other disk drive and component
manufacturers expand 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.
INTELLECTUAL PROPERTY
The Company regards elements of its manufacturing processes, product designs,
and equipment as proprietary and seeks to protect its proprietary rights through
a combination of employee and third party non-disclosure agreements, internal
procedures and patent protection. The Company has been issued a number of United
States Patents and has additional patent applications pending. There is no
assurance that patents will be issued with respect to such applications or that
any patents issued to the Company will protect the Company's competitive
position. The Company believes its competitive position is more dependent on the
technological know-how and creative skills of its employees than on patent
rights.
The Company believes that its success depends on the innovative skills and
technological competence of its employees and upon proper protection of its
intellectual properties. The Company has, from time to time, been notified of
claims that it may be infringing patents owned by others. If it appears
necessary or desirable, the Company may seek licenses under patents which it is
allegedly infringing. Although patent holders commonly offer such licenses, no
assurance can be given that licenses will be offered or that the terms of any
offered licenses will be acceptable to the Company. The failure to obtain a key
patent license from a third party could cause the Company to incur substantial
liabilities and/or to suspend the manufacture of the products utilizing the
patented invention.
Page 16 of 84
<PAGE>
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.
VOLATILITY OF STOCK PRICE
The market price of the Company's Common Stock has been volatile, with daily
closing market prices ranging from $18.00 to $59.00 per share over the first
three quarters of fiscal 1997. 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. The volatility of the stock price may reduce the ability of the Company
to raise additional operating funds through equity offerings.
Forward-Looking Information
- ---------------------------
Certain statements or assumptions in Management's Discussion and Analysis
contain or are based on "forward-looking" information (as defined in the Private
Securities Litigation and Reform Act of 1995) that involves risk and
uncertainties inherent in the Company's business. Actual outcomes are dependent
upon the Company's achievement of profitable yields on its pico form factor
inductive thin film products, timely completion of capacity expansion of the
Company's Goleta, California facility and successful transition to volume
production of MR disk head products with profitable yields. Other risk factors
include performance of internal plans, the Company's ability to control
inventory levels, the relatively limited number of customers and customer
changes in short range and long range plans, domestic and international
competition in the Company's product areas, performance issues with key
customers, risks related to international transactions and general economic
risks and uncertainties.
Page 17 of 84
<PAGE>
PART 11. OTHER INFORMATION
-----------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Exhibit
Number Description
-------- -----------
10(a) Offer letter dated February 26, 1997 between United Overseas
Bank (Malaysia) Bhd and Applied Magnetics (M) Sdn Bhd for
credit facility
10(b) Corporate Guarantee of the Registrant dated March 11, 1997 in
favor of United Overseas Bank (Malaysia) Bhd
10(c) Offer letter dated October 23, 1996 between Bank Utama
(Malaysia) Berhad and Applied Magnetics (M) Sdn Bhd for credit
facility
10(d) Corporate Guarantee of the Registrant dated April 15, 1997
in favor of Bank Utama (Malaysia) Berhad
10(e) Offer letter dated December 10, 1996 between DCB Bank Berhad
and Applied Magnetics (M) Sdn Bhd for credit facility
10(f) Corporate Guarantee of the Registrant dated February 26, 1997
in favor of DCB Bank Berhad
10(g) Employment Agreement Amendment No 1 with Craig D. Crisman
and the Company dated February 7, 1997
11 Statement re computation of per share information.
27 Financial Data Schedule
(b) Reports on Form 8-K. None.
Page 18 of 84
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
APPLIED MAGNETICS CORPORATION
Dated: August 8, 1997 /s/ Craig D. Crisman
------------------------------------
Craig D. Crisman
Chairman of the Board and Chief
Executive Officer
(Principal Financial Officer)
Dated: August 8, 1997 /s/ Peter T. Altavilla
-------------------------------------
Peter T. Altavilla
Corporate Controller
(Principal Accounting Officer)
Page 19 of 84
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
- ------------------------------------------------------------------------------
10(a) Offer letter dated February 26, 1997 between 21
United Overseas Bank (Malaysia) Bhd and Applied
Magnetics (M) Sdn Bhd for credit facility
10(b) Corporate Guarantee of the Registrant dated 27
March 11, 1997 in favor of United Overseas
Bank (Malaysia) Bhd
10(c) Offer letter dated October 23, 1996 between 38
Bank Utama (Malaysia) Berhad and Applied
Magnetics (M) Sdn Bhd for credit facility
10(d) Corporate Guarantee of the Registrant dated 49
April 15, 1997 in favor of Bank Utama
(Malaysia) Berhad
10(e) Offer letter dated December 10, 1996 between 58
DCB Bank Berhad and Applied Magnetics (M) Sdn Bhd
for credit facility
10(f) Corporate Guarantee of the Registrant dated 71
February 26, 1997 in favor of DCB Bank Berhad
10(g) Employment Agreement Amendment No 1 with 80
Craig D. Crisman and the Company dated
February 7, 1997
11 Statement re computation of per share information 83
27 Financial Data Schedule 84
Page 20 of 84
<PAGE>
EXHIBIT 10(a)
UNITED OVERSEAS BANK (MALAYSIA) BHD CHAIRMAN WEE CHO YAW
A MEMBER OF THE UNITED OVERSEAS BANK GROUP
(Company No: -271809K)
HEAD OFFICE CHUNG KHIAW BANK BLDG JALAN RAJA LAUT P O BOX 11212 50738 KUALA
LUMPUR MALAYSIA TELEPHONE 03-2927722 FACSIMILE 03-2301339 TELEX MA 31877
ANSWERBACK CODE LWBMCO CABLE BANKLEEWAH
PRIVATE AND CONFIDENTIAL
- ------------------------
26/02/1997 CGF/hdy/345/96/863
Applied Magnetics (M) Sdn Bhd
Plot 201, Bayan Lepas FTZ
Phase 3, 11900 Penang
Dear Sirs
Subject : APPLICATION FOR CREDIT FACILITIES
---------------------------------
We are pleased to advise that the United Overseas Bank (Malaysia) Bhd ("the
Bank") has made available for your use the following revised lines of credit
under the terms and conditions hereinstated and the standard terms and
conditions annexed herein.
1.0 FACILITIES
----------
RM20,000,000-00 for establishing documentary LETTERS OF CREDIT
(LC) at sight or 180 days usance for imports at
sight only for local purchase. Commission at 0.1%
per month subject to a minimum of RM50-00 per
issuance.
(RM20,000,000-00) for BANKERS ACCEPTANCE (BA) line on a maximum of
180 days basis. Acceptance commission at 0.75% per
annum.
(RM20,000,000-00) for BILLS OF EXCHANGE PURCHASED (BEP) / COMMERCIAL
BILLS PURCHASED (CBP) FOR PURCHASE OF FOREIGN
BILLS. Interest rate at 1.0% per annum overseas
centre rate.
(RM1,000,000-00) for SHIPPING GUARANTEE (SG) favouring(sic)
shipping agents for taking delivery of goods
before arrival of documents. Commission
at 0.1% flat. Minimum RM50-00.
(RM500,000-00) for BANK GUARANTEE (BG) favouring(sic) Government
Department & Statutory Bodies. Commission at
0.1% per month subject to a minimum of RM50-00 per
issuance.
Page 21 of 84
<PAGE>
RM20,000,000-00 for FORWARD EXCHANGE CONTRACTS (FX) denominated in
US Dollars or other approved currency.
- ------------------------
RM20,000,000-00 (The Bank's Base Lending Rate is currently at
RM20,000,000-00 9.25% perFX annum)
- ------------------------
2.0 PURPOSE OF FACILITIES
---------------------
LC//BA/BEP/CBP/SG - For trade financing requirements.
BG - To favour(sic) government and statutory
bodies.
FX - For spot and forward exchange contracts.
3.0 SECURITIES
----------
3.1 A corporate Guarantee by Applied Magnetics Corporation U.S.A. for
RM22,000,000-00 is to be executed to support the above lines of credit.
3.2 During the tenor of the facilities, your company shall undertake that all
obligations and liabilities under this Letter of Offer shall be on same
footing with all indebtedness to other bankers with the exception of
Malayan Banking Bhd.
4.0 DOCUMENTATION
-------------
4.1 A Board Resolution authorising(sic) the acceptance of this facility letter
is to be furnished to the Bank. The Resolution should also specify the
names of those of the Company's officers who are authorised(sic) to act
for the Company and the specimen signatures should be enclosed together
with the certified true copy of the said Resolution.
4.2 A Board Resolution Of Applied Magnetics Corporation U.S.A. sanctioning
the giving of the Corporate Guarantee to secure the banking facilities
granted to Applied Magnetics(M) Sdn Bhd is to be furnished to the Bank.
4.3 The facilities are to be released only upon completion of legal
documentation and all legal fees, costs and other charges relating to
legal documentation are to be borne by you.
4.4 All legal documents prepared by the Bank or its solicitors are to be
executed and all legal fees and charges are to be paid, within two (2)
weeks from the date of notification by the Bank or its solicitors. The
Bank reserves the absolute right to cancel the facilities, in the event
that you fail to execute any of the said documents or pay the legal fees
and charges within the aforesaid period.
5.0 TERMS GOVERNING LETTERS OF CREDIT (LC) FACILITY
-----------------------------------------------
5.1 Commission : 0.1% per month (or part of the month) on value of LC
for the validity period of the LC subject to a minimum
of RM50-00 per issuance.
Page 22 of 84
<PAGE>
5.2 The LC issued is to be at sight / usance upto(sic) 180 days for imports
only and at sight for local purchases.
6.0 TERMS GOVERNING BANKERS ACCEPTANCE (BA) FACILITY
------------------------------------------------
6.1 Tenor : Minimum 30 days; Maximum 180 days.
6.2 Commission : 0.75% per annum of the face value of each BA.
6.3 Discount Rate : At prevailing market rates.
6.4 Amount per BA : In multiple of one thousand ringgit with a minimum of
RM100,000-00.
6.5 Documentation : Company's statement that it is drawn to finance
either export from Malaysia or sales within Malaysia
to accompany each BA drawn.
6.6 Utilisation of BA facility shall be accordance with the guidelines laid
down by Bank Negara Malaysia (BNM) from time to time.
6.7 The Bankers Acceptance facility is to be operated within LC line.
7. TERMS GOVERNING OF BILLS EXCHANGE PURCHASED (BEP)/COMMERCIAL BILLS
------------------------------------------------------------------
PURCHASED (CBP) FACILITIES
--------------------------
7.1 The acceptance of the foreign bills is at the Bank's sole discretion.
7.2 The BEP/CBP line is to be operated within LC line.
8.0 TERMS GOVERNING SHIPPING GUARANTEE (SG) FACILITY
------------------------------------------------
8.1 Commission : 0.1% flat subject to a minimum of RM50-00 per
guarantee.
8.2 In the event that any SG issued by the Bank shall not be returned to the
Bank for cancellation upon expiry, the Bank shall be entitled to charge as
per the Association of Banks Malaysia regulations.
8.3 The SG facility is to be operated within LC line.
9. TERMS GOVERNING BANK GUARANTEE (BG) FACILITY
--------------------------------------------
9.1 Commission : 0.1% per month subject to a minimum of RM50-00 per
issuance.
9.2 In the event that any BG issued by the Bank shall not be returned to the
Bank for cancellation upon expiry, the Bank shall be entitled to charge a
fee of 0.1% per month subject to a minimum of RM50-00 per guarantee from
the date of expiry to the date of return of the guarantee or on receipt of
Page 23 of 84
<PAGE>
notification from the beneficiary that the Bank is no longer liable under
the guarantee.
9.3 In the event that the Bank be called upon to honour(sic) the guarantee,
the Bank reserves the right to levy interest rate at 4% per annum above
the Bank's Base Lending Rate on any sum paid by us.
9.4 The BG line is to be operated within LC line.
10. OTHER TERMS AND CONDITIONS
--------------------------
10.1 Section 62 of the Banking and Financial Institution Act 1989 prohibits the
Bank from extending any credit facility to the spouse(s), parent(s) and
child(ren) of any director or employee of the Bank. As such, you are to
confirm and declare if any of:-
a. your directors or managers or agents or shareholder(s) or their
spouse(s) or parent(s) or child(ren);
b. the guarantor(s) or person(s) giving securities to secure the above
facilities or their spouse(s) or parent(s) or child(ren);
are in the employment of or a member of Board of Directors of any of the
banks in the United Overseas Bank (UOB) Group. Should any of the aforesaid
persons take up employment with or becomes a director of any of the banks
in the UOB Group subsequent to the acceptance of this facility letter you
are to forthwith inform the Bank of such appointment and also inform the
Bank on the percentage of shares, if any, held by the aforesaid persons
(both direct and indirect) in your company. The Bank reserves the right
to recall the credit facilities in the event that any of the aforesaid
persons be in the employment or be a director of any of the Banks in the
UOB Group which may result in the contravention of Section 62 of the
abovementioned statue by the Bank.
10.2 The Bank shall be entitled to recall all or any of the facilities granted
herein in the event that your are blacklisted under the Biro Maklumat Cek
(BMC) guidelines or your account is redesignated or closed by the Bank for
any reason whatsoever.
10.3 You are advised to seek independent legal advice before executing this
facility letter and any of the loan or security documents prepared by the
Bank and/or our solicitors.
10.4 As required by law, the Bank will be furnishing to the Central Credit
Bureau of Bank Negara Malaysia the required particulars relating to these
facilities.
Absent for manifest errors, the certificate of the Bank as to the amount
outstanding, due and payable, shall be binding on you.
10.5 On acceptance of this facility letter, you are deemed to have consented to
our disclosure to your corporate guarantor from time to time of any
information relating to your credit facilities with us, including but not
limited to the amount due to us from time to time.
Page 24 of 84
<PAGE>
10.6 Interest at 1% per annum above the relevant Prescribed Rate or at such
other rate as the Bank may at its sole and absolute discretion prescribe
from time to time, will be charged, both after as well as before any
demand or judgement and notwithstanding that the banker and customer
relationship may have ceased or has been terminated, on all monies
outstanding and payable to the Bank including all interests, fees,
commissions and charges not paid when due from date of such default until
the date of full payment thereof with monthly rests.
10.7 Interest for utilisation(sic) in excess of the limit for each facility
stated in this Facility Letter will be charged at 1% above the relevant
prescribed rate stated in the Facility Letter or at such other rate as the
Bank may at its sole and absolute discretion prescribe from time to time
with monthly rests both before as well as after any demand or judgement
and notwithstanding that the banker and customer relationship may have
ceased or has been terminated.
10.8 The interest rates are subject to variation from time to time at the
Bank's discretion in the light of prevailing market conditions and such
amended rate(s) shall be payable by you as from the date specified in a
notice in writing served on you by the Bank PROVIDED ALWAYS that the Bank
may at its sole discretion waive such written notice if the variation of
interest relates only to the variation in the Bank's Base Lending Rate.
10.9 This offer is subject to the understanding that you consent to the Bank
disclosing from time to time whatever credit and other confidential
information the Bank deems fit pertaining to your credit facilities
and/or your accounts and related account(s) to the Bank's Group head
office/parent company or any other company in the United Overseas Bank
Group, whether in or outside Malaysia.
10.10 The Bank's standard terms and conditions attached herein and the terms and
conditions of this facility letter including the availability and limits
of the above facilities are subject to the Bank's periodical review and
any subsequent changes thereof at the Bank's sole discretion.
10.11 The Bank's Base Lending Rate means the rate of interest fixed by the Bank
from time to time based on the guidelines issued by Bank Negara Malaysia
(BNM) from time to time which is reflective of the total cost to the Bank
for maintaining the credit facilities together with such allowable profit
margin or such substituted rate by whatever name stipulated by the Bank
from time to time pursuant to any subsequent guidelines issued by Bank
Negara Malaysia (BNM) or any other authority having jurisdiction over the
Bank.
10.12 This Facility Letter shall supercede(sic) and cancel our previous Facility
Letter and Supplementary Letter dated 3/1/97 under Reference No
CGF/hdy/345//96/ 863 and 5/2/97 under Reference No CGF/kms/345/96/ 863-A.
10.13 The facilities will be serviced at our Penang Branch.
Branch Manager : Mr. Tan Yip Hean
Tel No. : 04-2622386
Page 25 of 84
<PAGE>
If the above arrangement is acceptable to you, please confirm by signing on the
attached copy of this letter and returning the same to our Penang Branch at No.
64E-H Lebuh Bishop, P.O Box 820, 10800 Penang within the next fourteen (14)
days.
It is our pleasure to be of service to you.
Yours faithfully
for UNITED OVERSEAS BANK (MALAYSIA) BERHAD
/s/ Tan Siak Tee /s/ Francis Lee Chin Yong
---------------- --------------------------
Tan Siak Tee Francis Lee Chin Yong
Director & Deputy Chief Executive
Chief Executive Officer Officer
c.c. Branch Manager, UOBM Penang Branch.
To: UNITED OVERSEAS BANK (MALAYSIA) BHD
WE CONFIRM ACCEPTANCE OF THE ABOVE ARRANGEMENT AND
FURTHER CONFIRM AND DECLARE THAT WE ARE NOT IN
CONTRAVENTION OF SECTION 62 OF THE BANKING AND
FINANCIAL INSTITUTIONS ACT 1989 (COPY OF OUR BOARD
RESOLUTION ACCEPTANCE IS ENCLOSED HEREWITH).
/s/ MUHAMMAD NASIR HAJI HANIFAH
MUHAMMAD NASIR HAJI HANIFAH ------------------------------------------
(FINANCE DIRECTOR)
/s/ DR. IAN STUART FOSTER
-------------------------------------------
DR. IAN STUART FOSTER
AUTHORISED(SIC) SIGNATORY
(IN ACCORDANCE WITH THE SIGNATORIES OF THE
SPECIMEN CARDS OF YOUR CURRENT ACCOUNT) AND
COMPANY STAMP, WHERE APPLICABLE.
DATE OF ACCEPTANCE: 28 MAR 1997
Page 26 of 84
<PAGE>
EXHIBIT 10(b)
UNITED OVERSEAS BANK (MALAYSIA) BHD
GUARANTEE
Page 27 of 84
<PAGE>
CORPORATE GUARANTEE
To:
UNITED OVERSEAS BANK (MALAYSIA) BHD.
(271809 K)
In consideration of your granting or continuing to make available banking
facilities or other accommodation from time to time (hereinafter called "the
Banking Facilities") or granting time to APPLIED MAGNETICS (M) SDN BHD
of PLOT 201, BAYAN LEPAS FTZ, PHASE 3, 11900 PENANG
(hereinafter called "the Customer") at our request, in such manner, to such
extent and for as long as you may at your sole discretion deem fit, we, APPLIED
MAGNETICS CORPORATION, a company incorporated in DELAWARE, UNITED STATES OF
AMERICA and having its registered office at CORPORATION TRUST CENTER, 1209
ORANGE STREET, CITY of WILMINGTON, COUNTRY (SIC) of NEW CASTLE, DELAWARE,
UNITED STATES of AMERICA
hereby agree with and guarantee you as follows:-
1. We will on demand pay to you all monies and discharge all obligations
liabilities whether actual or contingent now or hereafter due owing
or incurred to you by the Customer in whatever currency denominated whether
on any banking or other account or on the general balance of the Customer's
account with you or otherwise in any manner whatsoever (whether alone or
jointly and in whatever style name or form and whether as principal or
surety) including all liabilities in connection with foreign exchange
transactions, accepting endorsing or discounting any notes or bills, or
under bonds guarantees indemnities documentary or other credits or any
instruments whatsoever from time to time entered into by you for or at the
request of the Customer together with interest (as well after as before any
demand or judgment and irrespective of whether or not the banker and
customer relationship between the Customer and you has ceased or been
terminated) to date of payment at such rates and upon such terms as may
from time to time be payable by the Customer (or which would have been so
payable but for the liquidation or other incapacity of the Customer)
commission fees and other charges and all legal fees (on a solicitor and
client basis) and other costs charges and expenses incurred by you in
relation to the Customer or in enforcing or seeking to enforce any security
or obtaining or seeking to obtain payment of all or any part of the monies
or amounts hereby guaranteed on a full indemnity basis.
2. All monies received from or on account of the Customer or from any other
person or estate or from the realisation(sic) of any security or otherwise
for the purpose of being applied in reduction of the monies in Clause 1
mentioned above shall be treated for all purposes as payments in gross and
not as appropriated or attributed to any specific part or item of the said
Page 28 of 84
<PAGE>
monies even if appropriated thereto by the person otherwise entitled so to
appropriate. All securities now or at any time held by you shall be treated
as securities for the general balance and other amount owing by the
Customer. We will make no claim to such securities or any part thereof or
any interest therein unless and until we have paid all monies due from us
under this Guarantee and you shall have received the full amount of such
general balance and other amounts if any.
3. You shall be at liberty (whether before or after the insolvency or
bankruptcy of the Customer) to place any monies received hereunder in a
non-interest bearing suspense account for so long as you deem fit without
any obligation in the meantime to apply the same or any part thereof
towards discharge of any money or liabilities due or incurred by the
Customer to you.
4. Should the customer become bankrupt or insolvent or being an incorporated
company be wound up or liquidated, you may prove in the bankruptcy
insolvency or winding up or liquidation of the Customer for the whole
amount outstanding against the Customer to the exclusion of our rights to
be subrogated to you in respect of any part payments made by us hereunder
and no money or dividend so received by you shall be treated as received in
respect of this Guarantee or otherwise in relation to us, but the full
amount hereby guaranteed shall be payable by us until you shall have
received from all sources one hundred Sen in the Ringgit Malaysia on the
ultimate balance outstanding against the Customer. After you have received
such ultimate balance in full any claim on our part to any excess or any
securities remaining in your hands shall be a matter of adjustment between
you, us and any other person or persons laying claim thereto.
5. The total amount recoverable from us under this Guarantee shall be limited
to the principal sum of Ringgit Malaysia TWENTY TWO MILLION ONLY
---------------- (RM 22,000,000-00---------) only or its equivalent in
whatever currency denominated as shall be required by you at the date of
payment with interest and commission thereon and all reasonable costs
charges and expenses referred to in Clause 1 hereof.
6. This Guarantee shall not be considered as satisfied by any intermediate
payment or satisfaction of the whole or any part of any sum or sums of
money owing as aforesaid but shall be a continuing security and shall
extend to cover the ultimate balance from time to time owing to you by the
Customer in any manner whatsoever notwithstanding the death bankruptcy
insanity liquidation or other incapacity or any change in the constitution
of the Customer or us or in the name or style thereof or the retirement or
death of any partner or the admission of any further partner of the
Customer or any settlement of account or other matter whatsoever until
three (3) months after receipt by you of notice in writing to determine the
same signed by us PROVIDED ALWAYS that such notice shall not affect our
liabilities for monies obligations or liabilities present or future actual
or contingent due owing or incurred prior to the expiration of such three
(3) months period. In the event that this Guarantee is signed by more than
one person, the notice of termination referred to herein shall be signed
by all of us jointly.
7. This Guarantee is in addition to and shall not merge with or otherwise
prejudice or affect any other right remedy guarantee indemnity or security
and may be enforced notwithstanding the same or any other bill note
mortgage charge pledge or lien now or hereafter held by or available to
you.
Page 29 of 84
<PAGE>
8. Notwithstanding any notice of termination or that this Guarantee ceases to
be continuing for any reason whatsoever you may continue any account of
the Customer or open one or more new accounts and our liability hereunder
shall not in any manner be reduced or affected by any subsequent
transactions or receipts or payments into or out of any such account.
9. This Guarantee shall be without prejudice to and shall not be affected nor
shall we be released or exonerated by any of the matters following:-
.1 any securities negotiable or otherwise including other guarantees
which you may now or any time hereafter hold in respect of the
Customer from us or any other person or persons for any monies
whether hereby guaranteed or otherwise; or
.2 the variation exchange renewal release or modification of any such
securities or the refusal or neglect to complete enforce or assign
any judgment specialty or other security or instrument negotiable or
otherwise and whether satisfied by payment or not; or
.3 any time given or extended to the Customer and/or any other person
or persons including ourselves and the parties to any negotiable or
other security instrument guarantee or contract or any other
indulgence granted to or compromise composition or arrangement made
with the Customer and/or any other person or persons whether with or
without consent or notice to us; or
.4 the continuing and/or the opening and operation of any other account
or accounts current or otherwise with the Customer at any of your
branch or branches; or
.5 the granting of any other banking facility or facilities to the
Customer and/or variation of the Banking Facilities granted to the
Customer by way of (but not limited to) substitution addition
increase or reduction whatsoever; or
.6 any release or discharge given to any one or more co-guarantors
whether with or without our consent or notice.
10. You are to be at liberty but not bound to resort for your own benefit to
any other means of payment at any time and in any order as you think fit
without in consequence diminishing our liability to you hereunder and you
may enforce this Guarantee for the payment of the ultimate balance after
resorting to other means of payment or for the balance due at any time
notwithstanding that other means of payment have not been resorted to and
in the latter case, without entitling us to any benefit from such other
means of payment so long as any money remains due or payable (whether
actually or contingently) from the Customer to you and in addition you
shall be at liberty to require payment by us of any monies owing to you
without taking any proceedings first to enforce such payment by the
Customer.
11. Until the ultimate balance owing by Customer to you has been paid or
satisfied in full:-
Page 30 of 84
<PAGE>
.1 you shall be entitled forthwith without prior notice after an event
of default or in making demand to combine or consolidate all or any
of our then existing accounts wheresoever situate with our
liabilities to you and set-off or transfer any sum standing to the
credit of any such accounts ("the Credit Balances") in or towards
satisfaction of our liabilities to you under this Guarantee whether
such liabilities be present future actual contingent primary
collateral several or joint notwithstanding that the Credit Balances
and the said liabilities may not be expressed in the same currency
and you are authorised(sic) to effect any necessary conversion at
your then prevailing spot rate of exchange (as conclusively
determined by you) for purchasing the currency in the said
liabilities with the existing currency so converted;
.2 no part of the Credit Balances referred to in Clause 11.1 herein
shall be repayable to us or otherwise except with your prior
consent;
.3 you shall have a lien on all our property assets stocks shares
securities from time to time in your possession or held by you for
safe custody or otherwise ("the Assets");
.4 in the event that we shall fail to discharge our liabilities to you
under this Guarantee on demand you shall be entitled without further
notice or consent from us to sell assign transfer negotiate or
otherwise dispose of the Assets referred to in Clause 11.3 herein at
such times in such manner and generally on such terms and conditions
and for such consideration as you may in your absolute discretion
think fit without being under responsibility to us for the price
obtained thereby and you shall be entitled to apply the proceeds in
or towards the discharge of the costs incurred and of such monies
obligations and liabilities hereby guaranteed whether then due and
payable or not and if such proceeds are insufficient for such
purpose, we undertake to immediately make good such deficiency;
.5 we undertake if and when you so require to execute and sign all
transfers and other instruments or documents which you may from time
to time require for vesting or enabling you to vest any of the
Assets in or for facilitating delivery of the same to you or your
nominees or any purchaser and to do all such acts and things as may
be necessary or expedient for effecting or in connection with any
sale or other disposition you may make under Clause 11.4 herein.
Save for manifest errors
12. A statement signed by your manager or any one or your officers as to the
monies and liabilities for the time being due or incurred to you from or
by the Customer shall be final and conclusive evidence against us of the
indebtedness of the Customer to you for all purposes including legal
proceedings.
Page 31 of 84
<PAGE>
13. Any demand for payment or any other demand or notice under this Guarantee
may be made by your manager or any one of your officers or by any person or
firm for the time being acting as your solicitor or solicitors by letter
sent by post addressed to us at our address specified herein or at our
registered office or our last known place of business and a demand or
notice so sent shall be deemed to be served 14 business days following the
day on which it is posted. In proving such service it shall be sufficient
to prove that the notice or demand was properly addressed and posted
notwithstanding that the said notice or demand may subsequently undelivered
by the postal authorities.
14. This Guarantee shall not be determined or in any way prejudiced by:-
.1 any change in the Customer or us, whether by reason of bankruptcy
death incorporation amalgamation liquidation reconstruction or
otherwise howsoever in the name style constitution or composition by
retirement expulsion death or admission of any partner or partners
or otherwise but shall enure(sic) and be available for all intents
and purposes as if the resulting firm company or concern had been
the one whose obligations were originally guaranteed; or
.2 any amalgamation or merger that may be effected by you with any
other company or companies or any reconstruction by you involving
the formation of and transfer of the whole or any part of your
undertaking and assets to a new company or the sale or transfer of
the whole or any part of your undertaking and assets to another
company, whether the company or companies with which you amalgamate
or merge or the company to which you transfer the whole or any part
of your undertaking and assets either on a reconstruction or sale or
transfer as stated above shall or shall not differ from you in their
or its objects, character or constitution, it being our intent that
this Guarantee shall remain valid and effectual in all respects in
favor of, against and with reference to, and that the benefit of
this Guarantee and all rights conferred upon you by this Guarantee
may be assigned to and enforced by, any such company or companies
and proceeded on in the same manner and all intents and purposes as
if such company or companies had been named in this Guarantee instead
of and/or in addition to you.
15. Until the ultimate balance owing by the Customer to you has been paid or
satisfied in full (and notwithstanding payment of a dividend in any
bankruptcy or liquidation or under any compromise or arrangement) we hereby
waive all rights of subrogation and indemnity against the Customer and
agree not to demand or accept or to negotiate assign charge or otherwise
dispose of an monies obligations or liabilities now or hereafter due or
owing to us from the Customer or any co-guarantor or any promissory note
bill of exchange guarantee indemnity mortgage charge or other security from
the same or to take any step to enforce any right against the Customer or
any co-guarantor or to claim any set-off or counterclaim against the same
or to claim or prove in competition with you in the bankruptcy or
liquidation of the Customer or any co-guarantor or have the benefit of or
share in any payment or composition from the same or in any other guarantee
indemnity or security now or hereafter held by you for any monies
obligations or liabilities of the Customer. If we receive any payment
promissory note bill of exchange guarantee indemnity mortgage charge or
Page 32 of 84
<PAGE>
other security or other benefit or exercises any set-off or counterclaim or
otherwise act in breach of this Clause, anything so received and any
benefit derived directly or indirectly by us therefrom shall be held in
trust for you as a continuing security for our liability to you hereunder.
16. We hereby agree that you shall be at liberty without any further consent
from us and without thereby affecting our liability under this Guarantee
at any time to determine enlarge or vary any credit to the Customer. You
may enforce this Guarantee against us at any time notwithstanding that any
bills or other instruments covered by it may be in circulation or
outstanding and include the amount of the same or any of them in the said
general balance or not at your option and this Guarantee shall not be
determinable by us or our successors in title except on the terms of our
making full provision up to the limit of our Guarantee for any then
outstanding liabilities or obligations on your part and on the Customer's
account.
17. Though as between us and the Customer we are sureties only for the
Customer, yet as between us and you we shall be deemed to be principal
debtors for all the monies, the payment of which is hereby guaranteed and
accordingly shall not be discharged nor shall our liability be affected by
any fact or circumstance or any act thing omission or means whatsoever,
whereby our liability would not have been discharged if we had been the
principal debtors.
18. As a separate and independent stipulation, we agree that any sum or sums
of money which may not be recoverable from us on the footing of a
guarantee whether by reason of any defect in or want of powers of the
Customer or irregular exercise thereof or lack of authority by any person
purporting to act on behalf of the Customer or any legal or other
limitation disability or incapacity on or of the Customer or by any other
fact or circumstance and whether known to you or not shall nevertheless be
recoverable from us as sole or principal debtor and shall be paid by us on
demand. We hereby irrevocably and unconditionally undertake to indemnify
you in full and keep you fully indemnified against all loss damage
liabilities costs and expenses whatsoever which you may sustain or incur as
a result of or arising from the Banking Facilities which you may now or
hereafter grant to the Customer, except to the extend(sic) set for damages
liabilities costs and expenses, arising from your gross negligent willful
misconduct.
19. All sums payable by us under this Guarantee shall be paid to you in full
free of any present or future taxes levies imposts duties charges fees or
withholdings and without set off or counterclaim or any restriction
condition or deduction whatsoever. If we are compelled by law to make any
deduction or withholding we will promptly pay to you such additional amount
as will result in the net amount received by you being equal to the full
amount which would have been receivable had there been no deduction or
withholding. Any additional amount paid under this Clause shall not be
treated as interest but as agreed compensation.
Page 33 of 84
<PAGE>
20. If for any reason whatsoever any monies or liabilities due owing or
incurred by the Customer or us to you are denominated in a currency other
than the Ringgit Malaysia, you may at any time and from time to time, for
the purpose of determining our liabilities hereunder denominated in Ringgit
Malaysia, convert such monies or liabilities of the Customer into Ringgit
Malaysia at your spot rate of exchange (as conclusively determined by you)
for purchasing such currency with Ringgit Malaysia prevailing on the date
of actual payment by us and we hereby agree to indemnify you against the
full Ringgit Malaysia price (including all costs charges and expenses).
No payment to you (whether under any judgment or court order or otherwise)
shall discharge our liabilities to you under this Guarantee unless and
until you shall have received payment in full in the currency in which such
monies or liabilities due owing or incurred by the Customer to you and to
the extent the amount of such payment shall on actual conversion into such
currency fall short of such monies or liabilities expressed in that
currency you shall have a separate cause of action against us and shall be
entitled to enforce this Guarantee to recover the amount of the shortfall.
21. We hereby represent warrant and undertake with you (such representations
warranties and undertakings to continue so long as this Guarantee remains
subsisting) that:-
.1 we are duly incorporated and have full power to enter into and
perform and will perform our obligations under this Guarantee and
all necessary corporate shareholder and other action to enable us to
execute deliver and perform the same has been taken and we have
obtained and will maintain in full force and effect all necessary
consents licenses and authorities and no limitation on our powers to
borrow or give guarantees will be exceeded as a result of this
Guarantee;
.2 this Guarantee has been validly created and constitutes a valid and
legally binding obligation on us enforceable in accordance with its
terms; except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or
affecting generally the enforcement of creditors rights and except
to the extend that availability of the remedy of specific
performance, injunctive relief or other equitable remedies is
subject to the discretion of the court before which any proceeding
therefor may be bought.
.3 the creation of this Guarantee and the performance and observance of
the obligations here under does not and will not
3.1 contravene any existing applicable law statute rule or regulation
or any judgment decree or permit to which we are subject,
3.2 conflict with or result in any breach of any of the terms of
or constitute a default under any agreement or other
instrument to which we are a party or are subject or by which
we or any of our properties are bound,
3.3 contravene or conflict with any provision of our Memorandum and
Articles of Association, or
Page 34 of 84
<PAGE>
3.4 result in the creation or imposition of or oblige us to create
any charge or other encumbrance on any of our assets rights or
revenues;
.4 neither we nor any of our subsidiaries are in default in respect of
any material financial commitment or obligation including but not
limited to any guarantee indemnity bond or like obligation or in
breach of any agreement or arrangement or statutory or other legal
requirement to an extent or in a manner which might have a material
adverse effect on our and our subsidiaries' business assets or
financial condition taken as a whole;
.5 neither we nor any of our subsidiaries are involved in any action
suit arbitration or proceeding nor to our knowledge is any such
action suit arbitration or proceeding pending or threatened which
has or could have a material adverse effect on our and our
subsidiaries' business assets or financial condition taken as a
whole;
.6 our obligations under this Guarantee will rank at all times at least
pari passu with all our other existing and future indebtedness
obligations and liabilities actual or contingent from time to time
(save those as by law rank as preferential in a winding-up);
.7 all information furnished to you and the Customer in connection with
the Customer's application of the Banking Facilities with you do not
contain any untrue statement or omit to state any fact the omission
of which makes any statement made therein in the light of their
circumstances under which they are made, misleading and that we are
not aware of any material facts or circumstances that have not been
disclosed to you which might, if disclosed, adversely affect your
decision to grant the Banking Facilities or to take this Guarantee as
security.
22. No delay or omission on your part in exercising any right power privilege
or remedy in respect of this Guarantee shall impair such right power
privilege or remedy or be construed as a waiver of it nor shall any single
or partial exercise of any such right power privilege or remedy preclude
any further exercise of it or the exercise of any other right power
privilege or remedy. The rights powers privileges and remedies provided in
this Guarantee are cumulative and not exclusive of any rights powers
privileges or remedies provided by law.
23. Nothing done or omitted by you in pursuance of any authority discretion or
permission contained in this Guarantee shall diminish, affect or discharge
our liabilities hereunder.
24. This Guarantee shall be governed by and interpreted in accordance with the
laws of Malaysia and we irrevocably:-
.1 submit to the non-exclusive jurisdiction of the Courts in Malaysia;
.2 waive any objections on the ground of venue or forum non
conveniens(sic) or any similar grounds; and
.3 consent to service of process by registered mail or in any other
manner permitted by the relevant law.
Page 35 of 84
<PAGE>
25. No assurance security or payment which may be avoided under Section 293 or
294 of the Companies Act (as revised and amended by any statutory
modifications thereof) or by an provisions of the Bankruptcy Act 1967
(as revised and amended by any statutory modifications thereof) and no
release settlement or discharge which may have been given on the faith of
any such assurance security or payment shall prejudice or affect your right
to recover from us to the full extent of this Guarantee as if such
assurance security payment release settlement or discharge (as the case
may be) had never been guaranteed given or made.
26. Where this Guarantee is signed by more than one person, any liability
arising under this Guarantee shall be deemed to be the joint and several
liability of such persons and this Guarantee may be executed in any number
of counterparts, all of which taken together and when delivered to you
shall constitute one and the same instrument. You are to be at liberty to
release or discharge any one or more of such persons from liability under
this Guarantee or to compound with, accept compositions from or make any
other arrangements with any such persons without in consequence releasing
or discharging any other party to this Guarantee or otherwise prejudicing
or affecting your rights and remedies against any such other party. This
Guarantee shall not be terminated or prejudiced or affected by the death of
any one or more of such persons but in the event of any such death the
notice of termination referred to in Clause 6 herein shall be given jointly
by the survivor or survivors of such persons and the personal
representatives of such persons who have died.
27. If this Guarantee is to be signed by more than one person (such persons
being hereinafter referred to as "the Original Signatories") and any one
or more of the Original Signatories fails to sign the same or having
signed is not bound by this Guarantee (whether by reason of his lack of
capacity or improper execution of this Guarantee or for any other reason
whatsoever) the remaining Original Signatories shall continue to be bound
by this Guarantee as if such other Original Signatories had never been
party hereto.
28. The provisions of this Guarantee are severable and the invalidity or
unenforceability of any provision(s) herein shall not affect the validity
or enforceability of the remaining provisions of this Guarantee.
29. This Guarantee shall be binding on our successors in title.
30. In this Guarantee unless there is something in the subject or context
inconsistent with such construction or unless it is otherwise expressly
provided:-
.1 words in the singular include the plural and words in the plural
include the singular;
.2 words importing the masculine gender include feminine and neuter
genders and visa versa;
.3 references and words applicable to natural persons include any body
of persons company corporation firm or partnership corporate or
unincorporate and vice versa.
Page 36 of 84
<PAGE>
31. This Guarantee shall at all times remain your property.
Dated the 11 day of March 1997
SIGNED BY )
the duly authorised(sic) signatory )
for and on behalf of )
)
in the presence of:- )
The Common Seal of )
affixed in the presence of:- )
BERNICE WILLIAMS
/s/ Craig D. Crisman /s/ Peter T. Altavilla
------------------------------- ----------------------------
Craig D. Crisman Peter T. Altavilla
Its Chairman and Its Controller
Chief Executive Officer
Page 37 of 84
<PAGE>
EXHIBIT 10(c)
Our Ref: YKL / PS / va (ACF No. PR/96-073)
PRIVATE & CONFIDENTIAL
October 23, 1996
APPLIED MAGNETICS (M) SDN BHD
PLOT 201, BAYAN LEPAS,
FREE TRADE ZONE,
PHASE 3,
11900 PENANG.
Dear Sirs,
BANKING FACILITIES OF RM5,000,000
We refer to our Letter of Offer dated September 23, 1996 which was unacceptable
to you. We are now pleased to advise you that the Bank has approved Banking
Facilities to you under the following revised terms and conditions as requested
by you.
NATURE AND AMOUNT
OF FACILITIES : Omnibus line -
LC / TR / BA / RM5,000,000
BG / SG / ECR PRE,
POST / FX
Sublimits
BG (RM1,000,000)
SG (RM1,000,000)
FX (RM1,000,000)
------------------
RM5,000,000
-----------
PURPOSE : LC - To purchase / import of raw
materials from local / foreign
suppliers.
TR - To finance bills drawn
under LCs issued by the
Bank and/or Documentary
Bills for Collection
(under documents
...1/
BANK UTAMA (MALAYSIA) BERHAD
(Incorporated In Malaysia)
PRAI BRANCH (27714-A)
No. 2677, Jalan Chain ferry, Taman Inderawasih, 13600 Prai,
Pulau Pinang, Malaysia P.O. Box 219, 42100 Butterworth.
Tel: 04-3901567, 3903624 Fax: 04-3991612 Telex: Ma 47054
Page 38 of 84
<PAGE>
APPLIED MAGNETICS (M) SDN BHD - PAGE 2
against payment (DP) term).
BA - To finance imports/local
purchases and/or exports/local
sales under credit terms.
ECR - To finance the purchase of raw
Pre materials from local suppliers
for exports under Bank
Negara Malaysia's (BNM)
Certificate of Performance
(CP).
ECR - To finance bills drawn under
Post usance LC.
BG - To issue guarantees to relevant
authorities, acceptable to the
Bank.
SG - To facilitate clearance
of goods at the port
pending arrival of
original shipping/
delivery documents drawn
under the Bank's LC's.
FX - To hedge against major
foreign currency
fluctuations.
INTEREST RATE/ : LC - At 0.1% per mensem(sic) / as
per ABM rates and Prevailing
Foreign Centre rates.
TR - At 1.00% per annum +
Base Lending Rate (BLR) .
(Presently our BLR is at
9.20% p.a.)
BA - Acceptance Commission of
1.00% per annum + funding
cost.
...2/
BANK UTAMA (MALAYSIA) BERHAD
(Incorporated In Malaysia)
PRAI BRANCH (27714-A)
No. 2677, Jalan Chain ferry, Taman Inderawasih, 13600 Prai,
Pulau Pinang, Malaysia P.O. Box 219, 42100 Butterworth.
Tel: 04-3901567, 3903624 Fax: 04-3991612 Telex: Ma 47054
Page 39 of 84
<PAGE>
APPLIED MAGNETICS (M) SDN BHD - PAGE 3
ECR - 1.0% p.a. + Bank Negara
Malaysia's (BNM) prescribed
rates. Presently, BNM's
prescribed rate under the ECR
scheme is 6.70% p.a.
BG/SG - 0.1% per mensem(sic)
respectively, and as per
ABM rates.
FX - As quoted by the Bank's
Treasury.
We may in our discretion vary
the interest rate (including the
spread)/commission at any time
without prior notice.
ADDITIONAL INTEREST : LC - Should the account be
overdrawn or an excess
created, the Bank shall be
entitled to impose an
additional rate of 4% (four per
cent) per annum above the
Base Lending Rate for such
period for which the account is
overdrawn or in excess.
TR - An additional interest of 4%
per annum above the Base
Lending Rate shall be levied
for late payments/overdue or
on the amount outstanding on
due/maturity date as the case
maybe, until date of payment.
BA - An additional interest of 4%
per annum above the Base
Lending Rate shall be levied
...3/
BANK UTAMA (MALAYSIA) BERHAD
(Incorporated In Malaysia)
PRAI BRANCH (27714-A)
No. 2677, Jalan Chain ferry, Taman Inderawasih, 13600 Prai,
Pulau Pinang, Malaysia P.O. Box 219, 42100 Butterworth.
Tel: 04-3901567, 3903624 Fax: 04-3991612 Telex: Ma 47054
Page 40 of 84
<PAGE>
APPLIED MAGNETICS (M) SDN BHD - PAGE 4
for late payments/overdue
or on the amount
outstanding on
due/maturity date as the
case maybe, until date of
payment.
ECR PRE/ - An additional interest of 4%
POST per annum above the Base
Lending Rate shall be
levied for late
payments/overdue or on the
amount outstanding on
due/maturity date as the
case maybe, until date of
payment.
BG/SG - Should the account be
overdrawn or an excess
created, the Bank shall be
entitled to impose an
additional rate of 4% (four per
cent) per annum above the
Base Lending Rate for such
period for which the account is
overdrawn or in excess.
You are required to
indemnify the Bank
immediately upon a claim
being made on the Banker's
Guarantee or Shipping
Guarantee issued.
LIFETIME : LC - At sight or maximum 90 days
usance.
TR - Maximum of 180 days.
BA - Maximum of 180 days and
subject to BNM's guidelines.
ECR - As per BNM rules.
BG - On annual renewal basis.
...4/
BANK UTAMA (MALAYSIA) BERHAD
(Incorporated In Malaysia)
PRAI BRANCH (27714-A)
No. 2677, Jalan Chain ferry, Taman Inderawasih, 13600 Prai,
Pulau Pinang, Malaysia P.O. Box 219, 42100 Butterworth.
Tel: 04-3901567, 3903624 Fax: 04-3991612 Telex: Ma 47054
Page 41 of 84
<PAGE>
APPLIED MAGNETICS (M) SDN BHD - PAGE 5
SG - As per ABM rules/ until
presentation of original
shipping documents.
FX - Maximum 6 months and as
per BNM rules.
DURATION : The facilities are subject to
annual review but payable on
demand.
CANCELLATION FEE : Zero point five per cent (0.5%)
flat on the total amount of the
facility payable within seven (7)
days of cancellation after
acceptance but prior to any
disbursement of the facility.
SECURITY : Corporate Guarantee from your
parent company, Applied Magnetics
Corporation, USA for RM5.0 million.
LEGAL FEES/EXPENSES : All charges, legal fees and
incidental expenses incurred in
connection with the preparation
and enforcement of these facilities
including the Bank's solicitors
fee (on a solicitors-client's
basis) if any monies hereby
granted is required to be recovered
by any process of law or by our
solicitors shall be borne by you.
EVENT OF DEFAULT : The above facilities and interest
thereon and/or the amount
outstanding and unpaid shall be
payable immediately if one or more
of the following events should
occur:-
a) If you continuously fail to pay
when due/matured, any interest
or principal or any other sum of
money in accordance with the
terms of this Letter of Offer.
...5/
BANK UTAMA (MALAYSIA) BERHAD
(Incorporated In Malaysia)
PRAI BRANCH (27714-A)
No. 2677, Jalan Chain ferry, Taman Inderawasih, 13600 Prai,
Pulau Pinang, Malaysia P.O. Box 219, 42100 Butterworth.
Tel: 04-3901567, 3903624 Fax: 04-3991612 Telex: Ma 47054
Page 42 of 84
<PAGE>
APPLIED MAGNETICS (M) SDN BHD - PAGE 6
b) If you are unable to pay debts
as they become due and the
inability to pay is reasonably
deemed by us (the Bank) to be
materially prejudicial to the
Bank's interest and right and
or remedies against you in
respect of the above
facilities.
c) If you default on any of your
existing borrowings with other
financial institutions, this
shall constitute an event of
default on your part and we
(the Bank) reserves the right
to recall part or all of the
facility extended or
outstanding.
d) Cross default.
e) Breach of terms and conditions
of approval contained herein.
f) If a petition be presented or
an order is made or a
resolution is passed for
winding-up of your company or
the guarantor.
g) If a distress execution or
other process of a court of
competence jurisdiction
is levied or issued against
any of your company's and/or
guarantor's properties and
such distress execution
or other process, as the case
may be, is not satisfied by
your company and/or within
twenty one (21) days from the
date hereof.
...6/
BANK UTAMA (MALAYSIA) BERHAD
(Incorporated In Malaysia)
PRAI BRANCH (27714-A)
No. 2677, Jalan Chain ferry, Taman Inderawasih, 13600 Prai,
Pulau Pinang, Malaysia P.O. Box 219, 42100 Butterworth.
Tel: 04-3901567, 3903624 Fax: 04-3991612 Telex: Ma 47054
Page 43 of 84
<PAGE>
APPLIED MAGNETICS (M) SDN BHD - PAGE 7
h) If in the opinion of the Bank, the
security in favour(sic) of the Bank
or the business your company and/or
guarantor is in jeopardy.
In such cases, the aforesaid credit
facilities will automatically be
terminated and treated as cancelled.
All outstanding obligations with the
Bank will then immediately become due
and payable. Any monies so due but not
paid will attract an additional
interest rate of 4% per annum above
the Base Lending Rate (as well after
as before any judgement obtained and
not withstanding the fact that the
relationship of banker-customer
between the Bank and your company have
ceased for any reasons whatsoever)
calculated on the overdue amount
beginning from the due date to the
date of actual payment.
MATERIAL ADVERSE : The Bank reserves the right to
CHANGE CLAUSE terminate the facilities in the event
of any material adverse change in
your company and/or guarantor's
financial condition which might affect
your company and/or guarantor's
ability to comply with the obligations
under the Letter of Offer prior to the
first and subsequent disbursement.
CONDITIONS PRECEDENT : a) The Original copy of the Bank's Letter
of Offer duly accepted and signed;
b) Receipt of your company's Board
Resolution authorising(sic) the
acceptance of these facilities
together with the stipulated terms
and
...7/
BANK UTAMA (MALAYSIA) BERHAD
(Incorporated In Malaysia)
PRAI BRANCH (27714-A)
No. 2677, Jalan Chain ferry, Taman Inderawasih, 13600 Prai,
Pulau Pinang, Malaysia P.O. Box 219, 42100 Butterworth.
Tel: 04-3901567, 3903624 Fax: 04-3991612 Telex: Ma 47054
Page 44 of 84
<PAGE>
APPLIED MAGNETICS (M) SDN BHD - PAGE 8
authorising(sic) specific person(s)
to deal on your company's behalf;
c) Receipt of Corporate Guarantee for
RM5 million from your parent
company, Applied Magnetics
Corporation, USA;
d) Receipt of Board Resolution from
Applied Magnetics Corporation, USA
sanctioning the said Corporate
Guarantee.
e) All required legal documentation
effected;
f) Completion of legal documentation to
satisfaction of the Bank's solicitors
and the Bank.
DRAWDOWN/UTILISATION:(sic) The facilities may be available for
OF FACILITIES utilisation(sic)/drawdown upon
fulfilment(sic) of the conditions
precedent.
OTHER TERMS AND : a) Compliance with ECM 8 guidelines for
CONDITIONS Non-Resident Controlled Companies
(NRCC) at all times.
b) All terms and conditions including
interest rates, fees and commission
stipulated herein are current and
subject to changes from time to time
at our absolute discretion without
prior notice to you.
c) As a matter of policy, the Bank
usually review credit facilities on
a regular basis. Therefore, we would
require you to submit your annual
audited financial statements and
semi-annual
...8/
BANK UTAMA (MALAYSIA) BERHAD
(Incorporated In Malaysia)
PRAI BRANCH (27714-A)
No. 2677, Jalan Chain ferry, Taman Inderawasih, 13600 Prai,
Pulau Pinang, Malaysia P.O. Box 219, 42100 Butterworth.
Tel: 04-3901567, 3903624 Fax: 04-3991612 Telex: Ma 47054
Page 45 of 84
<PAGE>
APPLIED MAGNETICS (M) SDN BHD - PAGE 9
house financial statements within
120 and 60 days respectively after
the end of each period.
d) The Bank reserves the right to add
to, delete, alter, amend and vary
and terms and conditions in its
absolute discretion at any time it
deems fit. The Bank is under no
obligation to grant or continue
granting the facility and reserves
the right to recall or demand full
settlement, extend or cancel the
facility as it deems fit.
e) In accordance with Section 62 (1) of
the Bank and Financial Institutional
Act 1989, the approval and
utilisation(sic) from time to time
of the credit facilities are strictly
conditional that your directors,
managers, agents and guarantors or
shareholders (with five per cent
(5%) or more shareholdings) of such
facilities are not directly related
to any directors, officers or
employees of the Bank or the Bank's
subsidiaries currently or at any time
in the future either as parent(s)/
spouse(s)/child(ren). You undertake
to advise the Bank immediately and
the Bank reserves the right to recall
the credit facility should any of the
above relationship is established or
discovered at any time.
f) You shall open and maintain an active
and satisfactory account with us and
operate and activate your account
within the approved drawing limit and
payment of interest due must be
current at all times.
g) You are to notify the Bank promptly
on any change of the correspondence
address.
...9/
BANK UTAMA (MALAYSIA) BERHAD
(Incorporated In Malaysia)
PRAI BRANCH (27714-A)
No. 2677, Jalan Chain ferry, Taman Inderawasih, 13600 Prai,
Pulau Pinang, Malaysia P.O. Box 219, 42100 Butterworth.
Tel: 04-3901567, 3903624 Fax: 04-3991612 Telex: Ma 47054
Page 46 of 84
<PAGE>
APPLIED MAGNETICS (M) SDN BHD - PAGE 10
h) The Bank reserves the right to debit
your account for interest, commission,
charges, and principal sum of monies
outstanding and other incidental
expenses incurred.
i) You shall notify the Bank on any
change in Directorship, Management,
significant shareholders or any
material information relating to your
company.
j) You shall submit other information as
may be requested by us from time to
time.
k) All guidelines and rules imposed by
BNM from time to time are complied
with.
l) All other terms and conditions not
specifically mentioned herein that
shall be imposed by the Bank from time
to time.
As you may know, Bank Negara Malaysia has now established the Central Credit
Bureau to collect information from banks regarding credit facilities which they
grant to their customers. This is to enable participating Banks which are
approached for credit facilities by a customer, to be informed by the Bureau of
the aggregate credit facilities granted to the customer by other Banks.
The information is kept strictly confidential between the Bureau and
participating Banks and it is a term of the credit facilities granted to you
that the information regarding it will be given to the Bureau for the use of the
Bureau and the participating Banks.
Notwithstanding the approval of the facilities, the Bank reserves the right to
rescind the approval prior to any disbursement of the funds provided that our
right to cancel the facilities at any time in our absolute discretion shall not
be affected.
We trust the terms and conditions for the above facilities are acceptable to
you. Kindly indicate your acceptance by signing and returning the original of
this Letter of Offer to us within thirty (30) days from the date of this Letter
of Offer.
...10/
BANK UTAMA (MALAYSIA) BERHAD
(Incorporated In Malaysia)
PRAI BRANCH (27714-A)
No. 2677, Jalan Chain ferry, Taman Inderawasih, 13600 Prai,
Pulau Pinang, Malaysia P.O. Box 219, 42100 Butterworth.
Tel: 04-3901567, 3903624 Fax: 04-3991612 Telex: Ma 47054
Page 47 of 84
<PAGE>
APPLIED MAGNETICS (M) SDN BHD - PAGE 11
This Letter of Offer shall supercede and cancel our previous Letter of Offer
dated September 23, 1996.
Should you have any query, please do not hesitate to contact us at any time.
Thank you.
Yours faithfully,
for BANK UTAMA (M) BERHAD
PRAI BRANCH
/s/ Pronob Sengupta /s/ Yong Kin Leng
- ------------------------------- -----------------------------------
PRONOB SENGUPTA YONG KIN LENG
CREDIT OFFICER CUSTOMER RELATIONSHIP
MANAGER/BRANCH MANAGER
- ------------------------------------------------------------------------------
We, APPLIED MAGNETICS (M) SDN BHD (COMPANY NO : 170897-K) do understand and
accept your offer based on the terms and conditions outlined above.
/s/ Dr. John S. Foster /s/ Muhammad Nasir Haji Hanifah
- ------------------------------ ---------------------------------------
DR. JOHN S. FOSTER MUHAMMAD NASIR HAJI HANIFAH
MANAGING DIRECTOR (FINANCE DIRECTOR)
Authorised(Sic) Signatories and Rubber Stamp
Date of Acceptance: APPLIED MAGNETICS (M) SDN. BHD.
PLOT 201, BAYAN LEPAS FREE TRADE ZONE,
11900 PENANG, MALAYSIA,
/va
...11/
BANK UTAMA (MALAYSIA) BERHAD
(Incorporated In Malaysia)
PRAI BRANCH (27714-A)
No. 2677, Jalan Chain ferry, Taman Inderawasih, 13600 Prai,
Pulau Pinang, Malaysia P.O. Box 219, 42100 Butterworth.
Tel: 04-3901567, 3903624 Fax: 04-3991612 Telex: Ma 47054
Page 48 of 84
<PAGE>
EXHIBIT 10(d)
LETTER OF GUARANTEE
To:-
BANK UTAMA (MALAYSIA) BERHAD
In consideration of your opening or continuing an account with and
making or continuing to make advances loans or otherwise giving credit or
continuing to give credit or accomodation(sic) or granting to Applied Magnetics
(M) SDN BHD
- -----------------------------------------------------------------------
of Plot 201, Bayan Lepas FIZ, Phase 3, 11900 Penang
(hereinafter called "the Customer") at my/our request, for as long as you may at
your sole discretion deem fit I/we Applied Magnetics Corporation
- ------------------------------------------------------------------------
of 75 Robin Hill Road, Goleta, California 93117 USA
- ------------------------------------------------------------------------
the undersigned hereby jointly and severally agree with and guarantee you as
follows, that is to say:
1. I/We will pay you on demand:-
(I) all moneys which now are or may during the operation of this
Guarantee be owing to you from the Customer or remain unpaid on
the general balance of Customer's account with you anywhere and
on any account whatsoever whether from the Customer alone or
from the Customer jointly with or as surety for any other person
or persons or for any firm or company including advances
overdrafts discounts bills or notes held by you on or in respect
of which the Customer may be or have been liable to you in any
manner together with commission and other ordinary banking
expenses including interest and any additional interest at such
rate as may be from time to time be prescribed by you (as well
after as before judgment) although the relation of banker and
Customer may have ceased for whatever reason;
(II) all amounts which now are or may during the operation of
this Guarantee become owing to you by the customer in
respect of indemnities and/or guarantees given to the owners
agents charterers or masters of ships or in respect of any
kinds of indemnities and/or guarantees whatsoever entered into
by you at the request of or on behalf of the customer or in
respect of any bills accepted by the Customer;
Page 49 of 84
<PAGE>
(III) all amounts which now are or may during the operation of this
Guarantee become owing to you by the Customer arising out of any
agreement in writing made with you or otherwise howsoever in
respect of Bankers Acceptances or Letters of Credit or any
Letter of Credit irrevocable or otherwise opened or established
through you upon the application of the Customer and either
with you or any agent or branch of yours wherever situated; and
(IV) all costs charges and expenses which you may incur in enforcing
or seeking to enforce any security for or obtaining or seeking to
obtain payment of all or any part of the money or amounts hereby
guaranteed.
2. All moneys received from or on account of the Customer or from any other
person or estate or from the realisation(sic) of any security or otherwise for
the purpose of being applied in reduction of the moneys in Clause 1 above
mentioned shall be treated for all purposes as payments in gross and not as
appropriated or attributed to any specific part or item of the said moneys even
if appropriated thereto by the person otherwise entitled so to appropriate. All
securities now or at any time held by you shall be treated as securities for the
said general balance and other amount owing. I/We will make no claim to such
securities or any part thereof or any interest therein unless and until I/we
have paid all moneys due from me/us under this Guarantee and you shall have
received the full amount of such general balance and other amounts if any.
3. You shall be at liberty (whether before or after the insolvency or
bankruptcy of the Customer) to place any moneys received hereunder in a
suspense account for so long as you deem fit without any obligation in the
meantime to apply the same or any part thereof towards discharge of any
money or liabilities due or incurred by the Customer to you.
4. Should the Customer become bankrupt or insolvent or being an incorporated
company be wound up, you may prove in the bankruptcy insolvency or winding up of
the Customer for the whole amount outstanding against the Customer to the
exclusion of my/our rights to be subrogated to you in respect of any part
payments made by me/us hereunder and no money or dividend so received by you
shall be treated as received of this Guarantee or otherwise in relation to
me/us, but the full amount hereby guaranteed shall be payable by me/us until you
shall have received from all sources one hundred sen in the ringgit on the
ultimate balance outstanding against the Customer. After you have received such
ultimate balance in full any claim on my/our part to any excess or any
securities remaining in your hands shall be a matter of adjustment between you
me/us and any other person or persons laying claim hereto.
5. This guarantee shall be a continuing guarantee to you up to the aggregate
principal sum of Ringgit Malaysia: 5 Millions only (RM 5,000,000.00) for the
purpose of securing not merely an equivalent amount but the whole of the moneys
or general balance in Clause 1 hereof mentioned notwithstanding any such
payments receipts or dividends as are hereinbefore mentioned together with
interest thereon as prescribed by you
from time to time.
Page 50 of 84
<PAGE>
6. You may at all times without prejudice to this Guarantee and without
discharging or in any way affecting my/our liability hereunder and without any
notice to me/us:-
(a) determine renew vary restructure earmark or increase any
advance credit banking facilities or accommodation given or
to be given to the Customer or the manner in which the same
is applied or utilised(sic); and/or
(b) grant to the Customer or to any other person any time or
indulgence; and/or
(c) renew any bills notes or other negotiable securities; and/or
(d) take any other securities or guarantee from the Customer or
any other person; and/or
(e) deal with exchange release modify or abstain from taking
perfecting or failing to correct any invalidity in enforcing
any securities or other guarantees or rights which you may
now or hereafter have from or against the Customer or any
other person; and/or
(f) enter into any arrangement with or compound with the
Customer or with any other person or guarantor; and/or
(g) grant further facilities to the Customer and all sums
advanced to the Customer pursuant to the said further
facilities shall be secured by this Guarantee
AND I/we hereby expressly consent to all of the above acts on your part.
7. You are to be at liberty but not bound to resort for your own benefit to
any other means of payment at any time and in any order as you think fit
without in consequence diminishing my/our liability to you hereunder and you
may enforce this Guarantee for the payment of the ultimate balance after
resorting to other means of payment or for the balance due at any time
notwithstanding that other means of payment have not been resorted to and in
the latter case, without entitling me/us to any benefit from such other means
of payment so long as any sum liability or obligation remain due or owing or
payable or outstanding (whether actual or contingent) from the Customer to you.
8. This Guarantee shall not be determined or affected by the death or insanity
of myself or any one or more of us but shall in all respects and for all
purposes be binding and operative until determined as to future transactions by
fourteen (14) days' notice in writing given to you by me/us or any one of us by
the personal representatives of any of us who may be dead or in case of insanity
of any of us by the person legally entitled to
Page 51 of 84
<PAGE>
represent the insane person. During the pendency(sic) of such notice you may
subject always to the aforesaid limit of my/our liability hereunder fulfil(sic)
any requirements of the Customer based on agreements express or implied prior to
the receipt of such notice and you may afford the Customer such further
accommodation as you would have done had you not received such notice and any
moneys thereby due or remaining unpaid at or after the expiration of such notice
shall form part of the aforesaid general balance.
9. Without prejudice to your right to open new accounts in the name of the
Customer from time to time, in the event of this Guarantee ceasing from any
cause whatsoever to be binding as a continuing security on me/us or my/our
liquidators or personal representative(s) as the case may be you shall be at
liberty without thereby affecting your rights hereunder to open a fresh account
or accounts and to continue any then existing account with the Customer and no
money paid from time to time into any such account or accounts by or on behalf
of the Customer and subsequently drawn out by the Customer shall on settlement
of any claim in respect of this Guarantee be appropriated towards or have the
effect of payment of any part of the money due from the Customer at the time of
this Guarantee ceasing to be so binding as a continuing security or of the
interest thereon unless the person or persons paying in the money shall at the
time in writing direct you specially to appropriate it to that purpose.
10. You shall so long as any money remains owing hereunder have a lien therefor
on all money now or hereafter standing to my/our credit with you whether on any
current or other account and you shall also have a lien on any stock or share
certificates title deeds or other securities belonging to me/us under my/our
control which have been deposited with you for any purpose.
11. I/We hereby agree that you may at any time without any notice whatsoever
notwithstanding any settlement of account or other matter whatsoever combine or
consolidate all or any of my/our then existing accounts including accounts in
the name of the Bank (whether current deposit loan or of any other nature
whatsoever or whether subject to notice or not whether in Ringgit or in any
other currency) wheresoever situate and set-off or transfer any sum standing to
the credit of any one or more such accounts in or towards satisfaction of any
moneys obligations or liabilities owing by the Customer to you whether such
liabilities be present future actual contingent primary collateral several or
joint. Where such combination set-off or transfer requires the conversion of one
currency into another such conversion shall be calculated at your prevailing
spot rate of exchange (as conclusively determined by you) for purchasing the
currency for which I/we/am are liable with the existing currency so converted.
12. Any admission or acknowledgment in writing by the Customer or any person
authorised(sic) by the Customer of the amount of indebtedness of the Customer to
you and any judgment recovered by you against the Customer in respect of such
indebtedness shall be binding and conclusive against me/us. A statement signed
by your manager, sub- manager, secretary or any one of your officers as to the
moneys and liabilities for the time being due or incurred to you from or by the
Customer shall be final and conclusive evidence against me/us for all purposes
including legal proceedings.
Page 52 of 84
<PAGE>
13. This Guarantee shall not be considered as satisfied by any intermediate
payment or satisfaction of the whole or any part of any sum owing as aforesaid
but shall be a continuing security and shall extend to cover any sum or sums of
money which shall for the time being constitute the balance due from the
Customer to the Bank upon any such account as hereinbefore mentioned.
14. This Guarantee shall not be determined or in any way prejudiced by:-
(I) any change in the constitution of the Customer whether by retirement
expulsion death or admission of any partner or partners amalgamation
reconstruction or otherwise but shall enure(sic) and be available
for all intents and purposes as if the resulting firm company or
concern had been the one whose obligations were originally
guaranteed; or
(II) You being absorbed by or amalgamating with or taking over any
other bank or firm or corporation but shall enure(sic) and be
available for past and subsequent advances and all other purposes for
or by the absorbing or amalgamated company or concern and/or by your
successor in title.
15. I/We hereby declare that no security has been received by me/any of us from
the Customer or any other guarantor/s for the giving of this Guarantee and I/we
will not, as long as this Guarantee remains in force, take any security in
respect of my/our liability hereunder, without first obtaining your written
consent. I/We further agree that any security taken or held by us (whether
before or after the date hereof) for the giving of this Guarantee shall be held
in trust for you as security for the fulfilment of my/our obligations to you
hereunder and shall be deposited with you immediately upon the execution of this
Guarantee or our receipt of the said security for the aforesaid purpose.
16. I/We hereby agree that you shall be at liberty without any further consent
from me/us and without thereby affecting my/our liability under this Guarantee
at any time to determine enlarge or vary any credit to the Customer. You may
enforce this Guarantee against me/us at any time notwithstanding that any bills
or other instruments covered by it may be in circulation or outstanding and
include the amount of the same or any of them in the said general balance or not
at your option and this Guarantee shall not be determinable by me/us or my/our
personal representatives except on the terms of our making full payment up to
the limit of my/our Guarantee for any then outstanding liabilities or
obligations on our part and on the Customer's account.
17. You shall also be at liberty to release or discharge any of us from the
obligations of this Guarantee or to compound with or accept any composition
from or make any other arrangements with any of us without thereby releasing or
discharging any of us from this Guarantee or otherwise prejudicing or affecting
your rights and remedies against the other or any of us.
Page 53 of 84
<PAGE>
18. You are at liberty but not bound to resort for your benefit to any other
means of obtaining payment or securing performance at any time and in any manner
or order as you may deem fit without affecting the security evidenced by this
Guarantee. You may exercise and enforce your rights under this Guarantee either
before resorting to other means of obtaining payment or securing performance or
after such means have been resorted to in respect of any balance due or
outstanding liabilities or obligations and in the latter case without entitling
me/us to any benefit from such other means so long as any sum liability or
obligation remains due or owing or payable or outstanding (whether actual or
contingent) from the Customer to you.
19. As a separate and independent stipulation, I/we agree that any sum or
sums of money which may not be recoverable from me/us on the footing of a
guarantee whether by reason of any legal limitation disability or incapacity on
or of the Customer or by any other fact or circumstances and whether known to
you or not shall nevertheless be recoverable from me/us or each of us as sole
or principal debtors and shall be paid by me/us on demand.
20. No delay or omission on your part in exercising any rights power privilege
or remedy in respect of this Guarantee shall impair such right power privilege
or remedy or preclude any further exercise of it or the exercise of any other
right power privilege or remedy. The rights powers privileges and remedies
provided in this Guarantee are cumulative and not exclusive of any rights
powers privileges or remedies provided by law.
21. This Guarantee shall be binding and enforceable against each guarantor who
executes the same notwithstanding the fact that one or more of any intended
guarantors whether referred to herein or otherwise may not have executed the
Guarantee.
22. If this Guarantee is signed by or on behalf of more than one person (such
person being hereinafter referred to as ("the Original Signatories") and any one
or more of the Original Signatories is not bound by the provisions herein
contained (whether by reason of his of their lack of capacity or improper
execution of this Guarantee or for any other reason whatsoever), the remaining
Original Signatories shall continue to be bound by the provisions of this
Guarantee as if such other Original Signatory or Signatories had never been a
party/parties hereto.
Page 54 of 84
<PAGE>
23. No assurance security or payment which may be avoided under Section 293 or
294 of the Companies Act or by an provisions of the Bankruptcy Act 1967 an no
release settlement or discharge which may have been given on the faith of any
such assurance security of payment shall prejudice or effect your right to
recover from me/us to the full extent of this Guarantee as if such assurance
security payment release settlement or discharge (as the case may be) had never
been granted given or made.
24. Any demand for payment or service of any legal process may be made or
effected by prepaid registered or ordinary post addressed to me/us or each of us
at my/our address specified herein or at my/our last known place of business or
registered address and such demand or legal process shall be deemed to have been
duly served on the fifth (5th) day following that on which it is posted,
notwithstanding that the said demand or legal process may subsequently be
returned undelivered by the postal authorities. "Legal process" shall mean all
forms of originating process, pleadings, interlocutory applications of whatever
nature, affidavits, orders and such documents, other than the aforesaid, which
are required to be served under any legislation or subsidiary legislation or by
the terms of this Guarantee.
25. I/We shall and hereby undertake to pay and bear all whatsoever costs,
charges, fees, stamp duty and other disbursement (including the professional
charges of your solicitors on a full indemnity basis) in any way connected with
or arising out of this Guarantee or in the enforcement of your rights hereunder.
26. This Guarantee and all rights obligations and liabilities arriving
hereunder shall be construed and determined under and be enforced in accordance
with the laws of Malaysia and I/we agree that the Courts of Malaysia shall have
jurisdiction over all disputes arising under this Guarantee.
27. In this Guarantee unless there is something in the subject or context
inconsistent with such construction or unless it is otherwise expressly
provided:-
(i) words in the singular include the plural and words in plural
include the singular; and
(ii) where this Guarantee is given or executed by two (2) or more
individuals the agreements covenants stipulations and undertakings
expressed to be made by and on the part of such individuals be and
are binding upon such individuals jointly and severally.
Page 55 of 84
<PAGE>
28. This paper on which this Guarantee is written shall at all times remain
your property.
29. This Guarantee shall be binding upon my/our heirs, personal
representatives and successors in title.
Dated the 15th day of April 1997
The Common Seal of )
)
was duly affixed in the presence of:)
Page 56 of 84
<PAGE>
/s/ Craig D. Crisman /s/ Peter T. Altavilla
------------------------------ -----------------------------
DIRECTOR *CONTROLLER/SECRETARY
Name: Craig D. Crisman Name: Peter T. Altavilla
I.C.No: I.C.No:
The Common Seal of )
)
was duly affixed in the presence of:)
------------------------------ -----------------------------
DIRECTOR *DIRECTOR/SECRETARY
Name: Name:
I.C.No: I.C.No:
Signed by:-
- -------------------------- ------------------------
- -------------------------- ------------------------
- -------------------------- ------------------------
- -------------------------- ------------------------
in the presence of:- Bernice Williams
Page 57 of 84
<PAGE>
EXHIBIT 10(e)
Applied Magnetics (M) Sdn Bhd (PNG 96/154)
DCB BANK BERHAD
DCB 1 & 2, RHB Centre(sic)
426, Jalan Tun Razak
50400 Kuala Lumpur, Malaysia
Tel : 603-9878888
Fax : 603-9879000
Cable : DECOMBANK Kuala Lumpur
Telex : MA 31032, MA 32813, MA 33155 DCBANK
SWIFT : DCBBMYKL
(08.10.8171.)
(DCB LOGO)
PRIVATE & CONFIDENTIAL
Our Ref : PNG 96/154
December 10, 1996
APPLIED MAGNETICS (M) SDN BHD
Plot 210, Bayan Lepas FIZ
Phase 3
11900 Penang
Dear Sirs,
RE : CREDIT FACILITIES
We are pleased to offer you the following facilities :-
Facility Limit
Letter of Credit Trust Receipt/ Bankers
Acceptance/ Bills Purchased/ Bills |
Discounted/ Bills of Exchange Purchased/
Letter or guarantee/ Shipping Guarantee/ RM40.0 million
Foreign Currency Trade Financing/ 10%|
Foreign Exchange Contract Limit |
-
Foreign Exchange Contract Limit RM40.0 million
1
Page 58 of 84
<PAGE>
Applied Magnetics (M) Sdn Bhd (PNG 96/154)
Subject to satisfactory documentation on which will include more detailed terms
and conditions in addition to the basic terms and conditions as below:-
I. PURPOSE :
(a) LETTER OF CREDIT/ TRUST RECEIPT/ BANKERS ACCEPTANCE/ BILLS
PURCHASED/ BILLS DISCOUNTED/ FOREIGN CURRENCY TRADE FINANCING
For trade financing.
(b) BILLS OF EXCHANGE PURCHASED
For the purchase of foreign currency drafts/ cheques(sic).
(c) LETTER OF GUARANTEE
As security deposit and performance/ tender bonds favouring various
government/ statutory bodies and private companies.
(d) SHIPPING GUARANTEE
For the clearance of goods pending the receipt of shipping
documents.
(e) FOREIGN EXCHANGE CONTRACT LIMIT
To hedge against fluctuations in foreign exchange rates for trade
related transactions and other transactions as approved by Bank
Negara Malaysia.
II. INTEREST / COMMISSION :
(a) TRUST RECEIPT
1.0% per annum above our Base Lending Rate which is currently at
9.15% per annum.
(b) BANKERS ACCEPTANCE
1.0% per annum above our Cost of Funds.
(c) LETTER OF CREDIT/ SHIPPING GUARANTEE
At the prevailing ABM Rate.
(d) FOREIGN CURRENCY TRADE FINANCING
1.25% per annum above SIBOR.
(e) BILLS PURCHASED/ BILLS DISCOUNTED/ BILLS OF EXCHANGE PURCHASED
Local : 1.0% per annum above our Base Lending Rate.
Foreign : 1.0% per annum above the Prime Lending Rate.
2
Page 59 of 84
<PAGE>
Applied Magnetics (M) Sdn Bhd (PNG 96/154)
(f) LETTER OF GUARANTEE
1.2% per annum subject to a minimum of RM25/- per issue payable at
time of issue/ renewal.
The Bank shall be entitled at its absolute discretion to vary at any time and
from time to time the Base Lending Rate and/ or Cost of Funds of the Bank and/or
commission in respect of the Base Lending Rate of interest by displaying at the
premises of the Bank a general notice of the change of the Base Lending Rate of
interest addressed to the public generally and such display shall be deemed
sufficient notice to you or by any other modes deemed fit and proper by the
Bank; and
VII. COVENANTS :
(a) All costs, expenses and charges including legal fees and stamp
duties in connection with or incidental to the preparation of the
security documents are payable by you even though the facilities may
be aborted before utilisation(sic). We reserve the right to debit
all costs, expenses and charges from your account with us.
(b) You are to :-
(i) maintain an active and satisfactory account with us;
(ii) permit and consent to our providing the Central Credit Bureau,
Bank Negara Malaysia information on the credit facilities
granted to you which information is for the use of the Bureau
and all participating banks and kept strictly confidential
between them;
(iii) furnish us a copy of your latest audited accounts and that of
Applied Magnetics Corporation within six (6) months after the
close of each financial year;
(iv) furnish us your half yearly management account within two (2)
months after the half yearly closing of your books;
(v) inform us in writing when you declare and pay dividend; change
your directors/ shareholders; and/ or grant any loans to your
directors, shareholders, related and associate companies;
(vi) declare if any of your directors'/ shareholders'/ managers'
spouse, parent(s) and child(ren) are in the employment of the
DCB Bank Group. This is to enable us to comply with
Section 62 of the Banking
3
Page 60 of 84
<PAGE>
Applied Magnetics (M) Sdn Bhd (PNG 96/154)
and Financial Institutions Act 1989. We reserve the right to
recall the credit facilities in the event you fail to make
the appropriate declaration which leads us to contravene the
aforementioned section of the Act;
(vii) pay the penalty interest at 1.0% per annum above the
prescribed rate or any other rate the Bank may prescribe from
time to time on the amount due in the event that the principal
is not paid on due date. Interest overdue will be capitalised
(sic) at the end of the month and henceforth attract interest
at prescribed rate;
(viii) consent to our disclosing to the guarantor(s),
chargor(sic)(s), obligor(sic)(s) or any person giving or
providing security for the credit facilities granted to you
information on the said credit facilities which may be partly
or wholly secured against the guarantee(s), charge(s) or any
security whatsoever; and
(ix) inform us in the event that Applied Magnetics Corporation, USA
divests more than 10% of your shares.
(c) We will not permit any excess/temporary overdrawing over and above
the limits approved herein. However, in the event that an excess is
created in your account due to, for example, interest accumulation
or the expiry of the credit facilities etc, we shall have the right
to impose at our discretion a penalty rate of interest on the amount
in excess.
(d) We reserve the right to disallow you the continued utilisation(sic)
of the facilities in the event that there are overdue repayments. We
shall also have the right to impose at our discretion a penalty rate
of interest on the amount overdue.
(e) You are to operate your account with us in a satisfactory manner and
repay the bills promptly, failing which we reserve the right to vary
the terms and conditions imposed including the interest rate. In
addition, you are to maintain a satisfactory current account with
us.
(f) We reserve the right to debit your account and/or take any necessary
action(s) at your cost to recover any monetary losses due to your
inability and/or unwillingness to honour(sic) any foreign exchange
contracts or bookings entered into by you.
4
Page 61 of 84
<PAGE>
Applied Magnetics (M) Sdn Bhd (PNG 96/154)
(g) You are to actively utilise(sic) your credit facilities especially
the trade financing facilities failing which we reserve the right
to amend your interest rate. The Foreign Exchange Contract Limit
is to be utilised(sic) for underlying trade transactions and is to
comply with requirements specified in Exchange Control Act, 1953
and ECM 6 or in accordance with Bank Negara Malaysia regulations.
A fair amount of foreign exchange transaction is required to be
channelled to us every month failing which we reserve the
right to amend your interest rate. (Please refer to Appendix I for
the Clauses on the Foreign Exchange Contract Limit)
(h) In the event that we have to pay on a claim for the Letter of
Guarantee issued by us, we shall charge an interest of 5% or any
other rate determined by us above our Base Lending Rate commencing
from the date of our payment to the date of repayment by you.
(i) We reserve the right to pay the beneficiaries of the Letter of
Guarantee issued by us without your prior written consent. The
amount paid by us shall be final and conclusive and shall not, in
the absence of manifest error, be questioned on any account
whatsoever.
(j) We may request for a progress report of your business on a regular
interval.
(k) We reserve the right to capitalise(sic) interest in the event that
the facilities are under recall notwithstanding the termination of
banker-customer relationship for any reason whatsoever. We shall
charge additional interest at such rate that may be imposed at any
time and from time to time by us at our absolute discretion over
and above our prevailing Base Lending Rate as well as after or
before judgement.
(l) We may reduce your facility in the event that we are in
contravention of any section of the Banking and Financial
Institution Act 1989.
(m) We reserve the right to close your current account with us once
your current account has been blacklised(sic) by the Biro
Maklumat Cek (BMC). The bank has the absolute discretion to recall
the credit facilities once the account is blacklisted.
5
Page 62 of 84
<PAGE>
Applied Magnetics (M) Sdn Bhd (PNG 96/154)
VIII. EVENTS OF DEFAULT :
All monies outstanding under the facilities granted to you shall become due and
immediately repayable upon our demand for the recall of the facilities without
the need for us to furnish any reason to you; or in any of the following
circumstances when :-
(i) you or your guarantors default in the payment of any monies payable to us
after the same shall have become due to us whether formally demanded or
otherwise;
(ii) you or your guarantors default in any of the obligations or any of the
terms and conditions hereof;
(iii) your indebtedness or that of your guarantors' herein or under any other
agreement becomes capable of being declared prematurely due by reason of
any default in respect of the same or if due on demand when demanded or
the security for such indebtedness becomes enforceable;
(iv) you or your guarantors cease or threaten to cease business;
(v) a petition be presented or an order be made or a resolution be passed for
your or your guarantors' winding up;
(vi) there is a substantial deterioration in your financials or that of your
guarantors';
(vii) a distress or execution or other process of a court be levied upon or
issued against you or that of your guarantors' property and such action
is not satisfied by you or your guarantors within fourteen (14) days from
the date thereof; and when
(viii) you or your guarantors enter into any arrangement or composition with
your creditors.
IX. OTHER CONDITIONS :
(a) You shall inform us in writing when you obtain credit facilities
from any other institutions.
(b) Save for Malayan Banking Berhad's existing encumbrances we are to be
treated no worse off in terms of security given to your other
bankers.
6
Page 63 of 84
<PAGE>
Applied Magnetics (M) Sdn Bhd (PNG 96/154)
(c) The certificate of the Bank as to the amount outstanding, due and
payable, shall be final and conclusive and shall not, in the absence
of manifest error, be questioned on any account whatsoever.
(d) If any of the provision of this Letter becomes invalid, illegal or
unenforceable under any law, the validity, legality or
enforceability of the remaining provisions shall not in any way be
impaired or affected.
(e) The certificate of the Bank as to the amount outstanding, due and
payable, shall be final and conclusive and shall not, in the absence
of manifest error, be questioned on any account whatsoever.
(f) You shall as a term of offer comply with our requirement that the
security documentation in respect of the credit facilities shall be
prepared by solicitors on our panel and that you agree to pay the
said solicitors the legal fees, costs disbursements and all other
expenses incurred by us in connection with the preparation of the
said security documentation by the solicitors.
(g) No delay in exercising or omission to exercise any right, power or
remedy accruing to us upon any default shall impair such right,
power or remedy or be construed to be waiver thereof or an
acquiescence in such default.
If circumstances deem necessary, we may amend or impose additional terms and
conditions for which we will provide you our prior written notification.
7
Page 64 of 84
<PAGE>
Applied Magnetics (M) Sdn Bhd (PNG 96/154)
Please indicate your interest in our offer by conveying your acceptance direct
to our Penang Branch at 3, Penang Street, 10760 Pulau Pinang and executing the
documents within the period specified above.
We thank you for your support and co-operation.
Yours faithfully
for DCB BANK BERHAD
/s/ Yew Li Lin /s/ Amy Ooi
- ---------------------- -----------------------
Yew Li Lin Amy Ooi
Assistant Manager Senior Manager
Corporate Banking Corporate Banking
c.c. Penang Branch
YLL/mi
app.doc(LO abcdvii)
We, the undersigned, hereby declare that no member of our directors'/ managers'/
shareholders' family is in the employment of your Group and hereby also accept
the terms and conditions above and those stipulated in attachment I.
/s/ Muhammad Nasir Haji Hanifah
- -------------------------------
Date:
MUHAMMAD NASIR HAJI HANIFAH
(FINANCE DIRECTOR)
We, the Guarantor, hereby acknowledge that we are fully aware of the terms
governing the credit facilities of up to a principal amount of RM80.0 million
which DCB Bank Berhad has agreed to make available to Applied Magnetics (M)
Sdn Bhd, which terms are contained in this Letter of Offer.
/s/ Dr. Ian Stuart Foster
- -------------------------------
Date: 28 Feb 1997
APPLIED MAGNETICS (M) SDN. BHD.
DR. IAN STUART FOSTER
MANAGING DIRECTOR
APPLIED MAGNETICS (M) SDN.BHD.
(Co. No. 170897-K)
PLOT 201, BAYAN LEPAS FREE INDUSTRIAL ZONE,
11900 PENANG, MALAYSIA
8
Page 65 of 84
<PAGE>
Applied Magnetics (M) Sdn Bhd (PNG 96/154)
Attachment I
(DCB LOGO)
DCB o
DCB BANK BERHAD
Incorporated in Malaysia
TERMS AND CONDITIONS ON FOREIGN EXCHANGE
DEALING & SETTLEMENT
1.0 DEFINITIONS
In these Terms and Conditions:
a) "Bank" refers to DCB Bank Berhad, a company incorporated in Malaysia
and having its registered office at Level 8. DCB 2, RHB Centre,
426 Jalan Tun Razak, 50400 Kuala Lumpur.
b) "Customer" refers to new or existing customers acceptable to the
Bank to deal in foreign exchange. Such eligibility shall be at the
sole discretion of the Bank.
c) "Foreign Exchange Deal" means value today, value tomorrow, spot and
forward foreign exchange contract.
d) "Foreign Exchange Contract Line (FXCL)" refers to a limit
established by the Bank for customer to govern the volume of
forward foreign exchange contract concluded with the Bank.
e) "Settlement Limit" refers to the daily maximum amount established
by the Bank for customer to settle foreign exchange deal(s)
utilised(sic).
2.0 DOCUMENTARY REQUIREMENTS
To deal in foreign exchange, customer must provide the Bank with :
a) annual financial reports and other relevant documents requested for
purpose of establishing FXCL and/or Settlement Limit.
b) A Directors' Resolution
o stating directors' approval to deal in foreign exchange with
the Bank
o confirming all verbal instructions to the Bank on foreign
exchange deals shall be valid and binding instructions to
the Bank
o appointing authorised(sic) officer(s) to provide the Bank
with a list of personnel, and their specimen signatures,
approved to give instructions on foreign exchange deals and
settlement
9
Page 66 of 84
<PAGE>
Applied Magnetics (M) Sdn Bhd (PNG 96/154)
(NOTE: THE BANK MUST BE NOTIFIED IMMEDIATELY, IN WRITING, OF ANY
CHANGES TO THIS LIST)
O confirming its knowledge, understanding and compliance of ECM
Notices and other regulations governing foreign exchange deals
3.0 BUSINESS HOURS
Customer may deal in foreign exchange with the Bank during the following
hours: Monday to Friday 8.30 a.m. to 5.30 p.m.
4.0 AUTHORISED(SIC) DEALERS
The Bank shall provide a list of its authorised(sic) dealers upon request
by customer.
5.0 COMPLIANCE WITH EXCHANGE CONTROL OF MALAYSIA (ECM)
NOTICES
a) Customer shall comply with requirements stipulated in the ECM
Notices issued by Bank Negara Malaysia from time to time and shall
bear the consequence(s) arising thereof if there is a contravention.
b) Customer shall provide, upon request, the Bank supporting
information and/or documentation for purpose of checking such
compliance.
c) If customer is exempted from the requirements of ECM Notices,
customer shall provide the Bank evidence of approval from Bank
Negara Malaysia prior to dealing in forward foreign exchange
contract.
6.0 DEALING
6.1 Foreign Exchange Orders
Customer's authorised(sic) person may place foreign exchange orders
with the Bank via telephone. Such verbal instructions, to be
followed up with facsimile confirmations, are deemed to be firm
orders from customer. The following procedures shall apply.
a) Customer's authorised(sic) person contacts the Bank's
authorised(sic) dealer to place a foreign exchange order.
b) Customer receives a reply facsimile (known as FOREXECUTE) from
the Bank's authorised(sic) dealer confirming the order placed.
c) Any discrepancy noted in the FOREXECUTE must be notified to
the Bank's authorised(sic) dealer immediately.
10
Page 67 of 84
<PAGE>
Applied Magnetics (M) Sdn Bhd (PNG 96/154)
d) The Bank's authorised(sic) dealer puts the order on a global
watch (as per customer's specific request) until the order is
executed or cancelled by customer.
e) Once the order is executed, the Bank's authorised(sic) dealer
shall verbally notify the customer.
6.2 Dealing Procedures
a) Customer's authorised(sic) person contacts the Bank's
authorised(sic) dealer or officer requesting for exchange
rate quotation.
b) Once exchange rate is agreed upon, customer shall verbally
confirm the deal with the authorised(sic) dealer or officer.
c) Customer receives a Confirmation Advice from the Bank's
processing department on foreign exchange deal concluded. The
Confirmation Advice must be signed and returned to sender
within seven (7) days from date if receipt. Customer may
facsimile the duly signed Confirmation Advice to the sender
and follow-up with the posting of the original Confirmation
Advice.
d) Any discrepancy noted in the Confirmation Advice must be
conveyed to the sender within seven (7) days from date of
receipt. Otherwise, the Bank's record of the deal shall be
considered correct and good.
e) Customer shall notify the Bank's processing department on non-
receipt of Confirmation Advice within seven (7) days from deal
date. Failing which, customer shall be deemed to have received
and accepted the Confirmation Advice as conclusive.
7.0 CANCELLATION
a) Customer shall submit written instruction with explanation to cancel
foreign exchange deal concluded, duly signed by authorised(sic)
person, to the Bank. A penalty charge may be imposed on the
cancelled deal.
b) The Bank reserves the right to cancel any foreign exchange deal it
deems contravening the provisions of ECM Notices.
c) Customer shall bear any loss arising from any cancellation of
foreign exchange deal.
11
Page 68 of 84
<PAGE>
Applied Magnetics (M) Sdn Bhd (PNG 96/154)
8.0 SETTLEMENT
8.1 Settlement Bank
A list of the Bank's foreign exchange settlement banks will be
provided upon customer's request.
8.2 Same Day Settlement
Same day settlement is subject to the availability of customer's
Settlement Limit. In the absence of this, any of the following
measures may be adopted.
a) The Bank credits customer's account after receiving acceptable
authenticated confirmation from payee bank on the same day or
next business day.
b) The Bank credits customer's account with proceeds held under
repo for at least one (1) day until confirmation of funds is
received.
8.3 Settlement Procedures
a) Customer sends complete settlement instructions in writing,
duly signed by authorised(sic) person to reach the Bank BEFORE
the following cut-off time.
Currency cut-off Time
Australian Dollar 10:00 a.m. on value
Singapore Dollar
Philippines Peso 12:00 noon on value date
Deutsche Mark
Swedish Krona
Netherlands Guilder
Belgian Franc
French Franc
Italian Lira
Swiss Franc
Canadian Dollar 3:00 p.m. on value date
US Dollar
Pound Sterling
Indonesia Rupiah
Japanese 3:00pm one business day prior to value date
Hong Kong Dollar
New Zealand Dollar
Thai Baht
12
Page 69 of 84
<PAGE>
Applied Magnetics (M) Sdn Bhd (PNG 96/154)
b) Settlement instructions via facsimile is acceptable PROVIDED the
customer signs a Letter of indemnity to absolve the Bank from any
loss arising in whatever manner in connection with the use of the
facsimile instructions.
c) If settlement instructions reaches the Bank after the stipulated
payment cut-off time, the Bank shall remit funds on BEST EFFORT
basis. The Bank shall not be responsible for any costs, expenses or
interest charges arising thereof.
d) The Bank may impose interest charges on late receipt of funds from
customer.
e) Customer shall bear all costs, expenses and charges incidental to
remittance of funds.
9.0 SPECIFIC TERMS & CONDITIONS ON FORWARD FOREIGN
EXCHANGE CONTRACT
9.1 Dealing in Forward Foreign Exchange Contract
a) Customer may enter into a forward foreign exchange contract
subject to compliance with requirements of ECM Notices or
proof of specific approval from Bank Negara Malaysia.
9.2 Rollover
a) "Rollover" means an extension of a forward foreign exchange
contract to mature at another future date.
b) Customer shall give the Bank a notice to rollover a forward
foreign exchange contract within five (5) days from maturity
date. This notice must be substantiated with valid reason(s).
c) Rollover of a forward foreign exchange contract must comply
with requirements of ECM Notices.
d) The Bank shall at its discretion, grant or reject the request
to rollover.
e) The Bank reserves the right to rollover at historical rate or
at prevailing market rate.
10.0 AMENDMENT TO TERMS AND CONDITIONS
The Bank reserves the right to amend any of these Terms and Conditions
from time to time at its discretion. Any changes so made shall be binding
without prior notice to customer.
13
Page 70 of 84
<PAGE>
EXHIBIT 10(f)
GUARANTEE BY A FOREIGN CORPORATION
Date: February 26, 1997
To: DCB Bank Berhad
3, Penang Street
10200 Penang
Dear Sirs
RE: LETTER OF GUARANTEE
In consideration of your agreeing at our request to make available or continue
to make available banking facilities or any other accommodation whatever
(hereinafter called "the Facilities") under the Credit Facility Letter dated
December 10, 1996 (thereinafter referred to as "the Facility Letter") from time
to time and for so long as you may think fit to APPLIED MAGNETICS (M) SDN BHD a
private limited company incorporated in Malaysia and having its registered
office at 1ST FLOOR, STANDARD CHARTERED BANK CHAMBERS, LEBUH PANTAI, 10300
PENANG (hereinafter called "the Customer") WE, APPLIED MAGNETICS CORPORATION a
company incorporated in Delaware, UNITED STATES OF AMERICA and having our
registered office at CORPORATION TRUST CENTER, 1209 ORANGE STREET, CITY OF
WILMINGTON, COUNTRY (SIC) OF NEW CASTLE, DELAWARE, UNITED STATES OF AMERICA
HEREBY UNCONDITIONALLY AND IRREVOCABLY GUARANTEE UNDERTAKE AND AGREE as follows:
1. We will pay to you on demand all sums of monies or liabilities which are
now or shall hereafter from time to time be due or owing or shall remain
unpaid to you or be incurred from or by the Customer under the Facilities
either alone or jointly with any other person or persons including the
ultimate balance which at the date of such demand shall be due or
owing or remaining unpaid to you by the Customer thereunder together with
interest thereon at the rate prescribed in the Facility Letter or at such
rate or rates as you may from time to time stipulate as well after as
before judgement if any obtained against the customer in respect thereof
including banking and legal charges and other costs expenses and outgoings
which you may incur or be liable for in enforcing or seeking to enforce
this guarantee or any security for or obtaining or seeking to obtain
payment of all or any part of the monies and liabilities guaranteed
hereunder.
2. (a) This guarantee shall be a continuing guarantee for the
purpose of securing the whole of the monies and liabilities or
ultimate balance in paragraph 1 hereof notwithstanding any
such payments receipts or dividends as are hereinafter
mentioned provided always that the amount for which we shall
be liable under this guarantee shall not exceed the principal
sum of RINGGIT MALAYSIA FORTY MILLIONS (RM40,000,000-00) only.
Page 1
Page 71 of 84
<PAGE>
(b) In addition to the said limit hereinbefore mentioned we shall
be liable to pay interest on the sum claimable from us on
daily balance at such rate or rates as may from time to time
be fixed or determined by you with monthly rests from the date
of demand to the date of payment as well after as before any
judgement obtained in respect thereof.
(c) In the absence of express written agreement to the contrary
the above limit is to be added to and to be cumulative with
the limit or limits specified in any other guarantee or
guarantees in respect of the Customer's liabilities to you
which may now or subsequently hold from us so that we shall be
answerable up to an amount equivalent to the aggregate of such
limits as if we had given one guarantee up to the limit of
such aggregate to DCB Bank Berhad.
3. This guarantee shall be held by you as a continuing security
notwithstanding any intermediate payment or settlement of account or
accounts or satisfaction of any part of any sums or sums of money
due or owing as aforesaid or otherwise and notwithstanding the
closing of any of the Customer's accounts with you which is
subsequently reopened or the subsequent opening of any account by
the Customer and shall extend to cover all or any sum or sums of
money which shall for the time being constitute the balance due or
owing from the Customer on any account or accounts or otherwise as
hereinbefore mentioned.
4. All monies received from or on account of the Customer or from any
other person or estate or from the realisation(sic) of any security
or otherwise for the purpose of being applied in reduction of the
monies or the ultimate balance hereinbefore mentioned shall be
treated for all purposes as payments in gross and not as
appropriated or attributable to any specific part or item of the
said monies even if appropriated thereto by the person otherwise
entitled so to appropriate.
5. All guarantee indemnities or other securities now or at any time
hereafter held by you for or in respect of all or any of the monies
and liabilities mentioned hereinbefore shall be treated as
securities for the ultimate balance for the time being due or owing
to you by the Customer as aforesaid. Unless and until all monies and
liabilities due or owing to you by the Customer as aforesaid shall
have been paid to you in full we shall not claim or participate in
the benefit of any such securities or any part thereof or any
interest therein and you shall be entitled to realise(sic) and
apply such securities as you in your absolute discretion deem fit
for your own use and benefit.
6. Any indebtedness of the Customer whether as principal or as surety
and whether solely or jointly with any other person or persons (in
partnership or otherwise) now or hereafter held by us shall be
subordinated to the indebtedness or liabilities of the Customer to
you if you shall so require and shall be collected enforced and
Page 2
Page 72 of 84
<PAGE>
received by us as trustees for you and shall be paid over to you on
account of the indebtedness or liabilities of the Customer to you
but without reducing or affecting in any manner our liability under
this guarantee until all monies and liabilities hereby guaranteed
have been fully paid to you. Any security now or hereafter held by or for
us from the Customer in respect of ourliability hereunder
shall be held in trust for you and as security for our liability hereunder.
7. This guarantee shall be in addition to and shall not in any way be
prejudiced or affected by any other security whether negotiable or
otherwise including any other guarantee or indemnity which you may
now or at any time hereafter hold from us the Customer or any other
person for all or any part of the monies hereby guaranteed nor
shall such security or any other security to which you may otherwise
be entitled or the liability of any person not a party hereto for
all or any part of the money hereby guaranteed be in any way
prejudiced or affected by this guarantee.
8. This guarantee shall not be prejudiced diminished or affected in any
way nor shall we be released or exonerated by any of the matters
following:
(a) any increase decrease extension renewal or restructure of all
or any of the loans or advances or credit or banking or credit
facilities or other accommodation granted or given to the
Customer from time to time whether solely or jointly with any
other person or persons (in partnership) or otherwise and
whether beyond the said limit or otherwise or any variation of
any terms and conditions thereof with or without our consent
or notice to us;
(b) your refusal at any time or times with or without notice to us
or to the Customer to grant any further loans or advances or
credit or banking or credit facilities or other accommodation
to the Customer notwithstanding that this guarantee has not
yet reached the limit of our liability and you may at any time
in your absolute discretion refuse to grant such further
credit or accommodation;
(c) any variation exchange renewal release or modification of any
guarantee indemnity or security or the refusal or neglect by
you to complete enforce or assign any judgment specially or
other security or instrument negotiable or otherwise and
whether satisfied by payment or not all of which you are at
liberty to do whether with or without our consent or notice to
us;
Page 3
Page 73 of 75
<PAGE>
(d) any time forbearance concession or other indulgence given or
extended to the Customer and or to any party to any guarantee
indemnity security or other instrument in respect of any
monies hereby guaranteed all of which you are at liberty to
give whether or without our consent or notice to us;
(e) any compound compromise composition or arrangement made with
the Customer and/or any other person or persons all of which
you are at liberty to make whether with or without our consent
or notice to us;
(f) any legal limitation on or insufficiency in the borrowing
powers or disability or incapacity of or other fact or
circumstance relating to the Customer or any other person;
(g) any irregularity unenforceability or invalidity of any
obligations of the Customer or any other persons under any
security or document to the intent that our obligations under
this guarantee shall remain in full force and effect and this
guarantee shall be construed accordingly as if there were no
such irregularity unenforceability or invalidity.
9. Though as between us and the Customer we are sureties only for the
Customer yet as between you and us we shall be deemed to be
principal debtors for all the monies the payment of which is hereby
guaranteed and accordingly we shall not be discharged nor shall our
liability be affected in any way by any fact circumstance act
omission limitation or means whatsoever whether known to you or not
whereby our liability hereunder would have been discharged if we had
not been principal debtors.
10. No assurance or security or payment which may be avoided on the
bankruptcy or liquidation (as the case may be) or otherwise of the
Customer or ourselves and no release settlement or discharge which
may have been given or made on the faith of any such assurance
security or payment shall prejudice your right to recover from us
monies to the full extent hereof as if such assurance security
payment release settlement or discharge (as the case may be) had
never been granted given or made.
11. Should the Customer be wound up you may (notwithstanding payment to
you by us or any other person of any monies hereby guaranteed) rank
as creditors and prove in the bankruptcy or winding up of the
Customer for the whole amount outstanding against the Customer or
such ultimate balance and you may and shall be entitled to receive
and retain the whole of the dividends to the exclusion of all our
rights as guarantors and no money or dividend so received by you
shall be treated as received in respect of this guarantee or
otherwise in relation to us but the full amount hereby guaranteed
shall be payable by us until you shall have received from all
sources one hundred sen in the Ringgit on the ultimate balance
outstanding against the Customer.
Page 4
Page 74 of 84
<PAGE>
12. Until all monies due or owing by the Customer to you shall have
been fully paid and all its liabilities to you shall have been
satisfied and discharged we shall not:
(a) in respect of any monies which may have been paid by us seek
to enforce repayment or to exercise any other rights or legal
remedies of whatsoever kind which may accrue howsoever to us
in respect of the amount so paid against the Customer;
(b) prove in competition with you for any monies owing by the
Customer to us on any account whatsoever and/or in respect of
any monies due or owing from the Customer to you but will give
to you the benefit of any proof which we may be able to make
in the bankruptcy / liquidation of the Customer or in any
arrangement or composition with creditors;
(c) take any steps to enforce any rights against the Customer or
receive or claim or have the benefit of any payment or
distribution from or on account of the Customer or exercise
any right of set-off or counterclaim against the Customer
provided always that on making a claim against us pursuant
hereto you may at your sole discretion instruct us to take any
steps referred to in this subparagraph and any monies or other
benefit thereby obtained by us will thereafter be held by us
in trust for you.
13. (1) This guarantee shall not be determined or in any way be
prejudiced or affected by:-
(a) any change in the constitution of the Customer whether
by way of amalgamation consolidation reconstruction or
otherwise but shall enure and be available for all
intents and purposes as if the new or amalgamated or
resulting company or concern had been the one whose
obligations were originally guaranteed;
(b) any amalgamation reconstruction or sale of all or any
part of your undertaking and assets to another company
whether the company with which you amalgamate or the
company to which you transfer all or any of your assets
either on a reconstruction or sale as aforesaid shall
or shall not differ in its objects character and
constitution from you it being our intention that
this guarantee shall remain valid and effectual for
all purposes and in all respects in favour(sic) of
against and with reference to any such company
and that the benefit of this guarantee and all
rights conferred upon you hereby may be assigned to
and enforced by any such company and proceeded
on in the same manner to all intents and purposes as
if such company or companies person or persons had been
named herein instead.
Page 5
Page 75 of 84
<PAGE>
(2) No change whatsoever in our constitution shall affect our
liability or the liability of our successors or assigns under
this guarantee or shall affect the validity of or shall
discharge this guarantee and this guarantee shall be binding
on us notwithstanding any changes that shall subsequently take
place in our constitution whether by amalgamation
reconstruction or otherwise and in the event of any such
amalgamation reconstruction or change taking place as
aforesaid this guarantee shall operate as though it had been
originally given by such new or amalgamated or reconstructed
company or concern as if the liability thereto or thereunder
had commenced at the date of this guarantee.
14. This guarantee shall be a continuing security binding on us and our
successors and assigns. This guarantee shall not be determined or
affected in any way by our liquidation but shall in all respects and
for all purposes be binding and operative subject to Paragraph 15
hereof.
15. In the event of this guarantee being called in it shall be lawful
for you to continue the account or accounts with the Customer
notwithstanding such determination or calling in and our liability
for the amount due from the Customer either as principal or as
surety and either solely or jointly with any other person or persons
(in partnership or otherwise) at the date when the guarantee is so
determined or called in shall remain and be continuing notwithstanding
any subsequent payment into or out of the account or accounts by or on
behalf of the Customer. Upon such calling in as aforesaid it shall
be lawful for you to open a fresh account or accounts by or on
behalf of the Customer and no monies paid from time to time into any
such account or accounts or on behalf of the Customer and
subsequently drawn out by the Customer shall on a settlement of any
claim under this guarantee be appropriated towards or have the
effect of payment of any part of the monies due or owing from the
Customer at the date when the guarantee is determined. If a fresh
account is not opened by you it shall nevertheless be deemed to have
been so effected at the time of calling in.
16. You are at liberty to but are not bound to resort for your own
benefit to any other means of payment at any time and in any order
as you think fit without thereby diminishing our liability
hereunder and you may enforce this guarantee either for the payment
of the ultimate balance after resorting to other means of payment
or for the balance due at any time notwithstanding that other means
of payment have not been resorted to and in the latter case
without entitling us to any benefit from such other means of
payment as long as any monies shall remain due or owing from the
Customer to you and in addition you shall be at liberty to require
payment by us of any monies due or owing to you without taking
proceedings first against the customer to enforce such payment by
the Customer.
Page 6
Page 76 of 84
<PAGE>
17. As a separate and independent stipulation we hereby agree that in
the event the monies hereby guaranteed may not be recoverable on the
footing of a guarantee, whether by reason of any legal limitation,
disability or incapacity on the part of the Customer or any other
fact or circumstances, and whether known to you or us or not, the
monies shall nevertheless be recoverable from us as sole or
principal debtor and shall be paid by us on demand.
18. All payment by us hereunder shall be made without set-off or
counterclaim and without any deduction for any taxes, duties,
charges, fees, deductions, withholdings or restrictions whatsoever.
If we are obliged by law to make any such deduction, the amount due
from us shall be increased to the extent necessary to ensure that
after the making of such deduction you shall receive a net amount
equal to the amount you would have received had no such deduction
been required to be made.
19. A certificate signed by your officer as to the monies for the time
being due or owing to you from the Customer as aforesaid or as to
the liabilities of the Customer or any account settled or stated by
or between you and the Customer or admitted by the Customer or on
its behalf shall be accepted by us as conclusive evidence that the
amount appearing thereon is due or owing to you from the Customer.
20. Any notice or demand in relation to the matters aforesaid may be
effectually given or made to us by notice in writing under the hand
of any of your officers for the time being and either sent by
airmail registered post to us at our registered office as
abovementioned or our last known place of business or by telex or
facsimile transmission. A notice or demand so sent by airmail
registered post shall be deemed to have been served fourteen(14)
business days after posting or if sent by telex or facsimile
transmission and received by the other party shall be deemed to have
been served at the moment of despatch Provided Always that in the
case of any notice or demand sent by telex or facsimile transmission
if the moment of despatch does not occur on a day which is a
business day at the place where such notice or demand is received,
such notice or demand shall be deemed to have been given on the first
following business day at such place of receipt.
21. For the consideration aforesaid and as a separate and independent
stipulation in addition to and not in derogation of the guarantee
herein given we hereby irrevocably and unconditionally undertake to
indemnify you and keep you indemnified fully and completely against
all claims demands actions proceedings losses damages costs and
expenses including legal costs as between solicitor and client and
all other liabilities of whatsoever nature or description which may
be made taken incurred or suffered by you in connection with or in
any manner arising out of the Facilities.
Page 7
Page 77 of 84
<PAGE>
22. Our payment obligation hereunder shall be in the currency in which
the Facilities are accorded or granted by you to the Customer
('stipulated') and shall not be discharged by any amount paid in a
currency other than the stipulated currency whether pursuant to a
judgement or otherwise to the extent that the amount so paid on
prompt conversion to the stipulated currency under normal banking
procedures does not yield the amount in the stipulated currency.
If the amount due or owing under the judgement or otherwise upon
conversion does not yield such amount in the stipulated currency
you shall have recourse against us for the stipulated currency
deficiency provided that you may elect to accept payment in any
other currency without actual conversion into the stipulated
currency.
23. This guarantee shall be governed by and construed in all respects
in accordance with the laws of Malaysia but in enforcing this
guarantee you are at liberty to initiate and take action
or proceedings or otherwise against us in Malaysia or elsewhere
as you may deem fit and we hereby agree that where any actions or
proceedings are initiated and taken in Malaysia we shall submit to
the jurisdiction of the courts of Malaysia in all matters connected
with our obligations and liabilities under or arising out of this
guarantee. Any writ, judgment or other notice of legal process
shall be sufficiently served on us if delivered to our agent for
service of process in Malaysia as provided herein or at our
registered office.
Our agent for service of process in Malaysia shall be the CUSTOMER
and we undertake not to revoke the authority of the agent and if for
any reason any such agent no longer serves as our agent to receive
service of process we shall promptly appoint another agent and
advise you in writing thereof.
24. Before enforcing this guarantee you shall not be obliged to take any
action or obtain any judgment nor make or file any claim in the
bankruptcy dissolution or winding up of the Customer nor make any
demand of the Customer, nor enforce any other security held by you
for the Facilities. You need not advise us of any your dealings
with the Customer or of any default by the Customer of which you
may have knowledge.
25. All notices or communications under or in connection with this
Guarantee shall be in English, or, if any other language,
accompanied by a translation into English. In the Event
of any other language, the English text shall prevail.
26. In this guarantee unless the context otherwise requires:-
(a) words importing the singular number include the plural number
and vice versa;
Page 8
Page 78 of 84
<PAGE>
(b) words importing the masculine gender include the feminine
and neuter genders;
(c) the expression "you" includes your successors and assigns;
(d) the expression "we" and "us" include our successors and
assigns;
(e) references to a person or persons shall be deemed to include
corporations.
Date this 26 day of February, 1997
SIGNED BY )
)
)
the authorised(sic) )
signatory / attorney of )
APPLIED MAGNETICS CORPORATION )
(the Guarantor) )
in the presence of )
Bernice Williams )
)
)
)
By /s/ Craig D. Crisman By /s/ Peter T. Altavilla
---------------------------- ----------------------------
Craig D. Crisman Peter T. Altavilla
ITS Chairman and Chief ITS Controller
Executive Officer
Page 9
Page 79 of 84
<PAGE>
EXHIBIT 10(g)
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
THIS AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT is
made this 7 day of February 1997, by and between Applied Magnetics
Corporation, a Delaware corporation (the "Company"), a corporation having its
principal office at 75 Robin Hill Road, Goleta, California 93117, and Craig D.
Crisman ("Executive").
RECITALS
A. The Company and Executive entered into that certain Employment
Agreement (the "Employment Agreement"), dated August 1, 1995, regarding the
employment of Executive by the Company.
B. The Company and Executive desire to amend the Employment
Agreement in certain respects.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises and covenants herein contained, the parties hereto agree as
follows:
1. Section 2 of the Employment Agreement shall be amended to
read as follows:
"2. Position and Responsibilities. During the
period of his employment hereunder, Executive agrees to
serve the Company and the Company shall employ
Executive as Chief Executive Officer of the Company and
Chairman of the Board."
2. Section 4(a)(i) shall be amended to delete "Three Hundred
Seventy-Five Thousand Dollars ($375,000)" and substitute in place thereof "Four
Hundred Ten Thousand Dollars ($410,000)."
3. The third sentence of Section 7(a) shall be amended in its
entirety to state as follows:
"If terminated pursuant to this Section 7(a), the then current
Base Salary and the incentive compensation to which Executive would
be entitled to receive under the then current incentive compensation
plan, shall be paid to Executive on a prorated basis to the date of
termination."
-1-
Page 80 of 84
<PAGE>
4. Section 7(b) shall be amended in its entirety to read as
follows:
"(b) Termination Without Cause. The Company may terminate the
employment of Executive without cause at any time upon written
notice to Executive; provided, however, that the Company shall be
obligated to pay Executive, as severance, an amount equal to the
greatest Base Salary payable during the Term for a period of one
year following the date of termination and an amount equal to the
incentive compensation earned by Executive under the Company's
incentive compensation plan during the twelve(12) month period
immediately preceding the date of termination. The Committee shall
also accelerate the exercise dates of all stock options then held by
the Executive to the date of termination. Such options shall remain
exercisable for 180 days following the termination date."
5. Section 8(b) shall be amended in its entirety to read as
follows:
"(b) Termination Without Good Reason. If Executive terminates
his employment hereunder without good reason, his then current Base
Salary and the incentive compensation to which Executive would be
entitled to receive under the then current incentive compensation
plan, shall be paid to Executive on a prorated basis to the date of
termination."
6. Section 9 shall be deleted in its entirety.
7. The third sentence of Section 14 shall be amended in its
entirety to read as follows:
"No agreements or representations, oral or otherwise, express
or implied, except for that certain Agreement dated November 8,
1996 by and between the Company and Executive (the "Income Security
Agreement"), with respect to the subject matter hereof, have been
made by either party which are not set forth expressly in this
Agreement."
8. A new Section 18 shall be added to the Agreement, which shall
read as follows:
-2-
Page 81 of 84
<PAGE>
"18. Income Security Agreement. The Income Security Agreement
is intended to provide Executive with income security in the event
his employment is terminated under certain conditions following a
change in control (as that term is defined in the Income Security
Agreement) of the Company. To the extent that following a change in
control of the Company, there shall exist any inconsistency between
this Agreement and the Income Security Agreement, the provisions of
the Income Security Agreement shall prevail."
9. Any and all other terms and conditions contained in the
Employment Agreement shall remain in full force and effect and are hereby
reaffirmed.
IN WITNESS WHEREOF, the Company and Executive have executed, or
caused their duly authorized representatives to execute this Amendment as of
the date first above written.
COMPANY:
APPLIED MAGNETICS CORPORATION
By: /s/ Peter T. Altavilla
-------------------------------
Peter T. Altavilla
Controller and Secretary
EXECUTIVE:
/s/ Craig D. Crisman
------------------------------------
Craig D. Crisman
-3-
Page 82 of 84
<PAGE>
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(in thousands )
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
June 28, June 29, June 28, June 29,
-------------------------- --------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary Earnings Per Share:
Net income $ 21,028 $ 2,350 $ 83,991 $ 20,074
======== ========= ======== =========
Weighted average common shares outstanding 23,681 22,970 23,489 22,832
Dilutive effect of stock options 1,042 1,069 1,260 1,070
--------- --------- ---------- ---------
Weighted average number of common shares
outstanding 24,723 24,039 24,749 23,902
======== ========= ========== =========
Primary earnings per common share $ 0.85 $ 0.10 $ 3.39 0.84
======== ========= ========== =========
Fully Diluted Earnings Per Share:
Net income $ 21,028 $ 2,350 $ 83,991 $ 20,074
Interest expense related to convertible
subordinated debentures, net of tax effect 2,035 2,033 6,105 2,229
--------- --------- --------- ---------
Net income as adjusted $ 23,063 4,383 90,096 22,303
========= ========= ========= =========
Weighted average common shares
outstanding 23,681 22,970 23,489 22,832
Dilutive effect of stock options 1,040 1,062 1,309 1,101
Assuming conversion of convertible
subordinated debentures 6,183 6,183 6,183 2,378
---------- -------- --------- ---------
Weighted average number of common
shares outstanding as adjusted 30,904 30,215 30,981 26,311
========== ======== ========= ========
Fully diluted earnings per common
share: $ 0.75 $ 0.15 2.91 0.85
========== ========= ========= =========
</TABLE>
For the three months and nine months ended June 29, 1996, the Company
reflected primary earnings per share on the Condensed Consolidated
Statement of Operations since the conversion of the convertible
subordinated debentures to common stock, after giving effect to the
elimination of the related interest, net of income tax, had an
anti-dilutive effect on fully diluted earning per share.
Page 83 of 84
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet as of June 28, 1997 and the Consolidated Statement
of Operations for the nine months ended as of June 28, 1997 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-27-1997
<PERIOD-END> JUN-28-1997
<CASH> 168,661
<SECURITIES> 0
<RECEIVABLES> 50,743
<ALLOWANCES> 0
<INVENTORY> 52,233
<CURRENT-ASSETS> 283,187
<PP&E> 344,023
<DEPRECIATION> (172,877)
<TOTAL-ASSETS> 464,180
<CURRENT-LIABILITIES> 123,180
<BONDS> 0
0
0
<COMMON> 2,387
<OTHER-SE> 225,241
<TOTAL-LIABILITY-AND-EQUITY> 464,180
<SALES> 372,011
<TOTAL-REVENUES> 372,011
<CGS> 0
<TOTAL-COSTS> 236,981
<OTHER-EXPENSES> 46,860
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (9,127)
<INCOME-PRETAX> 85,587
<INCOME-TAX> 1,596
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 83,991
<EPS-PRIMARY> 3.39
<EPS-DILUTED> 2.91
</TABLE>
