As filed with the Securities and Exchange Commission on March 8, 1999
Registration No. 333- _________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
APPLIED MAGNETICS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 95-1950506
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
-------------------------
75 Robin Hill Road
Goleta, California 93117
(805) 683-5353
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
-------------------------
CRAIG D. CRISMAN
Chief Executive Officer
Applied Magnetics Corporation
75 Robin Hill Road
Goleta, California 93117
(805) 683-5353
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
With a copy to:
JAMES J. SLABY, JR., ESQ.
Sheppard, Mullin, Richter & Hampton LLP
333 South Hope Street, 48th Floor
Los Angeles, California 90071
(213) 620-1780
----------------------------
Page 1 of 42
<PAGE>
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If the any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
Proposed
Title of maximum Proposed
each class of offering maximum Amount
securities Amount price aggregate of
to be to be per offering registration
registered registered share (1) price fee
- ---------- ---------- --------- ----- ---
Common Stock,
$.10 par value 18,002,367 $3.875 (1) $69,759,172 $13,951.84
- -----------
(1) Estimated solely for purposes of determining the registration fee
under Rule 457(c). The price indicated is the closing price on the New York
Stock Exchange on March 1, 1999.
- -------------------------------------------------------------------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission (the
"Commission"), acting pursuant to said Section 8(a), may determine.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE, AND WE
MAY CHANGE IT. OUR STOCKHOLDERS MAY NOT SELL THESE SHARES UNTIL
THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL
THESE SHARES. IT IS NOT SOLICITING AN OFFER TO BUY THESE SHARES
IN ANY STATE WHERE THEY DO NOT PERMIT THE OFFER OR SALE.
Page 2 of 42
<PAGE>
Subject to Completion, Dated March 8, 1999 Prospectus
APPLIED MAGNETICS CORPORATION
18,002,367 Shares Common Stock
The 18,002,367 shares of Common Stock of Applied Magnetics
Corporation which may be offered hereby shall be sold by certain
stockholders named under the heading "Selling Stockholders". We
will not receive any of the proceeds of any sales by the selling
stockholders. The shares may be offered or sold by or for the
account of the selling stockholders from time to time or at one
time on the New York Stock Exchange, or otherwise, at prices and on
terms to be determined at the time of the sale, directly or through
brokers or dealers, who may receive compensation in the form of
discounts, commissions or concessions.
The Common Stock is listed on the New York Stock Exchange under the
symbol "APM." The closing price of the Common Stock on
___________, 1999 was $____ per share.
Investing in the Common Stock involves a high degree of risk. See
"Risk Factors" beginning on page 9 for a discussion of certain
factors you should consider before buying shares of the Common
Stock.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved these securities,
or determined if this Prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
---------------------------
The date of this prospectus is ________, 1999
Page 3 of 42
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy
statements and other information with the Securities and Exchange
Commission. You may read and copy any document that we file at
the SEC's public reference room at Judiciary Plaza, 450 Fifth
Street, N.W. Washington, D.C. 20549 and at the following regional
offices of the SEC: Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center,
Suite 1300, New York, New York 10048.
Please call the SEC at 1-800-SEC-0330 for further
information on the public reference room. The SEC maintains an
Internet site at http://www.sec.gov that contains reports, proxy
and information statements and other information regarding
issuers (including us ) that file documents with the SEC
electronically.
The SEC allows us to "incorporate by reference" the
information we file with them, which means that we can disclose
important information to you by referring you to those documents.
The information incorporated by reference is considered to be
part of this prospectus, and later information that we file with
the SEC will automatically update and replace this information.
We incorporate by reference the documents listed below and any
future filings made with the SEC under Sections 13(a), 13(c), 14,
or 15(d) of the Securities Exchange Act of 1934 until the selling
stockholders sell all of the Common Stock.
o Annual Report on Form 10-K for the fiscal year ended October 3, 1998;
o Quarterly Report on Form 10-Q for the fiscal quarter ended January 2,
1999; and
o Current Reports on Form 8-K dated October 28, November 24, 1998
February 12, 1999 and Current Report on Form 8-K/A dated March 5, 1999.
This prospectus is part of a registration statement we filed with the SEC.
You may request a copy of these filings, at no cost, by
writing or telephoning us at the following address: Applied
Magnetics Corporations, 75 Robin Hill Road, Goleta, California
93117, Attention: Peter T. Altavilla, Corporate Secretary.
Telephone: (805) 683-5353.
You should rely only on the information incorporated by
reference or provided in this prospectus or any supplement. We
have not authorized anyone else to provide you with different
information. Neither we nor any of the selling stockholders is
making an offer of the Common Stock in any state where the offer
is not permitted. You should not assume that the information in
this prospectus or any supplement is accurate as of any date
other than the date on the front of this prospectus.
Page 4 of 42
<PAGE>
PROSPECTUS SUMMARY
YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE
DETAILED INFORMATION ABOUT OUR COMPANY AND OUR CONSOLIDATED
FINANCIAL STATEMENTS AND THE NOTES TO THOSE STATEMENTS
INCORPORATED BY REFERENCE IN THIS PROSPECTUS.
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS BASED
ON OUR CURRENT EXPECTATIONS, ASSUMPTIONS, ESTIMATES AND
PROJECTIONS ABOUT APPLIED MAGNETICS CORPORATION AND OUR INDUSTRY.
THESE FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES.
APPLIED MAGNETICS' ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT
OF CERTAIN FACTORS AS MORE FULLY DESCRIBED IN THE "RISK FACTORS"
SECTION AND ELSEWHERE IN THIS PROSPECTUS.
The Company
We are an independent manufacturer of magnetic recording
heads and of head stack assemblies for disk drives. We
manufacture advanced inductive thin film (thin film) disk head
products and are in the process of qualifying our 4.3 gigabyte
per 3.5 inch disk magnetoresistive (MR) disk head products, in
each case, primarily to supply to manufacturers of 3.5 inch hard
disk drives. Our products compete on the basis of price,
performance, quality and availability. We have also begun
development of giant magnetoresistive disk head products (GMR),
also intended for computer disk drive applications.
Page 5 of 42
<PAGE>
Hard disk drives are the predominant high capacity data
storage device used in all classes of computers. Hard disk
drives typically include one to ten disks onto and from which
data is recorded and retrieved by two to 20 recording heads.
These heads are positioned by an actuator assembly to fly within
a microinch, or less, on one or both sides of each disk to read
and write to the disk. The head (or "slider") is attached to a
suspension assembly comprising a head gimbal assembly (HGA).
Multiple HGAs, assembled together with other components, comprise
a head stack assembly (HSA). We supply both HGAs and HSAs to
disk drive manufacturers.
Disk drive manufacturers are constantly developing higher
capacity and higher performance products. Independent head
suppliers, including us, work with the drive manufacturers to
develop customized HGAs and HSAs for each new drive program.
Head suppliers seek to have their products "designed-in" to
specifications for a particular drive program, thus becoming a
"primary supplier." Achieving primary supplier status usually
offers a competitive advantage, manifested by higher internal
yields and more favorable pricing, compared to entering the
program later in its product life cycle.
Multimedia personal computers and high end computer
applications such as network servers (Internet and Intranet),
workstations and mainframes are driving the continued demand for
greater data storage capacity and performance. In addition, the
market growth of notebook and sub-notebook computers has
increased demand for smaller form factor disk drives. In fiscal
1998, the industry accelerated the shift from thin film to MR
technology due to requirements for greater storage capacity and
performance. MR disk heads, which generally permit greater
storage capacities per disk and provide higher data transfer
rates than thin film disk heads, now represent the fastest
growing segment of the recording head industry.
We have focused our long-range growth strategy on MR and GMR
disk head technologies and we believe that GMR disk heads, which
ultimately afford greater recording densities and other
performance advantages as compared to either thin film or MR
heads, represent the next important magnetic recording head
technology.
Page 6 of 42
<PAGE>
The disk drive industry entered into a general slowdown late
in the first quarter of fiscal 1998 and simultaneously
accelerated the transition from disk drives using advanced
inductive thin film recording heads to MR recording heads. Our
largest customer at the time, Western Digital Corporation,
sharply reduced its production schedules as a reaction to the
hard disk drive oversupply in the industry's distribution
channel. As a result, we experienced significant cancellations,
production reschedules and price reductions that impacted
revenue, operating and financial results throughout fiscal 1998.
We were late to market with our 2.1, 2.8, and 3.4 gigabyte per
3.5 inch disk MR products. As a result, MR head shipments were
not a significant source of revenue in fiscal 1998. We expect to
ship inductive thin film products with 2.1 gigabyte per 3.5 inch
disk capacity through the second quarter of fiscal 1999, after
which MR and GMR disk heads are expected to be the primary
revenue source. During fiscal 1998, market conditions in the
disk drive industry which we serve were characterized by
continued short product life cycles and intense competition. The
industry product life cycle is currently running approximately 9
to 12 months.
On April 30, 1998, Western Digital and IBM entered into a
letter of intent. IBM plans to supply Western Digital with GMR
heads and other components and technology for desktop hard
drives. Western Digital expects to introduce hard drives based
on IBM products and designs in the first half of calendar year
1999. However, the agreement does not preclude other head
suppliers, such as Applied, from competing on future non-IBM
desktop programs at Western Digital. We cannot assure you,
however, that we will be able to successfully bid for and receive
purchase orders for these programs in the future.
In response to reductions in production schedules, we
reduced expenditures, including capital spending, in order to
realign costs to the decreased level of business. In addition,
we shut down our manufacturing facility in Ireland in order to
consolidate foreign manufacturing operations. A pre-tax
restructuring charge of $8.4 million was recorded during the
first quarter of fiscal 1998, primarily related to the shutdown
of the Ireland facility. Included in the charge was the write-
down of certain tooling and equipment. We also decreased
worldwide headcount from approximately 8,500 to 5,200 employees
by the end of fiscal 1998.
Page 7 of 42
<PAGE>
Fiscal 1999 will be another year of significant technology
transition, as we continue our product evolution from
predominantly inductive thin film to MR and GMR technology. We
have made significant technology investments in fiscal 1998 and
strengthened our MR development infrastructure by reorganizing
our wafer development group, adding new management and
engineering personnel with significant MR experience, expanding
our MR and GMR wafer fabrication facilities. We also converted
our inductive thin film wafer fabrication facility and equipment
to have the capability of manufacturing the inductive thin film
write element for MR and GMR heads. A successful transition will,
however, require our engineering and production resources to meet
their targeted design and process development plans, achieve
timely qualification on customer MR and GMR drive programs and
execute planned production ramps of these products. If we fail
to achieve program qualification in a timely manner, we could
suffer serious harm to our financial results.
Material Developments
Effective February 11, 1999, through an Agreement and Plan
of Merger, dated as of November 24, 1998 and amended and restated
as of January 19, 1999, our wholly owned subsidiary combined with
Das Devices, Inc., a Delaware corporation, in a merger
transaction in which DAS became our wholly owned subsidiary. In
connection with the merger, we issued or reserved for issuance to
the holders of the Common Stock and Preferred Stock of DAS,
option holders, warrant holders, employees and consultants, an
aggregate of 13,051,872 shares of our Common Stock, constituting
approximately 33% of our outstanding Common Stock after giving
effect to the merger, but excluding the shares of Common Stock to
be sold to certain investors following the merger. Directors and
5% stockholders of DAS are also subject to a provision in the
merger agreement which restricts sales of our securities by DAS
affiliates until the earlier of (i) 60 days after the merger or
(ii) 48 hours after one month of combined financial results have
been published. The merger was approved by the DAS stockholders
on February 11, 1999. The number of shares of Common Stock
issued in the merger was determined through negotiations between
our management and DAS management and was approved by each
company's Board of Directors.
Under the terms of a registration rights agreement with DAS,
we have agreed to use commercially reasonable efforts to register
Page 8 of 42
<PAGE>
the shares for resale under the Securities Act of 1933 within 60
days following the effective time of the merger. We agreed to
indemnify each holder of registered shares for any loss caused by
a material misstatement or omission in the registration
statement, to the extent not based upon information provided by
such holder. Each holder of shares included in such registration
statement has agreed to indemnify us, any underwriter and each
other such holder for any loss caused by a material misstatement
or omission made in the registration statement in reliance on
information provided to us by such holder.
DAS is primarily engaged in research and development of high technology
advancements in magnetic recording heads for hard disk drives for computer
applications and production methods for these heads. DAS also has limited
manufacturing capability and has begun to manufacture and ship disk drive heads
in limited quantities. DAS is focused on developing products for 1999 and future
periods that are advancements over presently available disk drive head products.
The merger combines DAS' proprietary and patented state-of-the-art wafer
technology with our high volume manufacturing capability. The merger also
increases the ability of the combined company to produce GMR heads for the
marketplace at high areal densities. The merger should also enable the combined
company to compete more effectively against larger competitors by providing it
with a greater ability to develop new products and to accelerate its time to
market performance.
On November 24, 1998, we entered into a Securities Purchase
Agreement, as amended and restated as of January 19, 1999 (the
"Securities Purchase Agreement"), with Sierra Ventures VI,
Watershed Partners, L.P., Watershed Cayman, L.L.C., Haussman
Holdings, East River Ventures, L.L.C., JAFCO America Ventures,
Inc. and The Chase Manhattan Bank as Trustee for First Plaza
Group Trust. On February 11, 1999, pursuant to the Securities
Purchase Agreement, we sold to the investors 4,950,495 shares of
Common Stock in consideration of the payment to us of
$18,750,000. Under the terms of a registration rights agreement
with the investors, we have agreed to use commercially reasonable
efforts to register the shares for resale under the Securities
Act of 1933, within 60 days of the date of sale. The
registration rights agreement contains indemnities similar to
those in our registration rights agreement with DAS. The
registration rights agreement also contains restrictions on the
resale of our securities by the investors similar to those
contained in the merger agreement.
Our principal executive offices are located at 75 Robin Hill
Road, Goleta, California 93117, and our telephone number at that
address is (805) 683-5353.
Page 9 of 42
<PAGE>
The Offering
Shares Offered Hereby 18,002,367 shares of Common
Stock, $.10 par value.
Plan of Distribution All of the shares of Common
Stock are being offered by the
selling stockholders. The
selling stockholders may offer
from time to time some or all
of the shares of Common Stock
held by them directly or
through brokers or, dealers.
See "Plan of Distribution".
Shares Outstanding 42,144,043 shares of Common
Stock as of February 25, 1999.
Proceeds We will not receive any of the
proceeds from the sale of the
shares by the selling
stockholders. See "Use of
Proceeds."
NYSE Trading Symbol APM
Risk Factors You should read carefully and
consider the matters discussed
under the heading "Risk
Factors" beginning on Page 9.
Page 10 of 42
<PAGE>
RISK FACTORS
You should carefully consider the risks described below
before investing in the Common Stock. The risks described below
are not the only risks facing us. Additional risks and
uncertainties that we do not presently know or that we do not
presently believe are important to an investor may also harm us.
If any of the events or conditions described in the
following risks actually occur, our business, financial condition
and results of operations could be seriously harmed. In that
case, you may lose all or part of your investment.
This prospectus contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ
materially as a result of certain factors, including the risks
faced by us below and in the documents incorporated by reference
by us herein.
We May Not Be Able to Respond to Technology Transitions
The magnetic recording head industry involves rapidly
changing technology, short product life cycles and intense price
competition. We believe that the life cycle of industry products
is currently running as short as nine to 12 months. Demand for
greater data storage capacity requires disk drive and disk head
manufacturers to continue to build greater performance into their
respective products. We cannot assure you that our products will
achieve the performance necessary to remain competitive, or that
we will qualify as a supplier for disk drive manufacturers'
programs.
During fiscal 1998, Applied experienced a rapid technology
transition as the disk drive industry moved from inductive thin
film to magnetoresistive (MR) disk head technology. As a result
of our inability to qualify our MR products on customer programs
during fiscal 1998, we faced reduced customer demand for our
products and significant reductions in revenues and experienced
substantial losses. We are still working to achieve MR program
qualifications and satisfactory production yields. Similarly,
DAS abandoned its inductive thin film development program when
the market moved to MR technology more quickly than DAS
management expected.
Page 11 of 42
<PAGE>
We cannot assure you that we will qualify for MR and giant
magnetoresistive (GMR) disk head manufacturing programs or that
we will not experience manufacturing and product quality problems
in the future. Our future success depends on our ability to
develop and qualify new products on a timely basis and to
manufacture them in sufficient quantities to compete effectively
on the basis of price and performance in customer's disk drives.
We also cannot assure you that changes in technology will not
result in a move away from MR and GMR technology to another
technology.
DAS Technology Is Unproven and May Not Meet Expectations
DAS' GMR technology and production advancements have been
recently developed and are unproven. The DAS technology is
currently being tested. The DAS GMR technology, however, may not
meet expectations as to performance, durability or reliability or
may otherwise fail to produce intended improvements over existing
technologies. Although DAS technology has achieved favorable
performance in testing, we cannot assure you that we will achieve
these results in large-scale production. If favorable results
are not achieved in large scale production, or the DAS technology
fails to obtain expected results, we may be required to spend
additional research and development funds to resolve problems or
develop alternative solutions. In that event, we may lose the
opportunity to bid for and receive additional customer contracts,
and that may seriously harm our business, financial condition and
results of operations.
We Are Dependent on Key Personnel
We depend on the continuing services of key technical and
management personnel, including Craig D. Crisman and John Foster.
The loss of services of any of the key members of our management
or technical teams or our failure to attract other qualified
personnel could harm our business, financial condition and
results of operations. Other than Mr. Crisman, none of our key
personnel is subject to an employment agreement. In addition,
the competition to attract, retain and motivate qualified
technical, sales and operations personnel in the disk drive
industry is intense. We have at times experienced, and continue
to experience, difficulty recruiting qualified personnel.
Page 12 of 42
<PAGE>
Amortization of Goodwill and Merger Expenses Will Delay
Profitability
Amortization will reduce our profitability. The merger with
DAS is being accounted for as a purchase, with the purchase price
allocated to the acquired assets and liabilities of DAS. An in-
process research and development charge, estimated to be
approximately $28.7 million, will be recorded in the second
quarter of fiscal 1999, the quarter during which the merger was
completed. Intangible assets are comprised of developed
technology and know-how of approximately $30.1 million and
goodwill of approximately $12.2 million. The developed
technology and know-how will be amortized as an expense over
three years, and the goodwill will be amortized as an expense
over seven years.
We also anticipate that costs associated with the merger
will negatively affect results of operations in the second
quarter of fiscal 1999. We estimate that the combined company
will incur approximately $3.5 million of expenses, primarily
relating to costs associated with combining the operations of the
two companies and the fees of financial advisors, attorneys and
accountants. Although we do not believe that the costs will
significantly exceed this amount, we cannot assure you that this
estimate is correct or that unanticipated expenses (including
research and development costs) will not substantially increase
the costs of the merger.
Integrating Business Operations May Prove Difficult or Divert
Management Attention From Our Business
The merger involves the integration of the operations and
systems of the two companies and the realization of potential
operating synergies may prove difficult. Management's attention
may be diverted from other business concerns to address
integration issues. These and other difficulties, including
challenges related to assimilating and retaining personnel,
associated with the merger may lead to potential short-term harm
to operating results.
Our Quarterly and Annual Operating Results May Fluctuate Due to
Product Cycles
Our operating results have fluctuated and may continue to
fluctuate from quarter to quarter and year to year. For example,
Page 13 of 42
<PAGE>
we experienced substantial losses in fiscal 1998. Our sales are
generally made pursuant to individual purchase orders and
customer-specific materials are ordered on the basis of these
purchase orders. As customer programs reach the end of their
life cycle, we may have to write-down inventory and equipment.
We must qualify on future programs to sell our products. We
experienced cancellation, rescheduling and reduction of orders in
fiscal 1998. Cancellations, rescheduling and reductions of
orders result in inventory losses, under-utilization of
production capacity and write downs of tooling and equipment
which may seriously harm our business, financial condition and
results of operations. Our operating results have in the past
been and our operating results likely will in the future be
harmed during periods when production capacity is underutilized.
We Are Exposed to Cycles in the Disk Drive Industry
As a result of market growth in the computer industry, we
experienced significant customer demand for our advanced
inductive thin film products during fiscal 1997. By the end of
fiscal 1998, our customers had discontinued development of new
products based on inductive thin film disk head technology in
favor of MR and GMR disk heads.
The disk drive industry is very cyclical and historically
has experienced periods of oversupply and reduced production
levels, resulting in significantly reduced demand for disk heads,
as well as intensely competitive pricing. The effect of these
cycles on suppliers, including us, has been magnified by hard
disk drive manufacturers' practice of ordering recording heads in
excess of their needs during periods of rapid growth, which
increases the severity of the drop in the demand for recording
heads during periods of slower growth or contraction. An
oversupply of hard disk drives occurred in early 1998 and, as a
result, head suppliers, including us, experienced intense pricing
pressure on their inductive thin film and MR head products. A
continued decline in demand for hard disk drives, as experienced
by the industry during fiscal 1998, has seriously harmed our
business, financial condition and results of operations. A
continued decline in demand for older products and the failure to
bring new products to the market would seriously harm our future
business, financial condition and results of operations.
Page 14 of 42
<PAGE>
We Have Significant Capital Needs
The recording disk head industry involves significant
capital investment. Substantial expenditures are necessary for
research and development in order to obtain technological
improvements and develop new technologies such as MR and GMR disk
head products. We believe that, in order to achieve our
objectives, we will need significant additional resources over
the next several years for capital expenditures, working capital
and research and development. During fiscal 1999, we plan to
purchase or enter into lease financing for approximately $45
million of manufacturing equipment and facility improvements. We
believe that we will be able to fund future expenditures from a
combination of existing cash balances, sale of Common Stock, cash
flow from operations, equipment lease financing arrangements and
existing credit facilities. We may, however, need additional
sources of capital to meet our financing requirements. We cannot
assure you that such additional funds will be available to us or,
if available, upon terms and conditions acceptable to us. If we
are unable to obtain sufficient capital, we will need to curtail
our operating and capital expenditures, which could seriously
harm our future business, financial condition and results of
operations.
We Must Service Short-term Borrowings and Some of Our Loans are
Callable
At February 22, 1999, we had approximately $60.2 million of
short-term borrowings outstanding in variable interest rate
demand loans from banks in Malaysia, where we have substantial
manufacturing operations. The loans are callable on demand and
have no termination date. The loans are used for the purchase of
manufacturing equipment and for working capital purposes. While
we have no reason to believe the loans will be called, we cannot
assure you that the banks will continue to make such loans
available. We have several significant lease obligations and
bank loans which are payable on a monthly basis. We cannot
assure you that we will continue to meet these obligations when
they come due. If we do not, the lenders could enforce
penalties, reclaim equipment or intellectual property, or
otherwise seriously harm our business, financial condition and
results of operations.
Page 15 of 42
<PAGE>
Our Revenues Come Primarily From a Few Customers
We have depended on two customers for most of our recent
sales. We cannot assure you that these customers will continue
to purchase from us or that we will be successful in obtaining
new customers.
The disk head industry is intensely competitive and largely
dependent on sales to a limited number of major disk drive
manufacturers. Western Digital accounted for 72% of our net
sales in fiscal 1998; Samsung Electronics accounted for 27% of
our net sales during fiscal 1998.
On April 30, 1998, Western Digital and IBM entered into a
letter of intent. IBM plans to supply Western Digital with GMR
heads and other components and technology for desktop hard
drives. Western Digital expects to introduce hard drives based
on IBM products and designs in the first half of calendar year
1999. However, the agreement does not preclude other head
suppliers, such as us, from competing on future non-IBM desktop
programs at Western Digital. We cannot assure you, however, that
we will be able to successfully bid for and receive purchase
orders for these programs in the future.
Our ability to obtain new customers depends on whether we
can:
o Achieve delivery of products that meet customer
specifications at competitive prices.
o Anticipate technological changes and meet development
requirements in a timely fashion.
o Develop products to meet individualized customer
requirements.
Our business, financial condition and results of operations
will be seriously harmed if:
o We are unable to attract new customers.
o If vertically integrated manufacturers do not continue
to purchase hard drive components from third parties
like us.
Page 16 of 42
<PAGE>
o Non-integrated disk drive manufacturers begin to
develop component manufacturing ability.
o Hard drive manufacturers enter into exclusive strategic
arrangements with component manufacturers.
We Face Intense Competition and May Not Be Able to Remain Competitive
We face intense competition for our hard drive components.
We cannot assure you that we will continue to develop technology
or sales and manufacturing capabilities to compete effectively
with our competitors.
We compete with other independent recording head suppliers,
as well as disk drive manufacturers that produce magnetic
recording heads used in their own products. Read-Rite
Corporation ("Read-Rite") has been the largest domestic
competitor among independent MR disk head manufacturers and has
had substantially greater sales of MR disk head products than us.
Currently, several large Japanese companies, some with
considerably more resources than us, compete in the independent
head market and have had considerable success in gaining market
share. Alps Electric Corporation, TDK Corporation (and its SAE
Magnetics subsidiary) and Yamaha Corporation continue to
aggressively develop and market recording heads.
Other independent recording head manufacturers that are
shipping, or intend to ship, to the original equipment
manufacturer (OEM) marketplace include Headway Technologies,
Inc., Silmag, Kaifa Technology, Inc. and Hitachi Metals Ltd.
Disk manufacturers such as Fujitsu, Hitachi, IBM, and
Seagate Technology produce some or all of their own inductive
thin film, MR, and GMR heads they use. All of these companies
have significantly greater financial, technical and marketing
resources than us. IBM also makes its recording head products
available in the OEM market to competing drive manufacturers.
Page 17 of 42
<PAGE>
We Depend on Foreign Operations Which are Subject to Additional
Risks
We conduct our slider production, assembly and test
operations in our facilities in Korea, Malaysia and China.
Further, independent contractors conduct manufacturing and
assembly operations for us in Malaysia and China. Our operations
in Korea have, from time to time in recent years, been affected
by labor disruptions 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, our foreign operations may be subject to:
o Delays in obtaining governmental permits and approvals.
o Currency exchange fluctuations.
o Currency and trade restrictions.
o Transportation problems.
We May Not Be Able to Protect our Intellectual Property or May Be
Accused of Infringing Others' Intellectual Property
We regard elements of our manufacturing processes, product
designs, and equipment as proprietary, and we seek to protect our
proprietary rights through a combination of employee and third
party non-disclosure agreements, internal procedures, trade
secret laws and patent protection. We have been issued a number
of United States and foreign patents and have additional patent
applications pending. We cannot assure you that patents will be
issued with respect to our applications or that any patents
issued to us will protect our competitive position. Also, we are
aware that certain licenses will need to be obtained in order to
manufacture and market GMR disk drive heads. There can be no
assurance that we can obtain such licenses on commercially
reasonable terms, if at all.
We believe that our success depends on the innovative skills
and technological competence of our employees and upon proper
protection of our intellectual properties. We have, from time to
time, been notified of claims that we may be infringing patents
owned by others. If it appears necessary or desirable, we may
seek licenses under patents that we may in the future have
allegedly infringed. Although patent holders commonly offer
licenses under these circumstances, licenses may not be offered
Page 18 of 42
<PAGE>
or the terms of any offered licenses may not be acceptable to us.
In addition, we will be required to obtain a license from third
parties to sell products based on MR and GMR technologies. If we
do not obtain the license on favorable terms or at all, we will
suffer immediate serious harm to our business, financial
condition and results of operations. The failure to obtain a key
patent license from a third party could cause us to incur
substantial liabilities and we may be required to suspend the
manufacture of the products using the patented invention.
Our Stock Price Has Varied Greatly and May Continue to Fluctuate
The market price of our Common Stock has been volatile, with
closing market prices ranging from $4.00 to $33.25 per share
during fiscal 1998 and from $3.38 to $9.19 per share during the
first five months of fiscal 1999. Our stock price may fluctuate
in the future due to a number of factors, including:
o Quarter-to-quarter operating results.
o Market assessments of proposed and completed strategic
transactions, including the merger.
o Disk drive and computer industry conditions.
o Awards of product qualifications and customer orders to
competitors.
o Changes in prices of our products or the products sold
by our competitors.
o New product or product development announcements by us
or our competitors.
o General market and economic conditions.
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 our Common Stock at any given time may be reduced
by factors independent of our operating results. The volatility
of our stock price may reduce our ability to raise additional
operating funds.
Page 19 of 42
<PAGE>
We May Not Be Ready for Year 2000 Computer Issues
The "Year 2000" issue exists because the date codes used in
some computer hardware and software systems use only two digits
and are therefore unable to distinguish between the years 1900
and 2000. Although we have partially completed an investigation
of our year 2000 exposure and we are in the process of
transferring DAS systems over to our systems, we cannot assure
you that we are ready for year 2000. Although we believe we will
not incur significant expenses relating to year 2000 readiness,
we are continuing to evaluate our information technology and
product infrastructures for year 2000 compliance. Any unresolved
or undetected year 2000 compliance problems could seriously harm
our business, financial condition and results of operations.
Our effort to address year 2000 issues began in 1997. In
fiscal 1998, we spent $7.5 million to complete the implementation
of a worldwide management information system that addresses the
year 2000 issue and also provides fully integrated manufacturing
and financial capabilities. In addressing year 2000 issues, we
have employed a five-step process consisting of:
o Conducting a company-wide inventory.
o Assessing year 2000 compliance.
o Remediating non-compliant hardware and software.
o Testing remediation hardware and software.
o Certifying year 2000 compliance.
Personnel from operations and from functional disciplines,
as well as information technology professionals, are involved in
the process. Inventory and assessment activities are estimated
to be approximately 75 percent complete. However, this estimate
is continuously updated as new information becomes available.
Overall remediation efforts are estimated to be approximately
50 percent complete. Communication with customers and suppliers
to determine the extent of their year 2000 efforts is an integral
part of the program. Costs for year 2000 efforts are not being
accumulated separately. Much of the cost is being accounted for
as part of normal operating budgets.
Page 20 of 42
<PAGE>
Shares Eligible for Future Sale May Adversely Affect Market Price
of Our Common Stock
If our stockholders sell substantial amounts of our Common
Stock (including shares issued upon the exercise of outstanding
options and warrants) in the public market, the market price of
our Common Stock could fall. These sales also might make it more
difficult to sell equity or equity-related securities in the
future at a time and at a price we deem appropriate. The Company
currently has outstanding: (i) 7% Convertible Subordinated
Debentures due 2006 which are convertible into 6,200,000 shares
of the Company's Common Stock and (ii) warrants to purchase
1,200,000 shares of the Company's Common Stock. In addition,
under various of the Company's stock option plans, the Company
has an additional 837,868 shares available for issuance pursuant
to stock options.
Page 21 of 42
<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the sale of Common
Stock offered by the selling stockholders.
SELLING STOCKHOLDERS
This prospectus may be used in connection with the sale of
certain shares of Common Stock by the selling stockholders. The
following table provides information as to the shares of Common
Stock owned beneficially by the selling stockholders as of
February 25, 1999, the number of shares to be sold by the selling
stockholders and the number of shares which will be owned by the
selling stockholders after the offering.
<TABLE>
<CAPTION>
NUMBER OF SHARES
SHARES TO BE BENEFICIALLY
NAME OF SELLING NUMBER OF BENEFICIALLY OFFERED FOR OWNED AFTER
STOCKHOLDER <F1> OWNED PRIOR TO OFFERING <F2> RESALE OFFERING <F2>
- --------------- -------------------------- ------ ------------
NUMBER PERCENT
<S> <C> <C> <C> <C>
Cassin, Brendan Joseph and 186,872 * 186,872 0
Isabel B., Trustees of the
Cassin Family Trust U/D/T
dated January 31, 1996
Donald L. Lucas Profit 65,815 * 65,815 0
Sharing Trust DTD 1-1-84
Lucas, Richard M. Cancer 52,619 * 52,619 0
Foundation
Donald L. Lucas, Trustee, 13,196 * 13,196 0
Donald L. Lucas and Lygia
S. Lucas Trust DTD 12/3/84
Viko Technology, Inc. 35,189 * 35,189 0
Patel, Pinakin R., Trustee 17,594 * 17,594 0
of the Pinakin R. and
Kalpana P. Patel Trust,
January 13, 1986
Kitrosser, Steven P. 4,486 * 4,486 0
Page 22 of 42
<PAGE>
Teal, Robert G. 5,383 * 5,383 0
Davis, Joseph 1,759 * 1,759 0
Frontline Partners, L.P. 175,948 * 175,948 0
Comdisco 33,824 * 33,824 0
Venture Lending & Leasing Inc. 12,725 * 12,725 0
Victory Ventures LLC 323,407 * 323,407 0
Jacobson, Crystalynn 29 * 29 0
Raza, S. Atiq 52,756 * 52,756 0
Equities Holdings LLC 26,199 * 26,199 0
Sierra Ventures VI 1,747,818 4.15% 1,747,818 0
SV Associates VI 167,233 * 167,233 0
AK Investments, Inc. 351,920 * 351,920 0
RWI Group II, L.P. 213,862 * 213,862 0
CitiCorp 958,279 2.27% 958,279 0
Das, Shyam C. 95 * 95 0
Northlea Partners, Ltd. 3,985 * 3,985 0
Levy, Leonard, Smith 1,112 * 1,112 0
Barney, Inc. Custodian FBO
Goel, Prabhaker as 17,596 * 17,596 0
Custodian for Prakrati Goel
Goel Foundation 17,596 * 17,596 0
Adkisson, James 4,399 * 4,399 0
Enguehard, Barre 8,798 * 8,798 0
East River Ventures, L.P. 950,930 2.26% 950,930 0
Chisholm Private Capital 485,294 1.15% 485,294 0
Partners, L.P.
Popular Profile Sdn. Bhd. 175,960 * 175,960 0
Carozza, Anna and Dary 1,935 * 1,935 0
Dewis, Joan 2,551 * 2,551 0
Vitiello, Salvatore J. 2,199 * 2,199 0
Page 23 of 42
<PAGE>
Lautman, William 17,595 * 17,595 0
Lindgren, Alicia B. 4,231 * 4,2231 0
DeMarco, Christopher 2,639 * 2,639 0
Petillo, John 8,798 * 8,798 0
M3 Partners, L.C. 70,384 * 70,384 0
Newman, Harold J., 35,192 * 35,192 0
Newberger & Berman, LLC,
Custodian FBO, IRA Rollover
Newman Harold J. 52,788 * 52,788 0
M3 Partners L.C. 4,961 * 4,961 0
Bailey, Clarke H. 3,416 * 3,416 0
Egan, Robert L. 3,416 * 3,416 0
Rawn, Stanley R. 3,416 * 3,416 0
Hackett, Melinda, Trust FBO 1,240 * 1,240 0
Pascal, Donald T. 5,639 * 5,639 0
Lowenberg, Jonathan M. 496 * 496 0
Doykos, James 496 * 496 0
Chorske, Michael W. 496 * 496 0
Hackett, Montague III, 1,240 * 1,240 0
Trust FBO
Rubin, Donald 6,269 * 6,269 0
Martin, Neil P. 1,759 * 1,759 0
Martin, Herbert J. 17,596 * 17,596 0
Lehman Brothers MBG Venture 15,234 * 15,234 0
Capital Partners 1997 L.P.
LBI Group Inc. 232,422 * 232,422 0
Walter A. Carozza 3,519 * 3,519 0
Aragon Fondkommission AB 175,963 * 175,963 0
Brewin Nominees Limited 7,037 * 7,037 0
Gerlach & Co 43,999 * 43,999 0
Page 24 of 42
<PAGE>
Banque Edouard Constant SA 52,788 * 52,788 0
Task Holdings Limited 175,963 * 175,963 0
Zaccaria, Bert L. 204,761 * 204,761 0
DAHLM Partners 21,995 * 21,995 0
English, Robert D. 17,595 * 17,595 0
Hart, Larry 924 * 924 0
KTS Partners LLC 351,926 * 351,926 0
Lockwood, Christopher J. 17,595 * 17,595 0
Price, D. Miles 17,595 * 17,595 0
Strauss, Peter 26,394 * 26,394 0
Whittier Ventures LLC 175,963 * 175,963 0
Berlin, Howard R. 35,192 * 35,192 0
Paduano, Daniel P. 35,192 * 35,192 0
JAFCO Co., Ltd. 175,963 * 175,963 0
JAFCO R-3 Investment 120,523 * 120,523 0
Enterprise Partnership
JAFCO JS-3 Investment 72,313 * 72,313 0
Enterprise Partnership
JAFCO G-6(A) Investment 108,470 * 108,470 0
Enterprise Partnership
JAFCO G-6(B) Investment 108,470 * 108,470 0
Enterprise Partnership
JAFCO G-7(A) Investment 147,038 * 147,038 0
Enterprise Partnership
JAFCO G-7(B) Investment 147,038 * 147,038 0
Enterprise Partnership
U.S. Information Technology 527,890 * 527,890 0
No. 2 Investment Enterprise
Partnership
Flinn, Lawrence Jr. 175,963 * 175,963 0
Yorkton Securities Inc. in 68,625 * 68,625 0
trust for Valeo Limited
Page 25 of 42
<PAGE>
Falore, David J. 1,759 * 1,759 0
Falore, Joseph M. 1,759 * 1,759 0
Schaltz, Gerald and Sharon 1,759 * 1,759 0
A., Trustees Shaltz Family
Trust, DTD 1/12/98
Rush & Co. 19,356 * 19,356 0
Lehman Brothers MBG 577 * 577 0
Ventures Capital Partners
1998 (A) L.P.
Lehman Brothers MBG 10 * 10 0
Ventures Capital Partners
1998 (B) L.P.
Lehman Brothers MBG Venture 65 65 0
Capital Partners 1998 (C)
L.P.
M.I.S. VC Partners, L.P. 615,870 1.46% 615,870 0
Watershed Partners, L.P. 299,505 * 299,505 0
Watershed Cayman, Ltd. 299,505 * 299,505 0
JAFCO America Ventures, Inc. 955,445 2.27% 955,445 0
The Chase Manhattan Bank, 4,900,989 11.63% 4,900,939 0
as Trustee for First Plaza
Group Trust <F3>
Mitchel G. Underseth 69,307 * 74,257 0
ORYX Technology Corp. 54,455 * 54,455 0
- ---------------
<FN>
<F1> Mr. Zaccaria became a member of our Board of Directors on
February 26, 1999.
<F2> The calculation of shares of Common Stock beneficially owned was
determined in accordance with Rule 13d-3 of the Exchange Act.
<F3> The Chase Manhattan Bank acts as the Trustee (the "Trustee") for the
First Plaza Group Trust (the "Trust"), a trust under and for the benefit
of certain employee benefit plans of General Motors Corporation ("GM")
and its subsidiaries. The address of Trust is c/o The Chase Manhattan
Bank, as Trustee for First Plaza Group Trust, 4 Chase Metrotech
Center, Brooklyn, New York 11245. These shares may be deemed to
be owned beneficially by General Motors Investment Management
Corporation ("GMIMCO"), a wholly owned subsidiary of GM. GMIMCO's
principal business is providing investment advice and investment
Page 26 of 42
<PAGE>
management services with respect to the assets of certain employee
benefit plans of GM and its subsidiaries and with respect to the assets
of certain direct and indirect subsidiaries of GM and associated
entities. GMIMCO is serving as the Trust's Investment manager with
respect to these shares and in that capacity has sole power to direct the
Trustee as to the voting and disposition of these shares. Because of the
Trustee's limited role, beneficial ownership of these shares by the
Trustee is disclaimed. The address of GMIMCO is 767 Fifth Avenue,
New York, New York 10153.
</FN>
</TABLE>
Our registration of the shares included in this prospectus
does not necessarily mean that the selling stockholders will
decide to sell any of the shares offered hereby. The shares
covered by this prospectus may be sold from time to time by the
selling stockholders so long as this prospectus remains in
effect; provided, however, that the selling stockholders are
first required to contact us to confirm that this prospectus is
in effect.
DESCRIPTION OF COMMON STOCK
Each holder of the Common Stock is entitled to one vote per
share held of record on each matter submitted to stockholders.
Cumulative voting for the election of directors is not permitted,
and the holders of a majority of shares voting for the election
of directors can elect all members of the Board of Directors.
Holders of record of shares of the Common Stock are entitled
to receive ratably dividends when and if declared by the Board of
Directors out of funds of legally available therefor. In the
event of a voluntary or involuntary winding up or dissolution,
liquidation or partial liquidation, holders of the Common Stock
are entitled to participate ratably in any distribution of the
assets of our company.
Holders of the Common Stock have no conversion, redemption
or preemptive rights. All outstanding shares of the Common Stock
are validly issued, fully paid and nonassessable.
PLAN OF DISTRIBUTION
Neither we nor the selling stockholders have employed an
underwriter for the sale of Common Stock by the selling
stockholders. The Company will bear all expenses, other than
broker or dealer discounts and commissions, stock transfer taxes
and the fees and disbursements of separate counsel, if any,
retained by the shareholders, associated with the sale of the
Common Stock. The securities covered by this prospectus may be
sold by or for the account of the selling stockholders pursuant
to this prospectus or pursuant to Rule 144 under the Securities
Act.
Page 27 of 42
<PAGE>
The selling stockholders may offer their shares of Common
Stock directly or through pledgees, donees, transferees or other
successors in interest at various times in one or more of the
following transactions (which may include block transactions):
- On any stock exchange (including the New York Stock
Exchange, the principal market for the Company's
shares) on which the shares of Common Stock may be
listed at the time of sale, either through a broker or
otherwise;
- In negotiated transactions;
- In the over-the-counter market;
- In a combination of any of the above transactions; or
- Through put or call option transactions, through short
sales or a combination of these methods.
The selling stockholders may offer their shares of Common
Stock at any of the following prices:
- Fixed prices which may be changed;
- Market prices prevailing at the time of sale;
- Prices related to such prevailing market prices; or
- At negotiated prices.
If applicable law requires, we will add a supplement to this
prospectus to disclose the specific shares to be sold, the names
of the selling stockholders, the public offering prices of the
shares to be sold, the names of any broker or dealer employed by
the selling stockholders in connection with such sale, and any
applicable commission or discount with respect to a particular
offer.
The selling stockholders may effect such transactions by
selling shares to or through broker-dealers, and all such broker-
dealers may receive compensation in the form of discounts,
concessions, or commissions from the selling stockholders and/or
the purchasers of shares of Common Stock for whom such broker-
dealers may act as agents or to whom they sell as principals, or
both (which compensation as to a particular broker-dealer might
be in excess of customary commissions).
Any broker-dealer acquiring Common Stock from the selling
stockholders may sell the shares either directly, in its normal
market-making activities, through or to other brokers on a
principal or agency basis or to its customers. Any such sales
may be at prices then prevailing on the New York Stock Exchange
or at prices related to such prevailing market prices or at
negotiated prices to its customers or a combination of such
methods. The selling stockholders and any broker-dealers that
Page 28 of 42
<PAGE>
act in connection with the sale of the Common Stock hereunder
might be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act; any commissions received by
them and any profit on the resale of shares as principal might be
deemed to be underwriting discounts and commissions under the
Securities Act of 1933. Any such commissions, as well as other
expenses incurred by the selling stockholders and applicable
transfer taxes, are payable by the selling stockholders.
We have not registered or qualified offers and sales of
shares of the Common Stock under the laws of any country, other
than the United States. To comply with certain states'
securities laws, if applicable, the selling stockholders will
offer and sell their shares of Common Stock in such jurisdictions
only through registered or licensed brokers or dealers. In
addition, in certain states the selling stockholders may not
offer or sell shares of Common Stock unless we have registered or
qualified such shares for sale in such states or we have complied
with an available exemption from registration or qualification.
Any broker-dealer acquiring Common Stock offered hereby may
sell such securities either directly, in its normal market-making
activities, through or to other brokers on a principal or agency
basis or to its customers. Any such sales may be at prices then
prevailing on the New York Stock Exchange, at prices related to
such prevailing market prices or at negotiated prices to its
customers or a combination of such methods. In addition and
without limiting the foregoing, the selling stockholders may be
subject to applicable provisions of Regulation M under the
Exchange Act of 1934, which may limit the timing of the purchases
and sales of shares of Common Stock by the selling stockholders.
LEGAL MATTERS
The validity of the shares of Common Stock has been passed
upon for us by Sheppard, Mullin, Richter & Hampton LLP, Los
Angeles, California.
EXPERTS
The audited consolidated financial statements and schedules
of Applied Magnetics Corporation included or incorporated by
reference in this prospectus and elsewhere in the registration
statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority
of said firm as experts in giving said reports.
The financial statements of DAS Devices, Inc., as of and
for the year ended December 31, 1997 incorporated in this
Prospectus by reference from the Company's Current Report on Form
8-K/A filed March 5, 1999, have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report,
which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
Page 29 of 42
<PAGE>
No person has been authorized to
give any information or to make
any representations other than
those contained in this
prospectus in connection with
the offer made by this
prospectus. If given or made, APPLIED MAGNETICS CORPORATION
you must not rely on such
information or representations.
You should not consider that the
delivery of this prospectus or
any sale made hereunder under
any circumstances creates any 18,002,367 Shares of
implication that there has been Common Stock
no change in us or in our
business, operations or
financial condition since the
date of this prospectus. This
prospectus does not constitute
an offer or solicitation by
anyone in any jurisdiction in
which such offer or solicitation
is not qualified to do so or to
anyone to whom it is unlawful to
make such solicitation.
Table of Contents
Where You Can Find More Information 4
Prospectus Summary 5
Risk Factors 11
Use of Proceeds 22
Prospectus
Selling Stockholders 22
Description of Common Stock 27 ________, 1999
Plan of Distribution 27
Legal Matters 29
Experts 29
Page 30 of 42
<PAGE>
Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses in
connection with the sale and distribution of the securities being
registered, other than underwriting discounts and commissions.
All of the amounts shown are estimates, except the Securities and
Exchange Commission registration fee and the listing fee.
Securities and Exchange Commission
registration fee $15,518*
Printing and engraving expenses 2,000*
Accounting fees and expenses 7,500*
Legal fees and expenses 15,000*
Miscellaneous expenses 1,000*
Total $41,018
*Estimate
Item 15. Indemnification of Directors and Officers
The indemnification of officers and directors of the
Registrant is governed by Section 145 of the General Corporation
Law of the State of Delaware (the "DGCL") and the Certificate of
Incorporation and By-Laws of the Registrant. Subsection (a) of
DGCL Section 145 empowers a corporation to indemnify any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation) by reason
of the fact that the person is or was a director, officer,
employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust
or other enterprise, against expenses (including attorneys'
II-1
Page 31 of 42
<PAGE>
fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by the person in connection with such
action, suit or proceeding if the person acted in good faith and
in a manner the person reasonably believed to be in or not
opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable
cause to believe the person's conduct was unlawful.
Subsection (b) of DGCL Section 145 empowers a corporation to
indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by
the person in connection with the defense or settlement of such
action or suit if the person acted in good faith and in a manner
the person reasonably believed to be in or not opposed to the
best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or
suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
DGCL Section 145 further provides that to the extent that a
present or former director or officer is successful, on the
merits or otherwise, in the defense of any action, suit or
proceeding referred to in subsections (a) and (b) of Section 145,
or in defense of any claim, issue or matter therein, such person
shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection
therewith. In all cases in which indemnification is permitted
under subsections (a) and (b) of Section 145 (unless ordered by a
court), it shall be made by the corporation only as authorized in
the specific case upon a determination that indemnification of
the present or former director, officer, employee or agent is
II-2
Page 32 of 42
<PAGE>
proper in the circumstances because the applicable standard of
conduct has been met by the party to be indemnified. Such
determination must be made, with respect to a person who is a
director or officer at the time of such determination, (1) by a
majority vote of the directors who are not parties to such
action, suit or proceeding, even though less than a quorum, or
(2) by a committee of such directors designated by majority vote
of such directors, even though less than a quorum, or (3) if
there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion, or (4) by the
stockholders. The statute authorizes the corporation to pay
expenses incurred by an officer or director in advance of the
final disposition of a proceeding upon receipt of an undertaking
by or on behalf of the person to whom the advance will be made,
to repay the advances if it shall ultimately be determined that
he was not entitled to indemnification. DGCL Section 145 also
provides that indemnification and advancement of expenses
permitted thereunder are not to be exclusive of any other rights
to which those seeking indemnification or advancement of expenses
may be entitled under any By-law, agreement, vote of stockholders
or disinterested directors, or otherwise. DGCL Section 145 also
authorizes the corporation to purchase and maintain liability
insurance on behalf of its directors, officers, employees and
agents regardless of whether the corporation would have the
statutory power to indemnify such persons against the liabilities
insured.
The Certificate of Incorporation of the Registrant (the
"Certificate") provides that no director of the Registrant shall
be personally liable to the Registrant or its stockholders for
monetary damages for breach of fiduciary duty as a director
except for liability (i) for any breach of the director's duty of
loyalty to the Registrant or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for paying a
dividend or approving a stock repurchase in violation of
Section 174 of the DGCL or (iv) for any transaction from which
the director derived an improper personal benefit.
The Registrant's By-laws provide that the Registrant shall
indemnify an officer or director for any costs incurred by such
officer or director in connection with a proceeding against such
officer or director by reason of the fact that he is or was an
officer or director of the Registrant, unless such
II-3
Page 33 of 42
<PAGE>
indemnification is prohibited under applicable law. Pursuant to
the By-laws, the Registrant may also be required to advance funds
to an officer or director who is entitled to indemnification upon
receipt of an undertaking by or on behalf of the officer or
director to repay the amount if it is ultimately determined that
such person is not entitled to indemnification. The By-laws
further provide that the Registrant may provide indemnification
or the advancement of expenses to any other person as permitted
by applicable law. Such By-law provisions are intended to be
broader than the statutory indemnification provided in the DGCL.
However, the extent to which such broader indemnification may be
permissible under Delaware law has not been established.
The Registrant maintains a directors and officers liability
policy. The policy's coverage, among other things, (i) provides
for payment on behalf of the Registrant's officers and directors
against loss (as defined in the policy) stemming from acts
committed by directors and officers in their capacities as such,
with no annual individual deductible element per director or
officer, and (ii) provides for reimbursement of the Registrant
against such loss for which the Registrant grants indemnification
to any director or officer, as permitted by law.
Item 16. EXHIBITS
5.1 Opinion of Sheppard, Mullin, Richter & Hampton LLP
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Deloitte & Touche LLP
23.3 Consent of Sheppard, Mullin, Richter & Hampton LLP (included
in Exhibit 5.1)
24.1 Power of Attorney of certain officers and directors
(included on page S-1)
Item 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
Statement:
a. To include any prospectus required by Section 10(a)(3)
of the Securities Act;
b. To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement
(or the most recent post- effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the Registrant Statement;
II-4
Page 34 of 42
<PAGE>
c. To include any material information with respect
to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information
in the Registration Statement;
Provided, however, that paragraphs (1)(a) and (1)(b) do not
apply if the Registration Statement is on Form S-3, or Form S-8,
and the information required to be included in a post- effective
amendment by those paragraphs is contained in periodic reports
filed with or furnished to the Commission by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
2. That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
3. To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934 that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
II-5
Page 35 of 42
<PAGE>
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
The undersigned Registrant hereby undertakes that:
1. For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
Prospectus filed as part of this Registration Statement in
reliance upon Rule 430A and contained in a form of Prospectus
filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of
this Registration Statement as of the time it was declared
effective.
2. For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of Prospectus shall be deemed to be a new
Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
II-6
Page 36 of 42
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the Registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form
S-3 and has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in
the City of Goleta, State of California, on March 8, 1999.
APPLIED MAGNETICS CORPORATION
By /S/ Craig D. Crisman
_______________________________
Craig D. Crisman
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Craig D. Crisman
and Jerry Goldress, and each of them, his attorneys-in-fact, each
with the power of substitution, for him in any and all
capacities, to sign any amendments to this registration statement
and to file the same, with exhibits thereto and other documents
in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of
1933, this Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
Signature Date
- --------- ----
/s/ Craig D. Crisman March 8, 1999
_______________________________________
Craig D. Crisman, Chairman of the Board
and Chief Executive Officer
(principal executive officer,
principal financial officer)
/s/ Peter T. Altavilla March 8, 1999
_______________________________________
Peter T. Altavilla, Secretary and
Controller (principal accounting officer)
/s/ Herbert Dwight, Jr. March 8, 1999
______________________________________
Herbert Dwight, Jr., Director
S-1
Page 37 of 42
<PAGE>
/s/ Harold Frank March 8, 1999
______________________________________
Harold Frank, Director
/s/ Jerry Goldress March 8, 1999
______________________________________
Jerry Goldress, Director
/s/ R. C. Mercure, Director March 8, 1999
______________________________________
R. C. Mercure, Director
S-2
Page 38 of 42
<PAGE>
EXHIBIT 5.1
[On SMR&H Letterhead]
March 8, 1999
Applied Magnetics Corporation
75 Robin Hill Road
Goleta, California 93117
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
As special counsel for Applied Magnetics Corporation, a Delaware
corporation ("AMC"), in connection with AMC's Registration Statement on Form
S-3, No. 333-_____ (the "Registration Statement"), registering a maximum of
18,002,367 shares of AMC's Common Stock, $0.10 par value (the "Shares"), to be
sold on behalf of certain holders thereof (the "Offering"), we have been
requested to render this opinion.
For the purpose of rendering the opinion set forth herein, we have
been furnished with and examined only the following documents:
1. The Certificate of Incorporation of AMC, certified by the
Delaware Secretary of State as of February 5, 1999;
2. The Bylaws of AMC, certified by the Secretary of AMC;
3. The Registration Statement; and
4. Records of the meetings of the Board of Directors of AMC
pertaining to the Offering.
S-3
Page 39 of 42
<PAGE>
Applied Magnetics Corporation
March 5, 1999
Page 2
With respect to all of the foregoing documents, we have assumed,
without investigation, the genuineness of all signatures, the authenticity of
all documents submitted to us as originals and the conformity to originals of
all documents submitted to us as certified or reproduced copies. We also have
obtained from the officers of AMC such advice as to such factual matters as we
consider necessary for the purpose of this opinion, and insofar as this opinion
is based on such matters of fact, we have relied on such advice. We express no
opinion as to the statistical information and the financial statements, the
notes thereto and related schedules and other financial data, included, or
documents incorporated by reference, in the Registration Statement.
Based on the foregoing, subject to the assumptions, limitations and
exceptions set forth herein, we are of the opinion that the Shares to be sold in
the Offering are duly authorized, validly issued, fully paid and nonassessable.
Our opinion expressed herein is limited to those matters expressly
set forth herein, and no opinion may be implied or inferred beyond the matters
expressly stated herein. We hereby disclaim any obligation to notify any person
or entity after the date hereof if any change in fact or law should change our
opinion with respect to any matter set forth in this letter.
This opinion is limited to the Delaware General Corporation Law and
the Securities Act, to present judicial interpretations thereof and to facts as
they presently exist. In rendering this opinion, we have no obligation to revise
or supplement it should such laws be changed by legislative action, judicial
decision or otherwise.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the prospectus which is part of the Registration Statement.
Very truly yours,
S-4
Page 40 of 42
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement of our reports dated December 15,
1998 included (or incorporated by reference) in Applied Magnetics Corporation's
Form 10-K for the fiscal year ended October 3, 1998 and to all references to our
firm included in this Registration Statement.
/s/ Arthur Andersen LLP
-----------------------
ARTHUR ANDERSEN LLP
Los Angeles, California
March 3, 1999
S-5
Page 41 of 42
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Applied Magnetics Corporation on Form S-3 of our report dated February 27, 1998
(March 9, 1998 as to the last sentence, second paragraph of Note 4), on the
financial statements of Das Devices, Inc. as of and for the year ended
December 31, 1997, appearing in the Current Report on Form 8-K/A of
Applied Magnetics Corporation filed March 5, 1999 and to the reference to us
under the heading "Experts" in the Prospectus, which is part of such
Registration Statement.
Deloitte & Touche LLP
San Jose, California
March 5, 1999.
S-6
Page 42 of 42
