SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
Current Report
(Amendment No. 1)
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 14, 1999
Applied Magnetics Corporation
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(Exact name of registrant as specified in its charter)
Delaware 1-6635
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(State or other jurisdiction of (Commission file number)
incorporation or organization)
95-1950506
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(I.R.S. Employer Identification No.)
75 Robin Hill Road, Goleta, CA 93117
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (805) 683-5353
Exhibit Index on Page 4
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Item 7. Financial Statements and Exhibits.
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(c) Exhibits
2.1 Amended and Restated Exchange Agreement by and Between
Applied Magnetics Corporation and Kennilworth Partners II LP
dated as of July 14, 1999.
2.2 Amended and Restated Registration Rights Agreement effective
as of July 14, 1999 between Applied Magnetics Corporation
and Kennilworth Partners II LP.
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the registrant has duly caused this registration statement
to be signed on its behalf by the undersigned, thereto duly authorized.
APPLIED MAGNETICS CORPORATION
By: /s/ Peter T. Altavilla
-------------------------
Name: Peter T. Altavilla
Title: Secretary and Controller
Date: July 26, 1999
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EXHIBIT INDEX
Exhibit Description Page
------- ----------- ----
2.1 Amended and Restated Exchange Agreement by and
Between Applied Magnetics Corporation and Kennilworth
Partners II LP dated as of July 14, 1999. 5
2.2 Amended and Restated Registration Rights Agreement
effective as of July 14, 1999 between Applied
Magnetics Corporation and Kennilworth Partners II LP. 33
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Exhibit 2.1
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AMENDED AND RESTATED
EXCHANGE AGREEMENT
By and Between
APPLIED MAGNETICS CORPORATION
and
KENNILWORTH PARTNERS II LP
Dated as of July 14, 1999
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TABLE OF CONTENTS
Page
1. STOCK PURCHASE; BOND PURCHASE........................................1
1.1 Stock Purchase.................................................1
1.2 Purchase Price for Common Shares...............................2
1.3 Note and Note Issuance.........................................2
1.4 Debenture Purchase.............................................2
1.5 Initial Closing Date Obligations...............................3
1.6 Second Closing Date Obligations................................3
1.7 Closing Deliveries.............................................4
2. RESTRICTIONS ON TRANSFER OF SECURITIES...............................4
2.1 Securities Legend..............................................4
2.2 Removal of Legends.............................................5
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................5
3.1 Organization and Good Standing.................................5
3.2 Capitalization.................................................5
3.3 Authority; No Conflict.........................................6
3.4 Approvals or Notices...........................................7
3.5 Compliance with the Law and other Instruments..................7
3.6 Securities Act Reports.........................................8
3.7 Brokers or Finders.............................................9
3.8 Absence of Material Changes....................................9
3.9 Certain Proceedings............................................9
4. REPRESENTATIONS AND WARRANTIES OF KENNILWORTH.......................10
4.1 Organization and Good Standing................................10
4.2 Authority; No Conflict........................................10
4.3 Approvals or Notices..........................................11
4.4 Ownership of Debentures.......................................11
4.5 Investment Matters. .........................................11
4.6 Certain Proceedings...........................................12
4.7 Brokers or Finders............................................12
5. COVENANTS OF THE COMPANY............................................12
5.1 Other Debenture Exchanges.....................................12
5.2 Participation in Rights Offering..............................13
5.3 No Diminishment of Capitalization.............................13
5.4 Series B Certificate of Designation...........................13
6. CONDITIONS PRECEDENT TO KENNILWORTH'S OBLIGATION TO
CLOSE...............................................................13
6.1 Accuracy of Representations...................................13
6.2 The Company's Performance.....................................13
6.3 Consents......................................................14
6.4 No Prohibition................................................14
6.5 Additional Documents..........................................14
6.6 Absence of Injunctions........................................14
6.7 Effectiveness of Registration Statement.......................14
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6.8 No Material Adverse Change....................................15
7. CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATION TO
CLOSE...............................................................15
7.1 Accuracy of Representations...................................15
7.2 Kennilworth's Performance.....................................15
7.3 Consents......................................................16
7.4 No Prohibition................................................16
7.5 Additional Documents..........................................16
7.6 Absence of Injunctions........................................16
7.7 Effectiveness of Registration Statement.......................16
8. INDEMNIFICATION; REMEDIES...........................................16
8.1 Indemnification and Payment of Damages by
Kennilworth...................................................16
8.2 Indemnification and Payment of Damages by the
Company.......................................................17
8.3 Procedure for Indemnification--Third Party Claims ............17
8.4 Procedure for Indemnification--Other Claims...................19
9. GENERAL PROVISIONS..................................................19
9.1 Termination...................................................19
9.2 Expenses......................................................20
9.3 Public Announcements..........................................20
9.4 Confidentiality...............................................20
9.5 Notices.......................................................20
9.6 Jurisdiction; Service of Process..............................21
9.7 Survival of Representations and Warranties....................22
9.8 Further Assurances............................................22
9.9 Waiver........................................................22
9.10 Entire Agreement and Modification.............................22
9.11 Assignments, Successors, and No Third-Party Rights............23
9.12 Severability..................................................23
9.13 Section Headings, Construction................................23
9.14 Governing Law.................................................23
9.15 Counterparts..................................................23
9.16 Attorneys' Fees...............................................23
10. Waiver of Jury Trial................................................24
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AMENDED AND RESTATED EXCHANGE AGREEMENT
This Amended and Restated Exchange Agreement (the
"Agreement") is made as of July 14, 1999, by Kennilworth Partners
II LP, a Delaware limited partnership ("Kennilworth"), and
Applied Magnetics Corporation, a Delaware corporation (the
"Company").
WHEREAS, Kennilworth and the Company have previously
entered into an Exchange Agreement, dated as of May 10, 1999 (the
"Prior Agreement");
WHEREAS, Kennilworth and the Company now desire to
amend the terms of the Prior Agreement to reflect certain changes
to the agreements previously reached between the two parties;
WHEREAS, at this time and in lieu of the transactions
contemplated by the Prior Agreement and all agreements ancillary
thereto, Kennilworth desires to purchase, and the Company desires
to sell to Kennilworth, and Kennilworth desires to purchase from
the Company six million (6,000,000) shares of the common stock,
$.10 par value, of the Company (the "Common Shares") for a total
purchase price of twenty-four million dollars ($24,000,000) (the
"Stock Purchase");
WHEREAS, the Company desires to sell to Kennilworth and
Kennilworth desires to purchase from the Company for the sum of
twenty-five million dollars ($25,000,000) (the "Note Purchase
Price") a Senior Subordinated Convertible Note (the "Note") in
the aggregate principal amount of thirty-seven million seven
hundred seventy-six thousand seven hundred sixteen dollars
($37,776,716) reflecting interest accruing on the Note on a zero-
coupon basis for the first three years after the issuance thereof
(the "Note Purchase");
WHEREAS, in connection with the Stock Purchase and the
Note Purchase, the Company desires to purchase from Kennilworth,
and Kennilworth desires to sell to the Company (the "Debenture
Purchase") certain 7% Convertible Subordinated Debentures of the
Company in the aggregate principal amount of twenty-four million
dollars ($24,000,000) (the "Debentures");
NOW, THEREFORE, in consideration of the terms and
conditions set forth herein, the parties agree as follows:
1. STOCK PURCHASE; BOND PURCHASE.
1.1 Stock Purchase. Subject to the terms and
conditions of this Agreement,
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(a) On the initial closing date (the "Initial
Closing Date"), which shall be as promptly as practicable
following the fulfillment or waiver of all conditions to the
Initial Closing, the Company will issue and sell four million
(4,000,000) Common Shares to Kennilworth (the "Tranche One
Shares"), and Kennilworth will purchase the Tranche One Shares
from the Company; and
(b) On that day which is ninety (90) days after
the Initial Closing Date (the "Second Closing Date"), the Company
will issue and sell two million (2,000,000) Common Shares to
Kennilworth (the "Tranche Two Shares"), and Kennilworth will
purchase the Tranche Two Shares from the Company.
1.2 Purchase Price for Common Shares. The purchase
price (the "Share Purchase Price") for (a) the Tranche One Shares
will be sixteen million dollars ($16,000,000) (the "Tranche One
Purchase Price"); and (b) the Tranche Two Shares will be eight
million dollars ($8,000,000) (the "Tranche Two Purchase Price").
The respective Share Purchase Prices shall be paid to the Company
on each of the two respective Closing Dates in U.S. dollars by
wire transfer of immediately available funds to an account
designated in writing by the Company.
1.3 Note and Note Issuance. On the Initial Closing
Date, the Company shall execute and deliver to Kennilworth the
Note, which shall be substantially in the form of that certain
Senior Subordinated Convertible Note attached hereto as Exhibit
B. The aggregate principal amount of the Note Purchase Price
shall be paid to the Company on the Initial Closing Date in U.S.
dollars by wire transfer of immediately available funds to an
account designated in writing by the Company.
1.4 Debenture Purchase.
(a) On the Initial Closing Date, the Company
shall tender payment in the amount of sixteen million dollars
($16,000,000) (the "Tranche One Debenture Payment") and purchase
from Kennilworth Debentures in the aggregate principal amount of
sixteen million dollars ($16,000,000) (the "Tranche One
Debentures") and any and all interest due on such Tranche One
Debentures through the Initial Closing Date;
(b) On the Second Closing Date, the Company shall
tender payment in the amount of eight million dollars
($8,000,000) (the "Tranche Two Debenture Payment) and purchase
from Kennilworth Debentures in the aggregate principal amount of
eight million dollars ($8,000,000) (the "Tranche Two Debentures")
and any and all interest due on such Tranche Two Debentures
through the Second Closing Date.
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(c) The Tranche One Debenture Payment and the
Tranche Two Debenture Payment shall be paid to Kennilworth on
each of the two respective Closing Dates in U.S. dollars by wire
transfer of immediately available funds to an account designated
in writing by Kennilworth.
1.5 Initial Closing Date Obligations. On the Initial
Closing Date:
(a) The Company will deliver to Kennilworth:
(i) a certificate representing the Tranche
One Shares;
(ii) the Note, duly executed by the Company;
(iii) the Tranche One Debenture Payment and
any and all interest due on such Tranche One Debentures through
the Initial Closing Date;
(iv) a certificate executed by the Company
representing and warranting to Kennilworth that each of the
Company's representations and warranties in this Agreement is
accurate in all material respects as of the Initial Closing Date;
and
(v) such other agreements, certificates or
documents as may be reasonably requested by Kennilworth.
(b) Kennilworth will deliver to the Company:
(i) the Tranche One Purchase Price;
(ii) the Note Purchase Price;
(iii) the Tranche One Debentures, duly
endorsed for delivery;
(iv) a certificate executed by Kennilworth
representing and warranting to the Company that each of
Kennilworth's representations and warranties in this Agreement is
accurate in all material respects as of the Initial Closing Date;
and
(v) such other agreements, certificates or
documents as may be reasonably requested by the Company.
1.6 Second Closing Date Obligations. On the Second
Closing Date:
(a) The Company will deliver to Kennilworth:
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(i) a certificate representing the Tranche
Two Shares;
(ii) the Tranche Two Debenture Payment and
any and all interest due on such Tranche Two Debentures through
the Second Closing Date;
(iii) a certificate executed by the Company
representing and warranting to Kennilworth that each of the
Company's representations and warranties in this Agreement is
accurate in all material respects as of the Second Closing Date;
and
(iv) such other agreements, certificates or
documents as may be reasonably requested by Kennilworth.
(b) Kennilworth will deliver to the Company;
(i) the Tranche Two Purchase Price;
(ii) the Tranche Two Debentures, duly
endorsed for delivery;
(iii) a certificate executed by Kennilworth
representing and warranting to the Company that each of
Kennilworth's representations and warranties in this Agreement is
accurate in all material respects as of the Second Closing Date;
and
(iv) such other agreements, certificates or
documents as may be reasonably requested by the Company.
1.7 Closing Deliveries. All deliveries made at each
of the Initial and Second Closings shall be deemed simultaneous
deliveries on such date and at such Closing. To the extent that
delivery of any one item is not made on any Closing Date, no
deliveries shall be deemed to have been made on such Closing
Date.
2. RESTRICTIONS ON TRANSFER OF SECURITIES.
2.1 Securities Legend. All certificates evidencing
(i) the Note, (ii) subject to the terms of the Registration
Rights Agreement, the Common Shares, and (iii) subject to the
terms of the Registration Rights Agreement, the common stock of
the Company ("Common Stock") issued upon conversion of the Note
(collectively with the Common Stock, if any, issued as dividends,
and the Series B Convertible Preferred Stock, if any, the
"Securities") shall be endorsed with the following, or a
substantially similar, legend (the "Securities Legend") and, to
the extent necessary, with any other legends required pursuant to
applicable state securities laws:
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THE SALE OF THE SECURITIES REPRESENTED BY
THIS INSTRUMENT WAS NOT REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT"). NO SALE
OR OTHER DISPOSITION OF THE SECURITIES MAY
BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATING THERETO OR
AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE ACT.
2.2 Removal of Legends. The Securities Legend
endorsed on the certificates evidencing the Securities shall be
removed, and the Company shall issue certificates without such
legends to the holder of such shares, if, and to the extent that,
the Securities are registered under the Securities Act of 1933,
as amended (the "Securities Act"), or qualified under applicable
state securities laws or if such holder provides to the Company
an opinion of counsel for such holder, in form and substance
reasonably satisfactory to the Company's counsel, to the effect
that a sale, transfer or assignment of such Securities may be
made without registration under the Securities Act, or
qualification under applicable state securities laws.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to Kennilworth as follows:
3.1 Organization and Good Standing. The Company (i)
is a corporation duly organized, validly existing and in good
standing under the laws of the state of Delaware, (ii) has all
requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as it is now being
conducted and (ii) is duly qualified or licensed and in good
standing to do business in each jurisdiction in which the
properties owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or license
necessary, except in such jurisdictions where the failure to be
so duly qualified or licensed and in good standing has not had,
either individually or in the aggregate, a material adverse
effect on the business, assets, results of operations or
financial condition of the Company. The Company has delivered to
Kennilworth true and complete copies of its Certificate of
Incorporation and Bylaws, each as amended through and in effect
as of the date hereof.
3.2 Capitalization.
(a) The authorized capital stock of the Company
consists of 120,000,000 shares of Common Stock, par value $.10
per share, and 5,000,000 shares of preferred stock, par value
$.10 per share ("Preferred Stock"), of which 200,000 shares are
designated as Series A Participating Preferred Stock. As of the
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date hereof, (i) 41,867,293 shares of Common Stock are issued and
outstanding and 7,010,645 shares of Common Stock are reserved for
issuance upon the exercise of outstanding options and warrants,
and (ii) no shares of Preferred Stock are issued and outstanding.
All outstanding shares of Common Stock are duly authorized,
validly issued, fully paid and nonassessable, are not subject to
and have not been issued in violation of any preemptive rights
and have not been issued in violation of any federal or state
securities laws. Except as set forth on Schedule 3.2 and this
Agreement, and the Note and Common Shares to be issued hereunder,
there are no issued or outstanding bonds, debentures, notes or
other indebtedness of the Company which have the right to vote
(or which are convertible into other securities which have the
right to vote) on any matters on which the Company's stockholders
have the right to vote ("Voting Debt"). Except as set forth on
Schedule 3.2, there are no outstanding or authorized
subscriptions, options, warrants, calls, rights, commitments or
any other agreements of any character to or by which the Company
is a party or is bound which, directly or indirectly, obligate
the Company to issue, deliver or sell or cause to be issued,
delivered or sold any shares of Common Stock or Preferred Stock
or any other capital stock, equity interest or Voting Debt of the
Company or any securities convertible into, or exercisable or
exchangeable for, or evidencing the right to subscribe for, any
such shares, interests or Voting Debt or obligating the Company
to grant, extend or enter into any such subscription, option,
warrant, call or right.
(b) The Securities, upon issuance and delivery in
accordance with the terms and provisions of this Agreement and
the Note, will be duly authorized, fully paid and non-assessable,
will be free of any liens, claims, charges, security interests,
pledges, voting or shareholder agreements encumbrances or
equities of any kind whatsoever and will not be issued in
violation of any preemptive rights.
3.3 Authority; No Conflict.
(a) The Company has all requisite right, power
and authority to execute, deliver and perform its obligations
under, and consummate the transactions contemplated by, this
Agreement and the other agreements and instruments contemplated
hereby. All proceedings have been taken and all authorizations
have been secured by the Company which are necessary to authorize
the execution, delivery and performance by the Company of this
Agreement and the other agreements and instruments contemplated
hereby.
(b) This Agreement and the Registration Rights
Agreement have been duly executed and delivered by the Company;
and each of this Agreement, the Registration Rights Agreement,
the Note and each other document executed and delivered by the
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Company hereunder (collectively, the "Company's Closing
Documents") constitutes the valid and binding obligation of the
Company, enforceable against the Company in accordance with its
terms, except insofar as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally or by
principles governing the availability of equitable remedies.
(c) Neither the execution and delivery of the
Company's Closing Documents by the Company nor the consummation
or performance of any of the transactions contemplated by the
Company's Closing Documents will, directly or indirectly (with or
without notice or lapse of time), result in a violation or breach
of (A) any provision of the organizational documents of the
Company or (B) any resolution adopted by the board of directors
or the stockholders of the Company.
3.4 Approvals or Notices. Except as set forth in
Schedule 3.4, no authorization, approval, order, license, permit,
franchise or consent, and no registration, declaration, notice or
filing by or with any domestic or foreign governmental authority
(including, without limitation, any filing or registration
pursuant to the Securities Act, the Securities Exchange Act of
1934 (the "Exchange Act") or the securities or blue sky laws of
the United States of America or any state or territory thereof)
by the Company is required in connection with the execution and
delivery of the Company's Closing Documents, the performance by
the Company of its obligations thereunder and the consummation of
the transactions contemplated thereby. Except as set forth in
Schedule 3.4, the Company is not and will not be required to give
any notice to or obtain any consent or approval from any
individual, corporation, partnership, limited liability company,
association or other entity (each, a "Person") in connection with
the execution and delivery of the Company's Closing Documents or
the consummation or performance of any of the transactions
contemplated by the Company's Closing Documents.
3.5 Compliance with the Law and other Instruments.
The Company is in material compliance with, and is conducting its
businesses in all material respects so as to comply with, all
applicable laws, ordinances, rules and regulations of all
authorities (including, without limitation, any federal, state or
local laws, rules, or regulations regulating the safety of the
workplace and/or the discharge of materials into the environment
or otherwise relating to the protection of the environment). The
Company maintains in full force and effect all licenses,
approvals, permits and consents for the lawful conduct of its
business. To its knowledge, the Company is not in default under
or with respect to, nor has it been charged with or threatened
with a charge of any violation or received any notice of any
violation of, and is not under investigation with respect to a
possible violation of, any provision of any federal, state or
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local law, ruling or regulation, or any judgment, order or decree
of any court, arbitrator or arbitration tribunal or any
governmental authority, agency or other instrumentality, domestic
or foreign, against, relating to or otherwise affecting the
Company or any of its assets. The Company is not in violation
of, or in default under, any term or provision of its Certificate
of Incorporation or Bylaws (as amended or revised) or of any
material lien, indenture, mortgage, lease, agreement, instrument,
contract, commitment or other arrangement, or subject to any
material restriction of any kind or character, which could have
a material adverse effect on the Company as a whole. The
execution and delivery of this Agreement and the other agreements
and instruments contemplated hereby, and the consummation of the
transactions contemplated herein and therein, will not (a) result
in the violation or breach of any material term or provision of,
or constitute a default under any statute, order, judgment, writ,
injunction, decree, license, permit, approval, authorization,
rule or regulation of any court or any governmental or regulatory
body applicable to the Company or by which any of its assets or
properties are bound or affected; or (b) result in the breach of,
constitute a default under, or result in the acceleration of any
obligation under, any provision of any agreement, lease,
contract, document, instrument, commitment, obligation or
arrangement of any kind or nature to which the Company is a party
or by which it is bound, unless such breach will not have a
material adverse effect on the business or operations of the
Company, which default, breach or acceleration has not been
waived; (c) result in the creation of any lien, claim or charge
on or against any of the assets or properties of the Company; or
(d) result in the termination of any license, franchise, lease or
permit to which the Company is a party or by which it is bound.
3.6 Securities Act Reports. The Company has
heretofore made available to Kennilworth true and complete copies
of the Company's Proxy Statement for the meeting of stockholders
held on February 26, 1999, the Company's Quarterly Report on
Form 10-Q for the quarter ended April 3, 1999, the Company's
Quarterly Report on Form 10-Q for the quarter ended January 2,
1999, the Company's Annual Report on Form 10-K for the fiscal
year ended October 3, 1998, the Company's Current Report on Form
8-K dated May 10, 1999, the Company's Current Report on Form 8-K
dated February 12, 1999, as amended March 5, 1999, the Company's
Current Report on Form 8-K dated November 24, 1998, the Company's
Current Report on Form 8-K dated October 28, 1998, and the
Company's Registration Statement on Form S-3, as filed on March
8, 1999, filed by the Company with the Securities and Exchange
Commission (the "SEC") pursuant to the Exchange Act or the
Securities Act (collectively, the "Commission Filings"). The
Commission Filings constitute all of the documents required to be
filed by the Company with the SEC since October 1, 1998. As of
their respective dates, each of the Commission Filings complied
in all material respects with the applicable requirements of the
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Exchange Act, the Securities Act and the rules and regulations
promulgated thereunder, and none of the Commission Filings
contained as of such date any untrue statement of a material fact
or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading. When
filed with the SEC, the financial statements included in the
Commission Filings complied as to form in all material respects
with the applicable rules and regulations of the SEC and were
prepared in accordance with generally accepted accounting
principles (as in effect from time to time) applied on a
consistent basis (except as may be indicated therein or in the
notes or schedules thereto), and such financial statements fairly
present the consolidated financial position of the Company as at
the dates thereof and the consolidated results of operations and
consolidated cash flows of the Company for the periods then
ended, subject, in the case of the unaudited interim financial
statements, to normal, recurring year-end audit adjustments.
3.7 Brokers or Finders. Except as set forth on
Schedule 3.7, the Company and its agents have incurred no
obligation or liability, contingent or otherwise, for brokerage
or finders' fees or agents' commissions or other similar payment
in connection with this Agreement.
3.8 Absence of Material Changes. Since April 3, 1999,
except as set forth in Schedule 3.8, (a) the Company has not
incurred any liability or obligation of any kind which,
individually or in the aggregate, is material to the business,
assets, results of operations, financial condition or prospects
of the Company; and (b) there has not been any material adverse
change in, and no event has occurred and no condition exists
which, individually or together with other events or conditions,
has had a material adverse effect on, the business, assets,
results of operations, financial condition or prospects of the
Company.
3.9 Certain Proceedings. Except as set forth on
Schedule 3.9, there is no action, claim, arbitration, hearing,
investigation, litigation or suit (each, a "Proceeding") pending
or, to the Company's knowledge, threatened, against, involving or
affecting the Company or the Company's assets, properties or
business, nor is there any judgment, decree, injunction, rule or
order of any court, governmental department, commission, agency,
instrumentality or arbitrator outstanding against the Company
which does or might (i) result in the modification, termination,
suspension, impairment or reformation of any material contract to
which the Company is a party; (ii) materially adversely affect
the manner in which the Company conducts its business; (iii) have
a materially adverse effect on the business, assets, results of
operations or financial condition of the Company; (iv) restrain,
prohibit, invalidate or put aside, in whole or in part, the
transactions contemplated hereby; (v) question the validity of
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this Agreement or the Registration Rights Agreement or of any
action taken or to be taken by the Company pursuant to or in
connection with the provisions of this Agreement and the
transactions contemplated hereby; or (vi) otherwise prevent or
hinder the consummation of this Agreement or the Registration
Rights Agreement.
4. REPRESENTATIONS AND WARRANTIES OF KENNILWORTH.
Kennilworth represents and warrants to the Company as
follows:
4.1 Organization and Good Standing. Kennilworth (i)
is a partnership duly organized, validly existing and in good
standing under the laws of the state of Delaware, (ii) has all
requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as it is now being
conducted and (ii) is duly qualified or licensed and in good
standing to do business in each jurisdiction in which the
properties owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or license
necessary, except in such jurisdictions where the failure to be
so duly qualified or licensed and in good standing has not had,
either individually or in the aggregate, a material adverse
effect on the business, assets, results of operations or
financial condition of Kennilworth.
4.2 Authority; No Conflict.
(a) Kennilworth has all requisite right, power
and authority to execute, deliver and perform its obligations
under, and consummate the transactions contemplated by, this
Agreement and the other agreements and instruments contemplated
hereby. All proceedings have been taken and all authorizations
have been secured by Kennilworth which are necessary to authorize
the execution, delivery and performance by Kennilworth of this
Agreement and the other agreements and instruments contemplated
hereby.
(b) This Agreement, the Registration Rights
Agreement, and each other document executed and delivered by the
Company hereunder (collectively, "Kennilworth's Closing
Documents") have been duly executed and delivered by Kennilworth;
and each of Kennilworth's Closing Documents constitutes the valid
and binding obligation of Kennilworth, enforceable against
Kennilworth in accordance with their respective terms, except
insofar as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally or by principles
governing the availability of equitable remedies.
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(c) Neither the execution and delivery of
Kennilworth's Closing Documents by Kennilworth nor the
consummation or performance of any of the transactions
contemplated by Kennilworth's Closing Documents by Kennilworth
will give any Person the right to prevent, delay, or otherwise
interfere with any of the transactions contemplated by this
Agreement or the Registration Rights Agreement pursuant to any
legal requirement or order to which Kennilworth may be subject;
or any contract, agreement, obligation, promise or undertaking (a
"Contract") to which Kennilworth is a party or by which
Kennilworth may be bound.
4.3 Approvals or Notices. Except as set forth in
Schedule 4.3, no authorization, approval, order, license, permit,
franchise or consent, and no registration, declaration, notice or
filing by or with any domestic or foreign governmental authority
(including, without limitation, any filing or registration
pursuant to the Securities Act, the Exchange Act or the
securities or blue sky laws of the United States of America or
any state or territory thereof) by Kennilworth is required in
connection with the execution and delivery of Kennilworth's
Closing Documents, the performance by Kennilworth of its
obligations thereunder and the consummation of the transactions
contemplated thereby. Kennilworth is not and will not be
required to give any notice or obtain any consent or approval
from any Person in connection with the execution and delivery of
Kennilworth's Closing Documents or the consummation or
performance of any of the transactions contemplated by
Kennilworth's Closing Documents.
4.4 Ownership of Debentures. Kennilworth is the sole
and absolute record and beneficial owner and holder of the
Debentures; has good and marketable title to, full power of
disposition over and full right to sell and transfer such
Debentures to the Company in accordance with the terms and
conditions of this Agreement; and, upon transfer at the Closing
pursuant to Section 1.1 hereof, such Debentures shall be free and
clear of all liens, encumbrances, charges, assessments and claims
whatsoever.
4.5 Investment Matters. The Securities are being
acquired for Kennilworth's own account and not on behalf of any
other Person, and will not be resold or distributed in violation
of the Securities Act, the Exchange Act or the securities or blue
sky laws of the United States of America or any state or
territory thereof. Kennilworth has received and examined the
Commission Filings. Kennilworth has had the opportunity to ask
questions of and receive answers from the management of the
Company concerning the Company, and has been furnished with all
other information about the Company which it has requested.
Kennilworth believes that it is an "accredited investor" as
defined in Rule 501(a) of the Securities Act, that it has been
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<PAGE>
fully apprised of all facts and circumstances necessary to permit
it to make an informed decision about acquiring the Securities,
that it has sufficient knowledge and experience in business and
financial matters, that it is capable of evaluating the merits
and risks of an investment in the Securities and that it has the
capacity to protect its own interests in connection with the
transactions contemplated by Kennilworth's Closing Documents.
Kennilworth has been advised by the Company and understands that,
except as expressly contemplated by Kennilworth's Closing
Documents, (a) the Securities to be issued hereunder will not be
registered under any securities laws, including, without
limitation, the securities laws of the United States or any other
jurisdiction, (b) the Securities must be held indefinitely unless
and until they are registered or an exemption from registration
becomes available, (c) the Securities shall bear appropriate
restrictive legends and (d) the Company shall have the right to
place a stop order against the Securities prohibiting transfer of
the Securities except in accordance with the Securities Act.
4.6 Certain Proceedings. There is no Proceeding
pending or, to Kennilworth's knowledge, threatened, against,
involving or affecting Kennilworth or Kennilworth's assets,
properties or business, nor is there any judgment, decree,
injunction, rule or order of any court, governmental department,
commission, agency, instrumentality or arbitrator outstanding
against Kennilworth which does or might (i) restrain, prohibit,
invalidate or put aside, in whole or in part, the transactions
contemplated hereby; (ii) question the validity of this Agreement
or of any action taken or to be taken by Kennilworth pursuant to
or in connection with the provisions of this Agreement and the
transactions contemplated hereby; or (iii) otherwise prevent or
hinder the consummation of this Agreement.
4.7 Brokers or Finders. Kennilworth has incurred no
obligation or liability, contingent or otherwise, for brokerage
or finders' fees or agents' commissions or other similar payment
in connection with this Agreement and will indemnify and hold the
Company harmless from any such payment alleged to be due by or
through Kennilworth as a result of the action of Kennilworth or
its agents.
5. COVENANTS OF THE COMPANY.
5.1 Other Debenture Exchanges. To the extent that,
after the date hereof and on or prior to that date which is 90
days after the Closing Date, the Company enters into any
agreements with other holders of Company debentures to exchange
such debentures with other Company securities, any securities
issued by the Company with respect to such exchange shall become
freely tradable, if at all, only after that date which is 90 days
after the Closing Date.
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<PAGE>
5.2 Participation in Rights Offering. Subject to the
requirements of applicable law, Kennilworth shall have the right,
but not the obligation, to participate in the Rights Offering (as
hereinafter defined) as if Kennilworth were the vested owner of
the Common Shares.
5.3 No Diminishment of Capitalization.
Notwithstanding anything contained herein to the contrary,
commencing as of the date hereof through the earlier of (a) the
maturity date of the Note, or (b) the conversion of the Note in
its entirety to Common Stock in accordance with its terms, the
Company agrees that under no circumstances shall it redeem or
otherwise reduce the number of shares of its outstanding Common
Stock without the prior written consent of Kennilworth, except to
the extent required by applicable law, provided the Company gives
Kennilworth forty-five (45) days prior written notice of such
redemption or reduction.
5.4 Series B Certificate of Designation. Promptly
following the Initial Closing Date, the Company shall file a
Certificate of Designation with the Secretary of State of the
State of Delaware designating 100 shares of Series B Convertible
Preferred Stock in form reasonably satisfactory to both the
Company and Kennilworth.
6. CONDITIONS PRECEDENT TO KENNILWORTH'S OBLIGATION TO
CLOSE. Kennilworth's obligation to consummate the transactions
contemplated by this Agreement is subject to the satisfaction, at
or prior to each applicable Closing Date, of each of the
following conditions (any of which may be waived by Kennilworth,
in whole or in part):
6.1 Accuracy of Representations. Each of the
representations and warranties contained in Section 3 hereof must
be accurate in all material respects as of each Closing Date.
6.2 The Company's Performance.
(a) Each of the covenants and obligations that
the Company is required to perform or comply with pursuant to the
Company's Closing Documents at or prior to each Closing Date must
have been performed or complied with in all material respects.
(b) Each document required to be delivered to
Kennilworth pursuant to Section 1.5 or 1.6, as the case may be,
must have been delivered.
(c) On the Initial Closing Date, the Company
shall make a public announcement of the transactions contemplated
by this Agreement, which public announcement shall include
reference to a future rights offering (the "Rights Offering").
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<PAGE>
(d) On or prior to the Second Closing Date, the
Company shall have effectuated the Rights Offering, with net
proceeds to the Company of not less than forty million dollars
($40,000,000).
6.3 Consents. Each of the consents identified in
Schedule 4.3 must have been obtained and must be in full force
and effect.
6.4 No Prohibition. Neither the consummation nor the
performance of any of the transactions contemplated by
Kennilworth's Closing Documents will, directly with, or result in
a material violation of, or cause Kennilworth or any person
affiliated with Kennilworth to suffer any material adverse
consequence under, (a) any applicable legal requirement or order,
or (b) any legal requirement or order that has been published,
introduced, or otherwise proposed by or before any governmental
body. There shall not have been any action taken, or any
statute, rule, regulation, order, judgment or decree enacted,
promulgated, entered, issued or enforced by any governmental
entity, and there shall be no action, suit or proceeding pending,
which (i) makes the transactions contemplated by this Agreement
illegal or imposes, or is reasonably likely to result in the
imposition of, material damages or penalties in connection
therewith or (ii) would, as of or after the Closing, impose
material limitations on the ability of Kennilworth effectively to
exercise full rights of ownership of the securities issued to
Kennilworth hereby, other than those limitations imposed by the
terms of Kennilworth's Closing Documents.
6.5 Additional Documents. Such other documents as
Kennilworth may reasonably request for the purpose of
(i) evidencing the accuracy of any representation or warranty of
the Company, (ii) evidencing the performance by the Company of,
or the compliance by the Company with, any covenant or obligation
required to be performed or complied with by the Company,
(iii) evidencing the satisfaction of any condition referred to in
this Section 6, or (iv) otherwise facilitating the consummation
of any of the transactions contemplated by this Agreement, must
have been delivered to Kennilworth.
6.6 Absence of Injunctions. No permanent or
preliminary injunction or restraining order or other order by any
court or governmental entity of competent jurisdiction or other
legal restraint or prohibition preventing consummation of the
transactions contemplated hereby shall be in effect.
6.7 Effectiveness of Registration Statement. On or
prior to the Initial Closing Date, the SEC shall have declared
effective the Registration Statement (as such term is defined in
the Registration Rights Agreement) and, at the Initial Closing
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<PAGE>
Date and Second Closing Date, the SEC shall not have issued any
order preventing or suspending the use of any preliminary or
final prospectus included in the Registration Statement or
otherwise filed pursuant to Rule 424(b) of the Securities Act.
6.8 No Material Adverse Change. (a) Since the date
hereof nothing shall have occurred which, individually or in the
aggregate, has had or, in the reasonable judgment of Kennilworth,
is reasonably likely to have, a material adverse effect on the
business, assets, results of operations, financial condition or
prospects of the Company.
(b) The Company shall not (1) have applied for
the appointment of, or the taking of possession by, a receiver,
custodian, sequestrator, trustee or liquidator of itself, or of
all or a substantially part of its property, (2) be generally
unable to pay its debts as they become due or have ceased
operations of its present businesses, (3) have made a general
assignment for the benefit of its creditors, (4) commence a
voluntary case under any state or federal bankruptcy laws, (5)
have filed a petition seeking relief under the Bankruptcy Code or
to take advantage of any other law providing for the relief of
debtors, or (6) have taken any corporate action authorizing or
otherwise consenting to the institution of any such proceedings,
filings or have taken any action for the purpose of effecting any
of the foregoing.
7. CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATION TO
CLOSE. The Company's obligation to consummate the transactions
contemplated by this Agreement is subject to the satisfaction, at
or prior to each applicable Closing Date, of each of the
following conditions (any of which may be waived by the Company,
in whole or in part):
7.1 Accuracy of Representations. Each of the
representations and warranties contained in Section 4 hereof must
be accurate in all material respects as of each Closing Date.
7.2 Kennilworth's Performance.
(a) Each of the covenants and obligations that
Kennilworth is required to perform or to comply with pursuant to
Kennilworth's Closing Documents at or prior to each Closing Date
must have been performed and complied with in all material
respects.
(b) Each document required to be delivered to the
Company pursuant to Section 1.5 or 1.6, as the case may be, must
have been delivered.
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7.3 Consents. Each of the consents identified in
Schedule 3.4 must have been obtained and must be in full force
and effect.
7.4 No Prohibition. There shall not be in effect any
legal requirement or any injunction or other order that (a)
prohibits the transactions contemplated hereby and (b) has been
adopted or issued, or otherwise become effective, since the date
hereof.
7.5 Additional Documents. Such other documents as the
Company may reasonably request for the purpose of (i) evidencing
the accuracy of any representation or warranty of Kennilworth,
(ii) evidencing the performance by Kennilworth of, or the
compliance by Kennilworth with, any covenant or obligation
required to be performed or complied with by Kennilworth,
(iii) evidencing the satisfaction of any condition referred to in
this Section 7, or (iv) otherwise facilitating the consummation
of any of the transactions contemplated by this Agreement, must
have been delivered to the Company.
7.6 Absence of Injunctions. No permanent or
preliminary injunction or restraining order or other order by any
court of governmental entity of competent jurisdiction or other
legal restraint or prohibition preventing consummation of the
transactions contemplated hereby shall be in effect.
7.7 Effectiveness of Registration Statement. On or
prior to the Initial Closing Date, the SEC shall have declared
effective the Registration Statement (as such term is defined in
the Registration Rights Agreement) and, at the Initial Closing
Date and Second Closing Date, the SEC shall not have issued any
order preventing or suspending the use of any preliminary of
final prospectus included in the Registration Statement or
otherwise filed pursuant to Rule 424(b) of the Securities Act.
8. INDEMNIFICATION; REMEDIES.
8.1 Indemnification and Payment of Damages by
Kennilworth. Kennilworth will indemnify and hold harmless the
Company, and its directors, officers, employees, agents, advisors
or other representatives ("Representatives"), and will pay to the
Company and its Representatives the amount of any damages
(including, without limitation, any and all attorneys' fees and
expenses) arising, directly or indirectly, from or in connection
with (a) any Breach of any representation or warranty made by
Kennilworth in this Agreement or in any certificate delivered by
Kennilworth pursuant to this Agreement, (b) any Breach by
Kennilworth of any covenant or obligation of Kennilworth in this
Agreement, or (c) any claim by any person for brokerage or
finder's fees or commissions or similar payments based upon any
agreement or understanding alleged to have been made by such
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<PAGE>
person with Kennilworth (or any person acting on its behalf) in
connection with any of the transactions contemplated by this
Agreement. For purposes of this Agreement, a "Breach" shall be
deemed to have occurred if there is any material inaccuracy in,
or material failure to perform or comply with, a representation,
warranty, covenant, obligation or other provision.
8.2 Indemnification and Payment of Damages by the
Company. The Company will indemnify and hold harmless
Kennilworth and its partners, officers, employees, agents,
advisors or other representatives (the "Kennilworth
Representatives") and will pay to Kennilworth and the
Kennilworth Representatives the amount of any damages (including,
without limitation, any and all attorneys' fees and expenses)
arising, directly or indirectly, from or in connection with (a)
any Breach of any representation or warranty made by the Company
in this Agreement or in any certificate delivered by the Company
pursuant to this Agreement, (b) any Breach by the Company of any
covenant or obligation of the Company in this Agreement, or (c)
any claim by any person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or
understanding alleged to have been made by such person with the
Company (or any person acting on its behalf) in connection with
any of the transactions contemplated by this Agreement.
8.3 Procedure for Indemnification--Third Party Claims.
(a) Promptly after receipt by an indemnified
party of notice of the commencement of any Proceeding against it,
such indemnified party will give notice to the indemnifying party
of the commencement of such claim, but the failure to notify the
indemnifying party will not relieve the indemnifying party of any
liability that it may have to any indemnified party, except to
the extent that the indemnifying party demonstrates that the
defense of such action is prejudiced by the indemnified party's
failure to give such notice.
(b) If any Proceeding referred to in Section
8.3(a) is brought against an indemnified party and it gives
notice to the indemnifying party of the commencement of such
Proceeding, the indemnifying party will, unless the claim
involves taxes, be entitled to participate in such Proceeding
and, to the extent that it wishes (unless (i) the indemnifying
party is also a party to such Proceeding and the indemnified
party determines in good faith that joint representation would be
inappropriate, or (ii) the indemnifying party fails to provide
reasonable assurance to the indemnified party of its financial
capacity to defend such Proceeding and provide indemnification
with respect to such Proceeding), to assume the defense of such
Proceeding with counsel satisfactory to the indemnified party
and, after notice from the indemnifying party to the indemnified
party of its election to assume the defense of such Proceeding,
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<PAGE>
the indemnifying party will not, as long as it diligently
conducts such defense, be liable to the indemnified party under
this Section 8 for any fees of other counsel or any other
expenses with respect to the defense of such Proceeding, in each
case subsequently incurred by the indemnified party in connection
with the defense of such Proceeding, other than reasonable costs
of investigation. If the indemnifying party assumes the defense
of a Proceeding, (i) it will be conclusively established for
purposes of this Agreement that the claims made in that
Proceeding are within the scope of and subject to
indemnification; (ii) no compromise or settlement of such claims
may be effected by the indemnifying party without the indemnified
party's consent unless (A) there is no finding or admission of
any violation of legal requirements or any violation of the
rights of any person and no effect on any other claims that may
be made against the indemnified party, and (B) the sole relief
provided is monetary damages that are paid in full by the
indemnifying party; and (iii) the indemnified party will have no
liability with respect to any compromise or settlement of such
claims effected without its consent. If notice is given to an
indemnifying party of the commencement of any Proceeding and the
indemnifying party does not, within ten days after the
indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will be bound by any
determination made in such Proceeding or any compromise or
settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an
indemnified party determines in good faith that there is a
reasonable probability that a Proceeding may adversely affect it
or its affiliates other than as a result of monetary damages for
which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the
indemnifying party, assume the exclusive right to defend,
compromise, or settle such Proceeding, but the indemnifying party
will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its
consent (which may not be unreasonably withheld).
(d) The Company and Kennilworth each hereby
consent to the non-exclusive jurisdiction of any court in which
a Proceeding is brought against any indemnified person for
purposes of any claim that an indemnified person may have under
this Agreement with respect to such Proceeding or the matters
alleged therein, and agree that process may be served on the
Company or Kennilworth with respect to such a claim anywhere in
the world.
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8.4 Procedure for Indemnification--Other Claims. A
claim for indemnification for any matter not involving a
third-party claim may be asserted by notice to the party from
whom indemnification is sought.
9. GENERAL PROVISIONS.
9.1 Termination. This Agreement may be terminated
prior to each of the Closing Dates as follows:
(a) At the election of the Company, if
Kennilworth has materially breached any material representation,
warranty, covenant or agreement contained herein and such breach
is not cured within a reasonable period following notice thereof,
such reasonable period to consist of not less than five (5)
business days;
(b) At the election of Kennilworth, if the
Company has materially breached any material representation,
warranty, covenant or agreement contained herein and such breach
is not cured within a reasonable period following notice thereof,
such reasonable period to consist of not less than five (5)
business days;
(c) At the election of the Company on the one
hand, or Kennilworth, on the other hand, if any action shall have
been instituted and be continuing by any governmental authority
with proper authority to restrain, modify or prohibit the
carrying out of the transactions contemplated hereby; and
(d) At any time prior to each of the Closing
Dates by mutual written agreement of the Company and Kennilworth.
If the Company or Kennilworth, as the case may be,
elects to terminate this Agreement pursuant to Sections 9.1(a),
(b) or (c) hereof, the terminating party shall deliver a notice
to the other party hereto declaring its election to so terminate
this Agreement in accordance with the provisions of such Section,
and setting forth therein the basis for such termination. If
this Agreement so terminates, (a) neither the Company nor
Kennilworth shall have any obligation to consummate any
transactions scheduled for subsequent Closing Dates, (b) any
previously consummated transactions between the parties pursuant
to this Agreement shall remain in full force and effect and
(c) this Agreement shall become null and void and have no further
force or effect (except as provided in Section 9.7 below) as to
the subsequent Closing Dates, if any, but shall remain in full
force and effect as to any consummated Closings; provided, that
nothing contained in this Section shall relieve any party hereto
from liability for any breach of such party's representations,
warranties, covenants or agreements contained herein.
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9.2 Expenses. Except as otherwise expressly provided
in this Agreement, each party to this Agreement will bear its
respective expenses incurred in connection with the preparation,
execution, and performance of this Agreement and the transactions
contemplated by this Agreement, including all fees and expenses
of agents, representatives, counsel and accountants. In the
event of termination of this Agreement, the obligation of each
party to pay its own expenses will be subject to any rights of
such party arising from a breach of this Agreement by another
party.
9.3 Public Announcements. Announcements concerning
the transactions provided for in this Agreement by the Company or
Kennilworth shall be subject to the reasonable prior approval of
the other party in all essential respects, except that (a) the
approval of Kennilworth shall not be required as to any
statements and other information which the Company may be
required to make pursuant to any rule or regulation of the SEC,
or as otherwise required by law, and (b) the approval of the
Company shall not be required as to any statements and other
information which Kennilworth may be required to make pursuant to
any rule or regulation of the SEC or the New York Stock Exchange,
or as otherwise required by law. The provisions of this Section
9.3 shall not be interpreted to limit Kennilworth's ability to
discuss information relating to the transactions contemplated by
this Agreement in accordance with Section 9.4 below.
9.4 Confidentiality. Kennilworth and the Company will
maintain in confidence any confidential information obtained in
the course of the transactions contemplated by this Agreement,
unless (a) such information is already known to such party or to
others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party, (b)
the use of such information is necessary or appropriate in making
any filing or obtaining any consent or approval required for the
consummation of the transactions contemplated by this Agreement,
or (c) the furnishing or use of such information is required by
legal proceedings. If the transactions contemplated by this
Agreement are not consummated, each party will return or destroy
as much of such written information as the other party may
reasonably request.
9.5 Notices. All notices, consents, waivers, and
other communications under this Agreement must be in writing and
will be deemed to have been duly given when (a) delivered by hand
(with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is
mailed by certified mail, return receipt requested, or (c) when
received by the addressee, if sent by a nationally recognized
overnight delivery service (receipt requested), in each case to
the appropriate addresses and telecopier numbers set forth below
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(or to such other addresses and telecopier numbers as a party may
designate by notice to the other parties):
If to Kennilworth:
Kennilworth Partners II LP
40 Cuttermill Road, Suite 308
Great Neck, New York 11021
Attn: Mr. Jeffrey Parket
Telephone: (516) 824-2499
Fax: (516) 829-4106
With a copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Attention: Jayshree Parthasarathy, Esq.
Telephone: (212) 940-8800
Fax: (212) 940-8776
If to the Company:
Applied Magnetics Corporation
75 Robin Hill Road
Goleta, California 93117
Attn: Mr. Craig D. Crisman
Telephone: (805) 683-5353
Fax: (805) 967-2677
With a copy to:
Sheppard, Mullin, Richter & Hampton LLP
333 South Hope Street, 48th Floor
Los Angeles, California 90071
Attn: James J. Slaby, Esq.
Phone: (213) 617-5411
Fax: (213) 620-1398
9.6 Jurisdiction; Service of Process. Any action or
proceeding seeking to enforce any provision of, or based on any
right arising out of, this Agreement may be brought against any
of the parties in the courts of the State of California, County
of Los Angeles, State of New York, New York County or, if it has
or can acquire jurisdiction, in the United States District Court
for the Central District of California or the United States
District Court for the Southern District of New York, and each of
the parties consents to the jurisdiction of such courts (and of
the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein.
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Process in any action or proceeding referred to in the preceding
sentence may be served on any party anywhere in the world.
9.7 Survival of Representations and Warranties.
Except as otherwise expressly provided herein, all covenants and
agreements of the parties hereto shall survive each Closing Date
until performed, and all representations, warranties of the
parties hereto shall survive for eighteen (18) months following
the applicable Closing Date (except for the provisions of
Sections 3.2(b), 4.4, 4.5, 8 and 9, which shall remain in full
force and effect) and shall in no way be affected by any
investigation of the subject matter thereof made by or on behalf
of any party.
9.8 Further Assurances. The parties agree (a) to
furnish upon request to each other such further information
(including, without limitation, information reasonably requested
to confirm fulfillment of the respective party's conditions to
closing), (b) to execute and deliver to each other such other
documents, and (c) to do such other acts and things, all as the
other party may reasonably request for the purpose of carrying
out the intent of this Agreement and the documents referred to in
this Agreement.
9.9 Waiver. The rights and remedies of the parties to
this Agreement are cumulative and not alternative. Neither the
failure nor any delay by any party in exercising any right,
power, or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of
any such right, power, or privilege will preclude any other or
further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum
extent permitted by applicable law, (a) no claim or right arising
out of this Agreement or the documents referred to in this
Agreement can be discharged by one party, in whole or in part, by
a waiver or renunciation of the claim or right unless in writing
signed by the other party; and (b) no waiver that may be given by
a party will be applicable except in the specific instance for
which it is given.
9.10 Entire Agreement and Modification. This Agreement
supersedes all prior agreements between the parties with respect
to its subject matter (including, without limitation, that
certain Exchange Agreement dated as of May 10, 1999, which the
parties agree, upon execution and delivery of this Agreement,
shall be of no further force or effect) and constitutes (along
with the documents referred to in this Agreement) a complete and
exclusive statement of the terms of the agreement between the
parties with respect to its subject matter. This Agreement may
not be amended except by a written agreement executed by the
parties hereto.
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9.11 Assignments, Successors, and No Third-Party
Rights. Neither party may assign any of its rights under this
Agreement without the prior consent of the other parties, which
will not be unreasonably withheld. Subject to the preceding
sentence, this Agreement will apply to, be binding in all
respects upon, and inure to the benefit of the successors and
permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any person other
than the parties to this Agreement any legal or equitable right,
remedy, or claim under or with respect to this Agreement or any
provision of this Agreement. This Agreement and all of its
provisions and conditions are for the sole and exclusive benefit
of the parties to this Agreement and their successors and
assigns.
9.12 Severability. If any provision of this Agreement
is held invalid or unenforceable by any court of competent
jurisdiction, the other provisions of this Agreement will remain
in full force and effect. Any provision of this Agreement held
invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or
unenforceable.
9.13 Section Headings, Construction. The headings of
Sections in this Agreement are provided for convenience only and
will not affect its construction or interpretation. All
references to "Section" or "Sections" refer to the corresponding
Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the
circumstances require. Unless otherwise expressly provided, the
word "including" does not limit the preceding words or terms.
9.14 Governing Law. This Agreement will be governed by
the internal laws of the State of California without regard to
the conflicts of laws principles of such state.
9.15 Counterparts. This Agreement may be executed in
one or more counterparts, each of which will be deemed to be an
original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same
agreement.
9.16 Attorneys' Fees. If any legal action or other
proceeding is brought for the enforcement of this Agreement, or
because of an alleged dispute, breach, default or misrepre-
sentation in connection with any of the provisions of this
Agreement, the successful or prevailing party shall be entitled
to recover reasonable attorneys' fees and other costs incurred in
that action or proceeding, in addition to any other relief to
which it may be entitled.
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<PAGE>
10. Waiver of Jury Trial. THE COMPANY AND KENNILWORTH
HEREBY WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT MATTER OF
THIS AGREEMENT. THIS WAIVER IS KNOWINGLY, INTENTIONALLY, AND
VOLUNTARILY MADE BY THE COMPANY AND KENNILWORTH, AND THE
COMPANY AND KENNILWORTH ACKNOWLEDGE THAT NO PERSON ACTING ON
BEHALF OF ANOTHER PARTY TO THIS AGREEMENT HAS MADE ANY
REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRIAL BY
JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. THE
COMPANY AND KENNILWORTH FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN
REPRESENTED (OR HAVE HAD THE OPPORTUNITY TO BE REPRESENTED) IN
THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY
INDEPENDENT LEGAL COUNSEL, SELECTED OF THEIR OWN FREE WILL, AND
THAT THEY HAVE HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH
COUNSEL.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed and
delivered this Agreement as of the date first written above.
"KENNILWORTH"
KENNILWORTH PARTNERS II LP
By: Kennilworth Advisors LLC,
General Partner
/s/ Adam Wachter
------------------------------
Adam Wachter, Attorney-In-Fact
for Jeffrey Parket
"COMPANY"
APPLIED MAGNETICS CORPORATION
/s/ Craig D. Crisman
------------------------
Craig D. Crisman
Chief Executive Officer
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<PAGE>
Exhibit 2.2
-----------
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (the
"Agreement") is made and effective as of July 14, 1999, by Applied Magnetics
Corporation, a Delaware corporation (the "Company"), and Kennilworth Partners II
LP, a Delaware limited partnership ("Kennilworth").
RECITALS
A. Upon the terms and subject to the conditions of an Amended and
Restated Exchange Agreement, dated as of July 14, 1999 (the "Exchange
Agreement"), by the Company and Kennilworth, Kennilworth has agreed to purchase
six million (6,000,000) shares of the common stock, $0.10 par value ("Common
Stock"), and to loan to the Company an aggregate principal amount of twenty-five
million dollars ($25,000,000) pursuant to the terms of a Senior Subordinated
Convertible Promissory Note (the "Note") by Company in favor of Kennilworth.
Such Note shall be in the aggregate principal amount of thirty-seven million
seven hundred seventy-six thousand seven hundred sixteen dollars ($37,776,716),
reflecting zero coupon interest through the third anniversary of the issuance
date thereof.
B. A material inducement for the parties to execute the Exchange
Agreement is that the Company enter into this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements of the parties contained herein, the parties agree as
follows:
1. Definitions. As used herein, the terms below shall have the
following meanings. Any such term, unless the context otherwise requires, may be
used in the singular or plural, depending upon the reference.
"Affiliate" shall have the meaning provided in the Exchange Act and
the rules and regulations of the Commission promulgated thereunder.
"Agreement" shall mean this Registration Rights Agreement.
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<PAGE>
"Commission" shall mean the United States Securities and Exchange
Commission.
"Common Stock" shall have the meaning provided in Recital A.
"Company" shall mean Applied Magnetics Corporation.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor law, and the rules and regulations issued pursuant to
that Act or any successor law.
"Exchange Agreement" shall have the meaning provided in Recital A.
"Holder" shall mean Kennilworth or any other Person who is the
record owner of the Registrable Shares or any successor or assign thereof.
"Initial Closing Date" shall have the meaning provided in the
Exchange Agreement.
"Kennilworth" shall have the meaning provided in the first paragraph
of this Agreement.
"Note" shall have the meaning provided in Recital A.
"Person" shall mean an individual, partnership, limited liability
company, joint venture, corporation, trust or unincorporated organization or any
other similar entity
"Register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such registration statement or document by the
Commission.
"Registration Expenses" shall mean all expenses incident to the
Company's performance of its obligations under this Agreement, including: (1)
registration and filing fees with the Commission; (2) fees and expenses of
compliance with state securities or blue sky laws (including reasonable fees and
disbursements of blue sky counsel); (3) printing expenses, messenger and
delivery expenses; (4) fees and expenses incurred in connection with the listing
of the Registrable Securities on the New York Stock Exchange or on such
securities exchange as the Common Stock may then be principally traded; and (5)
fees and expenses of counsel for the Company and its independent certified
accountants, including the expenses of any special audits or "cold comfort"
letters.
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<PAGE>
"Registrable Shares" shall mean (a) the Note, (b) the Shares, (c)
any Common Stock of the Company issued to a Holder as a dividend or other
distribution with respect to, or in exchange for or in replacement of, any of
the Shares or (d) any other shares of Common Stock of the Company held by a
Holder; provided, however, that shares of Common Stock shall only be treated as
Registrable Shares if and so long as (i) they have not been sold by Kennilworth
to or through a broker or dealer or underwriter in a public distribution or
otherwise, all pursuant to an effective Registration Statement under the
Securities Act covering the sale of such shares, (ii) they have not been sold in
a transaction exempt from the registration and prospectus delivery requirements
of the Securities Act, including any sale pursuant to Rule 144 under the
Securities Act or any similar provision, so that all transfer restrictions and
restrictive legends with respect thereto are removed upon the consummation of
such sale, or (iii) the Holder shall not have received from the Company an
opinion of counsel reasonably acceptable to the Holder stating that they may
immediately be resold by the Holder pursuant to Rule 144(k) under the Securities
Act without any volume limitation and without any additional unreasonable
expense.
"Securities Act" shall mean the Securities Act of 1933, as amended,
or any successor law, and the rules and regulations issued pursuant to that Act
or any successor law.
"Shares" shall mean (i) the 6,000,000 shares of Common Stock to be
issued and sold by the Company to Kennilworth pursuant to the Exchange Agreement
and (ii) the shares of Common Stock issuable upon conversion of the (A) Senior
Subordinated Convertible Promissory Note in the aggregate principal amount of
thirty-seven million seven hundred seventy-six thousand seven hundred sixteen
dollars ($37,776,716) to be issued and sold by the Company to Kennilworth
pursuant to the Exchange Agreement, or (B) Class B Convertible Preferred Stock
of the Company issuable upon conversion of the Senior Subordinated Convertible
Promissory Note pursuant to Section 2.2.3 of the Note.
"Violation" shall have the meaning provided in Section 9(a).
2. Registration. The Company shall, (i) with respect to the
Registrable Shares excepting the Note, prior to the Initial Closing Date (as
defined in the Exchange Agreement), and (ii) with respect to the Note, as
promptly as practicable following Kennilworth's written request and subject to
applicable laws:
(a) Commission Filing. Prepare and file with the Commission a
registration statement (the "Registration Statement") on a form for which
the Company then qualifies and which shall be available for the sale of
the Registrable Shares in accordance with the intended methods of
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<PAGE>
disposition thereof, and use its reasonable efforts to cause the
Registration Statement to be declared effective as promptly as reasonably
practicable.
(b) Amendments. Prepare and file with the Commission such
amendments and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement (or, at the Company's
discretion, any successor registration statement for which the Company
may, at such time, qualify) effective and to comply with the provisions of
the Securities Act with respect to the disposition of all Registrable
Shares covered by the Registration Statement until the earlier, to the
extent permitted by applicable law, of (1) the maturity date of the Note
in the aggregate principal amount of thirty-seven million seven hundred
seventy-six thousand seven hundred sixteen dollars ($37,776,716) or (2)
such time as the Registrable Shares have been disposed of in accordance
with the intended methods of disposition thereof as set forth in the
Registration Statement.
(c) Prospectus. Furnish to the Holders such number of
conformed copies of the Registration Statement and of each amendment and
supplement thereto (in each case including all exhibits), and such numbers
of copies of the prospectus included in the Registration Statement
(including each preliminary prospectus) and such other documents as they
may reasonably request in order to facilitate the disposition of
Registrable Shares owned by them in accordance with the intended method of
disposition thereof as set forth in the Registration Statement, and cause
all related filings to be made with the Commission as required by Rule
424.
(d) Blue Sky Qualification. Register and qualify the
Registrable Shares covered by the Registration Statement under such
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders (given the intended method of distribution), and
do any and all other acts and things which may be reasonably necessary or
advisable to enable the Holders to consummate the disposition in such
jurisdictions of the Registrable Shares covered by the Registration
Statement; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business
as a foreign corporation or to take any action that would subject it to
service of process in any such states or jurisdictions in suits other than
those arising out the offer and sale of the Registrable Securities covered
by the Registration Statement.
(e) Prospectus Delivery. Promptly notify each Holder of
Registrable Shares covered by the Registration Statement at any time when
the Company becomes aware of the happening of any event as a result of
which the Registration Statement or the prospectus included in the
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<PAGE>
Registration Statement or any supplement to the prospectus (as then in
effect) contains any untrue statement of a material fact or omits to state
a material fact necessary to make the statements therein (in the case of
the prospectus, in light of the circumstances under which they were made)
not misleading or, if for any other reason it shall be necessary during
such time period to amend or supplement the Registration Statement or the
prospectus in order to comply with the Securities Act, whereupon, in
either case, each Holder shall immediately cease to use the Registration
Statement or prospectus for any purpose and, as promptly as practicable
thereafter, the Company shall prepare and file with the Commission, and
furnish without charge to the appropriate Holders, a supplement to or
amendment of the Registration Statement or prospectus which will correct
such statement or omission or effect such compliance and such copies
thereof as the Holders may reasonably request.
(f) Cause the Registrable Shares to be listed on the New York
Stock Exchange or such other securities exchange on which the Common Stock
is principally traded at the time of the filing of the Registration
Statement.
3. The Company shall promptly notify the Holders of the issuance of,
or, to the Company's knowledge, the threatened issuance of any stop order by the
Commission suspending the effectiveness of the Registration Statement or of the
receipt by the Company of any notification with respect to the suspension or
threatened suspension of the qualification of any of the Registrable Securities
for sale under the securities or blue sky laws of any jurisdiction, and the
Company shall take all commercially reasonable action necessary (1) to prevent
the entry of any threatened stop order or any threatened suspension or (2) to
remove any stop order or lift any suspensions once entered.
4. The Company shall use its reasonable best efforts to comply with
all applicable rules and regulations of the Commission.
5. The Company shall pay all Registration Expenses in connection
with the registration of the Registrable Shares pursuant to this Agreement.
6. In connection with the preparation and filing of the Registration
Statement, the Holders shall have the opportunity to provide comments to counsel
to the Company during the preparation of the Registration Statement, each
prospectus included therein or filed with the Commission, and each amendment
thereof or supplement thereto. The Company shall not file the Registration
Statement, any prospectus included therein or any amendment thereof or
supplement thereto with the Commission over the reasonable written objections of
counsel for the Holders, if any; provided, that, if the Company fails to file
the Registration Statement, any prospectus included therein or any amendment
thereof or supplement thereto due to objections raised in accordance with the
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<PAGE>
terms of this Section 6, the Company shall be relieved of its obligation to file
such Registration Statement, prospectus, amendment or supplement pursuant to
Section 2 hereof until such objections have been resolved to the reasonable
satisfaction of the Company and the Holders.
7. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement with
respect to the Registrable Shares of any selling Holder that each Holder shall
furnish to the Company such information regarding itself, the Registrable Shares
held by it, and the intended method of disposition of such securities as the
Company may from time to time reasonably request to prepare the Registration
Statement and maintain its effectiveness.
8. Delay of Registration. No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Agreement.
9. Indemnification.
(a) Indemnification by the Company. To the full extent
permitted by law, the Company will indemnify and hold harmless each
Holder, each of its directors and officers, Bear Stearns & Co., Inc., and
its affiliates, any underwriter (as defined in the Securities Act) for
such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages, or liabilities (joint or several) and
reasonable expenses to which they may become subject under the Securities
Act, the Exchange Act, or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions or proceedings in
respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any
untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement, including any preliminary prospectus or
final prospectus contained therein or any amendments or supplements
thereto, (ii) any omission or alleged omission to state therein a material
fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation of the
Securities Act, the Exchange Act, or any state securities law or any rule
or regulation promulgated under the Securities Act, the Exchange Act, or
any state securities law, and the Company will pay to each such Holder,
director, officer, underwriter or controlling person, as incurred, any
legal or other expenses reasonably incurred by them, including the fees
and expenses of one law firm retained by them, plus appropriate local
counsel, in connection with investigating or defending any such loss,
claim, damage, liability, action or proceeding; provided, however, that
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<PAGE>
the indemnity agreement contained in this Section 9(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability,
action or proceeding if such settlement is effected without the consent of
the Company (which consent shall not be unreasonably withheld), nor shall
the Company be liable in any such case for any such loss, claim, damage,
liability, or proceeding to which any Holder, director, officer,
underwriter or controlling person may become subject to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon
and in conformity with written information furnished expressly for use in
connection with such registration by such Holder, underwriter or
controlling person to the Company. This right to indemnification shall
remain in full force and effect notwithstanding any investigation made by
or on behalf of such Holder or underwriter and shall survive the transfer
of such securities by such Holder.
(b) Indemnification by Holder. To the full extent permitted by
law, each selling Holder severally, but not jointly, will indemnify and
hold harmless the Company, each of its directors, each of its officers who
has signed the registration statement, each person, if any, who controls
the Company within the meaning of the Securities Act or the Exchange Act,
any underwriter (as defined in the Securities Act), any other Holder
selling securities pursuant to the Registration Statement and each person,
if any, who controls any such underwriter or other Holder within the
meaning of the Securities Act or the Exchange Act, against any losses,
claims, damages, or liabilities (joint or several) and reasonable expenses
to which any of the foregoing persons may become subject, under the
Securities Act, the Exchange Act or other federal or state law, insofar as
such losses, claims, damages, or liabilities (or actions or proceedings in
respect thereto) arise out of or are based upon any Violation, in each
case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with the preparation of the
Registration Statement; provided, however, that the indemnity agreement
contained in this Section 9(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided, further, that in no event
shall any indemnity under this Section 9(b) exceed the net proceeds from
the offering received by such Holder.
(c) Procedures. Promptly after receipt by an indemnified party
under this Section 9 of notice of the commencement of any action
(including any governmental action), such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party
under this Section 9, deliver to the indemnifying party a written notice
of the commencement thereof and the indemnifying party shall have the
right to participate in, and, to the extent the indemnifying party so
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<PAGE>
desires, jointly with any other indemnifying party similarly noticed, to
assume the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an indemnified party (together with all
other indemnified parties which may be represented without conflict by one
counsel) shall have the right to retain one separate counsel (plus
appropriate local counsel), with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and
any other party represented by such counsel in such proceeding. The
failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action, if prejudicial in
any material respect to its ability to defend such action, shall to the
extent prejudicial relieve such indemnifying party of any liability to the
indemnified party under this Section 9, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under
this Section 9. No indemnifying party shall consent to the entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to
such indemnifying party of a release from all liability in respect of such
action.
(d) Contribution. If the indemnification provided for in this
Section 9 from the indemnifying party is unavailable to an indemnified
party hereunder in respect of any losses, claims, damages, liabilities or
expenses referred to therein for any reason other than as specified
therein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities
or expenses in such proportion as is appropriate to reflect the relative
fault of the indemnifying party on the one hand and the indemnified
parties on the other in connection with the actions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying
party and indemnified parties shall be determined by reference to, among
other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or related to
information supplied by, such indemnifying party or indemnified parties,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action; provided, however, that in
no event shall the liability of any selling Holder hereunder be greater in
amount than the difference between the dollar amount of the proceeds
received by such Holder upon the sale of the Registrable Shares giving
rise to such contribution obligation and all amounts previously
contributed by such Holder with respect to such losses, claims, damages,
liabilities and expenses. The amount paid or payable to a party as a
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<PAGE>
result of the losses, claims damages, liabilities and expenses referred to
above shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 9(d) were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
(e) Survival. The obligations of the Company and Holders under
this Section 9 shall survive the completion of any offering of Registrable
Shares in a registration statement under this Agreement, and otherwise.
10. Reports Under Exchange Act. With a view to making available to
the Holders the benefits of Rule 144 promulgated under the Securities Act and
any other rule or regulation of the Commission that may at any time permit a
Holder to sell securities of the Company to the public without registration
generally or pursuant to an effective registration statement, the Company agrees
to use reasonable commercial efforts to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) qualify for registration for the sale of Registrable
Shares;
(c) file with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and
the Exchange Act; and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Shares, promptly upon request (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144,
the Securities Act and the Exchange Act, or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3, (ii) a
copy of the most recent annual and/or quarterly report of the Company and
such other reports and documents so filed by the Company, and (iii) such
other information as may be reasonably requested in availing any Holder of
any rule or regulation of the Commission which permits the selling of any
Registrable Shares without registration or pursuant to such form.
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<PAGE>
11. Amendment of Registration Rights. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or prospectively
only with the written consent of the Company and the holders of sixty-six
percent (66%) of the Registrable Shares then outstanding. Any amendment or
waiver effected in accordance with this Section shall be binding upon each
Holder of any Registrable Shares then outstanding, each future holder of all
such Registrable Shares and the Company.
12. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED
AND THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF CALIFORNIA (WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF).
13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
15. Negotiation of Agreement. Each of the parties acknowledges that
it has been represented by independent counsel of its choice throughout all
negotiations that have preceded the execution of this Agreement and that it has
executed the same with consent and upon the advice of said independent counsel.
Each party and its counsel cooperated in the drafting and preparation of this
Agreement and the documents referred to herein, and any and all drafts relating
thereto shall be deemed the work product of the parties and may not be construed
against any party by reason of its preparation. Accordingly, any rule of law or
any legal decision that would require interpretation of any ambiguities in this
Agreement against the party that drafted it is of no application and is hereby
expressly waived. The provisions of this Agreement shall be interpreted in a
reasonable manner to effect the intentions of the parties and this Agreement.
16. Notices. Any notice, request, instruction or other document to
be given hereunder by any party hereto to another party hereto shall be in
writing, shall be deemed to have been duly given or delivered when delivered
personally or telecopied (receipt confirmed, with a copy sent by reputable
overnight courier), or one business day after delivery to a reputable overnight
courier, postage prepaid, to the address of the party set forth below such
person's signature on this Agreement or to such address as the party to whom
notice is to be given may provide in a written notice to each of the other
parties to this Agreement, a copy of which written notice shall be on file with
the Secretary of the Company.
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<PAGE>
17. Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms to the fullest extent permitted by law.
18. Further Assurances. Each of the parties shall, without further
consideration, use reasonable efforts to execute and deliver such additional
documents and take such other action as the other parties, or any of them may
reasonably request to carry out the intent of this Agreement and the
transactions contemplated hereby.
19. Successors and Assigns. This Agreement shall be binding upon,
and all rights hereto shall inure to the benefit of, the parties hereto, and
their respective successors and permitted assigns.
20. Entire Agreement. This Agreement embodies the entire agreement
and understanding of the parties hereto in respect of the actions and
transactions contemplated by this Agreement. The parties agree that the terms of
this Agreement supersede any and all prior agreements between the parties,
including without limitation that certain Registration Rights Agreement dated as
of May 10, 1999, which, upon execution and delivery of this Agreement, shall be
of no further force or effect. There are no restrictions, promises, inducements,
representations, warranties, covenants or undertakings with regard to the
registration of the Company's capital stock pursuant to the Securities Act,
other than those expressly set forth or referred to in this Agreement.
21. Recapitalizations, etc. The provisions of this Agreement
(including any calculation of share ownership) shall apply, to the full extent
set forth herein with respect to the Registrable Shares, to any and all shares
of capital stock of the Company or any capital stock, partnership units or, any
other security evidencing ownership interests in any successor or assign of the
Company (whether by merger, consolidation, sale of assets or otherwise) that may
be issued in respect of, in exchange for, or in substitution of the Common Stock
or the Preferred Stock that is issuable upon exercise of the Note by reason of
any stock dividend, split, combination, recapitalization, liquidation,
reclassification, merger, consolidation or otherwise.
(Signature Pages Follow)
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
APPLIED MAGNETICS CORPORATION
By: /s/ Craig D. Crisman
________________________________
Craig D. Crisman,
Chairman of the Board and
Chief Executive Officer
Address:
75 Robin Hill Road
Goleta, California 93117
Attention: Chief Executive Officer
Telecopier: (805) 967-2677
KENNILWORTH PARTNERS II LP
By: Kennilworth Advisors LLC, general partner
By: /s/ Adam Wachter
________________________________
Adam Wachter
Its: Attorney-In-Fact for
Jeffrey Parket
Address:
40 Cuttermill Road, Suite 308
Great Neck, New York 11021
S-1
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