EXHIBIT 10.1
EXECUTION VERSION
AMENDED AND RESTATED
EXCHANGE AGREEMENT
By and Between
APPLIED MAGNETICS CORPORATION
and
KENNILWORTH PARTNERS II LP
Dated as of June 29, 1999
AMENDED AND RESTATED EXCHANGE AGREEMENT
This Amended and Restated Exchange Agreement (the "Agreement") is made
as of June 29, 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:
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1. STOCK PURCHASE; BOND PURCHASE.
1.1 STOCK PURCHASE. Subject to the terms and conditions of this
Agreement,
(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 three million
(3,000,000) Common Shares to Kennilworth (the "Tranche
One Shares"), and Kennilworth will purchase the Tranche
One Shares from the Company;
(b) On that day which is forty-five (45) days after the
Initial Closing Date (the "Second Closing Date"), the
Company will issue and sell one million five hundred
thousand (1,500,000) Common Shares to Kennilworth (the
"Tranche Two Shares"), and Kennilworth will purchase the
Tranche Two Shares from the Company; and
(c) On that day which is ninety (90) days after the Initial
Closing Date (the "Third Closing Date" and, together with
the First Closing Date and the Second Closing Date, the
"Closing Dates") the Company will issue and sell one
million five hundred thousand (1,500,000) Common Shares to
Kennilworth (the "Tranche Three Shares"), and Kennilworth
will purchase the Tranche Three 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 twelve million
dollars ($12,000,000) (the "Tranche One Purchase Price"); (b) the
Tranche Two Shares will be six million dollars ($6,000,000) (the
"Tranche Two Purchase Price); and (c) the Tranche Three Shares will be
six million dollars ($6,000,000) (the "Tranche Three Purchase Price").
The respective Share Purchase Prices shall be paid to the Company on
each of the three 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.
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1.4 DEBENTURE PURCHASE.
(a) On the Initial Closing Date, the Company shall tender
payment in the amount of twelve million dollars
($12,000,000) (the "Tranche One Debenture Payment") and
purchase from Kennilworth Debentures in the aggregate
principal amount of twelve million dollars ($12,000,000)
(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 six million dollars ($6,000,000) (the
"Tranche Two Debenture Payment) and purchase from
Kennilworth Debentures in the aggregate principal amount of
six million dollars ($6,000,000) (the "Tranche Two
Debentures") and any and all interest due on such Tranche
Two Debentures through the Second Closing Date; and
(c) On the Third Closing Date, the Company shall tender payment
in the amount of six million dollars ($6,000,000) (the
"Tranche Three Debenture Payment") and purchase from
Kennilworth Debentures in the aggregate principal amount
of six million dollars ($6,000,000) (the "Tranche Three
Debentures") and any and all interest due on such Tranche
Three Debentures through the Third Closing Date.
(d) The Tranche One Debenture Payment, Tranche Two Debenture
Payment and Tranche Three Debenture Payment shall be paid
to Kennilworth on each of the three 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) an Amended and Restated Registration Rights
Agreement substantially in the form of
Exhibit C hereto, executed by the Company
(the "Registration Rights Agreement");
(v) 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
(vi) such other agreements, certificates or
documents as may be reasonably requested by
Kennilworth.
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(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) the Registration Rights Agreement, executed
by Kennilworth;
(v) 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
(vi) 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:
(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.
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1.7 THIRD CLOSING DATE OBLIGATIONS. On the Third Closing Date:
(a) The Company will deliver to Kennilworth:
(i) a certificate representing the Tranche
Three Shares;
(ii) the Tranche Three Debenture Payment and
any and all interest due on the Tranche
Three Debentures through the Third 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 Third Closing Date; and
(iv) such other agreements, certificates or
documents as may be reasonably requested by
the Company.
(b) Kennilworth will deliver to the Company;
(i) the Tranche Three Purchase Price;
(ii) the Tranche Three 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 Third Closing Date; and
(iv) such other agreements, certificates or
documents as may be reasonably requested by
the Company.
1.8 CLOSING DELIVERIES. All deliveries made at each of the Initial,
Second and Third 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 issued upon conversion of the Note
(collectively with the Common Stock, if any, issued as dividends, 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:
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.
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2.2 REMOVAL OF LEGENDS.
(a) 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
[and, as of the Initial Closing Date, 100 shall be
designated as Series B Convertible Preferred Stock]. As of
the 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
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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 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
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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 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
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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 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,
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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
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
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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, the
Note 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.
(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
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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
the Securities are being acquired by Kennilworth for investment
purposes only and not with a view to, or for sale in connection with,
any resale or distribution of the Securities which would be 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 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.
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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.
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.
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.
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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, 1.6 or 1.7, 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").
(d) On or prior to the Second Closing Date, the Company shall
have filed a registration statement covering the Rights
Offering.
(e) On or prior to the Third 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.
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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 each 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.
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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, 1.6 or 1.7, as the case may be,
must have been delivered.
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 each 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.
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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
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
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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, 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
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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.
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
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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.
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
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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 (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
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Rosenman & Colin LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company:
Applied Magnetics Corporation
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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With a copy to:
Sheppard, Mullin, ▇▇▇▇▇▇▇ & Hampton LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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. 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
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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.
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.
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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 misrepresentation 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.
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,
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AND THAT THEY HAVE HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
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/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Managing Member
"COMPANY"
APPLIED MAGNETICS CORPORATION
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Executive Officer
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SCHEDULE 3.2
VOTING SECURITIES AND OUTSTANDING OPTIONS AND WARRANTS
As of April 29, 1999:
(1) 41,736,741 shares of the Company's common stock (the "Common
Stock") were outstanding. Such number includes 309,406
shares of Common Stock which have been issued to JAFCO
America Ventures, Inc., but for which no consideration has
been received.
(2) 5,000,000 shares of the Company's preferred stock were
authorized and none of such shares were outstanding.
(3) 6,199,947 shares of Common Stock were reserved for future
issuance pursuant to the terms of the 7% Convertible
Subordinated Debentures due 2006.
(4) 6,445,345 shares of Common Stock were reserved for issuance
pursuant to outstanding options or warrants issued under
various benefit plans.
(5) 276,750 shares of Common Stock were reserved for issuance
pursuant to options and warrants relating to the Company's
acquisition of DAS Devices, Inc., a Delaware corporation.
(6) Warrants for 1,000,000 shares of Common Stock were issued
and outstanding.
(7) Options for 4,175,122 shares of Common Stock were issued and
outstanding.
-1-
Schedule 3.4
REQUIRED CONSENTS
1. Certain filings must be made with the Securities and Exchange
Commission.
-2-
Schedule 3.7
BROKER FEES
None.
-3-
Schedule 3.8
MATERIAL CHANGES
The Company continues to experience financial difficulties, as
described in the Company's Quarterly Report on Form 10-Q for the quarters
ended April 3, 1999, and January 2, 1999, and the Company's press release
dated April 22, 1999, which discusses the Company's financial results for the
first six months and the second quarter of its current fiscal year.
-4-
Schedule 3.9
PENDING AND THREATENED LITIGATION
The Company is involved in litigation captioned APPLIED MAGNETICS
CORPORATION VS. JAFCO AMERICA VENTURES, INC., Santa ▇▇▇▇▇▇▇ Superior Court, Case
Number 229327. This action relates to breach of a contract pursuant to which
JAFCO America Ventures, Inc., was to purchase securities from the Company.
The Company has received correspondence dated June 10, and
September 21, 1998, from attorneys representing the Lemelson Medical,
Education & Research Foundation LP (the "Foundation") claiming that the
Company has infringed Foundation patents. To date, the Company has not
responded to the correspondence from the Foundation's lawyers. At this time
it is not possible to estimate the potential liability, if any, of the
Company to the Foundation or the extent to which any such liability may be
offset by possible claims against others.
The Company has also been named as a defendant in ▇▇▇▇▇▇▇ VS. DAS
DEVICES, INC., ET AL., an employment lawsuit filed in ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇ ▇▇. ▇▇ ▇▇▇▇▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, in Palo Alto,
California, has been defending DAS and the other defendants (other than the
Company). The Company was named as a defendant in a recently filed amended
complaint. No decision has been made as to the law firm that will defend the
Company is this lawsuit. We understand that to date an insurance carrier has
paid defense costs.
Comdisco, Inc. and Leasing Technologies International, Inc.,
companies that lease equipment, each filed a complaint against DAS Devices
and the Company on June 4 and 14, 1999, respectively, in the California
Superior Court for the County of Santa ▇▇▇▇▇. Venture Lending & Leasing, Inc.
and Venture Lending & Leasing II, Inc., companies that finance equipment
purchases, jointly filed a complaint against DAS Devices and us on June 8,
1999, in the California Superior Court for the County of Santa ▇▇▇▇▇. These
complaints allege, among other things, that these companies leased equipment
or made equipment financing available to DAS Devices, that DAS Devices
breached its agreements with them by failing to make lease or loan payments
and that we were required, and have failed, to assume those obligations. The
companies seek to recover, among other things:
- money damages, upon accelerating the obligations under the
agreements, totaling $6,843,695 plus additional money damages for other
losses to be proved;
- interest; and
- attorneys fees and costs of suit.
Three of the companies also seek punitive damages.
Two of the complaints also allege that the Company improperly
transferred unique and proprietary magnetoresistive and giant
magnetoresistive technologies from DAS Devices to the Company for inadequate
consideration, and seek an order setting aside the transfer of those
technologies and restraining the Company from using or transferring those
technologies. One of the complaints also names ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇
and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, executive officers of the Company, as defendants,
alleging that they breached a duty to these companies to not use their
control of DAS unfairly for the Company's and their benefit.
-5-
Schedule 4.3
REQUIRED CONSENTS
Certain filings must be made with the Securities and Exchange
Commission.