APPLIED MAGNETICS CORP PRE 14A
Filing Date: 12/5/97
APPLIED MAGNETICS CORPORATION
[Logo] 75 Robin Hill Road
Goleta, California 93117
January _, 1998
DEAR STOCKHOLDERS:
You are cordially invited to attend the Annual Meeting of Stockholders of
Applied Magnetics Corporation to be held at 4:00 p.m., local time, on Friday,
February 6, 1998, at the Company's facility at 75 Robin Hill Road, Goleta,
California, 93117. A copy of the Notice of Annual Meeting of Stockholders,
Proxy Statement and Proxy are enclosed. Stockholders of record on December 15,
1997, will be entitled to vote at the meeting. A formal notice setting forth
the business to come before the meeting and a proxy statement is attached.
A copy of the Annual Report for the fiscal year ended September 27, 1997, is
being delivered to each stockholder of the Company concurrently with the
enclosed proxy material.
WHETHER YOU PLAN TO ATTEND THE ANNUAL MEETING OR NOT, YOU ARE REQUESTED TO SIGN,
DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE IN
ORDER THAT AS MANY SHARES AS POSSIBLE MAY BE REPRESENTED AT THE ANNUAL MEETING.
Sincerely,
Craig D. Crisman
Chairman and Chief Executive Officer
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APPLIED MAGNETICS CORPORATION
75 ROBIN HILL ROAD
GOLETA, CALIFORNIA 93117
__________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
__________________________
To The Stockholders of
Applied Magnetics Corporation:
The Annual Meeting of Stockholders of Applied Magnetics Corporation (the
"Company") will be held at the Company's facility at 75 Robin Hill Road, Goleta,
California, 93117, on Friday, February 6, 1998 at 4:00 p.m, local time, for the
following purposes:
1. To elect five directors of the Company to serve for the ensuing year
and until their successors have been elected and qualified;
2. To consider and act upon a proposal to amend the Company's 1994
Employee Stock Option Plan to increase the number of shares of Common Stock
reserved for issuance thereunder from 3,250,000 to 5,350,000;
3. To consider and act upon a proposal to amend the Company's 1994 Non-
Employee Directors' Stock Option Plan to increase the number of shares of Common
Stock reserved for issuance thereunder from 150,000 to 300,000;
4. To approve an amendment to the Company's Certificate of Incorporation,
to increase the number of shares of Common Stock authorized for issuance from
40,000,000 to 80,000,000;
5. To approve and ratify the financing transaction described in the
accompanying Proxy Statement;
6. To ratify the appointment of Arthur Andersen LLP, independent
certified public accountants, as auditors for the Company for the fiscal year
ending October 3, 1998; and
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7. To transact such other business as may properly come before the Annual
Meeting and any adjournment thereof.
Stockholders of record at the close of business on December 15, 1997, will
be entitled to receive notice of, and to vote at, the Annual Meeting and any
adjournment thereof.
Craig D. Crisman
Chairman and Chief Executive Officer
Goleta, California
January _, 1998
YOUR VOTE IS IMPORTANT
Please immediately date, sign, and return your proxy in the enclosed envelope.
If you attend the meeting, you may withdraw your proxy and vote in person.
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APPLIED MAGNETICS CORPORATION
PROXY STATEMENT
INFORMATION CONCERNING VOTING AND PROXY SOLICITATION
GENERAL
The enclosed Proxy Statement is solicited on behalf of the Board of
Directors of Applied Magnetics Corporation (the "Company") for use at the Annual
Meeting of Stockholders (the "Meeting") to be held February 6, 1998, at the
Company's facility at 75 Robin Hill Road, Goleta, California, 93117, at 4:00
p.m., local time, and at any adjournments thereof. The Company's principal
offices are located at 75 Robin Hill Road, Goleta, California, 93117, and its
telephone number is 805/683-5353.
These proxy solicitation materials are to be mailed on or about January _,
1998 to all stockholders entitled to vote at the meeting.
REVOCABILITY
A stockholder giving a proxy has the power to revoke it at any time before
it is exercised by filing with the Secretary of the Company an instrument
revoking it or a duly executed proxy bearing a later date or by personal
attendance and voting at the Annual Meeting. Subject to such revocation, all
shares represented by each properly executed proxy received by the Company will
be voted in accordance with the instructions indicated thereon, and if
instructions are not indicated, will be voted (i) for the election of the
nominees for director named in this Proxy Statement; (ii) in favor of the
amendment to the 1994 Employee Stock Option Plan (the "1994 Plan") to increase
shares reserved for issuance under the 1994 Plan, by 2,100,000; (iii) in favor
of the amendment to the 1994 Non-Employee Directors' Stock Option Plan (the
"1994 Directors' Plan") to increase shares reserved for issuance under the 1994
Directors' Plan, by 150,000; (iv) in favor of the increase in the number of
shares of Common Stock authorized under the Certificate of Incorporation; (v) to
approve and ratify the financing transaction described herein (the "Financing
Transaction"); and (vi) in favor of the ratification of Arthur Andersen LLP as
the Company's independent auditors for the fiscal year ending October 3, 1998.
The Board is not aware of any matters that are expected to come before the
Annual Meeting other than those referred to in this Proxy Statement. If any
other matter should come before the Annual Meeting, the persons named in the
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accompanying proxy intend to vote such proxies in accordance with their best
judgment.
RECORD DATE AND VOTING
As of December 15, 1997 (the "Record Date"), the outstanding voting
securities of the Company consisted of ___,___,___ shares of $.10 par value
Common Stock. The presence in person or by proxy of holders of a majority of the
issued and outstanding Common Stock will constitute a quorum for the transaction
of such business as shall properly come before the meeting.
Each share of Common Stock has one vote on all matters. Stockholders do
not have the right to cumulate their votes in the election of directors.
The cost of soliciting proxies will be borne by the Company. The Company
is retaining Chase Mellon Shareholder Services to solicit proxies for a cost of
approximately $5,000 plus out-of-pocket expenses. In addition, the Company
expects to reimburse brokerage firms and other persons representing beneficial
owners of shares for their expenses in forwarding solicitation material to such
beneficial owners. Proxies may be solicited by certain of the Company's
directors, officers and regular employees, without additional compensation, in
person or by telephone or telegram.
Generally, stockholder approval of a matter, other than the election of
directors, requires the affirmative vote of a majority of the shares of Common
Stock present in person or represented by proxy and entitled to vote on the
matter. Directors are elected by a plurality of the votes of the shares present
in person or by proxy and entitled to vote on the election of directors. The
affirmative vote of the majority of the shares present, in person or by proxy at
the meeting and entitled to vote is required for approval of the amendment to
the 1994 Plan, approval of the amendment to the 1994 Directors' Plan, approval
and ratification of the Financing Transaction, and ratification of the selection
of the Arthur Andersen LLP as Company independent auditors. Passage of the
proposal to approve an amendment to the Company's Certificate of Incorporation
to provide for an increase in the Company's authorized Common Stock requires the
approval of a majority of the outstanding Common Stock.
Shares voted to abstain on a matter will be treated as entitled to vote on
the matter and will thus have the same effect as "no" votes. Broker non-votes
are not counted as entitled to vote on a matter in determining the number of
affirmative votes required for approval of the matter, but are counted as
present for quorum purposes.
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The term "broker non-votes" refers to shares held by a broker in street name
which are present by proxy but are not voted on a matter pursuant to rules
prohibiting brokers from voting on non-routine matters without instructions from
the beneficial owner of the shares. The election of directors and ratification
of the selection of independent certified public accountants are generally
considered to be routine matters on which brokers may vote without instructions
from beneficial owners. The New York Stock Exchange determines whether brokers
have discretionary authority to vote on a given proposal.
SECURITY OWNERSHIP BY PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table contains certain information regarding beneficial
ownership of the Company's Common Stock as of December 15, 1997 by (i) each
person which is known by the Company to own beneficially more than 5% of the
Company's Common Stock, (ii) each of the Company's directors, (iii) the Chief
Executive Officer and the Company's other most highly compensated executive
officer (the two officers shall be referred to as the "Named Executive
Officers"), and (iv) all directors and executive officers as a group:
Percent
Shares Beneficially of
Name Owned Class
---- ------------------- -----
NON-EMPLOYEE DIRECTORS:
Herbert M. Dwight, Jr 28,998(1) *
Harold R. Frank 869,161(2) 3.6
Jerry E. Goldress 19,999(3) *
R.C. Mercure, Jr 35,531(1)(2) *
EXECUTIVE OFFICERS:
Craig D. Crisman 344,643(4) *
Peter T. Altavilla 10,708(5) *
All Directors and Named Executive Officers
as a Group (6 persons) 1,187,551(6) 5.5
---------------------
* less than 1%
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(1) Includes, as to each of Messrs. Mercure and Dwight, options, exercisable
within 60 days, to purchase 29,998 shares under the Company's 1994
Directors' Plan
(2) Includes 578,607 shares held by Mr. Frank as Trustee of the Catherine M.
and Harold R. Frank Trusts. Does not include 53,700 shares held by
Wilmington Trust Company, as sole Trustee under irrevocable trusts for
three of Mr. Frank's grandchildren, as to all of which he disclaims any
beneficial interest. Includes 1,558 shares held by Mr. Frank as custodian
under the California Uniform Transfers to Minors Act, as to which shares he
disclaims any beneficial interest. Includes options, exercisable within 60
days to purchase 18,332 shares under the Company's 1994 Directors' Plan.
(3) Includes options, exercisable within 60 days, to purchase 19,999 shares
under the Company's 1994 Directors' Plan. See "Certain Relationships and
Related Transactions".
(4) Includes currently exercisable options to purchase 119,643 shares to Mr.
Crisman, pursuant to the arrangement between Grisanti, Galef & Goldress,
Inc. ("GG&G") and the Company. See "Certain Relationships and Related
Transactions". Includes options, exercisable within 60 days, to purchase
225,000 shares pursuant to options granted under employee stock option
plans.
(5) Includes options to purchase 8,750 shares exercisable within 60 days
pursuant to options granted under employee stock option plans.
(6) Includes options to purchase 451,720 shares exercisable within 60 days.
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PROPOSAL NO. 1
NOMINATION AND ELECTION OF DIRECTORS
DIRECTORS AND NOMINEES FOR DIRECTOR
Five directors, constituting the entire Board of Directors, are to be
elected at the Annual Meeting to hold office until the next Annual Meeting and
until their successors are elected and qualified. Unless otherwise instructed,
the proxy holders intend to vote the proxies received by them for the election
of the nominees named below, all of whom are now members of the Board. It is
not anticipated that any of the nominees will decline or be unable to serve as a
director. If, however, that should occur, the proxy holders will vote the
proxies in their discretion for any nominee designated by the present Board of
Directors to fill the vacancy. Each of the directors nominated was elected at
the 1997 Annual Meeting.
The following table sets forth certain information concerning each person
nominated for election as director:
NAME AGE DIRECTOR SINCE POSITION OR OFFICE
---- --- -------------- ---------------------------
Craig D. Crisman 56 1994 Chairman of the Board and
Chief Executive Officer of
the Company
Harold R. Frank 73 1957 Chairman Emeritus of the
Company and Director
Herbert M. Dwight, Jr. 67 1989 Director
Jerry E. Goldress 67 1995 Director
R.C. Mercure, Jr. 66 1982 Director
Mr. Crisman became an employee of the Company on August 1, 1995. Prior to
that time, commencing in 1981, he was a member of GG&G. GG&G was engaged by the
Company on August 1, 1994, to provide crisis management and turnaround services
to the Company. The turnaround engagement was determined to have been
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successfully completed on July 27, 1995. Mr. Crisman was elected Chief
Executive Officer and a director of the Company on August 1, 1994. He was
elected Chairman of the Board on November 3, 1995.
Mr. Frank, founder of the Company, was named Chairman Emeritus of the
Company on November 3, 1995. He is also director of Circon Corporation, a
producer of endoscopes and ultra miniature color video cameras for medical and
industrial applications, Trust Company of the West, a financial institution, and
Key Technology, Inc., a manufacturer of automated food processing systems.
Mr. Dwight is, and for more than five years has been, President and
Chairman of Optical Coating Laboratory, Inc., which is engaged in the design,
development and production of precision optical thin film components. He is
also a director of Applied Materials, Inc., a wafer fabrication equipment
manufacturer.
Mr. Goldress is, and for more than five years has been, Chief Executive
Officer of GG&G. Mr. Goldress is also a director of K2, Inc., a manufacturer of
snow skis and fishing tackle and of Artisoft, Inc., a computer software company.
For additional information concerning the relationship between GG&G and the
Company see "Certain Relationships and Related Transactions".
Dr. Mercure is, and for a period of more than five years, has been,
Professor and Director of the Engineering Management Program at the University
of Colorado at Boulder. Dr. Mercure has been a director of the Company since
1982. He is also a director of Ball Corporation, a manufacturer of metal and
plastic containers.
VOTE REQUIRED
The five nominees receiving the highest number of affirmative votes of the
shares present or represented and entitled to be voted for them shall be elected
as directors. Votes withheld from any director are counted for purposes of
determining the presence or absence of a quorum for the transaction of business,
but have no legal effect under Delaware law. While there is no definitive
statutory or case law authority in Delaware as to the proper treatment of
abstentions in the election of directors, the Company believes that abstentions
should be counted for purposes of determining whether a quorum is present at the
Annual Meeting for the transaction of business. In the absence of controlling
precedent to the contrary, the Company intends to treat abstentions with respect
to the election of directors in this manner.
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SPECIAL COMMITTEES AND ATTENDANCE AT MEETINGS
The Board of Directors has an Audit Committee whose members in fiscal 1997
were Messrs. Frank and Goldress and Dr. Mercure. The Board of Directors also
has a Compensation Committee whose members in fiscal 1997 were Messrs. Dwight,
Frank and Goldress.
The Audit Committee makes recommendations regarding the selection of
independent public accountants, reviews reports from its independent public
accountants and reviews with them the scope and results of the audit engagement.
During fiscal year 1997, there was one meeting of the Audit Committee.
The Compensation Committee reviews and makes recommendations to the Board
concerning the Company's executive compensation policy, authorizes and approves
the grant of options and awards to executive officers and key employees under
the Company's stock option and long-term incentive plans. See "Remuneration of
Directors". During fiscal year 1997, the Compensation Committee met on four
occasions.
The Board of Directors does not have a nominating committee or any other
committee which performs a similar function.
During fiscal year 1997, the Board met nine times. Each director attended
more than 75% of the Board meetings and meetings of any committees on which he
served during the year.
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PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO THE APPLIED MAGNETICS
CORPORATION 1994 EMPLOYEE STOCK OPTION PLAN
GENERAL
Under the 1994 Employee Stock Option Plan (the "1994 Plan"), 1,000,000
shares of Common Stock were initially reserved for issuance upon the exercise of
options which may be granted from time-to-time to officers and certain employees
of the Company and its subsidiaries. At the 1996 annual meeting of stockholders,
an amendment to increase the number of shares reserved for issuance, to
2,100,000, was approved. At the 1997 annual meeting, the stockholders approved
an amendment to increase the number of shares reserved for issuance to
3,250,000. The proposed amendment to the 1994 Plan, approved by the Board of
Directors, would increase the number of shares reserved for issuance under the
1994 Plan by 2,100,000 and is subject to approval by the stockholders of the
Company. The 1994 Plan permits the award of both Non-Qualified and Incentive
Stock Options.
The purpose of the 1994 Plan is to attract and retain executives and
certain other employees and to secure for the Company the benefits of the
incentive inherent in equity ownership by employees who are responsible for the
continuing growth and success of the Company. The Company believes that equity
based compensation arrangements such as stock options enhance the Company's
ability to attract and retain key technical, engineering and management
personnel who can make significant contributions to its future success.
The Company has considered prevailing compensation practices in the
industry in which it competes for these people and, particularly, compensation
and benefits being offered by companies engaged in recruitment efforts affecting
both the Company's personnel and those employment candidates whom the Company
itself may, from time-to-time, seek to recruit. On the basis of these
considerations, the Company believes that stock options are important
compensation elements, particularly during periods, such as those recently
experienced, when the disk drive industry is undergoing substantial changes and,
as a result, there is increased competition for attracting and retaining key
technical management and scientific resources. Moreover, this form of
compensation closely aligns employees' interests in the Company's success and
growth with similar interests of the Company's stockholders.
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As of the date of this proxy statement, options have been granted
under the 1994 Plan to purchase 1,670,014 shares of Common Stock, 612,701
options have been exercised and 967,285 shares are currently reserved for future
grants.
The Compensation Committee ("Committee") or the Board of Directors shall
determine the number of options to be granted to any executive officer or
employee of the Company, either individually or as a group. The exercise price
of options, when granted, will be not less than the fair market value of the
Company's Common Stock on the date of grant.
The following description summarizes certain provisions of the 1994 Plan.
This description is subject to, and is qualified in its entirety by, the full
text of the 1994 Plan and the defined terms used therein.
TERM
The 1994 Plan will continue in effect until terminated by the Company's
Board of Directors. However, in accordance with the requirements of federal tax
law, no Incentive Stock Options will be granted under the 1994 Plan more than
ten years following its effective date.
ELIGIBILITY
Key employees of the Company and its subsidiaries are eligible to receive
option grants under the 1994 Plan. Options may be granted to those persons
whose performance the Committee determines can have a significant effect on the
success of the Company. The Committee has the discretion to designate which
persons shall be granted options under the 1994 Plan, to determine whether
options, will be granted as Nonqualified or Incentive Stock Options and to
determine the terms of the options.
ADMINISTRATION AND OPERATION OF THE 1994 PLAN
The 1994 Plan is administered entirely by the Committee which has the
authority to interpret and determine all questions of policy pertaining to the
1994 Plan and to adopt such rules, regulations, agreements and instruments as it
deems necessary for its proper administration and take any and all other actions
it deems necessary or advisable for the proper administration of the 1994 Plan.
The 1994 Plan authorizes the grant of options to officers, executives and
other key employees of the Company and its subsidiaries. The Committee will
determine
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which officers, executives and other key employees ("Optionees") are eligible to
participate in the 1994 Plan. Selections for participation in the 1994 Plan and
the amount of options to be granted will be determined on the basis of the
Committee's belief as to the individual contribution to the growth of the
Company that those employees have made in the past and can make in the future,
based on their abilities and positions within the Company.
In addition, the 1994 Plan includes provisions which permit the Committee
to amend the plan from time-to-time in order to limit the options that may be
granted to certain executive officers. This limitation provision, which may be
expressed in either absolute terms or as a percentage of shares available, may
be imposed, at the Committee's discretion, if necessary to avoid circumstances
in which aggregate compensation paid by the Company to certain executives during
certain periods may not be deductible to the Company under Section 162(m) of the
Internal Revenue Code to the extent such aggregate compensation exceeds $1
million. See "Report of Compensation Committee--Chief Executive Officer's
Compensation-- Policy With Respect to Internal Revenue Code Section 162(m)."
STOCK AVAILABLE FOR AWARD
Provided the amendment to the 1994 Plan is approved by the stockholders,
the aggregate number of shares of Common Stock reserved for future issuance upon
exercise of options granted under the 1994 Plan shall not exceed 4,737,299
shares.
NONQUALIFIED AND INCENTIVE STOCK OPTIONS
Stock options may be granted under the 1994 Plan as either Incentive Stock
Options within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code") or Non-qualified Stock Options (i.e., stock options
which are not Incentive Stock Options).
The exercise price of options is set by the Committee and stated in the
option agreement. The exercise price may not be less than 100% of the fair
market value of the Common Stock on the date of the grant.
The exercise price may be paid in cash or by delivery of a cashier's or
certified check or a check issued by a broker-dealer which is a member firm of
the New York Stock Exchange, or at the discretion of the Committee, by delivery
of shares of the Company's Common Stock already owned by the Optionee; or any
combination of
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the foregoing. Options granted under the 1994 Plan will expire not later than
ten years after the date of |
