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                                                                  EXHIBIT 10(AA)
 
                                   AGREEMENT
 
    THIS AGREEMENT (the "Agreement"), made and entered into as of the    day of
November, 1996, by and between APPLIED MAGNETICS CORPORATION, a Delaware
corporation ("AMC") and                 ("Executive").
 
                              W I T N E S S E T H:
 
    WHEREAS, AMC (including subsidiaries and divisions) has always followed
compensation policies intended to reward executives for past services and to
demonstrate to them that AMC is concerned with the welfare of its employees and
intends to see that loyal executives are treated fairly; and
 
    WHEREAS, AMC regards the continued services of Executive to be in the best
interests of AMC and its shareholders and desires to assure the continued
services of Executives on an objective and impartial basis and without
distraction or conflict of interest in the event of an attempt to obtain control
of AMC; and
 
    WHEREAS, Executive is willing to remain in the employ of AMC upon the
understanding that AMC will provide him or her with income security if his or
her employment is terminated under certain conditions following a change in
control of AMC;
 
    NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter set forth, the parties hereto agree as follows:
 
    1.  DEFINITIONS.  For purposes of this Agreement, the following terms shall
have the meanings indicated:
 
    1.1  "AMC" means and includes Applied Magnetics corporation, and any
subsidiary or division thereof, as the context-may require.
 
    1.2  "BASE AMOUNT" means the sum of (a) Executive's then monthly base
salary; (b) Executive's then monthly car allowance, if any, and (c) one-twelfth
of an amount equal to any bonus that Executive received or was entitled to
receive for the fiscal year immediately preceding a Change in Control.
 
    1.3  "CAUSE" means (a) Executive's continued failure to perform his duties
after a written demand for substantive performance is delivered by AMC's Board
of Directors to Executive documenting specific areas of repeated and continuing
nonperformance, or (b) Executive's willful, reckless or grossly negligent
misconduct materially injurious to AMC; PROVIDED, HOWEVER, that "Cause" shall be
deemed not to have-occurred unless and until a resolution shall have been
adopted by the affirmative vote of two-thirds of the entire membership of AMC's
Board of Directors after reasonable notice to Executive of such Cause and
reasonable opportunity for Executive and his or her counsel to be heard.
 
    1.4  "CHANGE IN CONTROL" means (a) any Person becomes the beneficial owner,
directly or indirectly, of securities of AMC representing 20% of the combined
voting power of the then outstanding securities of AMC; or (b) there shall be
consummated any consolidation or merger of AMC in which AMC is not the
continuing or surviving corporation or pursuant to which shares of AMC's Common
Stock would be converted into cash, securities or other property, other than a
merger of the Company in which the holders of AMC's Common Stock immediately
prior to the merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger, or (c) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of AMC.
 
    1.5  "DISABILITY" means Executives absence from his or her duties with AMC
for a contiguous period of nine months as a result of Executive's incapacity due
to physical or mental illness, provided that notice
 
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of Executive's termination due to Disability is provided to Executive within the
30-day period following such nine-month period.
 
    1.6  "MEDICAL BENEFITS" mean all life, group insurance, medical and dental
care plans and all disability insurance provided by AMC to Executive immediately
before Executive's Termination of Employment.
 
    1.7  "OPTIONS" means all the options to purchase shares of Common Stock,
$.10 par value, of the Company granted to Executive under AMC's various employee
benefit plans (as defined in Rule 405 promulgated under the Securities Act of
1933), whether or not such options are vested or not.
 
    1.8  "PERSON" means a person as defined or referred to in Sections 3(a)(9)
and 13(d)(1) ET SEQ. of the Securities Exchange Act of 1934 and rules of the
Securities and Exchange Commission promulgated thereunder.
 
    1.9  "RETIREMENT" means termination by AMC or Executive of Executive's
employment based on Executive's having reached age 65 or such other age as shall
have been fixed in any arrangement established with Executive's consent with
respect to Executive.
 
    1.10  "TERMINATION OF EMPLOYMENT" means the termination of Executive's
employment with AMC, within three years after a Change in Control, by either (a)
AMC (other than for "Cause"); or (b) Executive (other than by Retirement, death
or Disability) following the occurrence, without Executive's consent, of any of
the following events ("Good Reason"):
 
        (i) the assignment to Executive of duties inconsistent with and adverse
    to Executive's position, duties, responsibilities and status with AMC
    immediately prior to a Change in Control of AMC, or an adverse change in
    Executives titles or offices as in effect immediately prior to a Change in
    Control of AMC, or a reduction of Executive's duties or responsibilities as
    in effect immediately prior to a change in Control of AMC, or any removal of
    Executive from or any failure to reelect Executive to any of such positions,
    except in connection with termination of Executive's employment for
    Disability, Retirement or Cause or as a result of Executive's death or by
    Executive other than for Good Reason;
 
        (ii) A reduction in Executive's base salary and bonus compensation
    unless such reduction is part of a uniformly applied program of reductions
    reasonably adopted due to AMC's then business condition;
 
       (iii) A failure to increase Executive's base salary on or before the
    later to occur of 12 months from the date of the last increase in
    Executive's base salary or 60 days following a Change in Control, in an
    amount not less than 50% of the average annual percentage base salary
    increase for all "Corporate Executives" of AMC in the 36 months preceding
    the date on which such increase shall be due. For purposes of this
    subparagraph (iii), "Corporate Executives" of AMC shall include AMC's
    Chairman, Chief Executive Officer, President; Chief Financial officer; Vice
    President, General Manager, [OTHERS?];
 
        (iv) A failure of AMC to continue in effect any benefit or incentive
    plan or arrangement in which Executive is participating at the time of a
    Change in Control, or the taking of any action by AMC which would adversely
    affect Executive's participation in or materially reduce Executive's
    benefits under any such plan or arrangement or deprive Executive of any
    material fringe benefit enjoyed by Executive at the time of a Change in
    Control, unless such failure results from a uniformly applied program of
    reductions reasonably adopted due to AMC's then business condition;
 
        (v) Executive is either (x) transferred to a principal work location
    which will require him to travel more than twenty-five (25) miles from his
    or her then principal residence to his or her new principal work location,
    or (y) he or she is required to engage in a substantially increased amount
    of travel on AMC's business;
 
        (vi) any material breach by AMC or any provision of this Agreement.
 
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    2.  PAYMENT UPON TERMINATION OF EMPLOYMENT.  Within 10 days immediately
following Termination of Employment, AMC shall forthwith pay to Executive a
lump-sum payment equal to         multiplied by the Base Amount.
 
    3.  CONTINUATION OF INSURANCE.  For a period of 12 months following
Executive's Termination of Employment or until such time that Executive shall be
employed by an employer who provides Executive with medical benefits
substantially similar to the Medical Benefits, Executive shall receive the same
Medical Benefits that he or she (and his or herfamily, if applicable) received
from AMC prior to his or her Termination of Employment; PROVIDED, HOWEVER, that
if the plans pursuant to which the Medical Benefits were provided to Executive
have been or are modified, Executive shall be entitled to substantially similar
Medical Benefits from other reputable sources. Executive shall be required to
pay the same amount for such Medical Benefits as he or she paid prior to his or
her Termination of Employment.
 
    4.  ACCELERATION OF OPTIONS UPON TERMINATION OF EMPLOYMENT.  Immediately
upon or following Termination of Employment, all shares covered by Executive's
Options shall become immediately and fully exercisable, and shall remain
exercisable until the expiration thereof, and Executive shall have the right to
purchase, by exercise of such Options, all or any portion of the shares covered
by such Options; provided however, that in no event may any Option be exercised
after the expiration date thereof.
 
    5.  REPRESENTATION BY EXECUTIVE; NO EMPLOYMENT CONTRACT.  Executive
represents that it is his or her present intention to continue in the employ AMC
and he or she is not currently aware of any facts or circumstances that would
cause him or her to change such intention in the foreseeable future. Executive
acknowledges that Executive has been advised and understands that this Agreement
shall not, however, be deemed in any way to create a contract of employment
between AMC and Executive.
 
    6.  EXPENSES OF EXECUTIVE.  AMC agrees to pay or reimburse Executive for all
costs and expenses (including court costs and attorneys, fees) incurred by
Executive (a) in the successful prosecution or settlement of any claim or action
by Executive to enforce his or her rights under this Agreement, or (b) in any
other action or proceeding, not involving such a claim or action by Executive,
which challenges the validity or enforceability of this Agreement or any similar
agreements with other employees of AMC. AMC further agrees to pay or reimburse
Executive for all ' costs and expenses (including legal and accounting fees and
expenses) incurred by Executive in connection with any audit or review by the
Internal Revenue Service of any excise tax imposed on any payments under this
Agreement.
 
    7.  LIABILITY FOR TAXES.  AMC shall have no liability for any tax liability
of Executive attributable to any payment made under this Agreement. AMC may
withhold from any such payment such amounts as may be required by applicable
provisions of the Internal Revenue Code, other tax laws, and the rules and
regulations of the Internal Revenue Service and other tax agencies, as in effect
at the time of any such payment.
 
    8.  TERMINATION OF AGREEMENT.  This Agreement shall terminate and be of no
further effect (except to the extent that any obligation of AMC hereunder
remains unpaid as of such time) upon the first to occur of (a) termination of
Executive's employment with AMC for any reason, whether voluntarily or
involuntary, prior to a change in Control; (b) termination of Executive's
employment by AMC due to Executive's death, Retirement, Disability or for Cause
or by Executive other than for Good Reason; (c) 36 months from the date of a
Change of Control, or (d) 12 months following the date that written notice of
termination of this Agreement is provided to Executive by AMC's Board of
Directors if a Change in Control does not occur. Within that 12-month period.
 
    9.  OTHER PLANS.  To the extent that Executive shall receive payments under
this Agreement, he or she shall not be eligible to receive severance benefits
under AMC's standard severance policy; PROVIDED, HOWEVER, that notwithstanding
the previous sentence, Executive shall be entitled to receive unused and accrued
vacation pay and shall be entitled to such other benefits as described in
Section 3 of this Agreement.
 
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    10.  TAXES.  Anything in this Agreement to the contrary notwithstanding, (1)
in the event that any payment to or for the Executive's benefit (whether payable
pursuant to the terms of this Agreement or otherwise) would not be deductible by
AMC as a result of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), then the aggregate amount payable under Section 2 shall be reduced
(but not below zero dollars), so that after giving effect to such reduction, no
payment made to or for the Executive's benefit will not be deductible because of
Section 280G, and (2) if the Executive establishes (in accordance with Section
280G) that all or any portion of the aggregate "parachute payments" (as defined
in Section 280G) payable to or for the Executive's benefit constitutes
reasonable compensation for services actually rendered, and if the present value
of all such "Parachute payments" which constitute reasonable compensation
exceeds 299% of the Executive's "base amount" (as defined in Section 280G), then
the Executive shall be entitled to receive an amount equal to (but not greater
than) the present value of all such "parachute payments" which constitute
reasonable compensation. For purposes of this Section 10, the "present value" of
any payment shall be determined in accordance with Section 1274(b)(2) of the
Code. If it is established that, notwithstanding the good faith of the Executive
and AMC in applying the terms of this Section 10, the aggregate "parachute
payments" paid to or for the Executive's benefit are in an amount that would
result in any portion of such "parachute payments" not being deductible, then
the Executive shall have an obligation to pay AMC upon demand an amount equal to
the sum of (1) the excess of the aggregate parachute payments paid to or for the
Executive's benefit over the aggregate "parachute payments" that could have been
paid to or for the Executive's benefit without any portion of such "parachute
payments" not being deductible; and (2) interest on the amount set forth in
clause (1) of this sentence at the applicable federal rate (as defined in
Section 1274(d) of the Code) from the date of the receipt of such excess by or
for the Executive's behalf until the date of such payment.
 
    11.  NO OBLIGATION TO MITIGATE.  Executive shall not be required to mitigate
damages or the amount of any payment provided for under this Agreement by
seeking other employment or otherwise, nor shall the amount of any payment
provided for under this Agreement be reduced by any compensation earned by
Executive as the result of employment by another employer after the date of
termination, or otherwise.
 
    12.  GENERAL PROVISIONS.
 
    12.1  Subject to the provisions of Section 11.4 below, no right, benefit or
interest hereunder shall be subject to assignment (except by operation of law-to
the personal representative or heirs of Executive if Executive dies after
Termination of Employment but prior to the making of the payment required by
section 2), anticipation, alienation, sale, encumbrance, charge, pledge,
hypothecation or set-off in respect of any claim, debt or obligation, or to
execution, attachment, levy or similar process.
 
    12.2  Except as provided in section 7, this Agreement may not be amended,
modified or canceled except by written agreement of the parties.
 
    12.3  In the event that the scope of any provision of this Agreement, or
portion thereof, shall be determined to be unenforceable to its full extent,
then such provision, or portion thereof, shall be enforced to the maximum extent
permitted by law. In the event that any provision of this Agreement, or portion
thereof, is determined to be invalid in its entirety, the remaining provisions
of this Agreement shall remain in full force and effect to the fullest extent
permitted by law.
 
    12.4  This Agreement shall be binding upon and inure to the benefit of
Executive (and his or her personal representative), AMC, and any successor
organization or organizations which shall succeed to substantially all of the
business and property of AMC, whether by means of merger, consolidation,
acquisition of substantially all of the assets of AMC or otherwise, including by
operation of law.
 
    12.5  This Agreement has been made in and shall be governed and construed in
accordance with the laws of the State of California.
 
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    12.6  This Agreement sets forth the entire agreement and understanding of
the parties hereto with respect to the matters covered hereby.
 
                                          APPLIED MAGNETICS CORPORATION,
                                            a Delaware corporation
 
                                          By
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                                            Name:
                                            Title:
 
                                            EXECUTIVE
 
                                            ------------------------------------
                                            Name:
 
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