AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON February 24, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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APPLIED MAGNETICS CORPORATION
(Exact name of registrant as specified in its charter)
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DELAWARE 367999 95-1950506
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification
incorporation or Classification Code No.)
organization) Number)
75 ROBIN HILL ROAD
GOLETA, CALIFORNIA 93117-5400
(805) 683-5353
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
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CRAIG D. CRISMAN
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
APPLIED MAGNETICS CORPORATION
75 ROBIN HILL ROAD
GOLETA, CALIFORNIA 93117-3108
(805) 683-5353
(Name and address, including zip code, and telephone number, including
area code, of agent for service)
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COPY TO:
JAMES J. SLABY, ESQ.
JON W. NEWBY, ESQ.
SHEPPARD, MULLIN, RICHTER & HAMPTON LLP
333 SOUTH HOPE STREET, 48TH FLOOR
LOS ANGELES, CALIFORNIA 90071
(213) 620-1780
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS
SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION
STATEMENT.
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If the securities being registered on this Form are being offered
in connection with the formation of a holding company and there is
compliance with General Instruction G, check the following box. [_]
<PAGE>
CALCULATION OF REGISTRATION FEE
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PROPOSED
TITLE OF EACH PROPOSED MAXIMUM
CLASS OF MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
BE REGISTERED REGISTERED (1) PER SHARE PRICE(2) FEE(2)
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Common Stock,
$.10 par value 33,356,984 Not applicable $1,418,531,499 $429,858
(1) Represents the number of shares of common stock, $.10 par value, of
Applied Magnetics Corporation ("Applied Magnetics"), issuable at an
exchange ratio of 0.679 upon consummation of the exchange offer for
shares of common stock, $.0001 par value (the "Shares"), of Read-
Rite Corporation ("Read-Rite") based upon the number of Shares
outstanding on January 26, 1997 and the 2,009,000 options to
purchase Shares outstanding under Read-Rite's stock option plans as
of September 30, 1996 as reported in Read-Rite's Annual Report on
Form 10-K for the Fiscal Year ended September 30, 1996 (the
"Read-Rite 1996 10-K"). According to Read-Rite's Quarterly Report
on Form 10-Q for the quarterly period ended December 31, 1996, as
of January 26, 1997, there were issued and outstanding 47,117,632
Shares, and based on the foregoing and assuming that (i) no Shares
have been issued since January 26, 1997 and (ii) no options for
Shares have been issued other than those reported in the Read-Rite
1996 10-K, the number of Shares to be canceled in the exchange
would be 49,038,092. However, the actual number of Shares will
depend on the facts as they exist on the date of exchange.
(2) Pursuant to Rules 457(f)(1), 457(f)(3) and 457(c) under the
Securities Act of 1933, as amended, and solely for the purpose of
calculating the registration fee, the registration fee was computed
on the basis of the average of the high and low prices of the
Shares as reported on the Nasdaq National Market on
February 21, 1997. The fee is $429,858, calculated as 1/33 of one
percent of the Proposed Maximum Aggregate Offering Price.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT
THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN
ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE>
APPLIED MAGNETICS CORPORATION
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K
LOCATION IN
FORM S-4 ITEM NUMBER AND HEADING PROSPECTUS
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1. Forepart of
Registration Statement
and Outside Front
Cover Page of Outside Front Cover
Prospectus....................... Page
2. Inside Front and
Outside Back Cover
Pages of Prospectus.............. Table of Contents;
Available
Information;
Incorporation of
Certain Information
by Reference
3. Risk Factors, Ratio of
Earnings to Fixed
Charges and Other
Information...................... Prospectus Summary;
Certain Investment
Considerations
4. Terms of the
Transaction...................... Prospectus Summary;
Background of the
Offer; The Offer;
Description of
Applied Magnetics
Capital Stock;
Comparison of Rights
of Holders of Shares
and Applied Magnetics
Common Stock; Market
Prices
5. Pro Forma Financial
Information...................... Pro Forma
Consolidated
Financial Data
6. Material Contacts with
the Company Being
Acquired......................... Background of the
Offer; The Offer
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<PAGE>
7. Additional Information
Required for
Reoffering by Persons
and Parties Deemed to
be Underwriters.................. *
8. Interests of Named
Experts and Counsel.............. *
9. Disclosure of
Commission Position on
Indemnification for
Securities Act
Liabilities...................... *
10. Information with
Respect to S-3
Registrants...................... Incorporation of
Certain Information
by Reference
11. Incorporation of
Certain Information by
Reference........................ Incorporation of
Certain Information
by Reference;
Description of
Applied Magnetics
Capital Stock
12. Information with
Respect to S-2 or S-3
Registrants...................... *
13. Incorporation of
Certain Information by
Reference........................ *
14. Information with
Respect to Registrants
Other Than S-2 or S-3
Registrants...................... *
15. Information with
Respect to S-3
Companies........................ Incorporation of
Certain Information
by Reference;
Background of the
Offer
16. Information with
Respect to S-2 or S-3
Companies........................ *
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<PAGE>
17. Information with
Respect to Companies
Other Than S-2 or S-3
Companies........................ *
18. Information if
Proxies, Consents or
Authorizations are to
be Solicited..................... *
19. Information if
Proxies, Consents or
Authorizations are not
to be Solicited or in
an Exchange Offer................ Outside Front Cover
Page; Prospectus
Summary; The Offer;
Incorporation of
Certain Information
by Reference
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*Indicates that Item is not applicable or answer is in the negative.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
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SUBJECT TO COMPLETION--DATED FEBRUARY 24, 1997
PROSPECTUS
OFFER TO EXCHANGE EACH OUTSTANDING SHARE OF COMMON STOCK
OF
READ-RITE CORPORATION
FOR
0.679 OF A SHARE OF COMMON STOCK
OF
APPLIED MAGNETICS CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 PM, EASTERN STANDARD
TIME, ON _______________, 1997, UNLESS THE OFFER IS EXTENDED (THE
"EXPIRATION DATE"). SHARES WHICH ARE TENDERED PURSUANT TO THE OFFER MAY
BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE.
Applied Magnetics Corporation, a Delaware corporation ("Applied
Magnetics"), hereby offers, upon the terms and subject to the conditions
set forth herein and in the related Letter of Transmittal (collectively,
the "Offer"), to exchange 0.679 of a share of common stock, $.10 par
value per share, of Applied Magnetics ("Applied Magnetics Common Stock")
(the "Offer Consideration") for each outstanding share of common stock,
$.0001 par value per share (each a "Share" and collectively, the
"Shares"), of Read-Rite Corporation, a Delaware corporation ("Read-
Rite"), validly tendered on or prior to the Expiration Date and not
properly withdrawn. On February 21, 1997, the last full trading day
prior to the announcement of the Offer, the closing price of the Shares
on the National Association of Securities Dealers Automated Quotation
National Market ("Nasdaq National Market") was $28 3/16 per Share.
Based on the closing price of Applied Magnetics Common Stock on the same
date, the value of the Offer was $37.50 per Share, representing a 33%
premium over the closing price of the Shares on such date. The dollar
value of the Offer will change as the market price of Applied Magnetics
Common Stock changes.
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<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PRELIMINARY
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Dealer Manager for the Offer is:
GLEACHER NATWEST INC.
The date of this Preliminary Prospectus is February 24, 1997.
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<PAGE>
APPLIED MAGNETICS' OBLIGATION TO EXCHANGE THE OFFER CONSIDERATION
FOR SHARES PURSUANT TO THE OFFER IS CONDITIONED UPON, AMONG OTHER
THINGS, THE SATISFACTION OR, WHERE APPLICABLE, WAIVER OF THE FOLLOWING
CONDITIONS:(I) APPROVAL OF AN AMENDMENT TO THE CERTIFICATE OF
INCORPORATION OF APPLIED MAGNETICS, AS AMENDED (THE "APPLIED MAGNETICS
CERTIFICATE"), TO INCREASE THE NUMBER OF SHARES OF APPLIED MAGNETICS
COMMON STOCK AUTHORIZED FOR ISSUANCE AND OF THE ISSUANCE OF SHARES OF
APPLIED MAGNETICS COMMON STOCK IN CONNECTION WITH THE OFFER AND THE
MERGER, BY THE HOLDERS OF A MAJORITY OF THE SHARES OF APPLIED MAGNETICS
COMMON STOCK OUTSTANDING ON THE APPLICABLE RECORD DATE (THE "APPLIED
MAGNETICS STOCKHOLDER CONSENT CONDITION"), (II) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE A NUMBER OF
SHARES WHICH, TOGETHER WITH SHARES THEN OWNED BY APPLIED MAGNETICS AND
ITS AFFILIATES, WILL CONSTITUTE AT LEAST A MAJORITY OF THE TOTAL NUMBER
OF OUTSTANDING SHARES ON A FULLY DILUTED BASIS (AS THOUGH ALL OPTIONS OR
OTHER SECURITIES CONVERTIBLE INTO OR EXERCISABLE OR EXCHANGEABLE FOR
SHARES HAD BEEN SO CONVERTED, EXERCISED OR EXCHANGED) AS OF THE DATE THE
SHARES ARE ACCEPTED FOR EXCHANGE BY APPLIED MAGNETICS PURSUANT TO THE
OFFER (THE "MINIMUM TENDER CONDITION"), (III) THE APPROVAL OF THE
ACQUISITION OF SHARES PURSUANT TO THE OFFER BY THE BOARD OF DIRECTORS OF
READ-RITE ("THE READ-RITE BOARD") PURSUANT TO SECTION 203 OF THE DGCL OR
APPLIED MAGNETICS BEING OTHERWISE SATISFIED IN ITS SOLE DISCRETION THAT
THE PROVISIONS OF SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
(the "DGCL") RESTRICTING CERTAIN BUSINESS COMBINATIONS ARE INVALID OR
NOT APPLICABLE TO THE ACQUISITION OF SHARES PURSUANT TO THE OFFER AND
THE MERGER (THE "DGCL CONDITION") AND (IV) ALL REGULATORY APPROVALS
REQUIRED TO CONSUMMATE THE OFFER HAVING BEEN OBTAINED AND REMAINING IN
FULL FORCE AND EFFECT, ALL STATUTORY WAITING PERIODS IN RESPECT THEREOF
HAVING EXPIRED AND NO SUCH APPROVAL CONTAINING ANY CONDITIONS OR
RESTRICTIONS WHICH THE APPLIED MAGNETICS BOARD OF DIRECTORS (THE
"APPLIED MAGNETICS BOARD") DETERMINES WILL OR COULD BE EXPECTED TO
MATERIALLY IMPAIR THE STRATEGIC AND FINANCIAL BENEFITS EXPECTED TO
RESULT FROM THE OFFER (THE "REGULATORY APPROVAL CONDITION"). THE MINIMUM
TENDER CONDITION, THE APPLIED MAGNETICS STOCKHOLDER CONSENT CONDITION,
THE DGCL CONDITION, THE REGULATORY APPROVAL CONDITION AND THE OTHER
CONDITIONS SET FORTH UNDER THE CAPTION "THE OFFER--CONDITIONS OF THE
OFFER" SHALL BE REFERRED TO COLLECTIVELY AS THE "OFFER CONDITIONS."
CAPITALIZED TERMS USED BUT NOT DEFINED ABOVE ARE DEFINED HEREINAFTER.
AS PART OF EACH EXCHANGE OF SHARES FOR APPLIED MAGNETICS COMMON
STOCK MADE PURSUANT TO THE OFFER, AND SUBJECT TO THE SATISFACTION OF ALL
THE CONDITIONS TO THE OFFER AND THE MERGER, APPLIED MAGNETICS AGREES,
AND SHALL COVENANT SEVERALLY WITH AND FOR THE BENEFIT OF EACH AND EVERY
HOLDER OF SHARES SO EXCHANGED, TO CAUSE THE MERGER TO OCCUR IN THE
MANNER DESCRIBED IN THIS PRELIMINARY PROSPECTUS.
THIS PRELIMINARY PROSPECTUS AND THE OFFER MADE HEREBY DO NOT
CONSTITUTE A SOLICITATION OF ANY PROXIES OR CONSENTS. ANY SUCH
SOLICITATIONS WILL BE MADE ONLY PURSUANT TO SEPARATE PROXY OR CONSENT
SOLICITATION MATERIALS COMPLYING WITH THE REQUIREMENTS OF SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AS APPLICABLE.
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<PAGE>
Applied Magnetics is unable to predict the amount of time
necessary, among other things, to obtain the stockholder, governmental
and regulatory approvals and consents required to complete the Offer and
the transactions contemplated herein. However, the time necessary to
obtain such approvals and consents may extend beyond the Expiration
Date, and Applied Magnetics reserves the right to extend the Offer from
time to time in its sole discretion.
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IMPORTANT
Any holder of outstanding Shares ("Read-Rite Stockholder") desiring
to tender all or any portion of his or her Shares should either
(a) complete and sign the related Letter of Transmittal or a facsimile
copy thereof in accordance with the instructions in the Letter of
Transmittal, and mail or deliver the Letter of Transmittal or such
facsimile and any other required documents to IBJ Schroder Bank & Trust
Company (the "Exchange Agent") and either deliver the certificates for
such Shares to the Exchange Agent along with the Letter of Transmittal,
deliver such Shares pursuant to the procedures for book-entry transfer
set forth herein or comply with the guaranteed delivery procedures set
forth below or (b) request his or her broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for such Read-
Rite Stockholder. A Read-Rite Stockholder having Shares registered in
the name of a broker, dealer, commercial bank, trust company or other
nominee is urged to contact such broker, dealer, commercial bank, trust
company or other nominee if he or she desires to tender such Shares.
A Read-Rite Stockholder that desires to tender Shares and whose
certificates for such Shares are not immediately available or who cannot
comply with the procedures for book-entry transfer on a timely basis or
who cannot deliver all required documents to the Exchange Agent prior to
the Expiration Date, may tender such Shares by following the procedure
for guaranteed delivery.
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<PAGE>
Questions and requests for assistance may be directed to MacKenzie
Partners, Inc. (the "Information Agent") or to the Dealer Manager at
their respective addresses and telephone numbers set forth on the back
cover of this Preliminary Prospectus. Requests for additional copies of
this Preliminary Prospectus and the Letter of Transmittal may be
directed to the Information Agent or to brokers, dealers, commercial
banks or trust companies.
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<PAGE>
TABLE OF CONTENTS
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Page
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AVAILABLE INFORMATION
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
READ-RITE INFORMATION
PROSPECTUS SUMMARY
Applied Magnetics
Read-Rite
Reasons for the Offer
Background of the Offer
Factors Concerning Forward-looking Information
Certain Investment Considerations
The Consent Solicitation
The Offer
The Merger
Dissenters' Rights
Certain Federal Income Tax Consequences
Effect of the Offer on Market for Shares;
Registration Under the Exchange Act
Comparison of the Rights of Holders of Shares
and Applied Magnetics Common Stock
Description of Applied Magnetics Capital Stock
Market Prices
The Exchange Agent
Request for Assistance and Additional Copies
Applied Magnetics and Read-Rite Comparative Per Share Data
Selected Financial Data
REASONS FOR THE OFFER
Offer Premium
Enhanced Business Opportunities
Strengthened Shared Technical and Production Capabilities
Potential Cost Savings and Benefits from Operational Synergies
BACKGROUND OF THE OFFER
THE CONSENT SOLICITATION
THE OFFER
GENERAL
Timing of the Offer
Extension, Termination and Amendment
Exchange of Shares; Delivery of Applied Magnetics
Common Stock
Cash in Lieu of Fractional Shares of Applied Magnetics Common Stock
Withdrawal Rights
Procedure for Tendering
Certain Federal Income Tax Consequences
Effect of Offer on Market for Shares;
Registration Under the Exchange Act
Purpose of the Offer; The Merger
DGCL Section 203
Conditions of the Offer
Relationships with Read-Rite
Fees and Expenses
Accounting Treatment
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Page
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Stock Exchange Listing
THE MERGER
DISSENTERS' RIGHTS
BUSINESS OF APPLIED MAGNETICS
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
DESCRIPTION OF APPLIED MAGNETICS CAPITAL STOCK
Applied Magnetics Common Stock
Applied Magnetics Preferred Stock
Applied Magnetics Rights Plan
COMPARISON OF THE RIGHTS OF HOLDERS OF SHARES AND APPLIED MAGNETICS
COMMON
STOCK
Special Meetings of Stockholders
Number of Directors
Advance Notice of Stockholder Nomination of Directors
Stockholder Proposal Procedures
Voting Majority
Indemnification
Certain Voting Rights For Mergers
Cumulative Voting
Removal of Directors
Stockholder Action by Written Consent
Amendment of Bylaws
Classification of Board of Directors
MARKET PRICES
VALIDITY OF APPLIED MAGNETICS COMMON STOCK
EXPERTS
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<PAGE>
AVAILABLE INFORMATION
Applied Magnetics and Read-Rite are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and in accordance therewith file reports, proxy
statements and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other
information filed by Applied Magnetics and Read-Rite with the Commission
may be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549 and at the public reference facilities
in the Commission's Regional Offices at Seven World Trade Center,
13th Floor, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
information may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. Because Applied Magnetics and Read-Rite each file
certain documents electronically with the Commission, reports, proxy and
information statements and other information regarding Applied Magnetics
and Read-Rite may also be obtained from the Commission at the
Commission's Web site, http://www.sec.gov. The Applied Magnetics Common
Stock is listed and traded on the New York Stock Exchange ("NYSE"). The
Shares are quoted on the Nasdaq National Market. Reports, proxy
statements and other information filed by Applied Magnetics with the
Commission may also be inspected at the offices of the NYSE, 20 Broad
Street, New York, New York 10005. Reports, proxy statements and other
information filed by Read-Rite with the Commission may also be inspected
at the offices of the National Association of Securities Dealers, Inc.,
1735 K Street NW, Washington, D.C. 20006.
This Preliminary Prospectus does not contain all of the information
set forth in the Registration Statement on Form S-4, as amended (the
"Registration Statement"), covering the Applied Magnetics Common Stock
offered hereby which has been filed with the Commission, certain
portions of which have been omitted pursuant to the rules and
regulations of the Commission, and to which portions reference is hereby
made for further information with respect to Applied Magnetics and Read-
Rite and the securities offered hereby. Statements contained herein
concerning any documents are not necessarily complete and, in each
instance, reference is made to the copies of such documents filed as
exhibits to the Registration Statement. Each such statement is qualified
in its entirety by such reference.
Not later than the date of commencement of the Offer, Applied
Magnetics will file with the Commission a statement on Schedule 14D-1
pursuant to Rule 14d-3 under the Exchange Act furnishing certain
information with respect to the Offer. Such Schedule and any amendments
thereto should be available for inspection and copying as set forth
above (except that such Schedules and any amendments thereto will not be
available at the regional offices of the Commission).
Pursuant to Rule 409 promulgated under the Securities Act of 1933,
as amended (the "Securities Act"), and Rule 12b-21 promulgated under the
Exchange Act, Applied Magnetics plans to request that Read-Rite and its
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<PAGE>
independent public accountants, Ernst & Young, LLP, provide to Applied
Magnetics the information required for complete disclosure concerning
the business, operations, financial condition and management of Read-
Rite. Applied Magnetics will provide any and all information which it
receives from Read-Rite or Ernst & Young, LLP prior to the expiration of
the Offer and which Applied Magnetics deems material, reliable and
appropriate in a subsequently prepared amendment or supplement hereto.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PRELIMINARY PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS
(NOT INCLUDING EXHIBITS TO SUCH DOCUMENTS THAT ARE NOT SPECIFICALLY
INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS) ARE AVAILABLE WITHOUT
CHARGE UPON REQUEST TO CORPORATE SECRETARY, APPLIED MAGNETICS
CORPORATION, 75 ROBIN HILL ROAD, GOLETA, CALIFORNIA 93117-3106.
TELEPHONE REQUESTS MAY BE DIRECTED TO THE CORPORATE SECRETARY'S
DEPARTMENT AT (805) 683-5353. IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH
DOCUMENTS, ANY REQUEST FOR DOCUMENTS SHOULD BE SUBMITTED NOT LATER THAN
FIVE BUSINESS DAYS PRIOR TO THE EXPIRATION DATE.
The following documents filed with the Commission by Applied
Magnetics (File No. 1-6635) are incorporated herein by reference:
(a) Applied Magnetics' Quarterly Report on Form 10-Q for the quarterly
period ended December 28, 1996 (the "Applied Magnetics 1997 Q1 Form 10-
Q"); (b) Applied Magnetics' Annual Report on Form 10-K for the fiscal
year ended September 28, 1996 (the "Applied Magnetics 1996 Form 10-K");
(c) Applied Magnetics' Proxy Statement for the 1997 Annual Meeting of
Stockholders, dated January 6, 1997 (the "1997 Applied Magnetics Annual
Meeting Proxy Statement"); (d) Applied Magnetics' Current Report on Form
8-K, dated February 24, 1997; (e) Applied Magnetics' Preliminary Consent
Statement on Schedule 14A, dated February 24, 1997, to Read-Rite
Stockholders (the "Applied Magnetics Schedule 14A"); and (f) the description
of the Applied Magnetics Corporation Rights contained in the Applied
Magnetics' Registration Statement on Form 8-A dated October 21, 1988,
and any amendment or report updating such description filed on or after
the date of this Preliminary Prospectus.
The following documents filed with the Commission by Read-Rite
(File No. 0-19512) are incorporated herein by reference: (a) Read-Rite's
Quarterly Report on Form 10-Q for the quarterly period ended
December 31, 1996 (the "Read-Rite 1997 Q1 Form 10-Q"); (b) Read-Rite's
Annual Report on Form 10-K for the fiscal year ended September 30, 1996
(the "Read-Rite 1996 Form 10-K"); and (c) Read-Rite's Proxy Statement
for the 1997 Annual Meeting of Stockholders dated January 15, 1997 (the
"1997 Read-Rite Annual Meeting Proxy Statement").
All documents filed by either Applied Magnetics or Read-Rite
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date hereof and prior to the date the Offer is
terminated or the Shares are accepted for exchange shall be deemed to be
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<PAGE>
incorporated herein by reference and to be a part hereof from the date
of such filing. Any statement contained herein or in a document
incorporated or deemed to be incorporated herein by reference shall be
deemed to be modified or superseded for purposes hereof to the extent
that a statement contained herein or in any other subsequently filed
document which also is, or is deemed to be, incorporated herein by
reference modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed to constitute a part hereof,
except as so modified or superseded.
READ-RITE INFORMATION
While Applied Magnetics has included information concerning Read-
Rite insofar as it is known or reasonably available to Applied
Magnetics, Read-Rite is not affiliated with Applied Magnetics and Read-
Rite has not to date permitted access by Applied Magnetics to Read-
Rite's books and records. Therefore, information concerning Read-Rite
which has not been made public is not available to Applied Magnetics.
Although Applied Magnetics has no knowledge that would indicate that
statements relating to Read-Rite contained or incorporated by reference
in this Preliminary Prospectus in reliance upon publicly available
information are inaccurate or incomplete, Applied Magnetics was not
involved in the preparation of such information and statements and, for
the foregoing reasons, is not in a position to verify any such
information or statements.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED
OR INCORPORATED BY REFERENCE IN THIS PRELIMINARY PROSPECTUS, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY APPLIED MAGNETICS OR GLEACHER NATWEST
INC. (THE "DEALER MANAGER"). THIS PRELIMINARY PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OR A SOLICITATION TO ANY PERSON IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. THE OFFER IS NOT BEING
MADE TO, NOR WILL TENDERS BE ACCEPTED FROM OR ON BEHALF OF, READ-RITE
STOCKHOLDERS IN ANY JURISDICTION IN WHICH THE MAKING OR ACCEPTANCE
THEREOF WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION.
HOWEVER, APPLIED MAGNETICS MAY, IN ITS SOLE DISCRETION, TAKE SUCH ACTION
AS IT MAY DEEM NECESSARY TO MAKE THE OFFER IN ANY SUCH JURISDICTION AND
EXTEND THE OFFER TO READ-RITE STOCKHOLDERS IN SUCH JURISDICTION. NEITHER
THE DELIVERY OF THIS PRELIMINARY PROSPECTUS NOR ANY EXCHANGE HEREUNDER
SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN
NO CHANGE IN THE AFFAIRS OF APPLIED MAGNETICS OR READ-RITE SINCE THE
DATE AS OF WHICH INFORMATION IS FURNISHED OR THE DATE HEREOF.
IN ANY JURISDICTION WHERE THE SECURITIES, BLUE SKY OR OTHER LAWS
REQUIRE THE OFFER TO BE MADE BY A LICENSED BROKER OR DEALER, THE OFFER
SHALL BE DEEMED TO BE MADE ON BEHALF OF APPLIED MAGNETICS BY THE DEALER
MANAGER, OR ONE OR MORE REGISTERED BROKERS OR DEALERS LICENSED UNDER THE
LAWS OF SUCH JURISDICTION.
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PROSPECTUS SUMMARY
The information below is qualified in its entirety by the more
detailed information and financial statements appearing elsewhere in
this Preliminary Prospectus, including the documents incorporated in
this Preliminary Prospectus by reference. Read-Rite Stockholders are
urged to read this Preliminary Prospectus and the Schedules hereto, and
the documents incorporated herein by reference, in their entirety. As
used in this Preliminary Prospectus, the terms "Applied Magnetics" and
"Read-Rite" refer to such entity and, unless the context otherwise
requires, its subsidiaries.
APPLIED MAGNETICS
Applied Magnetics is one of the world's leading independent
manufacturers of advanced magnetic recording heads for hard disk drives.
Applied Magnetics manufactures advanced inductive thin film and
magnetoresistive ("MR") disk head products, primarily for supply to
manufacturers of 3.5-inch hard disk drives. Applied Magnetics'
products compete on the basis of price, performance and availability.
Applied Magnetics' products are used in disk drives manufactured by,
among others, Maxtor Corporation ("Maxtor"), Micropolis Corporation
("Micropolis"), NEC Electronics, Inc. ("NEC"), Quantum Corporation
("Quantum"), and Western Digital Corporation ("Western Digital"). See
"Business of Applied Magnetics."
Applied Magnetics' product line is currently centered around thin
film disk heads, the largest segment of the recording head industry.
Thin film heads permit increased storage capacity per disk and provide
high transfer rates at a lower cost than MR heads. Applied Magnetics
continues to expand its thin film production capacity and further
develop its thin film technology. Applied Magnetics is also committing
engineering and production resources to further its MR disk head
capability, which it believes to be the next generation of recording
head technology. MR disk heads offer still greater recording densities
and other performance advantages demanded by the disk drive market.
In an effort to capitalize on market demand and to add to its
revenue, Applied Magnetics intends to increase its thin film and MR disk
head capacity. To achieve this goal, during fiscal 1997 Applied
Magnetics currently plans approximately $135 million in capital
expenditures, including equipment to be obtained through operating
leases, to increase overall production capacity and continue to improve
thin film and MR production processes. Capital expenditures for the
three months ended December 28, 1996 were $17.7 million. In addition,
the Company leased $4.1 million of production equipment through
operating leases.
Applied Magnetics' manufacturing and assembly operations are
located in California, Ireland, South Korea, Malaysia, the Philippines
and the People's Republic of China (the "PRC"). Applied Magnetics'
principal place of business is located at 75 Robin Hill Road, Goleta,
California 93117-5400; its telephone number at that location is
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(805) 683-5353. Applied Magnetics was incorporated in California in
1957 and reincorporated in Delaware in 1987.
READ-RITE
The following information concerning Read-Rite is derived from the
Read-Rite Fiscal Year 1996 annual report on Form 10-K:
Read-Rite is also one of the world's leading independent
manufacturers of advanced magnetic recording heads for hard disk drives.
Read-Rite supplies magnetic recording heads as head gimbal assemblies
("HGAs"), and for certain of its customers incorporates multiple HGAs
into headstack assemblies ("HSAs"). Read-Rite's products are sold
primarily for use in 3.5-inch form factor hard disk drives.
During fiscal 1996, Read-Rite supplied HGAs in volume for 35
different disk drive products to six customers, and supplied HSAs in
volume for 26 different disk drive products to four customers. In
fiscal 1996, Read-Rite sold on average approximately 25.8 million HGAs
per quarter (including HGAs incorporated into HSAs), and approximately
3.3 million HSAs per quarter.
Read-Rite also produces thin film MR tape heads for use in quarter-
inch cartridge ("QIC") tape drives in the 700 megabyte ("MB") to 4
gigabyte ("GB") range per cartridge. During fiscal 1996, Read-Rite
supplied QIC tape heads in volume for six different products to three
customers. Tape heads accounted for approximately 1% of the Read-Rite's
net sales in fiscal 1996.
Read-Rite's primary customers in fiscal 1996 were Western Digital,
Quantum, and Maxtor, representing 43%, 29%, and 12%, respectively, of
Read-Rite's net sales.
Read-Rite's principal wafer manufacturing facilities are located at
its headquarters in Milpitas, California, and in Fremont, California.
Read-Rite SMI Corporation ("SMI"), Read-Rite's joint venture in Japan
with Sumitomo Metal Industries, Ltd. ("Sumitomo"), operates a wafer
manufacturing facility near Osaka, Japan, subcontracts head "slider"
fabrication and HGA assembly to Read-Rite's Thailand subsidiary and to
SMI's own Thailand subsidiary, Read-Rite SMI (Thailand) Co., Ltd., and
sells finished HGAs primarily to Japanese customers. Read-Rite has its
primary thin film slider fabrication and HGA assembly facilities in
Bangkok, Thailand, and its primary thin film HSA assembly facilities in
Penang, Malaysia and Manila, the Philippines. Read-Rite also has a
sales and customer support office in Singapore, and a sales support
office in Colorado. Read-Rite manufactures wafers for tape heads at its
Milpitas facility. All tape head assembly is performed in the
Philippines.
In response to the continued shift in the marketplace to newer
technology products and the fact that the product programs Read-Rite has
been participating in using metal-in-gap ("MIG") technology reached end-
of-life in the third quarter of fiscal 1996, Read-Rite discontinued its
MIG products and related manufacturing activities. MIG programs
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accounted for $174 million, or 18%, of Read-Rite's sales for fiscal
1996.
Read-Rite was incorporated in California in 1981 and reincorporated
in Delaware in 1985. Read-Rite's executive offices are located at 345
Los Coches Street, Milpitas, California 95035; its telephone number at
that location is (408) 262-6700.
REASONS FOR THE OFFER
Offer Premium. The purpose of the Offer is for Applied Magnetics to
obtain control of Read-Rite. Applied Magnetics will, subject to satisfaction
of the conditions to the Offer and the Merger set forth herein, cause
Read-Rite to merge with and into Applied Magnetics which will be the
surviving corporation (the "Merger").
Applied Magnetics believes that the Offer is in the best interests
of the Read-Rite Stockholders because, among other things, the Offer
Consideration represents a substantial premium to the per Share price
prior to the public announcement of the Offer on February 24, 1997. The
following table sets forth the closing price per share of Applied
Magnetics Common Stock as reported on the NYSE Composite Tape on February 21,
1997, the Nasdaq National Market closing price per Read-Rite Share on
February 21, 1997, the value of the Offer Consideration on such date and
the premium of such Offer Consideration over such Share closing price.
APPLIED
MAGNETICS
COMMON READ-RITE OFFER
STOCK PRICE* SHARE PRICE* CONSIDERATION** PREMIUM
------------ ------------ --------------- -------
$55 1/4 $28 3/16 $37.50 33%
* Based on the closing prices of Applied Magnetics Common Stock and
the Shares on February 21, 1997, the last trading date prior to the
public announcement of the Offer.
** Based upon the Offer to exchange each outstanding Share for 0.679
of a share of Applied Magnetics Common Stock.
Enhanced Business Opportunities. In addition to the per Share
price premium provided by the Offer, Applied Magnetics believes that the
Read-Rite Stockholders will also benefit from the Offer as a result of
becoming stockholders of Applied Magnetics. Applied Magnetics has
carefully studied the potential benefits of the combination of the
businesses of Applied Magnetics and Read-Rite and, as a result, believes
that such a combination will provide a solid financial base to support
continued growth in the merchant market disk head supply business.
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Strengthened Shared Technical and Production Capabilities. The
combined entity would acquire enhanced production and developmental
capability in an expanding market for HDD recording heads. It would
acquire the combined production capacity of approximately 40 million
HGAs per quarter and revenue of greater than $1.8 billion per year.
While the combination of Applied Magnetics and Read-Rite would extend
the potential of inductive thin film technology, it would also position
it as a viable competitor in the rapidly expanding product cycle for MR
head technology. Industry production in this segment has grown from
72.9 million units during the calendar fourth quarter 1996 to a
projected 148.8 million units for the calendar fourth quarter of 1997.
The combined technical expertise and production capacity of Applied
Magnetics and Read-Rite would represent a more effective competitive
response to the increased challenge presented by suppliers from Japan
and domestically from IBM and others.
Potential Cost Savings and Benefits from Operational Synergies.
Applied Magnetics believes that the combination of Applied Magnetics'
and Read-Rite's businesses following consummation of the Offer and the
Merger would lead to annualized cash savings in excess of $100 million
compared to that consolidated amount expected to be incurred by the two
companies in the future if separately operated. Those cost savings are
expected to result primarily through the elimination of redundancies in
research and development ("R&D") and reduction in selling, general and
administrative ("SG&A") expenses. After an initial transition period,
the increase in operating income before tax (as compared, for each year,
to the estimated operating income of the two combined companies without
synergies), net of on-going integration costs, is expected to be
approximately $23 million in Fiscal 1997, increasing to in excess of
$100 million in Fiscal 1998. Transition period activities are expected
to include facility and equipment rationalization and headcount
reductions. However, because cost savings and increases in operating
income estimates are based upon certain assumptions about the future,
there can be no assurance that the cost savings and increases in
operating income estimated by Applied Magnetics would be realized in
such amounts and actual costs savings and increases in operating income
may be more or less than those estimated.
Reductions in SG&A expenses are based upon the combined company
assessing its needs for overlapping functions such as information
systems, sales and marketing, and finance, accounting and other
administrative functions, particularly in overlapping markets and in
corporate functions.
After fiscal 1998, the improvements in operating income are
expected to result primarily from manufacturing efficiencies and
increased revenues.
Expected income synergies do not include any normal business or
other revenue growth, or the effect of future general economic
conditions.
Applied Magnetics believes, in particular, that combining and
coordinating the R&D efforts of the two companies would result in
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improved time-to-market and higher predictability of successful new
product introduction. In general, the combined company would have
greater operational and capacity planning flexibility, reflecting the
larger number of wafer, slider and assembly manufacturing sites.
Multiple sites also would reduce the risks inherent in limited-site
manufacturing.
There would be many other advantages to the combination, including:
greater efficiencies in purchasing materials and components and capital
equipment, an expanded customer base, thereby reducing the risk of
concentration, and a significantly enhanced portfolio of intellectual
property, with nearly 100 United States patents, numerous pending
patents and patent applications, and a number of foreign patents. The
combination of Applied Magnetics and Read-Rite should result in the
creation of a more efficient and lower-cost producer, leading to economic
benefits for its customers while reinforcing the combined company's
ability to make the on-going capital investment required to meet the
technical demands of the combined company's customers.
THE ESTIMATES SET FORTH HEREIN ARE BASED UPON A VARIETY OF
ASSUMPTIONS RELATING TO THE BUSINESS OF APPLIED MAGNETICS AND READ-RITE
WHICH MAY NOT BE REALIZED IN THE COMBINED COMPANY AND ARE SUBJECT TO
SIGNIFICANT UNCERTAINTIES AND CONTINGENCIES. THE ESTIMATED SYNERGIES
ARE SUBJECT TO MATERIAL RISKS AND UNCERTAINTIES BEYOND THE CONTROL OF
APPLIED MAGNETICS AND READ-RITE. ACCORDINGLY, THERE CAN BE NO ASSURANCE
THAT THE ESTIMATED SYNERGIES WILL BE REALIZED, AND ACTUAL SYNERGIES, IF
ANY, MAY VARY MATERIALLY FROM THOSE SHOWN. THE INCLUSION OF SUCH
ESTIMATES HEREIN SHOULD NOT BE REGARDED AS AN INDICATION THAT APPLIED
MAGNETICS, READ-RITE OR ANY OTHER PERSON CONSIDERS THEM AN ACCURATE
PREDICTION OF FUTURE EVENTS. NONE OF APPLIED MAGNETICS, READ-RITE OR
ANY OTHER PERSON INTENDS PUBLICLY TO UPDATE OR OTHERWISE PUBLICLY REVISE
THE ESTIMATED SYNERGIES SET FORTH ABOVE EVEN IF EXPERIENCE OR FUTURE
CHANGES MAKE IT CLEAR THAT SUCH SYNERGIES WILL NOT BE REALIZED.
THE INDEPENDENT ACCOUNTANTS FOR APPLIED MAGNETICS AND READ-RITE
HAVE NOT EXAMINED OR COMPILED THESE ESTIMATES AND ACCORDINGLY DO NOT
EXPRESS AN OPINION OR ANY OTHER FORM OF ASSURANCE ON THEM.
THE ESTIMATED SYNERGIES SET FORTH ABOVE CONSTITUTE FORWARD LOOKING
INFORMATION. FOR A DISCUSSION OF FACTORS REGARDING SUCH FORWARD LOOKING
INFORMATION, SEE "--FACTORS CONCERNING FORWARD LOOKING INFORMATION."
FACTORS CONCERNING FORWARD-LOOKING INFORMATION
The Private Securities Litigation Reform Act of 1995 provides a
"safe harbor" for forward-looking statements to encourage companies to
provide prospective information about themselves without fear of
litigation so long as those statements are identified as forward-looking
and are accompanied by meaningful cautionary statements identifying
important factors that could cause actual results to differ materially
from those projected in the statement. Accordingly, Applied Magnetics
hereby identifies the following important factors which would cause
Applied Magnetics' actual results to differ materially from any such
results which might be projected, forecasted, estimated or budgeted by
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Applied Magnetics in forward-looking statements, including, but not
limited to, among other things, the estimated synergies:
...(i) Inability to continue to build greater performance into
smaller products;
..(ii) Heightened competition, including specifically the
intensification of price competition driven by Japanese
suppliers, the entry of new competitors and the
development of new products by new and existing
competitors;
.(iii) Failure to obtain new customers, retain existing
customers or reductions in demand by existing customers,
including inability to continue to qualify for disk drive
manufacturers' programs;
..(iv) Adverse state and federal legislation and regulation;
...(v) Adverse publicity and news coverage;
..(vi) Inability to carry out marketing and sales plans;
.(vii) Loss or retirement of key executives or key employees;
(viii) Adverse results in significant litigation matters; and
..(ix) Changes in interest rates causing an increase in interest
expense.
In addition to the foregoing, the ability of Applied Magnetics to
realize the increases in operating income referred to in "-- Potential
Cost Savings and Benefits from Operational Synergies" is also subject to
the following additional uncertainties, among others:
(i) The ability to integrate the Applied Magnetics and Read-
Rite management and R&D and operations functions on a
timely basis; and
(ii) The ability to eliminate duplicative functions while
maintaining acceptable performance levels.
Many of the foregoing factors discussed have been discussed in
prior filings of Applied Magnetics and Read-Rite with the Commission.
The foregoing review of factors pursuant to the Private Litigation
Securities Reform Act of 1995 should not be construed as exhaustive.
CERTAIN INVESTMENT CONSIDERATIONS
Sumitomo Option. Pursuant to the Joint Venture Agreement dated as of
June 14, 1991 between Read-Rite and Sumitomo (the "Joint Venture
Agreement"), each of Read-Rite and Sumitomo were granted an option to
purchase any or all SMI shares owned by the other upon the occurrence of
certain major corporate transactions. Specifically, in the event of a
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merger, reorganization or sale of Read-Rite's voting securities in a
transaction or related series of transactions ("Transaction") pursuant
to which the stockholders of Read-Rite immediately prior to such
Transaction possess fifty percent (50%) or less of the voting power of
the surviving entity immediately after the Transaction, Sumitomo is
entitled for a period of one year from the effective date of such
Transaction to purchase any or all SMI shares owned by Read-Rite (the
"Sumitomo Option"). Upon consummation of the Offer and the Merger,
Applied Magnetics, which will be the surviving entity after the Merger,
believes that more than 50% of its voting power will be held by former
Read-Rite Stockholders and hence, Sumitomo will not be entitled to
exercise the Sumitomo Option as a result of the Offer and the Merger.
In addition, upon consummation of the Offer and the Merger, Applied
Magnetics will become bound by the terms of the Joint Venture Agreement
and the ancillary agreements referred to therein.
Read-Rite Litigation. As set forth in the Read-Rite 1996 Form 10-K
and the Read-Rite 1997 Q1 Form 10-Q, several class action complaints
have been filed against Read-Rite and certain of its officers and
directors, including two complaints filed in the Superior Court of the
State of California, Santa Clara County ("State Action Complaints"), and
two complaints filed in the United States District Court, Northern
District of California, San Jose Division ("Federal Action Complaints").
The State Action Complaints allege violations of certain California
securities laws, fraud, unlawful, unfair or fraudulent business
practices, and false and misleading advertising. The Federal Action
Complaints allege violations of the Securities Exchange Act of 1934,
including with respect to trades in Shares by certain executive officers
of Read-Rite. Neither the successful consummation of the Offer nor the
Merger will terminate such lawsuits, and Applied Magnetics is unable to
determine the likelihood of an adverse resolution to such actions, or
the materiality to the combined companies thereof.
BACKGROUND OF THE OFFER
In early 1996, Mr. Charles G. Phillips, Managing Director of
Gleacher NatWest Inc. ("Gleacher NatWest"), financial advisor to the
Company, contacted Mr. H. Vaughan Blaxter, III, Vice President, General
Counsel, Secretary and director of the Hillman Co., a Read-Rite
Stockholder, and a member of the Read-Rite Board, in an effort to
arrange an introduction to Mr. Cyril J. Yansouni, Chairman and Chief
Executive Officer of Read-Rite, for the purpose of discussing a possible
business combination between Applied Magnetics and Read-Rite.
Mr. Blaxter agreed to arrange such a meeting and Mr. Phillips met
with Mr. Yansouni at Read-Rite's offices for the purpose of discussing,
in general terms, a possible business combination between Applied
Magnetics and Read-Rite. Shortly thereafter, Mr. Phillips contacted Mr.
Yansouni to arrange for a meeting between Mr. Yansouni and Mr. Craig D.
Crisman, the Chief Executive Officer of Applied Magnetics.
In May 1996, a meeting was held in Palo Alto, California, attended
by Mr. Yansouni and Mr. Fred Schwettmann, President and Chief Operating
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Officer of Read-Rite, Mr. Crisman and Mr. Phillips to discuss, among
other subjects, the possibility of a business combination between
Applied Magnetics and Read-Rite, including the feasibility of such a
combination and various issues related thereto. Following this meeting,
Mr. Phillips made several attempts to reach Mr. Yansouni to follow up on
matters discussed at the May 1996 meeting. Mr. Phillips concluded that,
in light of Mr. Yansouni's failure to return his calls, Read-Rite did
not wish to pursue the possible combination.
In September 1996, Mr. Phillips was able to reach Mr. Yansouni by
telephone and sought to determine his interest at that time in a
business combination transaction. Mr. Yansouni indicated that, while he
had continued to think about the possibility of the combination of Read-
Rite and Applied Magnetics, he would prefer to postpone further
consideration of the matter until January 1997.
On January 23, 1997, Mr. Phillips again met with Mr. Yansouni.
Mr. Phillips reviewed the benefits of a merger between Read-Rite and
Applied Magnetics for their respective stockholders and customers and
suggested that Mr. Yansouni contact Mr. Crisman to discuss the matter
further. On the afternoon of January 23, 1997, Mr. Yansouni did contact
Mr. Crisman by telephone and indicated a willingness to meet with Mr.
Crisman on February 16, 1997, following Mr. Yansouni's return from an
extended trip to Europe for the purpose of discussing a possible
business combination.
On February 16, 1997, Mr. Yansouni and Mr. Crisman met to discuss
the possibility of a business combination between Read-Rite and Applied
Magnetics. At the meeting, Mr. Crisman pointed out, among other things,
that such a combination between the two companies would enhance
stockholder value, that substantial cost savings could be achieved as a
result of the business combination and that the combined company would
be better positioned to meet increasing competition from foreign and
domestic manufacturers. Mr. Crisman also discussed pro forma financial
statements reflecting the results of combining the two companies, and
the substantial benefits that could be achieved through such a
combination. Mr. Yansouni inquired as to certain manufacturing
considerations and expressed concern that Read-Rite's stock was
undervalued and that Read-Rite's stock price did not take into
consideration projected future results of the Company. He stated that
given such undervaluation of Read-Rite's stock, a business combination
would be difficult to achieve. After discussion, Mr. Yansouni and
Mr. Crisman agreed to meet again on February 21, 1997 to further discuss
the matter.
At their meeting on February 21, 1997, Mr. Crisman reiterated the
benefits of the proposed business combination and proposed alternative
approaches to the proposed business combination. Mr. Yansouni
concluded, however, that on the basis of his projections and Read-Rite's
under valued stock it was not the right time to effect a merger of Read-
Rite and Applied Magnetics.
On February 24, 1997, Mr. Crisman delivered to Mr. Yansouni a
letter proposing that Applied Magnetics acquire all of the outstanding
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Shares of Read-Rite common stock for $37.50 per Share in market value of
Applied Magnetics Common Stock, a 33% premium to the closing price on
February 21, 1997 of $28 3/16 per Share.
On February 24, 1997, Applied Magnetics publicly announced its
intention to commence the Offer to approve the Applied Magnetics
Proposals and filed with the Commission its Consent Solicitation. See
"The Consent Solicitation."
THE CONSENT SOLICITATION
As more fully set forth in the Applied Magnetics Schedule 14A, on
_____________, 1997, Applied Magnetics commenced soliciting the written
consent of the Read-Rite Stockholders to (i) remove all of the present
members of the Read-Rite Board and any person or persons elected or
designated by any such director to fill any vacancy or newly created
directorship, pursuant to Section 141 of the DGCL and Section 3.15 of
the Read-Rite Bylaws, (ii) the reduction of the number of seats on the
Read-Rite Board to two, and (iii) the election of _____________ and
________________ (the "Applied Magnetics Nominees") the directors of
Read-Rite (or, if either Applied Magnetics Nominee is unable to serve as
a director of Read-Rite due to death, disability or otherwise, any other
person designated as a Applied Magnetics Nominee by Applied Magnetics),
and (iv) repeal each provision of the Read-Rite Bylaws and each
amendment thereto adopted subsequent to December 20, 1996 and prior to
the effectiveness of the Applied Magnetics Proposals set forth above, if
any.
Section 213(b) of the DGCL provides that if no record date has been
fixed by the board of directors, the record date for determining
stockholders entitled to consent to corporate action in writing without
a meeting, when no prior action by the board of directors is required,
shall be the first date on which a signed written consent setting forth
the action taken or proposed to be taken is delivered to the corporation
by delivery to its registered office in Delaware, its principal place of
business or an officer or agent of the corporation having custody of the
books in which proceedings of meetings of the stockholders are recorded.
No prior action is required by the Read-Rite Board with respect to the
Applied Magnetics Proposals. Since the first written consent was
delivered to Read-Rite on ________, 1997, the record date has been set
as _____, 1997.
THE OFFER
General. Applied Magnetics hereby offers, upon the terms and
subject to the conditions set forth herein and in the related Letter of
Transmittal, to exchange 0.679 of a share of Applied Magnetics Common
Stock (i.e, the Offer Consideration), for each outstanding Share validly
tendered on or prior to the Expiration Date and not properly withdrawn.
The term "Expiration Date" shall mean 5:00 p.m., Eastern standard time
on _____________, 1997, unless and until Applied Magnetics extends the
period of time for which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the
Offer, as so extended by Applied Magnetics, shall expire. On
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February 21, 1997, the closing price of the Applied Magnetics Common
Stock on the NYSE was $55 1/4. Based on such closing price, the value
of the Offer Consideration is $37.50 per share, representing a 33%
premium over the closing price of the Shares on the Nasdaq National
Market on such date of $28 3/16. The value of the Offer will change as
the market price of Applied Magnetics Common Stock changes.
Conditions of the Offer. Applied Magnetics' obligation to exchange
the Offer Consideration for Shares pursuant to the Offer is conditioned
upon, among other things, the satisfaction or, where applicable, waiver
of each of the Offer Conditions. Subject to the applicable rules and
regulations of the Commission, Applied Magnetics expressly reserves the
right, in its sole discretion, at any time or from time to time, to
delay acceptance for exchange or, regardless of whether such Shares were
theretofore accepted for exchange, exchange of any Shares pursuant to
the Offer or to amend or terminate the Offer and not accept for exchange
or exchange any Shares not theretofore accepted for exchange or
exchanged, upon the failure of any of the conditions to the Offer to be
satisfied. Applied Magnetics reserves the absolute right to waive any
defect or irregularity in the tender of any securities and to waive any
of the Offer Conditions (other than the Applied Magnetics Stockholder
Consent Condition, the Regulatory Approval Condition and the condition
related to the effectiveness of the Registration Statement). Although
Applied Magnetics reserves the right to do so, Applied Magnetics does
not currently intend to waive the Minimum Tender Condition or the DGCL
Condition. See "The Offer--Conditions of the Offer--Minimum Tender
Condition," "--Applied Magnetics Stockholder Consent Condition," "--DGCL
Condition," "--Regulatory Approval Condition" and "--Certain Other
Conditions of the Offer." Waiver or amendment of any of these conditions
may require an extension of the Offer.
As part of each exchange of shares for Applied Magnetics Common
Stock made pursuant to the Offer, and subject to the satisfaction of all
the conditions to the Offer and the Merger, Applied Magnetics agrees,
and shall have covenanted severally with and for the benefit of each and
every holder of shares so exchanged, to cause the Merger to occur in the
manner described in this Preliminary Prospectus.
Regulatory Approvals. The acquisition of Shares by Applied
Magnetics pursuant to the Offer is subject to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR" Act), and the
rules (the "Rules") that have been promulgated thereunder. Applied
Magnetics has filed with the Antitrust Division of the United States
Department of Justice (the "Antitrust Division") and the Federal Trade
Commission (the "FTC") a Hart-Scott-Rodino Notification Form with
respect to the Offer to acquire the Shares.
Timing of the Offer. The Offer is currently scheduled to expire on
__________________, 1997. However, it is Applied Magnetics' current
intention to extend the Offer from time to time as necessary until all
conditions to the Offer have been satisfied or waived. See "The Offer--
Extension, Termination and Amendment."
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Extension, Termination and Amendment. Applied Magnetics expressly
reserves the right (but is not obligated), in its sole discretion, at
any time or from time to time, and regardless of whether any of the
events set forth in "The Offer--Conditions of the Offer" shall have
occurred or shall have been determined by Applied Magnetics to have
occurred, (a) to extend the period of time during which the Offer is
open by giving oral or written notice of such extension to the Exchange
Agent, which extension will be announced no later than 9:00 a.m.,
Eastern standard time, on the next business day after the previously
scheduled Expiration Date, and (b) to amend the Offer in any respect
(including, without limitation, by decreasing or increasing the Offer
Consideration to holders of Shares and/or by increasing or decreasing
the number of Shares being sought in the Offer) by giving oral or
written notice of such amendment to the Exchange Agent. The rights
reserved by Applied Magnetics in this paragraph are in addition to
Applied Magnetics' right to terminate the Offer as described in "The
Offer--Extension, Termination and Amendment." There can be no assurance
that Applied Magnetics will exercise its right to extend the Offer.
However, it is Applied Magnetics' current intention to extend the Offer
until all Offer Conditions have been satisfied or waived. See "The
Offer--Extension, Termination and Amendment." During any such
extension, all Shares previously tendered and not withdrawn will remain
subject to the Offer, subject to the right of a tendering Read-Rite
Stockholder to withdraw his or her Shares. See "The Offer--Withdrawal
Rights."
Exchange of Shares; Delivery of Applied Magnetics Common Stock.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such
extension or amendment), Applied Magnetics will accept for exchange, and
will exchange, Shares validly tendered and not properly withdrawn as
promptly as practicable after the Expiration Date. See "The Offer--
Exchange of Shares; Delivery of Applied Magnetics Common Stock."
Withdrawal Rights. Tenders of Shares made pursuant to the Offer
are irrevocable, except that Shares tendered pursuant to the Offer may
be withdrawn at any time prior to the Expiration Date, and, unless
theretofore accepted for exchange and exchanged by Applied Magnetics for
the Offer Consideration pursuant to the Offer, may also be withdrawn at
any time after ______________, 1997. See "The Offer--Withdrawal Rights."
Procedure for Tendering Shares. For a holder of Shares validly to
tender Shares pursuant to the Offer, (i) a properly completed and duly
executed Letter of Transmittal (or manually executed facsimile thereof),
together with any required signature guarantees, or an Agent's Message
(as defined herein) in connection with a book-entry transfer, and any
other required documents, must be transmitted to and received by the
Exchange Agent at one of its addresses set forth on the back cover of
this Preliminary Prospectus and either certificates for tendered Shares
must be received by the Exchange Agent at such address or such Shares
must be tendered pursuant to the procedures for book-entry transfer set
forth under "The Offer--Procedure for Tendering" (and a confirmation of
receipt of such tender received), in each case, prior to the Expiration
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Date, or (ii) such Read-Rite Stockholder must comply with the guaranteed
delivery procedure set forth under "The Offer--Procedure for Tendering."
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY,
IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY
WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT.
IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD
BE ALLOWED TO ENSURE TIMELY DELIVERY.
THE MERGER
The purpose of the Offer is to enable Applied Magnetics to acquire
control of Read-Rite. Applied Magnetics will, subject to satisfaction
of the conditions to the Offer and the Merger set forth herein, cause
Read-Rite to merge with and into Applied Magnetics, which will be the
surviving corporation. In the Merger, each then outstanding Share
(other than Shares owned by Applied Magnetics or any of its affiliates,
Shares held in the treasury of Read-Rite (if Read-Rite is so authorized)
or by any subsidiary of Read-Rite and Shares owned by Read-Rite
Stockholders who perfect dissenters' rights under Delaware law, to the
extent such dissenters' rights are available) would be canceled in
exchange for the right to receive the Offer Consideration. See "The
Merger."
The Applied Magnetics Nominees have stated their intention to take,
subject to the fulfillment of the fiduciary duties they would have as
directors of Read-Rite, all actions necessary and desirable to
facilitate consummation of the Offer and the Merger including, among
other things,(i) approving Applied Magnetics' acquisition of the Shares
pursuant to the Offer under DGCL Section 203 and taking such other steps
as they deem necessary in order that Section DGCL 203 is inapplicable to
Applied Magnetics' acquisition of the Shares pursuant to the Offer and
the Merger, and (ii) adopting and approving an agreement and plan of
merger between Read-Rite and Applied Magnetics pursuant to which
Read-Rite will merge with and into Applied Magnetics, which will be the
surviving corporation of the Merger, and Read-Rite Stockholders (other
than Applied Magnetics and Read-Rite and their respective affiliates,
and Read-Rite Stockholders who perfect dissenters' rights under Delaware
law, to the extent available) will receive the Offer Consideration in
exchange for the cancellation of each Share (the "Merger Agreement").
Pursuant to the DGCL, the Merger Agreement requires the approval of
Read-Rite Stockholders in order to take effect. Under Section 251 of
the DGCL, approval of the Merger Agreement will require the approval of
the holders of a majority of Shares outstanding on the record date set
for stockholder action on the Merger Agreement (including Shares owned
by Applied Magnetics or its affiliates) at an annual or special meeting
of the Read-Rite Stockholders or by written consent.
If the Offer is consummated, Applied Magnetics will own a majority
of the outstanding Shares. Accordingly, Applied Magnetics will at such
time have sufficient voting power in Read-Rite to approve the Merger
-22-
<PAGE>
Agreement independently of the votes or consents of any other Read-Rite
Stockholders. Applied Magnetics presently intends to vote, or execute
written consents with respect to, any and all Shares then owned by
Applied Magnetics to approve such proposals.
DISSENTERS' RIGHTS
Assuming that the Shares continue to be quoted on the Nasdaq National
Market after the consummation of the Offer, Read-Rite Stockholders will not
have dissenters' rights under Delaware law in connection with the Merger. In
the event that, as a result of Applied Magnetics' purchase of Shares pursuant
to the Offer, the Shares are no longer quoted on the Nasdaq National Market,
the Read-Rite Stockholders will have dissenters' rights under Delaware law in
connection with the Merger pursuant to Section 262 of the DGCL. Applied
Magnetics presently contemplates that the Merger will be subject to certain
conditions, including that, to the extent dissenters' rights are available,
holders of not more than 5% of the outstanding Shares at the effective time
of the Merger perfect dissenters' rights. See "Dissenters' Rights."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Sheppard, Mullin, Richter & Hampton LLP, counsel for
Applied Magnetics, exchanges of Shares for Applied Magnetics Common Stock
pursuant to the Offer and the Merger should be treated for federal income tax
purposes as exchanges pursuant to a plan of reorganization within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"). Consequently, no gain or loss should be recognized by holders of
Shares upon such exchanges, except as described below under "Tax Consequences
to Holders of Shares if the Offer and the Merger Qualify as a
Reorganization." This opinion is based on the view of Sheppard, Mullin,
Richter & Hampton LLP that the Offer and the Merger should be treated as a
single transaction for federal income tax purposes, and on certain
assumptions, including that (a) the continuity of shareholder interest
requirement applicable to corporate reorganizations (which requires a
continuing equity interest in Applied Magnetics by holders owning a
significant percentage of the Shares prior to the consummation of the Offer)
will be satisfied, taking into account any holders that exercise dissenters'
rights under the DGCL, if any; (b) after the Offer and Merger, Applied
Magnetics will continue ReadRite's historic business or use a significant
portion of Read-Rite's historic assets in a business; and (c) the Offer and
Merger will be consummated as contemplated by this Preliminary Prospectus in
all material respects.
In rendering their opinion, Sheppard, Mullin, Richter & Hampton LLP
have further assumed that (i) upon consummation of the Offer, there will be
no significant contingencies preventing the prompt consummation of the
Merger, (ii) upon consummation of the Offer, Applied Magnetics will not have
waived any of the conditions relating to its obligation to consummate the
Offer in a manner that could prevent a prompt consummation of the Merger, and
(iii) the Merger will in fact be consummated promptly after the consummation
of the Offer. A significant delay in the consummation of the Merger would
substantially increase the risk that the Offer will not qualify as part of a
reorganization within the meaning of Section 368(a) of the Code, and the
absence of the Merger would mean that the Offer was not part of such a
reorganization. The consequences of a failure to so qualify are discussed
-23-
<PAGE>
below under "Tax Consequences to Holders of Shares if the Offer Does Not
Qualify as Part of a Reorganization."
Assuming that the Merger qualifies as a reorganization under the Code,
no gain or loss will be recognized by Read-Rite or Applied Magnetics as a
result of the Offer and the Merger.
If the Offer and the Merger together qualify as a reorganization within
the meaning of Section 368(a) of the Code, no gain or loss will be recognized
by a U.S. Holder (as defined under "The Offer--Certain Federal Income Tax
Consequences"), except with respect to a U.S. Holder who receives cash in
lieu of fractional shares of Applied Magnetics Common Stock.
If the Merger is not consummated, or if the Merger is consummated but
the Offer is treated as a separate transaction for federal income tax
purposes, exchanges pursuant to the Offer will be taxable transactions for
federal income tax purposes. If the Offer is a taxable transaction, then each
U.S. Holder exchanging Shares for shares of Applied Magnetics Common Stock
will recognize gain or loss for federal income tax purposes measured by the
difference between such U.S. Holder's adjusted basis in the Shares exchanged
and the sum of the fair market value of Applied Magnetics Common Stock
received by such U.S. Holder and any cash received by such U.S. Holder in
lieu of fractional shares of Applied Magnetics Common Stock.
If the Offer is a taxable transaction, the Merger itself should be
considered a reorganization within the meaning of Section 368(a)(1)(A) of
the Code if the continuity of interest requirement is satisfied in the
Merger. For advanced ruling purposes, guidelines published by the Internal
Revenue Service would require that stockholders of Read-Rite receive in the
Merger stock of Applied Magnetics having a value equal to at least 50% of
all of the stock of Read-Rite outstanding prior to the Merger. In that
event, a U.S. Holder receiving Applied Magnetics Common Stock in the
Merger would be subject to the rules concerning reorganizations described
above with respect to such Applied Magnetics Common Stock, but not with
respect to any Applied Magnetics Common Stock received by such U.S. Holder
pursuant to the Offer.
All holders of Shares should carefully read the discussion under "The
Offer--Certain Federal Income Tax Consequences" and are urged to consult with
their own tax advisors.
EFFECT OF OFFER ON MARKET FOR SHARES; REGISTRATION UNDER THE EXCHANGE ACT
The exchange of Shares pursuant to the Offer will reduce the number of
holders of Shares and the number of Shares that might otherwise trade
publicly and, depending upon the number of Shares so purchased, could
adversely affect the liquidity and market value of the remaining Shares held
by the public.
The Shares are quoted on the Nasdaq National Market. Depending upon the
number of Shares acquired pursuant to the Offer, following consummation of
the Offer, the Shares may no longer meet the requirements of the Nasdaq
National Market for continued quotation and the Shares may no longer
constitute "margin securities" for the purposes of the Federal Reserve
Board's margin regulations, in which event the Shares would be ineligible as
collateral for margin loans made by brokers. See "The Offer--Effect of Offer
on Market for Shares; Registration under the Exchange Act."
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<PAGE>
COMPARISON OF THE RIGHTS OF HOLDERS OF SHARES AND APPLIED MAGNETICS
COMMON STOCK
As a result of the Offer, Read-Rite Stockholders will become
stockholders of Applied Magnetics. Such holders will have certain rights as
Applied Magnetics stockholders that are different from the rights they
currently have in Read-Rite because of the differences between the Applied
Magnetics Certificate and Applied Magnetics' bylaws (the "Applied Magnetics
Bylaws"), on the one hand, and Read-Rite's Restated Certificate of
Incorporation, as amended (the "Read-Rite Certificate"), and the Read-Rite
Bylaws, on the other hand. For a comparison of the Certificate of
Incorporation and bylaw provisions of Applied Magnetics and Read-Rite, see
"Comparison of the Rights of Holders of Shares and Applied Magnetics Common
Stock."
DESCRIPTION OF APPLIED MAGNETICS CAPITAL STOCK
The authorized capital stock of Applied Magnetics consists of
40,000,000 shares of Applied Magnetics Common Stock, $.10 par value and
5,000,000 shares of preferred stock, $.10 par value ("Applied Magnetics
Preferred Stock"). As of February 20, 1997, there were 23,680,726 shares of
Applied Magnetics Common Stock issued and outstanding. As of February 20,
1997, there were no shares of Applied Magnetics Preferred Stock outstanding.
The Applied Magnetics Board has authority, without further action by the
holders of Applied Magnetics Common Stock, to divide the Applied Magnetics
Preferred Stock into series, to fix the number of shares comprising any
series and to fix or alter the voting powers, designations, preferences and
relative, participating, optional or other rights, and the qualifications,
limitations or restrictions, including dividend rights, dividend rates,
conversion rights, rights and terms of redemption, rights upon dissolution or
liquidation and sinking fund provisions, of any wholly unissued series of
Applied Magnetics Preferred Stock.
Holders of shares of Applied Magnetics Common Stock are entitled to one
vote per share for each share held. Subject to the rights of holders of
shares of outstanding Applied Magnetics Preferred Stock, if any, holders of
shares of Applied Magnetics Common Stock have equal rights to participate in
dividends when declared and, in the event of liquidation, in the net assets
of Applied Magnetics available for distribution to stockholders.
In October 1988, the Applied Magnetics Board declared a dividend of one
Right for each outstanding share of Applied Magnetics Common Stock to
stockholders of record on November 4, 1988 ("Applied Magnetics Right"). Each
Applied Magnetics Right entitles the holder to buy the economic equivalent of
one share of Applied Magnetics Common Stock in the form of one one-hundredth
of a share of a newly created series of participating preferred stock of
Applied Magnetics at an exercise price of $75.00 per share. The Applied
Magnetics Rights are exercisable only if a person or group acquires 20% or
more of the voting power of Applied Magnetics (an "Acquiring Person") or
announces a tender or exchange offer which would result in a person or group
becoming an Acquiring Person, in either case, without the prior consent of
Applied Magnetics.
-25-
<PAGE>
In March 1996, Applied Magnetics completed the sale, in an offshore
offering and in a concurrent private placement in the United States, of
$115.0 million of its 7% Convertible Subordinated Debentures (the
"Convertible Debentures") due in 2006. Of the $115.0 million debt, $22.0
million may be converted into shares of Applied Magnetics Common Stock, at
any time after May 1, 1996, at a conversion price of $18.60 per share. The
remaining $93.0 million of Convertible Debentures may be converted into
shares of Applied Magnetics Common Stock, at the same price, at any time
after March 22, 1997.
For information relating to ownership of Applied Magnetics Common Stock
by certain beneficial owners and directors and executive officers of Applied
Magnetics, see the 1997 Applied Magnetics Annual Meeting Proxy Statement. For
information relating to ownership of Shares by certain beneficial owners and
directors and executive officers of ReadRite, see Schedule B. As of December
16, 1996, as a group, Applied Magnetics' directors, executive officers and
their affiliates beneficially owned approximately 5.06% of the outstanding
shares of Applied Magnetics Common Stock. According to the 1997 Read-Rite
Annual Meeting Proxy Statement, Read-Rite's directors, executive officers and
their affiliates own approximately 3.2% of the outstanding Shares.
For additional information concerning the capital stock of Applied
Magnetics, see "Description of Applied Magnetics Capital Stock."
MARKET PRICES
The Applied Magnetics Common Stock is listed and principally traded on
the NYSE. The Shares are quoted and traded principally on the Nasdaq National
Market. The following table sets forth the range of high and low sales prices
as reported on the NYSE Composite Tape, with respect to Applied Magnetics
Common Stock, and the Nasdaq National Market, with
respect to the Shares.
APPLIED MAGNETICS READ-RITE
PRICE RANGE PRICE RANGE
----------- -----------
QUARTER High Low High Low
------- ---- --- ---- ---
1994
First Quarter................ $ 6 1/2 $ 5 1/8 $14 1/8 $ 8 3/4
Second Quarter............... $ 7 3/8 $ 5 1/8 $15 1/4 $11 5/8
Third Quarter............... $ 6 3/8 $ 4 1/4 $14 1/8 $11
Fourth Quarter............... $ 5 3/8 $ 4 $19 1/16 $11 7/8
1995
First Quarter................ $ 4 3/8 $ 2 1/4 $19 1/16 $15 1/2
Second Quarter............... $ 3 7/8 $ 2 1/2 $19 3/16 $14 7/8
Third Quarter................ $ 7 $ 2 5/8 $29 $19
Fourth Quarter............... $18 3/8 $ 7 1/8 $48 $26 1/4
1996
First Quarter. .............. $19 $12 1/8 $39 1/8 $21 3/4
Second Quarter............... $19 1/8 $13 3/4 $25 1/8 $16 3/4
Third Quarter. .............. $21 3/4 $ 9 1/2 $26 1/8 $12 15/16
Fourth Quarter............... $18 1/4 $ 8 1/4 $15 3/4 $ 9 7/8
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1997
First Quarter................ $31 7/8 $17 3/8 $26 1/2 $15 1/8
Second Quarter (through
February 21, 1997)......... $60 1/2 $29 1/8 $33 5/8 $24
On February 21, 1997, the last trading day before public announcement of
the Offer, the closing sales price per share of Applied Magnetics Common
Stock was $55 1/4 and the closing sales price of a Share was 28 3/16. Past
price performance is not necessarily indicative of likely future price
performance. Holders of Shares are urged to obtain current market quotations
for shares of Applied Magnetics Common Stock.
THE EXCHANGE AGENT
IBJ Schroder Bank & Trust Company has been appointed Exchange Agent in
connection with the Offer. The Letter of Transmittal (or facsimile copies
thereof) and certificates for Shares should be sent by each tendering
Read-Rite Stockholder or his or her broker, dealer, bank or nominee to the
Exchange Agent at the addresses set forth on the back cover of this
Preliminary Prospectus.
REQUEST FOR ASSISTANCE AND ADDITIONAL COPIES
Requests for information or assistance concerning the Offer may be
directed to the Dealer Manager or the Information Agent at their respective
addresses set forth on the back cover of this Preliminary Prospectus.
Requests for additional copies of this Preliminary Prospectus and the Letter
of Transmittal should be directed to the Information Agent.
ACCOUNTING TREATMENT
The Merger is intended to qualify as a pooling of interests for
accounting and financial reporting purposes under Accounting Principles Board
Opinion No. 16. Under this method of accounting, the assets and liabilities
of Applied Magnetics and Read-Rite will be carried forward to the combined
company at their recorded amounts, income of the combined company on a
consolidated basis will include income of Applied Magnetics and Read-Rite for
the entire fiscal period in which the Merger occurs and the reported income
of the separate companies for prior periods will be combined and restated as
consolidated income of the combined company.
The management of Applied Magnetics has determined that Applied Magnetics
is an entity eligible to participate in a business combination accounted for
as a pooling of interests. The management of Applied Magnetics believes that
Read-Rite is also eligible to participate in a business combination accounted
for as a pooling of interests based upon information regarding Read-Rite
available in publicly filed documents.
However, there may be factors and future Read-Rite actions which could
preclude pooling of interests accounting. These factors and potential
management actions are out of the control of Applied Magnetics and its
management. If the proposed combination ultimately does not qualify for
pooling of interests accounting, the proposed combination would be accounted
for in accordance with the purchase method of accounting.
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<PAGE>
Under the purchase method of accounting, a substantial amount of goodwill
would be recognized. This would result in substantial amortization expense
recorded in the financial statements of Applied Magnetics in the post
acquisition periods.
-28-
<PAGE>
APPLIED MAGNETICS AND READ-RITE COMPARATIVE PER SHARE DATA
The following table sets forth comparative per share data of Applied
Magnetics and Read-Rite on both a historical and pro forma consolidated
basis. This table should be read in conjunction with the historical financial
statements and notes thereto contained in the Applied Magnetics Fiscal 1996
annual report on Form 10-K, the Read-Rite Fiscal 1996 annual report on Form
10-K, the Applied Magnetics first quarter 1997 quarterly report on Form 10-Q
and the Read-Rite first quarter 1997 quarterly report on Form 10-Q, each of
which is incorporated by reference herein, and in conjunction with the
unaudited pro forma consolidated financial information appearing elsewhere in
this Preliminary Prospectus. See "Applied Magnetics and Read-Rite Unaudited
Pro Forma consolidated Financial Information."
The Merger, pursuant to which Read-Rite will merge with and into Applied
Magnetics, will be accounted for in accordance with the pooling of interests
method of accounting. The pro forma information set forth below assumes the
Merger occurred as of the beginning of the period presented. Accordingly, the
historical results of Applied Magnetics and Read-Rite have been combined and
adjusted to reflect the Merger for all periods presented. The pro forma
information does not reflect the estimated cost savings or revenue
enhancements that Applied Magnetics believes may result from the Merger. The
pro forma per share data is not necessarily indicative of actual results had
the Merger occurred on such dates or of future expected results.
Three months Fiscal year
ended ended
APPLIED MAGNETICS CORPORATION COMMON STOCK December 31, September 30,
NET INCOME (LOSS) PER COMMON SHARE: 1996(1) 1996(1)
------- -------
Historical - Primary $ 1.30 $ 1.35
Historical - Fully-Diluted 1.10 1.35
Pro Forma Consolidated - Primary 0.66 (0.19)
Pro Forma Consolidated - Fully-Diluted 0.59 (0.19)
BOOK VALUE PER COMMON SHARE (AT PERIOD END):
Historical - Fully-Diluted 5.79 4.72
Pro forma Consolidated - Fully-Diluted(2) 10.10 9.08
READ-RITE CORPORATION COMMON STOCK
NET INCOME (LOSS) PER COMMON SHARE:
Historical - Primary 0.12 (0.92)
Historical - Fully-Diluted 0.12 (0.92)
BOOK VALUE PER COMMON SHARE (AT PERIOD
END):
Historical - Primary 9.80 9.70
----------
(1) Applied Magnetics' fiscal year ended on September 28, 1996 and its
fiscal 1997 first quarter ended on December 28, 1997.
(2) Amount is calculated by dividing total pro forma common
stockholders' equity by the sum of total outstanding shares of
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<PAGE>
Applied Magnetics Common Stock plus new shares of Applied Magnetics
Common Stock to be issued pursuant to the Offer and the Merger (based
on the number of Shares outstanding at period end).
SELECTED FINANCIAL DATA
The summary below sets forth selected historical financial data and
selected unaudited pro forma financial data. This financial data should be
read in conjunction with the historical financial statements and notes
thereto contained in the Applied Magnetics Fiscal 1996 annual report on Form
10-K, the Read-Rite Fiscal 1996 annual report on Form 10-K, the Applied
Magnetics first quarter 1997 quarterly report on Form 10-Q and the Read-Rite
first quarter 1997 quarterly report on Form 10-Q each of which is
incorporated by reference herein, and in conjunction with the unaudited pro
forma consolidated financial information and notes relating to each appearing
elsewhere in this Preliminary Prospectus. See "Applied Magnetics and
Read-Rite Unaudited Pro Forma Consolidated Financial Information."
SELECTED HISTORICAL FINANCIAL DATA OF APPLIED MAGNETICS. The selected
consolidated financial data of Applied Magnetics for each of five full fiscal
years set forth below are derived from audited consolidated financial
statements of Applied Magnetics. The selected consolidated financial data of
Applied Magnetics for the first fiscal quarters ended December 28, 1996 and
December 30, 1995 have been derived from unaudited consolidated financial
statements which include, in the opinion of management, all adjustments,
consisting of normal recurring adjustments, necessary to present fairly the
consolidated results of operations and financial position of Applied
Magnetics for such periods. The results of operations for any interim period
are not necessarily indicative of results to be expected for future periods
or for the full fiscal year. This summary should be read in conjunction with
the financial statements and other financial information included in
documents incorporated herein by reference.
-30-
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended,
-------------------------------------------------------------
First First
Quarter Quarter
Ended Ended September September September September September
December 28, December 30, 28, 30, 30, 30, 30,
1996 1995 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
(UNAUDITED) (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net sales $ 121,627 $ 94,709 $ 344,754 $ 292,600 $ 275,927 $ 335,898 $ 297,864
Income (loss)
from continuing
operations 31,872 9,028 32,218 1,748 (52,670) (43,728) 315
Loss from discon-
tinued operations -- -- -- -- -- -- (25,422)
Net income (loss) 31,872 9,028 32,218 1,748 (52,670) (43,728) (25,107)
Net income (loss)
per share:
Net income (loss)
from continuing
operations $ 1.30 $ 0.38 $ 1.35 $ 0.08 $ (2.39) $ (2.17) $ 0.02
Loss from discon-
tinued operations -- -- -- -- -- -- (1.53)
Net income (loss) $ 1.30 $ 0.38 $ 1.35 $ 0.08 $ (2.39) $ (2.17) $ (1.51)
Weighted average
common and common
equivalent shares
outstanding: 24,532 23,774 23,897 22,472 22,082 20,156 16,604
BALANCE SHEET
Total assets 399,186 262,913 359,450 246,817 220,556 278,516 263,319
Long-term
obligations 115,848 2,790 116,263 3,254 677 11,550 27,224
</TABLE>
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<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF READ-RITE. The selected consolidated
financial data of Read-Rite for each of five full fiscal years set forth
below are derived from audited consolidated financial statements of
Read-Rite. The selected consolidated financial data of Read-Rite for the
first fiscal quarters ended December 31, 1996 and 1995 have been derived from
unaudited consolidated financial statements which include, in the opinion of
management, all adjustments, consisting of normal recurring adjustments,
necessary to present fairly the consolidated results of operations and
financial position of Read-Rite for such periods. The results of operations
for any interim period are not necessarily indicative of results to be
expected for future periods or for the full fiscal year. This summary should
be read in conjunction with the financial statements and other financial
information included in documents incorporated herein by reference.
<TABLE>
<CAPTION>
First First
Quarter Quarter
Ended Ended Fiscal Year Ended September 30,
December December ---------------------------------------------------------------------
31, 31, 1996(1) 1995 1994(2) 1993(3) 1992
--- --- ------- ---------- -------- ------- ----
1996 1995
---- ----
OPERATIONS (unaudited) (unaudited) (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales $ 251,588 $ 299,211 $ 991,118 $ 1,003,040 $ 638,589 $ 587,647 $ 482,586
Net income
(loss) 5,787 42,571 (42,986) 123,565 19,694 6,283 56,193
Net income
(loss) per
share 0.12 0.88 (.92) 2.60 .43 .14 1.48
Weighted
Average
Common &
Common
Equivalent
Shares
Outstanding 48,098,000 48,589,000 46,755,000 47,616,000 46,125,000 44,658,000 37,913,000
BALANCE
SHEET
Total assets $ 918,868 $ 943,636 $ 908,672 $ 939,457 $ 630,592 $ 553,010 $ 344,849
Long-term
obligations 170,129 135,837 172,037 137,406 52,414 52,065 28,717
</TABLE>
(1) Fiscal 1996 includes severance, relocation and other charges of
approximately $11,200, research and development charges for the
acquisition of planar technology of approximately $9,000,
approximately $24,100 for the write-down of capital assets,
approximately $7,000 associated with end-of-life inventory and
approximately $700 in other charges, for a total of $52,000 for the
year.
(2) Fiscal 1994 includes merger costs of $2,384.
(3) Fiscal 1993 includes a restructuring charge of $29,472.
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<PAGE>
APPLIED MAGNETICS AND READ-RITE SELECTED UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL INFORMATION. The following selected unaudited pro forma
consolidated financial information combines the consolidated balance sheets
and consolidated statements of operations of Applied Magnetics and Read-Rite
as if the Merger had occurred for all periods presented. These statements are
prepared on the basis of accounting for the Merger as a pooling of interests
and are based on the assumptions set forth in the notes thereto. These
statements do not reflect the estimated cost savings and revenue enhancements
Applied Magnetics believes will result from the Merger. Therefore, the
following information is not necessarily indicative of actual results that
would have occurred had the Merger occurred on such dates or of expected
future results. See "Applied Magnetics and Read-Rite Unaudited Pro Forma
Consolidated Financial Information."
<TABLE>
<CAPTION>
First Quarter Ended Fiscal Year Ended
--------------------------- ----------------------------------------------
December 31, December 31, September 30, September 30, September 30,
1996 1995 1996 1995 1994
------ ------ ------ ------ ------
PRO FORMA CONSOLIDATED (IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Net sales $ 373,215 $ 393,920 $ 1,335,872 $ 1,295,640 $ 914,516
Gross profit 82,411 106,916 196,905 303,956 87,123
Net income (loss) $ 37,659 $ 51,599 $ (10,768) $ 125,313 $ (32,976)
Net income (loss) per
share $ 0.66 $ 0.91 $ (0.19) $ 2.29 $ (0.62)
Fully diluted
income (loss) per
share $ 0.59 $ 0.91 $ (0.19) $ 2.29 $ (0.62)
Weighted average common
and dilutive common
equivalent shares
outstanding 63,519,842 56,864,943 54,749,124 50,481,620 49,214,104
PRO FORMA CONSOLIDATED
CONSOLIDATED BALANCE
SHEET DATA:
Cash and equivalents $ 220,810 $ 163,113 $ 209,691 $ 217,096 $ 86,238
Total current assets 554,656 583,809 526,960 603,631 338,179
Total current
liabilities 318,764 319,031 295,119 322,692 244,369
Total assets 1,318,054 1,206,549 1,268,122 1,186,274 851,148
Long-term
obligations 285,977 138,627 288,300 140,660 53,091
</TABLE>
REASONS FOR THE OFFER
OFFER PREMIUM
Applied Magnetics believes that the Offer is in the best interests of
the Read-Rite Stockholders because, among other things, the Offer
Consideration represents a substantial premium to the per Share price prior
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<PAGE>
to the public announcement of the Offer on February 24, 1997. The following
table sets forth the closing price per share of Applied Magnetics
Common Stock as reported on the NYSE Composite Tape on February 21, 1997,
the Nasdaq National Market closing price per Read-Rite share on February 21,
1997, the value of the Offer Consideration on such date and the premium of
such Offer Consideration over such Share closing price.
APPLIED
MAGNETICS READ-RITE OFFER
SHARE PRICE* SHARE PRICE* CONSIDERATION** PREMIUM
------------ ------------ --------------- -------
$55 1/4 $28 3/16 $37.50 33%
* Based on the closing prices of Applied Magnetics Common Stock and
the Shares on February 21, 1997, the last trading day prior to the
public announcement of the Offer.
** Based upon the Offer to exchange each outstanding Share for 0.679 of a
share of Applied Magnetics Common Stock.
The following chart sets forth a range of possible Applied Magnetics
Common Stock prices and the corresponding (i) total dollar value of the Offer
Consideration to be received per Share, and (ii) Share price premium over the
closing Share price on the last trading day prior to the public announcement
of the Offer. The Applied Magnetics Common Stock Prices set forth below are
for illustrative purposes only and are not intended to be an exhaustive list
of Applied Magnetics Common Stock Prices. There can be no assurance that the
actual Applied Magnetics Common Stock Price will be in the range set forth
below.
APPLIED
MAGNETICS
COMMON STOCK VALUE OF OFFER
PRICE CONSIDERATION* PREMIUM**
- ------------------------- ---------------------- -------------------
$60 $40.74 44.5%
$59 1/2 $40.40 43.3%
$59 $40.06 42.1%
$58 1/2 $39.72 40.9%
$58 $39.38 39.7%
$57 1/2 $39.04 38.5%
$57 $38.70 37.3%
$56 1/2 $38.36 36.1%
$56 $38.02 34.9%
$55 1/2 $37.68 33.7%
$55 $37.34 32.4%
* Based upon the Offer to exchange each outstanding Share for 0.679 of a
share of Applied Magnetics Common Stock.
**Based on the closing price per Share of $28 3/16 on February 21, 1997, the
last trading day prior to the public announcement of the Offer.
Since the Offer Consideration is fixed at 0.679 of a share of Applied
Magnetics Common Stock per Share, any increase or decrease in Applied
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Magnetics Common Stock Share price will affect the value of the Offer
Consideration.
ENHANCED BUSINESS OPPORTUNITIES
In addition to the per Share price premium provided by the Offer, Applied
Magnetics believes that the Read-Rite Stockholders will also benefit from the
Offer as a result of becoming stockholders of Applied Magnetics. Applied
Magnetics has carefully studied the potential benefits of the combination of
the businesses of Applied Magnetics and Read-Rite and, as a result, believes
that such a combination will provide a solid financial base to support
continued growth in the merchant market disk head supply business.
STRENGTHENED SHARED TECHNICAL AND PRODUCTION CAPABILITIES
The combined entity would acquire enhanced production and developmental
capability in an expanding market for HDD recording heads. It would acquire
the combined production capacity of approximately 40 million HGAs per quarter
and revenue of greater than $1.8 billion per year. While the combination of
Applied Magnetics and Read-Rite would extend the potential of inductive thin
film technology, it would also position it as a viable competitor in the
rapidly expanding product cycle for MR head technology. Industry production
in this segment has grown from 72.9 million units during the calendar fourth
quarter 1996 to a projected 148.8 million units for the calendar
fourth quarter of 1997. The combined technical expertise and production
capacity of Applied Magnetics and ReadRite would represent a more effective
competitive response to the increased challenge presented by suppliers from
Japan and domestically from IBM and others.
POTENTIAL COST SAVINGS AND BENEFITS FROM OPERATIONAL SYNERGIES
Applied Magnetics believes that the combination of Applied Magnetics' and
Read-Rite's businesses following consummation of the Offer and the Merger
would lead to annualized cash savings in excess of $100 million over that
combined amount expected to be incurred by the two companies in the future if
separately operated. Those cost savings are expected to result primarily
through the elimination of redundancies in R&D and reduction in SG&A
expenses. After an initial transition period, the annual increase in
operating income before tax (as compared, for each year, to the estimated
operating income of the two combined companies without synergies), net of
on-going integration costs, is expected to be approximately $23 million, in
Fiscal 1997, increasing to in excess of $100 million in Fiscal 1998.
Transition period activities are expected to include facility and equipment
rationalization and headcount reductions. However, because cost savings and
increases in operating income estimates are based upon certain assumptions
about the future, there can be no assurance that the cost savings and
increases in operating income estimated by Applied Magnetics would be
realized in such amounts and actual costs savings and increases in operating
income may be more or less than those estimated.
Reductions in SG&A expenses are based upon the combined company
assessing its needs for overlapping functions such as information systems,
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sales and marketing, and finance, accounting and other administrative
functions, particularly in overlapping markets and in corporate functions.
After fiscal 1998, the improvements in operating income are expected to
result primarily from manufacturing efficiencies and increased revenues.
Expected income synergies do not include any normal business or other
revenue growth, or the effect of future general economic conditions.
Applied Magnetics believes, in particular, that combining and
coordinating the R&D efforts of the two companies would result in improved
time-to-market and higher predictability of successful new product
introduction. In general, the combined company would have greater operational
and capacity planning flexibility, reflecting the larger number of wafer,
slider and assembly manufacturing sites. Multiple sites also would reduce the
risks inherent in single-site manufacturing.
There would be many other advantages to the combination, including:
greater efficiencies in purchasing materials and components and capital
equipment, an expanded customer base, thereby reducing the risk of
concentration, and a greatly enhanced portfolio of intellectual property,
with nearly 100 US Patents, numerous pending Patents and Patent Applications,
and a number of foreign Patents. The combination of Applied Magnetics and
Read-Rite should result in the creation of a more efficient and lower-cost
producer, leading to economic benefits for its customers while reinforcing
the combined company's ability to make the on-going capital investment
required to meet the technical demands of our customers.
THE ESTIMATES SET FORTH HEREIN ARE BASED UPON A VARIETY OF ASSUMPTIONS
RELATING TO THE BUSINESS OF APPLIED MAGNETICS AND READ-RITE WHICH MAY NOT BE
REALIZED AND ARE SUBJECT TO SIGNIFICANT UNCERTAINTIES AND CONTINGENCIES. THE
ESTIMATED SYNERGIES ARE SUBJECT TO MATERIAL RISKS AND UNCERTAINTIES BEYOND
THE CONTROL OF APPLIED MAGNETICS AND READ-RITE. ACCORDINGLY, THERE CAN BE NO
ASSURANCE THAT THE ESTIMATED SYNERGIES WILL BE REALIZED, AND ACTUAL
SYNERGIES, IF ANY, MAY VARY MATERIALLY FROM THOSE SHOWN. THE INCLUSION OF
SUCH ESTIMATES HEREIN SHOULD NOT BE REGARDED AS AN INDICATION THAT APPLIED
MAGNETICS, READ-RITE OR ANY OTHER PERSON CONSIDERS THEM AN ACCURATE
PREDICTION OF FUTURE EVENTS. NONE OF APPLIED MAGNETICS, READ-RITE OR ANY
OTHER PERSON INTENDS PUBLICLY TO UPDATE OR OTHERWISE PUBLICLY REVISE THE
ESTIMATED SYNERGIES SET FORTH ABOVE EVEN IF EXPERIENCE OR FUTURE CHANGES MAKE
IT CLEAR THAT SUCH SYNERGIES WILL NOT BE REALIZED.
THE INDEPENDENT ACCOUNTANTS FOR APPLIED MAGNETICS AND READ-RITE HAVE
NOT EXAMINED OR COMPILED THESE ESTIMATES AND ACCORDINGLY DO NOT EXPRESS AN
OPINION OR ANY OTHER FORM OF ASSURANCE ON THEM.
THE ESTIMATED SYNERGIES SET FORTH ABOVE CONSTITUTE FORWARD LOOKING
INFORMATION. FOR A DISCUSSION OF FACTORS REGARDING SUCH FORWARD LOOKING
INFORMATION, SEE "PROSPECTUS SUMMARY--FACTORS CONCERNING FORWARD LOOKING
INFORMATION."
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BACKGROUND OF THE OFFER
In early 1996, Mr. Charles G. Phillips, Managing Director of Gleacher
NatWest Inc., financial advisor to the Company, contacted Mr. H. Vaughan
Blaxter, Vice President, General Counsel, Secretary and director of THE
Hillman Co., a Read-Rite Stockholder, and a member of the Read-Rite Board, in
an effort to arrange an introduction to Mr. Cyril J. Yansouni, Chairman and
Chief Executive Officer of Read-Rite, for the purpose of discussing a
possible business combination between Applied Magnetics and Read-Rite.
Mr. Blaxter agreed to arrange such a meeting and Mr. Phillips met with
Mr. Yansouni at Read-Rite's offices for the purpose of discussing, in
general terms, a possible business combination between Applied Magnetics
and Read-Rite. Shortly thereafter, Mr. Phillips contacted Mr. Yansouni to
arrange for a meeting between Mr. Yansouni and Mr. Craig D. Crisman, the
Chief Executive Officer of Applied Magnetics.
In May 1996, a meeting was held in Palo Alto, California, attended by
Mr. Yansouni and Mr. Fred Schwettmann, President and Chief Operating Officer
of Read-Rite, Mr. Crisman and Mr. Phillips to discuss, among other subjects,
the possibility of a business combination between Applied Magnetics and
Read-Rite, including the feasibility of such a combination and various issues
related thereto. Following this meeting, Mr. Phillips made several attempts
to reach Mr. Yansouni to follow up on matters discussed at the May 1996
meeting. Mr. Phillips concluded that, in light of Mr. Yansouni's failure to
return his calls, Read-Rite did not wish to pursue the possible combination.
In September 1996, Mr. Phillips was able to reach Mr. Yansouni by
telephone and sought to determine his interest at that time in a business
combination transaction. Mr. Yansouni indicated that, while he had continued
to think about the possibility of the combination of Read-Rite and Applied
Magnetics, he would prefer to postpone further consideration of the matter
until January 1997.
On January 23, 1997, Mr. Phillips again met with Mr. Yansouni.
Mr. Phillips reviewed the benefits of a merger between Read-Rite and
Applied Magnetics for their respective stockholders and customers and
suggested that Mr. Yansouni contact Mr. Crisman to discuss the matter
further. On the afternoon of January 23, 1997, Mr. Yansouni did contact
Mr. Crisman by telephone and indicated a willingness to meet with Mr.
Crisman on February 16, 1997, following Mr. Yansouni's return from an
extended trip to Europe, for the purpose of discussing a possible business
combination.
On February 16, 1997, Mr. Yansouni and Mr. Crisman met to discuss the
possibility of a business combination between Read-Rite and Applied
Magnetics. At the meeting, Mr. Crisman pointed out, among other things, that
such a combination between the two companies would enhance stockholder value,
that substantial cost savings could be achieved as a result of the business
combination and that the combined company would be better positioned to meet
increasing competition from foreign and domestic manufacturers. Mr. Crisman
also discussed pro forma financial statements reflecting the results of
combining the two companies, and the substantial
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benefits that could be achieved through such a combination. Mr. Yansouni
inquired as to certain manufacturing considerations and expressed concern
that Read-Rite's stock was undervalued and that Read-Rite's stock price did
not take into consideration projected future results of the Company. He
stated that given such undervaluation of Read-Rite's stock, a business
combination would be difficult to achieve. After discussion, Mr. Yansouni and
Mr. Crisman agreed to meet again on February 21, 1997 to further discuss the
matter.
At their meeting on February 21, 1997, Mr. Crisman reiterated the
benefits of the proposed business combination and proposed alternative
approaches to the proposed business combination. Mr. Yansouni concluded,
however, that on the basis of his projections and Read-Rite's under valued
stock it was not the right time to effect a merger of Read-Rite and Applied
Magnetics.
On February 24, 1997, Mr. Crisman delivered to Mr. Yansouni a letter
proposing that Applied Magnetics acquire all of the outstanding Shares of
Read-Rite common stock for $37.50 per Share in market value of Applied
Magnetics Common Stock, a 33% premium to the closing price on February 21,
1997 of $28 3/16 per Share.
[Letterhead of Applied Magnetics Corporation]
February 24, 1997
Mr. Cyril J. Yansouni
Chief Executive Officer and
Chairman of the Board of Directors
Read-Rite Corporation
Dear Mr. Yansouni:
As you know from our conversations and those you have had with Gleacher
NatWest, our independent financial advisor, Applied Magnetics Corporation has
been interested for some time in effecting a business combination with
Read-Rite Corporation. Applied Magnetics believes strongly that the strategic
advantages which would result from a business combination of our two
companies would be of great benefit to our respective stockholders, employees
and customers. At the same time, the business combination would create a
significantly stronger entity in an increasingly competitive business
environment.
In the course of our recent discussions, we have made clear our willingness
to enter into a friendly, negotiated agreement to bring about this business
combination. We have, over the past twelve months, been respectful of your
desire to proceed at a slow pace but, in light of the demands of a rapidly
changing global marketplace and your apparent decision to delay further
consideration of this combination, we have concluded that it is in the best
interests of the stockholders of both companies for Applied Magnetics to
proceed with an offer to acquire Read-Rite.
Accordingly, the Board of Directors of Applied Magnetics has authorized me to
propose a transaction in which each share of Read-Rite would be converted
into .679 shares of Applied Magnetics. Based on the closing price for
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Applied Magnetics stock on February 21, 1997, this exchange ratio
would produce a value of $37.50 for each Read-Rite share, a 33% premium over
Read-Rite's current market price. The transaction is structured to be
tax-free to Read-Rite's stockholders and it is intended that the transaction
would qualify for pooling of interests accounting, but is not conditioned on
such treatment.
In light of the premium we are offering for Read-Rite's shares, we believe
that Read-Rite's Board of Directors has a fiduciary responsibility to provide
its stockholders with the opportunity to consider and take advantage of our
offer. We will file today with the Securities and Exchange Commission a
public registration statement which, when effective, will put our offer
directly to your stockholders. In support of our offer, we will proceed with
a consent solicitation which, in the absence of a negotiated agreement, would
remove Read-Rite's Board of Directors and replace it with a Board which
would, consistent with its fiduciary duties, pursue a Applied
Magnetics/Read-Rite combination.
We believe that the combination of our companies offers significant benefits
to both the stockholders of Read-Rite and those of Applied Magnetics,
including:
* Formation of one of the leading disk head suppliers and the leading
thin film inductive disk head supplier with quarterly capacity of
approximately 40 million HGAs, annualized sales of more than $1.8
billion, an equity market capitalization of approximately $3.4
billion and an exceptionally strong balance sheet;
* Creation of the leading producer in advanced thin film, inductive
disk heads, with a strengthened position in emerging
magnetoresistive (MR) technology;
* Merger of technical expertise and production capacity to
meet the increasingly competitive challenges from foreign
and domestic suppliers; and
* Significantly enhanced earnings potential. We estimate that the
combination of cost savings, manufacturing efficiencies and revenue
enhancements should produce incremental gains in pre-tax earnings of
more than $100 million in the twelve-month period following the
transaction.
We would prefer to move forward on a friendly basis, using a one-step format.
As I have indicated, I am open-minded as to the appropriate composition of
the Board and the role in the combined entity of the senior executives of
each company. This transaction is driven solely by our desire to create a
more competitive market participant, offering substantial benefits to our
stockholders and customers.
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We are convinced that this proposed combination of our resources will result
in a stronger, more profitable company. We look forward to hearing from you
and working constructively with you to finalize the transaction.
Sincerely yours,
/s/ Craig D. Crisman
cc: Board of Directors of Read-Rite
On February 24, 1997, Applied Magnetics publicly announced its
intention to commence the Offer to approve the Applied Magnetics Proposals
and filed with the Commission its Consent Solicitation. See "The Consent
Solicitation."
THE CONSENT SOLICITATION
Pursuant to the Consent Solicitation, Applied Magnetics is soliciting
Read-Rite Stockholders' consent to (i) remove all of the present members of
the Read-Rite Board and any person or persons elected or designated by any
such director to fill any vacancy or newly created directorship, (ii) reduce
the number of seats on the Read-Rite Board to two, (iii) the election of the
Applied Magnetics Nominees, _________________ and ___________________, as the
directors of Read-Rite (or, if either Applied Magnetics Nominee is unable to
serve as a director of Read-Rite due to death, disability or otherwise, any
other person designated as a Applied Magnetics Nominee by Applied Magnetics),
and (iv) repeal each provision of the Read-Rite Bylaws and each amendment
thereto adopted subsequent to December 20, 1996 and prior to the
effectiveness of the Applied Magnetics Proposals set forth above.
Section 213(b) of the DGCL provides that if no record date has been
fixed by the board of directors, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting, when no
prior action by the board of directors is required, shall be the first date
on which a signed written consent setting forth the action taken or proposed
to be taken is delivered to the corporation by delivery to its registered
office in Delaware, its principal place of business or an officer or agent of
the corporation having custody of the books in which proceedings of meetings
of the stockholders are recorded. No prior action is required by the
Read-Rite Board with respect to the Applied Magnetics Proposals. Since the
first written consent was delivered to the Company on ___________, the record
date has been set as ___________.
The effect of the Applied Magnetics Proposals will be to replace the
current directors of Read-Rite, Cyril J. Yansouni, Fred Schwettman, John G.
Linvill, William J. Almon, Michael E. Hackworth, and Matthew J. O'Rourke,
with the Applied Magnetics Nominees. The Applied Magnetics Nominees have
stated their intention to take, subject to the fulfillment of the fiduciary
duties they would have as directors of Read-Rite, all action necessary and
desirable to facilitate consummation of the Offer and the Merger including,
among other things, (i) approving Applied Magnetics' acquisition of the
Shares pursuant to the Offer and the Merger and taking such other actions as
they deem necessary to satisfy the DGCL Condition, and (ii) adopting and
approving the Merger Agreement pursuant to which Read-Rite will merge with
and into Applied Magnetics, which will be the surviving corporation, and
Read-Rite Stockholders (other than Applied Magnetics and Read-Rite and
their respective affiliates, and Read-Rite Stockholders who perfect
dissenters' rights under Delaware law, to the extent available) will receive
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the Offer Consideration in exchange for the cancellation of each Share. For a
more complete description of the Read-Rite Proposals and for more information
regarding the Applied Magnetics Nominees, see the Applied Magnetics Written
Consent Solicitation, which is being mailed separately to Read-Rite
Stockholders.
THE OFFER
GENERAL
Applied Magnetics hereby offers, upon the terms and subject to the
conditions set forth herein and in the related Letter of Transmittal, to
exchange 0.679 shares of Applied Magnetics Common Stock, the Offer
Consideration, for each outstanding Share validly tendered on or prior to the
Expiration Date and not properly withdrawn.
Tendering Read-Rite Stockholders will not be obligated to pay any
charges or expenses of the Exchange Agent. Except as set forth in the
Instructions to the Letter of Transmittal, transfer taxes, if any, on the
exchange of Shares pursuant to the Offer will be paid by or on behalf of
Applied Magnetics.
The purpose of the Offer is to enable Applied Magnetics to obtain
control of Read-Rite. Applied Magnetics presently intends, as soon as
practicable after consummation of the Offer, to propose and seek to have
Read-Rite effect the Merger. In the Merger, each outstanding Share (other
than Shares owned by Applied Magnetics or any of its affiliates, Shares held
in the treasury of Read-Rite (if Read-Rite is so authorized) or by any
subsidiary of Read-Rite and Shares owned by Read-Rite Stockholders who
perfect dissenters' rights under Delaware law, to the extent available) would
be canceled in exchange for the right to receive 0.679 of a share of Applied
Magnetics Common Stock. Read-Rite Stockholders will not receive cash for
their Shares pursuant to the Merger (other than with respect to dissenters'
rights, to the extent available, and cash in lieu of fractional shares of
Applied Magnetics Common Stock). See "The Merger."
In the event that Applied Magnetics obtains all of the Shares
pursuant to the Offer and/or the Merger, former holders of Shares would own
approximately 58% of the outstanding shares of Applied Magnetics Common
Stock, based on the number of Shares outstanding on January 26, 1997.
Applied Magnetics' obligation to exchange the Offer Consideration for
Shares pursuant to the Offer is subject to the Minimum Tender Condition, the
Applied Magnetics Stockholder Consent Condition, the DGCL Condition and the
Regulatory Approval Condition (in each case as defined on the cover page of
this Preliminary Prospectus), and the other conditions set forth under
"--Certain Conditions of the Offer."
As part of each exchange of shares for Applied Magnetics Common Stock
made pursuant to the Offer, and subject to the satisfaction of all the
conditions to the Offer and the Merger, Applied Magnetics agrees, and shall
be deemed to have covenanted severally with and for the benefit of each and
every holder of shares so exchanged, to cause the Merger to occur in the
manner described in this Prospectus.
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According to the Read-Rite 1997 Q1 Form 10-Q, as of January 26, 1997,
there were 47,117,632 Shares outstanding.
Requests will be made to Read-Rite pursuant to Rule 14d-5 promulgated
under the Exchange Act and Section 220 of the DGCL for the use of ReadRite's
stockholder lists and security position listings for the purpose of
communications with Read-Rite Stockholders and disseminating the Offer and
the Consent Solicitation to holders of Shares. A final Prospectus and the
related Letter of Transmittal and other relevant materials will be mailed to
registered holders of Shares and will be furnished to brokers, dealers,
commercial banks, trust companies and similar persons whose names, or the
names of whose nominees, appear on such stockholder lists or, if applicable,
who are listed as participants in a clearing agency's security position
listing for subsequent transmittal to beneficial owners of Shares by Applied
Magnetics following receipt of such list or listings from ReadRite.
TIMING OF THE OFFER
The Offer is currently scheduled to expire on ________, 1997.
However, it is Applied Magnetics' current intention to extend the Offer
from time to time as necessary until all conditions to the Offer have been
satisfied or waived. See "--Extension, Termination and Amendment."
EXTENSION, TERMINATION AND AMENDMENT
Applied Magnetics expressly reserves the right (but will not be
obligated), in its sole discretion, at any time or from time to time, and
regardless of whether any of the events set forth in "--Conditions of the
Offer" shall have occurred or shall have been determined by Applied Magnetics
to have occurred, to extend the period of time during which the Offer is to
remain open by giving oral or written notice of such extension to the
Exchange Agent, which extension will be announced no later than 9:00 a.m.,
Eastern standard time, on the next business day after the previously
scheduled Expiration Date. There can be no assurance that Applied Magnetics
will exercise its right to extend the Offer. However, it is Applied
Magnetics' current intention to extend the Offer until all Offer Conditions
have been satisfied or waived. During any such extension, all Shares
previously tendered and not withdrawn will remain subject to the Offer,
subject to the right of a tendering Read-Rite Stockholder to withdraw his or
her Shares. See "--Withdrawal Rights."
Subject to the applicable rules and regulations of the Commission,
Applied Magnetics also reserves the right, in its sole discretion, at any
time or from time to time, (i) to delay acceptance for, exchange of, or,
regardless of whether such Shares were theretofore accepted for exchange,
exchange of any Shares pursuant to the Offer, or to terminate the Offer and
not accept for exchange or exchange any Shares not theretofore accepted for
exchange, or exchanged, upon the failure of any of the conditions of the
Offer to be satisfied and (ii) to waive any condition (other than the Applied
Magnetics Stockholder Consent Condition, the Regulatory Approval Condition
and the condition relating to the effectiveness of the Registration
Statement) or otherwise amend the Offer in any respect, by giving oral or
written notice of such delay, termination or amendment to
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the Exchange Agent and by making a public announcement thereof. Any such
extension, termination, amendment or delay will be followed as promptly as
practicable by public announcement thereof, such announcement in the case of
an extension to be issued no later than 9:00 a.m., Eastern standard time, on
the next business day after the previously scheduled Expiration Date. Subject
to applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange
Act, which require that any material change in the information published,
sent or given to Read-Rite Stockholders in connection with the Offer be
promptly disseminated to Read-Rite Stockholders in a manner reasonably
designed to inform Read-Rite Stockholders of such change) and without
limiting the manner in which Applied Magnetics may choose to make any public
announcement, Applied Magnetics shall have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
making a release to the Dow Jones News Service.
Applied Magnetics confirms that if it makes a material change in the
terms of the Offer or the information concerning the Offer, or if it waives a
material condition of the Offer, Applied Magnetics will extend the Offer to
the extent required under the Exchange Act. If, prior to the Expiration Date,
Applied Magnetics shall increase or decrease the percentage of Shares being
sought or the consideration offered to holders of Shares, such increase or
decrease shall be applicable to all holders whose Shares are accepted for
exchange pursuant to the Offer, and, if at the time notice of any such
increase or decrease is first published, sent or given to holders of Shares,
the Offer is scheduled to expire at any time earlier than the tenth business
day from and including the date that such notice is first so published, sent
or given, the Offer will be extended until the expiration of such ten
business day period. For purposes of the Offer, a "business day" means any
day other than a Saturday, Sunday or a Federal holiday and consists of the
time period from 12:01 a.m. through 12:00 midnight, Eastern standard time.
EXCHANGE OF SHARES; DELIVERY OF APPLIED MAGNETICS COMMON STOCK
Upon the terms and subject to the conditions of the Offer (including,
if the Offer is extended or amended, the terms and conditions of any such
extension or amendment), Applied Magnetics will accept for exchange, and will
exchange, Shares validly tendered and not properly withdrawn as promptly as
practicable following the Expiration Date. In addition, subject to applicable
rules of the Commission, Applied Magnetics expressly reserves the right to
delay acceptance of or the exchange of Shares in order to comply with any
applicable law. In all cases, exchange of Shares tendered and accepted for
exchange pursuant to the Offer will be made only after receipt by the
Exchange Agent of certificates for such Shares (or a confirmation of a
book-entry transfer of such Shares in the Exchange Agent's account at The
Depository Trust Company or the ________ _______________ (collectively, the
"Book-Entry Transfer Facilities")), a properly completed and duly executed
Letter of Transmittal (or facsimile thereof) and any other required
documents.
For purposes of the Offer, Applied Magnetics will be deemed to have
accepted for exchange Shares validly tendered and not withdrawn as, if and
when Applied Magnetics gives oral or written notice to the Exchange Agent
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of its acceptance of the tenders of such Shares pursuant to the Offer.
Delivery of Applied Magnetics Common Stock in exchange for Shares, pursuant
to the Offer and cash in lieu of fractional shares of Applied Magnetics
Common Stock will be made by the Exchange Agent as soon as practicable after
receipt of such notice. The Exchange Agent will act as agent for tendering
Read-Rite Stockholders for the purpose of receiving Applied Magnetics Common
Stock and cash to be paid in lieu of fractional shares of Applied Magnetics
Common Stock from Applied Magnetics and transmitting such Applied Magnetics
Common Stock and cash to tendering Read-Rite Stockholders. Under no
circumstances will interest with respect to the fractional shares be paid by
Applied Magnetics by reason of any delay in making such exchange.
If any tendered Shares are not accepted for exchange pursuant to the
terms and conditions of the Offer for any reason, or if certificates are
submitted for more Shares than are tendered, certificates for such
unexchanged Shares will be returned without expense to the tendering ReadRite
Stockholder or, in the case of Shares tendered by book-entry transfer of such
Shares into the Exchange Agent's account at a Book-Entry Transfer Facility
pursuant to the procedures set forth below under "--Procedure for Tendering,"
such Shares will be credited to an account maintained within such Book-Entry
Transfer Facility as soon as practicable following expiration or termination
of the Offer.
CASH IN LIEU OF FRACTIONAL SHARES OF APPLIED MAGNETICS COMMON STOCK
No certificates representing fractional shares of Applied Magnetics
Common Stock will be issued pursuant to the Offer. In lieu thereof, each
tendering Read-Rite Stockholder who would otherwise be entitled to a
fractional share of Applied Magnetics Common Stock will receive cash in an
amount equal to such fraction (expressed as a decimal and rounded to the
nearest 0.01 of a share) times the closing price for shares of Applied
Magnetics Common Stock on the NYSE Composite Tape on the date such ReadRite
Stockholder's Shares are accepted for exchange by Applied Magnetics.
WITHDRAWAL RIGHTS
Tenders of Shares made pursuant to the Offer are irrevocable, except
that Shares tendered pursuant to the Offer may be withdrawn pursuant to the
procedures set forth below at any time prior to the Expiration Date, and,
unless theretofore accepted for exchange and exchanged by Applied Magnetics
for the Offer Consideration pursuant to the Offer, may also be withdrawn at
any time after _______________, 1997.
For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Exchange Agent at one of its addresses set forth on the back cover of this
Preliminary Prospectus, and must specify the name of the person having
tendered the Shares to be withdrawn, the number of Shares to be withdrawn and
the name of the registered holder, if different from that of the person who
tendered such Shares.
The signature(s) on the notice of withdrawal must be guaranteed by a
financial institution (including most banks, savings and loan associations
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and brokerage houses) which is a participant in the Securities Transfer
Agents Medallion Program or the New York Stock Exchange Medallion Signature
Program (an "Eligible Institution") unless such Shares have been tendered for
the account of any Eligible Institution. If Shares have been tendered
pursuant to the procedures for book-entry tender as set forth below under
"--Procedure for Tendering," any notice of withdrawal must specify the name
and number of the account at the Book-Entry Transfer Facility to be credited
with the withdrawn Shares and must otherwise comply with such Book-Entry
Transfer Facility's procedures. If certificates have been delivered or
otherwise identified to the Exchange Agent, the name of the registered holder
and the serial numbers of the particular certificates evidencing the Shares
withdrawn must also be furnished to the Exchange Agent as aforesaid prior to
the physical release of such certificates.
Tendering Read-Rite Stockholders will not be responsible for any
expenses of the Exchange Agent or for any brokerage fees or commissions in
connection with the Offer.
All questions as to the form and validity (including time of receipt)
of any notice of withdrawal will be determined by Applied Magnetics, in its
sole discretion, which determination shall be final and binding. Neither
Applied Magnetics, the Exchange Agent, the Information Agent, the Dealer
Manager nor any other person will be under any duty to give notification of
any defects or irregularities in any notice of withdrawal or will incur any
liability for failure to give any such notification. Any Shares properly
withdrawn will be deemed not to have been validly tendered for purposes of
the Offer. However, withdrawn Shares may be rendered by following one of the
procedures described under "--Procedure for Tendering" at any time prior to
the Expiration Date.
PROCEDURE FOR TENDERING
For a Read-Rite Stockholder validly to tender Shares pursuant to the
Offer, (i) a properly completed and duly executed Letter of Transmittal (or
manually executed facsimile thereof), together with any required signature
guarantees, or an Agent's Message (as defined below) in connection with a
book-entry transfer, and any other required documents, must be transmitted to
and received by the Exchange Agent at one of its addresses set forth on the
back cover of this Preliminary Prospectus and either certificates for
tendered Shares must be received by the Exchange Agent at such address or
such Shares must be tendered pursuant to the procedures for book-entry tender
set forth below (and a confirmation of receipt of such tender received (such
confirmation, a "Book-Entry Confirmation")), in each case prior to the
Expiration Date, or (ii) such Read-Rite Stockholders must comply with the
guaranteed delivery procedure set forth below.
The term "Agent's Message" means a message, transmitted by a
BookEntry Transfer Facility to, and received by, the Exchange Agent, and
forming a part of a Book-Entry Confirmation, which states that such BookEntry
Transfer Facility has received an express acknowledgment from the participant
in such Book-Entry Transfer Facility tendering the Shares that such
participant has received and agrees to be bound by the terms of the Letter of
Transmittal and that Applied Magnetics may enforce such agreement against
such participant.
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The Exchange Agent will establish accounts with respect to the Shares
at the Book-Entry Transfer Facilities for purposes of the Offer within two
business days after the date of the mailing of the final Prospectus, and any
financial institution that is a participant in any of the Book-Entry Transfer
Facilities' systems may make book-entry delivery of the Shares by causing
such Book-Entry Transfer Facility to transfer such Shares into the Exchange
Agent's account in accordance with such Book-Entry Transfer Facility's
procedure for such transfer. However, although delivery of Shares may be
effected through book-entry at the Book-Entry Transfer Facilities, the Letter
of Transmittal (or facsimile thereof), with any required signature
guarantees, or an Agent's Message in connection with a book-entry transfer,
and any other required documents, must, in any case, be transmitted to and
received by the Exchange Agent at one or more of its addresses set forth on
the back cover of this Preliminary Prospectus prior to the Expiration Date,
or the guaranteed delivery procedure described below must be complied with.
No signature guarantee is required on the Letter of Transmittal in
cases where (a) the Letter of Transmittal is signed by the registered
holder(s) of the Shares (including any participant in one of the Book-Entry
Transfer Facilities whose name appears on a security position listing as the
owner of Shares) tendered therewith and such holder(s) have not completed the
instruction entitled "Special Issuance Instructions" on the Letter of
Transmittal or (b) such Shares are tendered for the account of an Eligible
Institution. Otherwise, all signatures on the Letter of Transmittal must be
guaranteed by an Eligible Institution. If the certificates for Shares are
registered in the name of a person other than the signer of the Letter of
Transmittal, or if certificates for unexchanged Shares are to be issued to a
person other than the registered holder(s), the certificates must be endorsed
or accompanied by appropriate stock powers, in either case signed exactly as
the name or names of the registered owner or owners appear on the
certificates, with the signature(s) on the certificates or stock powers
guaranteed as aforesaid.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING READ-RITE STOCKHOLDER, AND THE DELIVERY
WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO CASH
RECEIVED IN LIEU OF FRACTIONAL SHARES OF APPLIED MAGNETICS COMMON STOCK, A
READ-RITE STOCKHOLDER MUST PROVIDE THE EXCHANGE AGENT WITH HIS OR HER CORRECT
TAXPAYER IDENTIFICATION NUMBER AND CERTIFY WHETHER SUCH READ-RITE STOCKHOLDER
IS SUBJECT TO BACKUP WITHHOLDING OF FEDERAL INCOME TAX BY COMPLETING THE
SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL. CERTAIN READ-RITE
STOCKHOLDERS (INCLUDING, AMONG OTHERS, ALL CORPORATIONS AND CERTAIN FOREIGN
INDIVIDUALS) ARE NOT SUBJECT TO THESE BACKUP WITHHOLDING AND REPORTING
REQUIREMENTS. IN ORDER FOR A FOREIGN INDIVIDUAL TO QUALIFY AS AN EXEMPT
RECIPIENT, THE READ-RITE STOCKHOLDER MUST SUBMIT A FORM W-8, SIGNED UNDER
PENALTIES OF PERJURY, ATTESTING TO THAT INDIVIDUAL'S EXEMPT STATUS.
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If a Read-Rite Stockholder desires to tender Shares pursuant to the
Offer and such Read-Rite Stockholder's certificates are not immediately
available or such Read-Rite Stockholder cannot deliver the certificates and
all other required documents to the Exchange Agent prior to the Expiration
Date or such Read-Rite Stockholder cannot complete the procedure for
book-entry transfer on a timely basis, such Shares may nevertheless be
tendered; provided, that all of the following conditions are satisfied:
(a) such tenders are made by or through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by Applied
Magnetics, is received by the Exchange Agent as provided below
on or prior to the Expiration Date; and
(c) the certificates for all tendered Shares (or a confirmation of a
book-entry transfer of such securities into the Exchange Agent's
account at a Book-Entry Transfer Facility as described above),
in proper form for transfer, together with a properly completed
and duly executed Letter of Transmittal (or facsimile thereof),
with any required signature guarantees (or, in the case of a
book-entry transfer, an Agent's Message) and all other documents
required by the Letter of Transmittal are received by the
Exchange Agent within three NYSE trading days after the date of
execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or
transmitted by telegram, telex, facsimile transmission or mail to the
Exchange Agent and must include a guarantee by an Eligible Institution in the
form set forth in such Notice.
In all cases, exchanges of Shares tendered and accepted for exchange
pursuant to the Offer will be made only after timely receipt by the Exchange
Agent of certificates for Shares (or timely confirmation of a book-entry
transfer of such securities into the Exchange Agent's account at a Book-Entry
Transfer Facility as described above), properly completed and duly executed
Letter(s) of Transmittal (or facsimile(s) thereof), or an Agent's Message in
connection with a book-entry transfer, and any other required documents.
Accordingly, tendering Read-Rite Stockholders may be paid at different times
depending upon when certificates for Shares or confirmations of book-entry
transfers of such Shares are actually received by the Exchange Agent.
By executing a Letter of Transmittal as set forth above, the
tendering Read-Rite Stockholder irrevocably appoints designees of Applied
Magnetics as such Stockholder's attorneys-in-fact and proxies, each with full
power of substitution, to the full extent of such stockholder's rights with
respect to the Shares tendered by such stockholder and accepted for exchange
by Applied Magnetics and with respect to any and all other Shares and other
securities issued or issuable in respect of the Shares on or after , 1997.
Such appointment is effective, and voting rights will be affected, when and
only to the extent that Applied Magnetics deposits the shares of Applied
Magnetics Common Stock for Shares tendered by such stockholder with the
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Exchange Agent. All such proxies shall be considered coupled with
an interest in the tendered Shares and therefore shall not be
revocable. Upon the effectiveness of such appointment, all prior proxies
given by such Read-Rite Stockholder will be revoked, and no subsequent
proxies may be given (and, if given, will not be deemed effective). Applied
Magnetics' designees will, with respect to the Shares for which the
appointment is effective, be empowered, among other things, to exercise all
voting and other rights of such Read-Rite Stockholder as they, in their sole
discretion, deem proper at any annual, special or adjourned meeting of
Read-Rite Stockholders, by written consent in lieu of any such meeting or
otherwise. Applied Magnetics reserves the right to require that, in order for
Shares to be deemed validly tendered, immediately upon Applied Magnetics'
exchange of such Shares, Applied Magnetics must be able to exercise full
voting rights with respect to such Shares.
All questions as to the validity, form, eligibility (including time
of receipt) and acceptance for exchange of any tender of Shares will be
determined by Applied Magnetics, in its sole discretion, which determination
shall be final and binding. Applied Magnetics reserves the absolute right to
reject any and all tenders of Shares determined by it not to be in proper
form or the acceptance of or exchange for which may, in the opinion of
Applied Magnetics' counsel, be unlawful. Applied Magnetics also reserves the
absolute right to waive any of the conditions of the Offer (other than the
Applied Magnetics Stockholder Consent Condition, the Regulatory Approval
Condition and the condition relating to the effectiveness of the Registration
Statement), or any defect or irregularity in the tender of any Shares. No
tender of Shares will be deemed to have been validly made until all defects
and irregularities in tenders of Shares have been cured or waived. Neither
Applied Magnetics, the Exchange Agent, the Information Agent, the Dealer
Manager nor any other person will be under any duty to give notification of
any defects or irregularities in the tender of any Shares or will incur any
liability for failure to give any such notification. Applied Magnetics'
interpretation of the terms and conditions of the Offer (including the Letter
of Transmittal and instructions thereto) will be final and binding.
The tender of Shares pursuant to any of the procedures described
above will constitute a binding agreement between the tendering Read-Rite
Stockholder and Applied Magnetics upon the terms and subject to the
conditions of the Offer.
In deciding whether two steps are part of a single transaction
qualifying as a reorganization, some courts have applied the so-called
"binding commitment" test. Under that test, two steps will be integrated only
if, at the time that the first step is consummated, there is a binding
commitment to consummate the second step. If the "binding commitment" test
were applied to the Offer and the Merger and Read-Rite has not at the time
the Offer is consummated entered into an agreement with Applied Magnetics
requiring the Purchaser to effect the Merger, the Offer and the Merger may
not be treated as a single transaction, and the Offer would not qualify as
part of a reorganization within the meaning of Section 368(a)(1)(A) of the
Code. Although the matter is not free from doubt, Sheppard, Mullin, Richter &
Hampton LLP do not believe that the "binding commitment" test
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should be applied to determine whether the Offer and the Merger should be
treated as a single transaction.
Assuming that the Merger qualifies as a reorganization under the
Code, no gain or loss will be recognized by Read-Rite or Applied Magnetics as
a result of the Offer and the Merger.
This summary does not address any tax consequences of the Offer or
the Merger to U.S. Holders (as defined below) of Shares who exercise
dissenters' rights under the DGCL, if any. It may not apply to certain
classes of taxpayers, including without limitation, insurance companies,
tax-exempt organizations, financial institutions, dealers in securities,
foreign persons, persons who acquired Shares pursuant to an exercise of
employee stock options or rights or otherwise as compensation and persons who
hold Shares as part of a straddle or conversion transaction. Also, the
summary does not address state, local or foreign tax consequences of the
Offer or the Merger. Each holder of Shares should consult such holder's own
tax advisor as to the specific tax consequences of the Offer and the Merger
to such holder.
This summary is based on current law and the opinion of Sheppard,
Mullin, Richter & Hampton LLP. Future legislative, judicial or administrative
changes or interpretations, which may be retroactive, could alter or modify
the statements set forth herein. The opinion of Sheppard, Mullin, Richter &
Hampton LLP set forth in this summary is based, among other things, on
assumptions relating to certain facts and circumstances of, and the
intentions of the parties to, the Offer and the Merger, which assumptions
have been made with the consent of Applied Magnetics. An opinion of counsel
is not binding on the Internal Revenue Service, and the Internal Revenue
Service is not precluded from taking contrary positions.
TAX CONSEQUENCES TO HOLDERS OF SHARES IF THE OFFER AND THE MERGER QUALIFY
AS A REORGANIZATION
If the Offer and the Merger together qualify as a reorganization
within the meaning of Section 368(a) of the Code, the material federal income
tax consequences to holders who are (a) citizens or residents of the United
States, (b) domestic corporations or (c) otherwise subject to United States
federal income tax on a net income basis in respect of the Shares ("U.S.
Holders") who hold Shares as capital assets and who exchange such Shares
pursuant to the Offer or the Merger, or both, will be as follows:
(1) no gain or loss will be recognized by a U.S. Holder on the
exchange of Shares for Applied Magnetics Common Stock, except as described
below with respect to the receipt of cash in lieu of fractional shares of
Applied Magnetics Common Stock, and subject to the discussion below of the
surrender of Rights that have become exercisable;
(2) the aggregate adjusted tax basis of shares of Applied Magnetics
Common Stock received by a U.S. Holder (including fractional shares of
Applied Magnetics Common Stock deemed received and redeemed as described
below) will be the same as the aggregate adjusted tax basis of the Shares
exchanged therefor;
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(3) the holding period of shares of Applied Magnetics Common Stock
(including the holding period of fractional shares of Applied Magnetics
Common Stock) received by a U.S. Holder will include the holding period of
the Shares exchanged therefor; and
(4) a U.S. Holder of Shares who receives cash in lieu of fractional
shares of Applied Magnetics Common Stock will be treated as having received
such fractional shares and then as having received such cash in redemption of
such fractional shares. Under Section 302 of the Code, provided that such
deemed distribution is "substantially disproportionate" with respect to such
U.S. Holder or is "not essentially equivalent to a dividend" after giving
effect to the constructive ownership rules of the Code, the U.S. Holder will
generally recognize capital gain or loss equal to the difference between the
amount of cash received and the U.S. Holder's adjusted tax basis in the
fractional share interest in Applied Magnetics Common Stock. Such capital
gain or loss will be long-term capital gain or loss if the U.S. Holder's
holding period in the fractional shares is more than one year.
TAX CONSEQUENCES TO HOLDERS OF SHARES IF THE OFFER DOES NOT QUALIFY AS PART
OF A REORGANIZATION
If the Merger is not consummated, or if the Merger is consummated but
the Offer is treated as a separate transaction for federal income tax
purposes, exchanges pursuant to the Offer will be taxable transactions for
federal income tax purposes. If the Offer is a taxable transaction, then each
U.S. Holder exchanging Shares for shares of Applied Magnetics Common Stock
will recognize gain or loss for federal income tax purposes measured by the
difference between such U.S. Holder's adjusted basis in the Shares exchanged
and the sum of the fair market value of Applied Magnetics Common Stock
received by such U.S. Holder and any cash received by such U.S. Holder in
lieu of fractional shares of Applied Magnetics Common Stock.
If the Offer is a taxable transaction, the Merger itself should be
considered a reorganization within the meaning of Section 368(a)(1)(A) of
the Code if the continuity of interest requirement is satisfied in the
Merger. For advanced ruling purposes, guidelines published by the Internal
Revenue Service would require that stockholders of Read-Rite receive in the
Merger stock of Applied Magnetics having a value equal to at least 50% of
all of the stock of Read-Rite outstanding prior to the Merger. In that
event, a U.S. Holder receiving Applied Magnetics Common Stock in the
Merger would be subject to the rules concerning reorganizations described
above with respect to such Applied Magnetics Common Stock, but not with
respect to any Applied Magnetics Common Stock received by such U.S. Holder
pursuant to the Offer.
EFFECT OF OFFER ON MARKET FOR SHARES; REGISTRATION UNDER THE EXCHANGE ACT
The exchange of Shares pursuant to the Offer will reduce the number
of holders of Shares and the number of Shares that might otherwise trade
publicly and, depending upon the number of Shares so purchased, could
adversely affect the liquidity and market value of the remaining Shares held
by the public.
After consummation of the Offer, the Shares may no longer meet the
requirements of the National Association of Securities Dealers, Inc. for
continued inclusion on the Nasdaq National Market, which require that an
issuer have at least 200,000 held shares, held by at least 300 stockholders
or 400 stockholders of round lots, with a market value of $1 million and have
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net tangible assets of at least either $2 million or $4 million, depending on
profitability levels during the issuer's four most recent fiscal years. If
the Nasdaq National Market were to cease to publish quotations for the
Shares, it is possible that the Shares would continue to trade in the
over-the-counter market and that price or other quotations would
be reported by other sources. The extent of the public market for such
and the availability of such quotations would depend, however, upon such
factors as the number of stockholders and/or the aggregate market value of
such securities remaining at such time, the interest in maintaining a market
in the Shares on the part of securities firms, the possible termination of
registration under the Exchange Act as described below, and other factors.
Applied Magnetics cannot predict whether the reduction in the number of
Shares that might otherwise trade publicly would have an adverse or
beneficial effect on the market price for, or marketability of, the Shares or
whether it would cause future market prices to be greater or lesser than the
value of the Offer Consideration.
The Shares are presently "margin securities" under the regulations of
the Federal Reserve Board, which has the effect, among other things, of
allowing brokers to extend credit on the collateral of such Shares. Depending
on factors similar to those described above with respect to listing and
market quotations, following consummation of the Offer the Shares may no
longer constitute "margin securities" for the purposes of the Federal Reserve
Board's margin regulations, in which event the Shares would be ineligible as
collateral for margin loans made by brokers.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated by Read-Rite upon application to the
Commission if the outstanding Shares are not listed on a national securities
exchange and if there are fewer than 300 holders of record of Shares.
Termination of registration of the Shares under the Exchange Act would reduce
the information required to be furnished by Read-Rite to its stockholders and
to the Commission and would make certain provisions of the Exchange Act, such
as the short-swing profit recovery provisions of Section 16(b) and the
requirement of furnishing a proxy statement in connection with stockholders'
meetings pursuant to Section 14(a) and the related requirement of furnishing
an annual report to stockholders, no longer applicable with respect to the
Shares. Furthermore, the ability of "affiliates" of Read-Rite and persons
holding "restricted securities" of Read-Rite to dispose of such securities
pursuant to Rule 144 under the Securities Act may be impaired or eliminated.
If registration of the Shares under the Exchange Act were terminated, the
Shares would no longer be eligible for Nasdaq National Market reporting or
for continued inclusion on the Federal Reserve Board's list of "margin
securities."
PURPOSE OF THE OFFER; THE MERGER
The purpose of the Offer is to enable Applied Magnetics to obtain control of
Read-Rite. Applied Magnetics will, subject to satisfaction of the conditions
to the Offer and the Merger set forth herein, cause Read-Rite to merge with
and into Applied Magnetics, which will be the surviving corporation. In the
Merger, each outstanding Share (other than Shares owned by Applied Magnetics
or any of its affiliates, Shares held in the treasury of Read-Rite (if
Read-Rite is so authorized) or by any subsidiary of Read-Rite and Shares
owned by Read-Rite Stockholders who perfect dissenters' rights under Delaware
law, to the extent available) would be canceled in exchange for the right to
receive the Offer Consideration. Assuming the Minimum Tender Condition is
satisfied and Applied Magnetics consummates the Offer, Applied Magnetics
believes it would have sufficient voting power to effect
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the Merger without the vote of any other Stockholder of Read-Rite. See
"The Merger."
DGCL SECTION 203
Section 203 of the DGCL, in general, prohibits a Delaware corporation
such as Read-Rite from engaging in a Business Combination (as defined in
Section 203) with an Interested Stockholder (as defined in Section 203)
within three years following the date that such person became an Interested
Stockholder unless (a) prior to the date that such person became an
Interested Stockholder, the board of directors of the corporation approved
either the Business Combination or the transaction that resulted in the
stockholder becoming an Interested Stockholder, (b) upon consummation of the
transaction that resulted in the stockholder becoming an Interested
Stockholder, the Interested Stockholder owned at least 85% of the voting
stock of the corporation outstanding at the time the transaction commenced,
excluding stock held by directors who are also officers of the corporation
and employee stock plans that do not provide employees with the right to
determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer, (c) a Business Combination is
proposed by an Interested Stockholder prior to the consummation or
abandonment of and subsequent to the public announcement of a proposed
transaction which (i) constitutes a merger or consolidation of the
corporation, (ii) is with or by a person who either was not an Interested
Stockholder during the previous three years or who became an Interested
Stockholder with the approval of the corporation's board of directors and
(iii) is approved or not opposed by a majority of the board of directors then
in office who were directors prior to any person becoming an Interested
Stockholder during the previous three years, or (d) on or subsequent to the
date such person became an Interested Stockholder, the Business Combination
is approved by the board of directors of the corporation and authorized at a
meeting of stockholders, and not by a written consent, by the affirmative
vote of the holders of at least 66 2/3% of the outstanding voting stock of
the corporation not owned by the Interested Stockholder. DGCL Section 203
generally defines Interested Stockholder to mean any person (other than the
corporation and any indirectly or directly majority-owned subsidiary of the
corporation) that (i) is the owner of 15% or more of the outstanding voting
stock of the corporation or (ii) is an affiliate or associate of the
corporation at any time within the three-year period immediately prior to the
date on which it is to be determined whether such person is an Interested
Stockholder. A copy of Section 203 of the DGCL is attached as Schedule C
hereto.
CONDITIONS OF THE OFFER
MINIMUM TENDER CONDITION. The Offer is conditioned upon, among other
things, there being validly tendered and not withdrawn prior to the
Expiration Date a number of Shares which, together with Shares owned by
Applied Magnetics and its affiliates, will constitute at least a majority of
the total number of outstanding Shares on a fully diluted basis (as though
all options or other securities convertible into or exercisable or
exchangeable for Shares had been so converted, exercised or exchanged) as of
the date the Shares are accepted for exchange by Applied Magnetics pursuant
to the Offer. According to the Read-Rite 1997 Q1 Form 10-Q, as of
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January 26, 1997, there were 47,117,632 Shares outstanding. According to the
Read-Rite 1996 10-K, there were 2,009,000 options to purchase Shares
outstanding under Read-Rite's stock option plans as of September 30, 1996.
Applied Magnetics owns 200 Shares, which constitutes less than 1% of the
outstanding Shares. Based on the foregoing, Applied Magnetics believes that
the Minimum Tender Condition would be satisfied if at least an aggregate of
25,054,582 Shares (or 51%) of the Shares expected to be outstanding
immediately prior to the consummation of the Offer had been validly tendered
pursuant to the Offer and not withdrawn. Applied Magnetics reserves the right
(but shall not be obligated), subject to the rules and regulations of the
Commission, to waive or amend the Minimum Tender Condition and to exchange
fewer than such number of Shares as would satisfy the Minimum Tender
Condition pursuant to the Offer; provided, that, in the event of such waiver
or amendment, the Offer shall expire no sooner than ten business days from
the date of such waiver or amendment.
APPLIED MAGNETICS STOCKHOLDER CONSENT CONDITION. The Offer is
conditioned, among other things, upon the satisfaction of the Applied
Magnetics Stockholder Consent Condition. Pursuant to the rules of the NYSE
(on which the Applied Magnetics Common Stock is listed), the issuance of
Applied Magnetics Common Stock pursuant to the Offer and the Merger must be
approved by the holders of a majority of the shares of Applied Magnetics
Common Stock voting as a single class, voted at a meeting of such holders at
which the total number of votes cast represents over 50% in interest of all
shares of Applied Magnetics Common Stock outstanding on the applicable record
date, or by written consent. In addition, pursuant to the Applied Magnetics
Certificate, approval of the holders of a majority of the shares of Applied
Magnetics Common Stock, voting as a single class, is required to amend the
Applied Magnetics Certificate to increase the number of shares of Applied
Magnetics Common Stock authorized for issuance taking into account the terms
of the Offer. Applied Magnetics intends to obtain such approvals by the
written consent of its stockholders.
DGCL CONDITION. The Offer is conditioned upon, among other things,
the satisfaction of the DGCL Condition. The DGCL 203 Condition may be
satisfied in a number of ways, including the following: (i) the current
Read-Rite Board may approve the Offer for purposes of Section 203, or (ii)
pursuant to the Consent Solicitation, Applied Magnetics could succeed in
replacing the Read-Rite Board with new directors who would (subject to
fiduciary duties) approve the Offer for purposes of Section 203. See "-DGCL
Section 203." A copy of the Section 203 DGCL is attached hereto as Schedule C
hereto.
REGULATORY APPROVAL CONDITION. The Offer is conditioned upon, among
other things, all regulatory approvals required to consummate the Offer
(the "Requisite Regulatory Approvals") having been obtained and remaining
in full force and effect, all statutory waiting periods in respect thereof
having expired and no such approval containing any conditions or
restrictions which the Applied Magnetics Board determines will or
reasonably could be expected to materially impair the strategic and
financial benefits expected to result from the Offer. Applied Magnetics
will use its reasonable best efforts to obtain the Requisite Regulatory
Approvals. As described below, applications and notices seeking the
Requisite Regulatory Approvals have been or will be promptly filed. The
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Offer cannot proceed in the absence of the Requisite Regulatory Approvals.
Although no assurances can be given, Applied Magnetics anticipates that it
will receive all regulatory approvals on a timely basis.
ANTITRUST. Under the HSR Act, and the Rules that have been
promulgated thereunder, certain acquisition transactions may not be
consummated unless certain information has been furnished to the Antitrust
Division and the FTC and certain waiting period requirements have been
satisfied. The acquisition of Shares by Applied Magnetics pursuant to the
Offer is subject to the HSR Act.
Applied Magnetics intends to file with the Antitrust Division and the
FTC a Hart-Scott-Rodino Notification and Report Form with respect to the
Offer. Under the applicable provisions of the HSR Act, the purchase of Shares
pursuant to the Offer could not be consummated until the expiration of a
30-day waiting period following the filing of such Form by Applied Magnetics.
Federal and state antitrust enforcement agencies frequently
scrutinize under the antitrust laws transactions such as Applied Magnetics'
acquisition of Shares pursuant to the Offer. At any time before or after
Applied Magnetics' acquisition of Shares, any such agency could take such
action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the acquisition of Shares
pursuant to the Offer or otherwise or seeking divestiture of Shares acquired
by Applied Magnetics or divestiture of substantial assets of Applied
Magnetics and/or Read-Rite. Private parties may also bring legal action under
the antitrust laws under certain circumstances.
Based upon an examination of publicly available information relating
to the businesses in which both Applied Magnetics and Read-Rite are engaged,
Applied Magnetics believes that the Offer will not violate the antitrust
laws. Nevertheless, there can be no assurance that a challenge to the Offer
on antitrust grounds will not be made or that, if such a challenge is made,
Applied Magnetics will prevail.
The Antitrust Division and the FTC are referred to herein as the
"Regulatory Commissions."
GENERAL. Except as set forth above, based upon an examination of
publicly available information filed by Read-Rite with the Commission and
other publicly available information with respect to Read-Rite, Applied
Magnetics is not aware of (a) any license or regulatory permit which appears
to be material to the business of Read-Rite and its subsidiaries, taken as a
whole, and which is likely to be adversely affected by Applied Magnetics'
acquisition of Shares pursuant to the Offer or (b) any approval or other
action by any state, federal or foreign governmental administrative or
regulatory agency or authority that would be required prior to the
acquisition of Shares pursuant to the Offer. Applied Magnetics presently
intends to take such actions with respect to any approvals as will enable it
to consummate the Offer. In this regard, Applied Magnetics expressly reserves
the right to challenge the validity and applicability of any state,
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foreign or other statutes or regulations purporting to require approval
of the consummation of the Offer.
There can be no assurance that any license, permit, approval or other
action, if needed, would be obtained, or would be obtained without
substantial conditions, or, if so obtained, when it would be obtained, or
that adverse consequences might not result to Read-Rite, Applied Magnetics or
to their respective businesses in the event of adverse regulatory action or
inaction.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, APPLIED MAGNETICS
HAVING RECEIVED ALL NECESSARY OR DESIRABLE GOVERNMENTAL AND REGULATORY
APPROVALS AND CONSENTS FOR THE ACQUISITION OF SHARES PURSUANT TO THE OFFER
AND THE OTHER TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING APPROVALS AND
CONSENTS FROM THE REGULATORY COMMISSIONS AND SUCH APPROVALS AND CONSENTS
HAVING BECOME FINAL ORDERS AND SUCH FINAL ORDERS NOT HAVING IMPOSED TERMS OR
CONDITIONS WHICH, IN THE AGGREGATE, WOULD HAVE OR, INSOFAR AS REASONABLY CAN
BE FORESEEN, COULD HAVE A MATERIAL ADVERSE EFFECT ON THE BUSINESS, ASSETS,
FINANCIAL CONDITION OR RESULTS OF OPERATIONS OF APPLIED MAGNETICS, READ-RITE
AND THEIR RESPECTIVE SUBSIDIARIES TAKEN AS A WHOLE.
CERTAIN OTHER CONDITIONS OF THE OFFER. Notwithstanding any other
provision of the Offer and subject to any applicable rules and regulations of
the Commission, including Rule 14e-1(c) under the Exchange Act (relating to
Applied Magnetics' obligation to exchange or return tendered Shares promptly
after the termination or withdrawal of the Offer), Applied Magnetics shall
not be required to accept for exchange or exchange any Shares, may postpone
the acceptance for exchange or exchange for tendered Shares and may, in its
sole discretion, terminate or amend the Offer as to any Shares not then
exchanged if at the Expiration Date any of the Offer Conditions have not been
satisfied or waived or if on or after the date of this Preliminary Prospectus
and at or prior to the time of exchange of any such Shares (whether or not
any Shares have theretofore been accepted for exchange or exchanged pursuant
to the Offer), any of the following events shall not have occurred:
(a) The shares of Applied Magnetics Common Stock which shall be
issued to the Read-Rite Stockholders in the Offer and the Merger shall have
been authorized for listing on the NYSE, subject to official notice of
issuance.
(b) The Registration Statement shall have become effective under the
Securities Act, and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been initiated or threatened by the Commission.
(c) No order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Offer and/or the Merger or any of the other transactions
contemplated by this Preliminary Prospectus shall be in effect. No statute,
rule, regulation, order, injunction or decree shall have been enacted,
entered, promulgated or enforced by any court, administrative agency or
commission or other governmental authority or instrumentality which
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prohibits, restricts or makes illegal the consummation of the Offer
and/or the Merger.
(d) All required material governmental authorizations, permits,
consents, orders or approvals which do not impose terms or conditions that
could reasonably be expected to have a material adverse effect on Applied
Magnetics and/or Read-Rite have been received.
(e) There shall not have occurred or been threatened (i) any general
suspension of trading in, or limitation on times or prices for, securities on
any national securities exchange or in the over-the-counter market in the
United States, (ii) any significant adverse change in interest rates, the
financial markets or major stock exchange indices in the United States or
abroad or in the market price of Shares, including, without limitation, a
decline of at least 10% in either the Dow Jones Average of Industrial Stocks
or the Standard & Poor's 500 Index from that existing at the close of
business on ______________, 1997, (iii) any change in the general political,
market, economic, regulatory or financial conditions in the United States or
abroad that could, in the sole judgment of Applied Magnetics, have a material
adverse effect upon the business, properties, assets, liabilities,
capitalization, stockholders' equity, condition (financial or otherwise),
operations, licenses or franchises, results of operations or prospects of
Read-Rite or any of its subsidiaries or the trading in, or value of, the
Shares, (iv) any material change in United States currency exchange rates or
any other currency exchange rates or a suspension of, or limitation on, the
markets therefor, (v) a declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States, (vi) any limitation
(whether or not mandatory) by any government, domestic, foreign or
supranational, or governmental entity on, or other event that, in the sole
judgment of Applied Magnetics, might affect, the extension of credit by banks
or other lending institutions, (vii) a commencement of a war or armed
hostilities or other national or international calamity directly or
indirectly involving the United States, or (viii) in the case of any of the
foregoing existing at the time of the commencement of the Offer, a material
acceleration or worsening thereof.
(f) Since _________, 1997, there shall not have occurred any (i)
material adverse change in the assets, liabilities, business, results of
operations or prospects of Read-Rite or (ii) any distribution with report to,
or split, combination or reclassification of, shares of ReadRite capital
stock declared or made by Read-Rite.
The foregoing conditions are for the sole benefit of Applied
Magnetics and may be asserted by Applied Magnetics regardless of the
circumstances giving rise to any such conditions (including any action or
inaction by Applied Magnetics) or may be waived by Applied Magnetics in whole
or in part (other than the Applied Magnetics Stockholder Consent Condition,
the Regulatory Approval Condition and the condition relating to effectiveness
of the Registration Statement). Although Applied Magnetics reserves the right
to do so, Applied Magnetics does not currently intend to waive any Offer
Condition unless it determines that doing so would not prevent it from
consummating the Merger promptly after consummating the Offer. The
determination as to whether any condition has been satisfied shall be in
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the sole judgment of Applied Magnetics and will be final and binding on all
parties. The failure by Applied Magnetics at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right and each such
right shall be deemed a continuing right which may be asserted at any time
and from time to time. Notwithstanding the fact that Applied Magnetics
reserves the right to assert the failure of a condition following acceptance
for exchange but prior to exchange in order to delay exchange or cancel its
obligation to exchange properly tendered Shares, Applied Magnetics will
either promptly exchange such Shares or promptly return such Shares.
As part of each exchange of shares for Applied Magnetics Common Stock
made pursuant to the Offer, and subject to the satisfaction of all the
conditions to the Offer, Applied Magnetics agrees, and shall be deemed to
have covenanted severally with and for the benefit of each of every holder of
shares so exchanged, to cause the merger to occur in the manner described in
this Prospectus.
POSSIBLE CONSEQUENCES OF ELECTION OF THE APPLIED MAGNETICS NOMINEES AND
CONSUMMATION OF THE OFFER
Election of the Applied Magnetics Nominees and consummation of the
Offer may, among other things, (i) result in acceleration of credit
facilities currently available to Read-Rite, (ii) enable the holders of
certain debt instruments of Read-Rite to require the repurchase of their
securities, and (iii) accelerate the date on which certain options
outstanding under Read-Rite's stock option plans become exercisable. Although
Applied Magnetics does not believe that these events would materially and
adversely impact the financial condition of Read-Rite, the actual impact of
such events cannot be presently ascertained and will depend, among other
things, on interest rates and future conditions in the credit markets.
RELATIONSHIPS WITH READ-RITE
Except as set forth herein under the captions "Prospectus
Summary-Background of the Offer" and "Background of the Offer," neither
Applied Magnetics nor, to the best of its knowledge, any of the persons
listed on Schedule A hereto nor any associate or majority-owned subsidiary of
any of the foregoing, beneficially owns or has a right to acquire any equity
securities of Read-Rite. Except as set forth herein, neither Applied
Magnetics nor to the best of its knowledge, any of the persons or entities
referred to above, nor any director, executive officer or subsidiary of any
of the foregoing, has effected any transaction in such equity securities
during the last 60 days.
Neither Applied Magnetics nor, to the best of its knowledge, any of
the persons listed on Schedule A hereto has any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of Read-Rite, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the
voting of any such securities, joint ventures, loan or option arrangements,
puts or calls, guaranties of loans, guaranties against loss or the giving or
withholding of proxies. Except as described herein, there have been no
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contacts, negotiations or transactions, between Applied Magnetics or, to the
best of its knowledge, any of the persons listed on Schedule A hereto, on the
one hand, and Read-Rite or its affiliates, on the other hand, concerning a
merger, consolidation or acquisition, a tender offer or other acquisition of
securities, an election of directors, or a sale or other transfer of a
material amount of assets. Neither Applied Magnetics, nor, to the best of its
knowledge, any of the persons listed on Schedule A hereto, has had any
transaction with Read-Rite or any of its executive officers, directors or
affiliates that would require disclosure under the rules and regulations of
the Commission applicable to the Offer.
FEES AND EXPENSES
Applied Magnetics has retained MacKenzie Partners, Inc. ("MacKenzie")
to act as Information Agent in connection with the Offer. The Information
Agent may contact holders of Shares by mail, telephone, telex, telegraph and
personal interviews and may request brokers, dealers and other nominee
Stockholders to forward the Offer materials to beneficial owners of Shares.
The Information Agent will be paid a customary fee of $_________________ for
such services, plus reimbursement of out-of-pocket expenses, and Applied
Magnetics will indemnify the Information Agent against certain liabilities
and expenses in connection with the Offer, including liabilities under
federal securities laws.
Pursuant to a letter agreement dated January 20, 1997 (the "Letter
Agreement"), Gleacher NatWest, Inc. ("Gleacher NatWest") is providing certain
financial advisory services to Applied Magnetics in connection with the
Offer. Under the Letter Agreement, Applied Magnetics has agreed to pay
Gleacher NatWest for its financial advisory services (including services as
Dealer Manager) in connection with the Offer, a financial advisory fee of (i)
$500,000 upon the commencement of the Offer, and (ii) up to an additional
$5,750,000 upon the completion of the Merger.
In addition to the compensation set forth above, Applied Magnetics
has agreed to reimburse the Dealer Manager for its reasonable travel and
other out-of-pocket expenses and has also agreed to reimburse it for
necessary and reasonable attorney's fees incurred in connection with its
engagement. Applied Magnetics has further agreed to indemnify Gleacher
NatWest and certain related persons and entities against certain liabilities
and expenses in connection with its engagement, including certain liabilities
under the federal securities laws. In connection with Gleacher NatWest's
engagement as financial advisor, Applied Magnetics anticipates that certain
employees of Gleacher NatWest may communicate in person, by telephone or
otherwise with a limited number of institutions, brokers or other persons who
are Read-Rite Stockholders for the purpose of assisting in the Consent
Solicitation. Gleacher NatWest will not receive any fee for or in connection
with such solicitation activities by its employees apart from the fees it is
otherwise entitled to receive as described above.
In addition to the fees to be received by Gleacher NatWest in con
nection with its engagement as financial advisor to Applied Magnetics,
Gleacher NatWest has in the past rendered various investment banking and
financial advisory services for Applied Magnetics for which it has received
customary compensation.
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Applied Magnetics will pay the Exchange Agent reasonable and
customary compensation for its services in connection with the Offer, plus
reimbursement for out-of-pocket expenses, and will indemnify the Exchange
Agent against certain liabilities and expenses in connection therewith,
including liabilities under the federal securities laws. Applied Magnetics
will not pay any fees or commissions to any broker or dealer or other person
(other than the Dealer Manager and the Information Agent) for soliciting
tenders of Shares pursuant to the Offer. Brokers, dealers, commercial banks
and trust companies will be reimbursed by Applied Magnetics for customary
mailing and handling expenses incurred by them in forwarding material to
their customers.
ACCOUNTING TREATMENT
The Merger is intended to qualify as a pooling of interests for
accounting and financial reporting purposes under Accounting Principles Board
Opinion No. 16. Under this method of accounting, the assets and liabilities
of Applied Magnetics and Read-Rite will be carried forward to the combined
company at their recorded amounts, income of the combined company on a
consolidated basis will include income of Applied Magnetics and Read-Rite for
the entire fiscal period in which the Merger occurs and the reported income
of the separate companies for prior periods will be combined and restated as
consolidated income of the combined company.
The management of Applied Magnetics has determined that Applied
Magnetics is an entity eligible to participate in a business combination
accounted for as a pooling of interests. The management of Applied Magnetics
believes that Read-Rite is also eligible to participate in a business
combination accounted for as a pooling of interests based upon information
regarding Read-Rite available in publicly filed documents.
However, there may be factors and future Read-Rite actions which
could preclude pooling of interests accounting. These factors and potential
management actions are out of the control of Applied Magnetics and its
management. If the proposed combination ultimately does not qualify for a
pooling of interests accounting, the proposed combination would be accounted
for in accordance with the purchase method of accounting.
Under the purchase method of accounting, a substantial amount of good
will would be recognized. This would result in substantial amortization
expense recorded in the financial statements of Applied Magnetics in the post
acquisition periods.
STOCK EXCHANGE LISTING
The Applied Magnetics Common Stock is listed on the NYSE. Application
will be made to list the Applied Magnetics Common Stock to be issued pursuant
to the Offer and the Merger on the NYSE. As described above under "The
Offer--Conditions of the Offer--Applied Magnetics Stockholder Consent
Condition," pursuant to the rules of the NYSE, the issuance of Applied
Magnetics Common Stock in the Offer and the Merger must be approved by the
holders of a majority of the shares of Applied Magnetics Common Stock, voting
as a single class, voted at a meeting of such holders at which the total
number of votes cast represents over 50% in interest of all shares
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of Applied Magnetics Common Stock outstanding on the applicable record date
or acting by written consent.
THE MERGER
If the Offer is consummated following the written consent solici
tation, then it is intended that the newly elected Read-Rite Board
will, in accordance with its fiduciary duties, (i) propose and approve the
Merger Agreement, containing customary terms and conditions, pursuant to
which Read-Rite will merge with and into Applied Magnetics, which will be the
surviving corporation of the Merger, and Read-Rite Stockholders (other than
Applied Magnetics and Read-Rite and their respective affiliates and Read-Rite
Stockholders who perfect dissenters' rights under Delaware law, to the extent
available) will receive the Offer Consideration in exchange for the
cancellation of each Share, and (ii) take all other actions as may be
necessary to effect the Merger.
Pursuant to the DGCL, the Merger Agreement requires the approval of
Read-Rite Stockholders in order to take effect. Under Section 251 of the
DGCL, approval of the Merger Agreement will require the approval of the
holders of a majority of Shares outstanding on the record date set for
stockholder action on the Merger Agreement (including Shares owned by Applied
Magnetics or its affiliates) at an annual or special meeting of the Read-Rite
Stockholders or by written consent.
If the Offer is consummated, Applied Magnetics and its affiliates
will own a majority of the outstanding Shares. Accordingly, Applied Magnetics
and its affiliates will at such time have sufficient voting power in ReadRite
to approve the Merger Agreement independently of the votes of any other
Read-Rite Stockholders, and Applied Magnetics presently intends to vote any
and all Shares then owned by Applied Magnetics and its affiliates to approve
such proposals.
The Merger will be subject to certain conditions. Applied Magnetics
presently intends to condition the Merger upon holders of not more than 5% of
the outstanding Shares at the effective time of the Merger perfecting
dissenters' rights, if available, with respect to the Merger pursuant to
Section 262 of the DGCL.
Rule 13e-3 of the General Rules and Regulations under the Exchange
Act, which Applied Magnetics does not believe would be applicable to the
Merger as long as the Merger occurred within one year of consummation of the
Offer, would require, among other things, that certain financial information
concerning Read-Rite, and certain information relating to the fairness of the
proposed transaction and the consideration offered to ReadRite Stockholders
therein, be filed with the Commission and disclosed to Read-Rite Stockholders
prior to consummation of the Merger.
In addition, Applied Magnetics reserves the right to acquire,
following the consummation or termination of the Offer, additional Shares
through open-market purchases, privately negotiated transactions, a tender
offer or exchange offer, or otherwise, upon such terms and at such prices as
it shall determine, which may be more or less favorable than those of
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the Offer. Applied Magnetics and its affiliates also reserve the right to
dispose of any or all Shares acquired by them pursuant to the Offer or
otherwise, upon such terms and at such prices as they shall determine.
In connection with the Offer, Applied Magnetics has reviewed, and
will continue to review, on the basis of available information, various
possible business strategies that it might consider in the event that it
acquires all or substantially all of the common equity interest in Read-Rite.
Applied Magnetics also intends to conduct a detailed review of Read-Rite and
its assets, corporate structure, capitalization, operations, properties,
policies, management and personnel and consider which changes, if any, would
be desirable in light of the circumstances which then exist. Such strategies
could include, among other things, changes in Read-Rite's business, corporate
structure, Certificate of Incorporation, Bylaws, capitalization, the
Read-Rite Board or management, and consideration of disposition of certain
assets or lines of business of Read-Rite.
Except as noted herein, Applied Magnetics does not have any present
plans or proposals that would result in an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, or sale or
transfer of a material amount of assets, involving Read-Rite or any of its
subsidiaries, or any material changes in Read-Rite's corporate structure or
business. However, because Applied Magnetics has not had access to ReadRite's
books and records, additional changes may be made after a full review of
Read-Rite's operations is completed.
DISSENTERS' RIGHTS
Holders of Shares do not have dissenters' rights as a result of the
Offer and, assuming the Shares remain listed on the Nasdaq National Market or
a similar market, will not have dissenters' rights as a result of the Merger.
However, in the event the Merger is consummated, and if, on the date fixed to
determine Read-Rite Stockholders entitled to vote on the Merger, the Shares
are no longer listed on a national securities exchange or the Nasdaq National
Market or a similar market, holders of Shares will have certain rights
pursuant to the provisions of Section 262 of the DGCL to dissent and to
demand appraisal of their Shares. Under Section 262, a copy of which is
attached as Schedule D, dissenting stockholders who comply with the
applicable statutory procedures would be entitled to receive a judicial
determination of the fair value of their Shares (exclusive of any element of
value arising from the accomplishment or expectation of the Merger) and to
receive payment of such fair value in cash, together with a fair rate of
interest, if any. Any such judicial determination of the fair value of Shares
could be based upon factors other than, or in addition to, the price per
Share to be paid in the Merger or the market value of the Shares. The value
so determined could be more or less than the price per Share to be paid in
the Merger.
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BUSINESS OF APPLIED MAGNETICS
Applied Magnetics is one of the world's leading independent
manufacturers of advanced magnetic recording heads for hard disk drives.
Applied Magnetics manufactures advanced inductive thin film and MR disk head
products, primarily for supply to manufacturers of 3.5-inch hard disk drives.
Applied Magnetics' products compete on the basis of price, performance and
availability. Applied Magnetics' products are used in disk drives
manufactured by, among others, Maxtor, Micropolis, NEC, Quantum and Western
Digital.
Applied Magnetics' product line is currently centered around thin
film disk heads, the largest segment of the recording head industry. Thin
film heads permit increased storage capacity per disk and provide high
transfer rates at lower costs than MR heads. Applied Magnetics continues to
expand its thin film production capacity and further develop its thin film
technology. Applied Magnetics is also committing engineering and production
resources to further its MR disk head capability, which it believes to be the
next generation of recording head technology. MR disk heads offer still
greater recording densities and other performance advantages demanded by the
disk drive market.
In an effort to capitalize on market demand and to add to its
revenue, Applied Magnetics intends to increase its thin film and MR disk head
capacity. To achieve this goal, during fiscal 1997 Applied Magnetics
currently plans approximately $135 million in capital expenditures, including
equipment to be obtained through operating leases, to increase overall
production capacity and continue to improve their film and MR production
process. Capital expenditures for the three months ended December 28, 1996
were $17.7 million. In addition, the Company leased $4.1 million of
production equipment through operating leases.
Applied Magnetics' manufacturing and assembly operations are located
in California, Ireland, South Korea, Malaysia and the PRC. Applied Magnetics'
principal place of business is located at 75 Robin Hill Road, Goleta,
California 93117-5400. Applied Magnetics was incorporated in California in
1957 and reincorporated in Delaware in 1987.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The unaudited pro forma consolidated financial information gives
effect to the Merger on the basis that it will be accounted for as a pooling
of interests. See "THE COMBINATION--Accounting Treatment." The consolidated
financial information on the following pages presents the historical
consolidated balance sheets of each of Applied Magnetics and Read-Rite at
December 31, 1996 and the pro forma unaudited consolidated balance sheet of
Applied Magnetics as of December 31, 1996, giving effect to the Merger as if
it had occurred on that date and the historical consolidated statements of
operations of each of Applied Magnetics and Read-Rite for each of the three
years in the period ended September 28, 1996 and the pro forma unaudited
consolidated statements of operations for the three years in the period ended
September 28, 1996, giving effect to the Combination as if it had been
effected at the beginning of the period presented. Certain
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reclassifications have been made to the historical financial
information to conform to current presentation.
The unaudited pro forma consolidated balance sheet gives effect to
anticipated transaction expenses related to the Combination and
assumes the exchange of 0.679 of a share of newly issued Applied Magnetics
Common Stock for each share of Read-Rite common stock outstanding. However,
pro forma financial information excludes the estimated effect of revenue
enhancements and expense savings associated with the consolidation of the
operations of Applied Magnetics and ReadRite. The pro forma financial
information also excludes costs and asset write downs during the transition
period associated with the integration of the business. See "Accounting
Treatment."
The unaudited pro forma consolidated financial statements are
intended for informational purposes and may not be indicative of the
consolidated financial position or results of operations that actually would
have occurred had the transaction been consummated during the periods or as
of the dates indicated, or which will be attained in the future. The pro
forma consolidated financial information should be read in conjunction with
the 1996 Annual Reports on Form 10-K of Applied Magnetics and Read-Rite
incorporated by reference herein.
The accompanying Notes to Unaudited Pro Forma Consolidated Financial
Information are an integral part of this statement and should be read in
their entirety.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
(1) The pro forma consolidated financial statements give effect to the
Combination by combining the respective financial statements of the two
companies for each period presented, in accordance with the pooling of
interest basis of accounting.
(2) A liability of $10 million has been recorded in the pro forma consolidated
balance sheet to reflect management's estimate of anticipated transaction
expenses related to the combination.
(3) The capital accounts have been adjusted to reflect the issuance of
31,932,754 shares of Applied Magnetics Common Stock at the exchange ratio
of .679 of a share of newly issued Applied Magnetic Common Stock for each
share of Read-Rite Common Stock outstanding.
(4) The pro forma consolidated statements of operations do not give effect to
anticipated expenses and nonrecurring charges related to the Combination
and the estimated effect of revenue enhancements and expense savings
associated with the combination of the operations of Applied Magnetics and
Read-rite. The pro forma consolidated statements of operations do not give
effect to asset write downs during the transaction period associated with
the integration of the business.
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Earnings per common share amounts for Applied Magnetics and Read-Rite are
based on the historical weighted average number of common shares outstanding
for each company during the period. With respect to the pro forma earnings
per share computation, shares have been adjusted to the equivalent shares of
Applied Magnetics Common Stock.
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<TABLE>
APPLIED MAGNETICS
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
(in thousands of dollars)
<CAPTION>
HISTORICAL HISTORICAL PROFORMA PROFORMA
APPLIED MAGNETICS READ-RITE ADJUSTMENTS APPLIED MAGNETICS
----------------- --------- ----------- -----------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 156,974 $ 63,836 $ -- $ 220,810
Short-term investments -- 68,585 -- 68,585
Accounts receivable, net
of allowances 43,587 109,806 -- 153,393
Inventories 37,517 51,039 -- 88,556
Prepaid expenses and other 9,279 14,033 -- 23,312
--------- ---------- -------- ----------
Total current assets 247,357 307,299 -- 554,656
Property, plant & equipment 142,920 581,023 -- 723,943
Intangibles & other assets 8,909 30,546 -- 39,455
-----------
Total assets $ 399,186 $ 918,868 $ -- $ 1,318,054
=========== =========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of
long-term debt $ 1,790 $ 15,803 $ -- $ 17,593
Bank notes payable 45,789 -- -- 45,789
Accounts payable 38,684 94,130 10,000 142,814
Accrued payroll & benefits 11,410 28,214 -- 39,624
Accrued taxation liabilities -- 25,340 -- 25,340
Other current liabilities 8,835 38,769 -- 47,604
--------- ---------- -------- ----------
Total current liabilities 106,508 202,256 10,000 318,764
Long-term debt, net 115,848 170,129 -- 285,977
Other liabilities 4,465 16,733 -- 21,198
Minority interest in
consolidated subsidiaries -- 68,902 -- 68,902
--------- ---------- -------- ----------
Total liabilities 226,821 458,020 10,000 694,841
SHAREHOLDERS' EQUITY:
Common stock 2,345 5 3,193 5,543
Paid-in capital 186,155 339,289 (3,193) 522,251
Retained (deficit) earnings (14,941) 120,896 (10,000) 95,955
Cumulative translation
adjustment -- 658 -- 658
--------- ---------- -------- ----------
173,559 460,848 (10,000) 624,407
Treasury stock, at cost (1,194) -- -- (1,194)
--------- ---------- -------- ----------
Total shareholders' equity 172,365 460,848 (10,000) 623,213
--------- ---------- -------- ----------
Total liabilities and
shareholders' equity $ 399,186 $ 918,868 $- $ 1,318,054
=========== =========== =========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS PRO FORMA FINANCIAL INFORMATION
</TABLE>
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<TABLE>
Applied Magnetics
Unaudited Pro Forma Consolidated Statement of Operations
Three months ended December 31, 1996
(in thousands, except per share and share data)
<CAPTION>
Pro forma
Historical Historical Pro forma Applied
Applied Magnetics Read-Rite Adjustments Magnetics
----------------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales $ 121,627 $ 251,588 $ -- $ 373,215
Cost of sales (75,030) (215,774) (290,804)
------------ ------------ --------- ------------
Gross profit 46,597 35,814 -- 82,411
Research & development costs (11,148) (14,938) -- (26,086)
Selling, general &
administrative expenses (2,044) (10,753) -- (12,797)
Interest income 1,862 2,113 -- 3,975
Interest expense (3,151) (3,628) -- (6,779)
Other income 279 -- -- 279
------------ ------------ --------- ------------
Income before income taxes 32,395 8,608 -- 41,003
Provision for income taxes (523) (2,668) -- (3,191)
------------ ------------ --------- ------------
Income before minority
interest 31,872 5,940 -- 37,812
------------ ------------ --------- ------------
Minority interest in
consolidated subsidiary -- (153) -- (153)
------------ ------------ --------- ------------
Net income $ 31,872 $ 5,787 $ -- $ 37,659
============ ============ ========= ============
Net income per share
Primary $ 1.30 $ 0.12 -- $ 0.66
============ ============ ========= ============
Fully diluted $ 1.10 $ 0.12 -- $ 0.59
============ ============ ========= ============
Weighted average common &
common equivalent shares
outstanding
Primary 24,531,737 48,098,000 -- 57,190,279
============ ============ ========= ============
Fully diluted 30,861,300 48,098,000 -- 63,519,842
============ ============ ========= ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS PRO FORMA FINANCIAL INFORMATION
</TABLE>
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<TABLE>
Applied Magnetics
Unaudited Pro Forma Consolidated Statement of Operations
Three months ended December 31, 1995
(in thousands, except per share and share data)
<CAPTION>
Pro forma
Historical Historical Pro forma Applied
Applied Magnetics Read-Rite Adjustments Magnetics
----------------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales $ 94,709 $ 299,211 $ -- $ 393,920
Cost of sales (71,195) (215,809) -- (287,004)
------------ ------------ --------- ------------
Gross profit 23,514 83,402 -- 106,916
Research & development costs (13,315) (8,156) -- (21,471)
Selling, general &
administrative expenses (1,671) (11,509) -- (13,180)
Interest income 538 2,445 -- 2,983
Interest expense (1,426) (3,123) -- (4,549)
Other income 1,489 -- -- 1,489
------------ ------------ --------- ------------
Income before income taxes 9,129 63,059 -- 72,188
Provision for income taxes (101) (15,764) -- (15,865)
------------ ------------ --------- ------------
Income before minority
interest 9,028 47,295 -- 56,323
------------ ------------ --------- ------------
Minority interest in
consolidated subsidiary -- (4,724) -- (4,724)
------------ ------------ --------- ------------
Net income $ 9,028 $ 42,571 $ -- $ 51,599
============ ============ ========= ============
Net income per share
Primary $ 0.38 $ 0.88 -- $ 0.91
============ ============ ========= ============
Fully diluted $ 0.38 $ 0.88 -- $ 0.91
============ ============ ========= ============
Weighted average common &
common equivalent shares
outstanding
Primary 23,774,471 48,589,000 -- 56,766,402
============ ============ ========= ============
Fully diluted 23,873,012 48,589,000 -- 56,864,943
============ ============ ========= ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS PRO FORMA FINANCIAL INFORMATION
</TABLE>
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<TABLE>
Applied Magnetics
Unaudited Pro Forma Consolidated Statement of Operations
Year ended September 30, 1996
(in thousands, except per share and share data)
<CAPTION>
Pro forma
Historical Historical Pro forma Applied
Applied Magnetics Read-Rite Adjustments Magnetics
----------------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales $ 344,754 $ 991,118 $ -- $ 1,335,872
Cost of sales (251,503) (887,464) -- (1,138,967)
------------ ------------ ------- ------------
Gross profit 93,251 103,654 -- 196,905
Research & development costs (50,867) (52,221) -- (103,088)
Selling, general &
administrative expenses (6,533) (43,644) -- (50,177)
Interest income 4,228 9,024 -- 13,252
Interest expense (9,056) (12,897) -- (21,953)
Other income 2,047 -- -- 2,047
------------ ------------ ------- ------------
Income before income taxes 33,070 3,916 -- 36,986
Provision for income taxes (852) (34,582) -- (35,434)
------------ ------------ ------- ------------
Income (loss) before minority
interest 32,218 (30,666) -- 1,552
Minority interest in consolidated
subsidiary -- (12,320) -- (12,320)
------------ ------------ ------- ------------
Net income (loss) $ 32,218 $ (42,986) $ -- $ (10,768)
------------ ------------ ------- ------------
Net income (loss) per share $ 1.35 $ (0.92) $ -- $ (0.19)
============ ============ ======= ============
Weighted average common & common
equivalent shares outstanding 23,897,168 46,755,000 -- 55,643,813
============ ============ ======= ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS PRO FORMA FINANCIAL INFORMATION
</TABLE>
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<PAGE>
<TABLE>
Applied Magnetics
Unaudited Pro Forma Consolidated Statement of Operations
Year ended September 30, 1995
(in thousands, except per share and share data)
<CAPTION>
Historical Pro forma
Applied Historical Pro forma Applied
Magnetics Read-Rite Adjustments Magnetics
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales $ 292,600 $ 1,003,040 $ -- $ 1,295,640
Cost of sales (252,684) (739,000) -- (991,684)
------------ ------------ ------- ------------
Gross profit 39,916 264,040 303,956
Research & development costs (33,655) (41,788) -- (75,443)
Selling, general & administrative
expenses (7,434) (44,406) -- (51,840)
Interest income 1,996 5,257 -- 7,253
Interest expense (4,826) (5,589) -- (10,415)
Other income 6,335 -- -- 6,335
------------ ------------ ------- ------------
Income before income taxes 2,332 177,514 -- 179,846
Provision for income taxes (584) (41,715) -- (42,299)
------------ ------------ ------- ------------
Income (loss) before minority
interest 1,748 135,799 -- 137,547
Minority interest in consolidated
subsidiary -- (12,234) -- (12,234)
------------ ------------ ------- ------------
Net income $ 1,748 $ 123,565 $ -- $ 125,313
============ ============ ======= ============
Net income per share $ 0.08 $ 2.60 $ -- $ 2.29
============ ============ ======= ============
Weighted average common &
common equivalent shares
outstanding 22,472,208 47,616,000 -- 54,803,472
============ ============ ======= ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS PRO FORMA FINANCIAL INFORMATION
</TABLE>
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<PAGE>
<TABLE>
Applied Magnetics
Unaudited Pro Forma Consolidated Statement of Operations
Year ended September 30, 1994
(in thousands, except per share and share data)
<CAPTION>
Historical Pro forma
Applied Historical Pro forma Applied
Magnetics Read-Rite Adjustments Magnetics
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales $ 275,927 $ 638,589 $ -- $ 914,516
Cost of sales (281,997) (545,396) -- (827,393)
------------ ------------ -------- ------------
Gross profit (loss) (6,070) 93,193 -- 87,123
Research & development costs (24,682) (25,524) -- (50,206)
Selling, general & administrative
expenses (17,267) (33,449) -- (50,716)
Interest income 825 1,690 -- 2,515
Interest expense (4,216) (4,759) -- (8,975)
Merger expense -- (2,384) -- (2,384)
Other income (160) -- -- (160)
------------ ------------ -------- ------------
Income before income taxes (51,570) 28,767 -- (22,803)
Provision for income taxes (1,100) (4,595) -- (5,695)
------------ ------------ -------- ------------
Income (loss) before minority
interest (52,670) 24,172 -- (28,498)
Minority interest in consolidated
subsidiary -- (4,478) -- (4,478)
------------ ------------ -------- ------------
Net income (loss) $ (52,670) $ 19,694 $ -- $ (32,976)
============ ============ ======== ============
Net income (loss) per share ($ 2.39) $ 0.43 $ -- $ ($0.62)
============ ============ ======== ============
Weighted average common &
common equivalent shares
outstanding 22,081,751 46,125,000 -- 53,400,626
============ ============ ======== ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS PRO FORMA FINANCIAL INFORMATION
</TABLE>
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DESCRIPTION OF APPLIED MAGNETICS CAPITAL STOCK
PREFERRED STOCK
Applied Magnetics has authorized a class of Preferred Stock consisting of
5,000,000 shares, $.10 par value. The Applied Magnetics Board has authority,
without any further action by the holders of Applied Magnetics Common Stock,
to divide the Applied Magnetics Preferred Stock into series, to fix the number
of shares comprising any series and to fix or alter the voting powers,
designations, preferences and relative, participating, optional or other
rights, and the qualifications, limitations or restrictions, including
dividend rights, dividend rates, conversion rights, rights and terms of
redemption, rights upon dissolution or liquidation and sinking fund
provisions, of any wholly unissued series of Applied Magnetics Preferred
Stock. As of February 21, 1997, there were no shares of Applied Magnetics
Preferred Stock outstanding. However, see "--Applied Magnetics Rights Plan."
COMMON STOCK
The authorized Common Stock of Applied Magnetics consists of 40,000,000
shares, $.10 par value. Holders of Applied Magnetics Common Stock have one
vote for each share held, are not entitled to cumulate their votes for the
election of directors and do not have preemptive rights. The shares are not
subject to redemption. Subject to the terms of any shares of Applied Magnetics
Preferred Stock which may be issued, holders of Applied Magnetics Common Stock
are entitled to receive such dividends as are declares by the Applied
Magnetics Board out of funds legally available therefor and are entitled to
participate equally in the assets of Applied Magnetics available for
distribution in the event of liquidation or dissolution. Applied Magnetics is
subject to certain dividend restrictions under a loan agreement. As of
February 20, 1997, there were 23,680,726 shares of Applied Magnetics Common
Stock outstanding.
APPLIED MAGNETICS RIGHTS PLAN
In October 1988, the Applied Magnetics Board declared a dividend of one
Applied Magnetics Right for each outstanding share of Applied Magnetics Common
Stock to stockholders of record on November 4, 1988. Each Applied Magnetics
Right entitles the holder to buy the economic equivalent of one share of
Applied Magnetics Common Stock in the form of one one-hundredth of a share of
a newly created series of participating preferred stock of Applied Magnetics
at an exercise price of $75.00 per share. The Applied Magnetics Rights are
exercisable only if a person or group acquires 20% or more of the voting power
of Applied Magnetics (an "Acquiring Person") or announces a tender or exchange
offer which would result in a person or group becoming an Acquiring Person, in
either case, without the prior consent of Applied Magnetics.
If any person or group becomes the beneficial owner of 20% or more of the
voting power of Applied Magnetics (other than as a result of a tender offer or
exchange offer for all outstanding shares of Applied Magnetics Common Stock at
a price and on terms determined by at least a majority of the members of the
Applied Magnetics Board who are not officers of Applied Magnetics to be both
adequate and otherwise in the best interests of Applied Magnetics and its
stockholders), then each Applied Magnetics Right (other than those owned by
the Acquiring Person or related parties) will entitle its holder to purchase,
at the Applied Magnetics Right's exercise price, shares of Applied Magnetics'
Common Stock or common stock equivalents having a market value of twice the
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Applied Magnetics Right's exercise price ("Flip-In Right"). The Flip-In Right
will result in substantial dilution of an Acquiring Persons' voting and
economic interest in Applied Magnetics and a substantial economic benefit to
the other stockholders of Applied Magnetics.
In addition, after a person or group becomes an Acquiring Person, if
Applied Magnetics is involved in a merger or other business combination trans
action with another person in which its common shares are changed or
exchanged, or Applied Magnetics sells 50% or more of its assets or earning
power to another person, each Right (other than owned by the Acquiring Person
or related parties) will entitle its holder to purchase, at the Applied
Magnetics Right's exercise price, shares of Common Stock of such other person
having a market value of twice the Applied Magnetics Right's exercise price.
Applied Magnetics will be entitled to redeem the Applied Magnetics Rights
at one cent per Right (i) at any time before the person or group becomes the
Acquiring Person without prior approval, (ii) in connection with an
acquisition of Applied Magnetics not involving the Acquiring Person and in
which all stockholders are treated alike or (iii) after the Flip-In Rights is
triggered and the exercise period has expired if and for as long as no person
owns 20% of the Applied Magnetics Common Stock. The Applied Magnetics Rights
expire at the earlier of (i) ten years after adoption of the Rights Plan, or
(ii) consummation of a merger following a tender offer approved by the Applied
Magnetics Board, in either case unless earlier redeemed by Applied Magnetics.
The Exercise Price payable, and the number of shares of Applied Magnetics
Common Stock or other securities or property issuable, upon exercise of the
Applied Magnetics Rights are subject to adjustments from time to time to
prevent dilution (i) in the event of a stock dividend on, or a subdivision,
combination or reclassification of, the Applied Magnetics Preferred Stock,
(ii) upon the grant to holders of the Applied Magnetics Preferred Stock of
certain rights or warrants to subscribe for Applied Magnetics Preferred Stock
or convertible securities or securities having the same or more favorable
rights, privileges and preferences as the Applied Magnetics Preferred Stock at
less than the current market price of the Applied Magnetics Preferred Stock,
or (iii) upon the distribution to holders of the Applied Magnetics Preferred
Stock of evidences of indebtedness or assets or of subscription rights or
warrants (other than those referred to above).
Stockholders of Applied Magnetics may, depending upon the circumstances,
recognize taxable income in the event that the Applied Magnetics Rights become
exercisable for Applied Magnetics Common Stock (or other consideration) or for
common stock of the acquiring company as set forth above.
COMPARISON OF THE RIGHTS OF HOLDERS OF SHARES AND
APPLIED MAGNETICS COMMON STOCK
Pursuant to the Offer, Read-Rite Stockholders who elect to receive
Applied Magnetics Common Stock in exchange for Shares will become stockholders
of Applied Magnetics. The following is a summary of certain similarities and
material differences between the rights of holders of Shares and the rights of
holders of Applied Magnetics Common Stock. As each of Read-Rite and Applied
Magnetics is organized under the laws of Delaware, these differences arise
solely from various provisions of the Certificate of Incorporation and Bylaws
of each of Read-Rite and Applied Magnetics.
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<PAGE>
The following summary does not purport to be a complete statement of the
rights of stockholders under the Read-Rite Certificate and the Read-Rite
Bylaws as compared with the rights of Applied Magnetics' stockholders under
the Applied Magnetics Certificate and the Applied Magnetics Bylaws or a
complete description of the specific provisions referred to herein. The
identification of specific differences is not meant to indicate that other
equally or more significant differences do not exist. The summary is qualified
in its entirety by reference to the DGCL and the governing corporate
instruments of Read-Rite and Applied Magnetics, to which stockholders are
referred.
SPECIAL MEETINGS OF STOCKHOLDERS
Under Delaware law, special meetings of the stockholders may be called by
the board of directors or such other persons as may be authorized by the
certificate of incorporation or bylaws. The Read-Rite Bylaws provide that a
special meeting may also be called by the Chairman of the Board, the president
or the chief executive officer, or by the president or secretary at the
request in writing of a majority of the Board of Directors, or at the request
in writing of stockholders owning a majority in amount of the entire capital
stock of the corporation issued and outstanding and entitled to vote. The
Applied Magnetics Bylaws provide that, in addition to the Board of Directors,
a special meeting may be called by a Committee of the Board of Directors which
has been duly designated and expressly provided with the power to call such
meetings. The Applied Magnetics Certificate and Applied Magnetics Bylaws do
not contain any provision granting stockholders the right to call special
meetings.
NUMBER OF DIRECTORS
Under Delaware law, the number of directors shall be fixed by or in the
manner provided in the bylaws, unless the certificate of incorporation fixes
the number of directors, in which case a change in the number of directors
shall be made only by an amendment to the certificate. The Read-Rite Bylaws
provide that the Read-Rite Board is to consist of six directors. The Applied
Magnetics Bylaws provide that the Applied Magnetics Board of Directors is to
consist of five directors. Neither the Read-Rite Certificate nor the Applied
Magnetics Certificate fixes the number of directors.
ADVANCE NOTICE OF STOCKHOLDER NOMINATION OF DIRECTORS
Both the Read-Rite Bylaws and Applied Magnetics Bylaws contain advance
notice provisions for the nominations of directors. Under the Read-Rite
Bylaws, a nomination may be made at a meeting of stockholders by any
stockholder, provided that the Secretary of Read-Rite receives written notice
not less than 90 days prior to the meeting. If less than 100 days' notice or
prior disclosure of the date of the meeting is given or made to stockholders,
the notice of nomination must be received not later than the close of business
on the 10th day following the day on which such notice of the date of the
meeting was mailed or public disclosure was made. In addition, under the
Read-Rite Bylaws, at any time that Applied Magnetics is subject to the
periodic reporting requirements under the Exchange Act, notice will be deemed
timely made by a stockholder with respect to an annual meeting of stockholders
if the notice by the stockholder is made in a timely manner pursuant to the
provisions of Rule 14a-8(a)(3)(i). The Applied Magnetics Bylaws have similar
provisions, however, the Secretary of Applied Magnetics must receive written
notice not less than 50 days nor more than 75 days prior to the meeting. If
less than 65 days prior notice or public disclosure is given by Applied
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Magnetics, notice by the stockholder must be delivered not later than the
close of business on the 15th day following the day on which such notice of
the date of the meeting was mailed or such public disclosure was made,
whichever first occurs.
The Read-Rite Bylaws and the Applied Magnetics Bylaws require different
information in the advance notice. Under the Read-Rite Bylaws, notice of
nominations, among other things, must state both the nominee's and nominator's
name and address; a description of all arrangements or understandings between
the nominator and each nominee; and whether the nominator intends to appear in
person or by proxy at the meeting to nominate the person specified in the
notice. The Applied Magnetics Bylaws require that the notice, among other
things, state not only the name and address of the nominee and nominator, but
also the age, and principal occupation or employment of the nominee. Applied
Magnetics has no requirements of a description of all arrangements and
understandings between the nominator and nominee, nor whether the nominator
intends to appear in person or by proxy. Both the Read-Rite Bylaws and the
Applied Magnetics Bylaws require the notice to state any other information
about the nominee required to be disclosed in solicitations for proxies for
the election of directors pursuant to rules of the Commission.
STOCKHOLDER PROPOSAL PROCEDURES
Under the Read-Rite Bylaws, business is properly brought before an annual
meeting if the Secretary of Read-Rite receives written notice not less than 90
days prior to the meeting. If less than 100 days' notice or prior disclosure
of the date of the meeting is given or made to stockholders, the notice of
nomination must be received not later than the close of business on the 10th
day following the day on which such notice of the date of the meeting was
mailed or public disclosure was made. The Applied Magnetics Bylaws have
somewhat similar provisions. However, the Secretary of Applied Magnetics must
receive written notice not less than 50 days nor more than 75 days prior to
the meeting. If less than 65 days prior notice or public disclosure is given,
notice by the stockholder must be delivered not later than the close of
business in the 15th day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made, whichever first
occurs. In addition, under the Read-Rite Bylaws, at any time that Read-Rite is
subject to the periodic reporting requirements under the Exchange Act, notice
will be deemed timely made by a stockholder with respect to an annual meeting
of stockholders if the notice by the stockholder is made in a timely manner
pursuant to the provisions of Rule 14a-8(a)(3)(i).
The Read-Rite Bylaws and the Applied Magnetics Bylaws require different
information in the notice of business to be conducted. Under the Read-Rite
Bylaws, notice of business to be conducted, among other things, must state the
stockholder's name, address and the nature of the business to be proposed as
well as if the nominator intends to appear in person or by proxy at the
meeting to introduce the business specified in the notice. Furthermore, the
Read-Rite Bylaws require the notice to state any other information about the
matter as would be required to be disclosed pursuant to the proxy rules of the
Commission had the matter been proposed or intended to be proposed by the
board of directors. The Applied Magnetics Bylaws require that stockholder
notices must contain, among other things, a brief description of the business
desired to be brought before the annual meeting, and the reasons for
conducting such business at the annual meeting; the name and record address of
the stockholder proposing such business; the class and number of shares of the
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corporation which are beneficially owned by the stockholder; and any material
interest of the stockholder in such business.
VOTING MAJORITIES
Under the Read-Rite Bylaws, once a quorum is present at any meeting, the
vote of the holders of a majority of the stock having voting power present in
person or represented by proxy will decide all issues unless the express
provisions of statute or the certificate of incorporation require a different
vote. Under the Applied Magnetics Bylaws, the election of directors and
procedural matters relating to the conduct of a meeting are decided by a
plurality of votes cast. All other matters are decided by the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy, unless the express provisions of statute, the Applied
Magnetics Certificate, or the Bylaws require a different vote.
INDEMNIFICATION
Both the Read-Rite Bylaws and the Applied Magnetics Bylaws provide for
the indemnification of directors, officers and persons serving at the request
of the respective corporations as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise to the fullest extent authorized by the DGCL. The Applied Magnetics
Bylaws also mandatorily extend this right to indemnification to all employees
of Applied Magnetics, whereas the Read-Rite Bylaws provide that this right to
indemnification may only be extended to employees and agents by the
corporation.
CERTAIN VOTING RIGHTS FOR MERGERS
Under Delaware law, any merger, consolidation or sale of all or
substantially all of the assets of a corporation requires the approval of the
holders of a majority (unless the certificate of incorporation requires a
higher percentage) of the outstanding shares of such corporation entitled to
vote thereon. Neither the Read-Rite Certificate nor the Applied Magnetics
Certificate requires a higher percentage.
CUMULATIVE VOTING
Under Delaware law, stockholders of a corporation are not entitled to
cumulate their votes in the election of directors unless the corporation's
certificate of incorporation so provides. Neither the Read-Rite Certificate
nor the Applied Magnetics Certificate provides for cumulative voting.
REMOVAL OF DIRECTORS
Under Delaware law, any or all directors of a corporation which does not
have cumulative voting or a classified board may be removed, with or without
cause, by the holders of a majority of the shares entitled to vote at an
election of directors, unless such corporation's certificate of incorporation
provides otherwise. Neither the Read-Rite Certificate nor the Applied
Magnetics certificate provides otherwise.
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STOCKHOLDER ACTION BY WRITTEN CONSENT
Under Delaware law, unless otherwise provided in the certificate of
incorporation, any action which may be taken at any annual or special meeting
may be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding shares having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Neither the
ReadRite Certificate nor the Applied Magnetics Certificate contains provisions
to the contrary.
AMENDMENT OF BYLAWS
Under Delaware law, the power to adopt, amend or repeal bylaws is vested
in the stockholders unless the certificate of incorporation confers the power
to adopt, amend or repeal bylaws upon the directors as well. Both the ReadRite
Certificate and the Applied Magnetics Certificate confer such power on their
respective boards of directors.
CLASSIFICATION OF BOARD OF DIRECTORS
Delaware law permits (but does not require) a certificate of
incorporation to provide that a board of directors be divided into classes,
with each class having a term of office longer than one year but not longer
than three years. Neither the Read-Rite Certificate nor the Applied Magnetics
Certificate provides for classes of directors.
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MARKET PRICES
The Applied Magnetics Common Stock is listed and principally traded on
the NYSE. The Shares are quoted and traded principally on the Nasdaq National
Market. The following table sets forth the range of high and low sales prices
as reported on the NYSE Composite Tape, with respect to Applied Magnetics
Common Stock, and the Nasdaq National Market, with respect to the Shares.
APPLIED MAGNETICS READ-RITE
Price Range Price Range
QUARTER High Low High Low
1994
First Quarter................. $ 6 1/2 $ 5 1/8 $14 1/8 $ 8 3/4
Second Quarter................ $ 7 3/8 $ 5 1/8 $15 1/4 $11 5/8
Third Quarter................ $ 6 1/2 $ 4 1/4 $14 1/8 $11
Fourth Quarter................ $ 6 3/8 $ 4 $19 $11 7/8
1995
First Quarter................. $ 4 3/8 $ 2 1/4 $19 $15 1/2
Second Quarter................ $ 3 7/8 $ 2 1/2 $19 1/2 $14 7/8
Third Quarter................. $ 7 $ 2 5/8 $29 $19
Fourth Quarter................ $18 7/8 $ 7 1/8 $48 $261/4
1996
First Quarter. ............... $19 $12 1/8 $39 1/8 $21 3/4
Second Quarter................ $19 1/8 $13 3/4 $25 1/8 $16 3/4
Third Quarter. ............... $21 3/4 $ 9 1/2 $26 1/8 $12 15/16
Fourth Quarter................ $18 1/4 $ 8 1/4 $15 3/4 $ 9 7/8
1997
First Quarter................. $31 7/8 $17 3/8 $26 1/2 $15 1/8
Second Quarter (through
February 21, 1997)........... $60 1/2 $29 1/8 $33 5/8 $24
On February 21, 1997, the last trading day before public announce ment
of the Offer, the closing sales price per share of Applied Magnetics Common
Stock was $55 1/4. Past price performance is not necessarily indicative of
likely future price performance. Holders of Shares are urged to obtain current
market quotations for shares of Applied Magnetics Common Stock.
VALIDITY OF APPLIED MAGNETICS COMMON STOCK
The validity of the shares of Applied Magnetics Common Stock offered
hereby will be passed upon for Applied Magnetics by Sheppard, Mullin, Richter
& Hampton LLP, 333 South Hope Street, 48th Floor, Los Angeles, California
90071.
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EXPERTS
The financial statements of Applied Magnetics incorporated by reference
in this Preliminary Prospectus and elsewhere in the Registration Statement
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said Firm as experts in giving said reports.
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SCHEDULE A
DIRECTORS AND EXECUTIVE OFFICERS OF APPLIED MAGNETICS CORPORATION
Directors and Executive Officers of Applied Magnetics Corporation. The
name, business address, present principal occupation or employment and
five-year employment history of each of the directors and executive officers
of Applied Magnetics Corporation are set forth below. Unless otherwise
indicated, each occupation set forth opposite an individual's name refers to
employment with Applied Magnetics Corporation. Each director and executive
officer listed below is a citizen of the United States.
Position with Applied Magnetics
Corporation; Principal
Occupation or Employment;
Name and Business Address 5-Year Employment History.
------------------------- --------------------------
Craig D. Crisman................. Chairman, Chief Executive
Applied Magnetics Corporation Officer and Director of Applied
75 Robin Hill Road Magnetics Corporation. Mr.
Goleta, California 93117 Crisman became an employee of
Applied Magnetics Corporation
on August 1, 1995. Prior to
that time, since 1981, he was a
member of Grisanti, Galef &
Goldress, Inc., a consulting
firm ("GG&G"). GG&G was
engaged by Applied Magnetics
Corporation on August 1, 1994,
to provide crisis management
and turnaround services to
Applied Magnetics Corporation.
The turnaround engagement was
determined to have been
successfully completed on
July 27, 1995. Mr. Crisman was
elected Chief Executive Officer
and a director of Applied
Magnetics Corporation on
August 1, 1994. He was elected
Chairman of the Board on
November 3, 1995. During the
five years preceding his
appointment as Chief Executive
Officer and as a director of
Applied Magnetics Corporation,
Mr. Crisman was a partner of
GG&G. In that capacity he had
been engaged, as a crisis
management consultant, in
business turnaround assignments
involving a number of different
enterprises in various
industries.
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Harold R. Frank.................. Director of Applied Magnetics
Applied Magnetics Corporation Corporation. Mr. Frank,
75 Robin Hill Road founder of Applied Magnetics
Goleta, California 93117 Corporation, was named Chairman
Emeritus of Applied Magnetics
Corporation 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.
Herbert M. Dwight, Jr............ Director of Applied Magnetics
Optical Coating Corporation. Mr. Dwight is,
Laboratory, Inc. and for more than five years
2789 Northpoint Parkway, has been, President and
Dept. 101-1 Chairman of Optical Coating
Santa Rosa, California Laboratory, Inc., which is
95407-7397 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.
Jerry E. Goldress................ Director of Applied Magnetics
Grisanti, Galef & Goldress, Inc. Corporation. Mr. Goldress is,
P.O. Box 5240 and for more than five years
Incline Village, Nevada has been, Chief Executive
89450 Officer of GG&G and is also
Chairman of The Wherehouse.
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Dr. R.C. Mercure, Jr............ Director of Applied Magnetics
Applied Magnetics Corporation Corporation. Ending in September 1996,
75 Robin Hill Road Dr. Mercure was, and for a period of
Goleta, California 93117 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 Applied
Magnetics Corporation since 1982. He
is a director of Imex Medical Systems,
which is engaged in the development
and manufacture of medical diagnostic
and monitoring instruments, and Ball
Corporation, a manufacturer of metal
and plastic containers.
Peter T. Altavilla................ Mr. Altavilla is Controller and
Applied Magnetics Corporation 75 Robin Secretary of Applied Magnetics
Hill Road Goleta, California 93117 Corporation.
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SCHEDULE B
OWNERSHIP OF SHARES BY CERTAIN BENEFICIAL OWNERS AND READ-RITE MANAGEMENT
The following table and notes thereto are reproduced from ReadRite's
Proxy Statement for the 1997 Annual Meeting of Read-Rite Stockholders, set
forth certain information with respect to beneficial ownership of Shares (i)
as of December 30, 1996 by any person known by Read-Rite to beneficially own
more than five percent of the outstanding Shares, and (ii) as of December 30,
1996 by each director (including Read-Rite's Chief Executive Officer), by the
four other most highly compensated executive officers of Read-Rite whose
compensation exceeded $100,000 for fiscal 1996, and by all current directors
and executive officers as a group:
-----------------------------------
NUMBER OF
SHARES PERCENT
NAME OF BENEFICIAL OWNER BENEFICIALLY OF
OR IDENTITY OF GROUP OWNED CLASS
- ------------------------------------ ------------------- ------------
J.P. Morgan & Co. Incorporated (1) 3,786,730 8.1%
60 Wall Street
New York, New York 10260
Cyril J. Yansouni (2)............. 920,217 1.9%
Fred Schwettmann (3).............. 133,297 *
John G. Linvill (4)............... 22,500 *
William J. Almon (5).............. 5,500 *
Michael L. Hackworth (6).......... 1,500 *
Matthew J. O'Rourke............... 1,200 *
Peter G. Bischoff (7)............. 150,520 *
Michael A. Klyszeiko (8).......... 90,001 *
Alan S. Lowe (9).................. 85,780 *
All executive officers
and directors as a
group (13 persons) (10)........... 1,538,151 3.2%
* Less than 1%
(1) Based on information received from J.P. Morgan and Co. Incorporated
as of December 17, 1996.
(2) Includes 685,308 shares issuable upon the exercise of stock options to
purchase shares of Common Stock which are exercisable within 60 days of
December 30, 1996.
(3) Includes 129,252 shares issuable upon the exercise of stock options to
purchase shares of Common Stock which are exercisable within 60 days of
December 30, 1996.
(4) Includes 19,500 shares issuable upon the exercise of stock options to
purchase shares of Common Stock which are exercisable within 60 days of
December 30, 1996.
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(5) Includes 4,500 shares issuable upon the exercise of stock options to
purchase shares of Common Stock which are exercisable within 60 days of
December 30, 1996.
(6) Includes 1,500 shares issuable upon the exercise of stock options to
purchase shares of Common Stock which are exercisable within 60 days of
December 30, 1996.
(7) Includes 146,721 shares issuable upon the exercise of stock options to
purchase shares of Common Stock which are exercisable within 60 days of
December 30, 1996.
(8) Includes 79,589 shares issuable upon the exercise of stock options to
purchase shares of Common Stock which are exercisable within 60 days of
December 30, 1996.
(9) Includes 64,026 shares issuable upon the exercise of stock options to
purchase shares of Common Stock which are exercisable within 60 days of
December 30, 1996.
(10)Includes 1,252,661 shares issuable upon the exercise of stock options to
purchase shares of Common Stock which are exercisable within 60 days of
December 30, 1996.
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SCHEDULE C
SECTION 203
DELAWARE GENERAL CORPORATION LAW
203 BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS.
(a) Notwithstanding any other provisions of this chapter, a
corporation shall not engage in any business combination with any interested
stockholder for a period of 3 years following the time that such stockholder
became an interested stockholder, unless:
(1) prior to such time the board of directors of the corporation
approved either the business combination or the transaction which resulted in
the stockholder becoming an interested stockholder, or
(2) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding for purposes of determining the
number of shares outstanding those shares owned (i) by persons who are
directors and also officers and (ii) employee stock plans in which employee
participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer, or
(3) At or subsequent to such time the business combination is approved
by the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66-2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
(b) The restrictions contained in this section shall not apply
if:
(1) the corporation's original certificate of incorporation
contains a provision expressly electing not to be governed by this
section;
(2) the corporation, by action of its board of directors, adopts an
amendment to its bylaws within 90 days of the effective date of this section,
expressly electing not to be governed by this section, which amendment shall
not be further amended by the board of directors.
(3) the corporation, by action of its stockholders, adopts an
amendment to its certificate of incorporation or bylaws expressly electing not
to be governed by this section, provided that, in addition to any other vote
required by law, such amendment to the certificate of incorporation or bylaws
must be approved by the affirmative vote of a majority of the shares entitled
to vote. An amendment adopted pursuant to this paragraph shall be effective
immediately in the case of a corporation that both (i) has never had a class
of voting stock that falls within any of the three categories set out in
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subsection (b)(4) hereof, and (ii) has not elected by a provision in its
original certificate of incorporation or any amendment thereto to be governed
by this section. In all other cases, an amendment adopted pursuant to this
paragraph shall not be effective until 12 months after the adoption of such
amendment and shall not apply to any business combination between such
corporation and any person who became an interested stockholder of such
corporation on or prior to such adoption. A bylaw amendment adopted pursuant
to this paragraph shall not be further amended by the board of directors;
(4) the corporation does not have a class of voting stock that is (i)
listed on a national securities exchange, (ii) authorized for quotation on The
NASDAQ Stock Market or (iii) held of record by more than 2,000 stockholders,
unless any of the foregoing results from action taken, directly or indirectly,
by an interested stockholder or from a transaction in which a person becomes
an interested stockholder;
(5) a stockholder becomes an interested stockholder inadvertently and
(i) as soon as practicable divests itself of ownership of sufficient shares so
that the stockholder ceases to be an interested stockholder and (ii) would
not, at any time within the 3 year period immediately prior to a business
combination between the corporation and such stockholder, have been an
interested stockholder but for the inadvertent acquisition of ownership;
(6) the business combination is proposed prior to the consummation or
abandonment of and subsequent to the earlier of the public announcement or the
notice required hereunder of a proposed transaction which (i) constitutes one
of the transactions described in the second sentence of this paragraph; (ii)
is with or by a person who either was not an interested stockholder during the
previous 3 years or who became an interested stockholder with the approval of
the corporation's board of directors or during the period described in
paragraph (7) of this subsection (b); and (iii) is approved or not opposed by
a majority of the members of the board of directors then in office (but not
less than 1) who were directors prior to any person becoming an interested
stockholder during the previous 3 years or were recommended for election or
elected to succeed such directors by a majority of such directors. The
proposed transactions referred to in the preceding sentence are limited to (x)
a merger or consolidation of the corporation (except for a merger in respect
of which, pursuant to section 251(f) of the chapter, no vote of the
stockholders of the corporation is required); (y) a sale, lease, exchange,
mortgage, pledge, transfer or other disposition (in one transaction or a
series of transactions), whether as part of a dissolution or otherwise, of
assets of the corporation or of any direct or indirect majority-owned
subsidiary of the corporation (other than to any direct or indirect
wholly-owned subsidiary or to the corporation) having an aggregate market
value equal to 50% or more of either that aggregate market value of all of the
assets of the corporation determined on a consolidated basis or the aggregate
market value of all the outstanding stock of the corporation; or (z) a
proposed tender or exchange offer for 50% or more of the outstanding voting
stock of the corporation. The corporation shall give not less than 20 days
notice to all interested stockholders prior to the consummation of any of the
transactions described in clauses (x) or (y) of the second sentence of this
paragraph; or
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(7) The business combination is with an interested stockholder who
became an interested stockholder at a time when the restrictions contained in
this section did not apply by reason of any paragraphs (1) through (4) of this
subsection (b), provided, however, that this paragraph (7) shall not apply if,
at the time such interested stockholder became an interested stockholder, the
corporation's certificate of incorporation contained a provision authorized by
the last sentence of this subsection (b).
Notwithstanding paragraphs (1), (2), (3) and (4) of this subsection, a
corporation may elect by a provision of its original certificate of
incorporation or any amendment thereto to be governed by this section;
provided that any such amendment to the certificate of incorporation shall not
apply to restrict a business combination between the corporation and an
interested stockholder of the corporation if the interested stockholder became
such prior to the effective date of the amendment.
(c) As used in this section only, the term:
(1) "affiliate" means a person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with, another person.
(2) "associate," when used to indicate a relationship with any person,
means (i) any corporation, partnership, unincorporated association or other
entity of which such person is a director, officer or partner or is, directly
or indirectly, the owner of 20% or more of any class of voting stock, (ii) any
trust or other estate in which such person has at least a 20% beneficial
interest or as to which such person serves as trustee or in a similar
fiduciary capacity, and (iii) any relative or spouse of such person, or any
relative of such spouse, who has the same residence as such person.
(3) "business combination," when used in reference to any corporation
and any interested stockholder of such corporation, means:
(i) any merger or consolidation of the corporation or any direct or
indirect majority-owned subsidiary of the corporation with (A) the interested
stockholder, or (B) with any other corporation, partnership, unincorporated
association or other entity if the merger or consolidation is caused by the
interested stockholder and as a result of such merger or consolidation
subsection (a) of this section is not applicable to the surviving entity;
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions), except
proportionately as a stockholder of such corporation, to or with the
interested stockholder, whether as part of a dissolution or otherwise, of
assets of the corporation or of any direct or indirect majority-owned
subsidiary of the corporation which assets have an aggregate market value
equal to 10% or more of either the aggregate market value of all the assets of
the corporation determined on a consolidated basis or the aggregate market
value of all the outstanding stock of the corporation;
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(iii) any transaction which results in the issuance or transfer by the
corporation or by any direct or indirect majority-owned subsidiary of the
corporation of any stock of the corporation or of such subsidiary to the
interested stockholder, except (A) pursuant to the exercise, exchange or
conversion of securities exercisable for, exchangeable for or convertible into
stock of such corporation or any such subsidiary which securities were
outstanding prior to the time that the interested stockholder became such, (B)
pursuant to a merger under Section 251(g) of this title; (C) pursuant to a
dividend or distribution paid or made, or the exercise, exchange or conversion
of securities exercisable for, exchangeable for or convertible into stock of
such corporation or any such subsidiary which security is distributed, pro
rata to all holders of a class or series of stock of such corporation
subsequent to the time the interested stockholder became such, (D) pursuant to
an exchange offer by the corporation to purchase stock made on the same terms
to all holders of said stock, or (E) any issuance or transfer of stock by the
corporation, provided however, that in no case under (C)-(E) above shall there
be an increase in the interested stockholder's proportionate share of the
stock of any class or series of the corporation or of the voting stock of the
corporation;
(iv) any transaction involving the corporation or any direct or
indirect majority-owned subsidiary of the corporation which has the effect,
directly or indirectly, of increasing the proportionate share of the stock of
any class or series, or securities convertible into the stock of any class or
series, of the corporation or of any such subsidiary which is owned by the
interested stockholder, except as a result of immaterial changes due to
fractional share adjustments or as a result of any purchase or redemption of
any shares of stock not caused, directly or indirectly, by the interested
stockholder; or
(v) any receipt by the interested stockholder of the benefit, directly
or indirectly (except proportionately as a stockholder of such corporation) of
any loans, advances, guarantees, pledges, or other financial benefits (other
than those expressly permitted in subparagraphs (i)-(iv) above) provided by or
through the corporation or any direct or indirect majority owned subsidiary.
(4) "control," including the term "controlling," "controlled by" and
"under common control with," means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
person, whether through the ownership of voting stock, by contract, or
otherwise. A person who is the owner of 20% or more of the outstanding voting
stock of any corporation, partnership, unincorporated association or other
entity shall be presumed to have control of such entity, in the absence of
proof by a preponderance of the evidence to the contrary. Notwithstanding the
foregoing, a presumption of control shall not apply where such person holds
voting stock, in good faith and not for the purpose of circumventing this
section, as an agent, bank, broker, nominee, custodian or trustee for one or
more owners who do not individually or as a group have control of such entity.
(5) "interested stockholder" means any person (other than the
corporation and any direct or indirect majority-owned subsidiary of the
corporation) that (i) is the owner of 15% or more of the outstanding
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voting stock of the corporation, or (ii) is an affiliate or associate of the
corporation and was the owner of 15% or more of the outstanding voting stock
of the corporation at any time within the 3-year period immediately prior to
the date on which it is sought to be determined whether such person is an
interested stockholder; and the affiliates and associates of such person;
provided, however, that the term "interested stockholder" shall not include
(x) any person who (A) owned shares in excess of the 15% limitation set forth
herein as of, or acquired such shares pursuant to a tender offer commenced
prior to, December 23, 1987, or pursuant to an exchange offer announced prior
to the aforesaid date and commenced within 90 days thereafter and either (I)
continued to own shares in excess of such 15% limitation or would have but for
action by the corporation or (II) is an affiliate or associate of the
corporation and so continued (or so would have continued but for action by the
corporation) to be the owner of 15% or more of the outstanding voting stock of
the corporation at any time within the 3-year period immediately prior to the
date on which it is sought to be determined whether such a person is an
interested stockholder or (B) acquired said shares from a person described in
(A) above by gift, inheritance or in a transaction in which no consideration
was exchanged; or (y) any person whose ownership of shares in excess of the
15% limitation set forth herein in the result of action taken solely by the
corporation provided that such person shall be an interested stockholder if
thereafter such person acquires additional shares of voting stock of the
corporation, except as a result of further corporate action not caused,
directly or indirectly, by such person. For the purpose of determining whether
a person is an interested stockholder, the voting stock of the corporation
deemed to be outstanding shall include stock deemed to be owned by the person
through application of paragraph (8) of this subsection but shall not include
any other unissued stock of such corporation which may be issuable pursuant to
any agreement, arrangement or understanding, or upon exercise of conversion
rights, warrants or options, or otherwise.
(6) "person" means any individual, corporation, partnership,
unincorporated association or other entity.
(7) "Stock" means, with respect to any corporation, capital stock and,
with respect to any other entity, any equity interest.
(8) "Voting stock" means, with respect to any corporation, stock of
any class or series entitled to vote generally in the election of directors
and, with respect to any entity that is not a corporation, any equity interest
entitled to vote generally in the election of the governing body of such
entity.
(9) "owner" including the terms "own" and "owned" when used with
respect to any stock means a person that individually or with or through any
of its affiliates or associates:
(i) beneficially owns such stock, directly or indirectly; or
(ii) has (A) the right to acquire such stock (whether such right is
exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding, or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise; provided, however,
that a person shall not be deemed the owner of stock tendered pursuant to a
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tender or exchange offer made by such person or any of such person's
affiliates or associates until such tendered stock is accepted for purchase or
exchange; or (B) the right to vote such stock pursuant to any agreement,
arrangement or understanding; provided, however, that a person shall not be
deemed the owner of any stock because of such person's right to vote such
stock if the agreement, arrangement or understanding to vote such stock arises
solely from a revocable proxy or consent given in response to a proxy or
consent solicitation made to 10 or more persons; or
(iii) has any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting (except voting pursuant to a revocable proxy or
consent as described in item (B) of clause (ii) of this paragraph), or
disposing of such stock with any other person that beneficially owns, or whose
affiliates or associates beneficially own, directly or indirectly, such stock.
(d) No provision of a certificate of incorporation or bylaw shall
require, for any vote of stockholders required by this section a greater vote
of stockholders than that specified in this section.
(e) The Court of Chancery is hereby vested with exclusive jurisdiction
to hear and determine all matters with respect to this section.
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SCHEDULE D
SECTION 262
DELAWARE GENERAL CORPORATION LAW
DISSENTERS' RIGHTS
262 DISSENTERS' RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has neither voted in
favor of the merger or consolidation nor consented thereto in writing pursuant
to ss.228 of this title shall be entitled to an appraisal by the Court of
Chancery of the fair value of his shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock
corporation and also a member of record of a nonstock corporation; the words
"stock" and "share" mean and include what is ordinarily meant by those words
and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Dissenters' rights shall be available for the shares of any class
or series of stock of a constituent corporation in a merger or consolidation
to be effected pursuant to Section 251 (other than a merger effected pursuant
to subsection (g) of Section 251), Section 252, Section 254, Section 257,
Section 258, Section 263 or Section 264 of
this title:
(1) Provided, however, that no dissenters' rights under this
section shall be available for the shares of any class or series of
stock which stock, or depository receipts in respect thereof, at the
record date fixed to determine the stockholders entitled to receive
notice of and to vote at the meeting of stockholders to act upon the
agreement of merger or consolidation, were either (i) listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or (ii) held of record by more
than 2,000 holders; and further provided that no dissenters' rights
shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the holders of the surviving corpora tion as
provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection,
dissenters' rights under this section shall be available for the
shares of any class or series of stock of a constituent
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corporation if the holders thereof are required by the terms of an
agreement of merger or consolidation pursuant to ss.ss.251, 252, 254,
257, 258, 263 and 264 of this title to accept for such stock anything
except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository
receipts in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock or depository
receipts at the effective date of the merger or consolidation will be
either listed on a national securities exchange or designated as a
national market system security on an interdealer quotation system by
the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.
and b. of this paragraph; or
d. Any combination of the shares of stock,
depository receipts and cash in lieu of fractional shares or
fractional depository receipts described in the foregoing
subparagraph a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under 253 of this title is not owned
by the parent corporation immediately prior to the merger, dissenters'
rights shall be available for the shares of the subsidiary Delaware
corporation.
(c) Any corporation may provide in its certificate of incorporation
that dissenters' rights under this section shall be available for the shares
of any class or series of its stock as a result of an amendment to its
certificate of incorporation, any merger or consolidation in which the
corporation is a constituent corporation or the sale of all or substantially
all of the assets of the corporation. If the certificate of incorporation
contains such a provision, the procedures of this section, including those
set forth in subsections (d) and (e) of this section, shall apply as nearly
as is practicable.
(d) Dissenters' rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which dissenters' rights
are provided under this section is to be submitted for approval at a meeting
of stockholders, the corporation, not less than 20 days prior to the
meeting, shall notify each of its stockholders who was such on the record
date for such meeting with respect to shares for which dissenters' rights
are available pursuant to subsections (b) or (c) hereof that dissenters'
rights are available for any or all of the shares of the constituent
corporations, and shall include in such notice a copy of this section. Each
stockholder electing to demand the appraisal of his shares shall deliver to
the
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corporation, before the taking of the vote on the merger or consolidation, a
written demand for appraisal of his shares. Such demand will be sufficient
if it reasonably informs the corporation of the identity of the stockholder
and that the stockholder intends thereby to demand the appraisal of his
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must do
so by a separate written demand as herein provided. Within 10 days after the
effective date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent corporation
who has complied with this subsection and has not voted in favor of or
consented to the merger or consolidation of the date that the merger or
consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to ss.228 or
ss.253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to dissenters' rights of the
approval of the merger or consolidation and that dissenters' rights are
available for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy of this
section; provided that, if the notice is given on or after the effective
date of the merger or consolidation, such notice shall be given by the
surviving or resulting corporation to all such holders of any class or
series of stock of a constituent corporation that are entitled to
dissenters' rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders of
the effective date of the merger or consolidation. Any stockholder entitled
to dissenters' rights may, within twenty days after the date of mailing of
such notice, demand in writing from the surviving or resulting corporation
the appraisal of such holder's shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of such
holder's shares. If such notice did not notify stockholders of the effective
date of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the
merger or consolidation notifying each of the holders of any class or series
of stock of such constituent corporation that are entitled to dissenters'
rights of the effective date of the merger or consolidation or (ii) the
surviving or resulting corporation shall send such a second notice to all
such holders on or within 10 days after such effective date; provided,
however, that if such second notice is sent more than 20 days following the
sending of the first notice, such second notice need only to be sent to each
stockholder who is entitled to dissenters' rights and who has demanded
appraisal of such holder's shares in accordance with this subsection. An
affidavit of the secretary or assistant secretary or of the transfer agent
of the corporation that is required to give either notice that such notice
has been given shall, in the absence of fraud, be prima facie evidence of
the facts stated therein. For purposes of determining the stockholders
entitled to receive such notice, each constituent corporation may fix, in
advance, a record date that shall be not more than 10 days prior to the date
the notice is given; provided that, if the notice is given on or after
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the effective date of the merger or consolidation, the record date shall be
the effective date. If no record date is fixed and the notice is given prior
to the effective date, the record date shall be the close of business on the
next day preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who
has complied with subsections (a) and (d) hereof and who is otherwise entitled
to dissenters' rights, may file a petition to the Court or Chancery demanding
a determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the
merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate number of
shares not voted in favor of the merger or consolidation and with respect to
which demands for appraisal have been received and the aggregate number of
holders of such shares. Such written statement shall be mailed to the
stockholder within 10 days after his written request for such a statement is
received by the surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal under
subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of
a copy thereof shall be made upon the surviving or resulting corporation,
which shall within 20 days after such service file in the office of the
Register in Chancery in which the petition was filed a duly verified list
containing the names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the value of their
shares have not been reached by the surviving or resulting corporation. If the
petition shall be filed by the surviving or resulting corporation, the
petition shall be accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the time and place
fixed for the hearing of such petition by registered or certified mail to the
surviving or resulting corporation and to the stockholders shown on the list
at the addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for
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notation thereon of the pendency of the appraisal proceedings; and if any
stockholder fails to comply with such direction, the Court may dismiss the
proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court
may, in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on
the list filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted his certificates of stock
to the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that he is not entitled to
dissenters' rights under this section.
(i) The Court shall direct the payment of the fair value of the
shares, together with interest, if any, by the surviving or resulting
corporation to the stockholders entitled thereto. Interest may be simple or
compound, as the Court may direct. Payment shall be so made to each such
stockholder, in the case of holders of uncertified stock forthwith, and the
case of holders of shares represented by certificates upon the surrender to
the corporation of the certificates representing such stock. The Court's
decree may be enforced as other decrees in the Court of Chancery may be
enforced, whether such surviving or resulting corporation be a corporation of
this State or of any state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded his dissenters' rights as provided in
subsection (d) of this section shall be entitled to vote such stock for any
purpose or to receive payment of dividends or other distributions on the stock
(except dividends or other distributions payable to stockholders of record at
a date which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal
-94-
<PAGE>
of his demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any stockholder
without the approval of the Court, and such approval may be conditioned upon
such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized
and unissued shares of the surviving or resulting corporation.
-95-
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for Shares and any other
required documents should be sent or delivered by each ReadRite Stockholder or
his or her broker, dealer, commercial bank, trust company or other nominee to
the Exchange Agent at one of its addresses set forth below.
THE EXCHANGE AGENT:
IBJ Schroder Bank & Trust Company
FACSIMILIE:
(212) 858-2611
CONFIRM BY TELEPHONE:
(212) 858-2103
By Hand or Overnight Delivery By Mail
1 State Street P.O. Box 84
New York, New York 10004 Bowling Green Station
Attn: Reorganization Department New York, New York 10274-0084
Securities Processing Window SC-1
(for Eligible Institutions only)
Any questions or requests for assistance or additional copies of the
Prospectus, the Letter of Transmittal and the Notice of Guaranteed Delivery
may be directed to the Information Agent or the Dealer Manager at their
respective telephone numbers and locations listed below. You may also contact
your local broker, commercial bank, trust company or nominee for assistance
concerning the Offer.
The Information Agent for the Offer is:
MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
Toll Free (800) 322-2885
The Dealer Manager for the Offer is:
GLEACHER NATWEST INC.
660 Madison Avenue
New York, New York 10021
(212) 418-4200 (call collect)
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Certificate of Incorporation, as amended, contains a
provision limiting the personal liability of directors to the Registrant or
its stockholders for monetary damages for breach of fiduciary duty as a
director. This provision is intended to eliminate the risk that a director
might incur personal liability to the Registrant or its stockholders for
breach of the duty of care. Such provision absolves directors of liability for
negligence in the performance of their duties, including gross negligence.
Directors remain liable for breaches of the duty of loyalty to the Registrant
and its stockholders as well as for acts or omissions not taken in good faith
or which involve intentional misconduct or a knowing violation of law and
transactions from which a director derived improper personal benefit. In
addition, the Registrant's Certificate of Incorporation does not absolve
directors of liability for unlawful dividends or stock repurchases or
redemptions to which a negligence standard presently applied under the
Delaware General Corporation Law (the "DGCL"). Also, there may be certain
liabilities, such as those under the United States federal securities laws or
other state or federal laws, which a court may hold are unaffected by the
Certificate of Incorporation.
The Registrant's Amended and Restated By-laws provide that each person
who is or was a director, legal representative, officer or employee of the
Registrant (or was serving at the request of the Registrant as a director,
legal representative, officer or employee of another entity), will be
indemnified and held harmless by the Registrant to the fullest extent
authorized by the DGCL (as it may be amended to allow for broader
indemnification rights) from any liability incurred as a result of such
service. Among other things, the indemnification provisions provide
indemnification for officers and directors against liabilities for judgments
in and settlements of lawsuits and other proceedings and for the advance and
payment of fees and expenses reasonably incurred by the director or officer in
defense of any such lawsuit or proceeding. The Registrant's Bylaws provide
that the rights to indemnification and the payment of expenses conferred
therein will not be exclusive of any other right that any person may have or
acquire under any statute, provision of the Certificate of Incorporation,
bylaw, agreement, vote of stockholders or disinterested directors or
otherwise. The Registrant's Bylaws also provide that the Registrant shall
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Registrant against any liability asserted against
such person and incurred by such person in any such capacity, whether or not
the Registrant would have the power to indemnify such person against such
liability under the DGCL. The Registrant maintains this insurance coverage for
its officers and directors as well as insurance coverage to reimburse the
Company for potential costs of its corporate indemnification of officers and
directors.
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<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
3.1 Certificate of Incorporation, as amended (incorporated by reference to
an exhibit filed with the Registrant's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1989).
3.2 Amended and Restated Bylaws (incorporated by reference to an exhibit
filed with the Registrant's Form 8-K, dated October 19, 1988).
5.1 Opinion of Sheppard, Mullin, Richter & Hampton LLP.**
8.1 Tax opinion of Sheppard, Mullin, Richter & Hampton LLP**
23.1 Consent of Arthur Andersen LLP.
23.2 Consents of Sheppard, Mullin, Richter & Hampton LLP (included in
Exhibit 5.1 and Exhibit 8.1).**
24.1 Powers of Attorney.
99.1 Form of Letter of Transmittal and instructions thereto.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Applied Magnetics Nominees.
99.4 Form of Letter to Clients for use by Broker, Dealers, Commercial
Banks, Trust Companies and Other Applied Magnetics Nominees.
99.5 Form of Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
99.6 Form of Summary Advertisement.
-----------
**To be filed by amendment
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<PAGE>
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
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<PAGE>
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred by a director, officer or controlling person
of the Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11 or 13 of this Form within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, Applied
Magnetics, THE REGISTRANT, CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE
THAT IT MEETS ALL THE REQUIREMENTS FOR FILING ON FORM S-4 AND HAS DULY CAUSED
THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNDER DULY AUTHORIZED, IN THE CITY OF GOLETA, STATE OF CALIFORNIA, ON THE
24TH DAY OF February, 1997.
Applied Magnetics, INC.
(Registrant)
By: /s/ Craig D. Crisman
CRAIG D. CRISMAN,
CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE OFFICER
Each person whose signature appears below appoints Craig D. Crisman
and Peter T. Altavilla and each of them, any of whom may act without the
joinder of the other, as his or her true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him or her and
in his or her name, place and stead, in any and all capacities to sign any and
all amendments (including post-effective amendments) to this Registration
Statement on Form S-4 and to file the same, with all exhibits thereto and all
other documents in connection therewith, with the Securities and Exchange
Commission, granting upon said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitute or substitutes may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Craig D. Crisman Chairman of the Board, February 24,
Craig D. Crisman Chief Executive Officer 1997
and Director (Principal
Executive Officer and
Principal Financial
Officer)
/s/ Peter T. Altavilla Corporate Controller February 24,
Peter T. Altavilla Peter T. Altavilla 1997
(Principal Accounting
Officer)
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<PAGE>
/s/ Harold R. Frank Chairman Emeritus and February 24,
Harold R. Frank Director 1997
/s/ R.C. Mercure, Jr. Director February 24,
R.C. Mercure, Jr. 1997
/s/Herbert M. Dwight, Jr. Director February 24,
Herbert M. Dwight, Jr. 1997
/s/ Jerry E. Goldress Director February 24,
Jerry E. Goldress 1997
-102-
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE NO.
----------- ----------- --------
3.1 Certificate of Incorporation, as amended
(incorporated by reference to an exhibit
filed with the Registrant's Quarterly
Report on Form 10-Q for the quarter ended
March 31, 1989).
3.3 Amended and Restated Bylaws (incorporated
by reference to an exhibit filed with the
Registrant's Form 8-K, dated October 19,
1988).
5.1 Opinion of Sheppard, Mullin, Richter &
Hampton LLP.**
8.1 Tax opinion of Sheppard, Mullin, Richter
& Hampton LLP.**
23.1 Consent of Arthur Andersen LLP. 104
23.2 Consents of Sheppard, Mullin, Richter &
Hampton LLP (included in Exhibit 5.1 and
Exhibit 8.1).**
24.1 Powers of Attorney.
99.1 Form of Letter of Transmittal and
instructions thereto. 106
99.2 Form of Notice of Guaranteed Delivery. 120
99.3 Form of Letter to Brokers, Dealers,
Commercial Banks, Trust Companies and
Other Applied Magnetics Nominees. 123
99.4 Form of Letter to Clients for use by
Broker, Dealers, Commercial Banks, Trust
Companies and Other Applied Magnetics
Nominees. 126
99.5 Form of Guidelines for Certification of
Taxpayer Identification Number on
Substitute Form W-9. 128
99.6 Form of Summary Advertisement. 132
-----------
**To be filed by amendment
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<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this Registration Statement of our report dated
December 12, 1996, incorporated by reference in Applied Magnetics
Corporation's Form 10-K for the year ended September 28, 1996, and to all
references to our Firm included in this Registration Statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Los Angeles, California
February 23, 1997
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<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
{LOGO}
{LETTERHEAD}
Dear Read-Rite Corporation Shareowner:
This Letter of Transmittal enables you to exchange each of your shares
of common stock, $.0001 par value, of Read-Rite Corporation for 0.679 of a
share of common stock, $.10 par value, of Applied Magnetics Corporation
("Offer"). Please follow the instructions in this letter in order to
exchange your shares and receive the benefits of our Offer. Simply complete
and sign pages 2 and 3 and return your certificate(s) in the enclosed
envelope.
Our Offer will expire at 5:00 p.m., Eastern standard time, on
________, 1997 (the "Expiration Date") unless extended. Shares which are
tendered may be withdrawn at any time prior to the Expiration Date. For
further information or assistance regarding our Offer please call our
representatives listed on the back.
Thank you for your time and support.
Sincerely,
/s/ Craig D. Crisman
Craig D. Crisman
Chairman of the Board and
Chief Executive Officer
-1-
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<PAGE>
IN ORDER TO TENDER YOUR SHARES, SIMPLY:
1. SIGN BY THE "X" BELOW
2. COMPLETE THE SUBSTITUTE FORM W-9 ON PAGE 3.
PLEASE SIGN HERE.
Signature(s) of Stockholder(s)
X ------------------------Dated: , 19
X ------------------------Dated: , 1997
(Must be signed by registered holder(s) exactly as name(s) appear(s) on stock
certificate(s) or on a security position listing or by person(s) authorized to
become registered holder(s) by certificate(s) and documents transmitted
herewith. If signature is by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, please provide the following information and see
Instruction 5.)
I CERTIFY THAT I HAVE READ THE INSTRUCTIONS ENCLOSED WITH AND CONSTITUTING A
PART OF THIS LETTER OF TRANSMITTAL AND THAT I COMPLY WITH THE STOCKHOLDER
REPRESENTATION INCLUDED WITH SUCH INSTRUCTIONS.
Name(s) _______________________________________________________________
_______________________________________________________________________
(PLEASE PRINT) Capacity (Full Title)
________________________________________________________________________
Address ________________________________________________________________
City/State/Zip Code
________________________________________________________________________
________________________________________________________________________
(AREA CODE AND TELEPHONE NUMBER)
COMPLETE THE BOX BELOW ONLY IF YOU WISH TO TENDER LESS THAN ALL THE SHARES
EVIDENCED BY YOUR CERTIFICATE(S).
CERTIFICATES AND SHARES TENDERED
(ATTACH ADDITIONAL LIST IF NECESSARY)
Total Number of Number
Certificate Shares Evidenced of Shares
Number(s)* by Certificate(s)* Tendered**
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Total Shares________________________________________________________
* Do not complete if delivering shares by book-entry transfer.
** You must indicate if you are tendering less than all Shares evidenced by
any certificate(s) delivered to the Exchange Agent. See Instruction 4.
-2-
-107-
<PAGE>
THIS PAGE MUST BE COMPLETED BY ALL TENDERING STOCKHOLDERS. PLEASE FILL IN YOUR
SOCIAL SECURITY NUMBER AND SIGN BELOW. Please see Instruction 9 for additional
information
PAYER'S NAME: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX A___________
FORM W-9 RIGHT AND CERTIFY BY SIGNING AND DATING BELSocial
Security Number(s)
OR
Employer Identification
Number(s)
PART 2--Certification--Under penalties of perjury, I
certify that:
(1) the number shown on this form is my Part 3--
correct Taxpayer Identification Number Awaiting TIN
(or I am waiting for a number to be o
issued to me) and
(2) I am not subject to backup withholding because (a) I
am exempt from backup withholding, or (b) I have not
been notified by the Internal Revenue Service
("IRS") that I am subject to backup withholding as a
result of a failure to report all interest or
dividends or (c) the IRS has notified me that I am
no longer subject to backup withholding.
Part 4--
Exempt TIN []
DEPARTMENT OF THE Certification Instructions--You must cross out item (2) in
Part 2 above if you have TREASURY INTERNAL been notified by the IRS that you
are subject to backup withholding because of REVENUE SERVICE underreporting
interest or dividends on your tax return. However, if after being notified by
the IRS that you were subject to backup withholding you received another
PAYER'S REQUEST FOR notification from the IRS stating that you are no longer
subject to backup TAXPAYER withholding, do not cross out item (2). If you are
exempt from backup withholding, IDENTIFICATION check the box in Part 4 above.
NUMBER (TIN) SIGNATURE DATE , 1996
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3
OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number to the
Depositary, 31% of all reportable payments made to me will be withheld, but
will be refunded if I provide a certified taxpayer identification number
within 60 days. , 1996 Signature Date NOTE:FAILURE TO COMPLETE AND RETURN THIS
SUBSTITUTE FORM W-9 MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS
MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR
ADDITIONAL INFORMATION.
-3-
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<PAGE>
Complete the following certification ONLY if you checked the box in Part 3 of
Substitute Form W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer Identification Number has
not been issued to me, and either (i) I have mailed or delivered an
application to receive a Taxpayer Identification Number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(ii) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a Taxpayer Identification Number within 60
days, 31% of all reportable payments made to me thereafter will be withheld
until I provide a number.
SIGNATURE _______________________________________________
DATE ____________________________________________________
NAME (PLEASE PRINT)______________________________________
IMPORTANT TAX INFORMATION
Certain Stockholders (including, among others, all corporations and
certain foreign individuals) are not subject to backup withholding. In order
for a foreign individual to qualify as an exempt recipient, that Stockholder
must submit a Form W-8, signed under penalties of perjury, attesting to that
individual's exempt status. A Form W-8 can be obtained from the Exchange
Agent. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional instructions.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the Internal Revenue Service.
-4-
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<PAGE>
OPTIONAL
If you would like shares of Applied Magnetics Common Stock and the check to be
issued for cash in lieu of fractional shares, if any, of Applied Magnetics
Common Stock to be delivered to a different address, complete the top box
below.
If you would like shares of Applied Magnetics Common Stock and the check
to be issued for cash in lieu of fractional shares, if any, of Applied
Magnetics Common Stock to be issued in a different name, complete the bottom
box below. You must include a signature guarantee if you complete the box at
the bottom of the page. The signature guarantee process is more fully
described in Instructions 1 and 5.
SPECIAL DELIVERY INSTRUCTIONS (See Instructions 1, 6 and 7)
To be completed ONLY if certificate(s) for the Applied Magnetics Common
Stock and the check to be issued for cash in lieu of fractional shares, if
any, of Applied Magnetics Common Stock are to be sent to someone other than
the undersigned, or to the undersigned at an address other than that shown on
the address label. Mail Applied Magnetics Common Stock and the check to be
issued for cash in lieu of fractional shares, if any, of Applied Magnetics
Common Stock to:
Name ______________________________________________________
(PLEASE TYPE OR PRINT)
Address _____________________________________________________
City/State/Zip Code _________________________________________
-5-
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<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 1, 5, 6 and 7)
To be completed ONLY if certificate(s) for the Applied Magnetics Common
Stock and the check to be issued for cash in lieu of fractional shares, if
any, of Applied Magnetics Common Stock are to be issued in the name of someone
other than those shown on your certificate(s). Issue Applied Magnetics Common
Stock and the check to be issued for cash in lieu of fractional shares, if
any, of Applied Magnetics Common Stock to:
Name _______________________________________________________
(PLEASE TYPE OR PRINT)
Address ____________________________________________________
City/State/Zip Code ________________________________________
(SOCIAL SECURITY NUMBER OR TAX IDENTIFICATION NUMBER)
________________________________
GUARANTEE OF SIGNATURE(S)
Authorized Signature _______________________________________
Name _______________________________________________________
(PLEASE TYPE OR PRINT)
Address ____________________________________________________
City/State/Zip Code ________________________________________
Name of Firm ________________________________ Dated: _______, 1997
-6-
-111-
<PAGE>
THE INFORMATION AGENT FOR THE OFFER IS:
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
Toll Free (800) 322-2885
THE EXCHANGE AGENT FOR THE OFFER IS:
IBJ Schroder Bank & Trust Company
FACSIMILE:
(212) 858-2611
CONFIRM BY TELEPHONE:
(212) 858-2103
BY MAIL: BY HAND OR OVERNIGHT DELIVERY:
P.O. Box 84 1 State Street
Bowling Green Station New York, New York 10004
New York, New York 10274-0084 Attn.: Reorganization Department
Attn.: Reorganization Department Securities Processing Window SC-1
(FOR ELIGIBLE INSTITUTIONS ONLY):
The Dealer Manager for the Offer is:
GLEACHER NATWEST INC.
660 Madison Avenue
New York, New York 10021
-7-
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<PAGE>
[LOGO]
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required on the
Letter of Transmittal in cases where:
(a) the Letter of Transmittal is signed by the registered holder(s)
of the Shares (which term, for purposes of this document, shall
include any participant in one of the Book-Entry Transfer
Facilities whose name appears on a security position listing as
the owner of Shares) tendered with the Letter of Transmittal and
such holder(s) have not completed the instruction entitled
"Special Issuance Instructions" on the Letter of Transmittal,
or
(b) such Shares are tendered for the account of an Eligible
Institution (as defined below).
Otherwise, all signatures on the Letter of Transmittal must be guaranteed
by a financial institution (including most banks, savings and loan
associations, brokerage houses and credit unions) which is a participant in
the Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(an "Eligible Institution"). See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES OR BOOK-ENTRY
CONFIRMATIONS. The Letter of Transmittal is to be used either:
(a) if certificates are to be forwarded with the Letter of
Transmittal, or
(b) if tenders are to be made pursuant to the procedures for
tender by book-entry transfer set forth in "The
Offer--Procedure for Tendering" in the Prospectus (as defined
herein), unless an Agent's Message is utilized.
Certificates for all physically tendered Shares ("Share Certificates"),
or confirmation of any book-entry transfer into the Exchange Agent's account
at one of the Book-Entry Transfer Facilities of Shares tendered by book-entry
transfer, as well as the Letter of Transmittal or facsimile thereof, properly
completed and duly executed with any required signature guarantees, and any
other documents required by the Letter of Transmittal, must be received by the
Exchange Agent at one of its addresses set forth herein on or prior to the
Expiration Date (as defined in the Prospectus).
Stockholders whose certificates are not immediately available or who
cannot deliver their certificates and all other required documents to the
Exchange Agent on or prior to the Expiration Date or who cannot complete the
procedures for book-entry transfer on a timely basis may nevertheless tender
their Shares by properly completing and duly executing a Notice of Guaranteed
Delivery pursuant to the guaranteed delivery procedure set forth in "The
Offer-Procedure for Tendering" in the Prospectus.
-8-
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<PAGE>
In order to utilize the guaranteed delivery procedure: (i) your tender
must be made by or through an Eligible Institution; (ii) a properly completed
and duly executed Notice of Guaranteed Delivery substantially in the form made
available by Applied Magnetics must be received by the Exchange Agent on or
prior to the Expiration Date; and (iii) the Share Certificates for all
tendered Shares (or a confirmation of a book-entry transfer of such securities
into the Exchange Agent's account at a Book-Entry Transfer Facility of Shares
tendered by book-entry transfer), in proper form for transfer, together with a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) with any required signature guarantees (or, in the case of a
book-entry delivery, an Agent's Message) and all other documents required by
the Letter of Transmittal, must be received by the Exchange Agent within three
New York Stock Exchange, Inc. trading days after the date of execution of such
Notice of Guaranteed Delivery.
IF SHARE CERTIFICATES ARE FORWARDED SEPARATELY TO THE EXCHANGE AGENT, A
PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL MUST ACCOMPANY EACH
SUCH DELIVERY.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS
BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. THE REPLACEMENT COST OF CERTIFICATES FOR SECURITIES IS GENERALLY
2% OF MARKET VALUE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE
TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be accepted. All tendering Stockholders, by execution
of the Letter of Transmittal (or facsimile thereof), waive any right to
receive any notice of the acceptance of their Shares for exchange.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
piece of paper and returned with the Letter of Transmittal.
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY
BOOKENTRY TRANSFER). If fewer than all the Shares evidenced by any certificate
submitted are to be tendered, fill in the number of Shares which are to be
tendered in the box on page 2 of the Letter of Transmittal. In such cases, new
certificate(s) for the remainder of the Shares that were evidenced by your old
certificate(s) will be sent to you, unless otherwise indicated in the box
marked "Special Delivery Instructions" on page 4 of the Letter of Transmittal,
as soon as practicable after the Expiration Date. All Shares represented by
certificates delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
the Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered, the signature must correspond with the name(s) as written on the
face of the certificates without alteration, enlargement or any change
whatsoever.
If any of the Shares tendered are owned of record by two or more joint
owners, all such owners must sign the Letter of Transmittal.
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If you wish to tender Shares and have more than one certificate and those
certificates are registered in more than one name, it will be necessary to
complete, sign and submit as many separate Letters of Transmittal as there are
different registrations of certificates. If the Letter of Transmittal or any
certificates or stock powers are signed by trustees, executors,
administrators, attorneys-in-fact, officers of corporations or others acting
in a fiduciary or representative capacity, such persons should so indicate
when signing, and proper evidence satisfactory to Applied Magnetics of their
authority so to act must be submitted. If the Letter of Transmittal is signed
by the registered holder(s) of the Shares transmitted with the Letter of
Transmittal, no endorsements of certificates or separate stock powers are
required unless Applied Magnetics Common Stock or certificates for Shares not
tendered or accepted are to be issued in the name of a person other than the
registered holder(s). Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
If the Letter of Transmittal is signed by a person other than the
registered holder of the certificate(s) listed, the certificate(s) must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name or names of the registered holder or holders appear on the
certificates(s). Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
6. STOCK TRANSFER TAXES. Applied Magnetics will pay or cause to be paid
any stock transfer taxes with respect to the transfer and sale of Shares to it
or its order pursuant to the Offer. Applied Magnetics will not pay or cause to
be paid any stock transfer taxes to the extent such taxes are the obligation
solely of the transferor. If, however, delivery of the consideration in
respect of the Offer is to be made to, or (in the circumstances permitted
hereby) if certificates for Shares not tendered or accepted are to be
registered in the name of any person other than the registered holder, or if
tendered certificates are registered in the name of any person other than the
person(s) signing the Letter of Transmittal, the tendering holder must provide
satisfactory evidence of the payment of any applicable transfer taxes (whether
imposed on the registered holder or such person) payable on account of the
transfer to such person prior to the delivery of the consideration pursuant to
the Offer.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THE LETTER OF
TRANSMITTAL.
7. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If certificates for
Applied Magnetics Common Stock and the check to be issued for cash in lieu of
fractional shares, if any, of Applied Magnetics Common Stock are to be issued
in the name of a person other than the signer of the Letter of Transmittal or
if certificates for Applied Magnetics Common Stock and the check to be issued
for cash in lieu of fractional shares, if any, of Applied Magnetics Common
Stock are to be mailed to someone other than the signer of the Letter of
Transmittal or to an address other than that shown on the address label, the
boxes marked "Special Issuance Instructions" or "Special Delivery
Instructions" on page 4 of the Letter of Transmittal should be completed.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions or requests
for assistance may be directed to, or additional copies of the Prospectus, the
Letter of Transmittal, the Notice of Guaranteed Delivery and other tender
offer materials may be obtained from, the Information Agent or the Dealer
Managers at their respective telephone numbers and/or addresses set forth on
the back
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of the Letter of Transmittal or from your broker, dealer, commercial bank or
trust company.
9. SUBSTITUTE FORM W-9. Each tendering Stockholder is required to provide
the Exchange Agent with a correct Taxpayer Identification Number ("TIN"),
generally the Stockholder's social security or federal employer identification
number, on Substitute Form W-9 on page 3 of the Letter of Transmittal. If a
Stockholder fails to provide a TIN to the Exchange Agent, such Stockholder may
be subject to a $50 penalty imposed by the Internal Revenue Service. In
addition, payments of cash in lieu of fractional shares of Applied Magnetics
Common Stock that are made to such Stockholder with respect to Shares accepted
pursuant to the Offer may be subject to backup withholding of 31%. The box in
Part 3 of the Substitute Form W-9 may be checked if the tendering Stockholder
has not been issued a TIN and has applied for a number or intends to apply for
a number in the near future. If the box in Part 3 is checked and the Exchange
Agent is not provided with a TIN within 60 days, the Exchange Agent will
withhold 31% of all payments of cash thereafter until a TIN is provided to the
Exchange Agent. The Stockholder is required to give the Exchange Agent the
social security number or employer identification number of the record owner
of the Shares or of the last transferee appearing on the stock powers attached
to, or endorsed on, the Shares. If the Shares are in more than one name or are
not in the name of the actual owner, consult the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional guidance on which number to report.
IMPORTANT: THE LETTER OF TRANSMITTAL OR A FACSIMILE COPY THEREOF
(TOGETHER WITH SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND
ALL OTHER REQUIRED DOCUMENTS) OR THE NOTICE OF GUARANTEED DELIVERY MUST BE
RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
STOCKHOLDER REPRESENTATION
The Stockholder executing the Letter of Transmittal, or on whose behalf
the Letter of Transmittal is executed (the "Tendering Stockholder"), delivers
to Applied Magnetics Corporation, a Delaware corporation ("Applied
Magnetics"), the above-described common shares, par value $.0001 per share
(the "Shares"), of Read-Rite Corporation, a Delaware corporation,
("Read-Rite"), pursuant to Applied Magnetics' offer to exchange 0.679 of a
share of common stock, par value $.10 per share, of Applied Magnetics (the
"Applied Magnetics Common Stock") for each outstanding Share, upon the terms
and subject to the conditions set forth in the Preliminary Prospectus dated
February __, 1997 (the "Prospectus"), receipt of which is acknowledged, and in
the Letter of Transmittal, including the Instructions and Stockholder
Representation (which, together with the Prospectus and any amendments thereto
constitute the "Offer").
Upon the terms and subject to the conditions of the Offer, subject to,
and effective upon, acceptance of the Shares tendered with the Letter of
Transmittal in accordance with the terms of the Offer, the Tendering
Stockholder sells, assigns and transfers to, or upon the order of, Applied
Magnetics, all right, title and interest in and to all of the Shares that are
being tendered and any and all Shares and other securities issued or issuable
in respect thereof on or after {commencement date}(collectively,
"Distributions"), and irrevocably constitutes and appoints the Exchange Agent
the true and lawful agent and attorney-in-fact of the Tendering Stockholder
with respect to such Shares (and any Distributions), with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to the full extent of the Tendering Stockholder's
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rights with respect to such Shares (and any Distributions), to (a) deliver
such Share Certificates (as defined herein) (and any Distributions) or
transfer ownership of such Shares (and any Distributions) on the account books
maintained by a Book-Entry Transfer Facility, together in either such case
with all accompanying evidences of transfer and authenticity, to or upon the
order of Applied Magnetics, (b) present such Shares (and any Distributions)
for transfer on the books of Read-Rite and (c) receive all benefits and
otherwise exercise all rights of beneficial ownership of such Shares (and any
Distributions), all in accordance with the terms and the conditions of the
Offer.
The Tendering Stockholder irrevocably appoints the designees of
Applied Magnetics, and each of them, the attorneys-in-fact and proxies of the
Tendering Stockholder, each with full power of substitution, to vote in such
manner as each such attorney and proxy or any substitute thereof shall deem
proper in the sole discretion of such attorney-in-fact and proxy or such
substitute, and otherwise act (including pursuant to written consent) with
respect to all the Shares tendered (and any Distributions) which have been
accepted by Applied Magnetics prior to the time of such vote or action, which
the Tendering Stockholder is entitled to vote at any meeting of Stockholders
(whether annual or special and whether or not an adjourned meeting), of
ReadRite or otherwise. This proxy and power of attorney is coupled with an
interest in the Shares and is irrevocable and is granted in consideration of,
and is effective upon, the acceptance of such Shares (and any Distributions)
by Applied Magnetics in accordance with the terms of the Offer. Such
acceptance for exchange shall revoke any other proxy granted by the Tendering
Stockholder at any time with respect to such Shares (and any Distributions)
and no subsequent proxies will be given (or, if given, will not be deemed
effective) with respect thereto by the Tendering Stockholder. The Tendering
Stockholder understands that in order for Shares to be deemed validly
tendered, immediately upon Applied Magnetics' acceptance of such Shares (and
any Distributions) for exchange Applied Magnetics or its designee must be able
to exercise full voting rights with respect to such Shares (and any
Distributions).
The Tendering Stockholder represents and warrants that the Tendering
Stockholder has full power and authority to tender, sell, assign and transfer
the Shares (and any Distributions) tendered and that when the same are
accepted for exchange by Applied Magnetics, Applied Magnetics will acquire
good, marketable and unencumbered title thereto, free and clear of all liens,
restrictions, claims, charges and encumbrances, and the same will not be
subject to any adverse claim. The Tendering Stockholder will, upon request,
execute and deliver any additional documents deemed by the Exchange Agent or
Applied Magnetics to be necessary or desirable to complete the sale,
assignment and transfer of the Shares (and any Distributions) tendered.
All authority conferred or agreed to be conferred pursuant to the Letter
of Transmittal shall not be affected by and shall survive the death or
incapacity of the Tendering Stockholder and any obligation of the Tendering
Stockholder hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the Tendering Stockholder. Subject
to the withdrawal rights set forth under "The Offer--Withdrawal Rights" in the
Prospectus, the tender of Shares made is irrevocable.
The Tendering Stockholder understands that tenders of Shares pursuant to
any one of the procedures described under "The Offer--Procedure for Tendering"
in the Prospectus and in the instructions to the Letter of Transmittal and
acceptance of such Shares will constitute a binding agreement between the
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Tendering Stockholder and Applied Magnetics upon the terms and subject to the
conditions set forth in the Offer.
Unless otherwise indicated on page 4 of the Letter of Transmittal under
"Special Issuance Instructions," please issue the shares of Applied Magnetics
Common Stock and the check to be issued for cash in lieu of fractional shares,
if any, of Applied Magnetics Common Stock in the name(s) of the registered
holder(s). Similarly, unless otherwise indicated on page 4 of the Letter of
Transmittal under "Special Delivery Instructions," please mail the Applied
Magnetics Common Stock and the check to be issued for cash in lieu of
fractional shares, if any, of Applied Magnetics Common Stock to the address of
the registered holder(s). The Tendering Stockholder recognizes that Applied
Magnetics has no obligation, pursuant to the Special Issuance Instructions, to
transfer any Shares from the name of the registered holder thereof if Applied
Magnetics does not accept any of the Shares so tendered.
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The Information Agent for the Offer is:
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
Toll Free (800) 322-2885
The Exchange Agent for the Offer is:
IBJ Schroder Bank & Trust Company
FACSIMILE:
(212) 858-2611
CONFIRM BY TELEPHONE:
(212) 858-2103
BY MAIL: BY HAND OR OVERNIGHT DELIVERY:
P.O. Box 84 1 State Street
Bowling Green Station New York, New York 10004
New York, New York 10274-0084 Attn.: Reorganization Department
Attn.: Reorganization Department Securities Processing Window SC-1
(For Eligible Institutions only):
The Dealer Manager for the Offer is:
GLEACHER NATWEST INC.
660 Madison Avenue
New York, New York 10021
(212) 418-4200 (call collect)
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EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
OFFER TO EXCHANGE EACH OUTSTANDING SHARE OF COMMON STOCK
OF
READ-RITE CORPORATION
FOR
0.679 OF A SHARE OF COMMON STOCK
OF
APPLIED MAGNETICS CORPORATION
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
As set forth in "The Offer--Procedure for Tendering" in the Prospectus,
dated ________ , 1997 (the "Prospectus"), this form or one substantially
equivalent hereto must be used to accept the Offer (as defined below) if
certificates for shares of common stock, par value $.0001 per share (the
"Shares"), of Read-Rite Corporation, a Delaware corporation ("Read-Rite"), if
the certificates and all other required documents cannot be delivered to the
Exchange Agent prior to the Expiration Date (as defined in the Prospectus), or
if the procedure for book-entry transfer cannot be completed on a timely
basis. Such form may be delivered by hand or transmitted by telegram,
facsimile transmission or mail to the Exchange Agent, and must include a
guarantee by an Eligible Institution (as defined in the Prospectus). See "The
Offer--Procedure for Tendering" in the Prospectus.
The Exchange Agent for the Offer is:
IBJ Schroder Bank & Trust Company
FACSIMILE:
(212) 858-2611
CONFIRM BY TELEPHONE:
(212) 858-2103
BY MAIL: BY HAND OR OVERNIGHT DELIVERY:
P.O. Box 84 1 State Street
Bowling Green Station New York, New York 10004
New York, New York 10274-0084 Attn.: Reorganization Department
Attn.: Reorganization Department Securities Processing Window SC-1
(For Eligible Institutions only):
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A
LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN ELIGIBLE INSTITUTION
UNDER THE INSTRUCTIONS THERETO, SUCH GUARANTEE SIGNATURE MUST APPEAR IN THE
APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
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Ladies and Gentlemen:
The undersigned hereby tenders to Applied Magnetics Corporation, a
Delaware corporation, upon the terms and subject to the conditions set forth
in the Prospectus, dated ________, 1997, and in the related Letter of
Transmittal (which together constitute the "Offer"), receipt of which is
hereby acknowledged, the number of Shares shown in the Box below pursuant to
the guaranteed delivery procedures set forth under "The Offer--Procedure for
Tendering" in the Prospectus.
Number of Shares _________________
Certificate Nos.
(if available):_____________________
(CHECK ONE BOX IF SHARES WILL BE TENDERED BY BOOK-ENTRY TRANSFER) o The
______________ Trust Company o __________________ Trust Company o
__________________ Trust Company
Account Number ___________________
Dated:_____________________________
Name(s) of Record Holder(s):_________
Please Print
Address(es):________________________
------------------------------------
Zip Code
Daytime Area Code and Tel. No.:
-----------------------------------
Signature(s):_______________________
------------------------------------
THE GUARANTEE BELOW MUST BE COMPLETED.
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a financial institution which is a participant in the
Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program,
guarantees (i) that the above named person(s) has (have) a "net long position"
in the Shares tendered hereby within the meaning of Rule 14e-4 under the
Securities Exchange Act of 1934, as amended, and (ii) to deliver to the
Exchange Agent, at one of its addresses set forth above, certificates
representing the Shares tendered hereby, in proper form for transfer, or
confirmation of book-entry transfer of such Shares into the Exchange Agent's
accounts at _______________ Depository Trust Company or the _______________
Depository Trust Company, in each case with delivery of a properly completed
and duly executed Letter of Transmittal (or a facsimile copy thereof), or an
Agent's Message (as defined in the Prospectus) in the case of book-entry
transfer, and any other documents required by the Letter of Transmittal,
within three (3) New York Stock Exchange, Inc. trading days of the date
hereof.
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Name of Firm: _____________________ Name:______________________________
Address:____________________________ Please Print
-----------------------------------
Zip Code Title:____________________________
Area Code and Tel No.:______________
----------------------------------- Dated:____________________________
Authorized Signature
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. SHARE
CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
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EXHIBIT 99.3
GLEACHER NATWEST INC.
660 Madison Avenue
New York, New York 10021
(212) 418-4200 (call collect)
OFFER TO EXCHANGE EACH SHARE OF OUTSTANDING COMMON STOCK
OF
READ-RITE CORPORATION
FOR 0.679 OF A SHARE OF COMMON STOCK
OF APPLIED MAGNETICS CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., EASTERN
STANDARD TIME, ON ___________, 1997, UNLESS THE OFFER IS EXTENDED (THE
"EXPIRATION DATE"). SHARES WHICH ARE TENDERED PURSUANT TO THE OFFER MAY BE
WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE.
To Brokers, Dealers, Commercial Bank Trust Companies and Other Applied
Magnetics Nominees: We have been appointed by Applied Magnetics Corporation, a
Delaware corporation ("Applied Magnetics"), to act as Dealer Manager in
connection with Applied Magnetics' offer to exchange 0.679 of a share of
common stock, par value $.10 per share, of Applied Magnetics (the "Applied
Magnetics Common Stock") for each outstanding common stock, par value $.0001
per share (each, a "Share" and collectively, the "Shares"), of Read-Rite
Corporation, a Delaware Corporation ("Read-Rite"), upon the terms and subject
to the conditions set forth in the Prospectus, dated _______________, 1997
(the "Prospectus"), and in the related Letter of Transmittal (which together
constitute the "Offer"), enclosed herewith.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THE MINIMUM TENDER
CONDITION, THE APPLIED MAGNETICS STOCKHOLDER CONSENT CONDITION, THE READ-RITE
STOCKHOLDER CONSENT CONDITION, THE DGCL CONDITION AND THE REGULATORY APPROVAL
CONDITION (IN EACH CASE AS DEFINED IN THE PROSPECTUS). SEE "THE
OFFER-CONDITION OF THE OFFER--MINIMUM TENDER CONDITION," "--APPLIED MAGNETICS
STOCKHOLDER CONSENT CONDITION" "--READ-RITE STOCKHOLDER CONSENT CONDITION."
"-DGCL CONDITION," "--REGULATORY APPROVAL CONDITION," AND "--CERTAIN OTHER
CONDITIONS OF THE OFFER" IN THE PROSPECTUS.
AS PART OF EACH EXCHANGE OF SHARES FOR APPLIED MAGNETICS COMMON
STOCK MADE PURSUANT TO THE OFFER AND THE MERGER, AND SUBJECT TO THE
SATISFACTION OF ALL THE CONDITIONS TO THE OFFER, APPLIED MAGNETICS AGREES, AND
SHALL COVENANT SEVERALLY WITH AND FOR THE BENEFIT OF EACH AND EVERY HOLDER OF
SHARES SO EXCHANGED, TO CAUSE THE MERGER TO OCCUR IN THE MANNER DESCRIBED IN
THE PRELIMINARY PROSPECTUS.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominees, or who hold
Shares registered in their own names, we are enclosing the following
documents:
1. Prospectus, dated _______________;
2. Letter of Transmittal (together with accompanying Substitute Form W-9)
to be used by holders of Shares in accepting the Offer and tendering
Shares;
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3. Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Shares are not immediately available, if time will not permit
all required documents to reach the Exchange Agent prior to the Expiration
Date (as defined in the Prospectus) or if the procedure for book-entry
transfer cannot be completed on a timely basis;
4. A letter which may be sent to your clients for whose accounts you hold
Shares registered in your name or in the name of your nominees, with space
provided for obtaining such clients' instructions with regard to the Offer;
5. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9; and
6. A return envelope addressed to the Exchange Agent. Applied Magnetics
will not pay any fees or commissions to any broker or dealer or any other
person (other than the fees of the Dealer Manager and the Information Agent as
described in the Prospectus) in connection with the solicitation of tenders of
Shares [and Rights] pursuant to the Offer. Applied Magnetics will, however,
upon request, reimburse you for customary mailing and handling expenses
incurred by you in forwarding the enclosed materials to your clients. Applied
Magnetics will pay or cause to be paid any stock transfer taxes with respect
to the transfer and sale of Shares to it or its order pursuant to the Offer,
except as otherwise provided in Instruction 6 of the Letter of Transmittal.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00
P.M., EASTERN STANDARD TIME, ON _________, 1997, UNLESS THE OFFER IS
EXTENDED.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal (or a facsimile thereof), with any required
signature guarantees, or an Agent's Message in connection with a book-entry
transfer, and any other required documents, should be sent to the Exchange
Agent, and certificates evidencing the tendered Shares should be delivered or
such Shares should be tendered by book-entry transfer, all in accordance with
the instructions set forth in the Letter of Transmittal and the Prospectus.
If holders of Shares wish to tender Shares, but it is impracticable for
them to forward their certificates or other required documents prior to the
Expiration Date, a tender may be effected by following the guaranteed delivery
procedures specified under "The Offer--Procedure for Tendering" in the
Prospectus.
Any inquiries you may have with respect to the Offer should be addressed
to the Dealer Manager or the Information Agent at their respective addresses
and telephone numbers set forth on the back cover page of the Prospectus.
Additional copies of the enclosed materials may be obtained from the
undersigned or by calling the Information Agent, MacKenzie Partners, Inc., at
(800) 322-2885 (toll free), or from brokers, dealers, commercial banks or
trust companies.
Very truly yours,
Gleacher NatWest Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE
YOU OR ANY OTHER PERSON AS AN AGENT OF APPLIED MAGNETICS, THE DEALER MANAGER,
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THE EXCHANGE AGENT OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF THE
FOREGOING, OR AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR USE
ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH
THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED
THEREIN.
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<PAGE>
EXHIBIT 99.4
OFFER TO EXCHANGE EACH OUTSTANDING SHARE OF COMMON STOCK
OF
READ-RITE CORPORATION
FOR
0.679 OF A SHARE OF COMMON STOCK
OF
APPLIED MAGNETICS CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., EASTERN
STANDARD TIME, ON ________, 1997 UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION
DATE"). SHARES WHICH ARE TENDERED PURSUANT TO THE OFFER MAY BE WITHDRAWN AT
ANY TIME PRIOR TO THE EXPIRATION DATE.
To Our Clients:
Enclosed for your consideration are the Prospectus dated ________, 1997
(the "Prospectus") and the related Letter of Transmittal (which together
constitute the "Offer") in connection with the offer by Applied Magnetics
Corporation, a Delaware corporation ("Applied Magnetics"), to exchange 0.679
of a shares of common stock, par value $.10 per share, of Applied Magnetics
(the "Applied Magnetics Common Stock") for each outstanding share of common
stock, par value $.0001 per share (each, a "Share" and collectively, the
"Shares"), of Read-Rite Corporation, a Delaware corporation, ("Read-Rite"),
upon the terms and subject to the conditions set forth in the Offer.
Stockholders whose certificates evidencing Shares ("Share Certificates")
are not immediately available or who cannot deliver their Share Certificates
and all other documents required by the Letter of Transmittal to the Exchange
Agent prior to the Expiration Date or who cannot complete the procedure for
delivery by book-entry transfer to the Exchange Agent's account at a BookEntry
Transfer Facility (as defined in "The Offer--Exchange of Shares; Delivery of
Applied Magnetics Common Stock" in the Prospectus) on a timely basis and who
wish to tender their Shares must do so pursuant to the guaranteed delivery
procedure described in "The Offer-- Procedure for Tendering" in the
Prospectus. See Instruction 2 of the Letter of Transmittal. Delivery of
documents to a Book-Entry Transfer Facility in accordance with the Book-Entry
Transfer Facility's procedures does not constitute delivery to the Exchange
Agent.
THIS MATERIAL IS BEING FORWARDED TO YOU AS THE BENEFICIAL OWNER OF SHARES
HELD BY US FOR YOUR ACCOUNT BUT NOT REGISTERED IN YOUR NAME. WE ARE THE HOLDER
OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN
BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS.
THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND
CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT.
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Accordingly, we request instructions as to whether you wish to have us
tender on your behalf any or all of the Shares held by us for your account,
upon the terms and subject to the conditions set forth in the Offer.
Please note the following:
1. Applied Magnetics is offering to acquire each outstanding Share in
exchange for 0.679 of a share of Applied Magnetics Common Stock.
2. The Offer is being made for all of the outstanding Shares.
3. The Offer and withdrawal rights will expire at 5:00 p.m., Eastern
standard time, on ______, 1997, unless the Offer is extended.
4. The Offer is conditioned upon, among other things, the Minimum Tender
Condition, the Applied Magnetics Stockholder Consent Condition, the DGCL
Condition and the Regulatory Approval Condition (in each case as defined in
the Prospectus). See "The Offer--Condition of the Offer--Minimum Tender
Condition," "--Applied Magnetics Stockholder Consent Condition," "--DGCL
Condition," "--Regulatory Approval Condition," and "--Certain Other Conditions
of the Offer" in the Prospectus.
5. Tendering Stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the transfer of Shares pursuant to the
Offer.
The Offer is made solely by the Prospectus, dated ____, 1997, and the
related Letter of Transmittal and any amendments thereto and is being made to
all holders of Shares. The Offer is not being made to, nor will tenders be
accepted from or on behalf of, holders of Shares in any jurisdiction in which
the making or acceptance thereof would not be in compliance with the laws of
such jurisdiction. However, Applied Magnetics may, in its sole discretion,
take such action as it may deem necessary to make the Offer in any such
jurisdiction and extend the Offer to holders of Shares in such jurisdiction.
In any jurisdiction where the securities, blue sky or other laws require the
Offer to be made by a licensed broker or dealer, the Offer shall be deemed to
be made on behalf of Applied Magnetics by Gleacher NatWest Inc. as Dealer
Manager, or one or more registered brokers or dealers licensed under the laws
of such jurisdiction.
If you wish to have us tender any or all of your Shares, please so
instruct us by completing, executing, detaching and returning to us the
instruction form contained in this letter. An envelope in which to return your
instructions to us is enclosed. If you authorize the tender of your Shares,
all such Shares will be tendered unless otherwise indicated in such
instruction form. PLEASE FORWARD YOUR INSTRUCTIONS TO US AS SOON AS POSSIBLE
TO ALLOW US AMPLE TIME TO TENDER SHARES ON YOUR BEHALF PRIOR TO THE EXPIRATION
OF THE OFFER.
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<PAGE>
EXHIBIT 99.5
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.
Social Security numbers have nine digits separated by two hyphens: I.E.,
000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: I.E., 00-0000000. The table below will help determine the
number to give the payer.
-----------------------------------------
Give the
For this type of account SOCIAL SECURITY
number of-
-----------------------------------------
1.An individual's account The individual
2.Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, any one of the
individuals(1)
3.Husband and wife (joint) The actual owner of the
account) account or, if joint funds,
either person(1)
4.Custodian account ofa The minor(2)
minor (Uniform Gift to
Minors Act)
5.Adult and minor (joint The adult, or if the
account) minor is the only
contributor, the minor(1)
6.Account in the name of The ward, minor, or
guardian or committee incompetent person(3)
a designated ward, minor,
or incompetent person
7.A.The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also trustee)
B.So-called trust account The actual owner(4)
that is not a legal or
valid trust under State
law
------------------------------------------------
Give the EMPLOYER
For this type of account IDENTIFICATION
number of-
-----------------------------------------
8. Sole proprietorship accoThe owner(4)
9. A valid trust, estate or The legal entity (Do
pension trust not furnish the identifying
number of the personal
representative or trustee
unless the legal entity
itself is not designated in
the account title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held in The partnership
the name of the business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered The broker or
nominee nominee
15. Account with the The public entity
Department of Agriculture
in the name of a public
entity (such as a state or
local government, school
district, or prison) that
receives agricultural
program payments
------------------------------------------------
(1)List the first and circle the name of the person whose number you furnish.
(2)Circle the minor's name and furnish the minor's social security number.
(3)Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4)Show the name of the owner.
(5)List first and circle the name of the legal trust, estate or pension trust.
NOTE: IF NO NAME IS CIRCLED WHEN THERE IS MORE THAN ONE NAME, THE NUMBER WILL
BE CONSIDERED TO BE THAT OF THE FIRST NAME LISTED.
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<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER If you don't have a taxpayer identification number of you
don't know your number, obtain Form SS-5, Application for a Social Security
Number Card (for individuals), or Form SS-4, Application for Employer
Identification Number (for businesses and all other entities), at the local
office of the Social Security Administration or the Internal Revenue Service
and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup
withholding on ALL payments include the following:
o A corporation
o A financial institution.
o An organization exempt from
tax under section 501(a), or
an individual retirement
plan.
o The United States or any
agency or instrumentality
thereof.
o A state, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
o A foreign government, a political subdivision of a foreign government,
or any agency or instrumentality thereof.
o An international organization
or any agency or
instrumentality thereof.
o A registered dealer in
securities or commodities
registered in the U.S. or a
possession of the U.S.
o A real estate investment
trust.
o A common trust fund operated by a bank under section 584(a).
o An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
o An entity registered at all times under the Investment Company Act of
1940.
o A foreign central bank of
issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following;
o Payments to nonresident
aliens subject to withholding
under section 1441.
o Payments to partnerships not
engaged in a trade or
business in the U.S. and
which have at least one
nonresident partner.
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<PAGE>
o Payments of patronage
dividends where the amount
received is not paid in
money.
o Payments made by certain
foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
o Payments of interest on
obligations issued by
individuals. Note: You may
be subject to backup
withholding if this interest
is $600 or more and is paid
in the course of the payer's
trade or business and you
have not provided your
correct taxpayer
identification number to the
payer.
o Payments of tax-exempt interest (including exemptinterest dividends
under section 852).
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<PAGE>
o Payments described in section
6049(b)(5) to nonresident
aliens.
o Payments on tax-free covenant
bonds under section 1451.
o Payments made by certain
foreign organizations.
o Payments made to a nominee.
EXEMPT PAYEES DESCRIBED ABOVE MUST STILL COMPLETE THE SUBSTITUTE FORM W-9 TO
AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE SUBSTITUTE FORM W-9 WITH THE
PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE
OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST,
DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. Certain
payments other than interest, dividends, and patronage dividends, that are not
subject to information reporting are also not subject to backup withholding.
For details, see the regulations under sections 6041, 6041A(a), 6045, and
6050A.
PRIVACY ACT NOTICE. Section 6109 requires most recipients of dividends,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Payers must generally withhold
31% of taxable interest, dividends, and certain other payments to a payee who
does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. If you fail
to furnish your correct taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due
to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE
INFORMATION WITH RESPECT TO WITHHOLDING. If you make a false statement with no
reasonable basis which results in no imposition of backup withholding, you are
subject to a penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.
Willfully falsifying certifications or affirmations may subject you to
criminal penalties including fines and/or imprisonment. (4) FAILURE TO REPORT
CERTAIN DIVIDEND AND INTEREST PAYMENTS. If you fail to include any portion of
an includible payment for interest, dividends or patronage dividends in gross
income and such failure is due to negligence, a penalty of 20% is imposed on
any portion of an underpayment attributable to that failure.
FOR ADDITIONAL INFORMATION CONTACT
YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE.
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<PAGE>
EXHIBIT 99.6
This announcement is neither an offer to exchange nor a solicitation of an
offer to exchange Shares. The Offer is made solely by the Prospectus, dated
_______, 1997, and the related Letter of Transmittal, and is not being made
to, nor will tenders be accepted from or on behalf of, holders of Shares in
any jurisdiction in which the making of the Offer or the acceptance thereof
would not be in compliance with the laws of such jurisdiction. In any
jurisdiction where securities, blue sky or other laws require the Offer to be
made by a licensed broker or dealer, the Offer shall be deemed to be made on
behalf of Applied Magnetics Corporation by Gleacher NatWest Inc., or one or
more registered brokers or dealers licensed under the laws of such
jurisdiction.
NOTICE OF OFFER TO EXCHANGE
EACH OUTSTANDING SHARE OF COMMON STOCK
OF
READ-RITE CORPORATION
FOR
0.679 OF A SHARE OF COMMON STOCK
OF
APPLIED MAGNETICS CORPORATION
Applied Magnetics Corporation hereby offers upon the terms and subject to the
conditions set forth in the Prospectus dated ______, 1997 (the "Prospectus"),
and in the related Letter of Transmittal (collectively, the "Offer"), to
exchange 0.679 of a share of common stock, par value $.10 per share, of
Applied Magnetics ("Applied Magnetics Common Stock"), subject to adjustment as
described below, for each outstanding share of common stock, par value $.0001
per share (each a "Share" and collectively, the "Shares"), of Read-Rite, a
Delaware corporation ("Read-Rite"), validly tendered on or prior to the
Expiration Date and not properly withdrawn. Each Share validly tendered on or
prior to the Expiration Date and not properly withdrawn will be entitled to
receive 0.679 of a share of Applied Magnetics Common Stock (the "Offer
Consideration"). Pursuant to the Offer, each Share will be exchanged for 0.679
of a share of Applied Magnetics Common Stock. Applied Magnetics Common Stock
is listed for trading under the symbol "APM" on the NYSE. On February 21,
1997, the closing price of the Applied Magnetics Common Stock on the NYSE was
$55 1/4. The value of the Offer will change as the market price of Applied
Magnetics Common Stock changes.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., EASTERN STANDARD
TIME, ON ________, 1997, UNLESS THE OFFER IS EXTENDED.
The purpose of the Offer is to enable Applied Magnetics to obtain control of
Read-Rite. Applied Magnetics presently intends, following consummation of the
Offer, to propose and seek to have Read-Rite effect the Merger. In the Merger,
each outstanding Share (other than Shares owned by Applied Magnetics or any of
its affiliates, Shares held in the treasury of Read-Rite (if Read-Rite is so
authorized) or by any subsidiary of Read-Rite and Shares owned by Read-Rite
Stockholders who perfect dissenters' rights under Delaware law, to the extent
available) would be canceled in exchange for the right to receive the Merger
Consideration. Assuming the Minimum Tender Condition is satisfied and Applied
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<PAGE>
Magnetics consummates the Offer, Applied Magnetics believes it would have
sufficient voting power to effect the Merger without the vote of any other
stockholder of Read-Rite.
Applied Magnetics' obligation to exchange the Offer Consideration for Shares
pursuant to the Offer is conditioned upon, among other things, the
satisfaction or, where applicable, waiver of the following conditions: (I)
there being validly tendered and not withdrawn prior to the Expiration Date a
number of Shares which, together with shares owned by Applied Magnetics and
its affiliates, will constitute at least a majority of the total number of
outstanding shares on a fully diluted basis (as though all options or other
securities convertible into or exercisable or exchangeable for Shares had been
so converted, exercised or exchanged) as of the date the Shares are accepted
for exchange by Applied Magnetics pursuant to the Offer, (II) approval of the
issuance of shares of Applied Magnetics Common Stock in connection with the
Offer and the merger and approval of an amendment to the Certificate of
Incorporation of Applied Magnetics, as amended (the "Applied Magnetics
Certificate") to increase the number of shares of Applied Magnetics Common
Stock authorized for issuance, by the holders of a majority of the Shares of
Applied Magnetics Common Stock outstanding [on the applicable record date]
(III) the approval, by written consent solicited by Applied Magnetics, of a
majority of the outstanding Shares of the following actions: (A) the removal,
pursuant to Section 141 of the Delaware General Corporation Law (the "DGCL")
and Read-Rite's Bylaws, of all of the present members of the Board of
Directors of Read-Rite (the "Read-Rite Board") and any person or persons
elected or designated by any of such directors to fill any vacancy or newly
created directorship, (B) the amendment of Read-Rite's Bylaws to fix the
number of directors at two, (C) the election of ____________ and _____________
(the "Applied Magnetics Nominees") as the directors of Read-Rite (or, if
either Applied Magnetics Nominee is unable to serve as a director of Read-Rite
due to death, disability or otherwise, any other person designated as a
Applied Magnetics Nominee), and (D) the repeal of each provision of the
Read-Rite Bylaws and each amendment thereto adopted subsequent to February 21,
1997 and prior to the effectiveness of the foregoing actions (A) through (C)
of this Condition III,(IV) the approval of the acquisition of Shares pursuant
to the Offer by the Read-Rite Board pursuant to Section 203 of the DGCL or
Applied Magnetics being otherwise satisfied in its sole discretion that the
provisions of Section 203 of the DGCL restricting certain combinations are
invalid or not applicable to the acquisition of Shares pursuant to the Offer
and the Merger, and (V) all regulatory approvals required to consummate the
Offer having been obtained and remaining in full force and effect, all
statutory waiting periods in respect thereof having expired and no such
approval containing any conditions or restrictions which the Applied Magnetics
Board of Directors (the "Applied Magnetics Board") determines will or could be
expected to materially impair the strategic and financial benefits expected to
result from the Offer.
The term "Expiration Date" means 5:00 P.M., Eastern Standard time, on
_________, 1997, unless and until Applied Magnetics, in its sole discretion,
shall have extended the period of time during which the Offer is open, in
which event the term "Expiration Date" shall mean the latest time and date at
which the Offer, as so extended by Applied Magnetics, will expire.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), Applied Magnetics will accept for exchange, and will exchange,
Shares validly tendered and not properly withdrawn as promptly as practicable
following the Expiration Date. In addition, subject to applicable rules of the
Commission, Applied Magnetics expressly reserves the right to delay acceptance
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<PAGE>
of or the exchange of Shares in order to comply with any applicable law. In
all cases, the exchange of Shares tendered and accepted for exchange pursuant
to the Offer will be made only after receipt by ___________ (the "Exchange
Agent") of certificates for such Shares (or a confirmation of a book-entry
transfer of such Shares into the Exchange Agent's account at ________
Depository Trust Company or the ____________ Depository Trust Company
(collectively, the "BookEntry Transfer Facilities")), a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees (or, in the case of a book-entry transfer) an Agent's
Message (as defined in the Prospectus) and any other documents required by the
Letter of Transmittal.
For purposes of the Offer, Applied Magnetics will be deemed to have accepted
for exchange Shares validly tendered and not withdrawn, as if and when Applied
Magnetics gives oral or written notice to the Exchange Agent of its acceptance
of the tenders of such Shares pursuant to the Offer. Delivery of Applied
Magnetics Common Stock in exchange for Shares pursuant to the Offer and cash
in lieu of fractional shares of Applied Magnetics Common Stock will be made by
the Exchange Agent as soon as practicable after receipt of such notice. The
Exchange Agent will act as agent for tendering Read-Rite Stockholders for the
purpose of receiving Applied Magnetics Common Stock and cash to be paid in
lieu of fractional shares of Applied Magnetics Common Stock from Applied
Magnetics and transmitting such Applied Magnetics Common Stock and cash to
tendering Read-Rite Stockholders. Under no circumstances will interest with
respect to fractional shares be paid by Applied Magnetics by reason of any
delay in making such exchange.
Tenders of Shares made pursuant to the Offer are irrevocable, except that
Shares tendered pursuant to the Offer may be withdrawn pursuant to the
procedures set forth in the Prospectus at any time prior to the Expiration
Date and, unless theretofore accepted for exchange and exchanged by Applied
Magnetics for the Offer Consideration pursuant to the Offer, may also be
withdrawn at any time after ______, 1997.
For a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Exchange
Agent at one of its addresses set forth on the back cover of the Prospectus,
and must specify the name of the person having tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and the name of the registered
holder of the Shares to be withdrawn, if different from that of the person who
tendered such Shares. The signature(s) on the notice of withdrawal must be
guaranteed by a financial institution (including most banks, savings and loan
associations and brokerage houses) which is a participant in the Securities
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Program or the Stock Exchange Medallion Program (an "Eligible
Institution") unless such Shares have been tendered for the account of any
Eligible Institution. If Shares have been tendered pursuant to the procedures
for book-entry tender as set forth in the Prospectus, any notice of withdrawal
must specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn Shares and must otherwise comply
with such Book-Entry Transfer Facility's procedures. If certificates have been
delivered or otherwise identified to the Exchange Agent, the name of the
registered holder and the serial numbers of the particular certificates
evidencing the Shares withdrawn must also be furnished to the Exchange Agent
as aforesaid prior to the physical release of such certificates. All questions
as to the form and validity (including time of receipt) of any notice of
withdrawal will be determined by Applied Magnetics, in its sole discretion,
which determination shall be final and binding. Neither Applied Magnetics, the
Exchange Agent, the Information Agent, the Dealer Manager nor any other person
will be under any duty to give
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<PAGE>
notification of any defects or irregularities in any notice of withdrawal or
will incur any liability for failure to give any such notification. Any Shares
properly withdrawn will be deemed not to have been validly tendered for
purposes of the Offer. However, withdrawn Shares may be rendered by following
one of the procedures described under the caption "The Offer--Procedure for
Tendering" in the Prospectus at any time prior to the Expiration Date.
Subject to the applicable rules and regulations of the Commission, Applied
Magnetics reserves the right, in its sole discretion, at any time or from time
to time, (i) to delay acceptance for, or, regardless of whether such Shares
were theretofore accepted for exchange, exchange of, any Shares pursuant to
the Offer or to terminate the Offer and not accept for exchange or exchange
any Shares not theretofore accepted for exchange, or exchanged, upon the
failure of any of the conditions of the Offer to be satisfied and (ii) to
waive any condition (other than the Applied Magnetics Stockholder Consent
Condition, the Regulatory Consent Condition and the condition relating to the
effectiveness of the Registration Statement (each as defined in the
Prospectus)) or otherwise amend the Offer in any respect, by giving oral or
written notice of such delay, termination or amendment to the Exchange Agent
and by making a public announcement thereof.
The information required to be disclosed by paragraph (e)(1)(vii) of Rule
14d-6 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), is incorporated herein by reference.
Requests have been made to Read-Rite pursuant to Rule 14d-5 under the
Exchange Act and Section 66 of the Companies Act for the use of Read-Rite's
Stockholder lists and security position listings for the purpose of
disseminating the Offer to holders of Shares. The Prospectus, the related
Letter of Transmittal and other relevant materials will be mailed to record
holders of Shares, and will be furnished to brokers, dealers, banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on the Stockholder lists, or if applicable, who are listed as
participants in a clearing agency's security position listing, for subsequent
transmittal to beneficial owners of Shares, by Applied Magnetics following
receipt of such lists or listings from Read-Rite or by Read-Rite, if Read-Rite
so elects.
The Prospectus and the Letter of Transmittal contain important information
that should be read before any decision is made with respect to the Offer.
Questions and requests for assistance may be directed to or additional copies
of the Prospectus, the Letter of Transmittal, the Notice of Guaranteed
Delivery or other Offer documents may be obtained from the Information Agent
or the Dealer Manager at their respective telephone numbers and addresses set
forth below or from your broker, dealer, commercial bank or trust company.
Copies of the foregoing will be furnished at Applied Magnetics' expense. No
fees or commissions will be payable to brokers, dealers or other persons other
than the Dealer Manager and the Information Agent for soliciting tenders of
Shares pursuant to the Offer. The Information Agent for the Offer is:
MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
Toll Free (800) 322-2885
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<PAGE>
The Dealer Manager for the Offer are:
GLEACHER NATWEST INC.
660 Madison Avenue
New York, New York 10021
(212) 418-4200 (call collect)
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<PAGE>
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO EXCHANGE EACH SHARE OF OUTSTANDING COMMON STOCK
OF
READ-RITE CORPORATION
FOR 0.679 OF A SHARE OF COMMON STOCK
OF
APPLIED MAGNETICS CORPORATION
The undersigned acknowledge(s) receipt of your letter and the enclosed
Prospectus, dated , 1997 (the "Prospectus"), and the related Letter of
Transmittal (which together constitute the "Offer") relating to the Offer by
Applied Magnetics Corporation, a Delaware corporation ("Applied Magnetics"),
to exchange 0.679 of a share of common stock, par value $.10 per share, of
Applied Magnetics for each outstanding share of common stock, par value $.0001
per share (collectively, the "Shares"), of Read-Rite Corporation, a Delaware
corporation.
You are instructed to tender to Applied Magnetics the number of Shares,
indicated below (or, if no number is indicated below, all Shares, that are
held by you for the account of the undersigned, upon the terms and subject to
the conditions set forth in the Offer.
Number of Shares to be SIGN HERE
Tendered:*
---------------------------
__________ Shares
- --------------------------------------
Daytime Area Code
and Tel. No. ___________________________
__________________ Signature(s)
Taxpayer Identification
No. or Social
Security No. ___________________________
------------------
Dated: __________________, ___________________________
199_ (Please print name(s) and
addresses(es))
--------
*Unless otherwise indicated, it will be assumed that all of your Shares held
by us for your account are to be tendered.
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