SCHEDULE 14A INFORMATION
Consent Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[X] Preliminary Consent Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Consent Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
READ-RITE CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant As Specified In Its Charter)
APPLIED MAGNETICS CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Consent Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction
applies:
________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
________________________________________________________________________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
________________________________________________________________________
<PAGE>
5) Total fee paid:
________________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1) Amount Previously Paid:
________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
________________________________________________________________________
3) Filing Party:
________________________________________________________________________
4) Date Filed:
________________________________________________________________________
<PAGE>
PRELIMINARY COPY--SUBJECT TO COMPLETION
APPLIED MAGNETICS CORPORATION [Logo]
75 Robin Hill Road
Goleta, CA 93117-5400
To the Stockholders of Read-Rite Corporation:
On ________, 1997, Applied Magnetics Corporation, a Delaware
corporation ("Applied Magnetics"), commenced an offer, upon the terms
and subject to the conditions set forth in Applied Magnetics' Offer to
Exchange dated ___________, 1997 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 (as defined below) and not properly
withdrawn. The "Expiration Date" is 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
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
was $28 3/16 per Share. Based on the closing price of Applied
Magnetics Common Stock on The New York Stock Exchange 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 value
of the Offer will change as the market price of Applied Magnetics
Common Stock changes. The purpose of the Offer is to acquire control
of, and the entire equity interest in, Read-Rite.
There are a number of impediments to consummation of the Offer,
including Section 203 ("Section 203") of the Delaware General
Corporation Law ("DGCL"), which restricts certain business
combinations, subject to various exceptions, including approval by the
Board of Directors of Read-Rite (the "Read-Rite Board"). Applied
Magnetics is today commencing a solicitation of all Read-Rite's
stockholders to (i) remove all six of the present members of 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; (ii)
amend Section 3.2 of Article III of Read-Rite's Bylaws (the "Read-Rite
Bylaws") to fix the number of directors of Read-Rite at two; (iii)
elect __________ and __________ (collectively, the "Nominees") as the
directors of Read-Rite; and (iv) repeal each provision of the Read-
Rite Bylaws or amendment thereto adopted subsequent to December 20,
1996 and prior to the effectiveness of all of the foregoing actions
<PAGE>
(collectively, the "Proposals"). The specific features of Applied
Magnetics' proposal as well as the consent procedure itself are
described in the accompanying Consent Statement.
If you were a stockholder of record on ___________, 1997, but
subsequently sold your Shares, you still retain voting rights in
connection with this consent solicitation. 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. Since
the first date on which a signed written consent setting forth the
action proposed to be taken in connection with the Offer was delivered
on ________, 1997, the Record Date will be _______________, 1997.
Your failure to vote may adversely affect those who continue to be
stockholders. Read-Rite stated in its Form 10-Q for the quarter ended
December 31, 1996 that, as of January 26, 1997, there were 47,117,632
Shares outstanding. Each Share entitled its record holder to one
vote. Stockholders of Read-Rite do not have cumulative voting rights.
In fairness to other stockholders, Applied Magnetics urges you to vote
all shares that you were entitled to vote as of the __________, 1997,
record date on your consent card.
Very truly yours,
APPLIED MAGNETICS CORPORATION
IMPORTANT
1. If your Shares are held in your own name, please sign, date and
mail the enclosed BLUE consent card to MacKenzie Partners, Inc.
("MacKenzie") in the post-paid envelope provided.
2. If your Shares are held in the name of a brokerage firm, bank
nominee or other institution, you should contact the person for
your account and give instructions for the BLUE consent card
representing your Shares to be mailed, dated and signed. Only
that institution can execute a BLUE consent card with respect to
your Shares and only upon receipt of specific instructions from
you. Applied Magnetics urges you to confirm in writing your
instructions to the person responsible for your account and to
provide a copy of those instructions to Applied Magnetics in care
of MacKenzie at the address set forth below using the stamped
self-addressed envelope included in the packet so that Applied
<PAGE>
Magnetics will be aware of all instructions given and can attempt
to ensure that such instructions are followed. Since Applied
Magnetics must receive consents from a majority of Read-Rite's
outstanding Shares in order for the Proposals to be adopted, a
broker non-vote or direction to withhold authority to vote on the
blue card will have the same effect as a "no" vote with respect
to Applied Magnetics' solicitation. Broker non-votes, abstaining
or not returning a signed consent will have the same effect as
withholding consent to the proposed actions. Applied Magnetics
urges each stockholder to ensure that the record holder of his or
her Shares marks, signs, dates and returns the enclosed consent
as soon as possible.
If you have any questions or require any assistance in executing
your consent, please call:
MACKENZIE PARTNERS, INC.
156 FIFTH AVENUE
NEW YORK, NEW YORK 10010
(212) 929-5500 (call collect)
or
Toll Free (800) 322-2885
<PAGE>
PRELIMINARY COPY
SUBJECT TO COMPLETION
____________, 1997
CONSENT STATEMENT
OF
APPLIED MAGNETICS CORPORATION
This Consent Statement is furnished by Applied Magnetics
Corporation, a Delaware corporation ("Applied Magnetics"), in
connection with the solicitation by Applied Magnetics of written
consents from the holders of shares of Common Stock, par value $.0001
per share (the "Shares"), of Read-Rite Corporation, a Delaware
corporation ("Read-Rite"), to take the following actions without a
stockholders' meeting, as permitted by Delaware law:
(1) Remove all six 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;
(2) Amend Section 3.2 of Article III of Read-Rite's Bylaws
(the "Read-Rite Bylaws") to fix the number of directors of Read-
Rite at two;
(3) Elect __________ and __________ (collectively, the
"Nominees") as the directors of Read-Rite; and
(4) Repeal each provision of the Read-Rite Bylaws or
amendment thereto adopted subsequent to December 20, 1996 and
prior to the effectiveness of the Proposals (as defined below).
All of the foregoing actions (collectively, the "Proposals") are
designed to expedite the prompt consummation of Applied Magnetics'
offer to acquire Read-Rite, which is described below. Stockholders of
Read-Rite are being asked to express their consent to the Proposals on
the accompanying BLUE consent card. The effectiveness of each of the
Proposals is subject to, and conditioned upon, the adoption of each of
the other Proposals by the holders of record, as of the close of
business on the Record Date (as hereinafter defined), of a majority of
the Shares then outstanding (including the receipt of consents from
such holders to the removal of each member of the Read-Rite Board and
to the election of each Nominee). APPLIED MAGNETICS RECOMMENDS THAT
YOU CONSENT TO EACH OF THE PROPOSALS.
This Consent Statement and the related BLUE consent card are
first being sent or given on or about ___________, 1997 to all holders
of record of Shares on the Record Date. On the Record Date, Applied
Magnetics was the record owner of 200 Shares.
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<PAGE>
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 Read-Rite
Board with respect to the Proposals. Since the first date on which a
signed written consent setting forth the action proposed to be taken
in connection with the Offer was delivered on ________, 1997, the
Record Date will be _______________, 1997.
On ________, 1997, Applied Magnetics commenced an offer,
upon the terms and subject to the conditions set forth in Applied
Magnetics' Offer to Exchange dated ___________, 1997 ("Offer to
Exchange") 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 validly
tendered on or prior to the Expiration Date (as defined below) and not
properly withdrawn. The "Expiration Date" is 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 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 (the "Nasdaq National Market") was $28 3/16 per Share.
Based on the closing price of Applied Magnetics Common Stock on The
New York Stock Exchange ("NYSE") 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 value of the Offer will
change as the market price of Applied Magnetics Common Stock changes.
Complete information about the Offer is contained in the Offer to
Exchange, which is available upon request from the Information Agent
for the Offer, MacKenzie Partners, Inc. ("MacKenzie"), and in the
Tender Offer Statement on Schedule 14D-1, which has been filed with
the Securities and Exchange Commission (the "Commission"). The Tender
Offer Statement on Schedule 14D-1 and any amendments thereto,
including exhibits, should be available for inspection and copies
should be obtainable in the manner set forth under "CERTAIN
INFORMATION CONCERNING APPLIED MAGNETICS" (except that such material
will not be available at the regional offices of the Commission or at
the offices of the NYSE).
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<PAGE>
THIS CONSENT STATEMENT IS NEITHER A REQUEST FOR THE TENDER OF
SHARES NOR AN OFFER WITH RESPECT THERETO. THE OFFER IS BEING MADE
ONLY BY MEANS OF THE OFFER TO PURCHASE AND THE RELATED LETTER OF
TRANSMITTAL.
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 of the Offer and the Merger (as defined
below), cause Read-Rite to merge (the "Merger") 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 stockholders of Read-Rite 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.
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, 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, (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, (iii) 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
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 determines will or could be
expected to materially impair the strategic and financial benefits
expected to result from the Offer.
Based upon prior conversations between management of Applied
Magnetics and management of Read-Rite, Applied Magnetics believes that
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<PAGE>
the current Read-Rite Board may be unwilling to approve the Offer and
the Merger under Section 203 and thus to permit the Offer and the
Merger to be consummated.
Accordingly, pursuant to the Proposals, Applied Magnetics is
seeking to elect to the Read-Rite Board persons who intend to approve
the Offer and the Merger under Section 203, which would satisfy the
DGCL Condition, and take such other actions as may be required to
expedite the prompt consummation of the Offer and the Merger or (b) if
any other transaction offering more value to Read-Rite's stockholders
is proposed, take actions to facilitate such a transaction, subject in
all cases to fulfillment of the fiduciary duties that they would have
as directors of Read-Rite. Accordingly, one possible result of the
adoption of the Proposals could be to expedite the prompt consummation
of the Offer and the Merger.
The Proposals will become effective when properly completed,
unrevoked consents are signed by the holders of record on the Record
Date of a majority of the Shares then outstanding and such consents
are delivered to Read-Rite. The effectiveness of each of the
Proposals is subject to, and conditioned upon, the adoption of each of
the other Proposals by the holders of record, as of the close of
business on the Record Date, of a majority of the Shares then
outstanding (including the receipt of consents from such holders to
the removal of each member of the Read-Rite Board and to the election
of each Nominee). See "CONSENT PROCEDURE."
This Consent Statement and the related BLUE consent card are
first being sent or given on or about ___________, 1997 to all holders
of record of Shares on the Record Date. On the Record Date, Applied
Magnetics was the record owner of 200 Shares.
ADOPTION OF THE PROPOSALS, INCLUDING THE REMOVAL OF THE CURRENT
MEMBERS OF THE READ-RITE BOARD AND ELECTION OF THE NOMINEES, IS AN
IMPORTANT STEP TOWARD PROMPT CONSUMMATION OF THE OFFER AND THE MERGER.
ACCORDINGLY, YOU ARE URGED TO PROMPTLY SIGN, DATE AND MAIL THE
ENCLOSED BLUE CONSENT CARD. YOU MUST SEPARATELY TENDER YOUR SHARES
PURSUANT TO THE OFFER IF YOU WISH TO PARTICIPATE IN THE OFFER.
EXECUTING A CONSENT DOES NOT OBLIGATE YOU TO TENDER YOUR SHARES
PURSUANT TO THE OFFER, AND YOUR FAILURE TO EXECUTE A CONSENT DOES NOT
PREVENT YOU FROM TENDERING YOUR SHARES PURSUANT TO THE OFFER.
Although Applied Magnetics does not presently intend to alter the
terms of the Offer, it is possible that, depending on the facts and
circumstances at the time, the terms might be altered in one or more
respects.
Because the Proposals will become effective only if executed
consents are returned by holders of record on the Record Date of a
majority of the total number of Shares then outstanding, the failure
to execute and return a consent will have the same effect as voting
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<PAGE>
against the Proposals. Since Applied Magnetics must receive consents
from a majority of Read-Rite's outstanding Shares in order for the
Proposals to be adopted, a broker non-vote or direction to withhold
authority to vote on the blue card will have the same effect as a "no"
vote with respect to Applied Magnetics' solicitation. Broker non-
votes, abstaining or not returning a signed consent will have the same
effect as withholding consent to the proposed actions.
Applied Magnetics has retained MacKenzie to assist in the
solicitation of consents to the Proposals.
If your Shares are registered in your own name, please sign, date
and mail the enclosed BLUE consent card to MacKenzie in the postage-
paid envelope provided. If your Shares are held in the name of a
brokerage firm, bank nominee or other institution, you should contact
the person for your account and give instructions for the BLUE consent
card representing your Shares to be mailed, dated and signed. Only
that institution can execute a BLUE consent card with respect to your
Shares and only upon receipt of specific instructions from you.
Applied Magnetics urges you to confirm in writing your instructions to
the person responsible for your account and to provide a copy of those
instructions to Applied Magnetics in care of MacKenzie Partners, Inc.,
156 Fifth Avenue, , New York, NY 10010 using the stamped self-
addressed envelope included in the packet so that Applied Magnetics
will be aware of all instructions given and can attempt to ensure that
such instructions are followed.
If you have any questions about executing your consent or require
assistance, please contact:
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>
TABLE OF CONTENTS
PAGE
----
SUMMARY 7
The Proposals 7
The Offer and the Merger 7
Voting Securities and Principal Holders 8
Consent Procedure 8
REASONS FOR THE SOLICITATION 8
THE PROPOSALS 9
THE OFFER AND THE MERGER 12
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF 12
CERTAIN INFORMATION CONCERNING APPLIED MAGNETICS 13
CERTAIN TRANSACTIONS BETWEEN APPLIED MAGNETICS
AND READ-RITE 15
SOLICITATION OF CONSENTS 16
CONSENT PROCEDURE 17
Effectiveness and Revocation of Consents 17
Special Instructions 18
Dissenters' Rights 19
ANNEX I I-1
ANNEX II II-1
ANNEX III III-1
ANNEX IV IV-1
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<PAGE>
SUMMARY
The information in this summary is qualified in its entirety by
reference to the more detailed information appearing elsewhere in this
Consent Statement.
THE PROPOSALS
Applied Magnetics is soliciting written consents from Read-Rite's
stockholders to remove all six of the present directors of Read-Rite,
amend the Read-Rite Bylaws to fix the number of directors of Read-Rite
at two, elect the Nominees to serve as the directors of Read-Rite and
repeal each provision of the Read-Rite Bylaws or amendment thereto
adopted subsequent to December 20, 1996 and prior to the effectiveness
of the Proposals. The Nominees intend to (a) approve the Offer and
the Merger under Section 203, which would satisfy the DGCL Condition,
and take such other actions as may be required to expedite the prompt
consummation of the Offer and the Merger or (b) if any other
transaction offering more value to Read-Rite's stockholders is
proposed, take actions to facilitate such a transaction, subject in
all cases to fulfillment of the fiduciary duties that they would have
as directors of Read-Rite. Accordingly, one possible result of the
adoption of the Proposals could be to expedite the prompt consummation
of the Offer and the Merger.
THE OFFER AND THE MERGER
On ________, 1997, Applied Magnetics commenced an offer, upon the
terms and subject to the conditions set forth in Applied Magnetics'
Offer to Exchange dated ___________, 1997 and in the related Letter of
Transmittal to exchange 0.679 of a share of Applied Magnetics Common
Stock for each outstanding Share validly tendered on or prior to the
Expiration Date. On February 21, 1997, the last full trading day
prior to the announcement of the Offer, the closing price of the
Shares on the Nasdaq National Market was $28 3/16 per Share. Based on
the closing price of Applied Magnetics Common Stock on the NYSE 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
value of the Offer will change as the market price of Applied
Magnetics Common Stock changes.
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 of the Offer and the Merger, 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
stockholders of Read-Rite who perfect dissenters' rights under
Delaware law, to the extent such dissenters' rights are available)
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<PAGE>
would be canceled in exchange for the right to receive the Offer
Consideration.
Although the adoption of the Proposals is an important step
toward prompt consummation of the Offer and the Merger, stockholders
of Read-Rite are not being asked to tender their Shares pursuant to
this Consent Solicitation or to consent to or vote on the Merger at
this time.
VOTING SECURITIES AND PRINCIPAL HOLDERS
The Shares constitute the only class of voting securities of
Read-Rite. Accordingly, only holders of Shares are entitled to
execute consents. For information regarding the persons believed to
be the beneficial owners of more than 5% of the Shares, see "VOTING
SECURITIES AND PRINCIPAL HOLDERS THEREOF" below.
CONSENT PROCEDURE
Applied Magnetics will pay all costs in connection with its
solicitation of consents. The consents are being solicited pursuant
to the procedure established by Sections 228 and 213 of the DGCL.
Stockholders of Read-Rite of record as of the close of business on the
Record Date are entitled to consent to the Proposals. The Proposals
will become effective when properly completed, unrevoked consents are
signed by the holders of record on the Record Date of a majority of
the Shares then outstanding and such consents are delivered to Read-
Rite. The effectiveness of each of the Proposals is subject to, and
conditioned upon, the adoption of each of the other Proposals by the
holders of record, as of the close of business on the Record Date, of
a majority of the Shares then outstanding (including the receipt of
consents from such holders to the removal of each member of the Read-
Rite Board and to the election of each Nominee). To be effective, the
requisite consents must be delivered to Read-Rite within 60 days of
the earliest dated consent delivered to Read-Rite. Since the first
date on which a signed written consent setting forth the action
proposed to be taken in connection with the Offer was delivered on
________, 1997, the Record Date will be _______________, 1997.
REASONS FOR THE SOLICITATION
Applied Magnetics is soliciting written consents to the Proposals
in order to expedite the prompt consummation of the Offer and the
Merger. The purpose of the Offer is to enable Applied Magnetics to
acquire control of, and the entire equity interest in, Read-Rite. AS
DESCRIBED BELOW, THE NOMINEES, IF ELECTED, INTEND TO SUPPORT THE OFFER
AND THE MERGER, SUBJECT IN ALL CASES TO FULFILLMENT OF THE FIDUCIARY
DUTIES THAT THEY WOULD HAVE AS DIRECTORS OF READ-RITE.
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<PAGE>
Applied Magnetics believes that the Offer is in the best
interests of the stockholders of Read-Rite because, among other
things, the Offer Consideration represents a substantial premium to
the per Share price on February 21, 1997, the last trading day prior
to the public announcement of the Offer on February 24, 1997. In
addition to the per Share price premium provided by the Offer, Applied
Magnetics believes that the stockholders of Read-Rite 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.
The Nominees intend to (a) approve the Offer and the Merger under
Section 203, which would have the effect of satisfying the DGCL
Condition, and take such other actions as may be required to expedite
the prompt consummation of the Offer and the Merger or (b) if any
other transaction offering more value to Read-Rite's stockholders is
proposed, take actions to facilitate such a transaction, subject in
all cases to fulfillment of the fiduciary duties that they would have
as directors of Read-Rite. Accordingly, one possible result of the
adoption of the Proposals could be to expedite the prompt consummation
of the Offer and the Merger.
THE PROPOSALS
Applied Magnetics is seeking written stockholder consents without
a meeting to the Proposals, which consist of taking the following
actions:
(1) Remove all six of the present members of 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;
(2) Amend Section 3.2 of Article III of the Read-Rite
Bylaws to fix the number of directors of Read-Rite at two;
(3) Elect the Nominees as the directors of Read-Rite; and
(4) Repeal each provision of the Read-Rite Bylaws or
amendment thereto adopted subsequent to December 20, 1996 and
prior to the effectiveness of the Proposals.
The effectiveness of each of the Proposals is subject to, and
conditioned upon, the adoption of each of the other Proposals by the
holders of record, as of the close of business on the Record Date, of
a majority of the Shares then outstanding (including the receipt of
consents from such holders to the removal of each member of the Read-
Rite Board and to the election of each Nominee).
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<PAGE>
APPLIED MAGNETICS RECOMMENDS THAT YOU CONSENT TO EACH OF THE
PROPOSALS.
REMOVAL OF DIRECTORS. The Proposals include the removal of all
Read-Rite's current directors and any other person who may be a
director at the time the action proposed to be taken by this consent
procedure becomes effective. Read-Rite's current directors are Cyril
J. Yansouni, Fred Schwettmann, John G. Linvill, William J. Almon,
Michael L. Hackworth and Matthew J. O'Rourke.
BYLAW AMENDMENT FIXING NUMBER OF DIRECTORS AT TWO. The Proposals
include an amendment to Section 3.2 of Article III of Read-Rite Bylaws
to provide that the number of directors be fixed at two. This
amendment to the Read-Rite Bylaws is set forth in its entirety in
Annex IV to this Consent Statement. The Read-Rite Bylaws currently
provide that the Read-Rite Board consists of six directors. This
Bylaw amendment is designed to reduce the number of directors
constituting the Read-Rite Board to the number to be in office if the
Proposal to remove the incumbent directors is approved and the
Nominees are elected.
THE NOMINEES SUPPORT THE OFFER AND THE MERGER.
ELECTION OF NOMINEES. The Proposals include the election as
directors of Read-Rite of the two Nominees named in the table below,
each of whom has consented to serve as a director, if elected, until
the next annual meeting of stockholders and until his successor has
been elected and qualified. The Nominees are committed to giving each
Stockholder the ability to participate in the Offer and the Merger.
Applied Magnetics' primary purpose in seeking to elect the Nominees to
the Read-Rite Board is to obtain the approval of the Offer and the
Merger under Section 203, thereby facilitating the consummation of the
Offer. However, if elected, the Nominees would be responsible for
managing the business and affairs of Read-Rite. Each director of
Read-Rite has an obligation under the DGCL to discharge his or her
duties as a director on an informed basis, in good faith, with the
care an ordinarily careful and prudent person in a like position would
exercise under similar circumstances and in a manner the director
honestly believes to be in the best interests of Read-Rite. In this
connection, circumstances may arise in which the interests of Applied
Magnetics and its affiliates, on the one hand, and the interests of
other stockholders of Read-Rite, on the other hand, may differ. In
any such case, the Nominees intend to discharge fully the obligations
owing to Read-Rite and its stockholders under the DGCL. Although
Applied Magnetics has no reason to believe that any of the Nominees
will be unable or unwilling to serve as directors, if any of the
Nominees is not available for election, the persons named on the BLUE
consent card will vote for the election of such other nominee or
nominees as may be proposed by Applied Magnetics.
-10-
<PAGE>
EMPLOYMENT HISTORY OR PRESENT
NAME, AGE AND PRINCIPAL OCCUPATION AND
BUSINESS ADDRESS FIVE-YEAR EMPLOYMENT HISTORY
- -------------------------------- ----------------------------------
None of the Nominees owns any Shares, nor is there any material
relationship between any Nominee and Read-Rite.
It is contemplated that each Nominee will be paid a fee of
$_______ by Applied Magnetics for agreeing to stand for election as a
director of Read-Rite. In addition, it is anticipated that each
Nominee, upon election, will receive a director's fee, consistent with
Read-Rite's past practice, for services as a director of Read-Rite.
According to Read-Rite's 1997 Proxy Statement, each nonemployee
director of Read-Rite receives a fee of $2,000 per quarter, plus
$1,000 for each board meeting attended and $500 for each board
committee meeting attended. Nonemployee directors also participate in
Read-Rite's 1991 Director Option Plan. Applied Magnetics has agreed
to indemnify each Nominee, to the fullest extent permitted by
applicable law, from and against any and all expenses, liabilities or
losses of any kind arising out of any threatened or filed claim,
action, suit or proceeding, whether civil, criminal, administrative or
investigative, asserted against or incurred by the Nominee in his
capacity as a nominee for election as a director of Read-Rite, and, if
elected, as a director of Read-Rite, or arising out of his status in
either such capacity. Applied Magnetics has also agreed to reimburse
each Nominee for his reasonable out-of-pocket expenses, including
reasonable fees and expenses of counsel.
REPEAL OF BYLAWS ADOPTED SUBSEQUENT TO DECEMBER 20, 1996 AND
PRIOR TO THE EFFECTIVENESS OF THE PROPOSALS. The Proposals include the
repeal of each provision of Read-Rite Bylaws or amendment thereto
adopted subsequent to December 20, 1996 and prior to the effectiveness
of the Proposals, if any. This Proposal is designed to prevent the
Read-Rite Board from taking actions to amend the Read-Rite Bylaws to
attempt to nullify the actions taken by the stockholders pursuant to
the Proposals or to create new obstacles to the consummation of the
Offer and the Merger. The Read-Rite Bylaws filed as an exhibit to
Read-Rite's Annual Report on Form 10-K for the fiscal year ended
September 30, 1996 (the most recent publicly available version of the
Read-Rite Bylaws) purport to reflect all amendments adopted through
December 20, 1996, the date such Form 10-K was filed with the
Commission. Accordingly, this Proposal would not repeal any provision
of the Read-Rite Bylaws that has been publicly disclosed prior to the
date hereof (although, as noted above, other Proposals for which
consents are solicited hereby would amend Section 3.2 of Article III
of Read-Rite Bylaws). If, however, the Read-Rite Board has adopted
since December 20, 1996, or adopts prior to the effectiveness of the
Proposals, any amendment to the Read-Rite Bylaws, this Proposal would
-11-
<PAGE>
repeal such amendment so as to prevent the Read-Rite Board from
creating new obstacles to the consummation of the Offer and the Merger
and to remove any existing undisclosed obstacles to the consummation
of the Offer and the Merger.
THE OFFER AND THE MERGER
On ________, 1997, Applied Magnetics commenced an offer, upon the
terms and subject to the conditions set forth in Applied Magnetics'
Offer to Exchange dated ___________, 1997 and in the related Letter of
Transmittal to exchange 0.679 of a share of Applied Magnetics Common
Stock for each outstanding Share validly tendered on or prior to the
Expiration Date. On February 21, 1997, the last full trading day
prior to the announcement of the Offer, the closing price of the
Shares on the Nasdaq National Market was $28 3/16 per Share. Based on
the closing price of Applied Magnetics Common Stock on the NYSE 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
value of the Offer will change as the market price of Applied
Magnetics Common Stock changes.
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 of the Offer and the Merger, 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
stockholders of Read-Rite 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.
VOTING SECURITIES AND
PRINCIPAL HOLDERS THEREOF
The Shares constitute the only class of voting securities of
Read-Rite. Accordingly, only holders of Shares are entitled to
execute consents. Read-Rite stated in its Form 10-Q for the quarter
ended December 31, 1996 that, as of January 26, 1997, there were
47,117,632 Shares outstanding. Each Share entitles its record holder
to one vote. Stockholders of Read-Rite do not have cumulative voting
rights.
The following table sets forth as of December 30, 1996, the name
of each person who, based on publicly available information, owned
beneficially more than 5% of the Shares outstanding at such date, the
number of Shares owned by each such person and the percentage of the
outstanding Shares represented thereby. The information below with
respect to beneficial ownership is based upon information filed with
the Commission pursuant to Sections 13(d) or 13(g) of the Securities
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<PAGE>
Exchange Act of 1934, as amended (the "Exchange Act"), and furnished
to Read-Rite by the respective stockholders.
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- ----------------------- --------------------- ----------
J.P. Morgan & Co. Incorporated (1)...... 3,786,730(1) 8.1%
60 Wall Street
New York, New York 10260
- -------------------------
(1) As noted in Read-Rite's 1997 Proxy Statement, based on
information received from J.P. Morgan & Co. Incorporated as of
December 17, 1996.
For information relating to the ownership of Shares by directors
and executive officers of Read-Rite, see Annex I hereto.
CERTAIN INFORMATION CONCERNING 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").
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
higher transfer rates than ferrite disk 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.
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<PAGE>
Applied Magnetics' manufacturing and assembly operations are
located in California, Ireland, South Korea, Malaysia, the Philippines
and the People's Republic of China. Applied Magnetics' principal
place of business is located at 75 Robin Hill Road, Goleta, California
93117-5400; its telephone number at that location is (805) 683-5353.
Applied Magnetics was incorporated in California in 1957 and
reincorporated in Delaware in 1987.
Set forth below is certain selected consolidated financial
information with respect to Applied Magnetics and its subsidiaries
excerpted from the information contained in Applied Magnetics' Annual
Report to Stockholders for the fiscal year ended September 28, 1996
(the "Applied Magnetics 1996 Annual Report") and Applied Magnetics'
quarter ended December 28, 1996 (the "Applied Magnetics 10-Q"). More
comprehensive financial information is included in the Applied
Magnetics 1996 Annual Report, the Applied Magnetics 10-Q and other
documents filed by Applied Magnetics with the Commission, and the
following summary is qualified in its entirety by reference to the
Applied Magnetics 1996 Annual Report, the Applied Magnetics 10-Q and
such other documents and all the financial information (including any
related notes) contained therein. The Applied Magnetics 1996 Annual
Report, the Applied Magnetics 10-Q and such other documents should be
available for inspection at the public reference facilities of the
Commission at 450 Fifth Street, N.W., Washington, DC 20549, and at the
regional offices of the Commission located at Seven World Trade
Center, 13th Floor, New York, NY 10048 and Citicorp Center, 500 West
Madison Street (Suite 1400), Chicago, IL 60661. Copies of the Applied
Magnetics 1996 Annual Report, the Applied Magnetics 10-Q and such
other documents should be obtainable, by mail, upon payment of the
Commission's customary charges, by writing to the Commission's
principal office at 450 Fifth Street, N.W., Washington, DC 20549.
Copies of the Applied Magnetics 1996 Annual Report, the Applied
Magnetics 10-Q and such other documents should also be available for
inspection at the offices of the NYSE, 20 Broad Street, New York, NY
10005. Such information may also be obtained from the Commission at
the Commission's Web site, http://www.sec.gov.
-14-
<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>
Certain information about the directors and executive officers of
Applied Magnetics and certain employees and other representatives of
Applied Magnetics who may also assist MacKenzie in soliciting consents is
set forth in the attached Annex II. Annex III sets forth certain
information relating to Shares owned by Applied Magnetics, its directors
and executive officers, such employees and other representatives and
certain transactions between any of them and Read-Rite.
CERTAIN TRANSACTIONS BETWEEN
APPLIED MAGNETICS AND READ-RITE
Other than the 200 Shares purchased by Applied Magnetics on February 5,
1997, Applied Magnetics is not aware of any transactions or proposed
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<PAGE>
transactions between its associates (other than subsidiaries of Applied
Magnetics) and Read-Rite other than transactions in the ordinary course of
business.
For information regarding certain other transactions between Read-Rite
and its affiliates and Applied Magnetics, the Nominees, the directors and
executive officers of Applied Magnetics and certain employees or other
representatives of Applied Magnetics, see Annex III hereto.
SOLICITATION OF CONSENTS
Solicitation of consents may be made by the directors, officers,
investor relations personnel and other employees of Applied Magnetics and
its affiliates. Consents will be solicited by mail, advertisement,
telephone or telecopier and in person. No such persons will receive
additional compensation for such solicitation.
In addition, Applied Magnetics has retained MacKenzie to assist in the
solicitation, for which MacKenzie will be paid a fee of $____________ and
will be reimbursed for its reasonable out-of-pocket expenses. Applied
Magnetics has also agreed to indemnify MacKenzie against certain
liabilities and expenses, including certain liabilities and expenses under
the federal securities laws. It is anticipated that approximately ___
persons will be employed by MacKenzie to solicit stockholders. MacKenzie
is also acting as Information Agent in connection with the Offer, for which
MacKenzie will be paid customary compensation in addition to reimbursement
of reasonable out-of-pocket expenses.
Banks, brokers, custodians, nominees and fiduciaries will be requested
to forward solicitation material to beneficial owners of the Shares.
Applied Magnetics and its affiliates will reimburse banks, brokers,
custodians, nominees and fiduciaries for their reasonable expenses for
sending solicitation material to the beneficial owners.
Applied Magnetics has retained IBJ Schroder Bank & Trust Company as
exchange agent in the Offer (the "Exchange Agent") and has agreed to 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 Gleacher
NatWest, Inc. ("Gleacher NatWest") and MacKenzie as information agent in
connection with the Offer) 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.
Although Gleacher NatWest, financial advisor to Applied
Magnetics, does not admit that it or any of its directors, officers,
employees or affiliates are a "participant", as defined in Schedule 14A
promulgated under the Securities Exchange Act or 1934, as amended, or that
such Schedule 14A requires the disclosure of certain information concerning
Gleacher NatWest, Gleacher NatWest may assist Applied Magnetics in this
solicitation. Gleacher NatWest engages in a full range of investment
banking services. As of the most recent practicable date prior to the date
hereof as such information was available, Gleacher NatWest does not hold
any Shares.
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<PAGE>
The cost of the solicitation of consents to the Proposals will be
borne by Applied Magnetics and its affiliates. Applied Magnetics will not
seek reimbursement of the costs of this solicitation from Read-Rite. Costs
related to the Offer and to the solicitation of consents to the Proposals
include expenditures for attorneys, accountants, financial advisors,
consent solicitors, public relations advisors, printing, advertising,
postage, litigation and related expenses and filing fees and, other than
the payment for Shares pursuant to the Offer, are expected to aggregate
approximately $____ million. The portion of such costs allocable solely to
the solicitation of consents to the Proposals is not readily determinable.
CONSENT PROCEDURE
Section 228 of the DGCL states that, unless otherwise provided in the
certificate of incorporation, any action required to be taken at any annual
or special meeting of stockholders, or any action that may be taken at any
annual or special meeting of stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, is signed by the holders of
outstanding stock 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, and those
consents are 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 stockholders are recorded. Read-Rite's certificate of
incorporation does not prohibit stockholder action by written consent.
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
Proposals. Since the first date on which a signed written consent
setting forth the action proposed to be taken in connection with the Offer
was delivered on ________, 1997, the Record Date will be _______________,
1997.
If the Proposals are adopted pursuant to the consent procedure, prompt
notice will be given pursuant to Section 228(d) of the DGCL to stockholders
who have not executed consents.
EFFECTIVENESS AND REVOCATION OF CONSENTS
The corporate actions proposed herein will be adopted when properly
completed, unrevoked consents are signed by the holders of record on the
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<PAGE>
Record Date of a majority of the Shares then outstanding and such consents
are delivered to Read-Rite, provided that the requisite consents are so
delivered within 60 days of the earliest dated consent delivered to Read-
Rite. The effectiveness of each of the Proposals is subject to, and
conditioned upon, the adoption of each of the other Proposals by the
holders of record, as of the close of business on the Record Date, of a
majority of the Shares then outstanding (including the receipt of consents
from such holders to the removal of each member of Read-Rite Board and to
the election of each Nominee).
Applied Magnetics plans to present the results of a successful
solicitation with respect to the corporate actions proposed herein to Read-
Rite as soon as possible.
An executed consent card may be revoked at any time before the action
authorized by the executed consent becomes effective by marking, dating,
signing and delivering a written revocation. A revocation may be in any
written form validly signed by the record holder as long as it clearly
states that the consent previously given is no longer effective. The
delivery of a subsequently dated consent card which is properly completed
will constitute a revocation of any earlier consent. The revocation may be
delivered either to Applied Magnetics in care of MacKenzie Partners, Inc.,
156 Fifth Avenue, New York, NY 10010 or to Read-Rite at 345 Los Coches
Street, Milpitas, California 95035 (Attention: Corporate Secretary) or any
other address provided by Read-Rite. Although a revocation is effective if
delivered to Read-Rite, Applied Magnetics requests that either the original
or photostatic copies of all revocations of consents be mailed or delivered
to Applied Magnetics in care of MacKenzie at the address set forth above,
so that Applied Magnetics will be aware of all revocations and can more
accurately determine if and when consents to the actions described herein
have been received from the holders of record on the Record Date of a
majority of outstanding Shares.
SPECIAL INSTRUCTIONS
If you were a record holder of Shares as of the close of business on
the Record Date, you may elect to consent to, withhold consent to or
abstain with respect to each Proposal by marking the "CONSENTS", "DOES NOT
CONSENT" or "ABSTAIN" box, as applicable, underneath each such Proposal on
the accompanying BLUE consent card and signing, dating and returning it
promptly in the enclosed post-paid envelope.
In addition, you may withhold consent to the removal of any individual
member of Read-Rite Board or to the election of any individual Nominee by
writing such person's name on the consent card. However, the effectiveness
of each of the Proposals is subject to, and conditioned upon, the receipt
of consents from the holders of record on the Record Date of a majority of
the Shares then outstanding to the removal of each member of the Read-Rite
Board and to the election of each Nominee.
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<PAGE>
If the stockholder has failed to check a box marked "CONSENTS", "DOES
NOT CONSENT" or "ABSTAIN" for one or more of the Proposals, such
stockholder will be deemed to have consented to such Proposal or Proposals,
except that such stockholder will not be deemed to have consented to the
removal of any member of Read-Rite Board or the election of any Nominee
whose name is written-in on the consent card.
APPLIED MAGNETICS RECOMMENDS THAT YOU CONSENT TO EACH OF THE
PROPOSALS.
YOUR CONSENT IS IMPORTANT. PLEASE MARK, SIGN AND DATE THE ENCLOSED
BLUE CONSENT CARD AND RETURN IN THE ENCLOSED POSTAGE-PAID ENVELOPE
PROMPTLY. FAILURE TO RETURN YOUR CONSENT WILL HAVE THE SAME EFFECT AS
VOTING AGAINST THE PROPOSALS.
If your Shares are held in the name of a brokerage firm, bank nominee
or other institution, you should contact the person for your account and
give instructions for the BLUE consent card representing your Shares to be
mailed, dated and signed. Only that institution can execute a BLUE consent
card with respect to your Shares and only upon receipt of specific
instructions from you. Applied Magnetics urges you to confirm in writing
your instructions to the person responsible for your account and to provide
a copy of those instructions to Applied Magnetics in care of MacKenzie
using the stamped self-addressed envelope included in the packet so that
Applied Magnetics will be aware of all instructions given and can attempt
to ensure that such instructions are followed. Since Applied Magnetics
must receive consents from a majority of Read-Rite's outstanding Shares in
order for the Proposals to be adopted, a broker non-vote or direction to
withhold authority to vote on the blue card will have the same effect as a
"no" vote with respect to Applied Magnetics' solicitation. Broker non-
votes, abstaining or not returning a signed consent will have the same
effect as withholding consent to the proposed actions.
DISSENTERS' RIGHTS
Assuming that the Shares continue to be quoted on the Nasdaq National
Market after the consummation of the Offer, stockholders of Read-Rite 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 stockholders of Read-Rite 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 holders of not more than 5%
of the outstanding Shares at the effective time of the Merger perfect
dissenters' rights, to the extent such holders have dissenters' rights.
-19-
<PAGE>
If you have any questions about giving your Consent or require
assistance, please contact:
MACKENZIE PARTNERS, INC.
156 FIFTH AVENUE
NEW YORK, NEW YORK 10010
(212) 929-5500 (call collect)
or
Toll Free (800) 322-2885
Dated: _________, 1997
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<PAGE>
ANNEX I
SHARES HELD BY READ-RITE'S DIRECTORS
AND EXECUTIVE OFFICERS
Based upon Applied Magnetics' review of Read-Rite's Proxy Statement
dated January 15, 1997, to Applied Magnetics' knowledge, the following
table sets forth the beneficial ownership of Shares 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 PERCENT
NAME OF SHARES OF TOTAL
---- --------- --------
Cyril J. Yansouni (1).............................. 920,217 1.9%
Fred Schwettmann (2)............................... 133,297 *
John G. Linvill (3)................................ 22,500 *
William J. Almon (4)............................... 5,500 *
Michael L. Hackworth (5)........................... 1,500 *
Matthew J. O'Rourke................................ 1,200 *
Peter G. Bischoff (6).............................. 150,520 *
Michael A. Klyszeiko (7)........................... 90,001 *
Alan S. Lowe (8)................................... 85,780 *
All executive officers and directors as
a group (13) persons (9)........................... 1,538,151 3.2%
- ------------------
* Less than 1%
(1) Includes 685,308 shares issuable upon the exercise of stock options to
purchase shares which are exercisable within 60 days of December 30,
1996.
(2) Includes 129,252 shares issuable upon the exercise of stock options to
purchase shares which are exercisable within 60 days of December 30,
1996.
(3) Includes 19,500 shares issuable upon the exercise of stock options to
purchase shares which are exercisable within 60 days of December 30,
1996.
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<PAGE>
(4) Includes 4,500 shares issuable upon the exercise of stock options to
purchase shares which are exercisable within 60 days of December 30,
1996.
(5) Includes 1,500 shares issuable upon the exercise of stock options to
purchase shares which are exercisable within 60 days of December 30,
1996.
(6) Includes 146,721 shares issuable upon the exercise of stock options to
purchase shares which are exercisable within 60 days of December 30,
1996.
(7) Includes 79,589 shares issuable upon the exercise of stock options to
purchase shares which are exercisable within 60 days of December 30,
1996.
(8) Includes 64,026 shares issuable upon the exercise of stock options to
purchase shares which are exercisable within 60 days of December 30,
1996.
(9) Includes 1,252,661 shares issuable upon the exercise of stock options
to purchase which are exercisable within 60 days of December 30, 1996.
I-2
<PAGE>
ANNEX II
INFORMATION CONCERNING THE DIRECTORS
AND EXECUTIVE OFFICERS OF APPLIED MAGNETICS
AND CERTAIN EMPLOYEES AND OTHER REPRESENTATIVES OF
APPLIED MAGNETICS
The following table sets forth the name and the present principal
occupation or employment, and the name, principal business and address of
any corporation or other organization in which such employment is carried
on, of (1) the directors and executive officers of Applied Magnetics and
(2) certain employees and other representatives of Applied Magnetics who
may also assist MacKenzie in soliciting consents from Read-Rite's
stockholders. Unless otherwise indicated, the principal business address
of each director, executive officer, employee or representative is Applied
Magnetics Corporation, 75 Robin Hill Road, Goleta, CA 93117-5400.
DIRECTORS AND EXECUTIVE OFFICERS OF APPLIED MAGNETICS
PRESENT OFFICE
NAME AND OR OTHER PRINCIPAL
PRINCIPAL BUSINESS OCCUPATION OR
ADDRESS EMPLOYMENT
- --------------------------- ---------------------
Craig D. Crisman...................... Chairman of the Board and
Chief Executive Officer
Harold R. Frank....................... Chairman Emeritus and
Director
Herbert M. Dwight, Jr................. Director
Jerry E. Goldress..................... Director
R.C. Mercure.......................... Director
Peter T. Altavilla.................... Secretary and Corporate
Controller
Mr. Crisman became an employee of Applied Magnetics on August 1, 1995.
Prior to that time, since 1981, he was a member of the consulting firm of
Grisanti, Galef & Goldress ("GG&G"). GG&G was engaged by Applied Magnetics
on August 1, 1994, to provide crisis management and turnaround services to
Applied Magnetics. 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 on August 1, 1994.
He was elected Chairman of the Board on November 3, 1995. During the five
II-1
<PAGE>
years preceding his appointment as Chief Executive Officer and as a
director of Applied Magnetics, 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.
Mr. Frank, founder of Applied Magnetics, was named Chairman
Emeritus of Applied Magnetics on November 3, 1995. He is also director of
Circon Corporation, a producer of endoscopes and ultra miniature color
video cameras for medical and industrial applications, Trust Company of the
West, a financial institution, and Key Technology, Inc., a manufacturer of
automated food processing systems.
Mr. Dwight is, and for more than five years has been, President
and Chairman of Optical Coating Laboratory, Inc., which is engaged in the
design, development and production of precision optical thin film
components. He is also a director of Applied Materials, Inc., a wafer
fabrication equipment manufacturer.
Mr. Goldress is, and for more than five years has been, Chief
Executive Officer of GG&G. He holds the position of Chairman and Chief
Executive Officer of Wherehouse Entertainment, a retail seller of compact
discs and videos.
Dr. Mercure was, ending in September of 1996, for more than five
years Professor and Director of the Engineering Management Program at the
University of Colorado at Boulder. Dr. Mercure has been a director of
Applied Magnetics since 1982. He is a director of Imex Medical Systems,
which is engaged in the development and manufacturer of medical diagnostic
and monitoring instruments, and Ball Corporation, a manufacturer of metal
and plastic containers.
Peter T. Altavilla has been employed by Applied Magnetics since
1987. He served as Assistant Controller until August 1, 1994, when he was
elected to his present position as Corporate Controller. Mr. Altavilla was
elected Secretary on February 9, 1996.
II-2
<PAGE>
CERTAIN EMPLOYEES AND OTHER REPRESENTATIVES OF APPLIED MAGNETICS
WHO MAY ALSO SOLICIT CONSENTS
PRESENT OFFICE
NAME AND OR OTHER PRINCIPAL
PRINCIPAL BUSINESS OCCUPATION OR
ADDRESS EMPLOYMENT
- ----------------------- ------------------------------
Steven E. Beal Manager of Sales, Marketing and Program
Management
Paul D. Frank Chief Technology Officer
Steven E. Beal has been with Applied Magnetics for 17 years.
He is responsible for worldwide sales, marketing and program management.
Paul D. Frank has been with Applied Magnetics for 27 years.
He is responsible for technical development. He holds a B.S. Degree in
mathematics and a Ph.D. in computer science.
II-3
<PAGE>
ANNEX III
SHARES HELD BY APPLIED MAGNETICS, ITS
DIRECTORS AND EXECUTIVE OFFICERS, CERTAIN EMPLOYEES AND
OTHER REPRESENTATIVES OF APPLIED MAGNETICS AND THE NOMINEES AND
CERTAIN TRANSACTIONS BETWEEN ANY OF THEM AND READ-RITE
Applied Magnetics purchased 200 Shares on February 5, 1997 for $29 7/8
per share (excluding mark-ups or commissions). No part of the purchase
price or market value of any of the Shares described in this paragraph was
represented by funds borrowed or otherwise obtained for the purpose of
acquiring or holding such Shares. Applied Magnetics is the record owner of
the Shares. Except as disclosed above, neither Applied Magnetics nor any
of its directors, executive officers or other representatives or employees,
or other persons known to Applied Magnetics who may solicit consents has any
security holdings in Read-Rite. Applied Magnetics disclaims beneficial
ownership of any Shares owned by any pension plan or other employee benefit
plan of Applied Magnetics or by any affiliate of Applied Magnetics.
Applied Magnetics further disclaims beneficial ownership of any securities
of Read-Rite held by Applied Magnetics or any of its subsidiaries for the
benefit of third parties or in customer or fiduciary accounts in the
ordinary course of business.
III-1
<PAGE>
ANNEX IV
FORM OF PROPOSED AMENDMENT
TO SECTION 3.2 OF ARTICLE III
OF READ-RITE Bylaws
Section 3.2. Number of Directors. The number of directors which shall
constitute the whole Board shall be two (2). The directors shall be
elected at the annual meeting of the stockholders, except as provided in
Section 3.3 of this Article, and each director elected shall hold office
until his or her successor is elected and qualified. Directors need not be
stockholders.
IV-1
<PAGE>
[FORM OF CONSENT CARD]
PRELIMINARY COPY--SUBJECT TO COMPLETION
BLUE
CONSENT
CARD
Unless otherwise indicated below, the undersigned, a stockholder of
record of Read-Rite Corporation (Read-Rite") on __________, 1997 (the
"Record Date"), hereby consents pursuant to Section 228(a) of the Delaware
General Corporation Law with respect to all shares of common stock of Read-
Rite (the "Shares") held by the undersigned to the taking of the following
actions without a meeting of the stockholders of Read-Rite:
1. The removal of each incumbent director of Read-Rite as follows: Cyril
J. Yansouni, Fred Schwettmann, John G. Linvill, William J. Almon,
Michael L. Hackworth and Matthew J. O'Rourke, and any other person who
is a director of Read-Rite at the time the action taken by this
written consent becomes effective.
/ / CONSENTS / / DOES NOT CONSENT / / ABSTAIN
INSTRUCTION: TO CONSENT, WITHHOLD CONSENT OR ABSTAIN FROM CONSENTING TO
THE REMOVAL OF ALL THE ABOVE-NAMED DIRECTORS AND ANY OTHER
PERSON WHO IS A DIRECTOR OF READ-RITE AT THE TIME THE ACTION
TAKEN BY THIS WRITTEN CONSENT BECOMES EFFECTIVE, CHECK THE
APPROPRIATE BOX ABOVE. IF YOU WISH TO CONSENT TO THE
REMOVAL OF CERTAIN OF THE ABOVE-NAMED DIRECTORS AND/OR
CERTAIN OF THE DIRECTORS NOT NAMED ABOVE WHO ARE DIRECTORS
OF READ-RITE AT THE TIME THE ACTION TAKEN BY THIS WRITTEN
CONSENT BECOMES EFFECTIVE, BUT NOT ALL OF THEM, CHECK THE
"CONSENTS" BOX ABOVE AND WRITE THE NAME OF EACH PERSON YOU
DO NOT WISH REMOVED IN THE FOLLOWING SPACE:
- ---------------------------------------------------------------------------
IF NO BOX IS MARKED ABOVE WITH RESPECT TO THIS PROPOSAL, THE
UNDERSIGNED WILL BE DEEMED TO CONSENT TO SUCH PROPOSAL,
EXCEPT THAT THE UNDERSIGNED WILL NOT BE DEEMED TO CONSENT TO
THE REMOVAL OF ANY INCUMBENT DIRECTOR WHOSE NAME IS WRITTEN-
IN IN THE SPACE PROVIDED ABOVE.
2. Amendment of Section 3.2 Article III of Read-Rite's Bylaws to fix the
number of directors at two.
/ / CONSENTS / / DOES NOT CONSENT / / ABSTAIN
<PAGE>
3. The election of the following persons as directors of Read-Rite to
hold office until their successors are elected and
qualified:_________________ (the "Nominees").
/ / CONSENTS / / DOES NOT CONSENT / / ABSTAIN
(CONTINUED AND TO BE DATED AND SIGNED ON REVERSE SIDE)
<PAGE>
INSTRUCTION: TO CONSENT, WITHHOLD CONSENT OR ABSTAIN FROM CONSENTING TO
THE ELECTION OF ALL THE ABOVE-NAMED PERSONS, CHECK THE
APPROPRIATE BOX ABOVE. IF YOU WISH TO CONSENT TO THE
ELECTION OF CERTAIN OF THE ABOVE-NAMED PERSONS, BUT NOT ALL
OF THEM, CHECK THE "CONSENTS" BOX ABOVE AND WRITE THE NAME
OF EACH SUCH PERSON YOU DO NOT WISH ELECTED IN THE FOLLOWING
SPACE:
- ---------------------------------------------------------------------------
IF NO BOX IS MARKED ABOVE WITH RESPECT TO THIS PROPOSAL, THE
UNDERSIGNED WILL BE DEEMED TO CONSENT TO SUCH PROPOSAL,
EXCEPT THAT THE UNDERSIGNED WILL NOT BE DEEMED TO CONSENT TO
THE ELECTION OF ANY CANDIDATE WHOSE NAME IS WRITTEN-IN IN
THE SPACE PROVIDED ABOVE.
4. Repeal each provision of the Read-Rite Bylaws or amendment thereto
adopted subsequent to December 20, 1996 and prior to the effectiveness
of the Proposals.
/ / CONSENTS / / DOES NOT CONSENT / / ABSTAIN
The provisions of the Consent Statement dated ____________, 1997 of Applied
Magnetics Corporation, which more fully set forth the amendments to the
Bylaws of Read-Rite described in Items 2 and 4 above, including the precise
wording of such amendments, are incorporated herein by reference.
IN THE ABSENCE OF DISSENT OR ABSTENTION BEING INDICATED ABOVE, THE
UNDERSIGNED HEREBY CONSENTS TO EACH ACTION LISTED ABOVE.
The effectiveness of each of the proposals set forth above is subject to,
and conditioned upon, the adoption of each of the other proposals set forth
above by the holders of record as of the close of business on the Record
Date of a majority of the Shares then outstanding (including the receipt of
consents from such holders to the removal of each member of the Board of
Directors of Read-Rite and to the election of each Nominee).
Please sign exactly as name appears on stock
certificates or on label affixed hereto.
When shares are held by joint tenants, both
should sign. In case of joint owners, EACH
joint owner should sign. When signing as
attorney, executor, administrator, trustee,
guardian, corporate officer, etc., give full
title as such.
DATED: ___________________________________
__________________________________________
Signature
<PAGE>
__________________________________________
Signature, if held jointly
__________________________________________
Title or Authority
IN ORDER FOR YOUR CONSENT TO BE VALID, IT MUST BE DATED.
PLEASE SIGN, DATE AND MAIL YOUR CONSENT PROMPTLY
IN THE POSTAGE-PAID ENVELOPE ENCLOSED
<PAGE>
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