UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1997
Commission file number: 0-19512
READ-RITE CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 94-2770690
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
345 LOS COCHES STREET, MILPITAS, CALIFORNIA 95035
(Address of principal executive offices)
(Zip Code)
(408) 262-6700
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
COMMON STOCK, $0.0001 PAR VALUE 47,872,293 SHARES
(Class) (Outstanding at July 31, 1997)
<PAGE>
READ-RITE CORPORATION
Index
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets-
June 30, 1997 and September 30, 1996
Consolidated Condensed Statements of Operations-
Three Months and Nine Months Ended June 30, 1997 and 1996
Consolidated Condensed Statement of Cash Flows-
Nine Months Ended June 30, 1997 and 1996
Notes to Consolidated Condensed Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II- OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
INDEX OF EXHIBITS
<PAGE>
Part 1. Financial Information
Item 1. Financial Statements
READ-RITE CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
June 30, Sept. 30,
1997 1996
-------- --------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $81,110 $82,291
Short-term investments 36,809 65,655
Accounts receivable, net 137,173 90,142
Inventories 80,769 58,005
Prepaid expenses and other current assets 13,672 13,962
-------- --------
Total current assets 349,533 310,055
Property, plant and equipment, at cost 1,019,850 834,852
Less: Accumulated depreciation 378,716 267,558
-------- --------
Property, plant and equipment, net 641,134 567,294
Intangible and other assets 37,425 31,323
-------- --------
TOTAL ASSETS $1,028,092 $908,672
======== ========
LIABILITIES, MINORITY INTEREST IN CONSOLIDATED
SUBSIDIARY AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $117,379 $88,434
Accrued compensation and benefits 39,273 27,099
Income taxes payable 26,119 27,754
Other accrued liabilities 35,481 37,196
Current portion of long-term debt and capital lease obligations 13,783 15,613
-------- --------
Total current liabilities 232,035 196,096
Long-term debt and capital lease obligations 164,986 172,037
Deferred income taxes and other 30,815 15,458
-------- --------
TOTAL LIABILITIES 427,836 383,591
Minority interest in consolidated subsidiary 74,522 71,282
-------- --------
Stockholders' equity:
Series A participating preferred stock, $0.0001 par value -- --
Common stock, $0.0001 par value 5 5
Additional paid-in capital 349,664 336,113
Retained earnings 175,507 114,979
Cumulative translation adjustment 558 2,702
-------- --------
TOTAL STOCKHOLDERS' EQUITY 525,734 453,799
-------- --------
TOTAL LIABILITIES, MINORITY INTEREST IN CONSOLIDATED
SUBSIDIARY AND STOCKHOLDERS' EQUITY $1,028,092 $908,672
======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
<PAGE>
READ-RITE CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales $310,236 $238,281 $843,892 $795,711
Cost of sales 238,146 226,912 673,608 658,231
-------- -------- -------- --------
Gross margin 72,090 11,369 170,284 137,480
Operating expenses:
Research and development 15,994 12,937 46,623 39,117
Selling, general and administrative 10,412 10,539 31,535 32,853
-------- -------- -------- --------
Total operating expenses 26,406 23,476 78,158 71,970
-------- -------- -------- --------
Operating income (loss) 45,684 (12,107) 92,126 65,510
Interest expense 3,569 3,020 10,631 9,113
Interest income and other, net 1,768 2,814 6,766 8,383
-------- -------- -------- --------
Income (loss) before provision for income
taxes and minority interest 43,883 (12,313) 88,261 64,780
Provision for income taxes 10,094 7,409 21,190 31,309
-------- -------- -------- --------
Income (loss) before minority interest 33,789 (19,722) 67,071 33,471
Minority interest in net income of
consolidated subsidiary 2,616 3,188 6,556 12,523
-------- -------- -------- --------
NET INCOME (LOSS) $31,173 ($22,910) $60,515 $20,948
======== ======== ======== ========
NET INCOME (LOSS) PER SHARE $0.64 ($0.49) $1.24 $0.44
======== ======== ======== ========
SHARES USED IN PER SHARE CALCULATION 48,963 46,617 48,626 47,840
======== ======== ======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
<PAGE>
READ-RITE CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 30,
-------------------
1997 1996
--------- ---------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $60,515 $20,948
Adjustments required to reconcile net income
to cash provided by operations:
Depreciation and amortization 122,501 78,301
Minority interest in net income of
consolidated subsidiary 6,556 12,523
Other, net 8,820 5,814
Changes in assets and liabilities:
Accounts receivable, net (48,760) 31,776
Inventories (23,054) (29,476)
Prepaid expenses and other current assets 336 (2,291)
Accounts payable, accrued liabilities and
income taxes payable 38,408 44,472
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 165,322 162,067
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (192,572) (218,111)
Maturities of available-for-sale investments 398,131 847,287
Purchases of available-for-sale investments (369,051) (805,590)
Other assets and liabilities, net (6,053) (6,302)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (169,545) (182,716)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt -- 50,000
Payments of principal on long-term debt and
capital lease obligations (8,881) (16,904)
Repurchase of common stock -- (43,046)
Proceeds from issuance of common stock 11,370 5,729
--------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 2,489 (4,221)
--------- ---------
Effect of exchange rate changes on cash 553 8,997
--------- ---------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS (1,181) (15,873)
Cash and cash equivalents at beginning of period 82,291 168,860
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $81,110 $152,987
========= =========
Supplemental disclosures:
Cash paid during the period for:
Interest $11,007 $6,128
Income taxes $12,666 $42,485
Other non-cash items:
Issuances of common stock under 401K plan $2,181 $2,332
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
<PAGE>
READ-RITE CORPORATION
Notes to Consolidated Condensed Financial Statements
(Unaudited)
Note 1 - General
Read-Rite Corporation (the "Company") maintains a fifty-
two/fifty-three week fiscal year cycle ending on the Sunday
closest to September 30. The third quarters of fiscal 1997 and
1996 ended on June 29, 1997 and June 30, 1996, respectively.
To conform to the Company's fiscal year ends, the Company
must add a fifty-third week to every sixth or seventh fiscal year;
however, both fiscal 1997 and fiscal 1996 are 52-week years.
For convenience, the accompanying financial statements have
been shown as ending on the last day of the calendar month.
In the opinion of management, all adjustments (consisting of
only normal recurring adjustments) considered necessary for a
fair presentation of the interim periods presented have been
included. The interim results are not necessarily indicative of
the operating results expected for the full fiscal year ending
September 30, 1997. The accompanying unaudited financial
statements should be read in conjunction with the Company's
audited financial statements included in its 1996 Annual Report
on Form 10-K.
Note 2 - Inventories
Inventories consisted of the following at (in thousands):
<TABLE>
<CAPTION>
June 30, September 30,
1997 1996
--------- -------------
<S> <C> <C>
Raw materials $19,284 $13,591
Work-in-process 55,305 34,157
Finished goods 6,180 10,257
------- -------
Total inventories $80,769 $58,005
======= =======
</TABLE>
Note 3 - Income Taxes
The provision for income taxes for the three months and nine
months ended June 30, 1997, is based upon the Company's
estimated annual effective tax rate for fiscal 1997. The effective
tax rate differs from the statutory federal income tax rate
primarily due to net tax savings associated with the Company's
foreign operations.
Note 4 - New Accounting Standards
In February 1997, the Financial Accounting Standards Board
issued Financial Accounting Standards Board Statement
Number 128 ("FASB 128"), Earnings Per Share, which the
Company is required to adopt in the first quarter of fiscal 1998.
At that time, the Company will be required to change the
method currently used to compute earnings per share and to
restate all prior periods. Under FASB 128, the dilutive effect of
outstanding stock options will be excluded from the calculation
of primary earnings per share. The impact of excluding the
dilutive effect of outstanding stock options is expected to result
in an increase in earnings per share presented by the Company
of $0.01 for the three months ended June 30, 1997, and $0.04
and $0.01 for the nine months ended June 30, 1997 and 1996,
respectively. There was no impact to primary earnings per
share for the three months ended June 30, 1996. A calculation
of dilutive earnings per share will also be required; however,
this is not expected to differ materially from the Company's
reported primary earnings per share.
READ-RITE CORPORATION
Notes to Consolidated Condensed Financial Statements
(Continued)
(Unaudited)
Note 4 - New Accounting Standards (Continued)
In July 1997, the Emerging Issues Task Force ("EITF") reached
a consensus in EITF Issue 96-16, regarding whether rights of a
minority shareholder should preclude an investor from
consolidating a majority-owned investee. The EITF determined
that consolidation of a majority-owned investee is not
appropriate if a minority shareholder has rights to participate in
the significant decisions made in the ordinary course of
business. The Company has not yet determined whether the
rights of Sumitomo Metal Industries, Ltd. ("Sumitomo"), as the
minority shareholder of Read-Rite SMI Corporation ("Read-
Rite SMI"), the Company's joint venture in Japan, would be
considered participating rights. If Sumitomo's minority
shareholder rights are determined to be participating rights, the
Company would be required to change the method of
accounting for its investment in Read-Rite SMI from
consolidation to the equity method. This change in accounting
treatment would have no effect on the Company's net income or
net income per share. The consensus in EITF Issue 96-16 is
effective for financial statements issued for fiscal years ending
after December 15, 1998.
Note 5 - Subsequent Event
In October 1996, the Company entered into a Development
Agreement with Quinta Corporation ("Quinta"), to design and
manufacture magneto-optical head gimbal assemblies and
headstack assemblies for Quinta's optically-enhanced
Winchester disk drive program. As part of that agreement, the
Company made certain investments in Quinta, for which it
received an aggregate of 1,249,998 shares of Quinta Series B
Preferred Stock. On July 2, 1997, Seagate Technology, Inc.
("Seagate") announced the signing of a definitive agreement
to acquire Quinta. Upon consummation of the acquisition,
each share of Quinta's outstanding preferred stock, including
the Series B Preferred Stock held by the Company, will be
converted into the right to receive cash and certain contingent
payments at a specified price per share. The Company
expects to report a gain from this transaction.
READ-RITE CORPORATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Certain statements in this Management's Discussion and
Analysis of Financial Condition and Results of Operations
include forward-looking information within the meaning of
Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as
amended, and are subject to the "safe harbor" created by those
sections. These statements include, but are not limited to, the
Company's plan to continue increasing its research and
development expenditures; the Company's expectation that
selling, general and administrative expenses will not increase
significantly in the near-term; the Company's plan to spend
approximately $300 million on capital expenditures in fiscal
1997; the Company's belief that its liquid assets, credit
facilities and cash generated from operations are sufficient to
fund its operations for the next year; the Company's belief
that it will remain a supplier to both Micropolis and Maxtor
notwithstanding recent acquisitions of such companies by
Singapore Technologies and Hyundai, respectively;
Quantum's stated intention to continue purchasing the
majority of its HGA requirements from merchant suppliers;
and the Company's belief that the Company and the
individual defendants in the purported class actions
(collectively, the "Actions") described in Part II, Item 1
"Legal Proceedings" below, have meritorious defenses in such
Actions. Actual results for future periods could differ
materially from those projected in such forward-looking
statements.
Some factors which could cause future actual results to
materially differ from the Company's recent results or those
projected in the forward-looking statements are failure to meet
forecasted expenditures, failure by the Company to execute on
magnetoresistive ("MR") product development; failure to
obtain necessary customer qualifications on new programs,
failure to timely and cost-effectively introduce those programs
into manufacturing, and failure to achieve and maintain
acceptable production yields on those programs; constraints
on supplies of raw materials or components limiting the
Company's ability to maintain or increase production;
significant increases or decreases in demand for the
Company's products, cancellation or rescheduling of customer
orders, changes to the Company's product mix, and changes
in business conditions affecting the Company which
significantly increase the Company's working capital needs;
the Company's inability to obtain or generate sufficient capital
to fund its research and development expenses and other
working capital needs; or failure by the Company to obtain
favorable resolution of the claims set forth in the Actions. For
a more detailed discussion of certain risks associated with the
Company's business, see "Certain Additional Business Risks"
below.
READ-RITE CORPORATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Three and Nine Months Ended June 30, 1997 Compared with
Three and Nine Months Ended June 30, 1996
The following table sets forth certain financial data as a
percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
------------------- -------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 76.8% 95.2% 79.8% 82.7%
--------- --------- --------- ---------
Gross margin 23.2% 4.8% 20.2% 17.3%
--------- --------- --------- ---------
Operating expenses:
Research and development 5.2% 5.4% 5.5% 4.9%
Selling, general and administrative 3.3% 4.5% 3.8% 4.2%
--------- --------- --------- ---------
Total operating expenses 8.5% 9.9% 9.3% 9.1%
--------- --------- --------- ---------
Operating income (loss) 14.7% -5.1% 10.9% 8.2%
Interest expense 1.2% 1.3% 1.3% 1.1%
Interest income and other, net 0.6% 1.2% 0.9% 1.0%
--------- --------- --------- ---------
Income (loss) before provision for income
taxes and minority interest 14.1% -5.2% 10.5% 8.1%
Provision for income taxes 3.2% 3.1% 2.6% 3.9%
--------- --------- --------- ---------
Income (loss) before minority interest 10.9% -8.3% 7.9% 4.2%
Minority interest in net income of
consolidated subsidiary 0.9% 1.3% 0.7% 1.6%
--------- --------- --------- ---------
NET INCOME (LOSS) 10.0% -9.6% 7.2% 2.6%
========= ========= ========= =========
</TABLE>
READ-RITE CORPORATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Net Sales
Net sales were $310.2 million for the three months ended June
30, 1997, a 30.2% increase over net sales of $238.3 million
for the three months ended June 30, 1996. The increase in net
sales in the current period was due primarily to significantly
higher unit sales and, to a lesser extent, higher average selling
prices for both headstack assemblies ("HSAs") and head
gimbal assemblies ("HGAs"). This increase in sales was
partially offset by the end-of-life of metal-in-gap ("MIG")
products, which accounted for none of the Company's sales
for the three months ended June 30, 1997, as compared to
19.0% of sales for the three months ended June 30, 1996.
Sales of HSAs and HGAs accounted for approximately 69%
and 30%, respectively, of net sales for the three months ended
June 30, 1997. Sales of HSAs and HGAs were approximately
66% and 33%, respectively, of net sales for the three months
ended June 30, 1996.
Net sales were $843.9 million for the nine months ended June
30, 1997, a 6.1% increase over net sales of $795.7 million for
the nine months ended June 30, 1996. The increase in net
sales in the current period was due primarily to significantly
higher unit sales and, to a lesser extent, higher average selling
prices for HSAs. This increase in sales was partially offset by
the end-of-life metal-in-gap ("MIG") products, which
accounted for a negligible amount of the Company's sales for
the nine months ended June 30, 1997, as compared to 21.1%
of sales for the nine months ended June 30, 1996.
The Company's sales of HSAs and HGAs accounted for
approximately 64% and 35%, respectively, of net sales for the
nine months ended June 30, 1997. Sales of HSAs and HGAs
were approximately 56% and 42%, respectively, of net sales
for the nine months ended June 30, 1996.
Gross Margin
The Company's gross margins are primarily influenced by
average selling prices, the level of unit sales in relation to
fixed costs, process yields, product mix (newer products and
HGAs typically generate higher gross margins than older
products and HSAs) and material costs. The relative impact
of these factors fluctuate from time to time. The Company's
gross margins also reflect charges for inventory and fixed
asset obsolescence related to products or technologies that
have reached their end-of-life.
The Company's gross margin for the three months ended June
30, 1997 was 23.2% of net sales, compared to 4.8% of net
sales for the three months ended June 30, 1996. The
significantly higher gross margin in the current period is
primarily attributable to higher average selling prices for
HSAs, and to increased unit sales in relation to fixed costs for
both HSAs and HGAs. Additionally, the three months ended
June 30, 1996 included a $10.0 million charge in cost of
goods sold for the write-off of inventory and fixed assets
associated with end-of-life products. The higher gross
margins were partially offset by a product mix weighted
toward HSAs, which tend to have lower gross margins.
The Company's gross margin for the nine months ended June
30, 1997 was 20.2% of net sales, compared to 17.3% of net
sales for the nine months ended June 30, 1996. The higher
gross margin in the current period is primarily attributable to
higher average selling prices and increased unit sales in
relation to fixed costs for HSAs. Additionally, the nine
months ended June 30, 1996, included a $10.0 million charge
in cost of goods sold for the write-off of inventory and fixed
assets associated with end-of-life products and a
READ-RITE CORPORATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Gross Margin (Continued)
$6.0 million charge in cost of goods sold for the consolidation
of the Company's San Diego operations to Northern
California.
As mentioned above, HSAs typically have lower gross
margins than HGAs. HSAs consist of two or more HGAs
and a variety of purchased components which the Company
assembles into a single unit. The cost of the purchased
components is a material percentage of the total cost of the
HSA; the gross margin on such purchased components is
substantially lower than the gross margin on HGAs produced
by the Company. The combination of the respective margins
on HGAs and non-HGA components and associated labor and
overhead included in HSAs thus typically produces a lower
aggregate gross margin on HSA sales compared to HGA sales.
Research and Development Expenses
Research and development ("R&D") expenses were $16.0
million, or 5.2% of net sales, for the three months ended June
30, 1997, compared to $12.9 million, or 5.4% of net sales, for
the three months ended June 30, 1996. The decrease in R&D
expenses as a percentage of net sales is attributable to the
significant increase in net sales in the current period. The
increase in R&D expenses in absolute dollars in the current
period is attributable to the Company's ongoing development
efforts in advanced inductive, MR and emerging technologies.
R&D expenses were $46.6 million, or 5.5% of net sales, for
the nine months ended June 30, 1997, compared to $39.1
million, or 4.9% of net sales, for the nine months ended June
30, 1996. R&D expenses for the nine months ended June 30,
1996 reflected a charge of $9.0 million due to an investment
in planar recording technology. Excluding this charge, R&D
expenses increased significantly in both absolute dollars and
as a percentage of net sales due to hiring of additional
engineers and related staff and increased support expenses for
the Company's ongoing development efforts in advanced
inductive, MR and emerging technologies.
In addition, from time to time, the Company engages in fully
or partially funded research and development for certain
existing or potential customers. R&D expenses under such
projects are offset as incurred to the extent of development
funds available. For the three months and nine months ended
June 30, 1997, R&D expenses were offset by development
funding of $1.8 million and $2.3 million, respectively. For
the three months and nine months ended June 30, 1996,
funded research and development was not material.
The Company intends to continue increasing its R&D
expenditures on an absolute dollar basis in future periods.
However, the level of R&D expenditures as a percentage of
net sales will vary from period to period depending on the
level of net sales.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses were
$10.4 million, or 3.3% of net sales, for the three months ended
June 30, 1997, compared to $10.5 million, or 4.5% of net
sales, for the three months ended June 30, 1996. SG&A
expenses were $31.5 million, or 3.8% of net sales, for the nine
months ended June 30, 1997, compared to $32.9 million, or
4.2% of net sales, for the nine months ended June 30, 1996.
The absolute dollar decrease in SG&A expenses for the three
months and nine months ended June 30, 1997 was primarily
due to cost reduction efforts implemented in the latter half of
fiscal 1996.
READ-RITE CORPORATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Selling, General and Administrative Expenses (continued)
The Company does not expect that SG&A expenses will
increase significantly in absolute dollars in the near-term, but
anticipates that SG&A expenses will vary from quarter to
quarter as a percentage of net sales, depending on the level of
net sales.
Interest Expense
Interest expense was $3.6 million and $10.6 million for the
three months and nine months ended June 30, 1997,
respectively, and $3.0 million and $9.1 million for the three
months and nine months ended June 30, 1996, respectively.
The increase in interest expense for the current periods as
compared to the same periods in fiscal 1996 is primarily due
to the increase in the average amount of debt outstanding.
Interest Income and Other, Net
Interest income and other, net, was $1.8 million for the three
months ended June 30, 1997, compared to $2.8 million for the
three months ended June 30, 1996. The decrease in interest
income and other, net, is primarily due to lower interest
income on lower average cash balances and foreign exchange
losses related to Read-Rite SMI.
Interest income and other, net, was $6.8 million for the nine
months ended June 30, 1997, compared to $8.4 million for the
nine months ended June 30, 1996. The decrease in interest
income and other, net, is primarily due to lower interest
income on lower average cash balances, partially offset by
foreign exchange gains related to Read-Rite SMI.
Provision for Income Taxes
The Company's estimated annual effective tax rate decreased
to 24.0% for the nine months ended June 30, 1997, compared
to 48.3% for the nine months ended June 30, 1996. The
decrease in the estimated annual effective tax rate for fiscal
1997 is primarily due to lower net tax from foreign operations.
The fiscal 1997 effective rate for the three months and nine
months ended June 30, 1997 differs from the statutory federal
income tax rate primarily due to net tax savings associated
with the Company's foreign operations.
Liquidity and Capital Resources
As of June 30, 1997, the Company had cash, cash equivalents
and short-term investments of $117.9 million, total assets of
$1,028.1 million and total long-term debt, including the
current portion, of $178.8 million. The Company's cash
generated by operating activities was $165.3 million for the
nine months ended June 30, 1997, compared to $162.1 million
for the nine months ended June 30, 1996.
The Company's business is highly capital intensive. During
the nine months ended June 30, 1997, the Company incurred
capital expenditures of approximately $192.6 million,
compared to $218.1 million for the nine months ended June
30, 1996. Capital expenditures have been made primarily to
expand production capacity in Thailand and Malaysia, to
expand wafer production in the United States and Japan, and
to support new manufacturing processes and new technologies
such as MR. The Company plans total
READ-RITE CORPORATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Liquidity and Capital Resources (continued)
capital expenditures of approximately $300 million in fiscal
1997; however, to the extent yields for the Company's
products are lower than expected, demand for such products
exceeds Company expectations, or the Company's
manufacturing process needs change significantly, such
expenditures may increase. As of June 30, 1997, total
commitments for construction or purchase of plant and
equipment totaled approximately $127.8 million.
The Company believes that its current level of liquid assets,
credit facilities, and cash expected to be generated from
operations will be sufficient to fund its operations for the next
12 months. However, if industry conditions become
unfavorable, the Company does not consistently achieve
timely customer qualifications on new product programs, or
the Company is unsuccessful at ramping up volume
production on new products at acceptable yields, the
Company's working capital and other capital needs will
increase. Conversely, if industry demand increases
significantly such that the Company's capital requirements
exceed management's current estimates, the Company may
again need to raise additional capital.
On March 28, 1997, the Company filed an omnibus shelf
registration statement on Form S-3 (the "Registration
Statement") with the Securities and Exchange Commission.
The Registration Statement, which became effective August 7,
1997, is intended to provide the Company flexibility to raise up
to $350 million from offerings of debt securities, common stock
or a combination thereof, subject to market conditions and the
Company's capital needs. Net proceeds from any offering
would be intended to be used for general corporate purposes,
including capital expenditures, and to meet working capital
needs.
The Company has never paid cash dividends on its capital
stock. The Company currently intends to retain any earnings
for use in its business and does not anticipate paying cash
dividends in the foreseeable future. Certain of the Company's
credit facilities currently prohibit the payment of cash
dividends.
Certain Additional Business Risks
The Company's business, financial condition and operating
results can be impacted by a number of factors, including but
not limited to those set forth below, any one of which could
cause the Company's actual results to vary materially from
recent results or from the Company's anticipated future
results.
The Company is a component supplier dependent upon a
limited number of customers in a volatile industry
characterized by rapid technological change, short product life
cycles, intense competition and steady price erosion. In
addition, as demonstrated during the second half of 1996
when significant orders were canceled and/or rescheduled by
certain customers with little or no advance warning, demand
for the Company's products is highly variable and thus
difficult to predict accurately. This variability was previously
demonstrated by the strong demand in the first half of fiscal
1993 and the significant industry contraction in the latter half
of fiscal 1993. In both cases, these demand variations
materially and adversely affected the Company's business,
financial condition and results of operations.
For the nine months ended June 30, 1997, the Company
produced HGAs in volume for 6 customers, HSAs in volume
for 4 customers and tape drive products in volume for 4
customers. Given the small number of high performance disk
drive and tape manufacturers who require an independent
source of HGA, HSA or tape head supply, the Company
expects its dependence on a limited number of customers to
continue. As
READ-RITE CORPORATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Certain Additional Business Risks (continued)
demonstrated by the significant reduction in the level of the
Company's business late in fiscal 1996 and in the second half
of fiscal 1993, the loss of any customer, or a significant
decrease in orders from one or more customers, may have a
material adverse effect on the Company's business, financial
condition and results of operations.
Given the Company's dependence upon a limited number of
customers, acquisitions and consolidations affecting such
customers could also have a material adverse effect on the
Company's business, financial condition and operating results.
For example, Seagate, a competitor of the Company, acquired
the tape head operations of Applied Magnetics Corporation
("AMC") in fiscal 1995, completed the acquisition of Conner
Peripherals, Inc., then a major customer of the Company in
fiscal 1996, and completed the acquisition of Quinta, the
Company's sole customer for its magneto-optical head
development effort, in August 1997. Seagate has significant
internal disk and tape head manufacturing capacity and does
not presently account for a material percentage of the
Company's net sales. Further, in fiscal 1996, Singapore
Technologies acquired the disk drive operations of Micropolis
Corporation ("Micropolis"), while Hyundai completed its
acquisition of Maxtor Corporation ("Maxtor"). While the
Company believes it will remain a supplier to both Micropolis
and Maxtor notwithstanding these changes in ownership, there
can be no assurance that these customers will continue
purchasing a significant quantity of their respective head
requirements from the Company.
Vertical integration by the Company's customers, through
which a customer acquires or increases internal HGA or HSA
production capability, could also materially and adversely
affect the Company's business, financial condition and results
of operations. In 1994, Quantum Corporation ("Quantum"), a
principal customer of the Company with no previous magnetic
recording head capacity, acquired Digital Equipment
Corporation's ("DEC") recording head and disk drive
operations and tape drive operations. In May 1997, Quantum
further announced the formation of a joint venture with its
primary manufacturing partner in Japan, Matsushita-Kotobuki
Electronics Industries Ltd. ("MKE") to manufacture MR
recording heads for rigid disk drives. According to the
announcement, this new venture will take over Quantum's
existing recording head operations and will be owned 51
percent by MKE. While Quantum's original acquisition of
DEC's recording head operations has not had a material
adverse effect on the Company's thin film head operations to
date, and Quantum has stated its intention to continue
purchasing the majority of its HGA requirements from
merchant suppliers, the Company cannot predict the effect the
formation of a Quantum/MKE recording head joint venture
will have on the Company's business with Quantum.
Accordingly, there can be no assurance that Quantum will
continue to purchase a significant portion of its head
requirements from the Company. Other acquisitions or
significant transactions by the Company's customers leading
to further consolidation or vertical integration could also
materially and adversely affect the Company's business,
financial condition and results of operations.
Currently, the Company's revenues are principally derived
from thin film inductive and MR products, which require
substantial investments in product development and
manufacturing equipment and facilities to effectively extend
the performance of these products to compete with new
products supporting higher areal densities. To maintain its
market position, the Company must continually and timely
improve its wafer fabrication, slider fabrication, HGA and
HSA technologies and facilities to meet industry demands, at
competitive costs. As the Company's customers continue to
move towards fewer, larger programs, and as competition for
this increasingly limited number of large volume programs
continues to increase, the failure by the Company to execute
on technologies necessary to consistently obtain qualification
on any of such volume programs will have a material adverse
effect on the Company's business, financial condition and
results of operations.
READ-RITE CORPORATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Certain Additional Business Risks (continued)
For example, in the second quarter of fiscal 1996, the
Company learned that to participate in certain key customer
programs, Company products would have to incorporate a
technical feature which the Company called "undershoot
reduction." Though the Company began development of
necessary processes for undershoot reduction in the second
quarter of fiscal 1996 and successfully reached volume
production in the fourth quarter of fiscal 1996, the significant
start-up costs and delays in new product introductions
materially and adversely impacted both the Company's
revenues and gross margins for the second half of fiscal 1996.
The disk drive industry is intensely competitive. Japanese
competitors such as TDK/SAE and Yamaha have been
aggressively competing for business in the United States and
in Japan, targeting the MR marketplace in particular; the
Company's primary domestic competitors are AMC, IBM,
Seagate and Quantum. IBM, Seagate, Quantum and other
disk drive manufacturers with "captive" or internal recording
head manufacturing capability, such as NEC and Fujitsu,
generally have significantly greater financial, technical and
marketing resources than the Company, and have made or
may make their products available in the merchant market. In
recent years, Seagate has been the Company's primary
competitor among captive head manufacturers. However, IBM
has made a series of announcements regarding its plans to
make substantial investments to expand its disk drive and disk
drive components business by selling to original equipment
manufacturers ("OEM") starting in 1997. The Company's
competitive position could be materially and adversely
affected if one or more of these competitors is successful in
marketing advanced MR products in the merchant market at
competitive pricing.
In its HSA business, the Company must compete against
certain of its customers' internal HSA capacity, as well as
against other merchant HSA manufacturers. The HSA
business is less capital intensive than the thin film HGA
business, thus making entry into the HSA manufacturing
business easier than entry into the thin film HGA business.
Accordingly, there can be no assurance that the Company will
be able to compete successfully with its customers' own HSA
capacity, or with existing or new HSA manufacturers.
Finally, new technologies, including extensions of existing
thin film head technology such as contact, near-contact, pico,
spin valve, or giant MR heads, which the Company is
currently developing, may compete in the future with the
Company's current head technologies and may support areal
density capabilities significantly greater than those of the
Company's thin film inductive and MR heads now in
commercial production. Additionally, other manufacturers
may already have or may develop, more advanced MR
technology or MR production capability than the Company.
Also, certain companies are developing alternative data
storage technologies, such as solid-state (flash or ferroelectric)
memory, optical disk drives or extensions of MIG
technologies, which do not utilize the Company's products.
The Company's competitive position may be materially and
adversely affected if a competitor precedes the Company in
the successful introduction of improved or new technologies
or products.
As indicated above, technology changes rapidly in the
Company's industry. These rapid changes require the
Company both to address obsolescence of old technologies
and to anticipate new technologies. Failure to smoothly
transition from old technologies or to anticipate and execute
on new technologies can have a material adverse effect on the
Company's business, financial condition and results of
operations. For example, due to the ever-increasing
performance requirements for recording heads, all of the
customer programs using the Company's MIG products
reached end-of-life during the third quarter of fiscal 1996.
READ-RITE CORPORATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Certain Additional Business Risks (continued)
Though MIG products accounted for approximately $174
million, or 18% of the Company's sales for fiscal 1996, the
Company's MIG revenues for fiscal 1997 will be negligible,
and the Company is no longer pursuing design-ins with this
technology. The rapid and unexpected decline in MIG sales
in the fourth quarter of fiscal 1996 (from approximately $65
million in the first quarter, $56 million in the second quarter,
$48 million in the third quarter, to $5 million in the fourth
quarter), coupled with the timing of certain new product
introductions in the Company's thin film business and
reductions in certain customer programs in the disk drive
industry during the third and fourth quarters, made it difficult
for the Company to transition its MIG facilities as planned to
the production of more advanced inductive or MR products.
As a result, during the fourth quarter of fiscal 1996, the
Company reduced its workforce in the Philippines by
approximately 5,000 employees, and incurred significant
charges for related severance costs, equipment and inventory
write-offs and facility-related charges. Additionally, in March
1996, the Company acquired a nonexclusive license to the
intellectual property of Censtor Corporation, including planar
technology, with a goal of combining that technology with the
Company's own inductive technologies and manufacturing
processes to extend recording areal densities for inductive
heads beyond conventional advanced thin film inductive
designs. However, due to delays in ramping production and to
the accelerating shift towards MR, in the latter half of
February 1997 the Company decided to discontinue planar
product development for hard disk drive applications and
instead to investigate potential uses of this technology in other
development applications. The impact on the Company's
business, financial condition, and results of operations from
this decision was not material.
The Company's business is highly capital intensive. To
maintain its market position, the Company must anticipate
demand for its products and the path of new technologies so
that production capacity, both in terms of amount and the
proper technologies, will be in place to meet customers'
needs. Accurate capacity planning is complicated by the pace
of technological change, unpredictable demand variations, the
effects of variable manufacturing yields, and the fact that most
of the Company's plant and equipment expenditures have long
lead times, thus requiring major commitments well in advance
of actual requirements. The Company's underestimation or
overestimation of its capacity requirements, or failure to
successfully and timely put in place the proper technologies,
would have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company has made substantial capital expenditures and
installed significant production capacity to support new
technologies and increased demand for its products. The
Company made capital expenditures in fiscal 1996 of
approximately $265.8 million, compared to approximately
$185.1 million for fiscal 1995, and plans to expend
approximately $300 million in fiscal 1997. There can be no
assurance that the Company's net sales will increase
sufficiently to absorb such additional costs, and that there will
not be periods, such as in fiscal 1996 and in the latter half of
fiscal 1993, when net sales declined quarter to quarter. See
"Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital
Resources" above.
The Company's production process is also labor intensive. As
a result, the Company conducts substantially all of its HGA
machining, assembly and test operations, HSA assembly and
tape head assembly operations offshore, and is thus subject to
the many risks associated with contracting with foreign
vendors and suppliers and with the ownership and operation
of foreign manufacturing facilities, including obtaining
requisite governmental permits and approvals, currency
exchange fluctuations and restrictions, variable or higher tax
rates, expiration of tax holidays, political instability, changes
in government policies relating to foreign investment and
operations, cultural issues, labor problems, trade restrictions,
transportation delays and interruptions, and changes in tariff
and freight rates. The Company has from
READ-RITE CORPORATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Certain Additional Business Risks (continued)
time to time experienced labor organization activities at
certain of its foreign operations, most recently in the first
quarter of fiscal 1997, but none of the Company's employees
are currently represented by a union. There can be no
assurance, however, that the Company will continue to be
successful in avoiding work stoppages or other labor issues in
the future.
The Company's manufacturing processes involve numerous
complex steps. Minor deviations can cause substantial yield
loss, and in some cases, cause production to be suspended.
Yields for new products initially tend to be low as the
Company completes product development and commences
volume manufacturing, and thereafter typically increase as the
Company ramps to full production. The Company's forward
product pricing reflects this assumption of improving yields;
as a result, material variances between projected and actual
yields have a direct effect on the Company's gross margins
and profitability. The difficulty of forecasting yields
accurately and maintaining cost competitiveness through
improving yields will continue to be magnified by ever-
increasing process complexity, and by the compression of
product life cycles which requires the Company to bring new
products on line faster and for shorter periods while
maintaining acceptable yields and quality, without, in many
cases, reaching the longer-term, high volume manufacturing
conducive to higher yields and declining costs.
As a high technology company in a narrowly defined industry,
the Company is often dependent upon a limited number of
suppliers and subcontractors, and in some cases on single
sources, for critical components or supplies. Limitation on or
interruption of the supply of certain components or supplies
can materially and adversely affect the Company's production
and results of operations. The Company has limited
alternative sources of certain key materials such as wafer
substrates, photoresist, wires and suspensions, and frequently
must rely on a single equipment supplier for a given
equipment type due to lack of viable alternatives or to insure
process consistency. Accordingly, capacity constraints or
production failures at, or restricted allocations by, the
Company's suppliers could have a material adverse effect on
the Company's own production, and its business, financial
condition and results of operations.
The Company manufactures custom products for a limited
number of customers. Because its products are custom, the
Company typically cannot shift raw materials, work-in-
process or finished goods from customer to customer, or from
one product program to another for a particular customer.
However, to enable its customers to get their products to
market quickly and to address its customers' demand
requirements, the Company must invest substantial resources
and make significant materials commitments, often before
obtaining formal customer qualifications and generally before
the market prospects for its customers' products are clear.
Moreover, given the rapid pace of technological advancement
in the disk drive industry, the disk drive products which do
succeed have unpredictable, and typically very short, life
cycles. Finally, in response to rapidly shifting business
conditions, the Company's customers have generally sought to
limit their purchase order commitments to the Company, and
certain customers have on occasion canceled or materially
modified outstanding purchase orders with the Company
without significant penalties. For example, the Company
experienced significant cancellations of orders during the third
quarter of fiscal 1996 and during the third quarter of fiscal
1993, and as a result, its operating results were materially and
adversely affected.
As a result of the above factors, the Company's inventory is
subject to substantial risk. To address these risks, the
Company monitors its inventories and provides inventory
write-downs intended to cover inventory risks. However,
given the Company's dependence on a few customers and a
limited number of
READ-RITE CORPORATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Certain Additional Business Risks (continued)
product programs for each customer, the magnitude of the
commitments the Company must make to support its
customers' programs and the Company's limited remedies in
the event of program cancellations, if a customer cancels or
materially reduces one or more product programs, or should a
customer experience financial difficulties, the Company may
be required to take significant inventory charges which, in
turn, could materially and adversely affect the Company's
business, financial condition and results of operations. While
the Company has taken certain charges and provided
inventory reserves to address known issues, there can be no
assurance that the Company will not be required to take
additional inventory write-downs due to the Company's
inability to obtain necessary product qualifications or due to
further order cancellations by customers.
The Company has experienced substantial fluctuations in its
quarterly and annual operating results in the past, and the
Company's future operating results could vary substantially
from quarter to quarter. The Company's operating results for
a particular quarter or longer periods can be materially and
adversely affected by numerous factors, such as delayed
product introductions, capacity constraints on certain
technologies, low product yields, increased material costs or
material or equipment unavailability, disruptions in foreign
operations, decreased demand for or decreased average selling
prices of the Company's products, increased competition
leading to a failure by the Company to obtain "design-in wins"
on one or more customer programs, changes in product mix,
increased operating costs associated with the ramp-up of
production as capacity is added or under-utilization of
capacity if demand is less than anticipated. The Company's
sales are generally made pursuant to individual purchase
orders which may be changed or canceled by customers on
short notice, often without material penalties. Changes or
cancellations of product orders could result in under-
utilization of production capacity and inventory write-offs.
For example, in the second half of fiscal 1996, and in calendar
1993, the Company experienced delays and cancellation of
orders, reduced average selling prices, inventory write-offs,
increased unit costs due to under-utilization of production
capacity, and, as a consequence of the foregoing, significantly
reduced revenues and gross margins, generating operating
losses. The Company expects periodic fluctuations will occur
in the future.
The trading price of the Company's common stock has been
and is expected to continue to be subject to wide fluctuations
in response to quarter-to-quarter variations in operating
results, announcements of technological innovations or new
products by the Company or its competitors, general
conditions in the disk drive and computer industries, changes
in earnings estimates or recommendations by securities
analysts, and other events or factors. In addition, stock
markets have experienced extreme price volatility in recent
years. This volatility has had a substantial effect on the
market price of securities issued by many high technology
companies, in many cases for reasons unrelated to the
operating performance of the specific companies, and the
Company's common stock has experienced volatility not
necessarily related to announcements of Company
performance. Broad market fluctuations may adversely affect
the market price of the Company's common stock.
READ-RITE CORPORATION
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On December 11, 1996, a purported class action complaint was
filed in the Superior Court of the State of California, Santa Clara
County, by Joan D. Ferrari and Mark S. Goldman against the
Company and certain of its officers and directors (the "Ferrari
State Action"). The Ferrari State Action complaint alleges that
during the period of April 19, 1995 - January 22, 1996,
defendants made false and misleading statements and
suppressed material information concerning the Company, in
violation of the California Corporations Law, the California
Civil Code (those section's prohibiting fraud), and the
California Business and Professions Code. A subsequent
demurrer by the Company was sustained in part and denied in
part, as a result of which the allegations under the California
Civil Code and the California Business and Professions Code,
and certain defendants, were excluded. The plaintiffs in the
Ferrari State Action seek damages of an unspecified amount.
On January 17, 1997, a purported class action complaint was
filed in the United States District Court for the Northern District
of California by Ferrari and Goldman against the Company and
certain of its officers and directors (the "Ferrari Federal
Action"). The Ferrari Federal Action contains virtually identical
factual allegations as the Ferrari State Action, and alleges
violations of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 and SEC Rule 10b-5. The plaintiffs in
the Ferrari Federal Action also seek damages of an unspecified
amount.
On January 21, 1997, a purported class action complaint was
filed in the United States District Court for the Northern District
of California by Edward McDaid against the Company and
certain of its officers and directors (the "McDaid Federal
Action"). The McDaid Federal Action contains essentially the
same factual allegations as the Ferrari State Action, but concerns
a purported class period of July 19, 1995 - June 19, 1996, and
alleges violation of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 and SEC Rule 10b-5. The plaintiffs in
the McDaid Federal Action also seek damages of an
unspecified amount.
On May 17, 1997, the United States District Court for
Northern California granted the Company's request that the
Ferrari Federal Action and McDaid Federal Action be
consolidated. The resulting action "In re Read-Rite
Corporation Securities Litigation," covers the time period
from July 19, 1995 to June 19, 1996, and combines and
reasserts those claims previously set forth in the Ferrari and
McDaid Federal Actions.
On May 19, 1997, a purported class action complaint was
filed in the United States District Court for Northern
California by James C. Nevius and William Molair against the
Company and certain of its officers and directors (the "Nevius
Federal Action"). The Nevius Federal Action asserts virtually
the same factual allegations as the McDaid Federal Action,
alleges violations of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 and SEC Rule 10b-5, but concerns a
purported class period of March 2, 1996 through June 19,
1996, inclusive. The plaintiffs in the Nevius Federal Action
seek damages in an unspecified amount.
On June 6, 1997, plaintiffs in the McDaid Federal Action
moved to dismiss their complaint. On June 23, 1997,
defendants moved to consolidate the Nevius Federal Action
with In re Read-Rite Corporation Securities Litigation. On July
18, 1997, the named plaintiffs in the Nevius Federal Action
moved to be appointed lead plaintiffs and to have their counsel
appointed lead counsel. These three motions are expected to be
heard in the United States District Court for the Northern
District of California in late October or early November 1997.
The Company believes that the Company and the individual
defendants have meritorious defenses in the above-described
actions. Accordingly, both on its own behalf and pursuant to
indemnification agreements between the Company and the
named individual defendants, the Company intends to continue
to defend each of these actions vigorously. Failure by the
Company to obtain a favorable resolution of the claims set forth
in
READ-RITE CORPORATION
PART II. OTHER INFORMATION
Item 1. Legal Proceedings (continued)
any of these actions could have a material adverse effect on the
Company's business, results of operations and financial
condition. Currently, the amount of such material adverse effect
can not be reasonably estimated.
Except as so noted, the Company is not a party, nor is its
property subject, to any material pending legal proceedings
other than ordinary routine litigation incidental to the
Company's business. The Company does not believe such
routine litigation, taken individually or in the aggregate, will
have a material adverse effect on the Company's business,
financial condition or results of operations.
READ-RITE CORPORATION
PART II. OTHER INFORMATION (continued)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Number Description
10.5 Employee Stock Purchase Plan (as
amended and restated July 22, 1997)
10.41 1995 Stock Option Plan (as amended
July 22, 1997)
10.53 License Agreement, dated as of
January 1, 1997, between the Company
and IBM (confidential treatment requested)
11.1 Statement Regarding Computation
of Earnings Per Share
27 Financial Data Schedule (electronic
filing only)
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the
quarter ended June 30, 1997.
READ-RITE CORPORATION
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, as amended, the Registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto
duly authorized.
Date: August 12, 1997 /s/ John T. Kurtzweil
John T. Kurtzweil
Vice President, Finance and
Chief Financial Officer
READ-RITE CORPORATION
INDEX OF EXHIBITS
Exhibit Number Description
10.5 Employee Stock Purchase Plan (as
amended and restated July 22, 1997)
10.41 1995 Stock Option Plan (as amended
July 22, 1997)
10.53 License Agreement, dated as of
January 1, 1997, between the Company
and IBM (confidential treatment requested)
11.1 Statement Regarding Computation
of Earnings Per Share
27 Financial Data Schedule (electronic
filing only)
<PAGE>
READ-RITE CORPORATION EXHIBIT 10.5
EMPLOYEE STOCK PURCHASE PLAN
(As amended and restated effective July 22, 1997)
1. Establishment of Plan. Read-Rite
Corporation proposes to grant the opportunity to purchase the
Company's Common Stock to employees of the Company and
Subsidiaries (as hereinafter defined) pursuant to the Plan
herein set forth. For purposes of this Plan, "Parent
Corporation" and "Subsidiary" (collectively, "Subsidiaries")
shall have the same meanings as, respectively, "parent
corporation" and "subsidiary corporation" in Sections 424(e)
and 424(f) of the Internal Revenue Code of 1986, as amended
(the "Code"). The Company intends that the Plan shall qualify
as an "employee stock purchase plan" under Section 423 of
the Code (including any amendments or replacements of such
section), and the Plan shall be so construed. Any term not
expressly defined in the Plan but defined for purposes of such
Section 423 shall have the same definition herein.
2. Purposes and Share Reserve. The purpose
of the Plan is to provide employees of the Company and
Subsidiaries with a convenient means to acquire an equity
interest in the Company, to enhance such employees' sense of
participation in the affairs of the Company and Subsidiaries,
to provide an incentive for continued employment and to help
such employees provide for their future financial security.
The maximum number of shares of Common Stock which
may be issued under the Plan shall be 1,500,000 shares of the
Company's authorized but unissued Common Stock or
Common Stock which are treasury shares. In the event that
any purchase opportunity for any reason expires or is canceled
or terminated, the shares of Common Stock allocable to the
unexercised portion of such purchase opportunity may again
be subjected to a purchase opportunity.
3. Administration and Shareholder Approval.
The Plan is administered by the Compensation Committee
appointed by the Board of Directors of the Company. Subject
to the provisions of the Plan, all questions of interpretation or
application of the Plan shall be determined by the Compensation
Committee, and its decisions shall be final and binding upon
all participants. Members of the Compensation Committee
shall receive no compensation for their services in connection
with the administration of the Plan, other than standard fees as
established from time to time by the Board of Directors of the
Company for services rendered by Board members serving on
Board committees. All expenses incurred in connection with
the administration of the Plan shall be paid by the Company.
The Company shall indemnify and hold harmless any
member of the Compensation Committee or any employee to
whom any responsibility with respect to the Plan is allocated
or delegated, from and against any and all liabilities, costs and
expenses, including attorney's fees, incurred by such persons
as a result of any act, or omission to act, in connection with
the performance of their duties, responsibilities and
obligations under the Plan, other than such liabilities, costs
and expenses as may result from the bad faith, criminal acts,
or willful misconduct of such persons or to the extent such
indemnification is prohibited by law. The Company shall
have the obligation to conduct the defense of such persons in
any proceeding to which this provision applies. If any person
covered by this indemnification clause determines that the
defense of the Company is inadequate, that person shall be
entitled to retain separate legal counsel for his/her defense and
the Company shall be obligated to pay for all reasonable legal
fees and other court costs incurred in the course of such
defense unless a court of competent jurisdiction finds such
person acted in bad faith or engaged in criminal acts or willful
misconduct. The Company may satisfy this obligation in
whole or in part through the purchase of a policy or policies of
insurance, but no insurer shall have any rights against the
Company arising out of this provision.
Notwithstanding any other provision of the Plan to
the contrary, any purchase opportunity granted pursuant to the
Plan shall be subject to (i) obtaining all necessary
governmental approvals and/or qualifications of the sale
and/or issuance of the purchase opportunities and/or the shares
of Common Stock and (ii) for a purchase opportunity granted
after the date the Board of Directors of the Company has
initially adopted or amended the Plan, obtaining any necessary
shareholder approval of the Plan with respect to such initial
adoption or amendment for such purchase opportunity to be
treated as an option described in section 423 of the Code or
the grant or exercise of such purchase opportunity to not be
treated as a non-exempt "purchase" under Section 16(b) of the
Securities Exchange Act of 1934, as amended.
4. Eligibility. Any employee of the Company
and Subsidiaries is eligible to participate in the Plan except the
following:
(a) employees who are not employed
by the Company or Subsidiaries on the 15th day of the month
before the beginning of a Purchase Period, with respect to that
Purchase Period;
(b) employees who are customarily
employed for less than 20 hours a week;
(c) employees who are customarily
employed for less than 5 months in a calendar year; and
(d) employees who own or hold
options to purchase or who, as a result of participation in this
plan, would own or hold options to purchase, 5% or more of
the Company's Common Stock within the meaning of section
423(b)(3) of the Code.
5. Offering Dates. The Plan is implemented by
sequential offerings of six months duration (the "Purchase
Period"); however, the first Purchase Period shall have a
twelve month duration commencing on April 1, 1992 and
ending on March 31, 1993. Subsequent Purchase Periods
shall commence April 1 and October 1 of each year and end
on September 30 and March 31, respectively, thereafter. The
first day of each Purchase Period shall be the "Offering Date"
and the last day of each Purchase Period shall be the
"Purchase Date".
Notwithstanding the foregoing, the Compensation
Committee may establish a different term for one or more
Purchase Periods and/or different commencing and/or ending
dates for such Purchase Periods. In the event the first and/or
last day of a Purchase Period is not a business day, the
Company shall specify the business day that will be deemed
the first or last day, as the case may be, of the Purchase
Period.
6. Participation in the Plan. Eligible
employees become participants in the Plan on the first
Offering Date after satisfying the eligibility requirements by
delivering to the Company's or Subsidiary's (whichever
employs such employee) payroll office (the "payroll office")
not later than the 15th day of the month before such Offering
Date a subscription agreement authorizing payroll deductions.
An eligible employee who does not deliver a subscription
agreement to the payroll office by such date after becoming
eligible to participate in the Plan shall not participate in the
Plan for that Purchase Period or for any subsequent Purchase
Period unless such employee subsequently enrolls in the Plan
by filing the subscription agreement with the payroll office
not later than the 15th day of the month preceding a
subsequent Offering Date. Once an employee becomes a
participant in the Plan, such employee will automatically
participate in each successive offering until such time as such
employee withdraws, or is withdrawn, from the Plan as set
forth below, and is not required to file any additional
subscription agreements for subsequent Purchase Periods in
order to continue participation in the Plan.
7. Grant of Purchase Opportunity on
Enrollment. Enrollment by an eligible employee in the Plan
with respect to a Purchase Period will constitute the grant (as
of the Offering Date) by the Company to such employee an
opportunity to purchase shares of Common Stock from the
Company under the Plan. All participants granted a purchase
opportunity under the Plan shall have the same rights and
privileges within the meaning of Section 423(b)(5) of the
Code. Re-enrollment by a participant in the Plan (but not
merely an increase or decrease in the level of payroll
withholding) will constitute the grant by the Company to the
participant of a purchase opportunity on the first day of the
Offering Period with respect to which such re-enrollment
occurs. Any participant whose opportunity to purchase
expires and who has not withdrawn from the Plan will
automatically be reenrolled in the Plan and granted a new
purchase opportunity on the first date of the next Offering
Period.
8. Purchase Price. The purchase price per
share at which a share of Common Stock will be sold in any
Purchase Period shall be eighty-five percent (85%) of the
lesser of:
(a) The fair market value on the
Offering Date; or
(b) The fair market value of the
Common Stock on the Purchase Date.
For purposes of the Plan, the term "fair market value"
shall mean for the applicable date the closing price of a share
of the Common Stock as reported on the NASDAQ National
Market System or, if not so reported, as reported on such other
stock exchange or market system on which the Common
Stock is traded as determined by the Compensation
Committee, or as otherwise determined by the Compensation
Committee if shares of Common Stock are not so reported.
9. Payment of Purchase Price; Changes in
Payroll Deductions; Issuance of Shares.
(a) Payment for the purchase price of
the shares of Common Stock is accumulated by regular
payroll deductions made during each Purchase Period. The
deductions are made as a percentage of the employee's base
pay in one percent (1%) increments not to exceed 10%. Base
pay (a) shall include all salaries, commissions, and advances
paid against future commissions, before deduction for any
contributions to any plan maintained by the Company and
described in Section 401(k) or Section 125 of the Code, and
(b) shall not include over-time, bonuses, annual awards, other
incentive payments, shift premiums, long-term disability,
worker's compensation or any other payments not specifically
referenced in (a). Payroll deductions shall commence on the
first payday following the Offering Date and shall continue to
the end of the Purchase Period unless sooner altered or
terminated as provided in the Plan.
(b) A participant may lower (but not
increase) the rate of payroll deductions during a Purchase
Period by filing with the payroll office a new authorization for
payroll deductions (which must be expressed as a whole
percentage of the employee's base pay in one percent (1%)
increments, including zero percent (0%)). A decrease in a
participant's payroll deductions to zero percent (0%) during a
Purchase Period shall not constitute the participant's
withdrawal from such Purchase Period and the Plan unless the
participant expressly elects such a withdrawal in writing in
accordance with the requirements of Section 11 of the Plan.
Such change in the rate of payroll deductions may be made at
any time during a Purchase Period, but not more than one
change may be made effective during any Purchase Period. A
participant may increase or lower the rate of payroll
deductions for any subsequent Purchase Period by filing with
the payroll office a new authorization for payroll deductions
not later than the 15th day of the month before the beginning
of such Purchase Period.
(c) All payroll deductions made for a
participant are credited to his/her account under the Plan and
are deposited with the general funds of the Company; no
interest accrues on the payroll deductions. All payroll
deductions received or held by the Company may be used by
the Company for any corporate purpose.
(d) On each Purchase Date, so long as
the Plan remains in effect and provided that the participant has
not terminated prior to a given Purchase Date, the Company
shall apply the funds then in the participant's account to the
purchase of whole shares of Common Stock reserved to the
extent permitted by the Plan. The purchase price per share
shall be as specified in Section 8 of the Plan. Any amount
remaining in such participant's account representing any
excess over the sum required to purchase whole shares shall
be held for purchases on the next Purchase Date unless the
remaining amount equals or exceeds the sum required to
purchase one whole share of Common Stock at the end of the
relevant Purchase Period, or the Plan has been oversubscribed,
in which case such funds shall be returned to the member. No
Common Stock shall be purchased on behalf of any employee
whose participation in the Plan has terminated prior to the last
day of a Purchase Period.
(e) Subject to the provisions of this
Plan, as promptly as practical after the Purchase Date, the
Company shall cause to be delivered to the participant, or the
participant's agent, certificates representing the shares of
Common Stock purchased by the participant. Delivery shall
be deemed effective for all purposes when the Company's
stock transfer agent deposits the stock certificates in the
United States mail addressed to the participant, or the
participant's agent, at the address specified by the participant.
Prior to the date of issuance of a stock certificate for the
shares of Common Stock being purchased, a participant shall
have no rights as a shareholder of the Company by virtue of
participation in the Plan.
(f) The Company may, from time to
time, establish or change (i) a minimum required withholding
amount for participation in any Purchase Period,
(ii) limitations on the frequency and/or number of changes in
the amount withheld during a Purchase Period, (iii) an
exchange ratio applicable to amounts withheld in a currency
other than U.S. dollars, (iv) payroll withholding in excess of
or less than the amount designated by a participant in order to
adjust for delays or mistakes in the Company's processing of
subscription agreements, (v) the date(s) and manner by which
the fair market value of the Common Stock is determined for
purposes of the administration of the Plan, and/or (vi) such
other limitations or procedures as deemed advisable by the
Company in the Company's sole discretion which are
consistent with the Plan, and Section 423 of the Code.
(g) Any portion of a participant's
purchase opportunity remaining unexercised after the end of
the Purchase Period to which it relates shall expire
immediately upon the end of such Purchase Period.
10. Designation of Beneficiary.
a. A participant may file a
written designation of a beneficiary who is to receive any
shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to
an Exercise Date on which the option in exercised but prior to
delivery to such participant of such shares and cash. In
addition, a participant may file a written designation of a
beneficiary who is to receive any cash from the participant's
account under the Plan in the event of such participant's death
prior to exercise of the option. If a participant is married and
the designated beneficiary is not the spouse, spousal consent
shall be required for such designation to be effective.
b. Such designation of
beneficiary may be changed by the participant at any time by
written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan
who is living at the time of such participant's death, the
Company shall deliver such shares and/or cash to the executor
or administrator of the estate of participant, or if no such
executor or administrator has been appointed (to the
knowledge of the Company), the Company, in its discretion,
may deliver such shares and/or cash to the spouse or to any
one or more dependents or relatives of the participant, or if no
spouse, dependent or relative is known to the company, then
to such other person as the Company may designate.
11. Limitation on Shares to be Purchased. No
employee shall be entitled to purchase Common Stock under
the Plan at a rate which exceeds $25,000 in fair market value,
determined as of the Offering Date (or such other limit as may
be imposed by the Code) for each calendar year in which the
employee participates in the Plan. If the number of shares to
be purchased by all employees participating in the Plan
exceeds the number of shares available in the Plan, the
Company will make a pro rata allocation of the remaining
shares in as uniform a manner as shall be practical and as the
Compensation Committee shall determine to be equitable.
Any payroll deductions accumulated in a participant's account
which are not used to purchase stock due to the limitations in
this paragraph shall be returned to the participant at the end of
the Purchase Period, unless insufficient to purchase a whole
share of Common Stock as provided in Section 9(d) of the
Plan, or at such other time as the Compensation Committee
shall determine.
12. Withdrawal. Each participant may
withdraw from the Plan by signing and delivering to the
payroll office notice on a form provided for such purpose.
Such withdrawal may be elected at any time for a Purchase
Period prior to the Purchase Date for that Purchase Period.
Upon withdrawal from the Plan, the accumulated
payroll deductions shall be returned to the withdrawn
employee and his/her interest in the Plan shall terminate. In
the event an employee voluntarily elects to withdraw from the
Plan, he/she may not resume his/her participation in the Plan
during the same Purchase Period, but he/she may participate
in any succeeding Purchase Period under the Plan by filing a
new authorization for payroll deductions in the same manner
as set forth above for initial participation in the Plan.
13. Termination of Employment. Termination
of a participant's employment for any reason, including
retirement, disability or death or the failure of a participant to
remain an eligible employee, terminates his/her participation
in the Plan immediately. In such event, the payroll deductions
credited to the participant's account will be returned to
him/her or, in the case of his/her death, to his/her legal
representative.
14. Repayment of Payroll Deductions Without
Interest. In the event an employee's interest in the Plan is
terminated, or in the event the Plan is terminated by the Board
of Directors of the Company, the Company shall promptly
deliver to the employee the payroll deductions credited to
his/her account. No interest shall accrue on the payroll
deductions of a participant in the Plan.
15. Capital Changes. In the event of changes in
the Common Stock of the Company due to stock dividends,
stock splits or other changes in capitalization, or in the event
of any merger, sale or any other reorganization, appropriate
adjustments will be made by the Company in the Plan's share
reserve, the shares subject to purchase under a participant's
purchase opportunity, and in the purchase price per share of
Common Stock.
16. Nonassignability. No rights or accumulated
payroll deductions of an employee under the Plan may be
pledged, assigned or transferred for any reason and any such
attempt may be treated by the Company as an election by such
employee to withdraw from the Plan.
17. Reports. Individual accounts will be
maintained for each participant in the Plan. Each participant
shall receive promptly after the end of each Purchase Period a
report of his/her account setting forth the total payroll
deductions accumulated, the number of shares of Common
Stock purchased and the remaining cash balance, if any,
carried forward to the next Purchase Period or returned to the
participant, as the case may be.
18. No Obligation. Neither this Plan nor the
grant of any opportunity to purchase hereunder shall confer
any right on any employee to remain in the employ of the
Company or any Subsidiary or restrict the right of the
Company or any Subsidiary to terminate such employee's
employment.
19. Headings. Headings have been provided for
purposes of identification and organization only and shall not
be treated as operative provisions of the Plan.
20. Transfer of Control. A "Transfer of
Control" shall be deemed to have occurred in the event any of
the following occurs with respect to the Company.
(a) the direct or indirect sale or
exchange by the shareholders of the Company of all or
substantially all of the stock of the Company where the
shareholders of the Company before such sale or exchange do
not retain, directly or indirectly, at least a majority of the
beneficial interest in the voting stock of the Company;
(b) a merger in which the shareholders
of the Company before such merger do not retain, directly or
indirectly, at least a majority of the beneficial interest in the
voting stock of the Company; or
(c) the sale, exchange, or transfer of all
or substantially all of the Company's assets (other than a sale,
exchange, or transfer to one (1) or more corporations where
the shareholders of the Company before such sale, exchange
or transfer retain, directly or indirectly, at least a majority of
the beneficial interest in the voting stock of the corporation(s)
to which the assets were transferred).
In the event of a Transfer of Control, the Board of
Directors of the Company shall provide that purchase
opportunities granted under the Plan shall be fully exercisable
to the extent of each participant's account balance for the
Purchase Period as of a date prior to the Transfer of Control.
All purchase opportunities shall terminate effective as of the
date of the Transfer of Control to the extent that the purchase
opportunity is not exercised as of the date of the Transfer of
Control.
21. Restriction on Issuance or Transfer of
Shares. The issuance of shares of Common Stock under the
Plan shall be subject to compliance with all applicable
requirements of federal or state law with respect to such
securities. A purchase opportunity may be not be exercised if
the issuance of shares of Common Stock upon such exercise
would constitute a violation of any applicable federal or state
securities laws or other laws or regulations. In addition, no
purchase opportunity may be exercised unless (i) a registration
statement under the Securities Act of 1933, as amended, shall
at the time of exercise of the purchase opportunity be in effect
with respect to the shares of Common Stock issuable upon
exercise of the purchase opportunity, or (ii) in the opinion of
legal counsel to the Company, the shares issuable upon
exercise of the purchase opportunity may be issued in
accordance with the terms of an applicable exemption from
the registration requirements of said Act. As a condition to
the exercise of the purchase opportunity, the Company may
require the participant to satisfy any qualifications that may be
necessary or appropriate, to evidence compliance with any
applicable law or regulation, and to make any representation
or warranty with respect thereto as may be requested by the
Company.
The Company may at any time place legends or other
identifying symbols regarding any applicable federal and/or
state securities restrictions or any provision convenient in the
administration of the Plan on some or all of the certificates
representing shares of Common Stock issued under the Plan.
The participant shall, at the request of the Company, promptly
present to the Company any and all certificates representing
shares of Common Stock acquired under the Plan in the
possession of the participant in order to carry out these
provisions.
The Company, in its absolute discretion may impose
such restrictions on the transferability of the shares of
Common Stock purchased under the Plan as it deems
appropriate and any such restriction may be set forth in the
respective subscription agreement and may be referred to on
the certificates evidencing such shares. The Company may
require the employee to give the Company prompt notice of
any disposition of shares of Common Stock acquired by
exercise of a purchase opportunity within two years from the
date of granting such opportunity or one year from the date of
exercise of such opportunity. The Company may direct that
the certificates evidencing shares of Common Stock acquired
under the Plan refer to such requirement to give prompt notice
of disposition.
22. Amendment or Termination of the Plan.
This Plan shall continue until terminated by the Board of
Directors of the Company or until all of the shares of
Common Stock reserved for issuance under the Plan have
been issued, whichever occurs first.
The Board of Directors of the Company may at any
time terminate the Plan, except that such termination cannot
affect shares of Common Stock or purchase opportunities
previously granted under the Plan, except as expressly
permitted by the Plan. The Board of Directors or any officer
as may be authorized by the Board of Directors from time to
time may at any time amend the Plan, provided that no
amendment makes any change in shares of Common Stock or
purchase opportunities previously granted which would
adversely affect the right of any participant, nor may any
amendment be made without approval of the shareholders of
the Company within 12 months of the adoption of such
amendment if such amendment would authorize the sale of
more shares than are authorized for issuance under the Plan or
would change the designation of corporations whose
employees may be offered purchase opportunities under the
Plan. In addition to the foregoing, approval of the Company's
shareholders shall be sought for any amendment to the Plan
for which the Board of Directors deems shareholder approval
necessary in order to comply with Rule 16b-3.
Notwithstanding any other provisions of the Plan to
the contrary, in the event of an amendment to the Plan which
affects the rights or privileges of purchase opportunities
offered under the Plan, each participant with an outstanding
purchase opportunity shall have the right to exercise such
outstanding purchase opportunity on the effective date of the
amendment and to participate in the Plan for the remaining
term of such outstanding purchase opportunity pursuant to the
terms and conditions of the Plan, as amended. If in
accordance with the preceding sentence, a participant elects to
exercise such outstanding purchase opportunity and to
commence participation in the Plan, as amended on the
effective date of such amendment, the participant shall be
deemed to have received a new purchase opportunity on such
effective date, and such effective date shall be deemed the
Offering Date for such new purchase opportunity.
IN WITNESS WHEREOF, the undersigned
Secretary of Read-Rite Corporation, a Delaware corporation,
hereby declares that the Read-Rite Corporation Employee
Stock Purchase Plan was adopted by the Board of Directors of
Read-Rite Corporation at its meeting on January 30, 1992,
readopted at its meeting on November 16, 1992, amended at
its meeting on December 19, 1994, and further amended at its
meetings on October 22, 1996 and July 22, 1997.
_____________________________________________
Rex S. Jackson
Vice President, General Counsel and Secretary
<PAGE>
READ-RITE CORPORATION EXHIBIT 10.41
1995 STOCK PLAN
(as amended July 22, 1997)
1. Purposes of the Plan. The purposes of this
Stock Plan are:
to attract and retain the best available
personnel for positions of substantial
responsibility,
to provide additional incentive to
Employees and Consultants, and
to promote the success of the Company's
business.
Options granted under the Plan may be Incentive Stock
Options or Nonstatutory Stock Options, as determined by the
Administrator at the time of grant. Stock Purchase Rights
may also be granted under the Plan.
2. Definitions. As used herein, the following
definitions shall apply:
(a) "Administrator" means the Board or
any of its Committees as shall be administering the Plan, in
accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the legal
requirements relating to the administration of stock option
plans under state corporate and securities laws and the Code.
(c) "Board" means the Board of Directors
of the Company.
(d) "Code" means the Internal Revenue
Code of 1986, as amended.
(e) "Committee" means a Committee
appointed by the Board in accordance with Section 4 of the
Plan.
(f) "Common Stock" means the Common
Stock of the Company.
(g) "Company" means Read-Rite
Corporation, a Delaware corporation.
(h) "Consultant" means any person,
including an advisor, engaged by the Company or a Parent or
Subsidiary to render services and who is compensated for such
services. The term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are
not compensated by the Company for their services as
Directors.
(i) "Continuous Status as an Employee or
Consultant" means that the employment or consulting
relationship with the Company, any Parent, or Subsidiary, is
not interrupted or terminated. Continuous Status as an
Employee or Consultant shall not be considered interrupted in
the case of (i) any leave of absence approved by the Company
or (ii) transfers between locations of the Company or between
the Company, its Parent, any Subsidiary, or any successor. A
leave of absence approved by the Company shall include sick
leave, military leave, or any other personal leave approved by
an authorized representative of the Company. For purposes of
Incentive Stock Options, no such leave may exceed ninety
days, unless reemployment upon expiration of such leave is
guaranteed by statute or contract. If reemployment upon
expiration of a leave of absence approved by the Company is
not so guaranteed, on the 181st day of such leave any
Incentive Stock Option held by the Optionee shall cease to be
treated as an Incentive Stock Option and shall be treated for
tax purposes as a Nonstatutory Stock Option.
(j) "Director" means a member of the
Board.
(k) "Disability" means total and permanent
disability as defined in Section 22(e)(3) of the Code.
(l) "Employee" means any person,
including Officers and Directors, employed by the Company
or any Parent or Subsidiary of the Company. Neither service
as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the
Company.
(m) "Exchange Act" means the Securities
Exchange Act of 1934, as amended.
(n) "Fair Market Value" means, as of any
date, the value of Common Stock determined as follows:
(i) If the Common Stock is listed
on any established stock exchange or a national market
system, including without limitation the Nasdaq National
Market or The Nasdaq SmallCap Market of The Nasdaq Stock
Market, its Fair Market Value shall be the closing sales price
for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or system for the last market trading
day prior to the time of determination, as reported in The Wall
Street Journal or such other source as the Administrator
deems reliable;
(ii) If the Common Stock is
regularly quoted by a recognized securities dealer but selling
prices are not reported, the Fair Market Value of a Share of
Common Stock shall be the mean between the high bid and
low asked prices for the Common Stock on the last market
trading day prior to the day of determination, as reported in
The Wall Street Journal or such other source as the
Administrator deems reliable;
(iii) In the absence of an established
market for the Common Stock, the Fair Market Value shall be
determined in good faith by the Administrator.
(o) "Incentive Stock Option" means an
Option intended to qualify as an incentive stock option within
the meaning of Section 422 of the Code and the regulations
promulgated thereunder.
(p) "Nonstatutory Stock Option" means an
Option not intended to qualify as an Incentive Stock Option.
(q) "Notice of Grant" means a written
notice evidencing certain terms and conditions of an
individual Option or Stock Purchase Right grant. The Notice
of Grant is part of the Option Agreement.
(r) "Officer" means a person who is an
officer of the Company within the meaning of Section 16 of
the Exchange Act and the rules and regulations promulgated
thereunder.
(s) "Option" means a stock option granted
pursuant to the Plan.
(t) "Option Agreement" means a written
agreement between the Company and an Optionee evidencing
the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the
Plan.
(u) "Optioned Stock" means the Common
Stock subject to an Option or Stock Purchase Right.
(v) "Optionee" means an Employee or
Consultant who holds an outstanding Option or Stock
Purchase Right.
(w) "Parent" means a "parent corporation",
whether now or hereafter existing, as defined in
Section 424(e) of the Code.
(x) "Plan" means this Read-Rite
Corporation 1995 Stock Plan
(y) "Restricted Stock" means shares of
Common Stock acquired pursuant to a grant of Stock
Purchase Rights under Section 11 below.
(z) "Restricted Stock Purchase Agreement"
means a written agreement between the Company and the
Optionee evidencing the terms and restrictions applying to
stock purchased under a Stock Purchase Right. The Restricted
Stock Purchase Agreement is subject to the terms and
conditions of the Plan and the Notice of Grant.
aa) "Rule 16b-3" means Rule 16b-3
of the Exchange Act or any successor to Rule 16b-3, as in
effect when discretion is being exercised with respect to the
Plan.
bb) "Section 16(b)" means Section
16(b) of the Securities Exchange Act of 1934, as amended.
cc) "Share" means a share of the
Common Stock, as adjusted in accordance with Section 13 of
the Plan.
dd) "Stock Purchase Right" means
the right to purchase Common Stock pursuant to Section 11 of
the Plan, as evidenced by a Notice of Grant.
ee) "Subsidiary" means a
"subsidiary corporation", whether now or hereafter existing, as
defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the
provisions of Section 13 of the Plan, the maximum aggregate
number of Shares which may be optioned and sold under the
Plan shall be three million (3,000,000) Shares plus (i) any
unused Shares, (ii) any forfeited Shares under the Plan and
(iii) the lesser of any Shares covered by grants under the
Amended and Restated 1987 Stock Option Plan (the "1987
Plan") or any forfeited Shares under the 1987 Plan. For
purposes of this Section 3, the following apply: (i) "unused
Shares" means any Shares reserved for issuance which are not
covered by grants prior to the termination of the 1987 Plan;
(ii) "forfeited Shares" means any Shares issued pursuant to
awards which are forfeited to the Company pursuant to award
terms and conditions. The term "forfeited Shares" shall not
include Shares as to which the original recipient received any
benefits of ownership (other than voting rights). The Shares
may be authorized, but unissued, or reacquired Common
Stock.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies.
The Plan may be administered by different Committees with
respect to different groups of Employees and Consultants.
(ii) Section 162(m). To the extent
that the Administrator determines it to be desirable to qualify
Options granted hereunder as "performance-based
compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two
or more "outside directors" within the meaning of Section
162(m) of the Code.
(iii) Rule 16b-3. To the extent
desirable to qualify transactions hereunder as exempt under
Rule 16b-3, the transactions contemplated hereunder shall be
structured to satisfy the requirements for exemption under
Rule 16b-3.
(iv) Other Administration. Other
than as provided above, the Plan shall be administered by
(A) the Board or (B) a Committee, which committee shall be
constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject
to the provisions of the Plan, and in the case of a Committee,
subject to the specific duties delegated by the Board to such
Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market
Value of the Common Stock, in accordance with Section 2(n)
of the Plan;
(ii) to select the Consultants and
Employees to whom Options and Stock Purchase Rights may
be granted hereunder;
(iii) to determine whether and to
what extent Options and Stock Purchase Rights or any
combination thereof, are granted hereunder;
(iv) to determine the number of
shares of Common Stock to be covered by each Option and
Stock Purchase Right granted hereunder;
(v) to approve forms of agreement
for use under the Plan;
(vi) to determine the terms and
conditions, not inconsistent with the terms of the Plan, of any
award granted hereunder. Such terms and conditions include,
but are not limited to, the exercise price, the time or times
when Options or Stock Purchase Rights may be exercised
(which may be based on performance criteria), any vesting
acceleration or waiver of forfeiture restrictions, and any
restriction or limitation regarding any Option or Stock
Purchase Right or the shares of Common Stock relating
thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;
(vii) to construe and interpret the
terms of the Plan and awards granted pursuant to the Plan;
(viii) to prescribe, amend and rescind
rules and regulations relating to the Plan, including rules and
regulations relating to sub-plans established for the purpose of
qualifying for preferred tax treatment under foreign tax laws;
(ix) to modify or amend each Option
or Stock Purchase Right (subject to Section 15(c) of the Plan),
including the discretionary authority to extend the post-
termination exercisability period of Options longer than is
otherwise provided for in the Plan;
(x) to authorize any person to
execute on behalf of the Company any instrument required to
effect the grant of an Option or Stock Purchase Right
previously granted by the Administrator;
(xi) to determine the terms and
restrictions applicable to Options and Stock Purchase Rights
and any Restricted Stock; and
(xii) to allow Optionees to satisfy
withholding tax obligations by electing to have the Company
withhold from the Shares to be issued upon exercise of an
Option or Stock Purchase Right that number of Shares having
a Fair Market Value equal to the amount required to be
withheld. The Fair Market Value of the Shares to be withheld
shall be determined on the date that the amount of tax to be
withheld is to be determined. All elections by an Optionee to
have Shares withheld for this purpose shall be made in such
form and under such conditions as the Administrator may
deem necessary or advisable.
(xiii) to make all other determinations
deemed necessary or advisable for administering the Plan.
(c) Effect of Administrator's Decision. The
Administrator's decisions, determinations and interpretations
shall be final and binding on all Optionees and any other
holders of Options or Stock Purchase Rights.
5. Eligibility. Nonstatutory Stock Options and
Stock Purchase Rights may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to
Employees. If otherwise eligible, an Employee or Consultant
who has been granted an Option or Stock Purchase Right may
be granted additional Options or Stock Purchase Rights.
6. Limitations.
(a) Each Option shall be designated in the
written option agreement as either an Incentive Stock Option
or a Nonstatutory Stock Option. However, notwithstanding
such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock
Options are exercisable for the first time by the Optionee
during any calendar year (under all plans of the Company and
any Parent or Subsidiary) exceeds $100,000, such Options
shall be treated as Nonstatutory Stock Options. For purposes
of this Section 6(a), Incentive Stock Options shall be taken
into account in the order in which they were granted. The Fair
Market Value of the Shares shall be determined as of the time
the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or
Stock Purchase Right shall confer upon an Optionee any right
with respect to continuing the Optionee's employment or
consulting relationship with the Company, nor shall they
interfere in any way with the Optionee's right or the
Company's right to terminate such employment or consulting
relationship at any time, with or without cause.
(c) The following limitations shall apply to
grants of Options and Stock Purchase Rights to Employees:
(i) No Employee shall be granted,
in any fiscal year of the Company, Options and Stock
Purchase Rights to purchase more than 250,000 Shares.
(ii) In connection with his or her
initial employment, an Employee may be granted Options and
Stock Purchase Rights to purchase up to an additional 250,000
Shares which shall not count against the limit set forth in
subsection (i) above.
(iii) The foregoing limitations shall
be adjusted proportionately in connection with any change in
the Company's capitalization as described in Section 13.
(iv) If an Option or Stock Purchase
Right is cancelled in the same fiscal year of the Company in
which it was granted (other than in connection with a
transaction described in Section 13), the cancelled Option or
Stock Purchase Right will be counted against the limits set
forth in subsections (i) and (ii) above. For this purpose, if the
exercise price of an Option or Stock Purchase Right is
reduced, the transaction will be treated as a cancellation of the
Option or Stock Purchase Right and the grant of a new Option
or Stock Purchase Right.
7. Term of Plan. Subject to Section 19 of the
Plan, the Plan shall become effective upon the earlier to occur
of its adoption by the Board or its approval by the
shareholders of the Company as described in Section 19 of the
Plan. It shall continue in effect for a term of ten (10) years
unless terminated earlier under Section 15 of the Plan.
8. Term of Option. The term of each Option shall
be stated in the Notice of Grant; provided, however, that in the
case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be
provided in the Notice of Grant. Moreover, in the case of an
Incentive Stock Option granted to an Optionee who, at the
time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Incentive Stock Option shall be
five (5) years from the date of grant or such shorter term as
may be provided in the Notice of Grant.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise
price for the Shares to be issued pursuant to exercise of an
Option shall be determined by the Administrator, subject to
the following:
(i) In the case of an Incentive Stock
Option
(A) granted to an Employee
who, at the time the Incentive Stock Option is granted, owns
stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than
110% of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee
other than an Employee described in paragraph (A)
immediately above, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory
Stock Option, the per Share exercise price shall be determined
by the Administrator but in no case shall be less than 85% of
the Fair Market Value per Share on the date of grant. In the
case of a Nonstatutory Stock Option intended to qualify as
"performance-based compensation" within the meaning of
Section 162(m) of the Code, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing,
Options may be granted with a per Share exercise price of less
than 100% of the Fair Market Value per Share on the date of
grant pursuant to a merger or other corporate transaction.
(b) Waiting Period and Exercise Dates. At
the time an Option is granted, the Administrator shall fix the
period within which the Option may be exercised and shall
determine any conditions which must be satisfied before the
Option may be exercised. In so doing, the Administrator may
specify that an Option may not be exercised until the
completion of a service period.
(c) Form of Consideration. The
Administrator shall determine the acceptable form of
consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the
Administrator shall determine the acceptable form of
consideration at the time of grant. Such consideration may
consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the
case of Shares acquired upon exercise of an option, have been
owned by the Optionee for more than six months on the date
of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares
as to which said Option shall be exercised;
(v) delivery of a properly executed
exercise notice together with such other documentation as the
Administrator and the broker, if applicable, shall require to
effect an exercise of the Option and delivery to the Company
of the sale or loan proceeds required to pay the exercise price;
(vi) reduction in the amount of any
Company liability to the Optionee, including any liability
attributable to the Optionee's participation in any Company-
sponsored deferred compensation program or arrangement;
(vii) any combination of the
foregoing methods of payment; or
(viii) such other consideration and
method of payment for the issuance of Shares to the extent
permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a
Shareholder. Any Option granted hereunder shall be
exercisable according to the terms of the Plan and at such
times and under such conditions as determined by the
Administrator and set forth in the Option Agreement.
An Option may not be exercised for a
fraction of a Share.
An Option shall be deemed exercised
when the Company receives: (i) written notice of exercise (in
accordance with the Option Agreement) from the person
entitled to exercise the Option, and (ii) full payment for the
Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of
payment authorized by the Administrator and permitted by the
Option Agreement and the Plan. Shares issued upon exercise
of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and
his or her spouse. Until the stock certificate evidencing such
Shares is issued (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent
of the Company), no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such stock
certificate promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for
which the record date is prior to the date the stock certificate
is issued, except as provided in Section 13 of the Plan.
Exercising an Option in any manner
shall decrease the number of Shares thereafter available, both
for purposes of the Plan and for sale under the Option, by the
number of Shares as to which the Option is exercised.
(b) Termination of Employment or
Consulting Relationship. Upon termination of an Optionee's
Continuous Status as an Employee or Consultant, other than
upon the Optionee's death or Disability, the Optionee may
exercise his or her Option, but only within such period of time
as is specified in the Notice of Grant, and only to the extent
that the Optionee was entitled to exercise it at the date of
termination (but in no event later than the expiration of the
term of such Option as set forth in the Notice of Grant). In the
absence of a specified time in the Notice of Grant, the Option
shall remain exercisable for three (3) months following the
Optionee's termination. In the case of an Incentive Stock
Option, such period of time for exercise shall not exceed three
(3) months from the date of termination. If, on the date of
termination, the Optionee is not entitled to exercise the
Optionee's entire Option, the Shares covered by the
unexercisable portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her
Option within the time specified by the Administrator, the
Option shall terminate, and the Shares covered by such Option
shall revert to the Plan.
Notwithstanding the above, in the event of an
Optionee's change in status from Consultant to Employee or
Employee to Consultant, an Optionee's Continuous Status as
an Employee or Consultant shall not automatically terminate
solely as a result of such change in status. However, in such
event, an Incentive Stock Option held by the Optionee shall
cease to be treated as an Incentive Stock Option and shall be
treated for tax purposes as a Nonstatutory Stock Option three
months and one day following such change of status.
(c) Disability of Optionee. In the event
that an Optionee's Continuous Status as an Employee or
Consultant terminates as a result of the Optionee's Disability,
the Optionee may exercise his or her Option at any time
within twelve (12) months from the date of such termination,
but only to the extent that the Optionee was entitled to
exercise it at the date of such termination (but in no event later
than the expiration of the term of such Option as set forth in
the Notice of Grant). If, at the date of termination, the
Optionee is not entitled to exercise his or her entire Option,
the Shares covered by the unexercisable portion of the Option
shall revert to the Plan. If, after termination, the Optionee
does not exercise his or her Option within the time specified
herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies
while employed with the Company, any options held by such
Optionee which are then vested or which would have
otherwise vested pursuant to such Optionee's option
agreement with the Company within twelve (12) calendar
months following the date of death shall be exercisable by the
Optionee's estate or a person who acquired the right to
exercise the Option by bequest or inheritance at any time
within twelve (12) months following the date of death (but in
no event later than the expiration of the Option's specified
term). To the extent that the Optionee was not entitled to
exercise an Option at the date of death pursuant to his/her
option agreement with the Company or via the acceleration
provided in this Paragraph (d), or to the extent that the
Optionee's estate or a person who by bequest or inheritance
acquired the right to exercise such Option does not exercise
such Option within the time and to the extent specified herein,
the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase
Rights may be issued either alone, in addition to, or in tandem
with other awards granted under the Plan and/or cash awards
made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing, by means of a Notice of Grant,
of the terms, conditions and restrictions related to the offer,
including the number of Shares that the offeree shall be
entitled to purchase, the price to be paid, and the time within
which the offeree must accept such offer, which shall in no
event exceed six (6) months from the date upon which the
Administrator made the determination to grant the Stock
Purchase Right. The Administrator shall not set the purchase
price for a Stock Purchase Right below the Fair Market Value
per share on the date of grant. The offer shall be accepted by
execution of a Restricted Stock Purchase Agreement in the
form determined by the Administrator.
(b) Repurchase Option. Unless the
Administrator determines otherwise, the Restricted Stock
Purchase Agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary
termination of the purchaser's employment with the Company
for any reason (including death or Disability). The purchase
price for Shares repurchased pursuant to the Restricted Stock
purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any
indebtedness of the purchaser to the Company. The
repurchase option shall lapse at a rate determined by the
Administrator.
(c) Other Provisions. The Restricted Stock
Purchase Agreement shall contain such other terms,
provisions and conditions not inconsistent with the Plan as
may be determined by the Administrator in its sole discretion.
In addition, the provisions of Restricted Stock Purchase
Agreements need not be the same with respect to each
purchaser.
(d) Rights as a Shareholder. Once the
Stock Purchase Right is exercised, the purchaser shall have the
rights equivalent to those of a shareholder, and shall be a
shareholder when his or her purchase is entered upon the
records of the duly authorized transfer agent of the Company.
No adjustment will be made for a dividend or other right for
which the record date is prior to the date the Stock Purchase
Right is exercised, except as provided in Section 13 of the
Plan.
12. Non-Transferability of Options and Stock
Purchase Rights. An Option or Stock Purchase Right may not
be sold, pledged, assigned, hypothecated, transferred, or
disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
13. Adjustments Upon Changes in Capitalization,
Dissolution, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to
any required action by the shareholders of the Company, the
number of shares of Common Stock covered by each
outstanding Option and Stock Purchase Right, and the number
of shares of Common Stock which have been authorized for
issuance under the Plan but as to which no Options or Stock
Purchase Rights have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an
Option or Stock Purchase Right, as well as the price per share
of Common Stock covered by each such outstanding Option
or Stock Purchase Right, shall be proportionately adjusted for
any increase or decrease in the number of issued shares of
Common Stock resulting from a stock split, reverse stock
split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without
receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance
by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and
no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an
Option or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event
of the proposed dissolution or liquidation of the Company, to
the extent that an Option or Stock Purchase Right has not been
previously exercised, it will terminate immediately prior to the
consummation of such proposed action. The Board may, in
the exercise of its sole discretion in such instances, declare
that any Option or Stock Purchase Right shall terminate as of
a date fixed by the Board and give each Optionee the right to
exercise his or her Option or Stock Purchase Right as to all or
any part of the Optioned Stock, including Shares as to which
the Option or Stock Purchase Right would not otherwise be
exercisable.
(c) Merger or Asset Sale. In the event of a
merger of the Company with or into another corporation, or
the sale of substantially all of the assets of the Company, each
outstanding Option and Stock Purchase Right shall be
assumed or an equivalent option or right substituted by the
successor corporation or a Parent or Subsidiary of the
successor corporation. In the event that the successor
corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall have the right to
exercise the Option or Stock Purchase Right as to all of the
Optioned Stock, including Shares as to which it would not
otherwise be exercisable. If an Option or Stock Purchase
Right is exercisable in lieu of assumption or substitution in the
event of a merger or sale of assets, the Administrator shall
notify the Optionee that the Option or Stock Purchase Right
shall be fully exercisable for a period of fifteen (15) days from
the date of such notice, and the Option or Stock Purchase
Right shall terminate upon the expiration of such period. For
the purposes of this paragraph, the Option or Stock Purchase
Right shall be considered assumed if, following the merger or
sale of assets, the option or right confers the right to purchase
or receive, for each Share of Optioned Stock subject to the
Option or Stock Purchase Right immediately prior to the
merger or sale of assets, the consideration (whether stock,
cash, or other securities or property) received in the merger or
sale of assets by holders of Common Stock for each Share
held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the
outstanding Shares); provided, however, that if such
consideration received in the merger or sale of assets was not
solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the
successor corporation, provide for the consideration to be
received upon the exercise of the Option or Stock Purchase
Right, for each Share of Optioned Stock subject to the Option
or Stock Purchase Right, to be solely common stock of the
successor corporation or its Parent equal in fair market value
to the per share consideration received by holders of Common
Stock in the merger or sale of assets.
14. Date of Grant. The date of grant of an Option
or Stock Purchase Right shall be, for all purposes, the date on
which the Administrator makes the determination granting
such Option or Stock Purchase Right, or such other later date
as is determined by the Administrator. Notice of the
determination shall be provided to each Optionee within a
reasonable time after the date of such grant.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The
Board may at any time amend, alter, suspend or terminate the
Plan.
(b) Shareholder Approval. The Company
shall obtain shareholder approval of any Plan amendment to
the extent necessary and desirable to comply with Section 422
of the Code (or any successor rule or statute or other
applicable law, rule or regulation, including the requirements
of any exchange or quotation system on which the Common
Stock is listed or quoted). Such shareholder approval, if
required, shall be obtained in such a manner and to such a
degree as is required by the applicable law, rule or regulation.
(c) Effect of Amendment or Termination.
No amendment, alteration, suspension or termination of the
Plan shall impair the rights of any Optionee, unless mutually
agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the
Optionee and the Company.
16. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be
issued pursuant to the exercise of an Option or Stock Purchase
Right unless the exercise of such Option or Stock Purchase
Right and the issuance and delivery of such Shares shall
comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated
thereunder, Applicable Laws, and the requirements of any
stock exchange or quotation system upon which the Shares
may then be listed or quoted, and shall be further subject to
the approval of counsel for the Company with respect to such
compliance.
(b) Investment Representations. As a
condition to the exercise of an Option or Stock Purchase
Right, the Company may require the person exercising such
Option or Stock Purchase Right to represent and warrant at the
time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell
or distribute such Shares if, in the opinion of counsel for the
Company, such a representation is required.
17. Liability of Company.
(a) Inability to Obtain Authority. The
inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the
lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue
or sell such Shares as to which such requisite authority shall
not have been obtained.
(b) Grants Exceeding Allotted Shares. If
the Optioned Stock covered by an Option or Stock Purchase
Right exceeds, as of the date of grant, the number of Shares
which may be issued under the Plan without additional
shareholder approval, such Option or Stock Purchase Right
shall be void with respect to such excess Optioned Stock,
unless shareholder approval of an amendment sufficiently
increasing the number of Shares subject to the Plan is timely
obtained in accordance with Section 15(b) of the Plan.
18. Reservation of Shares. The Company, during
the term of this Plan, will at all times reserve and keep
available such number of Shares as shall be sufficient to
satisfy the requirements of the Plan.
19. Shareholder Approval. Continuance of the
Plan shall be subject to approval by the shareholders of the
Company within twelve (12) months before or after the date
the Plan is adopted. Such shareholder approval shall be
obtained in the manner and to the degree required under
applicable federal and state law.
<PAGE>
EXHIBIT 10.53
LICENSE AGREEMENT ("Agreement") with an
Effective Date of January 1, 1997 between
INTERNATIONAL BUSINESS MACHINES
CORPORATION, a New York corporation ("IBM"), and
READ-RITE CORPORATION, a Delaware corporation
("READ-RITE").
Each of the parties (as "Grantee") desires to acquire a
nonexclusive license under patents of the other party (as
"Grantor"). In consideration of the premises and mutual
covenants herein contained, IBM and READ-RITE agree as
follows:
Section 1. Definitions
1.1 "Information Handling System" shall mean any
instrumentally or aggregate of instrumentalities primarily
designed to compute, classify, process, transmit, receive,
retrieve, originate, switch, store, display, manifest, measure,
detect, record, reproduce, handle or utilize any form of
information, intelligence or data for business, scientific,
control or other purposes.
1.2 "IHS Product" shall mean an Information Handling
System or any instrumentality or aggregate of
instrumentalities (including, without limitation, any
component, subassembly, computer program or supply)
designed for incorporation in an Information Handling
System; provided, however, that a Manufacturing Apparatus
(as defined hereinafter) shall not be considered to be an IHS
Product.
1.3 "IBM Licensed Patents" and "READ-RITE Licensed
Patents" shall mean all patents, including utility models and
typeface design patents and registrations (but not including
any other design patents or registrations) of Grantor:
(a) issued or issuing on patent applications entitled to
an effective filing date prior to January 1, 2001 ("Futures
Date");
(b) which, but for this Agreement, would be
infringed by Grantee's making, using, importing, offering for
sale, or leasing, selling or otherwise transferring a Grantee's
Licensed Product in the country in which such patent exists;
and
(c) under which patents or the applications therefor
Grantor or any of its Subsidiaries now has, or hereafter
obtains, the right to grant licenses to Grantee of or within the
scope granted herein without such grant or the exercise of
rights thereunder resulting in the payment of royalties or other
consideration by Grantor or its Subsidiaries to third parties
(except for payments between Grantor and its Subsidiaries,
and payments to third parties for inventions made by said third
parties while employed by Grantor or any of its Subsidiaries).
Licensed Patents shall include said patent
applications, continuations in part of said patent applications,
and any patents reissuing on any of the aforesaid patents.
1.4 "Licensed Patents" shall mean either IBM Licensed
Patents or READ-RITE Licensed patents as the context
indicates.
1.5 "Licensed Products" shall mean either IBM Licensed
Products or READ-RITE Licensed Products as the context
indicates.
1.6 "Magnetic Medium" shall mean a rigid planar or
flexible element having a magnetic material coated or plated
on or otherwise deposited on, or incorporated in, one or both
surfaces of said element and primarily designed for
magnetically storing digital information recorded thereon.
1.7 "Magnetic Transducer Apparatus" shall mean an IHS
Product comprising any instrumentality or aggregate of
instrumentalities (including, without limitation, head
assemblies, head assembly suspension apparatus, base plates,
slider mechanisms, head arms and any signal processing
circuitry carried thereby or disposed thereon, motion actuators
and supporting carriages) primarily designed for reading,
writing or erasing information on, in or from a Magnetic
Medium by transducing certain of the magnetic characteristics
of such medium to electrical signals, or vice versa, which
characteristics and signals are indicative of such information.
Magnetic Transducer Apparatus shall include apparatus
designed for magneto optical recording, but shall not include
apparatus designed for optical recording.
1.8 "IBM Licensed Products" shall mean IHS Products.
1.9 "READ-RITE Licensed Products" shall mean
Magnetic Transducer Apparatus.
1.10 "Manufacturing Apparatus" shall mean any
instrumentality or aggregate of instrumentalities primarily
designed for use in the fabrication (including testing) of an
IHS Product licensed herein.
1.11 "Subsidiary" of a party hereto or of a third party shall
mean a corporation, company or other entity:
(a) more than fifty percent (50%) of whose
outstanding shares or securities (representing the right to vote
for the election of directors or other managing authority) are,
now or hereafter, owned or controlled, directly or indirectly,
by a party hereto or such third party, but such corporation,
company or other entity shall be deemed to be a Subsidiary
only so long as such ownership or control exists; or
(b) which does not have outstanding shares or
securities, as may be the case in a partnership, joint venture or
unincorporated association, but more than fifty percent (50%)
of whose ownership interest representing the right to make the
decisions for such corporation, company or other entity is now
or hereafter, owned or controlled, directly or indirectly, by a
party hereto or such third party, but such corporation,
company or other entity shall be deemed to be a Subsidiary
only so long as such ownership or control exists; and
(c) notwithstanding (a) and (b) above, READ-RITE
SMI Corporation, a Japanese corporation ("READ-RITE
SMI"), shall be deemed a Subsidiary of READ-RITE, but only
so long as READ-RITE owns or controls, directly or
indirectly, not less than twenty percent (20%) of the
outstanding shares or securities (representing the right to vote
for the election of directors or other managing authority) of
such corporation.
Section 2. Grants of rights
2.1 Each party, as Grantor, on behalf of itself and its
Subsidiaries grants to the other, as Grantee, a worldwide,
nonexclusive license under Grantor's Licensed Patents:
(a) to make, use (including the right to use any
apparatus and practice any method in making), import, offer
for sale, and lease, sell and/or otherwise transfer Grantee's
Licensed Products;
(b) to have Grantee's Licensed Products made by
another manufacturer for the use and/or lease, sale or other
transfer by Grantee only when the conditions set forth in
Section 2.2 are met; and
(c) to make, have made, use and have used
Manufacturing Apparatus and to practice and have practiced
any method involved in the manufacture or use thereof;
provided, however, that the rights granted in this Section 2.1
(c) shall not serve to enlarge the scope of the rights granted in
Section 2.1(b).
The license granted by each party hereunder is worldwide.
[Section deleted - confidential treatment requested]
2.2 The license to have products made granted in Section
2.1(b) to Grantee:
(a) shall only apply when the specifications for such
Grantee's Licensed Products were created by Grantee (either
solely or jointly with one or more third parties);
(b) shall only be under claims of Grantor's Licensed
Patents, the infringement of which would be necessitated by
compliance with such specifications; and
(c) shall not apply to any products in the form
manufactured or marketed by said other manufacturer prior to
Grantee furnishing of said specifications.
Unless Grantee informs Grantor to the contrary,
Grantee shall be deemed to have authorized said other
manufacturer to make Grantee's Licensed Products under the
license granted to Grantee in this section when the conditions
specified in this Section 2.2 are fulfilled. In response to a
written request identifying a product and a manufacturer,
Grantee shall in a timely manner inform Grantor of the
quantity of such product, if any, manufactured by such
manufacturer pursuant to the license granted in Section 2.1(b).
2.3 No license or immunity is granted under this
Agreement by either party, either directly or by implication,
estoppel or otherwise to any third parties acquiring items from
either party for the combination of such acquired items with
other items (including items acquired from either party hereto)
or for the use of such combination even if such items have no
substantial use other than as part of such a combination.
2.4 IBM on behalf of itself and its Subsidiaries covenants
not to sue READ-RITE for its purchase, use, import, offer for
sale, sale and lease of READ-RITE Licensed Products made
by another manufacturer that are covered by the claims of
IBM Licensed Patents; provided, however, that the covenant
in this Section 2.4 shall not apply to or serve to enlarge the
scope of READ-RITE's license to have products made
granted in Sections 2.1(b) and 2.1(c). Further, the covenant in
this Section 2.4 shall not impair or limit any of IBM's rights to
institute any action or suit against any manufacturer from
whom READ-RITE purchases READ-RITE Licensed
Products.
2.5 READ-RITE on behalf of itself and its Subsidiaries
covenants not to sue IBM for its purchase, use, import, offer
for sale, sale and lease of IBM Licensed Products made by
another manufacturer that are covered by the claims of IBM
Licensed Patents; provided, however, that the covenant in this
Section 2.5 shall not apply to or serve to enlarge the scope of
IBM's license to have products made granted in Sections
2.1(b) and 2.1(c). Further, the covenant in this Section 2.5
shall not impair or limit any of READ-RITE's rights to
institute any action or suit against any manufacturer from
whom IBM purchases IBM Licensed Products.
2.6 Subject to Section 2.7, the licenses granted herein
shall include the right of each party to grant sublicenses to its
Subsidiaries, which sublicenses may include the right of the
sublicensed Subsidiaries to sublicense other Subsidiaries of
said party. No sublicense shall be broader in any respect at
any time during the life of this Agreement than the license
held at that time by the party that granted the sublicense.
2.7 Subject to Section 2.10, a sublicense granted to a
Subsidiary shall terminated on the earlier of:
(a) the date such Subsidiary ceases to be a
Subsidiary; and
(b) the date of termination or expiration of the
license of the party that granted the sublicense.
If a Subsidiary ceases to be a Subsidiary and holds
any patents under which a party hereto is licensed, such
license shall continue for the term defined herein.
2.8 In the event that neither a party nor any of its
Subsidiaries has the right to grant a license under any
particular Licensed Patent of the scope set forth in Section 2,
then the license granted herein under said Licensed patent
shall be of the broadest scope which said party or any of its
Subsidiaries has the right to grant within the scope set forth
above.
2.9 If, after the Effective Date, a party or any of its
Subsidiaries ("Acquiring Party") acquires assets, either by
acquiring an entity which owns the assets or by acquiring the
assets from such an entity, and said entity is, as of the date of
acquisition, licensed by the other party ("Licensor") under one
or more Licensed Patents through an existing agreement
pursuant to which royalties or other payments are made by
said entity to said Licensor, then the license and other rights
granted herein to the Acquiring Party with respect to said
Licensed Patents shall apply to products manufactured
through the use of said assets; provided, however, such
royalties or other payments shall continue to be made by
Acquiring Party to the Licensor with respect to products
manufactured through the use of said assets notwithstanding
that the Acquiring Party may have been licensed for the same
Licensed Products before the acquisition.
2.10 In the event one party hereto transfers a product line
either as part of or separate from a disposition of a Subsidiary
to any third party, and said third party, with the written
approval of said one party, requests in writing, within sixty
(60) days following the effective date of the transfer
("Transfer Date"), a license agreement with the other party
hereto upon terms and conditions as hereinafter provided, the
other party hereto agrees that it will enter into such license
agreement forthwith; provided, however, such transfer shall
include all of the following:
(a) patents or other intellectual property relating to
the line of marketable products; and
(b) tangible assets equivalent in value to the lesser of
fifty million U.S. dollars ($50,000,000) or twenty percent
(20%) of the total assets of the party of which it was formerly
a Subsidiary.
Any such agreement with such third party shall grant a
royalty-free license under the same terms and conditions as
the license granted to said one party herein under the other
party's Licensed Patents for the field (as defined between the
transferring party and such third party) of such product line,
except in the following respects:
(c) such field shall be within the field then licensed
to the transferring party;
(d) such field shall not be defined more broadly than
appropriate to cover the particular product line being
transferred and shall be in form and substance acceptable to
such other party;
(e) the license granted shall be limited in the twelve
(12) months immediately following such Transfer Date to a
volume of licensed products having an aggregate selling price
equal to no more than the aggregate selling prices of such
products by said one party in the twelve (12) months
preceding such Transfer Date plus twenty-five percent (25%);
the license granted to such third party shall be limited, in each
of the second through fifth twelve-month periods following
such Transfer Date, to a volume of licensed products having
an aggregate selling price equal to no more than the limit for
the immediately preceding twelve-month period plus twenty-
five percent (25%);
(f) the transferring party shall relinquish its rights
under this Agreement for such field for four (4) years
following such Transfer Date wherein the relinquishing of its
rights by such transferring party pursuant to this Section
2.10(g) shall be automatically effected as an amendment
hereto as of such Transfer Date, which amendment shall
automatically terminate four (4) years after the Transfer Date,
but licenses to such transferring party to use, lease, sell or
otherwise transfer apparatus that was manufactured by or for it
prior to the time of such relinquishing shall continue with
respect to such apparatus;
(g) such third party shall grant to such other party a
royalty-free license (under the same terms as the license
granted to such other party herein) under all Third Party
Patents for all products licensed herein to such other party on
the Effective Date of this Agreement; provided, however, if
such third party chooses not to grant such a license, then the
Futures Date for the license between the other party and such
third party shall be the Transfer Date. "Third Party Patents"
shall mean all patents throughout the world under which, at
any time commencing with the date of the product line
transfer, the third party or any of its Subsidiaries has the right
to grant such licenses; and
(h) this Section 2.10, Section 3, and Section 4 shall
be omitted;
(i) the name of such third party shall be substituted
for the name of the transferring party;
(j) in the event that such third party is or becomes
organized under the laws of a country different from that of
the transferring party, such license agreement shall contain
such additional terms and conditions (other than royalty
provisions) as may exist in patent license agreements between
the other party and other corporations organized under the
laws of the same country.
Section 3. Releases and Indemnification
3.1 Each party (as "Releasor") on behalf of itself and its
Subsidiaries which are Subsidiaries as of the Effective Date,
irrevocably releases the other party, its Subsidiaries which are
Subsidiaries on the Effective Date and its and their respective
customers from any and all claims of infringement of
Releasor's Licensed Patents which claims are based on acts
prior to the Effective Date, which, had they been performed
after the Effective Date would have been licensed under this
Agreement.
The release contained herein shall not apply to any
person other than the persons named in this Section 3 and
shall not apply to the manufacture of any items by any person
other than the other party or its Subsidiaries. The release
granted by READ-RITE to IBM is effective as of the Effective
Date. [Section deleted - confidential treatment requested]
3.2 READ-RITE shall indemnify and hold IBM and
IBM's Subsidiaries harmless from and against any and all
claims, actions, suits, proceedings and litigations brought by
READ-RITE SMI relating to infringement of any READ-
RITE SMI patents by IBM, and any losses, deficiencies,
damages, liabilities, costs and expenses including without
limitation, reasonable attorneys' fees and all related costs and
expenses, to be paid or otherwise incurred in connection with
the defense of any such claim, action, suite, proceeding or
litigation.
Section 4. [Section deleted - confidential treatment requested]
Section 5. Term of Agreement; Acquisition of a Party
5.1 The term of the licenses granted under this
Agreement shall be from the Effective Date until the
expiration of the last to expire of the License Patents, unless
earlier terminated under the provisions of this Agreement.
5.2 If one party (the "Acquired Party") is acquired by a
third party (the "Acquiror"), becoming a Subsidiary of the
Acquiror:
(a) the Acquired Party shall promptly give
notice of such acquisition to the other party (the "non-
Acquired Party");
(b) the license granted to the Acquired Party herein,
and all sublicenses (if any) granted to the Acquired Party's
Subsidiaries, shall continue in accordance with the terms of
this Agreement, [section deleted - confidential treatment
requested] provided, however:
(i) such license shall be limited in the twelve
(12) months immediately following such acquisition to a
volume of the Acquired Party's Licensed Products having an
aggregate selling price equal to no more than the aggregate
selling prices of such Products by said Acquired Party in the
twelve (12) months preceding such transfer plus twenty-five
percent (25%), and in each of the next twelve-month periods
for the remaining term of this Agreement, such license shall
be limited to a volume of the Acquired Party's Licensed
Products having an aggregate selling price equal to no more
than the limit for the immediately preceding twelve-month
period plus twenty-five percent (25%); and
(ii) such license shall continue only if the
Acquiror grants to the non-Acquired party a royalty-free
license (under the same terms as the license granted to the
non-Acquired party herein) under all Acquiror Patents for the
Licensed Products licensed herein to the Acquired Party;
provided, however, if the Acquiror chooses not to grant such a
license, then this license shall continue but the Futures Date in
Section 1.3 (a) for both parties shall be automatically changed
to the date of such acquisition. "Acquiror Patents" shall mean
all patents throughout the world under which, at any time
commencing with the date of the acquisition, the Acquiror or
any of its Subsidiaries has the right to grant such licenses; and
(c) except for the Futures Date which may be
changed to the date of acquisition pursuant to Section
5.2(b)(ii), the rights granted to the non-Acquired Party from
the Acquired Party under this Agreement shall not be affected.
5.3 If one party (the "Acquired Party") is acquired by a
third party such that it is no longer a separate legal entity, then
the Acquired Party shall require as a condition precedent to
the acquisition that the entity that survives after, or results
from, [section deleted - confidential treatment requested]
Section 6. Other License Rights
6.1 It is recognized that the parties hereto or their
respective Subsidiaries may now have, or hereafter obtain, the
right to grant licenses under one or more patents of any
country, including utility models and including type font
design patents and registrations (but not including any other
design patents or registrations), issuing on patent applications
entitled to an effective filing date prior to the Futures Date and
under the patent applications therefore, but that such grant or
the exercise of rights thereunder shall result in payment of
royalties or other consideration by Grantor or its Subsidiaries
to third parties. Each party (as Grantor) agrees that, upon
written request, it shall grant to the other party the extent and
subject to the terms and conditions under which it then has the
right to do so, a license of the broadest scope which Grantor
has the right to grant at any time but of no greater scope than
the scope of the licenses granted herein with respect to any
such patent or patent application. Such license shall be
granted under a separate agreement, upon payment of the
same royalty or other consideration as that which Grantor or
any of its Subsidiaries is obligated to pay to a third party
because of the grant of such license or the exercise of rights
thereunder.
6.2 Upon written request by a party, the other party shall
inform the requesting party of those patents or patent
applications coming within the scope of Section 6.1 at the
time of such request.
Section 7. [Section deleted - confidential treatment requested]
7.1 [Section deleted - confidential treatment requested]
7.2 Notices and other communications shall be sent by
facsimile or by registered or certified mail to the following
addresses and shall be effective upon mailing or transmission:
For IBM: For READ-RITE:
Director of Licensing Read-Rite Corporation
IBM Corporation Attn: General Counsel
500 Columbus Avenue 345 Los Coches Street
Thornwood, New York 10594 Milpitas, California 95035
Facsimile: (914) 742-6737 Facsimile: (408)956-3203
Section 8. Miscellaneous
8.1 Neither party shall assign or grant any right under
any of its Licensed Patents unless such assignment or grant is
made subject to the terms of this Agreement.
8.2 Neither party shall assign any of its rights or delegate
any of its obligations under this Agreement. Any attempt to
do so shall be void. However, a party which undergoes
reorganization may assign such rights and delegate such
obligation to its legal successor, provided that after the
reorganization, the successor and its Subsidiaries will have
essentially the same assets as such party and its Subsidiaries
had prior to the reorganization.
8.3 Neither party shall use or refer to this Agreement or
any of its provisions in any promotional activity.
8.4 Each party represents and warrants that it has the full
right and power to grant the licensee and release set forth in
Sections 2 and 3. Each party (as a Grantor) further represents
and warrants that prior to the execution of this Agreement, it
has informed the other party of any patent originating from
inventions made by employees of Grantor or its Subsidiaries,
which patent is now owned by Grantor or its Subsidiaries and
which patent, owing to prior arrangements with third parties,
does not qualify as a Licensed Patent of Grantor under which
licenses are granted in Section 2. Neither party makes any
other representation or warranties, express or implied, nor
shall either party have any liability in respect of any
infringement of patents or other rights of third parties due to
the other party's operation under the license herein granted.
8.5 Nothing contained in this Agreement shall be
construed as conferring any rights by implication, estoppel or
otherwise under any non-patent intellectual property right, or
any patents other than the Licensed Patents. Neither party is
required hereunder to furnish or disclose to the other any
technical or other information (including copies of Licensed
Patents).
8.6 Neither party shall have any obligation hereunder to
institute any action or suit against third parties for
infringement of any of its Licensed Patents or to defend any
action or suit brought by a third party which challenges or
concerns the validity of any of its Licensed Patents. Neither
party shall have any right to institute any action or suit against
third parties for infringement of any of the other party's
Licensed Patents. Neither party, nor any of its Subsidiaries, is
required to file any patent application, or to secure any patent
or patent rights, or to maintain any patent in force.
8.7 Each party shall, upon a request from the other party
sufficiently identifying any patent or patent application,
inform the other party as to the extent to which said patent or
patent application is subject to the licenses and other rights
granted hereunder. If such licenses or other rights under said
patent or patent application are restricted in scope, copies of
all pertinent provisions of any contract or other arrangement
creating such restrictions shall, upon request, be furnished to
the party making such request, unless such disclosure is
prevented by such contract, and in such event, a statement of
the nature of such restriction shall be provided.
8.8 If a third party has the right to grant licenses under a
patent to a party hereto (as a "Licensee") with the consent of
the other party hereto, said other party shall provide said third
party with any consent required to enable said third party to
license said Licensee on whatever terms such third party may
deem appropriate. Each party hereby waives any right it may
have to receive royalties or other consideration for said third
party as a result of said third party's so licensing said Licensee
within the scope of the licenses granted under Section 2 of this
Agreement.
8.9 As of the Effective Date of this Agreement, the
patent license agreement between IBM and READ-RITE
dated as of October 1, 1986 (the "Prior Agreement") is
terminated, and this Agreement supersedes the Prior
Agreement and all other license agreements and amendments
to such agreements between the parties which relate to the
subject matter of this Agreement, however if READ-RITE's
license under this Agreement is terminated, READ-RITE's
license under the Prior Agreement shall be reinstated under
the terms and conditions of the Prior Agreement.
8.10 This Agreement shall not be binding upon the parties
until it has been signed hereinbelow by or on behalf of each
party. NO amendment or modification hereof shall be valid or
binding upon the parties unless made in writing and signed as
aforesaid.
8.11 If any section of this Agreement is found by
competent authority to be invalid, illegal or unenforceable in
any respect for any reason, the validity, legality and
enforceability of such section in every other respect and the
remainder of this Agreement shall continue in effect so long
as the Agreement still expresses the intent of the parties.
However, if the intent of the parties cannot be preserved, this
Agreement shall be either renegotiated or terminated.
8.12 This Agreement shall be construed, and the legal
relations between the parties hereto shall be determined, in
accordance with the law of the State of New York, USA, as
such law applies to contracts signed and fully performed in
New York.
8.13 The headings of sections are inserted for convenience
of reference only and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement.
//
This Agreement embodies the entire understanding
of the parties with respect to the Licensed Patents, and
replaces any prior oral or written communications and
between them.
Agreed to: Agreed to:
READ-RITE CORPORATION INTERNATIONAL
BUSINESS
MACHINES
By: By:
R. S. Jackson M.C. Phelps Jr.
Vice President Business Vice President
Development & General
Counsel
<PAGE>
[ARTICLE] 5
[MULTIPLIER] 1,000
Part II. Other information, Item 6a.
Exhibit 11.1
READ-RITE CORPORATION
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
------------------- -------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income (loss) $31,173 ($22,910) $60,515 $20,948
========= ========= ========= =========
Weighted average common shares
outstanding 47,636 46,617 47,272 46,757
Common equivalent shares issuable
under dilutive stock options after
applying treasury stock method,
net of tax benefits 1,327 -- 1,354 1,083
--------- --------- --------- ---------
Common and common equivalent
shares used in computing net
income per share 48,963 46,617 48,626 47,840
========= ========= ========= =========
Net income (loss) per share $0.64 ($0.49) $1.24 $0.44
========= ========= ========= =========
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED CONDENSED BALANCE SHEET AT JUNE 30, 1997
(UNAUDITED) AND CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 30, 1997 (UNAUDITED) AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-1-1996
<PERIOD-END> JUN-30-1997
<CASH> 81,110
<SECURITIES> 36,809
<RECEIVABLES> 137,173
<ALLOWANCES> 0
<INVENTORY> 80,769
<CURRENT-ASSETS> 349,533
<PP&E> 1,019,850
<DEPRECIATION> 378,716
<TOTAL-ASSETS> 1,028,092
<CURRENT-LIABILITIES> 232,035
<BONDS> 0
0
0
<COMMON> 5
<OTHER-SE> 525,729
<TOTAL-LIABILITY-AND-EQUITY> 1,028,092
<SALES> 843,892
<TOTAL-REVENUES> 843,892
<CGS> 673,608
<TOTAL-COSTS> 673,608
<OTHER-EXPENSES> 78,158
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,631
<INCOME-PRETAX> 88,261
<INCOME-TAX> 21,190
<INCOME-CONTINUING> 60,515
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 60,515
<EPS-PRIMARY> $1.24
<EPS-DILUTED> $1.24
</TABLE>
