<PAGE> 1
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
--
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Read-Rite Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-----------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------
(5) Total fee paid:
--------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------
(2) Form, Schedule or Registration Statement No.:
--------------------
(3) Filing Party:
----------------------------------------------------
(4) Date Filed:
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<PAGE> 2
LOGO
READ-RITE CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 25, 1997
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Read-Rite
Corporation, a Delaware corporation (the "Company"), will be held on Tuesday,
February 25, 1997, at 10:00 a.m., local time, at the Company's facility at 44100
Osgood Road, Fremont, California, for the following purposes:
1. To elect six directors to serve for the ensuing year or until their
successors are duly elected and qualified.
2. To amend the Company's Employee Stock Purchase Plan to increase the
number of shares reserved for issuance thereunder by 500,000 shares.
3. To ratify the appointment of Ernst & Young LLP, as independent
auditors for the Company for the 1997 fiscal year.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on December 30, 1996
are entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, please sign and return
the enclosed proxy as promptly as possible in the postage prepaid envelope
enclosed for that purpose. Any stockholder attending the meeting may vote in
person even if he or she has returned a proxy.
THE BOARD OF DIRECTORS
Milpitas, California
January 15, 1997
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO
COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
<PAGE> 3
READ-RITE CORPORATION
345 LOS COCHES STREET
MILPITAS, CALIFORNIA 95035
PROXY STATEMENT FOR 1997
ANNUAL MEETING OF STOCKHOLDERS
The enclosed Proxy is solicited on behalf of the Board of Directors of
Read-Rite Corporation (the "Company") for use at the Annual Meeting of
Stockholders to be held on Tuesday, February 25, 1997, at 10:00 a.m., local
time, or at any adjournment thereof, for the purposes set forth herein and in
the accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting
will be held at the Company's facility at 44100 Osgood Road, Fremont,
California.
The proxy solicitation materials were mailed on or about January 15, 1997
to all stockholders of record on December 30, 1996 (the "Record Date").
INFORMATION CONCERNING SOLICITATION AND VOTING
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it any time before its use by delivering to the Secretary of the Company
at the above address written notice of revocation or a duly executed proxy
bearing a later date, or by attending the meeting and voting in person.
VOTING AND SOLICITATION
Each stockholder is entitled to one vote for each share of Common Stock on
all matters presented at the meeting. The required quorum for the transaction of
business at the Annual Meeting is a majority of the votes eligible to be cast by
holders of shares of Common Stock issued and outstanding on the Record Date.
Shares that are voted "FOR," "AGAINST," "WITHHELD" or "ABSTAIN" are treated as
being present at the meeting for purposes of establishing a quorum and are also
treated as shares entitled to vote at the Annual Meeting (the "Votes Cast") with
respect to such matter. Abstentions will have the same effect as a vote against
the proposal. Broker non-votes will be counted for purposes of determining the
presence or absence of a quorum for the transaction of business, but such
non-votes will not be counted for purposes of determining the number of Votes
Cast with respect to the particular proposal on which a broker has not voted.
Thus, a broker non-vote will not effect the outcome of the voting on a
particular proposal.
The cost of soliciting proxies will be borne by the Company. In addition,
the Company has retained ChaseMellon Shareholder Services to act as proxy
solicitor for the Annual Meeting at a cost of approximately $7,500 plus
expenses. The Company may also reimburse brokerage firms and other persons
representing beneficial owners of shares for their expenses in forwarding
solicitation materials to such beneficial owners. Proxies may also be solicited
by certain of the Company's directors, officers, and regular employees, without
additional compensation, personally or by telephone, facsimile or telegram.
2
<PAGE> 4
RECORD DATE AND PRINCIPAL SHARE OWNERSHIP
Stockholders of record at the close of business on December 30, 1996 are
entitled to notice of the meeting and to vote at the meeting. At the record
date, 47,029,092 shares of the Company's Common Stock were issued and
outstanding. As of December 30, 1996, the following entity was known by the
Company to be the beneficial owner of more than 5% of the Company's Common
Stock:
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME SHARES TOTAL
------------------------------------------------------------ --------- -----------
<S> <C> <C>
J. P. Morgan & Co. Incorporated(1).......................... 3,786,730 8.1%
60 Wall Street
New York, NY 10260
</TABLE>
- ---------------
(1) Based on information received from J. P. Morgan & Co. Incorporated as of
December 17, 1996.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals by stockholders of the Company which such stockholders intend to
present at the Company's 1998 Annual Meeting of Stockholders must be received by
the Company no later than September 17, 1997 so that they may be considered for
inclusion in the proxy statement and form of proxy relating to that meeting.
PROPOSAL ONE:
ELECTION OF DIRECTORS
NOMINEES
A board of six directors is to be elected at the Annual Meeting of
Stockholders. Unless otherwise instructed, the proxy holders will vote the
proxies received by them for the Company's six nominees named below, all of whom
are presently directors of the Company. If any nominee of the Company is unable
or declines to serve as a director at the time of the Annual Meeting of
Stockholders, the proxies will be voted for the nominee designated by the
present Board of Directors to fill the vacancy. It is not expected that any
nominee will be unable or will decline to serve as a director. The term of the
office of each person elected as a director will continue until the next Annual
Meeting of Stockholders or until a successor has been elected and qualified.
VOTE REQUIRED; RECOMMENDATION OF BOARD OF DIRECTORS
The six candidates receiving the highest number of "FOR" votes shall be
elected to the Company's Board of Directors. An abstention will have the same
effect as a vote withheld for the election of directors.
The Board of Directors recommends that the stockholders vote "FOR" the
nominees listed below:
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION
- ------------------------ ---- ----------------------------------------------------------
<S> <C> <C>
Cyril J. Yansouni....... 54 Chairman of the Board of Directors and Chief Executive
Officer of the Company
Fred Schwettmann........ 56 Director, President and Chief Operating Officer of the
Company
John G. Linvill......... 77 Professor Emeritus, Stanford University
William J. Almon........ 64 Chairman and Chief Executive Officer of StorMedia, Inc.
Michael L. Hackworth.... 55 President and Chief Executive Officer of Cirrus Logic,
Inc.
Matthew J. O'Rourke..... 58 Retired Partner, Price Waterhouse LLP
</TABLE>
Except as set forth below, each nominee has been engaged in his principal
occupation described above during the past five years. There is no family
relationship among any directors or executive officers of the Company.
3
<PAGE> 5
Mr. Yansouni has served as Chief Executive Officer and Chairman of the
Board of Directors of the Company since March 1991. Prior to joining the
Company, Mr. Yansouni was with Unisys Corporation, a manufacturer of computer
systems, from December 1988 to February 1991, where he served in various senior
management capacities, most recently as an Executive Vice President. From
October 1986 to December 1988, Mr. Yansouni was President of Convergent
Technologies, a manufacturer of computer systems which was acquired by Unisys
Corporation in December 1988. From 1967 to 1986, Mr. Yansouni was at Hewlett-
Packard Company, where he served in a variety of technical and management
positions, most recently as Vice President and General Manager of the Personal
Computer Group. Mr. Yansouni received his M.S. degree in electrical engineering
from Stanford University and his B.S. degree in electrical engineering and
mechanical engineering from the University of Louvain, Belgium. Mr. Yansouni is
also a director of Informix Software, Inc. and PeopleSoft, Inc., both software
companies, of Raychem Corporation, a material sciences manufacturing company,
and of ActivCard, a manufacturer of network access security systems.
Dr. Schwettmann joined the Company in May 1993 as President, Chief
Operating Officer and director. Dr. Schwettmann joined the Company after 17
years at Hewlett-Packard Company, where he served in a variety of technical and
management positions, most recently as Vice President and General Manager of the
Circuit Technology Group. Dr. Schwettmann received his B.Ch.E. degree from City
College of New York, his M.Ch.E. degree from New York University and his
Ph.D.Ch.E. degree from the City University of New York. Dr. Schwettmann is a
member of the Board of Directors of Actel Corporation, a supplier of field
programmable gate arrays. Dr. Schwettmann is also a director of SDL, Inc., a
supplier of customized semiconductor-based optoelectronic and laser products.
Dr. Linvill has been a director of the Company since August 1991. Dr.
Linvill has been a faculty member at Stanford University since 1955. Since 1989,
he has been Professor Emeritus, and from 1980 to 1990, he was Director of the
Center for Integrated Systems in Stanford's Electrical Engineering Department.
Dr. Linvill received his A.B. degree in mathematics and physics from William
Jewel College and his S.B., S.M. and Sc.D. degrees in electrical engineering
from the Massachusetts Institute of Technology.
Mr. Almon has been a director of the Company since December 1994. Since May
1994, Mr. Almon has been Chairman and Chief Executive Officer of StorMedia,
Inc., a manufacturer of thin film magnetic disks for rigid disk drives. He was
also President of StorMedia from May 1994 to May 1995. Since 1993, Mr. Almon has
also been a principal of the Balmon Group, an investment firm focused
principally on new data storage technology companies involving CD-ROMS, disk
arrays and magnetic media. From 1989 to 1992, Mr. Almon served as the President
and Chief Operating Officer of Conner Peripherals, Inc., a disk drive
manufacturer and a customer of the Company. Mr. Almon received his B.S. degree
from the United States Military Academy at West Point, and pursued graduate
studies at the Georgetown University School of Economics. Mr. Almon is also a
director of Sigma Designs, Inc., a multimedia company.
Mr. Hackworth has been a director of the Company since November 1995. Mr.
Hackworth has served as President, Chief Executive Officer and a director of
Cirrus Logic, Inc. since he founded the Company in January 1985. Previously, Mr.
Hackworth was employed by Signetics Corporation, most recently as Senior Vice
President of MOS and Linear Products.
Mr. O'Rourke has been a director of the Company since July 1996. He joined
Price Waterhouse in 1960, was admitted to partnership in 1972 and worked in
various Price Waterhouse offices throughout the United States until his
retirement in June 1996. He was a managing partner at Price Waterhouse's New
York office from 1994 through June 1996, prior to which he served as the
managing partner for Northern California. Mr. O'Rourke holds a B.S. degree in
Economics from Villanova University (Pennsylvania), and is a Certified Public
Accountant in a number of states, including California.
4
<PAGE> 6
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
Common Stock as of December 30, 1996 by each director (including the Company's
Chief Executive Officer), by the four other most highly compensated executive
officers of the Company whose compensation exceeded $100,000 for fiscal 1996
(such officers, together with the Chief Executive Officer, are collectively
referred to as the "Named Executive Officers"), and by all current directors and
executive officers as a group:
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME SHARES TOTAL
--------------------------------------------------------------- --------- ----------
<S> <C> <C>
Cyril J. Yansouni(l)........................................... 920,217 1.9%
Fred Schwettmann(2)............................................ 133,297 *
John G. Linvill(3)............................................. 22,500 *
William J. Almon(4)............................................ 5,500 *
Michael L. Hackworth(5)........................................ 1,500 *
Matthew J. O'Rourke............................................ 1,200 *
Peter G. Bischoff(6)........................................... 150,520 *
Michael A. Klyszeiko(7)........................................ 90,001 *
Alan S. Lowe(8)................................................ 85,780 *
All executive officers and directors as a group (13
persons)(9).................................................. 1,538,151 3.2%
</TABLE>
- ---------------
* Less than 1%
(1) Includes 685,308 shares issuable upon the exercise of stock options to
purchase shares of Common Stock which are exercisable within 60 days of
December 30, 1996.
(2) Includes 129,252 shares issuable upon the exercise of stock options to
purchase shares of Common Stock which are exercisable within 60 days of
December 30, 1996.
(3) Includes 19,500 shares issuable upon the exercise of stock options to
purchase shares of Common Stock which are exercisable within 60 days of
December 30, 1996.
(4) Includes 4,500 shares issuable upon the exercise of stock options to
purchase shares of Common Stock which are exercisable within 60 days of
December 30, 1996.
(5) Includes 1,500 shares issuable upon the exercise of stock options to
purchase shares of Common Stock which are exercisable within 60 days of
December 30, 1996.
(6) Includes 146,721 shares issuable upon the exercise of stock options to
purchase shares of Common Stock which are exercisable within 60 days of
December 30, 1996.
(7) Includes 79,589 shares issuable upon the exercise of stock options to
purchase shares of Common Stock which are exercisable within 60 days of
December 30, 1996.
(8) Includes 64,026 shares issuable upon the exercise of stock options to
purchase shares of Common Stock which are exercisable within 60 days of
December 30, 1996.
(9) Includes 1,252,661 shares issuable upon the exercise of stock options to
purchase shares of Common Stock which are exercisable within 60 days of
December 30, 1996.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held 8 meetings during fiscal 1996.
The Audit Committee held 4 meetings during fiscal 1996. From October 1995
through November 1995, the Audit Committee consisted of Messrs. Linvill, Almon
and H. Vaughan Blaxter III, a director of the Company from February 1991 through
February 1996. Mr. Hackworth joined the Audit Committee in November 1995. Mr.
Blaxter left the Audit Committee upon leaving the Board of Directors at the end
of his term in February 1996. Mr. O'Rourke joined the Audit Committee in July
1996. The Audit Committee
5
<PAGE> 7
reviews the financial statements and the internal financial reporting systems
and controls of the Company with the Company's management and independent
auditors, recommends resolutions for any dispute between the Company's
management and its auditors, and reviews other matters relating to the
relationship of the Company with its auditors.
The Compensation Committee held 2 meetings during fiscal 1996. From October
1995 through November 1995, the Compensation Committee consisted of Messrs.
Linvill, Almon and Blaxter. Mr. Hackworth joined the Compensation Committee in
November 1995. Mr. Blaxter left the Compensation Committee upon leaving the
Board of Directors at the end of his term in February 1996. Mr. O'Rourke joined
the Compensation Committee in July 1996. The Compensation Committee makes
recommendations to the Board of Directors regarding the Company's executive
compensation policies and administers the Company's stock option plans and
Employee Stock Purchase Plan (the "Purchase Plan").
The Board of Directors currently has no nominating committee or committee
performing a similar function.
Messrs. Almon, Yansouni and Schwettmann participated in all meetings of the
Board of Directors held during fiscal 1996. Mr. Almon further participated in
all meetings of the Audit Committee and the Compensation Committee held during
fiscal 1996. Dr. Linvill participated in all meetings of the Board of Directors
except one, all meetings of the Audit Committee and all meetings of the
Compensation Committee. Mr. Blaxter participated in all meetings of the Board of
Directors, the Audit Committee and the Compensation Committee held prior to the
expiration of his term in February 1996. Messrs. Hackworth and O'Rourke
participated in all meetings of the Board of Directors, the Audit Committee and
the Compensation Committee held subsequent to their appointments in November
1996 and July 1996, respectively.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
At the end of fiscal 1996, the Compensation Committee consisted of Messrs.
Linvill, Almon, Hackworth and O'Rourke. Each member of the Compensation
Committee is a nonemployee director. No member of the Compensation Committee has
a relationship that would constitute an interlocking relationship with executive
officers or directors of another entity.
COMPENSATION OF DIRECTORS
Each nonemployee director of the Company receives a fee of $2,000 per
quarter, plus $1,000 for each board meeting attended and $500 for each board
committee meeting attended. Nonemployee directors also participate in the
Company's 1991 Director Option Plan (the "Director Plan"). Under the Director
Plan, each new nonemployee director is automatically granted a nonstatutory
option to purchase 6,000 shares of Common Stock on the date upon which he or she
first becomes a director. Thereafter, on July 1 of each year, each nonemployee
director automatically receives a nonstatutory option to purchase 6,000 shares
of the Company's Common Stock. Options granted under the Director Plan generally
have a term of ten years unless terminated sooner after termination of the
optionee's status as a director or otherwise pursuant to the Director Plan. The
exercise price of each option granted under the Director Plan is equal to the
fair market value of the Common Stock on the date of grant. Options granted
under the Director Plan prior to December 1995 generally vest over three years
(25% after one year, 25% after two years, and 50% after three years); effective
December 1995, the Board of Directors extended vesting of future grants under
the Director Plan to four years (25% on each of the first four anniversaries of
the grant date). Effective July 1, 1996, Messrs. Almon, Hackworth and Linvill
were each granted options to purchase 6,000 shares of Common Stock under the
Director Plan at an exercise price of $14.38 per share. Effective July 16, 1996,
the date of Mr. O'Rourke's appointment to the Board of Directors, Mr. O'Rourke
was granted an option to purchase 6,000 shares of Common Stock under the
Director Plan at an exercise price of $12.00 per share.
6
<PAGE> 8
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation paid to the Named Executive
Officers for the Company's last three fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1) LONG-TERM
----------------------------------------------------- COMPENSATION
QUARTERLY ------------
VARIABLE STOCK OPTION
COMPENSATION GRANTS
NAME AND PRINCIPAL FISCAL AND ANNUAL OTHER ANNUAL (# OF
POSITION YEAR SALARY BONUS(2) COMPENSATION SHARES)
- ------------------------- ------ -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cyril J. Yansouni........ 1996 $570,000 $ 99,750(3) -- --
Chairman and Chief 1995 500,000 520,000 -- 122,672
Executive Officer 1994 450,000 129,189 -- 139,959
Fred Schwettmann......... 1996 410,000 61,500(3) -- --
President and Chief 1995 360,000 331,200 -- 98,888
Operating Officer 1994 325,000 177,474(4) -- 93,959
Peter G. Bischoff........ 1996 245,000 25,800(3) $200,155(5) --
Executive Vice 1995 245,000 143,080 231,364(5) 50,604
President 1994 220,000 28,873 244,216(5) 69,591
Michael A. Klyszeiko..... 1996 255,000 25,500(3) -- 10,000
Executive Vice 1995 240,000 140,160 -- 45,480
President, Operations 1994 205,000 26,904 -- 59,591
Alan S. Lowe(6).......... 1996 242,000 24,200(3) -- --
Senior Vice President,
Customer Business Units
</TABLE>
- ---------------
(1) Excludes certain perquisites and other amounts, such as car allowance, which
for any executive officer did not exceed, in the aggregate, the lesser of
$50,000 or 10% of the total annual salary and bonus for such executive
officer. The Company has no restricted stock award programs, stock
appreciation rights or long-term investment plans.
(2) Includes quarterly variable compensation and annual bonus awards earned for
performance in the fiscal year noted even though portions of such amounts
may be payable in subsequent years. Excludes quarterly variable compensation
and annual bonus awards paid in the fiscal year noted but earned in prior
years. Also excludes modified vesting of certain stock options granted to
such officers under the Company's annual bonus program. See "Aggregated
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values"
below. Under this program, in October 1993, Messrs. Yansouni, Schwettmann,
Bischoff, Klyszeiko and Lowe were granted options to purchase 49,959;
33,959; 19,591; 19,591; and 16,326 shares of Common Stock, respectively, at
the then current fair market value of $9.875 per share. These options were
scheduled to vest in six years, subject to earlier vesting based on Company
and individual performance criteria. Under the Company's fiscal 1995 annual
bonus program, vesting for 28,041; 19,002; 10,669; 10,451; and 9,103 of such
shares, respectively, was modified such that 50% of such options vested as
of October 1, 1995, 25% of such options vested on October 1, 1996, and 25%
of such options will vest on October 1, 1997, provided the employee remains
an employee in good standing through such date. The remaining shares from
the October 1993 grants will vest in October 1999, again, provided the
employee remains an employee in good standing through such date. See "Board
Compensation Committee Report on Executive Compensation -- Annual Bonus
Program."
(3) As further discussed below in "Board Compensation Committee Report on
Executive Compensation -- Quarterly Variable Compensation," executives of
the Company were paid quarterly variable compensation for the first quarter
of fiscal 1996 only. No other quarterly variable compensation or annual
bonuses were earned in fiscal 1996.
(4) Dr. Schwettmann joined the Company as President and Chief Operating Officer
in May 1993. Dr. Schwettmann's bonus amounts in fiscal 1994 reflect
quarterly and annual bonus payments guaranteed as part of Dr. Schwettmann's
hiring package. See "Employment Arrangements" below.
(5) Mr. Bischoff's compensation includes payments pursuant to Mr. Bischoff's
retention agreement dated April 1991, whereby the Company deposited
$1,000,000 into a trust account to be invested at
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<PAGE> 9
Mr. Bischoff's direction. All accrued income from investment of the trust
principal was also paid to Mr. Bischoff at the time of each annual payment.
See "Employment Arrangements."
(6) Mr. Lowe first became an executive officer of the Company in October 1996.
The above table includes compensation for Mr. Lowe for all of fiscal 1996,
including the period during which he was not an executive officer.
OPTIONS GRANTED AND OPTIONS EXERCISED IN THE LAST FISCAL YEAR
The following tables set forth information regarding stock options granted
to and exercised by the Named Executive Officers during the last fiscal year, as
well as options held by such officers as of September 29, 1996, the last day of
the Company's 1996 fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUES AT ASSUMED
ANNUAL RATES
OF STOCK PRICE
INDIVIDUAL GRANTS(1) APPRECIATION (THROUGH
------------------------------------------------- EXPIRATION DATE)(2)
% OF TOTAL EXERCISE ---------------------
OPTION OPTIONS PRICE EXPIRATION 5% 10%
NAME GRANTS GRANTED ($/SH) DATE PER YEAR PER YEAR
- ----------------------------- ------ ---------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Michael A. Klyszeiko......... 10,000(3) .8% $20.13 4-16-06 $127,179 $322,652
</TABLE>
- ---------------
(1) These options were granted under the Company's 1995 Stock Plan (the "1995
Plan") at an exercise price equal to the fair market value of the Company's
Common Stock on the date of grant. The 1995 Plan provides that in the event
of a merger of the Company with or into another corporation or a sale of
substantially all of the assets of the Company, each option shall be assumed
or an equivalent option substituted by the successor corporation. If the
successor corporation refuses to assume or substitute for the options under
the 1995 Plan, the optionee shall have the right to exercise the option as
to all shares (including shares for which the option would not otherwise be
exercisable) for a period of 15 days from the date the optionee receives
notice thereof from the administrator.
(2) The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and are not an estimate or projection
of future prices for the Company's Common Stock.
(3) Options vest over four years (25% on each of the first four anniversaries of
the grant date).
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
UNEXERCISED VALUE OF
OPTIONS UNEXERCISED OPTIONS
SHARES AT FISCAL YEAR END AT FISCAL YEAR END(1)
ACQUIRED ON VALUE ------------------ ---------------------
NAME EXERCISE REALIZED VESTED UNVESTED VESTED UNVESTED
- --------------------------------- ----------- ---------- ------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Cyril J. Yansouni................ 100,000 $1,704,170 658,298 203,610 $7,443,756 $355,159
Fred Schwettmann................. -- -- 109,501 185,846 146,006 269,519
Peter G. Bischoff................ -- -- 129,054 98,641 73,093 165,908
Michael A. Klyszeiko............. -- -- 61,976 96,095 98,743 149,008
Alan S. Lowe..................... 14,552 281,300 51,750 77,224 35,000 134,757
</TABLE>
- ---------------
(1) Represents the difference between the exercise price of the options and the
closing price of the Company's Common Stock on September 29, 1996 of $15.38
per share.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") presently consists of Messrs.
Linvill, Almon, Hackworth and O'Rourke, none of whom is an employee of the
Company. As part of its duties, the Committee reviews compensation levels of
executive officers, evaluates management performance and
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<PAGE> 10
administers the Company's Amended and Restated 1987 Stock Option Plan (the "1987
Plan"), 1995 Plan and Employee Stock Purchase Plan (the "Purchase Plan"). The
Committee is assisted by the Company's Human Resources personnel, and by a
compensation consulting firm which supplies the Committee statistical data and
other executive compensation information to permit the Committee to compare the
Company's compensation policies against compensation levels nationwide and
against programs of other companies of similar size in the Company's industry
and geographic area.
The Company's executive compensation programs are designed to attract and
retain executives who will contribute to the Company's long-term success, to
reward executives for achieving the Company's short- and long-term strategic
goals, to link executive compensation and stockholder interests through Company
performance-based and equity-based plans, and to recognize individual
contributions to Company performance.
Compensation for the Company's executive officers consists of four
principal elements: base salary, quarterly variable compensation, annual bonus
and stock options. The combination and relative weighting of these elements
reflects the Committee's belief that executive compensation should be closely
tied to the Company's profitability.
Base Salary. Executive officer salaries are initially determined by
evaluating the responsibilities of the position held and the experience and
performance of the individual, with reference to the competitive marketplace for
executive talent, including a comparison to base salaries for comparable
positions based on statistical data provided by the Company's compensation
consultant. Executive officer base salaries are targeted towards the 50th
percentile established by such data in order to place a greater emphasis on
Company performance-based components of the compensation package. The Committee
reviews executive salaries annually and adjusts them as appropriate to reflect
changes in market conditions and individual performance and responsibilities.
Mr. Yansouni's base compensation was increased from $500,000 in fiscal 1995 to
$570,000 for fiscal 1996. Mr. Yansouni's base salary has not been changed for
fiscal 1997.
Quarterly Variable Compensation. The Company's quarterly variable
compensation program acknowledges both Company and individual performance and is
intended to bring base salary plus quarterly variable compensation up to
approximately the 75th percentile established by reference to the statistical
data referenced above when all Company profitability and individual performance
objectives are met.
Under the quarterly program, each executive officer is eligible to receive
quarterly variable compensation equal to a percentage of that officer's base
salary determined by the Committee. At the beginning of the fiscal year, the
Committee sets quarterly Company "profit after tax" ("PAT") goals for the year.
No awards may be made under the program unless the Company is profitable. If the
Company is profitable, quarterly award eligibility begins to accrue once the
Company achieves 90% of the applicable quarterly PAT target, and increases on a
straight-line basis to full eligibility at 100% of the applicable quarterly PAT
target (e.g., at 95.5% of the applicable target, award eligibility is 55% of the
executive's maximum percentage for the quarter). Once eligibility is established
based on Company performance, 80% of that eligibility is paid, with the balance
of 20% payable based on individual performance considerations. Quarterly awards
for both the Chief Executive Officer and the President are based solely on
Company performance.
Quarterly variable compensation eligibility for fiscal 1996 ranged from
25%-40% of the respective base salaries of the participating officers except the
Company's Chief Executive Officer and President, whose percentages were 70% and
60%, respectively. In all cases, the percentages represent the maximum amount
payable for the year under this program to the executive if all four quarterly
awards are paid in full. Mr. Yansouni's quarterly variable eligibility was not
changed in fiscal 1996. Based on the PAT goals set by the Committee for fiscal
1996, quarterly awards were paid only for the first quarter of fiscal 1996.
For fiscal 1997, variable compensation eligibility again ranges from
25%-40% of the respective base salaries of the participating officers, except
for the Company's Chief Executive Officer and President, whose percentages
remain at 70% and 60%, respectively.
Annual Bonus. The Company's annual bonus program also acknowledges Company
and individual performance. In contrast to the quarterly program, however,
awards under the annual program can be paid
9
<PAGE> 11
only if the Company exceeds for the year the sum of the quarterly PAT targets
(the "Annual PAT Target") set by the Committee. The annual program is intended
to bring the executives' total compensation (base salary, quarterly variable
compensation and annual bonus) above the 90th percentile established by
reference to the statistical data discussed above when all Company profitability
and individual performance criteria are met.
For fiscal 1996, each executive's target base annual bonus eligibility
("ABE") under the annual program was a percentage of the sum of the executive's
base salary plus maximum quarterly variable compensation ("Total Compensation").
Under the 1996 program, annual bonus eligibility would have accrued if and to
the extent Company performance for the fiscal year exceeded the Annual PAT
Target, however, the Company did not meet the PAT goal for fiscal 1996. This
accrual calculation would have been on a straight-line basis to the extent the
Company's performance exceeded the Annual PAT Target, subject to a maximum ABE
equal to three times the base ABE in fiscal 1996. If eligibility was
established, actual awards could be adjusted at the Committee's discretion for
individual performance and other Company performance criteria.
For fiscal years 1994, 1995 and 1996, the Committee utilized stock option
grants under the 1987 Plan as the vehicle to award the first two thirds of the
maximum ABE, with the remaining third payable in cash. For fiscal 1996, for
example, each executive officer was granted a number of options which, when
multiplied times the estimated appreciation in the value of the Company's Common
Stock anticipated if the Company met the applicable performance targets, equaled
two-thirds of the maximum ABE for that executive. The stock option grants for
the fiscal 1996 program were made in the fourth quarter of fiscal 1995; the
Company's Chief Executive Officer was granted an option to purchase 42,672
shares under the fiscal 1996 program. All options granted under this program
were granted at the fair market value of the Common Stock on the date of grant
and vest six years from the date of grant. Vesting of all or a portion of such
options would have accelerated, however, if and to the extent the Company had
met or exceeded the applicable financial targets for fiscal 1996. Options so
accelerated would vest 50% at the time of acceleration, 25% one year later, and
25% two years later provided the executive remained employed by the Company
through such dates. The cash portion, if awarded, would have been paid at the
time of the award. Base ABE for fiscal 1996 ranged from 12% to 20% of Total
Compensation for the participating officers except for the Company's Chief
Executive Officer and President, whose percentage was 30%; Mr. Yansouni's ABE
was not changed for fiscal 1996. Because the Company did not meet or exceed the
PAT goal for fiscal 1996, vesting of these options was not accelerated, nor were
any annual cash bonuses awarded. The Committee has modified the annual bonus
program for fiscal 1997. Under the fiscal 1997 program, each executive's base
ABE will be the same percentage of that executive's base salary used for the
quarterly variable compensation program. The annual program will continue to be
based upon the Company exceeding the Annual PAT Target established by the
Committee. Awards under the annual program will, however, be cash only. Awards
will accrue on a straight-line basis to the extent Company performance exceeds
the Annual PAT Target, with the full base ABE payable if the Company exceeds the
Annual PAT Target by 25%, and the maximum annual award of two times ABE payable
if the Company exceeds the Annual PAT Target by 50%. Cash awards, if made, will
be made in full at the time of the award. Base ABE for fiscal 1997 ranges from
25% to 40% of base salaries for the participating officers except for the
Company's Chief Executive Officer and President, whose percentages are 70% and
60%, respectively.
Stock Options. Under the Company's stock option plan, stock options may be
granted to executive officers and other key employees of the Company. Upon
joining the Company, an individual's initial option grant is based on the
individual's responsibilities and position and upon information provided by the
Company's compensation consultant. The size of any annual stock option award is
based primarily on an individual's performance and the individual's
responsibilities and position with the Company, as well as on the individual's
present outstanding vested and unvested options. Options are designed to align
the interests of executive officers with those of the Company's stockholders.
All stock options granted to the Company's executive officers are granted with
an exercise price equal to the fair market value of the Company's Common Stock
on the date of grant and generally vest over three years. In November 1995, the
Committee determined, however, to extend vesting on future grants to four years
(25% on each of the first four anniversaries of the grant date). Vesting is
designed to encourage the creation of stockholder value over the long term since
no
10
<PAGE> 12
benefit is realized from the stock option grant unless the price of the Common
Stock rises over a number of years. Mr. Yansouni was granted no stock options in
fiscal 1996.
Other elements of executive compensation include participation in a
Company-wide medical and insurance benefits plan, and the ability to defer
compensation pursuant to a 401(k) plan. The Company presently makes matching
contributions for all participants in the 401(k) plan in the form of shares of
the Company's Common Stock. The amount of the contribution is $1.50 in Common
Stock for each $1.00 the employee contributes to his or her 401(k) account,
subject to a maximum Company match equal to the lesser of (i) $1,500 in Common
Stock or (ii) 100 shares of Common Stock per employee per year.
Mr. Yansouni receives no other material compensation or benefits not
provided to all executive officers.
The Committee has considered the potential impact of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
thereunder (the "Section"). The Section disallows a tax deduction for any
publicly-held corporation for individual compensation exceeding $1 million in
any taxable year for any of the Named Executive Officers, unless such
compensation is performance-based. The Company's policy is to qualify, to the
extent reasonable, its executive officers' compensation for deductibility under
applicable tax laws. However, the Committee believes that its primary
responsibility is to provide a compensation program that will attract, retain
and reward the executive talent necessary to the Company's success.
Consequently, the Committee recognizes that the loss of a tax deduction could be
necessary in some circumstances.
COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS
JOHN G. LINVILL
WILLIAM J. ALMON
MICHAEL L. HACKWORTH
MATTHEW J. O'ROURKE
EMPLOYMENT ARRANGEMENTS
In April 1991, the Company entered into a retention arrangement with Peter
G. Bischoff, Senior Vice President, Research and Development, pursuant to which
the Company deposited $1,000,000 into an interest bearing account and agreed to
pay to Mr. Bischoff $200,000 of such amount plus all accrued interest on
February 15 of each of 1992 through 1996. In October 1995, the Board of
Directors extended Mr. Bischoff's retention arrangement for four years such that
Mr. Bischoff will receive $200,000 on the last day of February 1997, 1998, 1999
and 2000, provided he remains an employee in good standing of the Company at the
time of each award. In extending this arrangement, however, the Board of
Directors eliminated the trust requirement.
In May 1993, Dr. Fred Schwettmann joined the Company as President and Chief
Operating Officer. As part of Dr. Schwettmann's hiring package, Dr. Schwettmann
received a hiring bonus of $75,000 and an option to purchase 200,000 shares of
the Company's Common Stock. The option was granted at the fair market value of
the Company's Common Stock on the date of grant, vesting as follows: 30,000
shares on the date of grant, 17,500 shares one year later, 42,500 shares two
years later, 60,000 shares three years later, and 50,000 shares four years
later. In addition, the Company guaranteed Dr. Schwettmann's first four
quarterly bonuses, and guaranteed a minimum fiscal 1993 annual bonus of $44,000,
payable 50% on the date of award, 25% one year later and the balance two years
later; these bonuses have been paid.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on its review of copies of filings under Section 16(a) of the
Securities Exchange Act of 1934, as amended, received by it, or written
representations from certain reporting persons, the Company believes that during
fiscal 1996, all Section 16 filing requirements were met.
11
<PAGE> 13
COMPARISON OF TOTAL CUMULATIVE STOCKHOLDER RETURN
The following graph sets forth the Company's total cumulative stockholder
return as compared to the Standard and Poor's 500 Composite Index and the
Hambrecht and Quist Computer Hardware Sector Index for the period October 18,
1991 (the date of the Company's initial public offering) through September 29,
1996. Total stockholder return assumes $100 invested at the beginning of the
period in the Common Stock of the Company, the stocks represented in the
Standard and Poor's 500 Composite Index and the stocks represented in the
Hambrecht and Quist Computer Hardware Sector Index, respectively. Total return
also assumes reinvestment of dividends; the Company has never paid dividends on
its Common Stock.
Historical stock price performance should not be relied upon as indicative
of future stock price performance.
<TABLE>
<CAPTION>
HAMBRECHT & QUIST
Measurement Period READ-RITE COMPUTER HARD-
(Fiscal Year Covered) CORPORATION S & P 500 WARE
<S> <C> <C> <C>
10/18/91 100 100 100
9/92 208 110 90
9/93 84 124 71
9/94 149 128 94
9/95 289 167 149
9/96 125 200 181
</TABLE>
PROPOSAL TWO:
APPROVAL OF AMENDMENT TO EMPLOYEE STOCK PURCHASE PLAN
The Purchase Plan was adopted by the Board of Directors in January 1992 and
approved by the stockholders in February 1993. Prior to the adoption of the
amendment discussed below, a total of 1,000,000 shares of Common Stock have been
reserved for issuance under the Purchase Plan. In October 1996, the Board of
Directors amended the Purchase Plan, subject to stockholder approval, to
increase the shares reserved for issuance from 1,000,000 shares to 1,500,000
shares. The stockholders are being asked to approve this share increase at the
Annual Meeting. The Board believes that increasing the number of shares
available under the Purchase Plan will enable the Company to continue its policy
of encouraging employee equity participation in the Company by enabling
employees to purchase the Company's Common Stock at a discount from the market
price through voluntary payroll deductions. The Board believes the continued
opportunity for employee equity participation will promote the attraction,
retention and motivation of employees.
12
<PAGE> 14
PURCHASE PLAN ACTIVITY
To date (without taking into account the proposed amendment to the Purchase
Plan), the Company has issued and sold an aggregate of 757,683 shares of Common
Stock pursuant to the Purchase Plan and 242,317 shares of Common Stock are
available for future issuance thereunder. Participation in the Purchase Plan is
voluntary and is dependent on each eligible employee's election to participate
and his or her determination as to the level of payroll deductions. Accordingly,
future purchases under the Purchase Plan are not determinable. Nonemployee
directors are not eligible to participate in the Purchase Plan. The following
table sets forth certain information regarding shares purchased under the
Purchase Plan during the Company's last fiscal year by each of the Named
Executive Officers, all current executive officers as a group and all employees
(excluding the executive officers) as a group:
<TABLE>
<CAPTION>
NUMBER OF
DOLLAR SHARES
NAME VALUE(1) PURCHASED(2)
----------------------------------------------------------- ---------- ------------
<S> <C> <C>
Cyril J. Yansouni.......................................... $ 13,013 694
Fred Schwettmann........................................... 14,230 781
Peter G. Bischoff.......................................... -- --
Michael A. Klyszeiko....................................... -- --
Alan S. Lowe............................................... 13,013 694
All executive officers as a group (9 persons).............. 74,221 4,125
All other employees (excluding executive officers) as a
group.................................................... 4,289,089 252,249
</TABLE>
- ---------------
(1) Represents the market value of the shares on the date of purchase. The
purchase price paid by each participant in the Purchase Plan is 15% below
the lower of market value on the (i) first day or (ii) last day of the
applicable purchase period. See "Summary of Purchase Plan" below.
(2) Includes shares purchased for the six month periods ended March 31, 1996 and
September 30, 1996.
SUMMARY OF PURCHASE PLAN
The purpose of the Purchase Plan is to provide a convenient and practical
means for employees of the Company and its subsidiaries to purchase the
Company's Common Stock and a method by which the Company may assist and
encourage its employees to become stockholders. The Purchase Plan is intended to
be a permanent program but the Board of Directors may terminate the Purchase
Plan at any time.
The Purchase Plan is intended to qualify under Sections 421 and 423 of the
Internal Revenue Code of 1986, as amended (the "Code"), and was originally
implemented with a one-year offering period which commenced on April 1, 1992.
Subsequent offering periods each have a six-month duration commencing on April 1
and October 1 of each year. The Purchase Plan is administered by the Committee.
All individuals employed by the Company or its subsidiaries on the fifteenth day
of the month prior to commencement of an offering period are eligible to
participate if they are customarily employed by the Company for at least twenty
hours per week and at least five months per year; provided, however, that
individuals holding 5% or more of the Company's Common Stock (directly or upon
the exercise of options) are not eligible to participate. The Purchase Plan
permits eligible employees to purchase Common Stock through payroll deductions
not exceeding 10% of an employee's compensation (and not more than $25,000 in
fair market value in any calendar year with such value being determined as of
the first day of an offering period), at a price equal to 85% of the closing
sale price for the Common Stock reported on the Nasdaq National Market at the
beginning or at the end of each offering period, whichever is lower. Employees
may end their participation in the offering at any time during the offering
period. Participation ends automatically on termination of employment with the
Company.
In the event of a stock dividend, stock split or other change in
capitalization affecting the Company's Common Stock, or in the event of any
merger, sale or reorganization, appropriate adjustments will be made in the
Purchase Plan's share reserve, the shares subject to purchase under each
participant's purchase opportunity and the purchase price per share of Common
Stock. In the event of a transfer of control of the
13
<PAGE> 15
Company pursuant to a sale of stock, a merger or a sale of assets, the Board of
Directors may provide that the purchase opportunities under the Purchase Plan
shall become fully exercisable or arrange with the successor corporation for
such corporation to assume the Company's rights and obligations under the
Purchase Plan. All purchase opportunities shall terminate as of the date of the
transfer of control to the extent that the purchase opportunity is neither
exercisable nor assumed by the successor corporation.
The Board of Directors may amend or terminate the Purchase Plan at any
time, except that such termination cannot affect shares of Common Stock or
purchase opportunities previously granted under the Purchase Plan, nor can any
amendment be made without approval of the stockholders of the Company within
twelve months of the date of the adoption of the amendment if the amendment
would authorize the sale of more shares than are authorized under the Purchase
Plan or would change the designation of the corporations whose employees may
participate under the Purchase Plan.
UNITED STATES TAX INFORMATION
The Purchase Plan, and the right of participants to make purchases
thereunder, are intended to qualify under the provisions of Sections 421 and 423
of the Code, under which no income will be taxable to a participant until the
shares purchased under the Purchase Plan are sold or otherwise disposed of. Upon
the sale or other disposition of shares, the participant will generally be
subject to tax, and the amount of the tax will depend upon the holding period.
If the shares are sold or otherwise disposed of more than two years from the
first day of the offering period and one year from the date the shares are
purchased, the participant will recognize ordinary income measured as the lesser
of (a) the excess of the fair market value of the shares at the time of such
sale or disposition over the purchase price, or (b) an amount equal to 15% of
the fair market value of the shares as of the first day of the offering period.
Any additional gain will be treated as long-term capital gain. If the shares are
sold or otherwise disposed of before the expiration of these holding periods,
the participant will recognize ordinary income generally measured as the excess
of the fair market value of the shares on the date the shares are purchased over
the purchase price. Any additional gain or loss on such sale or disposition will
be long-term or short-term capital gain or loss, depending on the holding
period. The Company is not entitled to a deduction for amounts taxed as ordinary
income or capital gain to a participant except to the extent of ordinary income
recognized by participants upon a sale or disposition of shares prior to the
expiration of the holding periods described above.
THE FOREGOING SUMMARY OF THE EFFECT OF UNITED STATES FEDERAL INCOME
TAXATION UPON PARTICIPANTS AND THE COMPANY IN CONNECTION WITH THE PURCHASE PLAN
DOES NOT PURPORT TO BE COMPLETE, AND REFERENCE SHOULD BE MADE TO THE APPLICABLE
PROVISIONS OF THE CODE. IN ADDITION, THIS SUMMARY DOES NOT DISCUSS THE
PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY
IN WHICH PARTICIPANTS MAY RESIDE.
VOTE REQUIRED; RECOMMENDATION OF BOARD OF DIRECTORS
The approval of the amendment to the Purchase Plan requires the affirmative
vote of a majority of the Votes Cast on the proposal at the Annual Meeting.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AMENDMENT TO THE
PURCHASE PLAN AND RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THIS PROPOSAL.
14
<PAGE> 16
PROPOSAL THREE:
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP, independent
auditors, to audit the financial statements of the Company for the 1997 fiscal
year. This nomination is being presented to the stockholders for ratification at
the Annual Meeting. Ernst & Young LLP has audited the Company's financial
statements since the Company's inception. A representative of Ernst & Young LLP
is expected to be present at the meeting, will have the opportunity to make a
statement, and is expected to be available to respond to appropriate questions.
VOTE REQUIRED; RECOMMENDATION OF BOARD OF DIRECTORS
The affirmative vote of a majority of the Votes Cast on the proposal at the
Annual Meeting is required to ratify the Board's selection. If the stockholders
reject the nomination, the Board will reconsider its selection.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE APPOINTMENT OF ERNST &
YOUNG LLP AS THE COMPANY'S AUDITORS FOR FISCAL 1997 AND RECOMMENDS THAT THE
STOCKHOLDERS VOTE "FOR" THIS PROPOSAL.
OTHER MATTERS
The Company knows of no other matters to be submitted at the Annual
Meeting. If any other matters properly come before the meeting, it is the
intention of the persons named in the enclosed proxy card to vote the shares
they represent as the Board of Directors of the Company may recommend.
THE BOARD OF DIRECTORS
Milpitas, California
January 15, 1997
15
<PAGE> 17
READ-RITE CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED AND RESTATED EFFECTIVE OCTOBER 22, 1996)
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 and to the limitations of Section 423 of
the Code or any successor provision in the Code, all questions of interpretation
or application of the Plan shall determined by the Compensation Committee, and
its decisions shall be final and binding upon all participants. Members of the
Compensation Committee shall be "disinterested persons", as defined in Rule
16b-3 or successor rule adopted by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as amended ("Rule 16b-3"). 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
1
<PAGE> 18
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
2
<PAGE> 19
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,
3
<PAGE> 20
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.
4
<PAGE> 21
10. 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.
11. 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.
12. 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.
13. 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.
14. 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.
15. 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.
16. 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
5
<PAGE> 22
and the remaining cash balance, if any, carried forward to the next Purchase
Period or returned to the participant, as the case may be.
17. 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.
18. Headings. Headings have been provided for purposes of
identification and organization only and shall not be treated as operative
provisions of the Plan.
19. 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 in its sole discretion, shall either (i) 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, as the Board so determines or (ii) arrange with the
surviving, continuing, successor, or purchasing corporation, as the case may be,
that such corporation assume the Company's rights and obligations under the
Plan. All purchase opportunities shall terminate effective as of the date of the
Transfer of Control to the extent that the purchase opportunity is neither
exercised as of the date of the Transfer of Control nor assumed by the
surviving, continuing, successor, or purchasing corporation, as the case may be.
20. 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
6
<PAGE> 23
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.
21. 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.
7
<PAGE> 24
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 meeting on October 22, 1996.
/s/ Rex S. Jackson
----------------------------------------
Rex S. Jackson
Vice President, General Counsel and
Secretary
8
<PAGE> 25
PROXY
READ-RITE CORPORATION
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints CYRIL J. YANSOUNI and REX S. JACKSON, jointly
and severally, proxies, with full power of substitution, to vote all shares of
Common Stock of Read-Rite Corporation, a Delaware corporation, which the
undersigned is entitled to vote at the Annual Meeting of Stockholders to be
held at the Company's facility at 44100 Osgood Road, Fremont, California, on
February 25, 1997, at 10:00 a.m., local time, or any adjournment thereof. The
proxies are being directed to vote as specified below or, if no specification
is made, FOR the election of directors, FOR the proposal to amend the Company's
Employee Stock Purchase Plan, FOR the appointment of Ernst & Young LLP, as
independent auditors, and in accordance with their discretion on such other
matters that may properly come before the meeting.
THE DIRECTORS RECOMMEND A FOR VOTE ON EACH ITEM.
(Continued and to be signed on reverse side)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 26
Please mark your votes
as indicated in this
example /X/
1. ELECTION OF DIRECTORS:
(Instruction: To withhold authority to vote for any individual nominee,
strike that nominee's name below.)
WITHHOLD
FOR AUTHORITY
all nominees listed to vote for
(except as withheld) nominees listed
/ / / /
Nominees: Cyril J. Yansouni Fred Schwettmann
John G. Linvill William J. Almon
Michael L. Hackworth Matthew J. O'Rourke
2. Proposal to amend the Company's Employee Stock Purchase Plan to increase the
number of shares of Common Stock reserved for issuance thereunder by 500,000
shares:
FOR AGAINST ABSTAIN
/ / / / / /
3. Proposal to ratify the appointment of Ernst & Young LLP, as independent
auditors for the 1997 fiscal year:
FOR AGAINST ABSTAIN
/ / / / / /
I plan to attend the Meeting: YES / / NO / /
Signature(s)__________________________________________Dated:___________, 1997
(Signature(s) must be exactly as name(s) appear on this proxy. If signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such, and, if signing for a corporation, please give your title. When shares
are in the names of more than one person, each should sign this Proxy.)
FOLD AND DETACH HERE
