<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 1, 1994
---------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File No. 0-13941
AST RESEARCH, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-3525565
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
16215 Alton Parkway
Irvine, California 92718
(Address of principal executive offices, zip code)
Registrant's telephone number, including area code: (714) 727-4141
_________________
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 _
There were 32,017,865 shares of the registrant's Common Stock, par
value $.01 per share, outstanding on January 28, 1994.
================================================================================
<PAGE>
AST RESEARCH, INC.
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
at January 1, 1994 (Unaudited)
and July 3, 1993 3
Consolidated Statements of Income
(Unaudited) for the three months and
six months ended January 1, 1994 and
January 2, 1993 4
Consolidated Statements of Cash Flows
(Unaudited) for the six months ended
January 1, 1994 and January 2, 1993 5-6
Notes to Consolidated Financial
Statements (Unaudited) 7-10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 11-16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
</TABLE>
<PAGE>
AST RESEARCH, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
January 1, July 3,
1994 1993
(In thousands, except share amounts) (Unaudited)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 145,427 $ 121,600
Accounts receivable, net of allowance
for doubtful accounts of $16,955 at
January 1, 1994 and $11,671 at July 3, 1993 359,411 236,020
Inventories 309,316 342,307
Deferred income taxes 41,826 46,058
Other current assets 16,959 15,230
- -----------------------------------------------------------------------------------------------------------------
Total current assets 872,939 761,215
Property and equipment 148,830 134,422
Accumulated depreciation and amortization (48,633) (39,500)
- -----------------------------------------------------------------------------------------------------------------
Net property and equipment 100,197 94,922
Other assets 37,758 30,022
- -----------------------------------------------------------------------------------------------------------------
$ 1,010,894 $ 886,159
=================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 50,000 $ 59,217
Accounts payable 209,319 157,996
Accrued salaries, wages and employee benefits 30,080 19,042
Other accrued liabilities 101,551 178,835
Income taxes payable 43,795 44,832
Current portion of long-term debt 125 247
- -----------------------------------------------------------------------------------------------------------------
Total current liabilities 434,870 460,169
Long-term debt 212,766 92,258
Other non-current liabilities 14,829 14,926
Contingencies
Shareholders' equity:
Common stock, par value $.01; 70,000,000
shares authorized, 31,727,515 shares
issued and outstanding at January 1, 1994,
and 31,579,115 shares at July 3, 1993 317 316
Additional capital 133,241 129,784
Retained earnings 214,871 188,706
- ----------------------------------------------------------------------------------------------------------------
Total shareholders' equity 348,429 318,806
- ----------------------------------------------------------------------------------------------------------------
$ 1,010,894 $ 886,159
================================================================================================================
</TABLE>
See accompanying notes.
<PAGE>
AST RESEARCH, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
--------------------- -----------------------
Jan. 1, Jan. 2, Jan. 1, Jan. 2,
(In thousands, except per share amounts) 1994 1993 1994 1993
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 677,011 $ 346,338 $1,191,420 $ 632,690
Cost of sales 562,445 270,153 990,954 491,491
- -----------------------------------------------------------------------------------------------------------------------
Gross profit 114,566 76,185 200,466 141,199
Selling and marketing expenses 53,022 34,233 95,093 68,294
General and administrative expenses 19,698 12,752 37,288 24,487
Engineering and development expenses 10,403 8,055 20,647 16,118
- -----------------------------------------------------------------------------------------------------------------------
Total operating expenses 83,123 55,040 153,028 108,899
- -----------------------------------------------------------------------------------------------------------------------
Operating income 31,443 21,145 47,438 32,300
Interest income 373 994 627 2,314
Interest expense (2,581) (221) (4,186) (452)
Other expense, net (2,064) (633) (4,235) (1,722)
- -----------------------------------------------------------------------------------------------------------------------
Income before provision for income taxes 27,171 21,285 39,644 32,440
Provision for income taxes 9,238 6,704 13,479 10,218
- -----------------------------------------------------------------------------------------------------------------------
Net income $ 17,933 $ 14,581 $ 26,165 $ 22,222
=======================================================================================================================
Net income per share:
Primary $ .55 $ .46 $ .81 $ .70
Fully diluted $ .54 $ .46 $ .79 $ .70
======================================================================================================================
Weighted average common and common
equivalent shares outstanding:
Primary 32,454 31,893 32,228 31,726
Fully diluted 33,404 31,989 33,195 31,778
======================================================================================================================
</TABLE>
See accompanying notes.
<PAGE>
AST RESEARCH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Six Months Ended
---------------------------
January 1, January 2,
(In thousands) 1994 1993
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $1,055,099 $ 568,359
Cash paid to suppliers and employees (1,091,042) (600,024)
Interest received 614 3,191
Interest paid (2,166) ( 540)
Income tax refunds received 1,130 -
Income taxes paid (8,706) (16,203)
Other cash received (paid) (5,137) 3,778
- ----------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (50,208) (41,439)
Cash flows from investing activities:
Proceeds from short-term investments - 2,676
Payment related to Tandy/GRiD acquisition (15,000) -
Purchases of capital equipment (11,186) (7,799)
Proceeds from disposition of capital equipment 530 374
Purchases of other assets 470 (70)
- ----------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (25,186) (4,819)
Cash flows from financing activities:
Short-term borrowings, net (9,195) 6,747
Repayment of long-term debt (121) (60)
Proceeds from issuance of long-term debt, net 108,733 -
Proceeds from issuance of common stock 1,410 3,087
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 100,827 9,774
Effect of exchange rate changes on cash and cash equivalents (1,606) 1,878
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 23,827 (34,606)
Cash and cash equivalents at beginning of period 121,600 87,874
- ----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 145,427 $ 53,268
======================================================================================================================
</TABLE>
See accompanying notes.
<PAGE>
AST RESEARCH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
RECONCILIATION OF NET INCOME TO NET CASH USED IN OPERATING ACTIVITIES:
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Six Months Ended
---------------------------
January 1, January 2,
(In thousands) 1994 1993
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net income $ 26,165 $ 22,222
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 11,154 6,088
Provision for deferred income taxes 979 1,127
Change in operating assets and liabilities, net
of effects of acquisition:
Accounts receivable (127,863) (64,930)
Inventories 38,205 (49,160)
Other current assets 1,119 (598)
Accounts payable and accrued expenses 41,631 43,289
Income taxes payable (1,010) (6,621)
Other current liabilities (44,933) 4,242
Exchange loss 4,345 2,902
- ----------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities $(50,208) $(41,439)
======================================================================================================================
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
The Company purchased certain assets relating to Tandy/GRiD
France's personal computer operations effective September 1, 1993.
In conjunction with the acquisition, liabilities were assumed as
follows:
Fair value of assets acquired $ 10,171 -
Note payable (6,720) -
- ---------------------------------------------------------------------------------------------------------------------
Liabilities assumed $ 3,451 -
=====================================================================================================================
Tax benefit of employee stock options $ 1,823 $ 3,925
=====================================================================================================================
</TABLE>
See accompanying notes.
<PAGE>
AST RESEARCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JANUARY 1, 1994
Basis of Presentation
The accompanying consolidated financial statements have been prepared by
the Company without audit (except for the balance sheet information as of July
3, 1993) in accordance with generally accepted accounting principles for
interim financial information and with instructions to Form 10-Q and
Article 10 of Regulation S-X. In the opinion of management, all adjustments
(consisting of only normal recurring accruals) considered necessary for a fair
presentation have been included.
The accompanying consolidated financial statements do not include certain
footnotes and financial presentations normally required under generally
accepted accounting principles and, therefore, should be read in conjunction
with the audited financial statements included in the Company's 1993 Annual
Report. The results of operations for the three and six month periods ended
January 1, 1994 are not necessarily indicative of the results to be expected
for the full year. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended July 3, 1993.
Fiscal Quarter
The Company operates within a conventional 52/53 week accounting fiscal
year. Fiscal 1994 represents a 52 week fiscal year, while fiscal 1993
represented a 53 week fiscal year and, as a result, the first half of fiscal
1994 included 26 weeks compared to 27 weeks for the comparable prior year
period. However, the second quarter of fiscal 1994 and 1993 both included 13
weeks.
Income Taxes
The Company provides for income taxes in interim periods based on the
estimated effective income tax rate for the complete fiscal year. For the
six-month period ended January 1, 1994, the estimated rate is less than the
U.S. statutory rate primarily due to estimates of the proportion of the
Company's fiscal 1994 consolidated income which will be earned in lower rate
foreign tax jurisdictions. Differences between the estimated effective tax
rate and the Company's actual effective tax rate could result from changes in
the mix of earnings in the various tax jurisdictions and are recognized when
known.
Acquisitions and Restructuring
Effective June 30, 1993, the Company purchased certain assets and assumed
certain liabilities utilized in connection with Tandy Corporation's ("Tandy")
personal computer manufacturing operations and the GRiD North American and
European sales divisions, excluding Tandy/GRiD France. Effective September 1,
1993, the Company purchased certain assets and assumed certain liabilities of
Tandy/GRiD France. The combined purchase price included $15 million in cash
and a three-year promissory note in the principal amount of $96.7 million.
The acquisitions have been accounted for by the purchase method of
accounting, and the net assets are included in the Company's consolidated
balance sheets based upon their estimated fair values at the transactions'
effective dates. The Company's consolidated statements of income include the
revenues and expenses of the acquired businesses subsequent to the
transactions' effective dates. The excess of the purchase price over the
estimated fair value of the net assets acquired (goodwill) of $20.5 million is
being amortized on a straight line basis over 10 years. The purchase price
allocations are based on preliminary estimates of the fair value of the net
assets acquired and are subject to adjustment as additional information
becomes available during fiscal 1994.
In connection with the Company's acquisition of Tandy Corporation's
personal computer manufacturing and engineering operations and GRiD North
American and European sales and marketing operations, the Company recorded a
pretax restructuring charge of $125 million in the fourth quarter of fiscal
1993. The charge was comprised of asset write-downs of $68 million and
accruals of estimated future cash expenditures of $57 million.
<PAGE>
AST RESEARCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JANUARY 1, 1994
The charge, which was incurred as a result of the Tandy/GRiD acquisition and
restructuring plan, reflects estimated expenses to combine and restructure the
Company's existing manufacturing capacity, as well as its marketing,
engineering, distribution, sales, and service operations. Also included
within the restructuring charge was selected inventory valuation adjustments
necessary to realign existing AST product lines and curtail production of
certain AST product offerings as a result of the newly acquired Tandy/GRiD
product offerings.
During the first half of fiscal 1994, the Company completed significant
portions of this product realignment strategy and in early November 1993
announced its plans regarding realignment of its worldwide manufacturing,
engineering and service operations and restructuring of its European
operations which is expected to be completed during the remainder of fiscal
year 1994. At January 1, 1994, $68.4 million of the original $125 million
restructuring charge remains on the Company's consolidated balance sheet which
the Company believes should be adequate to allow for the completion of its
restructuring plan. The Company anticipates that the remaining restructuring
related expenses will be incurred ratably over the remainder of fiscal 1994.
Contingencies
The Company was named as defendant or co-defendant, in most cases, along
with other personal computer manufacturers, including IBM, AT&T, Unisys,
Digital Equipment Corporation, NEC, Olivetti, NCR, Panasonic, and Matsushita,
in eight similar lawsuits each of which alleges as a factual basis the
occurrence of carpal tunnel syndrome or repetitive stress injuries, which are
being alleged with increasing frequency as a result of the use of various
computer products. The Company may be named in additional suits, but it is
impossible to predict how many may be filed.
The Internal Revenue Service (IRS) has completed its examination of the
Company's federal income tax returns for the years ended June 30, 1987 and
1988. As a result of this examination, the IRS has proposed adjustments to
the Company's federal tax liabilities for such years of approximately $8.3
million, excluding interest. The majority of such adjustments relate to the
allocation of income between the Company and its foreign manufacturing and
sales subsidiaries. Management believes that its position has substantial
merit and intends to vigorously contest these proposed adjustments.
Furthermore, management believes that any liability that may result upon the
final resolution of this matter will not have a material adverse affect on the
Company's consolidated financial position or results of operations.
The Company is also subject to other legal proceedings and claims which
arise in the normal course of business. While the outcome of these
proceedings and claims cannot be predicted with certainty, management does not
believe the outcome of any of these matters will have a material adverse
affect on the Company's consolidated financial position or results of
operations.
Per Share Information
Primary earnings per common share have been computed based upon the
weighted average number of common and common equivalent shares outstanding.
Common equivalent shares result from the assumed exercise of outstanding stock
options that have a dilutive effect when applying the treasury stock method.
The fully diluted per share calculation assumes, in addition to the above, (i)
that the Company's Liquid Yield Option Notes were converted from the date of
issuance with earnings being increased for interest expense, net of taxes,
that would not have been incurred had conversion taken place, and (ii) the
potential additional dilutive effect of stock options.
<PAGE>
AST RESEARCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JANUARY 1, 1994
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
and consist of the following:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
January 1, July 3,
(In thousands) 1994 1993
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Purchased parts $ 120,552 $ 146,565
Work in process 35,077 30,890
Finished goods 153,687 164,852
- ----------------------------------------------------------------------------------------------------
$ 309,316 $ 342,307
====================================================================================================
</TABLE>
Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
January 1, July 3,
(In thousands) 1994 1993
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Liquid Yield Option Notes (zero coupon convertible
subordinated notes) due 2013, less original issue
discount of $203,266, 5.25% yield to maturity $ 111,734 $ -
Promissory note payable, interest due annually
at initial rate of 3.75%, principal due July 1996 96,720 90,000
Other notes payable due in various installments
through April 2002 4,437 2,505
- ----------------------------------------------------------------------------------------------------
212,891 92,505
Less current portion of long-term debt (125) (247)
- ----------------------------------------------------------------------------------------------------
Long-term debt $ 212,766 $ 92,258
====================================================================================================
</TABLE>
On December 14, 1993, the Company issued $315 million par value of Liquid
Yield Option Notes (LYONs) due December 14, 2013. The LYONS are zero coupon
convertible subordinated notes which were sold at a significant discount to
par value with a yield to maturity of 5.25% and a total value at maturity of
$315 million. There are no periodic payments of interest on the LYONs. Each
$1,000 principal amount at maturity of LYONs is convertible into 12.993 shares
of the Company's common stock at any time. Upon conversion of a LYON, the
Company may elect to deliver shares of common stock at the conversion rate or
cash equal to the market value of the shares of common stock into which the
LYONs are convertible. The holder of a LYON may require the Company to
purchase its LYONs on December 14, 1998, December 14, 2003 and December 14,
2008 (the "Purchase Dates"), and such payments may reduce the liquidity of the
Company. However, the Company may, subject to certain exceptions, elect to
pay the purchase price on any of the three Purchase Dates in cash or shares of
common stock or any combination thereof.
<PAGE>
AST RESEARCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JANUARY 1, 1994
Total proceeds received from the sale of the LYONs were $111.7 million and
will be utilized for working capital, repayment of bank borrowings under its
revolving credit facilities, new product development, and other general
corporate purposes.
In connection with the Tandy acquisition, the Company issued a $96.7
million promissory note to Tandy Corporation which is due on July 11, 1996.
Upon maturity of the note, up to fifty percent of the initial principal amount
of the promissory note may be converted, at the option of the Company, into
common stock of the Company based upon its then fair market value, as defined
in the note. Interest is payable annually at an initial rate of 3.75% per
annum, adjusted once each year to the lower of either 5% or the three month
rate within the meaning of Section 1274(d)(2) of the Internal Revenue Code of
1986. There are no sinking fund requirements. The note also requires the
Company to maintain a standby letter of credit payable to Tandy Corporation in
the amount of 70% of the face value of the note or $67.7 million. This
standby letter of credit was issued under the terms of the Company's revolving
credit agreement.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
JANUARY 1, 1994
RESULTS OF OPERATIONS
The following table shows the results of operations for the periods
indicated as a percentage of net sales.
<TABLE>
<CAPTION>
Percentage of Net Sales Percentage of Net Sales
Three Months Ended Six Months Ended
----------------------- -----------------------
Jan. 1, Jan. 2, Jan. 1, Jan. 2,
1994 1993 1994 1993
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 83.1 78.0 83.2 77.7
- --------------------------------------------------------------------------------------------------------
Gross profit 16.9 22.0 16.8 22.3
- --------------------------------------------------------------------------------------------------------
Selling and marketing expenses 7.9 9.9 8.0 10.8
General and administrative expenses 2.9 3.7 3.1 3.9
Engineering and development expenses 1.5 2.3 1.7 2.5
- --------------------------------------------------------------------------------------------------------
Operating income 4.6 6.1 4.0 5.1
Other income (expense), net (0.6) - (0.7) -
- --------------------------------------------------------------------------------------------------------
Income before provision for income taxes 4.0 6.1 3.3 5.1
Provision for income taxes 1.4 1.9 1.1 1.6
- --------------------------------------------------------------------------------------------------------
Net income 2.6% 4.2% 2.2% 3.5%
========================================================================================================
</TABLE>
Sales
Net sales for the six-month period ended January 1, 1994 increased 88% to
$1.191 billion from $633 million in the six-month period ended January 2,
1993. This improvement in revenues was primarily due to increased demand for
the Company's desktop systems and notebook system products. The Company
shipped 752,000 computer systems in the first six months of fiscal 1994, an
increase of 114% over the 351,000 units shipped in the same prior year period.
Revenues from desktop system products increased 84% to $780 million for the
six-month period ended January 1, 1994 from $423 million in the comparable
prior year period. Strong demand for the Advantage! 486SX, Bravo 486SX/25,
486/33, 486/66D, and the Premmia 486 product lines all contributed to the
record level of computer system revenues. Revenues from Tandy's retail
operations, which is seasonally strong during the third and fourth calendar
quarters, and the recently acquired GRiD and Victor product families combined
to contribute to the significant desktop revenue growth. Included within
total desktop revenues were sales of the Company's 80386 systems which
declined to $41 million in the six-month period ended January 1, 1994,
compared to $143 million in the first six months of fiscal 1993.
The Company's notebook computer product revenues rose 98% to $252 million
in the six-month period ended January 1, 1994 from $127 million in the
comparable prior year period. This increase reflects a 79% increase in unit
shipments to 125,000 for the six-month period ended January 1, 1994 from
70,000 in the same prior year period. Notebook systems sales growth occurred
in all key notebook product line offerings including the Bravo notebooks, the
Advantage! Explorer, and the PowerExec.
North American revenues (including Canada) increased by 120% to $806
million during the first six months of fiscal 1994 over the comparable prior
year period, primarily due to growth in both desktop systems and notebook
computer sales. While revenue growth occurred in each of the Company's North
American distribution channels, sales to the consumer retail channel, which
includes sales made to Tandy Corporation, increased 292% and accounted for 39%
of North American revenues for the first six months of fiscal 1994 compared to
22% in the same fiscal 1993 period. The Company believes that its substantial
growth in this channel is partially due to the seasonal nature of the retail
channel in which sales are historically strongest during the third and fourth
calendar quarters. Sales to the independent reseller/dealer channel for the
six-month period ending January 1, 1994 also rose substantially, increasing
89% over the same prior year period and accounted for 42% of total North
American revenues. The national distributor channel and the original
equipment manufacturers (OEM) channel accounted for 11% and 8%, respectively,
of total North American revenues during the six-month period ended January 1,
1994.
Six month fiscal 1994 international revenues rose 45% to $385 million from
$266 million in the comparable prior year period and accounted for 32% of
total year-to-date fiscal 1994 revenues. New European subsidiaries in
Denmark, Finland, and Norway, as well as significant revenue growth in France,
Sweden, Switzerland, and the United Kingdom resulted in total European
revenues rising 81% to $234 million in the six-month period ended January 1,
1994 from $129 million in the prior year period. Increased demand for the
Company's Bravo desktop systems and the Bravo and PowerExec notebook systems
contributed to the European revenue growth. During the second quarter of
fiscal 1994, consistent with the Company's realignment of its European
operations, a new subsidiary was established in Limerick, Ireland. During the
second half of fiscal 1994, this subsidiary will begin the manufacture,
distribution, and servicing of AST products for the European region.
Pacific Rim revenues totaled $125 million in the six-month period ended
January 1, 1994, up 4% from the prior year total of $120 million. A
significant portion of the Company's Pacific Rim revenues are derived from
sales to the Hong Kong government and to Hong Kong based dealers who
ultimately market the Company's products within the People's Republic of China
(PRC). Although the PRC has historically provided the Company with
significant revenues and profitability, future sales of the Company's products
into the PRC are highly dependent upon continuing favorable trade relations
between the United States and the PRC and the general economic and political
stability of the region. Economic factors such as short-term fluctuations in
foreign currency exchange rates and changes in the PRC tax structure could
have a corresponding impact on future sales and operating results. Continuing
its commitment to this key market, during the first quarter of fiscal 1994,
the Company announced an agreement to establish manufacturing operations in
the PRC through a joint venture with a corporation affiliated with the Chinese
government.
In the Company's Rest of World region, revenues increased 57% in the six-
month period ended January 1, 1994 compared to the same prior year period.
This increase is primarily due to a 113% growth rate in the Company's Middle
East operations.
Revenues for the quarter ended January 1, 1994 increased 95% to $677
million from $346 million in the quarter ended January 2, 1993 due to strong
demand for the Company's desktop and notebook system sales. During the second
quarter of fiscal 1994, the Company introduced the PowerExec 4/33SL,
multimedia additions to its Premmia and Bravo line of desktop computers, and
the Premmia LX P/60, based on Intel's Pentium processor.
The Company's future success is highly dependent upon its ability to
continue to deliver innovative, value-added, and price competitive products to
the marketplace on a timely basis. Once introduced, there can be no assurance
that new products will receive favorable market acceptance. In addition,
continued revenue growth could be significantly impacted by the extremely
competitive pricing environment within the worldwide personal computer
marketplace.
Gross Profit
Gross profit margins decreased to 16.8% in the six-month period ended
January 1, 1994 from 22.3% in the six-month period ended January 2, 1993.
This decline in margins is primarily due to price reductions prompted by
competitive market conditions which have occurred throughout the past year
impacting all computer system products. Also contributing to the lower gross
profit margins was the increased percentage of revenues generated by sales to
the Company's consumer retail (including sales to Tandy's retail operations)
and OEM channels, which typically yield lower gross margins.
The results of the Company's international operations are subject to
currency fluctuations. As the value of the U.S. dollar strengthens relative
to other currencies, revenues from sales in those currencies convert to fewer
U.S. dollars. This effect on revenue has a corresponding impact on gross
profit, as the Company's production costs are incurred primarily in U.S.
dollars. Beginning in the first quarter of fiscal 1994 and continuing in the
second quarter, the value of the U.S. dollar rose dramatically against nearly
all European currencies. Currency fluctuations resulted in a 2.9 percentage
point gross margin reduction in a comparison of fiscal year-to-date 1994
results versus the prior year-to-date period. Currency fluctuations also
reduced second quarter fiscal 1994 gross margins by 2.4 percentage points when
compared to the prior year second quarter.
The Company has generally been able to obtain parts from multiple sources
without significant difficulty. However, a number of the Company's products
include certain components, such as active-matrix displays, CD-ROMs,
application specific integrated circuits, and microprocessors, that are
currently purchased from single sources due to availability, price, quality or
other considerations. The Company purchases components pursuant to purchase
orders placed in the ordinary course of business and has no guaranteed supply
arrangements with single source suppliers. There can be no assurance that
disruptions in delivery of components will not occur in the future, which
could adversely affect net sales and profitability of the Company.
The Company anticipates that pricing pressures will continue to be
significant and is prepared to adjust its pricing as required by the
marketplace. In addition, as product life cycles shorten, the risk of product
obsolescence increases which could negatively impact gross margins. And,
although component prices have generally declined in recent years, a change in
market conditions could result in higher component costs, negatively impacting
gross margins and operating income. Lower gross margins could also result in
decreased liquidity and adversely affect the Company's financial position.
Operating Expenses
Total operating expenses increased 40.5% to $153.0 million in the six-month
period ended January 1, 1994 from $108.9 million in the six-month period ended
January 2, 1993. However, as a percentage of sales, operating expenses
decreased to 12.8% from 17.2% in the comparable prior year period. The
increase in actual operating expenses was due to the increased level of sales
compared to the same prior year period.
Selling and marketing expenses increased 39.2% to $95.1 million in the six
months ended January 1, 1994 from $68.3 million in the prior year period.
This increase was attributable to enhanced product marketing and dealer
promotional activities resulting in higher expenses for co-op advertising and
other promotions. Additionally, the Company's continued focus on increasing
brand name awareness led to an increase in media advertising expenses.
Selling and marketing expenses also increased due to higher payroll and
related costs consistent with increases in sales and marketing staff
throughout the world. As a percentage of sales, selling and marketing
expenses declined to 8.0% for the period ended January 1, 1994 from 10.8% in
the prior year period.
General and administrative expenses increased by 52.3% to $37.3 million in
the six-month period ended January 1, 1994 from $24.5 million in the same
fiscal 1993 period. Depreciation and amortization expenses increased
primarily because of the expanded fixed asset base resulting from the
acquisition of Tandy's personal computer business. In addition, continued
expansion of the Company's domestic and international operations including
France and Sweden resulted in increased costs for payroll, payroll related
expenses, insurance, rent, and professional fees. As a percentage of sales,
general and administrative expenses decreased to 3.1% from 3.9% in the
comparable prior year period.
Engineering and development costs rose by 28.1% to $20.6 million for the
six-month period ended January 1, 1994 from $16.1 million in the comparable
prior fiscal period. The Company's new product development programs have
resulted in increased payroll and payroll-related costs and higher expenses
for equipment rental. Significant new notebook product introductions have
been made during the first six months of fiscal 1994, including the Power Exec
4/33SL and 4/25SL Special Edition, the Bravo notebooks, and the Advantage!
Explorer. Other new product introductions during the period included desktop
additions to the Advantage!, Bravo, and Premmia product lines as well as the
new Pentium-based Premium SE server, and the GRiD PalmPad SL. As a percentage
of sales, engineering and development costs declined to 1.7% for the period
ended January 1, 1994 from 2.5% in the comparable prior year period.
Total operating expenses for the quarter ended January 1, 1994 increased
51.0% to $83.1 million from $55.0 million in the same fiscal 1993 quarter. As
a percentage of sales, operating expenses declined to 12.3% from 15.9% in the
prior year quarter. The overall increased spending is primarily due to
increased payroll and employee benefit costs related to worldwide expansion
and expanded sales and marketing activities consistent with increased sales
levels.
Other Income and Expense
For the six-month period ended January 1, 1994, the Company had net
interest expense of $3.6 million compared to net interest income of $1.9
million in the corresponding fiscal 1993 period. Interest expense increased
as a result of the additional interest expense related to the note payable to
Tandy, the debt associated with the Company's December 1993 Liquid Yield
Option Notes issuance, and increased utilization of the Company's bank credit
facilities.
In the first six months of fiscal 1994, the Company recognized net other
expenses of $4.2 million compared to $1.7 million for the same fiscal 1993
period. These amounts relate primarily to foreign currency transaction and
remeasurement gains and losses and the costs associated with the Company's
foreign currency hedging activities. The Company adheres to a hedging
strategy which is designed to minimize the effect of remeasuring local
currency balance sheets of its foreign subsidiaries on the Company's
consolidated financial position and results of operations.
Provision for Income Taxes
The Company's effective tax rate increased to 34% in the six-month period
ended January 1, 1994 from 31% in the comparable prior year period. The
increased tax rate is attributable to changes in the proportion of income
earned within various taxing jurisdictions and the tax rates in the locations
in which those earnings were generated.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents totaled $145.4 million at January
1, 1994 compared to $121.6 million at July 3, 1993. Completion of the
December 1993 public debt offering combined with lower inventory levels
partially offset by increases in accounts receivable accounted for the higher
cash level. During the first six months of fiscal 1994, the Company used
$50.2 million of cash compared to $41.4 million in the prior year period.
Working capital increased to $438 million at January 1, 1994 from $301 million
at July 3, 1993, due to a combination of increased accounts receivable and
decreased accrued liabilities.
Capital expenditures totaled $11.2 million in the first half of fiscal 1994
and consisted of additions to plant and engineering equipment, office
furniture and fixtures, and worldwide information systems. During the second
quarter of fiscal 1994, the Company purchased both land and an existing
manufacturing plant in Limerick, Ireland for $4.2 million (included in total
capital expenditures) plus the assumption of a $1.4 million ten year
contingent liability payable in the event that the Company should terminate
operations in Ireland. The facility will eventually manufacture, distribute,
and service all of the Company's products destined for Europe, Africa, and the
Middle East.
The Company intends to fund its fiscal 1994 cash requirements through a
combination of cash on hand, cash provided by operations, available borrowings
under its revolving credit facilities and possible future public or private
debt and/or equity offerings. At January 1, 1994, the Company had available a
$225 million unsecured revolving credit facility with a final maturity date of
September 30, 1996. This revolving credit agreement allows the Company to
borrow, subject to certain leverage and total debt restrictions, at rates
based upon the bank's reference rate, or a spread of 5/8% over the LIBOR rate,
3/4% over the domestic certificate of deposit rate, or at a rate bid by a
bank, as selected by the Company. At January 1, 1994, there was $50 million
outstanding as drawings under this credit facility and $67.7 million was
outstanding in the form of a letter of credit issued to Tandy Corporation in
support of the acquisition note payable. The Company also has various
additional letter of credit facilities available for use by the Company and
its subsidiaries.
In connection with the second fiscal quarter completion of the Tandy/GRiD
France acquisition, the Company amended its original $90 million promissory
note issued to Tandy to increase it by $6.7 million to a total of $96.7
million. The note is due on July 11, 1996. Interest is payable annually at
an initial rate of 3.75% per annum, adjusted once each year to the lower of
either 5% or the three month rate within the meaning of Section 1274(d)(2) of
the Internal Revenue Code of 1986. There are no sinking fund requirements.
The note also requires the Company to maintain a standby letter of credit
payable to Tandy in the amount of 70% of the face value of the note or $67.7
million. Upon maturity of the note, up to fifty percent of the initial
principal amount of the promissory note may be converted, at the option of the
Company, into common stock of the Company based upon its then fair market
value, as defined in the promissory note.
On December 14, 1993, the Company issued $315 million par value of Liquid
Yield Option Notes (LYONs) due December 14, 2013. The LYONs are zero coupon
convertible subordinated notes which were sold at a significant discount to
par value with a yield to maturity of 5.25% and a total value at maturity of
$315 million. There are no periodic payments of interest on the LYONs. Each
$1,000 principal amount at maturity of LYONs is convertible into 12.993 shares
of the Company's common stock at any time. Upon conversion of a LYON, the
Company may elect to deliver shares of common stock at the conversion rate or
cash equal to the market value of the shares of common stock into which the
LYONs are convertible. Total proceeds received from the sale of the LYONs
were approximately $111.7 million, which will be utilized for working capital,
including the financing of expected increases in accounts receivable and
inventories, repayment of bank borrowings under the Company's revolving credit
facilities, new product development, and other general corporate purposes.
The holder of a LYON may require the Company to purchase its LYONs on December
14, 1998, December 14, 2003 and December 14, 2008 (the "Purchase Dates"), and
such payments may reduce the liquidity of the Company. However, the Company
may, subject to certain exceptions, elect to pay the purchase price on any of
the three Purchase Dates in cash or shares of common stock or any combination
thereof. The Company has made no decision as to whether it will meet future
purchase obligations in cash, common stock, or any combination thereof. Such
decision will be based on market conditions at the time a decision is
required, as well as management's view of the liquidity of the Company at such
time.
ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS
Future operating results may be impacted by a number of factors, including
worldwide economic and political conditions, industry specific factors, the
Company's ability to develop and produce commercially viable products, the
Company's ability to manage expense levels in response to decreasing gross
profit margins, the continued financial strength of the Company's dealers and
distributors and the Company's ability to successfully integrate the acquired
Tandy/GRiD operations into the Company's business model.
Consistent with industry practice, the Company provides certain of its
larger distributors, consumer retailers and dealers with stock balancing and
price protection rights which permit these distributors, retailers and dealers
to return slow-moving products to the Company for credit or to receive price
adjustments if the Company lowers the price of selected products within
certain time periods. To date, the Company has not experienced any material
adverse impact from stock balancing returns or price protection adjustments;
however, there can be no assurance that the Company will not experience
increased rates of return or price protection adjustments in the future. Any
significant returns or adjustments could adversely affect the Company's net
sales, gross profit and profitability.
The Company believes that, with the acquisition of additional manufacturing
facilities from Tandy Corporation and the purchase of manufacturing facilities
both in China and Ireland, production capacity will be sufficient to support
anticipated increases in unit volumes. The Company expects to increase
inventory levels to support higher production volumes. However, if the
Company is unable to obtain certain key components, or to effectively forecast
customer demand or manage its inventory, these higher inventory levels may
result in increased obsolescence and adversely impact the Company's gross
margins and results of operations.
The Company's corporate headquarters and certain manufacturing operations
are located near major earthquake faults. In the event of a major earthquake,
the Company's operating results could be adversely affected.
Because of these and other factors affecting the Company's operating
results, past financial performance should not be considered a reliable
indicator of future performance, and investors should not use historical
trends to anticipate results or trends in future periods.
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In June 1989, Texas Instruments Inc. (TI) advised the Company that it
believed certain AST computer products infringe certain TI patents. On
January 4, 1994, the Company initiated litigation in the U.S. District Court
in Santa Ana, California against TI alleging certain violations of licensing
agreements, federal antitrust laws and the California Unfair Practices Act.
In addition, the Company alleged that TI is infringing an AST patent and that
certain TI patents are invalid or inapplicable. Management does not believe
that the outcome of this matter will have a material adverse impact on the
Company's consolidated financial position or results of operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) Exhibits
<C> <S>
3.2 Bylaws of AST Research, Inc., a Delaware corporation, as amended to date.
4.1 Form of Amended and Restated Rights Agreement dated as of
January 28, 1994 between the Company and American Stock
Transfer & Trust Co., as Successor Rights Agent, as adopted by
the Board of Directors on January 28, 1994.
10.120 AST Research, Inc. 1994 One-Time Grant Stock Option Plan for
Non-Employee Directors.
10.121 Form of Option Agreement Under 1994 One-Time Grant Stock
Option Plan for Non-Employee Directors of AST Research, Inc.
10.122 Amendment to AST Research, Inc. 1989 Long-Term Incentive
Program.
10.123 Amendment to AST Research, Inc. 1991 Stock Option Plan for
Non-Employee Directors.
11. Computation of Net Income Per Share.
</TABLE>
(b) Reports on Form 8-K
On October 29, 1993, the Company filed a report on Form
8-K regarding the agreement with Tandy Corporation concerning the
completion of the purchase of certain assets and assumption of
certain liabilities relating to Tandy/GRiD France, effective
September 1, 1993.
On November 4, 1993, the Company filed a report on Form
8-K regarding the appointment of Safi U. Qureshey as Chairman and
Dr. Carmelo J. Santoro as Vice Chairman of the Board of Directors,
effective November 3, 1993.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AST RESEARCH, INC.
--------------------
(Registrant)
Date: February 15, 1994 /s/ BRUCE C. EDWARDS
--------------------
Bruce C. Edwards
Senior Vice President,
Finance and Chief
Financial Officer
<PAGE>
<PAGE>
BYLAWS
OF
AST RESEARCH, INC.
A Delaware Corporation
(as amended, through October 28, 1993)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION> Page
-------
<S> <C>
ARTICLE I. OFFICES 1
Section 1. Registered Office 1
Section 2. Other Offices 1
Section 3. Books 1
ARTICLE II. MEETINGS OF STOCKHOLDERS 1
Section 1. Place of Meetings 1
Section 2. Annual Meetings 1
Section 3. Special Meetings 1
Section 4. Notification of Business to be Transacted at Meeting 1
Section 5. Notice; Waiver of Notice 2
Section 6. Quorum; Adjournment 2
Section 7. Voting 2
Section 8. Stockholder Action by Written Consent Without a Meeting 2
Section 9. List of Stockholders Entitled to Vote 3
Section 10. Stock Ledger 3
Section 11. Inspectors of Election 3
Section 12. Organization 3
Section 13. Order of Business 3
ARTICLE III. DIRECTORS 3
Section 1. Powers 3
Section 2. Number and Election of Directors 4
Section 3. Vacancies 4
Section 4. Time and Place of Meetings 4
Section 5. Annual Meeting 4
Section 6. Regular Meetings 5
Section 7. Special Meetings 5
Section 8. Quorum; Vote Required for Action; Adjournment 5
Section 9. Action by Written Consent 5
Section 10. Telephone Meetings 5
Section 11. Committees 5
Section 12. Compensation 6
Section 13. Interested Directors 6
ARTICLE IV. OFFICERS 6
Section 1. Executive Officers 6
Section 2. Election; Term of Office and Remuneration 7
Section 3. Subordinate Officers 7
Section 4. Removal 7
Section 5. Resignations 7
Section 6. Powers and Duties 7
ARTICLE V. STOCK 7
Section 1. Form of Certificates 7
Section 2. Signatures 7
Section 3. Lost Certificates 8
Section 4. Transfers 8
Section 5. Registered Owners 8
ARTICLE VI. LIMITATION OF LIABILITY 8
ARTICLE VII. INDEMNIFICATION 8
Section 1. Action Other Than by or in the Right of the Corporation 8
Section 2. Action by or in the Right of the Corporation 9
Section 3. Determination of Right of Indemnification 9
Section 4. Indemnification Against Expenses of Successful Party 9
Section 5. Advances of Expenses 9
Section 6. Right of Agent to Indemnification upon Application;
Procedure Upon Application 10
Section 7. Other Rights and Remedies 10
Section 8. Insurance 10
Section 9. Indemnity Fund 11
Section 10. Constituent Corporations 11
Section 11. Other Enterprises, Fines, and Serving at Corporation's Request 11
Section 12. Indemnification of Other Persons 11
Section 13. Savings Clause 11
ARTICLE VIII. RECORDS 12
Section 1. Maintenance and Inspection of Share Register 12
Section 2. Maintenance and Inspection of Bylaws 12
ARTICLE IX. GENERAL PROVISIONS 12
Section 1. Dividends 12
Section 2. Disbursements 12
Section 3. Fiscal Year 13
Section 4. Corporate Seal 13
Section 5. Record Date 13
Section 6. Voting of Stock Owned by the Corporation 13
Section 7. Construction and Definitions 13
Section 8. Amendments 13
</TABLE>
<PAGE>
BYLAWS
OF
AST RESEARCH, INC.
A Delaware Corporation
ARTICLE I
OFFICES
Section 1. Registered Office. The address of the registered
office of the Corporation in the State of Delaware shall be 1209
Orange Street, Wilmington, New Castle County, Delaware, 19801, and
the name of its registered agent at such address is The Corporation
Trust Company.
Section 2. Other Offices. The Corporation may also have
offices at such other places both within and without the State of
Delaware as the Board of Directors may from time to time determine or
the business of the Corporation may require.
Section 3. Books. The books of the Corporation may be kept
within or without the State of Delaware as the Board of Directors may
from time to time determine or the business of the Corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. All meetings of the
stockholders shall be held at such place either within or without the
State of Delaware and on such date and at such time as may be
designated from time to time by the Board of Directors. If the Board
of Directors shall fail to fix such place, the meetings shall be held
at the principal executive office of the Corporation.
Section 2. Annual Meetings. Annual meetings of stockholders
shall be held at a time and date designated by the Board of Directors
for the purpose of electing directors and transacting such other
business as may properly be brought before the meeting.
Section 3. Special Meetings. Special meetings of
stockholders, for any purpose or purposes, may be called by the Board
of Directors, the Chairman of the Board of Directors, the President,
or the holders of shares entitled to cast not less than a majority of
the votes at such meeting. Special meetings may not be called by any
other person.
Section 4. Notification of Business to be Transacted at
Meeting. To be properly brought before a meeting, business must be
(a) specified in the notice of meeting (or any supplement thereto)
given by or at the direction of the Board of Directors, (b) otherwise
properly brought before the meeting by or at the direction of the
Board of Directors, or (c) otherwise properly brought before the
meeting by a stockholder entitled to vote at the meeting.
Section 5. Notice; Waiver of Notice. Whenever stockholders
are required or permitted to take any action at a meeting, a written
notice of the meeting shall be given which shall state the place,
date and hour of the meeting, and, in the case of a special meeting,
the purpose or purposes for which the meeting is called. Unless
otherwise required by law, such notice shall be given not less than
ten nor more than 60 days before the date of the meeting to each
stockholder of record entitled to vote at such meeting. If mailed,
such notice shall be deemed to be given when deposited in the mail,
postage prepaid, directed to the stockholder at his address as it
appears on the records of the Corporation. A written waiver of any
such notice signed by the person entitled thereto, whether before or
after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of
notice of such meeting, except when the person attends the meeting
for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is
not lawfully called or convened.
Section 6. Quorum; Adjournment. Except as otherwise required
by law or provided by the Certificate of Incorporation, the holders
of a majority of the capital stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy,
shall constitute a quorum for the transaction of business at all
meetings of the stockholders. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from
time to time, without notice other than announcement at the meeting
of the time and place of the adjourned meeting, until a quorum shall
be present or represented. At such adjourned meeting at which a
quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as
originally noticed. If after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting
shall be given to each stockholder entitled to vote at the meeting.
Section 7. Voting. Except as otherwise required by law, or
provided by the Certificate of Incorporation or these Bylaws, any
question brought before any meeting of stockholders shall be decided
by the vote of the holders of a majority of the stock represented and
entitled to vote thereat. Unless otherwise provided in the
Certificate of Incorporation, each stockholder represented at a
meeting of stockholders shall be entitled to cast one vote for each
share of the capital stock entitled to vote thereat held by such
stockholder. Such votes may be cast in person or by proxy, but no
proxy shall be voted on or after three years from its date, unless
such proxy provides for a longer period. Elections of directors need
not be by ballot unless the Chairman of the meeting so directs or
unless a stockholder demands election by ballot at the meeting and
before the voting begins.
Section 8. Stockholder Action by Written Consent Without a
Meeting. Any action which may be taken at any annual or special
meeting of stockholders may be taken without a meeting and without
prior notice, if a consent in writing, setting forth the action so
taken, is signed by the holders of all of the outstanding shares of
the Corporation. All such consents shall be filed with the Secretary
of the Corporation and shall be maintained in the corporate records.
Any stockholder giving a written consent, or the stockholder's proxy
holders, or a transferee of the shares or a personal representative
of the stockholder or their respective proxy holders, may revoke the
consent by a writing received by the Secretary of the Corporation
before written consents of the number of shares required to authorize
the proposed action have been filed with the Secretary.
Section 9. List of Stockholders Entitled to Vote. The
officer who has charge of the stock ledger of the Corporation shall
prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address
of each stockholder and the number of shares registered in the name
of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to
the meeting, either at a place within the city where the meeting is
to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is
to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be
inspected by any stockholder of the Corporation who is present.
Section 10. Stock Ledger. The stock ledger of the
Corporation shall be the only evidence as to who are the stockholders
entitled to examine the stock ledger, the list required by Section 9
of this Article II or the books of the Corporation, or to vote in
person or by proxy at any meeting of stockholders.
Section 11. Inspectors of Election. In advance of any
meeting of stockholders, the Board of Directors may appoint one or
more persons (who shall not be candidates for office) as inspectors
of election to act at the meeting. If inspectors are not so
appointed, or if an appointed inspector fails to appear or fails or
refuses to act at a meeting, the Chairman of any meeting of
stockholders may, and on the request of any stockholder or his proxy
shall, appoint inspectors of election at the meeting. In the event
of any dispute between or among the inspectors, the determination of
the majority of the inspectors shall be binding.
Section 12. Organization. At each meeting of stockholders
the Chairman of the Board of Directors, if one shall have been
elected, (or in his absence or if one shall not have been elected,
the President) shall act as Chairman of the meeting. The Secretary
(or in his absence or inability to act, the person whom the Chairman
of the meeting shall appoint secretary of the meeting) shall act as
secretary of the meeting and keep the minutes thereof.
Section 13. Order of Business. The order and manner of
transacting business at all meetings of stockholders shall be
determined by the Chairman of the meeting.
ARTICLE III
DIRECTORS
Section 1. Powers. Except as otherwise required by law or
provided by the Certificate of Incorporation, the business and
affairs of the Corporation shall be managed by or under the direction
of the Board of Directors.
Section 2. Number and Election of Directors. Unless
otherwise provided by the Certificate of Incorporation, the Board of
Directors shall consist of not less than 3 nor more than 7 members.
The exact number of authorized directors shall initially be 5 and,
thereafter, shall be fixed from time to time, within the foregoing
limits, by resolution of the Board of Directors. Directors shall be
elected at each annual meeting of stockholders and each director so
elected shall hold office until his successor is duly elected and
qualified, or until his earlier death, resignation or removal. Any
director may resign at any time effective upon giving written notice
to the Board of Directors, unless the notice specifies a later time
for such resignation to become effective. Unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to
make it effective. If the resignation of a director is effective at
a future time, the Board of Directors may elect a successor prior to
such effective time to take office when such resignation becomes
effective. Directors need not be stockholders.
Section 3. Vacancies. Vacancies in the Board of Directors
may be filled by a majority of the remaining directors, though less
than a quorum, or by a sole remaining director, except that a vacancy
created by the removal of a director by the vote or written consent
of the stockholders may be filled only by the vote of a majority of
the shares entitled to vote represented at a duly held meeting at
which a quorum is present, or by the written consent of holders of a
majority of the outstanding shares entitled to vote. Each director
so elected shall hold office until the next annual meeting of the
stockholders and until a successor has been elected and qualified.
A vacancy or vacancies in the Board of Directors shall be
deemed to exist in the event of the death, resignation, or removal of
any director, or if the authorized number of directors is increased,
or if the stockholders fail, at any meeting of stockholders at which
any director or directors are elected, to elect the number of
directors to be voted for at that meeting.
The stockholders may elect a director or directors at any time
to fill any vacancy or vacancies not filled by the directors, but any
such election by written consent shall require the consent of a
majority of the outstanding shares entitled to vote.
No reduction of the authorized number of directors shall have
the effect of removing any director before that director's term of
office expires.
Section 4. Time and Place of Meetings. The Board of
Directors shall hold its meetings at such place, either within or
without the State of Delaware, and at such time as may be determined
from time to time by the Board of Directors.
Section 5. Annual Meeting. The Board of Directors shall meet
for the purpose of organization, the election of officers and the
transaction of other business, as soon as practicable after each
annual meeting of stockholders, on the same day and at the same place
where such annual meeting shall be held. Notice of such meeting need
not be given. In the event such annual meeting is not so held, the
annual meeting of the Board of Directors may be held at such place,
either within or without the State of Delaware, on such date and at
such time as shall be specified in a notice thereof given as
hereinafter provided in Section 7 of this Article III or in a waiver
of notice thereof.
Section 6. Regular Meetings. Regular meetings of the Board
of Directors may be held at such places within or without the State
of Delaware at such date and time as the Board of Directors may from
time to time determine and, if so determined by the Board of
Directors, notices thereof need not be given.
Section 7. Special Meetings. Special meetings of the Board
of Directors may be called by the Chairman of the Board, the
President, by any Vice President, the Secretary or by any two
directors. Notice of the date, time and place of special meetings
shall be delivered personally or by telephone to each director or
sent by first-class mail or telegram, charges prepaid, addressed to
each director at the director's address as it is shown on the records
of the Corporation. In case the notice is mailed, it shall be
deposited in the United States mail at least five days before the
time of the holding of the meeting. In case the notice is delivered
personally or by telephone or telegram, it shall be delivered
personally or by telephone or to the telegraph company at least
48 hours before the time of the holding of the meeting. The notice
need not specify the purpose of the meeting.
Section 8. Quorum; Vote Required for Action; Adjournment.
Except as otherwise required by law, or provided in the Certificate
of Incorporation or these Bylaws, a majority of the directors shall
constitute a quorum for the transaction of business at all meetings
of the Board of Directors and the affirmative vote of not less than a
majority of the directors present at any meeting at which there is a
quorum shall be the act of the Board of Directors. If a quorum shall
not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting, from time to time,
without notice other than announcement at the meeting, until a quorum
shall be present. A meeting at which a quorum is initially present
may continue to transact business, notwithstanding the withdrawal of
directors, if any action taken is approved by at least a majority of
the required quorum to conduct that meeting. When a meeting is
adjourned to another time or place (whether or not a quorum is
present), notice need not be given of the adjourned meeting if the
time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting, the Board of
Directors may transact any business which might have been transacted
at the original meeting.
Section 9. Action by Written Consent. Unless otherwise
restricted by the Certificate of Incorporation, any action required
or permitted to be taken at any meeting of the Board of Directors or
of any committee thereof may be taken without a meeting if all the
members of the Board of Directors or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board of Directors or
committee.
Section 10. Telephone Meetings. Unless otherwise restricted
by the Certificate of Incorporation, members of the Board of
Directors of the Corporation, or any committee designated by the
Board of Directors, may participate in a meeting of the Board of
Directors or such committee, as the case may be, by conference
telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other.
Participation in a meeting pursuant to this Section 10 shall
constitute presence in person at such meeting.
Section 11. Committees. The Board of Directors may, by
resolution passed by a majority of the entire Board, designate one or
more committees, each committee to consist of one or more of the
directors of the Corporation. The Board of Directors may designate
one or more directors as alternate members of any such committee, who
may replace any absent or disqualified member at any meeting of the
committee. In the event of absence or disqualification of a member
of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or
disqualified member, the committee member or members present at any
meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of the absent
or disqualified member. Any committee, to the extent allowed by law
and as provided in the resolution establishing such committee, shall
have and may exercise all the power and authority of the Board of
Directors in the management of the business and affairs of the
Corporation. Each committee shall report to the Board of Directors
when required.
Section 12. Compensation. The directors may be paid such
compensation for their services as the Board of Directors shall from
time to time determine.
Section 13. Interested Directors. No contract or transaction
between the Corporation and one or more of its directors or officers,
or between the Corporation and any other corporation, partnership,
association, or other organization in which one or more of its
directors or officers are directors or officers, or have a financial
interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the
meeting of the Board of Directors or the committee thereof which
authorizes the contract or transaction, or solely because his or
their votes are counted for such purpose if: (i) the material facts
as to his or their relationship or interest and as to the contract or
transaction are disclosed or are known to the Board of Directors or
the committee, and the Board of Directors or committee in good faith
authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material
facts as to his or their relationship or interest and as to the
contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the
stockholders; or (iii) the contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or ratified, by
the Board of Directors, a committee thereof, or the stockholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a
committee which authorizes the contract or transaction.
ARTICLE IV
OFFICERS
Section 1. Executive Officers. The executive officers of the
Corporation shall be a President, a Chief Executive Officer, a Chief
Financial Officer and a Secretary. The Secretary shall have the
duty, among other things, to record the proceedings of the meetings
of stockholders and directors in a book kept for that purpose. The
Corporation may also have such other executive officers, including
one or more Vice Presidents, as the Board may in its discretion
appoint. The Board of Directors, if it so determines, may appoint a
Chairman of the Board and a Vice Chairman of the Board from among its
members, but such titles shall not confer upon such Board members
executive officer status. Any number of offices may be held by the
same person.
Section 2. Election, Term of Office and Remuneration. The
executive officers of the Corporation shall be elected annually by
the Board of Directors at the annual meeting or a regular meeting
thereof. Each such officer shall hold office at the discretion of
the Board of Directors until his successor is elected and qualified,
or until his earlier death, resignation or removal. The remuneration
of all officers of the Corporation shall be fixed by the Board of
Directors. Any vacancy in any office shall be filled in such manner
as the Board of Directors shall determine.
Section 3. Subordinate Officers. In addition to the
executive officers enumerated in Section 1 of this Article IV, the
Corporation may have one more assistant treasurers and assistant
secretaries and such other subordinate officers, agents and employees
as the Board of Directors may deem necessary, each of whom shall hold
office for such period as the Board of Directors may from time to
time determine. The Board of Directors may delegate to any executive
officer the power to appoint and to remove any such subordinate
officers, agents or employees.
Section 4. Removal. Except as otherwise delegated to an
executive officer with respect to subordinate officers, any officer
may be removed, with or without cause, at any time, by resolution
adopted by the Board of Directors. Such removal shall be without
prejudice to the contractual rights of such officer, if any, with the
Corporation.
Section 5. Resignations. Any officer may resign at any time
by giving written notice to the Board of Directors (or to a principal
officer if the Board of Directors has delegated to such principal
officer the power to appoint and to remove such officer). The
resignation of any officer shall take effect upon receipt of notice
thereof or at such later time as shall be specified in such notice;
unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 6. Powers and Duties. The Board of Directors may
designate an officer as the Chief Executive Officer. The Chief
Executive Officer shall, subject to the direction and control of the
Board of Directors, be the general manager of, and supervise and
direct, the business and affairs of the Corporation and the conduct
of the officers of the Corporation. The other officers of the
Corporation shall have such powers and perform such duties incident
to each of their respective offices and such other duties as may from
time to time be conferred upon or assigned to them by the Board of
Directors or the Chief Executive Officer.
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in
the Corporation shall be entitled to have a certificate signed, in
the name of the Corporation (i) by the Chairman of the Board of
Directors, the President or a Vice President and (ii) by the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary of the Corporation, certifying the number of shares owned
by him in the Corporation.
Section 2. Signatures. Any, or all, of the signatures on the
certificate may be a facsimile. In case any officer, transfer agent
or registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The Corporation may issue a
new certificate to be issued in place of any certificate theretofore
issued by the Corporation, alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate to be lost, stolen or destroyed. The
Corporation may, in its discretion and as a condition precedent to
the issuance of such new certificate, require the owner of such lost,
stolen, or destroyed certificate, or his legal representative, to
give the Corporation a bond (or other security) sufficient to
indemnify it against any claim that may be made against the
Corporation (including any expense or liability) on account of the
alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate.
Section 4. Transfers. Stock of the Corporation shall be
transferable in the manner prescribed by law and in these Bylaws or
in any agreement with the stockholder making the transfer. Transfers
of stock shall be made on the books of the Corporation only by the
person named in the certificate or by his attorney lawfully
constituted in writing and upon the surrender of the certificate
therefor, which shall be cancelled before a new certificate shall be
issued.
Section 5. Registered Owners. The Corporation shall be
entitled to recognize the exclusive right of a person registered on
its books as the owner of shares to receive dividends, and to vote as
such owner, and to hold liable for calls and assessments a person
registered on its books as the owner of shares, and shall not be
bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise
required by law.
ARTICLE VI
LIMITATION OF LIABILITY
No person shall be liable to the Corporation for any loss or
damage suffered by it on account of any action taken or omitted to be
taken by him as a director or officer of the Corporation if he acted
in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation or, with respect to
any criminal matter, had no reasonable cause to believe that his
conduct was unlawful.
ARTICLE VII
INDEMNIFICATION
Section 1. Action Other Than by or in the Right of the
Corporation. Subject to Section 3 of this Article VII, the
Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative
or investigative, and whether external or internal to the
Corporation, (other than a judicial action or suit brought by or in
the right of the Corporation) by reason of the fact that he is or was
a director or officer of the Corporation, or is or was serving at the
request of the Corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise
(all such persons being referred to hereafter as an "Agent"), against
expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea
of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal
action or proceeding, that he had reasonable cause to believe that
his conduct was unlawful.
Section 2. Action by or in the Right of the Corporation. The
Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
judicial action or suit brought by or in the right of the Corporation
to procure a judgment in its favor by reason of the fact that he is
or was an Agent (as defined in Section 1) against expenses (including
attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the Corporation, except
that no indemnification shall be made in respect of any claim, issue
or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for
such expenses which the Court of Chancery or other such court shall
deem proper.
Section 3. Determination of Right of Indemnification. Any
indemnification under Sections 1 or 2 (unless ordered by a court)
shall be made by the Corporation unless a determination is reasonably
and promptly made (i) by the Board by a majority vote of a quorum
consisting of directors who are or were not parties to such action,
suit or proceeding, or (ii) if such a quorum is not obtainable, or,
even if obtainable, if a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or
(iii) by the stockholders, that such person acted in bad faith and in
a manner that such person did not believe to be in or not opposed to
the best interests of the Corporation, or, with respect to any
criminal proceeding, that such person believed or had reasonable
cause to believe that his conduct was unlawful.
Section 4. Indemnification Against Expenses of Successful
Party. Notwithstanding the other provisions of this Article, to the
extent that an Agent has been successful on the merits or otherwise,
including the dismissal of an action without prejudice or the
settlement of an action without admission of liability, in defense of
any proceeding or in defense of any claim, issue or matter therein,
such Agent shall be indemnified against all expenses incurred in
connection therewith.
Section 5. Advances of Expenses. Except as limited by
Section 6 of this Article VII, expenses incurred in defending or
investigating any action, suit, proceeding or investigation shall be
paid by the Corporation in advance of the final disposition of such
matter, if the Agent shall undertake to repay such amount in the
event that it is ultimately determined, as provided herein, that such
person is not entitled to indemnification. However, no advance shall
be made by the Corporation if a determination is reasonably and
promptly made by the Board of Directors by a majority vote of a
quorum of disinterested directors, or (if such a quorum is not
obtainable or, even if obtainable, a quorum of disinterested
directors so directs) by independent legal counsel in a written
opinion, that, based upon the facts known to the Board or counsel at
the time such determination is made, such person acted in bad faith
and in a manner that such person did not believe to be in or not
opposed to the best interest of the Corporation, or, with respect to
any criminal proceeding, that such person believed or had reasonable
cause to believe his conduct was unlawful. In no event shall any
advance be made in instances where the Board or independent legal
counsel reasonably determines that such person deliberately breached
his duty to the Corporation or its stockholders.
Section 6. Right of Agent to Indemnification Upon
Application; Procedure Upon Application. Any indemnification under
Sections 2, 3, and 4, or advance under Section 5 of this Article VII,
shall be made promptly and in any event within 45 days, upon the
written request of the Agent, unless with respect to applications
under Sections 2, 3, or 5, a determination is reasonably and promptly
made by the Board of Directors by a majority vote of a quorum of
disinterested directors that such Agent acted in a manner set forth
in such Sections as to justify the Corporation's not indemnifying or
making an advance to the Agent. In the event no quorum of
disinterested directors is obtainable, the Board of Directors shall
promptly direct that independent legal counsel shall decide whether
the Agent acted in the manner set forth in such Sections as to
justify the Corporation's not indemnifying or making an advance to
the Agent. The right to indemnification or advances as granted by
this Article VII shall be enforceable by the Agent in any court of
competent jurisdiction if the Board or independent legal counsel
denies the claim, in whole or in part, or if no disposition of such
claim is made within 45 days. The Agent's expenses incurred in
connection with successfully establishing his right to
indemnification, in whole or in part, in any such proceeding shall
also be indemnified by the Corporation.
Section 7. Other Rights and Remedies. The indemnification
provided by this Article VII shall not be deemed exclusive of any
other rights to which an Agent seeking indemnification may be
entitled under any Bylaw, agreement, vote of stockholders or
disinterested directors, court order or otherwise, both as to action
in his official capacity and as to action in another capacity while
holding such office, since it is the policy of the Corporation that
indemnification of Agents shall be made to the fullest extent
permitted by law. The indemnification provided by this Article shall
continue as to a person who has ceased to be an Agent and shall inure
to the benefit of the heirs, executors and administrators of such a
person. All rights to indemnification under this Article shall be
deemed to be provided by a contract between the Corporation and the
Agent who serves in such capacity at any time while these Bylaws and
other relevant provisions of the General Corporation Law of the State
of Delaware and other applicable law, if any, are in effect. Any
repeal or modification thereof shall not affect any rights or
obligations then existing.
Section 8. Insurance. The Corporation may purchase and
maintain insurance on behalf of any person who is or was an Agent
against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not
the Corporation would have the power to indemnify him against such
liability under the provisions of this Article.
Section 9. Indemnity Fund. Upon resolution passed by the
Board, the Corporation may establish a trust or other designated
account, grant a security interest or use other means (including,
without limitation, a letter of credit), to ensure the payment of
certain of its obligations arising under this Article and/or
agreements which may be entered into between the Company and its
officers and directors from time to time.
Section 10. Constituent Corporations. For the purposes of
this Article, references to "the Corporation" include all constituent
corporations absorbed in a consolidation or merger as well as the
resulting or surviving corporation, so that any person who is or was
a director or officer of such a constituent corporation or is or was
serving at the request of such constituent corporation as a director
or officer of another corporation, partnership, joint venture, trust
or other enterprise shall stand in the same position under the
provisions of this Article with respect to the resulting or surviving
corporation as he would had he served such constituent corporation in
the same capacity.
Section 11. Other Enterprises, Fines, and Serving at
Corporation's Request. For purposes of this Article, references to
"other enterprise" in Sections 1 and 10 shall include employee
benefit plans; references to "fines" shall include any excise taxes
assessed a person with respect to any employee benefit plan; and
references to "serving at the request of the Corporation" shall
include any service as a director or officer of the Corporation which
imposes duties on, or involves services by, such director or officer
with respect to any employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner
he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have
acted in a manner "not opposed to the best interests of the
Corporation" as referred to in this Article.
Section 12. Indemnification of Other Persons. The provisions
of this Article VII shall not be deemed to preclude the
indemnification of any person who is not an Agent (as defined in
Section 1), but whom the Corporation has the power or obligation to
indemnify under the provisions of the General Corporation Law of the
State of Delaware or otherwise. The Corporation may, in its sole
discretion, indemnify an employee, trustee or other agent as
permitted by the General Corporation Law of the State of Delaware.
The Corporation shall indemnify an employee, trustee or other agent
where required by law.
Section 13. Savings Clause. If this Article or any portion
thereof shall be invalidated on any ground by any court of competent
jurisdiction, then the Corporation shall nevertheless indemnify each
Agent against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement with respect to any action, suit or
proceeding, whether civil, criminal, administrative or investigative,
and whether internal or external, including a grand jury proceeding
and an action or suit brought by or in the right of the Corporation,
to the full extent permitted by any applicable portion of this
Article that shall not have been invalidated, or by any other
applicable law.
ARTICLE VIII
RECORDS
Section 1. Maintenance and Inspection of Share Register. The
Corporation shall keep at its principal executive office, or at the
office of its transfer agent or registrar, if either be appointed and
as determined by resolution of the Board of Directors, a record of
its stockholders, giving the names and addresses of all stockholders
and the number and class of shares held by each stockholder.
A stockholder or stockholders of the Corporation holding at
least 5% in the aggregate of the outstanding voting shares of the
Corporation or who hold at least 1% of such voting shares and have
filed a Schedule 14B with the United States Securities and Exchange
Commission relating to the election of directors of the Corporation
may (i) inspect and copy the records of stockholders' names and
addresses and stockholdings during usual business hours on 5 days'
prior written demand on the Corporation, or (ii) obtain from the
transfer agent of the Corporation, on written demand and on the
tender of such transfer agent's usual charges for such list, a list
of the stockholders' names and addresses, who are entitled to vote
for the election of directors, and their stockholdings, as of the
most recent record date for which that list has been compiled or as
of a date specified by the stockholder after the date of demand.
This list shall be made available to any such stockholder by the
transfer agent on or before the later of 5 days after the demand is
received or the date specified in the demand as the date as of which
the list is to be compiled. The record of stockholders shall also be
open to inspection on the written demand of any stockholder or holder
of a voting trust certificate, at any time during usual business
hours, for a purpose reasonably related to the holder's interests as
a stockholder or as the holder of a voting trust certificate. Any
inspection and copying under this Section 1 may be made in person or
by an agent or attorney of the stockholder or holder of a voting
trust certificate making the demand.
Section 2. Maintenance and Inspection of Bylaws. The
Corporation shall keep at its principal executive office, the
original or a copy of these Bylaws, as amended, to date, which shall
be open to inspection by the stockholders at all reasonable times
during office hours.
ARTICLE IX
GENERAL PROVISIONS
Section 1. Dividends. Subject to limitations contained in
the General Corporation Law of the State of Delaware and the
Certificate of Incorporation, the Board of Directors may declare and
pay dividends upon the shares of capital stock of the Corporation,
which dividends may be paid either in cash, securities of the
Corporation or other property.
Section 2. Disbursements. All checks or demands for money
and notes of the Corporation shall be signed by such officer or
officers or such other person or persons as the Board of Directors
may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation
shall be fixed by resolution of the Board of Directors.
Section 4. Corporate Seal. The Corporation shall have a
corporate seal in such form as shall be prescribed by the Board of
Directors.
Section 5. Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any
meeting of stockholders or any adjournment thereof, or entitled to
receive payment of any dividend or other distribution or allotment of
any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a
record date, which shall not be more than 60 days nor less than ten
days before the date of such meeting, nor more than 60 days prior to
any other action. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to
any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Stockholders on the record date are entitled to notice and to vote or
to receive the dividend, distribution or allotment of rights or to
exercise the rights, as the case may be, notwithstanding any transfer
of any shares on the books of the Corporation after the record date,
except as otherwise provided by agreement or by applicable law.
Section 6. Voting of Stock Owned by the Corporation. The
Board of Directors may authorize any person, on behalf of the
Corporation, to attend, vote and grant proxies to be used at any
meeting of stockholders of any corporation (except this Corporation)
in which the Corporation may hold stock.
Section 7. Construction and Definitions. Unless the context
requires otherwise, the general provisions, rules of construction and
definitions in the General Corporation Law of the State of Delaware
shall govern the construction of these Bylaws.
Section 8. Amendments. Subject to the General Corporation
Law of the State of Delaware, the Certificate of Incorporation and
these Bylaws, the Board of Directors may by majority vote of those
present at any meeting at which a quorum is present amend or repeal
these Bylaws, or enact other Bylaws as in their judgment may be
advisable for the regulation of the conduct of the affairs of the
Corporation. Unless otherwise restricted by the Certificate of
Incorporation, these Bylaws may be altered, amended or repealed at
any annual meeting of the stockholders (or at any special meeting
thereof duly called for that purpose) by a majority of the combined
voting power of the then outstanding shares of capital stock of all
classes and series of the Corporation entitled to vote generally in
the election of directors, voting as a single class, provided that,
in the notice of any such special meeting, notice of such purpose
shall be given.
<PAGE>
- -------------------------------------------------------------------------------
AST RESEARCH, INC.
and
AMERICAN STOCK TRANSFER & TRUST COMPANY
Successor Rights Agent
-----------------------
Amended and Restated
Rights Agreement
Dated as of January 28, 1994
(Further Amending the
Rights Agreement
dated as of August 15, 1989, as amended,
between AST Research, Inc. and
Bank of America, NT & SA)
- -------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
Section Page
<C> <S> <C>
1 Certain Definitions 1
2 Appointment of Rights Agent 4
3 Issue of Rights Certificates 5
4 Form of Rights Certificates 6
5 Countersignature and Registration 7
6 Transfer, Split Up, Combination and
Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or
Stolen Rights Certificates 8
7 Exercise of Rights; Purchase Price;
Expiration Date of Rights 8
8 Cancellation and Destruction of Rights
Certificates 10
9 Reservation and Availability of Capital
Stock 10
10 Preferred Stock Record Date 12
11 Adjustment of Purchase Price, Number
and Kind of Shares or Number of Rights 12
12 Certificate of Adjusted Purchase Price
or Number of Shares 20
13 Consolidation, Merger or Sale or Transfer
of Assets or Earning Power 20
14 Fractional Rights and Fractional Shares 23
15 Rights of Action 24
16 Agreement of Rights Holders 24
17 Rights Certificate Holder Not Deemed a
Stockholder 25
18 Concerning the Rights Agent 25
<CAPTION>
Section Page
<C> <S> <C>
19 Merger or Consolidation or Change of
Name of Rights Agent 26
20 Duties of Rights Agent 26
21 Change of Rights Agent 28
22 Issuance of New Rights Certificates 29
23 Redemption and Termination 29
24 Exchange 30
25 Notice of Certain Events 32
26 Notices 33
27 Supplements and Amendments 33
28 Successors 34
29 Determinations and Actions by the
Board of Directors, etc. 34
30 Benefits of this Agreement 34
31 Severability 35
32 Governing Law 35
33 Counterparts 35
34 Descriptive Headings 35
</TABLE>
Exhibit A Form of Certificate of Designation, Preferences and Rights
Exhibit B Form of Rights Certificate
Exhibit C Form of Summary of Rights
<PAGE>
AMENDED AND RESTATED RIGHTS AGREEMENT
AMENDED AND RESTATED RIGHTS AGREEMENT, dated as of
January 28, 1994 (the "Agreement"), between AST Research,
Inc., a Delaware corporation (the "Company"), and American
Stock Transfer & Trust Company (the "Successor Rights
Agent"), amends and restates the Rights Agreement dated
August 15, 1989, as amended, between the Company and Bank of
America, NT & SA, a Delaware corporation and the Initial
Rights Agent. As used herein, the term "Rights Agent" shall
apply to the Successor Rights Agent.
W I T N E S S E T H
WHEREAS, on June 30, 1989 (the "Rights Dividend
Declaration Date"), the Board of Directors of the Company
authorized and declared a dividend distribution of one Right
for each share of common stock, par value $.01 per share, of
the Company (the "Common Stock") outstanding at the close of
business on August 15, 1989 (the "Record Date"), and has
authorized the issuance of one Right (as such number may
hereinafter be adjusted pursuant to the provisions of
Section 11(p) hereof) for each share of Common Stock of the
Company issued between the Record Date (whether originally
issued or delivered from the Company's treasury) and the
Distribution Date (as defined in Section 3 hereof), each
Right initially representing the right to purchase one one-
hundredth of a share of Series A Junior Participating
Preferred Stock of the Company having the rights, powers and
preferences set forth in the form of Certificate of
Designation, Preferences and Rights attached hereto as
Exhibit A, upon the terms and subject to the conditions
hereinafter set forth (the "Rights");
NOW, THEREFORE, in consideration of the premises and
the mutual agreements herein set forth, the parties hereby
agree as follows:
Section 1. Certain Definitions. For purposes of this
Agreement, the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who
or which, together with all Affiliates and Associates of
such Person, shall be the Beneficial Owner of 15% or more of
the shares of Common Stock then outstanding, but shall not
include (i) the Company, any Subsidiary of the Company, any
employee benefit plan of the Company or of any Subsidiary of
the Company, or any Person or entity organized, appointed or
established by the Company for or pursuant to the terms of
any such plan, (ii) any Person who is the Beneficial Owner
of 15% or more of the shares of Common Stock on the date
hereof, or (iii) any Person who shall become the Beneficial
Owner of 15% or more of the outstanding shares of Common
Stock solely as a result of an acquisition by the Company of
shares of Common Stock until such time thereafter as such
Person shall become the Beneficial Owner (other than by
means of a stock dividend or stock split) of any additional
shares of Common Stock. In addition, notwithstanding the
foregoing, no Person shall be deemed to be an Acquiring
Person either (i) if within eight (8) days after such Person
would otherwise become an Acquiring Person (but for the
operation of this clause (i)), such Person notifies the
Board of Directors that such Person did so inadvertently and
within two (2) days after such notification, such Person is
the Beneficial Owner of less than 15% of the outstanding
Common Stock, or (ii) as the result of an acquisition of
Common Stock by the Company which, by reducing the number of
shares outstanding, increases the proportionate number of
shares beneficially owned by such Person to 15% or more of
the Common Stock of the Company then outstanding; provided,
however, that if a Person shall become the Beneficial Owner
of 15% or more of the Common Stock of the Company then
outstanding by reason of share purchases by the Company and
shall, after such share purchases by the Company, become the
Beneficial Owner of any additional Common Stock of the
Company, then such Person shall be deemed to be an Acquiring
Person.
(b) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of
the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended and in effect on the date
of this Agreement (the "Exchange Act").
(c) A Person shall be deemed the "Beneficial
Owner" of, and shall be deemed to "beneficially own," any
securities:
(i) which such Person or any of such
Person's Affiliates or Associates, directly or indirectly,
has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to
any agreement, arrangement or understanding (whether or not
in writing) or upon the exercise of conversion rights,
exchange rights, rights, warrants or options, or otherwise;
provided, however, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," (A)
securities tendered pursuant to a tender or exchange offer
made by such person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for
purchase or exchange, or (B) securities which a Person or
any of such Person's Affiliates or Associates may be deemed
to have the right to acquire pursuant to any merger or other
acquisition agreement between the Company and such Person
(or one or more of its Affiliates or Associates) if such
agreement has been approved by the Board of Directors of the
Company prior to there being an Acquiring Person, or (C)
securities issuable upon exercise of Rights at any time
prior to the occurrence of a Triggering Event, or (D)
securities issuable upon exercise of Rights from and after
the occurrence of a Triggering Event which Rights were
acquired by such Person or any of such Person's Affiliates
or Associates prior to the Distribution Date or pursuant to
Section 3(a) or Section 22 hereof (the "Original Rights") or
pursuant to Section 11(i) hereof in connection with an
adjustment made with respect to any Original Rights;
(ii) which such Person or any of such
Person's Affiliates or Associates, directly or indirectly,
has the right to vote or dispose of or "beneficial
ownership" of (as determined pursuant to Rule 13d-3 of the
General Rules and Regulations under the Exchange Act),
including pursuant to any agreement, arrangement or
understanding, whether or not in writing; provided, however,
that a Person shall not be deemed the "Beneficial Owner" of,
or to"beneficially own," any security under this
subparagraph (ii) as a result of an agreement, arrangement
or understanding to vote such security if such agreement,
arrangement or understanding: (A) arises solely from a
revocable proxy given in response to a public proxy or
consent solicitation made pursuant to, and in accordance
with, the applicable provisions of the General Rules and
Regulations under the Exchange Act, and (B) is not also then
reportable by such Person on Schedule 13D under the Exchange
Act (or any comparable or successor report); or
(iii) which are beneficially owned,
directly or indirectly, by any other person (or any
Affiliate or Associate thereof) with which such Person (or
any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (whether or not in
writing), for the purpose of acquiring, holding, voting
(except pursuant to a revocable proxy as described in the
proviso to subparagraph (ii) of this paragraph (c)) or
disposing of any voting securities of the Company; provided,
however, that nothing in this paragraph (c) shall cause a
person engaged in business as an underwriter of securities
to be the "Beneficial Owner" of, or to "beneficially own,"
any securities acquired through such person's participation
in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition;
and provided further, however, that in no case shall an
officer or director of the Company be deemed (x) the
Beneficial Owner of any securities beneficially owned by
another officer or director of the Company solely by reason
of actions undertaken by such persons in their capacity as
officers or directors of the Company or (y) the Beneficial
Owner of securities held of record by the trustee of any
employee benefit plan of the Company or any Subsidiary of
the Company for the benefit of any employee of the Company
or any Subsidiary of the Company, other than the officer or
director, by reason of any influence that such officer or
director may have over the voting of the securities held in
the plan.
(d) "Business Day" shall mean any day other than
a Saturday, Sunday or a day on which banking institutions in
the State of California are authorized or obligated by law
or executive order to close.
(e) "Close of business" on any given date shall
mean 5:00 P.M., California time, on such date; provided,
however, that if such date is not a Business Day it shall
mean 5:00 P.M., California time, on the next succeeding
Business Day.
(f) "Common Stock" shall mean the common stock,
par value $.01 per share, of the Company, except that
"Common Stock" when used with reference to any Person other
than the Company shall mean the capital stock of such Person
with the greatest voting power, or the equity securities or
other equity interest having power to control or direct the
management, of such Person.
(g) "Continuing Director" shall mean (i) any
member of the Board of Directors of the Company, while such
Person is a member of the Board, who is not an Acquiring
Person, or an Affiliate or Associate of an Acquiring Person,
or a representative of an Acquiring Person or of any such
Affiliate or Associate, and was a member of the Board prior
to the date of this Agreement, or (ii) any Person who
subsequently becomes a member of the Board, while such
Person is a member of the Board, who is not an Acquiring
Person, or an Affiliate or Associate of an Acquiring Person,
or a representative of an Acquiring Person or of any such
Affiliate or Associate, if such Person's nomination for
election or election to the Board is recommended or approved
by a majority of the Continuing Directors.
(h) "Expiration Date" shall mean the earliest of
(i) the close of business on the Final Expiration Date, (ii)
the time at which the Rights are redeemed as provided in
Section 23 hereof, (iii) the time at which the Board of
Directors orders the exchange of the Rights as provided in
Section 24 hereof, or (iv) the consummation of a transaction
contemplated by Section 13(d) hereof.
(i) "Final Expiration Date" shall mean June 30,
1999.
(j) "Person" shall mean any individual, firm,
corporation, partnership or other entity.
(k) "Permitted Offer" shall mean a tender offer
for all outstanding Common Shares made in the manner
prescribed by Section 14(d) of the Exchange Act and the
rules and regulations promulgated thereunder; provided,
however, that such tender offer occurs at a time when
Continuing Directors are in office and a majority of the
Continuing Directors then in office has determined that the
offer is both adequate and otherwise in the best interests
of the Company and its stockholders (taking into account all
factors that such Continuing Directors deem relevant,
including, without limitation, prices that could reasonably
be achieved if the Company or its assets were sold on an
orderly basis designed to realize maximum value).
(l) "Preferred Stock" shall mean shares of Series
A Junior Participating Preferred Stock, $.01 per share par
value, of the Company.
(m) "Section 11(a)(ii) Event" shall mean any
event described in Section 11(a)(ii) (A), (B) or (C) hereof.
(n) "Section 13 Event" shall mean any event
described in clauses (x), (y) or (z) of Section 13(a)
hereof.
(o) "Stock Acquisition Date" shall mean the first
date of public announcement (which, for purposes of this
definition, shall include, without limitation, a report
filed pursuant to Section 13(d) under the Exchange Act) by
the Company or an Acquiring Person that an Acquiring Person
has become such.
(p) "Subsidiary" shall mean, with reference to
any Person, any corporation of which an amount of voting
securities sufficient to elect at least a majority of the
directors of such corporation is beneficially owned,
directly or indirectly, by such Person, or otherwise
controlled by such person.
(q) "Triggering Event" shall mean any Section
11(a)(ii) Event or any Section 13 Event.
Section 2. Appointment of Rights Agent. The Company
hereby appoints the Rights Agent to act as agent for the
Company and the holders of the Rights (who, in accordance
with Section 3 hereof, shall prior to the Distribution Date
also be the holders of the Common Stock) in accordance with
the terms and conditions hereof, and the Rights Agent hereby
accepts such appointment. The Company may from time to time
appoint such Co-Rights Agents as it may deem necessary or
desirable.
Section 3. Issue of Rights Certificates.
(a) Until the earlier of (i) the close of
business on the tenth day (or such later date as may be
determined by action of a majority of Continuing Directors
then in office) after the Stock Acquisition Date (or, if the
tenth day after the Stock Acquisition Date occurs before the
Record Date, the close of business on the Record Date), or
(ii) the close of business on the tenth business day (or
such later date as may be determined by action of a majority
of Continuing Directors then in office) after the date that
a tender or exchange offer by any Person (other than the
Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company, or
any Person or entity organized, appointed or established by
the Company for or pursuant to the terms of any such plan)
is first published or sent or given within the meaning of
Rule 14d-2(a) of the General Rules and Regulation under the
Exchange Act, if upon consummation thereof, such Person
would be the Beneficial Owner of 15% or more of the shares
of Common Stock then outstanding (the earlier of (i) and
(ii) being herein referred to as the "Distribution Date"),
(x) the Rights will be evidenced (subject to the provisions
of paragraph (b) of this Section 3) by the certificates for
the Common Stock registered in the names of the holders of
the Common Stock (which certificates for Common Stock shall
be deemed also to be certificates for Rights) and not by
separate certificates, and (y) the Rights will be
transferable only in connection with the transfer of the
underlying shares of Common Stock (including a transfer to
the Company). As soon as practicable after the Distribution
Date, the Rights Agent will send by first-class, insured,
postage prepaid mail, to each record holder of the Common
Stock as of the close of business on the Distribution Date,
at the address of such holder shown on the records of the
Company, one or more right certificates, in substantially
the form of Exhibit B hereto (the "Rights Certificates"),
evidencing one Right for each share of Common Stock so held,
subject to adjustment as provided herein. In the event that
an adjustment in the number of Rights per share of Common
Stock has been made pursuant to Section 11(p) hereof, at the
time of distribution of the Right Certificates, the Company
shall make the necessary and appropriate rounding
adjustments (in accordance with Section 14(a) hereof) so
that Rights Certificates representing only whole numbers of
Rights are distributed and cash is paid in lieu of any
fractional Rights. As of and after the Distribution Date,
the Rights will be evidenced solely by such Rights
Certificates and may be transferred by the transfer of the
Rights Certificates as permitted hereby, separately and
apart from any transfer of one or more Common Shares, and
the holders of such Rights Certificates as listed in the
records of the Company or any transfer agent or registrar
for the Rights shall be the record holders thereof.
(b) As promptly as practicable following the
Record Date, the Company will send a copy of a Summary of
Rights, in substantially the form attached hereto as Exhibit
C (the "Summary of Rights"), by first-class, postage prepaid
mail, to each record holder of the Common Stock as of the
close of business on the Record Date, at the address of such
holder shown on the records of the Company. With respect to
certificates for the Common Stock outstanding as of the
Record Date, until the Distribution Date, the Rights will be
evidenced by such certificates for the Common Stock and the
registered holders of the Common Stock shall also be the
registered holders of the associated Rights. Until the
earlier of the Distribution Date or the Expiration Date (as
such term is defined in Section 7 hereof), the transfer of
any certificates representing shares of Common Stock in
respect of which Rights have been issued shall also
constitute the transfer of the Rights associated with such
shares of Common Stock.
(c) Unless the Board of Directors by resolution
adopted at or before the time of the issuance (including
pursuant to the exercise of rights under the Company's
benefit plans) of any Common Stock specifies to the
contrary, Rights shall be issued in respect of all shares of
Common Stock which are issued after the Record Date but
prior to the earlier of the Distribution Date or the
Expiration Date. Certificates representing such shares of
Common Stock shall also be deemed to be certificates for
Rights, and shall bear the following legend:
This certificate also evidences and entitles
the holder hereof to certain Rights as set forth in the
Amended and Restated Rights Agreement between AST Research,
Inc., a Delaware corporation (the "Company"), and American
Stock Transfer & Trust Company (the "Rights Agent"), dated
as of January ___, 1994, (the "Rights Agreement"), the terms
of which are hereby incorporated herein by reference and a
copy of which is on file at the principal offices of the
Company. Under certain circumstances, as set forth in the
Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this
certificate. The Company will mail to the holder of this
certificate a copy of the Rights Agreement, as in effect on
the date of mailing, without charge promptly after receipt
of a written request therefor. Under certain circumstances
set forth in the Rights Agreement, Rights issued to, or held
by, any Person who is, was or becomes an Acquiring Person or
any Affiliate or Associates thereof (as such terms are
defined in the Rights Agreement), whether currently held by
or on behalf of such Person or by any subsequent holder, may
become null and void.
With respect to such certificates containing the foregoing
legend, until the earlier of (i) the Distribution Date or
(ii) the Expiration Date, the Rights associated with the
Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders
of Common Stock shall also be the registered holders of the
associated Rights, and the transfer of any of such
certificates shall also constitute the transfer of the
Rights associated with the Common Stock represented by such
certificates.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of
election to purchase and of assignment to be printed on the
reverse thereof) shall each be substantially in the form set
forth in Exhibit B hereto and may have such marks of
identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions
of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange
on which the Rights may from time to time be listed, or to
conform to usage. Subject to the provisions of Section 11
and Section 22 hereof, the Rights Certificates, whenever
distributed, shall be dated as of the Record Date and on
their face shall entitle the holders thereof to purchase
such number of one one-hundredths of a share of Preferred
Stock as shall be set forth therein at the price set forth
therein (such exercise price per one one-hundredth of a
share, the "Purchase Price"), but the amount and type of
securities purchasable upon the exercise of each Right and
the Purchase Price thereof shall be subject to adjustment as
provided herein.
(b) Any Rights Certificate issued pursuant to
Section 3(a) or Section 22 hereof that represents Rights
beneficially owned by: (i) an Acquiring Person or any
Associate or Affiliate of an Acquiring Person, (ii) a
transferee of an Acquiring Person (or of any such Associate
or Affiliate) who becomes a transferee after the Acquiring
Person becomes such, or (iii) a transferee of an Acquiring
Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring
Person becoming such and receives such Rights pursuant to
either (A) a transfer (whether or not for consideration)
from the Acquiring Person to holders of equity interests in
such Acquiring Person or to any Person with whom such
Acquiring Person has any continuing agreement, arrangement
or understanding regarding the transferred Rights or (B) a
transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect avoidance of
Section 7(e) hereof, and any Rights Certificate issued
pursuant to Section 6 or Section 11 hereof upon transfer,
exchange, replacement or adjustment of any other Rights
Certificate referred to in this sentence, shall contain (to
the extent feasible) the following legend:
The Rights represented by this Rights Certificate
are or were beneficially owned by a Person who was or became
an Acquiring Person or an Affiliate or Associate of an
Acquiring Person (as such terms are defined in the Rights
Agreement). Accordingly, this Rights Certificate and the
Rights represented hereby may become null and void in the
circumstances specified in Section 7(e) of such Agreement.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on
behalf of the Company by its Chairman of the Board, its
President or any Vice President, either manually or by
facsimile signature, and shall have affixed thereto the
Company's seal or a facsimile thereof which shall be
attested by the Secretary or an Assistant Secretary of the
Company, either manually or by facsimile signature. The
Rights Certificates shall be manually countersigned by the
Rights Agent and shall not be valid for any purpose unless
so countersigned. In case any officer of the Company who
shall have signed any of the Rights Certificates shall cease
to be such officer of the Company before countersignature by
the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned
by the Rights Agent and issued and delivered by the Company
with the same force and effect as though the person who
signed such Rights Certificates had not ceased to be such
officer of the Company; and any Rights Certificates may be
signed on behalf of the Company by any person who, at the
actual date of the execution of such Rights Certificate,
shall be a proper officer of the Company to sign such Rights
Certificate, although at the date of the execution of this
Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights
Agent will keep or cause to be kept, at its principal office
or offices designated as the appropriate place for surrender
of Rights Certificates upon exercise or transfer, books for
registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of
the respective holders of the Rights Certificates, the
number of Rights evidenced on its face by each of the Rights
Certificates, the Rights Certificate number and the date of
each of the Rights Certificates.
Section 6. Transfer, Split Up, Combination and
Exchange of Rights Certificates; Mutilated, Destroyed, Lost
or Stolen Rights Certificates.
(a) Subject to the provisions of Section 4(b),
Section 7(e), Section 14 and Section 24 hereof, at any time
after the close of business on the Distribution Date, and at
or prior to the close of business on the Expiration Date,
any Rights Certificate or Certificates may be transferred,
split up, combined or exchanged for another Rights
Certificate or Certificates, entitling the registered holder
to purchase a like number of one one-hundredths of a share
of Preferred Stock (or following a Triggering Event, Common
Stock, other securities, cash or other assets, as the case
may be) as the Rights Certificate or Certificates
surrendered then entitled such holder (or former holder in
the case of a transfer) to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any
Rights Certificate or Certificates shall make such request
in writing delivered to the Rights Agent, and shall
surrender the Rights Certificate or Certificates to be
transferred, split up, combined or exchanged at the
principal office or offices of the Rights Agent designated
for such purpose. Neither the Rights Agent nor the Company
shall be obligated to take any action whatsoever with
respect to the transfer of any such surrendered Rights
Certificate until the registered holder shall have completed
and signed the certificate contained in the form of
assignment on the reverse side of such Rights Certificate
and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial
Owner) or Affiliates or Associates thereof as the Company
shall reasonably request. Thereupon the Rights Agent shall,
subject to Section 4(b), Section 7(e), Section 14 and
Section 24 hereof, countersign and deliver to the Person
entitled thereto a Rights Certificate or Rights
Certificates, as the case may be, as so requested. The
Company may require payment of a sum sufficient to cover any
tax or governmental charge that may be imposed in connection
with any transfer, split up, combination or exchange of
Rights Certificates.
(b) Upon receipt by the Company and the Rights
Agent of evidence reasonably satisfactory to them of the
loss, theft, destruction or mutilation of a Rights
Certificate, and, in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to them, and
reimbursement to the Company and the Rights Agent of all
reasonable expenses incidental thereto, and upon surrender
to the Rights Agent and cancellation of the Rights
Certificate if mutilated, the Company will execute and
deliver a new Rights Certificate of like tenor to the Rights
Agent for countersignature and delivery to the registered
owner in lieu of the Rights Certificate so lost, stolen,
destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price;
Expiration Date of Rights.
(a) Subject to Section 7(e) hereof, the
registered holder of any Rights Certificate may exercise the
Rights evidenced thereby (except as otherwise provided
herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii)
and Section 23(a) hereof) in whole or in part at any time
after the Distribution Date upon surrender of the Rights
Certificate, with the form of election to purchase and the
certificate on the reverse side thereof duly executed, to
the Rights Agent at the principal office or offices of the
Rights Agent designated for such purpose, together with
payment of the aggregate Purchase Price with respect to the
total number of one one-hundredths of a share (or other
securities or property, as the case may be) as to which such
surrendered Rights are then exercisable, at or prior to the
Expiration Date.
(b) The Purchase Price for each one one-hundredth
of a share of Preferred Stock pursuant to the exercise of a
Right shall initially be $100.00, and shall be subject to
adjustment from time to time as provided in Section 11
hereof and shall be payable in accordance with paragraph (c)
below.
(c) Upon receipt of a Rights Certificate
representing exercisable Rights, with the form of election
to purchase and the certificate duly executed, accompanied
by payment, with respect to each Right so exercised, of the
Purchase Price per one one-hundredth of a share of Preferred
Stock (or other shares, securities or property, as the case
may be) to be purchased as set forth below and an amount
equal to any applicable transfer tax, the Rights Agent
shall, subject to Section 20(k) hereof, thereupon promptly
(i) (A) requisition from any transfer agent of the shares of
Preferred Stock (or make available, if the Rights Agent is
the transfer agent for such shares) certificates for the
total number of one one-hundredths of a share of Preferred
Stock to be purchased and the Company hereby irrevocably
authorizes its transfer agent to comply with all such
requests, or (B) if the Company shall have elected to
deposit the total number of shares of Preferred Stock
issuable upon exercise of the Rights hereunder with a
depositary agent, requisition from the depositary agent
depositary receipts representing such number of one one-
hundredths of a share of Preferred Stock as are to be
purchased (in which case certificates for the shares of
Preferred Stock represented by such receipts shall be
deposited by the transfer agent with the depositary agent)
and the Company will direct the depositary agent to comply
with such request, (ii) requisition from the Company the
amount of cash, if any, to be paid in lieu of fractional
shares in accordance with Section 11 hereof, (iii) after
receipt of such certificates or depositary receipts, cause
the same to be delivered to or upon the order of the
registered holder of such Rights Certificate, registered in
such name or names as may be designated by such holder, and
(iv) after receipt thereof, deliver such cash, if any, to or
upon the order of the registered holder of such Rights
Certificate. The payment of the Purchase Price (as such
amount may be reduced pursuant to Section 11(a)(iii) hereof)
may be made (x) in cash or by certified bank check or money
order payable to the order of the Company, or (y) by
delivery of a certificate or certificates (with appropriate
stock powers executed in blank attached thereto) evidencing
a number of shares of Common Stock equal to the then
Purchase Price divided by the closing market price (as
determined pursuant to Section 11(d) hereof) per share of
Common Stock on the Trading Date immediately preceding the
date of such exercise. In the event that the Company is
obligated to issue other securities (including Common Stock)
of the Company, pay cash and/or distribute other property
pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that such other securities, cash
and/or other property are available for distribution by the
Rights Agent, if and when appropriate.
(d) In case the registered holder of any Rights
Certificate shall exercise less than all the Rights
evidenced thereby, a new Rights Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall
be issued by the Rights Agent and delivered to, or upon the
order of, the registered holder of such Rights Certificate,
registered in such name or names as may be designated by
such holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to
the contrary, from and after the first occurrence of a
Triggering Event, any Rights beneficially owned by (i) an
Acquiring Person or an Associate or Affiliate of an
Acquiring Person, (ii) a transferee of an Acquiring Person
(or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such (a "Post
Transferee"), or (iii) a transferee of an Acquiring Person
(or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring
Person becoming such and receives such Rights pursuant to
either (A) a transfer (whether or not for consideration)
from the Acquiring Person to holders of equity interests in
such Acquiring Person or to any Person with whom the
Acquiring Person had any continuing agreement, arrangement
or understanding regarding the transferred Rights or (B) a
transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect the avoidance of
this Section 7(e) (a "Prior Transferee"), or (iv) any
subsequent transferee receiving transferred Rights from a
Post Transferee or a Prior Transferee, either directly or
through one or more intermediate transferees, shall become
null and void without any further action and no holder of
such Rights shall have any rights whatsoever with respect to
such Rights, whether under any provision of this Agreement
or otherwise. The Company shall use all reasonable efforts
to insure that the provisions of this Section 7(e) and
Section 4(b) hereof are complied with, but shall have no
liability to any holder of Rights Certificates or other
person as a result of its failure to make any determinations
with respect to an Acquiring Person or its Affiliates,
Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to
the contrary, neither the Rights Agent nor the Company shall
be obligated to undertake any action with respect to a
registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such
registered holder shall have (i) completed and signed the
certificate contained in the form of election to purchase
set forth on the reverse side of the Rights Certificate
surrendered for such exercise, and (ii) provided such
additional evidence of the identity of the Beneficial Owner
(or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights
Certificates. All Rights Certificates surrendered for the
purpose of exercise, transfer, split up, combination or
exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or
in cancelled form, or, if surrendered to the Rights Agent,
shall be cancelled by it, and no Rights Certificates shall
be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall
deliver to the Rights Agent for cancellation and retirement,
and the Rights Agent shall so cancel and retire, any other
Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent
shall deliver all cancelled Rights Certificates to the
Company, or shall, at the written request of the Company,
destroy such cancelled Rights Certificates, and in such case
shall deliver a certificate of destruction thereof to the
Company.
Section 9. Reservation and Availability of Capital
Stock.
(a) The Company covenants and agrees that it will
cause to be reserved and kept available out of its
authorized and unissued shares of Preferred Stock (and,
following the occurrence of a Triggering Event, out of its
authorized and unissued shares of Common Stock and/or other
securities or out of its authorized and issued shares held
in its treasury), the number of shares of Preferred Stock
(and, following the occurrence of a Triggering Event, Common
Stock and/or other securities) that, as provided in this
Agreement including Section 11(a)(iii) hereof, will be
sufficient to permit the exercise in full of all outstanding
Rights.
(b) So long as the shares of Preferred Stock (and
following the occurrence of a Triggering Event, Common Stock
and/or other securities) issuable and deliverable upon the
exercise of the Rights may be listed on any national
securities exchange, the Company shall use its best efforts
to cause, from and after such time as the Rights become
exercisable, all shares reserved for such issuance to be
listed on such exchange upon official notice of issuance
upon such exercise.
(c) The Company shall use its best efforts to (i)
file, as soon as practicable following the earliest date
after the first occurrence of a Section 11(a)(ii) Event on
which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance
with Section 11(a)(iii) hereof, or as soon as is required by
law following the Distribution Date, as the case may be, a
registration statement under the Securities Act of 1933 (the
"Act"), with respect to the securities purchasable upon
exercise of the Rights on an appropriate form, (ii) cause
such registration statement to become effective as soon as
practicable after such filing, and (iii) cause such
registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Act)
until the earlier of (A) the date as of which the Rights are
no longer exercisable for such securities, and (B) the date
of the expiration of the Rights. The Company will also take
such action as may be appropriate under, or to ensure
compliance with, the securities or "blue sky" laws of the
various states in connection with the exercisability of the
Rights. The Company may temporarily suspend, for a period
of time not to exceed ninety (90) days after the date set
forth in clause (i) of the first sentence of this Section
9(c), the exercisability of the Rights in order to prepare
and file such registration statement and permit it to become
effective. Upon any such suspension,the Company shall issue
a public announcement stating that the exercisability of the
Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in
effect. Notwithstanding any provision of this Agreement to
the contrary, the Rights shall not be exercisable in any
jurisdiction unless the requisite qualification in such
jurisdiction shall have been obtained and until a
registration statement (if required) has been declared
effective.
(d) The Company covenants and agrees that it will
take all such action as may be necessary to ensure that all
one one-hundredths of a share of Preferred Stock (and,
following the occurrence of a Triggering Event, Common Stock
and/or other securities) delivered upon exercise of Rights
shall, at the time of delivery of the certificates for such
shares (subject to payment of the Purchase Price), be duly
and validly authorized and issued and fully paid and
nonassessable.
(e) The Company further covenants and agrees that
it will pay when due and payable any and all federal and
state transfer taxes and charges which may be payable in
respect of the issuance or delivery of the Rights
Certificates and of any certificates for shares of Preferred
Stock (or Common Stock and/or other securities,as the case
may be) upon the exercise of Rights. The Company shall not,
however, be required to pay any transfer tax which may be
payable in respect of any transfer or delivery of Rights
Certificates to a Person other than, or the issuance or
delivery of a number of one one-hundredths of a share of
Preferred Stock (or Common Stock and/or other securities, as
the case may be) in respect of a name other than that of,
the registered holder of the Rights Certificates evidencing
Rights surrendered for exercise or to issue or deliver any
certificates for a number of one one-hundredths of a share
of Preferred Stock (or Common Stock and/or other securities,
as the case may be) in a name other than that of the
registered holder upon the exercise of any Rights until such
tax shall have been paid (any such tax being payable by the
holder of such Rights Certificate at the time of surrender)
or until it has been established to the Company's
satisfaction that no such tax is due.
Section 10. Preferred Stock Record Date. Each person
in whose name any certificate for a number of one one-
hundredths of a share of Preferred Stock (or Common Stock
and/or other securities, as the case may be) is issued upon
the exercise of Rights shall for all purposes be deemed to
have become the holder of record of such fractional shares
of Preferred Stock (or Common Stock and/or other securities,
as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights
Certificate evidencing such Rights was duly surrendered and
payment of the Purchase Price (and all applicable transfer
taxes) was made; provided, however, that if the date of such
surrender and payment is a date upon which the Preferred
Stock (or Common Stock and/or other securities, as the case
may be) transfer books of the Company are closed, such
Person shall be deemed to have become the record holder of
such shares (fractional or otherwise) on, and such
certificate shall be dated, the next succeeding Business Day
on which the Preferred Stock (or Common Stock and/or other
securities,as the case may be) transfer books of the Company
are open. Prior to the exercise of the Rights evidenced
thereby, the holder of a Rights Certificate shall not be
entitled to any rights of a stockholder of the Company with
respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any
preemptive rights, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided
herein.
Section 11. Adjustment of Purchase Price, Number and
Kind of Shares or Number of Rights. The Purchase Price, the
number and kind of shares covered by each Right and the
number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a) (i) In the event the Company shall at
any time after the date of this Agreement (A) declare a
dividend on the Preferred Stock payable in shares of
Preferred Stock, (B) subdivide the outstanding Preferred
Stock, (C) combine the outstanding Preferred Stock into a
smaller number of shares, or (D) issue any shares of its
capital stock in a reclassification of the Preferred Stock
(including any such reclassification in connection with a
consolidation or merger in which the Company is the
continuing or surviving corporation), except as otherwise
provided in this Section 11(a) and Section 7 hereof, the
Purchase Price in effect at the time of the record date for
such dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of
shares of Preferred Stock or capital stock, as the case may
be, issuable on such date, shall be proportionately adjusted
so that the holder of any Right exercised after such time
shall be entitled to receive, upon payment of the Purchase
Price then in effect, the aggregate number and kind of
shares of Preferred Stock or capital stock, as the case may
be, which, if such Right had been exercised immediately
prior to such date and at a time when the Preferred Stock
transfer books of the Company were open, he would have owned
upon such exercise and been entitled to receive by virtue of
such dividend, subdivision, combination or reclassification.
If an event occurs which would require an adjustment under
both this Section 11(a)(i) and Section 11(a)(ii) hereof, the
adjustment provided for in this Section 11(a)(i) shall be in
addition to, and shall be made prior to, any adjustment
required pursuant to Section 11(a)(ii) hereof.
(ii) In the event:
(A) any Acquiring Person or any
Associate or Affiliate of any Acquiring Person, at any time
after the date of this Agreement, directly or indirectly,
(1) shall merge into the Company or otherwise combine with
the Company and the Company shall be the continuing or
surviving corporation of such merger or combination and the
Common Stock of the Company shall remain outstanding and
unchanged, (2) shall, in one transaction or a series of
transactions, transfer any assets to the Company or to any
of its Subsidiaries in exchange (in whole or in part) for
shares of Common Stock, for shares of other equity
securities of the Company, or for securities exercisable for
or convertible into shares of equity securities of the
Company (Common Stock or otherwise) or otherwise obtain from
the Company, with or without consideration, any additional
shares of such equity securities or securities exercisable
for or convertible into shares of such equity securities
(other than pursuant to a pro rata distribution to all
holders of Common Stock), (3) shall sell, purchase, lease,
exchange, mortgage, pledge, transfer or otherwise acquire or
dispose of, in the transaction or a series of transactions,
to, from or with (as the case may be) the Company or any of
its Subsidiaries, assets on terms and conditions less
favorable to Company than the Company would be able to
obtain in arm's length negotiation with an unaffiliated
third party, other than pursuant to a transaction set forth
in Section 13(a) hereof, (4) shall sell, purchase, lease,
exchange, mortgage, pledge, transfer or otherwise acquire or
dispose of in one transaction or a series of transactions,
to, from or with (as the case may be) the Company or any of
the Company's Subsidiaries (other than incidental to the
lines of business, if any, engaged in as of the date hereof
between the Company and such Acquiring Person or Associate
or Affiliate) assets having an aggregate fair market value
of more than $10,000,000, other than pursuant to a
transaction set forth in Section 13(a) hereof, (5) shall
receive any compensation from the Company or any of the
Company's Subsidiaries other than compensation for full time
employment as a regular employee at rates in accordance with
the Company's (or its Subsidiaries') past practices, or (6)
shall receive the benefit, directly or indirectly (except
proportionately as a stockholder and except if resulting
from a requirement of law or governmental regulation), of
any loans, advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantage
provided by the Company or any of its Subsidiaries, or
(B) any Person (other than the
Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company, or
any Person or entity organized, appointed or established by
the Company for or pursuant to the terms of any such plan),
alone or together with its Affiliates and Associates, shall
at any time after the Record Date, become the Beneficial
Owner of 15% or more of the shares of Common Stock then
outstanding, other than pursuant to any transaction set
forth in Section 13(a) hereof, or
(C) during such time as there is
an Acquiring person, there shall be any reclassification of
securities (including any reverse stock split), or
recapitalization of the Company, or any merger or
consolidation of the Company with any of its Subsidiaries or
any other transaction or series of transactions involving
the Company or any of its Subsidiaries, other than a
transaction or transactions to which the provisions of
Section 13(a) apply (whether or not with or into or
otherwise involving an Acquiring Person) which has the
effect, directly or indirectly, of increasing by more than
1% the proportionate share of the outstanding shares of any
class of equity securities of the Company or any of its
Subsidiaries which is directly or indirectly beneficially
owned by any Acquiring Person or any Associate or Affiliate
of any Acquiring Person, then, promptly following five (5)
days after the date of the occurrence of an event described
in Section 11(a)(ii)(B) hereof and promptly following the
occurrence of any event described in Section 11(a)(ii)(A) or
(C) hereof, proper provision shall be made so that each
holder of a Right (except as provided below and in Section
7(e) hereof) shall thereafter have the right to receive,
upon exercise thereof at the then current Purchase Price in
accordance with the terms of this Agreement, in lieu of
shares of Preferred Stock, such number of shares of Common
Stock of the Company as shall equal the result obtained by
(x) multiplying the then current Purchase Price by the then
number of one one-hundredths of a share of Preferred Stock
for which a Right was exercisable immediately prior to the
first occurrence of a Section 11(a)(ii) Event, and dividing
that product (which,following such first occurrence, shall
thereafter be referred to as the "Purchase Price" for each
Right and for all purposes of this Agreement) by (y) 50% of
the current market price (determined pursuant to Section
11(d) hereof) per share of Common Stock on the date of such
first occurrence (such number of shares, the "Adjustment
Shares").
(iii) In the event that the number
of shares of Common Stock which are authorized by the
Company's charter but not outstanding or reserved for
issuance for purposes other than upon exercise of the Rights
are not sufficient to permit the exercise in full of the
Rights in accordance with the foregoing subparagraph (ii) of
this Section 11(a), the Company shall: (A) determine the
excess of (1) the value of the Adjustment Shares issuable
upon the exercise of a Right (the "Current Value") over (2)
the Purchase Price (such excess, the "Spread"), and (B) with
respect to each Right, make adequate provision to substitute
for the Adjustment Shares, upon payment of the applicable
Purchase Price, (1) cash, (2) a reduction in the Purchase
Price, (3) Common Stock or other equity securities of the
Company (including, without limitation, shares, or units of
shares, of preferred stock which the Board of Directors of
the Company has deemed to have the same value as shares of
Common Stock (such shares of preferred stock, "common stock
equivalents")), (4) debt securities of the Company, (5)
other assets, or (6) any combination of the foregoing,
having an aggregate value equal to the Current Value, where
such aggregate value has been determined by the Board of
Directors of the Company based upon the advice of a
nationally recognized investment banking firm selected by
the Board of Directors of the Company; provided, however, if
the Company shall not have made adequate provision to
deliver value pursuant to clause (B) above within thirty
(30) days following the later of (x) first occurrence of a
Section 11(a)(ii) Event and (y) the date on which the
Company's right of redemption pursuant to Section 23(a)
expires (the later of (x) and (y) being referred to herein
as the "Section 11(a)(ii) Trigger Date"), then the Company
shall be obligated to deliver, upon the surrender for
exercise of a Right and without requiring payment of the
Purchase Price, shares of Common Stock (to the extent
available) and then, if necessary, cash, which in the
aggregate are equal to the Spread. If the Board of
Directors of the Company shall determine in good faith that
it is likely that sufficient additional shares of Common
Stock could be authorized for issuance upon exercise in full
of the Rights, the thirty (30) day period set forth above
may be extended to the extent necessary, but not more than
ninety (90) days following the first occurrence of a Section
11(a)(ii) Trigger Date, in order that the Company may seek
shareholder approval for the authorization of such
additional shares (such period, as it may be extended, the
"Substitution Period"). To the extent that the Company
determines that some action need be taken pursuant to the
first and/or second sentences of this Section 11(a)(iii),
the Company (x) shall provide, subject to Section 7(e)
hereof, that such action shall apply uniformly to all
outstanding Rights, and (y) may suspend the exercisability
of the Rights until the expiration of the Substitution
Period in order to seek any authorization of additional
shares and/or to decide the appropriate form of distribution
to be made pursuant to such first sentence and to determine
the value thereof. In the event of any such suspension, the
Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended,
as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this
Section 11(a)(iii), the value of the Common Stock shall be
the current market price (as determined pursuant to Section
11(d) hereof) per share of the Common Stock on the date of
the first occurrence of a Section 11(a)(ii) Trigger Date and
the value of any "common stock equivalent" shall be deemed
to have the same value as the Common Stock on such date.
(iv) The right to buy Common Stock of
the Company pursuant to Section 11(a)(ii) hereof shall not
arise as a result of any Person becoming an Acquiring Person
through an acquisition of Common Stock pursuant to a
Permitted Offer.
(b) In case the Company shall fix a record date
for the issuance of rights, options or warrants to all
holders of Preferred Stock entitling them to subscribe for
or purchase (for a period expiring within forty-five (45)
calendar days after such record date) Preferred Stock (or
shares having the same rights, privileges and preferences as
the shares of Preferred Stock ("equivalent preferred
stock")) or securities convertible into Preferred Stock or
equivalent preferred stock at a price per share of Preferred
Stock or per share of equivalent preferred stock (or having
a conversion price per share, if a security convertible into
Preferred Stock or equivalent preferred stock) less than the
current market price (as determined pursuant to Section
11(d) hereof) per share of Preferred Stock on such record
date, the Purchase Price to be in effect after such record
date shall be determined by multiplying the Purchase Price
in effect immediately prior to such record date by a
fraction, the numerator of which shall be the number of
shares of Preferred Stock outstanding on such record date,
plus the number of shares of Preferred Stock which the
aggregate offering price of the total number of shares of
Preferred Stock and/or equivalent preferred stock so to be
offered (and/or the aggregate initial conversion price of
the convertible securities so to be offered) would purchase
at such current market price, and the denominator of which
shall be the number of shares of Preferred Stock outstanding
on such record date, plus the number of additional shares of
Preferred Stock and/or equivalent preferred stock to be
offered for subscription or purchase (or into which the
convertible securities so to be offered are initially
convertible). In case such subscription price may be paid
by delivery of consideration part or all of which may be in
a form other than cash, the value of such consideration
shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the
Rights. Shares of Preferred Stock owned by or held for the
account of the Company shall not be deemed outstanding for
the purpose of any such computation. Such adjustment shall
be made successively whenever such a record date is fixed,
and in the event that such rights or warrants are not so
issued, the Purchase Price shall be adjusted to be the
Purchase Price which would then be in effect if such record
date had not been fixed.
(c) In case the Company shall fix a record date
for a distribution to all holders of Preferred Stock
(including any such distribution made in connection with a
consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness, cash
(other than a regular quarterly cash dividend out of the
earnings or retained earnings of the Company), assets (other
than a dividend payable in Preferred Stock, but including
any dividend payable in stock other than Preferred Stock) or
subscription rights or warrants (excluding those referred to
in Section 11(b) hereof), the Purchase Price to be in effect
after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be
the current market price (as determined pursuant to Section
11(d) hereof) per share of Preferred Stock on such record
date, less the fair market value (as determined in good
faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with
the Rights Agent) of the portion of the cash, assets or
evidences of indebtedness so to be distributed or of such
subscription rights or warrants applicable to a share of
Preferred Stock and the denominator of which shall be such
current market price (as determined pursuant to Section
11(d) hereof) per share of Preferred Stock. Such
adjustments shall be made successively whenever such a
record date is fixed, and in the event that such
distribution is not so made, the Purchase Price shall be
adjusted to be the Purchase Price which would have been in
effect if such record date had not been fixed.
(d) (i) For the purpose of any computation
hereunder, other than computations made pursuant to Section
11(a)(iii) hereof, the "current market price" per share of
Common Stock on any date shall be deemed to be the average
of the daily closing prices per share of such Common Stock
for the thirty (30) consecutive Trading Days (as such term
is hereinafter defined) immediately prior to such date, and
for purposes of computations made pursuant to Section
11(a)(iii) hereof, the "current market price" per share of
Common Stock on any date shall be deemed to be the average
of the daily closing prices per share of such Common Stock
for the ten (10) consecutive Trading Days immediately
following such date; provided, however, that in the event
that the current market price per share of the Common Stock
is determined during a period following the announcement by
the issuer of such Common Stock of (A) a dividend or
distribution on such Common Stock payable in shares of such
Common Stock or securities convertible into shares of such
Common Stock (other than the Rights), or (B) any
subdivision, combination or reclassification of such Common
Stock, and prior to the expiration of the requisite thirty
(30) Trading Day or ten (10) Trading Day period, as set
forth above, after the dividend date for such dividend or
distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such
case, the "current market price" shall be properly adjusted
to take into account ex-dividend trading. The closing price
for each day shall be the last sale price, regular way, or,
in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction
reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if
the shares of Common Stock are not listed or admitted to
trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with
respect to securities listed on the principal national
securities exchange on which the shares of Common Stock are
listed or admitted to trading or, if the shares of Common
Stock are not listed or admitted to trading on any national
securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in
the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation
System ("NASDAQ") or such other system then in use, or, if
on any such date the shares of Common Stock are not quoted
by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker
making a market in the Common Stock selected by the Board of
Directors of the Company. If on any such date no market
maker is making a market in the Common Stock, the fair value
of such shares on such date as determined in good faith by
the Board of Directors of the Company shall be used. The
term "Trading Day" shall mean a day on which the principal
national securities exchange on which the shares of Common
Stock are listed or admitted to trading is open for the
transaction of business or, if the shares of Common Stock
are not listed or admitted to trading on any national
securities exchange, a Business Day. If the Common Stock is
not publicly held or not so listed or traded, "current
market price" per share shall mean the fair value per share
as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a
statement filed with the Rights Agent and shall be
conclusive for all purposes.
(ii) For the purpose of any computation
hereunder, the "current market price" per share of Preferred
Stock shall be determined in the same manner as set forth
above for the Common Stock in clause (i) of this Section
11(d) (other than the last sentence thereof). If the
current market price per share of Preferred Stock cannot be
determined in the manner provided above or if the Preferred
Stock is not publicly held or listed or traded in a manner
described in clause (i) of this Section 11(d), the "current
market price" per share of Preferred Stock shall be
conclusively deemed to be an amount equal to 100 (as such
number may be appropriately adjusted for such events as
stock splits, stock dividends and recapitalizations with
respect to the Common Stock occurring after the date of this
Agreement) multiplied by the current market price per share
of the Common Stock. If neither the Common Stock nor the
Preferred Stock is publicly held or so listed or traded,
"current market price" per share of the Preferred Stock
shall mean the fair value per share as determined in good
faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with
the Rights Agent and shall be conclusive for all purposes.
For all purposes of this Agreement, the "current market
price" of one one-hundredth of a share of Preferred Stock
shall be equal to the "current market price" of one share of
Preferred Stock divided by 100.
(e) Anything herein to the contrary
notwithstanding, no adjustment in the Purchase Price shall
be required unless such adjustment would require an increase
or decrease of at least one percent (1%) in the Purchase
Price: provided, however, that any adjustments which by
reason of this Section 11(e) are not required to be made
shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section
11 shall be made to the nearest cent or to the nearest ten-
thousandth of a share of Common Stock or other share or one-
millionth of a share of Preferred Stock, as the case may be.
Notwithstanding the first sentence of this Section 11(e),
any adjustment required by this Section 11 shall be made no
later than the earlier of (i) three (3) years from the date
of the transaction which mandates such adjustment, or (ii)
the Expiration Date.
(f) If as a result of an adjustment made pursuant
to Section 11(a)(ii) or Section 13(a) hereof, the holder of
any Right thereafter exercised shall become entitled to
receive any shares of capital stock other than Preferred
Stock, thereafter the number of such other shares so
receivable upon exercise of any Right and the Purchase Price
thereof shall be subject to adjustment from time to time in
a manner and on terms as nearly equivalent as practicable to
the provisions with respect to the Preferred Stock contained
in Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k)
and (m), and the provisions of Sections 7, 9, 10, 13 and 14
hereof with respect to the Preferred Stock shall apply on
like terms to any such other shares.
(g) All Rights originally issued by the Company
subsequent to any adjustment made to the Purchase Price
hereunder shall evidence the right to purchase, at the
adjusted Purchase Price, the number of one one-hundredths of
a share of Preferred Stock purchasable from time to time
hereunder upon exercise of the Rights, all subject to
further adjustment as provided herein.
(h) Unless the Company shall have exercised its
election as provided in Section 11(i), upon each adjustment
of the Purchase Price as a result of the calculations made
in Sections 11(b) and (c), each Right outstanding
immediately prior to the making of such adjustment shall
thereafter evidence the right to purchase, at the adjusted
Purchase Price, that number of one one-hundredths of a share
of Preferred Stock (calculated to the nearest one-millionth)
obtained by (i) multiplying (x) the number of one one-
hundredths of a share covered by a Right immediately price
to this adjustment, by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price,
and (ii) dividing the product so obtained by the Purchase
Price in effect immediately after such adjustment of the
Purchase Price.
(i) The Company may elect on or after the date of
any adjustment of the Purchase Price to adjust the number of
Rights, in lieu of any adjustment in the number of one one-
hundredths of a share of Preferred Stock purchasable upon
the exercise of a Right. Each of the Rights outstanding
after the adjustment in the number of Rights shall be
exercisable for the number of one one-hundredths of a share
of Preferred Stock for which a Right was exercisable
immediately prior to such adjustment. Each Right held of
record prior to such adjustment of the number of Rights
shall become that number of Rights (calculated to the
nearest one-ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of
the Purchase Price by the Purchase Price in effect
immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to
adjust the number of Rights, indicating the record date for
the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on
which the Purchase Price is adjusted or any day thereafter,
but, if the Rights Certificates have been issued, shall be
at least ten (10) days later than the date of the public
announcement. If Rights Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this
Section 11(i), the Company shall, as promptly as
practicable, cause to be distributed to holders of record of
Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result
of such adjustment, or, at the option of the Company, shall
cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates
held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new
Rights Certificates evidencing all the Rights to which such
holders shall be entitled after such adjustment. Rights
Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein (and may
bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders
of record of Rights Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in
the Purchase Price or the number of one one hundredths of a
share of Preferred Stock issuable upon the exercise of the
Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per one
one-hundredth of a share and the number of one one-hundredth
of a share which were expressed in the initial Rights
Certificates issued hereunder.
(k) Before taking any action that would cause an
adjustment reducing the Purchase Price below the then par or
stated value, if any, of the number of one one-hundredths of
a share of Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action which
may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully paid
and nonassessable such number of one one-hundredths of a
share of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall
require that an adjustment in the Purchase Price be made
effective as of a record date for a specified event, the
Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised
after such record date the number of one one-hundredths of a
share of Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such
exercise over and above the number of one one-hundredths of
a share of Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior
to such adjustment; provided, however, that the Company
shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such
additional shares (fractional or otherwise) or securities
upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such
reductions in the Purchase Price, in addition to those
adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board of
Directors of the Company shall determine to be advisable in
order that any (i) consolidation or subdivision of the
Preferred Stock, (ii) issuance wholly for cash of any shares
of Preferred Stock at less than the current market price,
(iii) issuance wholly for cash of shares of Preferred Stock
or securities which by their terms are convertible into or
exchangeable for shares of Preferred Stock, (iv) stock
dividend or (v) issuance of rights, options or warrants
referred to in this Section 11, hereafter made by the
Company to holders of its Preferred Stock shall not be
taxable to such stockholders.
(n) The Company covenants and agrees that it
shall not, at any time after the Distribution Date, (i)
consolidate with any other Person (other than a Subsidiary
of the Company in a transaction which complies with Section
11(o) hereof), (ii) merge with or into any other Person
(other than a Subsidiary of the Company in a transaction
which complies with Section 11(o) hereof), or (iii) sell or
transfer (or permit any Subsidiary to sell or transfer), in
one transaction, or a series of related transactions, assets
or earning power aggregating more than 50% of the assets or
earning power of the Company and its Subsidiaries (taken as
a whole) to any other Person or Persons (other than the
Company and or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o)
hereof), if (x) at the time of or immediately after such
consolidation, merger or sale there are any rights, warrants
or other instruments or securities outstanding or agreements
in effect which would substantially diminish or otherwise
eliminate the benefits intended to be afforded by the Rights
or (y) prior to, simultaneously with or immediately after
such consolidation, merger or sale, the shareholders of the
Person who constitutes, or would constitute, the "Principal
Party" for the purposes of Section 13(a) hereof shall have
received a distribution of Rights previously owned by such
Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after
the Distribution Date, it will not, except as permitted by
Section 23, Section 24 or Section 27 hereof, take (or permit
any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such
action will diminish substantially or otherwise eliminate
the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company shall at any
time after the Rights Dividend Declaration Date and prior to
the Distribution Date (i) declare a dividend on the
outstanding shares of Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller
number of shares, the number of Rights associated with each
share of Common Stock then outstanding, or issued or
delivered thereafter but prior to the Distribution Date,
shall be proportionately adjusted so that the number of
Rights thereafter associated with each share of Common Stock
following any such event shall equal the result obtained by
multiplying the number of Rights associated with each share
of Common Stock immediately price to such event by a
fraction the numerator which shall be the total number of
shares of Common Stock outstanding immediately prior to the
occurrence of the event and the denominator of which shall
be the total number of shares of Common Stock outstanding
immediately following the occurrence of such event.
Section 12. Certificate of Adjusted Purchase Price or
Number of Shares. Whenever an adjustment is made as
provided in Section 11 and Section 13 hereof, the Company
shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for
such adjustment, (b) promptly file with the Rights Agent,
and with each transfer agent for the Preferred Stock and the
Common Stock, a copy of such certificate, and (c) mail a
brief summary thereof to each holder of a Rights Certificate
(or, if prior to the Distribution Date, to each holder of a
certificate representing shares of Common Stock) in
accordance with Section 26 hereof. Notwithstanding the
foregoing sentence, the failure of the Company to make such
certification or give such notice shall not affect the
validity of such adjustment or the force or effect of the
requirement for such adjustment. The Rights Agent shall be
fully protected in relying on any such certificate and on
any adjustment therein contained.
Section 13. Consolidation, Merger or Sale or Transfer
of Assets or Earning Power.
(a) In the event that, following the Stock
Acquisition Date, directly or indirectly, (x) the Company
shall consolidate with, or merge with and into, any other
Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), and
the Company shall not be the continuing or surviving
corporation of such consolidation or merger, (y) any Person
(other than a Subsidiary of the Company in a transaction
which complies with Section 11(o) hereof) shall consolidate
with, or merge with or into, the Company, and the Company
shall be the continuing or surviving corporation of such
consolidation or merger and, in connection with such
consolidation or merger, all or part of the outstanding
shares of Common Stock shall be changed into or exchanged
for stock or other securities of any other Person or cash or
any other property, or (z) the Company shall sell or
otherwise transfer (or one or more of its Subsidiaries shall
sell or otherwise transfer), in one transaction or a series
of related transactions, assets or earning power aggregating
more than 50% of the assets or earning power of the Company
and its Subsidiaries (taken as a whole) to any Person or
Persons (other than the Company or any Subsidiary of the
Company in one or more transactions each of which complies
with Section 11(o) hereof), then, and in each such case,
proper provision shall be made so that: (i) each holder of a
Right, except as provided in Section 7(e) hereof, shall
thereafter have the right to receive, upon the exercise
thereof at the then current Purchase Price in accordance
with the terms of this Agreement, such number of validly
authorized and issued, fully paid, non-assessable and freely
tradeable shares of Common Stock of the Principal Party (as
such term is hereinafter defined), not subject to any liens,
encumbrances, rights of first refusal or other adverse
claims, as shall be equal to the result obtained by (1)
multiplying the then current Purchase Price by the number of
one one-hundredths of a share of Preferred Stock for which a
Right is exercisable immediately prior to the first
occurrence of a Section 13 Event (or, if a Section 11(a)(ii)
Event has occurred prior to the first occurrence of a
Section 13 Event, multiplying the number of such one one-
hundredths of a share for which a Right was exercisable
immediately prior to the first occurrence of a Section
11(a)(ii) Event by the Purchase Price in effect immediately
prior to such first occurrence), and (2) dividing that
product (which, following the first occurrence of a Section
13 Event, shall be referred to as the "Purchase Price" for
each Right and for all purposes of this Agreement) by 50% of
the current market price (determined pursuant to Section
11(d)(i) hereof) per share of the Common Stock of such
Principal Party on the date of consummation of such Section
13 Event; (ii) such Principal Party shall thereafter be
liable for, and shall assume, by virtue of such Section 13
Event, all the obligations and duties of the Company
pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it
being specifically intended that the provisions of Section
11 hereof shall apply only to such Principal Party following
the first occurrence of a Section 13 Event; (iv) such
Principal Party shall take such steps (including, but not
limited to, the reservation of a sufficient number of shares
of its Common Stock) in connection with the consummation of
any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly
as reasonably may be, in relation to its shares of Common
Stock thereafter deliverable upon the exercise of the
Rights; provided, however, that upon the subsequent
occurrence of any merger, consolidation, sale of all or
substantially all assets, recapitalization, reclassification
of shares, reorganization or other extraordinary transaction
in respect of such Principal Party, each holder of a Right
shall thereupon be entitled to receive, upon exercise of a
Right a payment of the Purchase Price, such cash, shares,
rights, warrants and other property which such holder would
have been entitled to receive had he, at the time of such
transaction, owned the shares of Common Stock of the
Principal Party purchasable upon the exercise of a Right,
and such Principal Party shall take such steps (including,
but not limited to, reservation of shares of stock) as may
be necessary to permit the subsequent exercise of the Rights
in accordance with the terms hereof for such cash, shares,
rights, warrants and other property; and (v) the provisions
of Section 11(a)(ii) hereof shall be of no effect following
the first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction
described in clause (x) or (y) of the first sentence of
Section 13(a), the Person that is the issuer of any
securities into which shares of Common Stock of the Company
are converted in such merger or consolidation, and if no
securities are so issued, the Person that is the other party
to such merger or consolidation; and
(ii) in the case of any transaction
described in clause (z) of the first sentence of Section
13(a), the Person that is the party receiving the greatest
portion of the assets or earning power transferred pursuant
to such transaction or transactions;
provided, however, that in any such case, (1) if the Common
Stock of such Person is not at such time and has not been
continuously over the preceding twelve (12) month period
registered under Section 12 of the Exchange Act, and such
Person is a direct or indirect Subsidiary of another Person
the Common Stock of which is and has been so registered,
"Principal Party" shall refer to such other Person; and (2)
in case such Person is a Subsidiary, directly or indirectly,
of more than one Person, the Common Stocks of two or more of
which are and have been so registered, "Principal Party"
shall refer to whichever of such Persons is the issuer of
the Common Stock having the greatest aggregate market value.
(c) If, for any reason, the Rights cannot be
exercised for Common Stock of such Principal Party as
provided in Section 13(a), then each holder of Rights shall
have the right to exchange its Rights for cash from such
Principal Party in an amount equal to the number of shares
of Common Stock that it would otherwise be entitled to
purchase times 50% of the current per share market price, as
determined pursuant to Section 11(d) hereof, of such Common
Stock of such Principal Party. If, for any reason, the
foregoing formulation cannot be applied to determine the
cash amount into which the Rights are exchangeable, then the
Board of Directors, based upon the advice of one or more
nationally recognized investment banking firms, and based
upon the total value of the Company, shall determine such
amount reasonably and with good faith to the holders of
Rights. Any such determination shall be final and binding
on the Rights Agent.
(d) Notwithstanding anything in this Agreement to
the contrary, Section 13 shall not be applicable to a
transaction described in clauses (x) and (y) of Section
13(a) if: (i) such transaction is consummated with a Person
or Persons who acquired Common Stock pursuant to a Permitted
Offer (or a wholly-owned Subsidiary of any such Person or
Persons); (ii) the price per share of Common Stock offered
in such transaction is not less than the price per share of
Common Stock paid to all holders of Common Stock whose
shares were purchased pursuant to such Permitted Offer; and
(iii) the form of consideration being offered to the
remaining holders of Common Stock pursuant to such
transaction is the same form as the form of consideration
paid pursuant to such Permitted Offer. Upon consummation of
any such transaction contemplated by this Section 13(d), all
Rights hereunder shall expire.
(e) The Company shall not consummate any such
consolidation, merger, sale or transfer unless the Principal
Party shall have a sufficient number of authorized shares of
its Common Stock which have not been issued or reserved for
issuance to permit the exercise in full of the Rights in
accordance with this Section 13 and unless prior thereto the
Company and such Principal Party shall have executed and
delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a) and (b)
of this Section 13 and further providing that, as soon as
practicable after the date of any consolidation, merger or
sale of assets mentioned in paragraph (a) of this Section
13, the principal Party will:
(i) prepare and file a registration
statement under the Act, with respect to the Rights and the
securities purchasable upon exercise of the Rights on an
appropriate form, and will use its best efforts to cause
such registration statement to (A) become effective as soon
as practicable after such filing and (B) remain effective
(with a prospectus at all times meeting the requirements of
the Act) until the Expiration Date;
(ii) deliver to holders of the Rights
historical financial statements for the Principal Party and
each of its Affiliates which comply in all respects with the
requirements for registration on Form 10 under the Exchange
Act;
(iii) use its best efforts, if the
Common Stock of the Principal Party shall become listed on a
national securities exchange, to list (or continue the
listing of) the Rights and the securities purchasable upon
exercise of the Rights on such securities exchange and, if
the Common Stock of the Principal Party shall not be listed
on a national securities exchange, to cause the Rights and
the securities purchasable upon exercise of the Rights to be
reported by NASDAQ or such other system then in use; and
(iv) obtain waivers of any rights of
first refusal or preemptive rights in respect of the shares
of Common Stock of the Principal Party subject to purchase
upon exercise of outstanding Rights.
(f) The provisions of this Section 13 shall
similarly apply to successive mergers or consolidations or
sales or other transfers. In the event that a Section 13
Event shall occur at any time after the occurrence of a
Section 11(a)(ii) Event, the Rights which have not
theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue
fractions of Rights, except prior to the Distribution Date
as provided in Section 11(p) hereof, or to distribute Rights
Certificates which evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the
registered holders of the Rights Certificates with regard to
which such fractional Rights would otherwise be issuable, an
amount in cash equal to the same fraction of the current
market value of a whole Right. For purposes of this Section
14(a), the current market value of a whole Right shall be
the closing price of the Rights for the Trading Day
immediately prior to date on which such fractional Rights
would have been otherwise issuable. The closing price of
the Rights for any day shall be the last sale price, regular
way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated
transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange
or, if the Rights are not listed or admitted to trading on
the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to
securities listed on the principal national securities
exchange on which the Rights are listed or admitted to
trading, or if the Rights are not listed or admitted to
trading on any national securities exchange, the last quoted
price or, if not so quoted, the average of the high bid and
low asked prices in the over-the-counter market, as reported
by NASDAQ or such other system then in use or, if on any
such date the Rights are not quoted by any such
organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a
market in the Rights selected by the Board of Directors of
the Company. If on any such date no such market maker is
making a market in the Rights the fair value of the Rights
on such date as determined in good faith by the Board of
Directors of the Company shall be used.
(b) The Company shall not be required to issue
fractions of shares of Preferred Stock (other than fractions
which are integral multiples of one one-hundredth of a share
of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of
Preferred Stock (other than fractions which are integral
multiples of one one-hundredth of a share of Preferred
Stock). In lieu of fractional shares of Preferred Stock
that are not integral multiples of one one-hundredth of a
share of Preferred Stock, the Company may pay to the
registered holders of Rights Certificates at the time such
Rights are exercised as herein provided an amount in cash
equal to the same fraction of the current market value of
one one-hundredth of a share of Preferred Stock. For
purposes of this Section 14(b), the current market value of
one one-hundredth of a share of Preferred Stock shall be one
one-hundredth of the closing price of a share of Preferred
Stock (as determined pursuant to Section 11(d)(ii) hereof)
for the Trading Day immediately prior to the date of such
exercise.
(c) Following the occurrence of a Triggering
Event, the Company shall not be required to issue fractions
of shares of Common Stock upon exercise of the Rights or to
distribute certificates which evidence fractional shares of
Common Stock. In lieu of fractional shares of Common Stock,
the Company may pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein
provided an amount in cash equal to the same fraction of the
current market value of one (1) share of Common Stock. For
purposes of this Section 14(c), the current market value of
one share of Common Stock shall be the closing price of one
share of Common Stock (as determined pursuant to Section
11(d)(i) hereof) for the Trading Day immediately prior to
the date of such exercise.
(d) The holder of a Right by the acceptance of
the Rights expressly waives his right to receive any
fractional Rights or any fractional shares upon exercise of
a Right, except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in
respect of this Agreement are vested in the respective
registered holders of the Rights Certificates (and, prior to
the Distribution Date, the registered holders of the Common
Stock); and any registered holder of any Rights Certificate
(or, prior to the Distribution Date, of the Common Stock),
without the consent of the Rights Agent or of the holder of
any other Rights Certificate (or, prior to the Distribution
Date, of the Common Stock), may, in his own behalf and for
his own benefit, enforce, and may institute and maintain any
suit, action or proceeding against the Company to enforce,
or otherwise act in respect of, his right to exercise the
Rights evidenced by such Rights Certificate in the manner
provided in such Rights Certificate and in this Agreement.
Without limiting the foregoing or any remedies available to
the holders of Rights, it is specifically acknowledged that
the holders of Rights would not have an adequate remedy at
law for any breach of this Agreement and shall be entitled
to specific performance of the obligations hereunder and
injunctive relief against actual or threatened violations of
the obligations hereunder of any Person subject to this
Agreement.
Section 16. Agreement of Rights Holders. Every holder
of a Right by accepting the same consents and agrees with
the Company and the Rights Agent and with every other holder
of a Right that:
(a) prior to the Distribution Date, the Rights
will be transferable only in connection with the transfer of
Common Stock;
(b) after the Distribution Date, the Rights
Certificates are transferable only on the registry books of
the Rights Agent if surrendered at the principal office or
offices of the Rights Agent designated for such purposes,
duly endorsed or accompanied by proper instrument of
transfer and with the appropriate forms and certificates
fully executed;
(c) subject to Section 6(a) and Section 7(f)
hereof, the Company and the Rights Agent may deem and treat
the person in whose name a Rights Certificate (or, prior to
the Distribution Date, the associated Common Stock
certificate) is registered as the absolute owner thereof and
of the Rights evidenced thereby (notwithstanding any
notations of ownership or writing on the Rights Certificates
or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent,
subject to the last sentence of Section 7(e) hereof, shall
be required to be affected by any notice to the contrary;
and
(d) notwithstanding anything in this Agreement to
the contrary, neither the Company nor the Rights Agent shall
have any liability to any holder of a Right or other Person
as a result of its inability to perform any of its
obligations under this Agreement by reason of any
preliminary or permanent injunction or other order, decree
or ruling issued by a court of competent jurisdiction or by
a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive
order promulgated or enacted by any governmental authority,
prohibiting or otherwise restraining performance of such
obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or
otherwise overturned as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a
Stockholder. No holder, as such, of any Rights Certificate
shall be entitled to vote, receive dividends or be deemed
for any purpose the holder of the number of one one-
hundredths of a share of Preferred Stock or any other
securities of the Company which may at any time be issuable
on the exercise of the Rights represented thereby, nor shall
anything contained herein or in any Rights Certificate be
construed to confer upon the holder of any Rights
Certificate, as such, any of the rights of a stockholder of
the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other
actions affecting stockholders (except as provided in
Section 25 hereof), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by
such Rights Certificate shall have been exercised in
accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent
reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights
Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the
administration and execution of this Agreement and the
exercise and performance of its duties hereunder. The
Company also agrees to indemnify the Rights Agent for, and
to hold it harmless against, any loss, liability, or
expense, incurred without gross negligence, bad faith or
willful misconduct on the part of the Rights Agent, of
anything done or omitted by the Rights Agent in connection
with the acceptance and administration of this Agreement,
including the costs and expenses of defending against any
claim of liability in the premises.
(b) The Rights Agent shall be protected and shall
incur no liability for or in respect of any action taken,
suffered or omitted by it in connection with its
administration of this Agreement in reliance upon any Rights
Certificate or certificate for Common Stock or for other
securities of the Company, instrument of assignment or
transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, consent, certificate, statement, or other
paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or
acknowledged, by the proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name
of Rights Agent.
(a) Any corporation into which the Rights Agent
or any successor Rights Agent may be merged or with which it
may be consolidated, or any corporation resulting from any
merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation
succeeding to the stock transfer or corporate trust business
of the Rights Agent or any successor Rights Agent, shall be
the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further
act on the part of any of the parties hereto; provided,
however, that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions
of Section 21 hereof. In case at the time such successor
Rights Agent shall succeed to the agency created by this
Agreement, any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights
Agent may adopt the countersignature of a predecessor Rights
Agent and deliver such Rights Certificates so countersigned;
and in case at that time any of the Rights Certificates
shall not have been countersigned, any successor Rights
Agent may countersign such Rights Certificates either in the
name of the predecessor or in the name of the successor
Rights Agent; and in all such cases such Rights Certificates
shall have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights
Agent shall be changed and at such time any of the Rights
Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so
countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, the Rights
Agent may countersign such Rights Certificates either in its
prior name or in its changed name; and in all such cases
such Rights Certificates shall have the full force provided
in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent
undertakes the duties and obligations imposed by this
Agreement upon the following terms and conditions, by all of
which the Company and the holders of Rights Certificates, by
their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal
counsel (who may be legal counsel for the Company), and the
opinion of such counsel shall be full and complete
authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in
accordance with such opinion.
(b) Whenever in the performance of its duties
under this Agreement the Rights Agent shall deem it
necessary or desirable that any fact or matter (including,
without limitation, the identity of any Acquiring Person and
the determination of "current market price") be proved or
established by the Company prior to taking or suffering any
action hereunder such fact or matter (unless other evidence
in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a
certificate signed by the Chairman of the Board, the
President, any Vice President, the Treasurer, any Assistant
Treasurer, the Secretary or any Assistant Secretary of the
Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent
for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder
only for its own gross negligence, bad faith or willful
misconduct.
(d) The Rights Agent shall not be liable for or
by reason of any of the statements of fact or recitals
contained in this Agreement or in the Rights Certificates or
be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such
statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any
responsibility in respect of the validity of this Agreement
or the execution and delivery hereof (except the due
execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for
any breach by the Company of any covenant or condition
contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any adjustment required
under the provisions of Section 11 or Section 13 hereof or
responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence of facts
that would require any such adjustment (except with respect
to the exercise of Rights evidenced by Rights Certificates
after actual notice of any such adjustment); nor shall it by
any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any
shares of Common Stock or Preferred Stock to be issued
pursuant to this Agreement or any Rights Certificate or as
to whether any shares of Common Stock or Preferred Stock
will, when so issued, be validly authorized and issued,
fully paid and nonassessable.
(f) The Company agrees that it will perform,
execute, acknowledge and deliver or cause to be performed,
executed, acknowledged and delivered all such further and
other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or
performing by the Rights Agent of the provisions of this
Agreement.
(g) The Rights Agent is hereby authorized and
directed to accept instructions with respect to the
performance of its duties hereunder from the Chairman of the
Board, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant
Treasurer of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and it
shall not be liable for any action taken or suffered to be
taken by it in good faith in accordance with instructions of
any such officer.
(h) The Rights Agent and any stockholder,
director, officer or employee of the Rights Agent may buy,
sell or deal in any of the Rights or other securities of the
Company or become pecuniarily interested in any transaction
in which the Company may be interested, or contract with or
lend money to the Company or otherwise act as fully and
freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent
from acting in any other capacity for the Company or for any
other legal entity.
(i) The Rights Agent may execute and exercise any
of the rights or powers hereby vested in it or perform any
duty hereunder either itself or by or through its attorneys
or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of
any such attorneys or agents or for any loss to the Company
resulting from any such act, default, neglect or misconduct;
provided, however, reasonable cause was exercised in the
selection and continued employment thereof.
(j) No provision of this Agreement shall require
the Rights Agent to expend or risk its own funds or
otherwise incur any financial liability in the performance
of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing
that repayment of such funds or adequate indemnification
against such risk or liability is not reasonably assured to
it.
(k) If, with respect to any Right Certificate
surrendered to the Rights Agent for exercise or transfer,
the certificate attached to the form of assignment or form
of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to
clause 1 and/or 2 thereof, the Rights Agent shall not take
any further action with respect to such requested exercise
of transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent
or any successor Rights Agent may resign and be discharged
from its duties under this Agreement upon thirty (30) days'
notice in writing mailed to the Company, and to each
transfer agent of the Common Stock and Preferred Stock, by
registered or certified mail, and to the holders of the
Rights Certificates by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon
thirty (30) days' notice in writing, mailed to the Rights
Agent or successor Rights Agent, as the case may be, and to
each transfer agent of the Common Stock and Preferred Stock,
by registered or certified mail, and to the holders of the
Rights Certificates by first-class mail. If the Rights
Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor
to the Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving
notice of such removal or after it has been notified in
writing of such resignation or incapacity by there signing
or incapacitated Rights Agent or by the holder of a Rights
Certificate (who shall, with such notice, submit his Rights
Certificate for inspection by the Company), then any
registered holder of any Rights Certificate may apply to any
court of competent jurisdiction for an appointment of a new
Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be (a) a
corporation organized and doing business under the law of
the United States or under the laws of any state thereof, in
good standing, having a principal office either in the State
of California or the State of New York, which is authorized
under such laws to exercise stock transfer or corporate
trust powers and is subject to supervision or examination by
a federal or state authority and which has at the time of
its appointment as Rights Agent a combined capital and
surplus of at least $10,000,000, or (b) an Affiliate of a
corporation described in clause (a) of this sentence. After
appointment, the successor Rights Agent shall be vested with
the same powers, rights, duties and responsibilities as if
it had been originally named as Rights Agent without further
act or deed; but the predecessor Rights Agent shall deliver
and transfer to the successor Rights Agent any property at
the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the
purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in
writing with the predecessor Rights Agent and each transfer
agent of the Common Stock and the Preferred Stock, and mail
a notice thereof in writing to the registered holders of the
Rights Certificates. Failure to give any notice provided
for in this Section 21, however, or any defect therein,
shall not affect the legality or validity of the resignation
or removal of the Rights Agent or the appointment of the
successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates.
Notwithstanding any of the provisions of this Agreement or
of the Rights to the contrary, the Company may, at its
option, issue new Rights Certificates evidencing Rights in
such form as may be approved by its Board of Directors to
reflect any adjustment or change in the Purchase Price and
the number or kind or class of shares or other securities or
property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale of shares
of Common Stock following the Distribution Date and prior to
the redemption or expiration of the Rights, the Company (a)
shall, with respect to shares of Common Stock so issued or
sold pursuant to the exercise of stock options or under any
employee plan or arrangement, or upon the exercise,
conversion or exchange of securities hereinafter issued by
the Company, and (b) may, in any other case, if deemed
necessary or appropriate by the Board of Directors of the
Company, issue Rights Certificates representing the
appropriate number of Rights in connection with such
issuance or sale; provided, however, that (i) no such Rights
Certificate shall be issued if, and to the extent that, the
Company shall be advised by counsel that such issuance would
create a significant risk of material adverse tax
consequences to the Company or the Person to whom such
Rights Certificate would be issued, and (ii) no such Rights
Certificate shall be issued if, and to the extent that
appropriate adjustment shall otherwise have been made in
lieu of the issuance thereof.
Section 23. Redemption and Termination.
(a) The Board of Directors of the Company may, at
its option, at any time prior to the earlier of (i) the
close of business on the tenth day following the Stock
Acquisition Date, or such later date as may be determined by
action of a majority of Continuing Directors then in office
and publicly announced by the Company (or, if the Stock
Acquisition Date shall have occurred prior to the Record
Date, the close of business on the tenth day following the
Record Date, or such later date as may be determined by
action of a majority of Continuing Directors then in office
and publicly announced by the Company), or (ii) the Final
Expiration Date, redeem all but not less than all the then
outstanding Rights at a redemption price of $.01 per Right,
as such amount may be appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring
after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price");
provided, however, if the Board of Directors of the Company
authorizes redemption of the Rights in either of the
circumstances set forth in clauses (i) and (ii) below, then
there must be Continuing Directors then in office and such
authorization shall require the concurrence of a majority of
such Continuing Directors: (i) such authorization occurs on
or after the time a Person becomes an Acquiring Person, or
(ii) such authorization occurs on or after the date of a
change (resulting from a proxy or consent solicitation) in a
majority of the directors in office at the commencement of
such solicitation if any Person who is a participant in such
solicitation has stated (or, if upon the commencement of
such solicitation, a majority of the Board of Directors of
the Company has determined in good faith) that such Person
(or any of its Affiliates or Associates) intends to take, or
may consider taking, any action which would result in such
Person becoming an Acquiring Person or which would cause the
occurrence of a Triggering Event unless, concurrent with
such solicitation, such Person (or one or more of its
Affiliates or Associates) is making a cash tender offer
pursuant to a Schedule 14D-1 (or any successor form) filed
with the Securities and Exchange Commission for all
outstanding shares of Common Stock not beneficially owned by
such Person (or by its Affiliates or Associates); provided
further, however, that if, following the occurrence of a
Stock Acquisition Date and following the expiration of the
right of redemption hereunder but prior to any Triggering
Event, (i) a person who is an Acquiring Person shall have
transferred or otherwise disposed of a number of shares of
Common Stock in one transaction or series of transactions,
not directly or indirectly involving the Company, or any of
its Subsidiaries, which did not result in the occurrence of
a Triggering Event such that such Person is thereafter a
Beneficial Owner of 10% or less of the outstanding shares of
Common Stock, and (ii) there are no other Persons,
immediately following the occurrence of the event described
in clause (i), who are Acquiring Persons, then the right of
redemption herein shall be reinstated and thereafter be
subject to the provisions of this Section 23.
Notwithstanding anything contained in this Agreement to the
contrary, a Distribution Date shall not occur and the Rights
shall not be exercisable until such time as the Company's
right of redemption hereunder has expired. The Company may,
at its option, pay the Redemption Price in cash, shares of
Common Stock (based on the "current market price", as
defined in Section 11(d)(i) hereof, of the Common Stock at
the time of redemption) or any other form of consideration
deemed appropriate by the Board of Directors.
(b) Immediately upon the action of the Board of
Directors of the Company ordering the redemption of the
Rights, evidence of which shall have been filed with the
Rights Agent and without any further action and without any
notice, the right to exercise the Rights will terminate and
the only right thereafter of the holders of Rights shall be
to receive the Redemption Price for each Right so held.
Promptly after the action of the Board of Directors ordering
the redemption of the Rights, the Company shall give notice
of such redemption to the Rights Agent and the holders of
the then outstanding Rights by mailing such notice to all
such holders at each holder's last addresses it appears upon
the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the Transfer
Agent for the Common Stock. Any notice which is mailed in
the manner herein provided shall be deemed given, whether or
not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the
Redemption Price will be made.
Section 24. Exchange.
(a) Subject to applicable laws, rules and
regulations, and subject to subsection (c) below, the
Company may, at its option, by majority vote of the Board of
Directors and a majority vote of the Continuing Directors,
at any time after the occurrence of a Section 11(a)(ii)
Event, exchange all or part of the then outstanding and
exercisable Rights (which shall not include Rights that have
become void pursuant to the provisions of Section 7(e)
hereof) for Common Stock at an exchange ratio of one (1)
share of Common Stock per Right, appropriately adjusted to
reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such exchange
ratio being hereinafter referred to as the "Ratio of
Exchange"). Notwithstanding the foregoing, the Board of
Directors shall not be empowered to effect such exchange at
any time after any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the
Company or any such Subsidiary, or any entity holding Common
Stock for or pursuant to the terms of any such plan),
together with all Affiliates and Associates of such Person,
becomes the Beneficial Owner of 50% or more of the Common
Stock then outstanding.
(b) Immediately upon the action of the Board of
Directors ordering the exchange of any Rights pursuant to
subsection (a) of this Section 24 and without any further
action and without any notice, the right to exercise such
Rights shall terminate and the only right thereafter of a
holder of such rights shall be to receive that number of
shares of Common Stock equal to the number of such Rights
held by such holder multiplied by the Ratio of Exchange.
The Company shall give public notice of any such exchange;
provided, however, that the failure to give, or any defect
in, such notice shall not affect the validity of such
exchange. The Company shall mail a notice of any such
exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the
Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of exchange
will state the method by which the exchange of the Common
Stock for Rights will be effected and, in the event of any
partial exchange, the number of Rights which will be
exchanged. Any partial exchange shall be effected pro rata
based on the number of Rights (other than Rights which have
become void pursuant to the provisions of Section 7(e)
hereof) held by each holder of Rights.
(c) In the event that there shall not be
sufficient shares of Common Stock issued but not outstanding
or authorized but unissued to permit any exchange of Rights
as contemplated in accordance with Section 24(a), the
Company shall either take such action as may be necessary to
authorize additional Common Stock for issuance upon exchange
of the Rights or alternatively, at the option of a majority
of the Board of Directors, with respect to each Right (i)
pay cash in an amount equal to the Current Value (as
hereinafter defined), in lieu of issuing Common Stock in
exchange therefor, or (ii) issue debt or equity securities
or a combination thereof, having a value equal to the
Current Value (as defined below), in lieu of issuing Common
Stock in exchange for each such Right, where the value of
such securities shall be determined by a nationally
recognized investment banking firm selected by the Board of
Directors by majority vote of the Board of Directors, or
(iii) deliver any combination of cash, property, Common
Stock and/or other securities having a value equal to the
Current Value in exchange for each Right. For purposes of
this Section 24(c) only, the Current Value shall mean the
product of the current per share market price of Common
Stock (determined pursuant to Section 11(d) on the date of
the occurrence of the event described above in subparagraph
(a)) multiplied by the number of shares of Common Stock for
which the Right otherwise would be exchangeable if there
were sufficient shares available. To the extent that the
Company determines that some action need be taken pursuant
to clauses (i), (ii) or (iii) of this Section 24(c), the
Board of Directors may temporarily suspend the
exercisability of the Rights for a period of up to sixty
(60) days following the date on which the event described in
Section 24(a) shall have occurred, in order to seek any
authorization of additional shares of Common Stock and/or to
decide the appropriate form of distribution to be made
pursuant to the above provision and to determine the value
thereof. In the event of any such suspension, the Company
shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended.
(d) The Company shall not be required to issue
fractions of shares of Common Stock or to distribute
certificates which evidence fractional shares of Common
Stock. In lieu of such fractional shares of Common Stock,
there shall be paid to the registered holders of the Rights
Certificates with regard to which such fractional shares of
Common Stock would otherwise be issuable, an amount in cash
equal to the same fraction of the current per share market
value of a whole share of Common Stock (as determined
pursuant to the second sentence of Section 11(d) hereof).
(e) The Company may, at its option, by majority
vote of the Board of Directors, at any time before any
Person has become an Acquiring Person, exchange all or part
of the then outstanding Rights for rights of substantially
equivalent value, as determined reasonably and with good
faith by the Board of Directors, based upon the advice of
one or more nationally recognized investment banking firms.
(f) Immediately upon the action of the Board of
Directors ordering the exchange of any Rights pursuant to
subsection (e) of this Section 24 and without any further
action and without any notice, the right to exercise such
Rights shall terminate and the only right thereafter of a
holder of such Rights shall be to receive that number of
rights in exchange therefor as has been determined by the
Board of Directors in accordance with subsection (e) above.
The Company shall give public notice of any such exchange;
provided, however, that the failure to give, or any defect
in, such notice shall not affect the validity of such
exchange. The Company shall mail a notice of any such
exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the
transfer agent for the Common Stock of the Company. Any
notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method
by which the exchange of the Rights will be effected.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose, at any
time after the Distribution Date, (i) to pay any dividend
payable in stock of any class to the holders of Preferred
Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular quarterly cash
dividend out of earnings or retained earnings of the
Company), or (ii) to offer to the holders of Preferred Stock
rights or warrants to subscribe for or to purchase any
additional shares of Preferred Stock or shares of stock of
any class or any other securities, rights or options, or
(iii) to effect any reclassification of its Preferred Stock
(other than a reclassification involving only the
subdivision of outstanding shares of Preferred Stock), or
(iv) to effect any consolidation or merger into or with any
other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), or to
effect any sale or other transfer (or to permit one or more
of its Subsidiaries to effect any sale or other transfer),
in one transaction or a series of related transactions, of
more than 50% of the assets or earning power of the Company
and its Subsidiaries (taken as a whole) to any other Person
or Persons (other than the Company and/or any of its
Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), or (v) to effect the
liquidation, dissolution or winding up of the Company, then,
in each such case, the Company shall give to each holder of
a Rights Certificate, to the extent feasible and in
accordance with Section 26 hereof, a notice of such proposed
action, which shall specify the record date for the purposes
of such stock dividend, distribution of rights or warrants,
or the date on which such reclassification, consolidation,
merger, sale, transfer, liquidation, dissolution, or winding
up is to take place and the date of participation therein by
the holders of the shares of Preferred Stock, if any such
date is to be fixed, and such notice shall be so given in
the case of any action covered by clause (i) or (ii) above
at least twenty (20) days prior to the record date for
determining holders of the shares of Preferred Stock for
purposes of such action, and in the case of any such other
action, at least twenty (20) days prior to the date of the
taking of such proposed action or the date of participation
therein by the holders of the shares of Preferred Stock
whichever shall be the earlier.
(b) In case any of the events set forth in
Section 11(a)(ii) hereof shall occur, then, in any such
case, (i) the Company shall as soon as practicable
thereafter give to each holder of a Rights Certificate, to
the extent feasible and in accordance with Section 26
hereof, a notice of the occurrence of such event, which
shall specify the event and the consequences of the event to
holders of Rights under Section 11(a)(ii) hereof, and (ii)
all references in the preceding paragraph to Preferred Stock
shall be deemed thereafter to refer to Common Stock and/or,
if appropriate, other securities.
Section 26. Notices. Notices or demands authorized by
this Agreement to be given or made by the Rights Agent or by
the holder of any Rights Certificate to or on the Company
shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is
filed in writing with the Rights Agent) as follows:
AST RESEARCH, INC.
16215 Alton Parkway
Irvine, California 92718
Attention: Safi U. Qureshey, President
Subject to the provisions of Section 21, any notice or
demand authorized by this Agreement to be given or made by
the Company or by the holder of any Rights Certificate to or
on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until
another address is filed in writing with the Company) as
follows:
AMERICAN STOCK TRANSFER & TRUST COMPANY
40 Wall Street
New York, New York 10005
Attention: Geraldine M. Zarbo
Notices or demands authorized by this Agreement to be given
or made by the Company or the Rights Agent to the holder of
any Rights Certificate (or, if prior to the Distribution
Date, to the holder of certificates representing shares of
Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder
at the address of such holder as shown on the registry books
of the Company.
Section 27. Supplements and Amendments. Prior to the
Distribution Date, the Company and the Rights Agent shall,
if the Company so directs, supplement or amend any provision
of this Agreement without the approval of any holders of
certificates representing shares of Common Stock. From and
after the Distribution Date, the Company and the Rights
Agent shall, if the Company so directs, supplement or amend
this Agreement without the approval of any holders of Rights
Certificates in order (i) to cure any ambiguity, (ii) to
correct or supplement any provision contained herein which
may be defective or inconsistent with any other provisions
herein, (iii) to shorten or lengthen any time period
hereunder (which lengthening or shortening, following the
first occurrence of an event set forth in clauses (i) and
(ii) of the first proviso to Section 23(a) hereof, shall be
effective only if there are Continuing Directors and shall
require the concurrence of a majority of such Continuing
Directors), or (iv) to change or supplement the provisions
hereunder in any manner which the Company may deem necessary
or desirable and which shall not adversely affect the
interests of the holders of Rights Certificates (other than
an Acquiring Person or an Affiliate or Associate of an
Acquiring Person); provided, this Agreement may not be
supplemented or amended to lengthen, pursuant to clause
(iii) of this sentence, (A) a time period relating to when
the Rights may be redeemed at such time as the Rights are
not then redeemable, or (B) any other time period unless
such lengthening is for the purpose of protecting, enhancing
or clarifying the rights of, and/or the benefits to, the
holders of Rights. Upon the delivery of a certificate from
an appropriate officer of the Company which states that the
proposed supplement or amendment is in compliance with the
terms of this Section 27, the Rights Agent shall execute
such supplement or amendment. Prior to the Distribution
Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common
Stock.
Section 28. Successors. All the covenants and
provisions of this Agreement by or for the benefit of the
Company or the Rights Agent shall bind and inure to the
benefit of their respective successors and assigns
hereunder.
Section 29. Determinations and Actions by the Board of
Directors, etc. For all purposes of this Agreement, any
calculation of the number of shares of Common Stock
outstanding at any particular time, including for purposes
of determining the particular percentage of such outstanding
shares of Common Stock of which any Person is the Beneficial
Owner, shall be made in accordance with the last sentence of
Rule 13d-3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act. The Board of Directors of the
Company (with, where specifically provided for herein, the
concurrence of the Continuing Directors) shall have the
exclusive power and authority to administer this Agreement
and to exercise all rights and powers specifically granted
to the Board (with, where specifically provided for herein,
the concurrence of the Continuing Directors) or to the
Company, or as may be necessary or advisable in the
administration of this Agreement, including, without
limitation, the right and power to (i) interpret the
provisions of this Agreement, and (ii) make all
determinations deemed necessary or advisable for the
administration of this Agreement (including a determination
to redeem or not redeem the Rights or to amend the
Agreement). All such actions, calculations, interpretations
and determinations (including, for purposes of clause (y)
below, all omissions with respect to the foregoing) which
are done or made by the Board (with, where specifically
provided for herein, the concurrence of the Continuing
Directors) in good faith, shall (x) be final, conclusive and
binding on the Company, the Rights Agent, the holders of the
Rights and all other parties, and (y) not subject the Board
or the Continuing Directors to any liability to the holders
of the Rights.
Section 30. Benefits of this Agreement. Nothing in
this Agreement shall be construed to give to any person
other than the Company, the Rights Agent and the registered
holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Stock)
any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to
the Distribution Date, registered holders of the Common
Stock).
Section 31. Severability. If any term, provision,
covenant or restriction of this Agreement is held by a court
of competent jurisdiction or other authority to be invalid,
void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be
affected, impaired or invalidated; provided, however, that
notwithstanding anything in this Agreement to the contrary,
if any such term, provision, covenant or restriction is held
by such court or authority to be invalid, void or
unenforceable and the Board of Directors of the Company
determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect
the purpose or effect of this Agreement, the right of
redemption set forth in Section 23 hereof shall be
reinstated and shall not expire until the close of business
on the tenth day following the date of such determination by
the Board of Directors.
Section 32. Governing Law. This Agreement, each Right
and each Rights Certificate issued hereunder shall be deemed
to be a contract made under the laws of the State of
Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State
applicable to contracts made and to be performed entirely
within such State, except for Sections 18, 19, 20 and 21
hereof which for all purposes shall be governed by and
construed in accordance with the laws of the State of
California.
Section 33. Counterparts. This Agreement may be
executed in any number of counterparts and each such
counterparts shall for all purposes deemed to be an
original, and all such counterparts shall together
constitute but one and the same instrument.
Section 34. Descriptive Headings. Descriptive
headings of the several Sections of this Agreement are
inserted for convenience only and shall not control or
affect the meaning or construction of any of the provisions
hereof.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed and their respective
corporate seals to be hereunto affixed and attested, all as
of the day and year first above written.
Attest: AST RESEARCH, INC.,
a Delaware corporation
By ____________________ By ___________________
Name: Name:
Title: Title:
Attest: AMERICAN STOCK TRANSFER &
TRUST COMPANY
By ____________________ By ____________________
Name: Name:
Title: Title:
<PAGE>
AST RESEARCH, INC.
1994 ONE-TIME GRANT STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE.
The AST Research, Inc. 1994 One-Time Grant Stock Option Plan
for Non-Employee Directors is intended to provide incentive to those
persons who are non-employee directors of AST Research, Inc., a Delaware
corporation, ("Corporation") on July 1, 1994, to encourage such
Participants to acquire a proprietary interest in the Corporation and to
continue their association with the Corporation.
2. DEFINITIONS.
(a) "Annual Meeting" shall mean the Corporation's Annual
Meeting of Stockholders held on October 27, 1994, or any postponement or
adjournment thereof.
(b) "Board" shall mean the Board of Directors of the
Corporation.
(c) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(d) "Committee" shall mean the Committee appointed by the
Board as set forth in Section 4 hereof.
(e) "Common Stock" shall mean the Common Stock, $.01 par
value, of the Corporation.
(f) "Corporation" shall mean AST Research, Inc., a
Delaware corporation.
(g) "Disability" shall mean the condition, as determined
by the Board or Committee, of a Participant who is unable to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to last for a
continuous period of not less than twelve (12) months. The Board or
Committee's determination of Disability or the absence thereof shall be
conclusive and binding on all interested parties.
(h) "Effective Date" shall mean the date of effectiveness
of the Plan which shall be the date of approval of this Plan by the
stockholders of the Corporation.
(i) "Exercise Price" shall mean the price per share of
Common Stock at which an Option may be exercised.
(j) "Fair Market Value" shall mean the value of one (1)
share of Common Stock, determined as follows:
(i) If the Common Stock is not listed or admitted to
trading on a stock exchange, the last sale price of the Common Stock in
the over-the-counter market on the date of valuation, or,
(ii) If the Common Stock is then listed or admitted
to trading on any stock exchange, the closing sale price on the date of
valuation on the principal stock exchange on which the Common Stock is
then listed or admitted to trading.
If no closing sale price is quoted on such day, or if
no sale takes place on such day on such principal exchange, as the case
may be, then the closing sale price on the over-the-counter market or
the closing sale price of the Common Stock on such exchange on the next
preceding day on which a sale occurred or closing sale price was
reported, as the case may be, shall be the Fair Market Value. During
such times as there is not a market price available, the Fair Market
Value shall be determined by the Board or the Committee in good faith,
which determination shall be conclusive and binding on all interested
parties.
(k) "Grant Date" shall mean July 1, 1994.
(l) "Option" shall mean any stock option granted pursuant
to the Plan.
(m) "Option Agreement" shall mean the written agreement
entered into between the Corporation and the Optionee with respect to
which an Option or Options are granted under the Plan.
(n) "Optionee" shall mean a Participant who has received
an Option.
(o) "Participant" shall mean a member of the Board on the
Grant Date who is not also an employee (within the meaning of Code
Section 3401 and the regulations thereunder) of the Corporation.
(p) "Plan" shall mean this AST Research, Inc. 1994 One-
Time Grant Stock Option Plan for Non-Employee Directors.
(q) "Purchase Price" shall mean the Exercise Price times
the number of whole shares of Common Stock with respect to which an
Option is exercised.
3. ADOPTION AND EFFECTIVE DATE OF PLAN.
Unless the Plan shall theretofore have been terminated, the
Plan shall be effective on the approval of the stockholders of the
Corporation, and shall terminate ten (10) years after such effective
date.
4. ADMINISTRATION.
The Plan shall be administered by the Board or by a
committee of two (2) or more persons appointed by the Board, such
committee, or the Board, if it administers the Plan, being hereinafter
the "Committee." The Committee shall be responsible for carrying out
the terms of the Plan with respect to all Plan administration matters.
Acts of a majority of the Committee at which a quorum is present, or
acts reduced to or approved in writing by all of the members of the
Committee, shall be the valid acts of the Committee.
The administration, interpretation or application of the
Plan by the Committee shall be final, conclusive and binding upon all
Participants. No member of the Board or the Committee shall be liable
for any action or determination made in good faith with respect to the
Plan or any Option granted thereunder.
5. ELIGIBILITY.
The persons who shall be eligible to receive Options under
the Plan shall be all persons who are non-employee directors of the
Corporation on July 1, 1994.
6. STOCK.
The stock subject to Options granted under the Plan shall be
shares of the Corporation's authorized but unissued or reacquired Common
Stock. The aggregate number of shares which may be issued under Options
exercised under the Plan shall not exceed 250,000 shares, and the
maximum number of shares of Common Stock with respect to which any
Participant may receive Options hereunder during any calendar year may
not exceed 50,000. The number of shares subject to Options outstanding
under the Plan at any time may not exceed the number of shares available
for issuance under the Plan. The limitations established by this
Section 6 shall be subject to adjustment upon the occurrence of the
events specified and in the manner provided in Section 9 hereof.
7. PARTICIPANTS; TIMING AND SIZE OF OPTION GRANTS.
On the Grant Date, but subject to approval of stockholders,
each Participant shall be granted an Option under the Plan covering
50,000 shares of Common Stock. All such Option grants are subject to
the limitation set forth in Section 6 hereof. As more specifically set
forth in Section 8(f) below, Options shall vest and become exercisable
at the rate of twelve and one-half percent (12.5%) per year, commencing
on the first anniversary of the Grant Date, and shall be fully vested
and exercisable on the eighth (8th) anniversary of the Grant Date, but
subject to acceleration as set forth in Section 8(f) below.
8. TERMS AND CONDITIONS OF OPTIONS.
Any Option granted pursuant to the Plan shall be evidenced
by an Option Agreement in such form as the Committee shall from time to
time determine, which Option Agreement shall comply with and be subject
to the following terms and conditions:
(a) Optionee's Agreement. Each Optionee shall agree to
remain a director of and to render to the Corporation services for the
remainder of the term for which the director was elected, but such
agreement shall not impose upon the Corporation any obligation to retain
the Optionee as a director for any period.
(b) Number of Shares. Each Option shall state the number
of shares to which it pertains and shall provide for the adjustment
thereof in accordance with the provisions of Section 9 hereof.
(c) Exercise Price. Each Option shall state the Exercise
Price, which price shall be 100% of the Fair Market Value on the Grant
Date.
(d) Medium and Time of Payment. The Purchase Price shall
be payable in full upon the exercise of the Option. The Purchase Price
may be paid (i) in cash or by certified check or by bank draft; (ii)
subject to any legal restrictions and obligations regarding the purchase
of shares for promissory notes or evidences of indebtedness, by delivery
of Optionee's promissory note in a form satisfactory to the Corporation
and (at the election of the Corporation) secured by a Pledge Agreement
of the shares purchased or other security; or (iii) by the surrender of
shares of the Common Stock in good form for transfer, owned by the
person exercising the Option and having an aggregate Fair Market Value
on the date of exercise equal to the Purchase Price, or in any
combination of the foregoing, so long as the total thereof equals the
Purchase Price. No share of Common Stock shall be issued upon the
exercise of an Option until full payment therefor has been made.
(e) Tax Withholding. The Corporation shall have the power
to withhold, or require an Optionee to remit to the Corporation, an
amount sufficient to satisfy Federal, state, and local withholding tax
requirements on the exercise of any Options under the Plan. To the
extent permissible under applicable tax, securities, and other laws, the
Board may, in its sole discretion, permit an Optionee to satisfy an
obligation to pay any tax to any governmental entity in respect of
exercise, up to an amount determined on the basis of the highest
marginal tax rate applicable to such Optionee, in whole or in part, by
(i) directing the Corporation to apply shares of Common Stock issuable
upon exercise of the Option or (ii) delivering to the Corporation shares
of Common Stock owned by the Optionee.
(f) Term and Exercise of Options; Vesting and
Acceleration. Each Option Agreement shall have a term of ten (10) years
from the Effective Date and shall state the time or times when the
Option so evidenced becomes exercisable. All Options under this Plan
expire not later than the tenth (10th) anniversary of the date of grant.
Options shall vest and become exercisable at the basic rate of twelve
and one-half percent (12.5%) of the number of shares covered thereby per
year, commencing on the first (1st) and continuing through the eighth
(8th) anniversary of the Grant Date. If the Common Stock achieves a
Fair Market Value on five (5) trading days in any period of twenty (20)
consecutive trading days during the term of the Option equal to, or
greater than, the percentage of the Exercise Price of the Option set
forth under Column A below, then, commencing with the first anniversary
of the Grant Date, the vesting and exercisability of the Option shall be
accelerated and vest proportionately and retroactively over the
accelerated period set forth in Column B below at the adjusted annual
rate set forth in Column C below:
<TABLE>
<CAPTION>
Column A Column B Column C
Adjusted Annual
Vesting Over Vesting Rate Commencing
% of Exercise Price Accelerated Period With 1st Anniversary
<C> <C> <C>
125% 6 years 16 2/3%
200% 4 years 25%
300% 1 year 100%
(but not prior to
July 1, 1995)
</TABLE>
Any acceleration and shortening of the vesting period of an
Optionee's Option in accordance with the foregoing shall be cumulative
and permanent, but early vesting shall not occur prior to July 1, 1995.
(g) Termination of Status as Director. In the event that
an Optionee shall cease to be a director of the Corporation for any
reason, including death or Disability, such Optionee or the Optionee's
heirs and personal representatives, as the case may be, shall have the
right to exercise Options at any time within ninety (90) days after such
termination to the extent that, at the date of such termination, the
Optionee's right to exercise such Options had vested pursuant to the
terms of the Plan and of the Option Agreement and had not previously
been exercised; provided, however, that if, prior to the date of
termination of Optionee's status as a Director, an event has occurred
giving rise to the repurchase right set forth in Section 10 hereof, such
right to exercise vested options shall expire at the later of the end of
such 90-day period or the end of the 180-day period set forth in Section
10. An Optionee's right to exercise the then unvested portion of
Options shall terminate as of the date of termination of the Optionee's
status as a director.
(h) Nontransferability of Options. During the lifetime of
an Optionee, Options shall be exercisable only by the Optionee and
shall not be assignable or transferable, except pursuant to a qualified
domestic relations order, as defined in the Code or the Employee
Retirement Income Security Act, or the rules thereunder. In the event
of the Optionee's death, no Option shall be transferable by the Optionee
otherwise than by will or by the laws of descent and distribution.
(i) Rights as a Stockholder. An Optionee or a transferee
of an Optionee shall have no rights as a stockholder with respect to any
shares covered by an Option until the date of the issuance of a stock
certificate for such shares. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is
prior to the date such stock certificate is issued, except as provided
in Section 9.
(j) Registration Rights. An Option may provide for the
right of an Optionee to require the Corporation to register the shares
issuable on exercise of an Option and the right to include such shares
in other registrations of the Corporation.
(k) Other Provisions. An Option Agreement authorized
under the Plan may contain other provisions not inconsistent with the
terms of the Plan.
9. CHANGES IN CAPITAL STRUCTURE.
In the event that the outstanding shares of Common Stock are
hereafter increased or decreased or changed into or exchanged for a
different number or kind of shares or other securities of the
Corporation by reason of merger, consolidation or reorganization in
which the Corporation is the surviving corporation or of a
recapitalization, stock split, combination of shares, reclassification,
reincorporation, stock dividend (in excess of 2%), or other change in
the capital structure of the Corporation, appropriate adjustments shall
be made by the Board of Directors in the aggregate number and kind of
shares subject to the Plan and to the grant of Options hereunder, and
the number and kind of shares and the price per share subject to
outstanding Options in order to preserve, but not to increase, the
benefits to persons then holding Options under the Plan.
In the event that the Corporation at any time proposes to
(i) dissolve or liquidate, or to merge into, consolidate with or to
enter into any other reorganization (including the sale of substantially
all of its assets) in which the Corporation is not the surviving
corporation, or (ii) enter into a merger or other reorganization as a
result of which the outstanding shares of Common Stock will be changed
into or exchanged for shares of the capital stock or other securities of
another corporation or for cash or other property, then the Board of
Directors or the Committee shall cause written notice of the proposed
transaction to be given to all Optionees not less than thirty (30) days
prior to the anticipated effective date of the proposed transaction, and
all Options shall be accelerated and, prior to the effective date of the
proposed transaction, each Optionee shall have the right to exercise all
Options held by him in respect of any or all shares then subject
thereto.
The grant of an Option pursuant to the Plan shall not affect
in any way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge or consolidate or to dissolve, liquidate, sell or
transfer all or any part of its business or assets.
10. PERMISSIVE RESALE TO CORPORATION.
(a) In the event,
(i) any "person" or "group" of persons (as the terms
"person" and "group" are used in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934 and the rules thereunder)
(A) makes a tender offer or exchange offer or
enters into a merger or other acquisition agreement (collectively, the
"Offer") to acquire the beneficial ownership, directly or indirectly, of
securities of the Corporation representing 15% or more of the combined
voting power of the then outstanding securities of the Corporation, and
(B) such "person" or "group" of "persons" does
not substantially concurrently offer to purchase each of the then
outstanding Options evidenced hereby in connection with such Offer for a
price at least equal to the Repurchase Price (as defined below), or
(ii) a majority of the Board of Directors of the
Corporation shall be comprised of persons who were not originally
elected to such office as part of the "Company Nominated Slate" of
directors (i.e., the slate of nominees proposed by the Board of
Directors in office immediately prior to the election or any other
change in directors),
then Optionee shall have the right to require the Corporation to
repurchase (the "Repurchase") the then outstanding Options (including
Options which are unvested on the date set for the Repurchase) at the
Repurchase Price for a period ending one hundred eighty (180) days
following the date on which (i) such "person" or "group" actually
acquires any securities of the Corporation pursuant to such Offer; or
(ii) a majority of the Board of Directors of the Corporation shall be
comprised of persons who were not elected as part of the "Company
Nominated Slate" of directors. On the occurrence of the events
described in Section 10(a)(i) hereof, the Repurchase Price shall be
equal to the difference between (i) the Acquisition Price (as defined
below) and (ii) the Exercise Price. The Acquisition Price shall be
equal to the sum of all (i) money and (ii) the fair market value of any
property actually paid or transferred for a share of the Common Stock of
the Corporation by such "person" or "group" pursuant to such Offer. On
the occurrence of the events described in Section 10(a)(ii) hereof, the
Repurchase Price shall be equal to the difference between (i) the
highest "Fair Market Value" (as defined in Section 2(i)) during the ten
(10) trading days prior to such event and (ii) the Exercise Price.
(b) The Repurchase shall be effected by delivery of a
notice (the "Repurchase Notice") to the Corporation within the one
hundred eighty (180) day period described above setting forth Optionee's
name, Optionee's intention to exercise his rights to the Repurchase, the
number of Options held by Optionee, the Repurchase Price, and the date
(which shall not be less than four (4) business days from the date of
the delivery of the Repurchase Notice) on which the Repurchase is to
occur. On the date set for the Repurchase, the Corporation shall
immediately pay Optionee, in cash or by certified or bank cashier's
check made payable to the order of Optionee, an amount equal to the
Repurchase Price multiplied by the number of Options surrendered for
Repurchase (the "Aggregate Repurchase Price").
11. SECURITIES LAW REQUIREMENTS.
Notwithstanding any other provisions of the Plan or
agreements made pursuant to the Plan, the Corporation shall not be
required to issue or deliver any certificate or certificates for shares
of stock upon the exercise of any Option prior to fulfillment of all of
the following conditions:
(a) Securities Exchange. The listing, or approval for
listing upon notice of issuance, of such shares on any securities
exchange as may at the time be a market for the Common Stock;
(b) Qualification. Any registration or other
qualification of such shares under any state or federal law or
regulation, or the maintaining in effect of any such registration or
other qualification which the Board or the Committee shall, in its
absolute discretion upon the advice of counsel, deem necessary or
advisable; and
(c) Consents. The obtaining of any other consent,
approval or permit from any state or federal governmental agency which
the Board or the Committee shall, in its absolute discretion upon the
advice of counsel, determine to be necessary or advisable.
12. AMENDMENTS TO THE PLAN.
The Board may, insofar as permitted by law, from time to
time, with respect to any shares of Common Stock at the time not subject
to Options, suspend or discontinue the Plan or revise or amend it in any
respect whatsoever, provided, however, that the Board may condition any
such revision or amendment on approval of the stockholders if the Board
determines that such approval is necessary or desirable for any reason,
including, without limitation, to comply with any laws, rules or
regulations pertaining to the Plan, and provided further that the Plan
provisions relating to the amount and timing of Options awarded
hereunder, and the Exercise Price thereof, shall not be amended more
than once every six (6) months, other than to comport with changes in
the Code or the Employee Retirement Income Security Act, or rules
thereunder.
13. APPLICATION OF FUNDS.
The proceeds received by the Corporation from the sale of
Common Stock pursuant to the exercise of Options will be used for
general corporate purposes.
<PAGE>
Agreement No.
OPTION AGREEMENT UNDER
1994 ONE-TIME GRANT STOCK OPTION PLAN FOR
NON-EMPLOYEE DIRECTORS
OF AST RESEARCH, INC.
THIS OPTION AGREEMENT, made this 1st day of July, 1994, between
AST RESEARCH, INC., a Delaware corporation (hereinafter referred to as
the "Company"), and , a non-employee director of the
Company (hereinafter referred to as the "Optionee"), is made with
reference to the following fact:
The Company desires, by affording the Optionee an opportunity to
purchase shares of Common Stock, $.01 par value, of the Company ("Common
Stock"), as hereinafter provided, to carry out the purpose of the 1994
One-Time Grant Stock Option Plan for Non-Employee Directors (the
"Plan").
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants
hereinafter set forth, and for good and valuable consideration, the
parties hereto have agreed, and do hereby agree, as follows:
1. Grant of Option. The Company hereby grants to the Optionee
the right and option to purchase all or any part of an aggregate of
50,000 shares of Common Stock (the "Option") on the terms and conditions
herein set forth. The number of shares subject to the Option shall be
subject to adjustment as provided in Paragraph 8 hereof.
2. Term of Option; Vesting. The term of the Option shall
commence on the date hereof and all rights to purchase shares under the
Option shall cease at 11:59 p.m. on the day before the tenth (10th)
anniversary of the date hereof, subject to earlier termination as
provided herein. Except as may otherwise be provided in this Agreement,
the Option shall be exercisable as set forth in Section 8(f) of the
Plan, a copy of which is attached hereto and incorporated herein:
3. Purchase Price. The Purchase Price shall be $
per share (the "Exercise Price") times the number of whole shares of
Common Stock with respect to which the Option is exercised. The
Exercise Price shall be subject to adjustment as provided in Paragraph 8
hereof.
4. Medium and Time of Payment. The Purchase Price shall be
paid in full at the time of the Option's exercise (i) in cash or by
certified check or by bank draft; (ii) subject to any legal restrictions
and obligations regarding the purchase of shares for promissory notes or
evidences of indebtedness and the consent of Company, by delivery of
Optionee's promissory note in a form satisfactory to the Company and (at
the election of the Company) secured by a Pledge Agreement of the shares
so purchased or other security; or (iii) by the surrender of shares of
Common Stock in good form for transfer, owned by the person exercising
the Option and having an aggregate Fair Market Value (as determined in
accordance with Section 2(j) of the Plan) on the date of exercise equal
to the Purchase Price of such shares; or (iv) any combination of (i),
(ii) and (iii) above. No share of Common Stock shall be issued upon the
exercise of the Option until full payment therefor has been made in the
manner set forth above. The holder of the Option shall not have any of
the rights of a shareholder with respect to the shares covered by the
Option until the date of the issuance of a stock certificate for such
shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the
date such stock certificate is issued, except as provided in Paragraph 8
hereof.
5. Nontransferability. As more specifically set forth in
Section 8(h) of the Plan, during the lifetime of the Optionee, the
Option shall be exercisable only by the Optionee and shall not be
assignable or transferable.
6. Termination of Status as Director. As more specifically set
forth in Section 8(g) of the Plan, and notwithstanding events giving
rise to the repurchase right set forth in Section 10 of the Plan, in the
event that the Optionee shall cease to be a director of the Company for
any reason, including death or Disability (as defined in Section 2(g) of
the Plan), the Optionee or his heirs and personal representatives, as
the case may be, shall have the right to exercise the Option at any time
within ninety (90) days after such termination (but in no event later
than the date of expiration of the term of the Option as set forth in
Paragraph 2 above), to the extent that, at the date of such termination,
the Optionee's right to exercise the Option had vested pursuant to the
terms set forth in Paragraph 2 above and had not previously been
exercised. The Optionee's right to exercise the then unvested portion
of the Option shall terminate as of the date of termination of the
Optionee's status as a director.
7. Changes in Capital Structure. In the event that the Company
proposes to effect the dissolution or liquidation of the Company or a
merger, consolidation, or reorganization of the Company with one or more
entities, corporate or otherwise, as a result of which the Company is
not the surviving entity, or upon a merger or other reorganization as a
result of which the outstanding shares of Common Stock of the Company
are changed into or exchanged for shares of the capital stock or
securities of another corporation or for cash or other property, or upon
the sale of substantially all of the property of the Company to another
entity, corporate or otherwise, then the Company shall cause written
notice to be given to the Optionee of the proposed transaction not less
than thirty (30) days prior to the anticipated effective date thereof,
and this Option, if not already exercisable, shall thereupon become
immediately exercisable and the Optionee shall have the right to
exercise this Option at any time prior to the effective date of the
termination of the Plan or the proposed transaction.
8. Adjustments. In the event that the outstanding shares of
Common Stock of the Company are hereafter increased or decreased or
changed into or exchanged for a different number or kind of shares or
other securities of the Company by reason of the events listed in
Section 9 of the Plan, or other change in the capital structure of the
Company, then the number and class of shares subject to this Option, and
the Exercise Price (but not the Purchase Price), shall all be
proportionately adjusted as set forth in Section 9 of the Plan.
Adjustments under this paragraph shall be made by the Board of Directors
of the Company whose determination with respect thereto shall be final
and conclusive. No fractional share shall be issued under this Option
or upon any such adjustment.
9. Permissive Resale of the Option to the Company. In the
event of a change of control of the Company, as more specifically set
forth in Section 10 of the Plan, the Optionee shall have the right to
require the Company to repurchase (the "Repurchase") the then
outstanding Options evidenced hereby (other than Options which are
unvested on the date set for the Repurchase) on the terms set forth in
Section 10 of the Plan.
10. Method of Exercising Option. Subject to the terms and
conditions of this Option Agreement, this Option may be exercised by
written notice to the Company, at its principal office in the State of
California, which presently is located at 16215 Alton Parkway, Irvine,
California 92718. Such notice shall state the election to exercise the
Option and the number of shares in respect of which it is being
exercised and shall be signed by the person or persons so exercising the
Option. Such notice shall be accompanied by payment in cash, certified
check, bank draft, promissory note(s) of the Optionee payable to the
Company in a form satisfactory to the Company or certificates for shares
of the Common Stock of the Company equal to, in the aggregate, the
Purchase Price of such shares. If all or part of the exercise price is
in the form of a promissory note the Optionee shall also deliver, at the
election of the Company, a Pledge Agreement, in a form satisfactory to
the Company. The Company shall deliver a certificate or certificates
representing the shares subject to such exercise as soon as practicable
after the notice shall be received; unless however, in the event payment
is made by promissory note(s), the Company shall retain, pursuant to a
Pledge Agreement, the number of shares with an aggregate exercise price
equal to the principal amount of any promissory note(s) delivered to the
Company in payment for such shares as security for the indebtedness of
the Optionee under such promissory note(s). The certificate or
certificates for the shares as to which the Option shall have been so
exercised shall be registered in the name of the person or persons so
exercising the Option and shall be delivered as provided above to or
upon the written order of the person or persons exercising the Option
except for those shares to be retained by the Company as security for
payment of any promissory note(s). In the event the Option shall be
exercised by any person or persons other than the Optionee in accordance
with the terms hereof, such notice shall be accompanied by appropriate
proof of the right of such person or persons to exercise the Option.
All shares that shall be purchased upon the exercise of the Option as
provided herein shall be fully paid and nonassessable. The holder of
this Option shall not be entitled to the privileges of share ownership
as to any shares of Common Stock not actually issued and delivered to
him.
11. Obligation of Optionee. In consideration of the grant of
the Option, Optionee agrees to remain a director of and to render to the
Company his services for the remainder of the term for which he was
elected.
12. Representations of Optionee The Optionee hereby certifies
that all shares of Common Stock of the Company purchased or to be
purchased by him pursuant to the exercise of this Option are being or
are to be acquired by him for investment and not with a view to the
distribution thereof except as may be permitted under the Securities Act
of 1933 and the rules and regulations thereunder. The Optionee agrees
that he shall, upon reasonable request by the Company in connection with
any exercise of the Option, execute and deliver an investment letter in
such form as may be deemed appropriate by the Company.
13. General. The Company shall at all times during the term of
the Option reserve and keep available such number of shares of Common
Stock as will be sufficient to satisfy the requirements of this Option
Agreement, shall pay all original issue and transfer taxes with respect
to the issue and transfer of shares pursuant hereto and all other fees
and expenses necessarily incurred by the Company in connection
therewith, and will from time to time use its best efforts to comply
with all laws and regulations, which, in the opinion of counsel for the
Company, shall be applicable thereto. In the event the Company
determines that it is required to withhold state or federal income tax
or FICA tax as a result of the exercise of any Option, it may require
the Optionee to make arrangements satisfactory to the Company to enable
it to satisfy such withholding requirements as a condition to the
exercise of the Option.
14. No Agreement to Retain a Director. Nothing in this
Agreement shall be construed to constitute or to be evidence of any
agreement, understanding or obligation, express or implied, on the part
of the Company to retain the Optionee a director of the Company for any
period.
15. General Provisions. Notwithstanding any other provisions of
this Agreement, the Company shall not be required to issue or deliver
any certificate or certificates for shares of stock upon the exercise of
this Option prior to fulfillment of all of the following conditions:
(a) The listing or approval for listing upon notice of
issuance, of such shares on any securities exchange as may at the time
be the market for the Company's Common Stock;
(b) Any registration or other qualification of such shares
under any state or federal law or regulation, or the maintaining in
effect of any such registration or other qualification which the Board
of Directors of the Company shall, in its absolute discretion upon the
advice of counsel, deem necessary or advisable; and
(c) The obtaining of any other consent, approval or permit
from any state or federal governmental agency which the Board of
Directors of the Company shall, in its absolute discretion upon the
advice of counsel, determine to be necessary or advisable.
16. Receipt of Plan Acknowledged. The undersigned Optionee
hereby acknowledges receipt of a copy of the Plan and that such Optionee
has read and understands the terms and provisions thereof.
IN WITNESS WHEREOF, the Company has caused this Option Agreement
to be duly executed by its officers thereunto duly authorized, and the
Optionee has hereunto set his hand, all as of the day and year first
above written.
AST RESEARCH, INC.
By:_____________________
Its:_________________
The "Company"
________________________
"Optionee"
<PAGE>
AMENDMENT TO
AST RESEARCH, INC. 1989 LONG-TERM INCENTIVE PROGRAM
WHEREAS, the purpose of this amendment is to provide for the
limitation under the AST Research, Inc. 1989 Long-Term Incentive Program
(the "Program") of the number of options and/or shares of restricted stock
which may be granted to any participant in the Program in a given calendar
year;
NOW, THEREFORE, the first paragraph of Section 7.1 of the Program is
hereby amended, subject to approval by the stockholders, to read as
follows:
"7.1 Grant of Options. One plan under the Program shall
relate to Options. Subject to the other applicable
provisions of the Program, Options may be granted to
Participants at any time and from time to time as shall
be determined by the Committee. The Committee shall
have complete discretion in determining the number of
Options granted to each Participant; provided, however,
that the maximum number of shares of Stock with respect
to which any Participant may receive Options hereunder
during any calendar year may not exceed 200,000 reduced
by the number of shares of Restricted Stock granted
during the calendar year. The Committee may grant any
type of Option permitted by law at the time of grant
and shall specify whether or not any Option is intended
to be an incentive stock option described in section 422
of the Code. In the case of incentive stock options, the
following conditions shall apply in addition to any other
requirements of this plan or the Code:"
Section 9.1 of the Program is hereby amended, subject to approval by
the stockholders, to read as follows:
"9.1 Grant of Restricted Stock. One plan under the Program
shall relate to Restricted Stock. Subject to the
provisions of Articles 5 and 6, the Committee, at any
time and from time to time, may grant shares of
Restricted Stock under the plan to such Participants,
in such amounts as it shall determine, and for such
consideration as it may determine; provided that (i)
the aggregate value of all consideration received by
the Company for such shares is equal to at least the
aggregate fair market value of such shares, and (ii)
the maximum number of shares of Restricted Stock which
any Participant may receive hereunder during any
calendar year may not exceed 200,000 reduced by the
number of Options granted under the Program during the
calendar year. Each grant of Restricted Stock shall
be in writing and shall specify the Period(s) of
Restriction and the time or times at which such
Period(s) shall lapse with respect to a specified
number of shares of Stock. The Periods of Restriction
shall not exceed ten years from the date of grant of
the Restricted Stock."
The Program shall remain in full force and effect, as hereby amended.
The undersigned, as Secretary of AST Research, Inc. (the "Company"),
hereby certifies that the foregoing Amendment was duly adopted by the
Compensation Committee, which also functions as the Plan Approval
Committee, and by the Board of Directors of the Company on October 28,
1993, and was duly approved by the stockholders of the Company at the
Annual Meeting of Stockholders held on January 28, 1994.
Dated: January 28, 1994
Dennis R. Leibel, Secretary
<PAGE>
AMENDMENT TO
AST RESEARCH, INC. 1991 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
WHEREAS, the purpose of this amendment is to provide for the
limitation under the AST Research, Inc. 1991 Stock Option Plan for
Non-Employee Directors (the "Directors' Plan") of the number of options
and/or shares of restricted stock which may be granted to any participant
in the Directors' Plan in a given calendar year;
NOW, THEREFORE, the Directors' Plan is hereby amended, subject to
approval by the stockholders, as set forth herein. The following sentence
shall be added at the end of Section 7, of the Directors' Plan, which
section is captioned "Participants; Timing and Size of Option Grants:"
"Notwithstanding the foregoing or any other term or provision
herein, the maximum number of shares of Common Stock with
respect to which any Participant may receive Options hereunder
during any calendar year may not exceed 100,000."
The Directors' Plan shall remain in full force and effect, as hereby
amended.
The undersigned, as Secretary of AST Research, Inc. (the "Company"),
hereby certifies that the foregoing Amendment was duly adopted by the
Compensation Committee, which also functions as the Plan Approval
Committee, and by the Board of Directors of the Company on October 28,
1993, and was duly approved by the stockholders of the Company at the
Annual Meeting of Stockholders held on January 28, 1994.
Dated: January 28, 1994
Dennis R. Leibel, Secretary
EXHIBIT 11
AST RESEARCH, INC.
COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
--------------------- -------------------------
Jan. 1, Jan. 2, Jan. 1, Jan. 2,
(In thousands, except per share amounts) 1994 1993 1994 1993
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Primary earnings per share
Shares used in computing primary
earnings per share:
Weighted average shares of
common stock outstanding 31,659 31,203 31,625 31,073
Effect of stock options treated as
equivalents under the treasury
stock method 795 690 603 653
-------- -------- -------- --------
Weighted average common
and common equivalent
shares outstanding 32,454 31,893 32,228 31,726
-------- -------- -------- --------
Net income $ 17,933 $ 14,581 $ 26,165 $ 22,222
-------- -------- -------- --------
Earnings per share - primary $ .55 $ .46 $ .81 $ .70
======== ======== ======== ========
Fully diluted earnings per share
Shares used in computing fully diluted
earnings per share:
Weighted average shares of
common stock outstanding 31,659 31,203 31,625 31,073
Effect of stock options treated as
equivalents under the treasury
stock method 890 786 715 705
Shares assumed issued on conversion
of Liquid Yield Option Notes 855 - 855 -
-------- -------- -------- --------
Total fully diluted shares outstanding 33,404 31,989 33,195 31,778
-------- -------- -------- --------
Net income - fully diluted earnings per share:
Net income - primary earnings per share $ 17,933 $ 14,581 $ 26,165 $ 22,222
Adjustment for interest on LYONs,
net of tax 176 - 176 -
-------- -------- -------- --------
Adjusted net income - fully diluted
earnings per share 18,109 14,581 26,341 22,222
-------- -------- -------- --------
Net income per share - fully diluted $ .54 $ .46 $ .79 $ .70
======== ======== ======== ========
</TABLE>
<PAGE>
