<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
AST RESEARCH, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[X] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
PRELIMINARY COPY
DRAFT
AST RESEARCH, INC.
16215 ALTON PARKWAY
IRVINE, CALIFORNIA 92718
April , 1995
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of AST
Research, Inc. to be held on May , 1995, at 9:00 a.m., Pacific Daylight Time,
in the Deauville Central Room of the Sutton Place Hotel, 4500 MacArthur Blvd.,
Newport Beach, California 92660.
The Special Meeting has been called to consider and approve, as a single
proposal, an amendment of AST's Certificate of Incorporation to increase the
size of the Board of Directors to thirteen members, and certain other matters
relating to the proposed purchase for approximately $377.5 million by Samsung
Electronics Co., Ltd. of an approximately 40.25% interest in AST. In connection
therewith, Samsung and AST will enter into certain cooperative arrangements,
including component supply and joint procurement. Samsung has commenced a cash
tender offer to purchase from AST's stockholders up to 5,820,000 shares of AST
common stock at $22.00 per share and is proposing to purchase from AST (i)
6,440,000 shares of common stock at $19.50 per share and (ii) an estimated
5,630,000 shares of common stock at $22.00 per share. Samsung's obligation to
consummate these transactions, and its right to consummate the elements of
these transactions other than the first purchase of 6,440,000 shares, are
subject to AST stockholder approval.
The matters to be considered and voted upon at the Special Meeting are of
great importance to your investment and the future of AST. Your Board of
Directors has carefully reviewed and considered the terms and conditions of the
transactions with Samsung and has received the opinion of its financial
advisor, Merrill Lynch, Pierce, Fenner & Smith Incorporated, to the effect that
the consideration to be received by AST and its stockholders in the
transactions is fair from a financial point of view. A copy of that opinion is
attached to the accompanying Proxy Statement. YOUR BOARD OF DIRECTORS HAS
UNANIMOUSLY APPROVED THE PROPOSED TRANSACTIONS WITH SAMSUNG, HAS DETERMINED
THAT THEY ARE FAIR TO, AND IN THE BEST INTERESTS OF, AST'S STOCKHOLDERS, AND
UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL.
Details of the proposed transactions are set forth in the accompanying Proxy
Statement. I urge you to read it carefully. Your vote is important. Approval
requires the affirmative vote of at least a majority of the voting power
represented by the Common Stock. I hope that you will be able to attend the
meeting in person. Whether or not you plan to attend the meeting, please sign
and return the enclosed proxy card promptly. A prepaid return envelope is
provided for this purpose. Your shares will be voted at the meeting in
accordance with your proxy.
If you have shares in more than one name, or if your stock is registered in
more than one way, you may receive more than one copy of the proxy material. If
so, please sign and return each of the proxy cards you receive so that all of
your shares may be voted. I look forward to seeing you at the May , 1995
Special Meeting of Stockholders.
Very truly yours,
AST RESEARCH, INC.
Safi U. Qureshey
Chief Executive Officer
and Chairman of the Board
<PAGE>
PRELIMINARY COPY
DRAFT
AST RESEARCH, INC.
16215 ALTON PARKWAY
IRVINE, CALIFORNIA 92718
April , 1995
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Stockholders:
Notice is hereby given that a Special Meeting of Stockholders of AST
Research, Inc. (the "Company") will be held in the Deauville Central Room of
the Sutton Place Hotel, 4500 MacArthur Blvd., Newport Beach, California 92660
on , May , 1995, at 9:00 a.m., Pacific Daylight Time, to consider
and approve, as a single proposal and with one vote, the matters summarized
below (collectively, the "Proposal") and to transact such other business as may
properly come before the meeting or any adjournments thereof:
1. The amendment and restatement of the Certificate of Incorporation to
increase the size of the Board of Directors from a range of five to nine
members to a range of five to thirteen members and make certain other
changes; and
2. The terms of the Company's Stock Purchase Agreement with Samsung
Electronics Co., Ltd. (the "Purchaser"), and the transactions
contemplated thereby, including (i) the issuance and sale by the Company
to the Purchaser of (a) 6,440,000 shares of common stock, par value
$0.01 per share, of the Company (the "Common Stock") at $19.50 per share
and (b) an additional number of shares of Common Stock at $22.00 per
share (approximately 5,630,000, assuming no further issuances and full
participation in the Purchaser's cash tender offer to purchase from the
Company's stockholders up to 5,820,000 shares of Common Stock at $22.00
per share), so that the Purchaser will own approximately 40.25% of the
outstanding Common Stock; and (ii) the grant to the Purchaser of the
rights, preferences and privileges and the acceptance and performance by
the Company of the restrictions and obligations contained in the Stock
Purchase Agreement and the exhibits thereto, including the Stockholder
Agreement.
The Stock Purchase Agreement, the exhibits thereto and related matters are
more fully described in the attached Proxy Statement.
The Company is submitting the Proposal for stockholder approval in connection
with the Stock Purchase Agreement. The affirmative vote of at least a majority
of the voting power represented by the shares of Common Stock entitled to vote
on the Proposal will be required to approve the Proposal. The close of business
on , April , 1995 is the date of record ("Record Date") for the
determination of stockholders entitled to notice of, to attend and to vote at
the Special Meeting. Accordingly, stockholders are eligible to vote at the
Special Meeting, in person or by proxy, even if they have tendered their shares
prior to the Record Date in connection with the Purchaser's offer described
above. Stockholders, including those whose shares are held by a brokerage firm
or in "street" name, may be asked to verify their stockholder status as of the
Record Date upon entrance to the Special Meeting. Accordingly, stockholders
attending the meeting should bring appropriate identification to the meeting
evidencing such stockholder status as of the Record Date. A list of
stockholders at the Record Date will be available during normal business hours
for examination by any stockholder for any purpose germane to the Special
Meeting for a period of ten days prior to the date of the Special Meeting, at
the offices of the Company, 16215 Alton Parkway, Irvine, California 92718.
<PAGE>
All stockholders are urged to attend the meeting in person or by proxy.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTPAID ENVELOPE. The
proxy is revocable and will not affect your right to vote in person in the
event you attend the meeting. You may revoke your proxy at any time before it
is voted. If you receive more than one proxy card because your shares are
registered in different names or at different addresses, please sign and return
each proxy card so that all of your shares will be represented at the Special
Meeting.
By Order of the Board of Directors
DENNIS R. LEIBEL
Secretary
Irvine, California
April , 1995
<PAGE>
PRELIMINARY COPY
THESE MATERIALS CONSTITUTE PRELIMINARY PROXY MATERIALS FILED WITH RESPECT
TO THE FORTHCOMING SPECIAL MEETING OF STOCKHOLDERS. CERTAIN INFORMATION IS
PRESENTED AS IT IS EXPECTED TO EXIST WHEN (AND IF) DEFINITIVE PROXY MATERIALS
ARE MAILED TO STOCKHOLDERS, AND WILL BE REVISED TO REFLECT ACTUAL FACTS AT
THAT TIME.
AST RESEARCH, INC.
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD MAY , 1995
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of AST Research, Inc. (the "Company") of Proxies to be voted
at the Special Meeting of Stockholders (the "Special Meeting") to be held in
the Deauville Central Room of the Sutton Place Hotel, 4500 MacArthur Blvd.,
Newport Beach, California 92660 on , May , 1995, at 9:00 a.m.,
Pacific Daylight Time, regarding an amendment of the Company's Certificate of
Incorporation to increase the maximum size of the Board of Directors to
thirteen members, and certain other matters (collectively, the "Proposal")
relating to the proposed purchase for approximately $377.5 million by Samsung
Electronics Co., Ltd, a Korean corporation (the "Purchaser") of an
approximately 40.25% interest in the Company.
Enclosed with this Proxy Statement is a notice of the Special Meeting,
together with a proxy for your signature. Failure to return a properly executed
and dated proxy card and failure to vote in person at the Special Meeting will
have the same effect as a vote AGAINST the Proposal. Any Proxy given pursuant
to this solicitation or otherwise may be revoked by the person giving it any
time before it is voted by delivering to the Secretary of the Company at 16215
Alton Parkway, Irvine, California 92718, on or before the business day prior to
the Special Meeting or at the Special Meeting itself, a written notice of
revocation bearing a date later than that of the Proxy previously granted or a
later dated Proxy relating to the same shares or by attending the Special
Meeting and voting in person. The approximate date on which this Proxy
Statement and the accompanying form of Proxy are first being sent to the
Company's stockholders is April , 1995. Shares of Common Stock represented by
properly executed Proxies received prior to or at the Special Meeting, unless
such Proxies have been revoked, will be voted in accordance with the
instructions indicated in the Proxies. If no instructions are indicated on a
properly executed Proxy of the Company, the shares will be voted FOR the
Proposal.
At the Special Meeting stockholders will be asked to consider and approve, as
a single proposal and with one vote, certain matters relating to the Proposal.
Such approval will require the affirmative vote of a majority of all shares of
Common Stock outstanding and entitled to vote at the Record Date for the
Special Meeting. The Purchaser has the right to consummate, subject to
regulatory approval and to the continued effectiveness of the Stock Purchase
Agreement, but regardless of whether stockholder approval has been obtained,
the first purchase from the Company of 6,440,000 shares of Common Stock, which
would represent approximately 16.6% of the Common Stock outstanding, after
giving effect to such purchase. If such purchase were to be made prior to the
Record Date, the Purchaser would hold and be entitled to vote such shares at
the Special Meeting. See "THE TRANSACTIONS."
Under the Bylaws of the Company, no business may be transacted at the Special
Meeting except as set forth in the notice of the Special Meeting accompanying
this Proxy Statement or as properly brought before the meeting by or at the
direction of the Board of Directors. Holders of a majority of the outstanding
Common Stock must be present in person or by Proxy in order to establish a
quorum for conducting business at the Special Meeting. Proxies marked "abstain"
and broker "non-votes" will be counted as present for purposes of establishing
a quorum. If any other matters are properly presented to the Special Meeting
for consideration (such as consideration of a motion to adjourn the Special
Meeting to another time or place (including, without limitation, for the
purpose of soliciting additional proxies)), the persons named in the Proxy and
acting thereunder will have discretion to vote on such matters in accordance
with their best judgment. As of the date hereof, the Board of Directors knows
of no such other matters.
THE DATE OF THIS PROXY STATEMENT IS APRIL , 1995.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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SUMMARY................................................................... 1
THE SPECIAL MEETING....................................................... 9
General................................................................. 9
Vote by Proxy........................................................... 9
Cost and Method of Solicitation......................................... 9
Shares Voting........................................................... 10
Vote Required........................................................... 10
INTERESTS OF CERTAIN PERSONS.............................................. 10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............ 13
BACKGROUND OF THE TRANSACTIONS............................................ 14
General................................................................. 14
Recommendation of the Company's Board of Directors...................... 16
Opinion of Financial Advisor............................................ 18
THE TRANSACTIONS.......................................................... 19
General................................................................. 19
The Company........................................................... 19
The Purchaser......................................................... 19
Capitalization........................................................ 20
Use of Proceeds....................................................... 20
The Stock Purchase Agreement and Exhibits............................... 21
The Offer............................................................. 21
The Share Issuances................................................... 21
Representations and Warranties........................................ 22
Conduct of Business of the Company.................................... 22
Other Potential Bidders............................................... 22
Termination........................................................... 23
Transaction Expenses.................................................. 23
The Stockholder Agreement............................................. 24
Standstill.......................................................... 24
Pro Rata Purchase Right............................................. 25
Transfer Restriction................................................ 25
Board Representation................................................ 25
Certain Covenants................................................... 26
Certain Approval Rights............................................. 26
Results of Operations............................................... 27
Material Transactions............................................... 28
Termination of Certain Rights....................................... 28
Registration Rights Agreement....................................... 29
Letter of Credit Agreement.......................................... 29
Strategic Alliance Agreement............................................ 29
Restated Certificate of Incorporation; Amended Bylaws................... 30
Stockholder Rights Plan; Certain Anti-Takeover Effects of the
Purchaser's Investment................................................. 32
OTHER BUSINESS............................................................ 33
Stockholder Proposals................................................... 33
AVAILABLE INFORMATION..................................................... 33
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 33
</TABLE>
<TABLE>
<C> <S>
ANNEXES
Annex A--Opinion of Merrill Lynch
Annex B--Stock Purchase Agreement
Annex C--Form of Letter of Credit Agreement
Annex D--Form of Registration Rights Agreement
Annex E--Form of Stockholder Agreement
Annex F--Form of Restated Certificate of Incorporation
Annex G--Form of Amended Bylaws
</TABLE>
i
<PAGE>
SUMMARY
The following is a summary of certain information contained in this Proxy
Statement. The summary is not intended to be complete and is qualified in its
entirety by reference to the more detailed information set forth elsewhere in
this Proxy Statement. Stockholders are urged to read this Proxy Statement in
its entirety.
THE SPECIAL MEETING
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
Proxies by the Board of Directors (the "Board") of AST Research, Inc., a
Delaware corporation (the "Company"). The Proxies will be used at a Special
Meeting of Stockholders of the Company (the "Special Meeting") to be held on
, May , 1995, at 9:00 a.m., Pacific Daylight Time, in the Deauville
Central Room of the Sutton Place Hotel, 4500 MacArthur Blvd., Newport Beach,
California 92660, and at any adjourned session of the Special Meeting.
At the Special Meeting, holders (the "Stockholders") of record of the common
stock, par value $0.01 per share, of the Company (the "Common Stock") at the
close of business on April , 1995 (the "Record Date") are being asked to
consider and approve, as a single proposal and with one vote, the matters
summarized below (collectively, the "Proposal").
1. The amendment and restatement of the Company's Certificate of
Incorporation (the "Restated Charter") to increase the size of the Board
from a range of five to nine members to a range of five to thirteen
members and make certain other changes; and
2. The terms of the Company's Stock Purchase Agreement (as defined herein)
with Samsung Electronics Co., Ltd. (the "Purchaser"), and the
transactions contemplated thereby, including (i) the issuance and sale
by the Company to the Purchaser of (a) 6,440,000 shares of Common Stock
at $19.50 per share and (b) an additional number of shares of Common
Stock at $22.00 per share (approximately 5,630,000, assuming no further
issuances and full participation in the Purchaser's cash tender offer
(the "Offer") to purchase from the Company's stockholders up to
5,820,000 shares of Common Stock at $22.00 per share, net to the seller
in cash), so that the Purchaser will own approximately 40.25% of the
outstanding Common Stock; and (ii) the grant to the Purchaser of the
rights, preferences and privileges and the acceptance and performance by
the Company of the restrictions and obligations contained in the Stock
Purchase Agreement and the exhibits thereto, including, without
limitation, the Stockholder Agreement.
THE BOARD HAS UNANIMOUSLY APPROVED THE RESTATED CHARTER AND THE OTHER
TRANSACTIONS (THE "TRANSACTIONS") CONTEMPLATED BY THE STOCK PURCHASE AGREEMENT
AND UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR APPROVAL OF THE
PROPOSAL. See "THE TRANSACTIONS."
VOTE BY PROXY
A Proxy card is enclosed for use at the Special Meeting. The Proxy may be
revoked at any time before it is voted.
SHARES VOTING
Only Stockholders of record on the Record Date are entitled to receive notice
of and to vote in person or by Proxy at the Special Meeting. Each Stockholder
will be entitled to one vote for each share of Common Stock recorded in his
name on the books of the Company as of the Record Date. Stockholders are
eligible to vote at the Special Meeting, in person or by Proxy, even if they
have tendered their shares to the Purchaser prior to the Record Date in
connection with the Offer.
1
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VOTE REQUIRED
The affirmative vote of a majority of all shares of Common Stock outstanding
and entitled to vote at the Record Date will be required for the approval of
the Proposal. Under the Delaware General Corporation Law (the "DGCL"), the
amendment and restatement of the Company's Certificate of Incorporation
requires the affirmative vote of a majority of the shares of Common Stock
issued and outstanding on the Record Date. In addition, under the rules of the
Nasdaq National Market, the issuance to the Purchaser of the shares of Common
Stock in the Second Issuance requires the approval of the holders of a majority
of the shares of Common Stock present and voting at the Special Meeting. In
light of the significant control and other rights that are being granted to the
Purchaser in connection with the Transactions, the Board has determined to
submit the Proposal in its entirety to the Stockholders. Accordingly, as a
single proposal, the Proposal requires the vote of a majority of the
outstanding shares. Approval of the Proposal is a condition to the Purchaser's
obligation to consummate the Transactions and to its rights to consummate the
Transactions, including the purchase of shares pursuant to the Offer but
excluding the first purchase of 6,440,000 shares. If the Proposal is not
approved as required, the Company and the Purchaser would not be required by
the Stock Purchase Agreement to consummate the Transactions (other than such
first purchase of 6,440,000 shares, which could, subject to regulatory approval
and to the continued effectiveness of the Stock Purchase Agreement, be
consummated at the Purchaser's election even without Stockholder approval).
BACKGROUND OF THE TRANSACTIONS
BACKGROUND OF AND REASONS FOR THE TRANSACTIONS
From its inception in 1980, the Company has achieved significant revenue
growth. In recent years, however, competition from a variety of personal
computer designers, manufacturers and marketers has intensified significantly.
At the same time, increases in demand for personal computers have created
industrywide shortages, which at times have resulted in premium prices being
paid for key components, such as dynamic random access memory chips ("DRAMs")
and high quality liquid crystal display panels ("LCDs"). These shortages have
occasionally resulted in the Company's inability to procure these components in
sufficient quantities to meet demand for its products.
In 1994, in light of the continued increase in competition in the personal
computer industry and other factors cited above, the Company began more
actively to explore alternatives to strengthen the Company's position in the
personal computer industry and to enhance the long-term viability of the
Company. The Company determined that additional sources of financing were
necessary for the continued growth of the Company and, accordingly, prospective
investors were contacted by or on behalf of the Company to solicit their
interest in the Company. After evaluating the proposed transactions, pursuing
each indication of interest it received from potential investors (including the
Purchaser's investment proposal), and a lengthy process of review, the Board
concluded, following discussions with management and its advisors, that
alternative financing of similar magnitude and likelihood of completion to the
Purchaser's proposal was not reasonably available at the current time and made
the determination set forth below.
RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS
At a meeting held on February 27, 1995, the Board unanimously (i) determined
that the Stock Purchase Agreement and the transactions contemplated thereby are
fair to, and in the best interests of, the Stockholders and the Company,
respectively, (ii) approved and adopted the Stock Purchase Agreement and the
other documents and transactions contemplated thereby, and (iii) recommended
that the Stockholders accept the Offer.
2
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OPINION OF FINANCIAL ADVISOR
On February 27, 1995, Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") delivered to the Board a written opinion to the effect that
the proposed consideration to be received by the Company and the Stockholders
(other than the Purchaser and its affiliates) pursuant to the Transactions,
taken as a whole, is fair to the Company and such Stockholders from a financial
point of view. A copy of the Merrill Lynch opinion, which sets forth the
assumptions made, matters considered and limits on the review undertaken, is
attached hereto as Annex A. THE MERRILL LYNCH OPINION SHOULD BE READ BY
STOCKHOLDERS CAREFULLY IN ITS ENTIRETY.
THE TRANSACTIONS
GENERAL
The Company. The Company was incorporated in California on July 25, 1980 and
reincorporated as a Delaware corporation effective July 1, 1987. The Company
designs, manufactures, markets, services and supports a broad line of personal
computers including desktop, server and notebook computer systems marketed
under the Advantage!(R), Bravo(TM), Premmia(TM), Manhattan(TM) and Ascentia(TM)
brand names. The Company's products often feature advanced design
characteristics while remaining compatible with established industry standards.
The Company currently markets its products through an extensive worldwide
distribution network of retail computer dealers, consumer retailers,
international and regional distributors, value added dealers ("VADs"), value
added resellers ("VARs"), original equipment manufacturers ("OEMs") and U.S.
Government approved dealers.
The Purchaser. The Purchaser is a Korean corporation and is a leading
international brand-name manufacturer of consumer electronics, semiconductors
and industrial electronics products. Each of the Purchaser's three main
business lines is divided into two divisions: consumer electronics into Audio
and Video and Household Appliances; semiconductors into Memory Devices and Non-
Memory Devices; and industrial electronics into Information/Computer Systems
and Telecommunications Systems.
THE STOCK PURCHASE AGREEMENT AND EXHIBITS
General. The Stock Purchase Agreement, dated as of February 27, 1995, between
the Company and the Purchaser and attached hereto as Annex B (the "Stock
Purchase Agreement"), provides that the Purchaser will (i) make the Offer to
purchase from the Stockholders for cash up to 5,820,000 shares of Common Stock
(the "Offer Shares") at $22.00 per share, (ii) have the right and obligation,
subject to certain conditions, to purchase from the Company (a) 6,440,000 newly
issued shares (the "First Issuance Shares") of Common Stock at $19.50 per share
(the "First Issuance") and (b) such additional number (5,630,000, assuming no
further issuances and full participation in the Offer) of newly issued shares
of Common Stock (the "Second Issuance Shares" and, together with the First
Issuance Shares, the "New Issue Shares") at $22.00 per share, net to the seller
in cash (the "Second Issuance" and, together with the First Issuance, the
"Share Issuances") so that, after giving effect to the completion of the First
Issuance and the purchase of the Offer Shares, the Purchaser will own
approximately 40.25% of the outstanding Common Stock, and (iii) acquire the
rights and accept the obligations and restrictions set forth in the Letter of
Credit Agreement, the Registration Rights Agreement and the Stockholder
Agreement attached hereto as Annexes C, D and E, respectively, and certain
other documents attached as exhibits to the Stock Purchase Agreement.
The Offer. The Stock Purchase Agreement provides that the obligation of the
Purchaser to accept for payment and pay for any Offer Shares tendered pursuant
to the Offer shall be subject to the condition that the Stock Purchase
Agreement not have been terminated and to the satisfaction or waiver of the
conditions to the Purchaser's obligations to purchase the New Issue Shares.
Subject to certain restrictions, the Purchaser may extend the Offer and may
make other changes in the terms and conditions of the Offer, but may not reduce
the number of Offer Shares or the Offer price.
3
<PAGE>
The Share Issuances. The obligations of the Company to issue and sell, and of
the Purchaser to purchase, the New Issue Shares are subject to the satisfaction
or waiver of certain conditions, including but not limited to, certain United
States and Korean regulatory approvals. In addition, the obligation of the
Purchaser to purchase the New Issue Shares is subject to the satisfaction or
waiver of the following conditions: (i) approval by a majority of the
Stockholders of (A) the Second Issuance, (B) the purchase by the Purchaser of
the Offer Shares, (C) the Stockholder Agreement and (D) the Restated Charter,
(ii) the continued effectiveness of (A) the Restated Charter, (B) the amendment
of the Company's Amended and Restated Rights Agreement, dated as of January 28,
1994 (the "Rights Plan"), to permit the Purchaser to acquire Common Stock in
accordance with the Stock Purchase and Stockholder Agreements, and (C) the
amendment of Mr. Safi U. Qureshey's employment agreement to waive certain
severance benefits to which he would otherwise be entitled upon such Common
Stock acquisitions by the Purchaser, and (iii) consolidated operating loss and
consolidated net cash used in operating activities requirements for the Company
and its subsidiaries for the fiscal quarter ending April 1, 1995 not exceeding
specified levels. The obligation of the Company to issue and sell the Second
Issuance Shares is further subject to the Offer being consummated in accordance
with its terms, Stockholder approval as described above and the receipt of any
waivers or amendments to the Company's credit arrangements and agreements
required to permit the transactions contemplated by the Stock Purchase
Agreement and the other agreements with the Purchaser described herein.
Representations and Warranties. The Stock Purchase Agreement contains various
customary representations and warranties of the parties thereto, including
representations by the Company as to (i) the absence of a material adverse
change to the business or financial condition of the Company and (ii) the
absence of certain changes or events concerning the Company's business,
compliance with law, litigation, insurance, employee benefit plans, labor
matters, intellectual property, environmental matters and taxes.
Conduct of Business of the Company. The Stock Purchase Agreement provides
that until the closing of the purchase and sale of the New Issue Shares, the
business and operations of the Company and each of its subsidiaries shall be
conducted in the ordinary course of business consistent with past practice.
Accordingly, except as otherwise expressly approved by the Purchaser in
writing, which approval shall not be unreasonably withheld, neither the Company
nor any of its subsidiaries may, prior to such closing, engage or agree to
engage in an enumerated list of transactions generally characterized as being
outside the ordinary course of business. Such transactions requiring the
Purchaser's prior approval include, without limitation (but subject to certain
exceptions stated in the Stock Purchase Agreement), (i) securities issuances,
(ii) new borrowings, loans, or investments, (iii) changes to compensation or
benefits arrangements for any director or officer, (iv) business combinations
or sales or acquisitions of substantial assets and (v) the specified corporate
actions which after the purchase and sale of the New Issue Shares will be
subject to the prior approval of the Purchaser in accordance with the
Stockholder Agreement.
Other Potential Bidders. The Stock Purchase Agreement required the Company
and its affiliates to cease any existing discussions or negotiations with any
third party with respect to any acquisition of more than 20% of the total
assets of the Company or any of its subsidiaries, acquisition of 20% or more of
the Common Stock or any equity securities of any subsidiary of the Company, or
merger or other combination of the Company or any of its subsidiaries. The
Stock Purchase Agreement provides that the Company may not, unless and until
the Stock Purchase Agreement is terminated in accordance with its terms,
initiate, solicit or encourage any discussions regarding any such third party
transaction, or hold any such discussions or enter into any agreement
concerning any such third party transaction, subject in each case to the
fiduciary obligations of the Board.
Termination. The Stock Purchase Agreement generally provides that either the
Purchaser or the Company may terminate its obligations thereunder (i) to the
extent that performance is materially restrained by a judgment, ruling, order
or decree of any Governmental Authority (as defined herein), (ii) if the
purchase by the Purchaser of the New Issue Shares and the Offer Shares is not
completed by June 30, 1995 or (iii) if
4
<PAGE>
the party seeking to terminate has not committed a material uncured breach of
any representation, warranty, covenant or agreement and there has been a
material breach by the other party of any representation, warranty, covenant,
or agreement which has not been cured within 10 days' notice of such breach.
Additionally, subject to certain conditions, the Company may terminate its
obligation to sell and issue the Second Issuance Shares and certain of its
other obligations under the Stock Purchase Agreement if the Company receives a
Superior Proposal (as defined herein) and the Company has paid a termination
fee to the Purchaser. The Purchaser may terminate its obligations under the
Stock Purchase Agreement if the Board has withdrawn or modified in an adverse
manner its recommendation of the Offer or other transactions contemplated by
the Stock Purchase Agreement or recommended another offer or if there has
occurred, or any definitive agreement or agreement in principle has been
executed with respect to, a Third Party Acquisition (as defined herein).
The Stockholder Agreement. The Stockholder Agreement provides, among other
things, for the following:
Standstill. Subject to certain exceptions, for a period of four years
from the closing of the purchase and sale of the New Issue Shares, neither
the Purchaser nor any of its affiliates may acquire or offer to acquire
beneficial ownership of any equity securities of the Company or interest
therein except pursuant to certain specified transactions, but subject to
the requirement that their collective ownership of the total voting power
represented by the outstanding capital stock of the Company not exceed
49.9%. After such four-year standstill period, the Purchaser may not
acquire or offer to acquire any equity securities if, as the result of or
after giving effect to such acquisition, the Purchaser's interest would
exceed 66.67%, except pursuant to a cash tender offer for all equity
securities not owned by the Purchaser and/or its affiliates.
Pro Rata Purchase Right. So long as the Purchaser's interest in the
Company is not less than 30% for a period of 25 consecutive days, the
Purchaser will have the right, but not the obligation, to maintain its
proportionate ownership interest in the Company in the event of certain
issuances of equity securities of the Company by purchasing from the
Company a pro rata portion of equity securities proposed to be issued by
the Company.
Transfer Restriction. The Purchaser may not sell or otherwise transfer
(except to an affiliate of the Purchaser that agrees to be bound by the
Stockholder Agreement) any of the Company's equity securities for a period
of five years from the purchase and sale of the First Issuance Shares,
except that (i) shares acquired under the Letter of Credit Agreement, as
described herein, may be sold at any time pursuant to certain public
offerings or open market transactions and (ii) other shares may be sold in
transactions from and after the third anniversary of the closing in which
all other stockholders may participate on a pro rata basis on the same
terms as the Purchaser, pursuant to certain public offerings or open market
transactions and in transactions approved by a majority of directors not
designated by the Purchaser, as described herein.
Board Representation. The Purchaser will initially have the right to
designate the number of directors that will be one fewer than a majority of
the total number of directors (anticipated to be six of thirteen members of
the Board upon Stockholder approval of the Transactions). If the Purchaser
acquires the First Issuance Shares but does not acquire the Second Issuance
Shares or the Offer Shares, or if the Purchaser's interest in the Company
is less than 30% for a period of 25 consecutive days, then the Purchaser
will be entitled to proportionate Board representation. While entitled to
Board representation, the Purchaser will also be entitled to designate one
of its director designees to serve on each committee of the Board. In
addition, at all times until the Purchaser's interest in the Company is
less than 30% or greater than 90% for a period of 25 consecutive days, the
Board must include at least three Independent Directors (as defined
herein).
5
<PAGE>
Results of Operations. So long as the Purchaser's interest in the Company
is not less than 30% for a period of 25 consecutive days, if the Company
and its subsidiaries fail to attain certain minimum consolidated revenue,
gross profit or net income results for fiscal 1996 or 1997, a management
committee of the Board will be formed with the authority to review and
determine the desirability of making certain changes in senior management
of the Company (persons acting as Vice President or higher, other than the
Chief Executive Officer). Designees of the Purchaser will constitute a
majority of the members of such committee.
Certain Approval Rights. So long as the Purchaser's interest in the
Company is not less than 30% for a period of 25 consecutive days, the prior
written consent of the Purchaser or, in the case of a Board action, the
affirmative vote or prior written consent of not less than a majority of
the directors designated by the Purchaser, will be required to approve or
authorize certain transactions, including, (i) certain significant
acquisitions of assets, stock or other interests of other business
operations, (ii) certain divestitures of product lines or lines of business
of the Company, (iii) certain issuances of voting securities, (iv) the
annual capital expenditure budget, and capital expenditures in excess of
$15 million other than pursuant to the approved budget, (v) any amendments
to the Company's Certificate of Incorporation or Bylaws, and (vi) the
entering into of certain strategic relationships and agreements not to
compete.
Registration Rights Agreement. The Purchaser will have the right to
require the Company to file certain Demand Registrations (as defined
herein) and will have certain "piggyback" registration rights. Expenses
relating to registrations (other than selling expenses and commissions)
will generally be payable by the Company.
Letter of Credit Agreement. The Letter of Credit Agreement provides that
the Purchaser will finance up to $75 million of principal payment
obligations of the Company under its existing $96.7 million note to Tandy
Corporation. Such financing will be provided either by direct advances by
the Purchaser to the Company or through draws under a standby letter of
credit. Establishment fees charged by an issuing bank with respect to any
such letter of credit will be paid or reimbursed by the Company. The
Company will repay the Purchaser for any such financing, at the Purchaser's
option, either by repayment in cash at the end of three years (with semi-
annual interest paid during such three years at an announced "prime"
lending rate), or by the issuance of additional shares of Common Stock at
the then prevailing market price, or a combination of both (subject to the
49.9% ownership limitation during the standstill period described above).
Restated Certificate of Incorporation and Amended Bylaws. The proposed
Restated Charter and amendment of the Company's Bylaws (the "Amended
Bylaws"), attached hereto as Annexes F and G, respectively, will, among
other things, increase the size of the Board from a range of five to nine
members to a range of five to thirteen members and implement other changes
consistent with certain elements of the Transactions.
STRATEGIC ALLIANCE AGREEMENT
In connection with the Stock Purchase Agreement, the Company and the
Purchaser have entered into a Strategic Alliance Agreement, dated as of
February 27, 1995 (the "Strategic Alliance Agreement"), pursuant to which such
parties have generally agreed to negotiate and agree, prior to the issuance and
sale of the Second Issuance Shares, to various mutually beneficial commercial
relationships intended to enhance the business prospects and competitive
position of both the Company and the Purchaser. Such relationships will be
effected through the following commercial agreements: (a) component supply
agreements for certain components used in the manufacture of the Company's
products, (b) a joint procurement agreement providing a mechanism for the
Purchaser and the Company to coordinate their purchases from third parties
6
<PAGE>
in order to obtain more favorable pricing as a result of leveraging the
combined purchasing power of both parties, (c) a joint marketing agreement to
share expertise to jointly market currently existing and newly developed
products of both parties in order to achieve maximum market penetration for
both parties, (d) a cross OEM agreement to coordinate the utilization of the
manufacturing and assembly capacity of each other, (e) a joint product
development agreement to provide for joint development of products to
accelerate product time to market for both parties, (f) a cross license
agreement for the parties to provide licenses to each other for certain of
their respective intellectual property rights, (g) an employee exchange
agreement to provide opportunities for employees of one company to spend time
as employees of the other company in order to facilitate a mutual understanding
of each party's respective business, and (h) a technical collaboration
agreement to provide that the Company and the Purchaser will collaborate
regarding technical information. While the Strategic Alliance Agreement sets
forth the principles agreed by the parties to govern these relationships, the
terms of the agreements remain subject to negotiation and may not be finalized
by the time of the Special Meeting, although such agreements must be mutually
satisfactory to the Company and the Purchaser and must be finalized prior to
the Second Issuance.
INTERESTS OF CERTAIN PERSONS
In considering the Proposal, Stockholders should be aware that certain
directors and officers of the Company, and the persons to be designated by the
Purchaser to serve as directors of the Company, may be deemed to have interests
in the Transactions that are in addition to the interests of the Stockholders
generally. See "INTERESTS OF CERTAIN PERSONS."
7
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Securities and Exchange
Commission (the "Commission") pursuant to the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), are incorporated in this Proxy Statement by
reference: (i) pages S-1, S-2 and S-4 through S-11 of Schedule I to the
Company's Schedule 14D-9 as filed with the Commission on March 6, 1995 (as
amended from time to time, the "Schedule 14D-9"), (ii) pages 14 through 24 and
pages 26 through 47 of the Company's Annual Report on Form 10-K for the fiscal
year ended July 2, 1994 (the "1994 10-K") and (iii) the Company's Quarterly
Reports on Form 10-Q for the fiscal quarters ended October 1, 1994 and December
31, 1994 (the "Quarterly Reports").
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Proxy
Statement and prior to the Special Meeting are deemed to be incorporated by
reference in, and made a part of, this Proxy Statement from the date of filing
of such documents. Any statement contained in a document all or any portion of
which is incorporated or deemed to be incorporated by reference herein are
deemed to be modified or superseded for purposes of this Proxy Statement to the
extent that a statement contained herein or in any other subsequently filed
document that also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Proxy Statement.
The Company will provide without charge to each person to whom a copy of this
Proxy Statement is delivered, on the written or oral request of such person and
by first-class mail or other equally prompt means within one business day of
receipt of such request, a copy of any and all of the documents referred to
above which have been or may be incorporated by reference in the Proxy
Statement. Such written or oral request should be directed to AST Research,
Inc., 16215 Alton Parkway, Irvine, California 92718, Attention: Investor
Relations ((714) 727-4141).
8
<PAGE>
PROXY STATEMENT
MAILED BEGINNING APRIL , 1995
FOR A SPECIAL MEETING OF STOCKHOLDERS TO
BE HELD MAY , 1995
THE SPECIAL MEETING
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
Proxies by the Board of the Company. The principal executive office of the
Company is located at 16215 Alton Parkway, Irvine, California 92718. The
Proxies will be used at a Special Meeting on , May , 1995, at 9:00
a.m., Pacific Daylight Time, in the Deauville Central Room of the Sutton Place
Hotel, 4500 MacArthur Blvd., Newport Beach, California 92660, and at any
adjourned sessions of the Special Meeting.
At the Special Meeting, Stockholders of record of the Common Stock at the
close of business on the Record Date are being asked to consider and approve,
as a single proposal and with one vote, the matters summarized below
(collectively, the "Proposal").
1. The Restated Charter to increase the size of the Board from a range of
five to nine members to a range of five to thirteen members and make
certain other changes; and
2. The terms of the Stock Purchase Agreement and the transactions
contemplated thereby, including (i) the issuance and sale by the Company
to the Purchaser of the New Issue Shares; and (ii) the grant to the
Purchaser of the rights, preferences and privileges and the acceptance
and performance by the Company of the restrictions and obligations
contained in the Stock Purchase Agreement and the exhibits thereto,
including the Stockholder Agreement.
On February 27, 1995, the last full trading day prior to the first public
announcement of the Transactions, the high, low and last reported sales price
per share of the Common Stock on the Nasdaq National Market was $14 3/8, $14
and $14 3/16, respectively. On April , 1995, the last full trading day prior
to the date of this Proxy Statement, the high, low and last reported sales
price per share of the Common Stock on the Nasdaq National Market was $
, $ and $ , respectively.
The Board has unanimously approved the Restated Charter and the other
elements of the Transactions and unanimously recommends that the Stockholders
vote FOR approval of the Proposal.
VOTE BY PROXY
A Proxy card is enclosed for use at the Special Meeting. Any Proxy given
pursuant to this solicitation or otherwise may be revoked by the person giving
it any time before it is voted by delivering to the Secretary of the Company at
16215 Alton Parkway, Irvine, California 92718, on or before the business day
prior to the Special Meeting or at the Special Meeting itself, a written notice
of revocation bearing a date later than that of the Proxy previously granted or
a later dated Proxy relating to the same shares or by attending the Special
Meeting and voting in person. The approximate date on which this Proxy
Statement and the accompanying form of Proxy will first be sent to the
Stockholders is April , 1995. Shares of Common Stock represented by properly
executed Proxies received prior to or at the Special Meeting, unless such
Proxies have been revoked, will be voted in accordance with the instructions
indicated in the Proxies. If no instructions are indicated on a properly
executed Proxy of the Company, the shares will be voted FOR the Proposal. In
addition, unless contrary instructions are indicated on the Proxy card, the
four non-employee directors of the Company designated on the Proxy card may, in
their discretion, vote on any procedural issues that may properly arise at the
Special Meeting.
COST AND METHOD OF SOLICITATION
The cost of soliciting Proxies will be borne by the Company. Proxies may be
solicited by directors, officers or regular employees of the Company in person
or by telephone or telegram. The Company will use
9
<PAGE>
the services of D.F. King & Co., Inc. to aid in the solicitation of Proxies;
their charges will be approximately $6,500 plus expenses. The Company will also
reimburse brokerage houses and other custodians, nominees and fiduciaries for
their expenses in sending proxy material to the beneficial owners of the Common
Stock.
SHARES VOTING
Only Stockholders of record on the Record Date are entitled to receive notice
of and to vote in person or by Proxy at the Special Meeting. At the close of
business on April 1, 1995, the Company had 32,376,500 shares of Common Stock
outstanding and entitled to be voted. Each Stockholder will be entitled to one
vote for each share of Common Stock recorded in his name on the books of the
Company as of the Record Date. Stockholders are eligible to vote at the Special
Meeting in person or by Proxy even if they have tendered their shares to the
Purchaser prior to the Record Date in connection with the Offer. The Common
Stock will vote together as a single class on the Proposal and on any
procedural matters presented at the Special Meeting.
Stockholders are not entitled to appraisal rights with respect to the
Proposal.
VOTE REQUIRED
The Common Stock is the Company's only issued and outstanding class of equity
security. The affirmative vote of a majority of all shares of Common Stock
outstanding and entitled to vote at the Record Date will be required for the
approval of the Proposal. Under the DGCL, the amendment and restatement of the
Company's Certificate of Incorporation requires the affirmative vote of a
majority of the shares of Common Stock issued and outstanding on the Record
Date. In addition, under the rules of the Nasdaq National Market, the issuance
to the Purchaser of the shares of Common Stock in the Second Issuance requires
the approval of the holders of a majority of the shares of Common Stock present
and voting at the Special Meeting. In light of the significant control and
other rights that are being granted to the Purchaser in connection with the
Transactions, the Board has determined to submit the Proposal in its entirety
to the Stockholders. Accordingly, as a single proposal, the Proposal requires
the vote of a majority of the outstanding shares. Approval of the Proposal is a
condition to the Purchaser's obligation to consummate the Transactions and to
its rights to consummate the Transactions, including the purchase of the shares
pursuant to the Offer but excluding the First Issuance. If the Proposal is not
approved as required, the Company and the Purchaser would not be required by
the Stock Purchase Agreement to consummate the Transactions (other than the
First Issuance, which could, subject to regulatory approval and to the
continued effectiveness of the Stock Purchase Agreement, be consummated at the
Purchaser's election even without Stockholder approval). See "THE
TRANSACTIONS." In such event, no assurances may be made that the Company and
the Purchaser would agree to proceed with any or all of the Transactions, or
any other transactions of a similar nature. There are boxes on the Proxy card
to vote FOR or AGAINST or to ABSTAIN on the Proposal. Holders of a majority of
the outstanding Common Stock must be present in person or by Proxy in order to
establish a quorum for conducting business at the Special Meeting. Proxies
marked "abstain" and broker "non-votes" will be counted as present for purposes
of establishing a quorum.
INTERESTS OF CERTAIN PERSONS
Certain directors and officers of the Company may be deemed to have interests
in the Transactions that are in addition to their interests, if any, as holders
of Common Stock and the interests of the Stockholders generally. The Board was
aware of these interests and considered them, among other factors, in approving
the Transactions and making its recommendation to Stockholders. The following
description, and certain information with respect to certain contracts,
agreements, arrangements and understandings between the Company and its
executive officers, directors and affiliates, does not purport to be complete
and is qualified in its entirety by reference to the text of such documents,
which have been filed as exhibits to the Company's
10
<PAGE>
Current Report on Form 8-K dated February 27, 1995 or the Schedule 14D-9 and
may be obtained in the manner set forth in "AVAILABLE INFORMATION," and to the
discussion thereof set forth in Schedule I to the Schedule 14D-9 to the extent
incorporated herein by reference.
Acceleration of Officer Stock Options in Accordance with their
Terms. Pursuant to the terms of stock option agreements evidencing the
grant of options to executive officers under the Company's 1989 Long-Term
Incentive Program, such options will accelerate and become exercisable upon
the acquisition by the Purchaser of 20% or more of the Common Stock;
provided, however, that the extent of such acceleration will be limited to
the portion that may be so accelerated without being deemed a "parachute
payment" for purposes of section 280G of the Internal Revenue Code of 1986,
as amended (the "Code"). Accordingly, if the Second Issuance and the
purchase of the Offer Shares occurs, such unvested options will accelerate.
The following table sets forth for each executive officer the number of
stock options subject to acceleration (assuming that the Transactions occur
on or before June 30, 1995) and the weighted average per share exercise
price of such stock options:
<TABLE>
<CAPTION>
NUMBER OF
UNVESTED WEIGHTED
STOCK OPTIONS AVERAGE
SUBJECT TO PER SHARE
NAME ACCELERATION EXERCISE PRICE
---- ------------- --------------
<S> <C> <C>
Safi U. Qureshey........................... 188,750 16.299
James T.Schraith........................... 201,250 15.468
Bruce C. Edwards........................... 105,000 15.969
Kirby B. Coryell........................... 114,750 12.767
Dennis R. Leibel........................... 27,250 15.920
Richard P. Ottaviano....................... 88,750 15.928
James D. Wittry............................ 60,000 12.625
Scott A. Smith............................. 41,250 16.852
</TABLE>
Waiver of Repurchase Rights. The Company's 1991 Stock Option Plan for
Non-Employee Directors (the "1991 Plan") and 1994 One-Time Grant Stock
Option Plan for Non-Employee Directors (the "1994 Plan") have been amended
to provide that the contemplated purchases of the Common Stock by the
Purchaser (i) will not trigger certain repurchase rights that the directors
would otherwise have thereupon with respect to vested options granted under
the 1991 Plan and outstanding options granted under the 1994 Plan and (ii)
will accelerate the exercisability of unvested options outstanding under
the 1994 Plan. Each of the affected directors has agreed to waive such
repurchase rights insofar as the Purchaser's contemplated investment is
concerned. The number of unvested stock options under the 1994 Plan subject
to acceleration held by each of Messrs. Yocam, Goeglein and Peltason and
Dr. Santoro (assuming that the contemplated investment by the Purchaser
takes place on or before June 30, 1995) is 50,000, each with an exercise
price of $14.25 per share. In addition, warrants to purchase shares of
Common Stock held by two of the Company's directors, Dr. Carmelo Santoro
and Mr. Richard Goeglein, have been amended to waive similar repurchase
rights thereunder. In each case, the repurchase rights would continue to be
triggered by certain acquisitions by other persons, as well as by
additional acquisitions by the Purchaser that bring the Purchaser's
interest in the Company in excess of 49.9%.
Acceleration of Exercisability of Warrants in Accordance with their
Terms. Pursuant to a warrant certificate issued by the Company to Dr.
Santoro in 1992, unvested warrants to purchase 25,000 shares of Common
Stock at a price of $13.50 per share will accelerate and become exercisable
upon acquisition by the Purchaser of 20% or more of the Common Stock. Such
warrants would otherwise have vested and become exercisable in July of 1995
and 1996.
Amendment of Severance Compensation Agreements. The Company maintains
severance agreements (the "Severance Compensation Agreements") with its
eight executive officers identified in
11
<PAGE>
the stock option table above and fifteen non-officer vice-presidents
(collectively, the "Covered Executives") which generally provide for the
payment of certain benefits in the event of the termination of a Covered
Executive's employment following a "change in control" (as defined in the
Severance Compensation Agreements), either by the Company without cause or
by the Covered Executive for "good reason" (as defined therein). Except as
set forth below, the contemplated acquisitions of Common Stock by the
Purchaser will constitute a "change in control" for purposes of the
Severance Compensation Agreements. Pursuant to a resolution of the Board
adopted February 27, 1995, the Severance Compensation Agreements have been
amended to (i) restrict the circumstances under which a Covered Executive
may claim "constructive termination" of his employment and receive benefits
under the Severance Compensation Agreements, (ii) clarify that the excise
tax "gross-up" provided in the Severance Compensation Agreements applies
with respect to all benefits and payments subject to excise tax under
section 4999 of the Code and (iii) provide that with respect to each
Covered Executive other than Mr. Safi U. Qureshey, the Company's Chief
Executive Officer and Chairman of the Board, the amount of the lump-sum
severance benefit otherwise payable to the Covered Executive would be
increased by 50% in the event the Covered Executive's employment were to be
terminated in accordance with any action taken by or recommendation of the
Management Committee (as defined herein). The circumstances under which a
Covered Executive may claim constructive termination of his employment
principally consist of (i) an adverse change in position, duties, offices
and responsibilities within the Company, (ii) a reduction in salary or
failure to provide for benefit and incentive compensation plan
participation at a level no less than that in effect prior to the change in
control, (iii) relocation of the Covered Executive by the Company, (iv) a
material breach by the Company of the Severance Compensation Agreement, or
(v) failure by the Company to obtain the assumption of the Severance
Compensation Agreement by any successor or assignee of the Company.
Waiver of Rights under Employment Agreement. Mr. Qureshey's employment
agreement with the Company, dated July 27, 1993, has been amended to
provide that Mr. Qureshey will not be entitled to receive severance
payments pursuant to his Severance Compensation Agreement, dated as of
February 15, 1991, upon the contemplated acquisitions of Common Stock by
the Purchaser. Mr. Qureshey will, however, continue to be entitled to such
payments in the event his employment is terminated or additional
acquisitions by the Purchaser bring the Purchaser's interest in the Company
in excess of 49.9%.
The Purchaser will have the right to certain Board representation
following the Transactions. See "THE TRANSACTIONS--The Stock Purchase
Agreement and Exhibits--The Stockholder Agreement." As of the date hereof,
the Purchaser did not indicate that it had selected any director designees,
and neither the Company nor the Board has any approval rights with respect
thereto. To the extent that any such director designees are affiliated or
associated with the Purchaser, such persons may thereby be deemed to have
interests in the Transactions that are in addition to the interests of the
Stockholders generally. When the Purchaser designees become directors they
will also be entitled, subject to certain restrictions (particularly in the
case of designees who may be deemed to be affiliates of the Purchaser), to
receive normal compensation and benefits customarily given by the Company
to non-employee members of the Board.
12
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of April 1, 1995, with
respect to all those known by the Company to be the beneficial owners of more
than 5% of its outstanding Common Stock, each director, the Chief Executive
Officer and the four other most highly compensated executive officers during
the Company's last fiscal year, and all directors and executive officers of the
Company as a group. Unless otherwise noted, each of the stockholders listed
owns less than 1% and has sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by him, subject to community
property laws where applicable, and the information contained in the footnotes
to this table. The Company had 32,376,500 shares outstanding at April 1, 1995.
<TABLE>
<CAPTION>
NUMBER OF SHARES
-------------------
PERCENTAGE
OPTIONS OF SHARES
NAME OF BENEFICIAL OWNER (A) TOTAL OUTSTANDING
------------------------ --------- --------- -----------
<S> <C> <C> <C>
FMR Corp. (b).................................. 0 2,284,553 7.06%
Brinson Holdings, Inc. (c)..................... 0 2,853,300 8.81%
Loomis, Sayles & Company, L.P. (d)............. 0 1,968,800 6.08%
Richard J. Goeglein............................ 108,000 125,000 --
Jack W. Peltason............................... 58,000 58,300 --
Carmelo J. Santoro, Ph.D....................... 99,500 99,500 --
Delbert W. Yocam............................... 69,000 69,000 --
Safi U. Qureshey (e)........................... 845,000 3,218,032 9.69%
James T. Schraith.............................. 233,500 239,500 --
Bruce C. Edwards (f)........................... 240,000 291,400 --
James L. Forquer (g)........................... 115,000 115,000 --
Richard P. Ottaviano........................... 156,500 157,500 --
All directors and executive officers as a group
(12 persons).................................. 2,157,500 4,611,258 13.35%
</TABLE>
- --------
(a) Includes shares which executive officers and directors have the right to
acquire within 60 days of April 1, 1995 under stock option and warrant
agreements (giving effect to the acceleration thereof to the extent set
forth under "INTERESTS OF CERTAIN PERSONS").
(b) According to such persons' report on Schedule 13G/A, these shares are
beneficially owned by FMR Corp., Fidelity Management & Research Company
("FMRC") and Fidelity Management Trust Company ("FMTC"), each of 82
Devonshire Street, Boston, Massachusetts 02109. According to such report,
FMRC and FMTC are each a wholly owned subsidiary of FMR Corp.
(c) According to such persons' report on Schedule 13G, these shares are
beneficially owned by Brinson Holdings, Inc. ("BHI"), Brinson Partners,
Inc. ("BPI") and Brinson Trust Company ("BTC"), each of 209 South LaSalle,
Chicago, Illinois 60604-1295. According to such report, BTC is a wholly
owned subsidiary of BPI and BPI is a wholly owned subsidiary of BHI.
(d) According to such person's report on Schedule 13G, these shares are
beneficially owned by Loomis, Sayles & Company, L.P., One Financial Center,
Boston, Massachusetts 02111.
(e) Includes 92,572 shares held by Nancy Marshall as custodian for minor
children of Mr. Qureshey and 8,760 shares held by Nancy Marshall, Ishrat
Qureshey and Lubna Bokhari, co-trustees of Irrevocable Trusts established
for the benefit of Mr. Qureshey's minor children, to which Mr. Qureshey
claims no beneficial interest.
(f) Includes 1,000 shares held by Mary Pat DeMayo Buskard as trustee for minor
children of Mr. Edwards to which Mr. Edwards disclaims any beneficial
interest.
(g) Mr. Forquer's employment with the Company terminated effective as of
October 17, 1994. Mr. Kirby Coryell has since been elected as an executive
officer in the same capacity previously held by Mr. Forquer.
13
<PAGE>
As a result of the Transactions, the Purchaser will become the largest single
beneficial owner of Common Stock of the Company. If each of the Share Issuances
and the Offer is consummated, the Purchaser will own approximately 40.25% of
the Common Stock. If only the First Issuance is consummated, the Purchaser will
own approximately 16.6% of the Common Stock then outstanding. At the
Purchaser's election, the Purchaser may consummate the First Issuance prior to
the Record Date. See "THE TRANSACTIONS--The Stock Purchase Agreement and
Exhibits."
BACKGROUND OF THE TRANSACTIONS
GENERAL
From its inception in 1980, the Company has achieved significant revenue
growth. In recent years, however, competition from a variety of personal
computer designers, manufacturers and marketers has intensified significantly.
At the same time, increases in demand for personal computers have created
industrywide shortages, which at times have resulted in premium prices being
paid for key components, such as DRAMs and high quality LCD screens. These
shortages have occasionally resulted in the Company's inability to procure
these components in sufficient quantities to meet demand for its products.
The Purchaser has advised the Company that it is a leading international
brand name manufacturer of consumer electronics, semiconductors and industrial
electronics products, having sales of approximately $14.6 billion in its fiscal
year ended December 31, 1994. The Purchaser and certain of its subsidiaries
have supplied components such as DRAMs and monitors to the Company pursuant to
customary commercial arrangements. Sales of such components by the Purchaser
and its subsidiaries to the Company aggregated approximately $46 million, $13
million and $7 million, respectively, for the Company's fiscal years ended July
2, 1994, July 3, 1993 and June 27, 1992, and approximately $43 million for the
eight months ended March 1, 1995.
In 1994, in light of the continued increase in competition in the personal
computer industry and the other factors cited above, the Company began more
actively to explore alternatives to strengthen the Company's position in the
personal computer industry and to enhance the long-term viability of the
Company. The Company determined that additional sources of financing were
necessary for the continued growth of the Company and requested the advice of
Merrill Lynch.
In August 1994, the Company engaged Merrill Lynch to act as its financial
advisor in connection with exploring potential courses of action, including
obtaining additional financing. In October 1994, the Company engaged Asia
Pacific Ventures, Ltd. ("APV") to contact a list of prospective investors
located in Asia, including the Purchaser, to solicit their interest in the
Company. Numerous prospective purchasers were contacted by or on behalf of the
Company. Subject to confidentiality agreements, each requesting entity was
provided with certain financial information and overviews of the Company.
During this period, the Company pursued each indication of interest it
received from potential investors, met with and/or provided information to
several potentially interested parties and engaged in preliminary discussions
with another computer company regarding a possible business combination. Such
discussions never advanced to a more serious level in light of the parties'
inability to reach a tentative framework for an acceptable valuation.
On November 1, 1994, a representative of APV, on behalf of the Company,
contacted the Purchaser to determine its possible interest in a transaction
with or an investment in the Company. After meetings between the Purchaser and
APV in the United States and Korea, the Purchaser requested that an initial
meeting with the Company be arranged.
On November 16, 1994, an initial meeting was held. Mr. Bo-Soon Song, Senior
Executive Managing Director and Chief Executive Officer of Samsung America,
Inc., Mr. Robert Kim, a Managing Director of the Purchaser, and other
executives of the Purchaser met with Mr. Qureshey and a representative of APV.
14
<PAGE>
The representatives from each company discussed the plans and goals of their
respective companies to determine whether the parties had mutual interests and
should proceed with further discussions.
On December 2, 1994, U.S. representatives of the Purchaser met at the
Company's headquarters in Irvine, California with Mr. James Schraith, the
Company's President and Chief Operating Officer, Mr. Bruce Edwards, Executive
Vice President and Chief Financial Officer of the Company, and a representative
of APV to discuss historical results of operations and to ask general questions
regarding the Company.
On December 12 and 13, 1994, Mr. Qureshey, Mr. Schraith and Mr. Edwards met
in Seoul, Korea with Mr. Young Soo Kim, Executive Vice President of the
Purchaser, Mr. Wook Sun, Executive Vice President of the Purchaser, Mr. Hee
Dong Yoo, Senior Executive Managing Director of the Purchaser, as well as other
executives of the Purchaser, to continue their earlier discussions of a
possible significant investment in the Company by the Purchaser and a strategic
alliance between the two companies. As a result of these meetings, on December
19, 1994 Mr. Yoo sent a letter to Mr. Qureshey indicating that the Purchaser
had an interest in pursuing discussions concerning a significant minority
investment coupled with a strategic alliance and requested initiation of a
formal information gathering process.
On December 21, 1994, the Company and the Purchaser entered into a
confidentiality agreement and during the latter part of December,
representatives of the Purchaser and their legal and financial advisors were
furnished certain non-public information concerning the Company's operations
and financial condition.
On January 5 and 6, 1995, senior executives of both companies and their legal
and financial advisors held a series of meetings in Irvine, California to
continue the information gathering process and to discuss various alternative
structures for the proposed investment and strategic alliance.
During the second week of January, the Purchaser's financial advisors and the
Company's financial advisors exchanged letters, including preliminary summaries
of the terms of a proposed transaction in which the Purchaser would acquire a
significant minority interest in the Company in exchange for certain Board
representation and approval rights. The Company had concerns regarding certain
of the terms proposed by the Purchaser, but expressed a willingness to continue
discussions of a strategic alliance that would involve a significant minority
position in the Company's Common Stock for the Purchaser.
From January 9 to February 6, 1995, the parties engaged in more extensive
negotiation of a preliminary term sheet. This included a series of telephone
conferences as well as meetings of senior executives and their respective legal
and financial advisors. At various times during this period, the parties
exchanged correspondence and proposed terms of a transaction. The foregoing
process resulted in a tentative understanding of certain key business terms and
guiding principles that served as the framework within which the parties then
negotiated the specific provisions of the definitive agreements.
On February 9, 1995, a news service reported certain statements regarding the
Purchaser's interest in and talks with the Company. Later that same day, the
Company issued a press release stating that it was in discussions with certain
parties, including the Purchaser, regarding a potentially significant minority
investment and possible strategic business arrangements.
Throughout this period, the Company and its advisors continued to gauge the
interest of others, and held discussions with another large electronics company
based in Asia regarding the terms of a potential investment. On February 9,
1995, the Company received a letter from such other party regarding a potential
investment in the Company, pursuant to which such other party would acquire an
approximately 19.9% interest in the Common Stock and would pursue certain
strategic relationships. The Board expressed reservations about the relative
attractiveness of this proposal at a telephonic meeting held on February 10,
1995. The Board believed, however, that all reasonable efforts should be made
to determine whether this informal proposal might be a prelude to an increased
commitment and/or more favorable terms if discussions were to progress.
15
<PAGE>
From January 26 to February 22, 1995, the Board held four meetings to
consider the terms of a proposed arrangement with the Purchaser, as well as
potential alternative transactions, and concluded that financing of the
magnitude proposed by the Purchaser and the proposed strategic alliance and
component supply arrangements were very important to the Company. The Board
instructed management to continue to develop the terms of a potential
investment by the Purchaser but asked that management also continue to hold
discussions with the other interested party to pursue the viability of this
alternative investment proposal. Meetings between this party, the Company and
their respective legal and financial advisors took place from February 14, 1995
to February 21, 1995. As differences narrowed and the final terms of the
Purchaser's proposal were negotiated, the Board instructed Mr. Qureshey to take
all appropriate steps to elicit the best offer from such other party.
Meetings with the Purchaser and its representatives subsequent to February 9,
1995 focused on the adequacy of the financial terms, other unresolved elements
of the proposal, the consequences, particularly as to future alternatives for
the Company, of such proposal and alternative proposals that could be pursued.
Based upon the results of discussions between management of the Company and the
other interested party, and between Merrill Lynch and such other party's
financial advisor, the Board concluded that such other party was unlikely to
increase the size of its financial commitment or agree to provide the Company
with any commitment to provide financing to repay amounts due at maturity under
the Company's existing obligations to Tandy Corporation. In light of the
foregoing, the Board concluded, following additional discussions with
management and its advisors, that alternative financing of similar magnitude
and likelihood of completion to the Purchaser's proposal was not reasonably
available at the current time. This belief was based on, among other factors,
the judgement that the other party was not willing to increase its proposed
commitment, the fact that no other parties had been identified which were
likely to enter into a financing transaction of similar magnitude within a
comparable time period as the Purchaser's proposal, the fact that,
notwithstanding the announcement on February 9, 1995 that the Company was in
discussions with the Purchaser, no other parties contacted either the Company
or its financial advisors to express an interest in making an investment in the
Company, and the Company's need for additional liquidity. Therefore, the Board
determined that its primary objective should be to continue to negotiate with
the Purchaser to obtain the most advantageous terms possible to the Company and
its existing stockholders.
On February 22, 1995, following a meeting of the Board, the Purchaser and its
legal and financial advisors were informed that the Board was willing to
continue the negotiation process if the remaining open issues could be
expeditiously resolved and if definitive agreements could then be promptly
finalized. During the next several days, the terms and conditions of the
definitive agreements were finalized.
On February 27, 1995, a special meeting of the Board was held at which
Merrill Lynch delivered its written opinion to the Board, and the Board
unanimously (i) determined that the Stock Purchase Agreement and the
transactions contemplated thereby are fair to, and in the best interests of,
the Stockholders and the Company, respectively, (ii) approved and adopted the
Stock Purchase Agreement and the other documents and transactions contemplated
thereby, and (iii) recommended that the Stockholders accept the Offer. On the
same day, following such Board approval, the Company and the Purchaser entered
into the Stock Purchase Agreement and the Strategic Alliance Agreement and
publicly announced their agreement. A copy of the written opinion of Merrill
Lynch delivered to the Board, which sets forth certain assumptions made,
matters considered and limits of the review by Merrill Lynch in rendering such
opinion, is attached as Annex A. STOCKHOLDERS ARE URGED TO READ THE OPINION
CAREFULLY IN ITS ENTIRETY. The Board was aware that Merrill Lynch became
entitled to certain of the fees in connection with its engagement by the
Company upon the consummation of such a transaction, and that Merrill Lynch in
the past had received fees for the providing of financial advisory and
financing services to the Company and the Purchaser.
RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS
The Board has reviewed and considered the terms and conditions of the
Transactions. At a meeting held on February 27, 1995, the Board unanimously
approved the terms of the Purchaser's investment as described above.
Accordingly, the Board unanimously recommends that Stockholders vote FOR
approval of the
16
<PAGE>
Proposal. In determining to make its recommendation, the Board considered a
number of factors, including:
(a) The oral and written presentations of Merrill Lynch and the written
opinion of Merrill Lynch to the effect that, from a financial point of
view, the proposed consideration to be received by each of
the Company and the Stockholders (other than the Purchaser and its
affiliates) in the proposed Transactions, taken as a whole, is fair to
the Company and the Stockholders;
(b) The fact that the Stockholders will be entitled to receive $22.00 per
share in cash for at least 18% of their Common Stock, thus earning an
immediate return on their investment while retaining a majority equity
interest in the Company and its future performance, including the
beneficial effects anticipated under the Strategic Alliance Agreement
(particularly the fact that the proposed strategic alliance, especially
the component supply arrangements, which will provide the Company with
a committed supply of critical components, should enhance the Company's
competitiveness);
(c) The fact that $22.00 per share to be paid pursuant to the Offer, $19.50
per share to be paid in the First Issuance and $22.00 per share to be
paid in the Second Issuance all represent a significant premium over
the recent trading prices of the Common Stock;
(d) The fact that the Stockholder Agreement contains certain protections
for existing Stockholders, including (A) a standstill provision which
prohibits the Purchaser for four years from (1) electing representative
directors constituting a majority of the Board or (2) acquiring more
than a 49.9% interest in the Company (except in certain limited
circumstances), (B) a provision that requires that there will continue
to be at least three Independent Directors until the Purchaser's
interest in the Company exceeds 90%, (C) a provision prohibiting the
Purchaser from selling its stake in the Company to a third party for
five years (except in certain limited circumstances) and (D) a
provision requiring that after the four-year Standstill Period (as
defined herein), the Purchaser's interest in the Company cannot exceed
66.67% without making a cash offer for 100% of the outstanding capital
stock, and that until the Purchaser's interest in the Company were to
exceed 90%, all material transactions between the Company and the
Purchaser or any of its affiliates must be approved by a majority of
Independent Directors;
(e) The Board's familiarity with the financial condition, results of
operations, business, technology, prospects and strategic objectives of
the Company;
(f) The fact that the Company will continue to be a publicly traded
company, headquartered in Irvine, California and led by Mr. Qureshey,
as Chairman and Chief Executive Officer, and the rest of its own
management team;
(g) The Board's belief that the additional financing from the New Issue
Shares and the Letter of Credit Agreement will increase the Company's
opportunities to expand its core businesses, pursue new projects,
improve long-term returns and decrease the financial risks it faces and
may otherwise face in the future; and
(h) The fact that the Board concluded that alternative financing of similar
magnitude and likelihood of completion to the Purchaser's proposal was
not reasonably available at the current time.
While the Board believes that the proposed investment by the Purchaser as
described herein is fair to, and in the best interests of, the Company and the
Stockholders, its approval may have certain adverse effects which Stockholders
should consider. These considerations include the consequences of the
Purchaser's special consent rights with respect to certain corporate
transactions, the composition of the Board following the transaction and the
likelihood that the size of the Purchaser's investment and the attendant rights
the Purchaser will receive (notwithstanding related restrictions on the
Purchaser) might discourage other persons from offering to acquire all or a
significant interest in the Company and may make more difficult a change in
control of the Company (other than one in which the Purchaser acquires
control). These considerations further include the possibility that, because
the Purchaser is a supplier of critical components in a highly competitive
marketplace, other suppliers may be less likely to extend attractive terms to
or do business with the Company. The Company has received notice from LG
Electronics, Inc., formerly known as Goldstar
17
<PAGE>
Co., Ltd. ("Goldstar"), another Korean company that supplies DRAM to the
Company, that, as a result of the agreements entered into with the Purchaser,
effective in April 1995, Goldstar will no longer supply such components to the
Company. For the twelve months ended March 31, 1995, Goldstar supplied
approximately 15% of the Company's DRAM requirements. The Company is currently
discussing with the Purchaser whether the Purchaser can supply such components.
In the event that the Company is unable to obtain such components from the
Purchaser, it will be required to find alternative sources of supply. If it is
unable to locate sufficient supply, or if the terms are less favorable than
those previously obtained from Goldstar, the Company's results of operations
could be adversely affected.
In addition, because the Purchaser has other business involvements typical of
large, multi-national companies and is not based in the United States (although
its presence in the United States is significant), it is possible that some
additional suppliers, customers, employees and others will not react favorably
to the proposed arrangements.
THE BOARD BELIEVES THAT THE TRANSACTIONS ARE FAIR TO, AND IN THE BEST
INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS AND HAS UNANIMOUSLY APPROVED THE
TRANSACTIONS AND UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
APPROVAL OF THE PROPOSAL.
OPINION OF FINANCIAL ADVISOR
On February 27, 1995, Merrill Lynch delivered its written opinion to the
Board to the effect that, as of such date, the proposed consideration to be
received by the Company and the Stockholders (other than the Purchaser and its
affiliates) in the Transactions, taken as a whole, is fair to the Company and
such Stockholders from a financial point of view. A copy of the Merrill Lynch
opinion is attached hereto Annex A and incorporated herein by reference. THE
STOCKHOLDERS ARE URGED TO READ CAREFULLY IN ITS ENTIRETY THE OPINION OF MERRILL
LYNCH, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS ON
THE REVIEW UNDERTAKEN.
Merrill Lynch's opinion to the Board addresses only the fairness from a
financial point of view of the consideration to be received by the Company and
such Stockholders pursuant to the Stock Purchase Agreement and the exhibits
thereto, and the Strategic Alliance Agreement (collectively, the "Transaction
Documents"), and does not constitute a recommendation to any Stockholder of the
Company as to how such Stockholder should vote.
In arriving at its opinion, Merrill Lynch, among other things; (i) reviewed
the Company's Annual Reports, Forms 10-K and related financial information for
the five fiscal years ended July 2, 1994 and the Company's Forms 10-Q and the
related unaudited financial information for the quarterly periods ended
September 30, 1994 and December 31, 1994; (ii) reviewed certain information,
including financial forecasts, relating to the business, earnings, cash flow,
assets and prospects of the Company, furnished to Merrill Lynch by the Company;
(iii) conducted discussions with members of senior management of the Company
concerning its businesses and prospects and the anticipated financial benefits
of certain of the Transaction Documents; (iv) reviewed the historical market
prices and trading activity for the Common Stock and compared them with those
of certain publicly traded companies which Merrill Lynch deemed to be
reasonably similar to the Company; (v) compared the results of the operations
of the Company with those of certain companies which Merrill Lynch deemed to be
reasonably similar to the Company; (vi) compared the proposed financial terms
of the transactions contemplated by the Stock Purchase Agreement and the other
Transaction Documents with the financial terms of other strategic investments
and mergers and acquisitions which Merrill Lynch deemed to be relevant; (vii)
participated in discussions and negotiations among representatives of the
Company, the Purchaser and their respective advisors; (viii) reviewed drafts of
the Stock Purchase Agreement and the Transaction Documents dated February 27,
1995; and (ix) reviewed such other financial studies and analyses and performed
such other investigations and took into account such other matters as Merrill
Lynch deemed necessary, including Merrill Lynch's assessment of general
economic, market and monetary conditions.
18
<PAGE>
In preparing its opinion, Merrill Lynch relied upon the accuracy and
completeness of all information supplied or otherwise made available to it by
the Company, and Merrill Lynch did not independently verify such information or
undertake an independent appraisal of the assets of the Company. With respect
to the financial forecasts and other information relating to the Company's
prospects and future performance furnished to Merrill Lynch by the Company,
Merrill Lynch assumed that such forecasts and information were reasonably
prepared and reflected the best currently available estimates and judgment of
the Company's management as to the expected future financial performance of the
Company and other matters covered thereby. Merrill Lynch also relied without
independent verification on the estimates of the Company as to the anticipated
financial benefits of certain of the Transaction Documents and assumed that the
agreements to be entered into pursuant thereto will provide in the aggregate
such benefits.
In connection with Merrill Lynch providing financial advice to the Company
regarding the matters set forth in the opinion, Merrill Lynch, at the Company's
request, had contact with several third parties identified to Merrill Lynch by
the Company or its agents with respect to an investment in or acquisition of
the Company. Merrill Lynch was not otherwise authorized by the Company or the
Board to solicit, nor did Merrill Lynch solicit, third-party indications of
interest for any transaction with respect to the Company.
Pursuant to certain letter agreements dated as of August 22 and November 2,
1994, as amended, between the Company and Merrill Lynch, the Company paid
Merrill Lynch a retainer fee of $100,000 and has agreed to pay to Merrill Lynch
an additional fee of $4.9 million upon consummation of the transactions
contemplated by the Stock Purchase Agreement and the other Transaction
Documents. In the event that the Purchaser were to acquire only the First
Issuance Shares, Merrill Lynch's aggregate fees would be reduced by 50%. The
fees paid or payable to Merrill Lynch are not contingent upon the contents of
the opinion delivered. The Company also agreed to indemnify and hold harmless
Merrill Lynch against certain liabilities, including liabilities under the
federal securities laws or arising out of or in connection with its rendering
of services under its engagement. In the event such indemnification is not
available, the Company agreed to contribute to the settlement, loss or expenses
involved in the proportion that the relevant financial interest of the Company
and the Stockholders bears to Merrill Lynch's relevant financial interest.
Merrill Lynch has, in the past, provided financial advisory and financing
services to the Company and to the Purchaser on unrelated matters and has
received fees for the rendering of such services. In the ordinary course of its
business, Merrill Lynch actively trades in the securities of the Company for
its own account and the accounts of its customers and, accordingly, may at any
time hold a long or short position in such securities.
Merrill Lynch is an internationally recognized investment banking firm and is
continually engaged in the valuation of business and their securities in
connection with mergers and acquisitions, leveraged buyouts, negotiated
underwritings, secondary distributions of listed and unlisted securities and
private placements.
THE TRANSACTIONS
GENERAL
The Company. The Company was incorporated in California on July 25, 1980 and
reincorporated as a Delaware corporation effective July 1, 1987. The Company
designs, manufactures, markets, services and supports a broad line of personal
computers including desktop, server and notebook computer systems marketed
under the Advantage!, Bravo, Premmia, Manhattan and Ascentia brand names. The
Company's products often feature advanced design characteristics while
remaining compatible with established industry standards. The Company currently
markets its products through an extensive worldwide distribution network of
retail computer dealers, consumer retailers, international and regional
distributors, VADs, VARs, OEMs and U.S. Government approved dealers.
The Purchaser. The Purchaser is a Korean corporation with its principal
executive offices located at 205, 2-Ka, Taepyung-Ro, Chung-Ku, Seoul, Korea
100-742. The Purchaser is a leading international brand-name manufacturer of
consumer electronics, semiconductors and industrial electronics products. Each
of the
19
<PAGE>
Purchaser's three main business lines is divided into two divisions: consumer
electronics into Audio and Video and Household Appliances; semiconductors into
Memory Devices and Non-Memory Devices; and industrial electronics into
Information/Computer Systems and Telecommunications Systems.
Capitalization. The following table sets forth the consolidated short-term
debt and capitalization of the Company as of April 1, 1995, as adjusted to give
effect to the First Issuance and as further adjusted to give effect to the
Second Issuance, but does not reflect any assumed usage of the net proceeds
therefrom. See "--Use of Proceeds." This table should be read in conjunction
with the Company's Consolidated Financial Statements and the notes thereto
incorporated by reference herein.
<TABLE>
<CAPTION>
AS OF APRIL 1, 1995
--------------------------------------
AS FURTHER
ACTUAL AS ADJUSTED ADJUSTED
------------ ------------ ------------
<S> <C> <C> <C>
Short-term debt:
Short-term borrowing(1)............... $ $ $
Current portion of long-term debt.....
------------ ------------ ------------
Total short-term.................... $ $ $
============ ============ ============
Long-term debt:(2)
Liquid Yield Option Notes due 2013(3). 117,677,700 117,677,700 117,677,700
Other long-term debt..................
------------ ------------ ------------
Total long-term debt................
------------ ------------ ------------
Stockholders' equity:
Common stock $0.01 par value;
200,000,000 shares authorized,
32,376,500 shares issued and
outstanding, 38,816,500 shares issued
and outstanding as adjusted and
44,446,500 shares issued and
outstanding as further adjusted(4)...
Preferred stock, $0.01 par value;
1,000,000 shares authorized, no
shares issued and outstanding........
Additional paid-in capital..............
Retained earnings.....................
------------ ------------ ------------
Total stockholders' equity..........
------------ ------------ ------------
Total capitalization................ $ $ $
============ ============ ============
</TABLE>
- --------
(1) Amount represents borrowings under the Company's line of credit agreements.
(2) Excludes operating lease commitments.
(3) Net of original issue discount of $197,322,300.
(4) Excludes shares reserved for issuance upon conversion of the Liquid Yield
Option Notes and pursuant to the Company's benefit plans and warrants
granted to two non-employee directors. The options and warrants are
generally exercisable in installments. See "INTERESTS OF CERTAIN PERSONS."
Use of Proceeds. The net proceeds to be received by the Company from the sale
of New Issue Shares are estimated to be $240 million. The proceeds will be used
for working capital, including the financing of expected increases in accounts
receivable, retirement of bank debt, capital expenditure requirements and other
general corporate purposes. The Company's $50 million revolving credit
agreement dated February 9, 1995 requires the Company to utilize proceeds from
any equity offering to repay any amounts then outstanding under this facility.
As of April 1, 1995, there are no amounts outstanding under this facility. The
Company has no other commitments for use of the funds, and management of the
Company will therefore have broad discretion in the application of the
proceeds. At April 1, 1995, the Company had $100.0 million drawn under its $225
million revolving credit agreement. The Company may choose to utilize some of
the proceeds from
20
<PAGE>
the investment to repay some or all of the then current outstanding borrowings
under such credit agreement, which does not require any repayments of principal
until its September 30, 1996 termination date. Such borrowings, once repaid,
may be reborrowed under the terms of such credit agreement. The weighted
average interest rate under such credit agreement was 7.8% for the month of
March 1995. The rate of interest under such credit agreement is subject to
change based upon the total amount outstanding and the duration of the selected
borrowing period. The Company is also considering terminating its existing
revolving credit agreement and negotiating a new revolving credit agreement.
While the Company has been able to maintain access to external financing
sources, no assurance can be given that such access will continue or that the
Company will be successful in obtaining new or replacement sources of
financing. Until the proceeds are so used, the Company intends to invest the
net proceeds in short-term money market instruments.
THE STOCK PURCHASE AGREEMENT AND EXHIBITS
The following description of the Stock Purchase Agreement and exhibits does
not purport to be complete and is qualified in its entirety by reference to the
text of the Stock Purchase Agreement and such exhibits.
The Offer. The Stock Purchase Agreement provides that the Purchaser shall
commence the Offer as promptly as reasonably practicable after the date of
execution of the Stock Purchase Agreement, but in no event later than five
business days after public announcement of the entering into of the agreement
by the parties. The obligation of the Purchaser to accept for payment and pay
for any Offer Shares tendered pursuant to the Offer shall be subject to the
condition that the Stock Purchase Agreement not have been terminated and to the
satisfaction or waiver of the conditions to the Purchaser's obligations to
purchase the New Issue Shares. The Purchaser may increase the Offer price and
may make any other changes in the terms and conditions of the Offer, provided
that no change may be made which decreases the Offer price, changes the form of
consideration to be paid in the Offer, increases or decreases the maximum
number of shares sought pursuant to the Offer, adds to or modifies the Offer
conditions, otherwise amends the Offer in a manner adverse to the Company's
stockholders or permits the Purchaser to accept for payment or purchase any
Offer Shares prior to the date of closing the Second Issuance.
The Stock Purchase Agreement requires that the Offer expire at midnight, New
York City time, on the date that is forty-five days from the date the Offer is
first published or sent to Stockholders, provided that the Purchaser may extend
the Offer (a) if the conditions thereto have not been met, (b) as required by
the Securities and Exchange Commission or (c) for any reason on one or more
occasions for an aggregate period of not more than ten business days beyond the
latest expiration otherwise permitted as aforesaid. The Offer was initially
scheduled to expire on April 20, 1995. On April , 1995, the Purchaser
extended the Offer until 5:00 pm, New York City time, on May , 1995.
The Share Issuances. The Stock Purchase Agreement sets forth the terms of the
Share Issuances. In addition to the condition that the parties deliver and
perform the several exhibits to the Stock Purchase Agreement and negotiate and
execute the several agreements contemplated by the Strategic Alliance Agreement
as described below, the obligations of the Company to issue and sell, and of
the Purchaser to purchase, the New Issue Shares are subject to the satisfaction
or waiver of the following conditions at the time of the First Issuance or the
Second Issuance, as applicable: (i) no statute, rule, regulation, judgment,
order, decree, ruling, injunction, or other action shall have been entered,
promulgated, enforced, or threatened by any governmental, quasi-governmental,
judicial, or regulatory agency or entity or subdivision thereof with
jurisdiction over the Company or the Purchaser or any of their subsidiaries or
any of the transactions contemplated by the Stock Purchase Agreement (each, a
"Governmental Authority") that purports, seeks or threatens to (A) prohibit,
restrain, enjoin, or restrict in a material manner, the purchase and sale of
any New Issue Shares as contemplated by the Stock Purchase Agreement or (B)
impose material adverse terms or conditions upon such purchase and sale of the
New Issue Shares (collectively, "Legal Ability"), (ii) compliance with
applicable regulatory requirements, including without limitation the Hart-
Scott-Rodino
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<PAGE>
Antitrust Improvements Act of 1976, as amended, and the regulations thereunder,
and Section 721 of the Exon-Florio Amendment to the Defense Production Act of
1950, and the regulations thereunder, and (iii) the other party's
representations and warranties set forth in the Stock Purchase Agreement being
true and correct in all material respects. In addition, the obligation of the
Purchaser to purchase the New Issue Shares is subject to the satisfaction or
waiver of the following conditions at the time of the First Issuance or the
Second Issuance, as applicable: (i) approval at the Special Meeting by holders
of a majority of the Common Stock of (A) the Second Issuance, (B) the purchase
by the Purchaser of the Offer Shares, (C) the Stockholder Agreement described
below and (D) the Restated Charter (collectively, "Stockholder Approval"), (ii)
the continued effectiveness of (A) the Restated Charter, (B) the amendment of
the Rights Plan, as described under "THE TRANSACTIONS--Stockholder Rights Plan;
Certain Anti-Takeover Effects of the Purchaser's Investment," to permit the
Purchaser to acquire Common Stock in accordance with the Stock Purchase and
Stockholder Agreements, and (C) the amendment of Mr. Qureshey's employment
agreement to waive certain severance benefits to which he would otherwise be
entitled upon such Common Stock acquisitions by the Purchaser, and (iii)
consolidated operating loss and consolidated net cash used in operating
activities requirements for the Company and its subsidiaries for the fiscal
quarter ending April 1, 1995 not exceeding specified levels.
The obligation of the Company to issue and sell the Second Issuance Shares is
further subject to (i) the Offer being consummated in accordance with its
terms, (ii) the receipt of Stockholder Approval and (iii) the receipt of any
amendments to the Company's credit arrangements and agreements required to
permit the transactions contemplated by the Stock Purchase Agreement and the
other agreements with the Purchaser described herein. As a result, subject to
the terms and conditions of the Stock Purchase Agreement, the Purchaser may
elect to consummate the First Issuance in advance of approval of the Proposal,
including, in certain circumstances, following termination of the Stock
Purchase Agreement by the Company.
The Company and the Purchaser filed the required Notification and Report Form
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 with the Federal
Trade Commission (the "FTC") and the Department of Justice and, on April 7,
1995, the FTC notified the Company that early termination under the Clayton Act
had been granted.
Representations and Warranties. The Stock Purchase Agreement contains various
customary representations and warranties of the parties thereto, including
representations by the Company as to (i) the absence of a material adverse
change to the business or financial condition of the Company and (ii) the
absence of certain changes or events concerning the Company's business,
compliance with law, litigation, insurance, employee benefit plans, labor
matters, intellectual property, environmental matters and taxes.
Conduct of Business of the Company. The Stock Purchase Agreement provides
that until the closing of the purchase and sale of the New Issue Shares, the
business and operations of the Company and each of its subsidiaries shall be
conducted in the ordinary course of business consistent with past practice.
Accordingly, except as otherwise expressly approved by the Purchaser in
writing, which approval shall not be unreasonably withheld, neither the Company
nor any of its subsidiaries may, prior to such closing, engage or agree to
engage in an enumerated list of transactions generally characterized as being
outside the ordinary course of business. Such transactions requiring the
Purchaser's prior approval include, without limitation (but subject to certain
exceptions stated in the Stock Purchase Agreement), (i) securities issuances,
(ii) new borrowings, loans, or investments, (iii) changes to compensation or
benefits arrangements for any director or officer, (iv) business combinations
or sales or acquisitions of substantial assets and (v) the specified corporate
actions which would become subject to the prior approval of the Purchaser in
accordance with the Stockholder Agreement, as described below.
Other Potential Bidders. The Stock Purchase Agreement required the Company
and its affiliates and their respective officers, directors, employees,
representatives and agents to immediately cease any existing discussions or
negotiations with any third party with respect to any (i) acquisition of more
than 20% of the total assets of the Company or any of its subsidiaries, (ii)
acquisition of 20% or more of the Common Stock
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or any equity securities of any subsidiary of the Company, or (iii) merger or
other combination of the Company or any of its subsidiaries (each, a "Third
Party Acquisition"). The Company may not, unless and until the Stock Purchase
Agreement is terminated in accordance with its terms as described below,
directly or indirectly, (i) initiate, solicit or encourage any discussions
regarding any Third Party Acquisition, or (ii) hold any such discussions or
enter into any agreement concerning any Third Party Acquisition, subject in
each case to the fiduciary obligations of the Board as provided in the next
following sentence. The Board shall not (i) approve or recommend any Third
Party Acquisition or (ii) approve or authorize the Company's entering into any
agreement with respect to any such Third Party Acquisition, provided, that if
the Board receives a bona fide proposal for a Third Party Acquisition that the
Board determines in its good faith reasonable judgment (based on the advice of
a financial advisor of nationally recognized reputation) provides a greater
aggregate value to the Company and/or the Company's stockholders than the
transactions contemplated by the Stock Purchase Agreement (a "Superior
Proposal"), the Board may, to the extent required under its fiduciary duties,
approve or recommend any such Superior Proposal, approve or authorize the
Company's entering into an agreement with respect to such Superior Proposal,
approve the solicitation of additional takeover or other investment proposals
or terminate the Stock Purchase Agreement, in each case at any time after the
fifth business day following notice to the Purchaser (a "Notice of Superior
Proposal") advising the Purchaser that the Board has received a Superior
Proposal and specifying the structure and material terms of such Superior
Proposal, and provided that the Superior Proposal continues to be a Superior
Proposal in light of any improved transaction proposed by the Purchaser prior
to the expiration of such five-business day period.
Termination. The Stock Purchase Agreement provides that either the Purchaser
or the Company may terminate its obligations thereunder (i) to the extent that
performance is prohibited, enjoined or otherwise materially restrained by any
final, non-appealable judgment, ruling, order or decree of any Governmental
Authority, provided that the party seeking to terminate its obligations shall
use its best efforts to remove such prohibition, injunction, or restraint, or
(ii) if the purchase by the Purchaser of the New Issue Shares and the Offer
Shares is not completed by June 30, 1995 and the failure to close on or before
such date did not result from the failure by the party seeking termination to
fulfill in all material respects any undertaking or commitment that is required
to be fulfilled by such party prior to such time, or (iii) if the party seeking
to terminate has not committed a material uncured breach of any representation,
warranty,covenant or agreement and there has been a material breach by the
other party of any representation, warranty, covenant, or agreement which has
not been cured within ten days' notice of such breach.
Additionally, the Company may terminate its obligation to sell and issue the
Second Issuance Shares and certain of its other obligations under the Stock
Purchase Agreement if (i) five business days have elapsed following the
Purchaser's receipt from the Company of a Notice of Superior Proposal, (ii) the
Superior Proposal described in such notice continues to be a Superior Proposal
in light of any improved transaction proposed by the Purchaser prior to the
expiration of the five-business day period following receipt by the Purchaser
of such notice, and (iii) the Company shall have paid to the Purchaser $10
million (the "Termination Fee"). In the event of such a termination, the
Purchaser may within 15 days elect to purchase the First Issuance Shares,
subject only to its having Legal Ability. In connection with such a purchase by
the Purchaser of the First Issuance Shares, the Purchaser and the Company would
enter into the Stockholder and Registration Rights Agreements but not the
Letter of Credit Agreement or the agreements contemplated by the Strategic
Alliance Agreement.
The Purchaser may terminate its obligations under the Stock Purchase
Agreement if the Board has withdrawn or modified in an adverse manner its
recommendation of the Offer or other transactions contemplated by the Stock
Purchase Agreement or recommended another offer or if a Third Party Acquisition
has occurred or any definitive agreement or agreement in principle has been
executed with respect to a Third Party Acquisition.
Transaction Expenses. The Stock Purchase Agreement provides that, except for
any Termination Fee, each of the parties will pay its own expenses incurred in
connection with the negotiation and preparation of
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the Stock Purchase Agreement, the Stockholder Agreement, the Registration
Rights Agreement, the Letter of Credit Agreement and related documents, the
performance of its obligations thereunder, and the effectuation of the
transactions contemplated thereby including, without limitation, all fees and
disbursements of its respective legal counsel, advisors, and accountants.
The Stockholder Agreement. The Stockholder Agreement required under the terms
of the Stock Purchase Agreement to be executed and delivered at the earlier of
the closing of the First or the Second Issuance provides, among other things,
for the following:
Standstill. Pursuant to the terms of the Stockholder Agreement, the
Purchaser has agreed that until completion of the purchase of the New Issue
Shares and the Offer Shares, neither the Purchaser nor any of its
affiliates will, directly or indirectly, acquire or offer to acquire
beneficial ownership of any equity securities of the Company or interest
therein except pursuant to the Offer or the purchase of the New Issue
Shares. During the period of four years after the closing of the purchase
and sale of the First Issuance Shares or, if there is a later closing of
the purchase and sale of the Second Issuance Shares, the period of four
years thereafter (the "Standstill Period"), neither the Purchaser nor any
of its affiliates will, directly or indirectly, acquire beneficial
ownership of any equity securities of the Company or interest therein,
except in enumerated circumstances, including purchases to fund payments
made under the Letter of Credit Agreement, as discussed below, open market
purchases at prices per share at least equal to $21.10, transactions
approved by a majority of the directors not designated by the Purchaser, as
discussed below, and purchases pursuant to its pro rata purchase rights as
described below.
Additionally, unless the Purchaser's percentage of the total number of
votes that may be cast in an election of directors of the Company at any
meeting of Stockholders of the Company (the "Purchaser Interest") has been
less than 30% for a period of 25 consecutive days, in the event that a
third party shall make an offer to acquire a 20% or greater interest in
equity securities of the Company, the Purchaser and/or its affiliates shall
be permitted to make a competing offer and acquire equity securities
pursuant to such offer, subject to certain conditions, including, without
limitation, that (a) (i) the third party offer is approved or recommended
by a majority vote of the directors not designated by the Purchaser or (ii)
the Rights Plan is not in effect or the associated preferred stock purchase
rights thereunder will not become exercisable if the third party offer
proceeds, (b) such third party offer is not withdrawn or terminated prior
to the Purchaser making a competing offer and (c) if the third party offer
is withdrawn or terminated before the Purchaser acquires equity securities
of the Company pursuant to the competing offer, the Board determines in
good faith that such third party offer was withdrawn or terminated
primarily as a result of the Purchaser's competing offer having superior
terms to or a substantially greater likelihood of success than such third
party offer. The Company may not enter into any agreement with the third
party offeror or take any action as a condition of the third party offer
unless and until the Purchaser has received notice under the Stockholder
Agreement and has been afforded not less than ten business days following
receipt of such notice from the Company to respond with a competing offer.
In no case during the Standstill Period may the Purchaser or any of its
affiliates, directly or indirectly, acquire or offer to acquire beneficial
ownership of any voting stock, if after such acquisition, the Purchaser
Interest would exceed 49.9%, unless such acquisition or offer (together
with related transactions) is (i) made pursuant to the Purchaser's rights
with regard to third party offers as described in the next preceding
paragraph, or (ii) has been approved by a majority of directors not
designated by the Purchaser and would result in the Purchaser and/or its
affiliates owning 100% of the Company's voting stock. After the Standstill
Period, the Purchaser's and/or its affiliates' right to acquire or offer to
acquire any equity security or interest therein will not be restricted;
provided, however, that the Purchaser shall not acquire or offer to acquire
any equity securities if, as the result of or after giving effect to such
acquisition, the Purchaser Interest would exceed 66.67%, except pursuant to
a cash tender offer for all equity securities not owned by the Purchaser
and/or its affiliates.
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Pro Rata Purchase Right. From and after the closing of the Second
Issuance until such time as the Purchaser Interest has been less than 30%
for a period of 25 consecutive days, the Company must give the Purchaser
prior written notice of any issuance by the Company of new securities as
the result of which the Purchaser Interest would be reduced, either
immediately upon issuance of such new securities, or upon subsequent
exercise or conversion thereof. The Purchaser may generally elect to
purchase up to its pro rata share of such new securities on the same terms
as the balance of the issuance of such new securities. The Purchaser's pro
rata purchase rights shall not apply to the following issuances: (i) any
issuance pursuant to (a) any stock option or purchase right or plan
exclusively for one or more employees and/or directors of the Company or
any of its subsidiaries or (b) warrants issued to directors prior to the
date of the Stockholder Agreement, (ii) any issuance in consideration of
any part of the acquisition by the Company or any of its subsidiaries of
any stock, assets or business; (iii) any issuance upon conversion of the
Company's Liquid Yield Option Notes due December 14, 2013, (iv) any
issuance pursuant to the exercise or conversion of a new security issued
after the date of the Stockholder Agreement in which the Purchaser was
entitled to participate pursuant to its pro rata purchase rights and (v)
any issuance in payment of any portion of the promissory note due July 11,
1996, issued by the Company to Tandy Corporation. In addition, if the
number of outstanding shares of voting stock is increased through the
issuance of additional shares, including issuances that do not trigger a
pro rata purchase right but excluding issuances pursuant to stock splits or
stock dividends issued or distributed proportionately on all outstanding
shares, then in connection with each such issuance the Purchaser and/or its
affiliates will have the right, but not the obligation, for designated
periods to purchase in the open market at any available price, up to the
number of additional shares as is necessary solely as a result of such
issuance to restore the Purchaser Interest to the same percentage as
existed immediately prior to such increase.
Transfer Restriction. The Purchaser may not sell or otherwise transfer
(except to an affiliate of the Purchaser that agrees to be bound by the
Stockholder Agreement) any of the Company's equity securities, or interest
therein, for a period of five years from the purchase and sale of the First
Issuance Shares, except that (i) shares acquired under the Letter of Credit
Agreement, as described below, may be sold at any time pursuant to certain
public offerings or open market transactions and (ii) other shares may be
sold in transactions from and after the third anniversary of the closing
(A) in which all other Stockholders may participate on a pro rata basis on
the same terms as the Purchaser, (B) pursuant to such public offerings or
open market transactions or (C) approved by a majority of directors not
designated by the Purchaser, as described below.
Board Representation. After the Purchaser acquires the New Issue Shares
and the Offer Shares, subject to the next following sentence, the Purchaser
will have the right to designate the number of directors of the Company
that will be one fewer than a majority of the total number of directors
(six of thirteen members of the Board, assuming the Board increases to
thirteen directors, as is anticipated, upon Stockholder Approval). If (a)
the Purchaser acquires the First Issuance Shares, but does not acquire the
Second Issuance Shares and the Offer Shares or (b) the Purchaser Interest
is less than 30% for a period of 25 consecutive days, then the Purchaser
will have the right to designate that number of directors that will result
in the total number of directors designated by the Purchaser being equal to
the product (rounded to the nearest whole number) of (i) the total number
of directors at that time, and (ii) the Purchaser Interest at that time. An
acquisition by the Purchaser of only the First Issuance Shares, giving the
Purchaser approximately 16.6% of all shares of outstanding Common Stock,
would result in the Purchaser designating one of eight members of the
Board. While entitled to Board representation, the Purchaser will also be
entitled to designate one of its director designees to serve on each
committee of the Board, and to select any of the directors as alternates
for each of its director designees serving on committees of the Board.
Purchaser designees will be placed on the Board promptly following the
consummation of the Transactions. In future years, Purchaser designees will
be nominated to the Board by the Company as
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part of its slate of nominees, and the Purchaser will be required to vote
its shares for such slate. As of the date hereof, the Purchaser did not
indicate that it had selected any director designees, and neither the
Company nor the Board has any approval rights with respect thereto.
After the closing and at all times until the Purchaser Interest is less
than 30% or greater than 90%, the Board must include at least three
directors who are not affiliates, officers, employees, agents, principal
stockholders, consultants or partners of the Purchaser, the Company or any
affiliate of either of them or of any entity that was dependent on the
Purchaser, the Company or any affiliate of either of them for more than 5%
of its revenues or earnings in its most recent fiscal year (each, an
"Independent Director"). During the Standstill Period, the Purchaser-
designated directors will not participate in the nomination of Independent
Directors. Thereafter, the Stockholder Agreement does not limit the
Purchaser's right to nominate directors (subject to the three-Independent
Director requirement). The Company's four current outside directors,
Messrs. Goeglein, Peltason and Yocam and Dr. Santoro, are expected to
continue to serve on the Board following the Transactions and would be
"Independent Directors" for purposes of the foregoing.
Certain Restrictions on Actions by the Purchaser. The Stockholder
Agreement provides that during the Standstill Period, neither the Purchaser
nor its affiliates will, directly or indirectly, (a) solicit, initiate or
participate in any solicitation of proxies or become a participant in any
election contest; call, or in any way participate in a call for, any
special meeting of Stockholders of the Company (or take any action with
respect to acting by written consent of the Company's Stockholders);
request, or take any action to obtain or retain any list of holders of any
securities of the Company; or initiate or propose any Stockholder proposal
or participate in the making of, or solicit Stockholders for the approval
of, one or more stockholder proposals; (b) deposit any voting stock in a
voting trust or subject the same to any voting agreement or arrangements,
except as provided in the Stockholder Agreement; (c) form, join or in any
way participate in a "group" (as defined therein) with respect to any
voting stock; (d) except as specifically permitted by the Stockholder
Agreement, otherwise act to control or influence the Company or its
management, Board, policies or affairs; or (e) disclose any intent,
purpose, plan or proposal with respect to the Stockholder Agreement, the
Company or its affiliates or the Board, management, policies, affairs,
securities or assets of the Company or its affiliates that is inconsistent
with the Stockholder Agreement. Notwithstanding the foregoing, however, the
Stockholder Agreement provides that nothing therein will be deemed to
prevent the Purchaser or its affiliates from voting their respective
shares, or taking such other action as it may deem necessary or appropriate
to cause the election as directors of those persons the Purchaser is
entitled to designate pursuant to the Stockholder Agreement, or prohibit or
restrict any action taken by the Purchaser or any of its affiliates in
connection with the exercise of the rights of the Purchaser and its
affiliates to make a competing offer in response to an offer by a third
party for a Third Party Acquisition.
Certain Approval Rights. So long as the Purchaser Interest is not less
than 30% for a period of 25 consecutive days, the Company shall not enter
into the following transactions without the prior written consent of the
Purchaser or, in the case of a Board action, the affirmative vote or
written consent of not less than a majority of the directors designated by
the Purchaser: (i) acquire or agree to acquire, or permit any of its
subsidiaries to acquire or agree to acquire, by merger, consolidation, or
acquisition of assets or stock, or otherwise, any corporation, partnership,
or other business organization or division thereof, or any other business
operation ("Acquired Entity") if the total assets, or the total revenues or
operating profits of such Acquired Entity as at the end of or for the most
recently completed four fiscal quarters preceding the agreement for such
acquisition shall exceed 20% of the total assets or the total revenues or
operating profits of the Company as at the end of or for such four fiscal
quarters, provided, however, the Purchaser's written consent shall not be
required for an acquisition in which the total value of all consideration
paid or given by the Company in such acquisition (including without
limitation the value of any funded debt or other capitalized obligations
assumed by the Company or any subsidiary of the Company) is less than $50
million; (ii) sell, contribute or otherwise transfer or agree to sell,
contribute or otherwise transfer, or permit any of its subsidiaries to
sell, contribute or otherwise transfer or agree to
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sell, contribute or otherwise transfer, any product line or line of
business of the Company or any of its subsidiaries or any interest therein
to any person other than a subsidiary of the Company that is or, if it were
a United States entity, would be, required to be consolidated for Federal
income tax purposes, if the assets, revenues or operating profit of such
product line or line of business as at the end of or for the most recently
completed four fiscal quarters preceding the agreement for such transfer
shall exceed 20% of the assets, revenues or operating profits of the
Company as at the end of or for such four fiscal quarters; (iii) authorize
for issuance, issue, sell, deliver or agree or commit to issue, sell or
deliver (whether through the issuance or exercise of options, warrants,
subscriptions, rights to purchase or otherwise), in any transaction or
series of related transactions, any equity securities if such securities
would represent an increase of 10% or more in the voting power outstanding
immediately prior to the issuance of such securities; (iv) approve any
annual capital expenditure budget, or authorize or make capital
expenditures in excess of $15 million in the aggregate for the Company and
all of its subsidiaries (other than pursuant to the approved budget); (v)
effect any amendments to the Restated Charter or Amended Bylaws or change
the number of authorized directors; and (vi) enter, or permit any of its
subsidiaries to enter, into any joint venture, partnership, or exclusive
licensing agreement with any third party that (a) involves an explicit or
projected commitment of cash and/or other resources of the Company and/or
of its subsidiaries or forecasted payments to or from the Company and/or
its subsidiaries during the duration of such agreement or relationship, or
the four-year period commencing on the date of such agreement, whichever is
less, in excess of $100 million, or (b) restricts or impairs in any
material respect the ability or right of the Company or any of its
subsidiaries to compete in any line of business or product that is material
to the business of the Company and its subsidiaries, taken as a whole;
provided, however, the Purchaser's written consent shall not be required
for any agreement for the procurement of central processing units and
licenses for the use of patents, basic input-output system software, disk
operating system software, Windows(R) operating system software, and
network operating system software, or other similar agreements, in each
case entered into in the ordinary course of business not substantially
inconsistent with past practice and for procurement of components to be
used in or with the Company's products, or provided to purchasers of the
Company's products in or with such products.
Results of Operations. Following the acquisition by the Purchaser of the
New Issue Shares and the Offer Shares, and provided that the Purchaser
Interest is not less than 30% for a period of 25 consecutive days, if (a)
the consolidated revenues or gross profits of the Company and its
subsidiaries for the fiscal year ended July 1996 shall be less than $2.6
billion or $430 million, respectively, (b) the consolidated revenues or
gross profits of the Company and its subsidiaries for the fiscal year ended
July 1997 shall be less than the greater of (i) $2.75 billion or $450
million, respectively, or (ii) 85% of the amounts therefor set forth in the
1997 operating plan of the Company approved by the Board; or (c) the
consolidated net income after taxes of the Company and its subsidiaries for
either of such fiscal years shall be less than 1% of net revenues, then a
management committee of the Board (the "Management Committee") will be
formed to review the desirability of changes in the management of the
Company and take such action, if any, as may be determined to be advisable
including without limitation the reassignment, change in the
responsibilities, removal, termination or replacement of any members of
management. For purposes of the foregoing, the "management" of the Company
shall refer to all persons who presently have the title of "Vice President"
or higher, whether or not any such person is an officer of the Company, and
all such persons who may perform the functions presently performed by any
of the foregoing, without regard to title, but shall not include the Chief
Executive Officer. The Management Committee shall make any determination
with respect to the termination or reassignment of an existing member of
management, or the decision to hire any new member of management within 60
days following the availability of the audited financial statements for the
relevant year (or such longer period of time as may be determined by a
majority of the Board), and no such determination shall be made thereafter;
provided that: (a) the Management Committee shall have such additional time
as is reasonably necessary for the recruitment and selection of any such
new member of management; and (b) no action or inaction by the Management
Committee following the fiscal year ended July 1996 shall impair its
ability to act as therein authorized following the fiscal year ended July
1997. The Management Committee shall not be
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authorized to take such actions if they would violate applicable law or if
the shortfall in consolidated revenues, gross profits or net income of the
Company and its subsidiaries referred to above, shall be the direct result
of certain "force majeure" events or a decline in the unit volume of the
world market for personal computers.
The consolidated revenue and gross profit figures presented in the
previous paragraph and in the Stock Purchase Agreement are target figures
agreed to by the Company and the Purchaser for usein determining when the
Management Committee will be established. Such figures should not be viewed
as forecasts of the future financial performance of the Company. The
Company does not intend to disclose its progress or lack of progress in
meeting the consolidated revenue and gross profit figures presented in the
previous paragraph and in the Stock Purchase Agreement, except to the
extent implicit in its ongoing periodic financial reporting activities,
consistent with past practices.
The Management Committee will consist of those members of the Board
designated by the Purchaser in accordance with the Stockholder Agreement,
the Chief Executive Officer of the Company, if he is then a director (or,
if he is not then a director, another director who is an employee of the
Company), and up to a maximum of four directors who are not officers or
employees of the Company. In the event there shall be more than four
directors who were not designated by the Purchaser and are not officers or
employees of the Company at a time when the Management Committee is
authorized to act in accordance with the foregoing, those directors who
were not designated by the Purchaser will select the four such directors
who will be members of the Management Committee in addition to the Chief
Executive Officer (or, if he is not then a director, another director who
is an employee of the Company) and the directors designated by the
Purchaser, and unless and until such selection is made the Management
Committee shall consist solely of the directors designated by the Purchaser
and the Chief Executive Officer of the Company (or, if he is not then a
director, another director who is an employee of the Company).
Material Transactions. At all times that the Purchaser Interest is less
than 100%, neither the Purchaser nor any of its affiliates shall engage in
any material transaction with the Company or any of its subsidiaries unless
such transaction has been approved by a majority of the Independent
Directors or, in the case of a series of related transactions, is in
accordance with guidelines approved by a majority of the Independent
Directors. "Material transaction" shall generally mean (i) any amendment
to, or termination of, the Stockholder Agreement or any of the other
Transaction Documents and (ii) any transaction between the Company, any of
its subsidiaries or the Company's Stockholders (as such), on the one hand,
and the Purchaser or any of its affiliates, on the other hand; provided,
that "material transaction" shall not include any (a) transactions with
Stockholders which are expressly permitted by the Stockholder Agreement,
(b) transactions in accordance with the terms of the Transaction Documents
and (c) other transactions or series of related transactions involving
payments by or obligations or transfer of property of the Company with an
aggregate value in any calendar or fiscal year of less than $5 million.
Termination of Certain Rights. The rights and obligations of the Company
and the Purchaser with respect to Board representation, approval rights and
certain covenants under the Stockholder Agreement generally terminate at
the first time after the date of such Agreement that the Purchaser Interest
is less than 15% for a period of 90 consecutive days.
See "THE TRANSACTIONS--Stockholder Rights Plan; Certain Anti-Takeover
Effects of the Purchaser's Investment" for a discussion of certain anti-
takeover effects of the foregoing which Stockholders should consider.
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Registration Rights Agreement. The Registration Rights Agreement required
under the terms of the Stock Purchase Agreement to be executed and delivered at
the earlier of the closing of the First or the Second Issuance provides, among
other things, for the following:
Pursuant to the Registration Rights Agreement, the Purchaser shall have the
right to require the Company to file a registration (a "Demand Registration")
under the Securities Act of 1933, as amended (the "Securities Act"), for any or
all of the Common Stock acquired by it or its affiliates from time to time not
in violation of the Stock Purchase Agreement or the Stockholder Agreement (the
"Registrable Shares"). The right to a Demand Registration is limited, however,
in that (i) it may be invoked in each instance only with respect to 2,000,000
or more Registrable Shares, (ii) the Company is not required to honor a Demand
Registration request within 18 months of the effectiveness of a previous Demand
Registration, and (iii) the Company may defer its obligation to honor a Demand
Registration request for up to 180 days if the Board determines in good faith
that a registration would require public disclosure of material non-public
information related to a significant pending transaction of the Company that
could be impaired by such disclosure. If the Purchaser purchases the First
Issuance Shares but not the Second Issuance Shares and the Offer Shares, the
Company shall not be required to effect more than three Demand Registrations;
if the Purchaser purchases all of the New Issue Shares and the Offer Shares,
the Company shall not be required to effect more than six Demand Registrations.
The Purchaser shall also have the right, with respect to most registered
offerings of Common Stock for cash, to require the Company to include
Registrable Shares in such offering (together with Demand Registrations,
"Registrations"). The Registration Rights Agreement provides that expenses
relating to Registrations (other than selling expenses and commissions) will
generally be payable by the Company and otherwise contains terms that are
generally customary to registration rights agreements of its type.
Letter of Credit Agreement. The Letter of Credit Agreement required to be
executed and delivered at the closing of the purchase and sale of the Second
Issuance Shares provides that the Purchaser will finance up to $75 million of
principal payment obligations of the Company under its existing $96.7 million
note to Tandy Corporation. Such financing will be provided either by direct
advances by the Purchaser to the Company or through draws under a standby
letter of credit. Establishment fees charged by an issuing bank with respect to
any such letter of credit will be paid or reimbursed by the Company. The
Company will repay the Purchaser for any such financing, at the Purchaser's
option, either by repayment in cash at the end of three years (with semi-annual
interest paid during such three years at an announced "prime" lending rate), or
by the issuance of additional shares of Common Stock (subject to the 49.9%
ownership limitation during the Standstill Period described above) at market
price, or a combination of both.
STRATEGIC ALLIANCE AGREEMENT
Pursuant to the Stock Purchase Agreement, the Company and the Purchaser have
entered into the Strategic Alliance Agreement, pursuant to which such parties
have agreed, subject to the terms and conditions thereof, to negotiate and
agree, prior and as a condition precedent to the issuance and sale of the
Second Issuance Shares, to various mutually beneficial commercial relationships
intended to enhance the business prospects and competitive position of both the
Company and the Purchaser. The following description of the Strategic Alliance
Agreement does not purport to be complete and is qualified in its entirety by
reference to the text of the Strategic Alliance Agreement, which has been filed
as an exhibit to the Schedule 14D-9.
The Strategic Alliance Agreement requires the Purchaser and the Company to
negotiate and enter into agreements embodying the principles summarized below
as a condition to consummating the Second Issuance.
Component Supply Agreements. Such agreements shall provide that the
Purchaser will supply the Company with certain components used in the
manufacture of the Company's products, including DRAMs, hard disk drives,
monitors and LCDs, with the Company being eligible for supply and terms
which, when considered in the aggregate, are at least as favorable as those
offered by the Purchaser to its most favored customer group.
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Joint Procurement Agreement. Such agreement shall provide a mechanism
pursuant to which the Purchaser and the Company will coordinate their
purchases from third parties in order to obtain more favorable pricing as a
result of leveraging the combined purchasing power of both parties.
Joint Marketing Agreement. Such agreement shall provide that the Company
and the Purchaser will share expertise to jointly market currently existing
and newly developed products of both parties in order to achieve maximum
market penetration for both parties.
Cross OEM Agreement. Such agreement shall provide that the Company and the
Purchaser will coordinate the utilization of the manufacturing and assembly
capacity of each other.
Joint Product Development. Such agreement shall provide that the Company
and the Purchaser will share expertise to jointly develop products in order
to accelerate product time to market for both parties.
Cross License Agreement. Such agreement shall provide that the Company and
the Purchaser will license to each other their respective patents,
copyrights, and other intellectual property in order to foster rapid
product development and low-cost production.
Employee Exchange Agreement. Such agreement shall provide that the Company
and the Purchaser will coordinate a program to provide opportunities for
employees of one company to spend time as employees of the other company
("Transfer Employees") in order to facilitate a mutual understanding of
each party's respective business and corporate culture, and attainment of
the mutual goals set forth in the Strategic Alliance Agreement, and provide
assistance and training to each other in areas where each party has
particular expertise. Such agreement shall provide that certain Transfer
Employees designated by the Purchaser will report directly to the Chief
Executive Officer of the Company.
Technical Collaboration Agreement. Such agreement shall provide that the
Company and the Purchaser will collaborate regarding technical information.
Management believes that the activities contemplated under the Strategic
Alliance Agreement should be of substantial benefit to the Company. However,
while the Strategic Alliance Agreement sets forth the principles agreed by the
parties to govern these relationships, the terms of the agreements remain
subject to negotiation and may not be finalized by the time of the Special
Meeting, although such agreements must be mutually satisfactory to the Company
and the Purchaser and must be finalized prior to the Second Issuance. Once
agreed to, a substantial amount of time and effort may be required for these
relationships with the Purchaser to be established and to develop.
Additionally, it is possible that because the Purchaser is a supplier of
critical components in a highly competitive marketplace, other suppliers may be
less likely to extend attractive terms to the Company, or to do business with
or enter into strategic relationships involving the Company. The Purchaser has
other business involvements typical of large, multi-national companies and is
not based in the United States (although its presence in the United States is
significant), and it is possible that some suppliers, customers, employees and
others will not react favorably to the proposed arrangements. The reliance by
the Company on the Purchaser for significant portions of certain components
requirements may reduce the Company's flexibility to respond to changes in the
market for personal computers.
RESTATED CERTIFICATE OF INCORPORATION; AMENDED BYLAWS
The following description of the proposed Restated Charter and the Amended
Bylaws of the Company does not purport to be complete and is qualified in its
entirety by reference to the text of such documents. Stockholders are urged to
read the Restated Charter and Amended Bylaws in their entireties.
In order to accommodate the Purchaser's director designees described herein,
the proposed Restated Charter amends and restates the current Certificate of
Incorporation of the Company by increasing the size of the Board from a range
of five to nine members to a range of five to thirteen members. Additionally,
the Restated Charter:
(i) limits the Board's power to amend the provisions of the Amended
Bylaws to be added as described below, in order to ensure the Purchaser's
ability to rely on such provisions remaining in effect;
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(ii) revises certain provisions relating to future issuances of preferred
stock, par value $0.01 per share, of the Company (the "Preferred Stock")
by: (a) clarifying the status of authorized and unissued shares of
Preferred Stock and the ability to reissue such shares as a part of the
series of which they were originally a part or to reclassify and reissue
such shares as part of a new series of Preferred Stock or as part of any
other series of Preferred Stock; (b) specifying the relative rights of
holders of Preferred Stock and Common Stock to receive dividends; and (c)
specifying the relative rights of holders of Preferred Stock and Common
Stock to share in all remaining assets of the Company upon liquidation or
dissolution; and
(iii) requires the Company to indemnify to the full extent authorized or
permitted by applicable law any person made, or threatened to be made, a
party or witness to any action, suit or proceeding by reason of the fact
that he, his testator or intestate, is or was a director or officer of the
Company or by reason of the fact that such director or officer, at the
request of the Company, is or was serving any other corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise, in any capacity.
The proposed Amended Bylaws amend the current Bylaws by making the following
changes, which relate specifically to terms of the Stockholder Agreement and
are necessary to implement the Company's agreements with the Purchaser set
forth therein:
(i) eliminating the requirement that the Board consist of not less than
five nor more than nine members;
(ii) providing that vacancies on the Board due to death, resignation or
removal of (a) a director designated by the Purchaser or (b) a director not
designated by the Purchaser must be replaced by the remaining directors
with, in the case of clause (a), a director designated by the Purchaser
and, in the case of clause (b), a director designated by those directors
not designated by the Purchaser;
(iii) providing for the Management Committee;
(iv) requiring that any special meeting of the Board called during the
Standstill Period by directors designated by the Purchaser be attended by
at least a majority of the directors not designated by the Purchaser to
constitute a quorum;
(v) requiring that two-thirds of the directors constitute a quorum for,
and the affirmative vote of not less than two-thirds of all directors be
required to approve, any action that would amend the existing Rights Plan,
or adopt or amend a new, stockholder rights plan, if such amended or new
stockholder rights plan does not contain provisions equivalent to those set
forth in the amendment to the Rights Plan as described below; and
(vi) providing that the amendment of certain of the foregoing new
provisions of the Amended Bylaws requires the approval of a majority of the
directors designated by the Purchaser.
As described herein, the Company is proposing to adopt the Restated Charter
and Amended Bylaws in order to effect certain aspects of the Transactions as
agreed to with the Purchaser. Stockholder Approval, and adoption of the
Restated Charter and Amended Bylaws are conditions to the Purchaser's
obligation to consummate the Second Issuance and the Offer. The Restated
Charter and Amended Bylaws will not become effective unless the Second
Issuance, the Offer and related Transactions are consummated. See "THE
TRANSACTIONS--Stockholder Rights Plan; Certain Anti-Takeover Effects of the
Purchaser's Investment" for a discussion of certain anti-takeover effects of
the foregoing which Stockholders should consider.
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STOCKHOLDER RIGHTS PLAN; CERTAIN ANTI-TAKEOVER EFFECTS OF THE PURCHASER'S
INVESTMENT
On June 30, 1989, the Board adopted the Rights Plan, which is intended to
protect Stockholders from unfair takeover practices. Under the Rights Plan,
each share of Common Stock carries one right to obtain additional stock or
other property according to terms provided in the Rights Plan (collectively,
the "Rights"). The Rights are not exercisable or separable from the Common
Stock until another party acquires at least 15% of the Company's then
outstanding Common Stock or commences a tender offer for at least 15% of the
Company's then outstanding Common Stock.
In the event the Company is acquired in a merger or other business
combination transaction in which the Company is not the surviving corporation
or 50% or more of its consolidated assets or earning power are sold or
transferred, each Right will entitle its holder to receive, at the then current
exercise price, common stock of the acquiring company having a market value
equal to two times the exercise price of the right. If a person or entity were
to acquire 15% or more of the outstanding shares of the Common Stock, or if the
Company is the surviving corporation in a merger and its Common Stock is not
changed, each Right will entitle the holder to receive, at the then current
exercise price, Common Stock having a market value equal to two times the
exercise price of the Right. Until a Right is exercised, the holder of a Right,
as such, will have no rights as a stockholder of the Company, including,
without limitation, the right to vote as a stockholder or receive dividends.
The Rights, which expire on June 30, 1999, may be redeemed by the Company at a
price of $0.01 per Right. At April 1, 1995, 500,000 of the 1,000,000 authorized
but unissued shares of Preferred Stock of the Company are reserved for issuance
upon exercise of these Rights.
As a condition to entering into the Stock Purchase Agreement, the Company
amended the Rights Plan (the "Rights Plan Amendment") to effectively exclude
the Purchaser and its affiliates until the earlier to occur of (i) the
termination of the Stock Purchase Agreement in accordance with its terms
without the purchase by the Purchaser of any shares of Common Stock pursuant
thereto, (ii) the Purchaser, its affiliates or associates collectively ceasing
to be, for a period of at 25 consecutive days following the closing of the
purchase and sale of the New Issue Shares, the beneficial owners of more than
15% of the Common Stock then outstanding or (iii) the Purchaser, its affiliates
and associates collectively becoming the beneficial owners of any shares of
Common Stock in violation of the terms of the Stockholder Agreement.
Accordingly, if the Proposal is approved, the Purchaser can, in accordance
with the terms and conditions of the Stockholder Agreement, acquire, without
additional Board or Stockholder approval and without triggering the Rights
Plan, up to 49.9% of the Common Stock during the first four years of its
investment, and up to 66.67% of the Common Stock at any time thereafter. In
addition, the Stockholder Agreement permits the Purchaser to acquire, without
such additional approval and without triggering the Rights Plan, 100% of the
Company's equity securities pursuant to a cash tender offer made to all holders
thereof. See "THE TRANSACTIONS--The Stock Purchase Agreement and Exhibits--The
Stockholder Agreement."
While the Board believes that the proposed investment by the Purchaser as
described herein is fair to, and in the best interests of, the Company and its
Stockholders, its approval (including, without limitation, the Rights Plan
Amendment, the Restated Charter, the Amended Bylaws and the Stockholder
Agreement) may have certain anti-takeover effects which Stockholders should
consider. These considerations include the likelihood that the size of the
Purchaser's investment and the attendant rights the Purchaser will receive
(notwithstanding related restrictions on the Purchaser) might discourage other
persons from offering to acquire all or a significant interest in the Company
and may make more difficult a change in control of the Company (other than one
in which the Purchaser acquires control). See "BACKGROUND OF THE TRANSACTIONS--
Recommendation of the Company's Board of Directors."
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OTHER BUSINESS
STOCKHOLDER PROPOSALS
No business may be brought before the Special Meeting other than the Proposal
and procedural matters that may arise in connection therewith. Proposals of
stockholders intended to be presented at the Company's next Annual Meeting of
Stockholders should be received at the Office of the Corporate Secretary prior
to May 31, 1995 for inclusion in the Proxy Statement for the Annual Meeting of
Stockholders scheduled to be held on or about November 2, 1995. The notice must
contain a brief description of the business proposed to be brought before the
meeting and the reasons for conducting the business at the meeting. In
addition, the notice must present certain information concerning the
stockholder making the proposal, who must be a stockholder of record at the
time of giving the notice and be entitled to vote at the meeting.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange Act
and in accordance therewith files reports and other information with the
Commission. Reports, proxy statements, and other information filed by the
Company can be inspected and copied at the public reference facilities of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following Regional Offices of the Commission: Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60611-2511, and 7 World
Trade Center, Suite 1300, New York, New York 10048. Copies of such material may
also be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act are incorporated in this Proxy Statement by reference: (i)
pages S-1, S-2 and S-4 through S-11 of Schedule I to the Schedule 14D-9, (ii)
pages 14 through 24 and pages 26 through 47 of the 1994 10-K, and (iii) the
Quarterly Reports.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Proxy
Statement and prior to the Special Meeting are deemed to be incorporated by
reference in, and made a part of, this Proxy Statement from the date of filing
of such documents. Any statement contained in a document all or any portion of
which is incorporated or deemed to be incorporated by reference herein are
deemed to be modified or superseded for purposes of this Proxy Statement to the
extent that a statement contained herein or in any other subsequently filed
document that also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Proxy Statement.
The Company will provide without charge to each person to whom a copy of this
Proxy Statement is delivered, on the written or oral request of such person and
by first-class mail or other equally prompt means within one business day of
receipt of such request, a copy of any and all of the documents referred to
above which have been or may be incorporated by reference in the Proxy
Statement. Such written or oral request should be directed to AST Research,
Inc., 16215 Alton Parkway, Irvine, California 92718, Attention: Investor
Relations ((714) 727-4141).
DENNIS R. LEIBEL
Secretary
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PRELIMINARY COPY
AST RESEARCH, INC.
PROXY FOR THE MAY __, 1995 SPECIAL MEETING OF STOCKHOLDERS
This Proxy is Solicited by The Board of Directors of AST Research, Inc.
The undersigned stockholder of AST Research, Inc. ("AST") hereby
appoints Richard J. Goeglein, Jack W. Peltason, Carmelo J. Santoro, Ph.D. and
Delbert W. Yocam and each of them, the lawful attorneys and proxies of the
undersigned, each with several powers of substitution, and hereby authorizes
them to represent and to vote, as designated on the reverse of this card, all
the shares of Common Stock of AST held of record by the undersigned on April __,
1995 at the Special Meeting of Stockholders to be held in the Deauville Central
Room of the Sutton Place Hotel, 4500 MacArthur Blvd., Newport Beach, California
92660, on May __, 1995 at 9:00 a.m., Pacific Standard Time, and at any and all
postponements and adjournments thereof, with all the powers the undersigned
would possess if personally present, upon all matters proposed by AST and set
forth in the Notice of Special Meeting of Stockholders dated April __, 1995, and
the Proxy Statement dated April __, 1995, receipt of which is hereby
acknowledged.
1. To approve (i) the amendment and restatement of the Certificate of
Incorporation to increase the size of the Board of Directors from a range of
five to nine members to a range of five to thirteen members and make certain
other changes; and (ii) the terms of the Stock Purchase Agreement dated February
27, 1995, by and between AST and Samsung Electronics Co., Ltd. ("Samsung"), and
the transactions contemplated thereby, including (A) the issuance and sale by
AST to Samsung of (a) 6,440,000 shares of common stock, par value $0.01 per
share, of AST (the "Common Stock") at $19.50 per share and (b) an additional
number of shares of Common Stock at $22.00 per share (approximately 5,630,000,
assuming no further issuances and full participation in Samsung's cash tender
offer to purchase from AST's stockholders up to 5,820,000 shares of Common Stock
at $22.00 per share), so that Samsung will own approximately 40.25% of the
outstanding Common Stock; and (B) the grant to Samsung of the rights,
preferences and privileges and the acceptance and performance by AST of the
restrictions and obligations contained in the Stock Purchase Agreement and the
exhibits thereto, including the Stockholder Agreement.
(Continued and to be signed and dated on the reverse side and returned promptly
in the enclosed envelope)
<PAGE>
[_] FOR [_] AGAINST [_] ABSTAIN
Shares represented by all properly executed proxies will be voted in
accordance with instructions appearing on this card and in the discretion of the
proxy holders as to any other matter that may properly come before the Special
Meeting of Stockholders. IN THE ABSENCE OF SPECIFIC INSTRUCTIONS, PROXIES WILL
BE VOTED FOR ITEM 1, AND IN THE DISCRETION OF THE PROXY HOLDERS AS TO ANY OTHER
MATTER THAT MAY PROPERLY COME BEFORE THE SPECIAL MEETING OF STOCKHOLDERS.
DATED: ------------------------ , 1995
----------------------------------------
Signature(s)
----------------------------------------
IMPORTANT: Please sign as name(s) appear
hereon, and date this proxy. If a joint
account, each joint owner must sign. If
signing for a corporation or partnership
or as agent, attorney or fiduciary,
indicate the capacity in which you are
signing.
