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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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AST RESEARCH, INC.
(Name of Subject Company)
AST RESEARCH, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(INCLUDING THE ASSOCIATED RIGHTS)
(Title of Class of Securities)
001907104
(CUSIP Number of Class of Securities)
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SAFI U. QURESHEY
CHIEF EXECUTIVE OFFICER
AST RESEARCH, INC.
16215 ALTON PARKWAY
IRVINE, CALIFORNIA 92718
(714) 727-4141
(Name, address and telephone number of person authorized to receive notice and
communications on behalf of the person(s) filing statement)
WITH COPIES TO:
THOMAS C. JANSON, JR. NICK E. YOCCA
SKADDEN, ARPS, SLATE, MEAGHER & FLOM STRADLING, YOCCA, CARLSON & RAUTH
300 SOUTH GRAND AVENUE 660 NEWPORT CENTER DRIVE
LOS ANGELES, CALIFORNIA 90071 NEWPORT BEACH, CA 92660
(213) 687-5000 (714) 725-4000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is AST Research, Inc., a Delaware corporation
(the "Company"), and the address of the principal executive offices of the
Company is 16215 Alton Parkway, Irvine, California 92718. The title of the
class of equity securities to which this statement relates is the common stock,
par value $.01 per share, of the Company, including the associated rights (the
"Rights") issued pursuant to the Company's stockholder rights plan (the "Common
Stock").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to the tender offer by Samsung Electronics Co., Ltd.,
a Korean corporation (the "Purchaser"), disclosed in a Tender Offer Statement
on Schedule 14D-1 (the "Schedule 14D-1"), dated March 6, 1995, to purchase up
to 5,820,000 shares of Common Stock (the "Offer Shares") at $22.00 per share,
net to the seller in cash, upon the terms and subject to the conditions set
forth in the Offer to Purchase, dated March 6, 1995 (the "Offer to Purchase"),
and the related Letter of Transmittal (which, together with the Offer to
Purchase and any amendments or supplements thereto, collectively constitute the
"Offer"). The Offer is being made by the Purchaser pursuant to a Stock Purchase
Agreement, dated as of February 27, 1995 (the "Stock Purchase Agreement"),
between the Purchaser and the Company. According to the Schedule 14D-1, the
address of the principal executive offices of the Purchaser is 250, 2-Ka,
Taepyung-Ro, Chung-Ku, Seoul, Korea 100-742.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above, which information is incorporated
herein by reference.
(b)(1) Certain information with respect to certain contracts, agreements,
arrangements and understandings between the Company and certain of its
executive officers, directors and affiliates is set forth in the attached
Schedule I and is incorporated herein by reference. In addition, consummation
of the transactions contemplated by the Stock Purchase Agreement and related
documents will have certain effects under certain compensation and incentive
plans and arrangements in which officers and directors of the Company are
participants, as summarized below.
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").
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 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. Each of the affected directors
has agreed to waive such repurchase rights insofar as the Purchaser's
contemplated investment is concerned. In addition, warrant certificates 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%. The foregoing
description does not purport to be complete and is qualified
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in its entirety by reference to the forms of the waivers and amendments filed
as exhibits hereto and incorporated herein by reference.
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 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 has maintained
severance agreements (the "Severance Compensation Agreements") with its eight
executive officers and eleven 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). 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 of Directors of the Company (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 defined below under "The Stock
Purchase Agreement and Exhibits--The Stockholder Agreement." The foregoing
description does not purport to be complete and is qualified in its entirety by
reference to the form of amendments filed as an exhibit hereto and incorporated
herein by reference.
Waiver of Rights under Employment Agreement. Mr. Qureshey's employment
agreement with the Company, dated July 27, 1993, has been amended, in the form
of Exhibit D to the Stock Purchase Agreement, 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 foregoing description does not
purport to be complete and is qualified in its entirety by reference to the
form of amendment filed as an exhibit hereto and incorporated herein by
reference.
(b)(2)
(i) THE STOCK PURCHASE AGREEMENT AND EXHIBITS.
The Offer is being made pursuant to the Stock Purchase Agreement. In
addition, the Stock Purchase Agreement provides that the Purchaser (a) will
have the right and obligation, subject to certain conditions, to purchase from
the Company (i) 6,440,000 newly issued shares of Common Stock (the "First
Issuance Shares") at $19.50 per share (the "First Issuance") and (ii) such
additional number (5,630,000, assuming no further issuances and full
participation in the Offer) of newly issued shares of the Common Stock (the
"Second Issuance Shares" and, together with the First Issuance Shares, the "New
Issue Shares") at $22.00 per share
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(the "Second Issuance" and, together with the First Issuance, the "Share
Issuances") so that its aggregate ownership in the Company would be, after
giving effect to the completion of the First Issuance and the purchase of the
Offer Shares, approximately 40.25%, and (b) will acquire the rights and accept
the restrictions set forth in the Letter of Credit Agreement, the Registration
Rights Agreement and the Stockholder Agreement attached as exhibits to the
Stock Purchase Agreement, and certain other documents attached as exhibits to
the Stock Purchase Agreement. As the context requires, references herein to
"Common Stock" shall be deemed to exclude the Rights. 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, copies of which are filed as exhibits hereto and
are incorporated herein by reference.
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 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 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 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 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 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 amendment to the Company's Certificate of Incorporation in
the form of Exhibit A to the
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Stock Purchase Agreement (the "Restated Charter") (collectively, the
"Stockholder Proposal"), (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"), in the form
attached as an exhibit to the Stock Purchase Agreement, to permit the Purchaser
to acquire Common Stock in accordance with the Stock Purchase and Stockholder
Agreements, and (C) the amendment to Mr. Qureshey's employment agreement, in
the form attached as an exhibit to the Stock Purchase 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 approval of the Stockholder Proposal 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 Stockholder Proposal, including, in certain circumstances, following
termination of the Stock Purchase Agreement by the Company.
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 will be subject to the prior approval of the Purchaser in
accordance with the Stockholder Agreement, as described below.
Other Potential Bidders. The Stock Purchase Agreement requires 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 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
will 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 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
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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 this 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 decrees 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 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.
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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 Shares 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
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 shall have
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.
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
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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 and (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 directors then authorized under the
Restated Charter. 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 then authorized under the Restated Charter, and (ii) the
Purchaser Interest at that time. 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.
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).
Certain Covenants. 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
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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 them 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) 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 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 Bylaws or change in 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
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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, changes 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 corporation, 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 herein authorized following
the fiscal year ended July 1997. The Management Committee shall not be
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 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
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Independent Directors. "Material transaction" shall generally mean (i) any
amendment to, or termination of, the Stockholder Agreement or, any of the other
documents that have been executed and delivered in connection with the Stock
Purchase Agreement (the "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.
The Company's Bylaws will be amended, in the form attached as an exhibit to
the Stock Purchase Agreement, to implement changes consistent with certain of
the foregoing transactions.
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.
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 Shares 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.
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(ii) STRATEGIC ALLIANCE AGREEMENT
Pursuant to 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 agreed,
subject to the terms and conditions thereof, 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. 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, a copy of which is filed as an exhibit hereto and is
incorporated herein by reference.
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 dynamic random access
memory chips ("DRAMs"), hard disk drives, monitors and liquid crystal
display panels ("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.
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.
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(iii) CONFIDENTIALITY AGREEMENT.
In connection with a possible transaction and potential future business
collaborations (the "transaction") between the Purchaser and the Company, the
parties entered into a confidentiality agreement on December 21, 1994 (the
"Confidentiality Agreement"). The Confidentiality Agreement provides that the
Purchaser and the Company will each provide the other with certain information
to be used solely for the purpose of evaluating the proposed transaction and
that each will keep all such information confidential. The Confidentiality
Agreement further provides that (i) each party may disclose such confidential
information to the extent required by law, but must first notify the other
party, (ii) disclosure of information shall only be to those representatives
necessary for the purpose of the evaluation, (iii) each party must promptly
return all documents furnished by the other party upon such party's written
request, (iv) for a period of one year from the execution of the
Confidentiality Agreement neither party will solicit employment of officers,
directors or other key employees of the other party without the prior written
consent of the other party and (v) prior to the execution or after the
termination of the Stock Purchase Agreement (or any other definitive agreement)
the Purchaser will not acquire any securities of the Company, enter into any
business combination transaction involving the Company, or solicit proxies with
respect to stock of the Company. The foregoing description of the
Confidentiality Agreement does not purport to be complete and is qualified in
its entirety by reference to the text of the Confidentiality Agreement, a copy
of which is filed as an exhibit hereto and is incorporated herein by reference.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation of the 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 holders of Common Stock, and the
Company, respectively, (ii) approved and adopted the Stock Purchase Agreement,
the other Transaction Documents and the transactions contemplated thereby, and
(iii) recommended that the stockholders of the Company accept the Offer.
Accordingly, the Board unanimously recommends that the stockholders of the
Company tender their shares of Common Stock pursuant to the Offer. A copy of
the letter to stockholders is attached as an exhibit hereto and is incorporated
herein by reference.
(b) Background; Reasons for the Recommendations.
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 & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch").
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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.
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.
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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 party regarding the terms
of a potential investment. On February 9, 1995, the Company received a letter
from such party regarding a potential investment in the Company, pursuant to
which such 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.
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 party referred to in the next preceding paragraph 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 the other interested 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.
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. Based upon the results of
discussions between management of the Company and the other party, and between
Merrill Lynch and the 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. 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 of Directors was held at
which Merrill Lynch delivered its written opinion to the Board, and the Board
unanimously approved the terms of the Purchaser's investment as described
above. On the same day, following such Board approval, the Company and the
Purchaser entered into the Stock Purchase Agreement and Strategic Alliance
Agreement and publicly
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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 an exhibit hereto. 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 described in Item 5 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 provision of financial
advisory and financing services to the Company and the Purchaser.
In determining to make its recommendations, the Board considered a number of
factors, including:
(i) 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
its stockholders (other than the Purchaser and its affiliates) in the
proposed transactions, taken as a whole, is fair to the Company and such
stockholders;
(ii) The fact that the Company's 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);
(iii) 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;
(iv) 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 Interest 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,
the Purchaser Interest cannot exceed 66.67% without making a cash offer for
100% of the outstanding capital stock, and that until the Purchaser
Interest 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.
(v) The Board's familiarity with the financial condition, results of
operations, business, technology, prospects and strategic objectives of the
Company;
(vi) 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;
(vii) 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
(viii) 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.
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While the Board of Directors 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 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 the Company. 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 here is significant), it is
possible that some suppliers, customers, employees and others will not react
favorably to the proposed arrangements.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to certain letter agreements dated as of August 22 and November 2,
1994, as amended, between the Company and Merrill Lynch (the "Engagement
Letter"), 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. 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 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 the Engagement Letter. 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 its stockholders bears to Merrill Lynch's relevant financial interest.
Pursuant to a certain letter agreement dated as of October 31, 1994, between
the Company and APV, the Company engaged APV for the purpose of identifying and
introducing prospective merger/acquisition/investment candidates. The Company
paid a retainer fee of $25,000, and will pay a fee of 0.5% of the consideration
paid by the Purchaser for its investment in the Company. The Company also
agreed to reimburse APV for its expenses on a pre-approved basis.
Neither the Company nor any person acting on its behalf currently intends to
employ, retain or compensate any other person to make solicitations or
recommendations to security holders on its behalf concerning the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Except as set forth in Schedule I under the caption "Executive
Compensation--Option/SAR Grants in Last Fiscal Year" or as described in Item
3(b)(1) above (the provisions of each of which are hereby incorporated herein
by reference), no transactions in the Common Stock have been effected during
the past 60 days by the Company or, to the best of the Company's knowledge, by
any executive officer, director, affiliate or subsidiary of the Company.
(b) To the best of the Company's knowledge, each executive officer, director
and affiliate of the Company currently intends to tender to the Purchaser all
Common Stock over which he or she has sole dispositive power, except for the
Common Stock held by such person(s) which, if tendered, could cause such
person(s) to incur liability under the provisions of Section 16(b) of the
Exchange Act and except for the Common Stock underlying stock options, if any,
held by such persons. The foregoing does not include any Common Stock over
which, or with respect to which, any such executive officer, director,
affiliate or subsidiary acts in a fiduciary or representative capacity or is
subject to the instructions of a third party with respect to such tender.
16
<PAGE>
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY SUBJECT COMPANY.
(a) The Company has been engaged in discussions with third parties regarding
certain possible transactions involving the Company and in connection with such
discussions executed confidentiality agreements with each such party. See Item
4(b) above (the provisions of which are hereby incorporated herein by
reference).
Except as set forth above or in Item 3(b) above (the provisions of which are
hereby incorporated herein by reference), the Company is not engaged in any
negotiation in response to the Offer which relates to or would result in (1) an
extraordinary transaction such as a merger or reorganization, involving the
Company or any subsidiary of the Company; (2) a purchase, sale or transfer of a
material amount of assets by the Company or any Subsidiary of the Company; (3)
a tender offer for or other acquisition of securities by or of the Company; or
(4) any material change in the present capitalization or dividend policy of the
Company.
(b) Except as described above or in Items 3(b) or 4 above (the provisions of
which are hereby incorporated herein by reference), there are no transactions,
Board resolutions, agreements in principle or signed contracts in response to
the Offer that relate to or would result in one or more of the events referred
to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
17
<PAGE>
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO.
-----------
<C> <S>
Exhibit 1 Stock Purchase Agreement, dated as of February 27, 1995, by and
between AST Research, Inc. and Samsung Electronics Co., Ltd.(1)
Exhibit 2 Form of Amended and Restated Certificate of Incorporation of AST
Research, Inc.(1)
Exhibit 3 Form of Amended Bylaws of AST Research, Inc.(1)
Exhibit 4 Amendment to Rights Plan, dated as of March 1, 1995, by and
between AST Research, Inc. and American Stock Transfer & Trust
Company.(1)
Exhibit 5 Amendment to and Clarification of Employment Agreement, dated as
of February 27, 1995, by and between AST Research, Inc. and Safi
U. Qureshey.(1)
Exhibit 6 Form of Letter of Credit Agreement, by and between AST Research,
Inc. and Samsung Electronics Co., Ltd.(1)
Exhibit 7 Form of Registration Rights Agreement, by and between AST
Research, Inc. and Samsung Electronics Co., Ltd.(1)
Exhibit 8 Form of Stockholder Agreement, by and between AST Research, Inc.
and Samsung Electronics Co., Ltd.(1)
Exhibit 9 Strategic Alliance Agreement, dated as of February 27, 1995, by
and between AST Research, Inc. and Samsung Electronics Co.,
Ltd.(1)
Exhibit 10 Confidentiality Agreement, dated as of December 21, 1994 by and
between AST Research, Inc. and Samsung Electronics Co., Ltd.
Exhibit 11 Letter to Stockholders of AST Research, dated March 6, 1995.*
Exhibit 12 Press Release issued by AST Research, Inc. on February 27, 1995.(1)
Exhibit 13 Opinion of Merrill Lynch.*
Exhibit 14 Amendment to Severance Compensation Agreement, dated as of
February 27, 1995, by and between the Company and Safi U.
Qureshey .
Exhibit 15 Form of Amendment to Warrant Certificate, dated as of February 27,
1995.
Exhibit 16 Amendment to the AST Research, Inc. 1994 One-Time Grant Stock
Option Plan for Non-Employee Directors, dated as of February 27,
1995.
Exhibit 17 Amendment to the AST Research, Inc. 1991 Stock Option Plan for
Non-Employee Directors, dated as of February 27, 1995.
Exhibit 18 Form of Acknowledgment/Consent to Waiver of Rights under AST's
1991 Stock Option Plan for Non-Employee Directors and/or AST's
1994 One-Time Grant Stock Option Plan for Non-Employee Directors.
Exhibit 19 Form of Amendment to Executive Officer Severance Compensation
Agreement.
Exhibit 20 Form of Amendment to Vice President Severance Compensation
Agreement.
</TABLE>
- --------
* Included in copies mailed to stockholders.
(1) Incorporated by reference to the exhibits index contained in Item 7 of the
Company's Current Report on Form 8-K dated February 27, 1995.
18
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: March 6, 1995
AST Research, Inc.
/s/ Bruce C. Edwards
By: _________________________________
Name: Bruce C. Edwards
Title:Executive Vice President
and Chief Financial
Officer
19
<PAGE>
SCHEDULE I
This information is being mailed on or about March 6, 1995, as part of the
Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") to the holders of record of the Common Stock at the close of
business on or about March 2, 1995. You are urged to read this Schedule I
carefully. You are not, however, required to take any action. Capitalized terms
used herein and not otherwise defined herein shall have the meaning set forth
in the Schedule 14D-9. Pursuant to the Stock Purchase Agreement, the Purchaser
commenced the Offer on March 6, 1995. The Offer is scheduled to expire at 12:00
midnight, New York City time, on April 20, 1995, unless the Offer is extended.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
GENERAL
The Common Stock is the only class of voting securities of the Company
outstanding. Each share of Common Stock has one vote. As of February 27, 1995,
there were 32,376,500 shares of Common Stock outstanding. The Board currently
consists of seven members, and there are currently no vacancies. Each director
holds office until such director's successor is elected and qualified or until
such director's earlier resignation or removal.
RIGHT TO DESIGNATE DIRECTORS
Pursuant to the Stock Purchase Agreement, and promptly upon the purchase by
the Purchaser of the New Issue Shares and the Offer Shares, the Purchaser will
be entitled to designate such number of directors (the "Purchaser Designees")
as equals one fewer than a majority of the total number of directors authorized
under the Restated Charter. It is thus expected that the Purchaser Designees
will comprise six of thirteen directors on the Board. 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 then authorized
under the Restated Charter, and (ii) the Purchaser Interest at that time.
Notwithstanding the Company's obligations outlined above, nothing shall require
any current member of the Board to resign from the Board. It is expected that
the Purchaser Designees may assume office at any time following the purchase by
the Purchaser of the New Issue Shares and the Offer Shares.
DIRECTORS
BRUCE C. EDWARDS, 41, rejoined the Company in March 1988 as Senior Vice
President, Finance and Chief Financial Officer. In July 1994, Mr. Edwards was
named Executive Vice President and Chief Financial Officer and appointed to the
Company's Board of Directors. Mr. Edwards was first with the Company as Vice
President, Finance from August 1983 and Chief Financial Officer from November
1983 to September 1986. Mr. Edwards currently serves on the Board of Directors
of Xircom, Inc. and Platinum Software Corporation.
RICHARD J. GOEGLEIN, 60, has served as a director since May 1987. Mr.
Goeglein is founder and principal of Gaming Associates, a casino management
company which develops and operates hotels/casinos at selected locations in the
United States. Mr. Goeglein served as President and Chief Executive Officer of
Dakin, Inc. from April 1990 through September 1991. Since January 1988, Mr.
Goeglein has also been the Chairman of ConServ International, a consulting and
real estate development business. From 1984 to his retirement date of December
31, 1987, Mr. Goeglein was the President and Chief Operating Officer of Holiday
Corporation, the holding company of Holiday Inns, Inc. Mr. Goeglein also served
on the Board of Directors of Holiday Corporation from 1978 to 1988. Mr.
Goeglein currently serves as a director of Boomtown Hotels and Casinos,
Hornblower Dining Yachts, Inc. and Platinum Software Corporation.
<PAGE>
JACK W. PELTASON, 71, was appointed as a director in July 1993. Mr. Peltason
has served as President of the University of California system since October
1992, following an eight-year tenure as Chancellor of the University of
California, Irvine and President of the American Council of Education, and a
10-year term as Chancellor at the University of Illinois at Champaign-Urbana.
Mr. Peltason is currently on the Board of Directors of Irvine Apartment
Communities and serves as a member of the Board of Trustees for the FHP
Foundation, Irvine Health Foundation, and Teachers Insurance and Annuity
Association.
SAFI U. QURESHEY, 44, one of the founders of the Company, has served as a
director since the Company's inception and served as President from the
Company's inception through July 1994. In July 1988, Mr. Qureshey was elected
Chief Executive Officer. Mr. Qureshey served as Co-Chairman of the Board from
1988 through June 1992, and was elected Chairman of the Board in November 1993.
Mr. Qureshey currently serves on the Board of the American Business Conference
and the Technology Leadership Council of California and is Chairman of the
Corporate Council on Africa and the California Business Higher Education Forum.
CARMELO J. SANTORO, PH.D., 53, served as Chairman of the Board from June 1992
until November 1993 and has served as a director since September 1990.
Effective November 1993, Dr. Santoro was elected Vice Chairman of the Board.
Dr. Santoro is Chairman and Chief Executive Officer of Platinum Software
Corporation. Dr. Santoro was President and Chief Executive Officer of Silicon
Systems, Inc. from 1982 through 1991 and was Chairman from 1984 through 1989,
when Silicon Systems, Inc. was acquired by TDK Corporation of Tokyo, Japan.
From 1980 to 1982, Dr. Santoro was Vice President, Integrated Circuits, at the
Solid State Division of RCA. In addition to Platinum Software Corporation, Dr.
Santoro is currently a director of Dallas Semiconductor Corporation, S3, Inc.
and the Cerplex Group.
JAMES T. SCHRAITH, 37, was named President and Chief Operating Officer and
was appointed to the Company's Board of Directors in July 1994. Mr. Schraith
joined the Company in March 1987 as Director of Customer Support. He was
appointed Vice President, North American Services in November 1988 and, in
August 1990, became Vice President, Channel Sales and Services. In July 1992,
Mr. Schraith was promoted to Vice President, U.S. Sales and Service and in July
1993 was appointed Senior Vice President, Sales and Service. Prior to joining
the Company, Mr. Schraith was employed for nine years by Schlumberger Ltd.,
where he served as Manager, Technical Services, National Product Sales Manager
and Director of Marketing. Mr. Schraith currently serves on the Board of
Directors of Pinnacle Micro, Inc.
DELBERT W. YOCAM, 51, has been a director of the Company since August 1992.
He was President, Chief Operating Officer and a director of Tektronix, Inc.
from 1992 through 1994. Prior to joining Tektronix, Mr. Yocam was an
independent consultant. From 1979 to 1989, Mr. Yocam was employed by Apple
Computer, Inc., serving as President of Apple Pacific from 1988 to 1989 and
Executive Vice President and Chief Operating Officer of Apple Computer, Inc.
from 1986 to 1988. Mr. Yocam is a director of Adobe Systems, Inc. and Oracle
Corporation.
S-2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of February 27, 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 Named Executive Officers (as defined
below), and all directors and executive officers of the Company as a group.
Unless otherwise noted, each of the stockholders listed owns less than 1.0% of
the outstanding Common Stock 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 February 27, 1995.
<TABLE>
<CAPTION>
NUMBER OF SHARES
-------------------- PERCENTAGE OF
NAME OF BENEFICIAL OWNER OPTIONS(A) TOTAL SHARES OUTSTANDING
- ------------------------ ---------- --------- ------------------
<S> <C> <C> <C>
FMR Corp. (b).......................... 0 4,299,098 13.28%
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.................... 58,000 75,000 --
Jack W. Peltason....................... 8,000 8,300 --
Carmelo J. Santoro, Ph.D............... 24,500 24,500 --
Delbert W. Yocam....................... 19,000 19,000 --
Safi U. Qureshey (e)................... 650,000 3,103,032 9.40%
James T. Schraith...................... 28,500 34,500 --
Bruce C. Edwards (f)................... 131,250 182,650 --
James L. Forquer (g)................... 25,000 25,000 --
Richard P. Ottaviano................... 64,000 65,000 --
All directors and executive officers as
a group (12 persons).................. 1,083,500 3,617,258 10.81%
</TABLE>
- --------
(a) Includes shares which executive officers and directors have the right to
acquire within 60 days of February 27, 1995 under stock option and warrant
agreements.
(b) 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. FMRC and FMTC
are each a wholly owned subsidiary of FMR Corp.
(c) 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. BTC is a wholly owned
subsidiary of BPI and BPI is a wholly owned subsidiary of BHI.
(d) 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 to replace Mr. Forquer.
S-3
<PAGE>
EXECUTIVE OFFICERS
The following table sets forth the name and age of each executive officer of
the Company at March 6, 1995, his positions and offices with the Company and
the period during which he has served as an executive officer of the Company:
<TABLE>
<CAPTION>
EXECUTIVE
OFFICER
NAME AGE POSITION(S) SINCE
---- --- ------------------------------- ---------
<S> <C> <C> <C>
Safi U. Qureshey................. 44 Chief Executive Officer and 1980
Chairman of the Board
James T. Schraith................ 37 President and Chief Operating 1991
Officer
Bruce C. Edwards................. 41 Executive Vice President and 1988
Chief Financial Officer
Kirby B. Coryell................. 45 Senior Vice President, 1994
Worldwide Operations
Dennis R. Leibel................. 50 Senior Vice President, Legal 1986
and Treasury Operations and
Secretary
Richard P. Ottaviano............. 49 Senior Vice President, 1991
Administration
James D. Wittry.................. 41 Senior Vice President, Americas 1994
Scott A. Smith................... 40 Vice President and General 1993
Manager, Server Products
</TABLE>
For information on the business background of Mr. Qureshey, Mr. Schraith and
Mr. Edwards see "Directors" above.
KIRBY B. CORYELL joined the Company in August 1993 as Vice President of
Mobile Operations. During his tenure he also served as acting General Manager
of the Mobile line of business and was promoted to Senior Vice President of
Operations in October 1994. Prior to joining the Company, he served most
recently as Director, Worldwide Service of Apple Computer, Inc. During his 12
years with Apple he also held the positions of Director, Imaging Business, and
Director, OEM Operations. Prior to Apple Computer, Inc., he served in various
positions for Texas Instruments and the Spectronics Division of Honeywell.
RICHARD P. OTTAVIANO joined the Company in October 1990 as Vice President,
Human Resources and was promoted to Senior Vice President, Administration in
August 1992. Prior to joining the Company, he served as Corporate Vice
President, Human Resources for Cipher Data Products. From 1973 to 1986, Mr.
Ottaviano held various positions with Xerox Corporation, including Vice
President, Human Resources. Mr. Ottaviano currently serves on the Board of
Directors for Irvine Medical Center and PACE Therapy, Inc.
JAMES D. WITTRY joined the Company in November 1994 as Senior Vice President,
Americas. Prior to joining the Company, Mr. Wittry served at Ingram Micro for
three years, as Senior Vice President, Sales, with responsibility for inside
and outside sales, national major accounts, technical support and training,
customer service and contracts. Prior to Ingram Micro, he served in various
management positions for Avnet Computer over a 12-year period.
DENNIS R. LEIBEL joined the Company in December 1985 as Treasurer and in
March 1988, was elected Vice President, Administration and General Counsel. In
January 1989, Mr. Leibel was elected Vice President, Legal and Treasury
Operations and Secretary and was promoted to Senior Vice President, Legal and
Treasury Operations in January 1995. Prior to joining the Company, Mr. Leibel
was employed for over seven years by Smith International, Inc., where he served
as Director of Taxes, Vice President, Tax and Financial Planning and
subsequently as Vice President, Finance. Mr. Leibel currently serves on the
Executive Committee of the Board of Directors of the World Trade Center
Association of Orange County and the Advisory Board of Directors of Court
Appointed Special Advocates of Orange County (CASA).
S-4
<PAGE>
SCOTT A. SMITH joined the Company in January 1993 as Vice President,
Engineering. In March 1994, Mr. Smith was appointed Vice President and General
Manager for Server Products. Prior to joining the Company, Mr. Smith served at
IBM for 16 years, most recently as Director, Visual Subsystems, with
responsibility for IBM's high volume monitor business and as Systems Manager,
Advanced Personal Systems.
COMMITTEES OF THE BOARD
The Board is responsible for the overall affairs of the Company. Authority
with respect to certain matters of the Company has been delegated to standing
committees of the Board, which are the Executive Committee, Audit Committee and
Compensation Committee. The Board does not have a standing Nominating
Committee.
The Executive Committee was established in January 1987 and is empowered to
act for and on behalf of the Board and its committees, but may not undertake
actions reserved in the Bylaws to the Board itself, such as filling vacancies
on the Board and declaring certain dividends to stockholders. Actions by the
Executive Committee are to be reported for review and ratification by written
consent or at a subsequent meeting of the Board. Messrs. Qureshey and Santoro
served on the Committee during fiscal 1994. Mr. Schraith was appointed to the
Committee in July 1994. No meetings were held in fiscal 1994. No meetings have
been held in fiscal 1995 as of February 27, 1995.
The Audit Committee has the responsibility of recommending to the Board the
appointment of the Company's outside auditors, reviewing the auditors' reports,
management reports and various audit criteria, and consulting with the auditors
concerning the adequacy of internal accounting controls. Mr. Goeglein, Mr.
Peltason, Dr. Santoro, and Mr. Yocam are the members of the Audit Committee,
which held three meetings in fiscal 1994. The Audit Committee has held two
meetings during fiscal 1995 as of February 27, 1995.
The Compensation Committee is empowered to review and administer the
Company's compensation practices and policies, which include administering the
Company's incentive compensation plans, reviewing compensation levels of the
Company's officers and directors, reviewing the Company's long-range plans for
management development and examining the Company's compensation structure as it
relates to industry practices. Mr. Goeglein, Mr. Peltason, and Mr. Yocam are
the members of the Compensation Committee. Dr. Santoro served on the
Compensation Committee until October 1993. The Compensation Committee held four
meetings in fiscal 1994. The Compensation Committee has held three meetings
during fiscal 1995 as of February 27, 1995.
ATTENDANCE AT MEETINGS
During fiscal 1994, the Board held a total of seven meetings, of which three
were special meetings conducted by telephone. During fiscal 1995, the Board has
held a total of thirteen meetings, of which eight were special meetings
conducted by telephone. During both fiscal 1994 and fiscal 1995, each member of
the Board attended 75 percent or more, aggregately, of the meetings of the
Board during the period in which he was a director and meetings of the
committees of which he was a member.
S-5
<PAGE>
EXECUTIVE COMPENSATION
The following tables present information concerning the cash compensation and
stock options provided to Mr. Qureshey and the four other most highly
compensated individuals serving as executive officers as of the end of fiscal
1994 (the "Named Executive Officers"). The notes to these tables provide more
specific information regarding compensation.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------- ------------
SECURITIES ALL
NAME AND OTHER ANNUAL UNDERLYING OTHER
PRINCIPAL FISCAL SALARY BONUS COMPENSATION(A) OPTIONS/SARS COMPENSATION
POSITION YEAR ($) ($) ($) (#) ($)
- --------- ------ ------- ------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Safi U. Qureshey........ 1994 623,076 236,221 36,465 125,000 148,119(b)
Chief Executive Officer 1993 543,700 514,298 93,960 60,000 184,580
and Chairman of the 1992 498,270 777,379 -- 60,000 --
Board
James T. Schraith....... 1994 314,009 130,191 -- 65,000 9,173(c)
President and Chief 1993 228,256 124,168 1,095 20,000 5,673
Operating Officer 1992 171,077 162,139 -- 10,000 --
Bruce C. Edwards........ 1994 297,337 80,137 3,496 75,000 7,021(c)
Executive Vice President 1993 251,873 256,454 4,980 30,000 6,283
and Chief Financial 1992 224,615 287,348 -- 15,000 --
Officer
James L. Forquer (d).... 1994 263,815 74,798 447,019(e) 115,000 846(c)
Sr. Vice President, 1993 -- -- -- -- --
Worldwide Operations 1992 -- -- -- -- --
Richard P. Ottaviano.... 1994 223,683 63,868 600 55,000 6,609(c)
Sr. Vice President, 1993 184,373 154,620 2,442 30,000 5,919
Administration 1992 149,231 208,196 -- 10,000 --
</TABLE>
- --------
(a) Except with respect to Mr. Forquer, Other Annual Compensation generally
includes reimbursement for medical expenses and/or tax and estate planning
expenses. The amounts shown for Mr. Qureshey represent reimbursement for
tax and estate planning only.
(b) The Company maintains an aggregate of $24,000,000 of split dollar life
insurance policies insuring the survivor of Mr. Qureshey and his spouse.
The portion of the premium paid for term life insurance coverage in fiscal
1994 was $19,679. The portion of the premium paid for non-term coverage,
valued in accordance with requirements of the Securities and Exchange
Commission as an interest-free loan to Mr. Qureshey, was $123,300. Also
included is the Company's 401(k) Plan matching contribution in the amount
of $5,140.
(c) The Company's matching contribution to the Company 401(k) Plan.
(d) Mr. Forquer's employment with the Company terminated effective as of
October 17, 1994. Mr. Coryell has since been elected as an executive
officer to replace Mr. Forquer.
(e) In August 1993, the Company entered into an agreement with Mr. Forquer to
assist in his relocation. The Company purchased the equity interest in Mr.
Forquer's northern California residence for $900,000, allowing for a quick
sale in otherwise unfavorable market conditions. The Company ultimately
recognized $615,000 of the equity upon the sale of the property. In
addition, the Company paid $152,850 and $7,215 for additional real estate
and temporary living costs, respectively.
S-6
<PAGE>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(D)
- ------------------------------------------------------------------------- ---------------------------
% OF TOTAL
OPTIONS/SARS
OPTIONS GRANTED TO EXERCISE OR
GRANTED(A) EMPLOYEES BASE PRICE EXPIRATION
NAME (#) IN FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
---- ---------- -------------- ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Safi U. Qureshey........ 100,000 7.38% 15.75 7/27/03 990,509 2,510,144
25,000 1.84% 16.88 6/01/04(b)(c) 265,315 672,360
James T. Schraith....... 50,000 3.69% 15.75 7/27/03 495,255 1,255,072
15,000 1.11% 16.88 6/01/04(b)(c) 159,189 403,416
Bruce C. Edwards........ 60,000 4.43% 15.75 7/27/03 594,305 1,506,087
15,000 1.11% 16.88 6/01/04(b)(c) 159,189 403,416
James L. Forquer........ 100,000 7.38% 15.75 7/27/03 990,509 2,510,144
15,000 1.11% 16.88 6/01/04(b) 159,189 403,416
Richard P. Ottaviano.... 40,000 2.95% 15.75 7/27/03 396,204 1,004,058
15,000 1.11% 16.88 6/01/04(b)(c) 159,189 403,416
</TABLE>
- --------
(a) All option grants were new and not granted in connection with an option
repricing transaction. All options vest and become exercisable at the rate
of 25% per year commencing on the first anniversary of the date of grant
(or earlier at the discretion of the Board or Compensation Committee).
Options expire 10 years from the date of grant.
(b) June 1, 1994 option grants were part of a split option grant to key
executives which required the Company to grant an equivalent number of
options to the grantees on November 1, 1994. Under the provisions of the
split-grant, the Company granted Messrs. Qureshey, Schraith, Edwards,
Forquer and Ottaviano options covering 25,000, 15,000, 15,000, 15,000 and
15,000 shares, respectively, on November 1, 1994, with an exercise price
equal to the $12.75 per share fair market value of the Company's Common
Stock on the grant date (the "FMV").
(c) An option grant to Mr. Schraith in the amount of 100,000 shares was made on
August 1, 1994, with an exercise price equal to the $15.25 per share FMV.
Option grants to Mr. Coryell in the respective amounts of 75,000 and 7,000
shares were made on October 26, 1994 and November 1, 1994, respectively,
with respective exercise prices equal to the $11.4375 and $12.75 per share
FMV. An option grant to Mr.Wittry in the amount of 60,000 shares was made
on November 11, 1994, with an exercise price equal to the $12.625 per share
FMV. Option grants to Messrs. Qureshey, Schraith, Edwards and Ottaviano in
the respective amounts of 25,000, 25,000, 15,000 and 15,000 shares were
made on February 1, 1995, with an exercise price equal to the $15.00 per
share FMV. Option grants on the same terms were made to certain of the
Company's other executive officers, Messrs. Coryell, Leibel and Smith, in
the respective amounts of 5,000, 10,000 and 5,000 shares. An additional set
of option grants in amounts identical to the February 1, 1995 grants has
been approved and will be made effective August 1, 1995, with an exercise
price equal to the then-applicable per share FMV.
(d) The potential gains shown are net of the option exercise price and do not
include the effect of any taxes associated with exercise. The amounts shown
are for the assumed rates of appreciation only, do not constitute
projections of future stock price performance, and may not necessarily be
realized. Actual gains, if any, on stock option exercises depend on the
future performance of the Company's Common Stock, continued employment of
the optionee through the term of the option, and other factors.
S-7
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN
LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FISCAL YEAR-END (#) FISCAL YEAR-END ($)
------------------------- -------------------------
SHARES VALUE
ACQUIRED ON REALIZED
NAME EXERCISE (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------ -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Safi U. Qureshey........ -- -- 590,000/205,000 4,577,500/0
James T. Schraith....... 33,000 388,375 15,000/78,500 10,156/0
Bruce C. Edwards........ -- -- 110,000/100,000 509,375/0
James L. Forquer........ -- -- 25,000/90,000 0/0
Richard P. Ottaviano.... 15,000 311,250 40,500/86,000 0/50,625
</TABLE>
COMPENSATION OF DIRECTORS
The directors of the Company serve until their successors are elected and
duly qualified. Non-employee directors receive annual retainers of $30,000
paid at the rate of $2,500 per month and additional committee meeting fees of
$2,000 per meeting for the Chairman and $1,000 per meeting per committee
member. Commencing November 1993, Dr. Carmelo J. Santoro, Vice Chairman of the
Board, received an additional annual retainer of $95,000. Prior to November
1993, Dr. Santoro was paid a retainer for consulting services to the Company.
See "Compensation Committee Interlocks and Insider Participation" below.
The 1991 Stock Option Plan for Non-Employee Directors provides for an
initial grant of options to purchase 20,000 shares of the Company's Common
Stock to each newly elected or appointed non-employee director. In addition,
on January 1 of each year, each participant will receive an option to purchase
12,000 shares of the Company's Common Stock. The aggregate number of shares
that may be issued under the plan is 250,000. Options vest and become
exercisable at the rate of 25% per year commencing on the first anniversary of
the date of grant.
Under the 1994 One-Time Grant Stock Option Plan for Non-Employee Directors,
each member of the Company's Board on July 1, 1994 who was not an employee of
the Company was granted an option to purchase 50,000 shares of the Company's
Common Stock. The aggregate number of shares of Common Stock which may be
issued pursuant to the plan is 250,000 and no participant may receive options
covering more than 50,000 shares in any calendar year. Options vest and become
exercisable at the rate of 12.5% per year, commencing on the first anniversary
of the date of grant. Based upon the performance of the Company's Common
Stock, vesting may be accelerated, but in no event prior to July 1, 1995.
In December 1990, the Board authorized the issuance of warrants to purchase
an aggregate of 80,000 shares of the Company's Common Stock to its then non-
employee Board members. Such warrants are exercisable at $13.875 per share and
vest over a three-year period. During fiscal 1994, 40,000 of such warrants
were exercised and at July 2, 1994, 40,000 shares remained exercisable. In
July 1992, the Board authorized the issuance of warrants to purchase 50,000
shares of Common Stock to Dr. Santoro, the Company's then Chairman of the
Board. Such warrants are exercisable at $13.50 per share and vest over a four-
year period. During fiscal 1994, 12,500 of such warrants were exercised and
the balance were not exercisable at fiscal year-end.
See Item 3(b) of the Schedule 14D-9 for a description of the consequences
regarding options and warrants described in the foregoing in light of the
Stock Purchase Agreement and related transactions.
S-8
<PAGE>
EMPLOYMENT CONTRACTS AND TERMINATION OF
EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS
On July 27, 1993, the Company entered into a five-year revolving term
employment agreement with Mr. Qureshey ("Agreement" or "Founder's Agreement"),
which provides in certain circumstances for a possible consulting term and
other post-termination benefits. All post-termination benefits are conditioned
upon Mr. Qureshey's not undertaking competing employment and his not soliciting
away Company employees. In addition, Mr. Qureshey agreed that he will vote his
shares along with the other stockholders in the election of directors and will
not join or participate against the Board in any proxy solicitation, and will
offer the Company a right of first refusal on any 100,000 or more share blocks
proposed to be sold by him in any private sale. If Mr. Qureshey should accept
non-competing but substantial employment with any other company or firm during
any period of active employment, consulting, or post-termination benefits under
the Founder's Agreement, the Company may elect that Mr. Qureshey cease to be an
employee or consultant and be entitled to receive an aggregate lump sum equal
to 50% of the salary and/or bonus, if any, which he is then receiving and which
he otherwise would be entitled to receive for the remaining balance of the
employment or post-termination benefit or consulting period, as described
below; however, all other benefits would cease and Mr. Qureshey would continue
to be bound by the restrictions concerning competing employment, non-
solicitation of employees, the voting of shares and the right of first refusal.
At any time following one year from a date of employment termination, Mr.
Qureshey may elect to terminate the foregoing restrictions upon 90 days'
written notice, in which event all Company obligations and benefits payable
under the Founder's Agreement would cease, all stock option acceleration would
be rescinded and any outstanding loans to Mr. Qureshey would have to be repaid
to the Company within 90 days. Nevertheless, Mr. Qureshey would continue to be
bound by the provisions of the Founder's Agreement pertaining to the Company's
confidential and proprietary information.
If Mr. Qureshey's employment is terminated for "cause," the Company will be
obligated to pay him only such severance compensation as shall have vested and
as the Board otherwise deems appropriate, or none at all, and the Company's
obligations under the Founder's Agreement will be null and void. If Mr.
Qureshey becomes disabled, upon the expiration of six consecutive months of
disability, Mr. Qureshey's employment may be terminated by the Company. In such
event or in the event of Mr. Qureshey's death, in addition to amounts paid from
insurance policies, Mr. Qureshey or his estate will be entitled to receive his
base salary and bonus for at least one year, the restriction period on all
restricted stock granted to him under Company plans shall lapse and all stock
options or other such rights which otherwise would have vested within two years
of such event will accelerate and become fully vested and remain exercisable in
accordance with their respective terms.
During employment, Mr. Qureshey will receive his salary, bonus and all other
benefits, including a $25,000 financial planning allowance and a gross-up for
income tax on such allowance, consistent with past practices. If Mr. Qureshey's
active employment is terminated by him for "good reason" or by the Company
without "cause," Mr. Qureshey will continue to receive his base salary for a
benefit period of five years following termination. In either event, (a) Mr.
Qureshey will be entitled to receive his annual bonus for the year in which
termination occurs, pro rated to the date of termination, as well as bonuses
for the two fiscal years following termination, such bonus amounts being
determined by taking the average of the bonuses paid to Mr. Qureshey in the
preceding two years; (b) all stock options will accelerate and become
exercisable and all restrictions on restricted stock awards will lapse; (c) the
benefits allowance for death or disability will continue for a period of five
years from the date of termination; and (d) all of his benefits payable under
the Company's tax-qualified employee benefit plans or other programs pertaining
to deferred compensation, retirement, profit sharing, 401(k), or employee stock
ownership (if any) will be paid. In addition, if Mr. Qureshey enters into loan
agreements for the purpose of exercising options or other rights to acquire
securities, the Company will guarantee such loans (up to $3,000,000) and pay
the interest on them for a period ending 13 months after the date of the event
causing tax liability to be incurred by reason of such exercise.
S-9
<PAGE>
In the event of Mr. Qureshey's disability or of his termination by the
Company without "cause" or termination of employment by Mr. Qureshey for "good
reason," Mr. Qureshey will also be entitled to receive additional benefits
during the first five-year post-termination benefit period including an office,
health and welfare benefits, continued use of a Company automobile followed by
transfer of title of such automobile to Mr. Qureshey at the end of the five-
year period, and up to $25,000 per year (grossed up for income taxes) for
estate, tax and financial planning services.
Following such five-year post-termination benefits period, provided Mr.
Qureshey has not and does not undertake substantial or competing employment,
the Company indefinitely will provide continued health and welfare benefits,
with Mr. Qureshey paying or reimbursing the Company the average cost of such
coverages, and Mr. Qureshey will have the title Vice Chairman. For a period of
up to five years following the first five-year post-termination benefits
period, Mr. Qureshey may elect to become a consultant and receive 60% of his
former base and be entitled to receive the additional benefits described in the
foregoing paragraph. If prior to any termination Mr. Qureshey undertakes an
"early retirement" from active employment and otherwise is not receiving the
post-termination benefits enumerated above, he may at his election become a
consultant to the Company and become subject to the restrictions under the
Founder's Agreement and also become entitled to receive 80% of his then base
salary for a period of five years, as well as the additional benefits listed
above. Bonus amounts will not be required during any consulting period.
Mr. Qureshey's benefits under the Founder's Agreement are in addition to and
not in lieu of the benefits payable to him under the Severance Compensation
Agreement (see below) entered into between the Company and Mr. Qureshey
following a change of control of the Company. Following a change in control of
the Company, Mr. Qureshey is generally entitled to all of the benefits
specified in the Severance Compensation Agreement, whether or not his active
employment is terminated. Mr. Qureshey will not otherwise participate in the
officer involuntary termination policy described below.
At the Annual Meeting of Stockholders held in May 1987, the stockholders
authorized and approved an indemnification program for corporate officers and
directors under which the Company and each corporate officer and director
entered into an Indemnification Agreement, substantially in the form approved
by the stockholders.
The Company has entered into Severance Compensation Agreements with each of
its eight executive officers. Under the agreements, following a "change in
control" of the Company, if either the Company terminates the officer's
employment for any reason other than death, disability or retirement, or if the
officer terminates his employment for "good reason" as defined in the
agreement, then (a) the Company will pay the officer severance compensation
equal to two years salary and bonus, (b) all stock options held by the officer,
to the extent they would otherwise have become exercisable within two years of
the change in control, will immediately become exercisable for a period of six
months following termination, and (c) the officer will receive continued
welfare benefits for a period of two years. Under the agreements, the Company
will indemnify the officer with respect to excise taxes on excess "parachute
payments" imposed under Section 4999 of the Code. The agreements terminate two
years following the date on which notice of non-renewal is given by either the
Company or the officer. Similar agreements have also been entered into with
eleven vice-presidents, except that (i) the agreements terminate one year
following the date on which notice of non-renewal is given, and (ii) the vice-
presidents' severance benefits include only one year of salary, bonus and
welfare benefits continuation, and only options otherwise vesting within one
year of the change in control will accelerate.
The Company has a severance policy for its executive officers which, in the
event of an involuntary termination, other than in connection with a "change in
control," requires the Company to pay its President severance equal to two
years salary and its other executive officers severance equal to six months
salary plus an additional month of salary for each year of employment with the
Company, up to a maximum of 12 months. Welfare benefits are also continued
during this period.
S-10
<PAGE>
Mr. Forquer's employment with the Company terminated on October 17, 1994.
Pursuant to an agreement between the Company and Mr. Forquer, Mr. Forquer will
be paid salary continuation for the 52-week period ending October 16, 1995. The
remaining terms of Mr. Forquer's severance agreement have yet to be finalized.
See Item 3(b) of the Schedule 14D-9 for a description of the consequences
regarding the employment and severance agreements described in the foregoing in
light of the Stock Purchase Agreement and related transactions.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Goeglein, Mr. Peltason, Dr. Santoro and Mr. Yocam served on the
Compensation Committee during fiscal 1994. Dr. Santoro, Vice Chairman of the
Board, served as Chairman of the Compensation Committee until October 1993, at
which time he resigned from that committee. In addition to his compensation as
a director, the Company had entered into a consulting agreement (which
commenced in July 1992 and expired in November 1993) with Dr. Santoro to
provide assistance in corporate organization and other matters. Pursuant to and
during the term of such agreement, Dr. Santoro received an aggregate of
$99,167. In addition to serving on the Company's Board, Mr. Goeglein, Dr.
Santoro and Mr. Edwards serve on the Board of Directors of Platinum Software
Corporation ("Platinum"), which designs, manufactures and markets accounting
software systems. At Platinum, Dr. Santoro is also an executive officer and Mr.
Goeglein serves on the Compensation Committee and Mr. Edwards serves on the
Audit Committee of the Platinum Board of Directors. In such capacities, each of
Dr. Santoro, Mr. Goeglein and Mr. Edwards has influence over the fees, equity
participation and other compensation paid to the others by Platinum. Dr.
Santoro and Mr. Goeglein, as members of the Board and Compensation Committee,
had and have, respectively, direct influence over the equity participation
awards and compensation paid to Mr. Edwards in his capacity as an executive
officer of the Company. As continuing Board members, each will continue to have
influence over the fees, equity participation and compensation paid to the
others by the Company. Prior to either Dr. Santoro's, Mr. Goeglein's or Mr.
Edwards' joining the Platinum Board of Directors, the Company purchased certain
accounting software systems from Platinum. In fiscal 1994, amounts paid to
Platinum by the Company were less than $2,000 and related primarily to service
and maintenance of previously purchased products. The Company believes that the
terms and conditions of its purchase relationship with Platinum are as
favorable to the Company as those that could have been obtained from any other
third-party vendor of similar products and services.
CERTAIN TRANSACTIONS
In August 1993, the Company entered into an agreement with Senior Vice
President James L. Forquer to assist in his relocation. The Company purchased
the equity interest in Mr. Forquer's northern California residence for
$900,000, allowing for a quick sale in otherwise unfavorable market conditions.
The Company ultimately realized approximately $615,000 of the equity upon sale
of the property. In addition, the Company paid $152,850 and $7,215 for
additional real estate and temporary living costs, respectively.
In September 1993, the Company loaned Vice President Scott A. Smith $100,000
for the purchase of a primary residence evidenced by a promissory note secured
by a deed of trust. The loan was issued interest free and is payable in full
three years from the date of the loan. At March 3, 1995, the entire amount
remained outstanding.
See "Compensation Committee Interlocks and Insider Participation" above.
S-11
<PAGE>
EXHIBIT 10
AST RESEARCH, INC.
16215 Alton Parkway
Irvine, California 92718
December 21, 1994
Samsung Electronics Co., Ltd.
Samsung Main Building
250, 2-Ga, Taopyung-Ro, Chung-Ku
Seoul, Korea
Re: Confidentiality Agreement
--------------------------
Ladies and Gentlemen:
In connection with a possible transaction and potential future
business collaborations (a "Transaction") involving AST Research, Inc. ("AST")
and Samsung Electronics Co., Ltd. ("SEC"), each party has agreed to provide
certain information relating to it and to its operating divisions and affiliates
to the other party and to the other party's Representatives (as defined below).
The party providing such information is referred to herein as the "Providing
Party" and the party receiving such information is referred to herein as the
"Recipient." As a condition to such information being furnished to the
Recipient and certain of the Recipient's directors, officers, employees, agents,
investment bankers, advisors, attorneys and accountants (collectively,
"Representatives"), the Recipient agrees, and agrees to cause its
Representatives, to treat in accordance with the provisions of this letter any
information concerning the Providing Party (whether prepared and delivered by or
on behalf of the Providing Party or otherwise, and irrespective of the form of
communication) that is furnished by the Providing Party or any of its
Representatives to the Recipient or its Representatives before, on or after the
date of this letter (the "Confidential Information"). Further, each party
agrees to take or abstain from taking certain other actions herein set forth.
The term "Confidential Information" shall be deemed to include,
without limitation, all notes, analyses, compilations, studies, interpretations
or other documents prepared by the Recipient or its Representatives which
contain, reflect or are based upon, in whole or in part, the information
furnished to the Recipient or its Representatives by or on behalf of the
Providing Party pursuant
<PAGE>
Samsung Electronics Co., Ltd.
December 21, 1994
Page 2
hereto. The term "Confidential Information" does not include information which
(i) was or becomes generally available to the public other than as a result of a
disclosure by the Recipient or its Representatives, or (ii) was known to the
Recipient or its Representatives prior to being furnished to the Recipient by or
on behalf of the Providing Party, provided that the source of such information
was not known to the Recipient or any such Representative to be bound by a
confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to the Providing Party or any other party with
respect to such information and the Recipient or any such Representative had no
reasonable basis for concluding that such source may be so bound, or (iii) was
or becomes available to the Recipient on a non-confidential basis from a source
other than the Providing Party, provided that such source was not known by the
Recipient to be bound by a confidentiality agreement with or other contractual,
legal or fiduciary obligation of confidentiality to the Providing Party or any
other party with respect to such information and the Recipient had no reasonable
basis for concluding that such source may be so bound.
The Recipient hereby agrees that the Confidential Information will be
kept confidential and will be used solely for the purpose of evaluating the
proposed Transaction (such evaluation being hereafter referred to as the
"Evaluation"), and that the Recipient and its Representatives will not disclose
any of the Confidential Information in any manner whatsoever; provided, however,
-------- -------
that (i) the Recipient may make any disclosure of such information to which the
Providing Party gives its prior written consent and (ii) any of such information
may and shall only be disclosed to the parties' respective Representatives who
need to know such information for the sole purpose of the Evaluation. The
Recipient further agrees to take such steps to protect and maintain the security
and confidentiality of the Confidential Information as the Recipient would in
the case of its own confidential business information. The Recipient shall
direct its Representatives to keep such information confidential and shall be
responsible for the unauthorized release of any Confidential Information
received by it or its Representatives from the Providing Party or any of its
Representatives or any copy of any such Confidential Information.
Neither party will, without the prior written consent of the other
party, and will direct its respective Representatives not to, disclose to any
person (unless such disclosure is legally compelled, subject to the provisions
of the
<PAGE>
Samsung Electronics Co., Ltd.
December 21, 1994
Page 3
following paragraph) either the fact that the Confidential Information has been
made available to it or that it is performing the Evaluation or that discussions
or negotiations are taking place concerning the possible Transaction referenced
above or the status of any of the foregoing. Such facts shall be deemed to be
included in the Confidential Information for all purposes of this Agreement.
The term "person" as used in this letter shall be broadly interpreted to
include, without limitation, any corporation, entity, trust, group, company,
partnership or individual.
If the Recipient or its Representatives are requested or required (by
oral questions, interrogatories, requests for information or documents,
subpoena, civil investigative demand or similar process) to disclose any
Confidential Information, the Recipient will promptly notify the Providing Party
of such request or requirement so that the Providing Party may seek to avoid or
minimize the required disclosure and/or to obtain an appropriate protective
order or other appropriate relief to ensure that any information so disclosed is
maintained in confidence to the maximum extent possible by the agency or other
person receiving the disclosure, or, in the sole discretion of the Providing
Party, to waive compliance with the provisions of this letter agreement. In any
such case, the Recipient will each use its reasonable efforts in cooperation
with the Providing Party or otherwise to avoid or minimize the required
disclosure and/or to obtain such protective order or other relief. If, in the
absence of a protective order or the receipt of a waiver hereunder, the
Recipient or its Representatives are compelled to disclose the Confidential
Information or else stand liable for contempt or suffer other censure or
penalty, the Recipient or such Representatives will disclose only so much of the
Confidential Information to the party compelling disclosure as such party
believes in good faith on the basis of advice of counsel is required by law.
The Recipient shall give the Providing Party prior notice of the Confidential
Information it believes it is required to disclose. Without limitation of the
foregoing, the Recipient expressly confirms and agrees that (a) no public
disclosure with respect to any discussions or negotiations taking place as
referred to herein is now required by reasons of securities laws or similar
requirements related to general disclosure and in the event either party
determines that such disclosure is required in the future, no such disclosures
shall be made unless and until such party consults with the other party
regarding the necessity and form of any such disclosure; and (b) no government
or regulatory filings shall be made with respect to the possible Transaction
contemplated
<PAGE>
Samsung Electronics Co., Ltd.
December 21, 1994
Page 4
hereby, except in either case pursuant to mutual agreement of the parties with
respect to the making and the form and content of any such disclosure or
filings.
Until the earlier of (a) the execution by the parties hereto of a
definitive agreement regarding the Transaction or (b) one year from the date
this letter agreement is executed, neither party nor their respective
Representatives who have knowledge of the Transaction will take any action to
solicit employment of officers, directors or other key employees of the other
party or the other party's subsidiaries so long as they are employed by the
other party or its subsidiaries, without the prior written consent of the other
party. The parties agree that the restrictions set forth in the immediately
preceding sentence shall not apply to any solicitation directed at the public in
general in publications available to the public in general or any contact
initiated by any such officer, director or key employee.
Until the earlier of (a) the execution by the parties hereto of a
definitive agreement regarding the Transaction or (b) one year from the date of
this Agreement, neither SEC nor any of its affiliates (including any person or
entity directly or indirectly, through one or more intermediaries, controlling
SEC or controlled by or under common control with SEC) will, either alone or as
part of a "group" (within the meaning of the Securities Exchange Act of 1934, as
amended), without the prior written consent of AST, (i) directly or indirectly
purchase, acquire or cause to be acquired, or offer or agree to so purchase or
acquire, any securities, rights to purchase securities or rights to vote
securities, or any assets, of AST; (ii) enter into, or offer or agree to enter
into, an acquisition or other business combination transaction involving AST;
(iii) make, or in any way participate in, any "solicitation" of "proxies" (as
such terms are used in the rules of the Securities and Exchange Commission) to
vote, or seek to advise or influence any person with respect to the voting of,
any voting securities of, AST; or (iv) propose any of the foregoing.
The parties hereby acknowledge that they are aware and will advise
their respective Representatives that the United States and Korean Securities
laws prohibit any person who has received from an issuer material, nonpublic
information concerning the matters which are the subject of this letter
agreement from purchasing or selling securities of such issuer or from
communicating such
<PAGE>
Samsung Electronics Co., Ltd.
December 21, 1994
Page 5
information to any other person under circumstances in which it is reasonably
foreseeable that such person is likely to purchase or sell such securities.
All documents and other materials in the possession of the Recipient
or its Representatives which embody any of the written Confidential Information
regardless of whether such document or material was prepared by the Providing
Party or by the Recipient or its Representatives will be returned to the
Providing Party immediately upon the request of the Providing Party, and except
as required by law or judicial or investigative process no copies, extracts or
other reproductions shall be retained by the Recipient or its Representatives;
provided, however, that all documents, memoranda, notes and other writings
- -------- -------
whatsoever prepared by the Recipient or its Representatives based on the
Confidential Information received from the Providing Party or its
Representatives, and any and all copies thereof in such party's possession shall
be returned to the Providing Party, or, at the option of the Recipient,
destroyed and such destruction shall be certified in writing to the Providing
Party by an authorized officer supervising such destruction.
Although the Providing Party agrees to provide in good faith
information which it believes to be reliable and relevant for the purpose of the
Evaluation, the Recipient acknowledges that neither the Providing Party nor any
of its Representatives makes any representation or warranty as to the accuracy
or completeness of any information which is so provided, and neither the
Providing Party nor any of its Representatives shall have any liability to the
Recipient, any of its Representatives or any other person resulting from the use
of such information by the Recipient or its Representatives. Only those
representations or warranties which are made in a final definitive agreement
regarding the Transaction, when, as and if executed and subject to such
limitations and restrictions as may be specified therein, will have any legal
effect. For the purpose of this paragraph "information" is deemed to include
all information furnished by or on behalf of the Providing Party to the
Recipient or its Representatives, whether or not Confidential Information as
defined herein.
The parties further acknowledge and agree that they each reserve the
right in their sole and absolute discretion, to reject any or all proposals and
to terminate discussions and negotiations with, or directly or indirectly
involving, the other party at any time. Unless and until a definite agreement
regarding the
<PAGE>
Samsung Electronics Co., Ltd.
December 21, 1994
Page 6
Transaction has been executed by the parties hereto, neither party will be under
any legal obligation of any kind with respect to the Transaction by virtue of
this letter or any other written or oral expression with respect to such
Transaction.
No failure or delay in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any right, power or privilege hereunder.
All questions and communications regarding either party or the
Transaction will be submitted or directed only to the persons designated by such
party. Except as set forth in the preceding sentence, each party agrees that
neither it nor any of its respective Representatives shall contact any other
officers, directors or employees of the other party directly without the consent
of the other party.
The parties hereby acknowledge the importance of maintaining the
confidentiality of the Confidential Information and the possibility and
discussions of a Transaction between them. Therefore, the parties agree that
money damages, which the parties agree would be substantial, would not be a
sufficient remedy for any breach or the material breach of this letter agreement
by either party or their respective Representatives, and the aggrieved party
shall be entitled, in addition to money damages, to specific performance and
injunctive relief and any other appropriate equitable remedies for any such
breach. Each party agrees not to oppose the granting of such equitable relief,
and to waive, and to cause its Representatives to waive, any requirement for the
securing or posting of any bond in connection with such remedy. Such remedies
shall not be deemed to be the exclusive remedies for a breach of this letter
agreement by either of us or our Representatives but shall be in addition to all
other remedies available at law or in equity to the parties hereto.
This letter agreement shall be governed by, and construed in
accordance with the laws of the State of California applicable to agreements
made and to be performed within such state. The parties hereto agree to submit
to the exclusive jurisdiction of the state courts and United States federal
courts sitting in Los Angeles, California for any actions, suits or proceedings
arising out of or relating to this letter agreement and the transactions
contemplated hereby (and
<PAGE>
Samsung Electronics Co., Ltd.
December 21, 1994
Page 7
each party agrees not to commence any action, suit or proceeding relating
thereto except in such courts).
If you are in agreement with the foregoing, please so indicate by
signing and returning one copy of this letter, whereupon this letter will
constitute our agreement with respect to the subject matter hereof.
Very truly yours,
AST RESEARCH, INC.
By: /s/ BRUCE C. EDWARDS
---------------------------------
Name: Bruce C. Edwards
Title: Executive Vice President
Accepted and Agreed to
this 21st day of December, 1994.
SAMSUNG ELECTRONICS CO., LTD.
By: /s/ MICHAEL MIN-JEONG YANG
---------------------------
Name: Michael Min-Jeong Yang
Title: Senior Manager
<PAGE>
EXHIBIT 11
AST RESEARCH, INC.
16215 ALTON PARKWAY
IRVINE, CALIFORNIA 92718
March 6, 1995
To Our Stockholders:
I am pleased to inform you that on February 27, 1995, AST Research, Inc.
entered into a definitive agreement with Samsung Electronics Co., Ltd. pursuant
to which Samsung has agreed to acquire a 40.25% interest in AST and, in
connection therewith, to commence certain strategic relationships, including
component supply and joint procurement. This proposed strategic alliance will
reinforce the two companies' strengths to develop, manufacture and market
personal computer products on a global scale. Samsung is one of the world's
preeminent diversified companies. The long-term aspects of such a relationship
are expected to enhance AST's future product offerings and ability to grow its
core businesses as it benefits from the convergence of consumer electronics,
telecommunications and personal computer technologies.
The investment by Samsung will result in a strategic cooperation between two
separate but complementary organizations. AST will continue to operate
separately, led by its own management team, but will benefit from a wide range
of cooperative arrangements, including, among others, expanded and improved
supply of critical components manufactured by Samsung and used by AST in the
manufacture of personal computers, joint product development, cross-OEM
(Original Equipment Manufacturer) arrangements and cross-licensing of patents.
By augmenting the resources and advantages of our respective organizations with
each other's strengths, in such areas as research and development,
manufacturing and marketing, we believe that our new alliance will provide both
short- and long-term benefits to stockholders, employees and customers and
other AST stakeholders.
To execute this alliance, Samsung has commenced today a tender offer to
purchase 5,820,000 shares of AST common stock, representing approximately 18%
of the currently outstanding common stock, for $22.00 per share. Additional
information about the tender offer is contained elsewhere in this package,
including the attached Schedule 14D-9 filed today by AST with the Securities
and Exchange Commission.
When combined with purchases by Samsung from AST of (i) 6,440,000 newly
issued shares of common stock for $19.50 per share, and (ii) 5,630,000 newly
issued shares of common stock for $22.00 per share, the tender offer will
result in Samsung owning 40.25% of AST's outstanding common stock. After the
transaction, AST will have approximately 44,446,500 shares of common stock
outstanding. The approximately 26,556,500 shares not owned by Samsung will
continue to trade as they have in the past. There is no fixed buyout option or
other contractual limit upon the upside potential of these shares. As a result,
AST stockholders will continue to participate in the long-term growth prospects
for AST. We believe that these prospects will be enhanced by the added
financial resources and strategic relationships Samsung is offering to AST.
THEREFORE, THE BOARD OF DIRECTORS OF AST ENTHUSIASTICALLY SUPPORTS THE
PROPOSED TRANSACTIONS, AND HAS UNANIMOUSLY APPROVED THE TENDER OFFER AND OTHER
TRANSACTIONS DESCRIBED ABOVE AND DETERMINED THAT THEY ARE FAIR TO, AND IN THE
BEST INTERESTS OF, AST STOCKHOLDERS. ACCORDINGLY, THE BOARD UNANIMOUSLY
RECOMMENDS THAT ALL STOCKHOLDERS ACCEPT SAMSUNG'S OFFER AND TENDER THEIR
SHARES.
The recommendation of the Board, including a description of certain matters
considered by the Board, is contained in the enclosed Schedule 14D-9. Samsung's
tender will begin March 6, 1995, and will expire on April 20, 1995, unless
extended. You should refer to Samsung's Offer to Purchase and related Letter of
Transmittal for the procedure for tendering your shares. I urge you to read
these documents carefully.
Very truly yours,
/s/ SAFI U. QURESHEY
Safi U. Qureshey
Chief Executive Officer
and Chairman of the Board
<PAGE>
EXHIBIT 13
Investment Banking Group
10900 Wilshire Boulevard
Suite 900
Los Angeles, California
90024
LOGO OF MERRILL LYNCH
February 27, 1995
Board of Directors
AST Research, Inc.
16215 Alton Parkway
Irvine, CA 92718
Gentlemen:
AST Research, Inc. (the "Company") and Samsung Electronics Co., Ltd. (the
"Purchaser") propose to enter into a Stock Purchase Agreement (the "Stock
Purchase Agreement") pursuant to which, among other things, the Purchaser will
(i) acquire from the Company approximately 6.44 million newly issued shares of
common stock, par value $0.01 per share (the "Common Stock") of the Company at
a purchase price of $19.50 per share (the "Initial Purchase"), (ii) make a
tender offer to purchase approximately 5.82 million shares of Common Stock at
$22.00 per Share, net to the seller in cash (the "Tender Offer"), and (iii)
acquire from the Company approximately 5.63 million newly issued shares of
Common Stock of the Company at a purchase price of $22.00 per share (the
"Subsequent Purchase") (such shares representing approximately 40.25% of the
shares of Common Stock outstanding after giving effect to the various
transactions). We further understand that the Company and the Purchaser propose
to enter into certain other agreements including the Stockholder Agreement, the
Strategic Alliance Agreement, the Letter of Credit Agreement and the
Registration Rights Agreement (each as defined in the Stock Purchase Agreement)
(collectively, the "Ancillary Agreements"). The Initial Purchase, the Tender
Offer, the Subsequent Purchase and the transactions and arrangements provided
for in the Ancillary Agreements are collectively referred to as the
"Transactions". Consummation of the Tender Offer, the Subsequent Purchase and
the transactions and arrangements provided for in the Ancillary Agreements is
conditioned upon approval thereof by the holders of the Common Stock.
You have asked us whether, in our opinion, the proposed consideration to be
received by the Company and the holders of the Common Stock (other than the
Purchaser and its affiliates) in the proposed Transactions, taken as a whole,
is fair to the Company and such stockholders from a financial point of view.
In arriving at the opinion set forth below, we have, among other things:
(1) 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 ending September 30, 1994 and December 31,
1994;
(2) Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets and prospects of the
Company, furnished to us by the Company;
<PAGE>
(3) Conducted discussions with members of senior management of the Company
concerning its businesses and prospects and the anticipated financial
benefits of certain of the Ancillary Agreements;
(4) Reviewed the historical market prices and trading activity for the
Common Stock of the Company and compared them with those of certain
publicly traded companies which we deemed to be reasonably similar to
the Company;
(5) Compared the results of operations of the Company with those of certain
companies which we deemed to be reasonably similar to the Company;
(6) Compared the proposed financial terms of the Transactions contemplated
by the Stock Purchase Agreement with the financial terms of certain
other strategic investments and mergers and acquisitions which we
deemed to be relevant;
(7) Participated in discussions and negotiations among representatives of
the Company, the Purchaser and their respective advisors;
(8) Reviewed the Stock Purchase Agreement and the Ancillary Agreements
dated February 27, 1995; and
(9) Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we
deemed necessary, including our assessment of general economic, market
and monetary conditions.
In preparing our opinion, we have relied on the accuracy and completeness of
all information supplied or otherwise made available to us by the Company, and
we have not independently verified such information or undertaken an
independent appraisal of the assets of the Company. With respect to the
financial forecasts and other information relating to its prospects and future
performance that have been furnished to us by the Company, we have assumed that
they have been reasonably prepared and reflect the best currently available
estimates and judgment of the Company's management as to the expected future
financial performance of the Company and the other matters covered thereby. We
have also relied without independent verification on the estimates of the
Company as to the anticipated financial benefits of certain of the Ancillary
Agreements and have assumed that the agreements to be entered into pursuant
thereto will provide in the aggregate such benefits.
In connection with our providing financial advice to the Company regarding
the matters set forth in this opinion, we have, at the Company's request, had
contacts with several third parties identified to us by the Company or its
agents with respect to an investment in or acquisition of the Company. We have
not otherwise been authorized by the Company or the Board of Directors to
solicit, nor have we solicited, third-party indications of interest for any
transaction with respect to the Company. We understand that the Company has
also engaged another party to make certain such inquiries, although we have not
independently verified such matters.
We have, in the past, provided financial advisory and financing services to
the Company and to the Purchaser on unrelated matters and have received fees
for the rendering of such services.
<PAGE>
On the basis of, and subject to the foregoing, we are of the opinion that the
proposed consideration to be received by the Company and the holders of the
Common Stock (other than the Purchaser and its affiliates) pursuant to the
proposed Transactions, taken as a whole, is fair to the Company and such
stockholders from a financial point of view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By /s/ Douglas L. Braunstein
-----------------------------------
Managing Director
Investment Banking Group
<PAGE>
EXHIBIT 14
AMENDMENT TO SEVERANCE COMPENSATION AGREEMENT
---------------------------------------------
Pursuant to resolution of the Board of Directors of AST Research,
Inc., a Delaware corporation (the "Company"), dated February 27, 1995, that
certain Severance Compensation Agreement (the "Agreement"), dated February 15,
1991, by and between the Company and Safi U. Qureshey (the "Executive") is
hereby amended, effective as of the date hereof, as follows:
1. Section 3(e)(i) of the Agreement is amended by substituting the
phrase "or an adverse change" for the phrase "or a change."
2. Section 3(e)(iii) of the Agreement is deleted and replaced with
the following:
any failure of the Company to maintain in effect benefit plans or
arrangements (including, without limitation, life insurance, accident,
disability and health insurance plans, 401(k) plans, retirement plans,
bonus plans, stock option plans, monthly automobile allowance, and all
similar plans which are from time to time made generally available to
senior executives of the Company)(hereinafter referred to as "Benefit
Plans") providing an aggregate level of benefits which is at least as
favorable to such senior executives as the aggregate level of benefits
provided under the Benefit Plans in effect at the time of a Change in
Control of the Company; or the taking of any action by the Company
which would, on an aggregate basis, adversely affect the Executive's
participation in or materially reduce the Executive's benefits under
the Benefit Plans; or reduce the aggregate level of material fringe
benefits enjoyed by the Executive as of the time of a Change in
Control of the Company;
3. Section 3(e)(iv) of the Agreement is deleted and replaced by the
following:
any failure by the Company to maintain incentive compensation plans
and arrangements (in-
<PAGE>
cluding, without limitation, the Benefit Plans)(the "Incentive Plans")
providing the Executive, on an aggregate basis, incentive compensation
opportunities at a level at least as favorable to the Executive as
those available to the Executive at the time of a Change in Control of
the Company; or the taking of any action by the Company which would,
on an aggregate basis, adversely affect the Executive's participation
in such Incentive Plans, expressed as a percentage of his base salary,
by more than ten (10) percentage points in any fiscal year as compared
to the immediately preceding fiscal year.
4. Section 3(e)(v) is deleted and replaced by the following:
the taking of any action by the Company which would adversely affect
the Executive's participation in or materially reduce the Executive's
benefits under any plan or arrangement to receive securities of the
Company or any successor entity maintained by the Company or such
successor in which the Executive is then participating (including,
without limitation, stock option and purchase plans and any other plan
or arrangement to receive and exercise stock options, stock
appreciation rights, restricted stock or grants thereof);
5. Section 3(g) of the Agreement is amended by adding the following
sentence thereto:
"Date of Termination" shall also mean, if the Executive terminates his
employment for Good Reason, the date of such termination.
6. Section 4(a) of the Agreement is deleted, to be replaced by the
following:
(a) The Company shall pay to the Executive as severance pay a
lump sum, in cash (i) in full on the fifth day following the Date of
Termination, or (ii) at the election of the Executive made prior to
the date Notice of Termination is given or the date the Executive
2
<PAGE>
terminates his employment for Good Reason, as applicable, one-half on
the fifth day following the Date of Termination and the balance plus
interest accrued at the Bank of America prime rate on the 7th day of
January in the year following the Date of Termination, consisting of
an amount equal to the sum of (1) the Executive's highest monthly base
salary plus car allowance then in effect during the 12-month period
immediately preceding the Date of Termination multiplied by twenty-
four (24), and (2) a lump sum bonus payment of two (2) times the
average of the two highest fiscal year's annualized bonus payment(s)
paid under all of the Company's bonus plans during the past three
years; provided, however, that the amount of any such lump sum payment
-------- -------
shall be subject to withholding pursuant to applicable law.
7. A new Section 4(d) is added to provide as follows:
(d) If the benefits provided to the Executive pursuant to this
Section 4 would, either alone or together with any other payments or
benefits received or to be received by the Executive in connection
with a Change in Control, constitute "parachute payments" (as defined
in Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code")), the Company shall pay to Executive an additional amount
necessary to place Executive in the same after-tax position as
Executive would have been had no such excise tax been imposed with
respect to any parachute payments. The amount payable pursuant to the
preceding sentence shall be grossed-up to the extent necessary to pay
income, excise and other taxes due on such amount. The determination
of any amounts payable under this Section 4(d) shall be made by a
nationally recognized public accounting firm chosen by the Company in
good faith, and such determination shall be conclusive and binding on
the Company and the Executive.
3
<PAGE>
IN WITNESS WHEREOF, the Company and the Executive have executed this
Amendment to Severance Compensation Agreement as of the 27th day of February,
1995.
EXECUTIVE: AST RESEARCH, INC.
/s/ SAFI U. QURESHEY By: /s/ DENNIS R. LEIBEL
- -------------------- ----------------------
SAFI U. QURESHEY DENNIS R. LEIBEL
Chairman and Senior Vice-President
Chief Executive Officer
4
<PAGE>
EXHIBIT 15
FORM OF AMENDMENT TO WARRANT CERTIFICATE
----------------------------------------
Pursuant to resolution of the Board of Directors of AST Research,
Inc., a Delaware corporation (the "Company"), dated February 27, 1995, that
certain AST Research, Inc. Warrant Certificate, issued by the Company to
[ ] (the "Warrant Holder") as of [ ] (the "Warrant Certificate")
is hereby amended, effective as of the date hereof, by adding the following
sentence to the end of Section 5.1 thereof:
Notwithstanding the foregoing, the provisions of this Section 5 shall
not apply with respect to any Change in Control that may occur in
connection with (i) the transactions contemplated by that certain
Stock Purchase Agreement, Dated As Of February 27, 1995, By And
Between the Company and Samsung Electronics Company, Ltd. ("Samsung"),
as the same may be amended pursuant to the terms thereof (the "Stock
Purchase Agreement") or (ii) subject to the proviso to this sentence,
the acquisition of Beneficial Ownership of Voting Stock by Samsung
and/or its Affiliates in transactions permitted by the Stockholder
Agreement; provided, however, that the provisions of this Section 5
-------- -------
shall apply in the event Samsung and/or its Affiliates should at any
time and by whatever means acquire, in the aggregate, Beneficial
Ownership of more than 49.9% of the Voting Stock of the Company, and
the transaction(s) whereby any such acquisition of Beneficial
Ownership of more than 49.9% of the Voting Stock of the Company occurs
shall constitute a Change in Control for purposes of this Section 5.
Capitalized terms used without definition in this Section 5 shall have
the meanings provided in the Stock Purchase Agreement.
<PAGE>
IN WITNESS WHEREOF, the Company and the Warrant Holder have executed
this Amendment to Warrant Certificate as of the 27th day of February, 1995.
WARRANT HOLDER: AST RESEARCH, INC.
By:
- --------------------- ----------------------
[ ]
Name:
---------------
Title:
---------------
2
<PAGE>
EXHIBIT 16
AMENDMENT TO THE AST RESEARCH, INC.
-----------------------------------
1994 ONE-TIME GRANT STOCK OPTION PLAN
-------------------------------------
FOR NON-EMPLOYEE DIRECTORS
--------------------------
Pursuant to resolution of the Board of Directors of AST Research, Inc., a
Delaware corporation (the "Company"), dated February 27, 1995, the AST Research,
Inc. 1994 One-Time Grant Stock Option Plan for Non-Employee Directors is hereby
amended, effective as of the date hereof, by adding the following sentence to
the end of Section 10(a) thereof:
Notwithstanding the foregoing, the provisions of this Section 10 shall
not apply with respect to any Offer that may occur in connection with
(i) the transactions contemplated by that certain Stock Purchase
Agreement, Dated As Of February 27, 1995, By And Between the Company
and Samsung Electronics Company, Ltd. ("Samsung"), as the same may be
amended pursuant to the terms thereof (the "Stock Purchase Agreement")
or (ii) subject to the proviso to this sentence, the acquisition of
Beneficial Ownership of Voting Stock by Samsung and/or its Affiliates
in transactions permitted by the Stockholder Agreement; provided, that
--------
the provisions of this Section 10 shall apply in the event Samsung
and/or its Affiliates should at any time and by whatever means
acquire, in the aggregate, Beneficial Ownership of more than 49.9% of
the Voting Stock of the Company, and the transaction(s) whereby any
such acquisition of Beneficial Ownership of more than 49.9% of the
Voting Stock of the Company occurs shall constitute an Offer for
purposes of this Section 10. Capitalized terms used without
definition in this Section 10 shall have the meanings provided in the
Stock Purchase Agreement.
<PAGE>
Date: February 27, 1995 AST RESEARCH, INC.
By: /s/ DENNIS R. LEIBEL
---------------------
DENNIS R. LEIBEL
Senior Vice-President
2
<PAGE>
EXHIBIT 17
AMENDMENT TO THE AST RESEARCH, INC.
-----------------------------------
1991 STOCK OPTION PLAN
----------------------
FOR NON-EMPLOYEE DIRECTORS
--------------------------
Pursuant to resolution of the Board of Directors of AST Research,
Inc., a Delaware corporation (the "Company"), dated February 27, 1995, the AST
Research, Inc. 1991 Stock Option Plan for Non-Employee Directors is hereby
amended, effective as of the date hereof, by adding the following sentence to
the end of Section 10(a) thereof:
Notwithstanding the foregoing, the provisions of this Section 10 shall
not apply with respect to any Offer that may occur in connection with
(i) the transactions contemplated by that certain Stock Purchase
Agreement, Dated As Of February 27, 1995, By And Between the Company
and Samsung Electronics Company, Ltd. ("Samsung"), as the same may be
amended pursuant to the terms thereof (the "Stock Purchase Agreement")
or (ii) subject to the proviso to this sentence, the acquisition of
Beneficial Ownership of Voting Stock by Samsung and/or its Affiliates
in transactions permitted by the Stockholder Agreement; provided, that
--------
the provisions of this Section 10 shall apply in the event Samsung
and/or its Affiliates should at any time and by whatever means
acquire, in the aggregate, Beneficial Ownership of more than 49.9% of
the Voting Stock of the Company, and the transaction(s) whereby any
such acquisition of Beneficial Ownership of more than 49.9% of the
Voting Stock of the Company occurs shall constitute an Offer for
purposes of this Section 10. Capitalized terms used without
definition in this Section 10 shall have the meanings provided in the
Stock Purchase Agreement.
<PAGE>
Date: February 27, 1995 AST RESEARCH, INC.
By: /s/ DENNIS R. LEIBEL
---------------------
DENNIS R. LEIBEL
Senior Vice-President
2
<PAGE>
EXHIBIT 18
FORM OF ACKNOWLEDGMENT/CONSENT TO WAIVER OF RIGHTS
--------------------------------------------------
The undersigned (the "Optionee") is a member of the Board of Directors of
AST Research, Inc., a Delaware corporation (the "Company"), and a holder of
outstanding stock options under the Company's 1991 Stock Option Plan for Non-
Employee Directors (the "1991 Plan")and/or the Corporation's 1994 One-Time Grant
Stock Option Plan for Non-Employee Directors (the "1994 Plan," and, together
with the 1991 Plan, the "Plans").
Pursuant to resolution of the Board dated February 27, 1995, (the
"Resolution"), Section 10 of each of the Plans has been amended to provide that
the provisions thereof will not apply with respect to any Offer (as defined in
such Section 10) that may occur in connection with (i) the transactions
contemplated by that certain Stock Purchase Agreement, Dated As Of February 27,
1995, By And Between the Company and Samsung Electronics Company, Ltd.
("Samsung"), as the same may be amended pursuant to the terms thereof (the
"Stock Purchase Agreement") or (ii) subject to the proviso to this sentence, the
acquisition of Beneficial Ownership of Voting Stock by Samsung and/or its
Affiliates in transactions permitted by the Stockholder Agreement; provided,
--------
that the provisions of each such Section 10 will apply in the event Samsung
and/or its Affiliates should at any time and by whatever means acquire, in the
aggregate, Beneficial Ownership of more than 49.9% of the Voting Stock of the
Company, and the transaction(s) whereby any such acquisition of Beneficial
Ownership of more than 49.9% of the Voting Stock of the Company occurs will
constitute an Offer for purposes of such Section 10. Capitalized terms used
without definition herein shall have the meanings provided in the Stock Purchase
Agreement.
The undersigned hereby voluntarily and irrevocably waives, with full
knowledge of the effects thereof, any rights he may otherwise have had under
Section 10 of either Plan (and the related provisions of any option agreement
issued with respect to stock options granted under either Plan (each such option
agreement an "Option Agreement")) with respect to any Offer that may occur in
connection with (i) the transactions contemplated by the Stock Purchase
Agreement or (ii) subject to the proviso
<PAGE>
to this sentence, the acquisition of Beneficial Ownership of Voting Stock by
Samsung and/or its Affiliates in transactions permitted by the Stockholder
Agreement, and consents to and acknowledges the effect of the Resolution as set
forth above; provided, that this Acknowledgment/Consent to Waiver of Rights
--------
shall not apply and shall be of no force and effect, and the undersigned
expressly reserves all rights under each Plan and Option Agreement, in the event
Samsung and/or its Affiliates should at any time and by whatever means acquire,
in the aggregate, Beneficial Ownership of more than 49.9% of the Voting Stock of
the Company, and it is expressly understood that the transaction(s) whereby any
such acquisition of Beneficial Ownership of more than 49.9% of the Voting Stock
of the Company occurs shall constitute an Offer for purposes of Section 10 of
each of the Plans.
2
<PAGE>
IN WITNESS WHEREOF, the Optionee has executed this Acknowledgment/Consent
to Waiver of Rights as of the 27th day of February, 1995.
--------------------------
[ ]
Optionee
3
<PAGE>
EXHIBIT 19
FORM OF AMENDMENT TO SEVERANCE COMPENSATION AGREEMENT
-----------------------------------------------------
(All Officers except Qureshey)
Pursuant to resolution of the Board of Directors of AST Research, Inc.
(the "Company"), that certain Severance Compensation Agreement (the
"Agreement"), dated [ ], by and between the Company and [ ]
(the "Executive") is hereby amended, effective as of the date hereof, as
follows:
1. Section 3(e)(i) of the Agreement is amended by substituting the
phrase "or an adverse change" for the phrase "or a change."
2. Section 3(e)(iii) of the Agreement is deleted and replaced with
the following:
any failure of the Company to maintain in effect benefit plans or
arrangements (including, without limitation, life insurance, accident,
disability and health insurance plans, 401(k) plans, retirement plans,
bonus plans, stock option plans, monthly automobile allowance, and all
similar plans which are from time to time made generally available to
senior executives of the Company)(hereinafter referred to as "Benefit
Plans") providing an aggregate level of benefits which is at least as
favorable to such senior executives as the aggregate level of benefits
provided under the Benefit Plans in effect at the time of a Change in
Control of the Company; or the taking of any action by the Company
which would, on an aggregate basis, adversely affect the Executive's
participation in or materially reduce the Executive's benefits under
the Benefit Plans; or reduce the aggregate level of material fringe
benefits enjoyed by the Executive as of the time of a Change in
Control of the Company;
3. Section 3(e)(iv) of the Agreement is deleted and replaced by the
following:
any failure by the Company to maintain incentive compensation plans
and arrangements (including, without limitation, the Benefit
<PAGE>
Plans)(the "Incentive Plans") providing the Executive, on an aggregate
basis, incentive compensation opportunities at a level at least as
favorable to the Executive as those available to the Executive at the
time of a Change in Control of the Company; or the taking of any
action by the Company which would, on an aggregate basis, adversely
affect the Executive's participation in such Incentive Plans,
expressed as a percentage of his base salary, by more than ten (10)
percentage points in any fiscal year as compared to the immediately
preceding fiscal year.
4. Section 3(e)(v) is deleted and replaced by the following:
the taking of any action by the Company which would adversely affect
the Executive's participation in or materially reduce the Executive's
benefits under any plan or arrangement to receive securities of the
Company or any successor entity maintained by the Company or such
successor in which the Executive is then participating (including,
without limitation, stock option and purchase plans and any other plan
or arrangement to receive and exercise stock options, stock
appreciation rights, restricted stock or grants thereof);
5. Section 3(g) of the Agreement is amended by adding the following
sentence thereto:
"Date of Termination" shall also mean, if the Executive terminates his
employment for Good Reason, the date of such termination.
6. Section 4(a) of the Agreement is deleted, to be replaced by the
following:
(a) The Company shall pay to the Executive as severance pay a
lump sum, in cash (i) in full on the fifth day following the Date of
Termination, or (ii) at the election of the Executive made prior to
the date Notice of Termination is given or the date the Executive
terminates his employment for Good Reason, as
2
<PAGE>
applicable, one-half on the fifth day following the Date of
Termination and the balance plus interest accrued at the Bank of
America prime rate on the 7th day of January in the year following the
Date of Termination, consisting of an amount equal to the sum of (1)
the Executive's highest monthly base salary plus car allowance then in
effect during the 12-month period immediately preceding the Date of
Termination multiplied by twenty-four (24), and (2) a lump sum bonus
payment of two (2) times the average of the two highest fiscal year's
annualized bonus payment(s) paid under all of the Company's bonus
plans during the past three years; provided, however, that if the
-------- -------
Executive's employment is terminated by the Company in accordance with
any action taken by or recommendation of the Management Committee
established pursuant to Article 7 of that certain Stockholder
Agreement Dated As Of February 27, 1995 By And Between the Company and
Samsung Electronics Company, Ltd. as the same may be amended pursuant
to the terms thereof, then the lump sum severance amount otherwise
provided for herein shall be increased by fifty (50) percent; and
provided, further, that the amount of any such lump sum payment shall
-------- -------
be subject to withholding pursuant to applicable law.
7. A new Section 4(d) is added to provide as follows:
(d) If the benefits provided to the Executive pursuant to this
Section 4 would, either alone or together with any other payments or
benefits received or to be received by the Executive in connection
with a Change in Control, constitute "parachute payments" (as defined
in Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code")), the Company shall pay to Executive an additional amount
necessary to place Executive in the same after-tax position as
Executive would have been had no such excise tax been imposed with
respect to any parachute payments. The amount payable pursuant to the
preceding sentence shall be grossed-up to the extent necessary to
3
<PAGE>
pay income, excise and other taxes due on such amount. The
determination of any amounts payable under this Section 4(d) shall be
made by a nationally recognized public accounting firm chosen by the
Company in good faith, and such determination shall be conclusive and
binding on the Company and the Executive.
4
<PAGE>
IN WITNESS WHEREOF, the Company and the Executive have executed this
Amendment to Severance Compensation Agreement as of the 27th day of February,
1995.
EXECUTIVE: AST RESEARCH, INC.
By:
- ------------------------------------ ---------------------------------
[Name] Name:
[Title] ----------------------------
Title:
---------------------------
5
<PAGE>
EXHIBIT 20
FORM OF AMENDMENT TO SEVERANCE COMPENSATION AGREEMENT
-----------------------------------------------------
(All Non-Officer Vice-Presidents)
Pursuant to resolution of the Board of Directors of AST Research, Inc.
(the "Company"), that certain Severance Compensation Agreement (the
"Agreement"), dated [ ], by and between the Company and [ ]
(the "Employee") is hereby amended, effective as of the date hereof, as follows:
1. Section 3(e)(i) of the Agreement is amended by substituting the
phrase "or an adverse change" for the phrase "or a change."
2. Section 3(e)(iii) of the Agreement is deleted and replaced with
the following:
any failure of the Company to maintain in effect benefit plans or
arrangements (including, without limitation, life insurance, accident,
disability and health insurance plans, 401(k) plans, retirement plans,
bonus plans, stock option plans, monthly automobile allowance, and all
similar plans which are from time to time made generally available to
senior executives of the Company)(hereinafter referred to as "Benefit
Plans") providing an aggregate level of benefits which is at least as
favorable to such senior executives as the aggregate level of benefits
provided under the Benefit Plans in effect at the time of a Change in
Control of the Company; or the taking of any action by the Company
which would, on an aggregate basis, adversely affect the Employee's
participation in or materially reduce the Employee's benefits under
the Benefit Plans; or reduce the aggregate level of material fringe
benefits enjoyed by the Employee as of the time of a Change in Control
of the Company;
3. Section 3(e)(iv) of the Agreement is deleted and replaced by the
following:
any failure by the Company to maintain incentive compensation plans
and arrangements (including, without limitation, the Benefit
<PAGE>
Plans)(the "Incentive Plans") providing the Employee, on an aggregate
basis, incentive compensation opportunities at a level at least as
favorable to the Employee as those available to the Employee at the
time of a Change in Control of the Company; or the taking of any
action by the Company which would, on an aggregate basis, adversely
affect the Employee's participation in such Incentive Plans, expressed
as a percentage of his base salary, by more than ten (10) percentage
points in any fiscal year as compared to the immediately preceding
fiscal year.
4. Section 3(e)(v) is deleted and replaced by the following:
the taking of any action by the Company which would adversely affect
the Employee's participation in or materially reduce the Employee's
benefits under any plan or arrangement to receive securities of the
Company or any successor entity maintained by the Company or such
successor in which the Employee is then participating (including,
without limitation, stock option and purchase plans and any other plan
or arrangement to receive and exercise stock options, stock
appreciation rights, restricted stock or grants thereof);
5. Section 3(g) of the Agreement is amended by adding the following
sentence thereto:
"Date of Termination" shall also mean, if the Employee terminates his
employment for Good Reason, the date of such termination.
6. Section 4(a) of the Agreement is deleted, to be replaced by the
following:
(a) The Company shall pay to the Employee as severance pay a lump
sum, in cash (i) in full on the fifth day following the Date of
Termination, or (ii) at the election of the Employee made prior to the
date Notice of Termination is given or the date the Employee
terminates his employment for Good Reason, as
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<PAGE>
applicable, one-half on the fifth day following the Date of
Termination and the balance plus interest accrued at the Bank of
America prime rate on the 7th day of January in the year following the
Date of Termination, consisting of an amount equal to the sum of (1)
the Employee's highest monthly base salary plus car allowance then in
effect during the 12-month period immediately preceding the Date of
Termination multiplied by twelve (12) and (2) a lump sum bonus payment
of one (1) times the average of the two highest fiscal year's
annualized bonus payment(s) paid under all of the Company's bonus
plans during the past three years; provided, however, that if the
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Employee's employment is terminated by the Company in accordance with
any action taken by or recommendation of the Management Committee
established pursuant to Article 7 of that certain Stockholder
Agreement Dated As Of February 27, 1995 By And Between the Company and
Samsung Electronics Company, Ltd., as the same may be amended pursuant
to the terms thereof, then the lump sum severance amount otherwise
provided for herein shall be increased by fifty (50) percent; and
provided, further, that the amount of any such lump sum payment shall
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be subject to withholding pursuant to applicable law.
7. A new Section 4(d) is added to provide as follows:
(d) If the benefits provided to the Employee pursuant to this
Section 4 would, either alone or together with any other payments or
benefits received or to be received by the Employee in connection with
a Change in Control, constitute "parachute payments" (as defined in
Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code")), the Company shall pay to Employee an additional amount
necessary to place Employee in the same after-tax position as Employee
would have been had no such excise tax been imposed with respect to
any parachute payment. The amount payable pursuant to the preceding
sentence shall be grossed-up to the extent necessary to
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<PAGE>
pay income, excise and other taxes due on such amount. The
determination of any amounts payable under this Section 4(d) shall be
made by a nationally recognized public accounting firm chosen by the
Company in good faith, and such determination shall be conclusive and
binding on the Company and the Employee.
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<PAGE>
IN WITNESS WHEREOF, the Company and the Employee have executed this
Amendment to Severance Compensation Agreement as of the 27th day of February,
1995.
EMPLOYEE: AST RESEARCH, INC.
By:
- ------------------------------- ------------------------------
[Name] Name:
[Title] -------------------------
Title:
------------------------
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