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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
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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This Amendment No. 1 amends and supplements the Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") filed on March 6, 1995, by
AST Research Inc., a Delaware corporation (the "Company"), and relates to the
tender offer made by Samsung Electronics Co., Ltd., a Korean corporation (the
"Purchaser"), disclosed in a Tender Offer Statement on Schedule 14D-1, dated
March 6, 1995, as amended, to purchase 5,820,000 shares of the Company's common
stock, par value $0.01 per share (the "Common Stock") 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, as amended (the "Revised Offer to
Purchase"), and the related Letter of Transmittal (which collectively in its
revised form with the Revised Offer to Purchase constitute the "Revised
Offer"). The purpose of this Amendment No. 1 is to amend and supplement Items
3, 8 and 9 of the Schedule 14D-9, as set forth below. All capitalized terms
used but not otherwise defined herein shall have the meanings ascribed to such
terms in the Schedule 14D-9.
On June 7, 1995, the Company filed with the Securities and Exchange
Commission (the "Commission") its definitive proxy material (the "Proxy
Statement") for the Special Meeting of the Stockholders (the "Special
Meeting"), scheduled to be held on June 30, 1995, to vote on the proposed
investment by the Purchaser. Such Proxy Statement is incorporated herein by
reference.
ITEM 3. IDENTITY AND BACKGROUND.
Item 3(b)(2)(i) is hereby supplemented to add the following:
Amendment No. 1 to Stock Purchase Agreement. Following the Restatement (as
defined below under "ADDITIONAL INFORMATION TO BE FURNISHED--Accounting
Restatement"), the Company and the Purchaser entered into Amendment No. 1 to
Stock Purchase Agreement, dated as of June 1, 1995 ("Amendment No. 1 to Stock
Purchase Agreement"). See "ADDITIONAL INFORMATION TO BE FURNISHED--Accounting
Restatement." Amendment No. 1 to the Stock Purchase Agreement provides, among
other things, for the following:
Waiver. The Purchaser agreed that the Restatement and the change in the
Company's method of accounting for the acquisition of the personal computer
manufacturing operations of Tandy Corporation set forth in the Restatement
(the "Accounting Change") shall not constitute a breach of any
representation, warranty or agreement or the failure of any condition set
forth in the Stock Purchase Agreement and agreed that it shall not have the
right to terminate the Agreement as a result of the Restatement or the
Accounting Change.
Contingent Shares Issuances. In the event that at any time or from time
to time an action results in an Adverse Event (as defined below) that
requires the payment by the Company of amounts in settlement of such action
and the aggregate amounts actually so paid by the Company including,
without limitation, any amounts paid by the Company for attorneys' fees,
(all such amounts being referred to herein as "Specified Amounts") exceeds
the Excess Loss Amount (as defined below) then the Company shall issue to
the Purchaser, without the payment by the Purchaser of any additional
consideration, a number of additional shares (rounded to the nearest whole
share) of Common Stock (the "Contingent Shares") equal to the Excess Loss
Amount divided by the Market Price (as defined below); provided, that in
the event that the number of shares to be issued pursuant to the above
formula would cause the Purchaser to exceed the maximum Purchaser Interest
of 49.9% permitted pursuant to the Stockholder Agreement, then, in lieu
thereof, the Company shall issue to the Purchaser (i) such number of shares
of Common Stock as will cause the Purchaser Interest to equal 49.9% and
(ii) a number of shares of Series A non-voting Junior Preferred Stock, par
value $.01 per share (the "Preferred Stock"), having the rights,
preferences and privileges substantially as set forth in the Certificate of
Designations attached as Exhibit A to the Amendment No. 1 to Stock Purchase
Agreement, equal to the difference between the number of shares of Common
Stock which would have been issued pursuant to the above formula and the
number of shares of Common Stock actually issued pursuant to clause (i),
above.
Issuance of Contingent Shares Prior to Tandy Note Settlement. In the
event that (a) Contingent Shares are issued pursuant to Amendment No. 1 to
Stock Purchase Agreement prior to the maturity of the Tandy Note (as
defined below under "ADDITIONAL INFORMATION TO BE FURNISHED--Accounting
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Restatement"), (b) the Purchaser is entitled to reimbursement pursuant to
the Letter of Credit Agreement and (c) the Purchaser elects, pursuant to
the Letter of Credit Agreement, to be reimbursed, in whole or in part, in
shares of Common Stock, then to the extent that the number of shares to be
issued pursuant to such reimbursement would cause the Purchaser Interest to
exceed 49.9%, the Company shall issue, in lieu thereof, to the Purchaser
(i) such number of shares of Common Stock as will cause the Purchaser
Interest to equal 49.9% and (ii) a number of shares of Preferred Stock
equal to the difference between the number of shares of Common Stock which
would have been issued pursuant to the reimbursement under the Letter of
Credit Agreement and the number of shares of Common Stock actually issued
pursuant to clause (i), above.
Additional Closing Condition. No party to any material instrument shall
have declared, or shall have notified the Company in writing of its
intention to declare, the Company in default or breach (which default or
breach has not been cured or waived at or prior to the Closing) under such
instrument as a result of the Restatement, where any such declaration would
have a material adverse effect, and there shall not have been issued or
commenced (and not dismissed) by the Commission any formal order of
investigation or formal enforcement proceeding relating to the Restatement
or the Accounting Change, nor shall the Commission have notified the
Company in writing that it intends imminently to issue or commence any such
formal order of investigation or formal enforcement proceeding.
"Adverse Event" shall mean (i) the settlement by the Company of any
litigation, whether now pending or hereafter filed, brought by or on behalf
of the holders of shares of Common Stock which, at the time of the
settlement, includes one or more claims or causes of action based upon or
arising out of the Restatement or the Accounting Change or (ii) the entry
of a final judgment, not subject to appeal, by a court of competent
jurisdiction against the Company in any litigation, whether now pending or
hereafter filed, brought by or on behalf of the holders of shares of Common
Stock which, at the time of such judgment, includes one or more claims or
causes of action based upon or arising out of the Restatement or the
Accounting Change.
"Excess Loss Amount" shall mean (a) all Specified Amounts theretofore
paid by the Company less (b) the sum of (i) $5 million plus (ii) any
amounts paid or to be paid to the Company by way of reimbursement,
contribution or indemnification by any insurance company or third party.
The computation of the Excess Loss Amount shall be made in respect of any
second or subsequent Adverse Event on a cumulative basis, taking into
account all amounts previously paid by the Company and paid or to be paid
to the Company in connection with all previous Adverse Events. In the event
that the settlement includes any securities, property or other non-cash
consideration to be issued or delivered by the Company the value of such
securities, property or other non-cash consideration shall be determined by
mutual agreement of the Company and the Purchaser. In the event the Company
and the Purchaser shall be unable to reach such agreement after a period of
30 days, such value shall be determined by a nationally recognized
investment baking firm to be designated for that purpose by the Company and
the Purchaser or, failing agreement on such investment banking firm after
an additional period of 10 days, by Merrill Lynch and Salomon Brothers Inc.
"Market Price" shall mean the average of the closing prices of the Common
Stock on the Nasdaq National Market System, or, if the Common Stock is not
then quoted on the Nasdaq National Market System, on the principal United
States securities exchange or quotation system on which the Common Stock is
then listed or quoted, for the period of 20 consecutive trading days
beginning on the first trading day following the first public announcement
of an Adverse Event; provided, that the Market Price shall not be less than
50% of the closing price of the Common Stock on the Nasdaq National Market
System on the date of the Closing of the Second Issuance (the "Reference
Price") nor greater than 150% of the Reference Price.
Since the Contingent Shares will be issued to the Purchaser without the
payment of any additional consideration, any such issuance will have a
dilutive effect on the other stockholders of the Company. The number of
additional shares, if any, that would be issuable to the Purchaser will
depend on the amount of any settlement or judgment in any current or future
litigation as a result of the Restatement,
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available insurance coverage and the Market Price of the Common Stock at
the time of any Adverse Event. In light of, among other things, the
uncertainty as to whether any litigation would result from the Restatement
and uncertainties involved in estimating at the current time the outcome of
any current or future litigation, the extent of any such dilution cannot
currently be estimated. However, Amendment No. 1 to Stock Purchase
Agreement provides that the Market Price that will be used to determine the
number of additional shares, if any, will not be lower than 50%, nor
greater than 150%, of the closing price of the Common Stock on the Nasdaq
National Market System at the closing of the Second Issuance.
Such Amendment also provides that, in the event that the issuance of the
Contingent Shares would cause the Purchaser Interest to exceed the maximum
of 49.9% established by the Stockholder Agreement, the number of shares to
which the Purchaser is entitled in excess of 49.9% will be issued in the
form of shares of the Preferred Stock. Each share of the Preferred Stock
will be entitled to dividends in the same amount and at the same time as a
share of Common Stock, will be non-voting, except as required by law, and
will share equally with the Common Stock in the distribution of any assets
upon the dissolution, winding up or liquidation of the Company, after
payment to the holders of the Preferred Stock of a preferential amount of
$.01 per share. In addition, each share of the Preferred Stock will be
convertible into one share of Common Stock at any time after the expiration
of the Standstill Period. The foregoing description of Amendment No. 1 to
Stock Purchase Agreement does not purport to be complete and is qualified
in its entirety by reference to the text of Amendment No. 1 to Stock
Purchase Agreement, a copy of which is filed as an exhibit hereto and is
incorporated herein by reference.
Item 3(b)(2)(ii) is hereby deleted in its entirety and replaced with the
following:
Strategic Alliance Agreement
Pursuant to the Stock Purchase Agreement, the Company and the Purchaser have
entered into the 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 and as a condition precedent to the issuance and sale of the Second
Issuance Shares, to various mutually beneficial commercial relationships
intended to enhance the business prospects and competitive position of both the
Company and the Purchaser. The following description of the Strategic Alliance
Agreement does not purport to be complete and is qualified in its entirety by
reference to the text of the Strategic Alliance Agreement, which has been filed
as an exhibit to the Company's Schedule 14D-9 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 Agreement. Such agreement shall provide that the Purchaser
and certain related companies will supply the Company and its subsidiaries
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.
Cooperative 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. The
Company and the Purchaser shall form a joint procurement committee, which
committee shall meet and facilitate the joint procurement efforts.
Marketing Cooperation Agreement. Such agreement shall provide that the
Company and the Purchaser will share expertise to jointly market currently
existing and newly developed non-competing products of
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each party in order to achieve maximum market penetration for both parties,
in a manner consistent with all applicable laws and regulations. The
Company and the Purchaser shall form a marketing cooperation team, which
team shall plan and execute the marketing cooperation efforts of the
parties. Under this agreement, the parties also agree to apply cerain co-
branding strategy to certain products, to coordinate the planning and
execution of the promotional activities for such co-branded products, and
to cooperate in connection with their participation in trade shows.
OEM Agreements. The parties shall enter into separate agreements with each
other governing (i) the Purchaser's Original Equipment Manufacturer ("OEM")
supply to the Company and (ii) the Company's OEM supply to the Purchaser.
Such agreements shall provide that the Company and the Purchaser will
coordinate the utilization of the manufacturing and assembly capacity of
each other in connection with personal computers and attachments, parts and
accessories thereof (the "Products"). Such agreements include a right of
first refusal regarding OEM opportunities offered by the other party and
certain technology sharing arrangements. Under the agreement governing the
Purchaser's OEM supply to the Company, at a minimum, the Company agreed to
buy Products from the Purchaser during calendar year 1996 in the aggregate
price amount of $200 million, provided that the Products are approved in
advance in writing by the Company as meeting the Company's market needs
during calendar year 1996, and that the products are provided with price,
allocation, terms and conditions at least as favorable as the Company is
able to obtain from other suppliers or the Company's own factories, and
that the Purchaser has adequate production capacity available to devote to
satisfying the Company's needs for such Products.
Joint Development and Technical Cooperation Agreement. Such agreement shall
provide that the Company and the Purchaser will share expertise in research
and product development through technical cooperation in order to jointly
develop products in order to reduce "product time to market" for both
parties. Both parties shall make reasonable efforts to define, plan and
implement at least one (1) joint development project every twelve (12)
months for a period of five (5) years in the general areas of personal
computers and related components thereto.
Patent 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 on a nonexclusive,
nontransferable and royalty-free basis, without the right to sublicense
third parties, 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 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 management advice,
assistance and training to each other in areas where each party has
particular expertise with respect to areas in which the parties do not
compete.
General Terms Agreement. Such agreement shall provide for general terms
which are incorporated into each of the individual agreements
(collectively, the "Strategic Agreements") to be entered into pursuant to
the Strategic Alliance Agreement. The Company and the Purchaser shall form
a top executive committee consisting of two or more directors of each of
the parties, which committee shall oversee the Strategic Agreements. The
Purchaser's members of such committee shall have the right to attend the
Company's management meetings and to report to the Company's Chief
Executive Officer to review the status of the Company's business and to
provide suggestions.
Management believes that the activities contemplated under the Strategic
Alliance Agreement should be of substantial benefit to the Company. However,
while the Strategic Alliance Agreement sets forth the principles agreed by the
parties to govern these relationships, the terms of the agreements remain
subject to negotiation, although such agreements must be mutually satisfactory
to the Company and the Purchaser and must be finalized prior to the Second
Issuance. Once agreed to, a substantial amount of time and effort may
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be required for these relationships with the Purchaser to be established and to
develop. Additionally, it is possible that because the Purchaser is a supplier
of critical components in a highly competitive marketplace, other suppliers may
be less likely to extend attractive terms to the Company, or to do business
with or enter into strategic relationships involving the Company. The Company
has receive notice from LG Semicon Co., Ltd., formerly known as Goldstar Co.,
Ltd. ("Goldstar"), one of its suppliers of DRAM, that it will no longer supply
such components to the Company, effective April 1995. For the twelve months
ended March 31, 1995, Goldstar and its related companies supplied approximately
15% of the Company's DRAM requirements. In the event that the Company is unable
to obtain such components from the Purchaser, it will be required to find
alternative sources of supply. If it is unable to locate sufficient supply, or
if the terms are less favorable than those previously obtained by the Company,
the Company's results of operations could be adversely affected.
In addition, the Purchaser has other business involvements typical of large,
multi-national companies and is not based in the United States (although its
presence in the United States is significant), and it is possible that some
suppliers, customers, employees and others will not react favorably to the
proposed arrangements. The reliance by the Company on the Purchaser for
significant portions of certain components requirements may reduce the
Company's flexibility to respond to changes in the market for personal
computers.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
Item 8 is hereby supplemented to add the following:
Accounting Restatement
In connection with a review of the Proxy Statement for the Special Meeting by
the staff (the "Staff") of the Commission, and after extensive discussions with
the Staff, the Company has restated its financial statements for the fiscal
year ended July 2, 1994 ("fiscal 1994"), with respect to certain adjustments
arising from the Company's acquisition in 1993 of certain assets and
liabilities of Tandy Corporation (the "Restatement").
On July 13, 1993, pursuant to an Agreement for Purchase and Sale of Assets,
dated as of June 30, 1993 (the "Purchase Agreement"), between the Company and
Tandy Corporation, TE Electronics, Inc. and GRiD Systems Corporation
(collectively "Tandy"), the Company acquired certain assets and assumed certain
liabilities of Tandy for $105 million (the "TE Acquisition"), consisting of $15
million in cash and a three-year promissory note (the "Tandy Note") with an
original principal amount of $90 million. Subsequently, on October 13, 1993,
the Company completed the purchase from Tandy of certain assets and the
assumption of certain liabilities of Tandy/GRiD France for a purchase price of
$5,006,000 (the "GRiD/France Acquisition" and, together with the TE
Acquisition, the "Acquisition") which was paid through an increase in the
principal amount of the Tandy Note. In addition to four manufacturing
facilities located in the United States and Scotland, the assets acquired by
the Company from Tandy included the GRiD and Victor brand desktop and non pen-
based notebook product lines and the GRiD pen-based product lines. The Company
also entered into a three-year agreement to supply personal computers to Tandy
Corporation's retail operations.
The Acquisition was accounted for as a purchase pursuant to Accounting
Principles Board Opinion No. 16 ("APB 16"). In accordance with APB 16, the
Company, as the acquirer, allocated the cost of the Acquisition (consisting of
cash paid, the principal amount of the Tandy Note and liabilities assumed) to
the assets and liabilities acquired based on their fair value at the date of
Acquisition.
In connection with the financial statements for the fiscal year ended July 3,
1993 ("fiscal 1993"), the Company made a preliminary purchase price allocation
and preliminarily determined that $15 million of the inventory acquired from
Tandy was excess and obsolete at the date of the Acquisition. The Company then
proceeded to identify, on a product line basis, the inventory acquired and to
evaluate the fair value
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attributable to such inventory. Prior to the Acquisition, the Company had no
significant experience in the pen-based segment of the personal computer
market, which was small with Tandy being one of the largest participants.
Accordingly, in determining the preliminary valuation of the pen-based products
inventory, the Company relied on forecasts of demand for such products prepared
and provided by Tandy at the time of the Acquisition which projected
significant increases in the unit volume of pen-based products. The Company
recognized the uncertainties associated with such forecasts but determined that
more time was required to evaluate properly whether such forecasts were
realistic and to estimate the realizable value of the associated inventory. The
Company ultimately determined that the realizable value of the pen-based
product inventory was significantly lower than that established in the
preliminary valuation and, in the financial statements for fiscal 1994,
reallocated approximately $33.6 million of the purchase price from inventory to
goodwill and was amortizing such goodwill over a ten-year period.
However, after extensive discussions with the Staff, the Company's financial
statements for the year ended July 2, 1995, have been restated from those
originally issued to reflect the $33.6 million reduction in the carrying value
of GRiD pen-based products inventories, made in the fourth quarter of fiscal
1995, as a charge to cost of sales rather than an increase in the carrying
value of goodwill.
The Restatement does not impact adversely the Company's working capital and
cash flow. The principal effect of any such Restatement is to reduce the
Company's net income in the fourth quarter of fiscal 1994 from net income of
$14.1 million to a net loss of $8.1 million and, in subsequent periods, to
increase pre-tax income by approximately $3.6 million per year due to the
reduction in amortization associated with the lower amount of goodwill. In
addition, the Company's total assets and shareholders' equity as of July 2,
1994, are reduced by $32.7 million and $22.2 million, respectively; however,
there is no decrease in tangible net worth.
Set forth below are selected financial data relating to the statement of
operations and balance sheet data for the fiscal year and the quarter ended
July 2, 1994, as previously reported, together with such data as restated.
AS REPORTED AND AS RESTATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED QUARTER ENDED
JULY 2, 1994 JULY 2, 1994
AS REPORTED: ------------ -------------
<S> <C> <C>
Statement of Income Data
Total revenue...................................... $2,367,274 $584,505
Total operating costs and expenses................. 2,280,593 566,790
Income tax expense................................. 25,503 5,216
Net income......................................... $ 53,501 $ 14,122
Net income per share, fully diluted................ $ 1.59 $ .41
Balance Sheet Data
Cash and cash equivalents.......................... $ 153,118
Inventories........................................ 333,729
Goodwill........................................... 61,912
Total assets....................................... 1,038,312
Total shareholders' equity......................... 383,954
AS RESTATED:
Statement of Income Data
Total revenue...................................... $2,367,274 $584,505
Total operating costs and expenses................. 2,313,285 599,482
Income tax expense (benefit)....................... 15,003 (5,284)
Net income (loss).................................. $ 31,309 $ (8,070)
Net income (loss) per share, fully diluted......... $ .95 $ (.25)
Balance Sheet Data
Cash and cash equivalents.......................... $ 153,118
Inventories........................................ 333,729
Goodwill........................................... 29,220
Total assets....................................... 1,005,620
Total shareholders' equity......................... 361,762
</TABLE>
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The Company believes that the Restatement does not materially affect the
transactions contemplated by the Stock Purchase Agreement and the Transaction
Documents since such Restatement does not have any adverse effect on the
Company's results of operations or tangible net worth for fiscal 1995 or future
periods and is a non-cash adjustment. While the Company cannot anticipate all
of the consequences associated with the Restatement, such consequences could
include legal action by holders of the Company's securities, including holders
currently party to the pending class action litigation described under Note 10
to the financial statements for fiscal 1994. The Company is unable to predict
whether any such claims may be made. The Company intends to vigorously defend
any claims that may be brought, however, it is not able to predict or quantify
the outcome of any such claims or the effect of a restatement on the currently
pending class action litigation.
The Company believes the Restatement does not represent an event of default
under the terms of its revolving credit agreements; however, should it be
determined that an event of default has occurred, the Company would be required
to obtain a waiver of such default. While the Company believes that such a
waiver could be obtained, failure to obtain a waiver would have a material
adverse effect on the Company.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
EXHIBIT NO.
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Exhibit 1 Amendment No. 1 to Stock Purchase Agreement, dated as of June 1,
1995, by and between AST Research, Inc. and Samsung Electronics
Co., Ltd.
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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: June 8, 1995
AST Research, Inc.
By: /s/ Bruce C. Edwards
----------------------------------
Name: Bruce C. Edwards
Title: Executive Vice President and
Chief Financial Officer
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EXHIBIT 1
AMENDMENT NO. 1
TO
STOCK PURCHASE AGREEMENT
This Amendment No. 1 (the "AMENDMENT") to the Stock Purchase Agreement, dated
as of February 27, 1995 (the "AGREEMENT"), is entered into as of June 1, 1995,
by and between Samsung Electronics Co., Ltd., a Korean corporation (the
"PURCHASER"), and AST Research, Inc., a Delaware corporation (the "COMPANY").
Capitalized terms used in this Amendment and not otherwise defined herein shall
have the meanings set forth in the Agreement.
WHEREAS, in connection with the review of the Company's proxy material for
the Special Meeting of its stockholders to be held to consider and vote upon
the Stockholder Proposals, the Commission has requested that the Company
restate its financial statements for the fiscal year ended July 2, 1994 in
certain respects;
WHEREAS, in order to permit the mailing of the proxy material for the Special
Meeting in a timely fashion the Company has agreed to restate its financial
statements for the fiscal year ended July 2, 1994 and subsequent periods
substantially to the effect set forth in the drafts of the financial statements
for such periods previously provided to the Purchaser (the "RESTATEMENT"); and
WHEREAS, the Purchaser and the Company desire to amend the Agreement as set
forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
set forth herein, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the undersigned, intending to
be legally bound hereby, agree as follows:
ARTICLE 1
WAIVERS
1.1 WAIVERS. The Purchaser hereby agrees that the Restatement and the change
in the Company's method of accounting for the acquisition of the personal
computer manufacturing operations of Tandy Corporation set forth in the
Restatement (the "ACCOUNTING CHANGE") shall not constitute a breach of any
representation, warranty or agreement or the failure of any condition set forth
in the Agreement and agrees that it shall not have the right to terminate the
Agreement as a result of the Restatement or the Accounting Change.
ARTICLE 2
CONTINGENT SHARES
2.1 CONTINGENT SHARE ISSUANCES.
2.1.1. "Adverse Event." For purposes of this Amendment and the Agreement
the term "ADVERSE EVENT" shall mean (i) the settlement by the Company of
any litigation, whether now pending or hereafter filed, brought by or on
behalf of the holders of Shares which, at the time of the settlement,
includes one or more claims or causes of action based upon or arising out
of the Restatement or the Accounting Change or (ii) the entry of a final
judgment, not subject to appeal, by a court of competent jurisdiction
against the Company in any litigation, whether now pending or hereafter
filed, brought by or on behalf of the holders of Shares which, at the time
of such judgment, includes one or more claims or causes of action based
upon or arising out of the Restatement or the Accounting Change.
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2.1.2. Issuance of Contingent Shares Following Adverse Event. In the
event that at any time or from time to time an action results in an Adverse
Event that requires the payment by the Company of amounts in settlement of
such action or in satisfaction of a judgment in such action and the
aggregate amounts actually so paid by the Company including, without
limitation, any amounts paid by the Company for attorneys' fees, (all such
amounts being referred to herein as "SPECIFIED AMOUNTS") exceeds the Excess
Loss Amount, as defined below, then the Company shall issue to the
Purchaser, without the payment by the Purchaser of any additional
consideration, a number of additional shares of Common Stock (the
"CONTINGENT SHARES") determined in accordance with Section 2.1.3. For
purposes of this Amendment, the term "EXCESS LOSS AMOUNT" shall mean (a)
all Specified Amounts theretofore paid by the Company less (b) the sum of
(i) $5 million plus (ii) any amounts paid or to be paid to the Company by
way of reimbursement, contribution or indemnification by any insurance
company or third party. The computation of the Excess Loss Amount shall be
made in respect of any second or subsequent Adverse Event on a cumulative
basis, taking into account all amounts previously paid by the Company and
paid or to be paid to the Company in connection with all previous Adverse
Events. In the event that the settlement includes any securities, property
or other non-cash consideration to be issued or delivered by the Company
the value of such securities, property or other non-cash consideration
shall be determined by mutual agreement of the Company and the Purchaser.
In the event the Company and the Purchaser shall be unable to reach such
agreement after a period of 30 days, such value shall be determined by a
nationally recognized investment banking firm to be designated for the
purpose by the Company and the Purchaser or, failing agreement on such
investment banking firm after an additional period of 10 days, by Merrill
Lynch & Co. and Salomon Brothers Inc.
2.1.3. Determination of Number of Contingent Shares. The number of
Contingent Shares to be issued shall equal such number of shares of Common
Stock (rounded to the nearest whole share) determined by dividing the
Excess Loss Amount by the Market Price; provided, that in the event that
the number of shares to be issued pursuant to the above formula would
exceed the maximum Purchaser Interest permitted pursuant to Section 2.1.7
of the Stockholder Agreement, then, in lieu thereof, the Company shall
issue to the Purchaser (i) such number of shares of Common Stock as will
cause the Purchaser Interest to equal 49.9% and (ii) a number of shares of
Series A Junior Preferred Stock, par value $.01 per share (the "PREFERRED
STOCK"), having the rights, preferences and privileges substantially as set
forth in the Certificate of Designations attached hereto as Exhibit A,
equal to the difference between the number of shares of Common Stock which
would have been issued pursuant to the above formula and the number of
shares of Common Stock actually issued pursuant to clause (i), above. For
purposes of this Amendment, the term "MARKET PRICE" shall mean the average
of the closing prices of the Common Stock on the NASDAQ National Market
System, or, if the Common Stock is not then quoted on the NASDAQ National
Market System, on the principal United States securities exchange or
quotation system on which the Common Stock is then listed or quoted, for
the period of 20 consecutive trading days beginning on the first trading
day following the first public announcement of an Adverse Event; provided,
that the Market Price shall not be less than 75% of the closing price of
the Common Stock on the NASDAQ National Market System on the date of the
Closing of the Second Issuance (the "REFERENCE PRICE") nor greater than
125% of the Reference Price.
2.1.4. Issuance of Contingent Shares Prior to Tandy Note Settlement. In
the event that (a) Contingent Shares are issued pursuant to this Agreement
prior to the maturity of the promissory note due July 11, 1996, issued by
the Company to Tandy Corporation, a Delaware corporation, (b) the Purchaser
is entitled to reimbursement pursuant to Article 3 of the Letter of Credit
Agreement and (c) the Purchaser elects, pursuant to Section 3.3(b) of the
Letter of Credit Agreement, to be reimbursed, in whole or in part, in
shares of Common Stock, then to the extent that the number of shares to be
issued pursuant to such Section 3.3(b) would cause the Purchaser Interest
to exceed the maximum Purchaser Interest permitted pursuant to Section
2.1.7 of the Stockholder Agreement, the Company shall issue, in lieu
thereof, to the Purchaser (i) such number of shares of Common Stock as will
cause the Purchaser Interest to equal 49.9% and (ii) a number of shares of
Preferred Stock equal to the difference between the number of shares of
Common Stock which would have been issued pursuant to Section 3.3(b) of the
Letter of Credit Agreement and the number of shares of Common Stock
actually issued pursuant to clause (i), above.
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2.2. DELIVERY OF CONTINGENT SHARES. Subject to the receipt of any necessary
approvals of any Governmental Authority, Contingent Shares shall be issued no
later than 30 Business Days after any payment of a Specified Amount in respect
of which Contingent Shares are issuable hereunder, at such date, time and place
as may be agreed upon by the Purchaser and the Company. At each issuance of
Contingent Shares, the Company shall deliver to the Purchaser a certificate or
certificates, registered in the name of the Purchaser or its permitted nominee,
in such denominations as the Purchaser may request, evidencing the full number
of Contingent Shares.
2.3. APPROVAL OF SETTLEMENTS, ETC. Notwithstanding the provisions of the
Stockholder Agreement, any Board decisions with respect to the approval of the
settlement of any litigation that would result in an Adverse Event or with
respect to the conduct of any litigation that could result in an Adverse Event,
shall be made by the affirmative vote of both (i) a majority of the full Board
of Directors and (ii) a majority of the Directors of the Company not designated
by the Purchaser.
2.4. STATUS OF CONTINGENT SHARES. Except as set forth in the Certificate of
Designations with respect to the Preferred Stock, the Contingent Shares shall
confer the same rights, and shall be subject to the same restrictions, as the
Shares. The provisions of Section 2.4 of the Stockholder Agreement shall not
apply to the acquisition by the Purchaser of Contingent Shares, or the
acquisition of shares of Common Stock upon conversion of shares of Preferred
Stock, acquired from the Company pursuant to this Article 2.
ARTICLE 3
THE OFFER AND THE SPECIAL MEETING
3.1. SPECIAL MEETING DATE. The first sentence of Section 6.1.2 of the
Agreement is hereby amended to read in its entirety as follows: "As promptly as
practicable, the Company shall schedule and set a date for a special meeting of
its stockholders to occur not later than July 14, 1995 at which the Stockholder
Proposals will be submitted to a vote of the Company's stockholders."
3.2. EXTENSION OF OFFER. Promptly following the announcement of the date of
the Special Meeting the Purchaser shall amend the Offer and the Schedule 14D-1
to extend the expiration date of the Offer to midnight, New York City time, on
the fifth Business Day after the date of the Special Meeting.
3.3. EXTENSION OF OUTSIDE DATE. Clause (ii) of Section 8.3 of the Agreement
is hereby amended by substituting "July 31, 1995" for "June 30, 1995".
3.4. ADDITIONAL CLOSING CONDITION. Section 7.2 of the Agreement is hereby
amended to add the following:
7.2.11. Effect of Restatement. No party to any material Instrument shall
have declared, or shall have notified the Company in writing of its
intention to declare, the Company in default or breach (which default or
breach has not been cured or waived at or prior to the Closing) under such
Instrument as a result of the Restatement, where any such declaration would
have a Material Adverse Effect, and there shall not have been issued or
commenced (and not dismissed) by the Commission any formal order of
investigation or formal enforcement proceeding relating to the Restatement
or the Accounting Change, nor shall the Commission have notified the
Company in writing that it intends imminently to issue or commence any such
formal order of investigation or formal enforcement proceeding.
ARTICLE 4
MISCELLANEOUS
4.1. EFFECT OF AMENDMENT. Except as set forth in this Amendment, the
provisions of the Agreement shall remain in full force and effect and all
references in the Agreement, the Investment Agreements and the Commercial
Agreements shall be deemed to refer to and mean the Agreement, as amended by
this Amendment.
4.2. COUNTERPARTS. This Amendment may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
4.3. TERMINATION. The provisions of Article 2 shall become effective at the
Closing and shall terminate on the first date on which the Purchaser Interest
shall be less than 19.9% for a period of at least 25 consecutive days.
4.4. EXPENSES. The fees and expenses of any investment banking firm engaged
pursuant to Section 2.1.2 shall be shared equally by the Company and the
Purchaser.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
AST RESEARCH, INC.
By: /s/ Safi U. Qureshey
-----------------------------------
Safi U. Qureshey
Chairman and Chief Executive
Officer
SAMSUNG ELECTRONICS CO., LTD.
By: /s/ H.D. Yoo
-----------------------------------
H.D. Yoo
Vice President and General
Manager
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<PAGE>
EXHIBIT A
CERTIFICATE OF DESIGNATIONS
OF THE
SERIES A NON-VOTING JUNIOR PREFERRED STOCK
(PAR VALUE $.01 PER SHARE)
OF
AST RESEARCH, INC.
----------------
PURSUANT TO SECTION 151 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
----------------
The undersigned DOES HEREBY CERTIFY that the following resolution was duly
adopted by the Executive Committee of the Board of Directors of AST Research,
Inc., a Delaware corporation (the "Corporation"), at a meeting duly convened
and held on [Date], at which a quorum was present and acting throughout:
RESOLVED, that pursuant to the authority expressly granted to and vested in
the Board of Directors by Article 4(b) of the Restated Certificate of
Incorporation of the Corporation, dated [July , 1995] (the "Certificate of
Incorporation"), as delegated to the Executive Committee thereof (the
"Executive Committee"), the Executive Committee hereby authorizes and approves
the creation of a series of Series A Non-Voting Junior Preferred Stock, par
value $.01 per share, of the Corporation (the "Series A Preferred Stock") upon
the terms and conditions set forth in these resolutions which fix the
designation and number of shares of the Series A Preferred Stock and the
powers, preferences and relative, participating, optional or other special
rights, and the qualifications, limitations and restrictions thereof (in
addition to those set forth in the Certificate of Incorporation that may be
applicable to the Series A Preferred Stock) as follows:
1. DESIGNATION AND AMOUNT; FRACTIONAL SHARES; PAR VALUE. There shall be a
series of Preferred Stock of the Corporation designated as "Series A Junior
Preferred Stock" and the number of shares constituting such series shall be
[ ]. The Series A Preferred Stock is issuable solely in whole shares that
shall entitle the holder thereof to exercise the voting rights, to participate
in the distributions and to have the benefit of all other rights of holders of
Series A Preferred Stock as set forth herein and in the Certificate of
Incorporation. The par value of each share of Series A Preferred Stock shall be
$.01. For purposes of this Certificate, the "Issue Date" of the Series A
Preferred Stock shall be [Date].
2. DEFINITIONS. As used herein, the following terms shall have the respective
meanings given thereto in the Section indicated below:
<TABLE>
<CAPTION>
DEFINED IN
DEFINED TERM SECTION
------------ ----------
<S> <C>
"Board of Directors"........................................... 3(a)
"Common Distributions"......................................... 3(a)
"Common Stock"................................................. 3(a)
"Issue Date"................................................... 1
"Liquidation".................................................. 4
"Parity Stock"................................................. 4
</TABLE>
3. DIVIDENDS. (a) Dividends Rights. Except as set forth below, the holder of
the shares of Series A Preferred Stock shall not be entitled to receive any
distribution with respect to the shares of Series A Preferred
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<PAGE>
Stock. Subject to the prior preferences and other rights of shares of any class
or series of stock of the Corporation authorized after the Issue Date ranking
senior to, or on a parity with, the Series A Preferred Stock as to the payment
of dividends or other distributions, if the Board of Directors of the
Corporation, or, to the extent permitted by applicable law, a duly authorized
committee thereof (the "Board of Directors"), shall at any time or from time to
time declare a dividend with a record date after the Issue Date with respect to
the shares of Common Stock, par value $.01 per share, of the Corporation (the
"Common Stock"), then the holders of the Series A Preferred Stock shall be
entitled to receive, out of funds legally available therefor, a dividend with
respect to each share of the Series A Preferred Stock equal to the dividend
payable per share of Common Stock. The record date for any dividend payable on
shares of Series A Preferred Stock shall be the same as the record date for the
relevant dividend payable on the Common Stock.
(b) Priority as to Dividends. Subject top Section 3(c), no dividends shall be
declared or paid or set apart for payment on the preferred stock of any series,
or stock of any other class which, in either case, ranks, as to dividends or
upon Liquidation junior to the Series A Preferred Stock unless at the time of
such declaration or payment or setting apart for payment all dividends to which
holders of Series A Preferred Stock are entitled pursuant to Section 3(a) have
been or contemporaneously are declared and paid (or declared and a sum
sufficient for the payment thereof set apart for such payment) on the Series A
Preferred Stock for the period commencing on the Issue Date and terminating on
or prior to the date of payment of such dividends on such junior stock.
(c) Notwithstanding anything to the contrary in Section 3(b) hereof,
dividends on any Parity Stock may be paid if dividends shall be declared upon
shares of Series A Preferred Stock and such Parity Stock on a pro rata basis so
that in all cases the amount of dividends declared per share on the Series A
Preferred Stock and such parity Stock shall bear to each other the same ratio
that accrued dividends per share on the shares of Series A Preferred Stock and
such parity Stock bear to each other.
4. LIQUIDATION PREFERENCE. Subject to the prior payment in full of the
preferential amounts to which the shares of any other series or class of stock
of the Corporation ranking, as to distributions upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary
(any such event, a "Liquidation"), senior to the Series A Preferred Stock, are
entitled in the event of any Liquidation, each holder of a share of Series A
Preferred Stock shall be entitled to receive, and be paid out of the assets of
the Corporation available for distribution to its stockholders, a liquidation
preference in the amount of $0.01 per share, plus all accumulated and unpaid
dividends on such share to the date of final distribution to the holders of
shares of Series A Preferred Stock, whether or not declared, without interest,
and no more, and thereafter each holder of a share of Series A Preferred Stock
will share pro rata with the holders of Common Stock, and any other class or
series of the Corporation's stock ranking junior to the Series A Preferred
Stock with respect to such Liquidation, based upon the respective number of
shares of Series A Preferred Stock and such other stock outstanding at the
record date for determining holders of record entitled to receive any such
distribution. If upon any Liquidation the amounts payable with respect to the
liquidation preference of the Series A Preferred Stock and with any shares of a
class or series of the Corporation's stock ranking on a parity with the Series
A Preferred Stock as to distributions upon such Liquidation ("Parity Stock")
are not paid in full, the holders of Series A Preferred Stock and of such other
shares will share pro rata in the amounts payable and other property
distributable with respect to such Liquidation so that the per share amounts to
which holders of Series A Preferred Stock and the holders of such shares of
Parity Stock are entitled will in all cases bear to each other the same ratio
that the liquidation preferences of the Series A Preferred Stock and such
shares of Parity Stock bear to each other. After payment in full of the
preferences in respect of the shares of the Series A Preferred Stock upon
Liquidation, the holders of such shares in their capacity as such shall not be
entitled to any further right or claim to any remaining assets of the
Corporation. Neither a consolidation or merger of the Corporation with or into
another corporation, nor a merger of any other corporation with or into the
Corporation, nor the sale of all or substantially all of the Corporation's
property or business (other than in connection with a winding up of its
business) will be considered a Liquidation for purposes of this Certificate.
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<PAGE>
5. VOTING RIGHTS. The holders of Series A Preferred Stock will not have any
voting rights except such rights as from time to time are required by the
Delaware General Corporation Law. Any shares of Series A Preferred Stock held
by the Corporation or any subsidiary of the Corporation shall not have voting
rights hereunder and shall not be counted in determining the presence of a
quorum or in calculating any percentage of shares under this Section 5.
6. RANKING UPON LIQUIDATION. Any class or series of stock of the Corporation
shall be deemed to rank:
i) senior to the Series A Preferred Stock, as to dividends or upon
Liquidation, if the holders of such class or series shall be entitled to
the receipt of dividends or of amounts distributable upon Liquidation, as
the case may be, in preference or priority to the holders of Series A
Preferred Stock.
ii) on a parity with the Series A Preferred Stock, as to dividends or
upon Liquidation, whether or not the dividend rates, dividend payment dates
or redemption or liquidation prices per share thereof are different from
those of the Series A Preferred Stock, if the holders of such class or
series of stock and the Series A Preferred Stock shall be entitled to the
receipt of dividends or of amounts distributable upon Liquidation, as the
case may be, in proportion to their respective amounts of accumulated and
unpaid dividends per share or liquidation prices, as the case may be,
without preferences or priority one over the other.
iii) junior to the Series A Preferred Stock, as to dividends or, to the
extent specified above, upon Liquidation, if such stock shall be Common
Stock or any other class or series of capital stock of the Corporation if
the holders of Series A Preferred Stock shall be entitled to receipt of
dividends or of amounts distributable upon Liquidation, as the case may be,
in preference or priority to the holders of shares of such other stock.
7. CONVERSION PRIVILEGES.
(a) Rights of Conversion. Each holder of shares of Series A Preferred Stock
shall have the right, at such holder's option, to convert all or a portion of
the shares held, at any time or from time after [the termination date of the
standstill provisions] into one fully paid and nonassessable share of Common
Stock, or such other securities and property as hereinafter provided.
(b) Conversion Procedures. Any holder of shares of Series A Preferred Stock
desiring to convert such shares pursuant hereto shall surrender the certificate
or certificates evidencing such shares at the office of a transfer agent for
the Series A Preferred Stock, which certificate or certificates, if the
Corporation shall so require, shall be duly endorsed to the Corporation or in
blank, or accompanied by proper instruments of transfer to the Corporation or
in blank, accompanied by (i) an irrevocable written notice to the Corporation
that the holder elects to convert such shares and specifying the name or names
(with address or addresses) in which a certificate or certificates evidencing
shares of Class A Common Stock are to be issued; and (ii) if required pursuant
to Section 7(e), an amount sufficient to pay any transfer or similar tax (or
evidence reasonably satisfactory to the Corporation demonstrating that such
taxes have been paid).
The holder of a share of Series A Preferred Stock at the close of business on
a record date shall be entitled to receive the dividend payable thereon on the
corresponding dividend payment date notwithstanding the conversion thereof
during the period between the record date with respect to such dividend and the
corresponding dividend payment date or the Corporation's default in the payment
of the dividend due on such dividend payment date. No payments or adjustments
in respect of dividends on shares of Series A Preferred Stock surrendered for
conversion (whether or not in arrears) or on account of any dividend on the
Common Stock issued upon conversion shall be made upon the conversion of any
shares of Series A Preferred Stock.
The Corporation shall, as soon as practicable after such surrender for
conversion of certificates evidencing shares of Series A Preferred Stock and
compliance with the other conditions herein contained, deliver at such offices
of such transfer agent to the holder whose shares of Series A Preferred Stock
are so surrendered, or to the nominee or nominees of such person, certificates
evidencing the number of full shares
7
<PAGE>
of Common Stock to which such person shall be entitled, together with a cash
payment in respect of any fraction of a share of Common Stock as hereinafter
provided. Subject to the following provisions of this paragraph, each
conversion shall be deemed to have been effected immediately prior to the close
of business on the date on which the certificates for shares of Series A
Preferred Stock to be converted shall have been surrendered together with the
irrevocable written notice and the payment of taxes (if applicable), all as
provided in this Section 7(b), and the person or persons entitled to receive
the Common Stock deliverable upon conversion of such Series A Preferred Stock
shall be treated for all purposes as the record holder or holders of such
Common Stock at such time on such date, unless the stock transfer books of the
Corporation shall be closed on such date, in which event such person or persons
shall be deemed to have become such holder or holders of record at the close of
business on the next succeeding day on which such stock transfer books are
open. No holder of Series A Preferred Stock shall have any rights as a holder
of Common Stock (or any other securities into which the Series A Preferred
Stock may become convertible) unless and until such conversion has been
effected.
(c) No Fractional Shares. No fractional shares or scrip representing
fractional shares of Common Stock shall be issued upon conversion of Series A
Preferred Stock. If a certificate or certificates representing more than one
share of Series A Preferred Stock shall be surrendered for conversion at one
time by the same record holder, the number of full shares of Common Stock
issuable upon conversion thereof shall be computed on the basis of the
aggregate number of shares of Series A Preferred Stock so surrendered by such
record holder as provided in Section 7(a). In lieu of any fractional share of
Common Stock that would otherwise be issuable upon conversion of any shares of
Series A Preferred Stock, the Corporation shall pay a cash adjustment in
respect of such fractional share in an amount equal to the same fraction of the
Closing Price (as defined below) of the Common Stock on the Trading Day
immediately (as defined below) preceding the date of conversion, calculated to
the nearest cent, with one-half cent rounded upward.
"Closing Price" with respect to any security on any day shall mean the
closing sale price, regular way, on such day or, in case no such sale takes
place on such day, the average of the reported closing bid and asked prices,
regular way, in each case on the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotation System (the "NASDAQ
NMS") or if such security is not quoted on the NASDAQ NMS, on the principal
national securities exchange or quotation system on which such security is
quoted or listed or admitted to trading or, if not quoted or listed or admitted
to trading on any national securities exchange or quotation system, the average
of the closing bid and asked prices of such security on the over-the-counter
market on the day in question as reported by the National Quotation Bureau
Incorporated, or a similar generally accepted reporting service, or if not so
available, in such manner as furnished by any New York Stock Exchange member
firm selected from time to time by the Board of Directors for that purpose or a
price determined in good faith by the Board of Directors (such determination to
be conclusive and evidenced in a resolution adopted by the Board of Directors).
"Trading Day" shall mean (x) if the applicable security is quoted on the
NASDAQ NMS, a day on which a trade may be made on the NASDAQ NMS, (y) if the
applicable security is listed or admitted for trading on a national securities
exchange, a day on which such national securities exchange is open for business
or (z) if the applicable security is not otherwise listed, admitted for trading
or quoted, any day other than a Saturday or Sunday or a day on which banking
institutions in the State of New York are authorized or obligated by law or
executive order to close.
(d) Adjustment of Change in Capital Stock; Reorganization of the
Corporation. If, after the Issue Date, the Corporation:
i) subdivides its outstanding shares of Common Stock into a greater
number of shares;
ii) combines its outstanding shares of Common Stock into a smaller
number of shares; or
iii) issues by reclassification of its Common Stock any shares of its
capital stock (other than any dividends or distribution to the holders
of Common Stock of any dividends or distribution to the holders of
Common Stock rights to purchase, warrants or options for its capital
stock),
8
<PAGE>
then the conversion rights in effect immediately prior to such action shall be
adjusted so that the holder of shares of Series A Preferred Stock thereafter
converted may receive the number of shares of capital stock of the Corporation
which such holder would have owned immediately following such action if such
holder had converted the shares of Series A Preferred Stock immediately prior
to such action. The adjustment shall become effective immediately after the
effective date of subdivision, combination or reclassification.
If the Corporation is a party to a consolidation or a merger which
reclassifies or changes its outstanding Common Stock, the person obligated to
deliver securities, cash or other assets upon conversion of shares of Series A
Preferred Stock shall make provisions in its certificate or articles of
incorporation or other constituent document to establish that the holder of
shares of Series A Preferred Stock may convert such shares into the kind and
amount of securities, cash or other assets which such holder would have
received immediately after the consolidation or merger if such holder had
converted such shares immediately before the effective date of the transaction.
Such certificate or articles of incorporation or other constituent document
shall provide for adjustments which shall be as nearly equivalent as may be
practical to the adjustments provided for in this Section 7(d).
(e) Reservation of Shares; Transfer Taxes, Etc. The Corporation shall at
all times reserve and keep available, out of its authorized and unissued
stock, solely for the purpose of effecting the conversion of the Series A
Preferred Stock, such number of shares of its Common Stock free of
preemptive rights as shall from time to time be sufficient to effect the
conversion of all shares of Series A Preferred Stock from time to time
outstanding.
The Corporation shall pay any and all United States issue or other taxes that
may be payable in respect of any issue or delivery of shares of Common Stock
upon conversion of the Series A Preferred Stock. The Corporation shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue or delivery of Common Stock (or other securities
or assets) in a name other than that in which the shares of Series A Preferred
Stock so converted were registered, and no such issue or delivery shall be made
unless and until the person requesting such issue has paid to the Corporation
the amount of such tax or has established, to the satisfaction of the
Corporation, that such tax has been paid.
(f) Prior Notice of Certain Events. In case:
i) the Corporation shall take any action that would require an
adjustment pursuant to Section 7(d) hereof; or
ii) the Corporation shall take any action that would require any
person to make provisions in a certificate or articles of incorporation
or other constituent document as contemplated by Section 7(d) hereof:
or
iii) of a Liquidation;
then the Corporation shall cause to be mailed to the holders of record of the
Series A Preferred Stock, at their last addresses as they shall appear upon the
stock transfer books of the Corporation, at least ten days prior to the
applicable date hereinafter specified, a notice stating the date on which the
subdivision, reclassification, consolidation, merger or Liquidation is expected
to become effective (but no failure to mail such notice or any defect therein
or in the mailing thereof shall affect the validity of the corporate action
required to be specified in such notice).
8. OUTSTANDING SHARES. For purposes of this Certificate, all shares of
Series A Preferred Stock issued by the Corporation shall be deemed
outstanding except, (i) from the date of surrender of a certificate
evidencing shares of Series A Preferred Stock, all shares of Series A
Preferred Stock represented by such certificate and surrendered for
conversion into Common Stock and (ii) from the date of registration of
transfer, all shares of Series A Preferred Stock held of record by the
Corporation or any direct or indirect majority-owned subsidiary of the
Corporation.
9
<PAGE>
9. STATUS OF ACQUIRED SHARES. Shares of Series A Preferred Stock acquired
by the Corporation will be restored to the status of authorized but
unissued shares of preferred stock, without designation as to class, and
may be issued, but not as shares of Series A Preferred Stock.
10. NO REDEMPTION. The shares of Series A Preferred Stock shall not be
subject to redemption, either mandatorily or at the option of the
Corporation or the holder thereof.
11. SEVERABILITY OF PROVISIONS. Whenever possible, each provision hereof
shall be interpreted in a manner as to be effective and valid under
applicable law, but if any provision hereof is held to be prohibited by or
invalid under applicable law, such provision shall be ineffective only to
he extent of such prohibition or invalidity, without invalidating or
otherwise adversely affecting the remaining provisions hereof.
IN WITNESS WHEREOF, AST Research, Inc. has caused this Certificate to be made
under the seal of the seal of the Corporation and signed by [Name], its
[Title], and attested by [Name], its [Title], on the day of [Date].
AST RESEARCH, INC.
By:____________________________
Name:
Title:
Attest:
_______________________________
Name:
Title:
10
