-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, jeRnA7M6Aoh73JMS0PEacgfkCcmAADH5yk4NmgIgpdz1MbXhiyNwqxyx+5h2Yf+f Vp+k6awsbg+K+Mp6EPTLqg== 0000725182-94-000013.txt : 19940216 0000725182-94-000013.hdr.sgml : 19940216 ACCESSION NUMBER: 0000725182-94-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19940101 FILED AS OF DATE: 19940215 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AST RESEARCH INC /DE/ CENTRAL INDEX KEY: 0000725182 STANDARD INDUSTRIAL CLASSIFICATION: 3571 IRS NUMBER: 953525565 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 34 SEC FILE NUMBER: 000-13941 FILM NUMBER: 94508853 BUSINESS ADDRESS: STREET 1: 16215 ALTON PKWY CITY: IRVINE STATE: CA ZIP: 92713 BUSINESS PHONE: 7147274141 10-Q 1 FORM 10-Q DATED 1/01/94 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _________________ FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 1, 1994 --------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ Commission File No. 0-13941 AST RESEARCH, INC. (Exact name of registrant as specified in its charter) Delaware 95-3525565 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 16215 Alton Parkway Irvine, California 92718 (Address of principal executive offices, zip code) Registrant's telephone number, including area code: (714) 727-4141 _________________ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _ There were 32,017,865 shares of the registrant's Common Stock, par value $.01 per share, outstanding on January 28, 1994. ================================================================================ AST RESEARCH, INC. INDEX
Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets at January 1, 1994 (Unaudited) and July 3, 1993 3 Consolidated Statements of Income (Unaudited) for the three months and six months ended January 1, 1994 and January 2, 1993 4 Consolidated Statements of Cash Flows (Unaudited) for the six months ended January 1, 1994 and January 2, 1993 5-6 Notes to Consolidated Financial Statements (Unaudited) 7-10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11-16 PART II. OTHER INFORMATION Item 1. Legal Proceedings 17 Item 6. Exhibits and Reports on Form 8-K 17 SIGNATURES 18
AST RESEARCH, INC. CONSOLIDATED BALANCE SHEETS
- ----------------------------------------------------------------------------------------------------------------- January 1, July 3, 1994 1993 (In thousands, except share amounts) (Unaudited) - ----------------------------------------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 145,427 $ 121,600 Accounts receivable, net of allowance for doubtful accounts of $16,955 at January 1, 1994 and $11,671 at July 3, 1993 359,411 236,020 Inventories 309,316 342,307 Deferred income taxes 41,826 46,058 Other current assets 16,959 15,230 - ----------------------------------------------------------------------------------------------------------------- Total current assets 872,939 761,215 Property and equipment 148,830 134,422 Accumulated depreciation and amortization (48,633) (39,500) - ----------------------------------------------------------------------------------------------------------------- Net property and equipment 100,197 94,922 Other assets 37,758 30,022 - ----------------------------------------------------------------------------------------------------------------- $ 1,010,894 $ 886,159 ================================================================================================================= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term borrowings $ 50,000 $ 59,217 Accounts payable 209,319 157,996 Accrued salaries, wages and employee benefits 30,080 19,042 Other accrued liabilities 101,551 178,835 Income taxes payable 43,795 44,832 Current portion of long-term debt 125 247 - ----------------------------------------------------------------------------------------------------------------- Total current liabilities 434,870 460,169 Long-term debt 212,766 92,258 Other non-current liabilities 14,829 14,926 Contingencies Shareholders' equity: Common stock, par value $.01; 70,000,000 shares authorized, 31,727,515 shares issued and outstanding at January 1, 1994, and 31,579,115 shares at July 3, 1993 317 316 Additional capital 133,241 129,784 Retained earnings 214,871 188,706 - ---------------------------------------------------------------------------------------------------------------- Total shareholders' equity 348,429 318,806 - ---------------------------------------------------------------------------------------------------------------- $ 1,010,894 $ 886,159 ================================================================================================================
See accompanying notes. AST RESEARCH, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------- Three Months Ended Six Months Ended --------------------- ----------------------- Jan. 1, Jan. 2, Jan. 1, Jan. 2, (In thousands, except per share amounts) 1994 1993 1994 1993 - ----------------------------------------------------------------------------------------------------------------------- Net sales $ 677,011 $ 346,338 $1,191,420 $ 632,690 Cost of sales 562,445 270,153 990,954 491,491 - ----------------------------------------------------------------------------------------------------------------------- Gross profit 114,566 76,185 200,466 141,199 Selling and marketing expenses 53,022 34,233 95,093 68,294 General and administrative expenses 19,698 12,752 37,288 24,487 Engineering and development expenses 10,403 8,055 20,647 16,118 - ----------------------------------------------------------------------------------------------------------------------- Total operating expenses 83,123 55,040 153,028 108,899 - ----------------------------------------------------------------------------------------------------------------------- Operating income 31,443 21,145 47,438 32,300 Interest income 373 994 627 2,314 Interest expense (2,581) (221) (4,186) (452) Other expense, net (2,064) (633) (4,235) (1,722) - ----------------------------------------------------------------------------------------------------------------------- Income before provision for income taxes 27,171 21,285 39,644 32,440 Provision for income taxes 9,238 6,704 13,479 10,218 - ----------------------------------------------------------------------------------------------------------------------- Net income $ 17,933 $ 14,581 $ 26,165 $ 22,222 ======================================================================================================================= Net income per share: Primary $ .55 $ .46 $ .81 $ .70 Fully diluted $ .54 $ .46 $ .79 $ .70 ====================================================================================================================== Weighted average common and common equivalent shares outstanding: Primary 32,454 31,893 32,228 31,726 Fully diluted 33,404 31,989 33,195 31,778 ======================================================================================================================
See accompanying notes. AST RESEARCH, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------- Six Months Ended --------------------------- January 1, January 2, (In thousands) 1994 1993 - ---------------------------------------------------------------------------------------------------------------------- Cash flows from operating activities: Cash received from customers $1,055,099 $ 568,359 Cash paid to suppliers and employees (1,091,042) (600,024) Interest received 614 3,191 Interest paid (2,166) ( 540) Income tax refunds received 1,130 - Income taxes paid (8,706) (16,203) Other cash received (paid) (5,137) 3,778 - ---------------------------------------------------------------------------------------------------------------------- Net cash used in operating activities (50,208) (41,439) Cash flows from investing activities: Proceeds from short-term investments - 2,676 Payment related to Tandy/GRiD acquisition (15,000) - Purchases of capital equipment (11,186) (7,799) Proceeds from disposition of capital equipment 530 374 Purchases of other assets 470 (70) - ---------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (25,186) (4,819) Cash flows from financing activities: Short-term borrowings, net (9,195) 6,747 Repayment of long-term debt (121) (60) Proceeds from issuance of long-term debt, net 108,733 - Proceeds from issuance of common stock 1,410 3,087 - ---------------------------------------------------------------------------------------------------------------------- Net cash provided by financing activities 100,827 9,774 Effect of exchange rate changes on cash and cash equivalents (1,606) 1,878 - ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 23,827 (34,606) Cash and cash equivalents at beginning of period 121,600 87,874 - ---------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 145,427 $ 53,268 ======================================================================================================================
See accompanying notes. AST RESEARCH, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) RECONCILIATION OF NET INCOME TO NET CASH USED IN OPERATING ACTIVITIES:
- ---------------------------------------------------------------------------------------------------------------------- Six Months Ended --------------------------- January 1, January 2, (In thousands) 1994 1993 - ---------------------------------------------------------------------------------------------------------------------- Net income $ 26,165 $ 22,222 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 11,154 6,088 Provision for deferred income taxes 979 1,127 Change in operating assets and liabilities, net of effects of acquisition: Accounts receivable (127,863) (64,930) Inventories 38,205 (49,160) Other current assets 1,119 (598) Accounts payable and accrued expenses 41,631 43,289 Income taxes payable (1,010) (6,621) Other current liabilities (44,933) 4,242 Exchange loss 4,345 2,902 - ---------------------------------------------------------------------------------------------------------------------- Net cash used in operating activities $(50,208) $(41,439) ====================================================================================================================== SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: The Company purchased certain assets relating to Tandy/GRiD France's personal computer operations effective September 1, 1993. In conjunction with the acquisition, liabilities were assumed as follows: Fair value of assets acquired $ 10,171 - Note payable (6,720) - - --------------------------------------------------------------------------------------------------------------------- Liabilities assumed $ 3,451 - ===================================================================================================================== Tax benefit of employee stock options $ 1,823 $ 3,925 =====================================================================================================================
See accompanying notes. AST RESEARCH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JANUARY 1, 1994 Basis of Presentation The accompanying consolidated financial statements have been prepared by the Company without audit (except for the balance sheet information as of July 3, 1993) in accordance with generally accepted accounting principles for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation have been included. The accompanying consolidated financial statements do not include certain footnotes and financial presentations normally required under generally accepted accounting principles and, therefore, should be read in conjunction with the audited financial statements included in the Company's 1993 Annual Report. The results of operations for the three and six month periods ended January 1, 1994 are not necessarily indicative of the results to be expected for the full year. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended July 3, 1993. Fiscal Quarter The Company operates within a conventional 52/53 week accounting fiscal year. Fiscal 1994 represents a 52 week fiscal year, while fiscal 1993 represented a 53 week fiscal year and, as a result, the first half of fiscal 1994 included 26 weeks compared to 27 weeks for the comparable prior year period. However, the second quarter of fiscal 1994 and 1993 both included 13 weeks. Income Taxes The Company provides for income taxes in interim periods based on the estimated effective income tax rate for the complete fiscal year. For the six-month period ended January 1, 1994, the estimated rate is less than the U.S. statutory rate primarily due to estimates of the proportion of the Company's fiscal 1994 consolidated income which will be earned in lower rate foreign tax jurisdictions. Differences between the estimated effective tax rate and the Company's actual effective tax rate could result from changes in the mix of earnings in the various tax jurisdictions and are recognized when known. Acquisitions and Restructuring Effective June 30, 1993, the Company purchased certain assets and assumed certain liabilities utilized in connection with Tandy Corporation's ("Tandy") personal computer manufacturing operations and the GRiD North American and European sales divisions, excluding Tandy/GRiD France. Effective September 1, 1993, the Company purchased certain assets and assumed certain liabilities of Tandy/GRiD France. The combined purchase price included $15 million in cash and a three-year promissory note in the principal amount of $96.7 million. The acquisitions have been accounted for by the purchase method of accounting, and the net assets are included in the Company's consolidated balance sheets based upon their estimated fair values at the transactions' effective dates. The Company's consolidated statements of income include the revenues and expenses of the acquired businesses subsequent to the transactions' effective dates. The excess of the purchase price over the estimated fair value of the net assets acquired (goodwill) of $20.5 million is being amortized on a straight line basis over 10 years. The purchase price allocations are based on preliminary estimates of the fair value of the net assets acquired and are subject to adjustment as additional information becomes available during fiscal 1994. In connection with the Company's acquisition of Tandy Corporation's personal computer manufacturing and engineering operations and GRiD North American and European sales and marketing operations, the Company recorded a pretax restructuring charge of $125 million in the fourth quarter of fiscal 1993. The charge was comprised of asset write-downs of $68 million and accruals of estimated future cash expenditures of $57 million. AST RESEARCH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JANUARY 1, 1994 The charge, which was incurred as a result of the Tandy/GRiD acquisition and restructuring plan, reflects estimated expenses to combine and restructure the Company's existing manufacturing capacity, as well as its marketing, engineering, distribution, sales, and service operations. Also included within the restructuring charge was selected inventory valuation adjustments necessary to realign existing AST product lines and curtail production of certain AST product offerings as a result of the newly acquired Tandy/GRiD product offerings. During the first half of fiscal 1994, the Company completed significant portions of this product realignment strategy and in early November 1993 announced its plans regarding realignment of its worldwide manufacturing, engineering and service operations and restructuring of its European operations which is expected to be completed during the remainder of fiscal year 1994. At January 1, 1994, $68.4 million of the original $125 million restructuring charge remains on the Company's consolidated balance sheet which the Company believes should be adequate to allow for the completion of its restructuring plan. The Company anticipates that the remaining restructuring related expenses will be incurred ratably over the remainder of fiscal 1994. Contingencies The Company was named as defendant or co-defendant, in most cases, along with other personal computer manufacturers, including IBM, AT&T, Unisys, Digital Equipment Corporation, NEC, Olivetti, NCR, Panasonic, and Matsushita, in eight similar lawsuits each of which alleges as a factual basis the occurrence of carpal tunnel syndrome or repetitive stress injuries, which are being alleged with increasing frequency as a result of the use of various computer products. The Company may be named in additional suits, but it is impossible to predict how many may be filed. The Internal Revenue Service (IRS) has completed its examination of the Company's federal income tax returns for the years ended June 30, 1987 and 1988. As a result of this examination, the IRS has proposed adjustments to the Company's federal tax liabilities for such years of approximately $8.3 million, excluding interest. The majority of such adjustments relate to the allocation of income between the Company and its foreign manufacturing and sales subsidiaries. Management believes that its position has substantial merit and intends to vigorously contest these proposed adjustments. Furthermore, management believes that any liability that may result upon the final resolution of this matter will not have a material adverse affect on the Company's consolidated financial position or results of operations. The Company is also subject to other legal proceedings and claims which arise in the normal course of business. While the outcome of these proceedings and claims cannot be predicted with certainty, management does not believe the outcome of any of these matters will have a material adverse affect on the Company's consolidated financial position or results of operations. Per Share Information Primary earnings per common share have been computed based upon the weighted average number of common and common equivalent shares outstanding. Common equivalent shares result from the assumed exercise of outstanding stock options that have a dilutive effect when applying the treasury stock method. The fully diluted per share calculation assumes, in addition to the above, (i) that the Company's Liquid Yield Option Notes were converted from the date of issuance with earnings being increased for interest expense, net of taxes, that would not have been incurred had conversion taken place, and (ii) the potential additional dilutive effect of stock options. AST RESEARCH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JANUARY 1, 1994 Inventories Inventories are stated at the lower of cost (first-in, first-out) or market and consist of the following:
- ---------------------------------------------------------------------------------------------------- January 1, July 3, (In thousands) 1994 1993 - ---------------------------------------------------------------------------------------------------- Purchased parts $ 120,552 $ 146,565 Work in process 35,077 30,890 Finished goods 153,687 164,852 - ---------------------------------------------------------------------------------------------------- $ 309,316 $ 342,307 ====================================================================================================
Long-Term Debt Long-term debt consists of the following:
- ---------------------------------------------------------------------------------------------------- January 1, July 3, (In thousands) 1994 1993 - ---------------------------------------------------------------------------------------------------- Liquid Yield Option Notes (zero coupon convertible subordinated notes) due 2013, less original issue discount of $203,266, 5.25% yield to maturity $ 111,734 $ - Promissory note payable, interest due annually at initial rate of 3.75%, principal due July 1996 96,720 90,000 Other notes payable due in various installments through April 2002 4,437 2,505 - ---------------------------------------------------------------------------------------------------- 212,891 92,505 Less current portion of long-term debt (125) (247) - ---------------------------------------------------------------------------------------------------- Long-term debt $ 212,766 $ 92,258 ====================================================================================================
On December 14, 1993, the Company issued $315 million par value of Liquid Yield Option Notes (LYONs) due December 14, 2013. The LYONS are zero coupon convertible subordinated notes which were sold at a significant discount to par value with a yield to maturity of 5.25% and a total value at maturity of $315 million. There are no periodic payments of interest on the LYONs. Each $1,000 principal amount at maturity of LYONs is convertible into 12.993 shares of the Company's common stock at any time. Upon conversion of a LYON, the Company may elect to deliver shares of common stock at the conversion rate or cash equal to the market value of the shares of common stock into which the LYONs are convertible. The holder of a LYON may require the Company to purchase its LYONs on December 14, 1998, December 14, 2003 and December 14, 2008 (the "Purchase Dates"), and such payments may reduce the liquidity of the Company. However, the Company may, subject to certain exceptions, elect to pay the purchase price on any of the three Purchase Dates in cash or shares of common stock or any combination thereof. AST RESEARCH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JANUARY 1, 1994 Total proceeds received from the sale of the LYONs were $111.7 million and will be utilized for working capital, repayment of bank borrowings under its revolving credit facilities, new product development, and other general corporate purposes. In connection with the Tandy acquisition, the Company issued a $96.7 million promissory note to Tandy Corporation which is due on July 11, 1996. Upon maturity of the note, up to fifty percent of the initial principal amount of the promissory note may be converted, at the option of the Company, into common stock of the Company based upon its then fair market value, as defined in the note. Interest is payable annually at an initial rate of 3.75% per annum, adjusted once each year to the lower of either 5% or the three month rate within the meaning of Section 1274(d)(2) of the Internal Revenue Code of 1986. There are no sinking fund requirements. The note also requires the Company to maintain a standby letter of credit payable to Tandy Corporation in the amount of 70% of the face value of the note or $67.7 million. This standby letter of credit was issued under the terms of the Company's revolving credit agreement. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS JANUARY 1, 1994 RESULTS OF OPERATIONS The following table shows the results of operations for the periods indicated as a percentage of net sales.
Percentage of Net Sales Percentage of Net Sales Three Months Ended Six Months Ended ----------------------- ----------------------- Jan. 1, Jan. 2, Jan. 1, Jan. 2, 1994 1993 1994 1993 - -------------------------------------------------------------------------------------------------------- Net sales 100.0% 100.0% 100.0% 100.0% Cost of sales 83.1 78.0 83.2 77.7 - -------------------------------------------------------------------------------------------------------- Gross profit 16.9 22.0 16.8 22.3 - -------------------------------------------------------------------------------------------------------- Selling and marketing expenses 7.9 9.9 8.0 10.8 General and administrative expenses 2.9 3.7 3.1 3.9 Engineering and development expenses 1.5 2.3 1.7 2.5 - -------------------------------------------------------------------------------------------------------- Operating income 4.6 6.1 4.0 5.1 Other income (expense), net (0.6) - (0.7) - - -------------------------------------------------------------------------------------------------------- Income before provision for income taxes 4.0 6.1 3.3 5.1 Provision for income taxes 1.4 1.9 1.1 1.6 - -------------------------------------------------------------------------------------------------------- Net income 2.6% 4.2% 2.2% 3.5% ========================================================================================================
Sales Net sales for the six-month period ended January 1, 1994 increased 88% to $1.191 billion from $633 million in the six-month period ended January 2, 1993. This improvement in revenues was primarily due to increased demand for the Company's desktop systems and notebook system products. The Company shipped 752,000 computer systems in the first six months of fiscal 1994, an increase of 114% over the 351,000 units shipped in the same prior year period. Revenues from desktop system products increased 84% to $780 million for the six-month period ended January 1, 1994 from $423 million in the comparable prior year period. Strong demand for the Advantage! 486SX, Bravo 486SX/25, 486/33, 486/66D, and the Premmia 486 product lines all contributed to the record level of computer system revenues. Revenues from Tandy's retail operations, which is seasonally strong during the third and fourth calendar quarters, and the recently acquired GRiD and Victor product families combined to contribute to the significant desktop revenue growth. Included within total desktop revenues were sales of the Company's 80386 systems which declined to $41 million in the six-month period ended January 1, 1994, compared to $143 million in the first six months of fiscal 1993. The Company's notebook computer product revenues rose 98% to $252 million in the six-month period ended January 1, 1994 from $127 million in the comparable prior year period. This increase reflects a 79% increase in unit shipments to 125,000 for the six-month period ended January 1, 1994 from 70,000 in the same prior year period. Notebook systems sales growth occurred in all key notebook product line offerings including the Bravo notebooks, the Advantage! Explorer, and the PowerExec. North American revenues (including Canada) increased by 120% to $806 million during the first six months of fiscal 1994 over the comparable prior year period, primarily due to growth in both desktop systems and notebook computer sales. While revenue growth occurred in each of the Company's North American distribution channels, sales to the consumer retail channel, which includes sales made to Tandy Corporation, increased 292% and accounted for 39% of North American revenues for the first six months of fiscal 1994 compared to 22% in the same fiscal 1993 period. The Company believes that its substantial growth in this channel is partially due to the seasonal nature of the retail channel in which sales are historically strongest during the third and fourth calendar quarters. Sales to the independent reseller/dealer channel for the six-month period ending January 1, 1994 also rose substantially, increasing 89% over the same prior year period and accounted for 42% of total North American revenues. The national distributor channel and the original equipment manufacturers (OEM) channel accounted for 11% and 8%, respectively, of total North American revenues during the six-month period ended January 1, 1994. Six month fiscal 1994 international revenues rose 45% to $385 million from $266 million in the comparable prior year period and accounted for 32% of total year-to-date fiscal 1994 revenues. New European subsidiaries in Denmark, Finland, and Norway, as well as significant revenue growth in France, Sweden, Switzerland, and the United Kingdom resulted in total European revenues rising 81% to $234 million in the six-month period ended January 1, 1994 from $129 million in the prior year period. Increased demand for the Company's Bravo desktop systems and the Bravo and PowerExec notebook systems contributed to the European revenue growth. During the second quarter of fiscal 1994, consistent with the Company's realignment of its European operations, a new subsidiary was established in Limerick, Ireland. During the second half of fiscal 1994, this subsidiary will begin the manufacture, distribution, and servicing of AST products for the European region. Pacific Rim revenues totaled $125 million in the six-month period ended January 1, 1994, up 4% from the prior year total of $120 million. A significant portion of the Company's Pacific Rim revenues are derived from sales to the Hong Kong government and to Hong Kong based dealers who ultimately market the Company's products within the People's Republic of China (PRC). Although the PRC has historically provided the Company with significant revenues and profitability, future sales of the Company's products into the PRC are highly dependent upon continuing favorable trade relations between the United States and the PRC and the general economic and political stability of the region. Economic factors such as short-term fluctuations in foreign currency exchange rates and changes in the PRC tax structure could have a corresponding impact on future sales and operating results. Continuing its commitment to this key market, during the first quarter of fiscal 1994, the Company announced an agreement to establish manufacturing operations in the PRC through a joint venture with a corporation affiliated with the Chinese government. In the Company's Rest of World region, revenues increased 57% in the six- month period ended January 1, 1994 compared to the same prior year period. This increase is primarily due to a 113% growth rate in the Company's Middle East operations. Revenues for the quarter ended January 1, 1994 increased 95% to $677 million from $346 million in the quarter ended January 2, 1993 due to strong demand for the Company's desktop and notebook system sales. During the second quarter of fiscal 1994, the Company introduced the PowerExec 4/33SL, multimedia additions to its Premmia and Bravo line of desktop computers, and the Premmia LX P/60, based on Intel's Pentium processor. The Company's future success is highly dependent upon its ability to continue to deliver innovative, value-added, and price competitive products to the marketplace on a timely basis. Once introduced, there can be no assurance that new products will receive favorable market acceptance. In addition, continued revenue growth could be significantly impacted by the extremely competitive pricing environment within the worldwide personal computer marketplace. Gross Profit Gross profit margins decreased to 16.8% in the six-month period ended January 1, 1994 from 22.3% in the six-month period ended January 2, 1993. This decline in margins is primarily due to price reductions prompted by competitive market conditions which have occurred throughout the past year impacting all computer system products. Also contributing to the lower gross profit margins was the increased percentage of revenues generated by sales to the Company's consumer retail (including sales to Tandy's retail operations) and OEM channels, which typically yield lower gross margins. The results of the Company's international operations are subject to currency fluctuations. As the value of the U.S. dollar strengthens relative to other currencies, revenues from sales in those currencies convert to fewer U.S. dollars. This effect on revenue has a corresponding impact on gross profit, as the Company's production costs are incurred primarily in U.S. dollars. Beginning in the first quarter of fiscal 1994 and continuing in the second quarter, the value of the U.S. dollar rose dramatically against nearly all European currencies. Currency fluctuations resulted in a 2.9 percentage point gross margin reduction in a comparison of fiscal year-to-date 1994 results versus the prior year-to-date period. Currency fluctuations also reduced second quarter fiscal 1994 gross margins by 2.4 percentage points when compared to the prior year second quarter. The Company has generally been able to obtain parts from multiple sources without significant difficulty. However, a number of the Company's products include certain components, such as active-matrix displays, CD-ROMs, application specific integrated circuits, and microprocessors, that are currently purchased from single sources due to availability, price, quality or other considerations. The Company purchases components pursuant to purchase orders placed in the ordinary course of business and has no guaranteed supply arrangements with single source suppliers. There can be no assurance that disruptions in delivery of components will not occur in the future, which could adversely affect net sales and profitability of the Company. The Company anticipates that pricing pressures will continue to be significant and is prepared to adjust its pricing as required by the marketplace. In addition, as product life cycles shorten, the risk of product obsolescence increases which could negatively impact gross margins. And, although component prices have generally declined in recent years, a change in market conditions could result in higher component costs, negatively impacting gross margins and operating income. Lower gross margins could also result in decreased liquidity and adversely affect the Company's financial position. Operating Expenses Total operating expenses increased 40.5% to $153.0 million in the six-month period ended January 1, 1994 from $108.9 million in the six-month period ended January 2, 1993. However, as a percentage of sales, operating expenses decreased to 12.8% from 17.2% in the comparable prior year period. The increase in actual operating expenses was due to the increased level of sales compared to the same prior year period. Selling and marketing expenses increased 39.2% to $95.1 million in the six months ended January 1, 1994 from $68.3 million in the prior year period. This increase was attributable to enhanced product marketing and dealer promotional activities resulting in higher expenses for co-op advertising and other promotions. Additionally, the Company's continued focus on increasing brand name awareness led to an increase in media advertising expenses. Selling and marketing expenses also increased due to higher payroll and related costs consistent with increases in sales and marketing staff throughout the world. As a percentage of sales, selling and marketing expenses declined to 8.0% for the period ended January 1, 1994 from 10.8% in the prior year period. General and administrative expenses increased by 52.3% to $37.3 million in the six-month period ended January 1, 1994 from $24.5 million in the same fiscal 1993 period. Depreciation and amortization expenses increased primarily because of the expanded fixed asset base resulting from the acquisition of Tandy's personal computer business. In addition, continued expansion of the Company's domestic and international operations including France and Sweden resulted in increased costs for payroll, payroll related expenses, insurance, rent, and professional fees. As a percentage of sales, general and administrative expenses decreased to 3.1% from 3.9% in the comparable prior year period. Engineering and development costs rose by 28.1% to $20.6 million for the six-month period ended January 1, 1994 from $16.1 million in the comparable prior fiscal period. The Company's new product development programs have resulted in increased payroll and payroll-related costs and higher expenses for equipment rental. Significant new notebook product introductions have been made during the first six months of fiscal 1994, including the Power Exec 4/33SL and 4/25SL Special Edition, the Bravo notebooks, and the Advantage! Explorer. Other new product introductions during the period included desktop additions to the Advantage!, Bravo, and Premmia product lines as well as the new Pentium-based Premium SE server, and the GRiD PalmPad SL. As a percentage of sales, engineering and development costs declined to 1.7% for the period ended January 1, 1994 from 2.5% in the comparable prior year period. Total operating expenses for the quarter ended January 1, 1994 increased 51.0% to $83.1 million from $55.0 million in the same fiscal 1993 quarter. As a percentage of sales, operating expenses declined to 12.3% from 15.9% in the prior year quarter. The overall increased spending is primarily due to increased payroll and employee benefit costs related to worldwide expansion and expanded sales and marketing activities consistent with increased sales levels. Other Income and Expense For the six-month period ended January 1, 1994, the Company had net interest expense of $3.6 million compared to net interest income of $1.9 million in the corresponding fiscal 1993 period. Interest expense increased as a result of the additional interest expense related to the note payable to Tandy, the debt associated with the Company's December 1993 Liquid Yield Option Notes issuance, and increased utilization of the Company's bank credit facilities. In the first six months of fiscal 1994, the Company recognized net other expenses of $4.2 million compared to $1.7 million for the same fiscal 1993 period. These amounts relate primarily to foreign currency transaction and remeasurement gains and losses and the costs associated with the Company's foreign currency hedging activities. The Company adheres to a hedging strategy which is designed to minimize the effect of remeasuring local currency balance sheets of its foreign subsidiaries on the Company's consolidated financial position and results of operations. Provision for Income Taxes The Company's effective tax rate increased to 34% in the six-month period ended January 1, 1994 from 31% in the comparable prior year period. The increased tax rate is attributable to changes in the proportion of income earned within various taxing jurisdictions and the tax rates in the locations in which those earnings were generated. LIQUIDITY AND CAPITAL RESOURCES The Company's cash and cash equivalents totaled $145.4 million at January 1, 1994 compared to $121.6 million at July 3, 1993. Completion of the December 1993 public debt offering combined with lower inventory levels partially offset by increases in accounts receivable accounted for the higher cash level. During the first six months of fiscal 1994, the Company used $50.2 million of cash compared to $41.4 million in the prior year period. Working capital increased to $438 million at January 1, 1994 from $301 million at July 3, 1993, due to a combination of increased accounts receivable and decreased accrued liabilities. Capital expenditures totaled $11.2 million in the first half of fiscal 1994 and consisted of additions to plant and engineering equipment, office furniture and fixtures, and worldwide information systems. During the second quarter of fiscal 1994, the Company purchased both land and an existing manufacturing plant in Limerick, Ireland for $4.2 million (included in total capital expenditures) plus the assumption of a $1.4 million ten year contingent liability payable in the event that the Company should terminate operations in Ireland. The facility will eventually manufacture, distribute, and service all of the Company's products destined for Europe, Africa, and the Middle East. The Company intends to fund its fiscal 1994 cash requirements through a combination of cash on hand, cash provided by operations, available borrowings under its revolving credit facilities and possible future public or private debt and/or equity offerings. At January 1, 1994, the Company had available a $225 million unsecured revolving credit facility with a final maturity date of September 30, 1996. This revolving credit agreement allows the Company to borrow, subject to certain leverage and total debt restrictions, at rates based upon the bank's reference rate, or a spread of 5/8% over the LIBOR rate, 3/4% over the domestic certificate of deposit rate, or at a rate bid by a bank, as selected by the Company. At January 1, 1994, there was $50 million outstanding as drawings under this credit facility and $67.7 million was outstanding in the form of a letter of credit issued to Tandy Corporation in support of the acquisition note payable. The Company also has various additional letter of credit facilities available for use by the Company and its subsidiaries. In connection with the second fiscal quarter completion of the Tandy/GRiD France acquisition, the Company amended its original $90 million promissory note issued to Tandy to increase it by $6.7 million to a total of $96.7 million. The note is due on July 11, 1996. Interest is payable annually at an initial rate of 3.75% per annum, adjusted once each year to the lower of either 5% or the three month rate within the meaning of Section 1274(d)(2) of the Internal Revenue Code of 1986. There are no sinking fund requirements. The note also requires the Company to maintain a standby letter of credit payable to Tandy in the amount of 70% of the face value of the note or $67.7 million. Upon maturity of the note, up to fifty percent of the initial principal amount of the promissory note may be converted, at the option of the Company, into common stock of the Company based upon its then fair market value, as defined in the promissory note. On December 14, 1993, the Company issued $315 million par value of Liquid Yield Option Notes (LYONs) due December 14, 2013. The LYONs are zero coupon convertible subordinated notes which were sold at a significant discount to par value with a yield to maturity of 5.25% and a total value at maturity of $315 million. There are no periodic payments of interest on the LYONs. Each $1,000 principal amount at maturity of LYONs is convertible into 12.993 shares of the Company's common stock at any time. Upon conversion of a LYON, the Company may elect to deliver shares of common stock at the conversion rate or cash equal to the market value of the shares of common stock into which the LYONs are convertible. Total proceeds received from the sale of the LYONs were approximately $111.7 million, which will be utilized for working capital, including the financing of expected increases in accounts receivable and inventories, repayment of bank borrowings under the Company's revolving credit facilities, new product development, and other general corporate purposes. The holder of a LYON may require the Company to purchase its LYONs on December 14, 1998, December 14, 2003 and December 14, 2008 (the "Purchase Dates"), and such payments may reduce the liquidity of the Company. However, the Company may, subject to certain exceptions, elect to pay the purchase price on any of the three Purchase Dates in cash or shares of common stock or any combination thereof. The Company has made no decision as to whether it will meet future purchase obligations in cash, common stock, or any combination thereof. Such decision will be based on market conditions at the time a decision is required, as well as management's view of the liquidity of the Company at such time. ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS Future operating results may be impacted by a number of factors, including worldwide economic and political conditions, industry specific factors, the Company's ability to develop and produce commercially viable products, the Company's ability to manage expense levels in response to decreasing gross profit margins, the continued financial strength of the Company's dealers and distributors and the Company's ability to successfully integrate the acquired Tandy/GRiD operations into the Company's business model. Consistent with industry practice, the Company provides certain of its larger distributors, consumer retailers and dealers with stock balancing and price protection rights which permit these distributors, retailers and dealers to return slow-moving products to the Company for credit or to receive price adjustments if the Company lowers the price of selected products within certain time periods. To date, the Company has not experienced any material adverse impact from stock balancing returns or price protection adjustments; however, there can be no assurance that the Company will not experience increased rates of return or price protection adjustments in the future. Any significant returns or adjustments could adversely affect the Company's net sales, gross profit and profitability. The Company believes that, with the acquisition of additional manufacturing facilities from Tandy Corporation and the purchase of manufacturing facilities both in China and Ireland, production capacity will be sufficient to support anticipated increases in unit volumes. The Company expects to increase inventory levels to support higher production volumes. However, if the Company is unable to obtain certain key components, or to effectively forecast customer demand or manage its inventory, these higher inventory levels may result in increased obsolescence and adversely impact the Company's gross margins and results of operations. The Company's corporate headquarters and certain manufacturing operations are located near major earthquake faults. In the event of a major earthquake, the Company's operating results could be adversely affected. Because of these and other factors affecting the Company's operating results, past financial performance should not be considered a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods. PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In June 1989, Texas Instruments Inc. (TI) advised the Company that it believed certain AST computer products infringe certain TI patents. On January 4, 1994, the Company initiated litigation in the U.S. District Court in Santa Ana, California against TI alleging certain violations of licensing agreements, federal antitrust laws and the California Unfair Practices Act. In addition, the Company alleged that TI is infringing an AST patent and that certain TI patents are invalid or inapplicable. Management does not believe that the outcome of this matter will have a material adverse impact on the Company's consolidated financial position or results of operations. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits 3.2 Bylaws of AST Research, Inc., a Delaware corporation, as amended to date. 4.1 Form of Amended and Restated Rights Agreement dated as of January 28, 1994 between the Company and American Stock Transfer & Trust Co., as Successor Rights Agent, as adopted by the Board of Directors on January 28, 1994. 10.120 AST Research, Inc. 1994 One-Time Grant Stock Option Plan for Non-Employee Directors. 10.121 Form of Option Agreement Under 1994 One-Time Grant Stock Option Plan for Non-Employee Directors of AST Research, Inc. 10.122 Amendment to AST Research, Inc. 1989 Long-Term Incentive Program. 10.123 Amendment to AST Research, Inc. 1991 Stock Option Plan for Non-Employee Directors. 11. Computation of Net Income Per Share.
(b) Reports on Form 8-K On October 29, 1993, the Company filed a report on Form 8-K regarding the agreement with Tandy Corporation concerning the completion of the purchase of certain assets and assumption of certain liabilities relating to Tandy/GRiD France, effective September 1, 1993. On November 4, 1993, the Company filed a report on Form 8-K regarding the appointment of Safi U. Qureshey as Chairman and Dr. Carmelo J. Santoro as Vice Chairman of the Board of Directors, effective November 3, 1993. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AST RESEARCH, INC. -------------------- (Registrant) Date: February 15, 1994 /s/ BRUCE C. EDWARDS -------------------- Bruce C. Edwards Senior Vice President, Finance and Chief Financial Officer EX-3.(II) 2 BYLAWS AS AMENDED TO DATE BYLAWS OF AST RESEARCH, INC. A Delaware Corporation (as amended, through October 28, 1993) TABLE OF CONTENTS
Page ------- ARTICLE I. OFFICES 1 Section 1. Registered Office 1 Section 2. Other Offices 1 Section 3. Books 1 ARTICLE II. MEETINGS OF STOCKHOLDERS 1 Section 1. Place of Meetings 1 Section 2. Annual Meetings 1 Section 3. Special Meetings 1 Section 4. Notification of Business to be Transacted at Meeting 1 Section 5. Notice; Waiver of Notice 2 Section 6. Quorum; Adjournment 2 Section 7. Voting 2 Section 8. Stockholder Action by Written Consent Without a Meeting 2 Section 9. List of Stockholders Entitled to Vote 3 Section 10. Stock Ledger 3 Section 11. Inspectors of Election 3 Section 12. Organization 3 Section 13. Order of Business 3 ARTICLE III. DIRECTORS 3 Section 1. Powers 3 Section 2. Number and Election of Directors 4 Section 3. Vacancies 4 Section 4. Time and Place of Meetings 4 Section 5. Annual Meeting 4 Section 6. Regular Meetings 5 Section 7. Special Meetings 5 Section 8. Quorum; Vote Required for Action; Adjournment 5 Section 9. Action by Written Consent 5 Section 10. Telephone Meetings 5 Section 11. Committees 5 Section 12. Compensation 6 Section 13. Interested Directors 6 ARTICLE IV. OFFICERS 6 Section 1. Executive Officers 6 Section 2. Election; Term of Office and Remuneration 7 Section 3. Subordinate Officers 7 Section 4. Removal 7 Section 5. Resignations 7 Section 6. Powers and Duties 7 ARTICLE V. STOCK 7 Section 1. Form of Certificates 7 Section 2. Signatures 7 Section 3. Lost Certificates 8 Section 4. Transfers 8 Section 5. Registered Owners 8 ARTICLE VI. LIMITATION OF LIABILITY 8 ARTICLE VII. INDEMNIFICATION 8 Section 1. Action Other Than by or in the Right of the Corporation 8 Section 2. Action by or in the Right of the Corporation 9 Section 3. Determination of Right of Indemnification 9 Section 4. Indemnification Against Expenses of Successful Party 9 Section 5. Advances of Expenses 9 Section 6. Right of Agent to Indemnification upon Application; Procedure Upon Application 10 Section 7. Other Rights and Remedies 10 Section 8. Insurance 10 Section 9. Indemnity Fund 11 Section 10. Constituent Corporations 11 Section 11. Other Enterprises, Fines, and Serving at Corporation's Request 11 Section 12. Indemnification of Other Persons 11 Section 13. Savings Clause 11 ARTICLE VIII. RECORDS 12 Section 1. Maintenance and Inspection of Share Register 12 Section 2. Maintenance and Inspection of Bylaws 12 ARTICLE IX. GENERAL PROVISIONS 12 Section 1. Dividends 12 Section 2. Disbursements 12 Section 3. Fiscal Year 13 Section 4. Corporate Seal 13 Section 5. Record Date 13 Section 6. Voting of Stock Owned by the Corporation 13 Section 7. Construction and Definitions 13 Section 8. Amendments 13
BYLAWS OF AST RESEARCH, INC. A Delaware Corporation ARTICLE I OFFICES Section 1. Registered Office. The address of the registered office of the Corporation in the State of Delaware shall be 1209 Orange Street, Wilmington, New Castle County, Delaware, 19801, and the name of its registered agent at such address is The Corporation Trust Company. Section 2. Other Offices. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require. Section 3. Books. The books of the Corporation may be kept within or without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. Place of Meetings. All meetings of the stockholders shall be held at such place either within or without the State of Delaware and on such date and at such time as may be designated from time to time by the Board of Directors. If the Board of Directors shall fail to fix such place, the meetings shall be held at the principal executive office of the Corporation. Section 2. Annual Meetings. Annual meetings of stockholders shall be held at a time and date designated by the Board of Directors for the purpose of electing directors and transacting such other business as may properly be brought before the meeting. Section 3. Special Meetings. Special meetings of stockholders, for any purpose or purposes, may be called by the Board of Directors, the Chairman of the Board of Directors, the President, or the holders of shares entitled to cast not less than a majority of the votes at such meeting. Special meetings may not be called by any other person. Section 4. Notification of Business to be Transacted at Meeting. To be properly brought before a meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a stockholder entitled to vote at the meeting. Section 5. Notice; Waiver of Notice. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise required by law, such notice shall be given not less than ten nor more than 60 days before the date of the meeting to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation. A written waiver of any such notice signed by the person entitled thereto, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Section 6. Quorum; Adjournment. Except as otherwise required by law or provided by the Certificate of Incorporation, the holders of a majority of the capital stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting of the time and place of the adjourned meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. If after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder entitled to vote at the meeting. Section 7. Voting. Except as otherwise required by law, or provided by the Certificate of Incorporation or these Bylaws, any question brought before any meeting of stockholders shall be decided by the vote of the holders of a majority of the stock represented and entitled to vote thereat. Unless otherwise provided in the Certificate of Incorporation, each stockholder represented at a meeting of stockholders shall be entitled to cast one vote for each share of the capital stock entitled to vote thereat held by such stockholder. Such votes may be cast in person or by proxy, but no proxy shall be voted on or after three years from its date, unless such proxy provides for a longer period. Elections of directors need not be by ballot unless the Chairman of the meeting so directs or unless a stockholder demands election by ballot at the meeting and before the voting begins. Section 8. Stockholder Action by Written Consent Without a Meeting. Any action which may be taken at any annual or special meeting of stockholders may be taken without a meeting and without prior notice, if a consent in writing, setting forth the action so taken, is signed by the holders of all of the outstanding shares of the Corporation. All such consents shall be filed with the Secretary of the Corporation and shall be maintained in the corporate records. Any stockholder giving a written consent, or the stockholder's proxy holders, or a transferee of the shares or a personal representative of the stockholder or their respective proxy holders, may revoke the consent by a writing received by the Secretary of the Corporation before written consents of the number of shares required to authorize the proposed action have been filed with the Secretary. Section 9. List of Stockholders Entitled to Vote. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder of the Corporation who is present. Section 10. Stock Ledger. The stock ledger of the Corporation shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by Section 9 of this Article II or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders. Section 11. Inspectors of Election. In advance of any meeting of stockholders, the Board of Directors may appoint one or more persons (who shall not be candidates for office) as inspectors of election to act at the meeting. If inspectors are not so appointed, or if an appointed inspector fails to appear or fails or refuses to act at a meeting, the Chairman of any meeting of stockholders may, and on the request of any stockholder or his proxy shall, appoint inspectors of election at the meeting. In the event of any dispute between or among the inspectors, the determination of the majority of the inspectors shall be binding. Section 12. Organization. At each meeting of stockholders the Chairman of the Board of Directors, if one shall have been elected, (or in his absence or if one shall not have been elected, the President) shall act as Chairman of the meeting. The Secretary (or in his absence or inability to act, the person whom the Chairman of the meeting shall appoint secretary of the meeting) shall act as secretary of the meeting and keep the minutes thereof. Section 13. Order of Business. The order and manner of transacting business at all meetings of stockholders shall be determined by the Chairman of the meeting. ARTICLE III DIRECTORS Section 1. Powers. Except as otherwise required by law or provided by the Certificate of Incorporation, the business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. Section 2. Number and Election of Directors. Unless otherwise provided by the Certificate of Incorporation, the Board of Directors shall consist of not less than 3 nor more than 7 members. The exact number of authorized directors shall initially be 5 and, thereafter, shall be fixed from time to time, within the foregoing limits, by resolution of the Board of Directors. Directors shall be elected at each annual meeting of stockholders and each director so elected shall hold office until his successor is duly elected and qualified, or until his earlier death, resignation or removal. Any director may resign at any time effective upon giving written notice to the Board of Directors, unless the notice specifies a later time for such resignation to become effective. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. If the resignation of a director is effective at a future time, the Board of Directors may elect a successor prior to such effective time to take office when such resignation becomes effective. Directors need not be stockholders. Section 3. Vacancies. Vacancies in the Board of Directors may be filled by a majority of the remaining directors, though less than a quorum, or by a sole remaining director, except that a vacancy created by the removal of a director by the vote or written consent of the stockholders may be filled only by the vote of a majority of the shares entitled to vote represented at a duly held meeting at which a quorum is present, or by the written consent of holders of a majority of the outstanding shares entitled to vote. Each director so elected shall hold office until the next annual meeting of the stockholders and until a successor has been elected and qualified. A vacancy or vacancies in the Board of Directors shall be deemed to exist in the event of the death, resignation, or removal of any director, or if the authorized number of directors is increased, or if the stockholders fail, at any meeting of stockholders at which any director or directors are elected, to elect the number of directors to be voted for at that meeting. The stockholders may elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors, but any such election by written consent shall require the consent of a majority of the outstanding shares entitled to vote. No reduction of the authorized number of directors shall have the effect of removing any director before that director's term of office expires. Section 4. Time and Place of Meetings. The Board of Directors shall hold its meetings at such place, either within or without the State of Delaware, and at such time as may be determined from time to time by the Board of Directors. Section 5. Annual Meeting. The Board of Directors shall meet for the purpose of organization, the election of officers and the transaction of other business, as soon as practicable after each annual meeting of stockholders, on the same day and at the same place where such annual meeting shall be held. Notice of such meeting need not be given. In the event such annual meeting is not so held, the annual meeting of the Board of Directors may be held at such place, either within or without the State of Delaware, on such date and at such time as shall be specified in a notice thereof given as hereinafter provided in Section 7 of this Article III or in a waiver of notice thereof. Section 6. Regular Meetings. Regular meetings of the Board of Directors may be held at such places within or without the State of Delaware at such date and time as the Board of Directors may from time to time determine and, if so determined by the Board of Directors, notices thereof need not be given. Section 7. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board, the President, by any Vice President, the Secretary or by any two directors. Notice of the date, time and place of special meetings shall be delivered personally or by telephone to each director or sent by first-class mail or telegram, charges prepaid, addressed to each director at the director's address as it is shown on the records of the Corporation. In case the notice is mailed, it shall be deposited in the United States mail at least five days before the time of the holding of the meeting. In case the notice is delivered personally or by telephone or telegram, it shall be delivered personally or by telephone or to the telegraph company at least 48 hours before the time of the holding of the meeting. The notice need not specify the purpose of the meeting. Section 8. Quorum; Vote Required for Action; Adjournment. Except as otherwise required by law, or provided in the Certificate of Incorporation or these Bylaws, a majority of the directors shall constitute a quorum for the transaction of business at all meetings of the Board of Directors and the affirmative vote of not less than a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting, from time to time, without notice other than announcement at the meeting, until a quorum shall be present. A meeting at which a quorum is initially present may continue to transact business, notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum to conduct that meeting. When a meeting is adjourned to another time or place (whether or not a quorum is present), notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Board of Directors may transact any business which might have been transacted at the original meeting. Section 9. Action by Written Consent. Unless otherwise restricted by the Certificate of Incorporation, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all the members of the Board of Directors or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee. Section 10. Telephone Meetings. Unless otherwise restricted by the Certificate of Incorporation, members of the Board of Directors of the Corporation, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors or such committee, as the case may be, by conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this Section 10 shall constitute presence in person at such meeting. Section 11. Committees. The Board of Directors may, by resolution passed by a majority of the entire Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any such committee, who may replace any absent or disqualified member at any meeting of the committee. In the event of absence or disqualification of a member of a committee, and in the absence of a designation by the Board of Directors of an alternate member to replace the absent or disqualified member, the committee member or members present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of the absent or disqualified member. Any committee, to the extent allowed by law and as provided in the resolution establishing such committee, shall have and may exercise all the power and authority of the Board of Directors in the management of the business and affairs of the Corporation. Each committee shall report to the Board of Directors when required. Section 12. Compensation. The directors may be paid such compensation for their services as the Board of Directors shall from time to time determine. Section 13. Interested Directors. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or the committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose if: (i) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (ii) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof, or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. ARTICLE IV OFFICERS Section 1. Executive Officers. The executive officers of the Corporation shall be a President, a Chief Executive Officer, a Chief Financial Officer and a Secretary. The Secretary shall have the duty, among other things, to record the proceedings of the meetings of stockholders and directors in a book kept for that purpose. The Corporation may also have such other executive officers, including one or more Vice Presidents, as the Board may in its discretion appoint. The Board of Directors, if it so determines, may appoint a Chairman of the Board and a Vice Chairman of the Board from among its members, but such titles shall not confer upon such Board members executive officer status. Any number of offices may be held by the same person. Section 2. Election, Term of Office and Remuneration. The executive officers of the Corporation shall be elected annually by the Board of Directors at the annual meeting or a regular meeting thereof. Each such officer shall hold office at the discretion of the Board of Directors until his successor is elected and qualified, or until his earlier death, resignation or removal. The remuneration of all officers of the Corporation shall be fixed by the Board of Directors. Any vacancy in any office shall be filled in such manner as the Board of Directors shall determine. Section 3. Subordinate Officers. In addition to the executive officers enumerated in Section 1 of this Article IV, the Corporation may have one more assistant treasurers and assistant secretaries and such other subordinate officers, agents and employees as the Board of Directors may deem necessary, each of whom shall hold office for such period as the Board of Directors may from time to time determine. The Board of Directors may delegate to any executive officer the power to appoint and to remove any such subordinate officers, agents or employees. Section 4. Removal. Except as otherwise delegated to an executive officer with respect to subordinate officers, any officer may be removed, with or without cause, at any time, by resolution adopted by the Board of Directors. Such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation. Section 5. Resignations. Any officer may resign at any time by giving written notice to the Board of Directors (or to a principal officer if the Board of Directors has delegated to such principal officer the power to appoint and to remove such officer). The resignation of any officer shall take effect upon receipt of notice thereof or at such later time as shall be specified in such notice; unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 6. Powers and Duties. The Board of Directors may designate an officer as the Chief Executive Officer. The Chief Executive Officer shall, subject to the direction and control of the Board of Directors, be the general manager of, and supervise and direct, the business and affairs of the Corporation and the conduct of the officers of the Corporation. The other officers of the Corporation shall have such powers and perform such duties incident to each of their respective offices and such other duties as may from time to time be conferred upon or assigned to them by the Board of Directors or the Chief Executive Officer. ARTICLE V STOCK Section 1. Form of Certificates. Every holder of stock in the Corporation shall be entitled to have a certificate signed, in the name of the Corporation (i) by the Chairman of the Board of Directors, the President or a Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares owned by him in the Corporation. Section 2. Signatures. Any, or all, of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. Section 3. Lost Certificates. The Corporation may issue a new certificate to be issued in place of any certificate theretofore issued by the Corporation, alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate to be lost, stolen or destroyed. The Corporation may, in its discretion and as a condition precedent to the issuance of such new certificate, require the owner of such lost, stolen, or destroyed certificate, or his legal representative, to give the Corporation a bond (or other security) sufficient to indemnify it against any claim that may be made against the Corporation (including any expense or liability) on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. Section 4. Transfers. Stock of the Corporation shall be transferable in the manner prescribed by law and in these Bylaws or in any agreement with the stockholder making the transfer. Transfers of stock shall be made on the books of the Corporation only by the person named in the certificate or by his attorney lawfully constituted in writing and upon the surrender of the certificate therefor, which shall be cancelled before a new certificate shall be issued. Section 5. Registered Owners. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise required by law. ARTICLE VI LIMITATION OF LIABILITY No person shall be liable to the Corporation for any loss or damage suffered by it on account of any action taken or omitted to be taken by him as a director or officer of the Corporation if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation or, with respect to any criminal matter, had no reasonable cause to believe that his conduct was unlawful. ARTICLE VII INDEMNIFICATION Section 1. Action Other Than by or in the Right of the Corporation. Subject to Section 3 of this Article VII, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, and whether external or internal to the Corporation, (other than a judicial action or suit brought by or in the right of the Corporation) by reason of the fact that he is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise (all such persons being referred to hereafter as an "Agent"), against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, that he had reasonable cause to believe that his conduct was unlawful. Section 2. Action by or in the Right of the Corporation. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed judicial action or suit brought by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was an Agent (as defined in Section 1) against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or other such court shall deem proper. Section 3. Determination of Right of Indemnification. Any indemnification under Sections 1 or 2 (unless ordered by a court) shall be made by the Corporation unless a determination is reasonably and promptly made (i) by the Board by a majority vote of a quorum consisting of directors who are or were not parties to such action, suit or proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable, if a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the stockholders, that such person acted in bad faith and in a manner that such person did not believe to be in or not opposed to the best interests of the Corporation, or, with respect to any criminal proceeding, that such person believed or had reasonable cause to believe that his conduct was unlawful. Section 4. Indemnification Against Expenses of Successful Party. Notwithstanding the other provisions of this Article, to the extent that an Agent has been successful on the merits or otherwise, including the dismissal of an action without prejudice or the settlement of an action without admission of liability, in defense of any proceeding or in defense of any claim, issue or matter therein, such Agent shall be indemnified against all expenses incurred in connection therewith. Section 5. Advances of Expenses. Except as limited by Section 6 of this Article VII, expenses incurred in defending or investigating any action, suit, proceeding or investigation shall be paid by the Corporation in advance of the final disposition of such matter, if the Agent shall undertake to repay such amount in the event that it is ultimately determined, as provided herein, that such person is not entitled to indemnification. However, no advance shall be made by the Corporation if a determination is reasonably and promptly made by the Board of Directors by a majority vote of a quorum of disinterested directors, or (if such a quorum is not obtainable or, even if obtainable, a quorum of disinterested directors so directs) by independent legal counsel in a written opinion, that, based upon the facts known to the Board or counsel at the time such determination is made, such person acted in bad faith and in a manner that such person did not believe to be in or not opposed to the best interest of the Corporation, or, with respect to any criminal proceeding, that such person believed or had reasonable cause to believe his conduct was unlawful. In no event shall any advance be made in instances where the Board or independent legal counsel reasonably determines that such person deliberately breached his duty to the Corporation or its stockholders. Section 6. Right of Agent to Indemnification Upon Application; Procedure Upon Application. Any indemnification under Sections 2, 3, and 4, or advance under Section 5 of this Article VII, shall be made promptly and in any event within 45 days, upon the written request of the Agent, unless with respect to applications under Sections 2, 3, or 5, a determination is reasonably and promptly made by the Board of Directors by a majority vote of a quorum of disinterested directors that such Agent acted in a manner set forth in such Sections as to justify the Corporation's not indemnifying or making an advance to the Agent. In the event no quorum of disinterested directors is obtainable, the Board of Directors shall promptly direct that independent legal counsel shall decide whether the Agent acted in the manner set forth in such Sections as to justify the Corporation's not indemnifying or making an advance to the Agent. The right to indemnification or advances as granted by this Article VII shall be enforceable by the Agent in any court of competent jurisdiction if the Board or independent legal counsel denies the claim, in whole or in part, or if no disposition of such claim is made within 45 days. The Agent's expenses incurred in connection with successfully establishing his right to indemnification, in whole or in part, in any such proceeding shall also be indemnified by the Corporation. Section 7. Other Rights and Remedies. The indemnification provided by this Article VII shall not be deemed exclusive of any other rights to which an Agent seeking indemnification may be entitled under any Bylaw, agreement, vote of stockholders or disinterested directors, court order or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, since it is the policy of the Corporation that indemnification of Agents shall be made to the fullest extent permitted by law. The indemnification provided by this Article shall continue as to a person who has ceased to be an Agent and shall inure to the benefit of the heirs, executors and administrators of such a person. All rights to indemnification under this Article shall be deemed to be provided by a contract between the Corporation and the Agent who serves in such capacity at any time while these Bylaws and other relevant provisions of the General Corporation Law of the State of Delaware and other applicable law, if any, are in effect. Any repeal or modification thereof shall not affect any rights or obligations then existing. Section 8. Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was an Agent against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article. Section 9. Indemnity Fund. Upon resolution passed by the Board, the Corporation may establish a trust or other designated account, grant a security interest or use other means (including, without limitation, a letter of credit), to ensure the payment of certain of its obligations arising under this Article and/or agreements which may be entered into between the Company and its officers and directors from time to time. Section 10. Constituent Corporations. For the purposes of this Article, references to "the Corporation" include all constituent corporations absorbed in a consolidation or merger as well as the resulting or surviving corporation, so that any person who is or was a director or officer of such a constituent corporation or is or was serving at the request of such constituent corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise shall stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation as he would had he served such constituent corporation in the same capacity. Section 11. Other Enterprises, Fines, and Serving at Corporation's Request. For purposes of this Article, references to "other enterprise" in Sections 1 and 10 shall include employee benefit plans; references to "fines" shall include any excise taxes assessed a person with respect to any employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director or officer of the Corporation which imposes duties on, or involves services by, such director or officer with respect to any employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Article. Section 12. Indemnification of Other Persons. The provisions of this Article VII shall not be deemed to preclude the indemnification of any person who is not an Agent (as defined in Section 1), but whom the Corporation has the power or obligation to indemnify under the provisions of the General Corporation Law of the State of Delaware or otherwise. The Corporation may, in its sole discretion, indemnify an employee, trustee or other agent as permitted by the General Corporation Law of the State of Delaware. The Corporation shall indemnify an employee, trustee or other agent where required by law. Section 13. Savings Clause. If this Article or any portion thereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each Agent against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, and whether internal or external, including a grand jury proceeding and an action or suit brought by or in the right of the Corporation, to the full extent permitted by any applicable portion of this Article that shall not have been invalidated, or by any other applicable law. ARTICLE VIII RECORDS Section 1. Maintenance and Inspection of Share Register. The Corporation shall keep at its principal executive office, or at the office of its transfer agent or registrar, if either be appointed and as determined by resolution of the Board of Directors, a record of its stockholders, giving the names and addresses of all stockholders and the number and class of shares held by each stockholder. A stockholder or stockholders of the Corporation holding at least 5% in the aggregate of the outstanding voting shares of the Corporation or who hold at least 1% of such voting shares and have filed a Schedule 14B with the United States Securities and Exchange Commission relating to the election of directors of the Corporation may (i) inspect and copy the records of stockholders' names and addresses and stockholdings during usual business hours on 5 days' prior written demand on the Corporation, or (ii) obtain from the transfer agent of the Corporation, on written demand and on the tender of such transfer agent's usual charges for such list, a list of the stockholders' names and addresses, who are entitled to vote for the election of directors, and their stockholdings, as of the most recent record date for which that list has been compiled or as of a date specified by the stockholder after the date of demand. This list shall be made available to any such stockholder by the transfer agent on or before the later of 5 days after the demand is received or the date specified in the demand as the date as of which the list is to be compiled. The record of stockholders shall also be open to inspection on the written demand of any stockholder or holder of a voting trust certificate, at any time during usual business hours, for a purpose reasonably related to the holder's interests as a stockholder or as the holder of a voting trust certificate. Any inspection and copying under this Section 1 may be made in person or by an agent or attorney of the stockholder or holder of a voting trust certificate making the demand. Section 2. Maintenance and Inspection of Bylaws. The Corporation shall keep at its principal executive office, the original or a copy of these Bylaws, as amended, to date, which shall be open to inspection by the stockholders at all reasonable times during office hours. ARTICLE IX GENERAL PROVISIONS Section 1. Dividends. Subject to limitations contained in the General Corporation Law of the State of Delaware and the Certificate of Incorporation, the Board of Directors may declare and pay dividends upon the shares of capital stock of the Corporation, which dividends may be paid either in cash, securities of the Corporation or other property. Section 2. Disbursements. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. Section 3. Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. Section 4. Corporate Seal. The Corporation shall have a corporate seal in such form as shall be prescribed by the Board of Directors. Section 5. Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than 60 days nor less than ten days before the date of such meeting, nor more than 60 days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Stockholders on the record date are entitled to notice and to vote or to receive the dividend, distribution or allotment of rights or to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of the Corporation after the record date, except as otherwise provided by agreement or by applicable law. Section 6. Voting of Stock Owned by the Corporation. The Board of Directors may authorize any person, on behalf of the Corporation, to attend, vote and grant proxies to be used at any meeting of stockholders of any corporation (except this Corporation) in which the Corporation may hold stock. Section 7. Construction and Definitions. Unless the context requires otherwise, the general provisions, rules of construction and definitions in the General Corporation Law of the State of Delaware shall govern the construction of these Bylaws. Section 8. Amendments. Subject to the General Corporation Law of the State of Delaware, the Certificate of Incorporation and these Bylaws, the Board of Directors may by majority vote of those present at any meeting at which a quorum is present amend or repeal these Bylaws, or enact other Bylaws as in their judgment may be advisable for the regulation of the conduct of the affairs of the Corporation. Unless otherwise restricted by the Certificate of Incorporation, these Bylaws may be altered, amended or repealed at any annual meeting of the stockholders (or at any special meeting thereof duly called for that purpose) by a majority of the combined voting power of the then outstanding shares of capital stock of all classes and series of the Corporation entitled to vote generally in the election of directors, voting as a single class, provided that, in the notice of any such special meeting, notice of such purpose shall be given. EX-4.1 3 AMENDED AND RESTATED RIGHTS AGREEMENT - ------------------------------------------------------------------------------- AST RESEARCH, INC. and AMERICAN STOCK TRANSFER & TRUST COMPANY Successor Rights Agent ----------------------- Amended and Restated Rights Agreement Dated as of January 28, 1994 (Further Amending the Rights Agreement dated as of August 15, 1989, as amended, between AST Research, Inc. and Bank of America, NT & SA) - -------------------------------------------------------------------------------
Table of Contents Section Page 1 Certain Definitions 1 2 Appointment of Rights Agent 4 3 Issue of Rights Certificates 5 4 Form of Rights Certificates 6 5 Countersignature and Registration 7 6 Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates 8 7 Exercise of Rights; Purchase Price; Expiration Date of Rights 8 8 Cancellation and Destruction of Rights Certificates 10 9 Reservation and Availability of Capital Stock 10 10 Preferred Stock Record Date 12 11 Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights 12 12 Certificate of Adjusted Purchase Price or Number of Shares 20 13 Consolidation, Merger or Sale or Transfer of Assets or Earning Power 20 14 Fractional Rights and Fractional Shares 23 15 Rights of Action 24 16 Agreement of Rights Holders 24 17 Rights Certificate Holder Not Deemed a Stockholder 25 18 Concerning the Rights Agent 25 Section Page 19 Merger or Consolidation or Change of Name of Rights Agent 26 20 Duties of Rights Agent 26 21 Change of Rights Agent 28 22 Issuance of New Rights Certificates 29 23 Redemption and Termination 29 24 Exchange 30 25 Notice of Certain Events 32 26 Notices 33 27 Supplements and Amendments 33 28 Successors 34 29 Determinations and Actions by the Board of Directors, etc. 34 30 Benefits of this Agreement 34 31 Severability 35 32 Governing Law 35 33 Counterparts 35 34 Descriptive Headings 35
Exhibit A Form of Certificate of Designation, Preferences and Rights Exhibit B Form of Rights Certificate Exhibit C Form of Summary of Rights AMENDED AND RESTATED RIGHTS AGREEMENT AMENDED AND RESTATED RIGHTS AGREEMENT, dated as of January 28, 1994 (the "Agreement"), between AST Research, Inc., a Delaware corporation (the "Company"), and American Stock Transfer & Trust Company (the "Successor Rights Agent"), amends and restates the Rights Agreement dated August 15, 1989, as amended, between the Company and Bank of America, NT & SA, a Delaware corporation and the Initial Rights Agent. As used herein, the term "Rights Agent" shall apply to the Successor Rights Agent. W I T N E S S E T H WHEREAS, on June 30, 1989 (the "Rights Dividend Declaration Date"), the Board of Directors of the Company authorized and declared a dividend distribution of one Right for each share of common stock, par value $.01 per share, of the Company (the "Common Stock") outstanding at the close of business on August 15, 1989 (the "Record Date"), and has authorized the issuance of one Right (as such number may hereinafter be adjusted pursuant to the provisions of Section 11(p) hereof) for each share of Common Stock of the Company issued between the Record Date (whether originally issued or delivered from the Company's treasury) and the Distribution Date (as defined in Section 3 hereof), each Right initially representing the right to purchase one one- hundredth of a share of Series A Junior Participating Preferred Stock of the Company having the rights, powers and preferences set forth in the form of Certificate of Designation, Preferences and Rights attached hereto as Exhibit A, upon the terms and subject to the conditions hereinafter set forth (the "Rights"); NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows: Section 1. Certain Definitions. For purposes of this Agreement, the following terms have the meanings indicated: (a) "Acquiring Person" shall mean any Person who or which, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of 15% or more of the shares of Common Stock then outstanding, but shall not include (i) the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan, (ii) any Person who is the Beneficial Owner of 15% or more of the shares of Common Stock on the date hereof, or (iii) any Person who shall become the Beneficial Owner of 15% or more of the outstanding shares of Common Stock solely as a result of an acquisition by the Company of shares of Common Stock until such time thereafter as such Person shall become the Beneficial Owner (other than by means of a stock dividend or stock split) of any additional shares of Common Stock. In addition, notwithstanding the foregoing, no Person shall be deemed to be an Acquiring Person either (i) if within eight (8) days after such Person would otherwise become an Acquiring Person (but for the operation of this clause (i)), such Person notifies the Board of Directors that such Person did so inadvertently and within two (2) days after such notification, such Person is the Beneficial Owner of less than 15% of the outstanding Common Stock, or (ii) as the result of an acquisition of Common Stock by the Company which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by such Person to 15% or more of the Common Stock of the Company then outstanding; provided, however, that if a Person shall become the Beneficial Owner of 15% or more of the Common Stock of the Company then outstanding by reason of share purchases by the Company and shall, after such share purchases by the Company, become the Beneficial Owner of any additional Common Stock of the Company, then such Person shall be deemed to be an Acquiring Person. (b) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended and in effect on the date of this Agreement (the "Exchange Act"). (c) A Person shall be deemed the "Beneficial Owner" of, and shall be deemed to "beneficially own," any securities: (i) which such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the "Beneficial Owner" of, or to "beneficially own," (A) securities tendered pursuant to a tender or exchange offer made by such person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange, or (B) securities which a Person or any of such Person's Affiliates or Associates may be deemed to have the right to acquire pursuant to any merger or other acquisition agreement between the Company and such Person (or one or more of its Affiliates or Associates) if such agreement has been approved by the Board of Directors of the Company prior to there being an Acquiring Person, or (C) securities issuable upon exercise of Rights at any time prior to the occurrence of a Triggering Event, or (D) securities issuable upon exercise of Rights from and after the occurrence of a Triggering Event which Rights were acquired by such Person or any of such Person's Affiliates or Associates prior to the Distribution Date or pursuant to Section 3(a) or Section 22 hereof (the "Original Rights") or pursuant to Section 11(i) hereof in connection with an adjustment made with respect to any Original Rights; (ii) which such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act), including pursuant to any agreement, arrangement or understanding, whether or not in writing; provided, however, that a Person shall not be deemed the "Beneficial Owner" of, or to"beneficially own," any security under this subparagraph (ii) as a result of an agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding: (A) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations under the Exchange Act, and (B) is not also then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); or (iii) which are beneficially owned, directly or indirectly, by any other person (or any Affiliate or Associate thereof) with which such Person (or any of such Person's Affiliates or Associates) has any agreement, arrangement or understanding (whether or not in writing), for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the proviso to subparagraph (ii) of this paragraph (c)) or disposing of any voting securities of the Company; provided, however, that nothing in this paragraph (c) shall cause a person engaged in business as an underwriter of securities to be the "Beneficial Owner" of, or to "beneficially own," any securities acquired through such person's participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition; and provided further, however, that in no case shall an officer or director of the Company be deemed (x) the Beneficial Owner of any securities beneficially owned by another officer or director of the Company solely by reason of actions undertaken by such persons in their capacity as officers or directors of the Company or (y) the Beneficial Owner of securities held of record by the trustee of any employee benefit plan of the Company or any Subsidiary of the Company for the benefit of any employee of the Company or any Subsidiary of the Company, other than the officer or director, by reason of any influence that such officer or director may have over the voting of the securities held in the plan. (d) "Business Day" shall mean any day other than a Saturday, Sunday or a day on which banking institutions in the State of California are authorized or obligated by law or executive order to close. (e) "Close of business" on any given date shall mean 5:00 P.M., California time, on such date; provided, however, that if such date is not a Business Day it shall mean 5:00 P.M., California time, on the next succeeding Business Day. (f) "Common Stock" shall mean the common stock, par value $.01 per share, of the Company, except that "Common Stock" when used with reference to any Person other than the Company shall mean the capital stock of such Person with the greatest voting power, or the equity securities or other equity interest having power to control or direct the management, of such Person. (g) "Continuing Director" shall mean (i) any member of the Board of Directors of the Company, while such Person is a member of the Board, who is not an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, or a representative of an Acquiring Person or of any such Affiliate or Associate, and was a member of the Board prior to the date of this Agreement, or (ii) any Person who subsequently becomes a member of the Board, while such Person is a member of the Board, who is not an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, or a representative of an Acquiring Person or of any such Affiliate or Associate, if such Person's nomination for election or election to the Board is recommended or approved by a majority of the Continuing Directors. (h) "Expiration Date" shall mean the earliest of (i) the close of business on the Final Expiration Date, (ii) the time at which the Rights are redeemed as provided in Section 23 hereof, (iii) the time at which the Board of Directors orders the exchange of the Rights as provided in Section 24 hereof, or (iv) the consummation of a transaction contemplated by Section 13(d) hereof. (i) "Final Expiration Date" shall mean June 30, 1999. (j) "Person" shall mean any individual, firm, corporation, partnership or other entity. (k) "Permitted Offer" shall mean a tender offer for all outstanding Common Shares made in the manner prescribed by Section 14(d) of the Exchange Act and the rules and regulations promulgated thereunder; provided, however, that such tender offer occurs at a time when Continuing Directors are in office and a majority of the Continuing Directors then in office has determined that the offer is both adequate and otherwise in the best interests of the Company and its stockholders (taking into account all factors that such Continuing Directors deem relevant, including, without limitation, prices that could reasonably be achieved if the Company or its assets were sold on an orderly basis designed to realize maximum value). (l) "Preferred Stock" shall mean shares of Series A Junior Participating Preferred Stock, $.01 per share par value, of the Company. (m) "Section 11(a)(ii) Event" shall mean any event described in Section 11(a)(ii) (A), (B) or (C) hereof. (n) "Section 13 Event" shall mean any event described in clauses (x), (y) or (z) of Section 13(a) hereof. (o) "Stock Acquisition Date" shall mean the first date of public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become such. (p) "Subsidiary" shall mean, with reference to any Person, any corporation of which an amount of voting securities sufficient to elect at least a majority of the directors of such corporation is beneficially owned, directly or indirectly, by such Person, or otherwise controlled by such person. (q) "Triggering Event" shall mean any Section 11(a)(ii) Event or any Section 13 Event. Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights Agent to act as agent for the Company and the holders of the Rights (who, in accordance with Section 3 hereof, shall prior to the Distribution Date also be the holders of the Common Stock) in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such Co-Rights Agents as it may deem necessary or desirable. Section 3. Issue of Rights Certificates. (a) Until the earlier of (i) the close of business on the tenth day (or such later date as may be determined by action of a majority of Continuing Directors then in office) after the Stock Acquisition Date (or, if the tenth day after the Stock Acquisition Date occurs before the Record Date, the close of business on the Record Date), or (ii) the close of business on the tenth business day (or such later date as may be determined by action of a majority of Continuing Directors then in office) after the date that a tender or exchange offer by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan) is first published or sent or given within the meaning of Rule 14d-2(a) of the General Rules and Regulation under the Exchange Act, if upon consummation thereof, such Person would be the Beneficial Owner of 15% or more of the shares of Common Stock then outstanding (the earlier of (i) and (ii) being herein referred to as the "Distribution Date"), (x) the Rights will be evidenced (subject to the provisions of paragraph (b) of this Section 3) by the certificates for the Common Stock registered in the names of the holders of the Common Stock (which certificates for Common Stock shall be deemed also to be certificates for Rights) and not by separate certificates, and (y) the Rights will be transferable only in connection with the transfer of the underlying shares of Common Stock (including a transfer to the Company). As soon as practicable after the Distribution Date, the Rights Agent will send by first-class, insured, postage prepaid mail, to each record holder of the Common Stock as of the close of business on the Distribution Date, at the address of such holder shown on the records of the Company, one or more right certificates, in substantially the form of Exhibit B hereto (the "Rights Certificates"), evidencing one Right for each share of Common Stock so held, subject to adjustment as provided herein. In the event that an adjustment in the number of Rights per share of Common Stock has been made pursuant to Section 11(p) hereof, at the time of distribution of the Right Certificates, the Company shall make the necessary and appropriate rounding adjustments (in accordance with Section 14(a) hereof) so that Rights Certificates representing only whole numbers of Rights are distributed and cash is paid in lieu of any fractional Rights. As of and after the Distribution Date, the Rights will be evidenced solely by such Rights Certificates and may be transferred by the transfer of the Rights Certificates as permitted hereby, separately and apart from any transfer of one or more Common Shares, and the holders of such Rights Certificates as listed in the records of the Company or any transfer agent or registrar for the Rights shall be the record holders thereof. (b) As promptly as practicable following the Record Date, the Company will send a copy of a Summary of Rights, in substantially the form attached hereto as Exhibit C (the "Summary of Rights"), by first-class, postage prepaid mail, to each record holder of the Common Stock as of the close of business on the Record Date, at the address of such holder shown on the records of the Company. With respect to certificates for the Common Stock outstanding as of the Record Date, until the Distribution Date, the Rights will be evidenced by such certificates for the Common Stock and the registered holders of the Common Stock shall also be the registered holders of the associated Rights. Until the earlier of the Distribution Date or the Expiration Date (as such term is defined in Section 7 hereof), the transfer of any certificates representing shares of Common Stock in respect of which Rights have been issued shall also constitute the transfer of the Rights associated with such shares of Common Stock. (c) Unless the Board of Directors by resolution adopted at or before the time of the issuance (including pursuant to the exercise of rights under the Company's benefit plans) of any Common Stock specifies to the contrary, Rights shall be issued in respect of all shares of Common Stock which are issued after the Record Date but prior to the earlier of the Distribution Date or the Expiration Date. Certificates representing such shares of Common Stock shall also be deemed to be certificates for Rights, and shall bear the following legend: This certificate also evidences and entitles the holder hereof to certain Rights as set forth in the Amended and Restated Rights Agreement between AST Research, Inc., a Delaware corporation (the "Company"), and American Stock Transfer & Trust Company (the "Rights Agent"), dated as of January ___, 1994, (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal offices of the Company. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. The Company will mail to the holder of this certificate a copy of the Rights Agreement, as in effect on the date of mailing, without charge promptly after receipt of a written request therefor. Under certain circumstances set forth in the Rights Agreement, Rights issued to, or held by, any Person who is, was or becomes an Acquiring Person or any Affiliate or Associates thereof (as such terms are defined in the Rights Agreement), whether currently held by or on behalf of such Person or by any subsequent holder, may become null and void. With respect to such certificates containing the foregoing legend, until the earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights associated with the Common Stock represented by such certificates shall be evidenced by such certificates alone and registered holders of Common Stock shall also be the registered holders of the associated Rights, and the transfer of any of such certificates shall also constitute the transfer of the Rights associated with the Common Stock represented by such certificates. Section 4. Form of Rights Certificates. (a) The Rights Certificates (and the forms of election to purchase and of assignment to be printed on the reverse thereof) shall each be substantially in the form set forth in Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed, or to conform to usage. Subject to the provisions of Section 11 and Section 22 hereof, the Rights Certificates, whenever distributed, shall be dated as of the Record Date and on their face shall entitle the holders thereof to purchase such number of one one-hundredths of a share of Preferred Stock as shall be set forth therein at the price set forth therein (such exercise price per one one-hundredth of a share, the "Purchase Price"), but the amount and type of securities purchasable upon the exercise of each Right and the Purchase Price thereof shall be subject to adjustment as provided herein. (b) Any Rights Certificate issued pursuant to Section 3(a) or Section 22 hereof that represents Rights beneficially owned by: (i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom such Acquiring Person has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Board of Directors of the Company has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect avoidance of Section 7(e) hereof, and any Rights Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange, replacement or adjustment of any other Rights Certificate referred to in this sentence, shall contain (to the extent feasible) the following legend: The Rights represented by this Rights Certificate are or were beneficially owned by a Person who was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement). Accordingly, this Rights Certificate and the Rights represented hereby may become null and void in the circumstances specified in Section 7(e) of such Agreement. Section 5. Countersignature and Registration. (a) The Rights Certificates shall be executed on behalf of the Company by its Chairman of the Board, its President or any Vice President, either manually or by facsimile signature, and shall have affixed thereto the Company's seal or a facsimile thereof which shall be attested by the Secretary or an Assistant Secretary of the Company, either manually or by facsimile signature. The Rights Certificates shall be manually countersigned by the Rights Agent and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have signed any of the Rights Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Rights Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the person who signed such Rights Certificates had not ceased to be such officer of the Company; and any Rights Certificates may be signed on behalf of the Company by any person who, at the actual date of the execution of such Rights Certificate, shall be a proper officer of the Company to sign such Rights Certificate, although at the date of the execution of this Rights Agreement any such person was not such an officer. (b) Following the Distribution Date, the Rights Agent will keep or cause to be kept, at its principal office or offices designated as the appropriate place for surrender of Rights Certificates upon exercise or transfer, books for registration and transfer of the Rights Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Rights Certificates, the number of Rights evidenced on its face by each of the Rights Certificates, the Rights Certificate number and the date of each of the Rights Certificates. Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates. (a) Subject to the provisions of Section 4(b), Section 7(e), Section 14 and Section 24 hereof, at any time after the close of business on the Distribution Date, and at or prior to the close of business on the Expiration Date, any Rights Certificate or Certificates may be transferred, split up, combined or exchanged for another Rights Certificate or Certificates, entitling the registered holder to purchase a like number of one one-hundredths of a share of Preferred Stock (or following a Triggering Event, Common Stock, other securities, cash or other assets, as the case may be) as the Rights Certificate or Certificates surrendered then entitled such holder (or former holder in the case of a transfer) to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Rights Certificate or Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Rights Certificate or Certificates to be transferred, split up, combined or exchanged at the principal office or offices of the Rights Agent designated for such purpose. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Rights Certificate until the registered holder shall have completed and signed the certificate contained in the form of assignment on the reverse side of such Rights Certificate and shall have provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request. Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e), Section 14 and Section 24 hereof, countersign and deliver to the Person entitled thereto a Rights Certificate or Rights Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Rights Certificates. (b) Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Rights Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Rights Certificate if mutilated, the Company will execute and deliver a new Rights Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated. Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights. (a) Subject to Section 7(e) hereof, the registered holder of any Rights Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein including, without limitation, the restrictions on exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a) hereof) in whole or in part at any time after the Distribution Date upon surrender of the Rights Certificate, with the form of election to purchase and the certificate on the reverse side thereof duly executed, to the Rights Agent at the principal office or offices of the Rights Agent designated for such purpose, together with payment of the aggregate Purchase Price with respect to the total number of one one-hundredths of a share (or other securities or property, as the case may be) as to which such surrendered Rights are then exercisable, at or prior to the Expiration Date. (b) The Purchase Price for each one one-hundredth of a share of Preferred Stock pursuant to the exercise of a Right shall initially be $100.00, and shall be subject to adjustment from time to time as provided in Section 11 hereof and shall be payable in accordance with paragraph (c) below. (c) Upon receipt of a Rights Certificate representing exercisable Rights, with the form of election to purchase and the certificate duly executed, accompanied by payment, with respect to each Right so exercised, of the Purchase Price per one one-hundredth of a share of Preferred Stock (or other shares, securities or property, as the case may be) to be purchased as set forth below and an amount equal to any applicable transfer tax, the Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly (i) (A) requisition from any transfer agent of the shares of Preferred Stock (or make available, if the Rights Agent is the transfer agent for such shares) certificates for the total number of one one-hundredths of a share of Preferred Stock to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests, or (B) if the Company shall have elected to deposit the total number of shares of Preferred Stock issuable upon exercise of the Rights hereunder with a depositary agent, requisition from the depositary agent depositary receipts representing such number of one one- hundredths of a share of Preferred Stock as are to be purchased (in which case certificates for the shares of Preferred Stock represented by such receipts shall be deposited by the transfer agent with the depositary agent) and the Company will direct the depositary agent to comply with such request, (ii) requisition from the Company the amount of cash, if any, to be paid in lieu of fractional shares in accordance with Section 11 hereof, (iii) after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, and (iv) after receipt thereof, deliver such cash, if any, to or upon the order of the registered holder of such Rights Certificate. The payment of the Purchase Price (as such amount may be reduced pursuant to Section 11(a)(iii) hereof) may be made (x) in cash or by certified bank check or money order payable to the order of the Company, or (y) by delivery of a certificate or certificates (with appropriate stock powers executed in blank attached thereto) evidencing a number of shares of Common Stock equal to the then Purchase Price divided by the closing market price (as determined pursuant to Section 11(d) hereof) per share of Common Stock on the Trading Date immediately preceding the date of such exercise. In the event that the Company is obligated to issue other securities (including Common Stock) of the Company, pay cash and/or distribute other property pursuant to Section 11(a) hereof, the Company will make all arrangements necessary so that such other securities, cash and/or other property are available for distribution by the Rights Agent, if and when appropriate. (d) In case the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, a new Rights Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent and delivered to, or upon the order of, the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, subject to the provisions of Section 14 hereof. (e) Notwithstanding anything in this Agreement to the contrary, from and after the first occurrence of a Triggering Event, any Rights beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such (a "Post Transferee"), or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom the Acquiring Person had any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Board of Directors of the Company has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of this Section 7(e) (a "Prior Transferee"), or (iv) any subsequent transferee receiving transferred Rights from a Post Transferee or a Prior Transferee, either directly or through one or more intermediate transferees, shall become null and void without any further action and no holder of such Rights shall have any rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise. The Company shall use all reasonable efforts to insure that the provisions of this Section 7(e) and Section 4(b) hereof are complied with, but shall have no liability to any holder of Rights Certificates or other person as a result of its failure to make any determinations with respect to an Acquiring Person or its Affiliates, Associates or transferees hereunder. (f) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder upon the occurrence of any purported exercise as set forth in this Section 7 unless such registered holder shall have (i) completed and signed the certificate contained in the form of election to purchase set forth on the reverse side of the Rights Certificate surrendered for such exercise, and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request. Section 8. Cancellation and Destruction of Rights Certificates. All Rights Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or any of its agents, be delivered to the Rights Agent for cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Rights Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all cancelled Rights Certificates to the Company, or shall, at the written request of the Company, destroy such cancelled Rights Certificates, and in such case shall deliver a certificate of destruction thereof to the Company. Section 9. Reservation and Availability of Capital Stock. (a) The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued shares of Preferred Stock (and, following the occurrence of a Triggering Event, out of its authorized and unissued shares of Common Stock and/or other securities or out of its authorized and issued shares held in its treasury), the number of shares of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/or other securities) that, as provided in this Agreement including Section 11(a)(iii) hereof, will be sufficient to permit the exercise in full of all outstanding Rights. (b) So long as the shares of Preferred Stock (and following the occurrence of a Triggering Event, Common Stock and/or other securities) issuable and deliverable upon the exercise of the Rights may be listed on any national securities exchange, the Company shall use its best efforts to cause, from and after such time as the Rights become exercisable, all shares reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise. (c) The Company shall use its best efforts to (i) file, as soon as practicable following the earliest date after the first occurrence of a Section 11(a)(ii) Event on which the consideration to be delivered by the Company upon exercise of the Rights has been determined in accordance with Section 11(a)(iii) hereof, or as soon as is required by law following the Distribution Date, as the case may be, a registration statement under the Securities Act of 1933 (the "Act"), with respect to the securities purchasable upon exercise of the Rights on an appropriate form, (ii) cause such registration statement to become effective as soon as practicable after such filing, and (iii) cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Act) until the earlier of (A) the date as of which the Rights are no longer exercisable for such securities, and (B) the date of the expiration of the Rights. The Company will also take such action as may be appropriate under, or to ensure compliance with, the securities or "blue sky" laws of the various states in connection with the exercisability of the Rights. The Company may temporarily suspend, for a period of time not to exceed ninety (90) days after the date set forth in clause (i) of the first sentence of this Section 9(c), the exercisability of the Rights in order to prepare and file such registration statement and permit it to become effective. Upon any such suspension,the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect. Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction unless the requisite qualification in such jurisdiction shall have been obtained and until a registration statement (if required) has been declared effective. (d) The Company covenants and agrees that it will take all such action as may be necessary to ensure that all one one-hundredths of a share of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/or other securities) delivered upon exercise of Rights shall, at the time of delivery of the certificates for such shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable. (e) The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of the Rights Certificates and of any certificates for shares of Preferred Stock (or Common Stock and/or other securities,as the case may be) upon the exercise of Rights. The Company shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer or delivery of Rights Certificates to a Person other than, or the issuance or delivery of a number of one one-hundredths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) in respect of a name other than that of, the registered holder of the Rights Certificates evidencing Rights surrendered for exercise or to issue or deliver any certificates for a number of one one-hundredths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) in a name other than that of the registered holder upon the exercise of any Rights until such tax shall have been paid (any such tax being payable by the holder of such Rights Certificate at the time of surrender) or until it has been established to the Company's satisfaction that no such tax is due. Section 10. Preferred Stock Record Date. Each person in whose name any certificate for a number of one one- hundredths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of such fractional shares of Preferred Stock (or Common Stock and/or other securities, as the case may be) represented thereby on, and such certificate shall be dated, the date upon which the Rights Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and all applicable transfer taxes) was made; provided, however, that if the date of such surrender and payment is a date upon which the Preferred Stock (or Common Stock and/or other securities, as the case may be) transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares (fractional or otherwise) on, and such certificate shall be dated, the next succeeding Business Day on which the Preferred Stock (or Common Stock and/or other securities,as the case may be) transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Rights Certificate shall not be entitled to any rights of a stockholder of the Company with respect to shares for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein. Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights. The Purchase Price, the number and kind of shares covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11. (a) (i) In the event the Company shall at any time after the date of this Agreement (A) declare a dividend on the Preferred Stock payable in shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C) combine the outstanding Preferred Stock into a smaller number of shares, or (D) issue any shares of its capital stock in a reclassification of the Preferred Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a) and Section 7 hereof, the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of Preferred Stock or capital stock, as the case may be, issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive, upon payment of the Purchase Price then in effect, the aggregate number and kind of shares of Preferred Stock or capital stock, as the case may be, which, if such Right had been exercised immediately prior to such date and at a time when the Preferred Stock transfer books of the Company were open, he would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification. If an event occurs which would require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii) hereof. (ii) In the event: (A) any Acquiring Person or any Associate or Affiliate of any Acquiring Person, at any time after the date of this Agreement, directly or indirectly, (1) shall merge into the Company or otherwise combine with the Company and the Company shall be the continuing or surviving corporation of such merger or combination and the Common Stock of the Company shall remain outstanding and unchanged, (2) shall, in one transaction or a series of transactions, transfer any assets to the Company or to any of its Subsidiaries in exchange (in whole or in part) for shares of Common Stock, for shares of other equity securities of the Company, or for securities exercisable for or convertible into shares of equity securities of the Company (Common Stock or otherwise) or otherwise obtain from the Company, with or without consideration, any additional shares of such equity securities or securities exercisable for or convertible into shares of such equity securities (other than pursuant to a pro rata distribution to all holders of Common Stock), (3) shall sell, purchase, lease, exchange, mortgage, pledge, transfer or otherwise acquire or dispose of, in the transaction or a series of transactions, to, from or with (as the case may be) the Company or any of its Subsidiaries, assets on terms and conditions less favorable to Company than the Company would be able to obtain in arm's length negotiation with an unaffiliated third party, other than pursuant to a transaction set forth in Section 13(a) hereof, (4) shall sell, purchase, lease, exchange, mortgage, pledge, transfer or otherwise acquire or dispose of in one transaction or a series of transactions, to, from or with (as the case may be) the Company or any of the Company's Subsidiaries (other than incidental to the lines of business, if any, engaged in as of the date hereof between the Company and such Acquiring Person or Associate or Affiliate) assets having an aggregate fair market value of more than $10,000,000, other than pursuant to a transaction set forth in Section 13(a) hereof, (5) shall receive any compensation from the Company or any of the Company's Subsidiaries other than compensation for full time employment as a regular employee at rates in accordance with the Company's (or its Subsidiaries') past practices, or (6) shall receive the benefit, directly or indirectly (except proportionately as a stockholder and except if resulting from a requirement of law or governmental regulation), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantage provided by the Company or any of its Subsidiaries, or (B) any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan), alone or together with its Affiliates and Associates, shall at any time after the Record Date, become the Beneficial Owner of 15% or more of the shares of Common Stock then outstanding, other than pursuant to any transaction set forth in Section 13(a) hereof, or (C) during such time as there is an Acquiring person, there shall be any reclassification of securities (including any reverse stock split), or recapitalization of the Company, or any merger or consolidation of the Company with any of its Subsidiaries or any other transaction or series of transactions involving the Company or any of its Subsidiaries, other than a transaction or transactions to which the provisions of Section 13(a) apply (whether or not with or into or otherwise involving an Acquiring Person) which has the effect, directly or indirectly, of increasing by more than 1% the proportionate share of the outstanding shares of any class of equity securities of the Company or any of its Subsidiaries which is directly or indirectly beneficially owned by any Acquiring Person or any Associate or Affiliate of any Acquiring Person, then, promptly following five (5) days after the date of the occurrence of an event described in Section 11(a)(ii)(B) hereof and promptly following the occurrence of any event described in Section 11(a)(ii)(A) or (C) hereof, proper provision shall be made so that each holder of a Right (except as provided below and in Section 7(e) hereof) shall thereafter have the right to receive, upon exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement, in lieu of shares of Preferred Stock, such number of shares of Common Stock of the Company as shall equal the result obtained by (x) multiplying the then current Purchase Price by the then number of one one-hundredths of a share of Preferred Stock for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event, and dividing that product (which,following such first occurrence, shall thereafter be referred to as the "Purchase Price" for each Right and for all purposes of this Agreement) by (y) 50% of the current market price (determined pursuant to Section 11(d) hereof) per share of Common Stock on the date of such first occurrence (such number of shares, the "Adjustment Shares"). (iii) In the event that the number of shares of Common Stock which are authorized by the Company's charter but not outstanding or reserved for issuance for purposes other than upon exercise of the Rights are not sufficient to permit the exercise in full of the Rights in accordance with the foregoing subparagraph (ii) of this Section 11(a), the Company shall: (A) determine the excess of (1) the value of the Adjustment Shares issuable upon the exercise of a Right (the "Current Value") over (2) the Purchase Price (such excess, the "Spread"), and (B) with respect to each Right, make adequate provision to substitute for the Adjustment Shares, upon payment of the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3) Common Stock or other equity securities of the Company (including, without limitation, shares, or units of shares, of preferred stock which the Board of Directors of the Company has deemed to have the same value as shares of Common Stock (such shares of preferred stock, "common stock equivalents")), (4) debt securities of the Company, (5) other assets, or (6) any combination of the foregoing, having an aggregate value equal to the Current Value, where such aggregate value has been determined by the Board of Directors of the Company based upon the advice of a nationally recognized investment banking firm selected by the Board of Directors of the Company; provided, however, if the Company shall not have made adequate provision to deliver value pursuant to clause (B) above within thirty (30) days following the later of (x) first occurrence of a Section 11(a)(ii) Event and (y) the date on which the Company's right of redemption pursuant to Section 23(a) expires (the later of (x) and (y) being referred to herein as the "Section 11(a)(ii) Trigger Date"), then the Company shall be obligated to deliver, upon the surrender for exercise of a Right and without requiring payment of the Purchase Price, shares of Common Stock (to the extent available) and then, if necessary, cash, which in the aggregate are equal to the Spread. If the Board of Directors of the Company shall determine in good faith that it is likely that sufficient additional shares of Common Stock could be authorized for issuance upon exercise in full of the Rights, the thirty (30) day period set forth above may be extended to the extent necessary, but not more than ninety (90) days following the first occurrence of a Section 11(a)(ii) Trigger Date, in order that the Company may seek shareholder approval for the authorization of such additional shares (such period, as it may be extended, the "Substitution Period"). To the extent that the Company determines that some action need be taken pursuant to the first and/or second sentences of this Section 11(a)(iii), the Company (x) shall provide, subject to Section 7(e) hereof, that such action shall apply uniformly to all outstanding Rights, and (y) may suspend the exercisability of the Rights until the expiration of the Substitution Period in order to seek any authorization of additional shares and/or to decide the appropriate form of distribution to be made pursuant to such first sentence and to determine the value thereof. In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect. For purposes of this Section 11(a)(iii), the value of the Common Stock shall be the current market price (as determined pursuant to Section 11(d) hereof) per share of the Common Stock on the date of the first occurrence of a Section 11(a)(ii) Trigger Date and the value of any "common stock equivalent" shall be deemed to have the same value as the Common Stock on such date. (iv) The right to buy Common Stock of the Company pursuant to Section 11(a)(ii) hereof shall not arise as a result of any Person becoming an Acquiring Person through an acquisition of Common Stock pursuant to a Permitted Offer. (b) In case the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Preferred Stock entitling them to subscribe for or purchase (for a period expiring within forty-five (45) calendar days after such record date) Preferred Stock (or shares having the same rights, privileges and preferences as the shares of Preferred Stock ("equivalent preferred stock")) or securities convertible into Preferred Stock or equivalent preferred stock at a price per share of Preferred Stock or per share of equivalent preferred stock (or having a conversion price per share, if a security convertible into Preferred Stock or equivalent preferred stock) less than the current market price (as determined pursuant to Section 11(d) hereof) per share of Preferred Stock on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Preferred Stock outstanding on such record date, plus the number of shares of Preferred Stock which the aggregate offering price of the total number of shares of Preferred Stock and/or equivalent preferred stock so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such current market price, and the denominator of which shall be the number of shares of Preferred Stock outstanding on such record date, plus the number of additional shares of Preferred Stock and/or equivalent preferred stock to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible). In case such subscription price may be paid by delivery of consideration part or all of which may be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holders of the Rights. Shares of Preferred Stock owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed, and in the event that such rights or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. (c) In case the Company shall fix a record date for a distribution to all holders of Preferred Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) of evidences of indebtedness, cash (other than a regular quarterly cash dividend out of the earnings or retained earnings of the Company), assets (other than a dividend payable in Preferred Stock, but including any dividend payable in stock other than Preferred Stock) or subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the current market price (as determined pursuant to Section 11(d) hereof) per share of Preferred Stock on such record date, less the fair market value (as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent) of the portion of the cash, assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to a share of Preferred Stock and the denominator of which shall be such current market price (as determined pursuant to Section 11(d) hereof) per share of Preferred Stock. Such adjustments shall be made successively whenever such a record date is fixed, and in the event that such distribution is not so made, the Purchase Price shall be adjusted to be the Purchase Price which would have been in effect if such record date had not been fixed. (d) (i) For the purpose of any computation hereunder, other than computations made pursuant to Section 11(a)(iii) hereof, the "current market price" per share of Common Stock on any date shall be deemed to be the average of the daily closing prices per share of such Common Stock for the thirty (30) consecutive Trading Days (as such term is hereinafter defined) immediately prior to such date, and for purposes of computations made pursuant to Section 11(a)(iii) hereof, the "current market price" per share of Common Stock on any date shall be deemed to be the average of the daily closing prices per share of such Common Stock for the ten (10) consecutive Trading Days immediately following such date; provided, however, that in the event that the current market price per share of the Common Stock is determined during a period following the announcement by the issuer of such Common Stock of (A) a dividend or distribution on such Common Stock payable in shares of such Common Stock or securities convertible into shares of such Common Stock (other than the Rights), or (B) any subdivision, combination or reclassification of such Common Stock, and prior to the expiration of the requisite thirty (30) Trading Day or ten (10) Trading Day period, as set forth above, after the dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the "current market price" shall be properly adjusted to take into account ex-dividend trading. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the shares of Common Stock are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading or, if the shares of Common Stock are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other system then in use, or, if on any such date the shares of Common Stock are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock selected by the Board of Directors of the Company. If on any such date no market maker is making a market in the Common Stock, the fair value of such shares on such date as determined in good faith by the Board of Directors of the Company shall be used. The term "Trading Day" shall mean a day on which the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading is open for the transaction of business or, if the shares of Common Stock are not listed or admitted to trading on any national securities exchange, a Business Day. If the Common Stock is not publicly held or not so listed or traded, "current market price" per share shall mean the fair value per share as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. (ii) For the purpose of any computation hereunder, the "current market price" per share of Preferred Stock shall be determined in the same manner as set forth above for the Common Stock in clause (i) of this Section 11(d) (other than the last sentence thereof). If the current market price per share of Preferred Stock cannot be determined in the manner provided above or if the Preferred Stock is not publicly held or listed or traded in a manner described in clause (i) of this Section 11(d), the "current market price" per share of Preferred Stock shall be conclusively deemed to be an amount equal to 100 (as such number may be appropriately adjusted for such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock occurring after the date of this Agreement) multiplied by the current market price per share of the Common Stock. If neither the Common Stock nor the Preferred Stock is publicly held or so listed or traded, "current market price" per share of the Preferred Stock shall mean the fair value per share as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. For all purposes of this Agreement, the "current market price" of one one-hundredth of a share of Preferred Stock shall be equal to the "current market price" of one share of Preferred Stock divided by 100. (e) Anything herein to the contrary notwithstanding, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least one percent (1%) in the Purchase Price: provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest ten- thousandth of a share of Common Stock or other share or one- millionth of a share of Preferred Stock, as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three (3) years from the date of the transaction which mandates such adjustment, or (ii) the Expiration Date. (f) If as a result of an adjustment made pursuant to Section 11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock other than Preferred Stock, thereafter the number of such other shares so receivable upon exercise of any Right and the Purchase Price thereof shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Stock contained in Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred Stock shall apply on like terms to any such other shares. (g) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one one-hundredths of a share of Preferred Stock purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein. (h) Unless the Company shall have exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price as a result of the calculations made in Sections 11(b) and (c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one one-hundredths of a share of Preferred Stock (calculated to the nearest one-millionth) obtained by (i) multiplying (x) the number of one one- hundredths of a share covered by a Right immediately price to this adjustment, by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price, and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price. (i) The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in lieu of any adjustment in the number of one one- hundredths of a share of Preferred Stock purchasable upon the exercise of a Right. Each of the Rights outstanding after the adjustment in the number of Rights shall be exercisable for the number of one one-hundredths of a share of Preferred Stock for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one-ten-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Rights Certificates have been issued, shall be at least ten (10) days later than the date of the public announcement. If Rights Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record date Rights Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Rights Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Rights Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Rights Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein (and may bear, at the option of the Company, the adjusted Purchase Price) and shall be registered in the names of the holders of record of Rights Certificates on the record date specified in the public announcement. (j) Irrespective of any adjustment or change in the Purchase Price or the number of one one hundredths of a share of Preferred Stock issuable upon the exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Purchase Price per one one-hundredth of a share and the number of one one-hundredth of a share which were expressed in the initial Rights Certificates issued hereunder. (k) Before taking any action that would cause an adjustment reducing the Purchase Price below the then par or stated value, if any, of the number of one one-hundredths of a share of Preferred Stock issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable such number of one one-hundredths of a share of Preferred Stock at such adjusted Purchase Price. (l) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuance to the holder of any Right exercised after such record date the number of one one-hundredths of a share of Preferred Stock and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the number of one one-hundredths of a share of Preferred Stock and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares (fractional or otherwise) or securities upon the occurrence of the event requiring such adjustment. (m) Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that in their good faith judgment the Board of Directors of the Company shall determine to be advisable in order that any (i) consolidation or subdivision of the Preferred Stock, (ii) issuance wholly for cash of any shares of Preferred Stock at less than the current market price, (iii) issuance wholly for cash of shares of Preferred Stock or securities which by their terms are convertible into or exchangeable for shares of Preferred Stock, (iv) stock dividend or (v) issuance of rights, options or warrants referred to in this Section 11, hereafter made by the Company to holders of its Preferred Stock shall not be taxable to such stockholders. (n) The Company covenants and agrees that it shall not, at any time after the Distribution Date, (i) consolidate with any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), (ii) merge with or into any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one transaction, or a series of related transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company and or any of its Subsidiaries in one or more transactions each of which complies with Section 11(o) hereof), if (x) at the time of or immediately after such consolidation, merger or sale there are any rights, warrants or other instruments or securities outstanding or agreements in effect which would substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights or (y) prior to, simultaneously with or immediately after such consolidation, merger or sale, the shareholders of the Person who constitutes, or would constitute, the "Principal Party" for the purposes of Section 13(a) hereof shall have received a distribution of Rights previously owned by such Person or any of its Affiliates and Associates. (o) The Company covenants and agrees that, after the Distribution Date, it will not, except as permitted by Section 23, Section 24 or Section 27 hereof, take (or permit any Subsidiary to take) any action if at the time such action is taken it is reasonably foreseeable that such action will diminish substantially or otherwise eliminate the benefits intended to be afforded by the Rights. (p) Anything in this Agreement to the contrary notwithstanding, in the event that the Company shall at any time after the Rights Dividend Declaration Date and prior to the Distribution Date (i) declare a dividend on the outstanding shares of Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, the number of Rights associated with each share of Common Stock then outstanding, or issued or delivered thereafter but prior to the Distribution Date, shall be proportionately adjusted so that the number of Rights thereafter associated with each share of Common Stock following any such event shall equal the result obtained by multiplying the number of Rights associated with each share of Common Stock immediately price to such event by a fraction the numerator which shall be the total number of shares of Common Stock outstanding immediately prior to the occurrence of the event and the denominator of which shall be the total number of shares of Common Stock outstanding immediately following the occurrence of such event. Section 12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever an adjustment is made as provided in Section 11 and Section 13 hereof, the Company shall (a) promptly prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment, (b) promptly file with the Rights Agent, and with each transfer agent for the Preferred Stock and the Common Stock, a copy of such certificate, and (c) mail a brief summary thereof to each holder of a Rights Certificate (or, if prior to the Distribution Date, to each holder of a certificate representing shares of Common Stock) in accordance with Section 26 hereof. Notwithstanding the foregoing sentence, the failure of the Company to make such certification or give such notice shall not affect the validity of such adjustment or the force or effect of the requirement for such adjustment. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained. Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power. (a) In the event that, following the Stock Acquisition Date, directly or indirectly, (x) the Company shall consolidate with, or merge with and into, any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), and the Company shall not be the continuing or surviving corporation of such consolidation or merger, (y) any Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof) shall consolidate with, or merge with or into, the Company, and the Company shall be the continuing or surviving corporation of such consolidation or merger and, in connection with such consolidation or merger, all or part of the outstanding shares of Common Stock shall be changed into or exchanged for stock or other securities of any other Person or cash or any other property, or (z) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one transaction or a series of related transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any Person or Persons (other than the Company or any Subsidiary of the Company in one or more transactions each of which complies with Section 11(o) hereof), then, and in each such case, proper provision shall be made so that: (i) each holder of a Right, except as provided in Section 7(e) hereof, shall thereafter have the right to receive, upon the exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement, such number of validly authorized and issued, fully paid, non-assessable and freely tradeable shares of Common Stock of the Principal Party (as such term is hereinafter defined), not subject to any liens, encumbrances, rights of first refusal or other adverse claims, as shall be equal to the result obtained by (1) multiplying the then current Purchase Price by the number of one one-hundredths of a share of Preferred Stock for which a Right is exercisable immediately prior to the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior to the first occurrence of a Section 13 Event, multiplying the number of such one one- hundredths of a share for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event by the Purchase Price in effect immediately prior to such first occurrence), and (2) dividing that product (which, following the first occurrence of a Section 13 Event, shall be referred to as the "Purchase Price" for each Right and for all purposes of this Agreement) by 50% of the current market price (determined pursuant to Section 11(d)(i) hereof) per share of the Common Stock of such Principal Party on the date of consummation of such Section 13 Event; (ii) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such Section 13 Event, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 11 hereof shall apply only to such Principal Party following the first occurrence of a Section 13 Event; (iv) such Principal Party shall take such steps (including, but not limited to, the reservation of a sufficient number of shares of its Common Stock) in connection with the consummation of any such transaction as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to its shares of Common Stock thereafter deliverable upon the exercise of the Rights; provided, however, that upon the subsequent occurrence of any merger, consolidation, sale of all or substantially all assets, recapitalization, reclassification of shares, reorganization or other extraordinary transaction in respect of such Principal Party, each holder of a Right shall thereupon be entitled to receive, upon exercise of a Right a payment of the Purchase Price, such cash, shares, rights, warrants and other property which such holder would have been entitled to receive had he, at the time of such transaction, owned the shares of Common Stock of the Principal Party purchasable upon the exercise of a Right, and such Principal Party shall take such steps (including, but not limited to, reservation of shares of stock) as may be necessary to permit the subsequent exercise of the Rights in accordance with the terms hereof for such cash, shares, rights, warrants and other property; and (v) the provisions of Section 11(a)(ii) hereof shall be of no effect following the first occurrence of any Section 13 Event. (b) "Principal Party" shall mean (i) in the case of any transaction described in clause (x) or (y) of the first sentence of Section 13(a), the Person that is the issuer of any securities into which shares of Common Stock of the Company are converted in such merger or consolidation, and if no securities are so issued, the Person that is the other party to such merger or consolidation; and (ii) in the case of any transaction described in clause (z) of the first sentence of Section 13(a), the Person that is the party receiving the greatest portion of the assets or earning power transferred pursuant to such transaction or transactions; provided, however, that in any such case, (1) if the Common Stock of such Person is not at such time and has not been continuously over the preceding twelve (12) month period registered under Section 12 of the Exchange Act, and such Person is a direct or indirect Subsidiary of another Person the Common Stock of which is and has been so registered, "Principal Party" shall refer to such other Person; and (2) in case such Person is a Subsidiary, directly or indirectly, of more than one Person, the Common Stocks of two or more of which are and have been so registered, "Principal Party" shall refer to whichever of such Persons is the issuer of the Common Stock having the greatest aggregate market value. (c) If, for any reason, the Rights cannot be exercised for Common Stock of such Principal Party as provided in Section 13(a), then each holder of Rights shall have the right to exchange its Rights for cash from such Principal Party in an amount equal to the number of shares of Common Stock that it would otherwise be entitled to purchase times 50% of the current per share market price, as determined pursuant to Section 11(d) hereof, of such Common Stock of such Principal Party. If, for any reason, the foregoing formulation cannot be applied to determine the cash amount into which the Rights are exchangeable, then the Board of Directors, based upon the advice of one or more nationally recognized investment banking firms, and based upon the total value of the Company, shall determine such amount reasonably and with good faith to the holders of Rights. Any such determination shall be final and binding on the Rights Agent. (d) Notwithstanding anything in this Agreement to the contrary, Section 13 shall not be applicable to a transaction described in clauses (x) and (y) of Section 13(a) if: (i) such transaction is consummated with a Person or Persons who acquired Common Stock pursuant to a Permitted Offer (or a wholly-owned Subsidiary of any such Person or Persons); (ii) the price per share of Common Stock offered in such transaction is not less than the price per share of Common Stock paid to all holders of Common Stock whose shares were purchased pursuant to such Permitted Offer; and (iii) the form of consideration being offered to the remaining holders of Common Stock pursuant to such transaction is the same form as the form of consideration paid pursuant to such Permitted Offer. Upon consummation of any such transaction contemplated by this Section 13(d), all Rights hereunder shall expire. (e) The Company shall not consummate any such consolidation, merger, sale or transfer unless the Principal Party shall have a sufficient number of authorized shares of its Common Stock which have not been issued or reserved for issuance to permit the exercise in full of the Rights in accordance with this Section 13 and unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing for the terms set forth in paragraphs (a) and (b) of this Section 13 and further providing that, as soon as practicable after the date of any consolidation, merger or sale of assets mentioned in paragraph (a) of this Section 13, the principal Party will: (i) prepare and file a registration statement under the Act, with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, and will use its best efforts to cause such registration statement to (A) become effective as soon as practicable after such filing and (B) remain effective (with a prospectus at all times meeting the requirements of the Act) until the Expiration Date; (ii) deliver to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates which comply in all respects with the requirements for registration on Form 10 under the Exchange Act; (iii) use its best efforts, if the Common Stock of the Principal Party shall become listed on a national securities exchange, to list (or continue the listing of) the Rights and the securities purchasable upon exercise of the Rights on such securities exchange and, if the Common Stock of the Principal Party shall not be listed on a national securities exchange, to cause the Rights and the securities purchasable upon exercise of the Rights to be reported by NASDAQ or such other system then in use; and (iv) obtain waivers of any rights of first refusal or preemptive rights in respect of the shares of Common Stock of the Principal Party subject to purchase upon exercise of outstanding Rights. (f) The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers. In the event that a Section 13 Event shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the Rights which have not theretofore been exercised shall thereafter become exercisable in the manner described in Section 13(a). Section 14. Fractional Rights and Fractional Shares. (a) The Company shall not be required to issue fractions of Rights, except prior to the Distribution Date as provided in Section 11(p) hereof, or to distribute Rights Certificates which evidence fractional Rights. In lieu of such fractional Rights, there shall be paid to the registered holders of the Rights Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right. For purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to date on which such fractional Rights would have been otherwise issuable. The closing price of the Rights for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Rights are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading, or if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by NASDAQ or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board of Directors of the Company. If on any such date no such market maker is making a market in the Rights the fair value of the Rights on such date as determined in good faith by the Board of Directors of the Company shall be used. (b) The Company shall not be required to issue fractions of shares of Preferred Stock (other than fractions which are integral multiples of one one-hundredth of a share of Preferred Stock) upon exercise of the Rights or to distribute certificates which evidence fractional shares of Preferred Stock (other than fractions which are integral multiples of one one-hundredth of a share of Preferred Stock). In lieu of fractional shares of Preferred Stock that are not integral multiples of one one-hundredth of a share of Preferred Stock, the Company may pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one one-hundredth of a share of Preferred Stock. For purposes of this Section 14(b), the current market value of one one-hundredth of a share of Preferred Stock shall be one one-hundredth of the closing price of a share of Preferred Stock (as determined pursuant to Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of such exercise. (c) Following the occurrence of a Triggering Event, the Company shall not be required to issue fractions of shares of Common Stock upon exercise of the Rights or to distribute certificates which evidence fractional shares of Common Stock. In lieu of fractional shares of Common Stock, the Company may pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one (1) share of Common Stock. For purposes of this Section 14(c), the current market value of one share of Common Stock shall be the closing price of one share of Common Stock (as determined pursuant to Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of such exercise. (d) The holder of a Right by the acceptance of the Rights expressly waives his right to receive any fractional Rights or any fractional shares upon exercise of a Right, except as permitted by this Section 14. Section 15. Rights of Action. All rights of action in respect of this Agreement are vested in the respective registered holders of the Rights Certificates (and, prior to the Distribution Date, the registered holders of the Common Stock); and any registered holder of any Rights Certificate (or, prior to the Distribution Date, of the Common Stock), without the consent of the Rights Agent or of the holder of any other Rights Certificate (or, prior to the Distribution Date, of the Common Stock), may, in his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Rights Certificate in the manner provided in such Rights Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and shall be entitled to specific performance of the obligations hereunder and injunctive relief against actual or threatened violations of the obligations hereunder of any Person subject to this Agreement. Section 16. Agreement of Rights Holders. Every holder of a Right by accepting the same consents and agrees with the Company and the Rights Agent and with every other holder of a Right that: (a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of Common Stock; (b) after the Distribution Date, the Rights Certificates are transferable only on the registry books of the Rights Agent if surrendered at the principal office or offices of the Rights Agent designated for such purposes, duly endorsed or accompanied by proper instrument of transfer and with the appropriate forms and certificates fully executed; (c) subject to Section 6(a) and Section 7(f) hereof, the Company and the Rights Agent may deem and treat the person in whose name a Rights Certificate (or, prior to the Distribution Date, the associated Common Stock certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Rights Certificates or the associated Common Stock certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent, subject to the last sentence of Section 7(e) hereof, shall be required to be affected by any notice to the contrary; and (d) notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining performance of such obligation; provided, however, the Company must use its best efforts to have any such order, decree or ruling lifted or otherwise overturned as soon as possible. Section 17. Rights Certificate Holder Not Deemed a Stockholder. No holder, as such, of any Rights Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the number of one one- hundredths of a share of Preferred Stock or any other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the holder of any Rights Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 25 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Rights Certificate shall have been exercised in accordance with the provisions hereof. Section 18. Concerning the Rights Agent. (a) The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and disbursements and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, or expense, incurred without gross negligence, bad faith or willful misconduct on the part of the Rights Agent, of anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability in the premises. (b) The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its administration of this Agreement in reliance upon any Rights Certificate or certificate for Common Stock or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons. Section 19. Merger or Consolidation or Change of Name of Rights Agent. (a) Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the stock transfer or corporate trust business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided, however, that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Rights Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of a predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor or in the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. (b) In case at any time the name of the Rights Agent shall be changed and at such time any of the Rights Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Rights Certificates, by their acceptance thereof, shall be bound: (a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion. (b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any Acquiring Person and the determination of "current market price") be proved or established by the Company prior to taking or suffering any action hereunder such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by the Chairman of the Board, the President, any Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate. (c) The Rights Agent shall be liable hereunder only for its own gross negligence, bad faith or willful misconduct. (d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Rights Certificates or be required to verify the same (except as to its countersignature on such Rights Certificates), but all such statements and recitals are and shall be deemed to have been made by the Company only. (e) The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Rights Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Rights Certificate; nor shall it be responsible for any adjustment required under the provisions of Section 11 or Section 13 hereof or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced by Rights Certificates after actual notice of any such adjustment); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Common Stock or Preferred Stock to be issued pursuant to this Agreement or any Rights Certificate or as to whether any shares of Common Stock or Preferred Stock will, when so issued, be validly authorized and issued, fully paid and nonassessable. (f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement. (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from the Chairman of the Board, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer. (h) The Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity. (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct; provided, however, reasonable cause was exercised in the selection and continued employment thereof. (j) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it. (k) If, with respect to any Right Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment or form of election to purchase, as the case may be, has either not been completed or indicates an affirmative response to clause 1 and/or 2 thereof, the Rights Agent shall not take any further action with respect to such requested exercise of transfer without first consulting with the Company. Section 21. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon thirty (30) days' notice in writing mailed to the Company, and to each transfer agent of the Common Stock and Preferred Stock, by registered or certified mail, and to the holders of the Rights Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon thirty (30) days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Stock and Preferred Stock, by registered or certified mail, and to the holders of the Rights Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of thirty (30) days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by there signing or incapacitated Rights Agent or by the holder of a Rights Certificate (who shall, with such notice, submit his Rights Certificate for inspection by the Company), then any registered holder of any Rights Certificate may apply to any court of competent jurisdiction for an appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be (a) a corporation organized and doing business under the law of the United States or under the laws of any state thereof, in good standing, having a principal office either in the State of California or the State of New York, which is authorized under such laws to exercise stock transfer or corporate trust powers and is subject to supervision or examination by a federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $10,000,000, or (b) an Affiliate of a corporation described in clause (a) of this sentence. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Stock and the Preferred Stock, and mail a notice thereof in writing to the registered holders of the Rights Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. Section 22. Issuance of New Rights Certificates. Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Rights Certificates made in accordance with the provisions of this Agreement. In addition, in connection with the issuance or sale of shares of Common Stock following the Distribution Date and prior to the redemption or expiration of the Rights, the Company (a) shall, with respect to shares of Common Stock so issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement, or upon the exercise, conversion or exchange of securities hereinafter issued by the Company, and (b) may, in any other case, if deemed necessary or appropriate by the Board of Directors of the Company, issue Rights Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) no such Rights Certificate shall be issued if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the Person to whom such Rights Certificate would be issued, and (ii) no such Rights Certificate shall be issued if, and to the extent that appropriate adjustment shall otherwise have been made in lieu of the issuance thereof. Section 23. Redemption and Termination. (a) The Board of Directors of the Company may, at its option, at any time prior to the earlier of (i) the close of business on the tenth day following the Stock Acquisition Date, or such later date as may be determined by action of a majority of Continuing Directors then in office and publicly announced by the Company (or, if the Stock Acquisition Date shall have occurred prior to the Record Date, the close of business on the tenth day following the Record Date, or such later date as may be determined by action of a majority of Continuing Directors then in office and publicly announced by the Company), or (ii) the Final Expiration Date, redeem all but not less than all the then outstanding Rights at a redemption price of $.01 per Right, as such amount may be appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the "Redemption Price"); provided, however, if the Board of Directors of the Company authorizes redemption of the Rights in either of the circumstances set forth in clauses (i) and (ii) below, then there must be Continuing Directors then in office and such authorization shall require the concurrence of a majority of such Continuing Directors: (i) such authorization occurs on or after the time a Person becomes an Acquiring Person, or (ii) such authorization occurs on or after the date of a change (resulting from a proxy or consent solicitation) in a majority of the directors in office at the commencement of such solicitation if any Person who is a participant in such solicitation has stated (or, if upon the commencement of such solicitation, a majority of the Board of Directors of the Company has determined in good faith) that such Person (or any of its Affiliates or Associates) intends to take, or may consider taking, any action which would result in such Person becoming an Acquiring Person or which would cause the occurrence of a Triggering Event unless, concurrent with such solicitation, such Person (or one or more of its Affiliates or Associates) is making a cash tender offer pursuant to a Schedule 14D-1 (or any successor form) filed with the Securities and Exchange Commission for all outstanding shares of Common Stock not beneficially owned by such Person (or by its Affiliates or Associates); provided further, however, that if, following the occurrence of a Stock Acquisition Date and following the expiration of the right of redemption hereunder but prior to any Triggering Event, (i) a person who is an Acquiring Person shall have transferred or otherwise disposed of a number of shares of Common Stock in one transaction or series of transactions, not directly or indirectly involving the Company, or any of its Subsidiaries, which did not result in the occurrence of a Triggering Event such that such Person is thereafter a Beneficial Owner of 10% or less of the outstanding shares of Common Stock, and (ii) there are no other Persons, immediately following the occurrence of the event described in clause (i), who are Acquiring Persons, then the right of redemption herein shall be reinstated and thereafter be subject to the provisions of this Section 23. Notwithstanding anything contained in this Agreement to the contrary, a Distribution Date shall not occur and the Rights shall not be exercisable until such time as the Company's right of redemption hereunder has expired. The Company may, at its option, pay the Redemption Price in cash, shares of Common Stock (based on the "current market price", as defined in Section 11(d)(i) hereof, of the Common Stock at the time of redemption) or any other form of consideration deemed appropriate by the Board of Directors. (b) Immediately upon the action of the Board of Directors of the Company ordering the redemption of the Rights, evidence of which shall have been filed with the Rights Agent and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price for each Right so held. Promptly after the action of the Board of Directors ordering the redemption of the Rights, the Company shall give notice of such redemption to the Rights Agent and the holders of the then outstanding Rights by mailing such notice to all such holders at each holder's last addresses it appears upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the Transfer Agent for the Common Stock. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. Section 24. Exchange. (a) Subject to applicable laws, rules and regulations, and subject to subsection (c) below, the Company may, at its option, by majority vote of the Board of Directors and a majority vote of the Continuing Directors, at any time after the occurrence of a Section 11(a)(ii) Event, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to the provisions of Section 7(e) hereof) for Common Stock at an exchange ratio of one (1) share of Common Stock per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such exchange ratio being hereinafter referred to as the "Ratio of Exchange"). Notwithstanding the foregoing, the Board of Directors shall not be empowered to effect such exchange at any time after any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or any such Subsidiary, or any entity holding Common Stock for or pursuant to the terms of any such plan), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or more of the Common Stock then outstanding. (b) Immediately upon the action of the Board of Directors ordering the exchange of any Rights pursuant to subsection (a) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such rights shall be to receive that number of shares of Common Stock equal to the number of such Rights held by such holder multiplied by the Ratio of Exchange. The Company shall give public notice of any such exchange; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the Common Stock for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to the provisions of Section 7(e) hereof) held by each holder of Rights. (c) In the event that there shall not be sufficient shares of Common Stock issued but not outstanding or authorized but unissued to permit any exchange of Rights as contemplated in accordance with Section 24(a), the Company shall either take such action as may be necessary to authorize additional Common Stock for issuance upon exchange of the Rights or alternatively, at the option of a majority of the Board of Directors, with respect to each Right (i) pay cash in an amount equal to the Current Value (as hereinafter defined), in lieu of issuing Common Stock in exchange therefor, or (ii) issue debt or equity securities or a combination thereof, having a value equal to the Current Value (as defined below), in lieu of issuing Common Stock in exchange for each such Right, where the value of such securities shall be determined by a nationally recognized investment banking firm selected by the Board of Directors by majority vote of the Board of Directors, or (iii) deliver any combination of cash, property, Common Stock and/or other securities having a value equal to the Current Value in exchange for each Right. For purposes of this Section 24(c) only, the Current Value shall mean the product of the current per share market price of Common Stock (determined pursuant to Section 11(d) on the date of the occurrence of the event described above in subparagraph (a)) multiplied by the number of shares of Common Stock for which the Right otherwise would be exchangeable if there were sufficient shares available. To the extent that the Company determines that some action need be taken pursuant to clauses (i), (ii) or (iii) of this Section 24(c), the Board of Directors may temporarily suspend the exercisability of the Rights for a period of up to sixty (60) days following the date on which the event described in Section 24(a) shall have occurred, in order to seek any authorization of additional shares of Common Stock and/or to decide the appropriate form of distribution to be made pursuant to the above provision and to determine the value thereof. In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended. (d) The Company shall not be required to issue fractions of shares of Common Stock or to distribute certificates which evidence fractional shares of Common Stock. In lieu of such fractional shares of Common Stock, there shall be paid to the registered holders of the Rights Certificates with regard to which such fractional shares of Common Stock would otherwise be issuable, an amount in cash equal to the same fraction of the current per share market value of a whole share of Common Stock (as determined pursuant to the second sentence of Section 11(d) hereof). (e) The Company may, at its option, by majority vote of the Board of Directors, at any time before any Person has become an Acquiring Person, exchange all or part of the then outstanding Rights for rights of substantially equivalent value, as determined reasonably and with good faith by the Board of Directors, based upon the advice of one or more nationally recognized investment banking firms. (f) Immediately upon the action of the Board of Directors ordering the exchange of any Rights pursuant to subsection (e) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of rights in exchange therefor as has been determined by the Board of Directors in accordance with subsection (e) above. The Company shall give public notice of any such exchange; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the transfer agent for the Common Stock of the Company. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the Rights will be effected. Section 25. Notice of Certain Events. (a) In case the Company shall propose, at any time after the Distribution Date, (i) to pay any dividend payable in stock of any class to the holders of Preferred Stock or to make any other distribution to the holders of Preferred Stock (other than a regular quarterly cash dividend out of earnings or retained earnings of the Company), or (ii) to offer to the holders of Preferred Stock rights or warrants to subscribe for or to purchase any additional shares of Preferred Stock or shares of stock of any class or any other securities, rights or options, or (iii) to effect any reclassification of its Preferred Stock (other than a reclassification involving only the subdivision of outstanding shares of Preferred Stock), or (iv) to effect any consolidation or merger into or with any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof), or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one transaction or a series of related transactions, of more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each of which complies with Section 11(o) hereof), or (v) to effect the liquidation, dissolution or winding up of the Company, then, in each such case, the Company shall give to each holder of a Rights Certificate, to the extent feasible and in accordance with Section 26 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of the shares of Preferred Stock, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least twenty (20) days prior to the record date for determining holders of the shares of Preferred Stock for purposes of such action, and in the case of any such other action, at least twenty (20) days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the shares of Preferred Stock whichever shall be the earlier. (b) In case any of the events set forth in Section 11(a)(ii) hereof shall occur, then, in any such case, (i) the Company shall as soon as practicable thereafter give to each holder of a Rights Certificate, to the extent feasible and in accordance with Section 26 hereof, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to holders of Rights under Section 11(a)(ii) hereof, and (ii) all references in the preceding paragraph to Preferred Stock shall be deemed thereafter to refer to Common Stock and/or, if appropriate, other securities. Section 26. Notices. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Rights Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows: AST RESEARCH, INC. 16215 Alton Parkway Irvine, California 92718 Attention: Safi U. Qureshey, President Subject to the provisions of Section 21, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Rights Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows: AMERICAN STOCK TRANSFER & TRUST COMPANY 40 Wall Street New York, New York 10005 Attention: Geraldine M. Zarbo Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Rights Certificate (or, if prior to the Distribution Date, to the holder of certificates representing shares of Common Stock) shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company. Section 27. Supplements and Amendments. Prior to the Distribution Date, the Company and the Rights Agent shall, if the Company so directs, supplement or amend any provision of this Agreement without the approval of any holders of certificates representing shares of Common Stock. From and after the Distribution Date, the Company and the Rights Agent shall, if the Company so directs, supplement or amend this Agreement without the approval of any holders of Rights Certificates in order (i) to cure any ambiguity, (ii) to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, (iii) to shorten or lengthen any time period hereunder (which lengthening or shortening, following the first occurrence of an event set forth in clauses (i) and (ii) of the first proviso to Section 23(a) hereof, shall be effective only if there are Continuing Directors and shall require the concurrence of a majority of such Continuing Directors), or (iv) to change or supplement the provisions hereunder in any manner which the Company may deem necessary or desirable and which shall not adversely affect the interests of the holders of Rights Certificates (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person); provided, this Agreement may not be supplemented or amended to lengthen, pursuant to clause (iii) of this sentence, (A) a time period relating to when the Rights may be redeemed at such time as the Rights are not then redeemable, or (B) any other time period unless such lengthening is for the purpose of protecting, enhancing or clarifying the rights of, and/or the benefits to, the holders of Rights. Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 27, the Rights Agent shall execute such supplement or amendment. Prior to the Distribution Date, the interests of the holders of Rights shall be deemed coincident with the interests of the holders of Common Stock. Section 28. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. Section 29. Determinations and Actions by the Board of Directors, etc. For all purposes of this Agreement, any calculation of the number of shares of Common Stock outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding shares of Common Stock of which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act. The Board of Directors of the Company (with, where specifically provided for herein, the concurrence of the Continuing Directors) shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board (with, where specifically provided for herein, the concurrence of the Continuing Directors) or to the Company, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Agreement, and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or not redeem the Rights or to amend the Agreement). All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board (with, where specifically provided for herein, the concurrence of the Continuing Directors) in good faith, shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other parties, and (y) not subject the Board or the Continuing Directors to any liability to the holders of the Rights. Section 30. Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any person other than the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of the Common Stock) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of the Common Stock). Section 31. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated; provided, however, that notwithstanding anything in this Agreement to the contrary, if any such term, provision, covenant or restriction is held by such court or authority to be invalid, void or unenforceable and the Board of Directors of the Company determines in its good faith judgment that severing the invalid language from this Agreement would adversely affect the purpose or effect of this Agreement, the right of redemption set forth in Section 23 hereof shall be reinstated and shall not expire until the close of business on the tenth day following the date of such determination by the Board of Directors. Section 32. Governing Law. This Agreement, each Right and each Rights Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts made and to be performed entirely within such State, except for Sections 18, 19, 20 and 21 hereof which for all purposes shall be governed by and construed in accordance with the laws of the State of California. Section 33. Counterparts. This Agreement may be executed in any number of counterparts and each such counterparts shall for all purposes deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Section 34. Descriptive Headings. Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. Attest: AST RESEARCH, INC., a Delaware corporation By ____________________ By ___________________ Name: Name: Title: Title: Attest: AMERICAN STOCK TRANSFER & TRUST COMPANY By ____________________ By ____________________ Name: Name: Title: Title: EX-10.120 4 1994 ONE-TIME GRANT STOCK OPTION PLAN AST RESEARCH, INC. 1994 ONE-TIME GRANT STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS 1. PURPOSE. The AST Research, Inc. 1994 One-Time Grant Stock Option Plan for Non-Employee Directors is intended to provide incentive to those persons who are non-employee directors of AST Research, Inc., a Delaware corporation, ("Corporation") on July 1, 1994, to encourage such Participants to acquire a proprietary interest in the Corporation and to continue their association with the Corporation. 2. DEFINITIONS. (a) "Annual Meeting" shall mean the Corporation's Annual Meeting of Stockholders held on October 27, 1994, or any postponement or adjournment thereof. (b) "Board" shall mean the Board of Directors of the Corporation. (c) "Code" shall mean the Internal Revenue Code of 1986, as amended. (d) "Committee" shall mean the Committee appointed by the Board as set forth in Section 4 hereof. (e) "Common Stock" shall mean the Common Stock, $.01 par value, of the Corporation. (f) "Corporation" shall mean AST Research, Inc., a Delaware corporation. (g) "Disability" shall mean the condition, as determined by the Board or Committee, of a Participant who is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to last for a continuous period of not less than twelve (12) months. The Board or Committee's determination of Disability or the absence thereof shall be conclusive and binding on all interested parties. (h) "Effective Date" shall mean the date of effectiveness of the Plan which shall be the date of approval of this Plan by the stockholders of the Corporation. (i) "Exercise Price" shall mean the price per share of Common Stock at which an Option may be exercised. (j) "Fair Market Value" shall mean the value of one (1) share of Common Stock, determined as follows: (i) If the Common Stock is not listed or admitted to trading on a stock exchange, the last sale price of the Common Stock in the over-the-counter market on the date of valuation, or, (ii) If the Common Stock is then listed or admitted to trading on any stock exchange, the closing sale price on the date of valuation on the principal stock exchange on which the Common Stock is then listed or admitted to trading. If no closing sale price is quoted on such day, or if no sale takes place on such day on such principal exchange, as the case may be, then the closing sale price on the over-the-counter market or the closing sale price of the Common Stock on such exchange on the next preceding day on which a sale occurred or closing sale price was reported, as the case may be, shall be the Fair Market Value. During such times as there is not a market price available, the Fair Market Value shall be determined by the Board or the Committee in good faith, which determination shall be conclusive and binding on all interested parties. (k) "Grant Date" shall mean July 1, 1994. (l) "Option" shall mean any stock option granted pursuant to the Plan. (m) "Option Agreement" shall mean the written agreement entered into between the Corporation and the Optionee with respect to which an Option or Options are granted under the Plan. (n) "Optionee" shall mean a Participant who has received an Option. (o) "Participant" shall mean a member of the Board on the Grant Date who is not also an employee (within the meaning of Code Section 3401 and the regulations thereunder) of the Corporation. (p) "Plan" shall mean this AST Research, Inc. 1994 One- Time Grant Stock Option Plan for Non-Employee Directors. (q) "Purchase Price" shall mean the Exercise Price times the number of whole shares of Common Stock with respect to which an Option is exercised. 3. ADOPTION AND EFFECTIVE DATE OF PLAN. Unless the Plan shall theretofore have been terminated, the Plan shall be effective on the approval of the stockholders of the Corporation, and shall terminate ten (10) years after such effective date. 4. ADMINISTRATION. The Plan shall be administered by the Board or by a committee of two (2) or more persons appointed by the Board, such committee, or the Board, if it administers the Plan, being hereinafter the "Committee." The Committee shall be responsible for carrying out the terms of the Plan with respect to all Plan administration matters. Acts of a majority of the Committee at which a quorum is present, or acts reduced to or approved in writing by all of the members of the Committee, shall be the valid acts of the Committee. The administration, interpretation or application of the Plan by the Committee shall be final, conclusive and binding upon all Participants. No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Option granted thereunder. 5. ELIGIBILITY. The persons who shall be eligible to receive Options under the Plan shall be all persons who are non-employee directors of the Corporation on July 1, 1994. 6. STOCK. The stock subject to Options granted under the Plan shall be shares of the Corporation's authorized but unissued or reacquired Common Stock. The aggregate number of shares which may be issued under Options exercised under the Plan shall not exceed 250,000 shares, and the maximum number of shares of Common Stock with respect to which any Participant may receive Options hereunder during any calendar year may not exceed 50,000. The number of shares subject to Options outstanding under the Plan at any time may not exceed the number of shares available for issuance under the Plan. The limitations established by this Section 6 shall be subject to adjustment upon the occurrence of the events specified and in the manner provided in Section 9 hereof. 7. PARTICIPANTS; TIMING AND SIZE OF OPTION GRANTS. On the Grant Date, but subject to approval of stockholders, each Participant shall be granted an Option under the Plan covering 50,000 shares of Common Stock. All such Option grants are subject to the limitation set forth in Section 6 hereof. As more specifically set forth in Section 8(f) below, Options shall vest and become exercisable at the rate of twelve and one-half percent (12.5%) per year, commencing on the first anniversary of the Grant Date, and shall be fully vested and exercisable on the eighth (8th) anniversary of the Grant Date, but subject to acceleration as set forth in Section 8(f) below. 8. TERMS AND CONDITIONS OF OPTIONS. Any Option granted pursuant to the Plan shall be evidenced by an Option Agreement in such form as the Committee shall from time to time determine, which Option Agreement shall comply with and be subject to the following terms and conditions: (a) Optionee's Agreement. Each Optionee shall agree to remain a director of and to render to the Corporation services for the remainder of the term for which the director was elected, but such agreement shall not impose upon the Corporation any obligation to retain the Optionee as a director for any period. (b) Number of Shares. Each Option shall state the number of shares to which it pertains and shall provide for the adjustment thereof in accordance with the provisions of Section 9 hereof. (c) Exercise Price. Each Option shall state the Exercise Price, which price shall be 100% of the Fair Market Value on the Grant Date. (d) Medium and Time of Payment. The Purchase Price shall be payable in full upon the exercise of the Option. The Purchase Price may be paid (i) in cash or by certified check or by bank draft; (ii) subject to any legal restrictions and obligations regarding the purchase of shares for promissory notes or evidences of indebtedness, by delivery of Optionee's promissory note in a form satisfactory to the Corporation and (at the election of the Corporation) secured by a Pledge Agreement of the shares purchased or other security; or (iii) by the surrender of shares of the Common Stock in good form for transfer, owned by the person exercising the Option and having an aggregate Fair Market Value on the date of exercise equal to the Purchase Price, or in any combination of the foregoing, so long as the total thereof equals the Purchase Price. No share of Common Stock shall be issued upon the exercise of an Option until full payment therefor has been made. (e) Tax Withholding. The Corporation shall have the power to withhold, or require an Optionee to remit to the Corporation, an amount sufficient to satisfy Federal, state, and local withholding tax requirements on the exercise of any Options under the Plan. To the extent permissible under applicable tax, securities, and other laws, the Board may, in its sole discretion, permit an Optionee to satisfy an obligation to pay any tax to any governmental entity in respect of exercise, up to an amount determined on the basis of the highest marginal tax rate applicable to such Optionee, in whole or in part, by (i) directing the Corporation to apply shares of Common Stock issuable upon exercise of the Option or (ii) delivering to the Corporation shares of Common Stock owned by the Optionee. (f) Term and Exercise of Options; Vesting and Acceleration. Each Option Agreement shall have a term of ten (10) years from the Effective Date and shall state the time or times when the Option so evidenced becomes exercisable. All Options under this Plan expire not later than the tenth (10th) anniversary of the date of grant. Options shall vest and become exercisable at the basic rate of twelve and one-half percent (12.5%) of the number of shares covered thereby per year, commencing on the first (1st) and continuing through the eighth (8th) anniversary of the Grant Date. If the Common Stock achieves a Fair Market Value on five (5) trading days in any period of twenty (20) consecutive trading days during the term of the Option equal to, or greater than, the percentage of the Exercise Price of the Option set forth under Column A below, then, commencing with the first anniversary of the Grant Date, the vesting and exercisability of the Option shall be accelerated and vest proportionately and retroactively over the accelerated period set forth in Column B below at the adjusted annual rate set forth in Column C below:
Column A Column B Column C Adjusted Annual Vesting Over Vesting Rate Commencing % of Exercise Price Accelerated Period With 1st Anniversary 125% 6 years 16 2/3% 200% 4 years 25% 300% 1 year 100% (but not prior to July 1, 1995)
Any acceleration and shortening of the vesting period of an Optionee's Option in accordance with the foregoing shall be cumulative and permanent, but early vesting shall not occur prior to July 1, 1995. (g) Termination of Status as Director. In the event that an Optionee shall cease to be a director of the Corporation for any reason, including death or Disability, such Optionee or the Optionee's heirs and personal representatives, as the case may be, shall have the right to exercise Options at any time within ninety (90) days after such termination to the extent that, at the date of such termination, the Optionee's right to exercise such Options had vested pursuant to the terms of the Plan and of the Option Agreement and had not previously been exercised; provided, however, that if, prior to the date of termination of Optionee's status as a Director, an event has occurred giving rise to the repurchase right set forth in Section 10 hereof, such right to exercise vested options shall expire at the later of the end of such 90-day period or the end of the 180-day period set forth in Section 10. An Optionee's right to exercise the then unvested portion of Options shall terminate as of the date of termination of the Optionee's status as a director. (h) Nontransferability of Options. During the lifetime of an Optionee, Options shall be exercisable only by the Optionee and shall not be assignable or transferable, except pursuant to a qualified domestic relations order, as defined in the Code or the Employee Retirement Income Security Act, or the rules thereunder. In the event of the Optionee's death, no Option shall be transferable by the Optionee otherwise than by will or by the laws of descent and distribution. (i) Rights as a Stockholder. An Optionee or a transferee of an Optionee shall have no rights as a stockholder with respect to any shares covered by an Option until the date of the issuance of a stock certificate for such shares. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights for which the record date is prior to the date such stock certificate is issued, except as provided in Section 9. (j) Registration Rights. An Option may provide for the right of an Optionee to require the Corporation to register the shares issuable on exercise of an Option and the right to include such shares in other registrations of the Corporation. (k) Other Provisions. An Option Agreement authorized under the Plan may contain other provisions not inconsistent with the terms of the Plan. 9. CHANGES IN CAPITAL STRUCTURE. In the event that the outstanding shares of Common Stock are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Corporation by reason of merger, consolidation or reorganization in which the Corporation is the surviving corporation or of a recapitalization, stock split, combination of shares, reclassification, reincorporation, stock dividend (in excess of 2%), or other change in the capital structure of the Corporation, appropriate adjustments shall be made by the Board of Directors in the aggregate number and kind of shares subject to the Plan and to the grant of Options hereunder, and the number and kind of shares and the price per share subject to outstanding Options in order to preserve, but not to increase, the benefits to persons then holding Options under the Plan. In the event that the Corporation at any time proposes to (i) dissolve or liquidate, or to merge into, consolidate with or to enter into any other reorganization (including the sale of substantially all of its assets) in which the Corporation is not the surviving corporation, or (ii) enter into a merger or other reorganization as a result of which the outstanding shares of Common Stock will be changed into or exchanged for shares of the capital stock or other securities of another corporation or for cash or other property, then the Board of Directors or the Committee shall cause written notice of the proposed transaction to be given to all Optionees not less than thirty (30) days prior to the anticipated effective date of the proposed transaction, and all Options shall be accelerated and, prior to the effective date of the proposed transaction, each Optionee shall have the right to exercise all Options held by him in respect of any or all shares then subject thereto. The grant of an Option pursuant to the Plan shall not affect in any way the right or power of the Corporation to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge or consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets. 10. PERMISSIVE RESALE TO CORPORATION. (a) In the event, (i) any "person" or "group" of persons (as the terms "person" and "group" are used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934 and the rules thereunder) (A) makes a tender offer or exchange offer or enters into a merger or other acquisition agreement (collectively, the "Offer") to acquire the beneficial ownership, directly or indirectly, of securities of the Corporation representing 15% or more of the combined voting power of the then outstanding securities of the Corporation, and (B) such "person" or "group" of "persons" does not substantially concurrently offer to purchase each of the then outstanding Options evidenced hereby in connection with such Offer for a price at least equal to the Repurchase Price (as defined below), or (ii) a majority of the Board of Directors of the Corporation shall be comprised of persons who were not originally elected to such office as part of the "Company Nominated Slate" of directors (i.e., the slate of nominees proposed by the Board of Directors in office immediately prior to the election or any other change in directors), then Optionee shall have the right to require the Corporation to repurchase (the "Repurchase") the then outstanding Options (including Options which are unvested on the date set for the Repurchase) at the Repurchase Price for a period ending one hundred eighty (180) days following the date on which (i) such "person" or "group" actually acquires any securities of the Corporation pursuant to such Offer; or (ii) a majority of the Board of Directors of the Corporation shall be comprised of persons who were not elected as part of the "Company Nominated Slate" of directors. On the occurrence of the events described in Section 10(a)(i) hereof, the Repurchase Price shall be equal to the difference between (i) the Acquisition Price (as defined below) and (ii) the Exercise Price. The Acquisition Price shall be equal to the sum of all (i) money and (ii) the fair market value of any property actually paid or transferred for a share of the Common Stock of the Corporation by such "person" or "group" pursuant to such Offer. On the occurrence of the events described in Section 10(a)(ii) hereof, the Repurchase Price shall be equal to the difference between (i) the highest "Fair Market Value" (as defined in Section 2(i)) during the ten (10) trading days prior to such event and (ii) the Exercise Price. (b) The Repurchase shall be effected by delivery of a notice (the "Repurchase Notice") to the Corporation within the one hundred eighty (180) day period described above setting forth Optionee's name, Optionee's intention to exercise his rights to the Repurchase, the number of Options held by Optionee, the Repurchase Price, and the date (which shall not be less than four (4) business days from the date of the delivery of the Repurchase Notice) on which the Repurchase is to occur. On the date set for the Repurchase, the Corporation shall immediately pay Optionee, in cash or by certified or bank cashier's check made payable to the order of Optionee, an amount equal to the Repurchase Price multiplied by the number of Options surrendered for Repurchase (the "Aggregate Repurchase Price"). 11. SECURITIES LAW REQUIREMENTS. Notwithstanding any other provisions of the Plan or agreements made pursuant to the Plan, the Corporation shall not be required to issue or deliver any certificate or certificates for shares of stock upon the exercise of any Option prior to fulfillment of all of the following conditions: (a) Securities Exchange. The listing, or approval for listing upon notice of issuance, of such shares on any securities exchange as may at the time be a market for the Common Stock; (b) Qualification. Any registration or other qualification of such shares under any state or federal law or regulation, or the maintaining in effect of any such registration or other qualification which the Board or the Committee shall, in its absolute discretion upon the advice of counsel, deem necessary or advisable; and (c) Consents. The obtaining of any other consent, approval or permit from any state or federal governmental agency which the Board or the Committee shall, in its absolute discretion upon the advice of counsel, determine to be necessary or advisable. 12. AMENDMENTS TO THE PLAN. The Board may, insofar as permitted by law, from time to time, with respect to any shares of Common Stock at the time not subject to Options, suspend or discontinue the Plan or revise or amend it in any respect whatsoever, provided, however, that the Board may condition any such revision or amendment on approval of the stockholders if the Board determines that such approval is necessary or desirable for any reason, including, without limitation, to comply with any laws, rules or regulations pertaining to the Plan, and provided further that the Plan provisions relating to the amount and timing of Options awarded hereunder, and the Exercise Price thereof, shall not be amended more than once every six (6) months, other than to comport with changes in the Code or the Employee Retirement Income Security Act, or rules thereunder. 13. APPLICATION OF FUNDS. The proceeds received by the Corporation from the sale of Common Stock pursuant to the exercise of Options will be used for general corporate purposes. EX-10.121 5 FORM OF OPTION AGREEMENT Agreement No. OPTION AGREEMENT UNDER 1994 ONE-TIME GRANT STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS OF AST RESEARCH, INC. THIS OPTION AGREEMENT, made this 1st day of July, 1994, between AST RESEARCH, INC., a Delaware corporation (hereinafter referred to as the "Company"), and , a non-employee director of the Company (hereinafter referred to as the "Optionee"), is made with reference to the following fact: The Company desires, by affording the Optionee an opportunity to purchase shares of Common Stock, $.01 par value, of the Company ("Common Stock"), as hereinafter provided, to carry out the purpose of the 1994 One-Time Grant Stock Option Plan for Non-Employee Directors (the "Plan"). NOW, THEREFORE, IN CONSIDERATION of the mutual covenants hereinafter set forth, and for good and valuable consideration, the parties hereto have agreed, and do hereby agree, as follows: 1. Grant of Option. The Company hereby grants to the Optionee the right and option to purchase all or any part of an aggregate of 50,000 shares of Common Stock (the "Option") on the terms and conditions herein set forth. The number of shares subject to the Option shall be subject to adjustment as provided in Paragraph 8 hereof. 2. Term of Option; Vesting. The term of the Option shall commence on the date hereof and all rights to purchase shares under the Option shall cease at 11:59 p.m. on the day before the tenth (10th) anniversary of the date hereof, subject to earlier termination as provided herein. Except as may otherwise be provided in this Agreement, the Option shall be exercisable as set forth in Section 8(f) of the Plan, a copy of which is attached hereto and incorporated herein: 3. Purchase Price. The Purchase Price shall be $ per share (the "Exercise Price") times the number of whole shares of Common Stock with respect to which the Option is exercised. The Exercise Price shall be subject to adjustment as provided in Paragraph 8 hereof. 4. Medium and Time of Payment. The Purchase Price shall be paid in full at the time of the Option's exercise (i) in cash or by certified check or by bank draft; (ii) subject to any legal restrictions and obligations regarding the purchase of shares for promissory notes or evidences of indebtedness and the consent of Company, by delivery of Optionee's promissory note in a form satisfactory to the Company and (at the election of the Company) secured by a Pledge Agreement of the shares so purchased or other security; or (iii) by the surrender of shares of Common Stock in good form for transfer, owned by the person exercising the Option and having an aggregate Fair Market Value (as determined in accordance with Section 2(j) of the Plan) on the date of exercise equal to the Purchase Price of such shares; or (iv) any combination of (i), (ii) and (iii) above. No share of Common Stock shall be issued upon the exercise of the Option until full payment therefor has been made in the manner set forth above. The holder of the Option shall not have any of the rights of a shareholder with respect to the shares covered by the Option until the date of the issuance of a stock certificate for such shares. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights for which the record date is prior to the date such stock certificate is issued, except as provided in Paragraph 8 hereof. 5. Nontransferability. As more specifically set forth in Section 8(h) of the Plan, during the lifetime of the Optionee, the Option shall be exercisable only by the Optionee and shall not be assignable or transferable. 6. Termination of Status as Director. As more specifically set forth in Section 8(g) of the Plan, and notwithstanding events giving rise to the repurchase right set forth in Section 10 of the Plan, in the event that the Optionee shall cease to be a director of the Company for any reason, including death or Disability (as defined in Section 2(g) of the Plan), the Optionee or his heirs and personal representatives, as the case may be, shall have the right to exercise the Option at any time within ninety (90) days after such termination (but in no event later than the date of expiration of the term of the Option as set forth in Paragraph 2 above), to the extent that, at the date of such termination, the Optionee's right to exercise the Option had vested pursuant to the terms set forth in Paragraph 2 above and had not previously been exercised. The Optionee's right to exercise the then unvested portion of the Option shall terminate as of the date of termination of the Optionee's status as a director. 7. Changes in Capital Structure. In the event that the Company proposes to effect the dissolution or liquidation of the Company or a merger, consolidation, or reorganization of the Company with one or more entities, corporate or otherwise, as a result of which the Company is not the surviving entity, or upon a merger or other reorganization as a result of which the outstanding shares of Common Stock of the Company are changed into or exchanged for shares of the capital stock or securities of another corporation or for cash or other property, or upon the sale of substantially all of the property of the Company to another entity, corporate or otherwise, then the Company shall cause written notice to be given to the Optionee of the proposed transaction not less than thirty (30) days prior to the anticipated effective date thereof, and this Option, if not already exercisable, shall thereupon become immediately exercisable and the Optionee shall have the right to exercise this Option at any time prior to the effective date of the termination of the Plan or the proposed transaction. 8. Adjustments. In the event that the outstanding shares of Common Stock of the Company are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of the events listed in Section 9 of the Plan, or other change in the capital structure of the Company, then the number and class of shares subject to this Option, and the Exercise Price (but not the Purchase Price), shall all be proportionately adjusted as set forth in Section 9 of the Plan. Adjustments under this paragraph shall be made by the Board of Directors of the Company whose determination with respect thereto shall be final and conclusive. No fractional share shall be issued under this Option or upon any such adjustment. 9. Permissive Resale of the Option to the Company. In the event of a change of control of the Company, as more specifically set forth in Section 10 of the Plan, the Optionee shall have the right to require the Company to repurchase (the "Repurchase") the then outstanding Options evidenced hereby (other than Options which are unvested on the date set for the Repurchase) on the terms set forth in Section 10 of the Plan. 10. Method of Exercising Option. Subject to the terms and conditions of this Option Agreement, this Option may be exercised by written notice to the Company, at its principal office in the State of California, which presently is located at 16215 Alton Parkway, Irvine, California 92718. Such notice shall state the election to exercise the Option and the number of shares in respect of which it is being exercised and shall be signed by the person or persons so exercising the Option. Such notice shall be accompanied by payment in cash, certified check, bank draft, promissory note(s) of the Optionee payable to the Company in a form satisfactory to the Company or certificates for shares of the Common Stock of the Company equal to, in the aggregate, the Purchase Price of such shares. If all or part of the exercise price is in the form of a promissory note the Optionee shall also deliver, at the election of the Company, a Pledge Agreement, in a form satisfactory to the Company. The Company shall deliver a certificate or certificates representing the shares subject to such exercise as soon as practicable after the notice shall be received; unless however, in the event payment is made by promissory note(s), the Company shall retain, pursuant to a Pledge Agreement, the number of shares with an aggregate exercise price equal to the principal amount of any promissory note(s) delivered to the Company in payment for such shares as security for the indebtedness of the Optionee under such promissory note(s). The certificate or certificates for the shares as to which the Option shall have been so exercised shall be registered in the name of the person or persons so exercising the Option and shall be delivered as provided above to or upon the written order of the person or persons exercising the Option except for those shares to be retained by the Company as security for payment of any promissory note(s). In the event the Option shall be exercised by any person or persons other than the Optionee in accordance with the terms hereof, such notice shall be accompanied by appropriate proof of the right of such person or persons to exercise the Option. All shares that shall be purchased upon the exercise of the Option as provided herein shall be fully paid and nonassessable. The holder of this Option shall not be entitled to the privileges of share ownership as to any shares of Common Stock not actually issued and delivered to him. 11. Obligation of Optionee. In consideration of the grant of the Option, Optionee agrees to remain a director of and to render to the Company his services for the remainder of the term for which he was elected. 12. Representations of Optionee The Optionee hereby certifies that all shares of Common Stock of the Company purchased or to be purchased by him pursuant to the exercise of this Option are being or are to be acquired by him for investment and not with a view to the distribution thereof except as may be permitted under the Securities Act of 1933 and the rules and regulations thereunder. The Optionee agrees that he shall, upon reasonable request by the Company in connection with any exercise of the Option, execute and deliver an investment letter in such form as may be deemed appropriate by the Company. 13. General. The Company shall at all times during the term of the Option reserve and keep available such number of shares of Common Stock as will be sufficient to satisfy the requirements of this Option Agreement, shall pay all original issue and transfer taxes with respect to the issue and transfer of shares pursuant hereto and all other fees and expenses necessarily incurred by the Company in connection therewith, and will from time to time use its best efforts to comply with all laws and regulations, which, in the opinion of counsel for the Company, shall be applicable thereto. In the event the Company determines that it is required to withhold state or federal income tax or FICA tax as a result of the exercise of any Option, it may require the Optionee to make arrangements satisfactory to the Company to enable it to satisfy such withholding requirements as a condition to the exercise of the Option. 14. No Agreement to Retain a Director. Nothing in this Agreement shall be construed to constitute or to be evidence of any agreement, understanding or obligation, express or implied, on the part of the Company to retain the Optionee a director of the Company for any period. 15. General Provisions. Notwithstanding any other provisions of this Agreement, the Company shall not be required to issue or deliver any certificate or certificates for shares of stock upon the exercise of this Option prior to fulfillment of all of the following conditions: (a) The listing or approval for listing upon notice of issuance, of such shares on any securities exchange as may at the time be the market for the Company's Common Stock; (b) Any registration or other qualification of such shares under any state or federal law or regulation, or the maintaining in effect of any such registration or other qualification which the Board of Directors of the Company shall, in its absolute discretion upon the advice of counsel, deem necessary or advisable; and (c) The obtaining of any other consent, approval or permit from any state or federal governmental agency which the Board of Directors of the Company shall, in its absolute discretion upon the advice of counsel, determine to be necessary or advisable. 16. Receipt of Plan Acknowledged. The undersigned Optionee hereby acknowledges receipt of a copy of the Plan and that such Optionee has read and understands the terms and provisions thereof. IN WITNESS WHEREOF, the Company has caused this Option Agreement to be duly executed by its officers thereunto duly authorized, and the Optionee has hereunto set his hand, all as of the day and year first above written. AST RESEARCH, INC. By:_____________________ Its:_________________ The "Company" ________________________ "Optionee" EX-10.122 6 AMENDMENT TO 1989 LONG-TERM INCENTIVE PROGRAM AMENDMENT TO AST RESEARCH, INC. 1989 LONG-TERM INCENTIVE PROGRAM WHEREAS, the purpose of this amendment is to provide for the limitation under the AST Research, Inc. 1989 Long-Term Incentive Program (the "Program") of the number of options and/or shares of restricted stock which may be granted to any participant in the Program in a given calendar year; NOW, THEREFORE, the first paragraph of Section 7.1 of the Program is hereby amended, subject to approval by the stockholders, to read as follows: "7.1 Grant of Options. One plan under the Program shall relate to Options. Subject to the other applicable provisions of the Program, Options may be granted to Participants at any time and from time to time as shall be determined by the Committee. The Committee shall have complete discretion in determining the number of Options granted to each Participant; provided, however, that the maximum number of shares of Stock with respect to which any Participant may receive Options hereunder during any calendar year may not exceed 200,000 reduced by the number of shares of Restricted Stock granted during the calendar year. The Committee may grant any type of Option permitted by law at the time of grant and shall specify whether or not any Option is intended to be an incentive stock option described in section 422 of the Code. In the case of incentive stock options, the following conditions shall apply in addition to any other requirements of this plan or the Code:" Section 9.1 of the Program is hereby amended, subject to approval by the stockholders, to read as follows: "9.1 Grant of Restricted Stock. One plan under the Program shall relate to Restricted Stock. Subject to the provisions of Articles 5 and 6, the Committee, at any time and from time to time, may grant shares of Restricted Stock under the plan to such Participants, in such amounts as it shall determine, and for such consideration as it may determine; provided that (i) the aggregate value of all consideration received by the Company for such shares is equal to at least the aggregate fair market value of such shares, and (ii) the maximum number of shares of Restricted Stock which any Participant may receive hereunder during any calendar year may not exceed 200,000 reduced by the number of Options granted under the Program during the calendar year. Each grant of Restricted Stock shall be in writing and shall specify the Period(s) of Restriction and the time or times at which such Period(s) shall lapse with respect to a specified number of shares of Stock. The Periods of Restriction shall not exceed ten years from the date of grant of the Restricted Stock." The Program shall remain in full force and effect, as hereby amended. The undersigned, as Secretary of AST Research, Inc. (the "Company"), hereby certifies that the foregoing Amendment was duly adopted by the Compensation Committee, which also functions as the Plan Approval Committee, and by the Board of Directors of the Company on October 28, 1993, and was duly approved by the stockholders of the Company at the Annual Meeting of Stockholders held on January 28, 1994. Dated: January 28, 1994 Dennis R. Leibel, Secretary EX-10.123 7 AMENDMENT TO AST RESEARCH, INC. 1991 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS WHEREAS, the purpose of this amendment is to provide for the limitation under the AST Research, Inc. 1991 Stock Option Plan for Non-Employee Directors (the "Directors' Plan") of the number of options and/or shares of restricted stock which may be granted to any participant in the Directors' Plan in a given calendar year; NOW, THEREFORE, the Directors' Plan is hereby amended, subject to approval by the stockholders, as set forth herein. The following sentence shall be added at the end of Section 7, of the Directors' Plan, which section is captioned "Participants; Timing and Size of Option Grants:" "Notwithstanding the foregoing or any other term or provision herein, the maximum number of shares of Common Stock with respect to which any Participant may receive Options hereunder during any calendar year may not exceed 100,000." The Directors' Plan shall remain in full force and effect, as hereby amended. The undersigned, as Secretary of AST Research, Inc. (the "Company"), hereby certifies that the foregoing Amendment was duly adopted by the Compensation Committee, which also functions as the Plan Approval Committee, and by the Board of Directors of the Company on October 28, 1993, and was duly approved by the stockholders of the Company at the Annual Meeting of Stockholders held on January 28, 1994. Dated: January 28, 1994 Dennis R. Leibel, Secretary EX-11 8 COMPUTATION OF NET INCOME PER SHARE EXHIBIT 11 AST RESEARCH, INC. COMPUTATION OF NET INCOME PER SHARE
Quarter Ended Six Months Ended --------------------- ------------------------- Jan. 1, Jan. 2, Jan. 1, Jan. 2, (In thousands, except per share amounts) 1994 1993 1994 1993 - ------------------------------------------------------------------------------------------------------------ Primary earnings per share Shares used in computing primary earnings per share: Weighted average shares of common stock outstanding 31,659 31,203 31,625 31,073 Effect of stock options treated as equivalents under the treasury stock method 795 690 603 653 -------- -------- -------- -------- Weighted average common and common equivalent shares outstanding 32,454 31,893 32,228 31,726 -------- -------- -------- -------- Net income $ 17,933 $ 14,581 $ 26,165 $ 22,222 -------- -------- -------- -------- Earnings per share - primary $ .55 $ .46 $ .81 $ .70 ======== ======== ======== ======== Fully diluted earnings per share Shares used in computing fully diluted earnings per share: Weighted average shares of common stock outstanding 31,659 31,203 31,625 31,073 Effect of stock options treated as equivalents under the treasury stock method 890 786 715 705 Shares assumed issued on conversion of Liquid Yield Option Notes 855 - 855 - -------- -------- -------- -------- Total fully diluted shares outstanding 33,404 31,989 33,195 31,778 -------- -------- -------- -------- Net income - fully diluted earnings per share: Net income - primary earnings per share $ 17,933 $ 14,581 $ 26,165 $ 22,222 Adjustment for interest on LYONs, net of tax 176 - 176 - -------- -------- -------- -------- Adjusted net income - fully diluted earnings per share 18,109 14,581 26,341 22,222 -------- -------- -------- -------- Net income per share - fully diluted $ .54 $ .46 $ .79 $ .70 ======== ======== ======== ========
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