SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported)
NOVEMBER 11, 1996 (NOVEMBER 6, 1996)
AST RESEARCH, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-13941 95-3525565
(Commission File Number) (IRS Employer 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
NOT APPLICABLE
(Former name or former address, if changed since last report.)
ITEM 5. OTHER EVENTS
On November 6, 1996, AST Research, Inc. (the "Company") signed a non-binding
letter of intent with Samsung Electronics Co., Ltd. ("Samsung") to provide
certain additional financial support to the Company as consideration for
shares of non-voting Preferred Stock. The additional support includes a
guaranty of a $100 million bank line of credit starting December 1, 1996, and a
guaranty of an additional $100 million bank line of credit starting April 1,
1997, both extending through December 31, 1998. The additional financial
support contemplated in this letter of intent is in addition to the existing
Samsung guaranty of a $200 million credit facility, provided pursuant to an
Additional Support Agreement between the Company and Samsung, dated December 21,
1996.
The letter of intent anticipates that the Company will issue non-voting
preferred stock, with an agreed upon value of approximately $15 million. The
shares would not be subject to mandatory redemption, but would be redeemable at
the Company's option for cash or shares of the Company's common stock, beginning
in 1999. The preferred shares would carry a cumulative dividend, beginning in
1999, at a rate to be agreed upon. The letter of intent also requires the
Company to repay a $50 million loan provided by Samsung to the Company on
October 11, 1996, upon the availability of funds under the credit line
contemplated by the letter of intent. The additional support transaction,
including the exact valuation, redemption provisions and preferred dividend
rate, is subject to definitive documentation and approvals.
The Company also announced that Roger W. Johnson has been named as a member of
the Company's Board of Directors. In addition, the Company released results of
the third quarter of fiscal year 1996, reporting a net loss of $135.3 million,
or $2.41 per share.
A copy of the press releases announcing the letter of intent, the addition of
Roger W. Johnson to the Board of Directors and announcing third quarter results
are attached as Exhibits 99.1 and 99.2 to this Report, and are incorporated
herein by this reference. A copy of the Letter of Intent is attached as Exhibit
99.3, and is incorporated herein by this reference. A copy of the $50 million
loan and related promissory note is attached as Exhibit 99.4, and is
incorporated herein by this reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit
Number Description
99.1 Press release issued by the Registrant on November 7, 1996, reporting
third quarter results, announcing a non-binding letter of intent with
Samsung pursuant to which Samsung will provide additional financial
support to the Company, and announcing that Roger W. Johnson has
been named as a Board Member.
99.2 Press release issued by the Registrant on November 7, 1996, announcing
that Roger W. Johnson has been named as a Board Member.
99.3 Loan Agreement and Promissory Note dated October 11, 1996 by and
between AST Research, Inc., and Samsung Electronics America, Inc.
99.4 Letter of Intent, dated November 7, 1996 by and between AST Research,
Inc., and Samsung.
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 hereunto duly authorized.
AST Research, Inc.
_______________________________________
(Registrant)
By /s/WON S. YANG
------------------------------------
Won S. Yang
Senior Vice President
and Chief Financial Officer (Acting)
Date: November 11, 1996
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
Media & Analyst Contact: Emory Epperson
(714) 727-7958
AST REPORTS THIRD QUARTER RESULTS
COMPANY ALSO ANNOUNCES INTENT FOR ADDITIONAL $200 MILLION FINANCIAL SUPPORT FROM
SAMSUNG;
ROGER W. JOHNSON, FORMER WESTERN DIGITAL CHAIRMAN AND CEO, JOINS BOARD
IRVINE, Calif., Nov. 7, 1996 -- AST Research, Inc. (ASTA-NASDAQ) today announced
revenues of $408.5 million for the third quarter of fiscal year 1996, ended
Sept. 28. This compares with revenues of $403.4 million reported during the
comparable prior year period. Total revenues for the first three quarters of
fiscal year 1996 were $1.492 billion, versus $1.736 billion for the previous
year's period.
The company reported a net loss of $135.3 million ($2.41 per share) during
the third quarter of fiscal year 1996, compared to a net loss of $96.4 million
($2.36 per share) reported during the prior year period. The 1996 third quarter
net loss included a $21.6 million one-time charge due to the write-off of
goodwill associated with the company's 1993 acquisition of Tandy Corporation's
personal computer manufacturing operations.
Third quarter revenues represented the first year-over-year increase in the
past five quarters. Unit shipments during the third quarter increased over the
prior year quarter by approximately 11 percent to 273,000, comprised of 242,000
desktops and 31,000 notebooks. Commercial desktop and notebook system
businesses were adversely affected due to selected product development delays,
lower sales to a key Asia Pacific customer and a continued aggressive pricing
environment, especially for notebook systems.
Worldwide revenues increased approximately one percent over the comparable
prior-year quarter. Sales of $227.5 million in the Americas were 19 percent
higher primarily because of increased consumer retail channel demand. Sales
within the company's Europe and Asia Pacific regions declined 14 percent due to
traditional seasonal slowdown and intensified competitive pressures.
"Our operating performance remains disappointing, but the numbers really do
not tell the story at AST right now," said Y.S. Kim, president and chief
executive officer. "In just eight weeks time, our new senior management team
has begun to aggressively address the key operational challenges that need to be
met in order to turn the company around. We believe that the actions being
implemented by AST will eventually have a positive impact on the bottom line."
Mr. Kim cited three current activities that are key to the success of AST's
strategy to return to profitability:
* The implementation of a clear operating strategy that centers on
strengthening AST's research and development capabilities, increasing
efficiency across the company and marketing more aggressively to end users.
* The long-term commitment from Samsung -- AST's largest shareholder -- as a
global strategic partner through continued financial support, the
realization of product component and branding synergies, and the sharing of
expertise, especially in the form of engineering, management and product
development talent.
* The continued endorsement of AST's turnaround program by major customers.
Mr. Kim pointed out that AST has maintained its business relationships with
major customers during the recent management transition, and that at least
two new relationships have been established since his tenure began -- one
to distribute AST products through a major retail consumer products chain,
and the other to supply systems to a Fortune 100 company.
ADDITIONAL SAMSUNG FINANCIAL SUPPORT
AST also announced it has entered into a non-binding letter of intent with
Samsung which contemplates that Samsung will provide an additional $200 million
in bank credit guarantees, in exchange for shares of AST non-voting preferred
stock. Subject to the execution of a definitive agreement, Samsung will provide
AST with a bank credit guarantee of $100 million in Dec. 1996 and an additional
$100 million in April 1997, both maturing on Dec. 31, 1998. These new
guarantees are in addition to AST's current $200 million in Samsung bank credit
guarantees extending through Dec. 31, 1997. Until the finalization of the new
credit guarantees, Samsung also has provided AST with a $50 million short-term
loan due on Dec. 19, 1996.
INVENTORY MANAGEMENT SUMMARY
AST continued its focus on improved inventory management, which has
resulted in a 45 percent reduction in inventory levels and a near doubling of
inventory turns over the past year. Total net inventory was $192.3 million,
down from $218.1 million at June 29, 1996 and represented inventory turns of
8.9. Accounts receivable totaled $344.4 million, which represented 76 days
sales outstanding. At Sept. 28, 1996, total cash and cash equivalents were $30.0
million, with $124.0 million in short-term borrowings.
NEW BOARD MEMBER
AST also announced that Roger W. Johnson, 62, past chairman, chief
executive officer and president at Western Digital Corp. and a former top
official for the U.S. General Services Administration (GSA) within the Clinton
Administration, was named to the company's Board of Directors. During an 11-
year tenure at Western Digital, he helped grow the company from revenues of
approximately $30 million, to multi-billion, Fortune 500 status.
REORGANIZATION SUMMARY
During the quarter and into October, AST implemented a management
reorganization that is designed to improve its future financial performance.
New executive appointments included that of Mr. Kim as president and chief
executive officer; Won Suk Yang as acting senior vice president, finance, and
chief financial officer; and Noh Byung (N.B.) Park as senior vice president,
worldwide product development and manufacturing.
To address end-user demand generation, AST created the Global Corporate
Marketing and Communications Group and established two senior-level positions to
lead the group's activities. The new function consolidates responsibilities for
global marketing and channel strategies, in addition to customer relations,
brand promotion, advertising and corporate communications.
AST also established the Product Planning Group to consolidate product
concept and life cycle management for all desktop, mobile and server brand
families.
OUTLOOK
"Disappointing results for this quarter have not diminished the intensity
of our turnaround efforts," said Mr. Kim. "Our goals for the remainder of the
year are to significantly increase our worldwide brand awareness efforts and re-
establish consistency in delivering products to our customers. Long-term, we
must continue to keep operational costs down, enhance customer recognition for
our products and strive to quickly bring the latest technologies to our
worldwide customer base, including systems based on Intel (R) Pentium(R) Pro
processors and Microsoft(R) Window's NT software."
FORWARD-LOOKING STATEMENTS
Statements contained in this press release which are not historical
information are forward-looking statements as defined within the Private
Securities Litigation Reform Act of 1995.
Such forward-looking statements are subject to risks and uncertainties
which could cause results to differ materially from those projected. Such
potential risks and uncertainties include, but are not limited to: the level of
competitive pricing pressures in the computer industry; the company's ability to
continue to develop, produce and deliver new products that incorporate leading-
edge PC technologies on a timely basis, that are competitively priced and
achieve significant market acceptance; the effect of any continued losses on the
company's supplier and customer relationships; and its ability to fund
continuing operations.
Additional factors which could affect the company's financial results are
included in the company's report on Form 10-K for Transition Period 1995, which
is filed with the Securities and Exchange Commission.
CORPORATE BACKGROUND
AST Research Inc., a member of the Fortune 500 list of America's largest
industrial and service companies, is one of the world's leading personal
computer manufacturers. The company develops a broad spectrum of desktop,
mobile and server PC products that are sold in more than 100 countries
worldwide. AST systems meet a wide range of customer needs, ranging from
corporate business applications to advanced home and home office use. Corporate
headquarters is located at 16215 Alton Parkway, P.O. Box 57005, Irvine, Calif.
92619-7005. Telephone (714) 727-4141 or (800) 876-4278. Fax: (714) 727-9355.
Information about AST and its products can be found on the World Wide Web at
http://www.ast.com.
# # #
AST(R), Advantage!(R), Ascentia and Bravo are trademarks of AST Research, Inc.
Intel and Pentium are registered trademarks, and Pentium Pro is a trademark of
Intel Corp. Windows is a registered trademark and Windows NT is a trademark of
Microsoft Corp.
AST RESEARCH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
September 28, December 30,
1996 1995
(In thousands) (Unaudited)
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 29,851 $ 125,387
Accounts receivable, net 344,361 392,598
Inventories 192,349 252,339
Other current assets 48,529 67,297
- --------------------------------------------------------------------------------
Total current assets 615,090 837,621
Property and equipment, net 94,747 98,725
Other assets 76,004 119,696
- --------------------------------------------------------------------------------
Total assets $ 785,841 $ 1,056,042
================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $ 599,134 $ 614,075
Long-term debt 128,563 125,540
Other non-current liabilities 6,911 5,545
- --------------------------------------------------------------------------------
Total liabilities 734,608 745,160
Common stock and additional capital 505,291 415,182
Retained earnings (deficit) (454,058) (104,300)
- --------------------------------------------------------------------------------
Total shareholders' equity 51,233 310,882
- --------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 785,841 $ 1,056,042
================================================================================
</TABLE>
AST RESEARCH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
---------------------------- -----------------------------
September 28, September 30, September 28, September 30,
(In thousands, except per share amounts) 1996 1995 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 408,483 $ 403,357 $ 1,467,214 $ 1,735,535
Revenue from related party - - 25,000 -
- ----------------------------------------------------------------------------------------------------------
Total revenue 408,483 403,357 1,492,214 1,735,535
Cost of sales 427,245 410,126 1,512,020 1,600,246
- ----------------------------------------------------------------------------------------------------------
Gross profit (loss) (18,762) (6,769) (19,806) 135,289
Selling, general and administrative expenses 78,020 75,193 243,634 236,826
Engineering and development expenses 8,873 9,566 29,032 27,399
Restructuring charge - - 6,527 -
Other charges 21,643 - 26,380 -
- ----------------------------------------------------------------------------------------------------------
Total operating expenses 108,536 84,759 305,573 264,225
- ----------------------------------------------------------------------------------------------------------
Operating loss (127,298) (91,528) (325,379) (128,936)
Financing and other expense, net (7,970) (4,854) (24,379) (14,873)
- ----------------------------------------------------------------------------------------------------------
Loss before income taxes (135,268) (96,382) (349,758) (143,809)
Income tax provision (benefit) - - - (9,248)
- ----------------------------------------------------------------------------------------------------------
Net loss $ (135,268) $ (96,382) $ (349,758) $ (134,561)
==========================================================================================================
Net loss per share $ (2.41) $ (2.36) $ (7.21) $ (3.83)
==========================================================================================================
Weighted average common shares outstanding 56,164 40,762 48,523 35,177
==========================================================================================================
</TABLE>
AST RESEARCH, INC.
COMPUTATION OF NET LOSS PER SHARE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
---------------------------- -----------------------------
September 28, September 30, September 28, September 30,
(In thousands, except per share amounts) 1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Primary loss per share
- ----------------------
Shares used in computing primary loss per share:
Weighted average shares of common stock
outstanding 56,164 40,762 48,523 35,177
Effect of stock options treated as common stock
equivalents under the treasury stock method - - - -
- -----------------------------------------------------------------------------------------------------------------
Weighted average common and common
equivalent shares outstanding 56,164 40,762 48,523 35,177
=================================================================================================================
Net loss $ (135,268) $ (96,382) $ (349,758) $ (134,561)
=================================================================================================================
Loss per share - primary $ (2.41) $ (2.36) $ (7.21) $ (3.83)
=================================================================================================================
Fully diluted loss per share
- ----------------------------
Shares used in computing fully diluted loss per share:
Weighted average shares of common stock
outstanding 56,164 40,762 48,523 35,177
Effect of stock options treated as common stock
equivalents under the treasury stock method - - - -
Shares assumed issued on conversion of
Liquid Yield Option Notes (LYONs) - - - -
- -----------------------------------------------------------------------------------------------------------------
Total fully diluted shares outstanding 56,164 40,762 48,523 35,177
Net loss - fully diluted earnings per share:
Net loss $ (135,268) $ (96,382) $ (349,758) $ (134,561)
Adjustment for interest on LYONs, net of tax - - - -
- -----------------------------------------------------------------------------------------------------------------
Adjusted net loss - fully diluted $ (135,268) $ (96,382) $ (349,758) $ (134,561)
=================================================================================================================
Loss per share - fully diluted $ (2.41) $ (2.36) $ (7.21) $ (3.83)
=================================================================================================================
</TABLE>
EXHIBIT 99.2
FOR IMMEDIATE RELEASE
Media & Analyst Contact: Emory Epperson
(714) 727-7958
ROGER W. JOHNSON, FORMER WESTERN DIGITAL CHAIRMAN & CEO
NAMED TO AST RESEARCH BOARD OF DIRECTORS
IRVINE, Calif., November 7, 1996 -- AST Research Inc. (ASTA -- NASDAQ) today
announced Roger W. Johnson, past chairman, chief executive officer and president
at Western Digital Corp. and a former top official for the U.S. General Services
Administration (GSA) within the Clinton Administration, was named to the
company's Board of Directors.
As president and CEO of Western Digital, Mr. Johnson, 62, led efforts to
establish the company as one of the premier manufacturers of personal computer
components and peripherals. Joining Western Digital in 1982 as president and
chief operating officer, he also was named a director in 1993 and shortly
thereafter was appointed CEO. During his tenure, he helped grow the company
from revenues of approximately $30 million, to multi-billion, Fortune 500
status.
"Roger is a perfect addition to our corporate governance team," said Y.S.
Kim, AST president and chief executive officer. "His successful administration,
turnaround and reinvention experience gained within the private and public
sectors is a great resource which we intend to utilize to the maximum extent in
our efforts to return to profitability."
Mr. Johnson, 62, served as GSA Administrator from 1993 to March 1996. In
June 1995, he was appointed by President Clinton to the National Economic
Council and also was a member of the President's Management Council, responsible
for ensuring implementation of many federal reinvention initiatives championed
by Vice President Al Gore.
Created in 1949, the General Services Administration sets federal policy in
the areas of information technology, telecommunications and automated data
processing, supply and service procurement and real property management and
acquisition. Mr. Johnson directed all functions of the federal agency, which
employs more than 16,000 and has financial responsibilities for more than $64
billion.
On the occasion of Mr. Johnson receiving an honorary doctorate degree from
Clarkson University, President Clinton said, "Roger has brought the skills he
developed so well in the private sector to his outstanding work at GSA, helping
us to improve the way our government works. He has truly used his success to
benefit others and I thank him for a job well done."
"I am very excited to help AST turn things around and plan on taking an
active role to assist where possible," said Mr. Johnson. "The excellent
relationships and working knowledge of both AST and Samsung Electronics that
have been developed over the years create a unique vantage point as an outside
director that will enable me to provide counsel and guidance in a variety of
areas."
In addition to AST, Mr. Johnson serves as a member of the Board of
Directors for Elexys International Inc. (Sunnyvale, Calif.), Group Technologies
(Tampa, Fla.), Insulectro, (Lake Forest, Calif.), and JTS Corp. (San Jose,
Calif.). He also has been appointed a Regent Lecturer of the University of
California, Irvine, where he teaches a graduate course titled "New Leadership
Roles," and with his wife Janice, is an active supporter of arts and
philanthropic organizations.
AST's Board of Directors is chaired by Kwang-Ho Kim, vice chairman,
president and CEO of Samsung Electronics. Other members include: Safi Qureshey,
AST co-founder and chairman emeritus; Y.S. Kim; Won Suk Yang, AST chief
financial officer (acting) and senior executive managing director, Samsung
Electronics; Bo-Soon Song, president and CEO, Samsung North America; Hyeon-Gon
Kim, executive vice president, strategic planning and management support office,
Samsung Electronics; Hee Dong Yoo, executive vice president and general manager,
information products, Samsung Electronics; Richard Goeglein, founder and
principal, Gaming Associates; and Jack W. Peltason, former president, University
of California.
AST Research Inc., a member of the Fortune 500 list of America's largest
industrial and service companies, is one of the world's leading personal
computer manufacturers. The company develops a broad spectrum of desktop,
mobile and server PC products that are sold in more than 100 countries
worldwide. AST systems meet a wide range of customer needs, ranging from
corporate business applications to advanced home and office use. Corporate
headquarters is located at 16215 Alton Parkway, P.O. Box 57005, Irvine,
California 92619-7005. Telephone (714) 727-4141 or (800) 876-4278. Fax (714)
727-9355. Information about AST and its products can be found on the World Wide
Web at http://www.ast.com.
# # #
EXHIBIT 99.3
October 11, 1996
AST Research, Inc.
16215 Alton Parkway
Irvine, California 92618
U.S.A.
Dear Sirs:
Samsung Electronics America, Inc. (the "Lender") hereby agrees to make a
loan to AST Research, Inc. (the "Borrower") in the principal amount of
US$50,000,000 (the "Loan") according to the terms of this letter agreement
(hereinafter referred to as the "agreement").
The Loan shall be evidenced by a promissory note of the Borrower
substantially in the form of Exhibit A hereto (as amended, supplemented or
modified from time to time, the "Note"), which shall represent the Borrower's
obligation to pay to the Lender the principal amount of US$50,000,000, with
interest thereon as prescribed below.
The Note shall bear interest at a fluctuating rate per annum equal to the
rate (the "Interest Rate") which is the sum of (i) one half of one percent
(0.5%) and (ii) either (a) the rate per annum determined by the Lender to be the
rate equal to the rate quoted on the Telerate Screen Page 3750 (or equivalent
successor to such page) for a period of two (2) months at or about 11:00 p.m.
(London time) on the day which is one business day prior to the date of the
borrowing on which dealings in deposits are carried on in the London interbank
market or (b) if no rate appears on such page, such rate per annum determined by
the Lender at its sole discretion as representing the cost of the Lender of
funding the outstanding principal amount of the Loan calculated on the basis of
a 360-day year of twelve 30-day months. Interest shall be calculated on the
basis of a 360 day year for actual days elapsed.
Any principal amount of the Loan that is not paid when due (whether as
stated or otherwise) shall thereafter bear interest at a rate per annum equal to
2% above the Interest Rate until paid in full (both before and after judgment).
The Lender shall be authorized to endorse the date and amount of the Loan
and all payments of principal on the Note on the Schedule attached thereto and
made a part thereof. The Lender's records shall constitute prima facie evidence
of the accuracy of the information so recorded, provided however, that the
failure to make any such endorsement shall not affect the obligation of the
Borrower under the Note. The Note shall be used to record the Loan and all
payments of principal under the Note until the Note is surrendered to the
Borrower by the Lender and the Note shall continue to be used and to be in full
force and effect even though there may be periods prior to surrender when no
amount of principal or interest is owing thereunder.
The Loan is payable in full on the earlier to occur of (a) December 19,
1996, (b) such date as the Borrower shall make a drawing under an additional
line of credit (above the Borrower's current $200 million bank line of credit)
to be provided or supported by the Lender or (c) such time as the Lender
declares the entire amount of the Loan due and payable in accordance with the
provisions of Section 4 of the Note.
The Borrower agrees (a) to pay or reimburse the Lender for all its costs
and expenses incurred in connection with the enforcement or preservation of any
rights under this agreement, the Note and any document or instrument executed
and delivered in connection therewith, including without limitation, fees and
disbursements of counsel to the Lender and (b) to pay, indemnify and hold the
Lender harmless from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this agreement and the Note.
This agreement shall be governed by and construed in accordance with the
laws of the State of California without regard to its conflict-of-laws
principals. The Borrower and the Lender agree that (a) any legal action or
proceeding arising out of or in connection with this Note or the transactions
contemplated hereby shall be brought exclusively in the courts of the State of
California or the Federal Courts of the United States of America sitting in
California, (ii) each irrevocably submits to the jurisdiction of each such
court, and (iii) any summons, pleading, judgment, memorandum of law, or other
paper relevant to any such action or proceeding shall be sufficiently served if
delivered to the recipient thereof by certified or registered mail (with return
receipt) at its address set forth in Section 7 of the Note. Nothing in the
preceding sentence shall affect the right of any party to proceed in any
jurisdiction for the enforcement or execution of any judgment, decree or order
made by a court specified in said sentence.
It is the intent of the Borrower and the Lender in the execution of this
Note and in all transactions related hereto to comply with the usury laws of the
State of California (or the usury laws of any other state that might be
determined by a court of competent jurisdiction to be applicable notwithstanding
such choice of law, hereinafter collectively referred to as "Usury Laws"). In
the event that, for any reason, it should be determined that the Usury Laws
apply to the Loan, the Borrower and the Lender stipulate and agree that none of
the terms and provisions contained herein shall ever be construed to create a
contract for use, forbearance or detention of money requiring payment of
interest at a rate in excess of the maximum interest rate permitted to be
charged by the Usury Laws, all such sums or property deemed to constitute
interest in excess of such maximum rate shall, at the option of the Lender, be
credited to the payment of the principal sum due hereunder.
If you agree with the terms of this agreement, please indicate your
agreement by signing below.
SAMSUNG ELECTRONICS AMERICA, INC.
By: /s/ BO-SOON SONG
-----------------------
Name: Bo-Soon Song
Title: Chief Executive Officer
ACCEPTED AND AGREED:
AST RESEARCH, INC.
By: /s/ WON SUK YANG
--------------------------------
Name: Won Suk Yang
Title: Senior Vice President and
Chief Financial Officer (Acting)
By: /s/ MARK P. DE RAAD
-------------------------------------
Name: Mark P. de Raad
Title: Vice President, Finance and Treasurer
PROMISSORY NOTE
October 11, 1996
Irvine, California
$50,000,000
FOR VALUE RECEIVED, AST Research, Inc., a Delaware corporation
("Borrower"), hereby unconditionally promises to pay to Samsung Electronics
America, Inc., a New York corporation ("Lender"), or assigns, at the address set
forth in Section 7 below, or at such other place as the holder hereof may from
time to time notify Borrower in writing, the principal sum of Fifty Million
DOLLARS ($50,000,000), together with interest from the date hereof, on the
outstanding principal amount at the rate set forth herein below, on the Maturity
Date (as defined below). Lender has lent to Borrower the sum of Fifty Million
DOLLARS ($50,000,000) on the date hereof.
1. The outstanding principal amount of this Note shall bear interest at
the rate per annum which is the sum of (i) one half of one percent (0.5%) and
(ii) either (a) the rate per annum determined by the Lender to be the rate equal
to the rate quoted on the Telerate Screen Page 3750 (or the equivalent
successor to such page) for a period of two (2) months at or about 11:00 p.m.
(London time) on the day which is one business day prior to the date hereof on
which dealings in deposits are carried on in the London interbank market or (b)
if no rate appears on such page, such rate per annum determined by the Lender at
its sole discretion as representing the cost of the Lender of funding the
outstanding principal amount hereof calculated on the basis of a 360-day year of
twelve 30-day months.
2. The principal sum of this Note, together with all accrued and unpaid
interest hereon and all other amounts due hereunder, shall be due and payable in
full on the earlier to occur of (a) December 19, 1996, (b) such date as Borrower
shall make a drawing under an additional line of credit (above the Borrower's
current $200 million bank line of credit) to be provided or supported by Lender
or (c) such time as Lender declares the entire amount of this Note due and
payable in accordance with the provisions of Section 4 hereof (such earlier
date, the "Maturity Date").
3. Principal and interest and all other amounts due hereunder shall be
payable in lawful money of the United States of America. Payments shall be
applied first to interest on past due interest, second to current due interest,
third to accrued interest, fourth to all other amounts (other than principal)
due hereunder, and fifth to principal. The undersigned may prepay all or part
of this Note at any time and from time to time without penalty.
4. An event of default ("Event of Default") hereunder shall occur if:
a. Borrower shall fail to pay any amount hereunder as and when due;
b. There shall be a default under any evidence of indebtedness for
borrowed money of Borrower or any of its subsidiaries having a
principal amount in excess of $2 million (i) resulting from the
failure to pay principal at maturity or (ii) as a result of which the
maturity of such indebtedness has been accelerated prior to its stated
maturity;
c. Borrower shall admit in writing its inability to pay or shall be
unable to pay its debts as they become due, or shall apply for a
receiver, trustee or similar officer with respect to all or a
substantial part of its property or shall institute by petition,
application, answer, consent or otherwise, any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debts, dissolution,
liquidation or similar proceedings relating to Borrower under the laws
of any jurisdiction; or
d. Any creditor of Borrower shall apply for a receiver, trustee or
similar officer with respect to all or a substantial part of
Borrower's property or shall institute by petition, application,
answer, consent or otherwise, any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debts, dissolution,
liquidation or similar proceedings relating to Borrower under the laws
of any jurisdiction, and such petition, bankruptcy, or other
proceeding shall not be stayed, bonded or discharged within sixty (60)
days.
Upon the occurrence of any Event of Default, and at such time as any Event
of Default is continuing, (i) if such event is an Event of Default specified in
clause (c) or (d) above, this Note shall automatically and immediately become
due and payable and (ii) if such event is any other Event of Default, the
holder hereof, at its option, may declare all sums due hereunder immediately due
and payable by sending a notice of default to Borrower.
5. No failure or delay on the part of the holder of this Note or the
failure to exercise any power or right under this Note shall operate as a waiver
of such power or right or preclude other or further exercise thereof or the
exercise of any other power or right. No waiver by the holder of this Note will
be effective unless and until it is in writing and signed by such holder. No
waiver of any condition or performance will operate as a waiver of any
subsequent condition or obligation. Except as provided herein, the undersigned
hereby waives diligence, presentment, demand for payment, notice of dishonor or
acceleration, protest and notice of protest, and any and all other notices or
demands in connection with delivery, acceptance, performance, default or
enforcement of this Note.
6. In the event that any action, suit or other proceeding is instituted
concerning or arising out of this Note, the prevailing party shall recover all
of such party's costs, and reasonable attorneys' fees incurred in each and every
such action, suit, or other proceeding, including any and all appeals or
petitions therefrom.
7. Notices required or permitted to be given under this Note to any party
hereto by any other party shall be in writing and shall be deemed to have been
duly delivered and given when personally delivered to the party (including by
express courier service) or sent by facsimile transmission at the address or
number set forth below, or any such other address or number as shall be given in
writing by the respective party to all other parties:
Borrower: AST Research, Inc.
16215 Alton Parkway
Irvine, California 92618
Attention: Chief Financial Officer
Fax Number: (714) 727-8584
With a copy to: AST Research, Inc.
16215 Alton Parkway
Irvine, California 92618
Attention: General Counsel
Lender: Samsung Electronics America Inc.
105 Challenger Road
Ridgefield Park
New Jersey 07660
Attention: Finance Manager
Fax No. (201) 229-7030
With a copy to: Samsung Electronics America Inc.
105 Challenger Road
Ridgefield Park
New Jersey 07660
Attention: Un Suk Ko
Fax No. (201) 229-7030
8. This Note, its validity, construction and effect, shall be governed
by, construed under and enforced in accordance with, the laws of the State of
California without regard to its conflict-of-laws principals. Borrower and
Lender agree that (i) any legal action or proceeding arising out of or in
connection with this Note or the transactions contemplated hereby shall be
brought exclusively in the courts of the State of California or the Federal
Courts of the United States of America sitting in California, (ii) each
irrevocably submits to the jurisdiction of each such court, and (iii) any
summons, pleading, judgment, memorandum of law, or other paper relevant to any
such action or proceeding shall be sufficiently served if delivered to the
recipient thereof by certified or registered mail (with return receipt) at its
address set forth in Section 7 hereof. Nothing in the preceding sentence shall
affect the right of any party to proceed in any jurisdiction for the enforcement
or execution of any judgment, decree or order make by a court specified in said
sentence.
9. It is the intent of Borrower and Lender in the execution of this Note
and in all transactions related hereto to comply with the usury laws of the
State of California (or the usury laws of any other state that might be
determined by a court of competent jurisdiction to be applicable notwithstanding
such choice of law, hereinafter collectively referred to as "Usury Laws"). In
the event that, for any reason, it should be determined that the Usury Laws
apply to the loan evidenced hereby, Borrower and Lender stipulate and agree that
none of the terms and provisions contained herein shall ever be construed to
create a contract for use, forbearance or detention of money requiring payment
of interest at a rate in excess of the maximum interest rate permitted to be
charged by the Usury Laws. In such event, if Lender shall collect monies or
other property which are deemed to constitute interest which would otherwise
increase the effective interest rate on this Note to a rate in excess of the
maximum rate permitted to be charged by the Usury Laws, all such sums or
property deemed to constitute interest in excess of such maximum rate shall, at
the option of Lender, be credited to the payment of the principal sum due
hereunder.
10. This Note shall not be assignable by Borrower. This Note shall be
assignable by Lender and all provisions of this Note shall inure to the benefit
of Lender and all of its successors and assigns.
IN WITNESS WHEREOF, the undersigned has caused this Note to be duly
executed and delivered as of the day and year first above written.
AST RESEARCH, INC.
By: /s/ WON SUK YANG
--------------------------------
Name: Won Suk Yang
Title: Senior Vice President and
Chief Financial Officer (Acting)
By: /s/ MARK P. DE RAAD
-------------------------------------
Name: Mark P. de Raad
Title: Vice President, Finance and Treasurer
EXHIBIT 99.4
AST RESEARCH, INC.
16215 Alton Parkway
Irvine, California 92718
November 6, 1996
Samsung Electronics Co., Ltd.
Samsung Main Building
250, 2-Ka, Taepyung-Ro, Chung-Ku
Seoul, Korea 100-742
Gentlemen:
This letter confirms our mutual understandings regarding certain
support arrangements to be implemented by Samsung Electronics Co., Ltd., a
Korean corporation ("Samsung"), and AST Research, Inc., a Delaware corporation
("AST"), and also sets forth our understandings with respect to certain matters
related thereto. Except for the agreements set forth in paragraph 3 below,
which are intended to be binding, this letter and the transactions described
herein are not to be considered as a legally binding or enforceable agreement of
either AST or Samsung. Rather, this letter will serve to assist the parties in
negotiating and entering into enforceable Definitive Agreements. Subject to the
foregoing, our understanding is as follows:
1. The Support Arrangements. Subject to the terms and conditions of
definitive agreements to be entered into between AST and Samsung (all such
agreements and other instruments, the "Definitive Agreements"), Samsung, or one
or more wholly-owned subsidiaries of Samsung designated by Samsung, will provide
the support arrangements and Samsung and AST will enter into the other
transactions consistent with the terms set forth in this letter.
2. Definitive Agreements. AST and Samsung shall enter into as
expeditiously as possible the Definitive Agreements pertaining to Issuance of
Preferred Shares and Supplemental Samsung Support Transactions, each of which
shall be consistent with the terms set forth in this letter. The Supplemental
Samsung Support Transactions shall include Samsung providing supplemental
guarantees for one or more bank lines of credit for AST, such supplemental
guarantees to be in addition to the current US$ 200 million bank credit line
guarantee provided by Samsung to AST which expires on Dec. 31, 1997. The
supplemental guarantees to be provided by Samsung shall include a first part
being for US$ 100 million in credit starting on Dec. 1, 1996, and a second part
being for an additional US$ 100 million in credit starting on April 1, 1997;
with both parts of the supplemental guarantees extending until Dec. 31, 1998.
The intention is that, including the current guarantee and the supplemental
guarantees described in this letter, Samsung is guaranteeing bank credit lines
for AST in a total amount of US$ 300 million starting on Dec. 1, 1996, which
increases to US$ 400 million on April 1, 1997, which decreases to US$ 200
million on Dec. 31, 1997, and which ends on Dec. 31, 1998. The Supplemental
Samsung Support Transactions shall also require AST to repay to Samsung
Electronics America, Inc. the US$ 50 million bridge loan which was provided to
AST on October 11, 1996, and require that such repayment be made promptly upon
the availability of funds under the credit line(s) supported by the supplemental
guarantees, at which time the promissory note evidencing such bridge loan shall
be canceled. The Issuance of Preferred Shares is intended to be in
consideration of the Supplemental Samsung Support Transactions, and shall
include the issuance by AST of shares of non-voting preferred stock of AST, with
an agreed upon valuation of approximately US$ 15 million. Such shares of
preferred stock shall not be subject to any mandatory redemption, but shall be
redeemable by AST, at the option of the independent directors of AST, beginning
in 1999 for cash, or through the issuance of shares of AST common stock. The
exact valuation and redemption provisions of the Preferred Shares are subject to
further review by both AST and Samsung, and approval by the independent
directors of the board of directors of AST, and the valuation amount to be
provided for in the Definitive Agreements may be greater than or less than the
approximate amount stated in this letter of intent. The shares of such AST
preferred stock shall have a cumulative dividend which begins accruing in 1999,
at a rate to be agreed upon.
The transactions contemplated hereby shall be subject to the final
approval of the Independent Directors on the Board of Directors of AST and, if
so desired by the Independent Directors or the full Board of Directors of AST,
to the receipt by the Board of Directors of AST of a fairness opinion, in form
and substance satisfactory to the Independent Directors, from a nationally
recognized investment banking firm selected by the Independent Directors.
3. Public Announcements. Neither the parties nor their respective
agents shall make any public announcement with respect to this Letter of Intent
or the transactions contemplated hereby, except as required by applicable law,
without prior consultation with the other party. The parties agree to make all
filings required under the securities laws in connection with this Letter of
Intent.
4. Governing Law. This Letter of Intent shall be governed by and
construed in accordance with the laws of the State of California applicable to
contracts to be performed in such state.
If the foregoing is in accordance with your understanding, please
return a signed copy of this letter to the undersigned.
Very truly yours,
AST RESEARCH, INC.
By: /s/ YOUNG SOO KIM
----------------------------------
Name: Young Soo Kim
Title: President, Chief Executive Officer
Accepted and agreed to:
SAMSUNG ELECTRONICS CO., LTD.
By: /s/ HYEON-GON KIM
------------------------
Name: Hyeon-Gon Kim
Title: Executive Vice President
