SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement |_| Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(c)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
RTI INC. .
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|x| $125 per Exchange Act Rules 0-11(c)(1)(ii), 14-a6(I)(1), or
14a-6(I)(2) or Item 22(a)(2) of Schedule 14A.
|_| $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(I)(3),
|_| Fee computed on table below per exchange Act Rules 14a-6(I)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
of the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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RTI INC.
300 Antone Rd.
Sunland Park, NM 88063
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON July 21, 1998
To the stockholders of RTI Inc.:
Notice is hereby given that the Annual Meeting of Stockholders ("Annual
Meeting") of RTI Inc., a New York corporation ("Company"), will be held at the
offices of the Company at 301 Antone Rd., Sunland Park, NM 88063 on July 21,
1998, at the hour of 11:00 local time for the following purposes:
(1) To elect six directors for a one year term expiring in 1999;
(2) To ratify the purchase of certain assets from Bacchus
Industries, Inc., an affiliated company, in exchange for
350,000 shares of the Company's Common Stock;
(3) To approve a private placement of up to 576,925 shares of 10%
convertible preferred stock at a purchase price of $2.60 per
share on the terms described herein;.
(4) To approve the granting of performance options for up to
1,564,000 shares of Common Stock to certain members of
management of the Company; and
(5) To transact such other business as may properly come before the
Meeting.
Only stockholders of record at the close of business on June 15, 1998
are entitled to notice of and to vote at the meeting or any continuation or
adjournment thereof.
By Order of the Board of Directors
Rocky Bacchus, Secretary
June 15, 1998
IF YOU WISH TO VOTE IN FAVOR OF EACH OF THE PROPOSALS AND FOR THE
NOMINEES PRESENTED, CHECK THE APPROPRIATE BOX AND SIGN, DATE AND RETURN
THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE
IF MAILED IN THE UNITED STATES. IN ANY EVENT, YOUR PROMPT RETURN OF A
SIGNED AND DATED PROXY WILL BE APPRECIATED.
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ANNUAL MEETING OF STOCKHOLDERS
OF
RTI Inc.
July 21, 1998
-----------------
PROXY STATEMENT
-----------------
GENERAL INFORMATION
Proxy Solicitation
This Proxy Statement is furnished to the holders of Common
Stock, $.08 par value per share ("Common Stock"), of RTI Inc. ("Company") in
connection with the solicitation of proxies on behalf of the Board of Directors
of the Company for use at the Annual Meeting of Stockholders ("Annual Meeting")
to be held on July 21, 1998, or at any continuation or adjournment thereof,
pursuant to the accompanying Notice of Annual Meeting of Stockholders. The
purpose of the meeting and the matters to be acted upon are set forth in the
accompanying Notice of Annual Meeting of Stockholders. The Board of Directors
knows of no other business which will come before the meeting.
Proxies for use at the meeting will be mailed to stockholders
on or about June 16, 1998 and will be solicited chiefly by mail, but additional
solicitation may be made by telephone, telegram or other means of
telecommunications by directors, officers, consultants or regular employees of
the Company. The Company may enlist the assistance of brokerage houses,
fiduciaries, custodians and other like parties in soliciting proxies. All
solicitation expenses, including costs of preparing, assembling and mailing the
proxy material, will be borne by the Company.
Revocability and Voting of Proxy
A form of proxy for use at the meeting and a return envelope
for the proxy are enclosed. Stockholders may revoke the authority granted by
their execution of proxies at any time before their effective exercise by filing
with the Secretary of the Company a written revocation or duly executed proxy
bearing a later date or by voting in person at the meeting. Shares represented
by executed and unrevoked proxies will be voted in accordance with the choice or
instructions specified thereon. If no specifications are given, the proxies
intend to vote "FOR" each of the Proposals set forth herein. Proxies marked as
abstaining will be treated as present for purposes of determining a quorum for
the Annual Meeting, but will not be counted as voting in respect of any matter
as to which abstinence is indicated. If any other matters properly come before
the meeting or
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any continuation or adjournment thereof, the proxies intend to vote in
accordance with their best judgment.
Record Date and Voting Rights
Only stockholders of record at the close of business on June
15, 1998 are entitled to notice of and to vote at the Annual Meeting or any
continuation or adjournment thereof. Each share of Common Stock is entitled to
one vote per share. Any share of Common Stock held of record on June 15, 1998
shall be assumed by the Board of Directors to be owned beneficially by the
record holder thereof for the period shown on the Company's stockholder records.
The affirmative vote of a plurality of the shares present in person or by proxy
at the meeting is required for the election of the directors and the affirmative
vote of a majority of the shares present is required for the approval of each of
the other Proposals being presented at the Annual Meeting.
The Directors and the executive officers of the Company own
approximately 18.14% of the Company's outstanding Common Stock and have
indicated their intent to vote their shares in favor of each of the Proposals to
be presented at the Annual Meeting.
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PROPOSAL NO.1
ELECTION OF DIRECTORS
The By-Laws of the Company provide for a Board of Directors of
not less than three (3) or more than nine (9) members. The Board of Directors
currently consists of four (4) members. At the Annual Meeting, six directors
will be elected to serve until the 1999 Annual Meeting of Stockholders and until
their successors have been elected and qualified. Present vacancy or vacancies
which occur during the year may be filled by the Board of Directors, and any
directors so appointed must stand for reelection at the next annual meeting of
stockholders. The nominees to be voted on by stockholders are Messrs. Rick,
Rockney and Ronald Bacchus, Dr. Lanny Snodgrass, Mr. Joel S.
Kanter and Mr. Alexander D. Williams.
All current directors have been nominated for reelection by
the Company's present directors. All nominees have consented to be named and
have indicated their intent to serve if elected. The Company has no reason to
believe that any of these nominees are unavailable for election. However, if any
of the nominees become unavailable for any reason, the persons named as proxies
may vote for the election of such person or persons for such office as the Board
of Directors of the Company may recommend in the place of such nominee or
nominees. It is intended that proxies, unless marked to the contrary, will be
voted in favor of the election of Messrs. Rick, Rockney and Ronald Bacchus, Dr.
Lanny Snodgrass, Mr. Joel S. Kanter and Mr. Alexander D.
Williams.
NOMINEES FOR ELECTION
Rick E. Bacchus (age 44) has been a Director of the Company since
February 24, 1997 and was elected President of the Company and President of
Refrigeration Technology, Inc., the Company's wholly-owned subsidiary
("RefTech") effective February 24, 1997. From November 1996 until February 24,
1997, Mr. Bacchus was president of QAI, and for the ten months prior thereto was
employed by QAI as an independent consultant. Mr Bacchus has been president of
Bacchus Industries, Inc. ("BII"), a predecessor of QAI, since 1977, although BII
discontinued its active business operations in December 1995.
Rockney D. Bacchus (age 42) has been a Director of the Company since
February 24, 1997 and was elected Vice President-Development and Secretary of
the Company effective February 24, 1997. From November 1996 until February 24,
1997, Mr. Bacchus was vice president of QAI, and for the ten months prior
thereto was employed by QAI as an independent consultant. Mr. Bacchus has been a
vice president of BII since 1977.
Ronald A. Bacchus (age 40) has been a Director of the Company since
February 24, 1997 and was elected Vice President of the Company and Vice
President-Manufacturing of RefTech effective February 24, 1997. From November
1996 until February 24, 1997, Mr. Bacchus was vice president of QAI, and for the
ten months prior thereto was employed by QAI as an independent consultant. Mr.
Bacchus has also been a vice president of BII since 1978.
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Dr. Lanny Snodgrass (age 57) was elected a director of the Company on
January 31, 1998. Dr. Snodgrass has been a practicing psychiatrist and physician
with chief status at the VA Puget Sound Health Care System since 1996, and on
the faculty of the University of Washington School of Medicine, Department of
Behavioral Sciences since 1997. Prior to 1996, Dr. Snodgrass was an Assistant
Professor at the UCLA School of Medicine.
Mr. Joel S. Kanter (age 41) has served as a Director and as the
President of Walnut Financial Services, Inc. ("Walnut"), a Business Development
Company registered under the Investment Company Act of 1940, as amended, since
February 27, 1995 and as the Chief Executive Officer of Walnut since April 15,
1996. From 1988 to February 27, 1995, Mr. Kanter was a consultant to Walnut
Capital Corp., a wholly-owned subsidiary of Walnut. Mr. Kanter has served as
President of Windy City, Inc., a privately held investment firm, since July
1986. Mr. Kanter currently serves on the Boards of Directors of GranCare, Inc.,
I-Flow Corporation, Osteoimplant Technology, Inc., Encore Medical Corporation
and Vitalink Pharmacy Services, Inc., each of which is a publicly-held company,
as well as a number of private concerns.
Mr. Alexander D. Williams (age 34) has served since 1995 in the Private Client
Services division of Morgan Stanley & Co., Inc. where he advises individuals and
foundations on the capital markets. From 1992 to 1994, he worked in strategic
marketing and sales for Bausch & Lomb, Inc. Mr. Williams has an MBA from the
Wharton School of Business and is a Trustee of the U.S. Olympic Foundation.
Pursuant to the Acquisition Agreement dated February 24, 1997, in which
the Company acquired the business of QAI, the Company agreed that, during the
period ending December 31, 2001, Rick E. Bacchus, Rockney D. Bacchus and Ronald
A. Bacchus, as a group, will have the non- assignable right to nominate three
members to the Company's Board of Directors, which consisted of seven members at
the time such agreement was entered into. Rick E. Bacchus, Rockney D. Bacchus
and Ronald A. Bacchus are currently serving as directors pursuant to such
agreement.
The Company pays its directors (other than full-time employees of the
Company) at the rate of $6,000 per year and reimburses its directors for their
out-of-pocket expenses incurred in connection with their services to the
Company.
No family relationship exists among the directors of the Company or
between any of such persons and the executive officers of the Company, except
that Rick E. Bacchus, Rockney D.
Bacchus and Ronald A. Bacchus are brothers.
During 1997 the Board of Directors held six meetings and acted three
times by unanimous written consent.
The Company has an audit committee currently comprised of Dr. Snodgrass.
If elected, Mr. Williams intends to also serve on the audit committee.
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The Board of Directors recommends that the stockholders vote "FOR" the
six foregoing nominees (Item No. 1 on the proxy card).
Executive Compensation.
The following table sets forth the total compensation paid during the
fiscal year ended December 31, 1997 to the Company's acting Chief Executive
Officer. No other officer was compensated at a rate in excess of $100,000 per
year.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SUMMARY COMPENSATION TABLE
Name and Year Annual Compensation
Principal
Position
Salary ($) Bonus Other
($) ($)
------------------ ---------------
Rick E. Bacchus 1997 80,000 3,077
/ CEO (1)
1996 6,000
Theo W. Muller
/ CEO 1995 6,000
</TABLE>
------------------------
(1) Mr. Bacchus is serving as the Company's acting Chief Executive Officer
since the resignation of Theo W. Muller on January 26, 1998, is
currently being compensated at the rate of $95,000 per year and has the
use of a Company-owned vehicle having a value of approximately $3,500.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
Pursuant to employment agreements between RefTech and each of Rick E.
Bacchus, Rockney D. Bacchus and Ronald A. Bacchus, such persons have been
employed as President, Vice President- Development and Vice
President-Manufacturing, respectively, of RefTech for a five year term
commencing February 24, 1997 at an annual base salary of $80,000, which was
increased to $95,000 per year (effective March 1, 1998) by the Board of
Directors on March 31, 1998, with Messrs Rick, Rockney and Ronald Bacchus
abstaining. In his employment agreement, Rick E. Bacchus also has been employed
as President of the Company for the term of such agreement. Each of the
employment agreements provides that upon a termination of employment thereunder
without cause, the terminated
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employee is entitled to a continuation of salary for a period of two months in
lieu of any other entitlements.
On February 24, 1997, RefTech acquired the business and substantially
all of the assets of QAI. In connection therewith, RefTech agreed to deliver to
QAI up to an additional 225,000 shares of the Company's Common Stock at such
time as certain operating results are achieved, if such results are achieved
prior to January 1, 2002. The Company has agreed that, in the event of an
unsolicited bona-fide tender offer for a majority of the Company's then
outstanding Common Stock initiated prior to January 1, 2002, which the Company's
Board of Directors determines not to recommend to the Company's stockholders,
such shares will be delivered even if such results have not yet been achieved.
Rick E. Bacchus, Rockney D. Bacchus and Ronald A. Bacchus currently own
substantially all of the capital stock of QAI.
The Company does not have any other employment agreement or termination
or change in control arrangement with any of its executive officers.
1987 Stock Option Plan
The Company's 1987 Stock Option Plan ("1987 Plan") was adopted by the
Board of Directors of the Company on November 4, 1987 and approved by the
stockholders of the Company on May 25, 1988. The 1987 Plan, as amended,
authorized the issuance of options for up to 90,625 shares of Common Stock
(subject to adjustment in certain circumstances) to such key employees or other
individuals (including executive officers and directors of and consultants to
the Company) who have performed, or reasonably may be expected to perform,
services of special importance to the management, operation or development of
the business of the Company. The 1987 Plan expired by its terms on November 3,
1997 and, as of December 31, 1997, had 5,500 options outstanding. Such options
expire in August 2002.
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Security Ownership of Certain Beneficial Owners and Management.
As of March 25, 1998, the Company had 1,606,166 shares of Common Stock
outstanding. Set forth below is information, as of such date, with respect to
(i) each person who is known by the Company to be the beneficial owner of more
than 5% of the Common Stock, (ii) each of the current directors of the Company,
and (iii) the beneficial ownership of Common Stock of all current directors and
all executive officers of the Company, as a group.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Number of Shares Percent
Name and Address of Owner of Common Stock of Class
Quality Air, Inc. 235,000 (a) 14.63%
c/o Rick E, Bacchus
301 Antone Street
Sunland Park, NM 88063
Rick E. Bacchus 84,568 (b) 5.26%
301 Antone Street
Sunland Park, NM 88063
Rockney D. Bacchus 84,567 (c) 5.26%
301 Antone Street
Sunland Park, NM 88063
Ronald A. Bacchus 84,566 (d) 5.26%
301 Antone Street
Sunland Park, NM 88063
Dr. Lanny Snodgrass 38,250 (e) 2.36%
8227 Juanita Drive
Kirkland, WA 98034
Joel S. Kanter -0- --
Walnut Financial Services
8000 Towers Crescent Drive
Vienna, VA 22182
Alexander D. Williams -0- --
Morgan Stanley & Co., Inc.
1211 Ave. of the Americas
New York, NY 10020
Theo W. Muller 155,393 (f) 9.67%
20 Peach Hill Road
Darien, CT 06820
All directors and executive 291,951 (g) 18.14%
officers, as a group (six persons)
</TABLE>
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(a) Includes 50,000 shares of Common Stock held in escrow to cover possible
indemnifications claims, but excludes up to 225,000 additional shares
which may be issued to QAI if the Company achieves certain operating
results. Rick E. Bacchus, Rockney D. Bacchus and Ronald A. Bacchus,
directors and executive officers of the Company, are stockholders of
QAI. Each of such persons claims beneficial ownership in approximately
33.2% of the shares held by QAI, and although he may be deemed to
beneficially own the remaining shares held of record by QAI, disclaims
beneficial ownership in such remaining shares.
(b) Consists of approximately 33.2% of the shares of Common Stock held by
QAI (see note (a) to this table), 4,417 shares of Common Stock and a
Redeemable Warrant to purchase 2,209 shares of Common Stock at a price
of $4.50 per share expiring in March 2003.
(c) Consists of approximately 33.2% of the shares of Common Stock held by
QAI (see note (a) to this table), 4,417 shares of Common Stock and a
Redeemable Warrant to purchase 2,208 shares of Common Stock at a price
of $4.50 per share expiring in March 2003.
(d) Consists of approximately 33.2% of the shares of Common Stock held by
QAI (see note (a) to this table), 4,416 shares of Common Stock and a
Redeemable Warrant to purchase 2,208 shares of Common Stock at a price
of $4.50 per share expiring in March 2003.
(e) Consists of 25,500 shares of Common Stock and a Redeemable Warrant to
purchase 12,750 shares of Common Stock at a price of $4.50 per share
expiring in March 2003.
(f) Consists of (i) 130,393 shares directly owned by Theo W. Muller, the
Company's former Chairman and (ii) 25,000 shares directly owned by
Frellum Corporation, which is 50.1% owned by Mr. Muller. See Item 12 -
"Certain Relationships and Related Transactions."
(g) Includes the shares referenced in notes (b), (c), (d) and (e) above.
The Company does not know of any arrangements, including any pledge by
any person of securities of the Company, the operation of which at a subsequent
date may result in a change in control of the Company.
Certain Relationships and Related Transactions.
On February 24, 1997, the Company's wholly-owned subsidiary, RefTech,
in the QAI Transaction, acquired the business and substantially all of the
assets of QAI for the consideration set forth therein. The Company has been
advised by QAI that the stockholders of QAI had a basis in their investment in
QAI of approximately $150,000 and that the stockholders of QAI's affiliate,
Industrias QAI, had a nominal basis in their investment in such company. The
tangible assets of QAI, as of February 23, 1997, consisted primarily of
approximately (i) $170,000 of inventory (a portion of which was at Industrias
QAI), (ii) $159,000 of furniture, equipment and vehicles, (ii)$229,000 of loans
to and receivables from Industrias QAI, (iv) $348,000 of third party
receivables, (v) $123,000 of other assets, and (vi) $17,000 of cash. The
intangible assets of QAI consisted primarily of a pending US patent
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application, know-how and other good will. The patent was assigned to QAI by
Rockney D. Bacchus and relates to high-efficiency central air conditioners.
In the QAI Transaction, RefTech assumed certain specified liabilities
of QAI, consisting of QAI's (i) indebtedness to the Company aggregating $690,000
plus accrued interest, which was incurred by QAI prior to its December 1996
letter of intent with the Company, (ii) indebtedness to Theo W. Muller, Chief
Executive Officer and Chairman of the Company during 1997, and his affiliated
companies, aggregating $830,000 plus accrued interest, which loans were made in
contemplation of, and to facilitate, the closing of the QAI Transaction, (iii)
QAI purchase commitments incurred in the ordinary course of QAI's business for
inventories, supplies and services aggregating approximately $1,300,000, and
(iv) other QAI scheduled liabilities incurred in the ordinary course of QAI's
business aggregating approximately $276,000.
As part of the QAI Transaction, RefTech entered into employment
agreements with Rick E. Bacchus, Rockney D. Bacchus and Ronald A. Bacchus, each
of whom became a director and executive officer of the Company upon the
consummation of the QAI Transaction. In addition, RefTech continued the
employment of Phillis Bacchus, the wife of Rick E. Bacchus, who handled
personnel administration and certain bookkeeping functions for QAI and who has
assumed similar responsibilities for RefTech, at a salary of $28,730 per annum.
RefTech also agreed to lend Rick E. Bacchus, Rockney D. Bacchus and
Ronald A. Bacchus, collectively, up to an aggregate of $240,000, repayable with
interest at 1% over prime during the period ending December 31, 2001, which
loans are to be secured by their respective shares of the Company's Common Stock
received by QAI in the QAI Transaction upon distribution of such shares to them
by QAI in liquidation of QAI. As of December 31, 1997, an aggregate of $60,506
(in four (4) separate transactions) had been loaned to Rick E. Bacchus and
Phillis Bacchus, jointly, pursuant to such arrangement, except that repayment
thereof is over the five year period from the date of the respective loan and
the loans are to be secured by the makers' shares of QAI stock until such time
as the Company's Common Stock is distributed to them by QAI. In addition, each
of Rockney and Ronald Bacchus borrowed $9,747 from the Company on substantially
the same terms.
RefTech leases its Sunland Park, New Mexico facility from BII. As part
of the QAI Transaction, BII granted the right to RefTech to acquire, at fair
market value (which is less than acquisition cost), certain equipment and
vehicles which had been used by QAI. At the present time, RefTech has the use of
such equipment without any cost, until it determines whether to acquire such
equipment. The Company is leasing such vehicles at a cost of $700 per month. As
set forth in Proposal No. 2 herein, the Board of Directors now believes that it
is in the Company's best interest to purchase such assets in exchange for
350,000 shares of the Company's Common Stock.
In contemplation of the consummation of the QAI Transaction, Theo W.
Muller, the Company's former Chairman and Chief Executive Officer and a former
director of the Company, and his affiliated companies, lent QAI an aggregate of
$870,000 with interest thereon at the rate of 8.5% per annum. Upon consummation
of the QAI Transaction, such indebtedness was assumed by RefTech, the principal
amount was repaid in full on February 24, 1997, and approximately $5,650 of
accrued interest thereon remains outstanding.
9
<PAGE>
The Company has two other notes outstanding relating to Mr. Muller, one
for $543,000 in favor of Mr. Muller ("Muller Note") and another for $50,000 in
favor of Frellum Corporation ("Frellum Note"), 51% of which is owned by Mr.
Muller. These notes, which were due on February 20, 1998, were renegotiated
effective February 21, 1998, for principal and accrued interest in the amounts
of $588,383 and $53,022, respectively. The terms of the Muller Note are 12%
interest per annum, payable quarterly, and principal installments of $100,000
each six months beginning August 20, 1998, until the principal is fully paid.
The terms of the Frellum Note are 12% interest per annum, with a payment of
$26,511 due on August 20, 1998, and the balance along with accrued interest due
and payable on October 29, 1998.
In April 1998, the Company consummated a bridge financing with gross
proceeds of $541,502. Of such proceeds, $27,712.83 was used to prepay principal
on the Frellum Note and accrued interest thereon up to April 29, 1998. Such
payment relieves the Company's obligation to make the aforementioned August 20,
1998 payment on the Frellum Note. Should the Company complete a private
placement of equity securities, the Company will prepay $143,000 in principal on
the Muller Note and be relieved of the first payment on such note due August 20,
1998.
In addition, the Company has granted Mr. Muller (i) a perfected
security interest in two (2) of its patents and one (1) of its patent
applications to secure the payment of the Muller Note and (ii) the right to
receive a five (5) year warrant to purchase 50,000 shares of Common Stock at an
exercise price of $4.50 per share if principal and interest on the Muller Note
are not paid in full by December 31, 1998.
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<PAGE>
PROPOSAL NO. 2
PURCHASE OF ASSETS FROM BACCHUS INDUSTRIES, INC.
To manufacture its products, the Company requires certain molds, tools,
and other manufacturing and transportation equipment (collectively the "Assets")
owned by BII, which is controlled by Messrs. Rick, Rocky, and Ronald Bacchus.
The Company has been using the Assets since February, 1997 without payment
therefor. Management believes that it is in the Company's best interests to
purchase the Assets because the Company would otherwise be required to purchase
replacement equipment at prices management believes would be in excess of the
proposed purchase price for the Assets. Furthermore, management believes that
the process of replacing the Assets would disrupt production and result in a
loss of revenues.
The Company manufactures several air cooling and air conditioning
product lines which are presently produced partially with the use of the Assets.
Such product lines include Aireze, E2Pak, Evapcon and the AC2. The Assets fall
into essentially three categories: 1) molds and plugs, 2)
manufacturing equipment, and 3) office furniture and equipment.
The manufacturing methods used to produce the Aireze, AC2, and E2Pak
product lines rely heavily on molds and plugs. Plugs are a permanent mirror
image of a fiberglass component, which is used to make a mold. Workers spray the
molds with fiberglass to form each component. The skill of the worker in this
spray technique, and the quality of the mold, determine the mechanical strength
and aesthetic appearance of the finished product. These molds have been
maintained for all prior models, because the Company's ability to replace these
parts provides customers with assurance that products being sold currently will
also be supported in future years. The molds and plugs have little resale value
outside their use in the ongoing business but permit the continued production of
such product lines.
A significant amount of manufacturing equipment is being used at the
Company's facilities in various work centers where individual components of the
Company's products are manufactured or assembled. These include conveyor lines,
air compressors, resin spray equipment, chopper guns, catalyst injectors, hydro
injectors, drilling jigs, propane tanks, extractors, air handling and dust
removal equipment, vacuum-formers, electrical service and manufacturing
equipment. While not all state of the art manufacturing equipment, certain of
the Assets are currently in place producing the fiberglass components used in
the Company's products.
Certain of the Assets include office furniture and equipment which is
presently being used by the Company. While the resale value is of such items is
nominal, without such equipment, the Company would be forced to replace it at
current market prices.
The Assets are located at the Company's facilities in Juarez, Mexico,
Westway, Texas and Sunland Park, New Mexico and include certain items which may
be outdated and/or not usable by the Company for any purpose.
While BII's records are incomplete and a complete schedule of the
Assets cannot be set forth, the Assets had a historical recorded cost in excess
of $4.2 million in 1993. When the Assets (which
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<PAGE>
had a depreciated book value of $2.4 million in 1993) are depreciated to
December 1997, the remaining depreciated book value represents $300,000
excluding any additions to the Assets in the period between 1993 to 1995. The
Assets have been deemed to have a value to the Company of $1,000,000, however,
due to their usefulness to the Company's operations. Such value was determined
by the "Placement Agent" (referred to under Proposal No. 3) because there is a
conflict of interest with the Messrs. Bacchus approving the terms of the Asset
purchase for both the Company and BII. The Placement Agent's valuation was not
based upon a detailed analysis, inspection or evaluation of the Assets and
therefore may not reflect the Assets' true market value.
Stockholders should be aware that the transaction will result in a
benefit to the Messrs. Bacchus in that BII will be potentially receiving an
aggregate of 350,000 shares of Common Stock in consideration for the sale of the
Assets. Given that BII is controlled by the Messrs Bacchus, this proposed
transaction will increase their holdings to an aggregate of approximately 31% of
the Company's outstanding Common Stock. The Messrs. Bacchus were not involved in
the determination of the purchase price for the Assets.
The Board of Directors is therefore recommending that the Company
purchase such assets in exchange for 350,000 shares of the Company's Common
Stock, which had a market value of $809,375 as of the close of business May 27,
1998.
The Board of Directors recommends that the stockholders vote "FOR" the
Purchase of Assets from Bacchus Industries, Inc. (Item No. 2 on the proxy
card).
12
<PAGE>
PROPOSAL NO. 3
PRIVATE PLACEMENT OF PREFERRED STOCK
As shown in the financial statements included in its Annual Report on
Form 10-KSB for the year ended December 31, 1997, the Company has a pressing
need for additional financing. The Company's Common Stock is quoted on the
Nasdaq SmallCap Market ("Nasdaq") under the symbol "RTII." In a letter dated,
February 26, 1998, Nasdaq informed the Company that it was not in compliance
with a Nasdaq Marketplace Rule which requires that companies maintain "Net
Tangible Assets" (defined in such rule as total assets (less goodwill) minus
total liabilities) of at least $2,000,000. The Company must complete this
financing in order to comply with such rule and not be delisted from Nasdaq. The
purchase of the assets referred to in Proposal No. 2 will also help the Company
meet its requirements under the such rule. Pursuant to Nasdaq's procedures, the
Company has submitted a Plan of Compliance ("Plan") of which this proposed
financing is a part. No assurances can be given that Nasdaq will accept the Plan
and not delist the Company's Common Stock.
Nasdaq has an additional rule, however, which states that companies
whose securities are quoted on Nasdaq may not issue securities amounting to 20%
or more of its outstanding securities without shareholder approval. At March 25,
1998, the Company had 1,606,166 shares of Common Stock outstanding. Given that
the proposed offering described below constitutes, upon conversion in full,
approximately 36% of the Company's outstanding Common Stock, the Company cannot
proceed with both stages (as explained below) of such offering without the
affirmative vote of the majority of the Company's stockholders voting on this
Proposal.
After due consideration the Board of Directors has decided that the
following proposed private placement is in the Company's best interests. G-V
Capital Corp. ("Placement Agent") has agreed in principle to act as Placement
Agent for an offering of approximately 577,000 shares of 10% convertible
preferred stock ("Preferred Stock") at an anticipated purchase price of $2.60
per share for gross proceeds of approximately $1,500,000 ("Offering"). The
Offering would be made pursuant to Rule 506 of Regulation D promulgated under
the Securities Act of 1933, as amended ("Act") and would be made to Accredited
Investors only, as such term is defined in Rule 501 of Regulation D. The
Offering would be accomplished in two stages, only the second stage of which
requires shareholder approval.
The first stage of the Offering (which closed in April 1998) involved a
$541,502 bridge financing in the form of nine-month Promissory Notes bearing 10%
interest (collectively "Notes") and five-year Warrants to purchase an aggregate
of 87,501 shares of Common Stock at an exercise price of $4.50 per share. The
Notes are secured by a security interest in the Company's assets with the
understanding that should the Company enter into a borrowing with a financial
institution, then the security interest would be converted to a junior and
subordinate lien to the lien of such financial institution. The Notes will
automatically rollover into the Offering upon shareholder approval of this
Proposal. If this Proposal is not so approved, the Notes will remain debt
instruments and become due at maturity.
Upon the approval of this Proposal, the second step involves the sale
of additional shares of Preferred Stock in an amount aggregating approximately
$1,000,000.
13
<PAGE>
The Preferred Stock shall be convertible into Common Stock (i) at the
holder's option on a 1 for 1 basis at any time after three months from the
closing of the Offering and (ii) at the Company's option on a 1 for 1 basis upon
thirty (30) days' written notice if the closing price of the Common Stock as
reported on Nasdaq equals or exceeds $6.50 for twenty (20) consecutive trading
days prior to the notice of redemption.
In consideration for its services in the Offering, the Placement Agent
will receive compensation consisting of (i) sales commissions in an amount equal
to 6% percent of the proceeds raised in the Offering; (ii) a non-accountable
expense allowance in an amount equal to 2% of the proceeds raised in the
Offering and (iii) a warrant, for nominal consideration, to purchase a number of
shares of Common Stock equal to 6% of the number of shares of Preferred Stock
placed in the Offering. The Company will be responsible for all of the expenses
of the Offering.
In March 1998, the Company consummated a private placement of 26 Units
at a purchase price of $20,000 per Unit ("March Offering"). Each Unit consisted
of 5,000 shares of Common Stock and 2,500 redeemable warrants to purchase one
share of Common Stock at a price of $4.50 per share for a period of five years.
Upon the closing of the offering set forth in this proposal, (assuming it is
approved by the stockholders), the Company intends to issue additional shares to
the investors in the March Offering without any additional consideration such
that their basis is reduced from $4.00 per share to $2.60 per share. The Company
intends to issue such shares even though it is not contractually obligated to do
so.
The Board of Directors recommends that the stockholders vote "FOR" the
Private Placement of Preferred Stock. (Item No. 3 on the proxy card).
14
<PAGE>
PROPOSAL NO. 4
GRANT OF STOCK OPTIONS TO CERTAIN EXECUTIVE OFFICERS
The Board of Directors believes that Messrs. Rick, Rocky and
Ronald Bacchus should be granted stock options upon the Company's realizing
certain performance goals. The Board of Directors, with the Messrs. Bacchus not
voting, has approved the following options, subject to shareholder approval. The
Marketplace Rules discussed in Proposal No. 3 also require shareholder approval
as the contemplated options would exceed 20% of the outstanding Common Stock
even assuming that the Offering is completed in full.
First Performance Options
Options have been granted (subject to shareholder approval) to Rick
Bacchus, Rocky Bacchus, and Ron Bacchus to each purchase 1/3 of such number of
shares of Common Stock equal to 1 option for every $5.51617 of earnings (in a
given fiscal year) up to a maximum of 782,000 shares of Common Stock; provided,
however, that such options shall be exercisable only in the event the Company
achieves net income (without considering the impact of options) by December 31,
2000 of at least $2,813,250. No options shall be earned if the Company's net
income, as defined, is less than such amount and such options shall expire after
the year 2000 if not earned.
Second Performance Options
Options have been granted (subject to shareholder approval) to Rick
Bacchus, Rocky Bacchus, and Ron Bacchus to each purchase 1/3 of such number of
shares of Common Stock equal to 1 option for every $9.74232 of earnings (in a
given fiscal year) up to a maximum of 782,000 shares of Common Stock; provided,
however, that such options shall be exercisable only in the event the Company
achieves net income (without considering the impact of options) by December 31,
2002 of at least $7,618,500. No options shall be earned if the Company's net
income, as defined, is less than such amount and such options shall expire after
the year 2002 if not earned.
General information for each of the First and Second Performance Options.
These options are being granted in consideration of Rick Bacchus, Rocky
Bacchus, & Ron Bacchus transferring their interest in currently pending patents
to the Company as well as to reward management for performance.
The performance restrictions will be eliminated and all 1,564,000
options shall be immediately exercisable (regardless of any other factors), if
any party makes a bona fide offer to either merge with the Company or make a
tender offer to purchase a controlling interest in the Company.
The exercise price of such options shall be an amount equal to the
average of the bid and the asked prices of the Company's Common Stock as
reported on Nasdaq (or other quotation medium if
15
<PAGE>
the Common Stock is not quoted on Nasdaq) at the close of business on the five
trading days prior to the date that the stockholders ratify this proposal.
The options will expire five years after the date such earnings targets
are achieved and shall only be exercisable by a given individual if such person
is employed by the Company on the date that the Company's Annual Report on Form
10-K (or 10-KSB) is filed containing its audited financial for such fiscal year
where the Company has reached a particular performance goal entitling management
to earn any of the foregoing options.
If the grant or exercise of the options generates a tax deduction for
the Company and a corresponding recognition of income to the option holder, then
the Company will immediately pay to the option holder the amount of benefit it
receives in tax reduction. If multiple years are required for the Company to use
the deduction then the Company will pay the option holder in good faith over the
years required to use the tax deduction. The Company will use its best efforts
to use the option holders deduction before those from other possible tax
incentive methods, and will pay option holders based on the highest rates at
which it would have paid taxes had the option deduction not been available for
use.
The Company will provide for legal expenses, accounting fees,
registration of shares, and other expenses reasonably associated with the
options.
The Board of Directors recommends that the stockholders vote "FOR" the
grant of the performance options. (Item No. 4 on the proxy card).
<PAGE>
Total Return To Shareholders
(Dividends reinvested monthly)
ANNUAL RETURN PERCENTAGE
Years Ending
Company I Index Dec93 Dec94 Dec95 Dec96 Dec97
RTI INC -64.60 -5.84 -57.82 107.47 64.29
HOUSEHOLD FURN&APPLNCE-SMALL 22.87 -10.48 -6.97 24.07 55.26
S&P SMALLCAP 600 INDEX 18.79 -4.77 29.96 21.32 25.58
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
INDEXED RETURNS
Years Ending
Base
Period
Dec92 Dec93 Dec94 Dec95 Dec96 Dec97
Company I Index
RTI INC 100 35.40 33.33 14.06 29.17 47.92
HOUSEHOLD FURN&APPLNCE-SMALL 100 126.82 121.54 113.07 140.29 217.82
S&P SMALLCAP 600 INDEX 100 118.79 113.12 147.01 178.35 223.98
</TABLE>
<PAGE>
OTHER BUSINESS TO BE TRANSACTED
As of the date of this Proxy Statement, the Board of Directors knows of
no other business to be presented for action at the Annual Meeting of
Stockholders. As for any business that may properly come before the Annual
Meeting or any continuation or adjournment thereof, the Proxies confer
discretionary authority to the person named therein. These persons will vote or
act in accordance with their best judgment with respect thereto.
ANNUAL REPORT TO STOCKHOLDERS
The Annual Report to Stockholders for the year ended December 31, 1997
is being mailed to stockholders with this Proxy Statement. It is expected that a
representative of Neff & Co., independent auditors will be present at the Annual
Meeting of Stockholders and will be available to respond to appropriate
questions.
STOCKHOLDER PROPOSALS - 1999 ANNUAL MEETING
Any stockholder proposals to be considered by the Company for inclusion
in the proxy material for the 1999 Annual Meeting of Stockholders must be
received by the Company at its principal executive offices by December 31, 1998.
The prompt return of your proxy will be appreciated and helpful in
obtaining the necessary vote. Therefore, whether or not you expect to attend the
meeting, please sign the proxy and return it in the enclosed envelope.
BY ORDER OF THE BOARD OF DIRECTORS
Rocky Bacchus, Secretary
Sunland Park, NM
June 15, 1998
<PAGE>
RTI INC.
P R O X Y
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Rick E. Bacchus and Dr. Lanny
Snodgrass as Proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated below, all the shares of
the common stock of RTI Inc. held of record by the undersigned on June 15, 1998,
at the annual meeting of shareholders to be held on July 21, 1998, or any
continuation or adjournment thereof.
1. ELECTION OF DIRECTORS
For all nominees listed below Withhold Authority to
(Except as Marked to the Vote All Nominees Listed
Contrary) ___ Below ___
Rick E. Bacchus; Rockney D. Bacchus; Ronald A. Bacchus; Dr. Lanny
Snodgrass; Joel S. Kanter; Alexander D. Williams
2. To ratify the purchase of certain assets from Bacchus Industries, Inc.,
an affiliated company, in exchange for 350,000 shares of the Company's
Common Stock.
FOR_______ AGAINST___________
3. To approve a private placement of 576,925 shares of 10% convertible
preferred stock at a purchase price of $2.60 per share.
FOR_______ AGAINST___________
4. To approve the granting of performance options for 1,564,000 shares of
Common Stock to certain members of the Company's management.
FOR_______ AGAINST___________
<PAGE>
5. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR PROPOSALS 1 THROUGH 4.
Please sign name exactly as appears below. When shares are held by
joint tenants, both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
Dated: , 1998
Signature
Signature, if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY USING THE ENCLOSED
ENVELOPE
