UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 March 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-17739
RAMTRON INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 84-0962308
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1850 Ramtron Drive, Colorado Springs, CO 80921
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (719) 481-7000
Indicate by check mark whether 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 registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.01 Par Value - 37,953,772 shares as of May 14, 1998
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<PAGE>
RAMTRON INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except par value amounts)
Mar. 31, Dec. 31,
1998 1997
-------- --------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $20,290 $ 6,193
Accounts receivable, less allowances
of $128 and $167, respectively 2,888 4,762
Inventories 7,361 7,147
Deposits -- 20
Prepaid expenses and other 198 215
------- -------
Total current assets 30,737 18,337
Property, plant and equipment, net 8,107 8,024
Intangible assets, net 4,587 4,693
------- -------
$43,431 $31,054
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable $ 2,467 $ 3,017
Accrued liabilities 1,073 1,535
Accrued royalties 482 414
License rights 1,100 1,100
Deferred revenue 1,009 995
Promissory note and accrued interest, related party 6,623 6,457
------- -------
Total liabilities 12,754 13,518
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Stockholders' Equity:
Preferred stock, $0.01 par value,
10,000 shares authorized:
Series A - 29 designated, 17 and no shares
issued and outstanding, respectively -- --
Common stock, $0.01 par value, 75,000 shares
authorized 37,954 and 37,923 shares issued
and outstanding, respectively 380 379
Additional paid-in capital 172,299 155,957
Accumulated deficit (142,002) (138,800)
------- -------
Total stockholders' equity 30,677 17,536
------- -------
$43,431 $31,054
======= =======
See accompanying notes to consolidated financial statements.
<PAGE>
RAMTRON INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(Unaudited)
(Amounts in thousands, except per share amounts)
1998 1997
-------- --------
Revenue:
Product sales $ 4,273 $ 3,151
Customer-sponsored research and development 589 34
-------- --------
4,862 3,185
-------- --------
Costs and expenses:
Cost of product sales 2,626 2,493
Research and development 2,671 2,933
Customer-sponsored research and development 501 30
Sales, general and administrative 1,907 1,937
-------- --------
7,705 7,393
-------- --------
Operating loss (2,843) (4,208)
Interest expense, related party (165) (78)
Other income 126 542
-------- --------
Net loss $(2,882) $(3,744)
======== ========
Loss per common share:
Net loss $(2,882) $(3,744)
Imputed dividends on convertible preferred stock (100) --
Accretion of discount on convertible preferred stock (220) --
-------- --------
Net loss applicable to common shares $(3,202) $(3,744)
======== ========
Net loss per common share - basic and diluted $(0.08) $(0.10)
======== ========
Weighted average shares 37,946 36,997
======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
RAMTRON INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(Unaudited)
(Amounts in thousands)
1998 1997
-------- --------
Cash flows from operating activities:
Net loss $(2,882) $(3,744)
Adjustments used to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 638 651
Other 1 (485)
Changes in assets and liabilities:
Accounts receivable 1,874 3,159
Inventories (214) 977
Prepaid expenses 44 120
Accounts payable and accrued liabilities (943) 381
License rights -- (550)
Accrued interest, related party 165 78
Deferred revenue 14 398
Other (100) (3)
-------- --------
Net cash provided by (used in) operating activities (1,403) 982
-------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment (522) (127)
-------- --------
Net cash used in investing activities (522) (127)
-------- --------
Cash flows from financing activities:
Issuance of capital stock, net of expenses 16,022 (19)
-------- --------
Net cash provided by (used in) financing activities 16,022 (19)
-------- --------
Net increase in cash and cash equivalents 14,097 836
Cash and cash equivalents, beginning of period 6,193 3,182
-------- --------
Cash and cash equivalents, end of period $20,290 $ 4,018
======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
RAMTRON INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
- -----------------------------------------------------------------------------
NOTE 1. BASIS OF PRESENTATION AND MANAGEMENT OPINION
The accompanying consolidated financial statements at March 31, 1998 and 1997
and for the periods then ended have been prepared from the books and records
of the Company without audit. The statements reflect all normal recurring
adjustments which, in the opinion of management, are necessary for the fair
presentation of financial position, results of operations and cash flows for
the periods presented.
Certain information and disclosures normally included in financial statements
have been omitted under Securities and Exchange Commission regulations. It is
suggested that the accompanying financial statements be read in conjunction
with the annual report on Form 10-K for the year ended December 31, 1997. The
results of operations for the period ended March 31, 1998 are not necessarily
indicative of the operating results for the full year.
NOTE 2. NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS 130"). The purpose of SFAS 130 is to establish standards for
reporting and display of comprehensive income and its components (revenue,
expenses, gains, and losses) in a full set of general-purpose financial
statements. Comprehensive income is the change in equity of a business
enterprise during a period from transactions and other events and
circumstances from non-owner sources. It includes all changes in equity
during a period except those resulting from investments by owners and
distributions to owners. The Company adopted SFAS 130 during the first
quarter of 1998. For the periods ended March 31, 1998 and 1997, comprehensive
income is the same as net income.
NOTE 3. INVENTORIES
Inventories consist of:
Mar. 31, Dec. 31,
1998 1997
-------- --------
(in thousands)
(Unaudited)
Finished goods $4,472 $4,108
Work in process 2,768 2,932
Raw material 121 107
------ ------
Total $7,361 $7,147
====== ======
<PAGE>
NOTE 4. PROMISSORY NOTE, RELATED PARTY
In September 1995, the Company and the National Electrical Benefit Fund (the
"Fund") entered into a Loan Agreement (the "Fund Credit Facility") pursuant
to which the Fund agreed to lend to the Company up to $12,000,000 bearing
interest at 12% and maturing in June 1998. The outstanding principal balance
and accrued interest as of March 31, 1998 under the Fund Credit Facility
were $5,500,000 and $1,123,000, respectively. The Fund Credit Facility is
secured by a first priority security lien on the Company's assets. The Fund
has the right to convert all or any portion of the amounts outstanding under
the Fund Credit Facility into common stock at any time or times before
maturity of the loan in June 1998 at a conversion price equal to $10.5125 for
each share of common stock.
NOTE 5. INCOME TAXES
The Company recognizes deferred income tax assets and liabilities for the
expected future income tax consequences of temporary differences between the
financial reporting and tax basis of assets, liabilities and carryovers. The
Company also recognizes deferred tax assets for the expected future effects of
all deductible temporary differences, loss carryovers and tax credit
carryovers. Deferred tax assets are then reduced, if deemed necessary, by a
valuation allowance for the amount of any tax benefits which, more likely than
not, based on current circumstances, are not expected to be realized.
NOTE 6. EARNINGS PER SHARE
In 1997, the Financial Accounting Standard Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings per Share." SFAS No. 128 simplifies the computation of
earnings per share by replacing the presentation of primary earnings per share
with a presentation of basic earnings per share. SFAS No. 128 requires dual
presentation of basic and diluted earnings per share by entities with complex
capital structures. Basic earnings per share includes no dilution and is
computed by dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted earnings
per share reflects the potential dilution assuming the issuance of common
shares for all dilutive potential common shares outstanding during the period.
As a result of the Company's net losses, all potentially dilutive securities
would be anti-dilutive and thus, are excluded from diluted earnings per share
for the three month periods ended March 31, 1998 and 1997.
<PAGE>
NOTE 7. PRIVATE PLACEMENT
In February 1998, the Company issued and sold in a private placement to
certain accredited investors for $1,000 per share an aggregate of 17,425
shares of a newly-established series of preferred stock, designated as Series
A Convertible Preferred Stock ("Series A Preferred Stock"), resulting in
gross aggregate proceeds of approximately $17.4 million. Each share of Series
A Preferred Stock is entitled to receive cumulative dividends at the rate of
6% per annum, payable in shares of Series A Preferred Stock valued at $1,000
per share. Each share of Series A Preferred Stock is also entitled to a
liquidation preference of $1,000 per share, plus any accrued but unpaid
dividends, in preference to any other class or series of capital stock of the
Company. Except for certain exceptions, holders of Series A Preferred Stock
have no voting rights.
The shares of Series A Preferred Stock are convertible into shares of the
Company's common stock upon the earlier of May 25, 1998 or the date on which
the registration statement relating to the resale of the common stock issuable
upon conversion of the Series A Preferred Stock becomes effective. The shares
of Series A Preferred Stock, including any accrued dividends thereon, will
automatically convert into common stock on the fifth anniversary of the date
of the original issuance to the extent any shares of Series A Preferred Stock
remain outstanding at that time. Each share of Series A Preferred Stock is
convertible into that number of shares of common stock equal to the quotient
of (i) $1,000 divided by (ii) the Conversion Price. Until September 1, 1998,
the Conversion Price shall be $10.00. Thereafter, subject to the maximum
Conversion Price specified below, the Conversion Price will be equal to the
lowest trading price of the common stock for the 22 trading days immediately
preceding the conversion date, less a discount ranging from 7% (beginning
September 1, 1998) and increasing by 1% per month to 15% (on or after May 1,
1999). The maximum Conversion Price is the lesser of (i) 85% of the average
of the daily low trade prices of the common stock for the fifteenth calendar
month after the closing, (ii) 85% of the average of the daily low trade prices
of the common stock for the twenty-first calendar month after the Closing, or
(iii) 85% of the average of the daily low trade prices of the common stock for
the twenty-seventh calendar month after the closing. Such provisions become
effective at the end of the fifteenth, twenty-first and twenty-seventh
calendar months, respectively, following the closing date.
The number of shares that any holder of Series A Preferred Stock may convert
in any calendar month, on a cumulative basis following the closing date, is at
least 20% and up to 50% (depending upon the price at which the common stock is
trading) of the number of shares of the Series A Preferred Stock held of
record by such holder on such day.
<PAGE>
If the Conversion Price falls below a pre-determined amount, (to be
established and re-established each calendar month by the Company) upon
conversion of any Series A Preferred Stock, the Company may, at its option, in
lieu of the issuance of common stock, honor such conversions through a cash
payment. Such cash payment would be equal in amount to the proceeds that
would otherwise have been received by the investor via conversion to common
stock and subsequent sale at the high trade price on the date of conversion.
The shares of Series A Preferred Stock will not be convertible into more than
approximately 7,420,000 shares of common stock (approximately 19.9% of the
number of shares of common stock outstanding on December 22, 1997) (the "NASD
Cap") without obtaining shareholder approval in accordance with the Rules of
the NASD listing requirements. If such shareholder approval is not obtained
by June 30, 1998, the Company will be required to redeem, at a price equal to
110% of the liquidation preference of such shares, the smallest number of
shares of Series A Preferred Stock which is sufficient, in the Company's
reasonable judgement, such that following such redemption, conversion of the
remaining shares of Series A Preferred Stock would not constitute a breach of
the Company's obligations under the Rules of the NASD.
The Company agreed to register the shares of common stock issuable upon
conversion of the Series A Preferred Stock for resale under the Securities Act
of 1933 by June 25, 1998. The Company filed a registration statement pursuant
to this agreement on Form S-3 on March 10, 1998 and such registration
statement became effective on March 23, 1998.
Each purchaser of the Series A Preferred Stock has agreed not to offer or sell
on any trading day, on a net basis, more than the following number of shares
of common stock: the greater of (i) 10% of the average daily trading volume of
the common stock for the five trading days immediately preceding such sale as
reported by NASDAQ, (ii) 20,000 shares, or (iii) 10% of the trading volume of
the common stock on the day of such sale, as reported by NASDAQ. In addition,
the purchasers of the Series A Preferred Stock and their affiliates have
agreed not to engage in any short sales, swaps, purchasing of puts, or other
hedging activities that involve the direct or indirect use of the common stock
to hedge their investment in the Series A Preferred Stock; however, the
investor may write call options if the call exercise price is greater than the
effective Conversion Price on the day that the call is written. These hedging
restrictions do not apply to certain short sales within three days of
conversion in amounts not greater than the number of shares issuable upon
conversion.
The conversion discount of the Series A Preferred Stock is considered to be an
additional preferred stock dividend. The maximum discount of 15% (the
"guaranteed return") of $3,075,007 will initially be recorded as a reduction
of preferred stock and an increase to additional paid-in capital. The
guaranteed return reduction to preferred stock will be accrued, as additional
dividends, over 14 months by recording a charge to income available to Common
Stockholders and an increase to preferred stock. The Company will also record
cumulative dividends of $60 per outstanding Series A Preferred share per annum
($1,045,500 annually assuming 17,425 Series A Preferred shares outstanding) as
a reduction of income available to Common Stockholders. The earnings per
share calculation will show the effect of the guaranteed return (recorded as
additional dividends) and annual cumulative dividends recorded to net income
available to Common Stockholders.
<PAGE>
As partial consideration for placing such securities, the Company issued to
the Placement Agents Series A Preferred Stock warrants to acquire an aggregate
of 1,742 shares of Series A Preferred Stock for an exercise price of $1,000
per share (subject to the same anti-dilution protections as are applicable to
the Series A Preferred Stock). Such warrants are exercisable for a period of
five years for shares of Series A Preferred Stock. The Company is obligated
to register the shares of common stock issuable upon exercise and conversion
of the Placement Agents' warrants for re-sale under the Securities Act.
NOTE 8. CONTINGENCIES
A patent interference proceeding, which was declared in 1991 in the United
States Patent and Trademark Office (the "Patent Office") between the Company,
National Semiconductor Corporation ("National") and the Department of the Navy
in regard to one of the Company's issued United States patents, is continuing.
The Patent involved covers a basic ferroelectric memory cell design invention
the Company believes is of fundamental importance to its FRAM business in the
United States. An interference is declared in the Patent Office when two or
more parties each claim to have made the same invention. The interference
proceeding is therefore conducted to determine which party is entitled to the
patent rights covering the invention. In the present interference contest,
the Company is the "senior" party, which means that it is in possession of
the issued United States Patent and retains all rights associated with such
patent. The other two parties involved in the interference are the "junior"
parties, and each has the burden of proof of convincing the Patent Office by a
preponderance of the evidence that it was the first to invent the subject
matter of the invention and thus is entitled to the corresponding patent
rights. Only the Company and National filed briefs in this matter. Oral
arguments were presented before the Patent Office on March 1, 1996.
The Patent Office decided the interference on May 6, 1997, holding that all of
the claims were patentable to National, one of the "junior" parties. The
other "junior" party, the Department of the Navy, was not granted any patent
claims pursuant to the interference proceedings. On June 20, 1997, the
Company filed a Request for Reconsideration with the Patent Office concerning
the interference decision. Pursuant to the Request for Reconsideration, the
Company requested that four separate issues be reconsidered because, from the
Company's perspective, they were either ignored or misconstrued in the
original decision. A decision on the Request for Reconsideration is expected
in the near future. The Company has the right to appeal, and plans to appeal,
any adverse decision of the Patent Office to the Federal District Court and
then, if necessary, to the Court of Appeals for the Federal Circuit. The
Company remains in possession of the issued United States Patent and retains
all rights associated with such patent while it pursues its appeal options.
The "junior" party has received no rights associated with this patent
decision and will not receive any such rights as long as the appeal process
continues. The Company is uncertain as to the ultimate outcome of the
interference proceeding, as well as to the resulting effects upon the
Company's financial position or results of operations.
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FACTORS AFFECTING FUTURE RESULTS
This quarterly report contains forward-looking statements. Except for
historical information, the matters discussed in this report are forward-
looking statements that are subject to certain risks and uncertainties that
could cause the actual results to differ materially from those projected. The
Company undertakes no obligation to publicly release the results of any
revisions to these forward-looking statements which may be made to reflect
events or circumstances after the date hereof. Factors that could cause
actual results to differ materially include, but are not limited to the
following: (i) the timely completion of the development and qualification for
manufacturing of the Company's new enhanced dynamic random access memory
("EDRAM" (registered trademark)) and ferroelectric random access memory
("FRAM" (registered trademark)) products; (ii) broader customer acceptance
of its EDRAM products and low-density FRAM products; (iii) acceptance of new
high-density FRAM products, which may be developed; (iv) the Company's and its
alliance partners' ability to manufacture its products on a cost-effective and
timely basis in the Company's own facility and through its alliance foundry
operations; (v) the Company's ability to perform under existing alliance
agreements and to develop new alliance and foundry relationships; (vi) the
availability and related cost of future financing; (vii) the retention of key
personnel; (viii) the outcome of the Company's patent interference and
litigation proceedings, and (ix) factors not directly related to the Company,
such as competitive pressures on pricing, marketing conditions in general,
competition, technological progression, product obsolescence and the changing
needs of potential customers and the semiconductor industry in general.
RESULTS OF OPERATIONS
Revenues for the first quarter of 1998 increased by 53% to $4.9 million from
the respective period in 1997. Revenues for the quarter were comprised
primarily from product sales. No license and development fee revenues were
recorded during the quarter from new license agreements or from the
achievement of milestones pursuant to existing license agreements. Customer-
sponsored research and development revenues totaling approximately $590,000
were recorded during the quarter and resulted from FRAM specialty design
services and FRAM foundry services.
EDRAM sales revenue totaled approximately 61% of total product sales revenue
during the first quarter or 1998 compared with 90% for the same period in
1997. EDRAM unit shipments increased by approximately 26% during the quarter
and average selling prices decreased by approximately 3% from the respective
period in 1997. The Company's EDRAM prices are subject to industry demand for
such products and the prices of competing specialty memories. The increase in
product revenues for the quarter resulted primarily from an increase in the
volume of 4-megabit EDRAM products sold to customers for use in communications
equipment and RAID disc controllers.
<PAGE>
FRAM product sales during the first quarter of 1998 increased by approximately
120% or $374,000 compared with the respective period in 1997, due primarily to
the fulfillment of FRAM product delinquencies resulting from the Company's
limited manufacturing capacity at its Colorado Springs fabrication facility.
The Company began shipping product manufactured from its FRAM alliance
foundry, Rohm, during the quarter. As a result of the FRAM foundry
manufacturing capacity now available from Rohm and the expected future foundry
capacity from the Company's other FRAM alliance partners, the Company will
begin to further limit FRAM production from its Colorado Springs fabrication
facility during the second quarter of 1998 due to the facility's corresponding
high cost of production and low volume capabilities.
Cost of product sales as a percentage of product revenues were 61% and 79% for
the first quarters of 1998 and 1997, respectively. The decrease in cost of
product sales as a percentage of product revenues in the first quarter of 1998
compared with the respective period in 1997 resulted primarily from lower
costs of manufacturing for the Company's EDRAM products and stable average
selling prices of those products. Cost of product sales associated with the
Company's FRAM products remained high during the quarter resulting primarily
from the majority of FRAM products sold having been manufactured at the
Company's Colorado Springs fabrication facility. Cost of product sales as a
percentage of product revenues for FRAM products is expected to decrease
beginning in the second quarter of 1998 as a larger mix of FRAM products sold
will be manufactured at the Company's low cost alliance foundry manufacturing
facilities.
Research and development expenses increased by $209,000 or approximately 7%
to $3.2 million in the first quarter of 1998 when compared with the
respective period in 1997. The increase in research and development expenses
resulted primarily from increases in costs associated with the design and
development of the Company's 16-megabit Enhanced Synchronous DRAM
("ESDRAM") product and from costs incurred to support customer-sponsored
research and development design and foundry activities.
Sales, general and administrative ("SG&A") expenses decreased by $30,000
or approximately 2% in the first quarter of 1998 when compared with the
respective period in 1997. The decreases in SG&A expenses resulted primarily
from decreases in marketing costs associated with the Company's EDRAM
products. Such decreases were partially offset by increased commission costs
on increased product sales during the quarter.
Interest expense, related party during the first quarter of 1998 increased by
approximately $87,000 when compared to the respective period in 1997 resulting
from $2.9 million of additional borrowings during 1997 under the Company's
credit facility with the Fund. There were no additional borrowings under such
credit facility with the Fund during the first quarter of 1998.
<PAGE>
Other income, net during the first quarter of 1998 decreased by $416,000 over
the respective period in 1997 resulting primarily from the collection during
the first quarter of 1997 of a receivable written off during a prior period.
During the quarter, the Company recorded a preferred stock non-cash imputed
dividend and accretion of discount totaling $320,000 or $.008 per share on a
basic and diluted basis. The imputed dividend and accretion of discount
results from certain provisions of the Series A Convertible Preferred Stock
("Preferred Stock") whereby a dividend is to be paid to the holders of the
Preferred Stock in additional shares of Preferred Stock, and the conversion
price of the Preferred Stock is determined by applying a discount which
increases over a fourteen month period from 7% to a maximum of 15% by May
1999. The dividend is being recognized ratably pursuant to all outstanding
Preferred Stock. The discount is being recognized ratably as a non-cash
deemed dividend over the applicable fourteen month period. For the current
quarterly period, $100,000 represents 35 calendar days of imputed dividends
and $220,000 represents one month of accretion of the discount (see
"Note 7").
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash balance as of March 31, 1998 was approximately $20.3
million, representing a $14.1 million increase from December 31, 1997. The
Company used approximately $1.4 million in operations during the first quarter
of 1998 compared with generating $1.0 million from operations for the
respective period in 1997. The use of $1.4 million in operations during the
quarter resulted primarily from the funding of losses of $2.9 million and the
pay down of accounts payable and accrued liabilities totaling approximately
$.9 million. These uses of cash during the quarter were partially offset by a
decrease in accounts receivable associated with the receipt of approximately
$2.0 million during January 1998 from a December 1996 FRAM license agreement.
Approximately $.5 million was used in investing activities during the first
quarter of 1998 compared with $.1 million in the respective quarter in 1997.
Such increases resulted primarily from the purchase of test and handling
equipment associated with FRAM product manufacturing from the Company's FRAM
alliance partners. The Company generated approximately $16 million, net of
expenses, from financing activities during the quarter due primarily to the
issuance of the Company's preferred stock in a private placement transaction
during February 1998. As of March 31, 1998, the Company had working capital
of approximately $18.0 million and total stockholders' equity of $30.7
million.
The Company intends to finance its operations and working capital requirements
during the remainder of 1998 by relying on its existing cash resources as of
March 31, 1998 of $20.3 million, payments from existing and future license and
development agreements and from the sale of the Company's FRAM and EDRAM
products.
<PAGE>
All amounts outstanding under the Fund's credit facility, repayment of which
is secured by liens on the Company's facility and certain other of its assets,
are due and payable on June 30, 1998. The Company has requested an extension
of the payment date or conversion into equity of amounts outstanding under the
credit facility. If such extension is not granted and the conversion into
equity is not made by the Fund, the Company will have to repay all principal
and accrued interest under the credit facility, which will use a substantial
portion of the Company's capital resources, however, the assets pledged as
collateral under the Fund credit facility would be released and available as
security to new lenders. There is no assurance, however, that the Fund will
agree to an extension of the payment date, or conversion into equity of
amounts owed under the Fund's credit facility.
The Company's future capital requirements include financing the growth of
working capital items such as accounts receivable and inventory, and the
funding of research and development efforts. The Company is continuing to
pursue additional license and development arrangements with third parties as a
source of such capital. The Company will also continue to seek reasonable
sources of financing to satisfy its future operating and working capital
requirements, but has not yet identified any specific new sources of such
financing. There can be no assurance, however, that such financing, if
required, will be available or, if available, will be on satisfactory terms to
the Company.
OUTLOOK
The Company expects revenues will continue to be sporadic in the foreseeable
future until the Company's products gain wider market acceptance and can be
manufactured in increased volumes and in a more cost-effective manner. The
Company has historically depended and continues to depend on revenues from new
license arrangements and upon the achievement of milestones under the
Company's existing and new license agreements as the major contributor of
positive quarterly operating results. Such license revenue does not typically
occur on a consistent basis and is therefore expected to create substantial
fluctuations in the Company's future quarterly revenues and results of
operations. The Company is continuing its efforts to improve and increase
commercial production and sales of its EDRAM products and low-density FRAM
products, decrease the cost of producing such products and develop and
commercialize new high and low-density FRAM products and enhancements to its
existing FRAM and EDRAM products.
There can be no assurance that all of the Company's foundry and alliance
partners will be able to achieve commercial production of the products
currently in development or in the periods presented in the Company's annual
report on Form 10-K for the year ended December 31, 1997. If such commercial
production is not achieved or is not achieved in a timely manner, the
Company's results of operations could be materially adversely affected.
<PAGE>
In February 1997, the Company and SGS-Thomson Microelectronics SA ("SGS-
Thomson") finalized a non-binding FRAM technology Memorandum of Understanding
(the "MOU"). Such MOU expired on June 30, 1997 pursuant to the terms of the
agreement. The Company and SGS-Thomson negotiated an extension to the
original MOU which incorporated expanded terms from the original MOU and
extended the term of such MOU to March 31, 1998. The MOU expired on March 31,
1998. The Company and SGS-Thomson continue to discuss possible FRAM
development and licensing arrangements for a future agreement, but no
contractual agreement exists at this time and there can be no assurance that
such an agreement will be entered into between the parties.
PART II - OTHER INFORMATION
ITEMS 1 - 5 None
ITEM 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.1* Amendment No. 3 RF/ID Products to High-Density
FRAM Cooperation Agreement dated January 15, 1998 between the
Registrant, Racom Systems, Inc., and Hitachi, Ltd.
Exhibit 27 Financial Data Schedule
* Confidential treatment has been granted or requested with respect to
portions of this exhibit, and such portions have been replaced with
"**". Such confidential portions have been deleted and separately
filed with the Securities and Exchange Commission pursuant to Rule 24b-2.
(b) Reports on Form 8-K
On February 4, 1998, the Registrant filed a report on Form 8-K.
The item reported was Item 5 - "Other Events."
On March 4, 1998, the Registrant filed a report on Form 8-K.
The item reported was Item 5 - "Other Events."
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RAMTRON INTERNATIONAL CORPORATION
(Registrant)
May 15, 1998 /S/ Richard L. Mohr
Richard L. Mohr
Executive Vice President and
Chief Financial Officer
(Principal Accounting Officer)
* "Confidential treatment has been granted or requested with respect to
portions of this exhibit, and such portions have been replaced with "**".
Such confidential portions have been deleted and separately filed with
the Securities and Exchange Commission pursuant to Rule 24b-2."
AMENDMENT NO. 3
RF/ID PRODUCTS
TO
HIGH-DENSITY FRAM COOPERATION AGREEMENT
This Amendment No. 3 ("Amendment No. 3") is made and entered into as of
January 15, 1998 ("Effective Date"), by and among Ramtron International
Corporation ("Ramtron"), a Delaware, USA corporation having its principal
office at 1850 Ramtron Drive, Colorado Springs, Colorado 80921, USA, and
Ramtron's affiliate company, Racom Systems, Inc. ("Racom"), a Delaware, USA
corporation having its principal office at 6080 Greenwood Plaza Blvd.,
Greenwood Village, Colorado 80111, USA and Hitachi, Ltd. ("Hitachi"), a
Japanese corporation having its principal office at 6, Kanda-Surugadai,
4-chome, Chiyoda-ku, Tokyo 101, Japan. Unless otherwise specified, all
references to Hitachi shall mean the Semiconductor and Integrated Circuits
Division of Hitachi.
RECITALS
A. Ramtron and Racom entered into a series of Technology License
Agreements and Addenda thereof ("R&R License Agreement") where under
Ramtron licensed its ferroelectric technology ("Ferroelectric
Technology") to Racom for use in the design, manufacture and sale of
products incorporating RF/ID Technology (as defined in Section 1.1),
and granted Racom certain exclusive rights to sublicense Ferroelectric
Technology for use in the design, manufacture and sale of products,
including RF/ID Products (as defined in Section 1.6).
B. Ramtron and Hitachi entered into the High-Density FRAM Cooperation
Agreement dated April 25, 1994 ("FRAM Agreement") where under Ramtron
licensed its Ferroelectric Technology to Hitachi so as to develop,
design, make, have made, use, sell and/or otherwise dispose of
High-Density FRAM Products (as defined in the FRAM Agreement).
C. Ramtron and Hitachi subsequently amended the FRAM Agreement pursuant to
an amendment entitled "Amendment To High-Density FRAM Cooperation
Agreement" dated September 21, 1995 ("Amendment No. 1") and "Amendment
No. 2 To High-Density FRAM Cooperation Agreement" dated March 11, 1996
("Amendment No. 2") where under the license scope of FRAM Agreement was
extended to Standard Memory FRAM Products and Non-Standard Memory FRAM
Products (as defined in the Amendment No. 1).
<PAGE>
D. Pursuant to the R&R License Agreement, Ramtron and Racom now desire to
license to Hitachi the RF/ID Technology and Patents of Ramtron and
Racom so as to develop, design, make, have made, use, sell, and/or
otherwise dispose of RF/ID Products, and also to extend the license
scope of FRAM Agreement to include RF/ID Products.
NOW THEREFORE, in consideration of the above premises and the mutual
covenants contained hereinafter, the parties agree as follows.
1. ARTICLE 1 - DEFINITIONS
Defined terms used herein shall have the meanings ascribed to such terms in
the FRAM Agreement and Amendment No. 1, unless otherwise provided herein as
follows;
1.1. RF/ID TECHNOLOGY" means technology based on electromagnetic waves or
sound waves used to remotely power, and to communicate and alter data in
RF/ID Products (as defined in Section 1.6).
1.2. "RACOM'S RF/ID TECHNOLOGY" means any technical information, except for
Patents, relating to Racom's RF/ID Technology as described in Attachment
A and developed by Racom and/or its Subsidiaries. Racom's RF/ID
Technology shall include RF/ID circuits technology and reader/writer
system technology, including, but not limited to, BIOS, firmware and all
the necessary technology for RF/ID chip implementation, but excluding
application software. Racom's RF/ID Technology shall include Racom's
RF/ID Technology improvements, enhancements and developments relating
to Racom's RF/ID Technology which may be created during the term of this
Amendment No. 3.
1.3. "RAMTRON'S RF/ID TECHNOLOGY" means any technical information, except
for Patents, relating to Ramtron's RF/ID Technology as described in
Attachment B and developed by Ramtron and/or its Subsidiaries.
Ramtron's RF/ID Technology shall include Ramtron's RF/ID Technology
improvements, enhancements and developments relating to Ramtron's
RF/ID Technology which may be created during the term of this
Amendment No. 3. Ramtron's RF/ID Technology shall also include RF/ID
Technology which may be jointly developed by Ramtron and Racom
(including their respective Subsidiaries), if any, during the term of
this Amendment No. 3 and/or further amendments thereof, if any. As of
the Effective Date, there is no such jointly-developed Ramtron RF/ID
Technology.
1.4. "RACOM PATENTS" means the Patents which had or have a first
effective filing date in any country prior to the termination or
expiration of this Amendment No. 3 and/or further amendments thereof,
if any, and which arise out of inventions pertaining to Racom's RF/ID
Technology, as described in Attachment A, and made and/or acquired by
Racom and/or its Subsidiaries, and under which Racom and/or its
Subsidiaries or any successor thereof has, as of the Effective Date of
this Amendment No. 3 and/or during the term of this Amendment No. 3
and or further amendments thereof, if any, the right to grant licenses
of the scope granted herein without the payment of royalty or other
consideration to third persons except for its employees or
Subsidiaries.
<PAGE>
1.5. For the purpose of this Amendment No. 3, "RAMTRON PATENTS"
means the Patents which had or have a first effective filing date in
any country prior to the termination or expiration of this Amendment
No. 3 and/or further amendments thereof, if any, and which arise out
of inventions made and/or acquired by Ramtron and/or its Subsidiaries,
and under which Ramtron and/or its Subsidiaries or any successor
thereof has, as of the Effective Date of this Amendment No. 3 and/or
during the term of this Amendment No. 3 and/or further amendments
thereof, if any, the right to grant licenses of the scope granted
herein without the payment of royalty or other consideration to third
persons except for its employees or Subsidiaries.
Unless otherwise specified herein, Ramtron Patents shall include
"RAMTRON-RACOM JOINT PATENTS" means which will have a first effective filing
date in any country prior to the termination or expiration of this Amendment
No. 3 and/or further amendments thereof, if any, and which will arise out of
inventions that may be made and/or acquired jointly by Ramtron and Racom
(including their respective Subsidiaries) during the term of this Amendment
No. 3 and/or further amendments thereof, if any, and under which
Ramtron/Racom(including their respective Subsidiaries) or any successor
thereof will have during the term of this Amendment No. 3 and/or further
amendments thereof, if any, the right to grant licenses of the scope granted
herein without the payment of royalty or other consideration to third persons
except for its employees or Subsidiaries. As of the Effective Date of this
Amendment No. 3, there are no such Ramtron-Racom Joint Patents.
1.6. "RF/ID PRODUCTS" means devices which are remotely powered by
electromagnetic waves or sound waves in which data can be retained in
such device and/or altered using electromagnetic waves or sound waves
and which use RAMTRON Base FRAM Technology, RAMTRON High-Density FRAM
Technology, Ramtron's RF/ID Technology, Racom's RF/ID Technology (if
Hitachi exercises the option under Article 4), Ramtron Patents and/or
Racom Patents; this includes devices commonly known as a smart card,
containing a microprocessor.
2. ARTICLE II -TRANSFER OF RAMTRON'S RF/ID TECHNOLOGY
2.1. Transfer of Ramtron's RF/ID Technology
Within sixty (60) days after the Effective Date of this Amendment No.3,
Ramtron shall provide Hitachi with Ramtron's RF/ID Technology.
2.2. Technical Assistance
Upon the written request of Hitachi, Ramtron agrees, subject to
availability of appropriate personnel, to send its qualified
engineer(s) to Hitachi for the purpose of assisting Hitachi with
respect to the implementation of Ramtron's RF/ID Technology, subject
to the mutually agreed-upon schedule. Hitachi agrees to pay an
engineer dispatching fee of United States ** per man-working day for
the above-said technical assistance and all reasonable air travel and
lodging accommodation fees in connection with the technical assistance
under this Section 2.2. It is confirmed and agreed hereby that the
above-said technical assistance shall not include the reasonable daily
technical Q&A which shall be provided at no charge to either party.
<PAGE>
3. ARTICLE III - GRANT OF LICENSE
3.1. Ramtron's RF/ID Technology License
Pursuant to the R&R License Agreement, Racom acknowledges that Ramtron
hereby grants to Hitachi and/or its Subsidiaries, subject to the terms
of this Amendment No. 3, a non-exclusive, non-sublicensable,
non-transferable, non-assignable, worldwide, perpetual license, under
Ramtron's Trade Secret Rights, Copyrights and/or Mask Work Rights, to
utilize Ramtron's RF/ID Technology so as to develop, design, make,
have made, use, sell and/or otherwise dispose of RF/ID Products.
3.2. Racom Patents License
Pursuant to the R&R License Agreement, Racom hereby grants to Hitachi
and/or its Subsidiaries, subject to the terms of this Amendment No. 3,
a non-exclusive, non-sublicensable, non-transferable, non-assignable,
worldwide license under Racom Patents to develop, design, make, have
made, use, sell and/or otherwise dispose of RF/ID Products for the
life of each Racom Patent.
3.3. Pursuant to the R&R License Agreement, only for the purpose of
this Amendment No. 3, Racom acknowledges that Ramtron extends the
license scope of the FRAM Agreement to include RF/ID Products, as
follows.
3.3.1. RAMTRON Base FRAM Technology License
Ramtron hereby agrees, subject to the terms of this Amendment No. 3, to grant
to Hitachi and/or its Subsidiaries a non-exclusive, non-sublicensable, non-
transferable, non-assignable, worldwide, perpetual license, under its Trade
Secret Rights, Copyrights and/or Mask Work Rights, to utilize Ramtron Base
FRAM Technology so as to develop, design, make, have made, use, sell and/or
otherwise dispose of RF/ID Products.
3.3.2. RAMTRON Patents License
Ramtron hereby agrees, subject to the terms of this Amendment No. 3,
to grant to Hitachi and/or its Subsidiaries a non-exclusive,
non-sublicensable, non-transferable, non-assignable, worldwide license
under RAMTRON Patents to develop, design, make, have made, use, sell,
and/or otherwise dispose of RF/ID Products for the life of each
RAMTRON Patent.
<PAGE>
3.3.3. RAMTRON High-Density FRAM Technology
Ramtron hereby agrees, subject to the terms of this Amendment No. 3,
to grant Hitachi and/or its Subsidiaries a non-exclusive,
non-sublicensable, non-transferable, non-assignable, worldwide,
perpetual license, under its Trade Secret Rights, Copyrights and/or
Mask Rights to utilize RAMTRON High-Density FRAM Technology so as to
develop, design, make, have made, use, sell and/or otherwise dispose
of RF/ID Products.
3.4. Customers Located Inside Japan
As of the Effective Date, pursuant to this Article 3, Hitachi may
commence the manufacture and sale of RF/ID Products for customers
located outside Japan. Hitachi may not commence the sale of RF/ID
Products for customers located inside Japan until January 1, 1999, in
order that Ramtron and Racom may honor a pre-existing agreement with
another Japanese company; provided, however, that Ramtron and Racom
agree to make its reasonable efforts to amend the pre-existing
agreement so that Hitachi can start RF/ID business in Japan before
January 1, 1999.
4. ARTICLE IV - OPTION RIGHTS TO RECEIVE RACOM'S RF/ID TECHNOLOGY
4.1. Option Rights Exercise
For a period up to December 31, 1999, Hitachi shall have the option
right to receive Racom's RF/ID Technology. When Hitachi desires to
exercise such option right, Hitachi shall provide to Racom a written
notice of option right exercise and pay to Racom the Option Fee of
United States Dollars ** within thirty (30) days of that written
notice. Within thirty (30) days of receipt of the Option Fee, Racom
shall provide Hitachi with Racom's RF/ID Technology and upon Hitachi's
request, Racom shall also provide Hitachi with the technical assistance
as set forth below. Upon receipt of the Option Fee, Racom hereby
agrees to grant to Hitachi and/or its Subsidiaries a non-exclusive,
non-sublicensable, non-transferable, non-assignable, worldwide,
perpetual license, under its Trade Secret Rights and/or Copyrights, to
utilize Racom's RF/ID Technology so as to develop, design, make, have
made, use, sell, and/or otherwise dispose of RF/ID Products.
4.2. Technical Assistance
Upon the written request of Hitachi, Racom agrees, subject to
availability of appropriate personnel, to send its qualified
engineer(s) to Hitachi for the purpose of assisting Hitachi with
respect to the implementation of Racom's RF/ID Technology, subject to
the mutually agreed-upon schedule. Such technical assistance shall be
provided by Racom to Hitachi at no charge to Hitachi up to thirty (30)
man-working days in total. After the initial thirty (30) man-working
days of assistance are provided, Hitachi agrees to pay an engineer
<PAGE>
dispatching fee of United States Dollars ** per man-working day for up
to an additional thirty (30) man-working days; and thereafter, Hitachi
agrees to pay an engineer dispatching fee of United States Dollars **
per man-working day. In addition, Hitachi agrees to pay all reasonable
air travel and lodging accommodation fees in connection with the
technical assistance under this Section 4.2. It is confirmed and agreed
hereby that the above said technical assistance shall not include the
reasonable daily technical Q&A which shall be provided at no charge to
either party.
5. ARTICLE V - COMPENSATION
In consideration of the rights granted under Articles 3 and 4, Hitachi
shall make payments as follows;
5.1. Fixed License Fee
Hitachi shall pay to Racom:
5.1.1. Fixed License Fee of United States Dollars ** shall be paid to
Racom by January 31, 1998.
5.1.2. Fixed License Fee of United States Dollars ** shall be paid to
Racom by April 30, 1998.
5.2. Running Royalty
5.2.1. Running royalty shall be paid to Ramtron semiannually (by June 30,
and by December 30 of each year pursuant to the payment procedures as
set forth in Article 8 of the FRAM Agreement) at the rate of ** of the
net sales (ex-factory price basis) on the RF/ID Products manufactured
hereunder by Hitachi and/or its Subsidiaries, except that Hitachi shall
not make royalty payments for RF/ID Products produced for Ramtron
and/or Racom as set forth in Article 8. The running royalty shall be
payable for ** years after the first Hitachi invoice for shipment of
commercial quantities of RF/ID Products from continuous production by
Hitachi. After ** years, the parties will discuss in good faith the
terms and conditions on licensing of Ramtron Patents and RF/ID
Technology, and/or Racom Patents and RF/ID Technology (if Hitachi
exercises the option under Article 4), if Hitachi needs; provided,
however, that in case the parties enter into any co-development of
RF/ID Products, the parties will agree that the licenses under
Ramtron's RF/ID Technology and Racom's RF/ID Technology shall be a
paid-up license, and will discuss in good faith the terms and
conditions of Ramtron Patents and Racom patents licensing, if Hitachi
needs. In no event shall the running royalty payment, if any, be
required after the expiration of Ramtron Patents and Racom Patents.
5.2.2. If the parties discuss the licensing terms and conditions after **
years as set forth in Section 5.2.1 above, such discussions shall be
conducted as the matter between the parties only, but shall not be
restricted or affected by any agreement between each company and
another company (e.g., the most favored conditions, etc.)
<PAGE>
5.2.3. At any time during the term of this Amendment No. 3, in case that
the parties enter into any co-development project of RF/ID Products,
the parties agree to discuss in good faith reduction of the running
royalty rate.
5.3. Withholding Tax
Payments made pursuant to this Amendment No. 3 may be subject to
deduction of the withholding tax as provided for by the applicable
U.S.-Japan tax treaty in force as of the date such payments are due.
If Hitachi is required by law to withhold tax payable by Ramtron or
Racom and to pay such tax for the account of Ramtron or Racom, Hitachi
shall obtain and deliver to Ramtron or Racom a certificate for such tax
payment from the Japanese Government.
5.4. Most Favored Clause
It is acknowledged and agreed by Ramtron and Racom that the fixed
license fee and running royalty as set forth in Article 5 and the
engineering services equal to United States Dollars ** as set forth in
Article 6, shall be the most favorable terms for Hitachi among the
similar RF/ID license agreements with other companies as of the
Effective Date. If Ramtron and/or Racom enter into a certain RF/ID
license agreement hereafter with another company in which the
compensation terms for such another company are better than those set
out herein, then Ramtron and/or Racom shall advise Hitachi of such
preferential terms and make the same terms available to Hitachi, with
Hitachi's acknowledgment, as of the date of such preferential
agreement.
6. ARTICLE VI-ENGINEERING SERVICE
In addition to Article 5, in consideration of the rights granted under
Articles 3 and 4, and as a condition of this Amendment No. 3, Hitachi
shall provide to Racom the following engineering services for
development of Racom RF/ID Products, up to the total amount of
engineering services equal to United States Dollars ** , under terms
and conditions to be mutually agreed upon and subject to the following
conditions.
1) Hitachi shall process and provide 6 inch pilot run wafers at US$**/wafer;
and
2) Hitachi shall provide mask sets at US$**/set; and
3) Hitachi shall provide design rules, device models, and other technical
information in order for Racom to complete the design and transfer of
designs of RF/ID products for manufacture by Hitachi.
<PAGE>
It is acknowledged and agreed by Hitachi that the provisions as described
under Article 6, including, but not limited to subsections 1), 2) and 3)
thereof, shall be no less favorable than the terms offered by Hitachi to any
external third parties during the term of this Amendment 3.
If, within a period of five (5) years of the Effective Date of this Amendment
No. 3, subject to timely requests from Racom, Hitachi is unable to provide the
engineering services as described herein, then Hitachi shall pay to Racom
United States Dollars ** or any unspent portion thereof.
7. ARTICLE VII-COVENANT NOT TO SUE
Ramtron and Racom shall agree, subject to the terms of this Amendment No. 3,
not to assert Ramtron Patents and Racom Patents, including reader/writer
patents and IC Card patents, that pertain to RF/ID Products against the
customers (including Hitachi's in-house customers) who purchased RF/ID
Products from Hitachi for the life of the Ramtron Patents and Racom Patents.
8. ARTICLE VIII-MANUFACTURING RIGHTS
Ramtron and Racom can purchase in total up to a maximum of ** of Hitachi's
production capacity of RF/ID Products under the separate business agreement
to be discussed in good faith between the parties. Hitachi agrees to provide
Ramtron and Racom with RF/ID products at a competitive sales price not less
than fair value pursuant to Antidumping Law and DOC regulations, which is the
sum of the cost of manufacturing, the amount for general expenses not less
than **% of the cost and the amount for profit not less than **% of the sum
of such expenses and cost. If the parties cannot reach an agreement on the
sales price, then the parties will settle the matter at the executive level
meeting. If Hitachi and Ramtron and/or Racom agree that the issue cannot be
resolved at the executive level meeting, and upon the request of one party,
such unresolved issue may be submitted to a mediator. The place of mediation
shall be the location designated by the other party. The mediator shall be
Hitachi's CPA or an independent CPA mutually acceptable under confidentiality
obligations if Hitachi's cost data is to be examined. The total number of
wafers for RF/ID Products to be made available by Hitachi for purchase by
Ramtron and Racom shall not exceed ** per month.
9. ARTICLE IX-CONFIDENTIALITY
It is agreed hereby that all the Confidential Information to be disclosed
under this Amendment No. 3 shall be controlled by the confidentiality
obligations as set forth in Section 7 of the FRAM Agreement. Hitachi hereby
agrees that, notwithstanding anything to the contrary contained in the FRAM
Agreement, or any Amendment thereto, Ramtron shall be entitled to provide to
Racom a copy of the FRAM Agreement and each Amendment thereto, redacted to
remove any reference to license fee amounts, royalty rates and other economic
and financial terms, which shall be attached hereto, provided that Racom
agrees not to disclose such redacted version of the FRAM Agreement to any
third party.
<PAGE>
10. ARTICLE X-REPRESENTATION AND WARRANTY
10.1. Ramtron, Racom and Hitachi represent and warrant that (i) they have
full power and authority to enter into this Amendment No. 3; (ii) the
terms and conditions of this Amendment No. 3, and each party's
obligations hereunder, do not conflict with or violate any terms and
conditions of any other agreement or commitment to which any party is
a signatory or by which it is bound.
10.2. Ramtron represents and warrants that it has all right, title and
interest in and to Ramtron's RF/ID Technology disclosed hereunder and
Ramtron Patents licensed hereunder to Hitachi, and that it has the
right to grant to Hitachi the licenses granted herein.
10.3. Racom represents and warrants that it has all right, title and
interests in and to Racom's RF/ID Technology disclosed hereunder and
Racom Patents licensed hereunder to Hitachi, and that it has the right
to grant to Hitachi the licenses granted herein.
10.4. Each party will defend, indemnify and hold harmless the other parties
against any third party claims arising out of or related to a breach of
the above representations and warranties.
10.5. Notwithstanding the indemnification provision set forth in Section 10.4
above, Racom shall defend, indemnify and hold harmless Hitachi, its
affiliates, Subsidiaries or customers and shall pay all losses,
damages, fees, expenses and costs (including reasonable attorneys'
fees) incurred by them based upon any claim, action or proceeding
brought by Racom Japan, Inc. ("Racom Japan"), Racom's affiliated
company, having its registered office at 6F Otsuka-Shinyurigaoka
Building 1-5-3, Kamiasao Asao-ku, Kawasaki-shi, Kanagawa-ken 215,
Japan, any successor thereof or any director, officer or employee of
Racom Japan or such successor (regardless of whether such person
holds such position at the time of a claim, action or proceeding) or
any trustee, shareholder or any others acting on its or their behalf
against Hitachi, its affiliates, subsidiaries or customers, where
such claim, action or proceeding relates to any rights or obligations
set forth in this Amendment No. 3. The foregoing sentence shall
include without limitation, any claim, action or proceeding arising
from or relating to: (i) any agreement between Racom Japan and
Racom, regardless of whether such agreement has been terminated; and
(ii) infringement or misappropriation of intellectual property rights.
Racom hereby acknowledges and agrees that if it fails to comply with its
obligations under the provisions of this Section 10.5 and Section 10.6, or in
the event of a breach of any of the representations, warranties or covenants
by Racom contained in this Article 10, then notwithstanding the provisions of
Sections 12.5 and 14.5 of the FRAM Agreement, Hitachi may seek any remedy
available at law or in equity with respect to such failure or breach.
<PAGE>
10.6. Ramtron and Racom shall provide prior written notice to Hitachi if a
substantial change of ownership of Racom Japan occurs during the term
of this Amendment No. 3, including, without limitation, a substantial
reduction in the number of Racom Japan's voting shares that Racom
holds as of the Effective Date, or an acquisition by one entity of
more than 50% of the total voting power of all of the outstanding
voting shares of Racom Japan.
10.7. Ramtron agrees to use its reasonable best efforts to encourage and
cause Racom to comply with its obligations under this Amendment No. 3
and to ensure that Hitachi receives and enjoys the rights, benefits and
privileges intended to be provided to Hitachi pursuant to this
Amendment No. 3.
11. ARTICLE XI-TERM AND TERMINATION
11.1. This Amendment No.3 shall become effective upon the Effective
Date and continue to be effective until expiration of the last of
Ramtron Patents and Racom Patents, regardless of whether or not the
FRAM Agreement is expired or terminated earlier.
11.2. Articles 3, 4 (if Hitachi exercises the option, as described
in Article 4), 5, 6, 7, 9 ,10, 11 and 12 of this Amendment No. 3
shall survive and continue after the expiration and/or any
termination of this Amendment No. 3.
12. ARTICLE XII-GENERAL PROVISIONS
12.1. Each party represents and warrants that there is or will be no
agreement with another company which may conflict or violate any
terms and conditions of this Amendment No. 3.
12.2. Unless otherwise specified in this Amendment No. 3, all the terms and
conditions of the FRAM Agreement as amended by Amendment No. 1 and
Amendment No. 2 shall apply in an appropriate manner for this
Amendment No. 3 until the expiration of this Amendment No. 3.
12.3. Publicity
All notices to third parties and all other publicity concerning the
terms and conditions of this Amendment No. 3 shall be jointly planned
and coordinated by and between Hitachi, Ramtron and Racom. None of
Hitachi, Ramtron or Racom shall act unilaterally in this regard,
pursuant to Article 9, without the prior written approval of the
other parties. It is expected that Hitachi, Ramtron and Racom will
mutually agree upon a press release which will be issued after the
Effective Date of this Amendment No. 3.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 3 to be
executed as below by their duly authorized officers.
RACOM SYSTEMS, INC. RAMTRON INTERNATIONAL CORPORATION
/S/ Richard L. Horton /S/ Greg Jones
- -------------------------------- ------------------------------
Richard L. Horton Greg Jones
President and CEO President and COO
HITACHI, LTD.
/S/ Tadashi Ishibashi
- -------------------------------
Tadashi Ishibashi
Executive Managing Director
General Manager
Semiconductor & Integrated Circuits Division
<PAGE>
ATTACHMENT A: RACOM RF/ID TECHNOLOGY
TO
AMENDMENT NO. 3
OF THE
FRAM AGREEMENT
The Racom RF/ID Technology includes the information provided below:
LF TECHNOLOGY
1. DESCRIPTION
a) General
The RACOM Low Frequency, LFM Series Proximity RF Read/Write Transponder
is a single chip implementation, passive, memory transponder. It
includes a 4K bit (K = 1024) nonvolatile FRAM memory. It supports an RF
interface data rate of approximately 8 kbps (See Note 1) for RF interface
data read and write operations. It is designed for use in passive, low
frequency, proximity RF read/write applications where the transponder is
inductively powered via its antenna coil from an incident, low frequency,
AC magnetic field. Such a field is generated by an associated
interrogator or reader/writer device, the LFC RF Communications
Controller.
b) Operation
The LFC Communications Controller communicates via its attached coil with
transponders using low frequency magnetic induction. Using this
interface, the Controller can read and write data from/to the
Transponder's FRAM memory.
The LFC Controller powers the transponder using a 125 kHz magnetic field.
This field/frequency is modulated by the LFC Controller (125 kHz/116.3
kHz) to send data to the transponder at a data rate of approximately 8
kbps (See Note 1, page 4). The transponder sends data to the Controller
at a frequency of 62.5 kHz carrying a data rate of approximately 8 kbps
(7.8125 kbps).
The LFC Controller accommodates half-duplex RF communications.
The transponder includes an Analog Front End with a power supply and RF
interface. The transponder also includes a received FSK data detector,
4K bit non-volatile (FRAM) memory, send data encoder/modulator, data
handling and memory addressing logic, memory write-protect logic ("lock
bits"), Command Error Checking, Customer Code checking and "Unique
Addressability" logic, and control logic (a state-machine).
<PAGE>
2. SCHEMATICS
3. DOCUMENTATION
HF TECHNOLOGY
1. DESCRIPTION
a) General
The HF RF/ID ASIC ("ASIC") is powered by and communicates via attached
coils. One coil receives power and clock ("POWER" coil) the second coil
communicates data ("COMM" coil). The ASIC is powered by magnetic
induction via the POWER coil. The powering frequency is 13.56 MHz, an
ISM frequency. A high frequency clock is derived from the powering
signal (13.56 MHz). This clock is divided by 4 (to 3.39 MHz) to clock
the H8 RF/ID FRAM Product ASIC and to provide the RF transmit data
carrier frequency. The ASIC communicates data and command messages via
its COMM coil. The ASIC communicates half duplex using a 3.39 MHz
carrier signal.
b) Powering and Clocking the ASIC
The ASIC operates when it is powered by an AC signal provided at its
POWER coil inputs. This AC signal is induced in POWER coil by a 13.56
MHz AC magnetic field generated by the associated RF Communications
Controller. The ASIC rectifies the AC powering signal to derive DC to
power its circuits. A logic clock is derived in the ASIC from the AC
powering signal induced in the POWER coil from the powering magnetic
field. The clock frequency is, thus, the same as that of the powering
field (13.56 MHz).
Lower frequency clocks are obtained by dividing down from the 13.56 MHz
clock ("CLOCK"). The clock for the ASIC is CLOCK/4 (3.39 MHz) (the
period of this clock, 295 ns., is the cycle time of the microprocessor in
the RF powered case). The RF transmit carrier frequency is also CLOCK/4
(3.39 MHz).
The ASIC has a voltage clamp circuit to hold the powering voltage out of
the rectifier from rising too high for the CMOS circuits.
The ASIC has a Power-On-Reset (POR) circuit to keep the logic reset when
DC voltage is insufficient to operate.
c) HF RF/ID FRAM Product Communications
The ASIC communicates data, receives commands, and transmit status
from/to the associated RF Communications Controller. The ASIC does this
via an attached COMM coil. Communications is half duplex at 3.39 MHz.
The data rate is 105.94 kbps for both transmit and receive.
<PAGE>
Received Data - The ASIC receives an 3.39 MHz ASK NRZ signal which it
detects, filters, and decodes into NRZ. This resulting NRZ serial data
stream is fed into the microcomputer via an I/O port bit. The received
signal is coded NRZ. Presence of 3.39 MHz represents a "1" and absence
represents a "0".
Transmitted Data - The ASIC transmits by PSK modulating a 3.39 MHz
carrier signal with MFM coded data. The 3.39 MHz carrier is inverted
(representing a 180 degree phase shift) whenever a transition from "1" to
"0" or "0" to "1" occurs in the MFM data stream. A program executing in
the microprocessor provides the NRZ data at an I/O port bit. Hardware
encodes the NRZ data into MFM.
2. SCHEMATICS
3. DOCUMENTATION
RACOM RF/ID PATENTS (Example of existing Racom RF/ID Patents as of the
Effective Date)
1. Low Power Consumption oscillator Using Multiple Transconductance
Amplifiers - Patent No. 5,444,421, issued 8/22/97.
2. Power supply and Power Enable circuit for an RF/ID Transponder - Patent
No. 5,479,172, issued 12/26/95
3. Passive RF Transponder and Method - Patent No. 5,517,194, issued 5/14/95
4. Communications System Utilizing FSK/PSK Modulation Techniques - Patent
No. 5,521,602, 5/28/96
5. Method and Apparatus for Detecting an FSK Encoded Carrier Signal - Patent
No. 5,533,061, issued 7/2/96
6. FSK Detector Circuit Method, Patent No. 5,553,099, issued 9/3/96
<PAGE>
ATTACHMENT B
TO
AMENDMENT NO. 3
TO
HIGH DENSITY FRAM COOPERATION AGREEMENT
RAMTRON'S RF/ID TECHNOLOGY
Concepts, ideas, techniques, procedures, know-how, show-how, trade secrets,
design information and other technical information relating generally to FRAM
technology and products including, specifically, the integration of FRAM
technology with RF/ID Technology.
Ramtron previously transferred to Hitachi a substantial amount of such
information and technology pursuant to the FRAM Agreement.
*****
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